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Answering a few more frequently asked questions
Most of us overly complicate our lives. We create legal problems that could be solved with some planning and advice.
Q. I own three small houses, which I rent. Do I need a written lease?
A. A written lease helps both the landlord and tenant understand the legal rights and duties that accompany the rental. If there are any questions, such as a charge for late payment or liability for damage to the property, the parties can refer to the lease. Too often the landlord relies on an oral agreement or a form lease not tailored to the landlord’s rental. Use a real estate attorney to draft a thorough lease that provides for potential problems. The legal expense for drafting the lease is tax deductible from your rental income.
A. Your grandson is your debtor, unless you really intended this as a gift. If he is at least age 18, then have him sign a promissory note acknowledging the loan and establishing a payment schedule and reasonable rate of interest. This emphasizes that both of you understand that this is a loan and must be paid back. If later he balks at paying you, then you could use the promissory note as evidence in small claims court, or as a tax loss if he becomes bankrupt, neither of which are happy outcomes.
Q. My sister and I own land together that we inherited from our parents. There is a possibility that we might sell it. Should we see a lawyer to write something up?
A. Likely your sister and you own the property as “tenants in common,” which means each of you has an undivided interest in the land, probably one-half each (depending on the parents’ Last Will and Testament). Accordingly, each of you is entitled to one-half the sales proceeds and obligated for one-half of the expenses. If you intend to sell the property, then a visit to an attorney to discuss these rights and duties may be helpful for both of you. Since any division of money creates potential for dispute, you should consider a written contract between you as to specific terms for any future sales of the property.
Q. My fiancé just told me that he hasn’t filed an income tax return for his construction business for the last five years. Would this cause any problems after we are married?
A. Dr. Phil may suggest that you reconsider marriage to this irresponsible person, but I am not Dr. Phil, so I will discuss the tax implications. Married persons may file a joint return or file under the tax status of married filing separately. The joint return usually is the better choice for its lower tax rate; however, by filing a return with him your refund may be attached by the IRS to recapture back taxes, penalties and interest he surely owes. Filing separately may be your best choice under these circumstances.
Q. My elderly father needs help in managing his financial affairs. What documents do I need to have him sign?
A. If he wants you to help him, then he should sign a Durable Power of Attorney to authorize you to manage his finances. Dad should consult with an attorney to insure that his estate planning documents, such as his Last Will and Testament, Living Will and Healthcare Representative form, as well as the Durable Power of Attorney, are updated.
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