real estate 91024As our parents and other loved ones age, they may need a little more attention from us. Parents, grandparents, aunts and uncles, or and even neighbors who are aging may want to be seen as strong and independent. Often, however, their abilities to take care of household and financial affairs begin to erode as they get older.

What’s at Risk?

One such example which can have catastrophic consequences is the failure to pay property taxes. A lot of retired people are struggle to make ends meet and may not be able to pay their taxes as they come due. This puts their home at risk because unfortunately, governments have processes in place to collect back taxes by placing liens against the property.

Worst Case Scenario

Different locales have different approaches to filing liens against property, but one of the worst is Washington, D.C. There, the city made a policy change in 2001 that has had devastating effects on homeowners. Prior to that time, the city would sell a lien at auction to individuals who could then charge interest on the amount due until it was paid. If it was not paid, the city could move to foreclose on the property.

The change in 2001 allowed the purchasers of the liens to go directly to court to foreclose on the property they purchased. This attracted predatory lenders from other states that became very aggressive in pursuing the foreclosures. In many cases, people who owned their homes free and clear lost them over unpaid taxes of less than $500. Once investors buy the liens, they can begin charging interest and legal costs, which makes it more expensive for the homeowner to pay off the lien.

While it is true that homeowners have ample time and notice to pay the taxes, even after the liens are sold, Washington’s story is replete with cases of owners with dementia or other serious illnesses. Because of these types of conditions, many owners were not aware of or did not understand what was happening. And without family or friends looking out for them, the predators can have a field day.

What Can be Done?

Thankfully, Washington is in the minority of governments that allow this predatory approach to tax collection. But it points out the need for those of us with elderly family members and friends to pay attention. Respect their pride, but make sure they get the help they need so they are not taken advantage of.

One of the main objectives of our law practice is to keep families out of court and out of conflict. Our lawyers can help you protect those you love by starting with a Family Estate Planning Session. Call our office today, mention this article, and we’ll waive the fee for your session.

Dedicated to your family’s wealth, health, and happiness,
Marc Garlett 91024

real estate 91024My wife and I were both apartment renters in our younger years. Now we are landlords with several 3 and 4-unit residential properties in and around Los Angeles.

Good landlords aren’t looking to take advantage of their tenants. Without even going into the legal and ethical implications, that’s just bad business. And good tenants respect their landlord’s property and time. That’s good business on their end of things as well (again, not to mention the legal and ethical consequences of not doing so).

But even when there are good, moral people on both sides of the landlord-tenant relationship, problems can – and do – still arise. Often, these problems are because of simple misunderstandings. So to help prevent those kinds of problems, here’s what prospective renters should ask before signing a lease:

Number 1: What Will My Total Cost Be and When Is It Due?

You might be surprised at how many people sign leases without understanding all of the associated costs and when they must be paid. Renting an apartment or house is exciting and it can be easy to simply just scan the document and jump straight to the signature line. Most tenants think about obvious costs, such as monthly rent and typical utilities. However, some leases require tenants to pay less obvious costs, such as application fees, credit check fees, parking fees, and optional service fees, such as cable and Internet. Review your lease carefully and compare leases from different landlords–what may seem like a better deal may not actually be better after everything is taken into consideration.

Be sure you know what the deposit is, what will be necessary to get your deposit returned after you move out, when your rent payment is due and what the late fee is if you are late (and whether or not there is a grace period for being late).

Number 2: What Rules and Regulations Will Apply to Me?

Many landlords impose rules on their tenants, particularly those living in close quarters, such as apartment buildings. More common rules include mandatory quiet times, as well as prohibitions on pets or parties. However, other important rules are also found in leases. For example, many landlords prohibit tenants from redecorating their property, from changing locks, from using propane grills or from storing items on balconies or porches. Read the lease carefully to ensure you understand and can abide by each of the rules.

Number 3: When Will My Lease End, and What Happens When It Does?

Many leases define how long they will last (called the “term” of the lease) and under what circumstances they will renew. If the lease does not provide this information, California state law will set the term of the lease and its renewal. Before you sign a residential lease, make sure you know how long you are locked into it and under what circumstances you can move out and owe no more rent. If you are not sure, consult with an attorney.

Dedicated to your family’s wealth, health, and happiness,
Marc Garlett 91024

Protecting Real Estate 91024Many parents believe that by adding children’s names to a property deed, they can easily pass along that property to their children. Unfortunately, those who act on that belief often find they have invited more problems than they have avoided.

This is because in California, when more than one person owns property together and they are not married, the default form of title ownership is referred to as tenants in common. This means that if one of the owners dies, his or her ownership share does not transfer to the other owner(s). Instead, it goes to the deceased owner’s heirs through probate.

The problems of probate (and there are many) can be avoided if the deed designates property ownership as joint tenants with the right of survivorship. However, there are several big reasons why it may not be advisable for you to deed real estate to your children in this manner, with adverse tax consequences topping the list. This is because deeding property to children is actually considered a gift, and the cost basis for that gift is what you paid for your home.

For example, let’s say you paid $150,000 for your home many years ago. You then add your children to the deed at some point, which the IRS deems a gift. After you die, the children sell the home for the current market value of, let’s say, $550,000. They will be taxed on the difference between the cost basis of $150,000 and the sale price of $550,000 – or $400,000. That’s a huge tax burden you’ve left for your children.

It would be better if your children inherited the property via your will, then selling it under the scenario described above would not create the same tax liability because their cost basis would be what the property was worth when they inherited it (that being the current market value of $550,000).

But there is an even better way; much better in fact. While inheriting property through a will does avoid some of the tax issues discussed above, it does NOT avoid probate. The way to avoid tax issues AND probate is by creating a living trust and titling the property in the name of the trust, and naming your children as the trust’s beneficiaries. You avoid – or more accurately, your kids avoid – the problems and costs of probate and do so in a tax-advantaged way.

So if you own real estate, give us a call today. We will review your current deed and advise you on on the easiest and most cost effective ways to pass it to your children.

To your family’s health, wealth, and happiness,
Marc Garlett 91024

Protecting Real Estate 91024As an estate planning attorney, I get that question all the time. And it’s a great question. You definitely want to make sure you hold title to your home correctly. Why?

If titled incorrectly:

  1. The home owner cannot control what happens to the property after s/he dies.
  2. The home owner’s heirs can lose the property to creditors, the government, or even an ex-spouse.
  3. The home owner’s heirs will have to pay capital gains tax on the sale of the property.
  4. The home (and the heirs) will have to endure the public, time-consuming, and very expensive probate process.

Common Ways to Hold Title

  1. Joint Tenancy (JT): Under JT, the owner who dies first cannot control what happens to the property after his or her death. JT ensures there will be a probate upon the death of the second joint tenant. Finally, the surviving joint tenant will pay capital gains taxes on one-half of the property after the death of the first joint tenant.
  2. Tenants in Common (TIC): A TIC does not provide any survivorship rights among the co-owners. When one tenant in common dies, that tenant’s interest in the property does not automatically pass to the surviving tenants in common. And each tenant’s interest does have to pass through probate upon each of their deaths. In California, a tenancy in common is presumed unless title is specifically taken in some other way.
  3. Community Property (CP): Possibly the most common way for married couples to own property, CP causes half of the property to be probated upon the first death, and the whole property to be probated upon the second death.
  4. Community Property with Right of Survivorship (CPw/ROS): Like joint tenancy, CPw/ROS is he-who-dies-last-wins situation, because only the surviving owner controls the disposition of the property upon death.

What eliminates all these potential problems? A Living Trust.

The best way to own your property is in a living trust.

  1. Owning property in a properly drafted and funded living trust avoids probate upon the death of both the initial and surviving spouses.
  2. Property received by heirs can be sold free of any capital gains tax and often avoids property tax reassessment.
  3. The trust will ensure the right people receive the property after the death of the owners.
  4. The property can be protected from creditors, predators, and even any future ex-spouses of the heirs.

Be one of the first five callers to mention this post and I’ll research and review the title of your primary residence free of charge. You’ll learn exactly how your title it is currently held, what that means to you and your loved ones, and how you can change the way you hold title if you’re not happy with the status quo.

To you family’s health, wealth, and happiness,
Marc Garlett 91024