To Will or Not to Will

The Texas Bar Journal has a new client page that contains very basic information about why everyone should have a will. Click here for the link. If you need a will, please contact Peterson Law Group at BrazosLawyers.com or 979-703-7014.

Ending the Violence: How to Obtain a Texas Protective Order

This article comes from the State Bar of Texas:

"The Texas Department of Public Safety reports that in 2006, there were 186,868 incidents of documented family violence statewide. However, the Texas Health and Human Services
Commission estimates that as many as 982,916 Texas women were actually battered that year. In Texas, more than 800 women were killed by their domestic partners from 1998 to 2005. These statistics indicate that although family violence is an inexcusable crime, it is prevalent in today’s society. If you or someone you know is a victim of family violence, you are not alone. Although the legal system is unfamiliar territory for most people, it can offer some protection from family violence through the use of a legal document known as a protective order.

What is a protective order?
A protective order is a civil court order that is designed to stop an abuser from continuing acts of violence, threatening, harassing, or stalking. A judge can create various conditions of a
protective order. For example, a judge may order a respondent — the person restricted by the order — to vacate a residence, pay child support, attend counseling, and/or not possess a
firearm. Abusers who violate a protective order can be fined, arrested, or both.


Who is eligible for a protective order?
Victims of family violence are eligible for a protective order. In Texas, “family violence” means an act by a member of a family or household against another member of the family or household that is intended to result in physical harm, bodily injury, assault, or sexual assault or that is a threat that reasonably places the member in fear of imminent physical harm, bodily injury,
assault, or sexual assault, but does not include defensive measures to protect oneself.
An application for a protective order may be filed by an adult member of the dating relationship or any adult may apply for a protective order to protect a child from family violence. In addition,
a prosecuting attorney or the Department of Protective and Regulatory Services may file an application for the protection of any person alleged to be a victim of family violence. Please contact your local law enforcement or domestic violence prevention agency immediately if you or
someone you care about is a victim of family violence. Even if you are not eligible for a protective order, other options may be available.

How do you obtain a protective order?
The first step is to complete an application. The application may be obtained through the office of the county or district attorney, a private attorney, or a legal aid program. In some communities,
domestic violence advocacy groups also provide assistance in obtaining protective orders. The application for a protective order must be filed in either the county where the victim lives
or the county where the offender lives and the applicant’s address can be kept confidential. There are no minimum time limits to establish residency, so even if you have not lived in the same county for very long, you may still file an application for a protective order in
that county. Protective orders are available in every county in Texas.

How much does a protective order cost?
Applying for a protective order is free. An applicant for a protective order may not be charged a fee by the county or district attorney’s office or by a sheriff or constable in connection with the
filing, serving, modifying, or withdrawing of a protective order. There is also no cost for certifying copies, court reporter fees, or any other service related to a protective order. However, if the applicant chooses to use a private attorney for assistance, the applicant may
still have to pay for the attorney’s time in assisting with the protective order. In this case, the court can order a respondent who has committed family violence to pay the private attorney’s fees.

How long does a protective order last?
If the court reviewing the application determines that there is a real threat of immediate family violence, the court may issue a temporary ex parte order that is valid for up to 20 days. The court will then set a hearing date for a final protective order, usually no more than 14 days after the application is submitted. At this hearing, the court will decide whether to grant a final protective order. If granted, the final protective order may be effective for up to two
years. If a person subject to the protective order is imprisoned on the date the protective order would expire, the period for which the order is effective can be extended and the order will expire one year after the person is released from confinement. A new protective order can also be requested after an earlier protective order has expired or while one is still in effect, so long as the earlier protective order is set to expire within 30 days of the date the new application for a protective order is filed.

What does a protective order actually do?
No piece of paper can protect you from all incidents of violence; however, a protective order provides a good deterrent in most situations. A protective order can require the abuser to stay
away from the victim’s home, workplace, and children’s schools (if the children are protected persons in the order). It can order the abuser to stop communicating in a harassing manner
with or threatening the victim. Protective orders can require the abuser to attend counseling, to pay child support, and to pay spousal support. All of the provisions in the order can be
enforced in court. Some violations, but not all, can result in the police taking the abuser to jail if he or she violates the order."

For the full article, click here.

In the News: Chris Peterson

Chris Peterson, a partner with Swearingen, Peterson & Benn, LLC, was recently appointed to the Advisory Council for the Research Valley Innvovation Center, a business incubator formed by the Research Valley Partnership. The RVP oversees the economic development efforts for Brazos County and the cities of Bryan and College Station, Texas.

Handy tips for choosing a tax preparer

The IRS has a handy tip sheet for choosing a tax preparer. Click here for the link. Some of the more helpful tips include:

-A paid preparer must sign the return as required by law.
-Avoid preparers who claim they can obtain larger refunds than other preparers. If your returns are prepared correctly, every preparer should derive substantially similar numbers.
-Beware of a preparer who guarantees results or who bases fees on a percentage of the amount of the refund. A practitioner may not charge a contingent fee (percentage of your refund) for preparing an original tax return.
-Understand that the most reputable preparers will request to see your receipts and will ask you multiple questions to determine your qualifications for expenses, deductions and other items. By doing so they have your best interest in mind and are trying to help you avoid penalties, interest or additional taxes that could result from an IRS examination.
-Choose a preparer you will be able to contact and one who will be responsive to your needs. Ask who will actually prepare the return before engaging services. Avoid firms where your work may be delegated down to someone with less training or some unknown worker. You should know exactly who works with your tax matters at all times and how to contact him or her; after all, you are paying for it. Determine if the preparer is exporting your return to a foreign country for preparation. Foreign countries do not have the same security and privacy laws as the United States nor is there any recourse should your information be compromised as a result of lax or nonexistent privacy procedures.
-Investigate whether the preparer has any questionable history with the Better Business Bureau, the state’s board of accountancy for CPAs, the state’s bar association for attorneys or the IRS Office of Professional Responsibility (OPR) for enrolled agents or the oversight agency in states that license or register tax preparers.
-Determine if the preparer’s credentials meet your needs or if your state mandates licensing or registration requirements for paid preparers. Is he or she an Enrolled Agent, Certified Public Accountant (CPA) or Tax Attorney? Only attorneys, CPAs and enrolled agents can represent taxpayers before the IRS in all matters including audits, collection actions and appeals. Other return preparers may represent taxpayers only in audits regarding a return that they signed as a preparer.
-Find out if the preparer is affiliated with a professional organization that provides or requires its members to pursue continuing education and holds them accountable to a code of ethics.
-Check IRS.gov for information regarding abusive shelters and other tax schemes and scams.

Remember, if it sounds too good to be true, chances are it is.

IRS Small Business Guide is available online now

The Small Business Resource Guide 2008, a one stop source for all the information a small business owner needs to comply with federal tax laws, is now available on IRS.gov.
You can also order a CD version online, or call (800) 829-3676 and ask for Publication 3207, revision March 2008.

EPA issues new regulation on lead-based paint

The Environmental Protection Agency has come out with a new lead-based paint rule that will affect the building and remodeling industry. The poress release follows:

"To further protect children from exposure to lead-based paint, EPA is issuing new rules for contractors who renovate or repair housing, child-care facilities or schools built before 1978. Under the new rules, workers must follow lead-safe work practice standards to reduce potential exposure to dangerous levels of lead during renovation and repair activities.

"The "Lead: Renovation, Repair and Painting Program" rule, which will take effect in April 2010, prohibits work practices creating lead hazards. Requirements under the rule include implementing lead-safe work practices and certification and training for paid contractors and maintenance professionals working in pre-1978 housing, child-care facilities and schools. To foster adoption of the new measures, EPA will also conduct an extensive education and outreach campaign to promote awareness of these new requirements.

"The rule covers all rental housing and non-rental homes where children under six and pregnant mothers reside. The new requirements apply to renovation, repair or painting activities where more than six square feet of lead-based paint is disturbed in a room or where 20 square feet of lead-based paint is disturbed on the exterior. The affected contractors include builders, painters, plumbers and electricians. Trained contractors must post warning signs, restrict occupants from work areas, contain work areas to prevent dust and debris from spreading, conduct a thorough cleanup, and verify that cleanup was effective. "

More information: EPA's lead program (http://www.epa.gov/lead)

Texas Vehicle Exemption for Personal Vehicle Used in Business

The following reminder comes from the Texas Association of Realtors:

"Don't ignore April 1 deadline for exempting your vehicle from taxationYou already know you aren't required to pay property tax on your personally owned vehicle that you also use for business purposes. But do you know how your local appraisal district is handling this exemption?
"Each of the 253 appraisal districts in Texas is handling the exemption of these so-called mixed-use vehicles from taxation differently. Some districts don't require an exemption form for such a vehicle if the owner was not charged property tax on that vehicle in 2007. If you haven't previously had to pay property tax on your personally owned vehicle that you use for business, check with your local appraisal district before you make the decision to not file an exemption form. Without filing an exemption form, there is no guarantee that the appraisal district won't tax you. A list of county appraisal districts with each district's contact information is available online. Those districts that require an exemption to be filed must receive your 2007 exemption by April 1; your 2008 exemption is due April 30."

For all of your legal needs, contact us at 979-680-9993 or via our website, BrazosLawyers.com.

Business Mileage Rates Increase for 2008

This just came out from the IRS:

Beginning Jan. 1, the 2008 optional standard mileage rate for business use of a car (including vans, pickups or panel trucks) is 50.5 cents per mile. The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile.

Related Link:
IR-2007-192, IRS Announces 2008 Standard Mileage Rates; Rate for Business Miles Set at 50.5 Cents per Mile

Like Kind Exchanges (1031 Exchanges)

The IRS recently came out with a new fact sheet answering some of the most common questions involving like-kind exchanges. The new fact sheet can be found below or by clicking this link.


Like-Kind Exchanges Under IRC Code Section 1031

FS-2008-18, February 2008 WASHINGTON — Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free.
The exchange can include like-kind property exclusively or it can include like-kind property along with cash, liabilities and property that are not like-kind. If you receive cash, relief from debt, or property that is not like-kind, however, you may trigger some taxable gain in the year of the exchange. There can be both deferred and recognized gain in the same transaction when a taxpayer exchanges for like-kind property of lesser value.

This fact sheet, the 21st in the Tax Gap series, provides additional guidance to taxpayers regarding the rules and regulations governing deferred like-kind exchanges.

Who qualifies for the Section 1031 exchange?

Owners of investment and business property may qualify for a Section 1031 deferral. Individuals, C corporations, S corporations, partnerships (general or limited), limited liability companies, trusts and any other taxpaying entity may set up an exchange of business or investment properties for business or investment properties under Section 1031.

What are the different structures of a Section 1031 Exchange?

To accomplish a Section 1031 exchange, there must be an exchange of properties. The simplest type of Section 1031 exchange is a simultaneous swap of one property for another.
Deferred exchanges are more complex but allow flexibility. They allow you to dispose of property and subsequently acquire one or more other like-kind replacement properties.
To qualify as a Section 1031 exchange, a deferred exchange must be distinguished from the case of a taxpayer simply selling one property and using the proceeds to purchase another property (which is a taxable transaction). Rather, in a deferred exchange, the disposition of the relinquished property and acquisition of the replacement property must be mutually dependent parts of an integrated transaction constituting an exchange of property. Taxpayers engaging in deferred exchanges generally use exchange facilitators under exchange agreements pursuant to rules provided in the Income Tax Regulations.

A reverse exchange is somewhat more complex than a deferred exchange. It involves the acquisition of replacement property through an exchange accommodation titleholder, with whom it is parked for no more than 180 days. During this parking period the taxpayer disposes of its relinquished property to close the exchange.

What property qualifies for a Like-Kind Exchange?

Both the relinquished property you sell and the replacement property you buy must meet certain requirements.

Both properties must be held for use in a trade or business or for investment. Property used primarily for personal use, like a primary residence or a second home or vacation home, does not qualify for like-kind exchange treatment.

Both properties must be similar enough to qualify as "like-kind." Like-kind property is property of the same nature, character or class. Quality or grade does not matter. Most real estate will be like-kind to other real estate. For example, real property that is improved with a residential rental house is like-kind to vacant land. One exception for real estate is that property within the United States is not like-kind to property outside of the United States. Also, improvements that are conveyed without land are not of like kind to land.

Real property and personal property can both qualify as exchange properties under Section 1031; but real property can never be like-kind to personal property. In personal property exchanges, the rules pertaining to what qualifies as like-kind are more restrictive than the rules pertaining to real property. As an example, cars are not like-kind to trucks.

Finally, certain types of property are specifically excluded from Section 1031 treatment. Section 1031 does not apply to exchanges of:
Inventory or stock in trade
Stocks, bonds, or notes
Other securities or debt
Partnership interests
Certificates of trust

What are the time limits to complete a Section 1031 Deferred Like-Kind Exchange?

While a like-kind exchange does not have to be a simultaneous swap of properties, you must meet two time limits or the entire gain will be taxable. These limits cannot be extended for any circumstance or hardship except in the case of presidentially declared disasters.
The first limit is that you have 45 days from the date you sell the relinquished property to identify potential replacement properties. The identification must be in writing, signed by you and delivered to a person involved in the exchange like the seller of the replacement property or the qualified intermediary. However, notice to your attorney, real estate agent, accountant or similar persons acting as your agent is not sufficient.

Replacement properties must be clearly described in the written identification. In the case of real estate, this means a legal description, street address or distinguishable name. Follow the IRS guidelines for the maximum number and value of properties that can be identified.
The second limit is that the replacement property must be received and the exchange completed no later than 180 days after the sale of the exchanged property or the due date (with extensions) of the income tax return for the tax year in which the relinquished property was sold, whichever is earlier. The replacement property received must be substantially the same as property identified within the 45-day limit described above.

Are there restrictions for deferred and reverse exchanges?

It is important to know that taking control of cash or other proceeds before the exchange is complete may disqualify the entire transaction from like-kind exchange treatment and make ALL gain immediately taxable.

If cash or other proceeds that are not like-kind property are received at the conclusion of the exchange, the transaction will still qualify as a like-kind exchange. Gain may be taxable, but only to the extent of the proceeds that are not like-kind property.

One way to avoid premature receipt of cash or other proceeds is to use a qualified intermediary or other exchange facilitator to hold those proceeds until the exchange is complete.

You can not act as your own facilitator. In addition, your agent (including your real estate agent or broker, investment banker or broker, accountant, attorney, employee or anyone who has worked for you in those capacities within the previous two years) can not act as your facilitator.
Be careful in your selection of a qualified intermediary as there have been recent incidents of intermediaries declaring bankruptcy or otherwise being unable to meet their contractual obligations to the taxpayer. These situations have resulted in taxpayers not meeting the strict timelines set for a deferred or reverse exchange, thereby disqualifying the transaction from Section 1031 deferral of gain. The gain may be taxable in the current year while any losses the taxpayer suffered would be considered under separate code sections.

How do you compute the basis in the new property?

It is critical that you and your tax representative adjust and track basis correctly to comply with Section 1031 regulations.

Gain is deferred, but not forgiven, in a like-kind exchange. You must calculate and keep track of your basis in the new property you acquired in the exchange.

The basis of property acquired in a Section 1031 exchange is the basis of the property given up with some adjustments. This transfer of basis from the relinquished to the replacement property preserves the deferred gain for later recognition. A collateral affect is that the resulting depreciable basis is generally lower than what would otherwise be available if the replacement property were acquired in a taxable transaction.

When the replacement property is ultimately sold (not as part of another exchange), the original deferred gain, plus any additional gain realized since the purchase of the replacement property, is subject to tax.

How do you report Section 1031 Like-Kind Exchanges to the IRS?

You must report an exchange to the IRS on Form 8824, Like-Kind Exchanges and file it with your tax return for the year in which the exchange occurred.
Form 8824 asks for:
Descriptions of the properties exchanged
Dates that properties were identified and transferred
Any relationship between the parties to the exchange
Value of the like-kind and other property received
Gain or loss on sale of other (non-like-kind) property given up
Cash received or paid; liabilities relieved or assumed
Adjusted basis of like-kind property given up; realized gain

If you do not specifically follow the rules for like-kind exchanges, you may be held liable for taxes, penalties, and interest on your transactions.

Beware of schemes

Taxpayers should be wary of individuals promoting improper use of like-kind exchanges. Typically they are not tax professionals. Sales pitches may encourage taxpayers to exchange non-qualifying vacation or second homes. Many promoters of like-kind exchanges refer to them as “tax-free” exchanges not “tax-deferred” exchanges. Taxpayers may also be advised to claim an exchange despite the fact that they have taken possession of cash proceeds from the sale.

Consult a tax professional or refer to IRS publications listed below for additional assistance with IRC Section 1031 Like-Kind Exchanges.
References/Related Topics
Publication 544, Sales and Other Dispositions of Assets
Form 8824, Like-Kind Exchanges (PDF)
Form 4797, Sales of Business Property

For your real estate legal needs, please contact Chris Peterson at 979-680-9993 or on the web at BrazosLawyers.com.

Long Term Care Insurance

Why buy long term care insurance?
1. It will help you keep your independence and dignity and allow you to make choices. When the time comes for paying for your long term care needs, you may end up spending your savings and then relying on Medicaid for assistance. Medicaid typically pays for a semi-private room in a nursing home, but not all nursing homes take Medicaid. In many states it is not easy to get Medicaid to cover home care or pay for assisted living. Many people want to stay at home, but with Medicaid may not be able to. Insurance allows you to have a choice of where you want to live.

2. If you are married and you have a need for long term care, your spouse may be forced to pay for an outside caregiver. The cost is likely to come from your combined income and assets. This may leave your spouse with minimal funds in the future. Insurance solves this problem and allows the healthy spouse to keep the assets.

3. Many healthy caregiving spouses won't spend their money and choose to "tough it out" on their own without help. If care of a disabled spouse drags on too long, this can have a devastating effect on the physical and emotion health of the caregiver. Insurance will pay for professional care for the disabled spouse and allow the caregiver spouse needed rest.

4. If your children promise to take care of you when the time comes that you need care, insurance will help them do that. Probably neither you nor your children have thought of the prospects of moving you from place to place, changing your dirty diapers, cleaning up after "accidents" in the bathroom or helping you with bathing and dressing. Insurance will pay for aides to help your children with these tasks.

5. If you are single and a need for long term care arises, insurance can pay for and coordinate that care. With insurance you won't have to feel you would be a burden for family or friends.
6. If you have the desire to leave assets behind when you die, insurance will help preserve those assets from the cost of long term care.

Buy Long Term Care Insurance When You Are Younger

There is a bonus to buying long term care insurance at a younger age. The yearly premium is lower and the total premium over the life of the policy is also less. For example, a person in good health, currently age 45, buying a typical policy with inflation protection, could spend $42,075 in total premiums to age 78. The yearly premium for this policy is $1,275.
Suppose this same person chooses to wait to buy the equivalent coverage-- adjusted for inflation -- at age 65. If that same policy were available in the future, he could pay $44,759 in total premiums over his 13 remaining years to age 78. His premium is also considerably higher and in this case is $3,443 a year. By waiting, he saves no money in total cost, he will have a much higher yearly cost and in addition will definitely incur the following risks:
The same policies only stick around about three years and historically, new policies invariably have higher rates for the same ages as older ones. This means, all else being equal, he could pay two or three times more in total cost for an equivalent policy in the future.
The policy at age 45 is based on the best health rating and someone age 65 is very unlikely to get that same rating which means a much more expensive total cost in the future.
By waiting, his health may deteriorate to a point where he can't even qualify for a policy. Unfortunately, we have seen this happen time and time again to people who wait and all of a sudden desperately want coverage because of a change in health and can't get it.
He may need long term care before he turns 65. The chances of incurring a disability prior to age 65 are quite high.
We recommend you work with a long term care insurance specialist who understands the policy provisions and the coverage needed and can help you determine the best policy for what you want.
You can read more about long term care insurance and locate a specialist in your area at www.longtermcarelink.net.

How to buy long term care insurance

There are dozens of long term care insurance companies selling hundreds of different types of policies. It can become very confusing. There are various benefit options for home care and nursing home care, waiting periods, qualifying periods, inflation riders, and the list goes on. Here is a checklist of some of the things you need to know before you purchase a policy.

LONG TERM CARE INSURANCE BUYING CHECKLIST

the more "yes" answers you get the better off you are.
1) Is the insurance company rated by A. M. Best (the rating company) with a rating of at least A, A+ or A++?
2) Is it a large diversified company with deep pockets and selling more than just long term care insurance?
3) Is the insurance representative an expert in long term care insurance? (Because of its complexity, almost all LTCi experts only sell LTCi; they seldom sell anything else.)
4) Does the representative have a degree and/or industry financial designations?
5) Does the representative own a personal long term care insurance policy for himself or herself?
6) Is the policy you like tax qualified, and if not, do you understand the ramifications?
7) Are there at least 6 ADL’s (Activities of Daily Living) allowed for in the benefit certification?
8) Does it allow "standby assistance"?
9) Is it a "pool of money" as opposed to a "stated period"?
10) Is it "integrated" as opposed to "2-pool"? (2-pool is not allowed in some states and very few companies sell these policies anymore but you must be aware of this.)
11) Do you understand how the elimination period works? (This is extremely important.)
12) Does it have prohibitive cost containment provisions?
13) Is there any "capping" of automatic benefit increase riders?
14) Do you understand how the waiver of premium works?
15) Does the assisted living facility benefit pay the same as for nursing home?
16) Are you buying adequate home care coverage?
17) Does the company have a history of premium rate stability without large periodic increases?
18) Does the policy pay for homemaker services and other nonmedical home care services?
19) Does the policy offer an alternative plan of care for services that don’t exist today?

Article reprinted by permission from the National Care Planning Council.