Real Property Ownership:  Many couples want to own real property together with a right of survivorship, so that when one passes away, the other one owns the property outright automatically.  For married couples, having both spouses’ names on the deed does this.  Unmarried couples can add “joint with right of survivorship” to their deed.  However, married couples also have the advantage that a creditor can take the property only if both spouses owe the creditor money.  If only the husband or only the wife owes the creditor money, the creditor cannot force the sale of the land. 

            Health Care Decisions:  A spouse does not have an automatic right to make medical decisions for the other.  Spouses and unmarried partners need Health Care Powers of Attorney appointing the other person to make those decisions. 

            Hospital Visitation:  Believe it or not, hospital policy governs this, not a law.  Hospitals commonly have a policy that only “immediately family” (usually meaning spouses, children, parents) can visit in ICU.  Unmarried partners can sign hospital visitation forms instructing that the other partner be allowed to visit.  Most hospitals will respect these forms, but they are not required to.

            Financial Authority:  A spouse does not automatically have the right to take financial actions on behalf of the other.  Spouses and unmarried partners need durable financial Powers of Attorney to have that authority.

            Inheritance:  A spouse has a statutory right to inherit some part of the other spouse’s estate when there is no will.  However, it is not a complete right.  When one spouse dies, if he is survived by children or by a parent, they will share in the estate along with the spouse.  For that reason, it is important that both married and unmarried couples have wills if they want their entire estate to go to their partner.  It is even more important for unmarried couples because without a will, they will not share in each other’s estate at all.

            Statutory Benefits:  Many state and federal laws give benefits only to spouses or to surviving spouses.  These statutes do not allow those benefits to go to unmarried partners or to anyone other than a spouse.  For example, surviving spouses of military servicemembers and veterans are entitled to certain benefits.  At the state level, surviving spouses of disabled veterans can keep the county property tax exemption used by the veteran when he/she was alive.  Under a federal law called ERISA, a spouse must consent before an employee withdraws money from his/her company retirement account.  Social Security law allows a spouse to have retirement benefits calculated based on his/her own earnings history or on his/her spouse’s earnings history if it is higher.  Benefits available by law to spouses or surviving spouses usually cannot be duplicated or transferred to unmarried partners.

            Property Division After Separation:  Please see the separate article on this website on this issue, as it requires a more lengthy discussion.  In short, North Carolina courts apply equitable principles similar to both business divisions and trust cases to divide property of unmarried couples.

            This column cannot cover all of the legal issues facing unmarried couples.  It is intended to highlight some common ones.

In this article, let’s look at two other programs that offer help.

            Disabled Veteran Exemption: 

A NC statute excludes the first $45,000 of tax value of the permanent residence of a “disabled veteran.”  Tax is figured on a lower tax value, resulting in a smaller tax bill.  Because it is an exclusion rather than a deferral, the excluded taxes never have to be paid back.  A “disabled veteran” is an honorably discharged veteran (or one discharged under honorable conditions) who has a total permanent service connected disability OR a veteran who receives benefits for specially adapted housing under 38 U.S. Code 2101.  The application requires certification of disability from the Department of Veterans Affairs.  There are no age or income limits for this program.  The exclusion is also available to the surviving spouse (who hasn’t remarried) of (1) a disabled veteran, or (2) a veteran who died as a result of a service-related condition who was honorably discharged (or discharged under honorable conditions), or (3) a servicemember who died from a service-related condition in the line of duty but not as a result of willful misconduct. 

            The application for a given year is due by June 1 of that year.  Once you have been approved, you do not have to reapply each year, but you do have to notify the tax office if you no longer qualify. Many counties, including Orange, will accept late applications for eligible persons, but there is an extra step of approval by the Board of County Commissioners, which causes a delay in approval. 

            Circuit Breaker Deferment:  

            A different statute allows your tax payment to be limited to a set percentage of your income, but it defers these taxes, meaning the part you did not have to pay becomes a lien against your property for three years.  When you sell your property or die, you or your estate will have to pay the amount that was deferred for the past three years.  Because it is a deferral rather than an exclusion, if you qualify for the homestead exclusion or the disabled veteran exclusion, those programs are better than the circuit breaker deferment.

            The circuit breaker program limits your payment of property taxes on your permanent residence to 4% of your income if your income is $27,100 or less; if your income is between $27,100 and $40,650, the limit is 5% of your income.  (That is based on 2012 income figures; they are indexed upward from time to time.)  So, if your income is $25,000, the most you would pay is $1,000; the rest of your bill would be deferred.  If your income is $37,000, the most you would pay is $1,850; the rest would be deferred.  Remember that “income” means taxable and non-taxable income, including any non-taxable Social Security benefits. 

            Remember to submit your applications on time to avoid delays and to get the relief you are entitled to receive.

Remember that this program defers taxes – it doesn’t wipe them out forever.  If the property changes hands, or if its use changes, it may no longer qualify.  In that case, the property owner will get a bill to catch up some of the deferred taxes.  If the owner doesn’t expect that bill, it can be a shock.  If you previously put your land into the program, you would have gotten a full explanation of the program then.  However, if you inherited land your parents put into the program, you may not have a reason to know about it until you get the large bill. 

How does the program work?  In summary, to be eligible, you must own land individually, or through a corporation or LLC you own, and meet the following requirements:

Agricultural:  At least 10 acres of the property must be actively used for growing crops, plants or animals under a sound management plan.  Alternatively, if the land is used to farm aquatic species (“fish farming”), it must have at least 5 acres in production or produce at least 20,000 pounds for commercial sale annually.  In either case, for the last 3 years, the activity must have produced an average gross income of at least $1,000.

Forestland: At least 20 acres of the property must be actively used to grow trees commercially under a sound management plan.  There is no income requirement for forestland.

Horticultural:  At least 5 acres of the property must be actively used in commercial production of fruits, vegetables, nursery or floral products.  The activity must have produced an average gross income of at least $1,000 for each of the last 3 years.  Alternatively, if the land is used to grow Christmas trees, the owner must meet income requirements set by the N.C. Department of Revenue. 

If the land changes ownership (by sale, gift, or inheritance) or if the property use changes, the Tax Office must re-evaluate whether the land still qualifies for the program.  If the new owner is continuing the same use on the same property, and the new owner agrees to be responsible for deferred taxes whenever in the future they become due, the new owner can continue the land use status without interruption.  If the land no longer qualifies for the program, it triggers the Tax Office sending a bill for the last 3 years’ worth of deferred taxes, plus interest.  That means being charged for the difference between a “regular” tax bill and your reduced tax bill for the past 3 years, plus interest.  If the bill isn’t paid, the Tax Office will file a lien against the property.      

While no one likes getting that bill for 3 years’ worth of deferred taxes, remember that if you have been part of the land use program for more than 3 years, you still come out ahead economically.  You will not have to pay back any of the money you saved on tax bills more than 3 years ago. 

This article is just a summary.  If you want to know details, you can read the statutes at N.C.G.S. 105-277 and those following it.  You can also call the County Tax Office; be sure to tell them you are calling about the land use program, so you can be connected to a staff member who works with that program.

            Buy More than Minimum Limits for Vehicle Coverage:  This is not a place to try to save a few bucks.  Minimum limits coverage for vehicle policies is only $30,000.  If you cause a wreck and the other person has to have major surgery, that alone can cost more than $30,000.  Then the other driver has a right to sue you personally, and you’ll have to pay your own lawyer to defend you (since insurance doesn’t have to pay for your lawyer after they pay their limits).  Even if you don’t own a lot of property, you might not want to lose what you have, and you don’t want an expensive legal bill.  Coverage that is a step or two above minimum limits is usually not that much more expensive, and is well worth it.

            Uninsured/Underinsured Motorist Coverage (UM/UIM for short):  Always choose this coverage on your vehicle policy.  It protects you and your passengers.  If you are in a wreck caused by another driver, your damages may be more than the other driver’s coverage.  Suppose you have medical bills, lost income, and pain and suffering of $100,000.  Suppose the other driver has a $30,000 policy, and that insurance company pays it to you.  You are still $70,000 short, and the other driver may not own enough property to bother going after.  If you have a $100,000 policy and you purchased UM/UIM coverage, your insurance company will pay you the other $70,000.  It’s even more important when the person who hit you had no insurance at all.  UM/UIM coverage is inexpensive, and helps you protect yourself.  Be aware that you cannot buy UM/UIM coverage when you buy only a minimum limits policy, since it isn’t available on those policies.  That’s another reason it is best to buy a policy with limits higher than the minimum.

            Umbrella Policies:  If you have enough assets to be worth protecting, consider a personal umbrella policy (PLUP for short).  It increases all of your personal insurance coverage (home and vehicle) for any risk covered under the policies to $1 million.  (They can be purchased for more, but most people choose $1 million.)  The real beauty is that coverage is often only about $200 per year, which is a modest expense for something that gives you so much more protection.  If you own property that is worth more than your current insurance coverage, even if you aren’t a Rockefeller, you should consider a PLUP.  Businesses can have umbrella coverage too, called a commercial umbrella policy (CLUP) that raises any coverage on your existing policies (premises liability insurance, fire insurance, company vehicle insurance, etc.) to $1 million or whatever other higher amount you choose.

            When a client sees me about an injury, fire, theft, or other casualty, one of the first things I do is to see what insurance coverage is available from which policies.  If you make good insurance choices that give you the most “bang” for your “premium buck,” you’ll be better protected financially and can save legal bills for things that otherwise would not be covered by your policies.

This article looks at the Homestead Exemption for elderly and disabled persons with low income.  Another article in this newsletter addresses the Disabled Veteran Exclusion and the Circuit Breaker Deferment Program.

The Homestead Exemption began when the legislature passed N.C.G.S. 105-277.1 in 1972.  The Exemption excludes $25,000 in value, or 50% of the tax value of the residence, whichever is greater.  This will significantly lower the homeowner’s tax bill.  Orange County residents who qualify for a Homestead Exemption also qualify for assistance with the 3R Fee.  You are eligible for the exemption on your permanent residence if (1) you or your spouse is over age 65 OR is totally and permanently disabled, AND (2) your income from the previous year is $27,100 or less (so for a 2012 application, this means your 2011 income).  Ownership and disability is determined as of January 1 of each year, so if you buy the home during the year or become disabled mid-year, you will not qualify until the following year.

The home must be your “permanent home,” not a second home or vacant farmland.  It is still your “permanent home” if you continue to own it while in a rehabilitation or nursing home.

What does “income” mean?  It means all money received from EVERY source other than gifts or inheritances from a spouse, parent, grandparent, child, or grandchild.  For example, income includes taxable and non-taxable Social Security benefits, taxable and non-taxable interest income, business income, rental income, and retirement income.  Proof of income is required.  If you are married, income from both spouses is counted, regardless whether the property is owned jointly. 

Income limits are adjusted up yearly by the same percentage as the Social Security Administration uses for Social Security benefit increases.  In years when SSA does not do a cost of living increase, the Homestead Exemption income limit does not increase either.

This is a tax forgiveness or exclusion program, meaning you do not ever owe the excluded taxes.  You will not have to catch up the excluded taxes when you sell your property or when someone else inherits it from you.  It is not merely a deferral of taxes owed.

You must turn in an application to the County Tax Office BY JUNE 1 of a given year if you want the exemption for that year.  You can get application at the Tax Office or online at http://www.dornc.com/downloads/av9_2011.pdf.  There is a separate application for relief on the 3R fee.  Once you are approved for the Exemption, you do not need to reapply each year, but you must notify the Tax Office if income goes above the eligibility limit, or if you (or your spouse) is no longer totally and permanently disabled.   Many counties, including Orange County, have a policy of accepting late applications, but they must be approved individually by the County Commissioners at a regular meeting, so this can delay approval.

As of 2012, since 2001 the State has not reimbursed counties or cities for tax revenue lost due to Homestead Exemptions.  Prior to that time, the State reimbursed part of this lost tax revenue.

            A general warranty deed is the most common.  Most home sales between strangers involve a general warranty deed.  With it, the seller warrants that he has good title from the people who owned it before him, and he has the right to pass on good title to the buyer.  It promises that the seller will defend that good title on the buyer’s behalf if he has to (or be liable to the buyer for damages if the warranty isn’t true). 

            In a special warranty deed, the seller promises to the buyer that he has done nothing to prevent the buyer having good title (e.g., no judgments outstanding against the seller), but the seller makes no promises about what any other owners may have done.  They are often used in divorce settlements.  If a couple agrees that the jointly-owned home will become the wife’s, the husband usually signs a special warranty deed because he doesn’t know what the wife (his co-owner) may have done to impair the title. 

            A non-warranty deed is also known as a quitclaim deed.  It unfairly gets a bad rap as “the Brooklyn Bridge deed,” from scams in the early 1900s where shysters would try to sell someone an official looking deed (that was a quitclaim deed) to the Brooklyn Bridge.  A quitclaim deed has no warranties of title at all.  A quitclaim deed simply means that the seller is conveying whatever interest he might have in the property, without saying what interest (if any) he actually owns in the property.  However, they are perfectly legal and useful in many legitimate transactions.  You would want to give a quitclaim deed when you are unable to promise anything about the title to the property.  For example, if old deeds and surveys show a boundary line overlap with your neighbor, but the two of you agree to fix the boundary line in a certain place, you will likely exchange quitclaim deeds on either side of that new line.  Quitclaim deeds are appropriate because neither owner can warrant to the other that she has good title where the line has been unclear or in dispute.

            What about a “deed of trust”?  Where does it fit into this system?  It doesn’t.  A deed of trust isn’t really a deed.  Whenever you read the phrase “deed of trust,” think “mortgage” in its place.  In some states that document is called a mortgage (which is clearer), but for historic reasons you probably won’t care about, in North Carolina it is called a deed of trust.  Yes, that confuses first year law students too.

     “Getting it in writing” is the best starting point.  Have every pool member sign the written agreement.  Be sure all pool members are over 18.  The agreement should state that the group is buying lottery tickets together, and how any winnings will be split.  If there is a schedule for buying tickets with due dates for contributions, specify it.  Then, stick to it.   You will have a problem if you sign an agreement that everyone signing the agreement splits proceeds equally, and then it turns out one person didn’t turn in their money in time for the purchase.

     The next problem is how to know that a particular lottery ticket is a group ticket, rather than the purchaser’s individual ticket.  Here are some options to prevent confusion (whichever one or more you choose should be spelled out in the written agreement):

1.  Have a person buy group lottery tickets who does not buy individual tickets for himself or herself.

2.  Purchase group lottery tickets at one store, and individual tickets elsewhere.

3.  Make copies of the group tickets (or scan and email them) to distribute to all pool members ahead of the drawing.  If it is an office pool, be sure the boss approves using the copier or company email for this purpose; if not, make your copies elsewhere and/or send email from home to personal email addresses. 

     As Grandma said, an ounce of prevention is worth a pound of cure (and is better than litigating with your friends or co-workers).  Good luck!

An employee must prove two things in order to qualify for benefits based on an occupational disease:

1. That the disease came from the work duties, and
2. That the type of work makes the employee more likely to get that disease than the general public.

The doctor’s opinion will likely carry the day on the first of those two. For example, if the doctor believes a worker’s carpal tunnel syndrome came from his computer data entry job, rather than some other cause (like a traumatic injury), the first test is proved. Another example is if the doctor says a hospital nurse’s contracting hepatitis B or MRSA came from exposure at her work, rather than from some other exposure.

The second test requires that the job duties make the worker more likely to get this disease than the general public. To meet this test, look to the doctor’s opinion and to scientific research. The doctor may be able to say that, over many years in practice, he has treated more computer data entry workers for carpal tunnel syndrome than the general public, so he believes the repetitive hand positions in this job predispose workers to the disease. There are also ergonomic studies about the link between certain jobs and particular health problems. For example, there are studies showing that dental hygienists are more likely to have neck pain than the general population. There are many studies linking full-time data entry to carpal tunnel syndrome.

Statistics can also help prove these cases. In the example above where a hospital nurse contracts hepatitis B or MRSA, statistics show that there are certain places where contracting these diseases is more likely. Hospitals are high on the list. While the general public may go to hospitals occasionally as a patient or visitor, hospital workers are there every day, increasing their risk.

What are some other conditions that may be occupational diseases? It is impossible to give a complete list, but here are a few common ones. Dental hygienists often have neck problems because of the position they have to hold while working on patients. Employees who do a lot of overhead work, like auto mechanics who work on vehicles that are on lifts, and some warehouse workers, are more likely to have difficulty with their shoulders. Carpet installers are prone to knee disorders (even with pads). Some assembly line jobs require repetitive motion that stresses particular joints.

For occupational diseases, Workers’ Comp law provides weekly compensation (2/3 of average weekly wage) while the employee must be out of work. Once the employee returns to work, permanent partial disability compensation can be calculated in various ways. If a worker is permanently disabled from the condition, lifetime weekly checks are available. Workers’ Comp also covers the employee’s medical care for the condition. Because proving an occupational disease can be technical, an employee or employer involved in an occupational disease case may want to consult the N.C. Industrial Commission’s website (www.ic.nc.gov) and/or consult an attorney for assistance. In my practice, I find that Workers’ Comp insurance companies are more likely to deny valid occupational disease claims than injury-by-accident claims. Because occupational disease cases are more complex to prove, insurance companies hope that the claimant will give up if they deny the claim initially. Do not be discouraged, as persistence will often be rewarded.

One is the Energy Efficient Mortgage (“EEM”), also called a “green mortgage.” This program began by Fannie Mae (backed by the U.S. Department of Housing and Urban Development) in 1979; however, Fannie Mae hasn’t done a good job making either lenders or consumers aware of it.

In a green mortgage, borrowers can add up to 15% of the home’s value to their mortgage amount and use that money for energy improvements. The green mortgage pays for energy upgrades during construction of a new home. It is also available to upgrade an existing home so that homeowners can save money on their energy costs. To be sure the mortgage stays affordable, there is a rule that spending on energy improvements must save the homeowner at least as much as the extra amount the purchase adds to the mortgage. For example, if the cost of upgrading a heating system adds $20 per month to the mortgage payment, it must save the homeowner at least $20 per month average on utility bills.

EEM borrowers get professional assistance deciding which energy improvements give the most “bang for the buck.” A trained energy inspector tours the home to score its existing energy efficiency, and to explain where the biggest energy losses happen. The inspector suggests which energy improvements will result in the most savings on energy costs.

There are two possible obstacles in getting an Energy Efficient Mortgage. One is that lenders may not be aware of the program, since Fannie Mae has not promoted it. The other is that there is some additional paperwork to be done. Since mortgages are already paper-intensive, some lenders may not be willing to do the additional paperwork for an Energy Efficient Mortgage. For more information on green mortgages, visit www.energystar.gov and search for “mortgages.”

Another useful mortgage product is the “reverse mortgage.” Instead of the homeowner sending the bank a check each month on their mortgage, the bank sends the homeowner a check each month. The amount of the loan balance owed against the home goes up incrementally with each payment sent to the homeowner, so a reverse mortgage “eats into” and eventually “eats up” the equity in the home.

The purpose of reverse mortgages is to allow a homeowner with limited income but a lot of home equity to turn that equity into monthly income. This is ideal for elderly persons with limited income but a house that is paid for, or for someone who becomes disabled but has a lot of equity in their home. The loan balance, which keeps growing with each check sent to the homeowner, will be paid in full when the homeowner dies or sells the home. If checks are paid to the homeowner long enough, of course, the mortgage balance will eliminate the homeowner’s equity. However, banks are careful in their calculations. The lender sets the amount of monthly payment they make to the homeowner at an amount that will not run out before the homeowner’s life expectancy. Many banks and lenders offer reversible mortgages. However, because they are not as common as regular mortgages, you may have to ask some questions to locate the person at the bank or lender who handles reverse mortgages.

Mediation is a very popular and successful type of ADR. In mediation, the parties and attorneys meet with a mediator to try to reach a settlement. The mediator does not make a decision like a judge. The mediator helps both sides recognize the strengths, weaknesses and risks in their case, and aids in communication. Because settlement is the goal, the parties have control in crafting the solution to their case, rather than having a decision handed to them. Depending on the type of case, court-mandated mediation settles about 70-75% of cases. Mediators can be free (e.g., the Orange County Child Custody Mediator, Judicial Settlement Conference in property division cases) or available at a nominal charge (e.g., the County Dispute Settlement Center). Mediators in some cases can be more expensive, e.g., $125-150/hour for attorney mediators for superior court or workers’ comp cases.

Arbitration is another form of ADR. In arbitration, the lawyers and parties hold a “mini-trial” before the arbitrator, who serves like a judge. Arbitration can be binding (final) or non-binding (subject to further hearing or appeal). The “mini-trial” is shorter and less formal than a regular trial. If the court orders arbitration, the arbitrator may be paid by the parties jointly, or by one party, depending on the case, at rates usually $125-150/hour. In district and superior court non-binding arbitration, if a party is unsatisfied with the decision, he/she can still demand a judge trial. If that happens, unfortunately, arbitration has only increased the parties’ expense, since their lawyers have to try the case twice. If the parties arbitrate because a contract requires it, arbitration with a private agency like the American Arbitration Association can be very expensive. By comparison, filing and court fees for using a courtroom trial are minimal since that system is funded with tax dollars. Thus, depending on the details of arbitration, it may or may not save expense compared to going to court.

With the parties’ consent, judges may allow trial procedures that save time and money. For example, the parties and the judge might agree on a time limit for each side to present evidence.

ADR is here to stay. With a few exceptions, ADR has proven beneficial to parties with legal disputes. With more cases being resolved in ADR, lawyers, judges and parties appreciate the benefit of less crowded court dockets, meaning they are able to hear sooner those cases that really do need a trial.