How Are Your Assets Titled?

When it comes to estate planning, how something is owned, i.e. how the title reads, is almost as important as what is owned.  Many people own property as joint tenants so that either of them can deal with the property.  This makes good sense from an administrative standpoint, but not necessarily from an estate planning standpoint.  Property held in joint tenancy automatically passes to the other joint tenant or tenants upon the death of one of the joint tenants.  This might or might not be what the parties had in mind.  For example, suppose Mom transfers her bank accounts into her and her sister's names so the sister can help Mom, who is getting older, deal with her bills.  Mom has a will that says that on her death the money will go to her children.  But when she dies the joint tenancy automatically transfers the accounts into the sister's name, regardless of what the will says.  If the sister wants to force the issue, the kids might be out of luck.

When planning your estate, always be aware of how your property is titled. 

Posthumously Conceived Children Can't Necessarily Get Social Security Benefits

The Supreme Court of the United States has just announced a fascinating decision.  In a unanimous opinion the Court sided with the Social Security Administration in holding that a child conceived posthumously (after the father's death), such as by way of preserved sperm, is not automatically entitled to Social Security benefits as a surviving heir unless the child is entitled to inherit from the father under state intestacy or inheritance law.  Simply put, such a child cannot rely solely on the fact that it is the genetic offspring of the father.  The child's right to receive benefits depends on whether state law would recognize the child as the father's child.  Since most state intestacy laws were enacted well before medical advances allowed for the preservation of the father's sperm and insemination of the mother by artificial means, this is an open question in most states that will require either legislative clarification or interpretation by each state's courts.

The case is Astrue v. Capato, docket number 11-159, opinion issued May 21, 2012.

Adult Adoptions

A Florida man, John Goodman, recently made news when it was announced that he intends to adopt his girlfriend, Heather Hutchins.  This prompted speculation that the move was designed to protect some of Goodman's fortune (he's a wealthy socialite in Florida) because in March he was found guilty of DUI manslaughter in the death of Scott Wilson in an automobile accident in which Mr. Goodman was driving under the influence of alcohol.  Wilson's family sued for damages.  The case has been dismissed, suggesting a settlement.

The question immediately comes to mind, can one adult adopt another and, if so, why?  The answer is yes, one adult can adopt another adult.  There are several reasons.  One of the most common is in the case of a remarriage where the new spouse has adult children.  Each spouse might wish to solidify the blended family by adopting each other's children, thus making one big, happy family.  Another reason is in states that do not recognize same-sex marriages, one member of the couple might adopt the other to give them both something similar to marriage under laws of inheritance and benefits such as health.

For a more detailed look at adult adoption, see this good post by the firm of Bryan Cave:
http://trustbryancave.com/girlfriends-come-and-go-but-daughters-are-forever-the-case-for-adult-adoption/#page=1

Two Common Bankruptcy Myths

There are a lot of myths surrounding bankruptcy, about what it can or can't do, who can file, who can't, that you can except certain debts, etc.  Two of the more pervasive myths are (1) that you need a minimum amount of debt in order to file and (2) that you have to repay all your debts in Chapter 13.  Both are false.

Anyone can file bankruptcy with any amount of debt.  In theory if you owe someone $25 you can file, though you'd probably be committed because the filing fee is $306.  But the truth is, there is no minimum amount of debt required.  Whether you file is a personal decision.  For some people, $5,000 is too much debt.  For others, $500,000 is not too much.  It all depends on the individual.

When it comes to Chapter 13, you do not have to repay all your debt.  It would be a foolish program if it required full repayment.  Think about it.  If someone can't repay their debts NOW, how are they going to be able to repay them in only 60 months, the maximum time allowed under Chapter 13?  What Chapter 13 does is look at what you can afford to pay and require you to pay that for the length of the plan, which is 36 or 60 months, depending on a number of factors.  At the end of the plan, any remaining debt is discharged, just like in a Chapter 7.  But Chapter 13 has advantages over Chapter 7:  There is no means test, which disqualifies some debtors from Chapter 7; you get to keep assets that you might otherwise lose in Chapter 7 (such as cars, houses, stocks, etc.); and some debts that can't be discharged in Chapter 7 can be discharged in Chapter 13.

JP Morgan Chase Shuts Down Collection Arm

An interesting article in American Banker just caught my eye.  JP Morgan Chase, one of the bigggest of the big guys, has quietly shut down most of its consumer collection activities.  As recently as mid-2011 this division was bringing in hundreds of millions of dollars a month in revenue for JPMC. Chase is mum about why it has stopped collection activities, but speculation is that it has something to do with similar problems faced by Chase, B of A and others in foreclosures:  Lack of documentation for the debts.

It looks like the bank that was too big to fail is now too big to manage.

Saving Your Business in Chapter 13

Most people think of Chapter 11 when they think of reorganizing a business.  While it's true that you have to file Chapter 11 if you have a corporation or a limited liability company (LLC), if you're a sole proprietor you can reorganize through Chapter 13.

A sole proprietor simply means a person running a business without having incorporated or formed an LLC through which she conducts the business.  If you're "doing business as" (d/b/a), you're probably a sole proprietor.  There is no legal distinction between the business and the individual in a sole proprietorship.  While this is often a disadvantage when it comes to protecting your personal assets (home, car, savings, etc.) from business debts, if it becomes necessary to reorganize the business being a sole proprietor lets you do so through Chapter 13.

Chapter 13 is only for individuals, which is why businesses generally don't file Chapter 13.  But because there is no difference between the individual and the business in a sole proprietorship, solos can reorganize in Chapter 13.  This means they can modify business leases, pay some debts, reject some contracts and often get all the advantages of Chapter 11 without the expense or hassle.  So if your business is struggling Chapter 13 might be just what you need.

Bankruptcy Mills

There is an interesting article on MSN about cut-rate bankruptcy lawyers, also known as bankruptcy mills.  You can read it here:
http://articles.moneycentral.msn.com/Banking/BankruptcyGuide/BewareCutRateBankruptcyAdvice.aspx

What constitutes a "bankruptcy mill" is in the eye of the beholder.  Filing hundreds or even thousands of bankruptcies a year doesn't make a firm or an attorney a mill in my opinion.  What does make a bankruptcy mill is when the attorney doesn't give the client the personal service the client deserves.  If the attorney is up front and says, in effect, "we'll do a bankruptcy for you for $XX, but realize that for that price you won't get return phone calls, we won't answer your questions and we won't do much more than prepare the forms and attend the meeting of creditors," the client can hardly complain.  But unless the attorney makes such a disclosure, most clients expect, and I would say, deserve personal attention.  Questions arise.  Clients expect those questions to be answered. They also expect a certain amount of "hand-holding" through what is usually a traumatic event in their lives. When an attorney ignores a client WITHOUT FIRST DISCLOSING that the bargain-basement fee the client paid doesn't entitle the client to personal attention, then that firm is a bankruptcy mill.