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26 Mar

PERSONAL REPRESENTATIVES-WHERE TO BEGIN?

Author: Jerry  //  Category: Denver Real Estate, seller information
Congratulations! You just found out you have been named as the personal representative of an estate!  So, now what?  Well first you need to understand how you got here.  You may have been selected personally by the decedent to carry out this responsibility; as such you may consider this an honor and a curse.  If the decedent died without a will (intestate), you were probably nominated by either family or friends; in this case just consider it a curse!

 Your Authority

 You will be issued “letters” from the court, which say that you have been appointed personal representative. These letters are evidence that you have authority to act on behalf of the estate. You will need to show or send them to various third parties, such as banks, insurance companies, etc., when you are administering the estate.

 Opening and Closing of the Estate

  Generally, you can choose how you will formally open and close the estate and the extent of court supervision over your activities as a personal representative. 

Formal proceedings will result in final and binding court orders and involve notice being sent to interested parties (beneficiaries, creditors, etc.) about actions to be taken. There may be a court hearing if an interested party objects to your actions. This option is also used if something in the case is out of the ordinary. For example, statutes may require formal opening if the will is irregular. Formal proceedings may also be used to settle a dispute, such as if family members disagree over who should be the personal representative. With informal proceedings, there is no advance notice to parties and no binding orders from the court. This option is chosen when there are no controversies or aspects of the case that are out of the ordinary. Sometimes estates are opened informally, but closed formally, so as to get the protection of a court order for the personal representative that everything has been done correctly.

 Your Specific Duties

  •  collecting and taking an inventory of estate assets, and be sure they are protected during your time of administration;
  • you must manage the assets until the estate is closed, paying the estate bills, including claims of creditors, expenses of administration and any taxes; and
  • making distribution to the heirs or the beneficiaries under a will.

 The law expects you to be impartial to any one creditor or beneficiary.  You cannot favor one person or yourself over others involved in the estate.   Remember, you have a fiduciary responsibility to properly handle the money and assets of others.

 Detail of Responsibilities

 1. Prior to appointment: A person named PR in a will has the power, prior to appointment by the court, to carry out written instructions of the deceased relating to the body, funeral, and burial arrangements. The PR may begin to take and protect the decedent’s property.

 2. Accounting: The PR sets up an estate accounting system at the beginning of administration of the estate. For your protection, keep records of all cash and other financial transactions of the estate and provide written accountings to the beneficiaries. This is very important and often not done correctly. In a supervised administration or with a formal closing, the accounting forms are filed with the court. This information will also be required for tax purposes.

 3. Inventory: Within three months, you must prepare a written inventory of the estate assets on a court-approved form. If you decide to close formally, the inventory must be filed with the court. Otherwise, just give a copy to interested parties.
Making sure that all proper bills are paid is an important part of your job. Send a Notice of Appointment to known creditors such as credit card companies, physicians, banks, etc. that the person has died and you are the personal representative.

 4. Notice of Appointment: Promptly after your appointment, the PR must prepare a Notice of Appointment form and send this to all those interested in the estate (such as beneficiaries and unpaid creditors) and file proof with the court that this notice was sent. This notice form is to let the interested persons know the facts and ground rules regarding administration of the estate, including your name and address, and the court in which the papers are on file.

 5. Creditor’s Claims: Making sure that all proper bills are paid is an important part of your job. Send a Notice of Appointment to known creditors such as credit card companies, physicians, banks, etc. that the person has died and you are the personal representative.

You should publish another notice in the newspaper for unknown creditors. If creditors don’t send you a bill within four months after first publication the claim should be forever barred. If you don’t publish a notice, the time for unknown creditors to make a claim against the estate is extended to a year from the date of the decedent’s death.

A claim may be given to you or filed with the court. No specific form is required. A bill that comes in the mail is a properly presented claim (but don’t pay bills that are only presented orally). If you disagree with the claim, you have 60 days to tell the claimant in writing. They then have 60 days to begin proceedings to enforce the claim.

It’s a good idea not to pay any claims until you’ve determined what they are, and until you’ve reached the end of the time in which someone can make claims.

 6. Family Protection: Allowances: Monetary allowances for certain family members, such as surviving spouse or minor children, during the period of administration are set by probate code but may be modified by court order. Where the family is entitled to these allowances, they have priority over creditors.

 7. Management and Investment: As personal representative, you’re responsible for managing the estate until it is distributed. What you can and can’t do may be specified in the will or by Colorado’s probate code.

Once you’re appointed, you have full authority and control over the assets the decedent owned in his name alone or as a co-tenant with others. (Property held in joint tenancy with right of survivorship is not a probate asset, nor are proceeds of life insurance that are payable to a named beneficiary other than the estate.)

To put others on notice of your authority, re-register the decedent’s assets in the name of the estate with you listed as personal representative (you will use your letters of appointment as evidence of your authority). For registered stocks and bonds, submit your letters of appointment to the transfer agent, along with the securities and an affidavit of domicile, which you get from a broker or a bank. If you need to sell some securities to raise money for estate expenses, you can do so without having the securities registered first, although it usually takes longer to get the proceeds. Bearer bonds need not be re-registered. When you sell or distribute any real estate, you will need to use your letters of appointment.

  8. Tax Responsibilities: The PR files the final income tax returns for the decedent as well as any gift tax returns. Both Federal and State estate tax returns must be filed if the estate is of sufficient size. There is also a separate income tax return that must be filed for the estate. When a person dies, his taxable year ends on the date of death and his income and deductions are reported through that date. The estate is a separate income tax paying entity and the PR must get a separate tax identification from the IRS.

 9. Bond: A surety bond may be required by the terms of the will or by court order, and bond premiums are payable out of the estate as an administration expense.

 10. Compensation: You may choose to be compensated for your duties as personal representative. Your compensation and that of your attorney is subject to a “reasonableness test” under the Colorado Probate Code. Family members often serve without pay, except for out-of-pocket costs. If you do this, consider filing a fee waiver with the court. If you take compensation, you must keep a detailed record of tasks performed and the time spent. Your attorney should also. Your compensation will be taxable as ordinary income.
The assets of the estate belong ultimately to the beneficiaries and not to you. Make distributions to beneficiaries as soon as it can be done safely.

 11. Distribution: Generally, estate assets are paid in this order: those held by the decedent as a fiduciary, such as if the decedent was serving as a trustee of a trust at the time of death; family allowances; expenses of administration; funeral costs; debts and taxes under federal law; amounts expended by Colorado under Medicaid; expense of last illness; debts and taxes under state law; bills; specific gifts under a will; beneficiaries under a will, or heirs, when there is no will.

 12. Termination: The estate does not terminate automatically. You may elect to close formally or informally. In informal closings, a closing affidavit form is filed with the court, indicating that the estate has been fully administered. This limits the time to one year when those who receive assets and creditors can challenge your administration and distribution of the estate.

In formal closings, the administration and proposed distribution of the estate is approved by the court and the personal representative is immediately discharged or released from liability by court order. A formal closing usually does not require an actual hearing before a judge.

 Liability

You are liable to the beneficiaries for any loss to the estate and for any gain the estate should have realized but did not, if that loss cannot be shown to have been a reasonable risk, taking into account the term of the investment. Also, you are liable if you were negligent or intentionally did something you shouldn’t (or failed to do something you should have done).

 This information has been condensed from material published by the Colorado Bar Association.

-Jerry Hart

                                  Check out Denver Real Estate here

 

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23 Mar

Western Water Law or The Law Of I Got It First!

Author: Jerry  //  Category: Buyer Info

 

While real estate Title insurance policies will not insure water rights or water usage, the ownership of water rights is decided through the water courts.   Nonetheless, a through overview and knowledge of how water is distributed in the west can eliminate potential problems on the part of a potential land buyer.

 

A HISTORY OF WATER RIGHTS

 

Originally in the United States, the English doctrine of water law was applied.  English water law held that an owner of riparian land had the right to the natural flow of water past, over, across, or under his land for domestic use.( Riparian means belonging to or relating to a watercourse, which is defined as a natural stream having a definite bed or banks, that flows on a regular basis)

 

PRIOR APPROPRIATION

The prior appropriation doctrine, or “first in time - first in right”, developed in the western United States in response to the scarcity of water in the region. The doctrine evolved during the California gold rush when miners in California needed to divert water from the stream to locations where it was needed to process ore. Customs and principles relating to water diversion developed in the mining camps, and disputes were resolved by simple priority rule. According to the rules of prior appropriation, the right to the full volume of water “related back” or had the priority date as of the time of first diverting the water and putting it to beneficial use. In other words, those with earliest priority dates have the right to the use of that amount of water over others with later priority dates.

Unlike a riparian right, an appropriative right exists without regard to the relationship between the land and water. An appropriative right is generally based upon physical control and beneficial use of the water. These rights are entitlements to a specific amount of water, for a specified use, at a specific location with a definite date of priority. An appropriative right depends upon continued use of the water and may be lost through non-use. Unlike riparian rights, these rights can generally be sold or transferred, and long-term storage is not only permissible but common. 

The first to use water (the senior appropriator) acquires the right (known as a priority) to its future use against later users (junior appropriators).  The first appropriator on a water source has the right to use all the water in the system necessary to fulfill his water right. A junior appropriator cannot use water to satisfy his water right if it will injure the senior appropriator. A senior appropriator may “place a call” on the river. A call requires that the institution which manages the water source shut down a junior diverter in order to satisfy the senior right. Senior appropriators, however, cannot change any component of the water right if it will injure a junior appropriator. Therefore, if a senior wants to change his place of use and this change will adversely affect a junior’s interest, the junior can stop the senior from changing the water right. Any change of a water right (time of use, place of use, purpose of use, point of diversion, etc.) cannot cause harm to another water user, regardless of priority.

WATER RIGHTS

For a water right to be created, an appropriation must first be made.  The required elements of an appropriation are the diversion of water ( usually made by removing water from its natural course or location), and the application to a beneficial use ( irrigation, mining, domestic use, for example).  Water rights can fall into two different types; storage and direct flow.  A storage water right is measured in terms of volume (usually acre-feet) and direct flow is measured by a rate of flow (usually cubic feet/sec).

The granting of a water right is the responsibility of the state agency, state engineer or official charged with the administration of water resources.  Along with the approval process, the responsible agency is responsible for the enforcement of the priority system of allocation.

-Jerry Hart

                                   check out Denver Real Estate here

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16 Feb

2009 Housing Stimulus Package Complete

Author: Jerry  //  Category: Buyer Info, Denver Real Estate, Home Buyer Financing

The American Recovery and Reinvestment Act of 2009 is expected to be signed by President Obama, in Denver, on Tuesday 2/17.  According to the National Assn. of Realtors (NAR), the home buyer tax provisions could stimulate up to 300,000 additional sales by December 1, 2009 when the provisions expire.  While the new tax credit falls short compared to other sponsored proposals, it is a maor improvement over the current first time buyer tax credit of $7,500 which required repayment.  The new credit effective 1/1/09 allows a credit of up to $8,000 and is not required to be repaid as long as the borrower owns the home for at least 3 years.  The Bill also reinstates the 2008 higher loan limits for FHA, Fannie Mae, and Freddie Mac loans.

First time home buyers make up a whopping 41% of all home purchasers.

                                                                     check out Denver Real Estate here.

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30 Dec

Credit Unions Step Up to the Plate!

Author: Jerry  //  Category: Buyer Info, Denver Real Estate, Home Buyer Financing

While Banks and Savings and Loan institutions nationwide have been busy lining up to the public trough for bailout funds, another institution has been busy writing home mortgages, your neighborhood credit union!  Surprised?  Don’t be, since credit unions have been writing home mortgages for years- they just have a different business model than the big boys.

 

 

 

Credit unions are non-profits that exist to make money, just not profit.  Their basic business plan is simple: credit unions receive deposits, and use that money to make loans.  They then charge more on those loans than is paid on deposits. Ta-Da!  A business that thrives.   And of course, they are very conservative when it comes to their lending standards.  Subprime and option ARM mortgages have never been in their portfolios, nor did they sell and repackage loans as investments on the secondary market.

 

What credit unions did do is loan only to credit worthy members on mortgages that truly were not greater than what the member could afford.  They also did this without creating fraudulent applications and wildly inflated appraisals-just like banks used to do in the old days!

 

Joining a credit union is generally based on membership requirements such as living in a certain area, working for a particular employer or industry, or belonging to a certain group.  The largest advantage of credit union membership is that loan rates are lower and returns are greater on savings and CD’s than usually found at banks.  Unlike banks, credit unions are member owned with excess earnings either passed back to members in the form of lower rates, greater earnings, or shares paid.

 

They hold most loans to maturity, and fewer than 1% of credit union mortgages are 60 or more days late according to the Credit Union National Administration (CUNA).  While their mortgage business is a fraction of that of other mortgage lenders, credit union originations increased 10% in the first 6 months of 2008 (according to CUNA), while mainstream lender originations dropped 18% during the same period as reported by the Mortgage Bankers Assn.

 

Not surprising, with car sales down and the difficulty dealers are having arranging financing, especially for the used car market, credit unions are more than willing to once again step up to the plate to assist.  As a result, credit union membership is growing by leaps and bounds, all thanks to sound business practices.

 

                                                                                              Check out Denver Real Estate here

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17 Dec

COLORADO HOA DISCLOSURE REQUIREMENTS

Author: Jerry  //  Category: Buyer Info, Denver Real Estate, Homeowners Assn.

 

Homeowners Disclosure

 

With the passage of SB100, Colorado statues now require that every Homeowners Association in the state deliver at least annually, within 90 days following the end of each fiscal year, the following information to all owners upon reasonable notice:

 

  • The date upon which the  fiscal year commences and the operating budget for the current fiscal year.
  • A list, by unit type of the owner’s current assessment, including both regular and special assessments.
  • Its annual financial statements, the results of any audits, and a list of all Association insurance policies.
  • The Association’s bylaws, articles, and rules and regulations.
  • All minutes of the executive board and member meetings for the fiscal year preceding the current annual disclosure.
  • The Association’s responsible governance policies

 

This information must be readily available at no cost to the owners at their convenience.  Availability means it may be published on a web page as long as an accompanying notice is sent via first class or e-mail; it can be maintained as part of literature table or binder at the Association’s place of business; or it may be mailed or personally delivered to the homeowners.  The cost of any distribution is to be accounted for as a common expense liability.

 

Home Buyer Disclosure by Seller

 

SB 100 states that, except in the case of a foreclosure sale, the seller of a property in a common-interest community must mail or deliver to the purchaser the most current copies of the following documents:

 

  1. the bylaws and rules on the Association;
  2. the covenants;
  3. the Association’s operating budget;
  4. the declaration;
  5. the association’s annual income and expenditures statement;
  6. minutes from the most recent annual owner’s meeting and any executive board meetings that occurred within the six months immediately preceding the title deadline; and
  7. the Association’s balance sheet.

 

This law requires the seller to provide the outlined HOA information to the buyer by title deadline, or, in the case of a for sale by owner, no later than 10 days prior to closing.

 

The new law states also that “written notice of any unsatisfactory provision in any of the documents listed above shall be cause for termination of the contract, if signed by the buyer or on the buyer’s behalf and given to the seller on or before the governing documents deadline.”  Time share units are not included in these requirements.

 

HOA Responsibility

 

The association must use its best efforts to accommodate a seller request for documents.  The Association may charge a reasonable fee, not to exceed the Associations actual cost per page, and must make documents available within 5 days of receipt of notice.

 

Disclosure Documents/ Receipt of Documents

 

Additionally, the seller must provide the buyer with a disclosure statement in bold-faced type.  It is the seller’s responsibility to obtain from the purchaser a signed acknowledgement of receipt of this information and disclosure statement at closing. This signed form must also be sent to the HOA in a reasonable time frame.

 

Check out denver Real Estate Here

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12 Dec

The 2008 Cost vs. Value Report- an early look

Author: Jerry  //  Category: Buyer Info, Denver Real Estate, Home Improvement

Each year Remodeling Magazine, in cooperation with REALTOR® magazine, produces the Cost vs. Value report detailing the average return of value for selected home improvement projects.  This report is further refined for each major regional area of the country.

The full 2008-2009 report will be available in December, but here are some early observations. Like last year’s report exterior remodeling projects lead the pack for recovery on dollars spent.  In fact those projects that boost curb appeal give you the greatest chance for recouping money spent, and still compare well with kitchen remodels.

From a national level here is what you can expect, showing expected recovery:

·        Upscale fiber cement siding (86.7%)

·        Midrange wood deck (81.8%)

·        Midrange vinyl siding (80.7%)

·        Upscale foam backed vinyl siding (80.4%)

·        Midscale minor kitchen remodel (79.5%)

·        Upscale vinyl window replacement (79.2%)

·        Midrange wood window replacement (77.7%)

·        Midrange vinyl window replacement (77.2%)

·        Upscale wood window replacement (76.5%)

·        Midrange major kitchen remodel (76.0%)

Home owners often wonder where their money will be safest during a sour financial market and as it has always been, investing in your home always pays off!  These numbers reflect a payback upon sale one year after the remodel, and are only averages. If you provide most of your labor the recovery will be even stronger

Many regions, the west coast in particular, often see recovery greater than 100%, while on the flip side Midwestern cities such as Cleveland, Chicago, and Milwaukee have some of the lowest recovery numbers.

Does it make sense to perform a major remodel just prior to a home sale?  Depends.  If the cost recovery is less than 100%, not really.  If your work will actually produce a gain, or a sale at a reasonable price is being hampered due to the lack of the project, then it may be to your advantage to proceed.  Your best direction is to always consult a Realtor to assist with which path to take.

Jerry Hart                                                                  Check out Denver Real Estate here

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01 Dec

Adverse Possession in Colorado-New 2008 Laws Reduce the Abuse

Author: Jerry  //  Category: Denver Real Estate

 

 

 

Adverse Possession is a method to acquire title to land that is owned by another through use.  Examples of use might include a fence, driveway, footpath or even a structure being placed on the property of another party.  The person claiming ownership must prove the following elements exist in order to have a case:

 

  • The possession must be OPEN and NOTORIOUS, that is it must be open for all to see.  This includes the owner, even if he/she has never actually seen the possession.
  • The possession must be HOSTILE to the actual owner, and must conflict with the owner’s rights and interests in the property. The possession must also be EXCLUSIVE in use to the possessor.
  • The possession must be CONTINUOUS and UNINTERRUPTED.  For Colorado the statutes specify at least 18 years, and may also be combined with the same possession by a prior owner.

 

If this all sounds criminal (for some it may be), the legal theory is that by not disputing a neighbor’s use of your property by way of a lawsuit, you, as the actual owner have abandoned your rights to the property, either right or wrong.

 

The Need for Change

 

A land dispute by two neighbors in Boulder, Colorado in late 2007 that made national headlines and stirred public opinion prompted state legislators to change the law that allowed it to happen. The whole story as reported by The Daily Camera can be read here.

 

Two State Representatives, Rob Witwer of Evergreen and Ron Tupa of Boulder co-authored a bill to stop what they determined to be outright abuse of the current law.  Witwer said “the current law was out of balance and needed to be fixed.  It was clear that abuse of adverse possession was much easier in Colorado than in most, if not all jurisdictions.”

 

The New Law

 

On July 1, 2008 HB 2008-1148 was signed into law by Governor Ritter, and applies to all adverse possession cases following this date.

 

In addition to the current requirements, the following is also required:

 

“The person claiming adverse possession had a good faith belief that the person in possession of the property of the owner of record was the actual owner of the property and the belief was reasonable under the particular circumstances.”

 

Also included in the law, judges will have the power to force adverse possessors to pay for the land they do win in court, and to compensate the original owners for back property taxes, and interest.

 

With the new law the burden of proof will lie with the possessor to prove they have evidence they were the actual owner which should reduce the number of cases appearing before the court.  Unfortunately the new law was a little late to apply to the Boulder case.

 

And, One Other Law-

 

In the Boulder case, the possessors were a former judge and an attorney.  This fact prompted another law to be passed which will restrict judges from hearing cases involving other judges from the same jurisdiction, in an effort to avoid conflicts of interest or the appearance of favoritism.

 

Jerry Hart

                                 

 Jerry is a full time Realtor serving the needs of Buyers and Sellers in the Denver Real Estate market.

Editors note: this article is not meant to provide any legal advice.  Always consult an attorney for a particular application.

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14 Nov

The First Time Buyer Tax Credit-Buyer Beware!

Author: Jerry  //  Category: Buyer Info, Denver Real Estate

 

The Background

 

One benefit of the Housing and Economic Recovery Act passed in July of this year is that qualified homebuyers may receive a one time tax credit of up to $7,500.  With the intent of stimulating the economy and encouraging Buyers to get off the fence, this credit is limited to first time buyers (those that have not owned a home in the past 3 years) and is set at a percentage of the home purchase price, 10%, and not to exceed $7,500.  This credit applies to all residential sales between 4/9/2008 and 7/1/2009.  Buyers can take this credit in 2009 for homes purchased in 2008; 2009 purchases can take the credit in 2010.

 

The Problem

 

The federal government requires the credit to be paid back on each year’s tax return beginning in 2011 in small 6.67% increments over 15 years, or about $500 a year for the full $7,500 credit.  This amounts to an interest free loan from Uncle Sam!  How could you possibly go wrong?

The best strategy would be to take the $7,500 (in the form of a refund or the reduced tax paid amount) and put it a safe investment.  Currently the stock market may not be your best choice-think money market or CD.  The rest of this post now refers to the 98% of buyers not following this advice!

 

Human nature being what it is, most buyers will pocket the credit and spend it on something which is an excellent way to jump start the economy.  Remember that this will have to be repaid each year or until the home is sold.  This is where the problem may begin.  You see, when the home is sold the remaining tax credit still due must be repaid in full, upon closing.  Assuming the buyer sells after 5 years (a not unrealistic time frame), and having made three years of repayment of the credit, the buyer will have $6,000 less equity upon sale.  No problem you say, what’s $6000?  In a declining or flat market it may be the difference between walking away with a little cash or being upside down if the purchase was done with 97 to 100% financing.  The current national housing market is depressed.  When will the market rebound(which it eventually always does) and begin positive appreciation gains?  That is the $64 question.  The choice is up to each buyer to determine if taking the tax credit will be in their best interest.

 

On a positive note, the National Association of Realtors® asked Congress to do away with the repayment provision of the tax credit to all buyers, not just first time buyers.  The proposals were part of a four point housing stimulus plan submitted in October by the association.  I would doubt Congress will take any action prior to the new administration taking office in 2009. 

 

Jerry Hart                                         Check out Denver Real Estate here

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