Sunday, June 28, 2009

Have You Made Your Estate Plan Yet?

We often do not think about preparing our estate plan until something reminds us of it. Sometimes we are reminded when we hear of the passing of celebrities, such as the recent deaths of Farrah Fawcett, Ed McMahon, Michael Jackson and Billy Mays. Sometimes we are reminded by the illness or passing of a loved one. Other times, articles like this give us a reminder. No matter what brings this to our attention, we should prepare our estate plan early and while we are in good mental and physical health, to avoid complications for our loved ones.

Estate planning tools such as wills and living trusts allow the property owner to plan who will benefit from their estate, which properties or dollar amounts are given to each beneficiary, and who will be in charge of administring the estate after they pass on. Moreover, proper estate planining can minimize the amount of estate taxes that have to be paid after the person dies, and can eliminate the need to go through a probate. These will maximize the amount of properties that will be passed to the beneficiaries. Since no one can predict how many years they will live, it is best to prepare one's estate plan sooner rather than later.

Sometimes, the beneficiaries may challenge a person's will or trust, claiming the deceased was not in proper mental state when he or she executed the estate plan. For this reason, it is best to prepare and execute the estate plan in an earlier age, rather than in an older age. Moreover, a complete estate planning package often includes advance health care directives, which are instructions for how a person wishes to deal with situations where person is seriously ill. Such instruments need to be prepare and executed while the person is in good health and able to properly state their wishes.

Estate planning is a broad topic which cannot be properly summarized in a few lines. This weblog is intended as general information and should not be relied upon as legal advice.

Robin Mashal is a partner at the law firm of Hong & Mashal, LLP, and can be reached at (310) 286-2000.

Tuesday, June 23, 2009

Countrywide Financial's senior executives are sued by the SEC

On June 4, 2009, the Securities and Exchange Commission filed a complaint against Angelo Mozilo, David Sambol, and Eric Sieracki, in the United States District Court, for the Central District of California, Case number CV 09-03994 VBF (AJWx). The complaint alleges that the named defendants "misled the market by falsely assuring investors that Countrywide was primarily a prime quality mortgage lender which had avoided the excesses of its competitors."

Based on this complaint, Countrywide Financial Corporation was founded by Eric Mozilo in 1969. Countrywide was headquartered in Calabasas, California, and its shares were traded on the New York Stock Exchange. Countrywide became one of the country's largest mortgage lenders until it suffered losses due to subprime loans, and was merged into Bank of America in July 2008. Angelo Mozilo was Countrywide's chairman of the board and its chief executive officer. David Sambol was Countrywide's chief operating officer. Eric Sieracki was Countrywide's chief financial officer.

Robin Mashal is a partner at the law firm of Hong & Mashal, LLP, and can be reached at (310) 286-2000. His practice focuses on business law, real estate law and civil litigation. Hong & Mashal LLP is a California business law firm.

Monday, June 1, 2009

Some Relief for the Borrowers

With the current state of global economy, there seems to be some good news for the borrowers. Here are a few examples.

Banks are Cash Strapped
The government has been conducting "stress tests" on banks, and telling some they need more liquidity. This apparently prompted some banks to send letters to borrowers with offers to discount the principal amount of their mortgage debts, if they can currently payoff their loan balances. Some borrowers have been able to approach lenders and negotiate nearly 30% off their principal balances to payoff the loan in cash. These scenarios are limited to large commercial mortgage loans, and only for those borrowers who can afford to pay them off in cash. But for those who have this ability, it is an amazing opportunity to make a good deal of money as the market will recover in the next few years.

Qualified Principal Residence Indebtedness
Section 108 of the Internal Revenue Code treats a discharge of a debt as ordinary income, taxed at ordinary income tax levels. For example, if a homeowner owes $500,000 to a bank and bank agrees forgive this debt, this like the homeowner had income of $500,000 and used it to payoff the debt. However, in light of the current "mortgage meltdown", Congress has created an exception. The Mortgage Debt Relief Act of 2007 allows a homeowner to exclude income from the discharge of debt on their principal residence in calendar years 2007 through 2012, based on mortgage restructuring, or forgiveness of mortgage debt in connection with a foreclosure. The Act allows up to $2,000,000 of forgiven debt to be excluded from income for married couples filing jointly, and up to $1,000,000 for married couples filing separately.

Deferred Discharge of Debt Income
On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009. This Act added a new Subsection 108(i) to the Internal Revenue Code, which permits a debtor to defer the recognition of discharge of debt income from the purchase, exchange, or forgiveness of a debtor’s debt instruments during calendar years 2009 and 2010. When this election is properly made, the taxpayer must include the discharge of debt in taxpayer's income ratably over the five taxable years starting with the fifth taxable year after the taxable year in which the reacquisition event took place.

Protection for Credit Card Borrowers
On May 22, 2009, President Obama signed into law the Credit Card Accountability, Responsibility and Disclosure ("CARD") Act of 2009. This new regulations will become effective February 2010, and are intended to protect the consumers from deceptive practices by the credit card companies, and include the following features: Cardholders must be given 45 days' notice prior to significant term changes including interest rate increases; credit card company cannot raise interest based on cardholder's record with other creditors; no more double-cycle billing; and payments on each statement will be due at least 21 days after the statement is mailed out.

Robin Mashal is a partner at the law firm of Hong & Mashal, LLP, and can be reached at (310) 286-2000. His practice focuses on business law, real estate law and civil litigation. Hong & Mashal LLP is a California business law firm.