Homebuying 101: should you get Closing Protection Coverage?

My spouse is more apt to get coverage that protects you beyond the normal warranty period, whether it is an extended warranty for a phone or car, or extra protection with an insurance policy.  Perhaps as an attorney I feel ready to assert my rights under express or implied coverage, and related laws.  Sometimes his way is more appropriate and prudent, other times such “extra” is unnecessary overkill.  Closing Protective Coverage (CPC)?  Get it.

In a nutshell, CPC protects you against mistakes or fraud from your title agent.  “Doesn’t my title insurance cover that?”  No, and many people make the mistake of thinking it does.  Your title agent is an independent person from the title company, i.e., they are licensed to work with the title company to get title insurance to you.  Often the title agent holds funds from buyer, seller or both in escrow until a certain time during the real estate transaction.  So, the independent title agent, might or might not be holding funds…. If a mistake, or–worse–fraud occurs, the title insurance company is not responsible for the acts of independent title agents.

Ohio law requires that the CPC letter offering the option for coverage must be given to the parties at the time the order for title insurance is placed.  The Closing Protection Coverage indemnifies the purchaser from:

(1) Theft, misappropriation, fraud, or any other failure to properly disburse settlement, closing, or escrow funds;

(2) Failure to comply with any applicable written closing instructions, when agreed to by the title insurance agent.

The cost for CPC is relatively low: for buyers it is $20, for sellers it costs $55.  You likely won’t experience fraud or mistake, but if you do, research showed that the range of costs from claims arising out of closing agent fraud start in the five figures.  CPC is worth it.

Contact me at julie@juliemillslaw.com, (216) 438-1298 (northeast Ohio) or (614) 519-8661 (central Ohio) for any help with real estate matters.

 

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Home Buying 101: importance of “Title Commitment” policy

Title to your property is its history of ownership.

I admit it: when my husband and I bought our house almost two decades ago, I sailed through signing our documents without paying too much attention to the mounds of paperwork.  My legal practice areas at that time didn’t involve much real estate, and I hired my boss to represent us through buying our home.  We had no issues.

Then, I represented a client purchasing a home and was “aghast” at what problems my husband and I could have had.  I decided to become extremely educated on things many ignore, particularly, title commitment policies.  The home buying process and the paperwork can be daunting, and my blog will run a short series (Home Buying 101) to make it a little easier to digest.  You might not become a real estate expert but hopefully my posts will poise you to ask questions most relevant to your situation.

“Title” to your property is basically a history of its ownership.  It is important when you buy property to know that you have “clear and marketable title.”  The land is yours, and no other interest or defect is going to come along and mess with your ownership, which could cost you a lot of money.  For example, you bought your home and assume it’s all yours.  But–at some point in the past (along the “chain of title”) someone who owned the home before you and died had an unknown heir who now says that he owns part of your property, as his dad’s will stated.  This stuff happens, and without insurance, you could become involved in a law suit.   Or a past contractor has a lien against your property for unpaid work.   Or a past owner has a court judgment against her that attaches to the property.  This list of possible “defects” is endless.

A title commitment policy ensures you–the buyer–that the property you buy will be free from any “problems” (defects) regarding ownership.  No one from the past will step forward and state that they have a right to your property–if anyone does, you are protected by insurance.

Once you decide you want property that is for sale, your realtor will order a title commitment.  You get the title commitment before closing, and the title policy after closing.  The title commitment is reviewed, amended if necessary, then becomes your policy after you close on your home.  You should carefully review your title commitment so that it says and covers what you want.  This might be where readers drift away because the document seems overwhelming, so if you are not likely to read the entire document, then 1) hire me (or any real estate attorney), or (better yet) 2) read Schedule B of the commitment.  Schedule B of the document is specific to you, the seller, and your situation.  Keep in mind that you typically have only a few days to review a title commitment so be sure to review as soon as you receive it.

Schedule A is the nuts and bolts of identifying information–buyer and seller information, commitment date, property price, loan amount, etc.  Schedule B is what you want to really pay close attention to, read more than once, read again.  Schedule B lists the exceptions to the policy, especially the Covenants, Conditions & Restrictions (CC&Rs).  Exceptions can affect the property being insured and are not covered by the title policy.  Examples include restrictions, easements (most utility easements are standard, but some easements exist that aren’t of public record and can affect your use of your property), setback requirements, and mineral rights.  What are your restrictions?  Do you understand how they could impact your ownership and use of the property?

For many of my clients, their home is their biggest asset.  Know what Schedule B says in your title commitment, at the least.  I do recommend having an attorney review your documents, particularly your title commitment.

If you have any questions about purchasing a home, or your title commitment, contact me at julie@juliemillslaw.com.  I represent buyers and sellers in residential real estate purchases.

 

 

10 Essential Steps to Start a Nonprofit–Final Step

Step #10:  Dissolving Your Nonprofit

Step #10 runs contrary to the title of the series, “10 Essential Steps to Start a Nonprofit,” but should be reviewed by those who are forming (or thinking about forming) a nonprofit.  Dissolving a nonprofit happens for many reasons: it becomes too difficult to raise funds or obtain grants; there are too few resources or revenue streams to offer programs or services; the mission or cause is no longer relevant or has been accomplished; or it has failed to file necessary forms and tax-exempt status has been revoked, leading the board of directors and voting members to vote to dissolve.  Whatever the reason, start with these steps (this list is not exhaustive!) to dissolve your Ohio nonprofit.

  1.  Have the board of directors and voting members vote to adopt a “resolution to dissolve.”  This resolution provides authority to move forward with the dissolution process.  In certain circumstances it is possible for directors alone to authorize dissolution–check to make sure you can proceed this way before starting.  Your dissolution should comply with the dissolution terms set forth in your code of regulations/bylaws.
  2. File a Certificate of Dissolution with the Ohio Secretary of State.
  3. File a Final Annual Report and Asset Disposition form with the Ohio Attorney General.
  4. File a tax clearance certificate with the Ohio Department of Taxation showing that all necessary tax obligations have been met.
  5. If your nonprofit had employees, you will need to notify the Department of Job and Family Services that contributions are either not required, or have been paid.
  6. On your IRS tax forms 990 or 990EZ, you will need to file a Schedule N (Liquidation, Termination, Dissolution, or Significant Disposition of Assets) as well as some organizing documents to notify the IRS that your nonprofit has dissolved.

Some nonprofits choose to just let the organization “expire”: the IRS revokes tax-exempt status after three years pass without filing the 990 tax form; the Secretary of State takes control of business records and lists the nonprofit as inactive if filing dates are missed, etc.  However, it is recommended (by me, for example) to complete the steps in the dissolution process so that you officially end the nonprofit corporation’s existence.  The main benefits of formal dissolution are that you make the organization beyond the reach of claimants and creditors, and you fulfill your obligations under Ohio law of distributing any remaining assets properly (i.e., to a like-minded nonprofit).

If you want to discuss how to dissolve a nonprofit, email me at julie@juliemillslaw.com.

10 Essential Steps to Start a Nonprofit (cont’d)

Step #9: Money and People!

You have completed most legal steps to forming your nonprofit, now it’s time to start the steps that help truly launch your organization, i.e., money and people.  Securing funding, forming partnerships—these steps will put your group in a position to accomplish your goals.

  1. Fundraising: know your state’s laws on fundraising that involve gambling or alcohol. Keep detailed financial records of the funds you receive.  If your events involve minors or animals, have waivers and releases ready!  Inquire when you need insurance for events.  Obtain the correct permits and permission from local authorities before your event.  If you are serving or selling food, be sure to check with your local health department and other agencies to see if you need to provide information.  This list is not exhaustive.
  2. Grants: educate yourself, your grant committee if you have one, and others who want to help with grants, on grant writing and the grant application process.  How you present your organization when applying for a grant affects how grant funders view your organization.  They are determining whether to give your group money from the application you submit.  Are your financials in order?  Are your goals and mission clearly described?  Are you organized, which implies trustworthiness with the money they give to you?
  3. Corporate sponsorships: one thing I learned when trying to identify potential corporate sponsors is that you want to look beyond what the corporation does and sells.  For example, animal related nonprofits tend to approach animal-related companies, e.g., pet food, pet supply, pet boarding companies.  This leaves out a potentially large source of funding.  A large contributor to local pet charities in my town is a basement foundation and repair company.  Another large sponsor of animal rescue-related charities in my area is a laptop repair and sales business.  Expand your outreach with companies!
  4. Partnerships: other organizations can be one of your greatest assets. Leverage your contacts in forming partnerships.  The food pantry you start would get much public view if you partner in an event with a group who fills bookbags with food to provide weekend meals for kids who suffer from food insecurity.  Contact organizations who might benefit from your group, and who might provide a benefit to yours.
  5. Media: send the word out to local media about your group, your events. Become familiar with preparing media releases.  Connect with Facebook groups, prepare a content calendar for posting on social media such as Facebook, Instagram, Twitter, Pinterest, etc.

Information about grant writing, fundraising, partnerships and related topics could fill a book.  The information above should serve to get you started in launching your organization’s work.  I’m happy to answer any questions–contact me at julie@juliemillslaw.com.

When to say goodbye to pets

A sizable portion (surprising to some) of my law practice is pet estate planning.  Whether it’s preparing a will and designating someone in it to care for your pet if you die, or creating a pet trust for your pet (recommended), or adding provisions to an existing will or trust, people see pets as family and plan for them as they do their children or other beneficiaries.  People engage in pet estate planning for everything from one dog, to a stable of horses, to parrots who often live to age 60 or 70.  (Blatant plug–I was one of the first Ohio attorneys to publish an article on pet estate planning after the change in Ohio law that permitted it.  I wish everyone planned for their pets in this way, and I’m happy to help with documents and, or, letters of intent regarding their care.)

As difficult as it is to plan for a day when we might not be able to care for our pets, it is incredibly difficult to know when it is time to humanely let our pets die.  How do you know when it’s time to let them go?  That decision is fairly easy when there’s visible suffering, but the signs aren’t always so clear.

Veterinarian Alice Villalobos, DVM created a scale that can help guide pet owners in deciding whether euthanasia is appropriate.  If you score higher than 35 on the scale, then perhaps supportive care is appropriate instead of euthanasia.  Whatever your score is on this scale, my suggestion is to discuss everything with your veterinarian.

If I can help you plan for your pet should something happen to you, please email me at julie@juliemillslaw, or visit http://www.juliemillslaw.com for additional information.

Three Ways Couples Hold Property in Ohio

There are three ways in Ohio that couples can hold property.  Why does it matter?

The form in which you hold property affects how you can transfer the property, what happens to it at your death, what happens if one of two property-holders dies or wants to sell his or her portion.  You should know how you hold property so you can change the type of deed you have for your specific reasons.  Do you want the other owner to get your share if you die, or do you want your kids to get it?  Do you want to transfer your share to the other owner outside of probate?  Do you want to transfer your share of the property to your spouse at your death only?

Get out your deed, or get onto your county recorder’s website and find your deed online.  Does it state:

1.  “George Burns and Gracie Allen, Husband and Wife”?  If no manner of title is stated, in Ohio the form of ownership will be presumed to be tenancy in common.  Each person owns an undivided fractional interest in the property.  They can own equal or unequal shares.  When an owner dies, that person’s share must go through probate, and is then transferred according to his or her will.

2.  “George Burns and Gracie Allen, joint tenants with rights of survivorship…”  The magic word is survivorship.  If the deed is a survivorship deed, then on the death of one owner, that owner’s share passes outside of probate to the other owner.  For a couple whose largest asset is their house, and few other assets that would need probated, having a survivorship deed could result in avoiding probate.

3.  What if George owned property and wanted to have the property pass to Gracie at his death, but for any number of reasons didn’t want her to have a present interest in the property?  George could have a transfer on death affidavit prepared (and recorded).  He would name Gracie in the affidavit to receive the property at his death.

If you want to avoid probate, be sure your deed has survivorship language or you record a transfer on death affidavit.  Why make your heirs go through the probate process if they can avoid it?

To change the form of ownership you have with your property, contact me to decide the best form of ownership for your situation, and to prepare and file a deed if necessary.  I can be reached at julie@juliemillslaw.com.

10 Essential Steps to Start a Nonprofit (cont’d)

STEP #8: WAYS TO LOSE YOUR TAX-EXEMPT STATUS

Most charities rely on donations to operate.  To attract donations, nonprofits will pursue tax-exempt status from the IRS so they can tell donors that their donations are deductible from their taxes.  People generally recognize the IRS code, 501c3, as an indicator that their donations are deductible.  Tax-exempt status makes it possible to secure grants, and makes the organization attractive to corporations and business who want to donate, for “good will” reasons and/or to receive a deduction off taxes.  Losing your tax-exempt status can be a huge blow to a charity, both financially and to the charity’s reputation.  Becoming knowledgeable on ways to lose tax-exempt status is crucial in running a tax-exempt nonprofit.

The federal government grants your organization tax-exempt status if you agree to certain behavior.  The government is saying, “we won’t make you pay certain taxes, but you now owe the public certain things (disclosure and accountability), and you must not do certain things.”  Not following the rules means that the IRS could revoke your organization’s tax-exempt status.

How to jeopardize your tax-exempt status:

  1. Inurement,” or private benefit.  First, as you read the definition of inurement, know that any amount can jeopardize tax-exempt status.  Second, inurement means to “benefit.”  The prohibition against inurement means that there shall be no using income or assets of a tax-exempt organization to unduly benefit an individual or organization that has a close relationship with the tax-exempt organization.  The inurement prohibition is absolute.  Assets and income are to be used to further the organization’s mission, period.
  2. Unrelated Business Income (UBI).  If your organization runs a business that produces income for your organization, but the purpose of the business is unrelated to your organization’s mission, then the organization is subject to tax on its income from the business.  If your tax-exempt organization provides clothing for shelters and low-income families, and receives income from a thrift store it runs, it is unlikely there would be a risk for UBI.  If your organization is a pet rescue and receives income from a nail salon business, the rescue might have UBI.
  3. Political campaign activity.  As with the inurement prohibition, any amount of political campaigning in support or opposition of a candidate is prohibited and could result in loss of 501c3 (tax exempt) status.  I counsel nonprofit clients that the organization can’t engage in political activity regarding a candidate, but can generally support or oppose an issue.  The tax-exempt “clean oceans” organizations can oppose a ballot initiative to ease pollution restrictions, for example.  I caution to proceed carefully, since tax-exempt status can be revoked if political activity is deemed to be “substantial,” and there are tests the IRS uses to determine this.

Guard your organization’s tax-exempt, 501c3 status.  Having to reapply is cumbersome if you lose this status, and it might give donors a reason to donate their money to an organization who has not behaved in ways that result in losing this designation.

If you have any questions about getting, maintaining, or losing tax-exempt status, email me at julie@juliemillslaw.com.