Will You Be My Guarantor?

Will You Be My Guarantor?

One of the questions you may be asked in your lifetime is to be a guarantor. This request may come from a family member or even a friend that needs someone to be a guarantor for a lease, loan, etc. Your first thought may be to agree right away to help that individual but, there are many things you should consider prior to becoming a guarantor.

It is important to understand that as a guarantor you are making yourself financially responsible for the obligations of the individual if they fail to perform. Often the Landlord or Lender requires a personal guarantor to provide an extra level of protection to ensure they are paid what they are owed. This likely means the individual does not meet their rental or loan criteria and is considered high risk. Therefore, the Lender or Landlord is looking to protect their interests by having a more qualified person guarantee to fulfill the financial obligations of the individual in the event they are unable to satisfy the prescribed conditions.

Since you are making the commitment to be financially responsible for the obligations of another, you should consider some of the following items prior to becoming a guarantor. To begin with, you should consider the individual’s financial situation. Are they reliable and dependable? Are they able to handle their own bills? These are questions you will want to consider, because depending on the individual’s financial situation, you may be putting yourself at a greater risk than you are aware of.

In relation to knowing the individual’s financial situation you should also take a second to consider your own financial situation. It is wise to consider whether you would be financially able to fulfill the obligations of the individual in the event they fail to perform. If you would not be able to handle the financial obligations of the individual, then you should not be their guarantor.

Additionally, you should be attentive to the underlying document that you are being asked to guarantee. If you are asked to be a guarantor on a lease, that is typically only a year-long commitment. However, if you are asked to guarantee on a car loan or mortgage, then you could be taking on this extra financial responsibility for seven, fifteen, or even thirty years. It is important to consider the underlying document for the guarantee so that you understand how long you are committing to taking on this additional financial responsibility. Moreover, you should consider how this extra financial responsibility may impact your own debt to income ratio and thus your own ability to get a loan or mortgage in the future.

Another item you should consider is what type of guarantee the Landlord or Lender is expecting you to provide. Is it a limited or unlimited guarantee? If it is limited, then there is usually a set amount that the Landlord or Lender will be able to collect from you as the guarantor. However, if it is an unlimited guarantee then they would be able to recover the entire amount from you as the guarantor. It is very important to understand the type of guarantee that you would be providing before you become a guarantor.

These are just a few items you should consider before becoming a guarantor. In light of the substantial financial responsibility of becoming a guarantor, it is advisable to seek the advice of a business law attorney before executing any type of personal guarantor. An attorney will be able to analyze your situation and the requirements of the personal guarantee, in order to advise you on the risks and best course of action with regards to becoming a personal guarantor.

 

What is a Title Commitment?

What is a Title Commitment?

In almost every real estate transaction title work will be ordered and a title commitment will be provided to the parties to review prior to closing. A title commitment is a document that provides information pertaining to the property that is subject to the transaction. It will list out the various requirements, exceptions, and details of the title policy that will be issued for the property after closing. Since the title commitment provides valuable information pertaining to the property that a buyer may not otherwise know, it is extremely important to carefully review the title commitment before closing.

There are three sections of a title commitment that should be carefully reviewed. The first section is Schedule A. In this section, you will see information such as the type and amount of the policy, the proposed insured, the interest that the policy will cover, the current owner of the property and the legal description of the property. When reviewing this section, you will want to make sure the current owner and the seller are the same person/entity, the correct property is described and the proposed insured is listed exactly how the buyer plans on taking title. If there are any discrepancies, you will want to have the title commitment revised prior to closing and the title policy being issued.

The next section in the title commitment will be Schedule B-I. This section lists out all the requirements that must be satisfied before the title company will issue the title policy. Typically, you will see requirements such as a warranty deed transferring the property to the buyer, satisfactions of previous mortgages, etc. Additionally, if either of the parties are entities, there will likely be a requirement of documentation authorizing the entity to perform this transaction. It is important you understand both your requirements, as well as the other party’s requirements, so that all requirements are met prior to closing so that the transaction can proceed smoothly.

The last section in the title commitment that you should review is Schedule B-II. This section lists out the exceptions to coverage provided by the title policy. There are two types of exceptions that will be listed in this section. The first type is the general exceptions. These exceptions are in every title commitment and can often be removed if certain actions are taken. The other type of exceptions are the specific exceptions. These are exceptions that are specifically connected to the property in the transaction. One example of a specific exception would be a prior mortgage on the property. Assuming the mortgage would be satisfied at closing, this exception would then be removed from the title commitment. Because these exceptions can cause a lack of coverage in the future if an issue arises, it is crucial that the buyer review each exception.

Taking into consideration the importance of the title commitment in the execution of a real estate transaction, it will be helpful to seek the advice of a real estate attorney prior to closing. A real estate attorney will be able to review each section of the title commitment and determine if there are any discrepancies or items that need to be revised. Moreover, an attorney will be able to analyze each exception to the title policy and advise you on the impact each exception has on the property. Overall, seeking the help of a real estate attorney to review the title commitment prior to closing can facilitate a smooth transaction and prevent future issues that may arise as a result of an overlooked item on the title commitment.

 

Transfer on Death Deeds

Transfer on Death Deeds

As you begin to think about the best structure for your estate plan, you are likely guided by one thought, which is how do I avoid probate? The consensus about probate is that it can be costly and time consuming. For that reason, many people structure their estate plan with the hope that probate can be avoided. One way to do this is to create a trust and place your assets, that would typically need to go through probate, into the trust. However, sometimes the cost of implementing a trust can be impractical for the size of your estate. Therefore, another solution for some estates is to utilize a transfer on death deed to avoid probate.

A transfer on death deed is a document that is recorded with the register of deeds in the county where the property is located and designates a beneficiary to take title to the property upon the death of the sole owner or the last to die of multiple owners. This document can be cancelled or changed at any time by the owners of the property simply by executing and recording another deed that designates a different beneficiary or no beneficiary. Moreover, the owner of the property does not need any consent or permission by the beneficiary in order to make these types of changes.

The clear advantage to using a transfer on death deed is that it will bypass probate and as a matter of law the property will pass to the designated beneficiary. Furthermore, there is the added benefit that the owner of the property maintains full and complete control in their interest in the property during their lifetime. This document does not grant any type of current interest in the property to the beneficiary. It is only upon the death of the owner(s) that the beneficiary obtains the interest in the property. Therefore, it allows for the owner of the property to continue to use their property as they see fit, with the benefit that upon their death the property shall avoid probate and pass directly to the beneficiary.

Despite the advantages to the transfer on death deed, there are still some disadvantages to executing this type of document. For example, the transfer on death deed must be publicly recorded in order to be effective. Therefore, the identity of the beneficiaries will be available in the public record during the property owner’s lifetime. This can be problematic if the beneficiary is not a family member or if there is tension among the beneficiaries of the owner’s estate. Depending on the individual and their circumstances, it may be preferable to keep this type of information private and thus utilize a different strategy to avoid probate.

In light of the possible advantages and disadvantages, it will be important to seek the advice of an estate planning attorney before executing a transfer on death deed. An estate planning attorney will be able to analyze your situation and advise you on the best course of action to take in structuring your estate plan to avoid probate, which may include executing a transfer on death deed.

 

What is a Supported Decision-Making Agreement?

What is a Supported Decision-Making Agreement?

A supported decision-making agreement is a method of decision-making available to individuals with disability through an arrangement with another trusted person. These agreements give individuals with functional impairments the ability to create a formal arrangement for support that service providers must recognize, while retaining rights and self-direction that might otherwise be lost through guardianship or even by using power of attorney. These agreements are based on three principles: (1) that everyone has the right to make choices, (2) that people can get help making choices without giving up that right, and (3) that people will often need help in understanding, making and communicating their choices.

With supported decision-making agreements, the individual retains their right to make decisions. The individual can make their own decisions and they can identify areas of their life where they would like to have someone support them in their decision making. The supporter would assist the functionally impaired individual in gathering information, comparing the different options, as well as helping the individual communicate their decision to a third party. All the tasks that the supporter can assist with are only used to assist the functionally impaired individual and it does not give the supporter any legal authority over the individual. Therefore, these agreements can be useful in maintaining the impaired individual’s rights and self-direction.

These agreements can be used in combination with other legal arrangements, such as power of attorney and/or guardianship. These documents are not mutually exclusive and in fact can be used to complement each other. A supported decision-making agreement can help cover areas that are not traditionally covered by a power of attorney, such as housing, filing taxes or even choosing a service provider. Additionally, these agreements can be a way to transition an individual to more support when needed, especially in cases where the individual’s impairment gets worse over time.

It is important to note that a supported decision-making agreement is distinctly different from a power of attorney. Firstly, the supporter does not have any authority to make the decision for the individual. The impaired individual still retains their right to make the decision, whether or not the supporter agrees with the decision is irrelevant. Secondly, the supporter does not have the legal authority to sign documents for the impaired individual or bind that individual to a legal agreement. Lastly, the supporter is limited in their role by the specific terms of the agreement as determined by the impaired individual. Therefore, the impaired individual can specifically designate in what areas and to what extent the supporter is allowed to assist with the decision-making process.

In respect to guardianship proceedings, the presence of a supported decision-making agreement is not evidence of incapacity or incompetency. In fact, now during a guardianship proceeding, the judge must consider the use of alternatives to guardianship. These alternatives include whether a supported decision-making agreement has been attempted. Additionally, the judge may consider whether less restrictive means, such as a supported decision-making agreement, could be used in the situation. Therefore, it is important to consider whether a supported decision-making agreement would be a feasible possibility for an impaired individual prior to considering a full guardianship proceeding.

If considering entering into a supported decision-making agreement, it may be a good idea to get your attorney involved. When entering into these types of agreements, it is important to consider what areas you would like support in your decision-making and what kind of support you would want. You need to consider if you would like the supporter to gather information, help you understand your options and/or help you communicate those decisions. Additionally, it will be important to consider the person you would like to designate as your supporter. Who will be able to assist you the most effectively in making decisions in certain areas of your life? Due to all of these considerations that go into the process of drafting a supported decision-making agreement, it is important that an attorney assist you in making sure the agreement represents your wishes and provides you with the needed support you require in making decisions.

 

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