"The Legal Report" Weblog

The Current Status of Same-Sex Marriage in California

2009-10-12T14:25:00.001-07:00

Every year or so there seems to be a “legal victory” for one side or the other in California’s same-sex marriage battle. Just as the winner praises each victory, the loser vows to continue the fight. So, where do we currently stand?
The latest “victory” was for the opponents of same-sex marriages, and that was the May 2009 California Supreme Court decision upholding the November 2008 voter-approved Constitutional amendment banning same-sex marriages (Section 7.5 of Article I of the Constitution, also referred to as “Prop 8").
In a nutshell, the function of the Supreme Court is to interpret and uphold the California Constitution. Therefore, while this was the same Supreme Court that one year earlier invalidated a state statute designed to ban same-sex marriages, the Court felt it had no discretion to invalidate a Constitutional provision designed to ban same-sex marriages since the provision presumably reflected the will of the majority of the voters.
Nevertheless, despite the apparent victory for the opponents, the proponents have found hope in the fact that the Court did not invalidate roughly 18,000 same-sex marriages that were legally established prior to Prop. 8's passing and have again vowed to continue the fight.
So, what will we see next? Already, same-sex marriage proponents have registered initiatives which overturn Section 7.5 of Article I of the California Constitution. Upon obtaining about 700,000 signatures – which is sure to happen – one of the initiative will be included as measures on the 2010 ballot and the issue will be brought before the voters again.
Other possible actions proponents have already initiated: (1) Senate Bill 54, introduced July, 2009, would allow California to recognize same-sex marriages performed in other states or countries (thus allowing Californians to marry in a different state and then have it recognized at home); and (2) Assembly Joint Resolution Bill 19, introduced May, 2009, urges the United States government to repeal the federal ban on same-sex marriages (thus invalidating California’s ban as conflicting with federal law).
Regardless of which side prevails in the next battle, where ever and whenever it may be fought, there are strong emotions on both sides of the fence and the war is sure to be fought for years to come.

Be Aware of Potential Cancellation of Debt Income

2009-10-12T14:24:00.001-07:00

A borrower may have taxable income to the extent a lender discharges the debt owed. This is known as “cancellation of debt income”. For example, if a credit card holder owes $2,000 on the card, but the bank agrees to cancel the debt, the holder now must declare an extra $2,000 of taxable income on his or her tax return.
While an additional $2,000 of income may not increase the tax due by very much, a $50,000 (or more) increase in income certainly will. Depending on the owner’s tax bracket, an additional $50,000 in income could add $12,500 to $17,500 in taxes due. These large debt cancellations are common in foreclosures, short sales and loan modifications. For example, say an owner buys property for $500,000. He puts $25,000 down and obtains a loan for $475,000. Three years later, the value of the property has gone down to $350,000 (not uncommon in this market) and the loan balance is $450,000. The owner can no longer afford the property, and seeks the least costly way to get rid of it.
If the owner simply walks away and allows the lender to foreclose, the owner will have $100,000 in cancelled debt income (loan balance less market value/purchase price). If the owner finds someone to purchase the property for $375,000 in a short sale, he will have $75,000 in cancelled debt income (loan balance less purchase price). Finally, if the owner obtains a loan modification that reduces the principal loan balance to $400,000, he will have $50,000 in cancelled debt income (original loan balance less reduced balance).
Luckily for most borrowers facing this issue, there are several situations in which the cancelled debt is not included in a taxpayer’s income. These include certain student loans, gifts received, debt that was otherwise deductible if paid, debt cancelled due to bankruptcy, debt cancelled while the borrower was insolvent (e.g., liabilities exceed assets), and debt cancelled on certain qualified principal residences.

Credit Card Practices Given a Major Make-Over

2009-10-12T14:23:00.000-07:00

At the end of last year, Americans’ credit card debt reached almost $1 trillion total, with the average card-holding household owing $10,679 (Nilson Report, April 2009). In the last 12 months, 34 million Americans have made a late credit card payment and 18 million have missed a payment entirely. (National Foundation for Credit Counseling, 2009 Financial Literacy Survey, April 2009).
In an effort to ease the burden on struggling cardholders, the federal government has passed the Credit Card Accountability Responsibility & Disclosure Act of 2009. The law becomes effective next February and contains numerous protections for cardholders, some of which are highlighted below.
No More Retroactive Interest Rate Hikes. Card issuers will no longer be able to raise interest rates on existing balances unless you are more than 60 days late on your account (i.e., no payment is received during the 60-day period after the due date). Instead, rate hikes will only apply to new purchases. Further, even if the rate is increased due to a late payment, the issuer must reinstate the lower rate after the cardholder has made six straight on-time monthly payments.
Payments Must Be Applied to Highest-Rate Balances First. Typically, card issuers apply payments to the balance subject to the lowest interest rate, thus increasing the total accrued interest and the time it takes to pay off the entire balance. Once this law takes effect, the issuer must apply any payments above the minimum to balances subject to the highest interest rate, then the balance subject to the next highest, and so on down the line.
No Payment-Based Fee. Banks will no longer be able to charge a fee related to the method of payment (i.e., no more fees for internet or telephone payments).
Set Payment Due Dates and Longer Grace Periods. The new law requires that the payment due date be the same day each month (or the next business day if the due date falls on a weekend or holiday). In addition, the billing statement must be mailed no later than 21 days before the payment is due, which is one week longer than the current laws impose.
Universal Defaults Prohibited. Currently, issuers can raise interest rates based on negative entries in a cardholder’s credit report (i.e., if the cardholder has made a late payment to a different credit card). Card issuers will no longer be able to do so.
And finally, a Legal Report favorite:
Gift Certificates Shall Not Expire. Echoing California’s law prohibiting the expiration of gift cards (see The Legal Report, Vol. 2, and our blog at www.Ajalatlaw.com), the new law prohibits the sale or issuance of gift certificates, store gift cards, or pre-paid cards that are subject to an expiration date and prohibits imposing dormancy fees, inactivity fees, or service fees on them.
Be Ready! In anticipation of the new law, card issuers have been taking steps to minimize the impact (i.e., raising interest rates, phasing out low-rate balance transfers, etc.). So, shop around for the best deals available now and keep an eye out for changes to your existing cards.

California Courts May Not Help If Your eBay Purchase Goes Sour

2009-04-22T06:15:00.004-07:00

Before a California court can impose and enforce California laws on a person, the Court must have what is known as “personal jurisdiction” over that person. California courts clearly have jurisdiction over California residents, but whether California courts have jurisdiction over a non-resident is a question that must be answered at the outset of any case.
The question is typically answered by looking at the facts of the situation and analyzing whether the non-resident person has purposely directed himself to the state and/or had sufficient contacts within the state. This issue came up in a recent case where a California Plaintiff purchased a car from a Wisconsin Defendant over the popular auction website, eBay. Needless to say, the car was not as advertised, so the Plaintiff buyer sued the Defendant seller in federal court for violations of California’s consumer protection laws.
The United States 9th Circuit Court of Appeals dismissed the case, ruling that a single eBay transaction, without anything more, is an insufficient “contact” to establish personal jurisdiction over a non-resident defendant. The Court relied on the fact that the Defendant seller did not specifically direct his eBay auction toward California or California purchasers, but that the auction was broadcast to the entire world. The Court further noted that the Defendant seller was not the owner of eBay and therefore was not specifically doing business in California, nor did he have any further or continuing obligation toward the California purchaser. Ultimately, the Court dismissed the case for “want of personal jurisdiction” (i.e., lack of personal jurisdiction) over the Defendant seller.
However, the Court was careful to point out that this case was limited to it’s facts and if the non-resident eBay seller had a continuing eBay operation that regularly sold to California consumers, the Court could easily find sufficient contacts to establish personal jurisdiction over him.
What’s the lesson for eBay users? Just be careful who you buy from on eBay. If it’s not a regular seller with sufficient contacts in California, you may not be able to use the California courts to enforce or cancel your agreement.

Speaking of the Estate Tax Exemption . . .

2009-04-22T06:15:00.001-07:00

The estate tax exemption is currently $3.5M, meaning that upon death, a person can transfer up to $3.5M to his or her heirs tax free (or $7.0M per married couple). This amount is the result of legislation that has increased the exemption from $650,000 in 1999 to the current amount for this year. The legislation was slated to grant an unlimited estate tax exemption for next year, making 2010 facetiously known as the “Year to Die” for estate tax purposes. However, in the 2010 federal budget proposal – which is being debated as this newsletter is going to print – President Obama has proposed that the estate tax remain at the 2009 level, meaning there would be no unlimited estate tax exemption for 2010. The consensus among both Democrats and Republicans is that Obama’s budget will pass, so for anyone considering dying next year in order to save estate taxes, you may have just been granted an extension!

How Much Money Can I Give as a Gift Without Paying Taxes?

2009-04-22T06:13:00.001-07:00

As of January 1, 2009, you can give gifts of up to $13,000 without incurring a gift tax. Further, that amount is per year, per donor and per donee – so that this year every person can give $13,000 to any number of individuals without any tax implications. Last year the limit was $12,000.
This can be a valuable estate planning tool for those that need to reduce the size of their estate, and thus estate taxes, in contemplation of their death. For example, say an older couple has accumulated a few million dollars in assets, some of it in cash, and they have seven heirs (e.g., two children and five grandchildren). This year, they can gift $26,000 to each heir ($13,000 from husband, $13,000 from wife), thereby reducing the size of their estate by $182,000 ($26,000 x 7 heirs). They can do the same thing next year as well, and reduce their estate by another $182,000. Further, payments made directly to educational or medical providers are not included in the $13,000, so those can be additional non-taxed gifts. By following this plan year after year, the couple could conceivably bring the size of their estate down below the estate tax exemption threshold for the year they die (currently $3.5M per person, but going down to $1M in 2011), thereby saving their heirs hundreds of thousands of dollars in estate taxes.
For larger gifts, a tax will be imposed on any amount over $13,000 unless the taxpayer elects to apply the overage to their lifetime $1,000,000 gift tax exemption. For example, in any one year, the older couple above can gift a total of $382,000 to their heirs, apply $200,000 of it to their lifetime gift tax exemption, and pay no tax on any of it. (However, utilizing their lifetime gift tax exemption for this purpose will cause a dollar-for-dollar reduction in their estate tax exemption).

Traps To Avoid When Buying a New (Or Used) Car

2009-04-22T06:12:00.001-07:00

When buying a new car, you may agree to trade in your old car and get the dealership to agree to pay off any existing loans. The good news is that this is a convenient transaction for you. The bad news is that if the dealership goes bankrupt without paying off the loan, you’re stuck with an outstanding loan on a car you no longer own. To avoid this trap, deal only with large, reputable dealerships that have little or no chance of closing. Or, you can sell your old car on your own and use the proceeds to purchase that new car.
Likewise, when buying a used car, you should always ask to see the car’s title to ensure that there are no outstanding loans against it. If there are, the lender could repossess the car, leaving you with nothing.

Follow-Up to “Lowering Your Property Taxes Under Prop 8"

2009-04-22T06:11:00.001-07:00

The last issue of The Legal Report detailed how California’s real property owners can decrease their property taxes by filing a Proposition 8 “Decline-in-Value Reassessment” form. Just to recap, property taxes are determined by the assessed value of the property, which is typically the amount paid, plus a 2% increase per year. For properties that have decreased in value, a decline-in-value reassessment seeks to reassess the property based on a lower market value, thus reducing property taxes.
There are two important updates. First, in Los Angeles County, the Assessor’s Office has [commendably] taken a proactive approach and is unilaterally reassessing all residential properties purchased between July 1, 2003 and June 30, 2008 (about 500,000 homes), among some others. The Assessor did this for approximately 318,000 homes last year as well, and reduced the value on 40% of them by an average of $73k – that’s a tax savings of $750. Los Angeles County owners can look up whether their property is being reassessed for this year at http://assessor.lacounty.gov. The result of the reassessments will be available in July. Thereafter, owners are free to accept the results, contest a no-change, or apply for an even further reduction.
Second, don’t be scammed! There are several companies offering their services of pursuing a property tax reduction on behalf of property owners. These companies are charging a fee for something that is free. While consumers can hire a company to seek a decline in value reassessment for them, there is really no need to – the forms are very simple to complete, they’re readily available on the county assessor’s website, and they’re free to file (and of course, if you’re in Los Angeles County, the Assessor may already be reassessing your property to begin with!).

Lower Your Property Taxes Under Prop 8 (Not That Prop 8!)

2009-01-20T21:25:00.000-08:00

Originally Posted January 2009

The amount of annual property tax California’s real property owners pay depends on the assessed value of the property. Typically, this is measured by the purchase price, plus an increase of no more than 2% per year, regardless of how much the property increases in value (thanks to Proposition 13's limit). For example, if you purchased a home in 2003 for $300,000, your property taxes for 2008 are based on a $300,000 basis, plus 2% per year for 4 years. This is true even if the current market value well exceeds $300,000. This 2% increase limit is a major benefit for owners whose property has increased in value.

However, if your property has decreased in value since you purchased it, Proposition 8 (passed in 1978 and having nothing to do with the current same-sex marriage ban Prop 8) also provides a benefit: You can apply for a "Decline-in-Value Reassessment" to contest the assessed value of your property, thus lowering your property taxes. Under Prop 8, you can apply to the County Assessor for a re-appraisal if you can show, primarily by way of comparables, that the value of your property has declined. Therefore, if your $300,000 home is now worth $200,000, and comparable homes in the area support that value, the assessor may grant your request and lower your assessed value, resulting in lower property taxes.

Some things to keep in mind: Even if the assessor does agree to lower your assessed value, your basis in the property remains the same – your purchase price – and the assessor is not bound by Prop 13's annual two-percent per year increase limit up to that amount. Therefore, even if the assessor reappraises your property at $200,000, if there is a sudden spike in property values, the assessor could reappraise it the following year back at $300,000, plus 2% per year since the year of purchase.

Nevertheless, there is no harm in exercising your rights under Prop 8 – if you can get your assessed value lowered, it will do nothing but save you money until your property value increases to or above your purchase price and the assessor decides to re-visit the issue.

Be Wary of Loan Modification Scams

2009-01-20T21:23:00.000-08:00

Originally Posted January 2009

With so many homeowners facing foreclosures, a new predatory scam has gained in popularity in California – charging advance fees for loan modification services then either disappearing with the money or failing to put forth a good faith effort to help the borrower.

Typically, an individual or company will contact a borrower who is behind in payments and offer to help negotiate a modification of their loan in order to avoid foreclosure. If the lender has already begun the foreclosure process by recording a Notice of Default against the property, California law prohibits any person, broker or otherwise, from collecting an advance fee for these services (attorneys are exempt, however).

If the lender has not yet filed a Notice of Default, requesting advance payment for modification services is permissible. However, the borrower must sign a written agreement pre-approved by the Department of Real Estate stating precisely what services will be performed, when they will be performed and how much it will cost. Currently, there are only about 95 individuals or businesses that have pre-approved agreements (see www.dre.ca.gov).

It is acceptable for licensed brokers to provide loan modification services without collecting advance fees if their services are fully completed before being paid.

New Law Allows You to Mount Your GPS

2009-01-20T21:21:00.000-08:00

Originally Posted January 2009

In the January 2008 print edition of The Legal Report, we mentioned California Vehicle Code §26708 as being a "Little Known Law (That’s Seldom Enforced)".

Specifically, we stated that: "California Vehicle Code §26708 prohibits driving a motor vehicle with any "object or material placed, displayed, installed, affixed, or applied upon the windshield or side or rear windows." Therefore, while enforcement may be lacking, it is nevertheless illegal to drive your car with any object, including a . . . GPS unit, affixed to your window."

Apparently, at least one member of the California legislature read our Report and last February presented SB1567 to the legislature, which quickly passed and became effective on January 1, 2009 Senate Bill 1567 amends §26708 to specifically exclude GPS units from the prohibition.

The law does limit where the GPS may be mounted: It must be in a 7-inch square in the lower right-hand corner of the windshield, or in a 5-inch square in the lower left-hand corner of the windshield and outside of an airbag deployment zone. So all of you that took your GPS units off your windshield last year can go ahead and put them back on!

No Texting While Driving: Is This Law Even Necessary?

2009-01-20T21:19:00.000-08:00

Originally Posted January 2009

On January 1, California Vehicle Code §23123.5 went into effect which states that "a person shall not drive a motor vehicle while using an electronic wireless communications device to write, send, or read a text-based communication."

At first glance, the law appears to be clear and reasonably likely to result in safer roads by decreasing distractions. However, there are serious questions about the scope and enforcement of this law and ultimately, whether laws prohibiting specific acts while driving are even necessary.

Scope of the Law. For drivers 18 years and older, the law prohibits "text-based communications" while driving. Theoretically, sending video or picture messages – which are becoming more and more common – is not prohibited as they are not "text-based" by definition, though we’ll have to await judicial interpretation to know for sure. Also, depending upon the interpretation of the word "communication" (i.e., does it mean a "two way conversation" or any conveyed message?), using the internet feature on a cell phone to look up directions or check traffic conditions may be prohibited. Finally, it is unclear whether GPS units are "wireless communication devices" and therefore covered by the statute, even though the legislature probably did not intend to prohibit the use of GPS devices (see article next column).

Enforcement of the Law. Practically, speaking, an officer looking from outside the vehicle will not know the difference between a driver typing a text message, which is illegal, and typing a phone number in order to make a call, which is legal. Also, receiving a text-message is not prohibited, presumably because text-messages are delivered immediately upon being sent and the driver has no control over when he or she receives a text-message. However, if a driver glances at his or her phone after hearing an audible notice that a text-message has been received (which is a conditioned response for many), there may be no way to dispute an officer’s claim that the driver was "reading a text-based communication."

Over time, these questions may be answered by the Courts or perhaps the legislature will continue to pass new laws to cover situations not covered by prior laws (which is precisely what the "no-texting" law is to the "hands-free" law).

However, there is, and always has been, a "basic speed law" in place that allows an officer to cite a driver for speeds in excess of those which are safe for conditions. This law does not focus on the specific act the driver is or is not doing, but on the more important factor of how doing that act is affecting his or her driving. In other words, the basic speed law prohibits doing anything while driving, if doing that "thing" makes driving unsafe given current conditions.

So, if you are talking on a cell phone, sending a text-message, eating a burrito or blow-drying your hair while driving and doing so causes you to drive unsafely, then you can, and should, be cited. Applying that logic to cell phones, if using a phone to make a call or send a text-message makes you drive unsafely, you should be cited under the basic speed law. If using your phone or a sending a text-message can be done safely, however, those acts should not, in and of themselves, be illegal. Otherwise, the legislature is going to find itself tumbling down a "slippery slope" by trying to create more and more laws to prohibit more and more specific acts, when the real issue – whether or not a driver is driving safely – is already covered by the basic speed law.

The National Vaccine Injury Compensation Program Information

2008-12-15T08:07:00.000-08:00

In addition to other areas of law, AJALAT & AJALAT, LLP specializes in litigating claims for vaccine-related injuries in the United States Court of Federal Claims under the National Vaccine Injury Compensation Program.

WHAT IS THE NATIONAL VACCINE INJURY COMPENSATION PROGRAM (VICP) AND WHY WAS IT ESTABLISHED? For many years, children have been required to participate in national vaccination programs. Vaccinations from diphtheria, tetanus, pertussis, measles, mumps, rubella, and polio are generally required to obtain social services, such as attending public schools and maintaining health insurance. While beneficial to the vast majority, these vaccinations are extremely harmful or even fatal to some children.As a result, lawsuits were brought against pharmaceutical companies on behalf of those injured or killed as a result of a vaccine. Juries had a difficult time resolving these cases as they balanced the main issue: Vaccines protect millions of children while injuring only a few. The disparity in jury verdicts reflected the moral dilemma: Do we sacrifice the health of a few innocent children to protect millions of others? From a certain moral standpoint, the answer appears to be in the affirmative. While unsettling, this is a conclusion we can be confident in. That is, until the innocent child is our own.In an attempt to reconcile this issue, on October 1, 1988, the federal government enacted Subtitle 2 of Title XXI of the Public Health Service Act, the National Vaccine Injury Compensation Program. The program is a "no-fault" system designed to compensate those individuals, or their families, who have been injured by vaccines without penalizing the manufacturers where they are without fault.

WHERE ARE THESE CLAIMS LITIGATED? Claims under the Program must be initially brought in the United States Court of Federal Claims, based in Washington, D.C. State-Court lawsuits -- usually based on products liability -- may be maintained only after rejecting the outcome in the Court of Federal Claims.

CAN ANY ATTORNEY HANDLE CLAIMS UNDER VICP? No. Only attorneys who are admitted to the United States Court of Federal Claims can handle claims under the Program. In addition, these claims are very complex and require a certain level of experience and expertise in the area of vaccination injuries.

ARE THESE CLAIMS LIMITED TO CHILDREN? No. A claim under the Program may be made by any individual, child or adult, for any injury caused by a vaccine, including injuries suffered as a result of a common flu-shot.

WHAT VACCINES ARE COVERED? The Program currently covers the following:

Vaccines containing tetanus toxoid (e.g., DTaP, DTP, DT; Td, or TT);
Vaccines containing whole-cell pertussis bacteria, extracted or partial cell pertussis bacteria, or specific pertussis antigen(s) (e.g., DTaP, DTP, P, DTP-HiB);
Measles, mumps, and rubella vaccines or any of its components (e.g., MMR, MR, M, R);
Vaccines containing rubella virus (e.g., MMR, MR, R);
Vaccines containing measles virus (e.g., MMR, MR, M);
Vaccines containing polio live virus (OPV);
Vaccines containing polio inactivated virus (e.g., IPV);
Hepatitis B vaccines;
Rotavirus vaccine; and
Any new vaccine recommended by the Centers for Disease Control and Prevention for routine administration to children, after publication by Secretary, HHS of a notice of coverage, including pneumococcal conjugate vaccines.

HOW MUCH COMPENSATION IS PROVIDED? Once entitlement to an award is established, the amount of the award will vary considerably, depending upon the facts of each case. Awards have ranged from $120.00 to $7.9 Million, with an average award of over $820,000, which actually can provide several millions of dollars in benefits when used to purchase an annuity with payments over the lifetime of a victim. In addition, attorney's fees are paid by the government, separate from any award, through the Program.

Foreclosure Also Hits the Innocent and Unsuspecting Tenant

2008-10-01T21:17:00.000-07:00

Originally Posted October 2008

In addition to the lender and the defaulting owner, another party that stands to suffer greatly from the foreclosure of a residential property is the innocent tenant.

The suffering typically begins early, long before the foreclosure sale. Notices of Sale, appraisers and potential buyers begin appearing at the property much to the confusion of the tenant.

Despite learning that a foreclosure may be imminent and a new owner may soon be in place, the tenant is bound by the terms of his rental agreement until such a transfer actually takes place.

This places the tenant between a rock and a hard place: Should he abide by the terms of the lease agreement and risk being forced to leave on short notice by the new owner? Or should he break the lease agreement now and risk liability to the owner if the property is not ultimately foreclosed upon?

Once the property is sold at auction (or the property reverts back to the lender if no sale occurs), the new owner is entitled to possession and the tenant becomes a "hold-over" tenant. The sale terminates the existing tenancy and there is no landlord-tenant relationship between the new owner and the existing tenant. (There is a minor exception where the tenancy begins prior to the loan that is foreclosed upon and notice of the tenancy has been given to the lender, but that situation is rare).

In terms of money, rent owing before the foreclosure sale is payable to the new owner and although technically the new owner cannot demand that the tenant pay rent after the sale, the new owner can seek the "fair rental value" of the property in a subsequent eviction action.

The new owner can decide to continue the tenancy, but that is unusual, especially if the new owner is the lender bank. However, if the new owner does accept rent, the relationship between the two becomes a consensual month-to-month tenancy and the new owner becomes a landlord with all the duties and obligations of such. Because of this, many lenders are simply allowing hold-over tenants to live rent-free until the lender can get around to filing an eviction, which is sometimes several months.

"Short Sale" and "Deed in Lieu" As Alternatives to Bankruptcy and Foreclosure

2008-10-01T21:14:00.000-07:00

Originally Posted October 2008

In California, as well as the entire country, the slumping economy and real estate market have forced people to scramble to find a quick, inexpensive way to avoid going through a bankruptcy and/or foreclosure. A "short sale" and a "deed in lieu of foreclosure" agreement are two options many borrowers may not be familiar with.

A "short sale" occurs when an owner/borrower sells their property for less than the outstanding balance of the loan upon approval of the lender, who agrees to accept less than the total balance in full satisfaction. From the owner’s perspective, a short sale allows relatively quick relief from the debt and avoids the negative impact of a foreclosure on their credit report (though the short sale itself may be reported to the credit bureau). From the lender’s perspective, a short sale can cut losses because the lender may lose less money than they would if they had to foreclose.

Before lenders will approve a short sale, they typically want to see that a solid buyer is in place, a Notice of Default has been recorded and the owner has a real "sob story" as to why he is having financial difficulties and should be forgiven part of the debt. If the situation is right, the lender may approve a short sale but not agree to forgive a part of the debt. In this case, the lender will condition approval of the sale upon the borrower signing an acknowledgment of the obligation to pay all or part of the remaining balance.

A "deed in lieu of foreclosure" agreement is another way to avoid bankruptcy and a foreclosure while reducing the negative impact on a credit report. In this situation, the borrower simply gives the lender the deed to the property in exchange for the lender forgiving the debt. Like a short sale, the lender must agree and the closer the property value and the balance of the loan are to each other, the more encouraged the lender will be. Also, the lender will typically require that theirs be the only loan against the property since accepting a deed in lieu may not extinguish junior liens (whereas a foreclosure usually does).

A potential trap in either case is that the lender’s agreement to forgive a certain amount of debt may be treated as income to the borrower for federal or state income tax purposes (although insolvency rules and the Mortgage Forgiveness Debt Relief Act of 2007 may alleviate this trap for many).

California's Anti-Deficiency Statutes and the "One Action Rule" Help Protect Already Troubled Homeowners

2008-10-01T21:12:00.000-07:00

Originally Posted October 2008

As is happening today more so than at any other time in California’s history (and across the country), borrowers are defaulting on their loans and losing their homes in foreclosure. Luckily, in some cases, a set of Depression-era laws can protect borrowers and soften the blow.

In the early 1900's, after a foreclosure was completed and the bank sold or reacquired the property, the bank could still sue the borrower for the remaining loan balance if the balance exceeded the value of the property. For example, assume a borrower purchased property for $100,000 and obtained a loan for the full amount. Thereafter the property value decreased to $80,000 and the owner stopped making payments. The lender would foreclose on a property (thus obtaining the $80k market value) and then seek a judgment against the borrower for the remaining amount ($20k), known as the "deficiency." In addition to having already lost their home, this additional debt often pushed borrowers into poverty.

In response, California enacted "anti-deficiency statutes", the One Action Rule and other rules which protect defaulting borrowers by preventing lenders from seeking the deficiency for certain loans or in a second action (the foreclosure being the first). In general, once the lender has reacquired the property that secured the debt, no further action can be taken against the borrower. Typically, these protections only apply to residential property that the borrower actually occupied. They do not apply to loans on vacation, investment, or commercial properties. Also, the statutes only apply to "purchase money loans", i.e., loans that are used to actually acquire the property. Examples of non-purchase money loans (to which the statutes do not apply) are refinances, home equity lines of credit and home improvement loans.

In addition, per the One Action Rule, the lender can only maintain one "action" against the borrower – either a judicial foreclosure (i.e., filing a lawsuit to foreclose on the property) or a non-judicial foreclosure (i.e., exercising the "Power of Sale" contained in the Deed of Trust). If a non-judicial foreclosure is sought, the lender can only foreclose and not thereafter seek a deficiency judgment regardless of the type of loan. If a judicial foreclosure is sought, the lender can foreclose and seek a deficiency judgment, unless the loan was a purchase money loan in which case the foreclosure is treated as a sale back to the lender. However, because judicial foreclosures are much more uncertain, time consuming and costly, lenders rarely pursue them, even if it means losing their right to a deficiency judgment against the borrower.

Finally, as is always the case, there are tax implications to the borrower – a foreclosure sale with this type of loan (i.e., a secured loan) may generate capital gains or losses and foreclosure of a non-purchase money loan may produce cancellation of debt income.

New Ruling Shields Text Messages From Employers' Eyes

2008-07-01T21:11:00.000-07:00

Originally Posted July 2008

Current California caselaw allows employers unrestricted access to their employees’ e-mails on devices owned or provided by the employer. The rationale is that employees have no "reasonable expectation of privacy" in e-mails because they are generally stored on the employer’s computers (or third-party servers paid for by the employer) and can be easily accessed by the employer.

On June 18th, in Quon v. Arch Wireless, the Ninth Circuit Federal Court of Appeals issued a ruling distinguishing text messages from e-mails and limiting an employer’s right to access such text messages – even if the service is paid for by the employer or the messages are on devices owned or provided by the employer.

The underpinning of the ruling is that unlike e-mails, text messages are generally intended to be instant communications that are not typically thought to be stored. Therefore, the participants in a text message conversation maintain a reasonable expectation of privacy in the content of that communication (however, there is still no expectation of privacy in the headings of a text message, only the content). A text message conversation is akin to an old-fashioned voice call over a telephone line, in which the participants maintain a reasonable expectation of privacy because they do not contemplate that a record of the conversation is being kept.

If your employer wants to look through your e-mails, text messages or any other communication, or they already have, be sure to consult an attorney to insure your privacy rights have not been violated.

Is the California Supreme Court Ruling on Gay "Marriage" Just a Matter of Semantics?

2008-07-01T21:10:00.000-07:00

Originally Posted July 2008

The recent California Supreme Court ruling on same-sex marriages has garnered a huge amount of public attention throughout the country. However, the ruling may not be as revolutionary as the general public believes, nor as progressive as the media would have you believe.

Long before the Court’s ruling, California already had in place a series of laws granting same-sex couples virtually all of the legal rights and responsibilities afforded to married couples (the differences are few and mostly procedural). The culmination of these laws comes from the California Domestic Partner Rights and Responsibilities Act of 2003 which in Family Code §297.5 states that: "Registered domestic partners shall have the same rights, protections, and benefits, and shall be subject to the same responsibilities, obligations, and duties under law . . . as are granted to and imposed upon spouses." The Courts have already acknowledged that the chief goal of the Act is to "equalize the status of registered domestic partners and married couples." (Koebke v. Bernardo (2005) 26 Cal.4th 824, 839).

Nevertheless, under current California laws and procedures, same-sex unions were called "domestic partnerships", while opposite-sex unions were called "marriages". Acknowledging that same-sex "domestic partners" already have the rights and responsibilities of a "married" couple, the Supreme Court limited the issue addressed to "whether the difference in official names of the relationships violates the Constitution."

The California Court explained that in this state, the "right to marry" is a fundamental right whose protection is guaranteed to all persons. Under principles of Constitutional law, in order for two groups to be treated differently with regard to a fundamental right, there must be a "compelling state interest" and the deferential treatment must be "necessary" to serve that compelling interest.

The Plaintiffs (several same-sex couples) argued that the difference in official names violates a same-sex couple’s fundamental rights to "marry", right of privacy and the freedom to pursue consensual familial relationships. The Defendants (the Governor, Attorney General and The Proposition 22 Legal Defense Fund) argued that the fundamental right to "marry" is not the equivalent of a right to same-sex "marriage" and that the state has a "compelling interest" in retaining the traditional and well-established definition of a "marriage".

Ultimately, and after much discussion, the Court concluded that California’s interest in calling one union a "marriage" while calling the other a "domestic partnership" is not a "compelling state interest" – especially given the fact California already gives same-sex couples virtually all rights afforded to opposite-sex married couples . The court further concluded that tradition alone is not a "sufficient justification for perpetuating, without examination, the restriction or denial of a fundamental Constitutional right" and that "fundamental rights, once recognized, cannot be denied to particular groups on the ground that these groups have historically been denied those rights." Therefore, all unions – whether opposite-sex or same-sex – should be called "marriages".

It should be noted that this California decision has no impact on Federal law, which defines marriage solely as "the union of a man and a woman" and does not recognize any type of "domestic partnership" whatsoever. This means that federal benefits granted to opposite-sex married partners (including Social Security, Medicare, federal housing, food stamps, federal military and veterans’ programs, federal employment programs and filing status for federal income tax purposes) will continue to be unavailable to California’s same-sex married couples.
(Of course, this is a brief discussion of the very lengthy opinion. You are encouraged to read the entire opinion at www.courtinfo.ca.gov to fully understand all of the arguments, analysis and conclusions.)

California's New "Hands Fee" Law: Will It Have the Intended Effect?

2008-07-01T21:08:00.000-07:00

Originally Posted July 2008

As you have likely heard, on July 1, two new laws affecting your right to use a cell phone or other mobile device while driving went into effect (Cal. Veh.Code §§ 23123 and 23124). Essentially, Section 23123 says that persons 18 and over cannot use a hand-held wireless telephone device while driving. Section 23124 says that persons under 18 cannot use any wireless telephone device (even if hands-free) or any "mobile service device" while driving. "Mobile service devices" are cell phones, pagers, laptops, and text messengers.

Presumably, the intent behind the new laws is to increase driver awareness and safety by decreasing driver distractions. The question is: Will the new laws make our roads safer?
At the outset, it is important to note this distinction: minor drivers (under 18) cannot use any device, while adult drivers (18+) can still use every device, except a handheld telephone. Therefore, the law certainly has "bite" for the minor drivers – they can’t use any of their wireless devices. One can imagine that new, young drivers will be more attentive if they are not using these devices while driving.

However, for adult drivers, it appears the law only prohibits one rather innocuous act: holding a cell phone while listening and talking. Arguably, this law does not prohibit rummaging through your purse or pockets looking for the phone, it does not prohibit turning the phone on or reading the screen, it does not prohibit scrolling through your address book or dialing a number, it does not prohibit fumbling to find a secure place to put the phone while you use the speaker-phone function and it does not prohibit making phone calls. Subject to different interpretations by the police departments and courts, it appears the law only prohibits carrying on a conversation while actually holding the phone or putting it up to your ear!

In fact, for adult drivers, the law seems to have actually added several potentially distracting steps to the process. Now, in addition to all the steps typically taken in making a phone call, adult drivers must also find their particular hands-free device, reach for it, set it up, ensure that it is charged, powered on and sync’ed with the cellular phone, speak though it, and then potentially put it away (if it’s not stationary). And there are still no restrictions on an adult driver using any mobile service device (pager, laptop, text messenger, etc.) while driving. Of course, as has always been true, if an officer feels a driver is overly distracted for any reason, including using a mobile device, the driver can be pulled over and cited accordingly.

Although we won’t know the law’s impact for a while, our guess is that the law will make our roads safer from drivers under 18, but possibly less safe from drivers 18 and older. We shall see!

Legal "Loophole": Could Bill Be Hillary's Vice President?

2008-05-01T21:06:00.000-07:00

Originally Posted May 2008

Most people know that there is a two-term limit on the office of President and therefore believe that Bill Clinton is ineligible to become Vice President because he is ineligible to be President. It appears that view is incorrect.

The Constitution and applicable amendments forbid a person from being elected to the office of President more than two times. At least on it’s face, the Constitution does not forbid a person from becoming President by any other process, e.g., presidential succession. As such, while Bill is ineligible to be elected President, he is not ineligible to actually be President. Bill is therefore is eligible to become VP and can indeed be his wife’s running mate – and assume the Presidency if Hillary is elected and thereafter cannot fulfill her duties. Scholars generally agree on this analysis, but the issue has never been formally addressed by the Supreme Court.

There are a couple of other relevant factors, as well: (1) Bill would only be eligible to be President for a maximum of two years (there is an effective 10-year limit on how long any individual can be President) and (2) Bill and Hillary would have to declare that they are inhabitants of different states as the President and VP cannot be from the same state (granted, this may not be a problem given the apparent "quality" of their marriage!).

All About Probate

2008-05-01T21:03:00.000-07:00

Originally Posted May 2008

A "probate" is the court-supervised proceeding for administering a person’s assets and debts following their death. During a probate, all of the decedent’s debts (e.g., bills, credit cards, loans, taxes, etc.) will be paid or settled. A decedent’s remaining assets are then formally transferred to any beneficiaries designated in a will or, if there is no will, to decedent’s legal heirs by intestate succession (default laws that dictate who will receive the assets of a deceased person).

My Relative Passed Away. How Do I Know if a Probate is Necessary?

A probate may not be needed if the total value of the decedent’s assets are less than $100,000 or if the only heir is a surviving spouse. Additionally, prior to death, a person may have structured their assets so that a probate can be avoided. Real property, bank accounts, IRAs, stock portfolios, vehicles and other assets can be directly or automatically transferred upon the owner’s death if title was held jointly with another person or if the decedent executed a beneficiary designation. Another common way people transfer their assets without probate is through a living trust. When decedent’s assets cannot be transferred through any of these alternate methods, a probate is usually necessary.

Even when decedent’s property can be transferred through alternate methods, it may still be necessary to commence probate proceedings. For example, the decedent may have been a party to a lawsuit when they died, or otherwise have a claim or dispute, which can only be prosecuted, defended or maintained through a probate. A probate can also be advantageous when the decedent has substantial debts because probate rules require creditors to follow strict procedural guidelines for asserting a claim against decedent’s estate, including a limited claim-filing period, or their claims may be barred.

What Can I Expect? What is the Probate Process?

Probate administration is initiated by filing a Petition for Probate with the superior court. The petition asks the court to appoint a personal representative and admit decedent’s will, if any, to probate. It identifies decedent’s heirs and other interested parties, and gives an estimated value of the assets to be probated. Once appointed, the personal representative then takes control of all of decedent’s property, has the assets appraised, pays or settles decedent’s debts, pursues or defends any claims, pays all attorney’s fees and other administrative expenses, and then makes final distribution of decedent’s assets to the heirs or beneficiaries. When appropriate, the personal representative may sell or liquidate decedent’s property to pay debts or administrative expenses, or to carry-out distributions.

The entire probate process takes no less than six (6) months to complete. It is not uncommon for a probate to last a year or more. The length of the proceedings depend on numerous factors and there is really no way to predict exactly how long a given case will take. In some instances, summary or expedited procedures may be available, which take less time and involve less fees and expenses.

What is Needed to Start the Probate Process?

Before consulting with an attorney, you should be prepared to advise the attorney as fully as possible of the nature and extent of decedent’s assets, names and addresses of all heirs and beneficiaries, and whether or not decedent had a will. This often necessitates a diligent search through decedent’s personal files and records, as well as any safe deposit boxes.

Many attorneys will also require a cost retainer to cover the initial expenses, including the filing fee, publication fee and any bond premium for the personal representative’s bond. The attorney will then prepare and file the initial petition which is normally set for hearing within six (6) weeks, at which time the personal representative is appointed and probate proceedings are commenced.

How Much Does a Probate Cost?

Costs. The fee to file a probate depends on the size of the estate, but the vast majority will be under $1,000. Other costs may include service of documents, publication fees, and bond premiums. In addition, in complex or contested matters, there may be other litigation expenses.

Attorney’s Fees. Attorneys fees are set by statute and depend on the size of the estate. Currently, attorney's fees are 4% on the first $100,000; 3% on the next $100,000; 2% on the next $800,000; 1% on the next $9,000,000; ½ of 1% on the next $15,000,000; and per court discretion above $25,000,000. A court hearing and order are required prior to the payment of any attorney's fees and such fees are generally not paid until final distribution of the estate.

Extraordinary Fees. In some cases, the court may award "extraordinary fees" if the attorney has performed extra work related to the probate, e.g., legal services in connection with the sale of property, litigation undertaken to benefit the estate or in defense of the estate, extraordinary efforts to locate heirs or assets, or accounting services. Again, a court hearing and order are required prior to the payment of any extraordinary fees. Also, under certain circumstances, an attorney may perform extraordinary services on a contingent-fee (i.e., a percentage of the recovery) basis.

Ajalat & Ajalat, LLP has been handling California probate matters for more than 20 years and is experienced in handling both simple and complex estates. Our general litigation experience makes us well-suited to handle estates involving legal claims or disputes, including contested probate matters such as will contests. Our attorneys provide clients with direct personal contact and attention throughout the entire proceeding and assist with every step of the administrative process. We can represent parties whether their interest in the estate is as personal representative, an heir or beneficiary, or contestant or other third-party claimant.

Ajalat & Ajalat can also assist clients in avoiding probate altogether when possible. We can assist in transferring non-probate assets such as property that is jointly-owned or transferable on death to a designated beneficiary. We also frequently provide clients with pre-mortem planning in preparing an entire estate plan, including a living trusts, wills, powers of attorney, advanced health care directives, and other related documents.

Your Government at Work for You!

2008-01-01T21:01:00.000-08:00

Originally Posted January 2008

On the lighter side, the following are actual bills pending before either the United States Senate or the House of Representatives. These may be mere resolutions, declarations of policy or actual statutes. As presented here, they may sound "silly" – and some may be – but keep in mind, there may be sound underlying reasons and at this point, they are just proposals:

Five More Minutes, Please. House Congressional Bill 227 urges all secondary schools to start after 9:00am in order to give "adolescents enough time to sleep so they can realize their full academic potential".

"Play" Is Important Too! Senate Bill 651, entitled the "Play Every Day Act", encourages 30 minutes of physical activity per day for kids, families and communities.

Who’s Calling? House Bill 251 would make it a crime to manipulate caller ID information.

It’s Not My War! House Bill 3190 would allow individuals to "opt out" of the Iraq war by directing that their income, estate or gifts taxes not be used in furtherance of the Iraq war.

Not Without My Turtle! Senate Bill 540 seeks to require the Food and Drug Administration to permit the sale of baby turtles as pets (as long as the seller uses proven methods for treating salmonella, of course).

Mini-Me? House Bill 2560 would prohibit all forms of human cloning. And you’d better obey – a violation of the law would be punishable by 10 years in prison and a $10 million fine.

Take That %*#@ Back to Your Own State! House Bill 274 would impose severe limitations on the interstate transportation of solid municipal waste.

Lucas, Get Out of There! House Bill 1173 would require the federal Consumer Product Safety Commission to set safety standards to prevent injuries caused by vending machines. The most important part? Emergency release handles for children that get stuck inside a machine.

Go Bruins! Senate Resolution Bill 257 seeks to officially congratulate the University of California, Los Angeles for becoming the first university to win 100 NCAA Division I titles.

You can look up the status of these bills or search for more fun ones at the Library of Congress website (http://www.loc.gov/).

Many Happy Returns?

2008-01-01T21:00:00.000-08:00

Originally Posted January 2008

Have you ever tried to return a purchase to a store and been assessed the dreaded "restocking fee"? Unfortunately, if the store gave notice of this fee prior to the purchase, then it’s perfectly valid.

California law says that the "common" consumer expectation is that a store will provide a refund, credit or exchange if a customer returns a product within 7 days with a proof of purchase. If a retailer’s policy differs from the common policy, they must inform the purchaser with a prominent sign detailing the information. The signs must be posted on at least one of the following places: by entrances; at cash registers; on product tags; or on order forms.

This law applies to all companies that sell products in California at stores, by mail or online. If the common policy does not apply, then the posting must advise customers whether a cash refund, store credit or exchange will be given for the full amount of the purchase price; the time period during which the customer may return the merchandise; the types of merchandise covered by the policy; and any other conditions that govern the refund, credit, or exchange of merchandise, such as paying a restocking fee, providing original packaging, or having proof of purchase.

There are some exceptions, however. No notice is required for merchandise that isn't returnable, e.g., perishable items like food, flowers, and plants; items damaged by the customer; products sold "as is" or with an "all sales final" notice; and goods that cannot be returned due to health considerations.

Feel Free to Ignore Your Mattress Tag

2008-01-01T20:58:00.000-08:00

Originally Posted January 2008

In the early 20th century, organic material such as straw, leaves, pine needles and reeds were used to stuff mattresses. Over time, these materials would rot and mold, and become a haven for vermin (hence the origin of the saying "don’t let the bed bugs bite").

So that consumers could make informed decisions about which mattress to buy, the U.S. Government passed a law that required mattress manufacturers to disclose the contents of the mattress on a tag. A companion law forbid manufacturers and sellers from removing these tags. The consumer, however, is free to do so. So while the tag’s warning is quite stern it does not apply to consumers and you may go ahead and ignore it without fear of criminal prosecution (but do still watch out for bed bugs!).

New California Laws for 2008

2008-01-01T20:57:00.000-08:00

Originally Posted January 2008

The following are a few of the hundreds of new laws that went into effect in California on January 1, 2008:

A notary public’s acknowledgment must now be based on "satisfactory evidence" and the certificate must now be signed under penalty of perjury. An acknowledgment based on mere "personal knowledge" or one that does not conform to the exact language of the California form are no longer valid. If you are having your signature notarized on any document, be sure the acknowledgment conforms to the new law or it won’t be valid!

A new law makes it an infraction punishable by a fine not exceeding one hundred dollars ($100) for a person to smoke a pipe, cigar, or cigarette in a motor vehicle any time a minor is present in the vehicle. The law does not distinguish between cars that are moving or stopped – or even running.

The California minimum wage has increased by 50 cents to $8.00 per hour. California workers now have one of the highest minimum wages in the country.

And our favorite new law . . .

Consumers can now redeem gift cards with balances of less than $10 for cash. So now when you use your card and leave a balance under $10, all you have to do it present your card to the merchant, cite California Civil Code section 1749.5(b)(2) and enjoy your cash!

(And don’t forget about two important laws that go into effect on July 1, 2008 – drivers under age 18 will be prohibited from using cell phones or any other "mobile service device" while driving; and adults can only use a cell phone while driving if they use a hands-free speaking and listening system.)

How to Deal With Debt Collectors

2007-10-01T20:56:00.000-07:00

Originally Posted October 2007

If a debt collector is contacting you in an attempt to collect money, and you want them to stop, all you have to do is say so!

Under the Federal Fair Debt Collection Practices Act, you can send the debt collector a written demand that they cease further communications with you immediately. The debt collector then may not communicate with you any further except to tell you that their efforts are being terminated or to notify you that they are going to invoke specific remedies (i.e., a lawsuit).

A violation by the debt collector can net you actual damages and a $1,000 maximum penalty, in addition to attorneys fees and costs.

Should You Deposit a Check with the Notation "Payment in Full" on It?

2007-10-01T20:54:00.000-07:00

Originally Posted October 2007

Have you ever been involved in a disputed transaction and been given a check labeled "payment in full" but written for less than the full amount of the claim? If so, and you were unsure whether or not to deposit the check, you’re not alone. California law is unsure too!

California Civil Code §1526 says that you can deposit the check without waiving any legal rights if you cross out the words "payment in full". You can still make a claim for any additional amount claim to be owed. In direct contrast, California Commercial Code §3311 states that when a claim is disputed and one party offers a check with the conspicuous written statement that it is intended as full satisfaction of the claim (i.e., "payment in full"), deposit of the check will constitute acceptance of the offer of full satisfaction and any clams to additional amounts is waived. Sections 1526 and 3311 are in direct conflict.

No California court has addressed this conflict. One federal court interpreting California law did and sided with the Commercial Code in concluding that depositing a check marked "payment in full" will waive any and all future claims against the payee. While the federal court decision is instructive, is it not binding on California state courts.

Ultimately, it appears that if you are involved in a disputed transaction and the other party offers you a check marked "payment in full", the safest course of action is not to deposit the check. Otherwise, you risk waiving any claim for any additional amounts owed.

Keep in mind, however, that this law applies only where there is a bona fide dispute as to the amount owed. Meaning, you can’t pay your undisputed $200 electric bill with a $100 check marked "payment in full" and expect to get away with it!

There's No "Pain and Suffering" Without Auto Insurance

2007-10-01T20:53:00.000-07:00

Originally Posted October 2007

California law requires that every owner of a car and every driver maintain liability insurance at all times. The main purpose of the law is to ensure that money is available to compensate an innocent driver who suffers injuries or damages in an accident with an at-fault driver. However, an innocent driver’s failure to maintain his own insurance will also limit the availability of damages that he can collect from an at-fault party.

If you are involved in an accident and you do not have automobile liability insurance, you cannot recover "non-economic" damages from the other party. This is true even if the accident is entirely the other party’s fault. "Non-economic" damages include compensation for physical pain or impairment, mental suffering, inconvenience, emotional distress and disfigurement. They are generally referred to simply as "general damages" or "pain and suffering" and the monetary value of such damages often far exceeds the value of other types of damages.

In addition, unlike "economic" damages for which a jury awards damages based upon certain, known amounts (i.e., out-of-pocket costs like medical bills, lost wages, repair bills, etc.), a jury is free to award any amount for non-economic damages. This uncertainty can be a great benefit to injured parties and help a case settle for a reasonable amount before trial.

So while the main purpose of the law is to ensure compensation for the other guy in an accident, having insurance will also ensure all compensation is available to you too!

Nobody Walks in L.A.: Parking in the City of Los Angeles

2007-10-01T20:51:00.000-07:00

Originally Posted October 2007

If you’ve driven a car, you’ve parked a car. And if you’ve parked a car, chances are that at some point, you’ve been ticketed by a Los Angeles Parking Enforcement Officer for illegally parking. Here are a few parking tips that should help you find a good spot and avoid a getting a ticket.

Colorful Curbs: Commercial Loading Zones (designated by a yellow curb) are only enforced from 7:00am to 6:00pm Monday through Saturday. Short-Time Parking Zones (designated by a green curb) are only enforced from 8:00am to 6:00pm, Monday through Saturday. You can legally park in either zone without limitation during non-enforcement times. No Stopping Zones (designated by a red curb) and Passenger Loading Zones (designated by a white curb) are enforced at all times.

Parking Meters: You can park at a spot with a broken meter, but you may still receive a ticket. If you do, you can contest the ticket online at www.lacity-parking.org. Also, even though you can park at a broken meter, you remain subject to the posted time limit.

If you own a Zero Emission Vehicle or Super Ultra Low Emission Vehicle and you have purchased a decal from the DMV, you can park free at any metered parking spaces. Again, however, you remain subject to the posted maximum time limit.

"Refeeding" the meter is not allowed if the owner is doing so to extend the time beyond the maximum possible for that space. You must move your car upon reaching the posted time limit. Also, you cannot simply move your car over a space or two to avoid this rule – you must first drive your car a minimum of one mile.

Keep in mind, these rules are for the City of Los Angeles only. Also, different rules exist for the LAX and Van Nuys Airport zones.

Tenant's Right to "Repair and Deduct"

2007-10-01T20:50:00.000-07:00

Originally Posted October 2007

Pursuant to California Civil Code § 1941, landlords have a duty to maintain residential property in a condition "fit for human occupation." Landlords must not let conditions exist that render the property "untenantable." Such conditions may include lack of weather protection, broken windows, doors, or locks, plumbing or gas problems, lack of hot or cold water, electrical problems, or unclean, unsanitary conditions. (Parallel duties may also exist under the rental agreement and the common law.)

If a landlord fails to remedy an untenantable condition, the tenant may undertake repairs and deduct the cost from the rent, but only under certain conditions.

Initially, the tenant must give the landlord "reasonable" notice that an untenantable condition exists and that it requires fixing. Although this notice may be oral, it should be in writing. Thirty (30) days is presumed to be a "reasonable" amount of time, however it can be much less depending on the type and severity of the condition.

After the notice period expires and the landlord fails to correct the condition, the tenant can vacate the property with no further obligation or the tenant may repair the condition and deduct the cost of the repair from the next month’s rental payment.

There are two significant limitations to the right to "repair and deduct": (1) the tenant can deduct a maximum of one month’s rent and (2) a tenant can only utilize this procedure two times in any 12-month period.

The "Reality" Behind Reality TV Shows

2007-07-01T20:48:00.000-07:00

Originally Posted July 2007

Currently, there are over 80 "reality" TV shows on the air, and several hundred more that have come and gone, all of which purport to show the "state of things as they exist" (the definition of "reality"). Viewers are captivated by a glimpse into the everyday real life of a famous actor, or by following a relationship as it blossoms (or withers, as the case may be), or imagining themselves being chosen by America as the next best thing. But the truth behind reality shows is that there’s very little "reality" involved, if any at all. From mixing and matching video and audio, to creating storylines, to making decisions for contestants, to outright manipulating vote totals, it is no secret that producers do whatever is necessary to get people to watch their shows so that advertisers will pay for commercial time.

While it doesn’t seem right that producers can outright lie to viewers, from a legal standpoint, there is nothing to prohibit it. There is no law or legal theory (i.e., fraud, misrepresentation, false advertisement, etc.) that imposes an obligation on producers to stand by the classification or definition of a show as a "reality show" or to be truthful when broadcasting a show to the viewing public.

What about the rights of the contestants or participants? Don’t the producers have a legal obligation to them to portray the truth, or at least attempt to present a factually accurate portrayal of the events? This is where the lengthy contract usually signed by the contestants comes into play which gives the producers indisputable discretion to do whatever they want.
In general, contracts between producers and contestants are very clear: The producer can do whatever they want, with little or no regard to the contestant whatsoever. In fact, the contract will usually expressly state that the participant may be subject to invasions of privacy, defamation, and embarrassing situations which may expose the participant to public ridicule, humiliation or condemnation – and that the contestant cannot hold the producers liable. The contracts even go so far as to specifically state that the producers may portray the participant in a "false light".

And yes, even the shows in which "America votes" each week may be manipulated. The contracts signed by the contestants of these "America votes" competitions usually acknowledge the broad power of producers over the votes and voting procedures, including the producer’s unfettered right to "limit the number of votes accepted."

Free Air, Water and Toilet?!

2007-07-01T20:45:00.000-07:00

Originally Posted July 2007

If you’re ever in an emergency and need air in your car tires or water for your car engine, you only need to go to the nearest gas station. California law requires that every gas station provide it’s customers free compressed air, water and tire gauges to be used in servicing your car. To be a "customer", you must make a purchase at the gas station of any product they have available, including, of course, gas.

To deal with an emergency of a different kind, every gas station within a 1/8th mile of a freeway off-ramp must also provide clean and sanitary public restrooms to their customers.

If the air/water machine or the bathroom require the deposit of coins, the attendant should provide coins or tokens.

New Laws Affecting Children's Health

2007-07-01T20:44:00.000-07:00

Originally Posted July 2007

The people of the State of California have recently passed several laws designed to improve their children’s health and access to health care.

School Menus. Beginning July 2007 and implemented gradually thereafter, public schools will be allowed to sell only milk and certain beverages that contain at least 50% fruit juice – and no soda at all. Also, schools will have to cut the calories, fat and sugar content of school snacks and meals that don’t meet new strict guidelines.

Mandatory Dentist Visits. In addition to required health check-ups and immunizations, children attending kindergarten at a public school (or first graders if they didn’t attend kindergarten) must have their teeth and gums inspected by the end of May of that year. There are limited exceptions for children whose parents oppose such visit or if it is too much of a financial burden on the parent.

Body Piercings and Tattoos. It is illegal to offer to perform or to actually perform body piercing (other than on the ears) on anyone under age 18 unless a parent or guardian is present or has signed a notarized consent form.

Served with a Complaint? DO NOT Ignore It!

2007-07-01T20:42:00.000-07:00

Originally Posted July 2007

All too often clients call in a panic when they learn that someone who has a judgment against them is attempting to enforce the judgment or debt by placing a lien on their property, freezing their bank accounts, or garnishing their wages. The client usually has a host of reasons why the plaintiff’s judgment is not valid and wants an attorney to dispute the plaintiff’s claims. When asked whether the client defended the lawsuit initially, typical responses include "well, I did get some papers in the mail, but I ignored them" or "I didn’t think anything would happen, but I want to defend it now." Unfortunately, "now" is usually too late.

In California, a lawsuit is commenced when a person (called a "plaintiff") files a "complaint" against another person (called a "defendant"). The complaint is then formally served on the defendant, giving the defendant notice of the lawsuit and requiring that the defendant respond within a specific time frame, usually 30 days from the date of service. If the defendant fails to respond within the required time frame, the plaintiff will request the court enter the "default" of the defendant and award a judgment – meaning the court officially recognizes that the defendant has failed to respond to the lawsuit and enters judgment based on that failure. The plaintiff will often be awarded everything requested and the defendant will have lost the case without ever having his day in court.

Once judgment is entered, the plaintiff will proceed with collection efforts. It is usually these proceedings that prompt the defendant to finally take action, albeit way too late. In some cases, there are motions that can be filed (generally only within six months of the date of the judgment) requesting that the court vacate or set aside the judgment for specified reasons, including the "surprise, inadvertence, or excusable neglect" of the defendant. If granted, the case may be reopened, but the court will likely force the defendant to pay plaintiff’s costs of obtaining the default and the default judgment. In many instances, however, the motion to vacate will not be granted and the defendant will be left having to satisfy the judgment.

Needless to say, if you are served with a complaint, do not ignore it – immediately consult an attorney.

"Do I Need an Attorney?" Insurnace Companies Don't Think So!

2007-03-01T20:40:00.000-08:00

Originally Posted March 2007

Consider the following hypothetical: You are in a car accident and it is the other driver’s fault. You make a claim with the other driver’s insurance carrier, Allstate Insurance, which promptly sends you a flier entitled "Do I Need an Attorney?" The flier extolls the benefits of not hiring an attorney in negotiation and settlement of your claim. The flier states that claims are resolved faster without attorneys and Allstate will treat you as if you are their "customer" (thus ignoring the inherent conflict of interest), you should sign authorizations allowing Allstate to obtain your medical records, and that Allstate will conduct prompt investigations on your behalf.

Initially, you are receptive to the idea, and believe that you are fully capable of handling it without an attorney. Plus, the Claims Representative is nice and seems to be looking out for your best interests.

Then, in your research, you discover something that Allstate won’t tell you: the "nice" Claims Representative has been trained with a series of telephone scripts and form letters aimed at convincing you not to hire an attorney. He has been taught to speak to you with empathy in order to gain your trust and make you feel as if Allstate will be your advocate, not your adversary (which is the reality of the relationship). In fact, you even discover that the Claims Representative will be rewarded with a bonus if you do not hire an attorney.

Allstate’s actions beg the question: Why are they putting so much effort into discouraging accident victims from hiring an attorney? The reason is pure and simple, and hardly surprising: so that Allstate can pay you less money. And that’s not just the opinion of a trial attorney – that’s based on a 1995 Allstate internal training document, which contains statistics demonstrating that when lawyers represent claimants, the settlement is two to three times higher than when claimants represent themselves. According to the manual, in settlements under $15,000, claimants without attorneys averaged $3,464. Those with counsel averaged $7,450. Even with the standard 33% attorney fee contingency, claimants make out much better having legal representation. But Allstate won’t tell you that.

Allstate’s tactics are deceptive, illegal and spawned lawsuits in several states on behalf of deceived claimants. A judge Pennsylvania stated: "without the benefit of an attorney to review the documents, the claimant could lose any benefit in a settlement and the information could be used against him or her if the matter went to litigation." The judge concluded that Allstate’s activities were willful and designed to boost its bottom line by urging victims to forego legal representation. In litigation in Connecticut, Allstate’s attorney unbelievably argued that Allstate has no legal duty "to settle fairly with third-party claimants" despite what it tells them.

What’s the lesson? In all matters involving an insurance claim, never deal directly with the insurer without first consulting an attorney. Their adjusters are professional negotiators trained to get you to forgo your legal rights and ultimately accept less than you may be entitled to – and regardless of what they tell you, it is their "bottom line" – not yours – that they will protect.

Payment of Interest on Residential Security Deposits

2007-03-01T20:39:00.000-08:00

Originally Posted March 2007

Landlords of rental units subject to the Los Angeles Rent Stabilization Ordinance (i.e., "rent control") must pay interest to tenants on all security deposits held for at least one year.
During the tenancy, the tenant is to be paid the accrued interest on a monthly or yearly basis either as a direct payment or as a credit against future rent. The landlord can choose the method of payment and must notify the tenant in writing of the choice.

Upon termination of the tenancy, the tenant is entitled to receive all unpaid, accumulated interest at the same time and in the same manner that their security deposit is returned.
The landlord can calculate the interest in one of two ways: (1) use the simple interest rates established by the Rent Adjustment Commission or (2) pay the tenant the actual amount earned on the deposit.

The simple interest rates established by the Commission are as follows: Five percent (5%) for the years 1990 through 2000; two percent (2%) for 2001; no interest payable for 2002; one percent (1%) for 2003; 0.26% for 2004; 1.21% for 2005; and 1.74% for 2006.

The only recourse the tenant has for a landlord’s failure to pay the interest is filing a civil action, usually in the Small Claims Court.

What is a "Medical Malpractice"?

2007-03-01T20:38:00.000-08:00

Originally Posted March 2007

Pursuant to the Hippocratic Oath, all physicians vow to"prescribe regimens for the good of patients and never do harm to anyone." Unfortunately however, sometimes patients do suffer harm at the hands of their physicians, either due to an overt act of the physician (e.g., removing the wrong limb) or the failure to act (e.g., the failure to diagnose a condition). Whether that harm or injury justifies a medical malpractice ("med-mal") claim, however, requires an in-depth analysis of the particular situation.

Initially, not all injuries resulting from medical care give rise to a med-mal claim. Contrary to general perception, the practice of medicine is an art, not a science – ten different doctors could give a patient ten different diagnoses and treatments – and they could all be reasonable under the circumstances. A med-mal claim exists only where the physician’s act or failure to act "falls below the standard of care in the relevant community." This means that if nine of the 10 physicians would treat one way, and the tenth treats a different way and an injury results, the actions of the tenth may fall below the standard of care and give rise to a claim. It is the patient’s burden to prove the elements that (1) he suffered an injury, (2) the injury was caused by the physician and (3) the physician’s acts were below the standard of care.

Med-mal cases are inherently complicated because they usually deal with medical issues that only physicians can explain. This also makes them very costly because they require the employment of expert witnesses – physician’s themselves – to testify as to the existence or non-existence of an element.

In addition, there are numerous restrictions on med-mal actions under California law. Some of the more significant are:

A $250,000 limit on non-economic damages (i.e., pain and suffering). Meaning that regardless of the extent of injury (up to, and including, death), compensation for pain and suffering is limited to $250,000. Economic damages such as lost earnings, medical care and other costs are not limited.

A physician may introduce evidence of, and be allowed a credit for, benefits given to the injured patient by his own insurance or through public-based programs. In other personal injury actions, a defendant cannot claim such a credit.

The amount an attorney can charge to handle a med-mal claim is set by statute and severely limited, often up to one-half of the fees recoverable in other personal injury actions.

If economic damages exceed $50,000, the physician (or more accurately, the insurance carrier) may elect to make periodic payments.

The complicated nature, high cost, legal restrictions and potential for large awards usually mean that med-mal claims will be heavily contested by the physicians and their insurance carrier.

California: How Do We Get Our Laws?

2006-12-01T20:37:00.000-08:00

Originally Posted December 2006

Unless you remember the words from the Saturday morning School House Rock episode "I’m Just a Bill", you may not know how we get our laws.

It all begins with an idea for a new (or modified) law. That idea can come from anyone, but it must be put in writing, or "authored", by a Senator or Assembly Member. The written form is called a "bill".

The bill is indexed and introduced to either House – the Senate or the Assembly. The bill is then read for the first time to the entire floor of either House, then assigned to the appropriate committees for hearing.

During the committee hearings, testimony may be offered in support or opposition to the bill. The committee then votes on the bill. If not passed, the bill "dies in committee".

If passed by a majority vote, the bill is forwarded to the next committee. After all committees have passed the bill, it is presented again to the entire floor. Once approved by the house of origin, the bill is transferred to the other house and the entire process is repeated there.
If a bill is amended in the second house, it must go back to the house of origin for agreement. If the house of origin does not agree, the bill is referred to a bipartisan committee to resolve the differences.

If both houses approve the bill, it goes to the Governor. The Governor has three choices: sign the bill into law, allow it to become law without his or her signature, or veto it. A governor's veto can be overridden by a two-thirds vote in both houses.

Not Every "Wrong" Justifies A Lawsuit: The Element of Damages

2006-12-01T20:35:00.000-08:00

Originally Posted December 2006

In our often litigious society, people who want to "sue" sometimes focus solely on the fact that they have been "wronged." In doing so, they overlook a critical element: Whether they have suffered any "damages."

"Damages" refers to the harm, detriment or injury a person has suffered as a result of the acts (or failure to act) of another person. This injury can be to a person or to a person’s property.
A perfect example is the potential client who calls complaining that he found a foreign object in his restaurant food prior to taking a bite. Has that person been wronged? Absolutely! There should not have been a foreign object in his food. Has that person been damaged? Absolutely not! Absent some actual injury from the presence of the foreign object, there is no claim against the restaurant. Further, there is no claim for "what could have happened" if he had chewed or swallowed the foreign object.

Even if some measure of damages have been suffered, they may be so minimal that litigation would not be economically feasible. A potential client called the other day wanting to file a lawsuit against a vending machine manufacturer. Apparently, her candy bar got stuck and didn’t fall. After she was playfully advised that a $500 retainer would be required to try and recover her .75¢, she dismissed the idea (but not before she asked whether we’d take the case on a contingency basis!).

The Duty to Report Suspected Child Abuse

2006-12-01T20:33:00.000-08:00

Originally Posted December 2006

In an effort to protect children from abuse and neglect, California has passed the "Child Abuse and Neglect Reporting Act," which requires certain persons to report suspected child abuse to the proper authorities.

Who must report? The law specifies who is a "mandatory reporter." The list is long and includes persons working in social services (police officers, social workers, probation officers, district attorneys, coroners, animal control officers), education (teachers, aides, district employees, administrators), medical field (doctors, nurses, psychologists, therapists), recreational services (camps, youth programs, youth centers, day cares), employees of film and photo printing services, and religious organizations (clergy members, record-keepers, etc.), among others. In essence, if your job requires direct contact and supervision of children, you are a mandatory reporter.

What triggers a report? A report must be made when the mandated reporter, in his or her professional capacity or within the scope of his or her employment, has knowledge of or observes a child whom the person knows or reasonably suspects has been the victim of child abuse or neglect. "Reasonably suspects" does not mean abuse has occurred, it means that most people with similar training and experience faced with the same facts would suspect that abuse has occurred.

How and when must a report be made? The report must be made immediately by telephone, then followed-up with a written report within 36 hours.

To whom is the report made? Reports must be made to a police department, sheriff's department, county probation department, or county welfare department. The receiving agency must accept the report and then perform several tasks, including opening a file, cross-reporting to other agencies, and investigating the suspected abuse.

The duty to report is individual, meaning that no supervisor or administrator may impede or inhibit an employee from reporting, and no person making a good faith report can be punished in any manner for doing so. Even if the employer does not advise or train employees on the reporting requirements, the duty still exists.

A mandated reporter who fails to make a required report is guilty of a misdemeanor, and may be prosecuted. In addition, the mandated reporter may be civilly liable to the victim of the abuse.

Even if not a mandated reporter under the law, any person (i.e., a parent, neighbor, relative, anonymous person, etc.), may still make a report if abuse or neglect is suspected and the authorities must act on that report.

First Rule of Construction Contracts: Put It In Writing!

2006-12-01T20:31:00.000-08:00

Originally Posted December 2006

The best way to avoid a dispute with your contractor is to insist on a detailed, complete and carefully drafted contract.

Among the terms to include in such a contract are the following:

(1) The full names of the parties, the job address and all contact information;
(2) A highly detailed description of the scope of construction work, including specific materials to be used;
(3) Start and completion dates;
(4) Total price of the project, including labor and materials, and a payment schedule;
(5) List of allowance items (lighting, fixtures, plumbing fixtures, appliances, etc.) and the budgeted amount, if any;
(6) List of required or potentially required permits, including who will be responsible for obtaining and paying for them;
(7) Agreement that any changes to the contract will only be done upon written "change orders" signed by both the contractor and the homeowner;
(8) Signature of both parties to the contract.

A contract that incorporates all the above items will help avoid confusion, delay and the time and expense of a dispute or lawsuit.

The Pitfalls of Hiring and Unlicensed Contractor - For Both Parties

2006-09-01T20:29:00.000-07:00

Originally Posted September 2006

Under California law, before a person can perform construction work where the cost of labor and materials total $500 or more, he or she must be licensed to do so. This strict law was enacted to ensure that a contractor has the minimum required skill, character and knowledge to perform the work for which he is hired and further ensures that a worker has adequate insurance to protect the homeowner from damage for injury to property. It also ensures that a bond has been posted which will be available to the homeowner if the contractor fails to complete the job.

A homeowner that hires an unlicensed contractor is acting as an "employer" of the contractor and accepts all associated risks: The homeowner is liable for worker’s compensation should the worker be injured, damage done by the worker to any person’s property, and mechanic's liens filed by unpaid subcontractors or suppliers.

Similarly, the worker who chooses to perform work without a contractor's license places himself at considerable risk. The criminal penalties for contracting without a license can be severe, including fines and jail time. On the civil end, a person who acts as an unlicensed contractor, and who does not get paid by a homeowner for work he performs, has absolutely no legal recourse, i.e., he cannot sue the homeowner to collect the money. This is true even if the unlicensed worker has completed the job and the homeowner knew the worker was unlicensed and took full advantage of that fact. If the homeowner did make payments to the unlicensed contractor, the law expressly allows the homeowner to sue to recover such payments.

What Are "Community Property" and "Separate Property"?

2006-09-01T20:25:00.000-07:00

Originally Posted September 2006

California is a "community property state" meaning that all property – real or personal – acquired during a marriage is presumed to be community property. All other property, which includes property acquired prior to marriage or after separation and property acquired by gift or inheritance (regardless of whether the person is married) is considered"separate property".
The distinction between labeling an asset as "community property" or "separate property" is important for three main reasons.

In terms of management and control, both spouses have equal management and control of community assets, but neither can dispose of community assets without the knowledge and consent of the other. In contrast, each spouse alone has management and control of their own separate property assets and can dispose of these assets in any manner and without the knowledge or consent of the spouse.

Community assets may be levied against for a debt incurred by either spouse before or during marriage. For example, a court could force the sale of a community property asset to satisfy the pre-marriage debt of either party. In contrast, separate property assets can only be levied against for a debt incurred by the separate property owner.

Finally, absent an effective estate planning device (i.e., a will or trust), upon death community assets are transferred wholly to the surviving spouse; whereas separate property assets are divided between the surviving spouse and other living relatives.

Manner of Holding Title to Real Property

2006-09-01T18:05:00.000-07:00

Originally Posted September 2006

The form and manner in which title to real property is held can have a substantial impact on your rights with regard to your property.

Unmarried sole owners of property will hold title as follows: "John Doe, a single man." If married, title will be held: "Jane Doe, a married woman as her sole and separate property." Sole owners can dispose of the entire property in any manner without restriction (i.e., by sale, will, gift, etc.).

If property is co-owned (meaning two or more owners), the parties rights are determined by the manner in which title is held. Co-owners can hold title as "tenants-in-common", "joint tenants", "community property", or "community property with the right of survivorship".

Co-owners who hold title as "tenants-in-common" each will own undivided interests, which may or may not be equal in quantity or duration. For example, John can own 60% of a parcel of land, while his friend Mike owns the remaining 40%, though each is equally entitled to possession of the entire parcel. Each party is entitled to their share of any income and must bear their proportionate share of the expenses. Each co-owner may unilaterally sell, lease, gift or will his or her interest and the new owner will become a tenant-in-common with the previous owner.
Co-owners can also be joint tenants, however the joint tenancy must be expressly stated in the deed and the interests must be equal in every regard (e.g., how acquired, quantity, and duration). The most notable feature of a joint tenancy is that the co-owners have the right of survivorship, meaning that when one joint tenant dies, title to the property is automatically conveyed to the surviving joint tenant(s). As such, joint tenancy property cannot be disposed of by will or trust. If one joint tenant transfers his interest, the joint tenancy is broken, and the new owner becomes a tenant in common with the other owners (who remain joint tenants as between themselves).

For the above methods of holding title, a business entity (i.e., a corporation, partnership, or LLC) or a trust may be the named owner instead of an individual.

"As community property" is a manner of holding title to property by a husband and wife during their marriage. In California, real property conveyed to a married man or woman is presumed to be community property, unless otherwise stated. Since all such property is owned equally and husband and wife must sign any transfer of, or loan against, the property. However, each spouse has the right to dispose of their one half of the community property, including transfers by sale, will, or gift.

"Community Property with Right of Survivorship" allows a husband and wife to own property together as described above, except that if either dies, the interest automatically passes to surviving spouse and not the estate of the deceased spouse.

Tax Planning: The Unified Tax Credit and The Marital Deduction

2006-06-01T18:03:00.000-07:00

Originally Posted June 2006

In order to minimize the estate taxes your heirs will pay upon your death and maximize the amount they will inherit, two basic tax concepts must be understood: The unified tax credit (UTC) and the unlimited marital deduction (UMD).

The UTC offers individuals a credit against federal estate taxes in an amount equal to the tax that would otherwise be due on a $2.0 million estate. Simply stated, you can transfer $2.0 million to your heirs tax-free. If you are married, your spouse also has the same credit, so that as a couple, you can transfer a total of $4.0 million to your children tax-free.

The individual exclusion amount will remain constant through 2008, increases to $3.5 million in 2009, and is unlimited for 2010 (the so-called "best year to die" in terms of federal estate taxes since no tax will be due regardless of the size of the estate). These may sound like high levels and for the next few years, they are. However, in 2011, the exclusion amount is reduced down to $1 million per individual. Given inflation, the cost of living, and the dramatic increase in real property values, it is conceivable that in another five years, many families will exceed $2 million in total assets. In addition, the way the government is spending money so freely these days, the exclusion amount may stay at that lower level for some time.

The UMD allows you to pass all of your property, without limit, to your spouse free of any estate tax. That’s the good news. The bad news is that your spouses’ estate will now double in size. To the extent that doubling puts your spouse over the exclusion amounts discussed above, it could cost your heirs $100's of thousands in estate taxes.

There are several estate planning methods designed to address these issues and preserve both spouses’ exclusion regardless of which spouse dies first, while also providing for the health and support of the surviving spouse. If you need further details, or any estate planning information, do not hesitate to contact us.

How Long Should I Retain Important Paperwork?

2006-06-01T18:02:00.000-07:00

Originally Posted June 2006

The question of how long to retain important paperwork often depends on the length of any applicable statute of limitation. A "statute of limitation" is a legally imposed time limit or deadline upon which a person or the government must bring an action against you to enforce a law or claim.

Tax Returns and Supporting Documents. The IRS has a "three-year" or "six-year" statute of limitation on tax audits. The "six-year" statute applies where the taxpayer omits additional gross income in excess of 25% of the amount stated on the return, and the "three-year" statute applies to all others. The returns themselves should be retained indefinitely, while any and all documents that support a return (i.e., receipts, statements, W-2s, 1099s, etc.), should be retained for seven years. Note: There is also an "indefinite" statute of limitation, but that applies only to fraudulent or non-filed returns.

Household Paperwork. Purchase receipts, utility bills, credit card and bank statements should be retained as long as they are relevant or supportive of your tax return (see above). However, it is not necessary that you retain duplicate items (i.e., once your bank or credit card statement is reconciled, you can throw away the actual purchase receipt, unless required for a warranty or rebate).

Family Documents. The following documents should be retained indefinitely: Birth, marriage and death certificates, divorce, separation, adoption & custody papers, and citizenship & naturalization documents. Passports, driver’s licenses, professional licenses, etc. can, and should, be discarded upon being replaced by updated documents.

Estate Planning Documents. Wills, trusts, advance health care directives, and powers of attorney should be retained indefinitely, even if amended, revoked or replaced. In fact, you should indicate directly on the revoked or replaced documents that they are no longer effective but keep the document. This will avoid any confusion as to which documents are applicable if more than one copy exists.

Legal Documents. The statute of limitations on enforcing written contracts is four (4) years. Therefore, you should retain any contract for at least 4 years after it’s completion. Insurance policies should be retained at least as long as the asset insured exists, or as long as it is relevant for tax purposes.

Real Property Documents. All documents related to real property ( such as all deeds, receipts for improvements, and tax information) should be kept for as long as you own the property. In addition, these documents should be retained as long as the proceeds from the sale of any real property are rolled over into another property, as the tax basis may be transferrable.

"Credit or Debit?"

2006-03-01T18:02:00.000-08:00

Originally Posted March 2006

If you’ve handed your plastic card to a cashier when making a purchase, you’ve undoubtedly heard the question "credit or debit?" Most of us confidently answer one or the other, but in reality, we don’t know or understand the difference between the two.

A straight credit card allows you to borrow money made available to you by a bank. The bank pays the payee, less a 1.5% to 3% charge, and in turn, you pay the money back to the bank after a period of time, plus interest. Usually, a signature is required. If you are using a straight credit card, your answer to the question "credit or debit?" will have to be "credit", or the transaction will not be processed. Credit card issuers generally provide benefits or rewards for using their card such as airline miles, extended warranties, purchase protection and disability insurance.
A straight debit card, a.k.a. "ATM" or "check card" will allow the bank to immediately transfer funds directly from your account to the payee’s account, charging the payee a flat fee (usually 50 to 95 cents). A personal identification number (PIN) is usually required for security purposes.
However – and here’s the confusing part – most, if not all, debit cards contain the Visa or Mastercard logo which allows debit card users to make purchases at merchants who only accept credit card transactions. Presenting a debit card and answering "credit" will make no difference to you, but will to the issuing bank, which makes more money for credit transactions than debit transactions (see above). For example, a $1,000 purchase from a merchant offering both options can net the issuing bank $15 to $30 if the transaction is processed through the credit system, but only 95 cents if processed through the debit system. To encourage the more profitable credit transactions, some banks will charge you a fee for debit transactions or offer product protection for credit transactions only. However, the money will still be deducted directly from your account, though it may take an extra day or two. Check with your bank which option affords you greater benefits.

How to Obtain Your Free Credit Report

2006-03-01T18:00:00.001-08:00

Originally Posted March 2006

Many companies, usually credit monitoring services, offer you a free credit report if you sign up. However, under the Fair & Accurate Credit Transactions Act of 2003, consumers are entitled to obtain a free credit report once every 12 months from each of the three nationwide consumer credit reporting agencies (Equifax, Experian and TransUnion).

You can request your annual credit report online at AnnualCreditReport.com , by phone (877-322-8228), or through the mail (see website above for address). Phone and mail requests take up to 15 days to process. Online requests provide results to users only after passing a rigorous identity test. For example, the test asks multiple choice questions such as "You opened a mortgage account in February 2002 with which of the following banks?" and "Which of the following streets have you lived on within the past 10 years?". The test is not easy and occasionally the correct answer is the always included "none of the above" option. However, once passed, you will have instant access to view and print your credit report and identify any problems or mistakes contained in it. (For a nominal fee – about $5 – the report will also provide your current credit rating or score.)

Why Should I Have Uninsured or Underinsured Motorist Coverage?

2006-03-01T18:00:00.000-08:00

Originally Posted March 2006

Unfortunately, you cannot count on the "other guy" to look out for your best interest. Having uninsured and underinsured motorist coverage protects the most important person: You! Although it is illegal to drive in California without insurance, "Uninsured" Motorist Coverage provides coverage for you, through your own policy, in the event you are in an accident with an uninsured party. Similarly, "Underinsured" Motorist Coverage provides coverage for you in the event that you are in an accident with a party that has insurance, but in an insufficient amount to fully compensate you for your injuries or damages. The higher the limit of your coverage, the more protection you will be afforded. A couple of other benefits are that Uninsured/Underinsured claims are generally less adversarial since the claim is made to the insured’s own company and it is against the law for an insurance company to raise your rates for making an uninsured/underinsured claim.

Simple Tips to Help You Avoid Becoming the Victim of Fraud and Identity Theft

2006-03-01T17:59:00.000-08:00

Originally Posted March 2006

According to a January 2006 Federal Trade Commission report, there were 686,863 reported cases of fraud and identity theft in the U.S. last year, which cost consumers and businesses over $682 million. Perpetrators used whatever private information they could to access victims’ credit cards, bank accounts, telephone service and other personal funds or services.

Two common methods used to acquire such private information are "courtesy" phone calls and "notice" e-mails. The following simple tips should help you avoid falling prey to these devious tactics:

"Courtesy" Calls. If someone calls purporting to be from a governmental agency, a credit card company or any other business, and asks for personal information, turn the tables on them – ask them to recite your information. If they are legitimate, they should have all of your information in front of them. If that causes a "stand-off", then give in, but initially provide inaccurate information. If they accept the false information as true and continue on, then you know that they are acquiring information, not verifying it. Hang up immediately.

E-Mail "Requests for Information" or "Notices Regarding Your Account". If you use e-mail, you’ve probably received an e-mail purporting to be from Amazon.com, e-bay or Paypal telling you that your account has been placed on "hold" and requesting that you "immediately" confirm or update your information to avoid account closure or some other penalty. While these e-mails look very authentic, never click on any links or enter any personal information. Instead, close the e-mail. If you think the e-mail may be legitimate, go to the website itself, log-in, and look for any notices posted to your account. It’s a good bet you won’t find any. You can always contact the company directly as well.

General Rules. As a general rule, do not give personal identifying information over the telephone or the Internet unless you initiated the contact. Finally, one of the best ways to avoid becoming the victim of identity theft is to periodically review your credit report.

Selecting the Right Structure for Your Business

2005-12-01T17:58:00.000-08:00

Originally Posted December 2005

For new business owners, limiting the personal liability of the owner for business transactions should be an important concern. The type of business structure created will significantly impact the owner’s exposure to personal liability.

On one end of the spectrum is the sole proprietorship, a form of business in which a person directly owns the business assets and is personally responsible for its liabilities. There is no legal distinction between the owner and the company, and therefore no limit to the owner’s personal liability. On the other end of the spectrum is a corporation, a legal entity which is wholly separate and distinct from its owners (i.e., shareholders) who are shielded from personal liability. However, strict adherence with detailed corporate laws and formalities is required or the owners risk losing the basic protection of the corporate structure.

In between the two extremes are general partnerships, limited partnerships, S-corps, and limited liability companies, among others. Each provides varying degrees of protection from personal liability. The limited liability company (LLC) has become popular because it combines many of the favorable aspects of other structures, including the flexibility of a sole proprietorship or partnership, limited personal liability like a corporation, and pass-through income tax treatment as with an "S-corp".

If you’re starting a new business or have an ongoing business, you should consult an attorney for advice on which structure best achieves your particular personal and business needs and goals.

Make Your Wishes Known: Who Will Care For My Children If We Both Die?

2005-12-01T17:56:00.000-08:00

Originally Posted December 2005

As parents, we work hard to provide the best possible lives for our children. We can’t imagine life without them and don’t even want to consider the opposite situation – their life without us. Who will take care of them? Who will make decisions regarding their lives and their support? And who will pay for it?

In general, if both parents of a minor child die, any person who is willing to take care of the child can petition the Court to be appointed the "guardian" of the child. The Court will evaluate the person, analyze their ability and capacity to take care of the child, and weigh objections from others, if any. If there are two or more willing persons, the Court will evaluate them all. Once appointed, the "Guardian" will owe strict legal duties to the child, similar to those of a natural parent.

If known, a parent’s wishes can have a profound influence on who the Court appoints as guardian. A "Nomination of Guardian" is the legal document parents can use to make such wishes known. It is typically drafted as part of an overall estate plan and specifies, in detail, who the parents would want to take care of their children should they both die. Often of even greater concern, the document can specify who is expressly forbidden to take custody of the children.
Ideally, a guardianship is used in conjunction with a Family Trust. The Trust will hold all the assets from which the Guardian will meet the financial needs of the child.

Further, a Nomination of Guardian can, and usually does, state specific desires that a parent may have for (a) the transition of the child and the guardians into each other’s lives, (b) the future medical, educational, religious and financial needs of the child, and (c) assuring that resources are available to meet those needs.

Legal Report Update - Gift Certificates

2005-12-01T17:36:00.000-08:00

Originally Posted December 2005

As you may recall, the original e-mail (available on www.Ajalatlaw.com) regarding gift certificates advised that gift certificates may not contain an expiration date. In response to the then-new law, merchants began charging service fees against the gift certificates, such as fees for non-use, or "dormancy fees". That is, if an owner failed to use a certificate for a certain amount of time, a monthly fee – typically a small percentage of the total – was deducted from the balance. It may not sound like much, however, over the course of several months, an entire certificate could be consumed by fees.

Once again, your legislators came through for you! Effective January 1, 2004, the law regarding gifts certificates was modified to respond to the merchants’ fees. It is still true that a gift certificate may not contain an expiration date and if it does that date is ineffective. In addition, the new law prohibits all service fees, including "dormancy fees".

There is one exception: Dormancy fees may be charged against a gift certificate that has not been used for 24 months, has a balance of $5 or less, and has a visible statement printed directly on it advising of the fee. However, the fee cannot exceed $1.00 per month.

The Laws Regarding Children In Cars

2005-12-01T17:35:00.000-08:00

Originally Posted December 2005

California law as of January 1, 2005, states that children must be secured in the back seat of a vehicle until they are either 6 years old OR 60 pounds (with limited exceptions). Further, a child may never (without exception) ride in the front seat of a motor vehicle with an active passenger air bag if the child is (1) under one year of age and weighs less than 20 pounds or (2) riding in a rear-facing child passenger restraint system.

Keep in mind, however, that these are the minimum standards established by the state. The guidelines outlined in the owner’s manual of your specific seat or your vehicle will be more stringent and should be followed. For example, studies have shown that it is safer for children to remain in a rear-facing car seat until they are both 1 year-old AND 20 pounds. Even though this is not a legal requirement, it is sound advice that should be followed.

Also, children may not ride in the back of a pickup or flatbed truck (covered or uncovered) unless secured to a restraint system that meets federal standards. And finally, no child under 6 years old may be left unattended in a car (meaning no one over 12 years old is present) if (a) the health or safety of the child is at risk, (b) the engine is running, or (c) the keys are in the ignition.

What Information Should I Collect If I'm Involved in an Auto Accident?

2005-10-01T17:35:00.000-07:00

Originally Posted October 2005

An accident can be a scary event. Of course, if there are injuries, the very first thing you should do is call 911. After all vehicles have been moved out of traffic and everyone is safe and secure, there are some general guidelines as to what information you should collect and provide to the other parties.

By law, basic information such as names, addresses, and registration information must be exchanged. Insurance information should also be obtained. Also write down the make, model, year and condition of the cars involved, the date, time and location, and number of passengers in the other car(s) (believe it or not, we’ve seen extra people inexplicably "appear" claiming injuries).

If there are witnesses, talk to them as soon as possible, especially if they approach you first (which usually means they believe you are less at fault). Take down their contact information immediately, as they may not be willing or able to wait around until the police arrive. Never admit fault at the accident scene since a thorough investigation might reveal otherwise.
You should keep a form in your glove compartment to organize this information (you can download and print out a handy form at www.Ajalatlaw.com).

Lastly, it is helpful to keep a disposable camera in your glove compartment. This will allow an important record of visual conditions as they were at the time of the accident and the conditions of the people and vehicles involved. If you have a camera phone, use it in the same way.

The "Living Will": Could It Have Prevented the Terri Schiavo Case?

2005-10-01T17:33:00.001-07:00

Originally Posted October 2005

Terri Schiavo suffered a heart attack in 1990 resulting in severe brain damage. She had no mental capacity and very little functional capacity. Since she couldn’t eat or swallow, she was being kept alive using a feeding tube.
Despite numerous unsuccessful attempts at rehabilitation, Terri’s parents believed she had a consciousness and deserved the chance to live. Terri’s husband Michael, believed she had no consciousness and would not have wanted to live in the persistent vegetative state that she was in.
Terri did not have an "Advance Health Care Directive" (AHCD), also known as a "living will", which unfortunately meant that, the one person who could have conclusively decided her fate – Terri herself – never did.
An AHCD is typically drafted as part of an overall estate plan and allows a person to "speak" their wishes when they no longer can. It allows a person to state their medical wishes, which are to be implemented by the named agent, usually a spouse or child. Such wishes include whether they would desire services to reduce discomfort and pain, preferences against certain procedures, and ultimately, whether they would want life-sustaining treatment. The document typically includes post-death wishes as well, such as wishes for certain religious or traditional ceremonies, organ donation, burial instructions and the disposition of their remains.
Granted, an AHCD addresses issues of our own mortality that people generally do not want to consider. However, in Terri Schiavo’s case – and presumably hundreds more each year that don’t receive media attention – that document alone could have allowed Terri’s wishes to be heard and avoided years of heartache for those left behind having to guess.

Lost Your Cell Phone? Call Your Provider Immediately!

2005-10-01T17:30:00.000-07:00

Originally Posted October 2005

If you’re like us, you misplace your cell phone all the time. If you’re lucky, you find it rather quickly. If you’re unlucky, you’re not going to find it at all because it’s been stolen.

As if being the victim of a crime isn’t bad enough, imagine then being told that you have to pay for all the calls – including international ones – that the criminal made! Unfortunately, that’s what most of us have agreed to do.

Many of you probably think that unauthorized cell phone charges are similar to unauthorized credit card charges in that your liability is limited by law. However, it is not. Cell phone providers, unlike credit card issuers, are not required to limit your liability for the unauthorized use of your phone and in all likelihood, your service contract states that if your phone is stolen you remain responsible for all charges until you notify the provider.

So, if you can’t find your phone and you have any reason whatsoever to believe it may have been stolen, you should immediately advise your provider. They will inactivate your account until further notified. If you do find your phone, it will be easy to reactivate. If you don’t, you may have saved yourself hundreds – and maybe even thousands – of dollars.