Attorney Shannon Wynn: Flood damage and selling a property

The record-setting flooding we saw in Walworth, Racine, and Kenosha counties brings to mind an important disclosure topic for real estate transactions… but first, our thoughts and hearts at Wynn at Law, LLC go out to everyone impacted by the flooding. We hope things return to normal for all of you as quickly as possible.

In some of our earlier articles we’ve talked about real estate disclosures. Flood damage is one of those things that must be disclosed by the seller before the transaction. Specifically, the form asks if the property owner was ‘aware’ of ‘any’ past flooding. It’s difficult for anyone to not be ‘aware’ of the current flooding, the worst in history. The issue is the word ‘any.’ If a seller knew of flooding back in 2008, it has to be disclosed. If the sellers know the property flooded in 1973 – another historic flood event in our area – even if the homeowner didn’t live there, it has to be disclosed.

Past transactions on the real estate can identify flooding disclosures that happened before the current one.

Sellers should fully explain the circumstances behind any flooding damage and give as much accurate detail as possible. If it only happened once, say so. If it only happened in the record-smashing deluge we just went through, say so. Most importantly, in the disclosure, you can be very specific about the cleanup and repairs you made, as well as any steps you took to (hopefully) prevent the next massive downpour from causing the same damage this downpour created.

If a property was on the market before the rivers overflowed, the previous disclosure from before the flood might be inaccurate. In that case, the disclosure should be amended.

Both the buyer’s and seller’s attorney (and their real estate agents, too) have legal responsibilities related to the disclosure form. As fiduciaries, they are bound to advise their clients with entire openness. This requirement applies even if the seller just doesn’t want to disclose the current flooding because, ‘It was once in a lifetime and will never happen again and this will sabotage my sale or selling price.’

Does a buyer have to abort plans to buy a house just because it is or was ever in a flood? Of course not. Flooding in an extraordinary event like the one we’ve just seen does not mean the property will flood in every storm. If this storm tells us anything, it’s that even extraordinary records can fall.

 

*The content and material in this original post is for informational purposes only and does not constitute legal advice.  

Photo by Scott Stevens, used with permission.

Attorney Shannon Wynn: What exactly is ‘probate'?

Wynn at Law LLC provides estate planning services – wills are one example. ‘Probate’ is a commonly used term in estate planning, especially these days when many clients have an estate worth more than $50,000. First, a bit on probate… then why $50,000 is an important number.

Probate is a court process whereby a will is legally ‘proven’ as the true last testament of the deceased. Essentially, the document is reviewed and validated. It came to be a more common process in the 16^th century when greedy relatives (or non-relatives) began making phony claims on a dead person’s property. It comes from the same Latin roots as ‘probation.’ In probation, a person has to prove he can live within the law… in probate, a document has to be proven to be authentic and created within the law. Probation and probate have nothing else in common other than the root word, meaning proof.

The ruling of a probate court is the first step in resolving all claims and distributing the deceased person's property in a will. The court officially designates an executor to carry out the will’s instructions. Usually, the executor is named already when the person made out the will. If a will is contested, it happens in probate court.

What else happens in probate?

·         Creditors must be notified and legal notices published.

·         Homes/property/other possessions may have to be sold off to pay those debts, or otherwise make distributions evenly to the beneficiaries.

·         If there is a lawsuit over the death, or the deceased was party to pending lawsuits, those are noted and settled (if possible).

·         Estate taxes, gift taxes or inheritance taxes must be considered if the estate exceeds certain thresholds. Working with an estate planner can minimize these.

Some assets, like life insurance, are not counted because they are transferred directly to the beneficiaries and avoid probate. Death benefits are not included in an estate. Living Trusts – usually created to hold large assets – also are excluded from probate. Joint tenants (e.g. husband and wife) are allowed the joint property in a ‘right of survivorship’ if one dies, and this, too, avoids probate. Bank or investment accounts designated Transfer on Death (TOD) avoid probate as well. Real Estate can also be re-titled to avoid to probate, through tools such as a Transfer on Death Deed (TODD).

Here’s where the $50,000 comes into play. For estates in Wisconsin, after all those subtractions, the small estate threshold is $50,000. If the estate is valued below that and there is a will, probate is avoided. If there is no will, or if the estate is more than $50,000, probate is required. Most probate proceedings in Wisconsin aren’t very onerous. They are informal, with no squabbles between beneficiaries and few creditors. This is little more than an application to the court, followed by a summary judgment. A more formal proceeding requires the court to help distribute assets.

Wynn at Law LLC works with clients to secure their assets in a will or trusts to hold up in probate, or avoid it all together.

*The content and material in this original post is for informational purposes only and does not constitute legal advice.  

Photo by Marzky Ragma Jr., used with permission.

Attorney Shannon Wynn: Medical bills a threat to financial independence

We are frequently seeing clients with ‘surprise’ medical bills when Wynn at Law,LLC counsels people through bankruptcy proceedings. Catastrophic medical bills are, unfortunately, one of the more common reasons for Chapter 7. Usually those clients didn’t have insurance coverage. The surprise medical bills to which this article refers are bills health insurance did not cover.

For example, you schedule an in-network procedure. You’re assured your insurance is covering the cost. But a few weeks later, an OUT-of-network bill arrives. The Jan. 2017 Journal of the American Medical Association (JAMA) pointed out the problem. “The average anesthesiologist, emergency physician, pathologist, and radiologist charge more than four times what Medicare pays for similar services, often leaving privately insured consumers stuck with surprise medical bills that are much higher than they anticipated.”

Wisconsin, by the way, is among the states with the highest out-of-network markups according to the study.

As a patient, you don’t get to select the specialists like the anesthesiologists – who charge six times what insurance customarily pays based on the Medicare rate. But you do get the specialist’s invoice once your insurer carves out how much it will pay. States and Congress will sort out how customers avoid surprise billings. Maybe the solution is in Healthcare Reform… might be in state laws capping out-of-network charges… either way, it doesn’t change the immediate danger it puts your financial independence in.

Wynn at Law, LLC works with clients to try to avoid a bankruptcy filing if they can. Sometimes, it’s as simple as talking with the insurance company and the out-of-network provider about the crushing surprise bill.

Our team here at Wynn at Law LLC hope you had an enjoyable and safe Independence Day, and we want you to know that we’re by your side if your financial independence is put in jeopardy.

*The content and material in this original post is for informational purposes only and does not constitute legal advice.

Photo by Sean Prior, used with permission.

Attorney Shannon Wynn: Avoid these five small-business-crushing scams

Consumers aren’t the only victims of fraud. Wynn at Law, LLC hears about thousands of small business scams every year. A reward of our business is being able to work with entrepreneurs to get a business off and running (see related article). It doesn’t take much more than a single scam to derail that dream.

These days it’s fairly simple to pop up an official-looking website and professional – but fake – letterhead. Aside from the possible remuneration from and legal ramifications for the scammers, if they’re caught, once the business owner parts with the money for a scam, the money is gone.

Wisconsin’s Better Business Bureau notes, “We continually see various scams against small businesses and they seem to be increasing each year.” Some of the common small business scams reported to the BBB include:

1.       Phony invoices. Businesses receive fake invoices demanding payment for product or services they never ordered or received. Often, if you look closely, you’ll see fine print that identifies the bill as an actual solicitation for business. Generally, the amount is small enough to not raise a red flag. Make sure that the business billing you is a business with whom you are familiar. If not, question it. Wynn at Law LLC’s best small business clients limit the employees authorized to place orders or pay invoices.

2.       Directory scams. A problem that has plagued businesses large and small for decades involves deceptive sales for directories. Scammers call claiming they want to update the company’s information for an online directory… when they could be using the info to set up your business for identity theft. Otherwise, they may also try to upsell your listing in a directory that’s irrelevant to you or your customers, or doesn’t exist at all. Do not give out information about your business to anyone, unless you know for what the information will be used.

3.       Charity pitches. Even new businesses are routinely asked to donate funds to needy causes. While many requests are legitimate, every year small businesses become victims of fraudulent or deceptive charitable solicitation schemes. If the charity isn’t on give.org, don’t give.

4.       Coupon books. Small business operators are often approached to participate in coupon book promotions. They seem like an inexpensive way to advertise your start-up. Problems occur if the promoters change the terms of the coupons to make them more attractive to buyers, when the books are oversold or when books are primarily distributed outside our area.

The fifth scam is among the most prolific – with terrifying outcomes. Internet & phone scams are a common nightmare. Watch out for ransomware, phishing, URL hustles, and spoofing scams. Scammers play on fear, convenience and lack of technical knowledge. Installing a protective software program like Norton or McAfee is a good start. A ‘firewall’ is recommended because it keeps your inside information inside… which includes your customers’ information. These days, you’re flirting with disaster by clicking on any links in unsolicited emails. One recent tip we heard was to shut off the preview pane on email inboxes to avoid emails a spam filter missed.

*The content and material in this original post is for informational purposes only and does not constitute legal advice.

 Photo by Brian Jackson, used with permission.

Attorney Shannon Wynn: ‘By-Owner’ real estate sellers need protection

One article earlier in the Wynn at Law, LLC archives mentioned our current real estate market cycle as being a seller’s market. There’s not much supply, and plenty of demand. Even in a hot seller’s market, there’s a temptation to increase the net price received for the property by offering it For Sale By Owner, or FSBO. (Real estate pros pronounce it ‘fizzboh.’)

Professional realtors have a home-selling advantage by having access to the realty company’s ad money, marketing and presentation resources, and buyers. However, the cost of that advantage is about six percent of the sale. So, FSBO sellers take over the job of the listing agent hoping to pocket that six percent. Many solo sellers do hire professionals to appraise, stage, photograph, video, drone, design flyers, and help them with the paperwork. Some don’t, and just bank on it selling easily because of the market.

Even a realtor-oriented source like Realty Times concedes that a part of a hot market will go FSBO. That website’s tip – and ours – for those sellers is to get a lawyer: “If you have opted to do a realtor-free FSBO transaction this is definitely the time to call an attorney.”

Every real estate transaction requires a deed. It has to be accurate. It has to be on-time. Anyone can access the records at the register of deeds office to pull that off. As much fun as that sounds, can he or she also assure that deed is legally sound? No. Realtor transactions always have an attorney: The title company and lenders insist upon it for that very reason.

Something else to consider: Another way a good attorney has your back when you go solo is by being your surrogate if negotiations get sticky.

Getting a lawyer involved early – as soon as you decide to go it alone – gives the owner an edge by being ready for closing. It provides the peace of mind that comes from having trained eyes look for other factors impacting the closing… before the closing. (See our previous article)

 

*The content and material in this original post is for informational purposes only and does not constitute legal advice.

 

 Photo by Andy Dean, used with permission.

Attorney Shannon Wynn: Form your company first

Wynn at Law, LLC counsels many business owners when a legal situation arises. However, the best opportunity for us to help a business happens at the front end, somewhere between the inspiration to start the business and the day the first customer arrives. We totally get the excitement and energy every business owner exudes when the lightbulb burns bright to start an enterprise.

Forming a general partnership doesn't require any legal paperwork, but it wouldn’t hurt to have a written agreement amongst partners. The fact is, partnerships are formed every day without even intending to do so if you and another person start working together on a business.

Other business structures require a bit more organization. A tax adviser is going to help with the tax advantages or disadvantages of organizing a business as a partnership, a limited liability corporation (LLC), or incorporate as an S-corp or a C-corp. I’ve listed these in order from the easiest to form to the more complex.

An attorney is your lifeline to help you form the business within the state guidelines while protecting your best interests. As one of my clients puts it, ‘Everything is great when it’s great… when it goes south you’re glad to have an operating agreement.’

She has an LLC, which needs an operating agreement among the LLC members. It governs the business and the members' financial and managerial rights and roles. For a corporation, they’re also known as by-laws.

Remember what the two L’s stand for: Limited Liability. The operating agreement separates the owner’s or owners’ liability from the business’ liability. In short, you separate your business finances and personal finances, shielding the liabilities of each from the other. That’s a huge deal, especially if a suit is brought against the business – or, just as crushing – at some point you face personal bankruptcy, a frequent topic of Wynn at Law LLC’s articles. (See our archive, below right, please)

*The content and material in this original post is for informational purposes only and does not constitute legal advice.

Photo by Andrew Lobov, used with permission.

Attorney Shannon Wynn: Graduation, gifts, and financial aid

 

One of the great rites of spring is the new crew of young adults graduating high school and heading off to their futures. When I'm not at Wynn at Law, LLC, I teach at Marquette University Law School, so I may see a few of them further in their academic journeys.

 

For students, parents, and grandparents, the issue of affording tuition is best tackled a few years before high school graduation. If you're blessed with a full-ride scholarship or a generous gift from family, the Free Application for Student Aid (FAFSA) is a challenging hurdle you'll skip. For families planning to apply for financial aid, here are a two estate planning things to keep in mind long before commencement. 

 

Inheritance – Inherited income impacts a student’s eligibility for certain amounts of financial grants (which don't have to be repaid) and can affect the amount of loans (which have to be repaid after graduation). The FAFSA looks at finances of the entire family including the previous tax year’s income. Inheritance or gifted money, even to a parent, can affect the amount of financial aid for the student. 

 

Generally, one-time events, like inheritances, are handled by adjusting the income and counting the sum as an asset. The asset protection allowance (APA) allows a certain amount of money in retirement and non-retirement accounts, like an inheritance, to be spared assessment. But the federal government does expect parents to use a percentage of their unprotected assets to pay for their child’s education. The APA looks at the age of the oldest parent to determine the amount spared from assessment, assuming a younger parent has more time in the workforce before they'll need the assets.  

 

For parents, a way to legally lower the total amount of assets recorded on the FAFSA is to use any gift or inheritance to pay off credit card debt and auto loans because consumer debt is not considered when a student applies for financial aid. Paying off that high interest revolving debt in an important part of avoiding bankruptcy, a frequent topic at Wynn at Law, LLC. 

 

Savings and investments – We all hear about the tremendous burden of student loan debt new college grads have to repay. Saving up a ton of money on a summer, minimum wage job isn't likely to reduce the amount borrowed by much. However, keep in mind two things: 1) reducing any amount they'll have to borrow is a good thing, and 2) If they do save summer earnings, the government expects that 20 percent of it be used for college, so make sure savings are set aside for the teen. 

 

On that note, if parents wish to transfer to their accounts assets held in a child’s name it’s best to do so at least two years before the FAFSA. Moving assets like this could trigger other issues when it comes to both financial aid and taxes so be sure to contact professionals for seasoned money management advice. 

 

*The content and material in this original post is for informational purposes only and does not constitute legal advice.  

 

 Photo by Monkey Business, used with permission.