The Legal Play: Recent Episodes

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It is important for taxpayers to understand how partition agreements and an IRS tax filing status are linked. The connection between the two can impact how a married couple files their tax returns and how it could potentially affect the non-debtor spouse.

In the case of married couples, partition agreements are legal documents that define the terms and conditions of the division of property between the two of them. Property can include real estate, bank accounts, and other valuable goods. Examples of partition agreements are prenuptial and postnuptial agreements. Partition agreements are essentially an agreement between the spouses on how to divide ownership and rights to their property. In Texas, any property that is earned or received, with some exceptions like inheritance, is considered community property, meaning both spouses have ownership rights over the whole. A partition agreement is typically used as a way for the spouses to state that they do not want Texas law to dictate ownership of the property, and they want to decide who owns what.

Today, it is not unusual to see couples entering partition agreements after they have married. The reasoning behind this movement is that it can allow the two individuals to have a say in how their property is divided up instead of letting default Texas community property laws decide. Certain pieces of property are defined as separate. This keeps property as “yours and mine” and eliminates the default “ours” factor.

Entering into a Partition AgreementOne of the most common questions we get about partition agreements is why someone would want to enter into one. The short answer is that there are a number of valid reasons, including:

1. People with a second marriage (who have children from a first marriage) may be worried about the consequences upon death (or the incapacitation) of one of the married partners, such that they want some of their money to go to their children. This may or may not occur if it is community property.
2. Married partners that no longer live together but do not wish to legally divorce.
3. In connection where partners are divorced and perhaps there is a reconciliation where the couple decides to reconcile but wants to have boundaries as to what each owns.
4. Estate planning purposes.
5. For creditor protection purposes so that the debts of a debtor-spouse do not attach to the non-debtor spouse, or the assets of a non-debtor’s spouse are not subject to claims from the creditors of a debtor-spouse. This can work fairly well when you partition them, if at the time you partition them there is no real debt problem. It works best if the spouses enter into a partition agreement prospectively so as to avoid the argument that this was done to defraud creditors.

It is worth noting that it can be hard for a creditor to set a partition aside unless the person already has a judgement against them or the partition agreement was signed well after the debt entered into collection actions.

Entering into Partition Agreement Before Marriage and Its Impact on Filing TaxesIf a partition agreement has already been signed, it is important to decide how to file your federal income taxes, especially if one spouse makes significantly more than the other.

If two spouses enter into a partition agreement that they have signed, executed and notarized, it usually does affect how we would advise them to file their tax returns. For example, if a couple has nothing but community property, community income and few debts, there is little reason not to file jointly. But there are financial complications which may need to be considered.

If you have a married couple with a diverse income in which one spouse makes one million dollars annually and the other spouse makes ten thousand dollars, they can still decide to share the income and it will be reported accordingly. This means they can still file a joint return and pay taxes on the whole amount. The benefit to this is typically money saving. Filing jointly often results in paying less tax than if filing separately. Yet it doesn’t have to be done this way. There may be important reasons for a couple to file separately.

Reasons for Changing Filing Status to “Married and Filing Separately” After Signing a Partition AgreementThere are some reasons for a couple to change their filing status to “married and filing separately” when a partition agreement comes into play, including:

• One spouse has a judgement against them that does not include the other spouse
• One spouse files bankruptcy
• One spouse is obligated into making financial disclosures to a government entity or creditor
• If a lesser earning spouse has aggressive creditors pursuing them

The goal is to prevent the debtor-spouse’s creditors from getting to the assets of the non-debtor spouse, especially in a case where the non-debtor spouse earns significantly more than the debtor-spouse. Filing jointly would be unwise in this case as it would give the creditors of the debtor-spouse access to financial information about the non-debtor spouse.

Why is this an issue? When creditors know how much the higher earning spouse makes, they could become much more aggressive in making the lesser earning spouse’s life miserable by threatening to take an annual deposition, demanding they respond to requests for production, or by garnishing what is in known bank accounts that the debtor-spouse may enjoy the benefits of. An aggressive creditor could put extreme pressure on the debtor-spouse to come up with money from somewhere, hoping they will dip into the higher earning spouse’s funds to appease the creditor.

If the creditor is the IRS, it can be a very good idea to file separately, because if the spouses file jointly, the IRS can keep any refund that the couple might have received and apply it towards the debt of the debtor-spouse. This means that any refund the non-debtor spouse would have received for money they alone contributed could be lost and the non-debtor spouse would lose out on the option to receive rightful refunds. By keeping property and debts separate, it can be possible to keep the IRS from withholding or garnishing any funds belonging to the non-debtor spouse.

Partition agreements and an IRS tax filing status are interconnected and can have far reaching implications. The best way to ensure your rights and your assets are protected is by enlisting the help of a trusted and reputable tax attorney before it is too late.

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Federal tax liens are a product of the Internal Revenue Service (IRS). Federal tax liens are created and filed in the property records by the IRS when a taxpayer owes the IRS money that the taxpayer hasn’t paid. If you have ever had a federal tax lien against your property, you may wonder if the IRS can foreclose on your property. By understanding how a federal tax lien works, it can equip you to avoid foreclosure or know how to handle it. However, in full disclosure, dealing with a federal tax lien can get messy quickly, which is why the majority of individuals or companies facing this situation turn to successful attorneys for guidance and representation.

Suffice it to say, you do not want a federal tax lien against you. It is the first thing that hits the public record, so creditors and credit reporting agencies will know there is a federal tax lien. A federal tax lien is filed in the county in which the debtor has property and theoretically puts a lien on all the property, real or otherwise, the debtor has in that county. For these reasons and so many more, federal tax liens should always be taken seriously.

Although federal liens are attached to everything a taxpayer owns within that county, there may be some wiggle room. A homeowner with a lien may still be able to sell furniture, such as a couch, to their neighbor without interference from the IRS. However, if a factory with a lien is selling expensive equipment worth millions of dollars, the IRS could come after that equipment and leave the buyer empty handed.

What Happens When a Federal Lien Is Issued on Property with an Existing Mortgage?In the event that the IRS has a federal tax lien against a house with an outstanding mortgage, the question becomes which is superior? The tax lien or the mortgage? In general, most states have a first come, first serve rule which means that if the mortgage is in existence prior to filing the tax lien (i.e. the deed of trust in favor of the mortgage lender is filed in the public record before the federal tax lien), the mortgage will most likely be superior.

However, it would be a mistake to think that the IRS cannot do anything if there is a current mortgage on the house. For example, if there is a house with an existing mortgage and a federal tax lien is filed, the IRS can still foreclose. A foreclosure requires the IRS to go through some procedural hurdles first, which typically makes this process uncommon, but it can happen.

The Steps the Government Takes to Follow Through with a ForeclosureFor the government to foreclose on a property, there is a procedure they must follow which can generally look like the following:

• The government gives notice by sending intent letters to the taxpayer
• If the taxpayer does not provide a satisfactory answer or any answer at all, then the IRS will do a public notification. This is most often done with commercial property and office buildings, but it may also be done with a house.
• The IRS will prepare to sell their interest in your house, which means they will foreclose on the property if you do nothing to stop them.
• Foreclosure means the IRS will conduct the sale of the property and issue a special kind of deed.

In most cases, the IRS applies the eighty percent rule, which means they are looking to get eighty percent of the value of the house. So, if you have a $300,000 house, $240,000 mortgage and a $60,000 tax lien on it, there is not enough equity.

Right of RedemptionThe taxpayer has a right of redemption which can be a specific number of months for the taxpayer to come up with the funds to pay the amount the property sold for, plus a redemption premium, which can be somewhere around twenty percent.

For instance, if a buyer at a foreclosure auction bids $100,000 for the property, the buyer’s right to possess the property isn’t final. There is a window of time in which the taxpayer has an opportunity to redeem the property. The taxpayer would have to pay the buyer $120,000 and then they could redeem the property. If the taxpayer can’t or chooses not to do this, the taxpayer must surrender the property. The buyer would then be the new property owner. Remember, though, there is a mortgage still in place. So, the buyer would own the house, subject to the first mortgage, meaning if they want to keep the house, the buyer would need to make the necessary payments to the mortgage company.

It is worth noting that although mortgage companies do not have to be notified of the property foreclosure sale, most sophisticated mortgage companies and banks have people whose sole job is to look for these federal notices and match them up with properties that are secured by a loan from them. In other words, even if you do not notify the mortgage company about a federal tax lien or IRS foreclosure, they will most likely find out anyway.

Perhaps even more problematic is that the mortgage company can decide that if a federal tax lien goes into place, they can start their own foreclosure. This is because most deeds-of-trust say that an additional lien on the property constitutes a default on the first lien mortgage, freeing the deed-of-trust holder to foreclose on the property. It can get quite complicated quickly, which is why enlisting the help of an attorney can be key to success in cases like these.

Ways to Keep the IRS from Foreclosing on a Federal Tax LienThere are two primary ways to keep the IRS from foreclosing on a federal tax lien, and they are:

1. Pay the lien.
2. Enter into some sort of installment program or offer in compromise. This can happen while the tax lien is in place.

Limited Life Span of a Federal Tax Lien

The fact is that federal tax liens have a ten-year life during which the IRS can collect the debt or reduce it to judgment. To reduce a lien to a judgment means filing in a court with proper jurisdiction and getting a court to issue a judgement against the taxpayer. This comes with its own administrative burdens and costs that the IRS will decide may or may not be worth doing.

The statute of limitation (the 10-year life of the lien) could help some individuals in the long run. There have been cases where taxpayer has simply waited out the ten-year life of the lien and then the IRS released it. Typically, if you owe the IRS a couple hundred thousand dollars and the IRS chooses not to foreclose on their tax lien, you may be able to wait out the ten-year period without much of an issue. However, during that time, you will not be able to sell or refinance the house.

Generally, if the individual is current on payments and taxes, and the mortgage company gets all the required information, most banks are content to do nothing and simply accept their monthly repayment. Yet, if you have a federal tax lien and are behind on payments, the mortgage lender may choose to be strict simply because the risk is now greater.

In short, the IRS can foreclose on your property, but by understanding a federal tax lien you are taking steps toward preventing that from happening, or at the very least knowing what to expect if it does become a reality. Whichever situation you find yourself in, enlist the help of a reputable tax attorney to make sure your rights are protected and that the actions you take best serve your interests.

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Bankruptcy is something the public hears about often. Most of the time, the news and media focus on big corporations or well-known wealthy individuals. Sometimes it may seem that certain corporations or individuals survive, and maybe even thrive after bankruptcy. It is not true that people or businesses can get richer through bankruptcy. Filing bankruptcy is, in fact, a serious issue.

Determining whether filing bankruptcy is the right move for you or your business is critical before moving forward. Bankruptcy is intended to be an option provided by the government to help people and businesses that are struggling to overcome large debt, but depending on the specific circumstances, bankruptcy is not for everyone.

From the moment you are even considering bankruptcy for yourself or your business, it is strongly suggested to make an appointment with a bankruptcy attorney for advisement of the right steps to take, when to take them, and what to expect.

Why Bankruptcy Exists

Bankruptcy is designed for people and businesses that are in debt to too many creditors and just cannot pay everybody. The underlying policy for bankruptcy is helping the debtor settle some, if not all of their debt in an organized fashion, attempting to ensure that most of the creditors with valid claims get something back.

For example, let’s say a debtor has several creditors. Some of these creditors could be suppliers or vendors, government taxing authorities, contract laborers or service individuals. It is not uncommon to have outstanding debt with multiple entities simply because cash-flow was not good enough to pay off everyone and the debtor prioritized some over others for whatever reason. Without bankruptcy, all creditors would likely be pursuing the debtor with their own resources and remedies, and the debtor would have to deal with each of them separately. This is a daunting task. And in some cases, the most aggressive creditors aren’t the ones that have superior right to be first-in-line to be repaid. Preferential treatment of one creditor over the other can have some long-lasting negative consequences. Instead, bankruptcy court offers an organized manner whereby the debtor and all the creditors must join together to figure things out.

The Potential Upside of Declaring Bankruptcy

While declaring bankruptcy for yourself or your business is not for everyone, there are some reasons why people tend to think it has an upside:

• Automatic stay. In bankruptcy there is something called an automatic stay. When a debtor files bankruptcy, the court will bar creditors from any further collection actions until the court eventually approves them doing so.
• Some people see a big financial mogul in the public eye that has filed bankruptcy and appears to still be doing really well with both money and even high public opinion. Individuals wonder why that person is still rich and having their image on the front of magazine covers. As glorified as some famous people make bankruptcy seem, the main thing to note is that bankruptcy is a cumbersome, expensive and stressful process. A lot of personal and financial information is shared with the court and the parties involved. And, ultimately, the debtor’s creditors still get paid something. So no matter how the media may spin it, no debtor in bankruptcy gets off scot-free.
• Immunity Toward Future Wages. When a person declares bankruptcy, it protects that person’s future wages. In other words, if I am quite talented and have the potential to earn a good wage, but I have current debts I can’t pay, I can file bankruptcy and use my current assets to pay creditors. Once my bankruptcy case is discharged, I can then go on to earn more money without having to promise those future wages to any of the previous creditors. This aspect of bankruptcy is important, because without it, productive members of society would not have incentive to continue working because their efforts would be just for the purpose of paying their creditors without having anything in it for themselves.

Can I get Rich by Filing Bankruptcy?

There is not a scenario where an individual or business can get rich by filing for bankruptcy. The system just does not work that way. A person or business may already be rich and have lots of assets, then file bankruptcy and not be forced to pay all their debtors and creditors. Add to that certain state exemptions, and the debtor may still have quite a bit leftover, such as their 40-acre ranch pursuant to the Texas homestead exemption.

While there can be good outcomes for a debtor in bankruptcy, there is no way to “game the system” so to speak. There are processes and protections in place where people are appointed to oversee, if not take control of, your assets to ensure the debtor is not doing something backwards or lying about the assets they have. For example, in a Chapter 7 complete liquidation case, a trustee is appointed. The trustee will do one of two things:

1. Make sure all the paperwork, disclosures and procedures are followed properly
2. See if there is some asset the trustee can take and sell to give the money to the creditors in the process

The bankruptcy court and the trustee will be on the lookout for recent “debts” repaid to creditors who may be a related party. For example, if on Monday I owe the bank $10,000 and I owe my mom $10,000, and then on Tuesday I get $10,000 and give it to my mom. Then on Wednesday, I file bankruptcy. The bank may say it is not fair, or legal, to show preference to my mom. That allows a trustee to sue my mom as the recipient of a fraudulent conveyance and make her give the money back so it can be divided up amongst my creditors according to the rights they had before the transfer was made.

Is Bankruptcy Right for Me and My Business?

In an effort to be transparent, debtors are often advised not to make any bankruptcy decisions on their own. It is much more prudent to speak to a bankruptcy attorney first to ensure it is in your best interest to file bankruptcy and determine under which chapter of bankruptcy to file.

If you are a person or business that is so far in debt that you may never get out (something to the tune of $100 million in debt), then bankruptcy may be right for you. If a person with this type of debt is being hounded by creditors, it can make it difficult for them to even get a bank account.

There may also be entities that cannot pay all their debts because of something that happened in the past. A good example of this can be office buildings. In most cases, these structures were worth more before the pandemic than they are now. Many of them have mortgages from the days when those buildings were more expensive, only now the owner does not have the same occupancy and thereby not enough cash flow. However, the building still exists and does not have to be built again, so it can still charge some rent and pay some mortgage. Certain mortgage lenders may be unwilling to work with the debtor. Filing bankruptcy may be the remedy. A court-approved bankruptcy plan that restructures this debt may give the creditors some continuing cash flow rather than allowing foreclosure on the real estate, which can disrupt the market and the lives of the people who work in the building.

On the other hand, there are other situations in which bankruptcy may not be recommended.

If you or your business have a limited number of creditors that you are able to work with, it may be wise to try to settle outside of bankruptcy. Bankruptcy can be long and cumbersome and potentially more expensive that simply renegotiating with existing creditors.

Someone who owes a bunch of people a little bit of money, may have at least some creditors that do not try to collect. It is possible that some of those debts may even be unenforceable or released due to the statute of limitations. It would not be advantageous for a person to file bankruptcy the month before the statute of limitations runs out on their $200,000 IRS debt.

Because every situation is different, it is best to seek professional legal counsel from an experienced bankruptcy attorney to determine the best path forward before taking action.

It is worth noting that there are more than a few types of debts that do not get discharged in bankruptcy, including:

• Employment Trust fund taxes
• Excise taxes
• Sales taxes
• Child support
• Alimony
• Certain intentional acts (such as libel and slander)

Abuse of Bankruptcy

If you are filing bankruptcy just to buy time, it is probably not the best strategy to file as it turns over a great deal of authority to the courts and trustees to do things to you or your business that would not have happened otherwise. While it may stop a foreclosure for a while, unless you can pay the debt in that ninety-day window, it is likely a mistake. It is also considered bankruptcy abuse to file simply for the purpose of invoking the automatic stay.

If you are wondering whether bankruptcy is right for you and your business, know that it is a complicated area of law. It is very strategic in terms of when you should file, what you should do beforehand, and all the processes that come during and after bankruptcy. Proceed with caution and make sure you are doing what is in your best interest by making an appointment with a reputable bankruptcy attorney today.

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Making a will is one of the most important things you can do to protect your assets, but what happens if your heirs can’t find the original will? The short answer is that things could get problematic quickly. This is primarily because copies do not carry the same weight as the original in the eyes of estate law.

Before you make a will, it is vital to understand how to ensure it is legal, how to store the original, and what to do if you decide you want to revoke the will and begin anew. Without knowledge of these processes, you could risk your assets being distributed contrary to your final wishes.

What Happens When You Do Not Have the Original Will?Probate courts need the original will because along with it comes the authenticity of the document. Without the original, there is a presumption that comes into play. It is not as simple as saying that your spouse or parent died, and you cannot find the original, but you have a copy of the will. The law will presume that without an original will, the testator, or person who made the will, destroyed it with the intent to revoke.

Some of the top reasons there is no original will to present include:

• Its location is unknown
• It is misplaced during a renovation or move
• It is destroyed in a natural disaster such as a fire or flood

That said, there are some instances in which it may be possible to overcome that presumption. For example, if the will was partially destroyed in a natural disaster, but some parts are still readable, and you have witnesses (often attorneys) who can attest that the will was only recently drawn up. Another way to overcome the presumption is if a spouse’s mirror-image copy still exists that was drawn up at the same time, and no legal heirs contest using a copy of the testator’s will in court.

Won’t My Lawyer Have Records of My Will?Many individuals make the mistake of thinking that when an original will cannot be found, their attorney will have copies.

Years ago, lawyers often kept clients’ wills in a safety deposit box or a fireproof safe. The problem is that the lawyers then had the obligation to keep track of it for thirty to forty years or more. Consider what might occur if something happens to the lawyer during that time. Consider if the heirs would even know who the testator’s lawyer was at the time it was drawn up and if they would know how to reach them. If lawyers do have a copy, it is still just a copy. However, if an original will cannot be produced and no one is contesting it, then there may not be a reason to anticipate any problems.

Copies Require NoticeIf the copy looks good, the circumstances for not having the original are not unusual and there are no obvious red flags or suspicions, everything may be fine. Yet, the caveat to this is that there must still be a notice put out to all the heirs that would potentially let them know the copy has been entered for probate and there is an application to probate using the copy. The heirs will need to be asked if they have any reason to protest. If the heirs sign waivers of notice saying they will not contest, it can be filed with the court.

Issues can occur if you cannot locate the heirs to notify them. You may have to hunt to find last known addresses, try to contact people who know where they are, and then issue a citation of personal service. If service of process fails, the person applying to probate the will may have to get a court-appointed ad litem to represent the heirs during any proceedings (see our previous blog and podcast about attorneys ad litem).

Copy of Will ScenarioLet us consider a scenario in which a person passed away. A woman, a former neighbor of the deceased, submitted a copy of the decedent’s 30-year-old will. The will left certain assets to the woman. The woman was not related to the deceased and hadn’t seen them in years. The deceased’s estate was close to four million dollars.

There were roughly 60 heirs that stood to inherit something if that copy of the will was invalidated. Because the copy of the will the woman submitted for probate was thirty years old, the woman was advised that she would end up losing her application to probate the copy and to settle.

The deceased’s estate paid the woman’s legal bills because she had done work to initiate probate proceedings. However, in the end, the deceased’s heirs inherited approximately two million dollars.

The lesson in this case is that if you have a legal will and you want there to be a specific distribution of assets upon your death, make sure you have an original that can be accessed by someone you trust. It can be a worst-case scenario when the will you actually wanted to be followed is thrown out by the court because there is no original and there is at least one heir who protests its probate.

Imagine this scenario. A mother passes away. The son and daughter are the heirs at law. The daughter has only a copy of the will in which her mother gives everything to her, and she submits it for probate. The brother could either sign the waiver notice, or he may contest the copy was something presumed to be destroyed with intent to revoke. In the latter case, the son would likely get half of his mother’s estate.

What To Know About Revoking a WillAn individual does have the power to revoke all previous existing wills and begin a new one. This is frequently done if, for example, children or grandchildren enter the picture after the first will was drawn up. The tricky part can be ensuring that the right people know about this change.

Consider this. A person had a will drafted two years ago and ensured that her daughter, cousin, lawyer, etc. have copies of that version. However, the person intends to now revoke it. What should they do?

Contrary to popular belief, tearing up the original will is a mistake. By doing so, it effectively makes the original disappear and then you are back to copies of wills. For a greater degree of protection, it is more efficient to mark the previous will “revoked,” put your signature near the word “revoked,” and put it back in the file. This ensures that when someone presents a copy of the original will, someone else with the original marked revoked can submit it as proof that the copy is null and void. The next step would be to formally create a new will.

Storing Your Original WillWith the importance of an original will already established, the next item on the to do list is to make sure the document is properly safeguarded.

Many individuals choose to store their wills in a safety deposit box at a bank. However, this is not a completely foolproof method. Not all safe deposit boxes are watertight. Should there be a flood, and the will is damp and slightly damaged but still readable, it may be okay. However, should the flood destroy the official document, then you are once again without an original.

Avoid storing original wills in safety deposit boxes or fireproof safes that are underground or at ground-level. Flood waters will be a threat to those documents. Even when putting them in those places above ground, it may still be wise to first put them in a sealed plastic bag.

Lastly, make sure that someone you trust will know where to look for the stored document after you pass. It is key to choose someone you do have a great deal of trust in. This is because whoever finds the original document may compare what they will get from the will that versus what they will get if there is no original document. An untrustworthy person may choose whichever is to their best advantage and could destroy it.

Important Takeaways for WillsIn review, here are the top takeaways about creating, revoking, and storing wills:

1. Make a will and ensure that it is done formally
2. Have witnesses and ask them to sign the document in blue ink
3. Safeguard the original will in a place where it will be well protected (preferably above ground)
4. If you revoke a will, be vocal about it and ensure that you preserve evidence of the fact that the old will has indeed been revoked
5. Make it known to a trustworthy person where the original will is located

Attempting to probate a copy of a will can create undue confusion and heartache. Work with a reputable estate attorney to make sure you are following all the necessary previsions so that your assets will be distributed as you truly wish upon your passing.

If you are planning to apply to probate an estate and do not have an original will, make sure you understand all the steps to comply with the law of your state. A trusted estate and probate attorney will be able to help you with all court requirements.

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Attorneys ad litem are important positions within the probate court system. An attorney ad litem can assist with representing those who cannot represent themselves, such as minor children, incapacitated individuals, and unknown heirs. A court appoints attorneys ad litem in different situations, such as heirship proceedings when there are potential unknown heirs to an estate.

Take the following scenario for example. a woman passes away and does not leave a will. The only known heir she has is her husband of many years. Because there is no will to follow, and a court must do its due diligence to determine all potential legal heirs, the court has to rule out the possibility of any children the woman may have had. There is always the possibility that the woman had been married before, had a child, and gave up a child for a closed adoption, or that she had a child when she was very young that she did not raise and no one knows about. In a situation like this, an attorney ad litem is appointed to represent these possible children in an heirship proceeding, to explore the possibility there may be unknown children of the woman who do exist. However unlikely, the courts must make sure all known heirs are accounted for before allowing an executor or administrator of the estate to liquidate assets and disperse anything to known beneficiaries.

What Is an Attorney Ad Litem and What Do They Do?In the case of heirship proceedings, the job of an ad litem attorney is to represent someone who cannot represent themselves. This includes people who are:

• Physically incapacitated
• Mentally incapacitated
• Legally incapacitated
• Minor children
• Unknown heirs who may not know about specific court proceedings

In the case of the last point, a court can say they are not sure if heirs (known or unknown) have notice of the probate proceedings, and the court will want to make sure the interests of all heirs are represented. To do this, the court will appoint an attorney ad litem. This type of lawyer is particularly helpful in the event that the deceased had no will, or the original copy of the will was lost, OR beneficiaries listed in the will cannot be found and are considered transient (homeless or have long lost contact with family and friends).

Without an original copy of the will, the law requires an heirship proceeding. An attorney ad litem is tasked with determining if there could be other individuals or unknown heirs out there. Typically, beneficiaries or acquaintances of the deceased can provide the names of some witnesses that are “disinterested” (i.e. not listed in the will or not intestate heirs). If these individuals have known the decedent or their family for many years, the disinterested witness may be able to share that the witness never knew of a will the deceased put together, or the witness might share that the person was married only one time, or that they absolutely never had children.

One case example includes a woman who passed away without a known will. Subsequently, the court could not find anyone from the woman’s childhood. However, the woman had lived in the same apartment for more than thirty years. An attorney ad litem was appointed by the court to investigate any potential heirs. The ad litem spoke with neighbors on both sides of the woman’s home who said they had never seen any visitors, only pets. An ad litem could feel fairly confident that the decedent was not married and very likely had no children. That information would then be turned over to the judge who would make the final ruling based on the information the ad litem collected.

Finding an Attorney Ad LitemAll attorneys ad litem have to take some kind of qualifying coursework and be certified to practice as an ad litem. Certain kinds of ad litem work require ongoing certification training to keep up their certification.

Another frequently asked question is if parties can choose their own attorney ad litem. It may be possible for the parties to recommend to the court who they would like to work with. However, the court has their own list or “wheel” for the probate court system which will provide an attorney ad litem for an heirship case. Theoretically, the court is supposed to go down the list from one attorney to the next and the court will assign them as necessary.

Payment for Ad LitemsIn Harris County probate court, there is a flat fee of seven hundred dollars paid to an attorney ad litem. These lawyers know going into the case that this will be their compensation.

That said, some ad litems will be required to put in hours and hours of work that go well beyond the scope of what one would consider worth seven hundred dollars of payment. While the court does allow an attorney ad litem to show all of the work they have done and ask for additional compensation, that is not common.

What to Know About Ad Litem AttorneysOne of the most important things to know about working with an attorney ad litem is to have open communication, which includes providing them with all the information and tools they need to effectively do their job. Lawyers in this capacity are not opposed to the case or any party necessarily, and they are not antagonistic to any party in particular. This type of legal representative is simply trying to ensure everyone is represented and that the court has all the information it needs in order to make a ruling.

Be warned that involving an ad litem in the case adds extra costs and time to the case, so it is beneficial to take steps to avoid having to have an ad litem. However, an attorney ad litem is required in some situations, such as heirships if there is no will, probate applications where there is only a copy of a will and known heirs cannot be found, or other specific situations like guardianships.

The bottom line is that attorneys ad litem can represent unknown heirs to the best of their abilities. After collecting as much relevant data as possible, they present that information to the court and then the court will determine what weight to give that information and if more work needs to be done.

If you have the need of an attorney ad litem’s services, you can be better equipped to help them by understanding their job description and exactly what they do for the court case.

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If you are in need of estate planning, it is critical to enlist the help of a reputable tax attorney to begin navigating the expiration of the 2017 Tax Cuts and Jobs Act. Why act now? Certain provisions of the 2017 Act are set to expire on December 31, 2025, which may have a profound and possibly negative effect on a person’s taxes if they have not engaged in careful tax planning. Add to that the uncertainty of the outcome of the 2024 presidential elections, and clients who anticipate leaving behind large estates will have good reason rework their estate plan.

Provisions of the 2017 Tax Cuts and Jobs ActBefore breaking down the provisions of the 2017 Tax Cuts and Jobs Act, it is important to address the various names this legislation can go by for clarity’s sake. Some commonly used monikers for it are “Pro Tax Law” and the “Trump Tax Bill.”

Regardless of what you call it, the legislation was passed early in the Trump administration and contains some of the following provisions:

• Minimizes corporate taxes
• Increases the gift tax and estate exemption
• Increases opportunity zones which give way to investments and some certain targeted investment loans
• Takes away itemized deductions
• Limits state and local taxes
• Limits casualty losses to federally declared disaster areas
• Eliminates theft loss

The bottom line for this piece of legislation is that it is a major bill that has changed the landscape of taxes and the way the government is funded.

Why Navigating the Expiration of the 2017 Tax Cuts and Jobs Act Is Important for Estate PlanningWhat is the big deal about this bill that has us discussing it today? Most of the provisions of the 2017 Tax Act are not permanent and are set to expire on December 31, 2025. This means that if Congress does not take any action to extend the current provisions, or change or otherwise alter the pre-existing 2016 law, taxpayers will be forced to revert back to 2016 tax laws.

This potential change is essential for estate planners to understand as well as the implications it could bring. For example, currently the estate tax exemption is around twelve million dollars for an individual and twenty-four million dollars for a couple, although it is important to note that this number changes annually based on inflation. However, if taxpayers must revert back to unchanged 2016 tax laws, that amount will revert back to around a seven million dollar exemption for individuals.

In other words, if Congress takes no action in the next year and a half, it may prove to be a major issue for people doing estate planning who also have a significant amount of wealth.

What Is Estimated to Happen Based on 2024 Election Results?If former-President Donald Trump is reelected, one might think that since his administration created the bill that its provisions might be extended. However, this is not guaranteed to be a sure thing, primarily due to the Republican to Democrat ratio currently in Congress.

Should it be so simple as to just extend the Trump era tax cuts, it still requires both the House and Senate to pass that legislation, in addition to getting the President’s signature. If Trump is reelected and there is a Republican majority in both the House and Senate, it might be possible for the tax cut provisions to be extended.

If Trump is not elected and there is not a Republican majority in Congress, it is possible Congress could strike some sort of compromise tax bill that will yield completely new tax laws. Although, be forewarned that a divided Congress can result in no progress, and if they take no action at all, it would revert us back to 2016 tax laws.

What To Do for Estate Planning NowWithout knowing what the 2024 election results will be, or what Congress may do before December 31, 2025, there are still actions people can take now. For example, if a parent has a significant amount of wealth such that they could anticipate being able to distribute some to their children, they may have an opportunity to give away between twelve million dollars (for an individual) and twenty-four million dollars (for a couple) to their children in trusts without it being taxed, if done by December 31, 2025. The important thing to note is that this must be done irrevocably, which means parents can never get that money back.

On the other hand, if a parent has twelve million dollars to put into a trust for their child but does not do so, and that person passes away after December 31, 2025 without Congress doing anything to make changes, it is plausible that the child would be exempt from having to pay tax on only seven million dollars of the twelve million. This means the child will have to pay taxes on the remaining five million.

This is the process for money left to children. Money left to a spouse is not taxed until the spouse dies. Money given to charity is not taxed.

How an Attorney Can Help with Navigating the Expiration of the 2017 Tax Cuts and Jobs ActSome individuals may choose to wait and see the result of the 2024 Presidential election and then try to make changes to their estate documents before December 31, 2025. That method could be difficult for people with complex estates. Drafting competent and enforceable estate documents takes time. It may be inadvisable to wait until after the election and then try to do change or put in place estate plans. In simpler cases, a reputable attorney may be able to assist despite the time crunch.

Ideally, people must realize it takes proactive work and planning to ensure that their estate planning happens as intended and in a timely way. It is wise for individuals to be thinking about what their game plan will be as election day approaches.

Every person’s situation is different, but working with a reputable tax attorney before the need is imminent can give individuals some sense of agency and control over what happens next.

Do not leave navigating the expiration of the 2017 Tax Cuts and Jobs Act until the last minute this election year. Consider reaching out to a tax attorney to help guide you now in multiple scenarios for your estate so that whether you choose to do something before or after election day, you will have a plan in place.

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Thousands of Americans consider themselves self-employed as freelance or “gig” workers, but understanding tax planning comes with that territory. Unfortunately, many do not understand what it takes to correctly pay their taxes, or the consequences of not doing so. The best plan of action is to follow professional legal counsel, prepare in advance, and know what to expect.

What Are Freelancers and Gig Workers?To understand tax planning for freelance and gig workers, it is necessary to first define these terms and know examples of each.

Freelancers are individuals who are self-employed and often work on different projects for multiple clients. Freelance positions may include those for writers, graphic designers, and illustrators. These people can generally work for several different people or companies remotely and their product’s final form is usually electronic, can be emailed or posted, and often does not have to produce a piece of paper or a tangible product.

A gig worker is essentially an internet-based worker that is not necessarily tied to a location or specific employer. They are typically engaged in some sort of professional work activity that yields an end-product that can be emailed or posted. Some good examples of gig workers could be individuals who publish, draft blueprints, make accounting entries, or make anything that can be put in electronic form, emailed, and assembled anywhere in the country or world.

Regardless of which category you fall into, it is absolutely necessary that you understand tax planning for freelance and gig workers.

What Do Freelancers and Gig Workers Need to Be Aware Of?Although being a freelancer or gig worker can be a big responsibility in and of itself, tax planning must not take a backseat to the work being done. If proper tax planning is not taken seriously, Tax Day (aka April 15th) could be a rude awakening.

When a freelancer or gig worker gets paid, the money usually goes into a bank account. That income is how personal and business expenses are paid. Freelancers and gig workers are then expected to pay self-employment taxes on a quarterly or annual basis and can do so electronically through the Internal Revenue Service.

Some good tips for tax planning for freelance and gig workers include:

1. You need to file your own tax returns and pay your own taxes. One of the most critical things for freelancers and gig workers to be aware of is that they will likely fall under the category of independent contractors, meaning that they are responsible for doing their own tax returns and paying their own taxes. When you are an independent contractor or self-employed, there is no W-2 form, and no client or employer withholding and paying your federal income taxes for you.
2. Know if your state has an income tax. Fortunately, Texas does not have a state income tax on a personal level, so if you do all your work in the state of Texas as a freelancer and gig worker, there is no state income tax consideration. However, some states do have a state income tax, meaning that if a freelancer is doing work for someone in New York, the state will likely want the freelancer to pay the state income tax. This is an issue some courts are still working on today.
3. Influencers and vloggers are considered contract workers. Technically, people in these professions should get a 1099 to account for what money they made in various states or locations. However, not all companies follow this protocol, and it is becoming a legal issue. The IRS is notifying content providers, and some influencers and vloggers are receiving an IRS notice that they have not been properly accounting. This has resulted in an influx of clients from these professions seeking legal counsel on what effect the notification may have on their taxes.
4. There is a benefit to paying your self-employment taxes quarterly. Quarterly tax payments are more advisable because it may enable the individual to avoid penalties. It helps a taxpayer avoid the shock of having to pay hefty taxes all at once on April 15, especially if they don’t have that money.
5. Be able to keep track of your revenue. Put the money you make in a bank account and make sure you get accounting statements so you can figure out how much money you are actually getting paid on a quarterly and annual basis so you can keep up with taxes.

A Word About International TaxesDepending on the situation, international taxes may apply to freelancers and gig workers. If the person is working internationally, there are additional tax issues to work through. Some countries are havens for internet workers because these countries do not collect income taxes (or at least require relatively low amounts of income tax paid in to that government), and that attracts business to the country. Other countries have high income tax burdens that can make it far more complicated. Either way, a freelance or gig worker must understand the international tax implications for their revenue.

For example, if I am physically residing in and working from the United States, and I do something to get revenue from Japan, it is counted as income in the U.S. It will need to be included in my income whether I receive a 1099 or not.

If I am an U.S. citizen, but reside in Costa Rica and doing the work from there, I am still responsible for income tax to the U.S. government and can be taxed on my worldwide income. While there are tax treaties between large industrial countries which can make international taxes easier to coordinate, international tax considerations can make international freelance and gig work tricky.

In contrast, there are people who are citizens of other countries who do freelance and gig work in the United States. This can also be a tricky situation that may come with transfer pricing issues.

Will the IRS Really Know I’m Making Money If I Don’t Report It?Although there will be people tempted to make money and simply not declare it, hoping the IRS will not take notice, this is not advised.

The money you make is traceable to an extent. For example, if someone pays for a service, the payor can deduct it on their end. This means there will be some sort of calculation triggered that lets the IRS know that money was made even if it was not reported by the earner. In this modern era, heavy with reporting by payors, the IRS has the ability to monitor payments and look at various other factors (like subpoenaing your bank records) to figure out how much money you are probably making, even if you do not report it.

Bottom line: Report your income. It will be found sooner or later, whether you report it or not.

When it comes to tax planning for freelance and gig workers, the takeaway is to keep track of revenue and deposits, be able to pay for things to run your business so you can deduct them and account for them, and make sure you have a good accountant and tax preparer. If any issues are anticipated or have already occurred, enlist the help of a reputable tax attorney.

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If you are the beneficiary of a trust, or the beneficiary of the estate of a deceased loved one in which a trust has or should have been created, make sure you understand your role and rights to avoid trust litigation. All trusts must have a trustee to manage the trust and potentially make disbursements to the beneficiaries according to the trust provisions. Sometimes the trustee and the beneficiary are the same person. In this case, there is little conflict. Where the trustee and the beneficiary are not the same person, and the beneficiary and trustee begin to disagree on how best to manage or disburse trust funds, then issues arise. Some of the issues may only be resolved in litigation. If you have arrived at this point, it is essential to work with an attorney who is knowledgeable about trust law and litigation to help you access what you are entitled to.

What Is a Trust?

Essentially, a trust is a contractual relationship by which there are at least three parties:

1. This person gives some type of asset over to a trustee. The asset can be money, accounts, property, etc.
2. The trustee is charged with holding something for the benefit of one or more beneficiaries. A trustee is often a relative, business associate, bank trust department, or formal trust company.
3. Beneficiary (or beneficiaries). The beneficiary is the party that is intended to eventually receive something from the grantor via the trust.

Types of Trusts

There are different types of trusts. For the purpose of today’s discussion, we will limit it to:

• Intervivos Trust. In this type of trust, property is given over during a grantor’s lifetime.
• Testamentary Trust. A testamentary trust can come out of a will from someone who has passed and leaves all or part of their estate to a party such as children or grandchildren.

What to Know About Trust Litigation

Unfortunately, there is litigation that can arise out of trusts. Even if a trust is put together with a knowledgeable attorney, if a trustee becomes irresponsible or untrustworthy, it may open the door to trust litigation.

A trustee has a fiduciary duty and must account for funds in the trust (i.e. keeping tax returns, books, bank account records, investment records, and expenditures). A trustee cannot spend money on themselves or engage in activities or investments that a prudent businessperson would not.

Trustees must also look out for the best interest of beneficiaries and in a reasonably conservative way for investments so there are no challenges to a trustee if something goes bad or breaches the business judgement rule. If a trustee mismanages, self-deals, or does something irresponsible, they could be accused of violating the business judgement rule.

One of the most common scenarios is a dispute between a beneficiary (or beneficiaries) and the trustee. A beneficiary may want their money for any number of reasons, but the trustee is given some discretion to decide if the beneficiary gets it or not. There may even be a clause included in the trust that stipulates the trustee has discretion to make distributions until said beneficiary (or beneficiaries) turns a certain age. This type of stipulation is generally executed as a protection against creditors by waiting until the liability goes away before distributions to beneficiaries begin.

Another trust litigation scenario is that beneficiary B complains that beneficiary A got all the money, which is not what the trust agreement said was supposed to happen (like it should have been an even split) or the trustee used their discretion and then that discretion is questioned.

There are times when the trust assets cannot be managed or disbursed as the grantor intended. Where circumstances don’t align with the language in the trust document, trustees or beneficiaries may have to get what is called a “Declaratory Judgement.” For example, if an asset such as an apartment complex is in a trust, a trustee may manage it or hire managers, and manage it for ten years. However, if a person comes along and wants to buy the apartment complex, or a government entity is going to put a highway through it and initiates the process of Eminent Domain, then the trustee may end up managing money instead of a property. At this point in time, the trustee may just want to make a distribution. If the trust document does not include instructions for the trustee on how to manage or disburse large sums of cash assets, it may cause problems. Rather than having the trustee make the decision and expose themselves to mismanagement claims or a breach of duty, it may be easier for a trustee to ask a court for a declaratory judgment, tell them the plans to give X amount of money to beneficiaries and X amount of money to creditors and ask the court to approve the decision. Should the beneficiaries complain against one another at this point, the trustee can let them argue about it, but be secure in doing whatever the court advises or orders.

Trusts with oil and gas interests are common in Texas. Great grandparents may put an oil and gas interest in a trust as part of their legacy. If the grandparents owned the land and then passed, the trustee for the grandkids or possibly the grandkids themselves are likely cashing royalty checks. This can create a host of legal issues as well.

In terms of trust litigation, probate courts in Texas have jurisdiction over trusts, so in a lot of counties there will be trust disputes brought into a statutory probate court as opposed to a district, federal, or county court. Probate courts see more of this type of lawsuit, sometimes making them more beneficial than other courts.

Sometimes trustees are bonded and sometimes they are not. Bonded companies will go after a trustee that creates a liability because they have to put up their money. It is important to understand that when you start requiring a bond that the trustee be a trust company or the trust department of the bank, you are adding a lot of expense. However, without it you run the risk of using a trustee that is not sophisticated enough or is so sophisticated that they take advantage of the situation. The takeaway here is to be wise when naming a trustee for your trust.

Why Work with an Attorney in Dealing with Trust Litigation Issues?

Trusts can still be subjected to trust litigation. However, there are several ways attorneys can assist in limiting these issues, such as:

• Enlist their help in wording and formalizing official trust documents. Experienced legal counsel should be able to use key legal phrases that strengthen these contracts.
• Ask them to explain your rights as a beneficiary to you if you are unsure you are getting the money you believe you are due according to the terms of the trust.
• Get legal counsel if you believe the trustee has abandoned his fiduciary duties.
• Sue a trustee that has not carried out their fiduciary duties.

At the end of the day, people are imperfect, so trust litigation can ensue. As such, make sure you have an experienced and successful trust attorney by your side every step of the way.

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Settlement agreements are legally binding contracts used to resolve disputes between parties. Those who seek legal counsel for settlement agreements are typically either about to enter into an agreement, or they have an existing agreement that has been breached and they want recourse.

The first question an attorney will likely ask a client about their dispute is, “What are you settling?” In some cases, it may have to deal with money owed. However, settlement agreements do not always center around money.

If you are facing the development of a settlement agreement or the breach of one, it is critical to know what they are, what matters they concern, if this process applies to you, the advantages of these types of agreements and how attorneys can help.

What Are Settlement Agreements?

Settlement agreements are binding contracts that consist of terms that two or more parties agree upon in written form. To be enforceable, the agreements must include the parties’ signatures and possibly even a notary’s signature and stamp. When done properly and with the help of an attorney, this yields an official document that says the parties have come together to agree on the terms therein and that they will abide by them.

The process for arriving at the need for settlement agreements is fairly simple:

• There is a dispute.
• The parties raise the dispute, possibly in litigation.
• The parties decide if they want to settle the dispute, or proceed to a trial.

When the involved parties must have a resolution, it requires either litigation or settlement. Settlements may include acquiescence by one of the parties, or a compromise by both or all.

Do I Need a Settlement Agreement?

Many people often need help discerning if their situation requires a settlement agreement.

In general, to justify a settlement agreement there needs to be either:

1. An active dispute
2. The potential for a dispute that the parties want to resolve before it becomes critical and does serious damage to the business or the persons involved

Breached Settlement Agreements

Because settlement agreements are binding contracts, parties may find themselves in a situation in which one or more individuals breaches the contract (i.e. does not take the action or refrain from an action they promised in the agreement). Often, the only recourse for this is litigation.

To prevent any room for misinterpretation of a settlement agreement, it requires that the terms be well-defined and detailed. It should include exactly what needs to be done to solve existing differences and comply with the terms of the settlement agreement. It should also include provisions for what rights a party has if the other party does not abide by their promises in the agreement.

The Advantages of Settlement Agreements

A lawsuit may have already been filed relating to the underlying dispute. At this point, the other party might decide they would rather settle outside of court and come up with a mutual agreement to get the court case dismissed.

There is an advantage of making a settlement agreement instead of taking the case to court. When a lawsuit is filed in court, it becomes public information. Decisions that juries and judges make are viewable by the general public.

However, in a settlement agreement, the parties can agree to terms that are not made public, which keeps the terms under wraps and avoids a long, drawn-out litigation process while still coming to a settlement. This is typically the most desirable option.

Do Settlement Agreements Require an Attorney?

People tend to look at the positive when it comes to settlement agreements and hope for the best outcome. Unfortunately, it seldom happens this way. It is difficult to imagine all possible scenarios and include language in the agreement which accounts for various outcomes. This means that, theoretically, attorneys are needed to compose and evaluate these documents to ensure the agreement is clear, valid, and enforceable.

When individuals try to develop their own settlement agreements without legal counsel, the outcome is not always the desired one.

It is not uncommon for individuals to decide on a settlement agreement, draft it up, and come together to sign. It may be that suddenly one party decides they do not want to sign. This means there is simply an unenforceable draft of the document, not an actual settlement agreement.

It could be a case where two parties drafted their own agreement, but the agreement did not make good sense due to contradictions or ambiguous language. The interpretation of the document could lead to many issues. Some cases take years to hash out what the parties’ intended. If the agreement regards the sale of real property, the sale could be delayed until the language in the agreement is resolved.

A reputable attorney with years of experience will be able to anticipate what kind of problems there are, discuss them with the parties, and incorporate them into the agreement to prevent contradictions and misinterpretations.

On the flip side, if a settlement agreement has already been made but breached, a lawyer can help clients manage the legal consequences or penalties of that breach. A breach allows the non-breaching party some rights and remedies from a wisely worded settlement.

Attorneys generally have a stronger and more complete knowledge of the statutes that protect their client’s rights. This means that a client might be able to bring a dispute to an attorney, and legal counsel would know that under something like the Texas property code, certain terms apply, and this means their rights are designated as X, Y, and Z.

It is possible to have an amicable settlement agreement. Yet, there are those individuals that no matter what they receive in a settlement, they will turn right around and ask for more tomorrow. The trick to crafting a solid settlement agreement is to make it so that you do not have to give said individual anything tomorrow.

To protect yourself and your rights in settlement agreements, enlist the help of a reputable and experienced Houston attorney.

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Most people cannot proceed in life without trusting others, but it is not recommended for people to enter into joint financial arrangements without first doing background checks and possibly putting protective measures in place. It may be tempting to wholly trust a business partner you have known for a while and know to be a standup person, but, even in this situation, not performing due diligence could end up costing you.

Why Protection Is Needed in Any Type of Financial ArrangementAs virtually any seasoned business attorney will tell you, they have yet to discover a person with a perfect halo. Therefore, everyone needs protection when entering into a financial arrangement.

It is not uncommon for someone to partner with someone else in a business venture or transaction only to find out that their trust was misplaced. It is important to note that it does not have to be a business transaction, per se, but usually involves some kind of financial deal in which you are not the sole player.

Unfortunately, some people find out the hard way that trusting someone else with money or carrying their share of financial liability may lead to disappointment when the other person fails to live up to your expectations.

Some of the situations in a financial joint venture that can occur without protection include:

• One financial partner running off with a bunch of the money and leaving their partner to face debts and liabilities alone
• Both financial partners taking out a loan for their business or a mortgage on real property, but when the business tanks and the bank or lender contacts you for repayment, one financial partner takes off, leaving the other to pay off the loan or mortgage by themselves
• One financial partner takes the business in a new direction without an agreement in place
• One financial partner wants to start their own business using company assets like equipment or customer contacts and there is not a non-compete agreement in place

The question then becomes, how you protect yourself from something like one of the above taking place?

What You Can Do to Protect YourselfWhile it can be true that to get by effectively in this life, you have to trust people, there are still steps you can and should take to protect yourself. It is possible to trust a person and still have a remedy in place should that trust fail. No one wants to end up partnerless and owing a substantial amount of money to the IRS, a bank, or some other third-party creditor because they misplaced their trust.

It is highly recommended that an individual entering into a financial joint venture proactively address remedies for potential issues. It is recommended to do a deep dive into the potential partner’s history by:

• Learning who they have previously dealt with
• Discovering what their past consists of
• Talking to people they have previously worked with
• Finding out if they are convicted criminals
• Identifying if they have been sued before
• Discovering if they have ever declared bankruptcy.

It is also critical to make disclosures. In other words, identify what it is that you want the other partner to do. It is necessary to have whatever it is the person is promising in writing. It is advisable to seek a lawyer for this step in the process. A business attorney can ensure those promises and expectations put in writing are enforceable

Additional practices to consider when entering a financial transaction with another person include:

1. Have audited financial statements for your company
2. Establish other people to watch over the business and oversee it (instead of entrusting it all to one person)
3. Be an active partner, as silent partnerships where one person supplies the money and the other person does the work can be unstable at times
4. Put non-compete and confidentiality agreements in place
5. Consider worst case scenarios and put in provisions that detail explicitly what may happen if one person breaches their agreement

Are There Exceptions to the Rule of Protection in Financial Joint Ventures?The short answer is that there are no exceptions to the rule of protection in financial joint ventures. Everyone needs protection because there is no way to anticipate what could happen a few weeks, months, or years down the road.

For example, let’s say you want to enter into an agreement with a good friend from college that you have known for years. Should you still take proactive measures to ensure your protection? Yes, and even though you know the person, you should start by looking into their history.

It is necessary to think of all the possible implications. If the friend is creative and a hard worker, that is fantastic, but they may not have any money to put up in the joint venture. If this friend will need to sign a guaranty or co-guaranty on something like a million-dollar debt, it may simply amount to a good gesture that may be worthless if there is a default.

Harsh as it can seem to take steps to protect yourself against long-term friends, it is essential.

Can You Ask Someone to Get Bonded?If there is a deal for which there is a market that would be bonded (like a construction contract), yes, you can ask someone to get bonded. The way this works is that there is generally a bond or amount of money that is promised and put up by a solvent surety, such as a bonding or insurance company. These entities do this in exchange for getting a fee and will put money up to secure something that a party is supposed to do.

There is no fixed amount for bonding. Sometimes it can be a flat fee like ten percent of a bond, or other times it may require putting up collateral equal to the amount of the bond.

If a bond is in place and the deal does not go through, the impacted party can simply have the surety cover the liability instead of having to chase the other person’s assets. The bonding company, who typically has a good deal of money, can come forward and finish the project. However, the bonding company may in turn sue the person who broke the deal.

When it comes to protecting yourself in a financial joint venture, hire an attorney, and together be sure to get written agreements in place, get an understanding, make plans for oversight, do thorough background research, and keep up with what is going on in the business. These are the best alternatives to blindly trusting someone when money is involved.

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One of the most common issues taxpayers face is knowing what can IRS collectors do and how to react. For instance, if an individual receives word that the Internal Revenue Service is coming after them for an amount owed, there are revenue officers who will then try to collect that assessment. But what happens next? Do you have to pay the assessment, or do you have options? What do you tell the IRS and how much do you tell them to obtain those options?

The best way to navigate this type of situation is to consult with a reputable tax attorney with experience in dealing with the IRS.

I Owe the IRS, What Can They Do?

If an assessment has already been made and revenue collectors are actively trying to collect, the individual has a couple of options:

1. This is generally not a recommended course of action. If the IRS knows where the taxpayer is living and the person is not planning to move, it is best to just face the agency.
2. Face the IRS. This government agency has power and will pursue the individual to get some sort of payment in return, though the exact amount depends on many different factors.

The Internal Revenue Service can get the information they need and choose to pursue the individual in one or more of the following ways:

1. Summons account information from banks
2. Put a lien on a person’s house and/or property
3. Foreclose on a person’s house and/or property

It is a common misconception to think that the IRS cannot get to bank or other financial account information. If a person refuses to give the IRS the information they are requesting, the agency can still get it through the bank or other institutions. The IRS may also use summons enforcement, in which case someone in the justice department can take the case and advise you in writing to hand over the information or they will take you to federal court.

Understanding How the IRS Views Property and Equity

After an assessment, the IRS will want to know how much the individual can pay. This is where it is helpful to know what IRS collectors can do and how to react.

There may be some debts the person will have to pay, even though it may be painful and take an extensive amount of time. In this case, installment agreements may be negotiated. If installment payments are the route the IRS agrees to and the individual takes, part of the value the IRS will ask for monthly is the value of the house and equity.

For example, if a person owes the IRS $5 million dollars and they make $80,000 a year and have $300,000 equity in the house, they probably can’t pay the $5 million. However, they could still afford to pay some. It is possible the IRS might declare the individual owes $20,000 a year for 5 years and must pay the $300,000. In total, that amount comes to $400,000. The value of a house is an important element in this case.

It is worth noting that although Texas is a community property state which sees husband and wife as joint owners of the whole property, meaning there would be a 50/50 split in equity, that is not how the IRS sees it. There is no division unless a previous legal document is in place stating such.

It is possible for a person to be close to retirement and have no income coming in. However, the IRS will still see value in the personal residence or homestead. In this instance, the property is viewed as the person’s main asset, so they must disclose the value of the property. The IRS will then likely put a lien on the property, and it will have the same effect as a judgement. The house cannot be sold with a title policy that says the house is free and clear of liens without first paying the amount owed to the IRS or getting the IRS to release it.

Before the IRS files a lien against their property, the individual could choose to work with the IRS to avoid it by making installment payments. As a general rule, the IRS is reluctant to enter into such agreements because it can compromise their position in regard to whatever equity is in the property. For instance, if the property is sold, it may diminish the IRS’ equity position. For this reason, the taxpayer is not typically able to enter into a compromise or installment plan without putting a lien on the house.

Many people faced with IRS assessments are already settled in their homes. Despite the IRS seeing value in the house, the owners cannot just sell it, or they would be homeless without anywhere to go. It is for this reason that the IRS can be negotiated with. An individual who can’t pay the IRS should not expect to compromise the amount owed or to be left alone by the IRS if they have some serious equity in their home. But the IRS must go through an extra process to foreclose upon someone’s principal residence. It doesn’t happen very often, although it can. If a home is worth $500,000 and has a $400,000 mortgage, the IRS will probably not take the home, but will instead say if the individual comes up with $400,000 in payments, they will likely release the lien because it is eighty percent of the equity.

Should a person die while in their home, and the IRS has an active lien on that property, the decedent’s probated estate is still obligated to pay what is owed to the IRS. There is no getting out of paying taxes, even after death. It is even possible that the children of the deceased could move into the house, and the IRS may still try to foreclose on the house and collect the lien.

There is light at the end of the tunnel regarding tax liens, and that is that they only have a 10-year life. Once a tax lien hits ten years, the IRS has to renew the lien to continue it. Sometimes they will not do this for people who have only modest houses and modest amounts of taxes due. If an individual falls into this category and is not in a hurry to sell/relocate and their debt is not big enough for the IRS to go after, they could try outlasting the 10-year lien. Yet, this will not keep the IRS from evaluating bank accounts and using other collection techniques to obtain assets of value.

The IRS Is Coming After Me. How Should I React?

If the IRS has assessed you for taxes owed and is actively pursuing payment, before deciding how to react, do not think you can get out of your debt. The goal shifts to figuring out how little you can pay without getting into serious trouble, and how long you can stay out of trouble with this arrangement.

The more money you owe, the more likely the IRS will persist. The more times you have been in the hole, so to speak, the IRS will persist and offer less flexibility.

When it comes to how you should react when the IRS pursues you, take the following into consideration:

• React proactively
• Do not ignore them
• Give the IRS information, but don’t be in too big of a hurry to do it and give them only the information they ask for (the exception to this rule is if you have a child with special needs or yourself or your spouse has some sort of excessive medical needs, in which case you should consult an attorney for proper timing in releasing that information)
• Get solid professional advice and heed it

If the above still leaves you feeling unsure of how to proceed, it is a wise idea to seek legal counsel. You are allowed to tell the IRS you need to consult with your attorney before responding to their questions. This enables lawyers to interact with the IRS on your behalf.

Hiring a professional and reputable tax attorney is highly recommended if an individual is being pursued by the IRS and is not sure of what to say or is afraid they might say something wrong. The best option may be to say nothing at all and let your legal representation speak for you.

Knowing what IRS collectors can do and how to react can be immensely helpful. However, there are situations in which enlisting the help of a professional tax attorney with IRS experience may still be advised to advocate for and protect a person’s rights.

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If you have ever found yourself wishing you could find some extra money, Texas unclaimed property is somewhere you should start your search. Essentially, Texas unclaimed property is exactly what it sounds like – there is some kind of property in Texas that is unclaimed. Usually it’s in monetary form, and comes from things like insurance premium refunds, utility deposits that were never returned, leftover money in bank accounts, and even unpaid wages. The funds may be owed to you directly, or as a beneficiary of a decedent who never claimed the property in their lifetime.

It is not uncommon for Texas residents to have an item or two of unclaimed property in the system, and the process to claim it may be as simple as typing in your name and address.. Believe it or not, it is as easy as it sounds. It’s just a simple search, and it’s free. What have you got to lose?

How to Determine if You Have Unclaimed Property in Texas

For many Texans, this unclaimed property consists of money they did not even realize they were owed. For this reason, we recommend searching for your name as well as that of both living and deceased loved ones to see if they have anything in the system to be claimed.

Here are the steps you can take to access the website:

1. Go to https://www.claimittexas.gov. Take care to ensure you are looking at a site from Texas Comptroller as there are some deceitful sites that will try to collect your information and have you pay a third party. Please note that the real website does not require you to pay any fees.
2. Type your last name or business name along with your first name into the box titled Claiming Property. Then hit search.
3. If the search results show an available claim for the name searched, you can click on it and follow the prompts to find out the next steps.

If the search reveals a rather large amount that is available to be claimed, or the property belongs to a loved one who has passed away and you do not possess letters testamentary, it can be wise to enlist the help of a reputable attorney to ensure that you are indeed able to claim it with minimal issues.

A Case Study: Finding Three Hundred Dollars

A woman recently found the website and ran her own name and those of her family members through its search engine. She was shocked to discover that her niece had an unclaimed check from an insurance company for more than $300. How could this happen?

As it turns out, the niece had moved before the insurance company sent the check and the check was never forwarded to her new address. In the end, the check landed in Texas unclaimed property.

The woman let her niece know about the unclaimed property immediately and shared the steps to follow, and the niece was able to claim her $300 dollars.

What To Know When Searching for Property of Your Deceased Loved Ones

What if the claim is in the name of a deceased loved one? Texas unclaimed property searchers should also be aware of the necessary procedures to access those funds. In some instances, our attorneys have found as much as ten thousand dollars or more in Texas unclaimed property for deceased individuals. In this case, if you are a current executor and you have the letters of testamentary, then you can go onto this website and apply to get the money to put into the decedent’s estate.

However, if there was no will or it was never probated, you will require an attorney to assist you to access the unclaimed money. It can be done but typically requires an attorney’s legal expertise.

In other words, if it is within four years and you possess the letters testamentary, you are on the right track. If it is outside of the four years and you are missing those letters of testamentary, there will be extra steps that will likely involve the help of an attorney.

A Case Study: Trusts, Wills, and Texas Unclaimed Property

One client found Texas unclaimed property past the four-year period. The deceased’s will was never probated because that individual intended her assets to go straight into a trust and avoid the probate process altogether.

The deceased specifically included a preamble in their will about a trust they had previously set up so their beneficiaries did not have to go through probate. However, the deceased never dreamed they would have Texas unclaimed property that would require letters testamentary. When one of the beneficiaries found the property, they sought the help of an attorney who is doing a muniment of title to transfer it to the trust, as this was exactly what the deceased indicated she wanted done in her will.

If you have questions about Texas unclaimed property such as where to look for it, what to do if you find it, or how to proceed on behalf of the deceased, contact a reputable attorney today to ensure you are able to claim what is rightfully yours.

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The birth of a business is characterized by a sense of positivity. Often little thought is given to setting the parameters for a potential battle for control of the company if disagreements between owners begin to cause an impasse. Having a vague business agreement can lead to substantial legal problems, not only for the owners, but for the business itself.

Fortunately, by working with a qualified attorney when forming the company, new business owners can flesh out a comprehensive business agreement that includes the protocol for the unthinkable. If certain events should occur, a well-planned business agreement will protect all involved.

The “Bright Side” of Partnerships

The majority of people who engage in business partnerships do so with the understanding that they are able to work well together. Initially, they are confident enough in each other to share a fifty-fifty ownership of the company without requiring anything more than a standard template.

We often hear budding entrepreneurs claim that a comprehensive business agreement is not needed. The most common reasons are:

• “We wholeheartedly believe we will do very well.”
• “We are going to make lots of money with our company.”
• “We are of like mind and always agree with one another.”
• “We have total belief in the business’ mission.”
• “Even if there turns out to be something that causes us to dissolve the company, we will just split everything fifty-fifty.”

The bright side of partnerships can be beautiful, but it seldom stays that way when problems arise.

Acknowledging Both Success and Failure Can Cause Problems

Most business owners mistakenly believe that only failure will bring problems to a company and its ownership, but the reality is that success can be equally responsible for demise in a partnership.

When there is some sort of failure within the company, these are some of the forms it can take:

• If one party doesn’t have any money, they may want the other one to put up the money instead.
• It may be viewed as unfair if one partner puts in money, but the other one does not want to.
• If one party brings in a contact base of family and friends and the other party does not, it can be seen as lopsided effort.
• If there are liabilities, one partner may want to force the other one to pay.
• If a pay cut is required, one partner could demand the other take it while they themselves do not.

Success of the business can also create problems in the partnership, and this typically takes forms in three primary ways:

1. One partner wants to sell out due to their current success, but the other does not.
2. One party may embrace success and want to take it easy, while the other prefers to keep their workload the same or even increase it.
3. With funds from new success, the partners may disagree on whether they take on more debt or pay off the debt they have.

In addition to failures and successes, life in general can bring up issues for the partners. For example, one partner may become older or not healthy and want out. Death of one of the partners can also bring about issues with the deceased’s estate and the partnership.

In the end, whether it is due to failure, success, or life, various circumstances can cause partners to be on different pages with how to run the business. Theoretically, most partners think they can just split up the business if they decide to go their separate ways, but it is far more complicated than this, and it often leads to a battle for control of the company.

What the Battle for Control of the Company Can Look Like

When two partners are at odds, the battle for control can look quite different depending on the specific details, or lack thereof, in the initial business agreement.

In general, when there are two partners who are not working well together anymore but their partnership agreement is silent as to what should happen in this event, one of three things takes place:

1. Both partners simply live with it and just continue on.
2. The partners decide to go their separate ways and sit down to negotiate a settlement regarding that decision.
3. They are forced to hire lawyers, file lawsuits, and have receivers appointed.

Before the partners decide which of the three pathways they want to choose going forward, the best thing to do is keep the lines of communication open to discuss what each of them wants to do and where they want to get in the process.

Potential Stumbling Blocks to Ending a Partnership

In the battle for control of the company, there are a few stumbling blocks that can play a large role in which of the above three ways they choose to move forward.

• Customer-base. The partners may fight over who gets the business’ customers once the partnership is dissolved.
• Manner of division. Some partners choose to split the business into parts and award some to each partner. However, this can be tricky because they could have an emotional or monetary attachment to the business they have helped build. This then necessitates a buyout agreement.
• Most businesses are financed by some sort of loan, and banks will require guarantees. Problems can arise if the exiting partner wants to be released from the personal liability with the loan since they are not there actively running the business and are not involved in the company and its line of credit.
• If things have grown so bad that the partnership has become adversarial and the partners cannot work it out themselves, professional lawyers, accountants, and appraisers will need to be brought in to value items and see what a buyout would require. Some businesses have just a desk, phone, and services. Other businesses might have a warehouse, inventory, storage yards, office buildings, and many other assets. The more assets and debts there are, the more complicated the situation becomes.
• Non-competes. This can be the biggest point of contention in buyouts as one partner typically does not want the other to be competing against them after they exit the partnership.
• Complete deadlock. This is when the partners absolutely cannot agree, and the business cannot operate without an agreement. A court may then be empowered to appoint a receiver who will take over the business. This is not efficient nor cost-friendly for the business or partners, so receivership is usually recommended only when the other sole option is to shut down the company completely.

Do I Need an Attorney to End My Business Partnership?

In the simplest of situations that have no external factors such as bank lending and liens, a lawyer’s help may not be required when ending a business partnership. Yet, if a complication exists like one partner buying another out or noncompete issues, these types of situations do require the experience of a knowledgeable attorney.

It is a mistake to wait until a problem develops to enlist the help of an attorney. Before going into the partnership, a lawyer can help owners proactively consider and determine factors such as determining buyout agreements for potential disputes, the division of the company if needed, who gets bought out, how much is paid in the buyout, what process will guide a buyout, the time period of the buyout, and non-competes.

When it comes to the battle for control of the company, the main takeaway should be to do as much as possible up front by having a lawyer present in the beginning to walk both partners through things they may not dream will happening and plan well for them. . . just in case.

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Trusts and wills are one way for a grantor to hand over their estate to a recipient of their choice. But many of us don’t have much to leave once we pass. Sometimes all the large property a grantor may have are a house and a car. The car title can be handled easily via a simple process through the local department of motor vehicles (DMV). While living, the grantor can complete a Beneficiary Designation Form. If this form has not been completed, a living heir of the decedent can submit an Affidavit of Heirship form to the local DMV.

For real property, such as a house, one of the best and easiest ways to leave your house to someone upon your death is what is called a “Lady Bird Deed.” The legal term for this type of deed is an Enhanced Life Estate Warranty Deed. It earned the name of Lady Bird Deed after Claudia “Lady Bird” Johnson, the wife of Former United States President Lyndon B. Johnson. Lady Bird used one of these deeds to transfer some of her real property to her daughter. The process was easy, effective, and legally recognized as a testamentary transfer. The name “Lady Bird Deed” was apparently catchy and much easier to say, thus the nickname stuck.

What exactly is a Lady Bird Deed? According to the associates at the Hap May firm, it is pure genius is what it is. Read on to know exactly how a Lady Bird Deed works, as well as knowing your rights under it (both as grantor and grantee).

Lady Bird Deed vs. Regular Warranty Deed The long and short of it is that a Lady Bird Deed reserves the right for the grantor to revoke the transfer during the life of the grantor, whereas transfers under Warranty Deeds cannot be revoked once signed and recorded. Lady Bird Deeds are similar to wills — the grantor can change their mind anytime up to their death. Whoever is named as grantee under a Lady Bird Deed is automatically granted title to the house once the grantor passes. But grantee beware: the grantor is well within their right to execute a subsequent contradictory Lady Bird Deed for the same property to someone else. In that case, the first deed is revoked, and the original grantee has no more rights to the house at that point.

Take the following scenario of a client who came to an attorney. The client’s grandmother had passed away. The granddaughter had a deed in which her grandmother had conveyed to the granddaughter the grandmother’s house before the grandmother passed away. As if losing her grandmother wasn’t enough, she was being hailed to court pursuant to an eviction suit, from someone claiming to have ownership rights to the house – her mother (grandmother’s daughter).

Before the grandmother passed, and previous to the execution of granddaughter’s deed, the grandmother had executed a Lady Bird deed to her daughter, giving her daughter full ownership rights to the house upon grandmother’s death. Days after the deed was signed and recorded, the daughter left the state and her dying mother behind. In the daughter’s absence, the granddaughter chose to stay and live with her sick grandmother and take care of her grandmother who was battling cancer.

With her daughter gone, the grandmother began to rethink deeding her home to the daughter. Since the granddaughter had devoted herself to caring for the grandmother, and because the granddaughter was using the house as a primary residence, the grandmother decided to execute another Lady Bird deed on behalf of her granddaughter.

When the grandmother passed away a few months later, the granddaughter used the Lady Bird deed to execute an affidavit of ownership and filed both in the property records. The house now belonged to the granddaughter.

However, when the daughter heard of her mother’s passing, she argued the house was hers because she was deeded the property first and had recorded it in the property records well before the granddaughter’s deed. This left the daughter and granddaughter contesting ownership of the property.

Ultimately, who does the house belong to?

The answer is in the type of deed that the grandmother executed, a Lady Bird Deed. This is because there is a substantial difference between it and a regular warranty deed, one is revokable, and the other is not.

If the grandmother had executed a regular warranty deed when she deeded the house to her daughter, then the mother would be correct. Generally, the rule is “first in time, first in right” – meaning that if you receive a deed first, and record it in the property records, the grantor has nothing left to deed to anyone else. If the grandmother had granted a warranty deed to her daughter, the second deed to the granddaughter would have been essentially worthless. However, a Lady Bird deed includes a special provision that basically says a grantor maintains all rights to the property during their lifetime, to live in it, make changes to it, and to transfer or even sell it. And the grantor has the right to change their minds and revoke the deed at any time, without the permission of the grantee, at any time during the grantor’s lifetime. Revocation is as simple as executing another Lady Bird Deed on behalf of another grantee. Since the grandmother had granted a simple Lady Bird Deed to her daughter, executing another deed to the granddaughter legally revoked the deed to her daughter.

Therefore, the house legally belongs to the granddaughter.

The Genius of a Lady Bird DeedThe ability for a grantor to revoke a previously executed deed is a remarkable feature. The grantor can do so without the initial grantee having any say in the matter. The grantor needs no permission, and the person who was originally deeded the property does not even have to be aware of the change.

Revocation can happen in one of two ways:

1. File a revocation in real property records that basically says, “I hereby revoke this deed.”
2. Convey another Lady Bird Deed to someone else.

There is no Texas statute that supports the existence and validity of Lady Bird Deeds. The Lady Bird Deed is just a type of deed that is revokable. Yet courts have upheld their legality as a binding contract and testamentary instrument. Their primary purpose is to avoid the probate process for people that do not have much to their name beyond a house.

If a person passes away without having deeded their house to someone else, then the property must be passed on via probate – either through a will (if the decedent has one) or through intestate succession (divided among the decedent’s legal heirs). If a person dies without a will, a court must appoint a dependent administrator to be responsible for paying the decedent’s debts and going through the court every time they need to do something, such as list and sell a house. This can be expensive and cumbersome.

In Texas, if all a person has in their name is their house, executing a Lady Bird Deed is a smart way to avoid the hassle of probate. The grantee can deed the house to the beneficiary of their choice, but continue to live in it and have the power to do what they want with the house in their lifetime. A Lady Bird Deed also gives the grantor the freedom to change their mind until they pass, because the deed does not become effective until the grantor’s death.

After the grantor passes, the grantee simply has to take a death certificate and an affidavit and file the deed in the real property records.

Stipulations of the Lady Bird DeedThere are a few stipulations of the Lady Bird Deed, such as:

• While many states, like Texas, recognize this type of deed, not all of them do. If you don’t live in Texas, check that your state recognizes Enhanced Life Estate Warranty Deeds before you decide to use one to transfer property.
• It is subject to abuse. For instance, someone on their deathbed could be made to sign a deed under undue influence or trickery. In this case, the deed to a grantee could be set aside if it can be shown there was undue influence or fraud exercised on the grantor. An example of this can be if one child locks mom away and will not let other children see her just to ensure she gets mom to sign the deed to her.
• To be recognized, the deed must be properly notarized and filed in the county’s real property records.

Whether you are considering deeding your home to someone via a Lady Bird Deed, or if you think deed ownership should be contested, enlist the help of a reputable real estate attorney to determine your options.

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Most employers understand that the US government expects them to collect employment and excise taxes from their employees’ pay, and that this withholding is to be paid over to the IRS. It can be tempting to use this money towards other business expenses, but employers should resist the impulse. Not all employers realize the impact of unpaid employment trust and how that relates to personal liability. The fact of the matter is if the employment trust isn’t paid, managers can be held personally liable to the IRS.

How Unpaid Employment Trusts Can Affect Personal LiabilityThe impact of unpaid employment trusts can be enormous for individuals. Despite the expectation that a business filing bankruptcy will extinguish all debts, including to the IRS, this is not the case. And even if the business itself has gone bankrupt and cannot pay employment trust liability, the IRS will find someone to hold personally liable for that debt. Much of this standard was set by the case of Begier vs the IRS from 1990. While it is a bit of an older case, it still sets the precedent and is very much applicable today.

However, before we break the case down, it is important to establish a couple of talking points first:

1. Trust fund taxes are essentially employment withholding taxes due to the Internal Revenue Service.
2. Employers pay their employees but hold some money out of those payments to pay the government taxes such as FICA, Social Security, and Medicare. This is called an employment trust. (Contrary to popular believe, a trust is not just something established by a person in the event of their death or incapacitation.) At its root, the definition of trust means having someone hold onto something for the benefit of another.

Now, back to Begier vs the IRS. In this situation, American International Airlines fell behind in paying its employment trust fund taxes, which the Internal Revenue Service was aware of. It was not a small sum by any standard. The airline eventually filed for Chapter 11 bankruptcy. For the first 90 days of the bankruptcy, they acted as a debtor in possession and, during that time, decided to reconcile the trust fund money they owed to the IRS. After 90 days, the court appointed a trustee to come in and take over for existing management.

When the appointed trustee found out about the large sum of money the airline had paid to the Internal Revenue Service when there were many debts still owed to other airline creditors, the trustee sued the IRS to attempt to recover the money. The argument the trustee made was that the IRS was no more superior to other creditors and thus should not get priority over available funds.

The court in Begier held that the money held in trust was never the airline’s money to begin with. So when they went into bankruptcy, those employment trust funds were not part of the “debtor’s estate.” The trustee was not able to recover those funds

But the bigger question is why the airline managers decided to pay off employment trust taxes rather than pay off some of the other airline creditors, especially knowing that some of the other debts were just as large, if not larger, than the IRS debt. While the intentions of the managers cannot be known exactly, it is very likely that they understood that if that particular debt was not paid before the company had no money left, that debt would not be extinguished in the bankruptcy and the human individuals responsible for running the business would be held personally liable for those debts for years to come.

This is important, so we will repeat it again: business managers who are signatories on the company bank account and the people responsible for signing the checks to the IRS, known as “responsible parties” , may be held personally liabile for employment trust and excise taxes if is the business does not pay this money over to the IRS. It may not happen immediately, but if substantial sums of money are due for employment or excise taxes, individuals will eventually receive notices from the IRS that their liability is under examination and they may be personally, and singularly, responsible for potentially millions of dollars owed to the IRS. That is precisely why the airline chose to take the remaining chunk of money they had and paid it to the IRS rather than other creditors.

One would expect that that if a business files bankruptcy, that much of the business’ debt can be forgiven. Employers take note: trust fund liability on the employer’s part does not go away. It is not a dischargeable debt. While federal income tax liability has a statute of limitation and may eventually be discharged, trust fund taxes cannot. A former employer can be retired and living off social security, the business long since dissolved, and the IRS will still expect payments to be made towards employment trust taxes that were never paid.

When a Company Is Liquidated and Trust Fund Taxes Are Still DueThere could be an instance in which a company files bankruptcy, is liquidated, and now no longer exists. Some wrongly think the taxes due will just go away.

Instead of the taxes being forgotten, the IRS will then search for the responsible parties. A responsible party is typically defined as someone who is an officer at the company and has the ability to sign checks.

Now, let’s assume that the IRS has found a responsible party. The options can vary and may include one of the following:

• File an Offer In Compromise. In this scenario, the responsible party will state their assets and income and estimate what money they will have available after living expenses during the next five years. This is not a popular option among attorneys and clients because they are a lot of work and a satisfactory compromise, from the individual’s perspective, is hard to reach. .
• Enter into an installment agreement and make regular payments. This is an agreement where the responsible party admits to owing the total amount the IRS requests and allows the responsible party to pay money to the IRS over time in installments. The IRS will then have the ability to garnish bank accounts directly, typically withdrawing monthly installments.
• Run and hide. This is exactly what it sounds like. If the responsible party does not have the money to pay, they may opt to permanently leave the country. Some people choose to find jobs overseas where they can function. However, if the amount owed is large and criminal, the Internal Revenue Service can seek extradition.

Technically, the IRS has a 10-year collection statute in which they have to collect or reduce the assessment to a judgement. If it is a relatively small amount owed, it is possible the IRS will choose not to pursue you. Should the amount owed be between $50 million and $100 million, they likely will pursue you. The clients we see are often held personally liable to amounts between $1 – $25 million. Often, international relocation is not an option – these clients have family and personal responsibilities in the USA, or the idea of leaving their home is unfathomable. Staying and dealing with the debt may mean having to give up 50% of their social security checks to the IRS every month.

The bottom line is that if employers do not realize the impact of unpaid employment trust they may be penalized heavily for it. Companies should pay over the trust fund taxes as soon as they are due and make it their priority to do so before the court can take that ability away from them.

If you are business owner, current or former, and you are dealing with personal liability for unpaid employment trust taxes, a reputable tax attorney can assist.

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This edition of the Legal Play includes special guest Judge Georgia L. Akers. In her legal career of 30+ years, Judge Akers has served as an attorney and as an associate probate judge. She spent more than a decade presiding as an associate judge over Harris County Probate Court No. 3 and, in that time, she learned and experienced many things from behind the bench. In addition to her work in probate court, Judge Akers also teaches estate administration at the University of Houston Law Center. There, she instructs students in the practical application of probate law in Texas, specifically concerning how estates are administered. Today, Judge Akers will share some of those valuable insights.

What Does an Associate Probate Judge Do?An associate probate judge is empowered to perform any role that a probate judge would perform. The primary difference is that an associate judge doesn’t run for office – they are appointed by the judge to assist the court in any area necessary.

In the case of Judge Akers, she was in charge of hearing the will docket, guardianship docket and heirship docket. She would also preside over trials assigned to her by the probate judge.

“These were trials that needed a lot of patience and time,” according to Judge Akers.

Probate courts are intended only for probate cases. At Harris County Probate Court No. 3, the judges primarily hear wills, trusts, guardianships, and civil mental health documents.

“When someone dies, the will has to be probated, or there has to be some action taken in order to manage the estate. It is up to the probate court to hear those matters, rule on those matters, and name an appropriate person to serve.”

In the Texas Statutes Probate Code, any matters incident to probating an estate are also heard in probate court, which can expand the scope of the case.

“That gives us a lot of leeway to hear divorce cases in a situation with a guardianship, or a personal injury lawsuit, or a contract dispute if it’s involved in a decedent’s estate.”

According to Judge Akers, it’s a matter of convenience and efficiency, as it doesn’t make sense to split the details of the probate case among multiple courts.

What Makes Probate Court Cases Unique?The documents used to develop a probate case – a will, for example – often have flaws that interfere with how the estate is managed. Judge Akers’ work as a probate judge often involves reviewing these documents and determining how they can be amended so they can pass through probate. In this way, probate judges and attorneys work closely with the decedent’s family (and other beneficiaries) to start the probate process.

There are other quirks specific to probate cases in Texas, such as:

• Probate cases require detailed, specialized knowledge – Judge Akers frequently receives communication from other attorneys concerning probate questions. If you don’t practice it, it can be difficult to intuit probate law, even for experienced attorneys. Fortunately, Texas has a robust estates code that provides solutions to just about any issue.“If there’s a problem with the will, there is some place in the estates code that will fix it, or at least get it into probate,” Akers observed.It was also common for Judge Akers to support the attorney while questioning the witness, asking the witness questions that may have been missed. This would be unusual in other areas of law.
• Probate cases can involve unusual assets or will-related provisions – You never know what you’ll get from an estate case, and Judge Akers has presided over some that have involved unique assets. For example, her court oversaw the case of Dr. Michael DeBakey’s estate, a brilliant cardiovascular surgeon who had more than a dozen patents for surgical instruments to his name when he died. There was also the case of a woman whose aunt was the creator of the original Texas Chainsaw Massacre film. The aunt died without a will and the rights to the film, highly sought after by production companies, passed to the niece.Clearly, probate courts must be prepared for anything.
• Probate cases can be emotionally charged affairs – “The death of a loved one changes the family dynamics,” said Akers. This is obvious in many probate cases, where the decedent’s passing can bring out the best, and worst, in people. And for many loved ones, probate hearings feel like the first major reminder that their family member is gone. Unsurprisingly, Judge Akers saw many people take the stand in tears, adding, “I always had a box of Kleenex on the bench.”Although she witnessed plenty of infighting among family members over estates, she also recalled family members who did the right thing during probate. For example, there was the case where a woman left behind all of her assets to one of her four children through right of survivorship. It wasn’t her intention to leave everything to one of the four children, but she did not have her will completely in order.One son had legal standing to claim ownership over all his mother’s assets, but instead he did the honorable thing. He told Judge Akers, “That’s not what my mother wanted. She wanted it split between the four of us.” Judge Akers reflected, “That’s a good family. That’s a strong family.”

What Are Some Issues That Probate Courts Contend With?Probate courts are extremely busy, with dozens of cases that must be heard in a single day. As such, there are professional expectations for both attorneys and judges.

However, given the complex and specialized nature of probate cases, it was common for lawyers to show up underprepared. In light of this, Judge Akers and Harris County Probate Court No. 3 would contact attorneys ahead of their court date to provide helpful reminders of what they would need to bring or do.

Since these attorneys were so busy and their cases potentially complex, Judge Akers respects attorneys who show up on time.

“I prided myself on always being on time, or even early, because you have a docket of 30 attorneys plus their clients who have come downtown. They probably don’t want to be there. I had one lawyer who couldn’t be on time if his life depended on it. I said I’d let him be the first one on the docket if he showed up on time. And one time he did, and I said, ‘Come on down.’”

Also important for attorneys – have your questions in writing that will be used to verify proof of death and other facts. These must be condensed down into writing, and failing to do so will cause delays or make it impossible to move the case forward.

What Are Some of Judge Akers’ Memorable Probate Court Moments?Judge Akers has overseen some memorable cases during her time as an associate probate judge and attorney, and a few have left an indelible mark on her career. One is amusing and two are solemn.

The amusing case involved a widower. Following his wife’s passing, her will was read to the court while Judge Akers was presiding and, in it, she confessed that she could have been a better partner to her husband while she was alive. The woman’s will asked her two sisters to find her surviving husband a good wife.

Judge Akers laughingly recalled, “I remember one of her two sisters popped up and yelled ‘I don’t want him!’”

But as probate ultimately involves the death of someone, Judge Akers has witnessed many solemn, profound moments over the years.

One case started with a small estate’s affidavit that Harris County Probate Court No. 3 received. The affidavit had some issues, so Judge Akers contacted the woman who sent the affidavit to help correct it. “It turned out her son was at the Pentagon on 9/11, and I told her that we would take care of it.”

Judge Akers sent out e-mails to probate lawyers familiar with the court to help put together an heirship and other documents, and the response was heartening. Her email box filled up with messages saying, we’ll do it, we’ll pay the fees, we’ll do whatever you want. And when the hearing for that heirship was read in our court, you could hear a pin drop.

Another historically momentous case was the estate cases for the Challenger crew, which were heard by Judge Akers’ court. Those cases involved a sum of money given to the surviving family members from the U.S. government, money that was meant to be passed, at least in part, to the crew’s children. “The attorneys got creative in how they set up trusts for those children,” said Akers.

Probate Law Can Lead to an Interesting Career, as Judge Akers Law Journey ShowsProbate law is complex and nuanced, but for those attorneys and judges who practice probate, it can make for a fulfilling, meaningful career. We thank Judge Akers for her time and willingness to share insights from her time behind the bench.

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1031 like-kind exchanges are a tax provision dictated by section 1031 of the Internal Revenue Code. They are used to defer taxes on capital gains resulting from a sale of real property, and therefore are an option for taxpayers who want to reinvest their funds into a different property.

Although 1031 exchanges are mostly straightforward, there are rules and deadlines to observe during the process. Failing to observe these rules may result in an expensive tax bill (and penalties). So, before engaging in a 1031 exchange, it is recommended that investors consult with a knowledgeable tax attorney first.

How a 1031 Like-Kind Exchange Works – a Small Business Example1031 exchanges are generally reserved for investment purposes – a rule cemented by the 2017 Tax Cuts and Jobs Act (TCJA). Prior to the TCJA, tax paying entities could swap out some types of personal property (such as equipment), but 1031 exchanges are now confined to real estate property exchanges only.

For example, a small business owner – let’s say an auto dealership owner – decides that his current location is no longer suitable for his current needs, or perhaps the value of his current property has skyrocketed. Being a savvy investor, he starts looking for another location that might serve his auto dealership better and prepares to sell his current property. After a brief search, he finds an excellent location in a nearby suburb.

Economically, it’s better for everyone – the business owner, the real estate companies, the local community and the IRS – for this transaction to go ahead. It drives additional economic activity and produces additional tax revenue. However, by selling his current property, the auto dealership owner must pay capital gains taxes from the proceeds of the sale.

To prevent taxes from blocking important economic activity, the IRS allows investors to switch out one like-kind property for another and defer capital gains taxes in the process. This is the tax-led philosophy behind allowing 1031 like-kind exchanges.

In this example, the auto dealership owner opts for a 1031 exchange to essentially move his business to a better location, using the funds generated from the initial property’s sale to acquire the new property. Any capital gains taxes generated from the sale are deferred, perhaps indefinitely.

This is a general overview of 1031 exchanges. In practice, there are several moving parts during the 1031 exchange process that taxpayers must manage to successfully see the process through.

The 1031 Like-Kind Exchange ProcessIf you and your tax attorney agree that a 1031 exchange makes sense for your current tax needs, here is what the process typically looks like:

• Determine which properties to exchange – First, you’ll need a pair of real properties to exchange. They must be “like-kind,” though the IRS’s definition in this area is broad. As long as both properties are investment properties, a 1031 is acceptable in most cases. Taxpayers can exchange an apartment complex for an industrial center, for example.
• Identify an intermediary (middleman) to facilitate the transaction – 1031 exchanges are automatically invalidated if the taxpayer accesses the proceeds from the sale at any point. Once the initial property is sold, the proceeds must be given to an intermediary that holds the funds in escrow. Those funds are used to facilitate the purchase of a new property. There are dedicated exchange facilitators who can serve in this role for investors.
• Make the exchange – From the date that the initial property is sold, you have 45 days to identify up to three potential exchange properties. These must be identified in writing and given to the intermediary. There’s a second deadline. From the date of sale, you have 180 days to purchase the new property.
• Notify the IRS of the 1031 exchange – Once the 1031 exchange is complete, the buyer must report the transaction to the IRS, using Form 8824. The buyer will need to provide details of the transaction, including the properties, parties and dates involved. They will also need to report the adjusted tax basis of the sold property.

Important 1031 Like-Kind Exchange ConsiderationsLike with most tax provisions, there are rules dictating how 1031 exchanges may be utilized. There are also additional considerations that may guide a taxpayer’s decision. For example:

• A 1031 exchange can be done in reverse – Investors may identify and purchase the new property first before selling their current property. Termed a “reverse exchange,” a titleholder may be necessary to facilitate this transaction.
• Capital gains taxes are deferred, not eliminated – 1031 exchanges may delay capital taxes, but the bill comes due if the new property is ever sold without another 1031. However, if the property owner dies before the property is sold, the capital gains taxes are wiped out. As such, 1031 exchanges are a popular estate planning tool.
• There can be no conflict of interest along the way – The intermediary must not be personally or professionally connected to any party involved in the 1031 exchange. That includes family members, business partners, employees, or anyone who provides professional services to the investor (an attorney, accountant, banker, agent, etc.). Anyone who has served the investor in the previous two years in one of these capacities is also disqualified.
• Sometimes, it makes sense to just pay the tax – While 1031 exchanges can reduce tax liabilities, it may not be worth the time and money to execute one. It takes considerable organization and time, as well as multiple parties to see the process through. For some transactions, the math may not make sense. A trusted tax attorney can ascertain whether that’s the case or not.

A Reputable Tax Professional Can Help with a 1031 Like-Kind ExchangeBy tax provision standards, 1031 like-kind exchanges are straightforward and simple to report. However, they are not always straightforward to organize and execute. Deadlines can be tight, and there will be additional complexities if there are liabilities tied to the property.

A tax attorney or accountant (or better yet, both) can adjust for these factors and ensure their client stays on time. In fact, a tax attorney can help their clients 1031 exchange their property for an intermediary property that’s only held for a short time to facilitate a second exchange. These are advanced tax maneuvers that require a tax professional to manage properly.

If you’re interested in exploring 1031 exchanges, our team of CPAs and tax attorneys can assess your situation and determine whether a 1031 will provide a tax advantage.

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For those who have never experienced an IRS audit, your only exposure to the process may be the brief portrayal in TV shows and movies where someone, or a team of people, wearing bland neutral suits shows up at your workplace and declares, “You’re being audited. Show us your books.” The reality of real-life audits is a bit different. If you’re being audited by the IRS, your first notification will likely come through the mail. The dreaded tax letter will be sent to the address on file with the agency, which means if you’ve moved without informing the government, it could be sent to a previous address. Whether it’s sent to the right address or not, the IRS will proceed with the audit, assessment, and collection process.

If you have received a tax letter from the IRS, a tax attorney can provide representation to the agency and guidance to their client on how to proceed.

You’ve Received Notice, but is it an Assessment or a Full-scale Audit?Increasingly, the IRS is sending out letters notifying taxpayers of an assessment rather than a full-scale audit. These assessments tend to be income adjustments that the IRS makes on their end due to information they’ve received from reporting agencies. In the letter, the IRS will explain the amount of taxes they believe is correct, with a possible explanation as to why, and then there will be an explanation of your rights to protest this change and the procedure to follow. When a taxpayer receives an assessment letter, they may respond and take steps to protest or appeal the decision. Otherwise, if the taxpayer does not respond, the IRS will move forward with collection. If the taxpayer has underpaid, notices that follow will inform the taxpayer how much is owed.

If the IRS has determined a full audit is necessary, the agency will notify the taxpayer that an audit is underway and that an assessment may be forthcoming. In the past, the IRS would often show up at the taxpayer’s place of residence or business to acquire documentation. Since the COVID pandemic, this part of the process is now largely done online and via telephone.

Audit, Assessment, Collections: The Three-stage Notification ProcessIt generally takes several months to complete an audit, and the taxpayer will be notified by mail throughout the process. Typically, the IRS will communicate with the taxpayer through the audit, assessment, and collection process, and typically looks like the following:

• Audit – The first piece of mail from the IRS will either be notification of an audit or of an assessment. If it’s an audit, the letter will notify the taxpayer that their tax situation is being reviewed. Requests for financial documentation will likely be forthcoming.
• Assessment – Once the audit is underway, or after it’s complete, the IRS will send a letter with an assessment in it. This assessment is the IRS’s official stance on the taxpayer’s position, specifying whether income or deductions are to be adjusted, and whether this will require the taxpayer to remit additional taxes. Following an assessment, the taxpayer will have a brief window where they may contest the IRS’s conclusions.
• Collections – If an assessment is made and moved forward, the taxpayer will receive a collections letter requesting payment.

A tax attorney can provide assistance at any point during this communication. For example, an attorney can help with acquiring or interpreting financial documentation. They can also push back against the IRS’s assessment, arguing on behalf of their taxpayer client and attempting to have the assessment thrown out.

How Does the IRS Determine Who to Audit?The IRS audits one out of every 500-1,000 tax returns a year, and it uses a handful of strategies to determine who to audit, including:

• Random selection – A large part of the IRS’s selection criteria is purely random, in part to assist the department in keeping their statistics current (i.e. what percentage of taxpayer returns are accurate without IRS intervention).
• Income and certain credits – Higher income taxpayers are more likely to be flagged for an audit, as well as those who report under $25,000 in income annually. Further, taxpayers who take large deductions or tax credits (the Earned Income Tax Credit, for example) are more likely to be flagged.
• Algorithmic analysis – The IRS also uses predictive algorithms to determine which taxpayers to audit.

Although audits are relatively rare, they are still a source of stress for many Americans waiting to see if they are up for an audit this year.

How Long do Taxpayers Have to Wait Until They Know if They Will be Audited?In general, the IRS will audit a tax return within three years of submission to the agency. That’s a long time, but the vast majority of returns are audited within 18 months, if they are to be audited at all.

However, there is no statute of limitations on fraud or tax evasion audits, so if either is the trigger behind an audit, it may occur at any point.

An Experienced Tax Attorney Can Provide Expert Representation During an AuditAn IRS audit may greatly alter an individual’s or business’s tax outlook well into the future. It may also come with additional penalties and fines that will further increase the stakes.

As a taxpayer, you have the right to seek professional representation, and it is highly recommended. Tax accountants and attorneys are both qualified to provide this representation, which includes communicating with the IRS, making formal arguments to the agency regarding their client’s tax position, and essentially making the case to the IRS on their behalf.

The IRS is a powerful organization that is best interfaced with through a knowledgeable tax professional. By partnering with an experienced tax attorney, you’ll have expert guidance throughout the auditing process and put yourself in the best possible position to navigate an IRS audit.

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When a business owner suddenly passes away, it raises the following questions about the company’s future:

• Will the business continue to exist, and in what form?
• Who will oversee the business’s affairs and decision making?
• How will clients and employees be retained?
• How can the business be guided through management and ownership uncertainty?

If a business owner dies with a will and succession plan, preserving the business may be as simple as pivoting to the next in line, whether that’s a vice president, a partner, or a family member who has an interest in the organization.

This guide is for those instances when a business owner dies without a clear transition plan in place. If this is the case, you’ll need to act fast to ensure the business can be preserved.

When a Business Owner Dies It Is Important to Act QuicklyWhether the business will be captained by someone else or liquidated, it’s important for everyone involved to move quickly. Why? There are a few reasons, including:

• Client and customer retention – When a business owner dies, the resulting uncertainty may compel clients to terminate their relationship with the company and seek services through a competitor. By sorting through the company’s affairs quickly, you will maintain confidence among existing clients.
• Employee retention – A business owner’s death can create a great deal of uncertainty among employees. If the company’s operations are sidetracked, it will also sidetrack payroll and benefits. The longer this goes on, the harder it will be to retain essential people. By implementing employee retention measures right away, you can prevent extended downtime due to labor shortfalls.
• Equipment and facility upkeep – Retaining customers and employees are the pressing matters, but some businesses also rely on equipment, which may deteriorate without constant upkeep. When a business owner dies, these assets will decline in value and condition if new ownership doesn’t act promptly.

If the business and its assets are to be sold off, any heirs and partners will want to maximize the company’s value. If the business is to be preserved and operated by a new person, retaining as much of its value as possible is also the priority. In both cases, you’ll need to move quickly to keep the company intact.

First, Determine the Nature of the Business and Who Has an Interest in ItWhether the plan is to liquidate the business or continue operating it, the first thing to do is to determine what kind of entity the business is, and who has an interest in it.

Regarding the first point, business entities may be classified as a sole proprietorship, a partnership, or a corporation. If the business was a sole proprietorship, there may be no succession plan, or anyone empowered to step into the decedent’s role.

If the business was a partnership or a corporation, you have some options. For instance, if the business was a general partnership, then another partner may be able to assume management duties and ensure there is no interruption in production or operation. If the entity was a corporation, shareholders may be able to quickly appoint a new head if the bylaws allow for it.

Once the entity’s classification is clear, you’ll need to speak to family members and employees to determine who has an interest in the business. It’s important to establish early on who is interested in running the business and who wants to liquidate its assets. If there are disagreements, it’s highly recommended that any heirs or beneficiaries bring in an attorney to mediate the process.

If No One Is In Charge of the Business, an Administrator Will Be Needed QuicklyIf the business was a sole proprietorship or if there is no other acting head of the organization, an administrator must be designated right away. In some organizations, the bylaws may allow shareholders to immediately appoint a new person to take charge – a vice president, for example – but if no immediate appointment is possible, no one may have decision-making power over the company. This may lead to a long decision-making lull between the owner’s death and a new management team.

The goal is to get a business administrator appointed as soon as possible. This is done by opening a probate case for the decedent’s estate and business. As part of the case, the probate court will designate an administrator (if one hasn’t been named in a will). Once an administrator is in place, they can move quickly to retain employees, smooth over client relationships, and make essential operational decisions.

A Few Steps to Take Once the Business Can Be ManagedOnce the probate case is open, and an administrator is in place, operations can be brought back online or asset liquidation can begin. From here, there are a few important steps to take, including:

• Implementing employee retention measures – If the mission is to retain the business or sell it to another person who wishes to operate it, you’ll need to retain critical employees. This means incentivizing employees either through promotions or bonuses. Both can be used to keep important workers on staff.
• Prioritizing the things that drive the business – By the time an administrator has control of the business, there will likely be multiple areas of the company that need to be addressed. However, you will need to be time-efficient by first addressing the departments most responsible for profitability. This could be your operational department, your salespeople, your marketing department, your accounting team – and you will need to identify which of these departments are vital for the short term and ensure they are working as needed.
• Determining what court orders are needed to either manage or liquidate the business – Whether the plan is to sell or operate the business, any administrator will need permission from the court to execute certain decisions. If there is a dependent administrator in place, they will need court orders for just about every transaction. To ensure none of these important matters are held up in court, anticipate the court orders you will need and get them handled before they cause roadblocks.

After a Business Owner Dies, a Trusted Attorney Can Help Preserve the OrganizationBusinesses are difficult enough to run when the managing principal is alive, and when they pass away, the situation can quickly grow in complexity.

If you have an interest in a business where the owner has recently died, an estate planning or business attorney can provide valuable, timely guidance on how to protect the company. They can also provide insight on what to do if you plan on running the business, plan on selling it to another would-be owner, or if you are expecting to liquidate. Our firm has experience in each instance and can recommend the most efficient, most effective approach.

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When an individual passes away, it falls to those left behind to determine what happens with any property and assets that individual possessed during their lifetime. The process of finding all the property and assets can be extremely complex, depending on what the property is and where it is kept. It’s relatively simple to find things like a house and a car, as those are large, tangible items. But in many cases, a person’s wealth that may be passed to beneficiaries and heirs can be difficult to locate, especially if the assets are intangible items such as investment accounts and partnership interest. Often, the breadth and nature of an individual’s property and assets hasn’t been communicated to any loved ones. This makes it far more difficult to locate some of the following assets:

• Bank accounts
• Brokerage accounts
• Property titles
• Insurance policies
• Interest holdings in partnerships or corporations

Records of these assets, and the ability to access them, are necessary to complete probate and ensure all heirs and beneficiaries receive their share.

Who is Authorized to Access a Decedent’s Assets?Although family members may perform a basic database search following the estate owner’s death, they will find it difficult to get information about, let alone access to certain things like retirement or bank accounts. If the decedent planned ahead, they may have named a third-party to be able to ask questions or access the account in the event of an emergency or their death. But if no other party has been given the authority to access that information, most financial institutions will require letters testamentary or court orders to release information. Often it falls to the estate’s executor to access those assets. Also termed an administrator, executors are empowered either by the decedent or by the courts to manage the decedent’s affairs following death.

A probate case concerning the estate will need to be opened before an administrator – independent or dependent – can start accessing assets.

An independent administrator is named in the decedent’s will and has broad powers in discovering and managing a decedent’s assets. A dependent administrator is designated by the court if no one is specified in the will. Dependent administrators are limited in comparison to independent executors and must receive court authorization before they can access or make any decisions regarding the estate’s assets.

Leaving Assets Behind? Create and Leave a WillIf you know you’ll be leaving behind considerable wealth, invest a small amount of time into creating a will. Though it is fairly simple to create one, it is recommended to have an estate planning attorney help with this. (We are currently working with a client where the decedent used a software program to create her will, and there are lots of problems with it that have caused the client to hire our firm to resolve.) Once you have created your will, put it in a place where loved ones can easily find it. Make sure an executor has been named. Your will should also include a general summary of the estate’s assets and where they can be found. This information will be valuable when it’s time for your executor to gather property for probate.

Where Can an Executor Search for a Decedent’s Assets?If no estate planning documents are available to provide an inventory and location of assets, the only option is to begin a thorough search that may include the following:

• Searching the decedent’s home for documentation – The first step in every asset search is surveying the decedent’s home for any helpful documentation. This could be a will, but it could also be property titles, account passwords, contact information for an attorney or CPA, or anything else that could be helpful in guiding the executor. If important paperwork is at the decedent’s home, it may be located in a filing cabinet, a safe, a lockbox, or another secured container. If you are lucky, the decedent will have everything specified in the documents they leave behind. If not, you’ll need to dig deeper.
• Searching the decedent’s phone or computer for information records – If a home search doesn’t turn up any critical paperwork, an independent administrator (or authorized dependent administrator) can search the decedent’s phone and computer for information. Chances are, these devices will be secured, but administrators may hire a computer forensics expert to crack through the device’s security and search for passwords, account information and the like. Authorized administrators are allowed to hire anyone they deem necessary to access the decedent’s assets.
• Contacting financial institutions and working with them to access accounts – Regarding bank, brokerage and retirement accounts, the first step is locating them. This can be a major challenge itself, and it may only be the beginning. Once the decedent’s accounts have been identified, the administrator will need to open up communication with the relevant banks or financial institutions. The mission here is to convince the institution to provide account information, but this rarely comes easy. The manager in charge of the decedent’s account likely won’t have the authority to provide this information. Further, banks almost always deny account information requests unless compelled to do so.
• Seeking court orders to authorize access or compel a third party to cooperate – When access-related roadblocks do emerge, and they will, administrators will need to get the courts involved. In most cases, financial institutions will provide the desired information if they receive a court order, but it must include the right provisions. If financial institutions are particularly stubborn, they can be compelled to respond to a court summons and explain their reasoning. In the majority of instances, it won’t come to this.
• Locating the decedent’s accountant, attorney or insurance agent – The decedent’s accountant, attorney and insurance agent can provide extremely valuable insight into the decedent’s assets, where they may be located, and whether the estate is involved in any judgments. You can track down essential financial documentation such as tax returns as well.

Searching for a Decedent’s Assets? Consult with an Experienced Estate Planning AttorneyIf you’ve stepped into an administrator role and are responsible for tracking down a decedent’s assets, it can be overwhelming. Our firm has assisted many administrators in this process, and it typically requires detailed, creative thinking to complete. If you’re an estate’s administrator or a potential heir, and you’re not sure what the next steps are, our expert team of CPAs and attorneys can offer solutions and expedite the process of finding a decedent’s assets.

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Talk of condemnation and eminent domain are standard for most attorneys, but they are not as well understood by the general public. This is due in part to the multiple definitions of condemnation. The most widely accepted explanation of this term is generally the declaration of something as reprehensible or wrong, or the declaration of something as unfit for use.

However, when it comes to condemnation and eminent domain and their relation to each other in the legal sphere, the definition rings a little different.

The Basics of Condemnation and Eminent DomainThe power of eminent domain is the government’s right to take private property that is intended for public use. In this scenario, condemnation describes the process by where a government agency can utilize the power of eminent domain.

Condemnation and eminent domain have long been an issue in American history as the country has grown and required modifications of land for the people who live on and around it. For example, as a form of condemnation, the government may need a particular piece of property to:

• build or expand a public road
• enact measures for flood control
• perform infrastructure work such as building a school

Under the lens of eminent domain, the government does have the power to take property used for public use, but both the federal constitution and state laws require fair compensation be paid to the landowner. Specifically, the United States Constitution features the Takings Clause, which stipulates that the government cannot take property without providing just compensation to the owner.

As you might imagine, there is not always an agreement as to what constitutes as fair. For this reason, it is not uncommon to have hearings and disputes with the government over the property’s land value and the amount being paid for it. Contrary to what you may think, there does not have to be a final determination of just compensation before the government may take possession of the property.

Many times, the property is already in the process of public use while the parties are still debating the land value. As explained below, the parties can agree to government use of the property while the fair value is later determined in hearings and appeals.

The Main Steps in Condemnation and Eminent DomainThere are two main steps that must happen in a condemnation and eminent domain case:

1. Determining if the land in question is required for public use
2. Determining how much the property is really worth

When it comes to confirming land is indeed intended for public use, the government must indicate what they plan to use it for. Often in Texas, the government is serious about the process because it is needed to promote community safety via widening a road, expanding a landfill, or managing flood control.

However, there are instances in which someone could question the legitimacy of that public use. For example, if certain members of the government have become corrupt and abuse the process by taking land they do not need in the name of some political issue, it can be challenged. Proving corruption and an abuse of power can be an uphill battle. Another example might be if the government says they need six inches of a person’s land to widen a road. Six inches is not much; therefore, it may be questioned if there really is a proper “public use” argument. Yet, the landowner can be at a disadvantage in winning these cases if a safety issue is involved.

Once it has been established that the piece of property is indeed for public use, the next step is determining how much the land or property is effectively worth. This also includes consideration of how much the taking of that land might reduce the value of any remaining land on the property.

For instance, taking six inches out of a person’s front yard can be relatively minor in comparison to the size of the yard left behind. However, if it is proposed that 20 feet be taken out of a front yard, it could mean that the property will no longer have much of a yard at all, which in turn can significantly affect the value of the house. In situations like this one, the government may be forced to take an entire lot even though they only need 20 feet of it solely because of the damage it will do to the remaining lot.

The Sometimes-Unusual Timeline for Condemnation and Eminent DomainAlthough some might think the process of condemnation and eminent domain would be linear, there are times when it is not.

Once both parties have agreed that they are not going to challenge the public necessity of the property, a special commissioner’s group may convene and determine the initial price they will offer for the property.

At this point, the government can go ahead and begin clearing and using the land for the intended public use even though there may still be quibbling over the price.

For example, the original value determination may be $5 per square foot. It is possible that the landowner could find an appraiser to testify that the property is actually worth $8 per square foot. Should this be proven in a court of law within the county of the property, the landowner might end up making more money than previously thought. That said, if during the litigation it comes out that the property is actually only worth $4 per square foot instead of $5, the landowner will likely lose that extra dollar per square foot.

However, in most cases there tends to be a settlement that ends up being somewhere between the initial offer and the new appraised price, which negates the need for litigation. Still, there are some cases that will go to court to determine the rightful value of the property.

If you have questions about condemnation and eminent domain, protect your rights by consulting with a reputable and experienced attorney.

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A receivership is a legal process through which a “receiver” (or trustee) is given limited control over an individual’s or entity’s assets in order to protect those assets and ensure they can be used in transactions with creditors.

Receiverships are typically requested by creditors and ordered by the court, though they may be established by a regulatory body, such as the FDIC, or requested by a private party. The court may also appoint a person as the receiver when ordering the receivership, but not always. In some instances, the court may request the parties involved to agree on a receiver, who then steps into the role.

When Is a Receivership Needed?Receiverships are usually requested by a creditor seeking payment from a borrower in default. Once requested, they are authorized through a court order or an order through a regulatory body. Creditors ask for a receivership in order to protect the assets owed to them.

Other instances when a receivership may be required include:

• During a bankruptcy case – During bankruptcy proceedings, the court may appoint a receiver to manage the bankrupt entity’s assets and oversee their liquidation. By entrusting the assets to a receiver, creditors know their interests are protected by an independent third party.
• When an entity’s principals cannot negotiate a decision – If partners or shareholders dispute the ownership of assets within the entity or cannot otherwise come to an important business-related decision, they may request a receivership. In this instance, the receiver acts as an impartial manager for the entity’s assets while its principals work through their disagreement. This is common for businesses heading toward bankruptcy and in the process of liquidating assets.
• When mismanagement of a trust or estate is suspected – Receiverships may necessary in the case of family disputes over the management of trusts or the assets in a decedent’s estate. Parties who suspect trust or estate assets are being misused or not allocated according to the grantor’s or decedent’s wishes may motion the court to appoint a receiver to manage the assets according to estate documents or private agreements.
• When a company has acted fraudulently – If a company is suspected of fraud, a government regulator may order a receivership to prevent assets from being lost or hidden from creditors. When a receiver is appointed during a fraud case, they may be given expanded powers to discover litigation and attain financial documentation.

What Can a Receiver Do with the Assets They Are Trusted With?The court (or regulator) dictates the terms of the receivership upon its creation. Among these terms are the powers granted to the receiver, which may include:

• Making any decisions allowed under an entity’s charter, articles or bylaws or allowed by any previous agreements or estate documents
• Taking any actions deemed necessary to manage the company’s business affairs
• Purchasing or leasing vehicles, equipment or other materials necessary to run the business
• Making payments to creditors
• Making any payments necessary to preserve the receivership’s assets
• Borrowing funds to maintain the company’s operations
• Engaging in legal action, or responding to legal action against the business
• Paying out – or cease paying out – dividends to shareholders
• Redistributing disbursements to beneficiaries per agreement and court order

In the case of a receivership of business assets, the company’s original owners remain the material owners of the entity, but their powers are greatly limited once a receivership is instituted. In the case of a trust or an estate, the powers of the trustee or executor may be greatly limited or temporarily removed during receivership.

What Are the Receiver’s Responsibilities?Receivers are expected to act as good stewards for the assets they are trusted with. This includes:

• Making decisions that protect the assets and property
• Observing concepts like fair market value (FMV) when liquidating assets
• Ensuring a company operates within the bounds of all government regulations
• Collecting funds from asset liquidation and pay out creditors
• Help steer the entity toward a period of recovery
• Observing all provisions in the court order authorizing the receivership

Receivers are empowered by the courts to essentially act as the entity’s primary decision maker, but this comes with major responsibilities.

Qualities to Look for in a ReceiverReceiverships consolidate a great deal of decision-making power into a single individual. Given their role, receivers should bring the following qualities to the case:

• Prior experience as a receiver – Receiverships demand a breadth of skills (accounting, business management, communication, legal) that are difficult to find in a single person. If an individual has proven themselves in prior receivership roles in the past, they will be better prepared to manage future receiverships. Our staff includes accounting and legal professionals who have performed in receivership roles for decades – including receiverships where judges sought us out in particular.
• Legal experience – Receivers must be certified accountants before they can take on a receivership position. However, some receiverships involve complex legal matters like executing or responding to litigation. Receivers are also expected to observe all applicable regulations when making their decisions, and these regulations may have legal consequences. A receiver who can provide specialized legal knowledge can consider the financial and legal consequences of every decision.
• Trustworthiness – Receivers may have considerable latitude in how they manage a company’s affairs. They must also serve as an impartial third party. Trust is an important quality in a receiver as they must put aside their personal biases when acting in the role. The courts will look for an established accountant or attorney – preferably one with past receivership experience – to ensure the receiver is trustworthy.
• A steady demeanor – Receivers are frequently thrust into the middle of situations where emotions are running high. Shareholders may hotly contest which assets to liquidate if they are facing bankruptcy. There may be legal action between the entity’s principals, so their legal teams may not even get along. Receivers are expected to manage these emotions as they make the best decisions for the business.

Receiverships Are a Powerful Solution for Protecting Assets and Creditors

Receiverships are a valuable asset-protection tool and can resolve deadlocks that may hold up bankruptcy proceedings, fraud cases, or internal disputes within a company. Though typically court-ordered, receiverships are also appropriate for private parties looking for an impartial, expert asset manager while important decisions are negotiated.

If your case requires a knowledgeable receiver that offers accounting and legal expertise, the May Firm can provide receivership services grounded in decades of experience.

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Everyone’s got an opinion on taxes, but only tax attorneys are qualified to give an expert opinion that holds legal weight. There are many scenarios where seeking a tax attorney’s guidance is beneficial, including the following examples:

• You need to know if a transaction qualifies as income or triggers a deduction
• You need to verify that your tax returns have been properly completed and filed
• You need to know what the tax implications are of a transaction before it is made
• You need to know if any tax complications may affect a transaction
• You need protection from tax penalties in case a transaction is revised by the IRS

In short, tax opinions by a qualified tax attorney are an important planning and protection tool for individuals and businesses. They can cover a broad range of tax-related topics and can guide people through complicated tax situations.

Why are Tax Attorneys Best Qualified to Provide Tax Opinions?A tax accountant – even a CPA – is an excellent professional to work with for tax preparation and some tax planning services. However, tax attorneys are the experts to consult with when your tax picture is uncertain. Here is why:

• Protection in case your transaction’s categorization is disputed – In some instances, if a taxpayer files their taxes in accordance with their attorney’s advice, they will be protected from harsh penalties if that guidance turns out to be incorrect. This protection is extended to tax preparers, so if your taxes are professionally prepared and filed following the guidance of a tax attorney, both the taxpayer and their preparation specialist are protected.
• Advanced knowledge of tax laws and provisions – Tax attorneys are deeply familiar with the tax code, at the federal and state levels. They are also familiar with certain localities’ tax codes, typically in the areas where they practice. Tax attorneys also understand legal procedure when it comes to tax regulation and possible future disputes. While accountants understand how best to code the transaction or deduction on tax forms, tax attorneys understand how to argue use of that code.

A Few Examples of Transactions That Need a Tax Opinion Tax opinions can be provided for most tax questions or concerns. Experienced tax attorneys have worked with enough clients on enough cases to provide useful guidance in an array of situations. A few common examples include:

• 1031 like-kind exchanges – 1031 like-kind exchanges come into play when selling and purchasing investment real estate. With a 1031 exchange, taxpayers may defer their capital gains taxes if they follow the qualifying rules under the IRS’s 1031 provision. These rules can be complicated (the property must qualify as like-kind, for instance) and if they aren’t followed, it can be costly.
• Business mergers and acquisitions – Business mergers and acquisitions have far-reaching and highly complex tax implications. Buyers need to know the tax basis of any assets they are purchasing to track gains or losses. Net operating losses (NOL) must be calculated and allocated to offset future tax burdens. Tax credits (carryover and refundable) and deferments are also a point of consideration, as they may be passed on to the acquiring business.
• Bankruptcies – Bankruptcies come with their own set of tax-related challenges, as people filing bankruptcy must plan how to satisfy creditors while also maintaining tax payments. Our firm regularly assists bankruptcy filers with arranging their finances, signing contracts, and negotiating with both the IRS and creditors to ensure all requirements are met. This requires plenty of informed tax opinions to get right.

These are only a few examples to illustrate when a tax opinion makes sense. As every taxpayer’s situation is unique, tax attorneys are ready to provide guidance on any tax question a client may have.

Tax attorneys may provide their opinions with varying levels of confidence. For example, an attorney may use prior case law and the tax code to demonstrate clear authority behind their opinion. When tax attorneys are confident, they will use language such as “will” and “likely”. In situations where the picture is less certain, an attorney may clarify that their opinion “should” hold or that there’s a better than 50/50 chance of it being correct. If the attorney’s opinion isn’t based on clear authority but may possibly be substantiated in court, the opinion is referred to as “non-frivolous.”

The degree of protection conferred by an attorney’s opinion depends on the confidence with which they provide it.

Three Reasons Why a Tax Opinion May Be NeededAn attorney’s tax opinion can provide valuable insight and protection, and is therefore needed in the following situations:

• When peace of mind is required – Tax opinions can provide valuable peace of mind to taxpayers facing a challenging tax situation. An attorney can help their clients achieve this peace of mind by offering informed guidance and protection from IRS penalties.
• When a contract requires it – Some parties to an agreement may require an official tax opinion regarding certain provisions in the contract before they sign.
• When it’s induced by a third party – A taxpayer may be induced to acquire an attorney’s tax opinion if there are questions, concerns, or scrutiny regarding their taxes.

Tax Concerns or Questions? An Attorney’s Tax Opinion Can Provide Needed GuidanceWhether you need a tax opinion for your own planning purposes or as part of another transaction, a trusted tax attorney can provide it. Our firm frequently helps taxpayers navigate transactions that will likely trigger tax consequences. We are well-prepared to provide an official tax opinion to those seeking clarity and peace of mind.

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To begin, all business entities, partnerships, limited liability corporations (LLCs) and corporations must maintain important documentation that specifies how the entity is to be run. These entity documents may be referred to as:

• An operating agreement or a company agreement (LLCs)
• A partnership agreement (general and limited partnerships)
• Articles of incorporation (incorporated entities)
• The bylaws (also corporations)

These documents differ slightly, but they serve the same purpose – to establish a high-level understanding of how your business is organized and who can make which decisions. You will need this documentation to do business with other organizations and to support any transactions your business is involved with.

Our practice regularly assists business owners with their entity documentation. It can be complex, so what follows is a guide to the entity documentation you will need when forming your business.

Limited Liability Corporations: The Operating or Company Agreement LLCs are governed by an operating or company agreement that defines the following:

• The LLC members and the equity they own in the business
• Who is authorized to do what (for example, who can transact with a business account)
• How membership voting is handled and how membership votes are counted
• How membership meetings are arranged
• The LLC’s entity and type of tax structure
• The buyout provisions, in case a member wishes to buy or sell additional equity

Ideally, the operating agreement will be created when the LLC is first formed, but it can also be developed after the LLC is created, as long as all members agree to its provisions. Most states do not require the LLC to file an operating agreement, but if an operating agreement isn’t on file with the state, the state’s own provisions will take precedence if there are questions about how the LLC should operate.

A common question asked is whether a single-member LLC needs an operating agreement. The answer is yes. Operating agreements are important, even for single-member LLCs. The sole member of an LLC presumably has complete control of the business and can perform everything necessary to run the company. However, other parties – including banks and other lending institutions – will need verification that this is the case. An operating agreement provides this verification and confirms who may make transactions on behalf of the LLC.

Partnerships: The Partnership AgreementPartnership agreements are similar to operating agreements but include additional provisions that identify the role each partner will serve for the business. Overall, partnership agreements typically include the following:

• The type of partnership – whether a general partnership or limited partnership
• Who will serve as the general partner and as limited partners
• Each partner’s contributions and ownership stake
• Each partner’s duties and areas of control
• How the partners are paid (distributions, dividends, profits, etc.)
• Whether new partners can join, any limitations to joining new partners, as well as the process for doing so
• The requirements that must be met for a partner to leave, and whether or not a buyout is required
• Partnership dissolution and wind up
• How disputes among partners are handled

Every partnership agreement is slightly different, as the exact provisions are governed by the type of partnership and the wishes of the partners. For example, our practice regularly establishes family limited partnerships (FLPs) for the family-owned businesses we serve. There are a couple of unique provisions that may be written into FLPs, such as:

• The business is not required to make distributions to partners
• Limited partners may not take control over the business, under any circumstances
• Certain conflicts of interest are understandable and excused

With these provisions, the idea is to give the general partner maximum control over the business while limiting the liability other partners face.

We recommend FLPs for estate planning reasons, as limited partners receive a large federal tax discount on their share of the company’s assets. This discount can be up to 30 percent for some people.

This is just one example – partnerships can be customized to fit the partners’ (and company’s) needs. A business lawyer can help fine-tune the agreement to fit these preferences.

Corporations: The Bylaws and Articles of Incorporation Corporate entities are governed by a pair of documents – articles of incorporation and the bylaws. Here is a brief summary of each document:

• Articles of incorporation – The articles of incorporation are mostly used by external parties (such as lending organizations) and must be filed with the state. They must include the company’s name, the type of corporate entity and other identifying information. This document is quick to put together, but it must be perfectly accurate, as it will be used to verify the company’s processes, ownership, and status.
• The bylaws – The bylaws are primarily for internal use, as they describe how the corporation organizes its shareholder meetings, when those meetings are to be held, who the company’s directors and officers are, what happens in the instance of a director vacancy, when and how directors may be removed, the board’s responsibilities, how the company may issue stock, how disputes are handled, and dissolution and wind up procedures. In the bylaws, owners may establish how many directors are required to establish a quorum (the number needed to officially meet or vote). The bylaws can also specify what constitutes a majority for voting purposes, and whether agreements may be made outside of meetings.

Your company’s bylaws have a major impact on how your business is run internally and who ultimately makes high level decisions. As such, it is an important document to get right, so it is recommended that you author your company’s bylaws during entity formation.

Other Entity Documents a Business Should KeepMany business owners think that once the entity is established with the proper documentation, that’s it. No further documentation (hard copy or electronic) is necessary. This is not the case.

In corporations, directors will hold meetings to discuss and make certain decisions. These meetings should be documented in meeting minutes. If a meeting cannot be held, a Consent in Lieu of Meeting may be required. LLCs, even single member LLCs, are required to keep documentation consenting to certain actions taken. In corporations, if a board is deadlocked on a decision or it is unclear whether an action they have taken will be accepted by the shareholders, the shareholders can enter into a Shareholder Resolution, which must also be drafted and signed by the required shareholder percentage. That percentage should be explained in the corporation’s bylaws.

If assets are transferred (often in LLCs or Partnerships), there must be Assignments of Interest or Buy/Sell Agreements.

Not all actions or transactions require documentation, but there are those that do. Certain transactions must be documented for tax purposes or when stakeholders wish to see documentation supporting an action that was taken.

If you aren’t sure whether, or how, to document an action, an attorney can offer guidance.

A Reputable Business Attorney Can Help with Business Legalities and Entity DocumentationEntity documentation makes your business official in the eyes of outside parties. It is also necessary for establishing your company’s management and decision-making procedures and confirming that all formalities have been met to make a transaction official.

Whether your business already exists or is being formed, a business attorney can help you customize your entity documentation to meet your shareholders’ and company’s needs.

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Executors are individuals that are named either in a final will and testament or by the courts, following an estate owner’s death, and are responsible for carrying out the wishes of the decedent according to the instructions of the will. Once named, the executor assumes administration of the estate, its assets and the decedent’s will. In this way, an executor serves a double role as fiduciary and administrator.

It can be an honor to serve as an executor as the position implies trust, but it also comes with many responsibilities. Often the responsibilities are so great that executors do not have the time or expertise to handle them. In those cases, probate attorneys and accountants can provide expert guidance and assist with case management.

What Are an Executor’s Responsibilities?

An executor is entrusted by the decedent, or the court, to carry out the decedent’s wishes. This includes proper management of the decedent’s estate.

Some of the executor’s duties include:

• Gathering all documentation relevant to the estate’s finances.
• Submitting the will to a probate court.
• Communicating with anyone who has an interest in the estate. This could include heirs and creditors, as well as agencies like the Social Security Administration.
• Taking an inventory of the estate’s assets and presenting it to the court.
• Ascertaining fair market value (FMV) for all inventoried assets.
• Determining which assets are required to pass through probate.
• Alerting all beneficiaries, heirs, and creditors to the probate process.
• Managing the estate’s assets and transferring them to beneficiaries.

Executors can be paid for their time, but in many cases where the executor is a family member, executors will forego payment for their executive duties as the compensation must be declared and is still taxable. Furthermore, any compensation paid to the executor is paid out of the estate’s assets. In many cases, executors are also beneficiaries of the estate, and taking payment would reduce the amount left to disperse to themselves as a beneficiary. The duties of an estate executor can be a major undertaking . Beyond simply taking inventory and dividing and distributing property, the executor must create a tax ID number for the estate, and must file estate tax returns. For large estates, it is common work with an accountant and probate attorney to ensure that all assets are properly accounted for and forms are filed on time.

Challenges That Executors May Face During Administration

Although some estates are small and simple enough to manage without difficulty, executors regularly face additional complexities, such as:

• Discovering assets that may not be clearly defined anywhere in the decedent’s documents
• Establishing accounts just for the estate
• Dealing with potential conflicts of interest
• Resolving outstanding lawsuits or other legal actions involving the estate
• Mediating conflict between beneficiaries
• Demonstrating validity of all documentation to the court
• Resolving confusion or uncertainties in the will
• Handling complex assets or investments, such as business ownership

If any of the above are present, an accountant or probate attorney can advise the executor on making legally defensible decisions. Probate attorneys can also walk the executor through the process and ensure it is properly managed.

For example, a client we recently represented was the executor of an estate that included a condo. While selling the condo, the court disputed whether it was being sold at FMV. We had to reach out to an independent appraiser to prove to the court that the transaction met FMV standards. Our firm regularly encounters and resolves roadblocks like this.

Executors: Independent vs. Dependent Administrators

Executors may be considered independent or dependent administrators of the decedent’s estate and affairs. Here are the differences between the two:

• Independent administrators – Independent executors are either named in the will or are appointed by the court if all beneficiaries agree with the decision.
  In Texas, independent administrators are given additional latitude to engage in transactions on the estate’s behalf.
  Independent administrators must submit an inventory of all assets, a value appraisal of those assets, and any claims against the estate. Once this is provided, the court’s involvement will be minimal. Essentially, the executor will have the agency to pay creditors and transfer assets to beneficiaries without notifying the court of every decision.There are limitations in place to prevent independent administrators from breaching their fiduciary duty. For instance, the court may appoint a lawyer to represent any heirs that are not present during the probate process, to ensure they are fairly considered.
• Dependent administrators – Dependent administrators are usually appointed by the court if no executor is named in the decedent’s will, or if the decedent died intestate (without a will).Dependent administrators must receive court approval before finalizing any transactions between the estate and other parties, including beneficiaries, creditors, or financial institutions.The added court oversight can slow the administration process down, but it’s helpful for contentious or complex cases. Dependent administration is also recommended if the executor is inexperienced in estate management or has potential conflict of interest issues.

Three Things to Remember if You’ve Been Named an Executor

Our firm has assisted many executors entrusted with high-value estates. Along the way, we’ve compiled a short list of important things to remember when being named an executor, including:

• Bring everything to the court at the same time – Dependent administrators have to verify every estate-related decision with the courts. Given the court system’s procedural nature, this can be time-consuming. As such, we advise our executor clients to consider every possible decision before approaching the judge. If you can get everything approved at once, it will save multiple trips to the courthouse and prevent bottlenecks from emerging while managing the estate.
• Observe a clear division between estate and personal accounts – Prior to and throughout the probate process, the executor will need to prove they are properly managing the estate’s assets. That means clear accounting. To establish this accounting transparency, it’s vital that the executor create a separate set of bank accounts just for the estate. This will make it easier for the executor to organize the estate’s finances and to establish a clear accounting trail for all transactions.
• Get the process started early – Probating an estate can take years, and it’s an expensive process. It isunwise to prolong probate. If you get started right away on gathering documentation, getting court approvals, and appraising assets, you’ll extract maximum value out of the estate and lose less of it to probate.

Why Should Executors Work with a Probate Firm?

If you’ve got the time, experience, and confidence to administer an estate, you may only need an attorney or accountant when complicated questions arise. For everyone else, there are good reasons to partner with a probate attorney or accountant. For example:

• An accountant can create a clear division between personal and estate finances – Accountants can establish a clear division of accounts and assets between the executor and the estate. This will protect the executor from a common, and potentially serious, mistake – intermingling personal assets with estate assets.
• An attorney will ensure their client acts as a proper fiduciary – Executors must make reasonable financial decisions on the estate’s behalf. For example, all assets must be liquidated at fair market value and creditors must be paid according to priority. A probate attorney will advise their client on how to meet these fiduciary requirements.
• A law firm will prevent their client from becoming overwhelmed – Estate administration requires an attention to detail and organization, as there are rigid procedures to follow at every step. For inexperienced executors, it can be too much for one person to take on. A law firm which specializes in probate will oversee important details such as deadlines and documentation, preventing their client from becoming overwhelmed in the process.

Estate administration is a major undertaking, even for those who have done it before. If you have recently been named the executor in a will or by the courts, a probate attorney or accountant can guide you through the process and ensure you take every necessary step in acting as an effective executor.

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As individuals take steps to prepare for their future, one of the more confusing areas for many are fiduciary roles in estate planning and probate. Questions about this topic can range from, “What is a fiduciary?” to “What are their roles?” To create a proper estate plan and create a trust, it is critical to first understand the answers to these questions to ensure that your wishes are followed and your assets are protected.

Fiduciary Roles in Estate Planning and ProbateBefore we begin talking about fiduciary roles in estate planning and probate, it is important to review the definition of a fiduciary. This role is filled by a person who is willing to take on the highest legal responsibility one can have when it comes to taking care of another party’s assets and property. This means the fiduciary is a person who is willing to act on behalf of another individual in a legal capacity. A fiduciary agrees to put a client or beneficiary above any interests of their own, avoid related conflicts, and fulfill their legal duty in a manner that can be accounted for in a court of law.

A fiduciary trust involves a trustee who has fiduciary responsibilities to manage an individual’s assets and/or act on behalf of the individual when necessary. This is often used as an estate planning tool designed to help delegate inheritances and arrange for charitable contributions, among other things.

There are two primary types of trusts:

1. Intervivos trust. This type of trust is created immediately by simply transferring property to a trust or trustee for the benefit of one or more beneficiaries. An intervivos trust is created while a person is still alive. For this reason, it is sometimes referred to as a living trust.
2. Testamentary trust. This type of trust does not exist until the grantor dies, at which point there will be a set of provisions stated in the grantor’s will which then constitutes a trust agreement by appointing trustees, funding the trust with corpus or property, and determining how it will be distributed amongst beneficiaries (such as at a certain age, for the purpose of college, for the purpose of maintenance support standards, etc.).

When forming a trust, trustee(s) must be named who will have fiduciary duties.

Other fiduciary roles in probate and estate planning are executors and guardians. The executor is a person named in a testamentary will who will be the person in charge of administering the decedent’s estate – inventorying and dispersing property to decedents, filing tax returns on behalf of the decedent and the estate, and all other miscellaneous tasks. A guardian is typically a person (or a couple) named to take care of minor children, but a guardian can also be responsible for taking care of certain property or the testator, if they are not deceased, but simply incapacitated. It is not possible for a fiduciary to be both a guardian and an executor if the guardian role occurs while the testator or grantor is still alive. It is, however, possible to be an executor of the probate and estate and also be the trustee of a trust that is created out of it.

Responsibilities of a fiduciary in the trust of an estate could include:

• Adhering to all specifications and directions stipulated in the Declaration of Trust.
• Maintaining precise financial records to be used for taxes and to supply to beneficiaries.
• Investing trust assets when needed in a conservative manner that requires only a small risk.
• Relaying actions to the beneficiaries as stipulated in the trust.

The fiduciary does have a responsibility to get someone else involved if investments must be made to keep the money in the trust growing. In this respect, a trustee does have a prudent investor duty that comes with a certain level of discretion.

The duties of the executor include adhering to the decedent’s wishes and prioritizing the interests of the beneficiaries. This includes protecting the decedent’s assets, paying debts and taxes, as well as distributing the estate according to the terms of the will. Proper accounting and reporting to the probate court is also required.

When Fiduciary Duties Are BreachedThe above levels of discretion for trustees are where issues can and do occur – and can manifest in the following ways:

• Using the trust’s or estate’s assets for personal gain rather than beneficiary gain.
• Comingling the fiduciary’s funds with the trust or estate funds
• Dispersing funds to one beneficiary more favorably than another beneficiary
• Allowing estate or trust property to be wasted, fall into disrepair, or not be invested wisely

A fiduciary’s responsibility is to protect the trust or estate. Therefore, in the case of a trust, it would be a breach of duty for the trustee to invest trust money into something simply because the trustee has access to it. This is primarily an issue for unsophisticated trustees who are anxious to support pet projects they like. It would also be a breach of duty for a fiduciary to use the trust money to work out their own deals and loan the money back and forth.

When appointing guardians, many individuals choose two guardians as fiduciaries—one to aid the person with doctor appointments, living arrangements, and medications, and the other guardian to control the assets and real property of the incapacitated person’s estate to make sure nothing is wasted. In the case where a fiduciary is the guardian of the estate of an incapacitated person, there may be issues with beneficiaries or family members. For instance, if a mother is allowing her two daughters to spend their mother’s money, a guardian can step in and stop this from happening so the mother will still have enough money left to provide for herself.

Fiduciary duty is the highest level of legal standard that a person can be held to under U.S. law. Fiduciaries are required to uphold a duty of care and a duty of loyalty to the beneficiaries of an estate or trust at all times. That is why it is important to use discretion when choosing who will be named as your executor, trustee, or guardian.

Unfortunately, and in spite of a grantor’s best effort to choose a trustworthy fiduciary, breach of fiduciary duty is not uncommon. These types of situations are handled by law firms annually. Beneficiaries who feel they have been wronged by trustees can make a claim against a fiduciary and enlist legal representation.

How An Attorney Can Help with Understanding Fiduciary Roles in Estate Planning and ProbateBefore creating a trust for estate planning and probate, it is wise to consult with an estate planning attorney. Legal counsel can help educate you about the types of trusts and which might be the best for your specific needs and goals. This can go beyond establishment of the trust and extend to other financial areas such as taxes.

All too often, individuals who use inexperienced family members or trustees as fiduciaries can experience unnecessary complications that could potentially have been avoided by enlisting the help of reputable legal counsel.

Beneficiaries of trusts and estates who feel they are not receiving distributions as a grantor intended can also enlist the help of an attorney to determine if the trustee or executor is acting according to legal standards and best practices. An experienced attorney can also help beneficiaries bring claims to remove a trustee or executor, so the beneficiary can access assets that are rightfully theirs.

For more information about fiduciary roles in estate planning and probate, make an appointment for a consultation with a reputable estate planning attorney who has demonstrated proven experience and success in this particular area of law.

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Foreclosure is a legal process in which a borrower or debtor forfeits their right to property by defaulting on payments or other obligations. In Texas, once a debtor is in default, the creditor must send notice to the borrower that they are in default and have 20 days to cure. If, after 20 days, the default continues, the creditor has the right to post notice of a public foreclosure sale. It is during this process that a debtor will file for bankruptcy. The foreclosure process would then be halted by an automatic stay – a provision in the bankruptcy code that kicks in as soon as a debtor files for bankruptcy. While in effect, an automatic stay prevents the creditor from pursuing collections against the debtor – with some limitations.

On the creditor’s side, automatic stays complicate the collections and foreclosure processes. However, creditors may move to lift a stay to resume foreclosure and recover payment.

Automatic Stay Details: What it Prevents and How Long it Lasts

As per Section 361 of the U.S. Bankruptcy Code, an automatic stay goes into effect as soon as a debtor files for bankruptcy – either Chapter 7 or Chapter 13 (or Chapter 11 for business entities). Because it is implemented instantly, it is common for debtors to wait until the last moment before filing bankruptcy to give themselves maximum time to act.

Once an automatic stay is in effect, it will prevent the following actions:

• Moving to foreclose a property
• Creating, perfecting, or enforcing a lien
• Repossessing collateral
• Garnishing wages

Automatic stays only provide temporary protection. If the debts are not discharged in bankruptcy, they remain the debtor’s obligation.

If the stay is not lifted by a court order, it will typically remain in effect as long as bankruptcy proceedings are ongoing. For Chapter 7, this could mean several months. For Chapter 13, this could mean several years.

Debtors must continue making post-petition payments, including taxes, and maintaining insurance on the property. If debtors fail to do so, they risk losing their objection to lift the stay.

Bankruptcy courts may alter an automatic stay if a debtor is potentially “gaming” the system to avoid payment. For example, if a debtor has filed for bankruptcy more than once within the previous calendar year, the stay may be reduced to 30 days total. If the debtor has a history of bankruptcy filings, the court may remove the automatic stay entirely.

When an Automatic Stay is Helpful for Creditors

Automatic stays are primarily a tool for debtors, but they can benefit some creditors, too. If a property has multiple liens against it, an automatic stay freezes collection attempts by all creditors. This gives the court time to organize repayment to all lien holders, giving every creditor a fair chance to attain compensation, though lien priority dictates who is paid back first.

Lifting an Automatic Stay to Continue Foreclosure

Bankruptcy delays the foreclosure process, but creditors may continue foreclosure if they have the stay lifted. The burden of proof falls on the creditor to demonstrate why the automatic stay should be lifted, and reasons given may include:

• Insurance doesn’t adequately cover the property. We recently participated in a case where two hearings were needed to determine whether a particular commercial insurance policy was sufficient for the property in question. After determining that the policy was not sufficient, the stay was lifted.
• The creditor’s business stands to lose money if the stay is not lifted.
• The property is falling into disrepair.
• The property’s value will decline to the point where selling it will not cover costs following bankruptcy proceedings.

Motions to lift an automatic stay are considered on a case-by-case basis by the bankruptcy court. Prior to making a decision, the court will hold a hearing for both sides to make their argument. Sometimes the court will agree with the creditor that the stay should be lifted and foreclosure may continue. Sometimes the court will keep the stay in place.

Courts are more likely to keep the stay in place if the debtor is only a few payments behind and can continue making payments. The debtor must also be able to maintain insurance and tax payments. The court will also be more likely to keep a stay in place if the debtor elects to sell the property and use the proceeds to pay creditors back.

When is the Court Likely to Lift an Automatic Stay?

The court will be more likely to lift a stay and allow foreclosure to continue if:

• The debtor’s equity does not cover the liens held against the property. This is more likely to be the case if there are multiple liens taken against the property. If the liens held against the property are worth more than the property itself, the debtor cannot sell the property unless secured lien holders agree to take less. In this case, the bankruptcy court may force a sale to liquidate the property and pay off lien holders in priority order.
• The mortgage is greater than the property’s worth.
• The debtor is too far behind on payments to catch up within a reasonable timeframe.

Delayed by an Automatic Stay? An Experienced Real Estate Attorney Can Help

Foreclosure battles can be contentious between creditors and debtors, especially when a bankruptcy stay is involved. And ultimately, whether the stay is lifted or allowed to stand is based on subjective factors. This means either side can win with better preparation and knowledge of the law.

An experienced attorney can provide both for a client. Our practice, for example, specializes in representing creditors involved in bankruptcy proceedings. We can help organize motions to have a stay lifted, allowing creditors to complete foreclosure and recoup what they can on the property.

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The U.S. economy attracts more foreign investment than any other, as it is stable and largely trustworthy. In 2021 alone, foreign investors pumped nearly $5 trillion in inward investments, much of this dedicated to real estate development. Opening the economy to so much foreign investment brings certain risks with it, but the truth is that the vast majority of noncitizen investors are just wealthy people looking to further their own interests.

Optimizing those foreign interests in America comes with challenges. Many of them are legal or tax-related, so it’s standard operating procedure for foreign investors to work with domestic parties for investment purposes.

Here, we’ll address how this dynamic works and what steps can be taken to minimize a foreign investor’s U.S. tax liability. A Foreign Investor and a Domestic Developer: An Ideal (Limited) Partnership The first step for foreign investors is to connect with a U.S.-based partner to invest in. There are numerous brokerage services that can facilitate this connection and simplify the process for investors. There are, of course, brokerage fees attached to this.

A common tactic for foreign investors is to partner with a domestic developer - if we’re talking real estate investment. Whether it’s a piece of land, a hotel, a golf course or any other piece of commercial real estate, foreign investors frequently partner with U.S. real estate developers in need of a capital infusion. The U.S. partner executes the job on the ground while the foreign partner supplies cash.

Typically, the investor and developer form a limited partnership (LP) to manage this professional relationship. LPs are a favored choice for real estate development for a couple of reasons, including:

Limited liability for investors - In an LP arrangement, the domestic partner is considered the “general partner” while any foreign investors are considered “limited partners.” Limited partners are only liable up to the amount of their investment, so foreign investors have a liability shield that protects them. Minimal commitment - Limited partners are not involved with the day-to-day operations tied to their investment. This responsibility falls on the general partner (the U.S. developer), so foreign investors can put their money to work without committing time.

Which Tax Structure Makes Sense for a Domestic Company Working with a Foreign Investor? The foreign and domestic parties are usually tied together through an LP, but there’s still the matter of corporate tax structure.

When an LP is formed between a foreign investor and U.S.-based developer, the next step is usually to set up a domestic company that serves as the LP’s business instrument. In other words, a new corporation is formed to ensure tax and legal compliance, and to simplify the distribution process when it’s time to pay foreign investors.

In most cases, a C-corporation provides the desired tax structure for the new company. This company is formed in a state that has stable, corporation-friendly laws in place - Delaware, Nevada and Texas are three examples. Why is a C-Corporation Tax Structure Preferred for Foreign Investment? C-corporations are not pass-through entities. They are required to pay corporate taxes on top of capital gains, which are added to the company’s income. As such, they do not enjoy the same tax benefits as a pass-through organization. Further, loss and depreciation, which can offset corporate tax burdens, are usually not relevant during the initial years following the C-corp’s founding. With all this in play, what makes C-corps the optimal choice for foreign investors?

First, domestic developers often provide an increased rate of return to foreign investors to offset the increased tax burden.

Second, when leveraging a C-corp tax structure, certain withholding and reporting requirements are not triggered until distributions are paid out to investors.

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As millions of people now have a presence on the internet and receive income for that presence, it is increasingly important for them to enlist the services of a CPA or tax preparer that understands taxes for internet content providers. Failure to document income and expenses through official channels in a timely manner could result in serious consequences for internet content providers of any size. What Is an Internet Content Provider? Internet content providers are considered to be people or entities that provide content for the internet to generally either:

Help generate ad revenue for a specific content providing platform that they then get a percentage of revenue from Establish subscription services that the content providing platform then gives them a percentage of revenue

Taxes for Internet Content Providers Some internet content providers have the potential to make a lot of money on various platforms. For example, a person may be providing content regarding clothes such as taking pictures in clothes from certain designers. The clothing manufacturer may then figure out how many sales are attributable to a content provider’s website and then will pay the content provider money for that service. Depending on the rate of success, this could result in potentially significant income for an internet content provider.

Many of these people tend not to be traditional businesspeople who are intimately familiar with accounting and tax compliance. This is a mistake. Payments to an internet content provider are considered income and are taxable. In other words, it requires that these individuals keep detailed records of expenses and that they file annual tax returns. Failing to do so can create significant headaches and potentially serious consequences that could yield adverse effects for the individual themselves as well as their occupation as an internet content provider. What Internet Content Providers Need to Know About Their Taxes With the rise of a growing population of internet content providers, the Internal Revenue Service is taking notice. To ensure that these individuals do not fly under the radar and are not exempt from tax regulation, they are developing standards for auditing these individuals and platforms. Currently, the IRS is sending out 1099 forms to content providers to gather accurate information. Platforms and content providers are expected to comply with the criteria set forth by the IRS, such as:

Filing tax returns in a timely manner Paying the appropriate amount of taxes

A Real World Example of Tax Issues for Internet Content Providers Recently, OnlyFans creators were contacted by IRS criminal investigators. This platform is said to have a lot of different things, but much of their revenue comes from thousands and thousands of adult actors or content providers who have subscribers. As a result, the platform is making an impressive amount of money, which has attracted the attention of the Internal Revenue Service, which is now resulting in investigations and subpoenas for some of the top earning content providers.

The people being subpoenaed are then faced with having to figure out what to do. In general, some of the actions these individuals should consider taking are:

Enlisting the help of a reputable and experienced lawyer. Criminal investigations typically require legal representation, especially when it comes to the protection of fifth and sixth amendment rights. Ultimately, they will most likely end up having to share at least some bank account information and tax return documentation. Even if the person had a CPA handle the tax returns, that information may still end up being scrutinized. Including all their income in documentation. This can require extensive legwork to gather all the information pertaining to the income an internet content provider has received. Filing tax returns. Ideally, the content provider should have already filed a tax return.

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Taxes can be a complex topic, but even more so when it comes to what happens when there is a subpoena of tax records of a taxpayer and/or their certified public accountant by the Internal Revenue Service or another federal government agency.

It is a mistake for an individual or financial to assume that they must automatically comply with a subpoena for tax documents. There could be instances in which the subpoena could be considered unlawful, in which case once that determination is official, it would not require that an individual or tax preparer comply with it.

In order to protect themselves and their rights, both individuals and CPAs must be aware of what happens once a subpoena for tax records or documents issued and what steps should be taken in response. What Happens When a CPA Receives a Subpoena of Tax Records The CPA must respond to a lawful subpoena. However, the question becomes if the subpoena is deemed lawful or not. A taxpayer who is subject to a subpoena has the right to challenge it. This can be a difficult position for financial planners as they must protect the confidentiality of documents they have produced for a taxpayer, as well as the documents provided to them by the individual. Yet, they are required by law to respond to a lawful subpoena, with lawful being the keyword. If a CPA receives a tax subpoena, it generally requires several actions including:

The tax preparer should immediately enlist the help of a reputable lawyer who is familiar with tax law. If the law allows transparency in this specific situation, the CPA should make their taxpayer client aware that the records have been subpoenaed. This, in turn, gives the client notice so they can hire an attorney for themselves. The lawyer can then challenge the validity of the subpoena in question.

What Happens When an Individual Taxpayer Receives a Subpoena of Tax Records While it is possible that a person’s CPA could receive a subpoena, it is equally plausible that an individual themselves could receive one. If an individual taxpayer receives a subpoena, the following steps should be taken:

A taxpayer who receives a subpoena is required to respond to it. The person should hire an attorney for representation and to defend their fifth and sixth amendment rights. If a taxpayer does not already have a tax preparer, they should hire one to help analyze if the data being subpoenaed could be incriminating, contradict tax returns, or could pose other problems for the investigation itself or the individual. A professional financial planner can also better determine if the information being requested is something that is really needed, or if it is something the government would eventually receive anyway. The individual should ask their CPA if they should be fighting the subpoena or just providing the information that has been requested. Ultimately the tax preparer, should be able to help the taxpayer understand if the order will have any real effect on them or not.

A Real World Example of a Subpoena of Tax Records When a federal government agency subpoenaed the tax records of the Donald Trump organization, the appointed CPA did not immediately turn over those documents to the government without question. They first fought the presumption that the subpoena was lawful by taking it all the way to the Supreme Court. The taxpayer, Trump, and his organization also fought the validity of the subpoena.

Ultimately, federal law says that the court makes the final ruling. In this particular case, the court ruled that at least some of the tax documents in question should be turned over to the government. That is in the process of being done now and then it will be reviewed by designated government entities.

This was not a situation where just because the subpoena of tax records was issued, automatic compliance by Trump or the CPA took place. The subpoena did not mean that tax documents should be automatically turned over wit...

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Straight from the files of real estate law, bankruptcy, and investment, we want to share an interesting personal story about a recent undertaking that blended all three of these areas. Our hope in sharing this story is that it will shed some light on the process for others aspiring to have similar endeavors. The process is not without risk, but if done right, the payoff can be big. Finding the Property Late last year, we were contacted by a bankruptcy lawyer who was representing a bank trying to foreclose on a specific piece of property where the borrower was in default. The borrower had gone through several bankruptcy tactics and was now delaying foreclosure. Our acquaintance was about to have the stay lifted so they could foreclose on behalf of her small out of town bank. The bank had asked the attorney to find someone who would buy the note and just take over the foreclosure and repossession process for the property. Getting the Property In the end, there was an arrangement put in place for a company we owned to buy the note from the bank and take over the bankruptcy process. Although the process was complicated and at times drawn out, we got the automatic stay in bankruptcy which then prevents foreclosures from occurring while someone is in bankruptcy. The automatic stay prevents foreclosures until such a time as the judge allows it. We went through the process, got the judge to approve it, and then received the right to foreclose. Although the debtor did try to do several things to stop the foreclosure, they were unable to do so. We then got the order to lift the stay and then posted the property for foreclosure. We then conducted a foreclosure sale, where as the holder of the note, we were allowed to credit bids. This enabled us to bid up to the amount of the debt including:

Unpaid interest Attorney’s fees Related costs

By that time, with the attorney’s fees, because of the bankruptcy and interest running at a default rate, the balance owed was enough that nobody else bid and we were able to bid and eventually became owners of the property. Property Evictions As new owners of the property, we had to go through the process of evicting the occupant. The next step was to hire eviction counsel, file the papers and serve them on the property. By having a process server tape the papers to the wall and also send letters to the debtor and the property, it then triggered a thirty-day clock where the occupant had thirty days to leave the property. Fortunately, the occupant called us on the thirtieth day and said they were turning over the property. Had the occupants not turned over the property within the thirty-day time period, we would have had to go to court and either have them evicted or get a judgement saying the occupant had no right to be on the property. Then, if necessary, a constable would have gone out to the property and physically removed the occupant. Luckily it did not come to that. Renovating and Selling the Property for Profit The property was not horrible, but it was definitely not clean either, so we spent several days hauling out trash and then began painting and cleaning and getting ready to put in new floors so the property could go on the market soon.

The project became a family affair as my wife is a real estate agent and helped take on many of the responsibilities of improving the property and staging it in a way that makes it more marketable.

The property is now awaiting a few final touches and inspections before it goes on the market. The endeavor has been a mixture of bankruptcy, real estate law, real estate investment, and real estate marketing. It is an adventure that we are glad we signed on for because although we have helped with legalities of situations like this before, going through it personally has given us a firsthand perspective that will only add to us successfully representing similar cases in the future.

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While estate and financial planning matters can be textbook situations much of the time, there are unique circumstances such as the incarceration of oneself or a loved one that can make the process more challenging, yet still critically important. For situations like these, the soon to be incarcerated need the help of a reputable and experienced estate planning attorney. Why the Incarcerated Need Estate and Financial Planning Even those individuals who are about to be incarcerated need estate, personal, and financial planning to protect themselves and/or the family they leave behind. Leaving behind regular daily life for that of one behind bars provides a fair amount of disruption to normal practices, and that requires being proactive in getting things in order before incarceration takes effect. 4 Types of Estate Planning That Should Take Place Before Incarceration When living in a prison, it provides substantial challenges in protecting one’s own life as well as that of their loved ones, which is why estate planning practices such as the following are key:

Drawing up a will. If the individual that is soon to be incarcerated does not yet have a will in place, it is essential to do. This is particularly important should the individual or their spouse pass away while the convicted is in prison. Giving consideration to the passing of a spouse outside the prison. Just as getting one’s own affairs in order protects them, it is equally crucial to consider what would happen if the spouse taking care of things at home passes away while the individual is serving their sentence. It requires carful thought before incarceration officially begins because without it, a person’s intended wishes may not be able to be honored. Preparing healthcare documents. Also on the list should be healthcare planning such as a power of attorney for healthcare. This legal document typically allows another person (in this case probably the spouse, mother, father, brother, sister, or child of the incarcerated) to make a decision regarding the convicted person’s healthcare. This may look like the ability for them to decide whether or not to do a surgery, what hospital to go to, or whether or not to have a medical procedure should the incarcerated suffer an accident, heart attack, or similar condition. Having a power of attorney for healthcare in place allows the individual’s wife, mother, son, or whomever they appoint to make those medical decisions for them. Without this document in place, a warden or the medical staff of the prison may be the ones to make these decisions for the individual. Protecting the spouse of the incarcerated with estate planning. It is important to note that if a husband and wife have an arrangement in which the wife designates the husband to make medical decisions for her, but he then goes to prison, matters can become muddled quickly. For this reason, most legal counsel recommends that a document be drawn up and put in place ahead of time that stipulates that while the husband is incarcerated, the wife’s mother or sister or whomever can take over those decisions in his place.

If you or someone you love could possibly be incarcerated, it is vital to begin getting their affairs in order as soon as possible. Equally as important is giving this task to an attorney who intimately understands how to rethink run of the mill estate and financial planning and apply them to more unique circumstances such as incarceration. Look for a lawyer that has experience in this particular area of estate planning for higher confidence in the process.

When an individual is set to go to prison, one of the best gifts they can give the loved ones they leave behind is to have their own and their spouse’s affairs in order before serving their sentence. This helps all parties feel less encumbered by what are already highly emotional and distressful circumstances.

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Even when a person is accused of or charged with a crime, there are no accepted delays in paying taxes for criminals. Everyone in the United States is required to file tax returns for any income that they make regardless of where that income comes from. This is also applicable to criminals, making taxes for criminals a bit of a niche in the tax practice world. Why Taxes for Criminals Must Be Filed In many cases that tax lawyers deal with, there is a person or people who have committed some sort of a crime, financial or otherwise. Just because an individual commits a crime and may be facing incarceration does not prevent them from having to file tax returns. In addition, it could cause more headaches for the person in the following instances:

Plea Bargains and Parole. Not only are criminals not excused from filing taxes, but if they do not file their returns, it could also affect their case. For example, if an individual agrees to a plea bargain or seeks parole or some other form of relief, they must ensure they are indeed current on their tax returns. New Charges. There can be some instances in a which a person is accused of a crime, but the government may not be able to prove beyond a shadow of a doubt that they committed the crime. This could open the door to the Internal Revenue Service, FBI, or other government entities to change tactics and instead prove that the person in question committed tax fraud by not reporting profits from whatever money-making enterprise they are or were connected to.

The bottom line is that taxes for criminals must still be completed and filed because it is simply the law. It also could become a significant obstacle to their freedom in the long run. Cases Where the Accused’s Failure to Pay Taxes Worked Against Them New charges for tax evasion have sometimes famously occurred throughout history and turned out to be the undoing for the accused.

One of the most famous people of note in this situation was Al Capone, a Chicago businessman and alleged gangster during the Prohibition Era. Although many suspected Capone was involved in illegal bootlegging, authorities were unable to prove it. Despite the government not being able to charge Capone with prohibition violations for the illegal sale of alcohol, they were instead able to prove that he was guilty of making money and not paying taxes on that income. Ultimately, Capone was charged with twenty-two counts of tax evasion. How A Tax Attorney Can Help with Taxes for Criminals Despite many criminals having problems other than that of taxes, they are still required to file a tax return, and it is in their best interest to do so.

For example, if a person is accused of being involved in a hitman scenario, it is likely that a trial will be held to determine if that individual played an illegal role. Should the authorities be unable to prove the individual’s involvement in the hitman scenario, they may switch tactics by evaluating the individual’s tax returns.

Whether or not it can be proved that the individual made $200,000 from a hitman deal or not, the fact may still remain that the individual made $200,000. As stated before, tax returns are used to declare income wherever it comes from. This individual needed to do a tax return for this amount in order for it not to be an additional legal issue.

While some certified public accountants may be tempted to turn down helping this individual get their tax returns in order, most tax attorneys understand the fact that the individual still has an obligation to pay and report their taxes since they made the $200,000. An accountant could help with the W-2 and home mortgage and record the income and file an official tax return.

Although this is indeed a benefit for the accused by keeping the Internal Revenue Service or Justice Department from prosecuting them for failure to file a tax return and ultimately tax evasion, a tax attorney knows that completing and filing the tax retur...

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Real estate is always evolving and encompasses a variety of different moving parts, which is part of what can contribute to weird real estate issues. Real estate lawyers have long since found a number of title, lien, and possession issues with some unusual circumstances that have made for interesting cases over the years. To help give readers an idea of what weird real estate issues can look like, we have put together a list of what some of those scenarios might be. What Weird Real Estate Can Look Like When you are talking about what weird real estate can look like, the sentiment is a bit of an oxymoron because it is not the real estate itself that is weird. Typically, a real estate related issue such as title, ownership, or possession of a property is what can become the basis for the weird factor.

For example, if someone is seeking title insurance for a property it is so the title insurance company can ensure the fact that buyer or lender received a clear title that prohibits the following:

Anyone from coming to take the property from them An easement messing up the planned usage of the property A lien that would have to be paid

The three different areas of real estate that become important in these scenarios include:

Who has the title? Are there any liens? Who has possession?

Realistically, any of the above three areas of real estate could potentially be a problem. How Who Holds the Title Can Become an Ingredient for Weird Real Estate If a title holder acquires a title by making an illegal loan (one that requires the former owner to give the lender a deed), there is a provision in Texas law that says that is void. If the current owner of the property suddenly tries to evict the homeowner of more than twenty years, it becomes a battle between the title holder and the person in possession of the property. It also creates a problem for the lender who is now not getting paid and is facing questions as to whether their lien on the property is valid. The Connection Between Weird Real Estate and Easements Sometimes there could be an easement which may allow someone who does not possess or own the property to still use the property. Many times, this is not an issue because it is common to have an easement for someone like the power company so power lines go to the house.

The problem can happen when the usage of a property cuts off access to the property. If someone else has the right to use the front part of a property and does so constantly in a way that interferes with a person’s rights to the property, it can create a problem.

There are some legal mechanisms to deal with this although they are not foolproof. If access to the property is restricted due to an easement, it will either be necessary to deal with the easement holder or for the owner to simply find an alternative point of access, which typically devalues the property.

It is worth noting that easement issues can develop over time. For an example, what used to be an easement on a person’s property for two or three families to make their way to church once a week through an area can become tricky when years later a subdivision is established and grows, as now it yields dozens of people crossing over that same property to get to church. Potential Issues with Estates and Trusts If a person passes, a will generally makes it easier to determine who gets possession of a property. Without a will, the rights to a property can become a gray area because it involves searching for family and heirs and such.

Should there be no will, but thirty family members or potential heirs were found, it requires either:

Getting all thirty people to agree on what to do with the property, or Taking the battle to court for partitioning of property, the sale of the property, and distribution of the purchase funds

Trusts are no stranger to weird real estate issues either. If a trust is the owner of a piece of property,

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Trusts can be an excellent estate planning tool in order for an individual to provide for their heirs, but when a trust is formed in a reactive effort to avoid judgements or creditors, it may be possible for the law to see a fraudulent transfer in play, and that has the potential to come with serious consequences. However, if an individual works closely with an attorney to proactively establish a trust under valid circumstances, it can be effective for the person forming the trust as well as their intended heirs.

To better understand this topic, we will define what a fraudulent transfer is, how it may happen in relation to a trust, and what it can mean for creditors. What Is a Fraudulent Transfer? When defining the legal term fraudulent transfer, there are two primary prongs to keep in mind:

Actual Intent: If a transferor transfers money or property to another person, entity, or a trust with the actual intent to delay, hinder, or defraud one or more of their creditors, then the law usually sees that as a fraudulent transfer. For this reason, it can be set aside by the creditors or a bankruptcy trustee. Constructive: Without regard to what the transferor’s original intent was, if the transfer was made at a time when the transferor was insolvent or had insufficient capital to continue operating and the transfer does delay, hinder, or defraud one or more creditors, it can be considered a constructive fraudulent transfer. It too can be set aside with certain legal action by creditors or the bankruptcy trustee of the transferor.

As we move forward to discuss how fraudulent transfers come into play for trusts, it is recommended to keep this information in mind. How Fraudulent Transfers Can Come into Play When There Is a Trust People set up trusts for a number of different reasons and then transfer money and property to them. Trusts are usually formed to benefit a beneficiary after the person forming the trust has passed.

There are three main roles in the formation of a trust:

a donor a trustee a beneficiary

In the eyes of the law, someone could be two of those three persons, but not all three because one person performing all of these roles could manipulate them for self-benefit.

To learn more about how a fraudulent transfer can come into play when there is a trust, let us consult the following examples:

The Typical Trust: In this type of situation, it is common to see a grandparent put together a trust for their grandchild to eventually go to college. To do this, during the grandparent’s lifetime or as part of their will, they will set aside a fund of money or property (that can be sold at a later time to gain money) to be put into a trust so that money or income source can eventually pay for the grandchild’s education. The grandparent may even appoint their son or daughter to be the trustee in the event that they die before the grandchild becomes of college age.

Despite the grandparent appointing one of their children to be the trustee of the funds, it is typically not considered an asset to them. In the situation that the trustee was to experience financial problems such as judgements or bankruptcy, these are not considered the trustee’s funds. Although the trustee controls the funds for their child, the funds do not belong to them. The funds belong to the beneficiary or grandchild of the deceased party. Therefore, if there were to be a judgement against the mom, it would not allow creditors to garnish the funds in the trust account.

A Fraudulent Trust: If there is an individual who believes they are about to get a judgement against them and they have some money they would like to keep creditors from getting to, they might decide to quickly establish a trust that they pour all of their assets into and say it is for the benefit of their heirs. In this case, the transferor established the trust with the primary intent to defraud their creditors.

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Although fraudulent conveyance can have many applications in a variety of situations such as suicide or divorce, we will focus on if a divorce can be a fraudulent conveyance, and if the creditors of one spouse can go after the creditors of a now former spouse after a divorce. While this not necessarily a pleasant topic to discuss, it is something we have seen in my office and does require addressing. What Is Fraudulent Conveyance or Fraudulent Transfer? The first step in determining if a divorce can be a fraudulent conveyance is to properly define the term which is also commonly referred to as fraudulent transfer. A fraudulent conveyance or fraudulent transfer can take place when someone who is a debtor owes money because:

They have defaulted on a loan They have a judgement against them They obtained money or property through wrongful means

This debtor then owes one or more creditors a specific amount of money because of one or more of the above situations. What Might a Fraudulent Conveyance or Fraudulent Transfer Look Like? In general, people that have defaulted on a loan, have a judgement against them, or have wrongfully obtained money or property, will try to hide this fact so that when they eventually file bankruptcy or a creditor tries to collect a debt, the individual will not appear to have anything.

The most common ways these individuals try to hide their assets can include:

Hiding assets in Swiss bank accounts (although this does not work as well as it used to) Putting the assets in offshore bank accounts Giving the assets to their parents, wives, children, or grandchildren Burying physical gold in their backyard

What the Law Says About Fraudulent Conveyance in General and Regarding Divorce In general terms, the law does provide some relief to creditors in the form of fraudulent conveyance or fraudulent transfer through either:

The Uniform Fraudulent Transfer Act Chapter 5 Bankruptcy Code provisions that give a bankruptcy trustee the power to go after those individuals who have received a conveyance in connection with an effort to defraud a creditor or creditor population

In terms of divorce, one technique a married individual that is being chased by creditors or is trying to proactively hide assets from creditors may use is to get a divorce. In the formal divorce process a formal divorce decree may be issued allowing the individual’s soon to be ex-spouse get an unusually large share of the assets or property of the marital estate.

For the purposes of a trial, it is necessary to prove actual intent that a party gave property or money to a spouse in a divorce for the purposes of fraudulent conveyance. However, if unable to prove actual intent, both the Uniform Fraudulent Transfer Act and the bankruptcy code (which most states including Texas have adopted in one form or another) have provisions that say even if actual intent cannot be established, if the debtor’s actions show the circumstances were such that the individual had knowledge that a judgement was likely going to be rendered to him and there was liability that would lead to a judgement, it could lead also to intent.

If there was indeed a transfer via divorce (a divorce decree is going to transfer property which can prove a transfer) at the time the debtor was insolvent, meaning their debt or potential debt exceeded the value of their assets, or it delayed, hindered, or defrauded any creditor, then the transfer (i.e., the divorce or divorce decree) is subject to a fraudulent transfer action. This means that either a bankruptcy trustee or a creditor of the debtor can go after and seize the assets that were given to the spouse in the divorce, or they can obtain a judgement against the spouse and collect whatever other assets they may have.

When it comes to fraudulent conveyance or fraudulent transfer in a divorce, it is generally not an easy case to make, but under the right circumstances and when work...

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Earnest money contracts to buy real estate are something every buyer and seller should be familiar with. Although most are familiar with a one to four-family residential contract, there are those that can also be put together for farms, ranches, commercial office buildings, commercial properties, and industrial properties. Regardless of the type of property, it can be advantageous to enlist the help of a reputable and knowledgeable real estate attorney to assist with the different components of earnest money contracts.

How Earnest Money Works Earnest money is typically put down in the form of a check that is paid to the title company to hold on to until the transaction terminates or is fulfilled. However, it is worth noting that there are forfeiture provisions that can go into effect if certain things do not happen. If the property is not closed upon, the buyer is at risk of losing their earnest money. A real estate attorney may be helpful in dealing with a more complex escrow situation. More recently, a termination option has become available in which a buyer will pay a fixed amount of money in markets that are considered a buyer’s market, in which there is a great deal of product available. These options are usually low numbers of approximately $100, $200, or $500 and allow the buyer the option to terminate if they see something they do not like or for no particular reason. In this case, the buyer forfeits their termination fee which the seller keeps, but the buyer typically wants the rest of their earnest money back. However, at present, there is a much tighter market with not a lot of product, so some of these termination provisions are at a much higher number that buyers are putting up in order to more effectively attract a seller. It may even be possible for the buyer to waive their termination option entirely to make themselves more competitive in attracting a seller. A buyer’s higher termination option number or waiver may make them stand out from all the other bidders and make a seller more likely to accept their contract.

The Role the Title Company Plays in Earnest Money Contracts Most of the time the title insurance company gets involved in the process. The purpose of a title insurance company is:

To go through the process to make sure that the seller has a good title To ensure there are no liens To determine that the borders are properly defined To make certain there are no easements or judgments that affect the property

This process is in place so that a buyer knows that they actually are buying the property and there are not expected to be any legal problems that come up afterward. However, should there be legal problems that crop up afterward, there is an insurance policy that will help pay the cost of fixing that property or paying the damages caused by the title problem. The seller typically pays for the title policy, but it is an option for the buyer to pay for it. The title company generally takes over the process of closing. They will get a title report out showing liens, easements, problems that exist, and whether or not they get eliminated or it is just something the buyer has to understand. The title company will provide that report and work out whatever needs to be worked out regarding that and makes sure that any liens, taxes, or homeowners association dues that are outstanding are paid at closing. Usually, the buyer’s money (or lender’s money) goes to the title company who will then pay the taxes and the former mortgage company and any other liens necessary to clean it up and then disperse the excess monies (if any) to the seller.

Surveys and Inspections as Related to Earnest Money Contracts Typically, when buying a home, a survey is done. In cases where there are lots, blocks, and subdivisions, it is typically not that difficult to do. Farms, ranches, and places with larger acreages can be a different story. There are also usually inspections where the buyer wi...

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Straight from the files of a Houston real estate attorney focusing on bankruptcy, and investment, we want to share an interesting personal story about a recent undertaking that blended all three of these areas. Our hope in sharing this story is that it will shed some light on the process for others aspiring to have similar endeavors. The process is not without risk, but if done right, the payoff can be big. Finding the Property Late last year, we were contacted by a bankruptcy lawyer who was representing a bank trying to foreclose on a specific piece of property where the borrower was in default. The borrower had gone through several bankruptcy tactics and was now delaying foreclosure. Our acquaintance was about to have the stay lifted so they could foreclose on behalf of her small out of town bank. The bank had asked the attorney to find someone who would buy the note and just take over the foreclosure and repossession process for the property. Getting the Property In the end, there was an arrangement put in place for a company we owned to buy the note from the bank and take over the bankruptcy process. Although the process was complicated and at times drawn out, we got the automatic stay in bankruptcy which then prevents foreclosures from occurring while someone is in bankruptcy. The automatic stay prevents foreclosures until such a time as the judge allows it. We went through the process, got the judge to approve it, and then received the right to foreclose. Although the debtor did try to do several things to stop the foreclosure, they were unable to do so. We then got the order to lift the stay and then posted the property for foreclosure. We then conducted a foreclosure sale, where as the holder of the note, we were allowed to credit bids. This enabled us to bid up to the amount of the debt including:

Unpaid interest Attorney’s fees Related costs

By that time, with the attorney’s fees, because of the bankruptcy and interest running at a default rate, the balance owed was enough that nobody else bid and we were able to bid and eventually became owners of the property. Property Evictions As new owners of the property, we had to go through the process of evicting the occupant. The next step was to hire eviction counsel, file the papers and serve them on the property. By having a process server tape the papers to the wall and also send letters to the debtor and the property, it then triggered a thirty-day clock where the occupant had thirty days to leave the property. Fortunately, the occupant called us on the thirtieth day and said they were turning over the property. Had the occupants not turned over the property within the thirty-day time period, we would have had to go to court and either have them evicted or get a judgement saying the occupant had no right to be on the property. Then, if necessary, a constable would have gone out to the property and physically removed the occupant. Luckily it did not come to that.

Renovating and Selling the Property for Profit The property was not horrible, but it was definitely not clean either, so we spent several days hauling out trash and then began painting and cleaning and getting ready to put in new floors so the property could go on the market soon. The project became a family affair as my wife is a real estate agent and helped take on many of the responsibilities of improving the property and staging it in a way that makes it more marketable.

The property is now awaiting a few final touches and inspections before it goes on the market. The endeavor has been a mixture of bankruptcy, real estate law, real estate investment, and real estate marketing. It is an adventure that we are glad we signed on for because although we have helped with legalities of situations like this before, going through it personally has given us a firsthand perspective that will only add to us successfully representing similar cases in the future.

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Suicide is never an easy topic to discuss, especially as it relates to legal matters such as fraudulent conveyance. Taking one’s own life is a decidedly tragic event that adversely impacts the deceased’s family, friends, and even community. In addition to the heartache of losing someone to suicide, those survived by the individual often do not realize that the legal consequences related to the act can go on long after. Learning more about a fraudulent transfer and how it relates to the Uniform Fraudulent Transfer Act may help survivors better understand the legal processes that can follow a suicide. Understanding Fraudulent Transfers A fraudulent transfer happens when an individual that has money or property and is about to lose that property due to some sort of judgment or creditor then transfers said property to another party. This may be done so that if a judgment or creditor tries to collect from the transferor, there is no property left to collect on. The law recognizes this act as unjust and generally allows a creditor to proceed against the recipient of a fraudulent transfer to recover one of two things:

The property that was transferred Judgment for the value of the property

Uniform Fraudulent Transfer Act As many other states do, the state of Texas follows the Uniform Fraudulent Transfer Act. This act sets forth the circumstances and establishes the rules to be followed when analyzing if a transfer of money or property is subject to it. There are two prongs to the Uniform Fraudulent Transfer Act including:

Actual Intent Constructive Fraud

Breaking Down Actual Intent as It Relates to the Uniform Fraudulent Transfer Act For the actual intent prong of the act, if a transferor transfers property to another individual with the express intent to hinder, delay, or defraud the transferor’s creditors it is typically considered to be a fraudulent transfer. Actual intent may be hard for a creditor to prove as the circumstances might or might not permit a jury or judge to determine that the transferor had such intent. Factors that can be taken into consideration in determining intent are:

A transfer was made to an insider or related party The debtor or transferor retains possession or control of the property after the transfer A transfer or obligation was concealed in what is viewed as a secret manner An obligation by the transferor was incurred or the transferor had been sued or threatened with a lawsuit before a transfer was made The transfer was substantially all of the debtor or transferor’s assets The debtor or transferor removed or concealed assets The amount of consideration received by the transferor was not of reasonable equivalent value The transferor was insolvent or became insolvent as a result of the transfer

Constructive Fraud and the Uniform Fraudulent Transfer Act In the event that a creditor cannot establish the actual intent prong of the act, the constructive fraud prong of the act comes into play. Of the two prongs, constructive fraud is usually easier to prove as all that is necessary is to show the following:

There was a transfer The transfer was made at the time that the debtor or transferor was insolvent The transfer was for less than an equivalent value in exchange for the transfer

Fraudulent Transfer Act and Suicide Case Study #1 With the knowledge of what a fraudulent transfer is and how the Fraudulent Transfer Act would come into play, it may be easier to understand how the unfortunate incident of suicide might invoke the act. The following case study may help the reader to make better sense of this connection, however, please be forewarned that the following is tragic and somewhat gruesome and may not be appropriate for all audiences. In this example, a husband and wife are going through an intensely contentious divorce. Amidst the divorce, the husband returns to his marital home to gather some of his belongings. In doing so, he gets into a confrontation with the wife and violence ensues,

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When it comes to commercial or residential real estate, most people readily understand that a real estate agent’s services will be required, but in many cases it may also require those of a lawyer. When it comes to the basic building blocks of buying or selling a property as set forth by the Texas Real Estate Commission, agents are well positioned to care for clients. However, in the event that a unique circumstance should arise such as a dispute, title issue or easement, a real estate attorney can be an individual’s best bet. Why People Need a Real Estate Attorney? In many cases, a real estate agent will help a party look for property and communicate and negotiate an offer on that property. From there, on the buyer’s behalf, a title company will examine real property records to ensure the seller indeed does own the property and that there are no liens, judgments, or clouds to the title on the property lasting after the close of the transaction. A lender also normally becomes involved and will draft the appropriate documents.

With a realtor, title company and bank lined up, a real estate deal has most of the right players in place. Still, when what was thought to be a small, standard purchase develops a complication with the transaction or the base use of the property, a lawyer’s knowledge is needed to provide guidance for that real estate deal.

There are three main considerations of real estate that can account for a rather large percentage of real estate deals, including:

Who is the owner? Who has title to the property? What rights do they have and what type of restrictions are there on those rights? Property use. Who uses the property? Is a tenant? Is it somebody who is in possession? Is it someone who has an easement in the property? Is it someone that has no authority to use it but is using it anyway and may have been using it for a long time and have acquired some rights by doing so? Are there mortgage liens? Are there tax liens? Are there judgment liens? What is it that would cloud the title and ultimately give someone else the right to foreclose upon the property by having a foreclosure sale?

The 7 Most Common Situations in Which a Real Estate Attorney Is Needed The real estate industry is vast, and with it can come many issues that require the assistance of a knowledgeable attorney in the industry. The seven most common situations in which a real estate attorney is needed include:

Title to real estate Borrowing of money Possession of property Border disputes Oil and gas issues Title/possession/ownership dispute Earnest money contract cases

Title to Real Estate This area of real estate involves who owns the property. A title company can be instrumental in ensuring a buyer, lender, or borrower that is pledging a piece of property as collateral is indeed the right person signing the deed of trust and the note. It is critical to guarantee that the seller is the person who owns the property and has the ability to sell it. Unfortunately, this is not always as clear cut as one would think.

When a title company issues a title commitment or title report, it ensures that the title is claimed to the property in question and that the buyer is getting a good title and the lender is getting a good lien on the property. This is then generally followed by a list of exceptions that may concern city ordinances that could restrict the use of property. It may also include deed restrictions from homeowners’ associations. Sometimes it may be possible to find a lien or someone who has rights to a property because they had a lien on it or a fractional interest.

Without a lawyer to look at easement issues, there may be someone who buys a property who discovers an easement that keeps them from using the property the way they intended. In cases like these, navigating real estate title issues can be a challenge that requires a successful real estate attorney. Borrowing Money

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With a new tax plan from the current White House administration becoming a distinct possibility, it leaves many Americans wondering about capital gains as it applies to real estate transactions. With the plan still in the discussion phase, there are few concrete details about what new capital gains rates could eventually be if it were to go through, but even the likelihood of the plan passing has many people asking what they can do to maximize their investments. In terms of selling a personal residence or real estate that is held for investment or business use, it is crucial to look at what capital gains rates have been, and what they could be sometime soon.

Capital Gains Rates Now Until the law concerning capital gains rates is changed, the rates are typically 15 to 20 percent depending upon whether an individual makes more than $250,000 or not. In addition to this, there is 3.8% that gets added to that investment income coming out of Obamacare for people who make more than $250,000. The capital gains rate is 15% for people who:

make $400,000 or less if they are single make $450,000 or less if they are married

And in addition, an individual making more than $250K a year has a 3.8% Obamacare net investment income tax added to that. Prior to this year, the maximum gain someone would be required to pay on a capital gains transaction is 23.8% which is essentially the 20% plus the 3.8%.

Capital Gains Rates and the Future During the last year and a half and even prior to that, the government has spent a great deal of money due to COVID and other reasons. Because of this significant uptick in spending, it is not inconceivable that Americans will see a tax increase. The new administration has already proposed an aggressive tax increase that would raise capital gains rates significantly, to as high as the mid-40s. While this is possible, some consider it even more likely that instead of the rates going from 23.8% to the 44%, the tax hike will instead put the maximum rate at 28%. This rate would only be reached with compromise. America has had capital gains rates in the past of 28% so it is possible they will see them again if the tax plan passes. In light of this, it could be prudent for investors who are looking at potentially large capital gains transactions to anticipate a 28% rate in the near future. Realistically, an individual who sells something now will continue to be at the lower tax rate, but if they decide to sell it toward the end of the year or after, it could very well be at a much higher rate.

The Potential Effect of Higher Capital Gains Rates on the Market The fact that Americans are anticipating higher capital gains rates has had an effect on the market to a certain extent. Most people who are facing capital gains transactions have one of two reactions:

“I need to do it now while the rates are lower.” “I’m not going to sell that stock or real estate ever because I’m not going to pay that kind of tax.”

The second reaction is particularly disheartening because this is not the desired effect. The goal is to still have individuals be able to sell their assets when they can and change their portfolio and doing so without having to play some sort of tax game with the respect to their business and investment decisions. Personal Residences and Capital Gains Rates A personal residence is only taxable to the extent that the gain on the house exceeds $250,000 for a single individual or $500,000 for a married couple. For example, if a person and their spouse bought a house for $400,000 ten years ago and are now selling it for $800,000, it is simply a $400,000 gain. However, a married couple who sells a house that exceeds the $250,000 or $500,000 limits may have to face new capital gains taxation on some of the proceeds of the sale of their house. Individuals who find themselves in this situation have either typically held on to their house for a long time,

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Although it is not a welcome prospect, things to consider before a business owner dies are critical in the here and now. If you are a business owner who has not yet given thought to what will happen to the company you have worked so hard for, you risk losing everything for yourself as well as any potential beneficiaries. Estate planning is not just for individuals, it is essential for business owners as well. To protect all that you have built in assets, relationships, and more, it is advised for you to meet with an estate planning attorney as soon as possible so your legacy does not go unsecured. What Happens to a Corporation When the Business Owner Dies? In the unfortunate event that a business owner dies, one of the most frequently asked questions by personnel and relatives is, “What will happen to the business?” To a degree, this depends on how it is classified. For example, a corporation or limited liability company does not die, even if the owner does.

A corporation can live until it is either:

Voluntarily terminated by filing papers with the state of the corporation Terminated by the state for issues with creditors, failure to file the proper forms, or failure to pay a state franchise tax

Aside from the above, a corporation should continue to exist even if the president or sole shareholder of the company dies. Why Wills Are Important for Corporation Stocks Corporations have stocks, and if the owner who owned all or even the majority of that stock dies, the stock then becomes an asset that is subject to probate. This means that the person’s will can determine who will get his or her corporation stocks in the event of their death.

In addition to having a will, some owners may choose to put corporate stock into a trust, as in some cases this can avoid probate and keep a business from ceasing to operate. If upon their death an owner wants to give stock to charity, that can be done through a will or a combination of a will and a trust. It is important to discuss this with your lawyers and accountants before taking action as sometimes there can be more advantage to making charitable contributions before death.

Giving advance thought to who will get the corporation stocks if a business owner dies is critical for both the individual’s and company’s wellbeing. Because life is unpredictable and we are not promised tomorrow, it requires both parties to be proactive now, regardless of the age or health of the owner. The Importance of Securing a Successor Now Business owners often have strong relationships with employees, customers, suppliers, and government agencies, and in the event that the owner passes, those relationships must be able to be maintained in their absence.

Many companies mistakenly do not consider that it could take some time for the business to recover from the death of an owner because that person may have acted as the primary agent in:

Bringing in business Collecting monies owed Fulfilling contracts

The result is that in some cases a business owner can be difficult to replace. At the very least it may require time and money to do so. For this reason, it can be beneficial to have insurance or enough cash stored away that this can be handled without waiting.

For some businesses such as sales, accounting, and such, the owner’s personal relationship with a client or customer base is critical to the company’s success. In situations like these, when an owner passes it is not uncommon for employees or staff to panic and try to grab the business, form their own business, or take the practices and relationships to a new employer who will reward them.

To keep the business from ending up this way after the owner’s death, it is important to make good use of covenants not to compete, as well as consider the following questions now, before it becomes an issue:

Who is going to take over the company? Will it be a family member? Will it be a current employee?