A Better Way to Hold Title to Your Principal Residence
recent change in the law has made it easier to create a tenancy by the entirety. You may want to consider doing so. That’s because the principal feature which distinguishes tenancy by the entirety from other forms of joint ownership is that the homestead property of a married couple is beyond the reach of a judgment creditor who has a judgment against only one spouse. For example, if a husband is involved in an automobile accident where the damages awarded to the other party exceed his insurance policy limits, the judgment creditor will not be able to force the sale of the husband’s principal marital residence if he holds title as tenants by the entirety with his wife.
As with joint tenancy, when one spouse dies, the survivor of a tenancy by the entirety automatically becomes the sole owner. Please call Lawrence Staat to assist you in gaining the additional protection that tenancy by the entirety provides.
Claims to Recover Investment Losses Mushroom
Nearly 7,000 investors filed arbitration claims last year to recover their losses suffered at the hands of their stockbrokers and financial planners. Most investors who file arbitration claims agree to settlements. Those investors proceeding to arbitration hearings receive an award in their favor better than half of the time. Our firm prosecutes and defends arbitration claims nationwide. Negligence and breach of fiduciary duty claims are most common. Churning claims, unsuitable investments and misrepresentations about material facts, such as the risks involved with a particular investment or strategy, also are common. Additionally, numerous claims allege that brokerage firms gave poor advice, or no advice at all, in assisting individuals with employee stock options. Investors should remember that stockbrokers and financial planners must adhere to rigorous standards, but often fail to do so. For detailed discussions of the rights of investors, duties of stockbrokers and financial planners, the securities arbitration process or other related topics, call James Eccleston or visit our sister website, www.FinancialCounsel.com.
Trust Beneficiaries Given Effective Right to Sue
On January 25, 2002, the Illinois Supreme Court issued a decision giving trust beneficiaries injured by an attorney’s negligent estate planning an effective right to sue for damages which a lower court had taken away. The injured beneficiary, who was represented by Henry Novoselsky, had contended that the estate planning attorney’s malpractice resulted in unnecessary estate/death taxes of $240,000. The Supreme Court reversed an earlier appellate court decision which had ruled that such negligence claims automatically were barred six years from the date of the attorney’s negligent advice, regardless of when the beneficiary’s mother, his client, died and death taxes became due.
The Illinois Supreme Court’s ruling held that all persons injured by negligent attorney estate planning must be given a reasonable period from their client’s death to file suit upon their claims, and that their claims would not automatically be barred six years from the date of the attorney’s negligence. The Supreme Court found that when damages from an attorney’s negligence do not occur until the death of the person for whom estate planning services were performed, beneficiaries injured by the negligence may be able to sue within set periods of time regardless of whether the beneficiary’s inheritance passed through a probate estate or under a living trust. Please contact Henry Novoselsky for additional information on the rights of trust beneficiaries.
New Tax Act Gives Businesses a Larger Deduction for Depreciation and Larger Refund of Taxes from a Net Operating Loss
The new tax act recently signed by President Bush allows a 30% first-year depreciation bonus on certain property acquired after September 10, 2001, and before September 11, 2004. The principal types of qualifying property are computer software, assets having a depreciation period of 20 years or less, water utility property, and leasehold improvements made in business (i.e., nonresidential) premises. In order to qualify, the property must be placed in service before January 1, 2005, except that certain constructed property can qualify if placed in service before January 1, 2006.
The act also allows businesses that suffer net operating losses (“NOLs”) in 2001 or 2002 to apply those losses against taxable income as far back as five tax years instead of the general two-year “carryback” period. Thus, for example, if a firm was profitable before 2001, but suffered an operating loss that year, the loss could be used to reduce its taxable income—and thus generate tax refunds—for tax years as far back as 1996. Please call Lawrence Staat with any questions you may have.
Business Owners Signing Guaranties Must Be Careful
Recent decisions regarding the law of guaranty describe a rule that all owners of closely held businesses should know. The Supreme Court of Massachusetts has held that a guarantor’s dealings with the bank after she guaranteed the bank’s loan to her corporation did not terminate the guaranty.
In this case, the owners of the company signed guaranties in 1984 that covered all present and future indebtedness of the company to the bank. The guaranties provided that they were to remain in effect until terminated in writing. Subsequent to the signing of the 1984 guaranties, in 1985 the guarantors were asked to sign more comprehensive guaranties. Only one of the guarantors signed the 1985 guaranty. After the company defaulted, the bank sued the owner who had signed only the 1984 guaranty and refused to make any payment. The guarantor asserted that her refusal to sign the 1985 guaranty constituted a revocation of her 1984 guaranty.
The court ruled in favor of the bank. The 1984 guaranty provided that the defendant must send written notice to the bank in order to terminate the guaranty. The guarantor never sent written notice of revocation to the bank to terminate her obligation under the 1984 guaranty. Thus, she did not comply with the terms of the contract, and refusing to sign the 1985 guaranty did not affect her obligation under the 1984 guaranty.
It is important for you to note that a well-drafted guaranty will always provide a method for termination. If the guarantor fails to follow that method, the guaranty remains effective. Our office is available to help you with loan documentation and financing. Please call Steven Filipowski for assistance in this area.
Avoid Income Taxes on the Sale of Your
Investment Real Estate or Business Property
Do you desire to sell investment real estate or business property and acquire more expensive property of the same kind? Are you reluctant to do so because of the income taxes that you will incur on the sale? Consider exchanging rather than selling your property. An exchange will avoid the income taxes. There are various ways to structure the exchange so that it fits your circumstances. If you already have identified the property that you want to acquire and the owner of that property would like to acquire your property, you can arrange a direct exchange. If the owner does not want your property but wants to close before you have located a buyer for your property (or you want to close to lock in low-cost financing), you can set up a reverse deferred exchange where you close on the purchase of the property and have six months to find a buyer and close on your property. If six months is a problem, we can structure the arrangement to give you more time.
Conversely, if you have a buyer for your property but have not identified a property that you want, you can do a forward deferred exchange which will allow you to close on your sale and give you six months to locate and close on the replacement property. To discuss the possibilities for your circumstances, please call Lawrence Staat.
For more information on issues highlighted here, please contact one of the following Shaheen, Novoselsky, Staat & Filipowski professionals:
Henry N. Novoselsky
Lawrence G. Staat
Steven C. Filipowski
James J. Eccleston
William E. Hofmann
Jack L. Haan
Stephen S. Berkeley
Scott E. Galbreath
Mercy T. Tang-Tellez
Michael J. Vahey
Ronald M. Amato
April J. Lindauer
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