Can That Contractor Take Your Home?
When hiring a contractor to work on that dream addition to your home, chances are good you will (and should) sign a contract. A good contract will ensure that your rights are protected - that the contractor will show up and do the work you want within the time frame you request. But you should know that such documents also give the contractor certain rights, and in some cases, may even allow the contractor to take your home should you fail to pay up!
A contractor's legal right in your property is referred to as a mechanic's lien. A "lien" is the legal term for the right a creditor has in a borrower's property. A mechanic's lien is a specific type that is created by law to protect contractors, home-repair people, and home building supply people. Other types of workers who may be eligible to receive a mechanic's lien include subcontractors (the crew hired by your general contractors), electricians, architects, lumber yards, and plumbers.
Although mechanic's liens vary by state, they usually allow the protected individuals to jump to the front of the line should your creditors have to go to court to get payment on a failed project.
Let's look at an example to see how mechanic's liens usually work. Say you are expecting a new baby. Given the current real estate market, you don't think you will be able to sell your home, but you desperately need more space for your growing family. So, you hire Sam, a general contractor, to add an extra room above your garage. As part of the contract you and Sam sign, Sam is given a mechanic's lien in your home. (Sam will have to follow the necessary state requirements to "perfect" the lien, which may require filing a form with the county recorder or office that maintains real property records, and giving you notice of the lien and of commencement of work.) Sam's rights in your property are now similar to a mortgage holder. If Sam finishes the job, and you pay as required, Sam must clear the title on your home, meaning that he must release the lien. However, if you fail to pay Sam what he is owed, he could go to court. There, in an extreme case, Sam could ask the court to order a forced sale of your home in order to satisfy the debts you owe him.
You must understand the rights that contractors and others you hire might have in your property by virtue of a mechanic's lien.
Mechanic's liens aren't necessarily called by that name; in some states or areas, they may be called construction liens, materialman's liens, or supplier's liens. It is also important to note that in some cases, they don't always apply to real property (the legal term for real estate, i.e., your home). Rather, in some cases such liens can apply to personal property (the legal term describing everything you own that isn't real estate). For example, the repair person you hire to fix your oven may be able to take out a mechanic's lien interest in that same oven.
Chances are excellent that when you start a home-construction project, you will have every intention of paying your contractors. However, in these tough financial times, it is important to realize that all may not always go as planned. Consequently, you must understand the rights that contractors and others you hire might have to your property by virtue of a mechanic's lien. When signing a contract with a contractor, like any other contract, make sure you understand each clause; when in doubt, ask for clarification or talk to your lawyer.
Understanding FDIC Insurance
In these uncertain economic times, many Americans are doing everything they can to protect their savings and financial security. However, if your money is in an institution that is protected by the Federal Deposit Insurance Corporation (FDIC), there is a good chance your money is already safe.
The FDIC is an agency of the federal government charged with protecting deposits in American banks and savings associations, even if those institutions fail. The FDIC was created in 1933 in order to calm fears of "runs on banks," a phenomenon perhaps best represented by the scenes at the "Bailey Building and Loan" in Frank Capra's It's a Wonderful Life. This insurance is automatic. You don't have to do anything other than deposit your money. What this means is that if you deposit a qualified amount of money at a qualified institution into a qualified account, your money will be insured by the FDIC and its safety guaranteed by the federa1 government. But what do all of these "qualifieds" mean?
First, FDIC insurance doesn't apply to all the money you can possibly deposit. There are limits. Currently, the key amount is $250,000 or less. (Although this cap is currently set to be lowered to $100,000 by the end of 2009.) This means that for a single account (with one owner), the FDIC will protect the first $250,000 deposited. For joint accounts (those with two or more owners), the FDIC will protect up to the first $250,000 deposited per owner. This same cap applies to Individual Retirement Accounts (IRAs).
You are certainly free to deposit more than $250,000 with a single institution, but, unless that money is spread over different types of accounts (i.e., $50,000 in a single account and $220,000 in an IRA), anything above the cap will not be protected. The FDIC offers an Electronic Deposit Insurance Estimator (EDIE) on its Web site (www.fdic.gov); this tool allows depositors to determine whether their accounts are covered and, if so, up to how much.
What does it mean to make your deposit with a "qualified" institution? The FDIC covers most - but not all- banks and savings associations. In order for an institution to gain FDIC insurance, it must meet certain requirements. You can tell if a bank or savings association is covered by the FDIC by looking for the FDIC "seal" at the institution or by going onto the FDIC's Web site and using its "Bank Find" application. You can also find out by calling the FDIC directly at 1-877-ASK-FDIC. If the institution is insured, all of its qualified accounts (within the cap) will be insured.
And lastly, we must define what "qualified" accounts are. Traditional savings, money market deposits, and most retirement accounts are qualified. However, investment products such as stocks, bonds, mutual funds, and life insurance policies are not covered, even if they are purchased from institutions that are covered. The FDIC's online EDIE can help you determine whether your money is in an account that is "qualified."
Although these federal protections can't stop you from making bad investments, they should provide you with a peace of mind regarding the savings you keep in banks and saving institutions. If you think that a bank has misused your savings or possibly committed fraud, contact the FDIC's Consumer Response Center (1-877-ASK-FDIC or consumeralerts@fdic.gov) and your attorney to identify the appropriate corrective steps.
Planning For Incapacity: Controlling Your Legal Affairs As You Age
Few of us are comfortable talking about illness, disability, or death, However, these issues won't go away just because we refuse to confront them, In many cases, the failure to plan for your own illness or disability will only compound the problem. In order to help you understand how addressing such issues head-on can help you be legally, and maybe even emotionally, prepared, YourLaw is presenting the following primer on an important legal tool - the power of attorney.
Q. What can I do to make sure that people consider my wishes if I become incapacitated?
A. Make plans now, while you still have capacity. The first priority is to make sure that, in the event of incapacity, someone of your choice is authorized to act on your behalf, and/or to tell other people how to care for you and your property.
There are different types of planning tools that can help you accomplish this goal. Some tools, including the power of attorney, joint property arrangements, and living trusts, can help you manage your property and financial affairs. Others, including advance-directives for health care, can help you address your health-care concerns, including decisions to be made near the end of life. The details regarding these documents vary by state; however, some general principles apply. You should work with your attorney to create the right plan for your specific circumstances.
While in this issue we focus just on powers of attorney, future editions of YourLaw will look at advance-directives and living trusts.
Q. What is a power of attorney?
A. A power of attorney is a document in which you (the principal) grant certain authority to another person (the agent or attorney in fact) to act on your behalf. A power of attorney may be very specific-for example, authorizing a person to sell a car for you, and nothing more. Or it can be very broad, allowing the agent to do almost anything on your behalf. A general power of attorney grants a person broad authority to handle virtually all types of financial matters. Note that the Social Security Administration will not permit your agent, even through a general power of attorney, to cash or deposit your Social Security check.
Q. Will a power of attorney be valid if I become mentally incapacitated or incompetent?
A. In most states, a power of attorney is not valid if you become incapacitated, unless it's a durable power of attorney. A durable power of attorney clearly states that you intend the power to continue if you become disabled or incapacitated. It generally remains in effect until you deliberately revoke it or you die. In some states, your durable power of attorney is terminated if a guardian is appointed for you (although appointment of a guardian is usually unnecessary, because the durable power of attorney takes care of the management of your affairs).
Q. Do I need a lawyer to write a durable power of attorney?
A. While not required, it is advisable to ask a lawyer to draft your durable power of attorney. A lawyer can make sure that your document meets your state's requirements and that the powers you wish to give your agent are actually spelled out in language that will be legally effective to protect your interests.
Some powers need to be very clearly spelled out-for example, the power to make gifts or loans or file tax returns. Some states require a specific format or specific wording in the document. Certain states offer do-it-yourself, short-form durable powers of attorney. These documents allow you to simply mark off the powers to be granted to the agent, with state law providing an in-depth definition of what each power means. However, even if you're using these simplified forms, legal consultation is advisable.
Q. Whom should I name as my agent under a durable power of attorney? Does the person nave to be a lawyer?
A. Your agent does not have to be a lawyer. In most states, it can be any adult or an institution. However, it should be someone who knows you well and whom you trust completely to manage your affairs. After all, decisions made by your agent can have tremendous consequences. Your agent has to carry out your wishes and should always act as you would choose or with your best interests in mind. If there is no one whom you would trust with this power, other planning tools may suit you better.
Q. How may I ensure that my agent under my power of attorney will manage my affairs properly after I become incapacitated?
A. Your power of attorney should contain specific guidance for what is expected, including your agent's particular duties, responsibilities, and limitations. You can also build in some oversight by requiring annual accountings to other family members, or requiring co-signatures for large transactions.
Using a power of attorney to plan for your possible incapacity can be key to ensuring that you, your affairs, and your family are taken care of.
Q. Who decides whether I'm incapacitated?
A. You can specify how you wish to have your incapacity and mental status determined if the need should arise. For example, through your durable power of attorney, you can name a doctor or particular mental health professional who will be responsible for making this determination, or you could say that if two doctors certify in writing that you lack capacity, then your power of attorney becomes effective. Any doctor or clinical psychologist who makes evaluations of capacity should have experience in this area. If you provide no instructions, then a court may ultimately have to decide the issue, guided by generally accepted standards.
As these questions show, using a power of attorney to plan for your possible incapacity can be key to ensuring that you, your affairs, and your family are taken care of. Working with your attorney when drafting such documents will likely save you some time and headaches, particularly if you have any complex issues (such as owning a small business, having a number of assets and investments, or having children from a previous marriage). Powers of attorney work like many legal tools: an ounce of prevention is worth a pound of cure. Even though a power of attorney may seem straightforward and simple, these tools are important legal documents outlining rights and responsibilities for both sides. In the end, you can't be too careful when protecting your rights, especially when your finances may be on the line. A simple review of your planning needs by your attorney will certainly be worth your time if it ends up providing you and your loved ones with peace of mind.
Changing Your Mind
To revoke a power of attorney, simply notify the person you have named to act as your agent. For your protection, it is best to do this in writing. You also should destroy all copies of the power of attorney and notify in writing any third parties with whom your agent might have done business. Where substantial assets are at stake, you may also want to file a document called a revocation of power of attorney in the public record where you live or own real estate, and maybe even in the local newspaper if business interests are at stake.
Lincoln's Bicentennial: Celebrating a Legacy of Liberty
Throughout 2009, the nation will celebrate President Abraham Lincoln's 200th birthday. The boy born in 1809 in a log cabin in present-day Hodgenville, Kentucky would have only one year of formal education before becoming America's 16th and perhaps greatest president.
Lincoln was inaugurated shortly before the start of the Civil War in 1861, although several states had already seceded by the time he moved into the White House. Despite this tough start, President Lincoln's legacy is one of freedom, equality, and respect for the rule of law.
Toward the end of his life, President Lincoln fought to identify the legal basis for mandating racial equality throughout the nation. This quest came to a head in his drafting of the Emancipation Proclamation (1863). Although most people know that this document freed slaves from Southern states that had seceded from the Union and not yet come back under Union control, few realize that the Proclamation actually involves a technical legal argument. Rather than just focusing on the morality of the question, President Lincoln was careful to find the legal justifications for banning slavery. This balanced approach is a perfect demonstration of Lincoln's understanding of the importance of the rule of law. Ultimately it led to the Thirteenth Amendment, which, upon being passed just a few months after his assassination, finally abolished slavery In the United States.
Individuals and organizations across the nation are using this anniversary as an opportunity to celebrate a great American. For example, both the U.S. Postal Service and the U.S. Mint have released special commemorative collections in honor of President Lincoln: stamps and pennies respectively. On May 1st. the annual Law Day celebrations will focus on Lincoln's Legacy (www.lawday.org). Many state and local bar associations, as well as historical societies, have also planned activities celebrating President Lincoln throughout the spring.
This year marks the birth of Lincoln; but it is even more important to celebrate his life and legacy. President Lincoln perhaps framed his own legacy best in the 1863 Gettysburg Address when he stated"... that this nation, under God, shall have a new birth of freedom-and that government of the people, by the people, for the people shall not perish from the earth."