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ILLINOIS
LEGAL UPDATE
SPRING 2009 ISSUE
FAQS about Mortgage Foreclosures
As the
economic crisis deepens, more people are facing foreclosure. Before that day
comes, know your rights and responsibilities, and what you may expect should you
face foreclosure.
Q:
What happens if I cannot make my mortgage payments?
A:
Let your lender know as soon as you can, preferably in writing. Although your
lender can insist that you make your mortgage payments in full and on time,
lenders also know about the economy, and many are willing to work with you.
Ultimately, most lenders would rather have your money than your house.
Q:
What options do I have if the lender threatens foreclosure?
A:
Surprisingly, you may have a number of options. The first is to negotiate with
your lender. It is the lender's loan, and the lender can agree to almost any
kind of solution that you can imagine, although most will not be willing to
suspend payments for a long period of time.
Another
option is to refinance with a new lender at a lower rate or for a longer term.
Selling your home quickly may be an option, as long as you will get enough to
pay your mortgage (or you can make up the difference out of your pocket).
Bankruptcy is always an option, as the bankruptcy court may give you time to
catch up on your mortgage. Finally, the federal government currently is
announcing new programs to help homeowners.
Q:
What happens if my lender sues for foreclosure?
A:
Just because you have been sued does not mean that the options discussed above
are off the table, but you will have to work fast. If you are served with a
foreclosure suit, hire a lawyer as soon as you can. Even if you have not
retained an attorney, file an appearance and answer so that you will receive
notice of what is happening.
Homeowners have 90 days to bring their loan current to avoid foreclosure; do
this if you can. Even after foreclosure, you have the right to "redeem" your
home by paying off the loan in full within 90 days. If none of this is done, you
will have to leave the home after it is sold at auction, but this process can
take seven months or more from start to finish.
Q:
I received some mail promising help in working out my foreclosure; should I send
money?
A:
Unfortunately, as foreclosures rise, so do foreclosure scams. Legitimate
nonprofits and legal aid organizations can help, but avoid people demanding
money up front to "renegotiate" your loan.
Also,
avoid those who offer to buy your house and lease it back to you, giving you the
right to repurchase it later. You will discover that the price you have to pay
is far more than you will ever be able to pay, and you will probably end up
being evicted.
Two Deaths are Two Occurrences
In a
case clarifying an important insurance issue, the Illinois Supreme Court
addressed what constitutes an "occurrence" for purposes of an insurance policy.
Many
insurance policies contain two separate coverage limits: a "per occurrence"
limit, setting a coverage limit for any single occurrence, and an "aggregate"
limit, fixing an upper limit the policy will pay, regardless of the number of
occurrences. Therefore, more than one occurrence increases the amount of
coverage available, up to the aggregate limit.
The case
involved two boys who fell into a pit and died of hypothermia when they became
trapped and could not get out. The investigation showed that one fell in and got
stuck, and the other got caught trying to help his friend. The question was
whether this was one occurrence (for which a $1 million per occurrence limit
applied) or two occurrences (in which case the $2 million aggregate limit
applied).
The
supreme court ruled that the two deaths were two separate occurrences. An
"occurrence" in Illinois
is determined by the "cause theory," which focuses on what caused the damages.
Using this standard, the court rejected the insurer's argument that the "cause"
of the deaths was a single failure by the property owner to secure his property.
The
court did recognize that when events are close together in time and space, they
should be treated as if they are a single event and, therefore, a single
occurrence. However, the court found that this did not happen, because the
evidence did not show that the boys had become trapped at the same time, nor did
it show how close together in time the two boys died. Because the evidence did
not show that the boys' injuries were so close in time and space that they
should be treated as a single event, their injuries were treated as two separate
events and, therefore, two separate occurrences.
By
clearly defining both what constitutes an occurrence and what evidence would be
required to show that a series of events is a single occurrence because of a
close temporal and spatial relationship, the court has hopefully made what can
be a complex issue of insurance coverage easier to analyze and apply.
The Value of Pets
So what
is the family pet worth? Most of us would not sell the family dog or cat (or
turtle or parakeet) for any amount of money, a view recently validated by an Illinois court.
The case
involved a dachshund that was badly injured when it was attacked by a neighbor's
husky. The dachshund's owners incurred almost $4,800 in vet bills in treating
its injuries. However, when they tried to recover these costs, the trial court
limited their recovery to just $200, which is what the evidence showed a pet
dachshund was worth.
The
court modified the judgment to allow the dachshund owners to recover the full
amount of vet bills. In Illinois,
pets are treated as property, and the general rule is that when property is
damaged, the owner may recover the lesser of the cost of repair to the property
or its market value.
However,
the court found that this rule should not apply to family pets, because
reasonable people know that pet owners "feel compelled to pay considerably more
than a nominal amount for veterinary care" and that they "are prepared to make
great sacrifices for the well-being and continued existence of their household
pets, to which they have become deeply attached."
Based on
this finding, the court held that pets should be treated like heirlooms,
photographs, and other kinds of property that have little market value but that
have great personal value to the owner. Here, the fact that the dachshund owner
was willing to spend $4,800 to save the dog's life showed the dog's value, and
so the entire amount was ruled to be recoverable.
Work-Related Injuries in Illinois
The
Workers' Compensation Act was designed to enable workers to recover for
work-related injuries without going to the hassle and expense of filing and
pursuing a lawsuit in court. Under the Act, an employer is required to
compensate an employee for injuries that occur in the course of, or arising out
of, his or her employment. Compensation includes payment of all medical and
hospital expenses, a percentage of lost wages, and an award for temporary and/or
permanent disability.
There
have been a number of cases that have interpreted or defined the meaning of the
phrases "in the course of" or "arising out of" the employment. In order for an
injury to be within the course of employment, it must occur within the period of
employment at a place where an employee may reasonably be performing his or her
duties and while he or she is fulfilling those duties or doing something
incidental to those duties. Thus, if an employee is injured running a personal
errand while driving to work, that injury will be deemed outside of the course
or scope of employment. Or, if an employee is injured while ignoring the
explicit rules of the company, the injury is not in the course of employment.
In one
case, the court agreed with the findings of the statewide Industrial Commission,
which stated that a worker who was injured while riding as a passenger on a
forklift was not acting within the scope of his employment because, according to
a company safety rule, the employee was prohibited from riding double as a
passenger on a forklift.
For an
injury to arise out of employment, the cause must be some risk connected with,
or incidental to, the employment. For example, a housekeeper who was hurt when
she baited a trap for a raccoon was acting within the scope of her employment
because her employer knew that she was baiting the trap. However, a police
officer who was sitting in a chair in a courthouse and who injured his back when
he turned to answer a question did not have an injury arising out of his
employment because his injury could have occurred anywhere with any normal
activity.
So You’re Married: Now What?
For most
of us, our last serious step into adulthood is to get married and start a family
of our own. People getting married have all kinds of concerns--the ceremony, the
honeymoon, setting up a household--but they often forget important legal
matters.
Change the Name
Women
often choose to change their surnames when they get married. If you do, make
sure to change your name on all important documents, such as your Social
Security card and your driver's license.
Change the Beneficiaries
Make
sure that insurance policies, retirement accounts, bank accounts, and similar
documents name your new spouse as your beneficiary in case you die.
Get a Will
A will
allows you to specify who gets property when you die, other than property for
which you are able to designate a beneficiary, and also allows you to establish
trusts for the care of your children.
Know the Law
Your
change in status changes your responsibilities. Spouses in Illinois owe each other a duty of support.
Earnings during the marriage are treated as being earned by both. Husband and
wife may both be liable on a lease, mortgage, or other contract.
Your
marriage is a significant change in your life. Recognizing that this is the
case, and planning for it, will serve you well in the long run.
Generation-Skipping Trusts
If you
have heard of generation-skipping trusts (GSTs) at all, you probably think of
them as a way for wealthy families to shield their fortunes from estate taxes.
That is true as far as it goes, but GSTs can also have benefits for the less
well off by protecting assets from ex-spouses and creditors and by serving as a
place for appreciable assets to grow outside of taxable estates.
Although the phrase "generation skipping" sounds like an arrangement which
leaves out children altogether in favor of the grandchildren, in fact what a GST
"skips" is the taxation of assets put into children's estates by their parents.
In a typical scenario, grandparents who are satisfied that their children are
financially secure may decide to set up a GST in favor of all of their
descendants as possible beneficiaries.
Successive generations eventually receive the assets without the repeated
imposition of estate taxes when each preceding generation dies. The assets are
taxed only once, at the time of the initial transfer to the trust.
The
first generation of children can be made to benefit as well. Although they will
not technically own the assets in the trust, they can be given a right to
distributions for their reasonable needs, meaning not only their support and
maintenance, but also "comforts, conveniences, pleasures, and happiness."
However, discretion over whether trust funds may be used for the benefit of the
child must be exercised not by the child but by a "disinterested trustee," that
is, someone who is not a related or subordinated person as defined in the
Internal Revenue Code.
There is
a limit on the amount that can be transferred into a GST. Currently, the limit
is $2 million for each person setting up the trust. In other words, a married
couple could place up to $4 million in a GST. In 2009, the per-person amount is
set to rise to $3.5 million. Any amount that is transferred in excess of the
limit is subject to gift or estate tax when the older generation passes along
the assets, and an additional "generation-skipping tax" is imposed when the
children die and the property is transferred to the grandchildren. The potential
estate tax benefits of a GST are easy to see when it is considered that each
dollar over the limit is taxed at the highest estate tax rate, which currently
is 45%.
If there
are downsides to a GST for some people, they may be found in the fact that
someone outside the family (the trustee) will become intimately involved in the
family's money matters, and that it will be necessary to file an income tax
return for the trust each year. Still, under the right circumstances and with
proper planning under the guidance of a professional, these and any other
drawbacks for a GST could pale next to the bottom-line advantages realized as
assets are passed from generation to generation without Uncle Sam taking his
cut.
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