New California Homeowners’ Insurance Requirement

  • November 6, 2018

New California law mandates additional homeowners’ insurance requirement. In response to the massive destruction caused by numerous California wildfires over the past several years, California is taking steps to enact laws that seek to fund wildfire prevention and protect consumers impacted by wildfires. One of the biggest issues that homeowners’ who lost their homes are facing, is the unfortunate discovery that they are underinsured. Outdated or inaccurate replacement cost estimates are often the cause of the problem. For homeowners with replacement cost coverage, a new law, which goes into effect January 1, 2019 will require insurers to provide, every other year before policy renewal time, an estimate of the cost to rebuild or replace the home in a way that complies with existing insurance regulations. The new law is aimed at improving the information available to policyholders so they can make informed decisions about how much coverage to buy. The law goes into effect July 1, 2019, and has several exceptions. See Ins C §10103.4 (added by Stats 2018, ch 205).

No matter where you live, it is always advisable to review your insurance with your insurance broker regularly. Insurance is one of those products that we consider to be a key piece of your asset protection plan. We know that buying insurance is not a particularly sexy or gratifying purchase, but if you ever need it, you will be glad you did.

Real Property Disputes: Local or Transitory?

  • October 31, 2018

Real Property Disputes: Local or Transitory?  Where do we go from here?

In the law, some cases are considered “local” actions, while others are described as “transitory.”  What does that mean? Essentially, some cases must be decided only in a court of the one particular state that is connected to the subject of the case. Those are called “local actions.”

On the other hand, most lawsuits are “transitory” and can be litigated in any state that has jurisdiction over the parties, based on their residence or presence in the state.  Sometimes several states might be potential venues for a transitory action, and the litigants may engage in “forum-shopping” because they prefer the laws of one state over another.  When multiple states might be the venue of a transitory action, there are rules to help rank which state is a better venue than others.  Typical examples of transitory actions are contract disputes, injury claims, and class-actions.

Quiet title actions, probate of real property and judicial foreclosure actions are all examples of “local actions” involving real estate that must be heard in the state in which the property is located.

We recently handled a case from California that addressed issues arising from both local and transitory actions.  A trust estate was being litigated in California, but the estate included property located in Nevada.  In that instance, the court – applying long-established exceptions to the local action rule – entered orders determining the parties’ respective interests in real estate located in Nevada.  The Nevada Supreme Court recently upheld the entry of the California probate court’s order that the defendant “trustee” had no interest in the Nevada lands she had conveyed to herself.  The ruling was based on the fact that the California probate court had proper jurisdiction over the trust and the parties who were all of its trustees and beneficiaries.

The same exception to the local action rule applies in a variety of other settings, the most common of which are divorce proceedings.  In a divorce, a court in State “A” can divvy up property of the spouses located in State “B” and any other states.  The Court’s power to do this stems from its jurisdiction over the owners – the divorcing spouses.  Likewise, in a partnership dispute or dissolution, if the court has jurisdiction over the partners or the partnership, it can divvy up their real estate, no matter where it is located, and the courts where the land is located must give effect to the decree partnership dissolution (or the divorce decree) which divides the land.

Cases involving a mixture of local and transitory actions can be complicated.  Incline Law Group, LLP has the experience to guide you through the process.

5 Common Individual Bankruptcy Myths

  • September 6, 2018

Facts v Myths BankruptcyBelow are five of the most common reasons people give for reasons as to why they think they have to avoid filing bankruptcy when their lives are in financial turmoil.

People in financial distress commonly will delay or not seek relief under the United States Bankruptcy Code, due to common myths and misperceptions.  As a result, such persons and their families continue to suffer needlessly, and in many cases, make their situation worse by delaying or not filing bankruptcy.

1. I am married, and so my spouse has to file bankruptcy with me. 

False.  In many cases, it may make sense for both spouses of the marriage to file bankruptcy jointly, but there is no legal requirement that you have to do so.  In fact, there are situations where it may make more sense for only one spouse to file bankruptcy, such as when all of the debt or a vast majority of the debt is in one spouse’s name only.

2. A bankruptcy filing will stay on my credit report forever.

False.  Under the Fair Credit Reporting Act, credit reporting agencies may not report a bankruptcy case on a person’s credit report after 10 years from the date the bankruptcy case is filed.  A Chapter 13 bankruptcy case may be removed from reporting on your credit reports after seven years, according to the policies of the members of the Associated Credit Bureaus, as an effort by them to persuade individuals to file a Chapter 13 bankruptcy rather than a Chapter 7 bankruptcy.

 

3. I will not be able to obtain credit after filing bankruptcy.

False.  Many debtors start receiving credit offers very shortly after they received their bankruptcy discharge of debts. This includes credit cards and auto loans. Initially, the terms of the loans or credit may result in a higher than the average interest rate, lower credit limit, or other less than favorable terms; but assuming his or her credit is maintained, a debtor discharged in bankruptcy can return to receiving more commercially reasonable credit terms, including housing loans after a few years.

4. My tax debts to the IRS can never be discharged in bankruptcy.  

False.  While generally speaking, tax liabilities cannot be discharged in bankruptcy, under certain circumstances, older personal income taxes that have not been paid for a period of time after filing an income tax return can be discharged.  Otherwise, tax liabilities can be paid in full under a Chapter 13 repayment plan, over a period of time of up to 60 months.

5. You lose everything if you file a personal Chapter7 bankruptcy.

False.  A Chapter 7 bankruptcy is referred to as a bankruptcy liquidation, which can result in certain assets of a debtor having to be turned over and liquidated in the bankruptcy.  However, certain assets are exempt from bankruptcy proceedings and allowed to be retained by the debtor.  For example, individual retirement accounts and certain qualified retirement plans that have a value of $500,000or less are exempt for each debtor in Nevada.  Equity in a debtor’s primary residence can be exempt up to $550,000 in Nevada.  Nevada also allows each debtor to retain a vehicle with equity value equal to or less than$15,000 and household furniture equal to or less than $12,000.  Such valuations are determined by the current fair market value of the asset, namely, the reasonable market price that a debtor could obtain for the asset if the debtor were to sell it.  Nevada law also allows for other exemptions to protect certain other assets from bankruptcy.

Instead of doing nothing or needlessly delaying and making matters worse for themselves, people with acute financial problems should not hesitate to contact a bankruptcy attorney to ask questions and explore options available to them both in and outside of bankruptcy. An informed bankruptcy lawyer can be an excellent tool to assist one in navigating the turbulent waters during times of financial distress and confusion.

Residential Leases – What is Missing from your Lease Agreement

  • August 17, 2018

What’s missing from the residential lease you drafted?

DIY Leases

As we near the end of the summer, the housing market is hot.  The rental market is even hotter.  Landlords are seizing opportunities to rent their property due to the shortage of rental units in our area.  We often see landlords and tenant entering into written leases that were either drafted by a non-lawyer or downloaded off of the internet (we often refer to these as the DIY (Do It Yourself) Lease). These leases are often missing key terms which make it very difficult for either party to enforce the terms of the lease.   NRS 118A.200 sets forth a number of provisions and clauses that must be contained in a residential lease agreement, otherwise, the lease is considered unlawful.  For example, one provision that is often omitted from a DIY lease is that a tenant has the right to display the flag of the United States. While this may seem obvious or unnecessary to include for some landlords, failure to do so violates NRS 118A.200.

Bear Box (Bear Proof Trash Container)

NRS Lease Provisions

Even if a lease includes the provisions as required by NRS 118A.200, many leases we see are contractually deficient and can expose the landlord to liability.  We often see leases that do not contain terms that related to local and property specific factors.  For example, in the Lake Tahoe area, securing trash in bear-proof containers is a great concern due to the wildlife that lives here.  Failure to properly secure trash can lead to severe fines against the property owner as well as bears being deemed a nuisance and subsequently euthanized.  Any lease in the Lake Tahoe area should include specific provisions relating to wildlife and trash so that it is clear that the tenant is responsible for securing trash and will be held accountable for the tenant’s failure to adequately do so.  This is just one of many location-specific examples in the Lake Tahoe area but it should be noted that almost every geographic location in Nevada and California has specific issues that should be addressed in the lease.

Having an attorney draft, or at least review, your lease is relatively inexpensive and is certainly less expensive than attempting to enforce an unlawful or invalid lease.  If you would like us to take a look at your lease or draft one for your rental property, do not hesitate to contact us.

Residency Requirements for Divorce in California & Nevada

  • July 31, 2018

As a family law attorney, I am often asked about the residency requirements in Nevada v  California.

Pursuant to NRS 125.020, in order to file for divorce in Nevada, one of the parties must be a resident of the state of Nevada for 6 weeks preceding the filing of the Complaint for Divorce.  Such residency must be corroborated by an Affidavit of Residency signed by an individual, also a resident of the State of Nevada, who can confirm that a party to the action has been continuously physically present in the state during that period of time.

In California, the residency requirements are longer.  Pursuant to California Family Code Section 2320 one of the parties must be a resident of the State of California for a period of six months before a Petition for Dissolution of Marriage can be filed. Furthermore, California also has a separate county residency requirement of three months. If a party has not yet met the residency requirements in California, he or she can still file a Petition for Legal Separation prior to meeting the required term of residency and then later convert the Petition to a Petition for Dissolution of Marriage once the residency requirements have been met. The court would then be empowered to make temporary custody and support orders similar to those made in a Dissolution case while the party is waiting to obtain residency.

In addition to the residency requirements for filing of actions, both states also have  adopted the Uniform Child Custody Jurisdiction and Enforcement Act (“UCCJEA”) which only allows a court to make a child custody determination if the child or children have resided in that state for a period of six months and there is no other state which has jurisdiction over the child. There are some statutory exceptions for emergency situations, but in most cases, the courts will have to defer to the child’s “home state” if there are two or more states which are seeking jurisdiction to make a custody order.  Accordingly, even if an individual satisfies the residency requirements for obtaining a divorce or dissolution, there could still be issues as to whether that state has proper jurisdiction to enter a child custody order

Finally, unlike Nevada which does not have a statutory “waiting period”, California courts cannot issue a Judgment of Dissolution until an additional six months have expired from the date the Respondent was served with the dissolution petition or otherwise acknowledged service. This is to acknowledge the public policy to promote marriage and make sure spouses are given adequate time to consider their decision to proceed with the dissolution of their marriage.

Nevada Series Limited Liability Companies (LLCs)

  • July 31, 2018

As discussed in my prior post on asset protection, at Incline Law Group we are always looking for ways to protect our clients’ assets by achieving two goals 1) separating business assets from personal ownership and 2) separating business assets from each other by avoiding common ownership. There are many ways to do this and the best way depends on the type of assets, the risk level associated with your assets, financing issues, personal preference, taxes and many other factors.

For real estate investment, such as ownership of a number of income properties, a Nevada Series Limited Liability Companies can be a really great entity structure to maximize asset protection and minimize administrative costs. Series LLCs are not for everyone, so carefully analyzing the benefits to your business assets with your attorney and CPA is extremely important.

A Series LLC looks similar to a parent company/subsidiary sort of structure. A master company is filed with the Nevada Series LLCSecretary of State, like any other LLC, but with an election to be a Series LLC. The creation of any number of series companies is authorized in the Series LLC governing documents.  When a new series company is needed, it can be formed internally and is not registered with the Secretary of State, thus minimizing filing fees. While each series company may have its own tax ID number, a single tax return may be filed which can maximize tax benefits of profit and loss sharing across the series companies.

This type of entity structure can be a great fit for real estate holdings. For example, if I own 5 rental properties, I can put each property into a series company.  I am able to save licensing and filing fees, as well as potentially file a single tax return, but at the same time, each of those series companies is treated as a distinct and separate LLC (so long as I follow all applicable statutory,  financial and governance rules). Therefore, I have achieved a great deal of asset protection while minimizing costs.

Again, Series LLCs are not for everyone. They do require extra TLC when it comes to banking, financials and bookkeeping. They also have limited application if your assets are located in another state, such as California. But if, after careful investigation, it looks like a Series LLC may fit your needs, it is a structure that can be a fantastic tool for asset protection.

 

Asset Protection – Common Misconceptions and the Bucket Theory

  • July 11, 2018

It is quite common for clients to tell me that they thought their standard family revocable grantor trust would serve to protect assets from creditors.  This is a very common misconception.  Your standard revocable family trust does not in fact provide any asset protection.  There are certain types of trusts that can provide assert protection, such as Nevada irrevocable asset protection trusts.  However, it is not always necessary to utilize these very advanced estate planning techniques for the average person to protect assets from creditors.

When seeking to protect assets we seek to achieve two goals:

  • separate your business assets from your personal assets.
  • separate your business assets from other business assets.

For example, if you own a primary residence and two office buildings, your first consideration might be putting the office buildings into an entity (LLC, Series LLC, Corporation or the like) and removing them from being titled under your individual name.  The second consideration would be to separate the assets from each other by putting each office building into separate entities.

Why is this type of structure recommended?  Because if everything is in your individual name and one of the tenants sues for a slip and fall, and obtains a judgment against you, it will be a personal judgment and your personal assets may be subject to that judgment, including your home.  If all of your assets are in your name, you have created one big bucket of aggregated value for a judgment creditor to dip into.

However, if the business assets are held in an entity structure, you are starting to create multiple buckets which hold fewer assets and less value.  The tenant, in this case will be limited to seeking a judgment against the business at which s/he fell and recover only against its assets, which will no longer include your personal home. Further, if we have taken the extra step of separating the business assets from each other, then we are again creating more buckets and minimizing the value that is available for satisfaction of the judgment in each bucket.

Every client’s needs, level of risk and level of risk tolerance are different.  Additionally there may be tax and other considerations when looking at entity structures.  Corporate formalities and relevant laws must be adhered to in any entity structure to maintain the protections they can afford.  It is important to discuss all of these issues with your legal counsel and CPA before forming new entities and transferring assets.

You spent a great deal of time and effort to earn and grow your assets.  A well thought out asset protection plan is important to safekeeping them.

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5 Steps for a Successful Divorce Mediation

  • July 11, 2018

Mediation is emerging as the procedure of choice for couples hoping to obtain closure of their divorce issues without engaging in the time consuming, emotional and costly litigation process. However, mediation is not for everyone and there are definitely several requirements to assure its success.  If all of the ingredients for a successful mediation are not present, mediation can sometimes be as time-consuming, frustrating and costly as litigation. The first and the most basic requirement for mediation is that both parties want to mediate. Mediation requires two active voices in the room. The goal is to get an agreement that reflects what each of your needs, in order to move forward in your life. If you are not both willing and voluntary participants, then there will not be two voices, and the result will likely be failed mediation or, at best, an unbalanced agreement which could be subject to enforceability issues in the future.

Other requirements of a successful mediation:

  1. Both Parties Are Determined to Settle The Matter: If both parties want to resolve everything in mediation, and keep coming back to the table to talk and to try, then they will likely be successful.
  2. Both Parties Must Be Active Participants.  Both people have to contribute to the discussion. This means that you have to be able to sit in the room together and use your best efforts to listen to your ex, even when you don’t agree with what he/she is saying. If you and your ex-have a dynamic where one of you feels intimidated by the other, and you can’t say what you are really thinking with him/her in the room – then mediation is probably not the right process for you. It follows also that neither person should be cognitively or emotionally impaired (e.g., severe depression) in any way that affects capacity to mediate. Neither person should lack capacity due to drug or alcohol abuse.
  3. Both Parties Want To Settle the Case and Move On.  The breakdown of a marriage is similar to a death and does cause both parties to engage in the grieving process. This can involve transition through various stages such as denial, pain, anger, depression, reconstruction and eventually acceptance. It is often the case that divorcing couples are at different stages of the grieving process which can certainly complicate the ability of both parties to have lucid discussions about child custody, visitation, division of assets, support, etc.  Mediation of these important and often very emotionally charged issues requires a focus on the long-term and the big picture. You must think about your ex and – on some level – hope to honor your past love for each other, the years of your lives that you spent together.
  4. No Hidden Assets and Full Financial Disclosure. It goes without saying that parties cannot make informed decisions if they do not have all of the information on which to base decisions. In mediation, you will not have the power of the court behind you to compel your spouse to produce credit card statements, bank statements, stock options, small business records, etc. Most couples who choose mediation feel confident that they know what each other has, or can trust the other party to voluntarily produce information without engaging in formal discovery. Mediation would not be right for someone who wants to ‘make a deal’ without revealing their cards.
  5. No Patterns of Intimidation, Control or Domestic Violence. Finally, it is important to note that, if you and your spouse have a history of violence between you, you probably should use more traditional methods for negotiating your divorce. It is difficult to speak freely and express what you want if you fear repercussions or do not feel that you can contribute productively without inciting anger in the abusive spouse.

Whether you decide to mediate or litigate, it is also important that you retain an attorney to assist you during either process. Mediation is a way to conserve resources and funds, but you still need to have an attorney reviewing your agreements to be sure your interests are being protected. Mediators represent the agreement or the goal or resolution and do not have the ability to be representing the interests of the individual parties with conflicting interests. You want to make sure to have any agreements reached in mediation reviewed by your own counsel.

Nevada Has No Corporate Taxes, Right?

  • July 11, 2018

It is true that Nevada does not impose corporate income taxes. This and the fact that Nevada also does not impose personal income tax makes it a very business-friendly state. However, this does not mean that you can escape taxation simply by forming a corporation or limited liability company in Nevada. First, regardless of where you incorporate, the Fed’s are always entitled to a piece of the action, whether that is recovered through corporate taxes or personal taxes. Second, if you are doing business in another state, you may be required to register to do business in that state, which may mean paying annual registration fees as well as state corporate income taxes or other taxes imposed by that state. Third, if you are not a resident of Nevada, you may be obligated to pay state personal income tax in whichever state you do reside.

So what constitutes “doing business” in another state? Here is a lawyer answer for you – it depends. Every state has a different statutory definition of what constitutes doing business in that state. It is fairly safe to say that if you repeatedly conduct activities in a state, like shipping goods from a warehouse or having salespeople visiting customers on a regular basis, that is likely to be considered “doing business” in that state. This may mean that you need to register your business to do business in that state.

While Nevada is one of the most business-friendly states around, which is one of the many reasons we love our beautiful Silver State, forming an LLC or corporation here, if you are not actually conducting business in our fair state, is not necessarily going to help you avoid taxes in another state. The solution, of course, is for you to bring your business to Nevada. We would welcome you with open arms. But short of that, you should consult with an attorney and/or CPA before electing the state in which you incorporate your business

5 Ways to Keep Your Divorce Clean

  • July 11, 2018

We have all heard people refer to some divorces as “messy” or “ugly”. Fortunately, these cases are not the norm but every so often there are cases that are so fueled by anger and vindictiveness that they take inordinate amounts of time, money and emotional energy to get them resolved. Almost every divorce litigant starts off the process expressing a desire to “be amicable”, “stay out of court”, and “keep it clean”. How exactly can that be done? In my experience, following a few simple steps can result in a successful and fair divorce.

  1. Channel Anger. Anger is almost unavoidable in a divorce, but it has its proper time and place. Feel free to vent when necessary to friends, therapists, support groups, and any others who you can rely on to help you work through it. Try to keep your anger out of the negotiations. Question your own motivations behind your proposals. There is an old expression that criminal lawyers see bad people at their best and family law attorneys see good people at their worst. People who are normally pretty mild mannered and kind often default to “scorched earth” when they sense an attack.
  2. Do An Ongoing Cost-Benefit Analysis. Although the agreement on the table may leave you with less than you feel a judge would award to you at trial, you have to look at the big picture. Your assessment should take into account the literal cost of fighting — attorney’s fees — as well as the emotional cost of further delays.
  3. Accept Compromise. As Mick Jagger says, “you can’t always get what you want, but if you try, sometimes you just might find, you get what you need.” After a divorce, no one feels like they’ve “won” and most believe their exes “won”. Dissatisfaction is guaranteed when you are dividing one household into two and dividing the time you spend with your children. To cope with the grieving process, try and appreciate, or even enumerate, the compromises you are both making. Everyone feels like he or she is losing out. The trick is ensuring you wind up with what you need in order to move on.
  4. Ignore the Peanut Gallery. Do not listen to your well intentioned neighbor or coworker or friend or family member who knows nothing about the law but is able to rattle off the custody arrangements and support awards that all the people they know have obtained in a variety of courts. Listening to these people will cause you to become insecure. It will make you second guess yourself or feel you’re caving too early or being a sucker. Keep in mind that family law cases are determined on a very factual basis. It is guaranteed that the Peanut Gallery only has limited facts about your case and about the other cases. Nobody knows everything about a marriage except the two people in it. Rely on your friends for emotional support only. Unless they are a family law attorney practicing regularly in your jurisdiction, do not rely on them for legal strategy or advice.
  5. Find the Right Professionals. Retain an attorney and/or a mediator who understands your desire to keep things clean and amicable and agrees to help you try and achieve that goal (assuming your spouse and his or her lawyer are on the same page). Don’t just blindly call lawyers out of the phone book. Talk to others about their experiences with various lawyers and find a lawyer who has a good track record for achieving good results for clients outside of court and who is willing to work with you to keep you on track in your efforts to “keep it clean”.