Saturday, December 31, 2011

LLC Incorporation Myths

Business owners often struggle with whether or not they should form a limited liability company for a new entrepreneurial venture. And that maybe makes sense. Deciding to form a limited liability corporation requires thoughtful analysis.

Unfortunately, people often complicate the analysis of LLC incorporation because they believe several "urban myths" about the limited liability company. The good news in all this--at least from your perspective--is that you'll make your own entrepreneurial decision-making easier and more profitable by recognizing and then ignoring these myths. But let me explain...

Limited Liability Company Protection Weaker than a Regular Corporation

Commonly, you hear knowledge-able business people--sometimes even attorneys and accountants--suggest that a limited liability company provides its owners with weaker protection than a corporation. Often the person unhelpfully offering this bit of mythology pairs the advice with the statement, "Well, you know, the thing is, LLCs just haven't been as tested in litigation."

This myth is dead wrong--and for two big reasons. First, if you talk with attorneys knowledgeable in LLC law, you'll learn that a limited liability company offers better protection than a regular corporation because by design an LLC requires less legal maintenance in the form of meetings, minutes, boards and officers. Less required maintenance means in layman's terms that the LLC owner is less likely to "break" the legal protection.

The weaker legal protection myth misleads business people in a second way, too. In many states, an LLC provides protection that regular corporations do not. How? In many states, your personal creditors may in a worst-case scenario be able to gain ownership of your stock in a corporation but not of your interest in an LLC.

In other words, many times, the LLC doesn't just provide you, the owner, from bad stuff that happens inside the LLC. The limited liability company also self-protects business assets from bad stuff that happens to the LLC owners.

Limited Liability Company an Alternative to S Corporation

Another limited liability company myth concerns the "LLC versus S corporation" question.

People often assume (incorrectly) that one option you need to consider as an alternative to a limited liability company is the S corporation. After all, sure, LLCs may be great. But S corporations (so the rumors say) offer small businesses the opportunity to minimize payroll taxes that the owners pay.

But here's where this myth loses touch with solid ground reality. An S corporation is not a real corporation. An S corporation is a tax accounting classification that the Internal Revenue Service and almost all state revenue agencies allow corporations and LLCs to make.

In other words, a business owner never has to choose between an LLC and an S corporation. A business owner can choose to have his or her LLC treated for tax accounting purposes as an S corporation.

Note: If an LLC doesn't make an election to be treated as an S corporation, the IRS uses default rules to determine how the LLC is taxed. Typically, the one-owner business operating as an LLC gets taxed as a sole proprietorship. And a business with more than one owner that is operating as a limited liability company gets taxed as a partnership.

Limited Liability Company the 'Fly-by-night' Option

One last, almost laughable, LLC myth needs busting: the notion that the LLC option is the one that 'fly-by-night' operators use.

One can guess where this notion comes from: All the big, old business entities like General Electric, 3M, and IBM operate as regular corporations. And so it sort of seems like new small businesses should, too.

But here's the problem: The corporation is not state-of-the-art legal technology. The corporation is, really, an old technology. You should think about a corporation as being like a steamship a skyscaper.

The limited liability company option, in comparison, is like a personal computer or the Internet. In a sense, the LLC amounts to a new legal technology with big benefits as compared to the old technology of the traditional corporation. Which is probably why newer big companies like Microsoft, and many of the cellular phone companies make extensive use of the LLC.

Note: Big benefit number one is the fact that the LLC requires less legal maintenance. Benefit number two comes from the fact that limited liability companies select the tax accounting treatment they want.

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Wednesday, December 28, 2011

Emancipation of a Minor

Emancipation is the process by which a guardian relinquishes - or is made to relinquish - parental control over a minor (that is, someone under the age of 18). The child then gains certain rights which are usually reserved for adults, thought not all of them. There are several situations under which a minor may wish to seek emancipation, or when a parent may wish to have them emancipated for practical reasons. However, until a court legally grants an emancipation, the child is still legally subject to the rules and guidance of their parent or guardian.

Military Service

The first common way a minor in the United States can become emancipated is by joining the military. This is an issue of practicality, as once a minor is a member of the US armed forces, he or she is ultimately answerable to the government, not his or her parents. However, for a minor to join the military in the first place, the approval of the parents is required. In this sense, it is a sort of transfer of responsibility, from parent to government.


Like military service, a minor becoming married makes parental responsibility impractical. Also like military service, a marriage requires the guardian to agree to the minor getting married. The duty of a minor to obey his or her parents is replaced by the minor's obligation to support his or her spouse.


The third common reason for the emancipation of a minor is continued domestic abuse. Repeated abuse form a parent is usually grounds for emancipation if the child is supporting himself or herself. If the child is too young for this, he or she is usually remanded into the custody of the state. The decision of a court to allow a child emancipation due to abuse is very dependent on the circumstances of the case. If you believe you have a right to emancipation, it can help to discuss your case with a family lawyer before proceeding.

Filing for Emancipation

The laws regarding how a minor obtains emancipation vary by state, although there is plenty of common ground. The minor must file a petition with the court, which usually requires proving an adequate reason for seeking independence. The filer must also prove economic independence. Finally, except in cases of abuse, the minor must prove parental consent.

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Tuesday, December 27, 2011

What Is A Notary Public?

Most people have heard the term "notary public" and "notarized signature" but have no idea who notaries are and what they actually do. A notary public is a sworn and bonded official of a particular U.S. state who is appointed by the Secretary of State.

In carrying out these duties, a notary public is expected to exercise independent judgment as well as following the state law. If the notary suspects that a signer is not of sound mind, does not understand what he or she is signing, or is being coerced, the notary has a duty to refuse to notarize the signature. The same holds true if there is any indication of fraud or deception.

The most common transaction for the notary relates to a signature on a document, referred to as execution of the document. The document signer must appear in person and present valid identification to the notary public. He or she must confirm understanding of the document and that he or she is signing voluntarily under his or her own free will.

A notary public can also acknowledge that the signer swore to or affirmed the truth of the information contained in a document. This is what most people are referring to when they talk about a "sworn statement." What kind of notarial act is required is up to the parties, not the notary.

You may have seen a notary seal on a document. Many people assume that application of the seal is the notarial act, but this is not correct. Some states do require a seal, but it must be accompanied by notarial wording which usually refers to the signer and the date. It might say something like, "Acknowledged before me," or "Sworn and signed before me," with the name of the notary public and the date added. The notary public will ask for a signature in his or her official journal, which is required by the state. In some states a thumbprint will also be taken if the document relates to a real estate transaction.

If this all seems complicated, don't worry. You don't need to know a lot of background information in order to get something notarized. If a real estate transaction or legal proceeding requires a notarized signature, the only thing you need to know is where to find a convenient notary. Many full-service business shipping outlets such as UPS Store have notaries available. The advantage of using services in a UPS Store or similar place is that you can also make copies of the document for yourself, your attorney, or any other parties who might need a record, and you can ship them from there, also.

Notaries are appointed and so are subject to oversight and discipline by the state government. Notary fees are also regulated. A notary commission expires and must be renewed, typically after four years, though it varies from state to state.

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Do you need a notary?  By The People of Fairfield always have a notary public available during business hours.
1371-C Oliver Road, Fairfield
Office Hours:
Monday thru Friday 9:00am to 6:00pm

Friday, December 23, 2011

3 Reasons Why You Should File An Uncontested Divorce

Divorce is one of the most difficult situations that any individual can go through in their lifetime. The situation can actually become significantly more difficult in the event that there are children involved. However, it is a common misconception that all forms of divorce are difficult and only can be handled by engaging a fierce legal battle. Many times if the parties to divorce can agree on several major points they can actually file what is known as an Uncontested Divorce. This sort of legal remedy is not only mutually beneficial but it also is significantly less costly than a standard action that would be filed in the courts. Here are 3 major reasons why you should opt to file an Uncontested Divorce.

1. A significant decrease in costs associated with attorney fees and legal expenses due to the fact that most of the major issues that are typically disputed in the courts are already decided by the parties. It is without a doubt that attorney fees are quite high when it actually comes to cases dealing with a Divorce. As a result, it is always a very good idea to come to terms with the other side in order to taken advantage of an uncontested filing. This will not only speed up the process of the separation but it will also be significantly less expensive had it been a standard disputed case.

2. A very stress free and simple way of dividing the assets of the marital property between the parties. Typically there is a great deal of dispute regarding the splitting of the marital property. There is so much controversy and legal fighting that occurs as to who is really entitled to have a specific asset from the estate. However, when the parties decide as to who is to receive what asset then it makes sense to file an Uncontested Divorce because there will be no need for extra legal expense and headache associated with adjudicating the matter in court.

3. Easy method by which the custody of minor children is divided as well as determination of visitation rights. This is one of the most sensitive topics throughout the whole process because it involves minor children and they can be severely affected by the quarreling of the parents. However, when the matter is solved via an Uncontested Divorce then essentially there is less of a emotional burden on the children.

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Wednesday, December 21, 2011

Valid Reasons To Contest A Will

Sometimes when an individual passes away and leaves a will, controversy arises over whether the will should be probated. Family members may find themselves being pitted against one another if the wishes described in a testator's will are disputed. While no one wants to find himself in the position of contesting a will, sometimes there are valid reasons to do so. If you believe that a will is invalid for one reason or another, and you are a potential beneficiary, it may be in your best interest to contest the will.

Who Can Contest a Will?

Before submitting a reason for contesting a will, is important to first know whether you are even eligible to contest. To be eligible, you must have some stake in the outcome of the will. Perhaps you are a beneficiary but feel that you should have been given a greater share, or maybe you were left out of the will entirely but believe you are entitled to be included or would have been included under intestacy laws. If you stand to gain financially from contesting a will, you will likely be permitted to submit a contest if you wish.

Criteria for Contest

There are several reasons that an eligible individual may contest a will. The valid reasons for opposing a will's probate include:

  • Fraud: The supposed testator did not actually create the will being submitted, the signature of the testator was forged, or the testator was tricked into thinking that s/he was signing a different document other than a will.
  • Undue Influence: Through blackmail, threat, bribery, or other influence, an individual convinced the testator to change his or her will or to write a will that benefited the offending individual over others.
  • Mental incapacity: The testator was not "of sound mind" to write and/or sign the will.
  • Improper procedure: The will does not meet the validity requirements as listed under state law. For example, the will was not signed by the testator or witnesses were not present.
If an individual can provide evidence that a will is invalid for any of the above reasons, the will may be declared invalid by the court. In this case, an earlier will draft may be admitted to probate or, if a different valid will draft doesn't exist, the estate may be divided according to state intestacy laws.

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Wednesday, December 14, 2011

What is a Promissory Note and Why Do You Need One?

A promissory note is a legal contract used to record details of a loan transaction between two or more parties. Promissory notes are used in a variety of financial and real estate transactions, as well as business and personal loans. Before signing any promissory note agreement, it's important to understand the different types of notes, how they are used, repayment schedules and legal terms.

Types of Promissory Notes:

Personal: One of the most common types of promissory notes are ones used to document personal loans between family members or friends. Although many people shy away from legal documents when lending money to personal acquaintances, a personal promissory note can prevent misunderstandings. Drafting a personal note payable demonstrates a good faith effort on behalf of the Borrower and offers a sense of security to the Lender. Personal promissory notes should clearly state the repayment terms, amount to be repaid, how much interest will be charged and what will occur if the Borrower defaults on the loan.

Commercial: When borrowing money from a commercial lender, a promissory note will almost always be required. Similar to personal promissory notes, commercial notes outline the repayment terms, payment amount and interest rate. Should the Borrower default on a commercial promissory note, the lender has the right to demand full payment. For example, if you take out a $5000 loan and default on it with a balance of $2500 due, the Lender can demand you pay the balance immediately. If the lender is unable to collect, they can place a lien on the property you are financing. If the lender sues you, they can legally take possession of your property. Not only will you lose the property, but it will also leave a negative impact on your credit report.

Investments: Many organizations use promissory notes as a way to raise capital for business. A promissory note is issued to investors in exchange for a loan. This type of note payable guarantees investors will receive a return on their investment within a specific time period.

Real Estate: Negotiable promissory notes are used in real estate transactions. Governed by Article 3 of the Uniform Commercial Code, real estate promissory notes must meet certain conditions set forth by the National Conference of Commissioners on Uniform State Laws.

Repayment Schedules:

There are several types of repayment schedules associated with promissory notes. Personal notes are usually more lenient than commercial, investment or real estate notes. Commercial lenders typically devise a repayment schedule based on financial forecasting. Basically, there are three types of promissory note repayment schedules. They include:

Installment Payments with Interest: This type of repayment schedule is referred to as amortized payments and allows Borrowers to pay a set amount each month for a specific time period. A portion of the payment is applied toward the principal and the remainder is applied toward the interest. This type of repayment schedule is common when borrowing money for an automobile, home or business loan.

Balloon Payments: This type of repayment schedule allows borrowers to pay installment payments or interest-only payments; followed by one large (balloon) payment at the end of the loan. Although interest-only payments can be appealing, the downside is the principal amount of the note never decreases. The balloon payment consists of the entire amount of principal, along with any interest remaining on the loan.

Lump Sum Payment with (or without) Interest: This type of repayment schedule is frequently used for short term personal loans which can be paid back within twelve months or less. As the name implies, the Borrower repays the amount of the loan in one lump sum payment on a specific date. If interest in charged the amount of interest should clearly be stated in the promissory note along with the principal amount and repayment date.

Legal Terms:

Although promissory notes are relatively simple documents, it's always a good idea to have an attorney draft them. At the very least, an attorney should review the documents to ensure they are legally binding and will hold up in a court of law. Should you decide to draft a promissory note without legal counsel, it's wise to be familiar with the terminology used within the document. Basically, there are five legal terms used in a basic promissory note.

Promisor - The person who is obtaining the loan and who will be obligated to repay it.

Promisee - The person who is providing the loan and who will receive payment for it.

Obligor - The person who is bound by the legal agreement; usually the Promisor.

Obligee - The person to whom the Obligee is bound; usually the Promisee.

Mutual Consideration - When there is a contract between two parties there must be some value received by both parties. This is referred to as "mutual consideration". In the case of a promissory note the Promisor receives value from the loan and the Promisee receives value from the repayment of the loan.

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Sunday, December 11, 2011

Estate Planning : What Is a Durable Power of Attorney?

Durable power of attorney allows the power of attorney to manage funds even in the event of incapacitation. Find out what durable power of attorney is from an estate planning and probate lawyer in this free video on estate law.

Saturday, December 10, 2011

Incorporation 101: The Nature of Limited Liability Companies

What is LLC?

Limited Liability Company (LLC) is a relatively new business structure allowed by state statute. It is neither a partnership nor a corporation, but a distinct type of business structure that offers an alternative to those two traditional structures by combining the corporate advantages of limited liability with the partnership advantage of pass-through taxation.

Limited Liability Companies are becoming more and more popular, and it's easy to see why. LLCs combine the personal liability protection of a corporation with the tax benefits and simplicity of a partnership. In addition, they're more flexible and require less on going paperwork than corporations.

Owners of an LLC are called "members". Since most states do not restrict ownership, members may be individuals, corporations, and other LLCs and foreign entities. There may be unlimited number of members. Most states also permit "single member" LLCs, those having only one owner.

Members in an LLC are analogous to partners in a partnership or shareholders in a corporation, depending on how the LLC is managed. A member will more closely resemble shareholders if the LLC utilizes a manager or managers, because then the members will not participate in management. If the LLC does not utilize managers, then the members will closely resemble partners because they will have a direct say in the decision-making of the company.

Why Should I Form an LLC?

If you decided to start your own business, you will need to figure out which type of business entity you want to set up. Today LLC is one of the most popular business entities established by new businesses because of the many advantages it has. Forming an LLC helps protect your personal assets, reduces your taxes and saves your time and efforts by eliminating excessive paperwork. In other words, LLCs are often favored over other types of business entities because they combine the limited liability protection of a corporation and the pass through taxation of a partnership.

Single- vs. Multiple-Member LLC

In general, LLCs can be formed with unlimited numbers of members, in which case it is called Multiple-Member LLC. Nevertheless, most states also permit Single-Member LLCs, having only one owner (member). A Single-Member LLC is taxed as a sole proprietorship, while a Multiple-Member LLC is taxed as a partnership.

Advantages of Forming LLC

LLC is a relatively new type of business structure that combines the best features of the corporation with those of the sole proprietorship or partnership. LLC has many advantages and benefits which cannot be enjoyed together in any other type of business.

  • Personal Liability Protection:
LLC is an entity separate from its owner(s). Being legally distinct entity, the personal assets of the owner (such as personal residences, and personal bank accounts) are not reachable by business creditors. The LLC owner's liability is generally limited to the amount of money that person has invested in the LLC. Thus, LLC members are offered the same limited liability protection as corporation's shareholders.
  • Tax Advantage:
LLCs allow pass-through taxation, and that advantage is the prime reason for the recent popularity of the LLCs. Pass-through taxation means that earnings of an LLC are taxed only once, basically being treated like the earnings from a partnership, sole proprietorships and most S-Corporations.
  • Ease of Transfer:
With LLCs its easier to sell ownership interests to third parties without disrupting the continued operation of the business. As a comparison, selling interests in a sole proprietorship or general partnership require much more time and effort. An owner must individually transfer assets, business licenses, bank accounts, permits and other legal documentation.
  • No Ownership Restrictions:
LLCs have no restriction on the number or types of owners. By comparison, S-Corporations cannot have more than 100 stockholders, and each must be a resident or citizen of the United States. None of these restrictions apply to an LLC.
  • Easier to Raise Capital:
LLCs allow for many ways to raise capital. You can admit new members by selling membership interests. You can even create new classes of membership interests with different voting or profit characteristics.
  • Greater Credibility:
As a registered LLC, your business will enjoy legitimacy and greater credibility when dealing with other companies, banks and potential partners/investors.
  • Flexible Management and Ownership Structure:
Like general partnerships, LLCs are generally free to establish any organizational structure agreed on by the members. Thus, profit interests may be separated from voting interests.

How to Form an LLC?

After you decide to form an LLC, Articles of Organization must be filed with that state and initial fees must be paid. After your Articles of Organization are filed, your LLC should have an organizational meeting where an Operating Agreement is adopted, interest certificates are distributed, and other preliminary matters are completed. LLC Kit includes all of the information and paperwork to make this process easier.
  • Publications:
Three states require notice to be published in a newspaper that an LLC has been formed - New York, Arizona and Nebraska.
  • Federal Tax ID Number:
A Federal Tax Identification Number, also known as an Employer Identification Number or EIN, is basically a social security number for businesses. It is the number the IRS uses to identify the business, and it must be included on tax filings the business makes. If you operate your business as a sole proprietorship or partnership and are now looking to incorporate or form an LLC, you must obtain a new EIN for your business.
  • Single-Member LLCs:
The IRS does allow Single-Member LLCs to qualify for pass-through tax treatment. However, taxation of one person LLCs at the state level may be different.
Corporation as an LLC Member

A corporation can be a member of an LLC. This allows you to create an additional level of ownership, which is designed to create an entity that can offer such traditional fringe benefits as retirement plans and an additional level of protection from liability.

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Friday, December 9, 2011

Using A Quit Claim Deed In A Divorce

A divorce is always a hard decision to make whether the husband and wife were together for only a short time or for long years. Not only does it involve emotional distress but division of conjugal properties as well.

When couples decide on who should get this or that conjugal property which they acquired as husband and wife, legal documents known as deed are necessary. These documents are crucial to legally transfer a certain property from one person to another. One vital form is called the quit claim deed.

A quit claim deed is referred to as such because it quits or ceases a person's claim or interest on a real estate property and passes it to another person. There is no guarantee, though, when it concerns the rights of the person receiving the property.

Divorce situations

A divorce is just one of several situations where a quit claim deed proves necessary. An example would be a husband foregoing interest in the property that his wife owns. In this situation, the husband who quits claim on the property is referred to as the grantor while the wife who owns the property is called the grantee. Whatever risks involved here especially since there's no warranty on the title will be taken care of by the wife.

A quit claim deed is also needed if a married person who solely owns a property, which he or she bought prior to getting married, sells the property concerned to a third party. Executing a quit claim deed, in this instance, serves to ensure that the other spouse no longer has any interest to reclaim the property later on. With the absence of this deed, it is possible that the spouse could come back to claim ownership of the property.

In another divorce case, one spouse say, the wife, may want to stay in the conjugal home. The wife then needs to ask for a quit claim deed from her husband so she could claim sole interest in the residential property.

Names and mortgage

A quit claim deed should show the legal names of the parties involved in the transaction. In the case of divorced couples, the deed should bear the husband and wife's legal names or the same names that appear in their divorce decree. However, should both spouses wish to live in separate homes and would like to retain ownership of their conjugal property, this document will not be necessary.

As for mortgage concerns, a quit claim deed does not release the person quitting claim from his mortgage obligations. However, to remove the person who quits claim from the mortgage, the mortgage has to be refinanced through the name of the grantee or the person to whom the interest has been transferred.

In a divorce, a spouse can only claim ownership of the property and mortgage by refinancing the mortgage after the home has been conveyed to him or her. It is important to note, though, that many lenders will only allow a divorced individual to refinance a property if he or she has been on title to the said property for at least one year.

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Tuesday, December 6, 2011

Living Trust - Great Way To Plan For Your Loved Ones

A living trust is basically a trust that is created when one is alive rather than being created when one dies. This legal agreement is drawn to ensure the property of an individual is dispersed as per his wishes when he dies. The individual transfers the ownership of assets to the trust. He then chooses a trustee who administers it. The trustee could be a friend, family member, a law firm or an attorney among others. The trustee holds the legal title of the property on behalf of the beneficiary.
Since this agreement is entered into when the owner is still alive, it can begin benefiting him immediately. It is revocable meaning that one can make any desired changes. It shows how the income and assets it has earned should be distributed after his death. If the owner is the trustee and he becomes disabled or incapacitated a successor trustee can manage the financial affairs.
It can be used for all kinds of properties. Just like the will, it offers quite a broad planning flexibility. For it to work properly it is important to ensure that all the property has been transferred from the name of the owner to that of the trust.
There are many benefits of having such an agreement. Firstly no property registered herewith will be subject to probate. Probate is a process supervised by the court that involves distributing your property to your inheritors and paying off your debts. With this kind of agreement, your assets technically are not yours any longer as the trust owns them. So, your loved ones are saved the hassle of probate which can be expensive and time consuming.
If one is able and willing, he is allowed to manage his own trust. In this case, he makes a provision for the successor trustee to take over after his death. Upon your death, the successor trustee simply transfers all ownership to beneficiaries named in the trust. After all the property has been transferred to the named beneficiaries, the trust ceases to exist.
Another benefit is that this document offers some level of privacy. This is because the terms of this agreement are not made public upon the death of the owner. This means that the deceased individual's debts, assets and inventories remain private. The estate is then distributed privately.
This is an easy way of transferring assets to your inheritors free of probate in a matter of weeks or a few months of your death. It is especially ideal for people with large estates. A married couple would also find it ideal at it could offer savings on income and on estate taxes in form of a joint living trust.
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Monday, December 5, 2011

What Is a QDRO?

A QDRO or qualified domestic relation order is a domestic relations order that creates or recognizes the existence of an 'alternate payee's' right to receive, or assigns to an alternate payee the right to receive, all or a portion of the benefits payable with respect to a participant under a retirement plan, and that includes certain information and meets certain other requirements. It is a judgment, decree or order that is made pursuant to the state domestic relations law and that relates to the provision of child support, alimony payments, or marital property rights for the benefit of a spouse, former spouse, child, or other dependent of a participant.
A state authority, generally a court, must actually issue a judgment, order, or decree of otherwise formally approve a property settlement agreement before it can be a 'domestic relations order' under ERISA. The mere fact that a property settlement is agreed and signed by the parties will not, in and of itself, cause the agreement to be a domestic relations order.
There is no requirement that both parties to a marital proceeding sign or otherwise endorse or approve an order. It is also not necessary that the retirement plan be brought into state court or made a party to a domestic relations proceeding for an order issued that proceeding to be a 'domestic relations order' or a 'qualified domestic relations order'. Indeed, because state law is generally preempted to the extent that it relates to retirement plans, the Department takes the position that retirement plans cannot be joined as a party in a domestic relations proceeding pursuant to state law. Moreover, retirement plans are neither permitted nor required to follow the terms of the domestic relations order purporting to assign retirement benefits unless they are QDROS's.
What you just read is the complete definition according to ERISA (Employee Retirement Income Security Act of 1974) and the Department of Labor. So what does it mean? It means that in order to 'split' any part of one spouse's pension or retirement plan held at their current or past employer with the divorcing spouse. This crucial legal document is necessary to complete the final step in dividing retirement assets in divorce.
Here are some common misconceptions from clients:
  • A QDRO is not necessary to divide an IRA; the final divorce decree will suffice with investment companies and banks. Caution to investments held in annuities and investments with surrender charges. Call the company to find out what, if any surrender charges there will be before signing the final decree.

  • The misconception that the divorce decree is accurate on how retirement assets should be divided; to ensure an 'accurate' divorce decree, have your attorney share the language used in the decree to divide the retirement assets with the attorney drafting the QDRO before the final hearing. This language must be approved by the employer before the judge signs the final order.

  • My divorce decree is all I need to get my portion of retirement assets; we recommend having the QDRO ready and approved by the employer's benefits department when finalizing the divorce. This way the judge can sign both the final decree and the QDRO at the final hearing. Otherwise it may take 6 months to 2 years or longer before you can have these assets placed in your name.

  • The spouse receiving his/her portion of retirement assets will have to pay taxes on their portion. There are options to receiving your portion of retirement assets without paying full taxes. Call us, we can show you your options.

  • My spouse has a 401(k) and a pension to divide, all I need is one QDRO; This is wrong, each plan will require a separate QDRO. Please ask your attorney what your QDRO will cost and who will pay for it and put it in the final order. They may cost from $650 to $1,200 each!

  • The pension is split and QDRO is complete, now I can get my portion of the pension; this is not always the case, you must know what your options are before agreeing to split the pension. It depends on what the plan administrator outlines about your options. Some may require the alternate payee to turn a certain age before having access to income or a lump sum option. So if you are expecting income now, you may have to wait until you and/or your spouse turn 65.

  • My attorney can draft the QDRO as part of their retainer; most attorneys do not draft QDRO's as part of the divorce, they outsource the job to another qualified attorney. The attorney drafting the QDRO must obtain a sample or model QDRO from the plan administrator to properly prepare the document. Most companies will supply this model or sample to the QDRO attorney

  • What happens to my money once the retirement plan or pension is in my name? You have several options depending on the plans rules. If it is a 401(k), then your portion can be rolled into an IRA without paying taxes or penalties. If you are under 59 ½ and decide to take money from your plan you will be subject to not only income taxes, but a 10% early withdrawal penalty too!
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Saturday, December 3, 2011

Warranty Deed vs. Quit Claim Deed

When you're in the process of selling (or purchasing) a house, you will most likely, encounter several kinds of documents: all with different names and with different uses and functions. Two of the most misunderstood documents are the warranty deed and the quit claim deed. Many think that these two forms are alike, but they are not.

A warranty deed is a document which the seller presents to you and is used in majority of all sales transactions. The warranty deed simply states that the seller owns the property being sold and that it is free from any sort of liens. By presenting a warranty deed, the buyer is assured that the holder of the title has the legal right to transfer ownership of the unit and is assured that no one (financial institution or other creditors) would come after him to make a claim on the property. In the eventuality that someone does lays claim to the property that has just been purchased (or that the claims stated in the warranty is erroneous), the buyer is further protected by law, and would be entitled to receive a form of compensation. Warranty deeds seldom stand alone as these documents are usually backed up by a title insurance policy.

A quitclaim deed, on the other hand, is presented to a buyer by someone who does not necessarily own the property being sold, but holds responsibility for it. This occurs due to several reasons such as when the owner dies and bequeaths the property to one of his heirs, or when there is a marriage and the owner wants to include the name of his/her spouse to the title (among others). A quitclaim deed offers a lower level of protection to buyers. This kind of document is used primarily when the property in question will just stay within a family.

Incidentally, there are times when both a warranty deed and a quitclaim deed are presented to a potential buyer. An example is when the property lies on the border of rivers and or lakes; where ownership of the underwater land on which his property stands on remains unclear.

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