Common Estate Planning Mistakes

When it comes to estate planning, people make mistakes most commonly in one of two areas:  First, they fail to have any kind of estate plan at all.  Secondly, once they have a plan, they forget about it.

An estate plan is not a static document because life isn't static.  Circumstances change.  Asset values go up or, as is more common in recent years, down.  Divorces, remarriages, new children, deaths, selling assets, buying new assets -- all of these things can make the best estate plan meaningless.  An outdated estate plan can leave your family vulnerable, unable to pay estate taxes, for example, or even unable to pay funeral expenses because of lack of liquidity.

Any time you have a change in your life you should review your estate plan.  If this is done periodically, the changes will be minimal, but the savings, not only in dollars but in hurt feelings and even breaking up of a family, can be huge.

Surrendering a House

In bankruptcy a debtor has three options when it comes to secured debt (debt where the creditor has collateral that can be repossessed): Surrender (give the collateral back), reaffirm (renew the contract, essentially excepting the debt from the bankruptcy), or redeem (paying the creditor a lump sum equal to the value of the collateral -- not a realistic option for obvious reasons).  To surrender means you give back the collateral and walk away from the debt, not owing any deficiency that may exist after the creditor sells the collateral.  With a car or any other personal property, surrender is fairly easy.  Drive the car to the bank, drop the keys on the manager's desk and walk away.  It's a bit more tricky with a house.  How do you give a house back?

The issue is becoming more and more important because of the backlog of foreclosures.  In years past, as soon as a person filed bankruptcy the bank filed a motion for relief from the automatic stay to get permissioin to foreclose.  Now, banks are waiting several months to act, if they act at all.  While this might seem like a great deal for the debtor because she gets to live in the house rent-free until the bank acts. there are some big downsides. If your bankruptcy schedules say you're going to surrender something, you are required to surrender within 45 days of the meeting of creditors.  For a house, this means, at the very least, to leave and notify the bank that the property is vacant. But this doesn't solve everything. As long as the debtor still has legal title, she is considered the owner.  That means if someone is hurt on the property (such as by slipping and falling on the ice), the debtor could be responsible.  If there are dues, such as condominium fees, the debtor could be personally responsible.  Same goes for assessments made by the city. If these things happen after you have filed (post-petition), the debts are not discharged by the bankruptcy. 

If you plan to surrender your house in bankruptcy. talk to your attorney about how you actually accomplish that.

Taxes in Bankruptcy

Will my tax debt be wiped out in a bankruptcy?  For many, that's a huge question.  It's also a question that a lot of professionals, bankruptcy attorneys included, don't have the answer to.  In most cases, the answer is "No."  Taxes are not discharged in a bankruptcy.  That's because the same people who wrote the Bankruptcy Code, Congress, are the same people who wrote the Internal Revenue Code and the government takes care of itself.  Letting people discharge taxes in bankruptcy would seriously hamper the government's ability to do business.

Tax debt CAN be discharged if all these conditions are met:
1.  The taxes are income taxes. Other types of tax, such as payroll taxes or the "personal liability assessment" for officers and directors of a company that didn't pay over payroll taxes, tax penalties and the like are not dischargeable, ever.
2.  You filed a return for the period in question.  If you've been delaying filing a return, the taxes can't be discharged regardless of how old they are.
3.  The taxes are at least three years past due.  Since income taxes are not due until April 15 of the year following the calendar year for which the tax applies, this means three years after April 15 for the prior year.
4.  You didn't commit fraud, such as wilfully evading paying, using a false social security number, etc.
5.  You pass the "240-day" rule, which says the IRS must have assessed the tax more than 240 days before you file, or it hasn't yet assessed the tax.  If you fall between those two deadlines, they can't be discharged.

WARNING:  Even if you are able to discharge the taxes, if the IRS filed a tax lien against any property you own, that lien, just like other liens, such as mortgages or judgments, passes through bankruptcy unaffected and can still be enforced against the property.

If you are filing bankruptcy because of tax debt (this includes state taxes as well as federal), be sure you talk to a knowledgeable tax and bankruptcy professional before filing.

Court Asked to Exclude Busty Woman from Trial

A Chicago lawyer has filed a novel motion in a small claims action involving a car dealership and a married couple.  Thomas Gooch, who represents the dealership, filed a motion to exclude "a large-breasted woman" from sitting at the plaintiff's counsel table with the plaintiffs and their attorney, Dmitri Feofanov.  According to CBS News, Gooch claims that the sole purpose of having this woman, who Feofanov identified as a paralegal, at counsel table is to distract the jury from the merits of the case.  Although the motion described the woman as "large-breasted," Gooch reportedly told a local newspaper that he doesn't object to the fact that she's buxom ("Personally, I like big breasts" Gooch is quoted to have said) but he objects because she isn't a lawyer and has no business at counsel table "dressed in such a fashion as to call attention to herself."

This raises all sorts of interesting possibilities.  Perhaps jurors who are deemed too attractive will be asked to be excused because their appearance may detract the other jurors from considering the case.