To Give or Not To Give

There are 3 basic options for estate planning. Two require the assistance of an attorney. One only requires a checkbook and a pen

  1. Prepare a Last Will and Testament and leave your property outright to your heirs in a will.
  1. Prepare an Irrevocable Trust: your funds go into the Trust and are distributed over time by your duly appointed Trustee in accordance with the terms of the Trust.
  1. Gift all your money away during your lifetime.

Charles Feeney was a billionaire philanthropist. He chose Option 3. Feeney made his money operating duty-free shops in airports all over the world and had a knack for investing in successful tech start ups like Facebook in which he was an early investor.

By 1982 he was worth over $8 billion and during that year he started giving that money away through a foundation he started called Atlantic Philanthropies, a collection of private foundations located around the world.

You’ve probably never heard of Mr. Feeney because he deliberately remained under the radar.  In January of this year, a profile of him in the New York Times, James Bond of Philanthropy’ Gives Away the Last of His Fortune said this about him:

“His name does not appear in gilded letters, chiseled marble or other forms of writing anywhere on the 1,000 buildings across five continents that $2.7 billion of his money paid for. For years, Atlantic’s support came with a requirement that the beneficiaries not publicize its involvement.

None of the major American philanthropists have given away a greater proportion of their wealth, and starting in 1982, Mr. Feeney did most of this in complete secrecy, leading Forbes magazine to call him the “James Bond of philanthropy.”

Five years ago at the age of 85, his foundation still had $1.7 billion left and the way he had it figured, time was running out. The Times article noted that Feeney achieved his goal by giving the last of the money, $7 million grant to Cornell University, to support students doing community service work.

For those of you who choose to give all your money away, God bless you. For the rest of you who choose to leave your good fortune to your heirs, we can assist you in your estate planning.  Please give us a call at 212-693-3737.

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Is Haunted House A “Defect” Under The Property Disclosure Law

Under the New York Property Condition Disclosure Act (PCDA) (N.Y. Real Prop. Law § 460-467), a seller of real property must disclose any hidden defects relating to that property to the buyer. Failure to inform the buyer about such latent material defects could result in unlimited post-closing liability upon the seller, even if the seller was unaware of those defects.

For example, if after the sale, the buyer finds leaks in the piping, which the seller had not revealed, then the seller would be held liable to cure that defect. Due to this onerous provision in the law, a seller may ‘opt-out’ of the disclosure requirement by agreeing to pay the buyer a one-time waiver fee of $500.

Over the years, people have been trying the expand the scope of the term ‘material defects’. In Stambovsky v. Ackley, 169 A.D.2d 254 (SC New York 1991) the court dealt with the question of duty to disclose that a house was haunted. The buyers claimed a ‘haunted house’ was a material defect and sued for damages.

The court stated that a buyer may not pursue a legal remedy for fraudulent misrepresentation against the seller on the grounds that the premises is haunted. New York law fails to recognize the calculus for placing a value on ‘haunted houses.’ Any remedy for damages incurred as a result of the seller’s mere silence was denied.

However, the court held that reports of hauntings had lowered the resale value of the house, and held that while caveat emptor prevented an action for monetary liability, it did not prevent the equitable remedy of recission.

To conclude, New York law does not recognize a haunted house as a material defect upon the property. But the courts left the squeaking door open, to allow a rescission of the contract because the house was haunted, as a remedy in equity.

If you you have any queries relating to real estate planning, please contact the office of Jeffrey Weinstein at 212-693-3737.

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Legal Funding Company Ripped off 9 /11 Responders

New York State Attorney General Eric Schneiderman and the Consumer Financial Protection Bureau filed a federal lawsuit in Manhattan against New Jersey based RD Legal Funding Company.

The company allegedly defrauded 9/11 first responders suffering from cancer and other Ground Zero-related illnesses out of millions of dollars by luring them into costly advances on compensation fund and settlement payouts by lying, or failing to disclose essential terms of the deals.

Known as Lawsuit Loans, these programs are attractive to plaintiffs awaiting judgments or settlements in civil lawsuits and personal injury cases. The fine print in these deals contain additional costs and charges that dramatically increase the actual cost of these loans.

When a person contacts one of the lawsuit loan companies that offers pre-settlement lawsuit funding, the company contacts the plaintiff’s lawyer to ascertain what the net settlement will be. Then, based on that estimate, the company will offer a cash advance to the plaintiff. The amount advanced can range anywhere from $500 to $50,000, depending on the case. This is a rip off, because the actual interest rates on these loans can end up costing the borrower in excess of 100% of the amount loaned.

These funding companies also attract heirs in estate matters. Many heirs of estates realize that, even in the absence any protracted family disputes, it may take a relatively long time to collect their benefits under the legacy. When people have an urgent need for cash, they turn to such funding companies for a quick fix. However, the money provided to them is at exorbitant rates.

Our advice is that a pre-settlement funding company should be your last resort, when you have no alternative sources of funding like friends or relatives. And if you do end up using this option, make sure you get all the details spelled out and clearly disclosed by the funding company in the terms of the contract.

Please remember to consult your lawyer and CPA before you sign any contracts with these funding companies.

For any assistance in this regard, please contact Jeffrey Weinstein Estates Attorney, on 212-693-3737

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SAVING REAL ESTATE THROUGH BANKRUPTCY

Many real estate owners are confronting the worst housing market in decades. Foreclosures and loan defaults are at an all-time high and refinancing is difficult even for creditworthy homeowners. As a result, bankruptcy has become the favorable choice for many property owners facing foreclosure. Here are some of the ways bankruptcy can help:

  1. The filing of a bankruptcy petition stops a foreclosure dead in its tracks:
    The “automatic stay” provision of the bankruptcy code will temporally stop all litigation and any attempt to collect a debt the moment the bankruptcy case is filed with the court. In fact, filing a bankruptcy petition can immediately stop a foreclosure sale. A federal bankruptcy case filing trumps many state rights of creditors to proceed against a debtor, with few exceptions.
  2. A bankruptcy case can serve to cure a default and reinstate a mortgage:
    Most property owners that have fallen behind on mortgage payments have few remedies available to them that do not include either the full payment of their mortgage arrears in one lump-sum or redemption of the property through payment of the entire balance due to the lender. But in this credit-tight market, these options are rarely available. For that reason, a Chapter 11 Bankruptcy or chapter 13 bankruptcy case is often the only solution available to save real estate. These cases enable a property owner to cure a mortgage default by repaying the mortgage arrears through a monthly payment plan. Once the property owner completes the plan, the mortgage is reinstated and the default is cured.
  3. Some mortgages can be eliminated or modified in bankruptcy:
    The bankruptcy code permits a debtor to modify the terms of a mortgage if the property is worth less than the amount due to the lender. A second mortgage on a residence and any mortgage on any other property may be modified or reduced. In some instances, if the first mortgage exceeds the value of the property, a second mortgagee can convert the lien from secured to unsecured status. The second mortgage holder then is treated as a general creditor with no rights against the real estate. This bankruptcy procedure has become a powerful tool for homeowners with no equity in their homes. Relieving homeowners of the burden of paying a second mortgage often provides the additional income needed to save the home.

Thus, bankruptcy can serve as a tool for a homeowner to level the playing field against big banks and assist individuals to get back on the road to financial stability.

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