Legal Update New Year 2020
A. Estate Planning – Proactive Planning
B. Hiring a Contractor – Home Services
C. Collect Funds Owed
A. Estate Planning – Proactive Planning
Most of our clients have a will and power of attorney, but there is much more that can be done to make your estate easier to handle at the end of your life:
Collectables: Stamp and coin collections worth less than $10,000 aren’t significant enough to be considered an investment and will cause a burden on your Personal Representative. You know what you paid and probably have an idea of their market value. Consider liquidating the items – the cash generated will create a nest egg. An alternative is to have a collection appraised and donate it to a charity, creating an income tax deduction.
Timeshares: Timeshares can be re-titled in the name of the current owner and an adult child as joint tenants to avoid probating the asset. This is especially important for out-of-state timeshares.*
Oil & Gas: Ownership of oil and gas interests may become a problem the more they are divided generation to generation. Consider putting the oil, gas, and mineral rights in an LLC and leave adult heirs units of ownership in the LLC. That way, there is only one lease to negotiate and one royalty check each month. This simplifies and reduces accounting and legal fees. Once or twice a year, as is deemed appropriate, each heir will receive a check for their share of the income. *
Farm Land: Similar to the above, if a person desires to keep the family homestead in the family, the land could be put in an LLC with the heirs signing a buy/sell agreement restricting the transfer of the ownership interests to only family members. This will help protect the land from creditors’ claims and divorces of family members.*
Gun Collections: Guns are very important to many Americans, but the safekeeping of guns is a problem. It’s very expensive to insure guns. A gun safe is a great idea but even they can be stolen. A senior citizen should consider gifting some of their guns to relatives during their lifetime. A large stockpile of guns and ammo is a real target of thieves.
Get Organized: Create a file system for real estate deeds, promissory notes, brokerage accounts, bank accounts, motor vehicle titles, bills of sale, etc., and review them with your named Power of Attorney and Personal Representative. This will enhance his or her ability to handle your affairs upon your disability or demise.
Consolidate: Unless there is a specific reason for numerous bank accounts, brokerage accounts, mutual funds, etc., consider consolidating accounts to make them easier to manage late in life. Multiple monthly statements, K-1s, 1099s, and 1098s can be confusing as the years pass. Make a commitment this year to simplify your life
*Seek legal counsel regarding these transactions
B. Hiring a Contractor – Home Services
Networking with friends and business associates is a good starting point to locating a good contractor. However, you need to determine the knowledge and background of the person supplying a reference. An uncle that owns ten rental homes probably knows a good plumber. An elderly neighbor lady that has replaced one roof on her home in 35 years is not a good source for a referral of a roofer. She’s never been on the roof and has no idea as to the materials or quality of the finished product.
Social media and yellow page advertising is a good place to find overpriced contractors that aren’t very busy. I had a tenant who found a plumber online who charged over $80000 for one hour of labor to repack a valve on a radiator.
Once you narrow it down to two or three contractors, obtain a written bid for the work that includes hours to be worked, hourly labor rates, and costs of materials. Don’t be surprised if the bids vary by as much as 50%. With the building boom being experienced in Colorado, contractors aren’t shy about charging excessive rates.
When a homeowner selects a contractor, it’s usually wise to enter into a written agreement for jobs in excess of a few thousand dollars. The agreement should include details as to beginning and completion dates, whether the contractor has a license to perform the work (some work through other contractors), documentation of insurance for property damage or personal injuries, workman’s compensation insurance on employees, warranty on labor and materials, inspections by electrical, plumbing, and roofing inspectors, jobsite clean-up, and payments to the contractor. Always hold the final payment until after completion and final inspections.
Mechanic’s liens by material suppliers are always a risk. Verify that the plumbing, roofing, or concrete suppliers have been paid with your money before making a final payment. On large remodels, new home construction, or construction of large out-buildings, hire an attorney to review or draft contracts and to consult with regarding mechanic lien releases and final payments. Buyer beware!
C. Collect Funds Owed
Businesses and individuals with substantial investments need to act promptly to collect funds owed to them.
Any book or seminar on account receivables will stress the importance of immediate action on past due accounts. The odds of collecting a debt six months or a year past due are substantially less than a 30-day old debt.
Oftentimes, debts aren’t paid because of financial failures, pending divorces, or business dissolutions. The first creditors to sue are often the only ones to be paid. An eventual bankruptcy or divorce will often end any hopes of payment. Sue on that promissory note, foreclose on a deed of trust, and file a mechanic’s lien for labor and/or materials. The early bird gets the worm (money!).
Sport News:
The University of Denver Hockey Team won the Division I NCAA National Championship on April 8th, 2017 in Chicago, Illinois. DU has won eight national titles in hockey. Tickets for the regular season games are very reasonable; treat yourself to a hockey game. You can reach the DU box office at (303) 871-6083
http://www.denverpioneers.com/tickets/hockey.html