The following sections are brief reviews of the law as it applies in MOST states. Therefore, the information in this section may not apply in the state where you live. Note also that the content provided on this page and on this website is not legal advice and is provided for general information purposes only to allow you to learn more about the UAW-FCA-Ford-General Motors Legal Services Plan and its benefits. If you have a legal problem, call us to understand how the law applies in your state and in your situation at (800)482-7700.
Buying/Selling Real Estate (5)
Carefully Inspect the Home. If you are not buying a newly constructed home, you will be buying a used home “as is” without warranties from the seller. It is recommended that the sale be contingent with you being satisfied with the results of an inspection done by a professional housing inspector. This would have to be stated in the purchase agreement.
Shop Around for the Best Financing Arrangements. Even before you go house hunting, you may want to speak with a lender to determine what you can afford based upon your income and expenses. At no charge, many lenders will speak with you regarding your situation to give you some direction in this area. Even though a lender may ultimately determine that you can qualify to make a certain monthly payment, you still need to decide whether your lifestyle will allow you to afford the monthly housing cost.
Before you apply for a loan (typically done within five days after signing a purchase agreement) you should shop around and compare interest rates and mortgage costs between the different lenders. You will also want to know whether the lender will service the loan for the life of the loan. You may wish to be “pre-qualified” by a lender which may make you more attractive to a seller.
Understand the Role of the Real Estate Agent. Typically, because the real estate agents are paid a commission by the seller (typically 7% of the sales price) the agents only have a fiduciary duty to the seller and may not be looking out for the buyer’s best interests (unless you have a true buyer-agent agreement.) You should rely on your attorney to best protect your legal interests.
Do Not Rely on Oral Representations. If a representation made to you is important and you are relying on it in purchasing the property, it must be stated specifically in the purchase agreement.
Sale by Owner or Through Real Estate Agency. The great majority of homes are sold through a real estate agency. Typically, you will pay a commission of 7% of the sales price for the services of a real estate agency. You will sign a “listing agreement” which will set forth among other things, the amount of the commission and the length of the listing. You should shop around for a realtor before deciding on who you want to sell your home. Since the listing agreement is a binding contract, it is important that you have your attorney review the document before signing.
You Must Disclose Hidden Defects. In many states, a seller can be held liable for damages including possible rescission of the transaction if they fail to disclose a material defect known to them and not reasonably discoverable by the purchaser. (This can occur for instance when the seller actively conceals or otherwise fails to disclose to a buyer that the basement leaks). In some states sellers must now provide a written “Sellers Disclosure Statement” before the purchase agreement is signed which sets forth, to the seller’s good faith knowledge, the condition of various aspects of the home.
Sellers Are Liable for Innocent Misrepresentations. A few states (including Michigan) follows the minority rule which holds a seller liable for a representation relied upon by a buyer even if the seller did not know that the representation was false.
Survey. If you are planning to build on your property or put any new structure on it, you should have a survey done so that you know where the boundaries are.
Zoning. You should also check with the local government to determine if there are any zoning requirements which may restrict or in some way affect your planned use of your property. Although you may be able to request a variance, if there is a restriction, you would want to be aware of these facts prior to completing the transaction.
Water. If your property is not connected to a sewer, you should check to determine what the cost is to connect. If there is no sewer, you must have the land checked to find the percolation rate. You will need to make sure that the property is of the right size and location to hold a drain field for the septic system. If a well is in, you should have the Health Department inspect the water. If there is no well, then you might need to check with a well driller in the area to find the cost and condition of the area’s water supply.
Utilities. If utilities are not already available, you should check with the local companies to determine what your cost will be.
Building and Use Restrictions. You should also obtain a copy of the Building and Use Restrictions to determine if they will have any effect on your intended use of the property.
Homeowners Associations. If there is a Homeowners Association, you should determine if you are required to be a member and if so, what the dues are. You also need to determine whether there are any restrictions on the use of your property.
Easements. You should examine the property to determine if you have complete access to your property. You should also examine it to determine if any other parties may have to use your property to obtain access to their property.
Property Division. If you are planning on dividing your property, there may be local restrictions on this.
Whether you are buying or selling real estate, it is important that you understand the basic steps of a real estate transaction.
Purchase Agreement. The first document signed by both parties is the purchase agreement. THIS IS A BINDING CONTRACT AND CONTROLS THE ENTIRE TRANSACTION. FOR THIS REASON, YOU SHOULD NOT SIGN THIS DOCUMENT WITHOUT HAVING AN ATTORNEY REVIEW IT FIRST. It is extremely important because it contains all the essential terms of the agreement. It will contain the names of the parties, the description of the property, the purchase price, the deposit, the financing arrangements and the time for the closing. You can also make the transaction contingent upon many factors. These may include satisfactory financing, a satisfactory survey or inspection, the sale of your present home, etc. It is not enough to discuss these items with the other party. For the parties to be bound by these terms, they must be included in the purchase agreement. By discussing your concerns and requirements with an attorney, the purchase agreement can meet your particular needs.
Preparation for Closing. Once the purchase agreement is signed, the parties must complete certain tasks to prepare for closing. Unless the buyer is paying with cash or will sign a land contract, the buyer must arrange for financing. If a mortgage is being applied for, the mortgage company or bank will order a credit investigation and the property will be appraised. Whatever the terms of payment, a title insurance policy will have to be ordered. Routinely, the seller will purchase this. This will protect both parties, since the title insurance company insures that the seller has valid title to convey. Information concerning taxes, special assessments, liens, land contracts or mortgages must also be obtained prior to closing.
Closing. A closing date is usually scheduled after the title insurance company has issued the commitment to insure the title of the buyer and the mortgage company or bank has approved the financing arrangements. Usually the broker or the title insurance company will prepare a closing package containing all the documents except the mortgage documents. Mortgage documents are prepared by the mortgage company or the bank. At the closing, the documents are signed and the monies are disbursed.
After the Closing. After the closing, the signed documents are recorded with the Register of Deeds to give legal notice of the change of title.
Not always. Federal laws, and state statutes in most states, provide 3-day cancellation rights for some consumer contracts. Contracts solicited by door-to-door salespeople and contracts for installment purchases or loans secured by your residence are examples of agreements where a 3-day cancellation notice must be provided to the consumer.
However, most consumer purchases and contracts are not covered by such a cancellation requirement. Never assume that you can get out of an agreement you sign. Be sure you understand the agreement and want to buy the product or service before you sign.
Before you sign a home improvement contract, take 2 steps: 1) Learn as much as you can about the contractor; and 2) Examine the contract carefully, and show it to a lawyer.
Many states have licensing requirements for contractors. Call the state agency involved to make certain the contractor is licensed and in good standing, without any action having been taken against the license. Get the names of people the contractor has worked for in your area, and call them. Ask if you can see the work on their houses. Check with the Better Business Bureau for complaints. Get competing bids, and if this contractor’s bid is much lower, ask the other bidders why their bids are higher. Make sure the bid you choose covers the same materials and work as the competing bids.
The more detailed the contract the better. The materials to be used and the work to be done should be spelled out, with product manufacturers and model numbers if possible. Get a start date and a completion date in the contract if you can. Make sure that appropriate permits required in your area are taken out, since review of the job by local inspectors will help protect you.
Yes. A lawyer can help you evaluate what you owe, and check to see if there are any legal issues that can be raised on your behalf, either with the debt or with the way it is being collected. A lawyer can also help you work out the best arrangement for paying any agreed amount.
Federal laws, and statutes in some states, protect consumers from abusive debt collectors. You should tell debt collectors, in writing, that you do not want to hear from them further about the debt, and see a lawyer. You and your lawyer can request verification of the debt, if you believe you do not owe it. Debt collectors can be liable for damages for abusive tactics, or for continuing to make collection demands after being told not to or after an attorney is involved.
When you cosign, you are taking on the same burden to pay the loan or installment contract as the person taking out the loan or buying the product. If they don’t make payments, the creditor will look to you to pay, and sue you if need be. If you are forced to make the payments, you can seek compensation from the person for whom you cosigned, but getting your money back may be difficult. Think carefully before you cosign.
Mortgage borrowing grew more hazardous during the 1990’s, as high-rate lenders and fly-by-night mortgage brokers crowded the home lending and refinancing business. Aggressive and dishonest practices have become common in many communities.
** Bait and switch, with promises of lower costs and interest rates than the loan provided at closing;
** Loans packed with fees, so the quoted interest rate is far from the actual cost of the loan;
** Big prepayment penalties, so borrowers are stuck with high-rate loans for years;
** Mortgage brokers promising to find the best loans, but actually looking for the best deal for themselves, and getting fees from the lenders for selling borrowers on higher-rate loans;
** Borrowers being convinced to cover all their debts with a refinanced home loan, even though they can’t afford the payments and are putting their house on the line. Brokers may convince appraisers to inflate quoted home values so the loans will go through.
Sometimes legal representation can help homeowners get out of bad loans, or change the terms. Federal mortgage loan disclosure rules are not always followed, and state consumer statutes provide a basis to challenge dishonest practices. Plan attorneys have sued lenders and brokers when legal issues were available, saving clients money and keeping some homes from foreclosure. However, the best advice is to avoid problems by not entering into mortgage loans that you don’t fully understand.
** Shop around. Don’t jump for the first loan offered, particularly if the lender or broker called you.
** Ask questions, of the lender and your legal services office. Your Plan office can answer questions about the nature and meaning of the documents you are being asked to sign.
** Don’t jump to sign. You can change your mind, even if you told the lender you would sign.
** Don’t assume you have a 3-day right to cancel, but, if you do, use it if you need to. Many home mortgage refinance agreements can be canceled, but home purchase loans cannot. If you received a right to cancel notice, don’t wait until the three days are up to get help making that decision.
** Don’t be pressured.
Some places to go for more information:
Federal Trade Commission: www.ftc.gov/bcp/conline/pubs/alerts/eqtyalrt.htm
National Consumer Law Center: www.consumerlaw.org/consumer/foreclose.html
Coalition for Responsible Lending:www.responsiblelending.org
Credit Reporting (1)
A consumer has a right to dispute inaccurate information on his or her credit report. Once a dispute has been received, the credit reporting company is required to investigate the information within a reasonable period of time. It is not unusual for an investigation to take at least four to six weeks. If the agency is unable to verify the information, it should be deleted. If the information is verified but the consumer continues to dispute the information, a brief statement may be prepared which explains the dispute. The agency must make this explanation part of the consumer’s file. Adverse information (that is correct) may remain on a report for seven years. Bankruptcies may remain on a report for ten years. Inquiries generally stay on for two years.
Medicaid and Medicare (6)
In addition to the limits on assets, the resident’s monthly income must be less than the nursing home’s monthly private pay rate. If the Medicaid applicant is married, the community spouse will usually be entitled to keep a portion of joint income. If the spouse has income independent of the resident, the spouse may be able to retain that income. If the spouse does not have separate income, or a very low income, the spouse may be allowed to keep a portion of the resident’s income. This is called a community spouse income allowance, and the amount is determined by Medicaid.
Assets that are not counted and will not disqualify a Medicaid applicant from receiving Medicaid include: the residential home; personal belongings and household goods; one car; a prepaid irrevocable funeral contract with a value of $2,000 or less; a burial plot for the applicant and the applicant’s spouse; burial insurance and term life insurance; life insurance that has been assigned to cover funeral costs and irrevocably transferred to a trust, up to $6,443, and other life insurance if the face value of all policies owned to insure a particular person is $1,500 or less. This is not a complete list but it does include the most common assets not counted.
Assets that are counted include: cash, savings; promissory notes, and contract payments; equity the applicant has in real estate other than the applicant’s home; checking accounts; stock; and certain trust income.
A nursing home resident is allowed to have no more than $2,000 in countable assets at any given time to be eligible for Medicaid. In addition, if the resident is married, Medicaid will divide up the countable assets of the couple at the time one spouse enters the nursing home. The spouse who is not entering the nursing home will be able to keep the greater of either A) $16,152, or B) one-half of the assets, up to $80,760, without affecting the other spouse’s eligibility for Medicaid.
If the couple’s countable assets are more than either of these two combined limits, Medicaid will not pay for the nursing home until the excess assets are “spent down”. The excess assets can be used for nursing home care itself, and for a few other limited purposes. It is best to consult an attorney to plan how to spend assets.
Neither the person applying for Medicaid nor the applicant’s spouse may simply give away assets in order to qualify for Medicaid. That is called a divestment. If any assets are given away or transferred within thirty-six (36) months of the Medicaid application (60 months for transfers to or from trusts), for the purpose of making the resident eligible for Medicaid, the resident may be subject to a period of ineligibility as a penalty. The period of ineligibility is based upon how long the assets could pay for nursing home care. For example, if the resident gave away $15,000.00 worth of assets, and the nursing home’s private pay rate is $3,000.00 per month, the resident would be ineligible for Medicaid assistance for five months. There are certain instances where divestments are allowed, however there are very few, and they are extremely limited.
Medicaid is a government program that helps pay for medical expenses of people with financial need. Unlike Medicare, there are financial eligibility requirements for Medicaid. Medicaid has strict limits on the assets and income the person entering the nursing home, and the person’s spouse, are allowed to keep. If a person qualifies for coverage, Medicaid will pay for basic or skilled nursing home care.
Medicaid divides assets (money and property) owned by the person applying and his or her spouse into two (2) groups: 1) assets that are counted, and 2) assets that are not counted toward Medicaid eligibility.
Medicare is the government health insurance program that covers people who are 65 years of age and older or permanently disabled. Medicare will cover up to 100 days of “skilled” nursing home care following release from hospitalization. The first 20 days of skilled care are covered in full. A significant co-pay is necessary for the next 80 days. The nursing home must be “Medicare-certified” and have “Medicare-certified” beds available. Medicare will not pay for “basic”, or custodial, care in a nursing home.
You should also be aware that some states either already do or are in the process of implementing plans to obtain reimbursement for Medicaid benefits in part or whole from the person’s estate after his or her death. Even in states where this is not currently in effect, it may have retroactive effect once it is implemented. With estate recovery, the government will seek to recover the costs of benefits by placing liens against homes and other assets of deceased Medicaid recipients.
Medicare and Medicaid rules are quite complicated and are continually subject to change. This information is only intended as a brief summary regarding the subject of paying for nursing home care. For those who have specific questions, you should consult an attorney and be sure that you verify the current law.
Social Security Benefits (2)
In order to qualify for Social Security disability, a claimant must establish an inability to engage in substantial gainful activity of any kind. Essentially, this means you must be unable to work at all. To determine if this is true, the Social Security Administration will first decide if you can return to your former job. If not, then it will see if you are able to perform any other jobs. To reach this decision, the administration evaluates your residual functional capacity. To determine your residual functional capacity, the Administration will look at your age, education and work experience. If, after making this evaluation, it is determined there are no jobs which you can perform, you will be awarded benefits.
To apply for benefits, you can go to your local Social Security office. You will be asked to fill out forms and they will get medical information from your doctors. Most applicants are not represented by attorneys at that point. If you are denied benefits at this stage, you can then file a request for reconsideration. This request must be filed within 60 days of the date of the denial of benefits. Once again this is essentially a matter of filling out forms at your local Social Security office and representation by an attorney is not necessary.
If you are again denied benefits, you will have 60 days to request a hearing before an administrative law judge. The judge takes testimony from the applicant and sometimes family members and experts who evaluate cases for the administration. At this point, you should consult with an attorney. It is best to call an attorney upon receipt of the denial of the request for reconsideration. This is not covered by your legal services benefit plan. However, you can be provided with a referral to a cooperating attorney in your area who handles these kinds of claims.
Traffic Matters (3)
Appear at your court date on time. Do not do anything at court that the judge might believe shows disrespect for the proceedings, such as chewing gum or reading the newspaper or dressing inappropriately.
If you pay the fine ahead of time, that is considered a guilty plea.
If you fail to appear at your court date and fail to pay the assessed fine, the court will issue a bench warrant and eventually your license may be suspended.
If you plead guilty or are found guilty, you will be assessed a fine and points (generally between two and four) will be added to your driving record. The points will remain on your driving record for a period of three years. If you reach 12 points at any one time, your license may be suspended.
If you plead guilty or are found guilty, you will be assessed insurance points by your insurance carrier. This usually results in an increase in your insurance premiums.
You will need an attorney to represent you if:
You already have a substantial number of points and are at risk of losing your license now or in the near future.
You received the ticket as a result of an accident that caused personal injury to another person or property damage to another vehicle.
Wills, Estates and Trusts (5)
Although joint ownership and naming beneficiaries can be used where appropriate to avoid probate, these arrangements must be used carefully because they can have many negative consequences. It can be very dangerous to add parties other than your spouse as a joint owner to any of your property. The possible negative consequences include: losing control over your property, increased tax liability, inadvertently making your property available to creditors of the other party, and inadvertently disinheriting other persons whom you may want to share in this property at your death. Because there are so many negative consequences to such an action, you should not add others as a joint owner without discussing it thoroughly with an attorney.
In addition, if you are in a second marriage and have children from your first marriage to whom you wish to leave property upon your death, you should discuss this with your attorney to be sure your estate is set up properly.
Some property may pass to others on your death without being transferred by a Will or a trust. Any property that is owned jointly with survivorship rights passes automatically to the joint owner. This can include real estate, bank accounts, stocks or bonds and other property. Some property may be paid directly to a named beneficiary. This includes life insurance policies, IRAs, or certain bank accounts that have named beneficiaries. There can be advantages to simply naming a beneficiary for certain types of property, whether or not you have a will or a trust. For example, if you are married, it may be preferable to name a spouse as the beneficiary of an IRA or 401K account for income tax purposes.
If a husband and wife own everything jointly, and they have identical wills, when the first spouse dies, the surviving spouse will become the sole owner of everything held jointly, without the need for reviewing the will or going through probate. However, when the second spouse dies, then the assets will pass through probate and be distributed in accordance with the will of the second spouse. If there is no will, then the assets will pass according to the laws of your state through the Probate process.
In order to avoid probate through a Living Trust, you must transfer assets to the trust before your death. On your death, any assets remaining in your name and not in the trust must be probated. (This would not include property that is held jointly with survivorship rights with another person or where a beneficiary was already named.) Because you must transfer at least your major assets to the trust, a Living Trust is more complicated and time consuming to set up than a Will. Even if you are the trustee, when you handle your own business, you will do so as the Trustee rather than as an individual. In addition to transferring assets to the trust when the trust is set up, you must also transfer assets that you acquire later to the trust. These transfers are not necessary with a Will.
In addition, you should be aware that you will not save any taxes by setting up a trust, unless the value of your property is greater than the “Unified Credit” allowed by Federal Estate tax law. The “Unified Credit” is $1,060,000 in 2003, and will increase in annual increments to $2,000,000 in 2006. If your assets are greater than the “Unified Credit” at the time of your death, there can be tax advantages in the creation of trusts, assuming the trusts are set up and funded properly.
Finally, people often believe that setting up a trust will result in one’s heirs not needing an attorney and that the transfer of the assets will be simplified and quicker. That is generally not true. The property owned by the “trust” will still have to be transferred to the trust beneficiaries after the death of the original trustee. Generally, the time involved, complications and need for an attorney will be the same with or without a trust.
Is it worth the time and trouble for you to set up a Living Trust? In general, couples who jointly own their home and have few other assets may not need a Living Trust. On the other hand, if you have numerous or complex investments, real estate in more than one state, or want to leave your estate to persons who you do not believe could manage it on their own, or if the value of your assets are greater than the “Unified Credit,” you may be a candidate for a Living Trust. The final answer to this question should be made after a thorough review of your estate and a discussion of your needs and desires with an attorney.
A Living Trust is an arrangement in which you transfer legal title of your assets to the trust, to be managed for the benefit of the persons named in the trust document as beneficiaries. The person creating the trust is usually the trustee until he or she dies, or becomes unable to manage the trust due to poor health or disability. At that time, a Successor Trustee takes over management of the trust. If you have a Living Trust, you also still need a Will. The Will is necessary to distribute any assets on your death that you may not have transferred to the trust, and to name a guardian for minor children.
A Living Trust can avoid probate; allow a successor trustee to manage your assets if you become disabled, instead of someone appointed by the court; limit the share your spouse receives of your estate; and simplify distribution of property you own in more than one state. Information about assets in a living trust is also generally not available to the public.
In some instances, the advantages of a Living Trust may be accomplished by other means, such as a durable power of attorney, bank trust account, or joint ownership.
Under certain circumstances, probate may present certain advantages over a Living Trust. For example, a Personal Representative may ask the court for supervision where questions arise. It is also advantageous in limiting the time in which creditors or heirs can file claims against an estate or challenges to a will.
In regard to privacy, a Living Trust may not have significant advantages over probate under a Will. Independent probate administration may be used in most circumstances. This does not require the Personal Representative to file an inventory of the assets of the estate, nor any annual accounts, and as a result, information on the deceased’s assets are not made available to the public.
A Will is your written instructions to distribute your property at your death to those persons whom you wish to receive it. Your Will only transfers property that you own at the time of your death. That means it would not include property you own jointly with another (even a spouse) if that property is owned with survivorship rights. Having a Will does not avoid probate. A Will states who will receive your property. Probate is the process used to transfer the property. A Will also lets you identify who will handle the process after your death (a Personal Representative or Executor); who will take care of minor children (the Guardian); and allows you to set up a trust to manage property for those you identify (note that this type of trust does not go into effect until after your death).