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Washington Law Imposes Important Rules for Powers of Attorney

Posted Wednesday, December 13, 2017 by McKean J. Evans

What is a power of attorney? For many folks, a power of attorney, i.e., a legal document designating another person to act on your behalf as your “agent,” is a critical part of an estate plan or other legal arrangement. While it might seem straightforward to appoint a person to act on your behalf in case you become too ill or otherwise unable to manage your own affairs, this is not always the case. Washington law provides important rules governing powers of attorney that can make these documents more complex than might meet the eye.

First, to be valid in the first place, powers of attorney must follow certain formal requirements. The document must use the explicit term “power of attorney” and grant authority to an agent to act in the principal’s (i.e., your) place. The principal’s signature must be either notarized or witnessed by two unrelated persons who are not the principal’s home health or similar caregivers.

Unless otherwise provided, powers of attorney automatically take effect upon signing and automatically terminate upon death, revocation or divorce. Principals may detail specific circumstances (e.g., illness or incapacity) under which their power of attorney takes effect, and may even designate specific persons to determine when those circumstances are present.

Importantly, powers of attorney can grant broad powers to the agent by default simply by mentioning certain topics. For instance, powers of attorney mentioning real estate permit the agent to mortgage the property or remove buildings; references to financial institutions permit the agent to close accounts; references to businesses permit the agent to terminate the principal’s ownership or fire employees. A power of attorney may grant greater or more detailed powers than might appear at first blush.
Conversely, certain authority is presumed not to be granted to the agent unless the power of attorney explicitly provides as such. This includes important powers such as making gifts over the federal gift tax exclusion or making health care decisions.

Also important is that a power of attorney can implicate the principal’s will or other parts of their estate plan. Agents can often deviate from the principal’s estate plan if the agent does not know about the estate plan, or if the agent concludes the estate plan is not consistent with the principal’s best interest. This is especially important because the principal’s would-be heirs generally can’t sue the agent over changes to the principal’s estate plan.

Finally, a power of attorney can automatically terminate if a court appoints a legal guardian for the principal, which might occur if someone petitions the court claiming the principal can no longer manage their own affairs. This might alarm principals who execute a power of attorney because they desire certainty as to who will manage their affairs should they become incapacitated. Principals can maintain some certainty by nominating a prospective guardian in their power of attorney. The court appointing a guardian must appoint the principal’s nominee absent good cause.

If you have questions regarding a power of attorney or similar estate law matters, contact Pivotal Law Group attorneys Mike Larson or McKean Evans for a free consultation.

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Seattle Legislation Update – City Council To Vote On New Short-Term Rental Rules

Posted Wednesday, December 6, 2017 by McKean J. Evans

Owners and renters of properties used as short-term rentals (e.g., Airbnb) should be mindful of the Seattle city council’s imminent action on proposed new short-term rental rules. On Monday, December 11, 2017, the Seattle city council is expected to vote on a council committee’s approved proposed short-term rental regulations.

The proposed regulations are expected to tackle Seattle’s affordable housing crisis. Approximately 6,000 units in Seattle are currently used as short-term rentals. City council members have expressed an interest in preserving Seattle’s housing supply for local city dwellers. Some have contended that the rapid growth in the short-term rental industry depletes the local housing stock and drives up rents. The council previously passed legislation officially defining short-term rentals as specific units of housing offered for rent for fewer than 30 nights consecutively.

The proposed regulations would limit new renters to renting out their primary residence as well as one additional unit. Existing renters would be allowed to rent out two units, with the ability to add their primary residence as an additional short-term rental unit. Also, existing renters in specific locations such as downtown or South Lake Union, or renting older buildings in Capitol Hill, would be permitted to continue renting the properties they currently offer as short-term rentals.

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What Is A Speculative Builder And How Can Speculative Builders Pay Lower Real Estate Development Taxes?

Posted Wednesday, November 29, 2017 by McKean J. Evans

Seattle is in a construction boom and many firms are engaged in large scale real estate construction projects. That often entails tax liability under Washington and Seattle sales tax and business and occupation (“B&O”) tax. But certain real estate developers may obtain a tax advantage by structuring their venture as a “Speculative Builder.”

Basically, an entity developing real estate the entity already owns may qualify as a Speculative Builder. Washington tax law provides a Speculative Builder owes no sales tax or B&O tax on the value of construction services performed on real property the Speculative Builder owns. This is in contrast to a conventional builder who constructs improvements on real property for consumers; such a builder pays B&O tax and must collect and remit sales tax. Depending on the nature of the construction work, operating as a Speculative Builder may reduce a real estate developer’s tax liability considerably.

This tax advantage only applies if the entity seeking to qualify as a Speculative Builder is the genuine, bona fide owner of the property being developed. The most obvious attribute of ownership is holding title to the property, so it is critical that any entity seeking Speculative Builder tax advantages obtain title to the property before construction begins. Additionally, Washington’s Department of Revenue applies a multi-factor test to determine whether a Speculative Builder’s ownership of property is bona fide. The factors are: (1) the parties’ intentions when the land was acquired; (2) who paid for the land; (3) who paid for improvements to the land; and (4) how all parties, including financiers, deal with the land.

This means that if a putative Speculative Builder’s ownership of property is a mere formality, with another entity retaining ownership of the property as a practical matter, the Department of Revenue may conclude that the would-be Speculative Builder does not genuinely own the land for tax purposes. Such a determination would deprive the entity of the Speculative Builder tax advantage. Similarly, the Speculative Builder tax advantage may not apply if the property being developed is transferred away from the putative Speculative Builder immediately after construction becomes complete. Further, selling the property in the midst of construction might disqualify the would-be Speculative Builder from the tax advantage.

Pivotal Law Group attorneys McKean Evans and Mike Larson advise Washington entities regarding business, construction and tax matters. Please contact Pivotal Law Group today for a free consultation.

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Happy Thanksgiving from Pivotal Law Group!

Posted Wednesday, November 22, 2017 by Christopher L. Thayer

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What to Expect When You’re Expecting To Make An Insurance Claim – A Cheat Sheet

Posted Wednesday, November 15, 2017 by McKean J. Evans

So you’ve had a loss – perhaps a tree fell on your house, your car was wrecked or you became injured or disabled – and it’s time to dust off that insurance policy to see if you’re covered. Maybe you already made a claim but your insurer denied it for reasons that don’t make sense – or, perhaps even more frustrating, the insurer refuses even tell you whether they’re going to pay your claim or not. Or maybe you’ve just recently purchased a policy and want to know your rights.

This cheat sheet is a list of some issues you may want to consider. It tells you (1) the basic information you need; (2) some of your basic rights under Washington law; and (3) some helpful tips and “best practices.”

This is only a summary – your rights and obligations depend on the specific circumstances. If you think you might have a claim or dispute involving insurance, it’s wise to consult a lawyer. Insurance is complex and it is easy to accidentally put yourself in a disadvantage or even lose your rights entirely.

Basic Information You Need

Do I Have The Policy Documents? The insurance policy is absolutely critical. It states your coverage, your rights, and the insurer’s rights. It likely includes provisions requiring you to take certain action – like notifying your insurer of a claim within a certain period of time – in order to preserve your rights.

Many people are surprised to learn that their declarations page, summary plan description, or brochure explaining their coverage isn’t the policy. An insurance policy virtually always consists of a collection of multiple separate documents. For instance, a life insurance policy might consist of an application, a policy contract, and several addenda, riders or attachments. There are often additional documents such as annual statements that are also critical to understanding your rights under the policy.

Did I Get The Policy Through My Employer? Insurance policies you acquired through or in connection with your employer are different from regular policies. Employer-related policies are subject to a federal law called the Employee Retirement Income Security Act (ERISA for short). ERISA can apply even if the policy was issued by an insurance company that’s not your employer, and even if your employer doesn’t pay your premium. ERISA is very different from the law governing normal insurance policies; it’s complex and imposes special rules and deadlines. If you think your policy might be subject to ERISA, it’s important to pay extra close attention and consult a qualified attorney.

Do I Have All The Facts? If you have a claim or think you might want to make a claim, it’s crucial you know the facts. Make sure you obtain all the documents that are potentially relevant. If it’s a health or disability claim, have all the relevant medical records. If it’s a car crash, have the police report.

Know Your Rights

Here are some of the basic rights you have as a Washington policyholder:You Have The Right To Be Treated Fairly. Washington law imposes a duty on insurers to act in “good faith.” Good faith generally means the insurer must treat you honestly, made decisions on your claim based on adequate information, and never put their interests over yours. Remember that policyholders also have to act in good faith, so be sure you’re always honest when dealing with your insurer.

You Have The Right To Have The Insurer Follow The Policy. The policy is a contract between you and the insurer. The insurer has to follow it. The insurer can’t try to re-write the policy after you make a claim.

You Have The Right To Prompt Claim Responses. Washington law requires your insurer to respond to your claim within a specific time – often ten days – and acknowledge that they received your claim. Beyond the initial claim, insurers generally have to respond to your communications about the claim in a reasonable time. The insurer must also tell you whether or not they will pay the claim within a reasonable time after you provide the documentation they need to made a decision.

You Have The Right To A Full Investigation. Insurers have to decide whether to pay claims based on a reasonable investigation. That means your insurer has to make a reasonable effort to look for evidence that’s relevant to your claim. They can’t just consider the evidence that supports denying the claim.

Best Practices

Below are some helpful best practices to keep in mind when dealing with a possible insurance claim.

Keep A Paper Trail. Make sure you document everything that’s relevant to the policy or your claim. It’s especially critical to document all your communications with the insurer or with third parties (doctors, mechanics, potential witnesses, etc.). Communicate via email or hard copy mail when practical. If you have a phone call or in-person meeting with an adjuster, take notes, then send them an email summarizing your understanding of the discussion and inviting them to correct you if they think you got it wrong. If you lose money or have other harm because your insurer isn’t doing what they’re supposed to, document it. If it’s not on paper, it never happened.

Cooperate With Reasonable Requests. If your insurer makes a reasonable request for information or similar assistance with your claim, comply promptly. Remember you have a duty to act in good faith, and your policy may affirmatively require you to cooperate in making a claim. That doesn’t mean bending over backwards, but you should comply with reasonable requests. If you wind up in court, you want to be sure that it’s your insurer and not you who the judge sees as being unreasonable.

Be Proactive. Procrastination will never improve your position and it can make you lose your rights entirely if you miss a deadline. Promptly notify your insurer if you think you have a claim. Include as much information about the claim as possible. Follow up with the adjuster if they are slow in getting back to you. Reach out to third parties who might have relevant information. Generally, delay in processing your claim benefits your insurer – not you.

McKean Evans has represented policyholders in disputes with their insurers for over five years and has experience with a broad variety of insurance. If you have an insurance question, contact McKean at (206) 805-1493 or mevans@pivotallawgroup.com for a free consultation.

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DISCLAIMER: This blog is not legal advice. This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice under any circumstances, nor should it be construed as creating an attorney-client relationship. The information on this blog is a general statement of the law and may not be up to date, accurate or applicable to your specific circumstances.

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