Newsletter - Spring 2011

This newsletter is designed to keep you up-to-date with changes in the law. For help with these or any other legal issues, please call today. The information in this newsletter is intended solely for your information. It does not constitute legal advice, and it should not be relied on without a discussion of your specific situation with an attorney.

 

When a couple agrees to a divorce settlement, it’s generally final. But in some instances, a judge might allow a couple to reopen it and change the terms if they later realize they made an honest mistake - such as that their property wasn’t worth as much as they thought.

For example, when a wealthy New York lawyer and his wife divorced, they agreed to split their property, which included a $5.4 million investment account, right down the middle. Unfortunately, the account was invested with the notorious Wall Street fraudster Bernard Madoff.

Madoff’s ponzi scheme wasn’t revealed until after the husband had already paid the wife $6.6 million, including her share of the investment account, which was actually worthless.

The wife argued that she was still entitled to the full amount of the settlement. But a New York appeals court agreed with the husband that the settlement should be set aside due to a “mutual mistake.”

always-consult-with-a-lawyer-before-you-sign-a-releaseInsurance companies and other businesses often try to get injured people to sign a release right away, before they talk with a lawyer. Sometimes they actually say that they’re trying to protect or take care of the person, and that there’s “no need to get lawyers involved.”

Beware! There’s a reason they don’t want people to talk with a lawyer, which is that they don’t want them to understand all their rights.

The truth is that you should always talk with an attorney before signing a release (or any other important legal document). Don’t even think of signing away your rights before you fully understand what your rights are.

Take the case of a Nebraska woman who claimed that she suffered a ruptured appendix after a hospital’s emergency-room physicians, who were employed by an outside urgent-care company, failed to diagnose her appendicitis.

Before filing suit - and without first speaking to an attorney - she settled her malpractice claims against the hospital. As part of the settlement, she signed a document giving up her right to sue the hospital and “all others liable.”

Later, she hired a lawyer to sue the urgent-care company. But the urgent-care company argued that it couldn’t be sued because the woman had given up her right to sue “all others liable.”

Ultimately, the state’s highest court allowed the case to go before a jury to determine whether the urgent-care company was protected by the release.

So the woman might eventually have her day in court - but even if she does, she will have had to go through a lengthy and expensive legal process to get there, one that probably could have been easily avoided if she had spoken to an attorney before signing the release against the hospital.

It’s always advisable to speak with an attorney before signing any releases. And the best advice is to speak to a lawyer as soon as possible after an injury occurs.

new-reverse-mortgage-option-could-help-some-seniorsA new type of reverse mortgage that could benefit some senior citizens has been approved by the Federal Housing Administration.

In a traditional mortgage, you borrow money against your house and pay it back in monthly installments over time. With a reverse mortgage, you borrow money against your house, but you don’t have to pay it back until you die, sell the house, or move - which means you don’t owe anything as long as you stay in your home.

In most cases, to qualify you must be at least 62 years old.

Reverse mortgages have been criticized in the past because they can involve high fees. For instance, in a traditional reverse mortgage, a borrower had to pay 2% of the loan amount as mortgage insurance. On a $250,000 mortgage, that amounted to a $5,000 fee.

However, a new product called a “Saver” reverse mortgage cuts this fee almost to zero. You pay just .01%, or only $25 on a $250,000 loan.

The tradeoff is that the total amount you can borrow is less - about 10% to 18% less in most cases.

(Other fees still apply, including closing costs and an origination fee that is capped by law at $6,000. But banks have been lowering these fees, too, so it pays to shop around.)

Another option that can work for some seniors is a private reverse mortgage - in other words, a reverse mortgage-type loan from a family member rather than from a bank.

The advantages to a senior are that a private loan doesn’t require origination or insurance fees, there is no limit to how much of your equity you can borrow, and you don’t have to sell the house if you move to a nursing home (which can help someone qualify for Medicaid). Also, private loans can come with a lower interest rate than bank loans, although there is a minimum interest rate set by the IRS.

A family member who makes such a loan can help out a relative while collecting interest that’s higher than what savings accounts and CDs typically provide. Also, if a senior is able to save money by avoiding higher interest and fees, he or she may have a larger estate to pass on to heirs.

If you’re hiring a regular babysitter to work in your home, or an elderly relative is hiring someone to provide home care, you should be aware that the “nanny tax” might apply.

Generally, the tax applies if you hire someone and pay them $1,700 or more a year. Here’s what’s involved:

when-hiring-home-help-beware-of-the-nanny-tax-gen-prac

  • You must pay the employer’s share of Social Security and Medicare taxes for the employee. That’s 6.2% of wages for Social Security and 1.45% for Medicare.
  • You must also withhold the employee’s share of these taxes and pay that, too. The amounts are the same, except that for 2011 the employee’s Social Security tax is reduced to 4.2%.
  • In addition to these taxes, you may have to pay a 6.2% federal unemployment tax if you pay someone more than $1,000 in a calendar quarter. You might be able to take a credit against this of up to 5.4%, but on the other hand you might also have to pay state unemployment taxes.
  • If asked, you might have to withhold federal and state income taxes from the employee’s pay.

Sound complicated? It is! But remember that these rules apply only if you hire someone directly. If you pay an agency and the agency pays the employee, then you’re off the hook because the agency has to do the paperwork.

With so many people having filed for bankruptcy in the current economy, it’s important to know that it’s illegal for an employer to discriminate against a worker because he or she went bankrupt.

Most everyone is aware that it’s illegal to discriminate on the basis of race or sex, but few people realize that “bankruptcy discrimination” is also illegal.

However, the law isn’t as extensive as the laws against race and sex discrimination.

For instance, a federal appeals court in Philadelphia recently decided that while it’s illegal to fire someone for going bankrupt, it’s okay to refuse to hire someone because of a prior bankruptcy filing.

The court said this was true because the discrimination rules in the federal bankruptcy laws are different from the ones in the federal civil rights laws.

time-to-update-your-health-care-proxy A health care proxy states who you want to make medical decisions for you if you’re not able to make them yourself. A living will provides a roadmap as to how you want those decisions to be made. It’s a very good idea to create these documents, and to review them on a regular basis. Here are some things to consider:

Has your state recently adopted a ‘standard’ health care proxy form? Some states have adopted a particular form by law. It might not be necessary to use this form, but you might want to do so, because doctors and hospitals will be more familiar with it and using it might avoid delay and confusion about whether to accept a document.

If you spend a significant amount of time in another state, you might want to see if that state has adopted a standard form as well. There’s no harm in having multiple forms - as long as you name the same person as your agent!

Does your document mention HIPAA? The Health Insurance Portability and Accountability Act, or HIPAA, protects your medical privacy. The law generally became effective in 2003. So if you have an older health care proxy or one that doesn’t specifically mention HIPAA or waive your rights under the law, your agent could have a hard time accessing your medical records in a crisis. Be sure you’ve updated your proxy with reference to HIPAA so that your doctor can talk freely with your agent and tell him or her about your condition.

Has your medical condition changed? If you have recently developed a condition that could land you in the hospital - diabetes, MS, or any other long-term problem - you might want to talk with your doctor about the specific issues that could arise with that disease, and update your living will with your instructions.

If you’ve named different people in your health care proxy and power of attorney documents, be aware that they could come into conflict.

Have you thought about nutrition and hydration? It’s not easy to think about these issues, but it’s very important to do so, and it can save your agent from making difficult decisions without knowing your wishes and agonizing afterward as to whether he or she did the right thing.

Some people executed a living will long ago from a book or from the Internet. A lot of these “cheap” forms have very inadequate provisions for nutrition and hydration and can create serious problems in real-life situations.

Be careful with multiple agents. If you’ve named more than one person as your agent, consider whether they still get along and will be able to agree when making decisions.

Lately, it’s happened that some doctors and hospitals have been confused about what to do if there are multiple agents. They might be unwilling to follow one agent’s instructions without the other agent being present, even if the other agent would agree with the decision. It might be good to clarify that multiple agents can independently make decisions for you.

Don’t be too specific. Unless you have very strong wishes, it’s usually not a good idea to be highly specific about medical treatments in a living will. It’s better to state your general philosophy about later-life care, and allow your agent to make specific decisions based on the details of the actual situation that arises.

On the other hand, it’s good to be very specific about certain non-medical things, such as organ donation, burial instructions, and religious preferences. Doing so can be very helpful to an agent and to family members at a difficult and stressful time.

Is your health care agent also your power of attorney? Most people will name the same person in their health care proxy and in their power of attorney, but there might be reasons not to do so - for instance, the person you trust most to make medical decisions might not be good with money. That’s okay - but keep in mind that the two could come into conflict. For instance, your health care proxy might decide that you need round-the-clock care at home, but the person who has power of attorney might think a nursing home is better and refuse to pay for 24-hour care. If so, a court would have to decide between them.

If you name different people, it’s a good idea to be more specific about your wishes in order to try to head off conflict.