Here are some tips that will help bring you good legal health in the new year:

 Protect yourself and your relationships.  If you have a partner, and you have not married, consider becoming registered domestic partners, or entering into some form of agreement with each other to protect your relationship.  Without these types of agreements, you and your partner are legal strangers. California recognizes marriage and domestic partnerships between same-sex couples, but most other states still do not accept these as legal arrangements.  If you travel or work outside California, you will definitely need powers of attorney, health care directives and other documents to protect yourselves. 

Resolution:  Design the financial, estate planning, and health care documents that will protect each of you and your relationships for whatever the future brings.

Minimize tax headaches.  California requires LGBT couples who are married or registered domestic partners to file joint tax returns.  But the federal government does not recognize these relationships, so same-sex couples must file single returns for the IRS.  This means that multiple tax returns must be prepared, and time and costs of preparation can be much higher for couples in the gay community than for heterosexuals.
 

The real headache is the time required to separate the income from joint assets and from separate assets, such as bank accounts, businesses and sale of securities.  Expenses such as medical insurance, mortgages and property taxes must be split, too.  If there are children, it is very difficult to decide which partner will take the allowable deductions, especially if they are related by blood to only one partner but the other is providing a majority of the support.

Resolution:  Discuss your financial situation with your attorney and with your tax preparer so that your finances can be arranged in the most logical way to meet the complex rules of joint and single tax returns.

Plan for disability.  No one likes to think about incapacity or death, but the fact is that most of us will be incapacitated at some point in our lives. Incapacity without important legal protections in place can lead to very complicated and often, very sad issues for you, your partner or your family.  At a minimum, you will need a General Durable Power of Attorney which gives your partner or other responsible person authorization to act as your agent for your personal and financial affairs; and an Advance Health Care Directive which states your personal wishes for the type of medical care you wish to receive, and authorizes your partner or other person to act on your behalf with respect to your medical care.

Resolution:  Review your family and personal relationships with your attorney, and have the necessary legal documents prepared to protect you in case of disability.

Plan for long-term care.  We now know that a majority of us will need nursing home care at some time in our lives, and at least 40% of us will need long term care before we pass on.  Medicare does not pay for long term care in any kind of care facility.  MediCal may cover long term care, but only for those who have completely exhausted their assets (with allowance for spouses who may retain a residence to live in).  For most of us, there is no government program to support long term care of any kind.

Resolution:  Review your financial situation with your attorney to begin planning for long-term care insurance, a MediCal trust, or various other options to preserve your assets and protect yourself and your partner if and when you require long-term care.

Plan for your pets.  A pet is just like family, to many of us.  But we rarely stop to think about what happens when its owner becomes incapacitated or dies.  It is possible that a pet will be euthanized if the owner didn’t provide legal protections for its care.  Pets are property, so you can’t leave money directly to them, but you do have other options to make sure your pet is well cared for.  You might leave money to a caretaker, or set up a pet trust to fund the care of your pet if something happens to you.  There are many ways to make sure your pet will be treated well.

Resolution:  Plan your pet’s future with your attorney, and design the documents that will give it all the legal protection it deserves as a member of your family.

So, why is it that so many people think they can do it themselves when it comes to serious legal issues, tax problems or critical financial planning?  It takes years of training and study to become a lawyer, a CPA or a registered financial planner.  These professionals, like doctors, have acquired skills that other people don’t have.  But when there is a legal or financial crisis, people often choose to ignore the experts, and strike off on their own. 

I have noticed over the past few years that many people attempt to file bankruptcy on their own.  I explain to all my prospective clients that filing bankruptcy is a very serious matter, and there are many complex rules that have to be followed.  Every bit of income, every debt, and all assets have to be documented and verified.  Deadlines for filing various documents have to be met.  The bankruptcy petition itself is many, many pages of questions that have to be correctly answered.  There are the federal rules which must be followed, as well as local bankruptcy rules.   An experienced attorney knows how to navigate all of those rules, and understands how the system really works.  Wise debtors let an attorney handle their bankruptcy. 

However, all too often I have to pick up the pieces (if it’s possible to pick up the pieces) after “do-it-yourselfers” who think they know the law as well as an experienced lawyer.  The fall-out is always painful, and often ugly, for the client.  And worse, that person’s actions often affect family members and others.  I’ll tell you about two recent real-life examples which should serve as a strong reminder that legal work should be left to legal professionals:

 A prospective client called me. He was in a panic.  He told me he filed for bankruptcy pro per (meaning by himself and without the assistance of an attorney), and the bankruptcy trustee was selling his house because there was substantial equity.  He wanted me to jump in and “fix it.”  He desperately wanted my help, but it was too late.  In a Chapter 7 bankruptcy, once the process is started it’s extremely difficult to stop it.  This debtor did not understand the rules, and worse, he had relied on advice from his CPA, not an experienced attorney, on how to handle his house in the bankruptcy.  The CPA had little more understanding of the bankruptcy laws than his client.  The debtor’s decision to do it himself, and to rely on advice from a non-attorney, created a very unhappy situation.

 In another sad story of a pro per bankruptcy filer, a gentleman filed for Chapter 7 bankruptcy protection.  He did not properly list his income or his expenses, and used the wrong set of bankruptcy exemptions to protect his few assets.  There were so many red flags in his case that the United State’s Trustee took a keen interest, as well as the Chapter 7 bankruptcy trustee.  This led to numerous court hearings, examinations, and requests for documents.  The debtor wanted to have his case dismissed, to basically undo what he had done, but the Judge said no.  He was denied a discharge of his debts and prohibited from filing bankruptcy again for another year.  His case remains open though, and there is still the possibility that he will lose some of his assets.

 In both of these cases, had the pro per hired an experienced bankruptcy attorney, many of these issues could have been avoided.  In the first example, an attorney hired by the debtor would have immediately identified the equity in the house and the risks associated with filing.  The attorney could have advised the client to wait to file until the house was sold, or at least provided advice on what was likely to happen.  Timing can be everything.

 In the second example, an experienced attorney would have been well aware of all of the red flags.  The attorney would have used the correct set of exemptions and made sure that the income and expense calculations were accurate.  What became a nightmare of a bankruptcy could have been an ordinary, relatively simple route to a discharge of debts and a fresh start in life for the debtor.

 Doing it yourself sounds like a good way to save money and get the job done on your own time.  The first step may look easy…   but it’s all the steps that come after that can trip you up.  And those can be terribly costly and make your life miserable, for sure.