The Legal Play Blog

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Most people cannot proceed in life without trusting others, but it is not recommended for people to enter into joint financial arrangements without first doing background checks and possibly putting protective measures in place. It may be tempting to wholly trust a business partner you have known for a while and know to be a standup person, but, even in this situation, not performing due diligence could end up costing you.

Why Protection Is Needed in Any Type of Financial Arrangement

As virtually any seasoned business attorney will tell you, they have yet to discover a person with a perfect halo. Therefore, everyone needs protection when entering into a financial arrangement.

It is not uncommon for someone to partner with someone else in a business venture or transaction only to find out that their trust was misplaced. It is important to note that it does not have to be a business transaction, per se, but usually involves some kind of financial deal in which you are not the sole player.

Unfortunately, some people find out the hard way that trusting someone  else with money or carrying their share of financial liability may lead to disappointment when the other person fails to live up to your expectations.

Some of the situations in a financial joint venture that can occur without protection include:

• One financial partner running off with a bunch of the money and leaving their partner to face debts and liabilities alone
• Both financial partners taking out a loan for their business or a mortgage on real property, but when the business tanks and the bank or lender contacts you for repayment, one financial partner takes off, leaving the other to pay off the loan or mortgage by themselves
• One financial partner takes the business in a new direction without an agreement in place
• One financial partner wants to start their own business using company assets like equipment or customer contacts and there is not a non-compete agreement in place

The question then becomes, how you protect yourself from something like one of the above taking place?

What You Can Do to Protect Yourself

While it can be true that to get by effectively in this life, you have to trust people, there are still steps you can and should take to protect yourself. It is possible to trust a person and still have a remedy in place should that trust fail. No one wants to end up partnerless and owing a substantial amount of money to the IRS, a bank, or some other third-party creditor because they misplaced their trust.

It is highly recommended that an individual entering into a financial joint venture proactively address remedies for potential issues. It is recommended to do a deep dive into the potential partner’s history by:

• Learning who they have previously dealt with
• Discovering what their past consists of
• Talking to people they have previously worked with
• Finding out if they are convicted criminals
• Identifying if they have been sued before
• Discovering if they have ever declared bankruptcy.

It is also critical to make disclosures. In other words, identify what it is that you want the other partner to do. It is necessary to have whatever it is the person is promising in writing. It is advisable to seek a lawyer for this step in the process. A business attorney can ensure those promises and expectations put in writing are enforceable

Additional practices to consider when entering a financial transaction with another person include:

1. Have audited financial statements for your company
2. Establish other people to watch over the business and oversee it (instead of entrusting it all to one person)
3. Be an active partner, as silent partnerships where one person supplies the money and the other person does the work can be unstable at times
4. Put non-compete and confidentiality agreements in place
5. Consider worst case scenarios and put in provisions that detail explicitly what may happen if one person breaches their agreement

Are There Exceptions to the Rule of Protection in Financial Joint Ventures?

The short answer is that there are no exceptions to the rule of protection in financial joint ventures. Everyone needs protection because there is no way to anticipate what could happen a few weeks, months, or years down the road.

For example, let’s say you want to enter into an agreement with a good friend from college that you have known for years. Should you still take proactive measures to ensure your protection? Yes, and even though you know the person, you should start by looking into their history.

It is necessary to think of all the possible implications. If the friend is creative and a hard worker, that is fantastic, but they may not have any money to put up in the joint venture. If this friend will need to sign a guaranty or co-guaranty on something like a million-dollar debt, it may simply amount to a good gesture that may be worthless if there is a default.

Harsh as it can seem to take steps to protect yourself against long-term friends, it is essential.

Can You Ask Someone to Get Bonded?

If there is a deal for which there is a market that would be bonded (like a construction contract), yes, you can ask someone to get bonded. The way this works is that there is generally a bond or amount of money that is promised and put up by a solvent surety, such as a bonding or insurance company. These entities do this in exchange for getting a fee and will put money up to secure something that a party is supposed to do.

There is no fixed amount for bonding. Sometimes it can be a flat fee like ten percent of a bond, or other times it may require putting up collateral equal to the amount of the bond.

If a bond is in place and the deal does not go through, the impacted party can simply have the surety cover the liability instead of having to chase the other person’s assets. The bonding company, who typically has a good deal of money, can come forward and finish the project. However, the bonding company may in turn sue the person who broke the deal.

When it comes to protecting yourself in a financial joint venture, hire an attorney, and together be sure to get written agreements in place, get an understanding, make plans for oversight, do thorough background research, and keep up with what is going on in the business. These are the best alternatives to blindly trusting someone when money is involved.

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One of the most common issues taxpayers face is knowing what can IRS collectors do and how to react. For instance, if an individual receives word that the Internal Revenue Service is coming after them for an amount owed, there are revenue officers who will then try to collect that assessment. But what happens next? Do you have to pay the assessment, or do you have options? What do you tell the IRS and how much do you tell them to obtain those options?

The best way to navigate this type of situation is to consult with a reputable tax attorney with experience in dealing with the IRS.

I Owe the IRS, What Can They Do?

If an assessment has already been made and revenue collectors are actively trying to collect, the individual has a couple of options:

1. This is generally not a recommended course of action. If the IRS knows where the taxpayer is living and the person is not planning to move, it is best to just face the agency.
2. Face the IRS. This government agency has power and will pursue the individual to get some sort of payment in return, though the exact amount depends on many different factors.

The Internal Revenue Service can get the information they need and choose to pursue the individual in one or more of the following ways:

1. Summons account information from banks
2. Put a lien on a person’s house and/or property
3. Foreclose on a person’s house and/or property

It is a common misconception to think that the IRS cannot get to bank or other financial account information. If a person refuses to give the IRS the information they are requesting, the agency can still get it through the bank or other institutions. The IRS may also use summons enforcement, in which case someone in the justice department can take the case and advise you in writing to hand over the information or they will take you to federal court.

Understanding How the IRS Views Property and Equity

After an assessment, the IRS will want to know how much the individual can pay. This is where it is helpful to know what IRS collectors can do and how to react.

There may be some debts the person will have to pay, even though it may be painful and take an extensive amount of time. In this case, installment agreements may be negotiated. If installment payments are the route the IRS agrees to and the individual takes, part of the value the IRS will ask for monthly is the value of the house and equity.

For example, if a person owes the IRS $5 million dollars and they make $80,000 a year and have $300,000 equity in the house, they probably can’t pay the $5 million. However, they could still afford to pay some. It is possible the IRS might declare the individual owes $20,000 a year for 5 years and must pay the $300,000. In total, that amount comes to $400,000. The value of a house is an important element in this case.

It is worth noting that although Texas is a community property state which sees husband and wife as joint owners of the whole property, meaning there would be a 50/50 split in equity, that is not how the IRS sees it. There is no division unless a previous legal document is in place stating such.

It is possible for a person to be close to retirement and have no income coming in. However, the IRS will still see value in the personal residence or homestead. In this instance, the property is viewed as the person’s main asset, so they must disclose the value of the property. The IRS will then likely put a lien on the property, and it will have the same effect as a judgement. The house cannot be sold with a title policy that says the house is free and clear of liens without first paying the amount owed to the IRS or getting the IRS to release it.

Before the IRS files a lien against their property, the individual could choose to work with the IRS to avoid it by making installment payments. As a general rule, the IRS is reluctant to enter into such agreements because it can compromise their position in regard to whatever equity is in the property. For instance, if the property is sold, it may diminish the IRS’ equity position. For this reason, the taxpayer is not typically able to enter into a compromise or installment plan without putting a lien on the house.

Many people faced with IRS assessments are already settled in their homes. Despite the IRS seeing value in the house, the owners cannot just sell it, or they would be homeless without anywhere to go. It is for this reason that the IRS can be negotiated with. An individual who can’t pay the IRS should not expect to compromise the amount owed or to be left alone by the IRS if they have some serious equity in their home. But the IRS must go through an extra process to foreclose upon someone’s principal residence. It doesn’t happen very often, although it can. If a home is worth $500,000 and has a $400,000 mortgage, the IRS will probably not take the home, but will instead say if the individual comes up with $400,000 in payments, they will likely release the lien because it is eighty percent of the equity.

Should a person die while in their home, and the IRS has an active lien on that property, the decedent’s probated estate is still obligated to pay what is owed to the IRS. There is no getting out of paying taxes, even after death. It is even possible that the children of the deceased could move into the house, and the IRS may still try to foreclose on the house and collect the lien.

There is light at the end of the tunnel regarding tax liens, and that is that they only have a 10-year life. Once a tax lien hits ten years, the IRS has to renew the lien to continue it. Sometimes they will not do this for people who have only modest houses and modest amounts of taxes due. If an individual falls into this category and is not in a hurry to sell/relocate and their debt is not big enough for the IRS to go after, they could try outlasting the 10-year lien. Yet, this will not keep the IRS from evaluating bank accounts and using other collection techniques to obtain assets of value.

The IRS Is Coming After Me. How Should I React?

If the IRS has assessed you for taxes owed and is actively pursuing payment, before deciding how to react, do not think you can get out of your debt. The goal shifts to figuring out how little you can pay without getting into serious trouble, and how long you can stay out of trouble with this arrangement.

The more money you owe, the more likely the IRS will persist. The more times you have been in the hole, so to speak, the IRS will persist and offer less flexibility.

When it comes to how you should react when the IRS pursues you, take the following into consideration:

• React proactively
• Do not ignore them
• Give the IRS information, but don’t be in too big of a hurry to do it and give them only the information they ask for (the exception to this rule is if you have a child with special needs or yourself or your spouse has some sort of excessive medical needs, in which case you should consult an attorney for proper timing in releasing that information)
• Get solid professional advice and heed it

If the above still leaves you feeling unsure of how to proceed, it is a wise idea to seek legal counsel. You are allowed to tell the IRS you need to consult with your attorney before responding to their questions. This enables lawyers to interact with the IRS on your behalf.

Hiring a professional and reputable tax attorney is highly recommended if an individual is being pursued by the IRS and is not sure of what to say or is afraid they might say something wrong. The best option may be to say nothing at all and let your legal representation speak for you.

Knowing what IRS collectors can do and how to react can be immensely helpful. However, there are situations in which enlisting the help of a professional tax attorney with IRS experience may still be advised to advocate for and protect a person’s rights.

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If you have ever found yourself wishing you could find some extra money, Texas unclaimed property is somewhere you should start your search. Essentially, Texas unclaimed property is exactly what it sounds like – there is some kind of property in Texas that is unclaimed. Usually it’s in monetary form, and comes from things like insurance premium refunds, utility deposits that were never returned, leftover money in bank accounts, and even unpaid wages. The funds may be owed to you directly, or as a beneficiary of a decedent who never claimed the property in their lifetime.

It is not uncommon for Texas residents to have an item or two of unclaimed property in the system, and the process to claim it may be as simple as typing in your name and address.. Believe it or not, it is as easy as it sounds. It’s just a simple search, and it’s free. What have you got to lose?

How to Determine if You Have Unclaimed Property in Texas

For many Texans, this unclaimed property consists of money they did not even realize they were owed. For this reason, we recommend searching for your name as well as that of both living and deceased loved ones to see if they have anything in the system to be claimed.

Here are the steps you can take to access the website:

1. Go to https://www.claimittexas.gov. Take care to ensure you are looking at a site from Texas Comptroller as there are some deceitful sites that will try to collect your information and have you pay a third party. Please note that the real website does not require you to pay any fees.
2. Type your last name or business name along with your first name into the box titled Claiming Property. Then hit search.
3. If the search results show an available claim for the name searched, you can click on it and follow the prompts to find out the next steps.

If the search reveals a rather large amount that is available to be claimed, or the property belongs to a loved one who has passed away and you do not possess letters testamentary, it can be wise to enlist the help of a reputable attorney to ensure that you are indeed able to claim it with minimal issues.

A Case Study:  Finding Three Hundred Dollars

A woman recently found the website and ran her own name and those of her family members through its search engine. She was shocked to discover that her niece had an unclaimed check from an insurance company for more than $300. How could this happen?

As it turns out, the niece had moved before the insurance company sent the check and the check was never forwarded to her new address. In the end, the check landed in Texas unclaimed property.

The woman let her niece know about the unclaimed property immediately and shared the steps to follow,  and the niece was able to claim her $300 dollars.

What To Know When Searching for Property of Your Deceased Loved Ones

What if the claim is in the name of a deceased loved one? Texas unclaimed property searchers should also be aware of the necessary procedures to access those funds. In some instances, our attorneys have found as much as ten thousand dollars or more in Texas unclaimed property for deceased individuals. In this case, if you are a current executor and you have the letters of testamentary, then you can go onto this website and apply to get the money to put into the decedent’s estate.

However, if there was no will or it was never probated, you will require an attorney to assist you to access the unclaimed money. It can be done but typically requires an attorney’s legal expertise.

In other words, if it is within four years and you possess the letters testamentary, you are on the right track. If it is outside of the four years and you are missing those letters of testamentary, there will be extra steps that will likely involve the help of an attorney.

A Case Study: Trusts, Wills, and Texas Unclaimed Property

One client found Texas unclaimed property past the four-year period. The deceased’s will was never probated because that individual intended her assets to go straight into a trust and avoid the probate process altogether.

The deceased specifically included a preamble in their will about a trust they had previously set up so their beneficiaries did not have to go through probate. However, the deceased never dreamed they would have Texas unclaimed property that would require letters testamentary. When one of the beneficiaries found the property, they sought the help of an attorney who is doing a muniment of title to transfer it to the trust, as this was exactly what the deceased indicated she wanted done in her will.

If you have questions about Texas unclaimed property such as where to look for it, what to do if you find it, or how to proceed on behalf of the deceased, contact a reputable attorney today to ensure you are able to claim what is rightfully yours.