Prenup signed 24 years earlier couldn’t be enforced

A California couple signed a prenuptial agreement back in 1985 saying that the wife wouldn’t get any alimony payments if the couple divorced.

At that time, prenuptial agreements like this one weren’t valid in California. In fact, the couple even acknowledged in the agreement that it probably wasn’t legally enforceable.

But times change! In 2000, the California Supreme Court ruled that a waiver of alimony in a prenup could be enforced under certain circumstances. And in 2002, the state legislature passed a law saying that alimony waivers were okay as long as both members of the couple had their own lawyer.

The couple in this case divorced in 2009. So was the prenup now legally valid? [Read more…]

Ex-wife sued for damaging husband’s credit rating

When a Utah couple divorced, the wife got to live in the couple’s house. Although both spouses’ names were on the mortgage, the wife was ordered to make the mortgage payments.

After some time went by, the wife developed a constant pattern of paying the mortgage late. As a consequence, the husband’s credit score suffered.

Finally, the husband sued the wife, claiming she had violated the divorce agreement.

The wife replied that she had always made the payments, even though they were late, and that the husband couldn’t complain unless she had actually defaulted on the loan and the lender had come after the husband for the money. [Read more…]

‘Skyping’ with child might not qualify as visitation

Videoconferencing technology such as Skype, FaceTime, and Google Video has made remote face-to-face communication so cheap and simple that it’s fast becoming part of everyday life. But does a video chat between a parent and a child count as “visitation”? A recent North Carolina court decision suggests that it might not.

The case involved a mother who suffered from mental illness and who lost custody of her son due to neglect. In order to maintain the bond between the mother and the child, the judge directed the county to set up visitation via video chats over Skype. The county would set up the connection at a local parenting center, where the mother would be able to communicate with her son under the supervision of a social worker. [Read more…]

Trust distributions could be divided in divorce

Money distributions that a husband receives each year from a trust could be divvied up at divorce, the South Carolina Supreme Court recently decided.

During their marriage, the husband used some assets to create a “charitable remainder trust.” This is a type of trust that pays annual income to the donor, with the trust assets going to charity when the donor passes away. (There are a number of tax advantages to this type of trust.)

In this case, each year the trust paid 7% of its assets to the husband. When the husband dies, the trust will pay 7% of its assets each year to the wife. When she dies, the assets will go to charity.

A divorce judge ordered the husband to split his 7% annual payment with the wife. [Read more…]

Spending time with a new partner can jeopardize alimony

Divorce agreements often say that alimony payments will stop if the spouse receiving them begins “cohabiting” with someone else.

The logic of this is that sometimes a spouse will get divorced, start receiving alimony, and then move in with a lover who will support him or her. This isn’t fair, since the ex-spouse is then paying to support someone who is already being supported by someone else.

But the problem is that “cohabitation” isn’t always clear-cut. Sometimes it’s obvious that an ex-spouse has moved into someone else’s home and is being taken care of by them financially. But not always.

Take a recent case from Delaware where a retired couple’s divorce agreement called for the husband, Joseph, to pay alimony to his ex-wife, Shannon. The agreement said that Joseph could stop paying alimony if Shannon started “cohabiting” as defined by state law. Under Delaware law, two people are cohabiting if they “regularly reside” together and hold themselves out as a couple. [Read more…]

What happens if an ex-spouse files bankruptcy?

It’s fairly common for spouses who have recently been through divorce to encounter financial problems. Sometimes, a former spouse will file bankruptcy as a result.

This often makes the other spouse very nervous. What if the bankrupt spouse is supposed to pay alimony, or child support? Will that continue? What if the bankrupt spouse still owes money to the other spouse as a result of the divorce agreement? What if the bankrupt spouse had been ordered to pay off a joint debt?

If your ex-spouse has filed bankruptcy, or is thinking of doing so, it’s wise to speak to your family law attorney right away. There are some general rules governing what will happen, but only an attorney can tell you exactly how they apply to your specific situation.

As a general rule, any debt a spouse has incurred as a result of a divorce cannot be avoided in bankruptcy. So for instance, if a spouse has been ordered to pay alimony or child support, they have to continue to do so even if they go bankrupt. [Read more…]

Demand for smaller homes is growing as baby boomers age

As the baby boomer generation hits retirement and starts to think about downsizing, it appears that demand for smaller homes is growing significantly.

For many years, the trend was always in the other direction – people wanted bigger and bigger houses. The average size of a new home in 1973 was 1,660 square feet. That number increased almost every year after that, hitting 2,521 square feet in 2007. Since then, however, there has been a decline, with the average size sliding to 2,392 square feet in 2010. Most homebuilders predict the average size will continue to decrease.

In a recent survey, some 43% of Americans age 50-64 said they planned to move in the next few years – a real surprise given that this is usually the most stable group of homeowners. And of those who planned to move, fully 50% said they planned to downsize to a smaller home. [Read more…]

Housing prices are spiking – and here’s why

House prices have been increasing sharply lately – in fact, prices for existing homes in February were up an astonishing 10% over the previous year. What’s behind the increase?

The main reason is simple – lack of inventory. Not many homes are on the market, which means buyers are bidding on a small number of houses, driving up the price.

Lack of inventory is caused by a number of factors, including:

  • Few new homes have been built since 2008;
  • Banks are no longer selling many foreclosed homes, due to red tape;
  • Investors have bought up a lot of homes recently and are using them as rentals; and [Read more…]

Banks must do more to help troubled homeowners

Banks and other companies that collect mortgage payments from homeowners will have to do more to help homeowners who are having financial problems to avoid foreclosure, under new rules issued by the U.S. Consumer Financial Protection Bureau.

Currently, there are no national standards for what financial institutions have to do if a borrower falls behind on payments.

The new rules, which take effect next year, say that banks and loan servicers must evaluate borrowers under all possible financial-help programs permitted by Fannie Mae, Freddie Mac, and private investors. They cannot simply steer borrowers to whatever program is most financially beneficial to the lender. [Read more…]

U.S. cracks down on ‘forced’ homeowner’s insurance

When people take out a mortgage, they’re often required to obtain homeowner’s insurance on the property. This policy protects the lender’s interest in the property as well as the owner’s.

But what happens if the owner later cancels the policy, or simply stops paying the premiums?

Since the housing crash a few years ago, millions of Americans have allowed their homeowner’s insurance policies to lapse. Sometimes this was inadvertent – they just forgot to pay the bill – but in other cases the owner was struggling and had trouble affording the payments.

Typically, in such cases the lender is allowed to obtain a new policy and “force” the homeowner to accept it. [Read more…]

Buying a condo? It’s now easier to get an FHA loan

One of the simplest ways to obtain a mortgage for a first-time homebuyer – or for anyone who might not have terrific credit and a big down payment – is a loan insured by the Federal Housing Administration.

The FHA doesn’t make loans, but it insures them for lenders. This makes lenders much more willing to offer a mortgage, because if the borrower defaults, the FHA will be on the hook.

FHA loans often require a down payment of as little as 3.5 percent, and can be obtained in many cases by people who have iffy credit or who have a bankruptcy or foreclosure in their past.

The catch is that borrowers have to pay mortgage insurance. Actually, they usually have to pay two types of insurance – an upfront payment of 1.75 percent of the loan amount (which can be rolled into the loan), and a monthly payment that depends on the length of the loan and the loan-to-value ratio. [Read more…]

What happens if your long-term care insurance company fails?

People typically buy long-term care insurance years before they need it. As a result, they’re taking a gamble that the company will still be around when it’s time to pay out. What happens if the company goes out of business?

Usually, insurance companies don’t just suddenly shut their doors. Most commonly, another insurance company will buy out or absorb a company that’s in trouble, and the new company will honor the old company’s policies.

But in cases where an insurance company simply fails, every state has an insurance guaranty association that protects consumers. The purpose of this association is to take over the policies of an insurance company that’s experiencing financial difficulties and ensure that claims are paid. The guaranty association may provide insurance coverage directly to consumers, or it may facilitate the sale of the policies to another insurance company. It’s also possible that policyholders will be given the opportunity to cash in their policies. [Read more…]

Consult an attorney before signing a nursing home agreement

A nursing home agreement is a binding contract that typically involves a large amount of money. Just as with a real estate contract, it’s wise to have an attorney review the agreement before you sign it, so you can understand exactly what your rights and responsibilities will be.

That can be especially true if you’re signing a contract for an aging relative. For instance, you’ll want to know to what extent you might become personally responsible to pay for your relative’s care.

In one recent case, Judy Andrien signed an admission agreement with a nursing home in Connecticut on behalf of her mother. Judy signed the contract as a “responsible relative,” and she agreed to pay the nursing home out of her mother’s assets and assist in arranging for Medicaid coverage. [Read more…]

Retirement community fees might be tax-deductible

Here’s some good news for people who live in – or are thinking of entering – a “continuing care retirement community.” These are communities for older people that provide an entire continuum of care, from independent living to nursing home, so that residents can “age in place” and not have to move elsewhere if their faculties start to diminish.

These communities are an appealing option, but they can be very expensive. The good news is that there is a tax break that could help defray the costs.

When moving into a community, residents typically sign a contract that includes a hefty entrance fee, which might or might not be refundable. Residents pay a monthly fee as well. Entry fees can run from $20,000 to more than $500,000, with monthly charges ranging from $200 to $3,500 or more.  [Read more…]

Women may soon pay more for long-term care insurance

Long-term care insurance may soon be getting more expensive for women. That’s because two of the country’s biggest long-term care insurance providers have announced plans to introduce “gender-based” pricing.

The simple fact is that, on average, women live longer than men. Life insurance has long recognized this fact, and life insurance premiums typically vary based on gender.  However, long-term care insurance has always been gender-neutral.

This started changing recently when Genworth Financial decided to charge more for policies purchased by single women. John Hancock quickly followed suit, and other insurers are likely to fall in line.

Genworth hasn’t said how much it will raise rates for women, but according to the American Association for Long-Term Care Insurance, women will likely end up paying 20 to 40 percent more than men. [Read more…]

How married couples can maximize their Social Security benefits

Applying for Social Security can seem easy, but there are actually a great many options and choices, and figuring out which one works best for you often requires a lot of strategizing.

For instance, the longer you wait to apply for Social Security, the higher the monthly benefit you’ll receive.

Depending on what year you were born, Social Security calculates what it considers your “full” retirement age. If you claim benefits before that age, Social Security penalizes you by reducing your benefit. If you claim benefits after that age, Social Security rewards you with “delayed retirement credits” and a significantly larger benefit.

So you’ll need to decide if it makes sense to apply sooner, and receive a smaller monthly check for the rest of your life, or wait and apply later, when you’ll be eligible for a larger amount. [Read more…]

Highest Recommendations

Margaret [Cross] has represented me in the past, dealing with issues of estate planning and real estate. She helped set up our homestead, a will, and other estate needs, and helped me understand why each was needed. I would definitely recommend Margaret.  ~ Jeremy, estate planning client

Highest Recommendations

Mary [Hart] represented me twice for two separate real estate transactions. Both times, we were faced with unusual obstacles, and Mary did a great job helping me understand what was happening and what was needed to fix the problems. She was always checking in and could be reached even at odd hours – made me feel like I was in good hands.  ~ Jeremy, real estate client

What you need to know about estate and gift taxes

Income tax, payroll tax, capital gains tax – the fiscal-cliff law passed in January changed many areas of the Internal Revenue Code, including one you might not have focused on lately: estate and gift taxes. Here’s what you need to know.

What’s the current estate and gift tax exclusion? The exclusion is the amount you can transfer during your lifetime and via your will before estate or gift tax is due. It consists of two items. The basic exclusion is $5 million, and is adjusted for inflation annually. For 2013, the basic exclusion after inflation adjustments is $5,250,000.

The second part of the applicable exclusion benefits married couples. When you’re married, your total exclusion can also include the unused portion of your deceased spouse’s basic exclusion. Executors make this “portability” election by filing an estate tax return, even if an estate is not taxable and might not otherwise need to file. [Read more…]

Manage your business with a few key numbers

Regardless of the type of business you’re running – whether it’s selling electronics, making furniture, or servicing automobiles – monitoring a few key financial indicators is often all that’s needed to keep your company growing and prosperous. On the other hand, neglecting a firm’s vital signs can lead to management by crisis and corrective action that’s too little, too late.

A prudent business owner won’t wait until the end of the year (or even the end of the quarter) to learn that revenues are declining, inventories are shrinking, or payroll expenses are spiraling out of control. Although annual financial statements provide historical perspective and a wealth of data for long-term planning, correcting current problems is a matter of timely insight and informed analysis. You want to know whether your business is losing money or growing – now, not later. [Read more…]

Tax filing reminders

  • October 1 – Generally, the deadline for businesses to adopt a SIMPLE retirement plan for 2013.
  • October 15 – Filing deadline for 2012 individual tax returns on automatic six-month extension of the April 15 deadline.
  • October 15 – If you converted a regular IRA to a Roth in 2012 and now want to switch back to a regular IRA, you have until October 15, 2013, to do so without penalty.