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The Purpose of Title Insurance in a Real Estate Transaction

The Purpose of Title Insurance in a Real Estate Transaction

When you are buying or selling real property, one of the things your agent or attorney will typically discuss with you is the title insurance. You may think that, if you have a valid deed and have properly recorded it, you don’t have any concerns about title. That may not be true.

Understanding Title Insurance

Like other forms of insurance, title insurance is designed to protect you against financial loss. The financial loss that can be covered by title insurance relates specifically to title problems that arise and can include a variety of issues, such as:

  • Financial loss caused by the fact that the seller (transferor) did not legally own the property when it was sold
  • Financial loss resulting when there are outstanding liens on the property, including unpaid mortgages or other encumbrances that give creditors the right to take the property through a foreclosure action
  • Financial loss caused by interruptions in the chain of title, including instances where the owner of the property died, but the property was not legally transferred through the probate process
  • Financial loss caused by tax liens

If you have a policy of title insurance in effect and a lawsuit is filed related to any of the above issues, the title insurance company will be required to defend the action and must satisfy any judgments that arise. Without a policy of title insurance, your only recourse in such a situation would be to sue the other party to the transaction. That party may be unable to satisfy any judgment you obtain.

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PA Supreme Court Upholds Property Tax Challenge

Notebook with property tax  sign on a table.

The Pennsylvania Supreme Court has reversed the ruling of a lower court, validating a taxpayer’s claim against a school district. In Valley Forge Towers Apartments N, LP, v. Upper Merion Area School District, the state’s high court found that the lower court had wrongfully dismissed a complaint filed by a taxpayer, who had alleged that the school district’s policy of appealing only the assessment of commercial property owners in its district was contrary to the uniformity clause of the Pennsylvania constitution.

In its opinion, the PA Supreme Court reiterated and clarified legal precedent governing classification of taxable entities in a district:

  • According to prior rulings, all property in a district falls into a single class. The uniformity clause therefore prohibits the creation of subclasses of property, and does not allow the government to treat properties differently for any reason
  • The prohibition established by the uniformity clause governs all systematic or intentional applications of the property tax laws, and not just wrongful conduct

In the matter before the court, the plaintiff had filed suit in the Commonwealth Court in Montgomery County, but the Court of Common Pleas had dismissed the action. The Supreme Court remanded the matter back to the Montgomery Court of Common Pleas, noting that a taxing authority (here, the Upper Merion Area School District) cannot “implement a program of only appealing the assessment of one sub-classification of properties..” The court further stressed that the sub-classification would be constitutionally impermissible if based on any “type” of property, including single family, commercial, industrial or apartment complexes.

Advocates for property owners say the decision is a big win, providing a means for taxpayers to meaningfully challenge what are often unilateral actions by tax authorities.

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The Elements of a Personal Injury Claim Based on Negligence

Personal injury law book on a table.

In the aftermath of a personal injury, you can face serious physical and financial challenges. You may be unable to work because of your injury, and have no disability insurance or other means of income. Under those circumstances, it’s common to want your personal injury claim resolved fairly soon. Unfortunately, it’s a process and there are specific things you must demonstrate to a court before you can succeed with a personal injury claim.

Though you can always seek compensation for the intentional or reckless acts of another person, as a practical matter, most personal injury claims are based on a legal theory of negligence. To successfully prosecute a personal injury claim based on negligence, you must show three things: that the defendant breached the duty of care; that the breach caused the accident; and that, because of the accident, you suffered actual loss.

The Standard of Care

Under the law of negligence, as it has developed over the centuries, every person is considered to have a duty to use reasonable care in all daily actions. Accordingly, when you are driving a motor vehicle, designing or manufacturing a product, maintaining real property, using a power tool, or engaging in any activity, you must act as a reasonable person would. The law, however, does not specifically identify what qualifies as reasonable behavior. Instead, the standard of care (and whether it was breached) is determined by the jury on a case-by-case basis, with attention paid to prior decisions.

Causation

There are two types of causation that must be proven in a successful personal injury claim: actual cause and proximate cause. Actual cause, also known as “but for” cause, simply asks the question whether the accident would have occurred “but for” the defendant’s breach of the duty of care. Proximate cause is a somewhat higher standard, and requires that the accident or injury be “reasonably foreseeable” based on the breach of the duty of care.

Actual Loss

There are situations where you can show that the defendant did not act reasonably and that the breached caused an accident, but you may still be unable to recover damages (monetary compensation for your losses). For example, if all your losses are covered by insurance, you won’t be able to recover compensatory damages, as the law does not allow you to recover twice for the same loss. In addition, if your car had little or no value and the damage caused in an accident did not reduce its value, you have no loss for which you are entitled to be compensated.

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Equitable Distribution in Pennsylvania

Toy house, car and cash with engagement ring

When your marriage has fallen apart, one of the most challenging tasks you’ll face can be the division of marital debts and assets, particularly if you’ve built up a substantial marital estate or there are extensive marital debts. Like the majority of states, Pennsylvania is an “equitable distribution” jurisdiction. The parties to a divorce are always free to work out the terms of the division of debts and assets, though the court always has discretion to review a marital property settlement to prevent fraud, duress or undue influence.

If the parties cannot negotiate a settlement, the court will look at a number of factors in an effort to allocate debts and assets “equitably.” It’s important to understand that “equitably” means “fairly,” but not necessarily equally.

The first thing the court will typically do is distinguish between “separate” property and “marital” property. Separate property is any property that belongs exclusively to one of the parties, and can include:

  • Property acquired before the marriage
  • Property received through gift or inheritance
  • Property excluded from the marital estate by a valid prenuptial/postnuptial agreement
  • Property obtained after separation

When determining how the the property will be distributed, the court can consider a broad range of factors, such as:

  • How long the parties were married
  • The age, health and income of each party
  • Other non-marital assets to which either party has access
  • The potential earning capacity of both parties
  • Whether there are minor children and one spouse will be required to be custodian of those children
  • The extent to which either spouse contributed to the increased earning potential of the other party (by working while the other spouse was in school, for example)

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The Most Common Types of Irrevocable Trusts

Trusts and Estate Planning

If you have a significant estate and you want to ensure that your assets will be distributed according to your wishes when you die, you’ve probably heard about or even given some consideration to executing an irrevocable trust. As the name implies, an irrevocable trust, once implemented, generally cannot be revoked or invalidated. There are significant benefits to an irrevocable trust, which can be used to:

  • Minimize estate tax consequences
  • Protect assets from creditors
  • Provide for family members who are minors, lack capacity to manage their own affairs, or have any type of special needs

There are literally dozens of different types of irrevocable trusts. In this blog, we will look at irrevocable trusts that can have an impact on potential tax liability.

Irrevocable Trusts That Can Reduce or Avoid Taxes

Managing potential tax liability is often the primary reason for preparing and executing an irrevocable trust. The types of irrevocable trusts that can avoid or reduce taxes include:

  • Charitable trusts – A charitable trust affects potential tax liability by making gifts to charitable organizations. There are three types of charitable trusts:
    • Charitable lead trusts – With this type of charitable trust, you name a charity to receive any income produced by the property in the trust, and another beneficiary to receive the principal in the trust when the trust is terminated.
    • Charitable remainder trusts – This type of trust distributes income to a named beneficiary, with principal given to a charitable organization at the termination of the trust
    • Pooled income trusts – This type of trust allows you to pool assets with other trustors (trust makers) and receive income from the trust for a specific period of time. In most instances, a charitable organization is both trustee and beneficiary of principal.
  • Bypass trusts – This type of trust is used to protect property that would be transferred to a spouse upon death. Instead of being distributed to the spouse, the property is placed in trust. The spouse may receive income from the property or use it (if it’s real property, for example), but never owns the property, so it’s never part of the estate.
  • QTIP trusts – A qualified terminable interest property (QTIP) trust postpones the payment of estate taxes until the death of the surviving spouse.

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Why You Need an Attorney at a Real Estate Closing

Why You Need an Attorney at a Real Estate Closing

For most folks, there’s no investment more substantial than the sale or purchase of a home. The transaction involves a substantial number of complex documents, from the purchase agreement to the deed, the mortgage, financing documents and title commitments. In a transaction of this magnitude, it’s just good sense to hire an attorney to ensure everything is in order. But you also want your lawyer to go to the closing.

Why You Have a Closing

The primary function of the closing is to ensure the simultaneous transfer of the property to the buyer and payment of the purchase price to the seller. At the closing, the buyer will typically make payment in a form previously agreed upon. If there’s still an existing mortgage on the property, the closing agent will prepare a check to pay off that mortgage from the proceeds of the sale, so that the buyer takes the property free and clear of the prior mortgage. At the closing, the seller will also sign the deed and give it to the buyer, thereby conveying possession of the property. The closing agent then registers a new deed with the appropriate local governmental office (usually a register of deeds).

The Benefits of Having a Lawyer at a Closing

In most instances, your lawyer will review the proposed closing statement before the actual closing takes place. However, you want your attorney at the actual closing to deal with any unanticipated contingencies, and to confirm that everything is as expected:

  • Identifying and addressing any potential cloud or defect on title
  • Ensuring that the deed provided is what was agreed upon
  • Verification that all promised repairs or modifications in the buy-sell agreement have been made
  • Making certain the seller doesn’t try to change any terms at the last minute, or try to back out without sufficient legal reason

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What Happens If You Die without a Will in Pennsylvania?

What Happens If You Die without a Will in Pennsylvania?

There’s a common misperception that, if you die without a will in Pennsylvania, no one will know what to do with your property and your heirs will have to fight it out in probate court. To the contrary, Pennsylvania, like other states, has laws that specifically provide for the distribution of assets when a person dies without a will. Such a person is considered to have died “intestate,” and the distribution of the estate is governed by Pennsylvania’s laws of intestacy.

Contrary to another common myth, the laws of intestacy do not give all the deceased’s property to the state. Here’s an overview of the general distribution set forth in the Pennsylvania intestacy laws:

  • If there are no surviving children—If you die leaving a spouse, but have no living children or parents, your spouse is entitled to the entire estate. If you have no surviving children, but a parent was alive at the time of your death, your spouse gets the first $30,000 and half of any residuary estate. Surviving parents will share the rest of the estate.
  • If there are surviving children—If your spouse survives you, and all of your surviving children are also the children of your spouse, your spouse will get the first $30,000, plus half of any remaining property. If, however, you have any surviving children who are not the offspring of your surviving spouse, your surviving spouse only gets half of the estate (and is not entitled to the first $30,000).
  • No surviving spouse—If your spouse predeceased you, your entire estate will go to your children. If you have no surviving children, the estate will be divided equally between your parents. If you have no surviving spouse, children or parents, the estate will go to your siblings or their children. If you had no surviving siblings, any living grandparents may share the estate (half to paternal and half to maternal grandparents). If there are no grandparents, the estate goes to your uncles, aunts and their children and grandchildren. Only if there are no such surviving relatives will the estate go to the Commonwealth of Pennsylvania.

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Factors That Can Affect the Validity of a Will in Pennsylvania

Factors That Can Affect the Validity of a Will in Pennsylvania

People do some pretty strange things when it comes time to divide the property of a loved one. It’s not uncommon for potential heirs to engage in wrongful conduct to gain advantage in estate matters. There are, however, ways that you can contest a will. Here are the most common factors that can be used to challenge the validity of a will:

  • Failure to meet formality requirements—In Pennsylvania, a will must meet certain technical requirements to be valid. It must be in writing, and it must be signed at the end of the document. Pennsylvania courts have ruled a will to be invalid because it was signed at the beginning of the document.
  • Misrepresentation or fraud—A will may be declared unenforceable if it can be shown that that testator (the person executing the will) was misled into believing it was something other than a will
  • Forgery—A will can also be rendered void if it can be proven that the testator never signed the will and that any signature on the will was forged
  • Undue influence—If you can show that someone named in the will exerted improper or undue influence on the testator, when the testator was in an intellectually weakened capacity. Undue influence in Pennsylvania requires that you show a confidential relationship between the person receiving a substantial benefit and the testator. The person may be a family member, caregiver or a person with power of attorney. Furthermore, there’s no requirement for undue influence that the testator lacked capacity, only that the testator’s “reasoning power, factual knowledge, freedom of thought and decision, and other characteristics of a fully competent mentality” be impaired.
  • Lack of capacity-For a Pennsylvania will to be valid, the testator must have been “of sound mind.”

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Protecting Your Estate with a Will in Pennsylvania

Protecting Your Estate with a Will in Pennsylvania

Regardless of the size of your estate, you want to make certain your property passes with minimal stress to your loved ones and in accordance with your wishes. One of the best ways to do that is by drafting and executing a “last will and testament.”

Uses of a Last Will and Testament

A valid will can be used to accomplish a number of objectives, including:

  • The orderly distribution of your assets, as well as payment of all final obligations
  • The designation of a person to act as guardian of your minor children
  • The designation of a person to manage any assets or property that you leave to minor children
  • The creation and funding of a trust to benefit loved ones
  • Charitable giving

Though you are not legally required to retain an attorney to prepare and execute a will, it’s money well-spent to do so. An attorney can help you take the right steps to minimize the risk of misunderstandings by beneficiaries—your heirs will be thankful if you use a lawyer to ensure clarity in the distribution of your property.

Pennsylvania does not require that a will be notarized, but does mandate that the will be signed in front of at least two witnesses, and that the witnesses sign the document as well. It’s often easier, though, if you have the will notarized, because then it will be considered to be “self-proving.” If a will is not “self-proving,” there are additional steps that you must take during the probate process to demonstrate the legitimacy of the will.

Other requirements for a valid will in Pennsylvania include:

  • The person executing the will must be at least 18 years old
  • The person executing the will must be of sound mind
  • The will must be in writing

Contact Our Experienced Estate Attorneys

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Will a Pre-Existing Injury Prevent You from Recovering Workers’ Compensation?

Will a Pre-Existing Injury Prevent You from Recovering Workers' Compensation?

In Pennsylvania, when you have been hurt on the job, you have a right to pursue workers’ compensation benefits if you can prove two things: that you were hurt and that the injury occurred while you were working. What happens, though, if you had suffered an unrelated injury in the past, off the job, and you have an accident at work that causes that old injury to flare up? Can your employer deny you benefits because the original injury was not work-related?

In Pennsylvania, an injured worker cannot be denied workers’ compensation benefits solely because the injury relates to a pre-existing medical condition. If the old injury never healed, and that’s was causing your current disability, you may find it difficult to get your claim approved. However, if it’s an aggravation of a prior injury, you may be able to recover benefits.

The key, in most cases, is whether you can show that some current activity or accident at work made the condition worse. If you played baseball in college and suffered a torn rotator cuff, limiting movement in your shoulder, you may not be able to recover workers’ compensation if you take a job that requires a lot of heavy lifting and you experience pain in the old injury. However, if you fall at work or are involved in some traumatic accident that causes new pain or injury, that claim may be approved.

Contact Our Experienced Workers’ Compensation Attorneys

The workers’ compensation process can be complex and intimidating, and many legitimate claims are initially denied. Don’t risk the denial of benefits to which you are entitled. Send us an e-mail or call our office to schedule an appointment to discuss your rights related to a workplace injury. Evening and weekend consultations are available upon request.

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