Previously we covered what taxpayers should plan for in light of the recent United States presidential election and its results. Of course, there’s much more to consider than just taxes, so this week we are considering the legal landscape in 2025 and what various business owners should expect going into the new year.

One of the Trump campaign’s overarching themes was reducing the regulatory reach of the federal government. So far, comments from the incoming Trump administration suggest that it will follow through with slashing federal regulations.

Some industries and segments of the economy will feel this impact more than others. In particular, the energy and consumer finance industries will be on the front of this regulatory pullback.

The Biden administration’s relationship with oil and gas companies (federal land leasing for oil drilling, in particular) was a subject of discussion the previous four years. The Trump administration will likely roll back some of the regulations concerning federal land leasing requirements, making it easier for these companies to expand their oil and gas drilling and extraction operations.

Consumer finance is another industry that will probably see some regulatory easing with the new president. The Consumer Financial Protection Bureau (CFPB) has recently developed and put in place various regulations aimed at banks and lending institutions. These regulations limit certain fees that banks can charge their customers. The CFPB has also created similar fee-limiting regulations at airlines, capping what airlines can charge for certain services. While it isn’t clear what will happen to the regulations already on the books, it is probable that the CFPB will have less influence in regulating industries.

In fact, a notable Supreme Court decision came down earlier in 2024 that will steer the regulatory direction further.

The Chevron Doctrine, in place for more than 40 years, was overturned in June. This legal concept required courts to accept a federal regulatory body’s “reasonable interpretation” of the regulations they pass. In other words, the Chevron Doctrine required courts to give preference to the federal regulator’s perspective when making legal judgements.

Now that the Chevron Doctrine has been overturned, courts now have the latitude to interpret regulatory language as it sees fit, which may be in contradiction to what federal regulators intended. In effect, federal regulators will have less power to enforce their actions through the courts.

It’s still too early to make firm predictions on what the legal landscape will look like in 2025 and what regulatory bodies will be targeted by the Trump administration. However, there is one example of what these changes might look like for business owners – nondisclosure agreements and covenants.

Non-disclosure agreements are made between employers and employees – typically new hires. They restrict what the employee may do with the inside knowledge they gain by working with the business. This includes trade knowledge, customer lists and other important company assets.

Non-disclosure agreements and covenants are a matter of debate because they can either be too restrictive (which makes it difficult for employees to work in the same industry if they leave the business) or too lax (which exposes the employer to significant risk). While campaigning, the Biden administration stated that it would make employer-employee non-disclosure agreements difficult to enforce – coming down on the employee’s side in this regard.

The Trump administration will likely take a different approach. Currently, covenant agreements are enforced at the state level and are therefore enforced differently all over the country. If the Trump administration does differ from the democrats in this area, it may keep the existing state-level regulations in place for non-disclosure agreements. As such, it’s important for employers and employees to check with their state’s restrictions on covenant agreements before authoring or signing the document.

With a new executive in place and control shifting in the legislature, 2025 will be a year of transition and change. Many of these changes will be aimed at drawing down the regulatory strength to the federal government, which will have impacts on industry and the economy.

If you own a business or are planning on making a major life change in 2025 – like switching jobs or retiring – an experienced attorney can advise you on how to proceed and what to consider so you won’t be caught off guard in the new year.

Election season is behind us. The U.S. has a new incoming president and likely a new tax philosophy for the country. That means it’s time for taxpayers to review their tax planning strategies and position themselves for potential changes to the tax code.

Starting in 2025, the Republicans will control the executive branch, along with both parts of Congress, albeit with a tight margin in the House that may be an obstacle to major tax-related changes. Regardless, there are certain policies that tax experts are preparing for, including the Hap May legal team.

During President Donald Trump’s first term in office, his signature tax-related piece of legislation was the 2017 Tax Cuts and Jobs Act (TCJA). The TCJA made many major changes to the tax code that are still in effect today, as most of the relevant provisions are set to sunset (expire) at the end of 2025. One provision that will remain is the corporate tax rate, which was permanently set to 21 percent following the TCJA’s passage.

However, if another tax bill isn’t passed prior to 2026, the following tax provisions are set to revert back to their 2017 standards:

It’s likely that with President Trump’s re-election the above provisions will be extended with the passage of a TCJA “part two” piece of legislation.

There are reasons to believe that both parties would want to avoid a TCJA sunset. The provisions contained in the act benefits a number of constituencies, and allowing the TCJA to expire without an alternative would have potentially serious political blowback for Republicans and Democrats. As such, it’s safe to expect that a new tax law of some kind will be passed in 2025.

It’s also safe to expect that the new tax law will look a great deal like the old one – Trump has even said as much in interviews – but passing the law will mean overcoming a zero-room-for-error margin in the House. As some blue state Republicans may be interested in lifting the SALT cap (which would impact states with a high state or local income tax), there may be contentious negotiations ahead for Republicans behind the scenes.

Although tax experts have a general idea of what the next four years will hold from a tax perspective, politics are unpredictable as a rule. That’s why if you’re reviewing your tax planning strategies, it’s best to do so with a tax planning expert. With a professional tax and business attorney providing guidance on your tax planning, you’ll be best positioned for 2025 and beyond.

The Corporate Transparency Act (CTA) is a federal anti-corruption and anti-money laundering law that came into effect on January 1, 2024. Among its provisions is the beneficial owner information report (BOIR), which many business entities are required to file, or they may face significant penalties that can increase quickly.

BOIRs are filed with the Financial Crimes Enforcement Network (FinCEN) and are used to identify the entity’s beneficial owners. This is meant to assist FinCEN with identifying bad actors hiding behind business entities to engage in criminal activity. If your organization is engaged in legitimate business, there’s no reason not to comply with the CTA.

Beneficial owners must be identified on a BOIR. To be considered a beneficial owner, either of the following must be true about an individual:

The CTA’s definition of “substantial control” is somewhat open-ended, but in general, if any of these are the case for an individual, they likely need to be identified on a BOIR:

Entities that must file a BOIR include limited liability corporations (LLCs), non-publicly traded corporations, and limited partnerships (including limited liability partnerships and family limited partnerships).

Exempt entities include publicly traded corporations, sole proprietorships, non-profit corporations, most trusts, and inactive entities. These entities are not required to file a BOIR with FinCEN. Further, some beneficial owners do not need to be included on a BOIR, including minor children, individuals whose only interest in the reporting company are through a future inheritance, certain creditors, and employees who are not senior officers and whose economic or control benefits are based on their employment status within the company.

If you’ve previously filed a BOIR for a reporting entity and that entity is the beneficial owner of another reporting entity – LLC 1 owns LLC 2, for example, and both need to file a BOIR – you should be able to use a FinCEN number that the reporting system generates upon reporting, and then you can use the FinCEN number to report the beneficial owner information for LLC 2.

However, some have encountered issues with FinCEN’s online filing system that occasionally makes this shortcut entry of a FinCEN impossible without re-entering all of the “end-of-the-line” beneficial owner information for the second entity. This shouldn’t be a problem, as long as you know who the beneficial owners are for the second entity, you can just enter their information to complete the process.

If the entity’s beneficial owner is a trust, check the box that says, “beneficial owner is an exempt entity” and enter the name of the trust in the box.

Anyone who is authorized by the reporting entity to file a BOIR may do so. This individual must also provide their personal information (or create their own FinCEN number and provide it) on the BOIR for compliance purposes.

To file a BOIR with FinCEN, go to the agency’s website. Once there, click on “File BOIR” and click on the Web option to File Online. There are numerous prompts to click through and some instructional videos online to watch that demonstrate how to file the BOIR. When submitting the report, the following information will be required:

Once the BOIR is filed, make sure to download the filing submission when prompted at the end of the filing process. This is proof that your organization has filed the BOIR. Be sure to save the submission ticket under a document name for the entity that corresponds to the BOIR just submitted. The filing ticket itself will not have the entity name on it.

If you believe that incorrect information has been submitted with the BOIR, the process can be restarted by clicking the “Correct a BOIR” button on the agency’s filing website.

The CTA stipulates that any reporting entity that willfully violates BOIR reporting requirements are to be assessed a civil penalty of up to $500 each day that the violation continues.

However, none of the May Firm’s clients (that we are aware of) have received warning from FinCEN that they are past filing requirements or have been assessed fines. Given the number of reporting entities that FinCEN must obtain information from, as well as the difficulties in obtaining information from existing companies that must still file, it is likely that it will be some time before the agency reaches out to non-filers and threatens penalties.

That said, it is recommended to comply with BOIR filing requirements and submit beneficial owner information voluntarily. If your business still hasn’t filed its BOIR, there is still time to do so and avoid any penalties.

Filing a BOIR is a relatively straightforward and simple process for reporting entities. However, if your organization is unsure how to proceed with the CTA and with BOIR filing, an experienced business attorney can provide guidance.

Although many questions remain regarding the CTA’s impact on businesses, including when and how FinCEN will enforce BOIR filing, prompt and accurate filing will ensure your organization isn’t surprised by penalties or additional scrutiny from the agency.

The 2024 elections have driven intense conversation on a number of issues. Among them are taxes, as both political parties have good reason to pass a new set of tax laws in the near future. Enacted in 2017, many current tax provisions are set to expire a little more than 12 months from now, so the next administration will have to make tax law a focus soon after they settle into the Oval Office.

Let’s review how the 2024 elections may affect taxes, depending on who is in control of the legislative and executive branches.

The last major tax bill was passed in 2017, known as the Tax Cuts and Jobs Act. In most instances, it is still the primary tax document governing individual and business tax provisions. And many – but not all – of those provisions are scheduled to sunset at the end of 2025.

That means, theoretically, if no new tax bill is passed by the legislature and signed into law by the President, any provisions that are scheduled to sunset would revert back to what was on the books before the TCJA – effectively back to 2016-era tax provisions.

Thankfully that won’t affect some of the most impactful provisions – corporate tax rates will remain at a flat 21 percent even if the act expires. There are, however, numerous important provisions that would be affected by a pre-2017 rollback, including the child tax credit, the standard deduction, and state and local tax (SALT) deductions.

As both political parties have their own tax agendas to pursue (and constituents to please), it’s highly likely that a new tax bill will be passed before the TCJA expires. As for what a new set of tax laws would include, that would depend on which party has greater control over the legislative process.

There is a chance that the Republicans will control both the House and Senate following the 2024 elections, which would give them serious negotiation power should a new tax bill come to the floor.

In this theoretical outcome, it’s likely that most of the TCJA provisions set to expire would be extended. That would be the starting point, at least, but it’s likely that certain things like the amount of the standard deduction would be recalibrated to match today’s economic realities. Further, both parties have indicated a willingness to raise the child tax credit in a new tax bill beyond what the TCJA provides for 2025 ($1,700 refundable portion).

In a Republican-majority scenario, the following provisions would probably be preserved along with the tax concepts underpinning the TCJA:

In addition to the above tax-related provisions, there are many questions surrounding tariffs under a potential Trump administration. Putting aside the economic impacts of tariffs, as there are many and they are difficult for any one person to explain, much of the discussion related to tariffs is centered around whether they can be used to fund government programs – perhaps as a way to offset the cost of continuing tax cuts.

The Democrats may also have the upper hand in tax law negotiations, depending on how the presidential and Senate/House elections shake out. On the campaign trail, Harris has indicated a desire to raise the corporate tax rate up from 21 percent, but likely not back to the pre-TCJA days of a 35 percent tax rate.

Although the Democrats would surely push for a newly authored and conceived bill – not just a continuation of the TCJA – it’s possible that some of the TCJA’s more popular provisions may remain in place. For example, it appears both parties agree on a larger child tax credit, though it’s unclear where each party stands on exact amounts.

An increased corporate tax rate (relative to the current 21%) is also likely under a Democrat-sponsored bill. There’s a significant chance that Democrats would also push to lift the $10,000 cap on the SALT exemption, though this would favor high-income earners in states with higher state taxes.

And if the tax-related ideas set forth in the Inflation Reduction Act are to be furthered in a new Democrat tax bill, certain industries may benefit from tax-friendly provisions, such as those involved in or allied to green manufacturing.

Everyone should vote for whom they feel will best represent their interests, regarding taxes or otherwise. However, it’s important to keep tax laws in mind when selecting a candidate, especially if your financial situation would be greatly impacted by the election’s outcome.

If you have questions about tax planning with the 2024 elections coming up, consider scheduling a consultation with an experienced tax attorney that can provide in-depth guidance on optimal tax planning strategies, no matter what your tax situation is and no matter who is writing the tax laws come 2025 and beyond.

Under Section 363 of the Bankruptcy Code, interested parties are authorized to buy assets in bankruptcy. By doing so, the purchaser is able to acquire the asset “free and clear,” which means any liens or judgements against the asset are not transferred to the asset (and the party purchasing the asset).

This gives would-be buyers opportunities to acquire valuable assets at a steep discount, but there is a process that must be followed to ensure the transaction is completed in accordance with Section 363.

Few assets are off the table if you’re purchasing them during bankruptcy. What is on sale is a matter of discussion between the debtor company (or individual), the court-appointed bankruptcy trustee and the interested third-party buyer. In general, though, all of the following can be sold or purchased free and clear through bankruptcy:

In some cases, buyers can even purchase judgements levied against the debtor company, gaining legal grounds to seek repayment from the debtor company.

Typically, it’s difficult (or outright impossible) to buy assets in bankruptcy due to the presence of liens or judgements against the assets. Tax liens, first liens, second liens and so on determine the priority in which creditors are paid back, should the asset be liquidated. This means if the asset is sold, the liens would then become the responsibility of the new owner, entangling them with creditors they would otherwise rather not deal with.

Instead, third party buyers typically seek a free and clear transaction by leveraging Section 363 of the Bankruptcy Code. Here’s how such a sale under Section 363 would typically proceed:

In addition to seeking a stalking horse, the debtor may also start the selling process before filing bankruptcy to ensure the 363-process can be completed quickly.

To do so, the debtor and their trustee will file a motion with the bankruptcy court. This motion will seek approval for the bidding process, along with the deadlines for the auction and following sale. If no stalking horse bidder is present at this time, one may be selected to start the process.

Another hearing will be scheduled once a buyer is identified for the final transaction. At this hearing, the debtor must provide evidence that the selected buyer provided the best or highest bid, and that the auction process is completed without interference from the debtor.

Once the court approves the sale, it can be performed free and clear, so the buyer walks away with a no-strings-attached asset, and the funds raised from the sale are then used to satisfy the debtor’s creditors.

Underpinning every asset purchase in bankruptcy is the pursuit of a good deal. As assets sold in bankruptcy tend to be sold under tight deadlines, debtors are encouraged to liquidate those assets as efficiently as possible to satisfy creditors. As debtors do not have time to perform an extended buyer search, assets are typically sold at a deep discount.

For the buyers, discounted assets can serve strategic or investment needs, including:

Buying assets in bankruptcy offers obvious advantages to the buyer, but it must be done in accordance with the Bankruptcy Code to ensure there are no lien-related complications.

If you are looking to acquire assets at an advantage, purchasing them in bankruptcy is an option. However, given the complexities, it is recommended that would-be buyers first consult with an experienced bankruptcy attorney. Their expertise will ensure the transaction is completed in accordance with Section 363, and can also help with vital parts of the process, such as due diligence and asset valuation.

It is important for taxpayers to understand how partition agreements and an IRS tax filing status are linked. The connection between the two can impact how a married couple files their tax returns and how it could potentially affect the non-debtor spouse.

In the case of married couples, partition agreements are legal documents that define the terms and conditions of the division of property between the two of them. Property can include real estate, bank accounts, and other valuable goods. Examples of partition agreements are prenuptial and postnuptial agreements. Partition agreements are essentially an agreement between the spouses on how to divide ownership and rights to their property. In Texas, any property that is earned or received, with some exceptions like inheritance, is considered community property, meaning both spouses have ownership rights over the whole. A partition agreement is typically used as a way for the spouses to state that they do not want Texas law to dictate ownership of the property, and they want to decide who owns what.

Today, it is not unusual to see couples entering partition agreements after they have married. The reasoning behind this movement is that it can allow the two individuals to have a say in how their property is divided up instead of letting default Texas community property laws decide. Certain pieces of property are defined as separate. This keeps property as “yours and mine” and eliminates the default “ours” factor.

One of the most common questions we get about partition agreements is why someone would want to enter into one. The short answer is that there are a number of valid reasons, including:

It is worth noting that it can be hard for a creditor to set a partition aside unless the person already has a judgement against them or the partition agreement was signed well after the debt entered into collection actions.

If a partition agreement has already been signed, it is important to decide how to file your federal income taxes, especially if one spouse makes significantly more than the other.

If two spouses enter into a partition agreement that they have signed, executed and notarized, it usually does affect how we would advise them to file their tax returns. For example, if a couple has nothing but community property, community income and few debts, there is little reason not to file jointly. But there are financial complications which may need to be considered.

If you have a married couple with a diverse income in which one spouse makes one million dollars annually and the other spouse makes ten thousand dollars, they can still decide to share the income and it will be reported accordingly. This means they can still file a joint return and pay taxes on the whole amount. The benefit to this is typically money saving. Filing jointly often results in paying less tax than if filing separately. Yet it doesn’t have to be done this way. There may be important reasons for a couple to file separately.

There are some reasons for a couple to change their filing status to “married and filing separately” when a partition agreement comes into play, including:

The goal is to prevent the debtor-spouse’s creditors from getting to the assets of the non-debtor spouse, especially in a case where the non-debtor spouse earns significantly more than the debtor-spouse. Filing jointly would be unwise in this case as it would give the creditors of the debtor-spouse access to financial information about the non-debtor spouse.

Why is this an issue? When creditors know how much the higher earning spouse makes, they could become much more aggressive in making the lesser earning spouse’s life miserable by threatening to take an annual deposition, demanding they respond to requests for production, or by garnishing what is in known bank accounts that the debtor-spouse may enjoy the benefits of. An aggressive creditor could put extreme pressure on the debtor-spouse to come up with money from somewhere, hoping they will dip into the higher earning spouse’s funds to appease the creditor.

If the creditor is the IRS, it can be a very good idea to file separately, because if the spouses file jointly, the IRS can keep any refund that the couple might have received and apply it towards the debt of the debtor-spouse. This means that any refund the non-debtor spouse would have received for money they alone contributed could be lost and the non-debtor spouse would lose out on the option to receive rightful refunds. By keeping property and debts separate, it can be possible to keep the IRS from withholding or garnishing any funds belonging to the non-debtor spouse.

Partition agreements and an IRS tax filing status are interconnected and can have far reaching implications. The best way to ensure your rights and your assets are protected is by enlisting the help of a trusted and reputable tax attorney before it is too late.

Federal tax liens are a product of the Internal Revenue Service (IRS). Federal tax liens are created and filed in the property records by the IRS when a taxpayer owes the IRS money that the taxpayer hasn’t paid. If you have ever had a federal tax lien against your property, you may wonder if the IRS can foreclose on your property. By understanding how a federal tax lien works, it can equip you to avoid foreclosure or know how to handle it. However, in full disclosure, dealing with a federal tax lien can get messy quickly, which is why the majority of individuals or companies facing this situation turn to successful attorneys for guidance and representation.

Suffice it to say, you do not want a federal tax lien against you. It is the first thing that hits the public record, so creditors and credit reporting agencies will know there is a federal tax lien. A federal tax lien is filed in the county in which the debtor has property and theoretically puts a lien on all the property, real or otherwise, the debtor has in that county. For these reasons and so many more, federal tax liens should always be taken seriously.

Although federal liens are attached to everything a taxpayer owns within that county, there may be some wiggle room. A homeowner with a lien may still be able to sell furniture, such as a couch, to their neighbor without interference from the IRS. However, if a factory with a lien is selling expensive equipment worth millions of dollars, the IRS could come after that equipment and leave the buyer empty handed.

In the event that the IRS has a federal tax lien against a house with an outstanding mortgage, the question becomes which is superior? The tax lien or the mortgage? In general, most states have a first come, first serve rule which means that if the mortgage is in existence prior to filing the tax lien (i.e. the deed of trust in favor of the mortgage lender is filed in the public record before the federal tax lien), the mortgage will most likely be superior.

However, it would be a mistake to think that the IRS cannot do anything if there is a current mortgage on the house. For example, if there is a house with an existing mortgage and a federal tax lien is filed, the IRS can still foreclose. A foreclosure requires the IRS to go through some procedural hurdles first, which typically makes this process uncommon, but it can happen.

For the government to foreclose on a property, there is a procedure they must follow which can generally look like the following:

In most cases, the IRS applies the eighty percent rule, which means they are looking to get eighty percent of the value of the house. So, if you have a $300,000 house, $240,000 mortgage and a $60,000 tax lien on it, there is not enough equity.

The taxpayer has a right of redemption which can be a specific number of months for the taxpayer to come up with the funds to pay the amount the property sold for, plus a redemption premium, which can be somewhere around twenty percent.

For instance, if a buyer at a foreclosure auction bids $100,000 for the property, the buyer’s right to possess the property isn’t final. There is a window of time in which the taxpayer has an opportunity to redeem the property. The taxpayer would have to pay the buyer $120,000 and then they could redeem the property. If the taxpayer can’t or chooses not to do this, the taxpayer must surrender the property. The buyer would then be the new property owner. Remember, though, there is a mortgage still in place. So, the buyer would own the house, subject to the first mortgage, meaning if they want to keep the house, the buyer would need to make the necessary payments to the mortgage company.

It is worth noting that although mortgage companies do not have to be notified of the property foreclosure sale, most sophisticated mortgage companies and banks have people whose sole job is to look for these federal notices and match them up with properties that are secured by a loan from them. In other words, even if you do not notify the mortgage company about a federal tax lien or IRS foreclosure, they will most likely find out anyway.

Perhaps even more problematic is that the mortgage company can decide that if a federal tax lien goes into place, they can start their own foreclosure. This is because most deeds-of-trust say that an additional lien on the property constitutes a default on the first lien mortgage, freeing the deed-of-trust holder to foreclose on the property. It can get quite complicated quickly, which is why enlisting the help of an attorney can be key to success in cases like these.

There are two primary ways to keep the IRS from foreclosing on a federal tax lien, and they are:

Limited Life Span of a Federal Tax Lien

The fact is that federal tax liens have a ten-year life during which the IRS can collect the debt or reduce it to judgment. To reduce a lien to a judgment means filing in a court with proper jurisdiction and getting a court to issue a judgement against the taxpayer. This comes with its own administrative burdens and costs that the IRS will decide may or may not be worth doing.

The statute of limitation (the 10-year life of the lien) could help some individuals in the long run. There have been cases where taxpayer has simply waited out the ten-year life of the lien and then the IRS released it. Typically, if you owe the IRS a couple hundred thousand dollars and the IRS chooses not to foreclose on their tax lien, you may be able to wait out the ten-year period without much of an issue. However, during that time, you will not be able to sell or refinance the house.

Generally, if the individual is current on payments and taxes, and the mortgage company gets all the required information, most banks are content to do nothing and simply accept their monthly repayment. Yet, if you have a federal tax lien and are behind on payments, the mortgage lender may choose to be strict simply because the risk is now greater.

In short, the IRS can foreclose on your property, but by understanding a federal tax lien you are taking steps toward preventing that from happening, or at the very least knowing what to expect if it does become a reality. Whichever situation you find yourself in, enlist the help of a reputable tax attorney to make sure your rights are protected and that the actions you take best serve your interests.

Bankruptcy is something the public hears about often. Most of the time, the news and media focus on big corporations or well-known wealthy individuals. Sometimes it may seem that certain corporations or individuals survive, and maybe even thrive after bankruptcy. It is not true that people or businesses can get richer through bankruptcy. Filing bankruptcy is, in fact, a serious issue.

Determining whether filing bankruptcy is the right move for you or your business is critical before moving forward. Bankruptcy is intended to be an option provided by the government to help people and businesses that are struggling to overcome large debt, but depending on the specific circumstances, bankruptcy is not for everyone.

From the moment you are even considering bankruptcy for yourself or your business, it is strongly suggested to make an appointment with a bankruptcy attorney for advisement of the right steps to take, when to take them, and what to expect.

Why Bankruptcy Exists

Bankruptcy is designed for people and businesses that are in debt to too many creditors and just cannot pay everybody. The underlying policy for bankruptcy is helping the debtor settle some, if not all of their debt in an organized fashion, attempting to ensure that most of the creditors with valid claims get something back.

For example, let’s say a debtor has several creditors. Some of these creditors could be suppliers or vendors, government taxing authorities, contract laborers or service individuals. It is not uncommon to have outstanding debt with multiple entities simply because cash-flow was not good enough to pay off everyone and the debtor prioritized some over others for whatever reason. Without bankruptcy, all creditors would likely be pursuing the debtor with their own resources and remedies, and the debtor would have to deal with each of them separately. This is a daunting task. And in some cases, the most aggressive creditors aren’t the ones that have superior right to be first-in-line to be repaid. Preferential treatment of one creditor over the other can have some long-lasting negative consequences. Instead, bankruptcy court offers an organized manner whereby the debtor and all the creditors must join together to figure things out.

The Potential Upside of Declaring Bankruptcy

While declaring bankruptcy for yourself or your business is not for everyone, there are some reasons why people tend to think it has an upside:

Can I get Rich by Filing Bankruptcy?

There is not a scenario where an individual or business can get rich by filing for bankruptcy. The system just does not work that way. A person or business may already be rich and have lots of assets, then file bankruptcy and not be forced to pay all their debtors and creditors. Add to that certain state exemptions, and the debtor may still have quite a bit leftover, such as their 40-acre ranch pursuant to the Texas homestead exemption.

While there can be good outcomes for a debtor in bankruptcy, there is no way to “game the system” so to speak. There are processes and protections in place where people are appointed to oversee, if not take control of, your assets to ensure the debtor is not doing something backwards or lying about the assets they have. For example, in a Chapter 7 complete liquidation case, a trustee is appointed. The trustee will do one of two things:

The bankruptcy court and the trustee will be on the lookout for recent “debts” repaid to creditors who may be a related party. For example, if on Monday I owe the bank $10,000 and I owe my mom $10,000, and then on Tuesday I get $10,000 and give it to my mom. Then on Wednesday, I file bankruptcy. The bank may say it is not fair, or legal, to show preference to my mom. That allows a trustee to sue my mom as the recipient of a fraudulent conveyance and make her give the money back so it can be divided up amongst my creditors according to the rights they had before the transfer was made.

Is Bankruptcy Right for Me and My Business?

In an effort to be transparent, debtors are often advised not to make any bankruptcy decisions on their own. It is much more prudent to speak to a bankruptcy attorney first to ensure it is in your best interest to file bankruptcy and determine under which chapter of bankruptcy to file.

If you are a person or business that is so far in debt that you may never get out (something to the tune of $100 million in debt), then bankruptcy may be right for you. If a person with this type of debt is being hounded by creditors, it can make it difficult for them to even get a bank account.

There may also be entities that cannot pay all their debts because of something that happened in the past. A good example of this can be office buildings. In most cases, these structures were worth more before the pandemic than they are now. Many of them have mortgages from the days when those buildings were more expensive, only now the owner does not have the same occupancy and thereby not enough cash flow. However, the building still exists and does not have to be built again, so it can still charge some rent and pay some mortgage. Certain mortgage lenders may be unwilling to work with the debtor. Filing bankruptcy may be the remedy. A court-approved bankruptcy plan that restructures this debt may give the creditors some continuing cash flow rather than allowing foreclosure on the real estate, which can disrupt the market and the lives of the people who work in the building.

On the other hand, there are other situations in which bankruptcy may not be recommended.

If you or your business have a limited number of creditors that you are able to work with, it may be wise to try to settle outside of bankruptcy. Bankruptcy can be long and cumbersome and potentially more expensive that simply renegotiating with existing creditors.

Someone who owes a bunch of people a little bit of money, may have at least some creditors that do not try to collect. It is possible that some of those debts may even be unenforceable or released due to the statute of limitations. It would not be advantageous for a person to file bankruptcy the month before the statute of limitations runs out on their $200,000 IRS debt.

Because every situation is different, it is best to seek professional legal counsel from an experienced bankruptcy attorney to determine the best path forward before taking action.

It is worth noting that there are more than a few types of debts that do not get discharged in bankruptcy, including:

Abuse of Bankruptcy

If you are filing bankruptcy just to buy time, it is probably not the best strategy to file as it turns over a great deal of authority to the courts and trustees to do things to you or your business that would not have happened otherwise. While it may stop a foreclosure for a while, unless you can pay the debt in that ninety-day window, it is likely a mistake. It is also considered bankruptcy abuse to file simply for the purpose of invoking the automatic stay.

If you are wondering whether bankruptcy is right for you and your business, know that it is a complicated area of law. It is very strategic in terms of when you should file, what you should do beforehand, and all the processes that come during and after bankruptcy. Proceed with caution and make sure you are doing what is in your best interest by making an appointment with a reputable bankruptcy attorney today.

Making a will is one of the most important things you can do to protect your assets, but what happens if your heirs can’t find the original will? The short answer is that things could get problematic quickly. This is primarily because copies do not carry the same weight as the original in the eyes of estate law.

Before you make a will, it is vital to understand how to ensure it is legal, how to store the original, and what to do if you decide you want to revoke the will and begin anew. Without knowledge of these processes, you could risk your assets being distributed contrary to your final wishes.

Probate courts need the original will because along with it comes the authenticity of the document. Without the original, there is a presumption that comes into play. It is not as simple as saying that your spouse or parent died, and you cannot find the original, but you have a copy of the will. The law will presume that without an original will, the testator, or person who made the will, destroyed it with the intent to revoke.

Some of the top reasons there is no original will to present include:

That said, there are some instances in which it may be possible to overcome that presumption. For example, if the will was partially destroyed in a natural disaster, but some parts are still readable, and you have witnesses (often attorneys) who can attest that the will was only recently drawn up. Another way to overcome the presumption is if a spouse’s mirror-image copy still exists that was drawn up at the same time, and no legal heirs contest using a copy of the testator’s will in court.

Many individuals make the mistake of thinking that when an original will cannot be found, their attorney will have copies.

Years ago, lawyers often kept clients’ wills in a safety deposit box or a fireproof safe. The problem is that the lawyers then had the obligation to keep track of it for thirty to forty years or more. Consider what might occur if something happens to the lawyer during that time. Consider if the heirs would even know who the testator’s lawyer was at the time it was drawn up and if they would know how to reach them. If lawyers do have a copy, it is still just a copy. However, if an original will cannot be produced and no one is contesting it, then there may not be a reason to anticipate any problems.

If the copy looks good, the circumstances for not having the original are not unusual and there are no obvious red flags or suspicions, everything may be fine. Yet, the caveat to this is that there must still be a notice put out to all the heirs that would potentially let them know the copy has been entered for probate and there is an application to probate using the copy. The heirs will need to be asked if they have any reason to protest. If the heirs sign waivers of notice saying they will not contest, it can be filed with the court.

Issues can occur if you cannot locate the heirs to notify them. You may have to hunt to find last known addresses, try to contact people who know where they are, and then issue a citation of personal service. If service of process fails, the person applying to probate the will may have to get a court-appointed ad litem to represent the heirs during any proceedings (see our previous blog and podcast about attorneys ad litem).

Let us consider a scenario in which a person passed away. A woman, a former neighbor of the deceased, submitted a copy of the decedent’s 30-year-old will. The will left certain assets to the woman. The woman was not related to the deceased and hadn’t seen them in years. The deceased’s estate was close to four million dollars.

There were roughly 60 heirs that stood to inherit something if that copy of the will was invalidated. Because the copy of the will the woman submitted for probate was thirty years old, the woman was advised that she would end up losing her application to probate the copy and to settle.

The deceased’s estate paid the woman’s legal bills because she had done work to initiate probate proceedings. However, in the end, the deceased’s heirs inherited approximately two million dollars.

The lesson in this case is that if you have a legal will and you want there to be a specific distribution of assets upon your death, make sure you have an original that can be accessed by someone you trust. It can be a worst-case scenario when the will you actually wanted to be followed is thrown out by the court because there is no original and there is at least one heir who protests its probate.

Imagine this scenario. A mother passes away. The son and daughter are the heirs at law. The daughter has only a copy of the will in which her mother gives everything to her, and she submits it for probate. The brother could either sign the waiver notice, or he may contest the copy was something presumed to be destroyed with intent to revoke. In the latter case, the son would likely get half of his mother’s estate.

An individual does have the power to revoke all previous existing wills and begin a new one. This is frequently done if, for example, children or grandchildren enter the picture after the first will was drawn up. The tricky part can be ensuring that the right people know about this change.

Consider this. A person had a will drafted two years ago and ensured that her daughter, cousin, lawyer, etc. have copies of that version. However, the person intends to now revoke it. What should they do?

Contrary to popular belief, tearing up the original will is a mistake. By doing so, it effectively makes the original disappear and then you are back to copies of wills. For a greater degree of protection, it is more efficient to mark the previous will “revoked,” put your signature near the word “revoked,” and put it back in the file. This ensures that when someone presents a copy of the original will, someone else with the original marked revoked can submit it as proof that the copy is null and void. The next step would be to formally create a new will.

With the importance of an original will already established, the next item on the to do list is to make sure the document is properly safeguarded.

Many individuals choose to store their wills in a safety deposit box at a bank. However, this is not a completely foolproof method. Not all safe deposit boxes are watertight. Should there be a flood, and the will is damp and slightly damaged but still readable, it may be okay. However, should the flood destroy the official document, then you are once again without an original.

Avoid storing original wills in safety deposit boxes or fireproof safes that are underground or at ground-level. Flood waters will be a threat to those documents. Even when putting them in those places above ground, it may still be wise to first put them in a sealed plastic bag.

Lastly, make sure that someone you trust will know where to look for the stored document after you pass. It is key to choose someone you do have a great deal of trust in. This is because whoever finds the original document may compare what they will get from the will that versus what they will get if there is no original document. An untrustworthy person may choose whichever is to their best advantage and could destroy it.

In review, here are the top takeaways about creating, revoking, and storing wills:

Attempting to probate a copy of a will can create undue confusion and heartache. Work with a reputable estate attorney to make sure you are following all the necessary previsions so that your assets will be distributed as you truly wish upon your passing.

If you are planning to apply to probate an estate and do not have an original will, make sure you understand all the steps to comply with the law of your state. A trusted estate and probate attorney will be able to help you with all court requirements.

Attorneys ad litem are important positions within the probate court system. An attorney ad litem can assist with representing those who cannot represent themselves, such as minor children, incapacitated individuals, and unknown heirs. A court appoints attorneys ad litem in different situations, such as heirship proceedings when there are potential unknown heirs to an estate.

Take the following scenario for example. a woman passes away and does not leave a will. The only known heir she has is her husband of many years. Because there is no will to follow, and a court must do its due diligence to determine all potential legal heirs, the court has to rule out the possibility of any children the woman may have had.  There is always the possibility that the woman had been married before, had a child, and gave up a child for a closed adoption, or that she had a child when she was very young that she did not raise and no one knows about. In a situation like this, an attorney ad litem is appointed to represent these possible children in an heirship proceeding, to explore the possibility there may be unknown children of the woman who do exist. However unlikely, the courts must make sure all known heirs are accounted for before allowing an executor or administrator of the estate to liquidate assets and disperse anything to known beneficiaries.

In the case of heirship proceedings, the job of an ad litem attorney is to represent someone who cannot represent themselves. This includes people who are:

In the case of the last point, a court can say they are not sure if heirs (known or unknown) have notice of the probate proceedings, and the court will want to make sure the interests of all heirs are represented. To do this, the court will appoint an attorney ad litem. This type of lawyer is particularly helpful in the event that the deceased had no will, or the original copy of the will was lost, OR beneficiaries listed in the will cannot be found and are considered transient (homeless or have long lost contact with family and friends).

Without an original copy of the will, the law requires an heirship proceeding. An attorney ad litem is tasked with determining if there could be other individuals or unknown heirs out there. Typically, beneficiaries or acquaintances of the deceased can provide the names of some witnesses that are “disinterested” (i.e. not listed in the will or not intestate heirs). If these individuals have known the decedent or their family for many years, the disinterested witness may be able to share that the witness never knew of a will the deceased put together, or the witness might share that the person was married only one time, or that they absolutely never had children.

One case example includes a woman who passed away without a known will. Subsequently, the court could not find anyone from the woman’s childhood. However, the woman had lived in the same apartment for more than thirty years. An attorney ad litem was appointed by the court to investigate any potential heirs. The ad litem spoke with neighbors on both sides of the woman’s home who said they had never seen any visitors, only pets. An ad litem could feel fairly confident that the decedent  was not married and very likely had no children. That information would then be turned over to the judge who would make the final ruling based on the information the ad litem collected.

All attorneys ad litem have to take some kind of qualifying coursework and be certified to practice as an ad litem. Certain kinds of ad litem work require ongoing certification training to keep up their certification.

Another frequently asked question is if parties can choose their own attorney ad litem. It may be possible for the parties to recommend to the court who they would like to work with. However, the court has their own list or “wheel” for the probate court system which will provide an attorney ad litem for an heirship case. Theoretically, the court is supposed to go down the list from one attorney to the next and the court will assign them as necessary.

In Harris County probate court, there is a flat fee of seven hundred dollars paid to an attorney ad litem. These lawyers know going into the case that this will be their compensation.

That said, some ad litems will be required to put in hours and hours of work that go well beyond the scope of what one would consider worth seven hundred dollars of payment. While the court does allow an attorney ad litem to show all of the work they have done and ask for additional compensation, that is not common.

One of the most important things to know about working with an attorney ad litem is to have open communication, which includes providing them with all the information and tools they need to effectively do their job. Lawyers in this capacity are not opposed to the case or any party necessarily, and they are not antagonistic to any party in particular. This type of legal representative is simply trying to ensure everyone is represented and that the court has all the information it needs in order to make a ruling.

Be warned that involving an ad litem in the case adds extra costs and time to the case, so it is beneficial to take steps to avoid having to have an ad litem. However, an attorney ad litem is required in some situations, such as heirships if there is no will, probate applications where there is only a copy of a will and known heirs cannot be found, or other specific situations like guardianships.

The bottom line is that attorneys ad litem can represent unknown heirs to the best of their abilities. After collecting as much relevant data as possible, they present that information to the court and then the court will determine what weight to give that information and if more work needs to be done.

If you have the need of an attorney ad litem’s services, you can be better equipped to help them by understanding their job description and exactly what they do for the court case.