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Friday, August 14, 2009

LIVING WILLS ARE NOT DEATH PANELS.

Living Wills, also known as Advance Directives, are an important part of anyone's life planning and estate documents. Contrary to falsehoods being spread during the current healthcare reform debate, a living will actually puts the PATIENT in control to dictate what specific care the patient desires to be administered or withheld in the event of an end of life condition. In the absence of such, the default mechanism is to keep the patient alive, even if the patient would indefinitely be in a persistent vegetative state. 99.9% of my clients, in fact, do not want to be kept on a ventilator or other life sustaining measures indefinitely - which would occur in the absence of a living will. Living Wills should be executed to prevent such a scenario, along with Healthcare Proxies and Powers of Attorney.

Wednesday, June 3, 2009

THE IMPORTANCE (AND RISKS) OF A POWER OF ATTORNEY

from the New York Times
May 21, 2009
Putting Your Faith in a Power of Attorney

By DEBORAH L. JACOBS
TRUST and estate lawyers routinely tell their clients about the importance of signing a durable power of attorney. Often written at the same time as a will, it appoints a family member, friend or adviser as an agent to act on your behalf in financial and legal matters — even if you become incompetent.

But as essential as these documents are, they face new — and continuing — obstacles. One is using them amid the disruptions in the financial services industry. Another is an old problem that may have grown more acute after recent scams and frauds: Many people mistrust these documents, which give unbridled power to your agent. So some people sign them to appease their lawyers but never give them to the person designated to handle their affairs.

“A power of attorney is a license to steal,” said Bernard A. Krooks, a specialist in elder law at Littman Krooks in New York who nonetheless encourages clients to sign a power of attorney. “You have to be careful who you appoint as your agent.”

Some states have tried to reduce abuses. In New York, for example, a new law requires that as of Sept. 1 all new powers of attorney be signed not only by the principal (the person granting the power) but also by the agent — a reminder of his or her obligation to put the principal’s welfare first.

In addition, if the power of attorney includes the authority to make total annual gifts of more than $500 to one person or charity, that power must be included in a separate rider that, like a will, must be signed in the presence of two witnesses.

The law, enacted Jan. 27, may deter some people from signing a power of attorney, Mr. Krooks said.

He and other lawyers remind their clients that even if signing a power of attorney makes the client feel vulnerable, it’s far better than living without one. If you become incompetent, you lack the capacity to make legally binding commitments. Without a power of attorney, your family might have no choice but to ask a court to appoint a guardian to oversee your finances. This can be an expensive and sometimes embarrassing ordeal and can involve unpleasant, even acrimonious, exchanges.

Although the two are sometimes confused, a durable power of attorney, which deals only with financial matters, and a health-care proxy, which authorizes an agent to make medical decisions on your behalf, are distinctly different. And when thinking about signing a durable power of attorney, it is important to consider the following issues:

WHOM CAN YOU TRUST? The best person to put in charge, lawyers say, is a close family member — preferably one who lives nearby. Most financial advisers do not want this responsibility, nor is it cost effective to pay their hourly fee to handle routine tasks like paying bills.

Naming joint agents, which is allowed only in some states, is one way to provide checks and balances. Or you can appoint another person, like an attorney, an accountant or a family friend, to supervise the arrangement.

Before appointing an agent, it is important to determine whether that person is willing to take on the duties. If you’re nervous about giving the signed document to your designated agent right away, you could leave it with your lawyer with instructions on when to turn it over, said Gloria S. Neuwirth, a lawyer with Davidson, Dawson & Clark in New York. In that case, remember to tell your agent whom to contact.

WHAT POWERS SHOULD BE INCLUDED? You ought to authorize your agent to take any financial action you could take yourself, said Lawrence P. Katzenstein, a lawyer with Thompson Coburn in St. Louis. This could include estate-planning strategies like financing college savings plans for children or grandchildren, prepaying charitable bequests and converting traditional I.R.A.’s to Roth I.R.A.’s.

If you have set up a living trust — a way to provide for yourself financially and to transfer assets to friends or family after your death instead of having them distributed under the terms of a will — you should carefully distinguish between the responsibilities of the trustee and those of the agent, Mr. Katzenstein said. He recommends that you indicate whether the agent may take money out of the trust, and that you give the agent the authority to transfer assets into it if you become incompetent.

Even if most assets are ultimately held by the trust, you still need the agent to perform quasi-personal functions like signing a nursing home contract or tax return and accessing a safe-deposit box.

This is not always easy, and the digital world has made it harder, in some ways.

Wendy S. Goffe, a lawyer with Graham & Dunn in Seattle, relied on a power of attorney that her husband, Scott Schrum, had given her to piece together his paperless financial life after it was found that he had cancer. While he was disabled, the form gave Ms. Goffe access to electronic records, including those for her husband’s rollover I.R.A. and 401(k) and the 529 college savings plan he had managed for their daughter Maya, 7.

The biggest chore was tracking down shares of stock that Mr. Schrum, also a lawyer, had purchased by exercising employee options online. Because of “a string of bad luck,” Ms. Goffe said, the financial institution holding the options and the couple’s brokerage company had been sold, their Web sites eliminated and the records put into storage. The shares, worth $7,500, had been credited to a stranger’s account. In dealing with each institution, she needed to present the power of attorney.

WHEN DOES THE DOCUMENT TAKE EFFECT? You can choose to make it effective from the moment you sign it, or specify that it be activated by a specific event, for instance, if you become incompetent.

The problem with the second approach, known as a springing power, is that someone must decide when you have reached that state, said Ms. Neuwirth, the New York lawyer. Traditionally, this has required a medical opinion and can lead to disputes.

Even when powers are effective immediately, the agent may not be sure when it’s necessary to take control. That is what happened to Dr. Mark Segall, a surgeon in Los Gatos, Calif., who said his elderly parents gave him power of attorney in 1996.

Knowing that they were private about financial matters and valued their independence, he did not use it until last year, when he said they seemed relieved to have his help. He then discovered that they had been shredding all their mail, including bills, for many months and had accumulated about $1,100 in finance charges on their credit card (at Dr. Segall’s request, the company waived the late fee).

WHERE IS A POWER OF ATTORNEY VALID? Because state laws vary, you cannot assume that a power of attorney signed in one state will be honored in another. Howard M. Hujsa, a lawyer with Cummings & Lockwood in Bonita Springs, Fla., recalled a client whose son was unable, under his mother’s power of attorney, to sell her house after she became incompetent.

Her power of attorney was signed in Massachusetts, which at the time required only one witness; his mother had moved to Florida, where the property was located, and Florida law says an agent with power of attorney cannot sell real estate on behalf of the principal unless the document is signed by two witnesses.

The family had to go to court to have the son appointed as guardian. He continued in this role until his mother died several years later and he had to file annual reports to the court, something an agent under a power of attorney is not required to do. The process wound up costing the family more than $30,000 in additional legal fees, Mr. Hujsa said.

Likewise, if you plan to spend time overseas and buy or sell real estate, conduct business or open a bank account there, you need to find out what the law in that country requires, said Anne J. O’Brien, a lawyer with Arnold & Porter in Washington. Very few countries will honor durable powers of attorney from other jurisdictions, she said.

While some countries have an equivalent form, others permit the arrangements only under court supervision, said Mark Summers, a lawyer with Speechly Bircham in London. In Britain, you must use a power of attorney that is 25 pages long.

Many Americans are surprised to find out that a British power of attorney can cost several thousand dollars, he said, about 10 times what a lawyer would charge in the United States to prepare a much shorter document.

Sunday, March 8, 2009

WHAT CONTRACT?


from the New York Times
March 8, 2009
What Contract?

By MICHAEL M. GRYNBAUM
COULD the days of the iron-clad contract be numbered?

It used to be that once a buyer went to contract on an apartment, the terms of the deal were all but set in stone. Sales prices never budged, and if the buyer balked, the down payment went bye-bye.

But double-digit price declines and the lending drought have started to threaten this once near-inviolable pillar of New York real estate. Buyers are demanding concessions from developers on apartments that they say have lost up to 30 percent in value. Others are hoping to back out of their contracts entirely, while keeping their down payments in the process.

The sudden demand has sent lawyers scurrying to uncover avant-garde legal tactics for ducking out of a deal. Downtown conversions like 75 Wall Street and new developments like One Hunters Point in Long Island City are facing suits from buyers seeking to break contracts on the basis of a once-obscure consumer protection law.

The number of New Yorkers filing claims with the attorney general’s office to claw back their down payments has more than tripled in the last two years, although most disputes don’t reach this step. In 2007, 57 claims were filed; in 2008, 168. By Feb. 20 of this year, the office had already recorded 74 claims.

The ultra high end is not immune. At the Brompton, a heavily marketed Upper East Side condominium designed by the architect Robert A. M. Stern, lawyers say some buyers are calling on the project’s developer to pay closing costs, cover taxes and relocation expenses, and, yes, even retroactively drop the price of apartments.

It remains unclear whether these efforts will be convincing, whether at the negotiating table or in a court of law. On the developer’s side is the legal strength of a signed contract and the financial leverage of a buyer’s deposit.

But the incentives have realigned in a market where many apartments are now worth less than their purchase prices. It may make financial sense for buyers to cut their losses and leave their deposit on the table rather than move into a money pit. And while developers would pocket the down payment, they might be stuck with a unit that eventually sells for much less — or even worse, just sits. This new math may put some developers in a negotiating mood.

“Behind this, the big elephant in the room is the price,” said Adam Leitman Bailey, a real estate lawyer who says he is representing unhappy buyers from nearly 50 buildings.

The traditional method for a buyer to break a contract is to prove that some element of the completed unit differs from the developer’s offering plan. This is why lawyers have been known to use lasers to measure square footage to within a millimeter and to debate descriptions of views and amenities.

But if the issue is more financial than material, buyers may be forced to “in essence, throw themselves at the mercy of the developer,” said Peter Graubard, a real estate lawyer.

“They are saying, ‘Hey, listen, I’m in a financial hardship and the loss of this 10 or 15 percent deposit is going to be devastating to me right now,’ ” said Mr. Graubard, explaining that every one of his clients who went to contract before October 2008 — about 30 in all — is trying to renegotiate or abandon a deal.

Officials at the attorney general’s office said they were seeing more appeals based on such emotional pleas.

But these arguments may not fly. Unless a contract includes a mortgage contingency, nothing in the law allows for a change in financial circumstances or the lending market to constitute a “right of rescission.”

Sometimes, though, a bit of saber-rattling can shake loose concessions.

“Threatening not to close, threatening legal action, maybe the threat of an attorney general’s action, all can bring a developer to negotiate,” Mr. Graubard said.

Some lawyers are looking beyond the traditional methods of arguing breach of contract.

A Web site called No-Condo.com opened in December and immediately received nearly 100 queries from New York residents who want their deposits back. It is the brainchild of Lawrence Weiner, a lawyer at Wilentz, Goldman & Spitzer in Woodbridge, N.J., whose arsenal includes the Interstate Land Sales Full Disclosure Act, a 41-year-old consumer protection law rarely applied in the city.

Created to protect against speculators selling uninhabitable plots, the act requires developers of condominiums or conversions with more than 100 units to provide buyers with a particular type of property report containing information like proof of ownership and the availability of public utilities.

“I wouldn’t categorize it as a technicality,” Mr. Weiner said. “A lot of developers, in a rush to bring things to market, chose not to comply, or maybe they didn’t even realize they needed to comply.” Since December, Wilentz has filed lawsuits on behalf of buyers at 20 Pine Street, 75 Wall Street, One Hunters Point, One Brooklyn Bridge Park and 111 Fulton Street. The developers of these buildings all declined to comment or did not return calls.

The law has its limits as a negotiation device: a developer is exempt from the act if he or she has pledged to complete the unit within two years. But for distressed buyers in certain buildings, the Land Sales Act may offer a way out.

Cynthia Ehrlich, a self-employed tax accountant in her early 50s, made an $85,000 down payment — “all the money I had” — last March on a small one-bedroom at 75 Wall Street, a full-service condominium converted from an old bank building.

The problems began almost immediately. Ms. Ehrlich said she had been attracted to the property by a 10-year tax abatement, but soon learned that the development had not yet qualified for the abatement program. In May, she lost a major source of revenue, and was consequently turned down for a mortgage. Because her contract did not have a contingency clause, she said, the developer declined to return her deposit.

She plans to file suit this month for a return of her deposit on the grounds that the property violated the Land Sales Disclosure Act by not providing the proper property report. Ms. Ehrlich said she had regained hope after learning of the existence of the act.

“It’s the only good news I got,” Ms. Ehrlich said. “It’s a lot of money to lose, and I don’t make a lot.”

The developer of 75 Wall Street, the Hakimian Organization, declined to comment.

At the Brompton, with its “Stylishly Proper” slogan, luxe location on East 85th Street and prices to match, several buyers said they were in financial straits. A group of nearly 30 buyers recently organized over the Internet and held a meeting to discuss their options.

“We just feel this is not primarily a real estate issue,” said Patricia Congiu, 45, an Upper East Sider who went to contract on a 1,900-square-foot three-bedroom in September 2007. “This is not a situation where someone signed a contract and the price went down. It’s a global recession, like nothing seen since the Great Depression.”

Ms. Congiu said she and her husband had “wanted the building to be our final home. We were looking forward to raising our family there.” But now she is not sure whether her income can support the property. Like several other buyers in the Brompton, she said she hoped the developer, the Related Companies, would sympathize with their situation and provide relief so they can move in. “If they gave us a concession,” she said, “we can have a cushion. I don’t want to hurt the building.”

Other unhappy buyers at the Brompton say financial concerns are not the issue. Marc Rossell, 54, went to contract with his wife in August 2007 for a 3,600-square-foot spread, combining three ninth-floor apartments.

He said he was told by the developer that his southern view would clear an adjacent building, but on a walk-through inspection, he found “a water tank right there outside of our windows, and an ugly rooftop.” Mr. Rossell did not think the view matched the description in the offering plan, and believed the discrepancy could help him get free of his contract.

“It didn’t seem to be of the same quality that they basically represented in the showroom,” he said. “We definitely have the money. It’s not that at all.”

Through a spokeswoman, Related declined to comment.

As buyers become more cautious, contracts may begin looking more like they did before the housing boom of the last 15 years.

“You’re going to see a shift back toward an inclusion of mortgage contingencies,” predicted Jay B. Solomon, a partner at Klein & Solomon, a real estate law firm. Such contingencies provided an out for buyers when financing was not available, but they fell out of favor in the last 15 years as buyers faced more competition for apartments.

Under New York state law, buyers in a new development have the right to get out of their contracts if the developer does not close at least one unit within a year of the originally projected start date. Developers almost always find a way to meet this requirement, but lawyers say that buyers are now putting those initial deals under a microscope.

“If you see one unit that’s closed and nothing else for three months, that seems sort of suspect,” said Meg Goble, a partner at the real estate law firm Hanley & Goble. “If you see the unit has closed and there’s no certificate of occupancy, that also looks sort of suspect.”

Ms. Goble said evidence that the sponsor had spun some sort of sweetheart deal for the unit, like giving it away to a friend, could provide a legal ground for breaking a contract.

Of course, not everyone in the industry has sympathy for the buyer who wants concessions or money back.

“I think it is the height of audacity,” said Stuart Saft, a partner in the real estate division of Dewey & Leboeuf, which represents several large developers in contract disputes. “The buyer calls and says, ‘The apartment is not worth as much as when we signed for it.’ My response for that is, if the market went up 20 percent, would you have given us 20 percent more because the market improved?”

And for his part, Mr. Graubard, primarily a buyers’ lawyer, is skeptical of efforts to undo purchase agreements. “You really can’t get that creative; there’s only so far you can go,” he said. “Without the enforceability of a signed contract — well, really, what do we have?”

Sunday, March 1, 2009

GOOD PLANNING MAKES ALL THE DIFFERENCE IN ESTATE PLANNING





From the New York Times
February 26, 2009
Good Advice Makes All the Difference in Estate Planning

By DEBORAH L. JACOBS
IT’S always been painful to spend money on estate planning, because you don’t live to reap the benefits even if you know your heirs will. Amid the current financial duress, you may be tempted to eliminate what might seem like a discretionary expenditure.

Yet your estate plan may urgently need a tuneup or a total overhaul because of the increase in the federal tax-free amount or changes in your personal circumstances. To find the best person for the job and pay for only what’s essential, consider these issues:


DO YOU NEED A NEW LAWYER? After a brief conversation by phone or in person, the professional who created your last plan might be able to make any necessary changes at little cost. On the other hand, if you hope to use sophisticated techniques like avoiding the generation-skipping transfer tax, achieving valuation discounts through family limited partnerships or protecting assets from creditors, be prepared to pay for expert guidance. And don’t be afraid to ask, “How many of these kinds of transactions have you done?” If the answer isn’t dozens, consider finding someone else.

HOW DO YOU FIND A GOOD LAWYER? Start with referrals from people you know who are in similar situations or from professionals whose judgment you trust, like accountants, financial advisers or other lawyers. State and local bar associations can direct you to lawyers in your area but can’t vouch for their skills. Other names can also be found on Martindale.com, the nationwide lawyers’ directory that you can search by location and area of practice, and on www.actec.org the Web site of the American College of Trust and Estate Counsel, a group of trust and estate lawyers.

Depending on where you live, you may have a choice between large national firms with many practice groups or estate-planning boutiques — small firms that specialize in trusts and estates work. The latter tend to be less expensive because their overhead is lower.

Meet with the lawyer before you decide to work together (most professionals charge for this initial consultation only if you go forward). Pay attention to chemistry.

Barbara E. Shiers, a lawyer with Frankfurt Kurnit Klein & Selz in New York, said it’s important to consider this question: would you feel comfortable revealing highly personal information that bears upon your estate plan? This might include not only your finances but also the state of your marriage and relationships with other family members, and whatever might keep you awake at night, like children’s substance-abuse problems or spending habits.

“Everyone would write the best possible will for themselves if only they had the knowledge,” said Pam H. Schneider, a lawyer with Gadsden Schneider & Woodward in Radnor, Pa. You want a lawyer who can listen to your concerns and put herself in your shoes when she drafts the necessary documents, Ms. Schneider said.

HOURLY RATE OR FLAT FEE? While most lawyers charge an hourly rate, some offer flat fees for a package of basic estate planning documents, like a will, living trust, power of attorney, living will and health-care proxy. John L. Berger, a lawyer with Lowenstein Sandler in Roseland, N.J., bills by the hour but gives clients an estimate of the total cost. If clients require more changes or explanations than he factored in, he gives them a heads-up before they incur additional charges.


SHOULD YOU AND YOUR SPOUSE HAVE SEPARATE LAWYERS? This adds to the cost, because two people will need to get up to speed on your situation and draft documents, rather than having one lawyer produce his-and-hers versions of the same wills and trusts. But under most state laws, when couples are jointly represented, everything you tell the lawyer, even privately, is not confidential from your spouse

Separate representation may be desirable in second marriages between those who already have children, said Stephanie E. Heilborn, a New York lawyer. It’s even more important for people in troubled marriages or when one spouse has skeletons in the closet — like a secret companion or an out-of-wedlock child.

You may dread the day when that bill comes, but look at it this way, Ms. Heilborn said: A good estate plan is a surefire way to save taxes, and that’s money in the bank for your heirs. Few investments can make the same promise.