Suttons Bay Law

In 2008, the Michigan Court of Appeals held that a child’s ability to sue for a personal injury is not impaired despite any pre-injury waivers signed by the child’s parent. The case of Woodman v. Kera, L.L.C., 280 Mich. App. 125 (2008), involved a 5-year-old boy who was injured at an indoor recreation facility. The boy’s father had signed a pre-injury waiver, purporting to hold the recreation facility harmless if any injuries occurred to the child. According to the Court, the waiver could not prevent the child from pursuing a lawsuit against the facility. This conclusion was based on the common law rule that a parent lacks authority to waive, release, or compromise his or her child’s claims merely by virtue of the parental-child relationship. A parent, absent a specific exception created by the Michigan Legislature, cannot authorize an act that is detrimental to the child.

This case, which has far-reaching effects on commercial recreation establishments, churches, and schools, is currently under review by the Michigan Supreme Court. Oral argument on the case was heard by the Supreme Court in October of 2009, and an opinion is expected sometime later this year. It is also possible for the State Legislature to enact an exception to the general rule cited in Woodman, either before or after a decision is reached.

In the meantime, Woodman remains the rule in Michigan, and therefore establishments are best served by acting prudently and maintaining adequate insurance. While it is not recommended to discontinue the use of pre-injury waivers, awareness of the limited protection afforded by the waivers is important. For more information about this matter, please contact us.

Tags: Asset Protection, Disputes & Litigation, Know it Now, Personal Management by Dan Penning
No Comments »

I’m pleased to announce that one of Michigan’s premier business journals, DBUSINESS, recently announced its 2010 “Top Lawyers” in metropolitan Detroit - and three of the principals with Wright Penning & Beamer made the list.

DBUSINESS compiles its list as a resource and reference guide for its readers. Selection criteria include:

• legal knowledge
• analytical capabilities
• judgment
• communication ability, and,
• legal experience.

The list was published in the journal’s November/December 2009 edition.

According to the publication, selected lawyers “possess the highest professional ability and ethical standards.”

Dirk Beamer, Lee Flaherty and I were selected this year. Beamer for his expertise in business and commercial litigation; Flaherty for her work with non-profits and charitable organizations, and I was recognized for business and estate planning.

As a founding shareholder of the firm I’ve focused my practice areas primarily in planning for business entities including family businesses, estate planning for business owners, individuals, families with special needs children, and succession planning for family cottages and farms. Through these practice areas our firm has become a leading resource for individual and business clients.

Beamer oversees our firm’s diverse litigation practice, focusing primarily on business and commercial litigation. He spearheads the firm’s efforts in insurance law, unfair competition, trademark infringement, employment matters and contract disputes. Dirk has litigated in state and federal courts across the country. He also counsels business owners and managers concerning employment practices and management.

In addition to her work with non-profits, Lee Flaherty is well versed in real estate, business law, estate planning and probate. Lee’s business expertise encompasses the support of ongoing businesses, business purchases and sales, and representation in commercial real estate transactions. Her estate planning practice focuses on the preparation of a wide variety of trusts and other documents to assist clients in avoiding probate, preserving assets and minimizing taxes.

I take pride in my colleagues’ accomplishments and wanted to share this good news with you. As a firm we continue to strive daily to deliver the highest quality legal services to our clients throughout Michigan and beyond.

Dan A. Penning

Tags: Agribusiness, Business Management/Law, Business Succession, Cottage Law, Employment Law, Estate Planning, Know it Now, Personal Management, Special Needs Children, Suttons Bay Depot by Dan Penning
No Comments »

If you’re like me, you received any number of gift cards this past holiday season. Looking at the handful of gift cards I received, it occurred to me that I might just hold onto them until I needed something from a particular store. But, having heard that the sales reports for this past holiday season didn’t quite meet projections, I quickly asked myself, “What happens to my card if a store goes out of business or files bankruptcy?” Doing some quick research, I learned that consumers lost an estimated $8-10 billion in gift cards due to stores going out of business in 2008. How does this happen?

I discovered that the purchaser of a gift card is essentially loaning the issuing store money in the amount of the card. The issuing store, however, is not required to give the purchaser collateral as security for the loan in the amount of the gift card or do anything else for that matter to insure that the card continues to have value. As a result, the holder of the gift card is nothing more than an unsecured creditor. If the store goes out of business by filing for bankruptcy or by simply shutting its doors, the holder of the gift card will likely receive nothing for the gift card, or, at most, a few cents for each dollar of value (and then only years down the road at the end of the bankruptcy proceeding).

There are stores that have continued to accept gift cards while in bankruptcy proceedings, but there is no law that requires them to do so. For example, when Sharper Image declared bankruptcy in 2008, it had approximately $20 million in outstanding gift cards. Sharper Image stores continued to accept the gift cards but only on one condition: the shopper had to spend double the amount of the gift card to redeem it.

While bankruptcy courts should be able to provide some protection, that protection is often illusory. In one bankruptcy case, a Chicago law firm was successful in gaining class certification from the bankruptcy court for gift card holders, treating the entire group as a single creditor with combined claims of approximately $19 million. But the process takes a long time, and the secured creditors get paid before general unsecured creditors. There is no guarantee that any money will remain to pay the unsecured creditors like the card holders.

Consider also the positive effect that unredeemed gift cards have on the financial reports of the merchants. Fewer than 30 percent of store gift cards are redeemed within a month of purchase. The amount of each gift card may seem small, but in total, unredeemed gift card balances can add up to millions of dollars per retailer. Best Buy (BBY), which had approximately $471 million in unspent balances shown on its books in one recent year, added $135 million in unspent gift cards to its total operating income of $3.6 billion.

According to First Data, a website that compiles gift card statistics, through the 2009 holiday season, merchant branded (”closed loop”) gift card sales increased 2.1 percent compared to 2008. Most closed loop cards don’t have charges and fees in connection with the purchase because retailers can more than recoup their money from gift card sales. According to the National Retail Federation, shoppers spend 15 to 40 percent more than the gift card value.

Open loop gift cards, on the other hand, are not tied to specific merchants but are sold by banks or credit card companies (Visa, American Express, etc.). Recipients may use them at any business that accepts that particular card. However, hidden fees and expiration dates are common with open loop cards. Earlier in 2009, Congress passed reforms relative to the credit card industry that included regulations for open loop gift cards. The rules, which take effect in August of this year, prohibit dormancy fees unless the card has not been used for at least a year. The rules also require at minimum, a five-year expiration date.

If you have unspent gift cards in your pocket, consider spending them right away. Otherwise, keep informed about the retailers’ financial strengths (and weaknesses) if you choose to keep them for later use.

Dan A. Penninng

Tags: Know it Now, Personal Management by Dan Penning
No Comments »

You write a check, but, by the time it’s presented to your bank for payment, there’s not enough money in your account to cover it. You go to the ATM and make a withdrawal, or, use a debit card to make a purchase, but, unknown to you, there is not enough money in your account to cover the transaction. What happens? One would think that the check would be returned for nonsufficient funds and the ATM and debit card transactions would simply be denied. Not necessarily so. To the contrary, most banks will automatically advance the funds to cover the check, the ATM withdrawal and the debit card purchase. Then, the next time you make a deposit, they will pay themselves back, along with an overdraft fee.

With check writing going the way of the rotary dial telephone (industry sources estimate that 75% of financial transactions today are electronic), banks and credit unions are increasingly turning to overdraft fees on electronic transactions to bolster their bottom lines in these tough economic times. In fact, it is anticipated that the financial services industry will make $38 billion in income in 2009 from overdraft fees alone, which typically run about $35 per transaction.

While the idea that your bank will cover your overdraft transaction may sound like a good thing, the problem is that the $3 latte at your favorite coffee house that you paid for with your debit card may end up costing you as much as $40 once the overdraft fee is added. And, in many cases, due to the timing of transactions, you may have no idea that your account is overdrawn in the first place, which leads to even more fees. What began as a good idea for bank customers has led to consumer outrage, increasing government scrutiny and class action lawsuits across the country against the nation’s largest banks. While the US Congress considers legislation to reign in what it believes to be abusive and unfair practices involving overdraft fees, the Federal Reserve Board, on November 12, 2009, announced sweeping new rules regulating overdraft fees on ATM and one-time debit card transactions. Those rules, intended to enable consumers to limit their exposure to overdraft fees, include the following provisions:

1. Consumers must affirmatively consent to being enrolled in the institution’s overdraft protection service for ATM and one-time debit transactions (”opt-in”) before overdraft fees can be assessed. This is a marked change from the current policy of many institutions whereby the mere issuance of an ATM or debit card includes automatic enrollment in the institution’s overdraft protection program. The rule also affords the ongoing right to revoke such consent at any time;

2. The opt-in requirement applies to all consumers, including existing account holders;

3. The rules do not apply to overdraft protection for written checks and automatic on-line bill pay; banks may continue to enroll customers in those programs automatically. However, the new rules prohibit banks from tying overdraft protection for checks and automatic bill pay to a requirement that consumers also opt-in to overdraft protection for ATM and debit card transactions;

4. The rules require institutions to provide consumers who do not opt-in with the same account terms, conditions, features and prices, as those provided to consumers who do opt-in; and

5. Compliance by July 1, 2010 is mandatory.

Irrespective of this action by the Federal Reserve, Congress continues to draft and debate its own legislative response to this situation. Much can, and undoubtedly will, happen between now and July 1, 2010 as financial institutions react to these new mandates. (For more information, please visit the website for the Federal Reserve at: www.federalreserve.gov, or, simply keyword search “overdraft fees” using your internet browser.)

Dan A. Penning

Tags: Know it Now, Personal Management by Dan Penning
No Comments »

Many of us sent kids off to college last month, and some of us even returned to school ourselves. Coincident with the start of the new school year, the Internal Revenue Service announced the launch of an interesting back-to-school feature on its website. If you have (or will soon have) kids in college, you will want to take a look at the new “Tax Benefits for Education” section on www.irs.gov.

The section highlights a number of tax breaks intended to help parents and students pay for higher education. In addition to describing how to take advantage of deductions and credits that have been in place for some time, the section features two significant changes that will be in effect just for 2009 and 2010.

The first change expands Section 529 plans to permit expenditures for a student’s computer equipment and computer-related services, such as software and Internet access. Previously, the qualified expenses were limited to tuition, fees, books, supplies, equipment, special needs services and, for those enrolled at least half-time, room and board.

The second change is called the “American opportunity credit” and is designed to help students pay for the first four years of college. It expands the existing Hope credit, making it available to more families and adding course materials to the list of qualified expenses.

In addition to the new Web section, you can find out more about school-related tax breaks in IRS Publication 970, Tax Benefits for Education. Download it from www.irs.gov or call 1-800-TAX-FORM (829-3676) to have a copy sent to you.

Dan A. Penning

Tags: Know it Now, Personal Management by Dan Penning
No Comments »

The following article reports on an increasingly used strategy by individuals representing homeowners whose homes are in danger of foreclosure. In summary, the article addresses situations where a homeowner’s mortgage may have been sold or reassigned between several different companies and, therefore, the original mortgage note and mortgage executed by the homeowner cannot be located. If there is no evidence of a mortgage note or mortgage having been executed by the homeowner, then the bank or lending facility may have a challenge to actually prove indebtedness. The article below does provide useful information and should be considered by any homeowner facing a foreclosure action by their lender.

Dan Penning

——————————————————
From an article which originally appeared on the Consumer Warning Network website:

Homeowners’ Rallying Cry: Produce the Note

by MITCH STACY Associated Press Correspondent

ZEPHYRHILLS, Fla. (AP) — Kathy Lovelace lost her job and was about to lose her house, too. But then she made a seemingly simple request of the bank: Show me the original mortgage paperwork.

And just like that, the foreclosure proceedings came to a standstill.

Lovelace and other homeowners around the country are managing to stave off foreclosure by employing a strategy that goes to the heart of the whole nationwide mess.

During the real estate frenzy of the past decade, mortgages were sold and resold, bundled into securities and peddled to investors. In many cases, the original note signed by the homeowner was lost, stored away in a distant warehouse or destroyed.

Persuading a judge to compel production of hard-to-find or nonexistent documents can, at the very least, delay foreclosure, buying the homeowner some time and turning up the pressure on the lender to renegotiate the mortgage.

“I’m going to hang on for dear life until they can prove to me it belongs to them,” said Lovelace, a 50-year-old divorced mother who owns a $200,000 home in Zephyrhills, near Tampa. “I’ll try everything I can because it’s all I have left.”

In interviews with The Associated Press, lawyers, homeowners and advocates outlined the produce-the-note strategy. Exactly how many homeowners have employed it is unknown. Nor is it clear how successful it has been; some judges are more sympathetic than others.

More than 2.3 million homeowners faced foreclosure proceedings last year and millions more are in danger of losing their homes. On Wednesday, President Obama will unveil a plan to spend at least $50 billion to help homeowners fend off foreclosure.

Chris Hoyer, a Tampa lawyer whose Consumer Warning Network Web site offers the free court documents Lovelace used to file her request, has played a major role in promoting the produce-the-note strategy.

“We knew early on that the only relief that would ever come to people would be to the people who were in their houses,” Hoyer said. “Nobody was going to fashion any relief for people who have already lost their houses. So your only hope was to hang on any way you could.”

Tom Deutsch, deputy executive director of the American Securitization Forum, a group that represents banks, law firms and investors, dismissed the strategy as merely a stalling tactic, saying homeowners are “making lawyers jump through procedural hoops to delay what’s likely to be inevitable.”

Deutsch said the original note is almost always electronically retained and can eventually be found.

Judges are often willing to accept electronic documentation. And lenders are sometimes allowed to produce other paperwork to establish they are the holder of a loan. Still, assembling such documents to a judge’s satisfaction takes time, which to homeowners is the point.

Lovelace filed her produce-the-note demand last fall after the bank acknowledged that her original mortgage document had been lost or destroyed. Since then, there has been no activity on the foreclosure — no letters from the lender, no court filings.

The law firm handling the foreclosure for the lender refused to comment.

A University of Iowa study last year suggested that companies servicing mortgages are often negligent when it comes to producing the documentation to support foreclosure. In the study of more than 1,700 bankruptcy cases stemming from home foreclosures, the original note was missing more than 40 percent of the time, and other pieces of required documentation also were routinely left out.

The first big success of the produce-the-note movement came in 2007 when a federal judge in Cleveland threw out 14 foreclosures by Deutsche Bank National Trust Co. because the bank failed to produce the original notes.

Michael Silver, a lawyer for two of the families in that case, said at least one eventually lost their home. Still, he considers that a success.

“From the perspective of the person who’s in the home, you may have kept them in the house another 10 or 12 months,” he said. “If I can get a result with economic benefits to a client, then I think I won.”

Democratic Rep. Marcy Kaptur of Ohio endorsed the strategy in a fiery speech on the House floor during debate on the federal bank bailout last month.

“Don’t leave your home,” she said. “Because you know what? When those companies say they have your mortgage, unless you have a lawyer that can put his or her finger on that mortgage, you don’t have that mortgage, and you are going to find they can’t find the paper up there on Wall Street.”

April Charney, head of foreclosure defense for Jacksonville Area Legal Aid in Florida, said the strategy has been so successful for her that she now travels around the country to train other lawyers in how to use it. She said she has gotten cases delayed for years by demanding that lenders produce paperwork they cannot find.

“This is an army of lawyers getting out there to stop foreclosures so we can get to the serious business of creating solutions,” Charney said. “Nothing good is going to happen as long as we continue to bleed homeowners.”
—————————————————-
Visit Consumer Warning Network for balance of article and reader comments and additional information about foreclosures and this issue.

Dan Penning
—————————————————–

Tags: Asset Protection, Disputes & Litigation, Personal Management, Suttons Bay Depot by Dan Penning
No Comments »

At Wright Penning & Beamer, we contact our corporate clients on at least an annual basis to remind each client of the necessity of maintaining their corporate records in order to comply with the requirements referenced below. In order to assist our clients with organizing the information required to be included in the annual minutes of the corporation, we have prepared a checklist identifying the various events and actions needed. If you are a Wright Penning & Beamer corporate client, you probably have seen this checklist in a different format before. If you are not a Wright Penning & Beamer client, you may want to utilize the checklist to organize the information to be provided to your own corporate counsel.

The Michigan Business and Corporation Securities Act requires that corporations of all types maintain corporate records on an annual basis in the corporation’s record book in order to qualify as a valid entity in the state of Michigan. Further, the Act requires that special or unique actions taken by shareholders or directors on behalf of a corporation throughout a fiscal year also be recorded in writing and made part of the corporate records. Finally, the Internal Revenue Service also requires several actions taken by shareholders and / or directors on behalf of a corporation be reflected in writing in the corporation’s records for audit purposes.

We hope you find the checklist of assistance to you. If you have further questions, please feel free to contact Wright Penning & Beamer.

Shareholder Information
1. Identification:
____Who are the present shareholder(s) of the Company? (Please provide full names.)
____Have any shareholders taken action by proxy? (i.e. by a person appointed to act on his/her behalf.)
____Are there any new shareholders?
____Were there any changes in Company stock? (Issuance of preferred, common voting, non-voting shares, etc.)

2. Actions:
____Have the shareholders approved any board actions, resolutions and/or board decisions in the past fiscal year in any written documents? If so, please provide a copy.
____Did the shareholders hold any formal special meetings since the last annual meeting? (If yes, please provide the purpose of the meeting, business discussed, and any resolutions or actions approved, together with copies of any documents confirming the meeting.)

Director / Officer Information
1. Directors:
Identify the individuals who were last elected and served on the Board of Directors.

2. Appointment/Election of Officers:
Identify the individuals who were last elected and served as Officers of the Corporation:
President
Vice-President
Treasurer
Secretary
Other
Also, please indicate if the same individuals will continue to serve as Officers in the current fiscal year and note any changes.

Personnel Matters
1. Personnel Matters / Benefits
____Please identify any new insurance policies purchased by the Company on behalf of any employer/officer/director, including health, disability, or life insurance (or identify any changes in these types of coverages).

2. Compensation of Key Employees / Owners:
____Review and approve salary, bonuses and any other compensation received by key employees / owners.
____Review and approve any proposed changes to compensation in current fiscal year.

Financial Statements and Related Information
1. Financial Statements:
____Please provide a copy of the Company’s year-end financial statements.

2. Annual Report:
____Please provide a copy of the Company’s annual report filed with the state of Michigan or the state of incorporation, if not a Michigan corporation.

3. Authority to Do Business Documents:
____Has the Company filed all required documents for authority to do business in states where the Company is doing business, other than in the state of original corporation?

Administrative Action
1. Banking Matters:
____Has the company opened or closed any bank accounts?
____Has the Company changed banking institutions?
____Please identify any changes in authorized signers with regard to bank accounts.
____Has the Company made any resolutions with regard to depository accounts? (If yes, please provide copies.)
____Has the Company taken out any new loans? (If yes, please identify the amount, purpose, and lending institution for each loan.)

2. Property / Equipment Matters:
____Please identify all purchases / leases of equipment by the Company in excess of $15,000.00. (Identify the equipment by name, model number if applicable, purchase price and date purchased / leased.)
____Please identify any sales of Company equipment. (Include sale price, date of sale, and description of equipment sold.)
____Please identify any increases or changes in rents, leases, or other contracts with respect to the Company’s buildings, real estate holdings and place of business operations.

Liability / Insurance & Related Matters
____Has the Company been sued in the past year? If so, please provide all information regarding the lawsuit and its status.
____Has the Company obtained new or changed any of its liability coverages? Please list all of the liability insurance coverages carried by the Company, together with the carriers, annual premiums and a summary of coverages.

Please visit our website at www.wrightpenning.com where we have additional checklists for your business.

Dan A. Penning
———————————————-

Tags: Asset Protection, Business Management/Law, Personal Management by Dan Penning
No Comments »

As the U.S. economy and, in particular, the housing market, comes to a grinding halt, many Americans who spent their home equity like monopoly money find themselves with no equity in their homes and, in many cases, individuals owe the bank and mortgage companies more than their homes are worth.

The traditional strategy of finding a smaller and less expensive home to provide excess proceeds at retirement to fund living expenses has all but disappeared for some individuals. The downturn in property values and almost impossible credit market to acquire new financing has made home selling and buying a struggle in many markets.

I read about an interesting concept in a recent USA Today article reproduced below involving the concept of “house swapping”. Individuals with good credit and jobs not substantially impacted by the current recession are looking for opportunities to “move up” to larger homes and this activity is being inhibited by housing markets where selling their existing smaller home is next to impossible. The solution, a seller looking to “move up” connects with a seller looking to “downsize” and both sellers become purchasers and help each other. Although the person downsizing may not extract equity for retirement, it may provide that person with lower overhead which, together with perhaps a decision to work longer, can be a solution other than having his or her more expensive home foreclosed upon by the mortgage company.

Dan A. Penning
————————————-
The original source for the article below is from USA Today:

By Lisa Bernard-Kuhn, The Cincinnati Enquirer
Linda and Peter Gatchell’s dream was simple.

After years of saving, the Deerfield Township, Ohio, couple was ready to move from their suburban cul-de-sac to a 5-acre spread in Morrow, Ohio.

So in June they placed their three-bedroom home on the market for $175,000. Then they waited. And waited. And waited.

“I thought it would be really easy to sell my house because of the price and the location. Boy was I wrong,” Linda Gatchell, 49, said. “I had this big old plan, and now it’s crumbling before me.”

Caught between a deepening recession and poor housing market, the Gatchells decided on a different approach. They became one of a growing number of home sellers nationwide turning to a new strategy — permanent housing swaps.

A familiar practice in Europe, home swaps have largely remained uncharted territory for most U.S. consumers, said Daniel Westbrook, CEO of OnlineHouseTrading.com, a website that matches up eager sellers.

As the financial meltdown and credit crisis have squeezed housing markets, though, the concept is gaining popularity.

“Think of it as reciprocal selling. I’ll buy your house, if you buy mine,” said Westbrook. “There are a lot more motivated sellers out there today than there are buyers. This is as simple as two sellers helping each other out.”

For the most part, Westbrook said, swapping a home should work like a typical real estate transaction — just with double the paperwork.

“It’s really two real estate transactions happening simultaneously,” he said. “The biggest concern should be that both contracts are signed when you leave the table. You don’t want anyone walking away, holding on to two mortgages.”

He recommends anyone considering the approach to consult a real estate attorney or Realtor.

‘Trying to get creative’

Interest in the emerging trend is playing out daily at websites such as Westbrook’s and social networking sites such as Craigslist.org, where homeowners are posting pleas such as the Gatchells: “We want to live in the country, do you want do to live in the city?”

In the past year, home-swap postings to Craigslist have grown by 50%, with more than 12,300 postings in November, according to Craigslist.

Most posts are from homeowners in New York, Los Angeles and San Francisco — markets hit hardest by the burst in the housing bubble.

Like the Gatchells’ posting, the majority of listings tell the stories of home owners looking for creative options in a tough market.

Some shed light on the desperation delivered by the troubling times: “2br — looking for someone to take over our loan,” reads a posting from a Loveland, Ohio, mobile home owner looking to shed a $32,000 mortgage.

“The reality is folks who own a home are having trouble selling, and everyone is trying to get creative,” said R.J. Seiffert, a Realtor with RE/MAX in Highland Heights, Ohio. “This time of year is always the valley in the slope, but of course the valley now is a little deeper and getting out will take a little more time.”

A Realtor since 1990, Seiffert said he knows of very few local home-swap transactions that have come to fruition.

“Like any deal, everyone has to come away feeling like they won a little bit of something, or no one is going to shake hands,” he said.

Website listings increase

So far, Linda Gatchell has had one response from her Craigslist posting.

“Unfortunately, our house wasn’t what the person was looking for,” she said.

Others have had more luck.

Burlington, Ohio, homeowner Debra Settimio-Fiorelli has two postings on Craigslist: One for her daughter who wants to move from Salt Lake City back to Cincinnati, and another for her condo.

Recently, she said, a poster contacted her about swapping a $279,000 home in Greendale, Ind., for her $119,000 condo.

“He said he’s recently divorced, looking to downsize and is willing to sell the house to me for $229,000,” she said. “We’re still working out the details, but it’s a very interesting concept.”

At OnlineHouseTrading.com, Westbrook said he has roughly 60,000 active listings.

“It might be a niche now, given the market, but as the concept gets out there I think more people will understand that this is a viable option for selling their home,” he said.

Tags: Asset Protection, Estate Planning, Personal Management by Dan Penning
No Comments »

By Karey Wutkowski

WASHINGTON (Reuters) - The federal agency that insures most U.S. bank deposits unveiled a plan to prevent about 1.5 million home mortgage foreclosures by promising to share any losses with mortgage companies that agree to refinance certain home loans.

The agency, the Federal Deposit Insurance Corp, said on Friday the plan would cost the government about $24.4 billion, which could be paid from the U.S. Treasury’s $700 billion bailout program for the financial industry.

So far, most of the money in the bailout program, the Troubled Asset Relief Program, or TARP, has been injected as capital into banks.

FDIC Chairman Sheila Bair, who spent weeks unsuccessfully lobbying Bush administration officials for the foreclosure prevention plan, unveiled her agency’s proposal two days after Treasury Secretary Henry Paulson dismissed the idea of the government underwriting failing home loans.

Paulson told reporters on Wednesday, “That (foreclosure plan) is a subsidy, or spending, program. The TARP was investment, not spending.”

The FDIC pushed forward with its plan, posting it on its website Friday morning (http://www.fdic.gov/consumers/loans/loanmod/index.html).

“Although foreclosures are costly to lenders, borrowers and communities, the pace of loan modifications continues to be extremely slow,” the FDIC said. “It is imperative to provide incentives to achieve a sufficient scale in loan modifications to stem the reductions in housing prices and rising foreclosures.”

The FDIC said its plan would modify about 2.2 million mortgage loans by offering financial incentives to mortgage servicers. It would pay servicers $1,000 to cover expenses for each loan modified to the required standards, and would promise to share up to 50 percent of losses incurred if a modified loan defaults.

Eligible borrowers would include those who have missed at least two monthly payments on loans for homes they live in. Servicers would be expected to lower those borrowers’ monthly payments to about 31 percent of the borrowers’ monthly income.

The Treasury Department said on Friday that it was aggressively looking at ways to reduce skyrocketing home foreclosures under the TARP.

“We continue to aggressively examine strategies to mitigate foreclosures and maximize loan modifications, which are a key part of working through the necessary housing correction and maintaining the strength of our communities,” Treasury Interim Assistant Secretary Neel Kashkari said in testimony prepared for delivery to a U.S. House of Representatives committee.

Link to Original Reuters Article: (Reporting by Karey Wutkowski; editing by John Wallace)

Tags: Asset Protection, Personal Management, Suttons Bay Depot by Dan Penning
No Comments »

It is estimated that one in five families have a “special needs” member.

Parents with a special needs child worry most about what will happen to that child when they are no longer able to care for him or her. If the family is fortunate enough to own a business, planning for the child’s life after the parent’s death can become complicated.

---

As the parent of a special needs child, Attorney Dan Penning knows what is involved in planning for a child’s future.

---

For many family business founders, it was the idea of the family working together to secure financial futures that formed the vision and offered the incentive. There must be great comfort in thinking that the business entity will continue to support a child who is unable to support themselves. However, the family business is most likely not the best place to put the financial future of a special needs individual.Individuals with special needs are those who have chronic physical, developmental, behavioral, or emotional conditions that limit their ability to live, think and/or work independently. Basically they are people who cannot make it through life without regular and constant assistance. Certainly there are highly functioning special needs individuals who work successfully, but are unable to perform other life tasks like driving or preparing meals.At some point in the life of the special needs individual, their advocates and caregivers, who are usually their parents, are no longer able to perform those tasks. What happens then?Even the highly functioning individual usually runs into increasing needs as life goes on. While they may be able to work successfully as a young adult, that does not ensure long-term success. A family business could provide the perfect work environment for that special needs individual – a custom designed job around caring folks. Later in life, when his or her parents are no longer involved in the business, how would that continue? Would it make sense to make the special needs individual a shareholder or partner so that they can have some control and reap the benefits of the business?The unfortunate truth is that the special needs individual is likely to end up in a state-supported facility at some point – and likewise become a ward of the state. Funds left to your child may be attached by the government and used in lieu of public funds to pay for the support of the child (who may now be an adult). If your child were to own shares in a business, the state could force the sale and/or liquidation of that business to care for the child. How can you then best provide for the care of your child after your death?Dan Penning, managing partner of Wright Penning & Beamer Attorneys in Farmington Hills, Mich., knows firsthand the difficulties of dealing with these issues. The father of an autistic son who is unlikely to be able to care for himself, Penning specializes in corporate law and is a business owner, but has been through the planning issues from the side of a parent.

“Providing for the financial and custodial well-being of a special needs individual is only a part of planning…a very important part,” says Penning. “We want our son to be well cared for and we want our other children to be involved in his care after we are unable to do so. But, we don’t want to put undue burden on our other children, or guilt-trip them into being our replacements as custodians – although we do expect them to be his advocates.”
Penning says good estate planning is key.

“We aren’t sure where our son will be in the future, but we do want to be sure that the funds are available for him. We have set up a ‘Special Needs Trust’ and funded it with life insurance so that the dollars will be there when they are needed. I referred my own case to an attorney who specializes in Special Needs Trusts. That way our other children will get the benefit of our other assets and our special needs son will be well provided for regardless of what financial path our life takes.”

When asked about using the business asset as a funding mechanism for the Special Needs Trust, Penning says he can’t think of many circumstances that would make sense for the Trust to own the business asset.

“You wouldn’t want the trustee to be forcing the business into bad decisions due to the needs of the special needs individual. If the trustee was also a shareholder in his or her own right, that might constitute a conflict of interest and I would want to avoid that. So, I would recommend a Buy-Sell Agreement, putting the business asset into the hands of the most likely successors to run the business and cash into the estate that can then be distributed to the Special Needs Trust.”

---

Marcus Murray says it is a mistake to think that a business can provide for a special needs child.

---

Marcus L. Murray, a financial advisor and RN with many other credentials, who is with Mass Mutual/Detroit Financial Group in Farmington Hills, says many business owners have done no planning at all, thinking that the business will continue to provide for
their special needs child.“What a mistake! It is important that the Special Needs Trust be drafted to address issues beyond the financial…to address caretaking, lifestyle and so on. It is important that the parents communicate with the trustees, and a long list of successor trustees, what they have in mind for the care of their child. Then they need to fund the need. I usually recommend life insurance because it doesn’t make sense to fund a trust with real dollars if you can buy dollars.”

Murray adds that many legal issues change when the special needs child becomes of legal age. Caregivers, he says, need to be aware of those changes. Finding the “right” trustees and successor trustees and connecting them with the right legal and financial team is the key to the best long-term care for your loved one.

In the end, no one can be sure that the planning they do will yield the intended results. You can be sure that leaving the financial needs of a special needs individual to a business is a mistake. If you, or someone you love, is in this situation, seek the advice of competent legal and financial advisors – it is the best way to achieve your intended results.

Richard Segal is the chair of the Family Business Council, a membership organization of family-owned businesses. He can be reached at RMSegal@aol.com.

This article originally appeared in Corp! September 2007

Tags: Asset Protection, Estate Planning, Personal Management, Special Needs Children by Dan Penning
No Comments »