Tag Archives: Insurance

Estate Planning for Young Families

Many couples with young children or those without children yet do not think estate planning is for them. Estate planning is often associated with old people or those with large estates. However, estate planning is important for young families just as it is for older people and those with lots of assets. Unfortunately, even a young adult can face an untimely death or disability. Planning for that possibility, although not a pretty or fun thought, is both prudent and responsible.

Estate planning for a young family is not expensive and offers many benefits if a death or illness occurs. In addition to an estate plan, a young couple should look into insurance needs — life insurance, long term care insurance, and disability insurance.

Here are some of the essential parts of an estate for a young couple:

Who will handle my estate?

An executor handles an estate after someone dies. If you decide you need a revocable living trust, a trustee does something similar after you die. In both examples, the executor or trustee handle the financial affairs of the estate until it closes, including finding assets, paying bills, and finally distributing assets. Although for most couples, the executor is the spouse of the deceased there may be reasons you want someone else. In any event, it is always good to have a backup, known as a successor if the original executor or trustee cannot serve.

Who will be the guardian to my children?

The naming of a guardian is perhaps the most important reason for a young couple with few assets to have a will. Without a will, the court will appoint a guardian which can lead to ugly family battles to decide who will care for your children. It is important to name a guardian. A revocable living trust cannot name a guardian for minor children – only a will can.

There are two parts of being a guardian – one is for the child’s well being and one is for the child’s financial affairs. You can have one guardian who does both or decide only one is necessary.

How will my assets be distributed? 

Although most couples leave all assets to the surviving spouse, an estate plan also aids in determining how and if children will receive any of your assets.

Insurance Needs

Insurance is an important aspect of an estate plan because it addresses what happens if there is a loss of income due to a death or disability. Since I am not an insurance salesman or financial planner, I do not give advice on what you may or may not need. However, it is important to plan for unexpected events by purchasing life insurance (either whole life or term), disability insurance, and/or long term care insurance. There are lots of options out there, so you should sit with a qualified financial planner or insurance salesperson to decide what is needed.

 

Legal Issues with Short Term Rentals

The City of Glendale has recently enacted a noise ordinance that targets properties that require police responses due to loud music and other nuisances. Glendale’s ordinance creates a series of fines after the police respond to loud music or nuisance complaints. The Glendale News Press reports that the City of Glendale has already began to enforce this ordinance on a house that was rented through Airbnb.com. While being rented through Airbnb.com, renters who rented the property for a day or two threw large parties which caused neighbors to complain. The article, “Party Central” House Issued Police Warning provides more details on the background story regarding the rental.

Airbnb.com has caused a number of legal issues that must be addressed by local governments. Property owners may not be even be aware that they may not rent their property on a short term basis or that it creates additional landlord-tenant rights.

Many jurisdictions have prohibitions against short term rentals. California courts have upheld city ordinances that prohibit short term rentals in residential neighborhoods. In Ewing v. City of Carmel by the Sea, the California Court of Appeals found that the City of Carmel could prohibit rentals for less than 30 days in residential neighborhoods, basically prohibiting a home from being used as a bed and breakfast. A property owner should check with their local zoning code before renting their properties on a short term basis. Also, if a property is located in a homeowners’ association, there may be additional CC&Rs that would apply. Many homeowners’ associations prohibit short term rentals or even any rentals. 

Further, if a property owner rents through Airbnb.com enough, the property owner may need to obtain a business license and/or pay a business tax. Each jurisdiction has its own ordinance on when a business permit is required.

Some particular issues may also arise in cities with rent control, such as Los Angeles. Although single family homes are not subject to the Los Angeles Rent Stabilization Ordinance, if you rent your home by the bedroom, rent control could apply if residents live there for more than thirty days. This could have an unintended consequence that a landlord of a short term rental could not actually evict a tenant without cause.

Also, you should check your insurance policy to see what may or may not be covered when renting on a short term basis. Your insurance carrier may find that your home is not owner occupied or that you were running a business out of your home, in which case, your insurance policy would need to be modified.

In sum, there are many issues that may arise from using Airbnb.com. Before a property owners uses Airbnb.com, they should be aware of potential liability and whether or not it is a permitted use of their home. Call Attorney Anthony Marinaccio at (818) 839-5220 to learn more about your legal options.

How Renting Rooms Can Affect Your Insurance Policy

A recent unpublished decision in the California Court of Appeal should be a wake up call to property owners who claim that they occupy their home when in fact they rent it out. As a result of lying on an insurance application, the home owner in Lopez v. Allstate Insurance Co. was not covered by his insurance policy when the property caught fire.

The Plaintiff bought the house in 2004. On the insurance application, the homeowner wrote the house had eight rooms and one occupant when in fact the house had more than eight rooms and had three tenants. The policy was soon cancelled for an unrelated reason. In 2005, after replacing the roof of the house, the homeowner applied for property insurance again. The application stated the house was 1,600 square feet when the house was in fact 3,000 square feet. Further, the application stated there was only one family unit or apartment on the property.

The new policy provided that a dwelling was “a one-, two-, three- or four-family building structure which is used principally as a private residence and located at the address stated on the Policy Declarations,” and that “Building structure” was a structure with walls and a roof.

In 2009, a fire destroyed the house. In response, the homeowner filed a claim on his insurance. It was soon discovered the house had been split into six “studio units” rented to six individuals. Each “studio unit” had a lockable door, a microwave, a table, chair, and refrigerator. The tenants shared bathrooms. Allstate paid the homeowner $13,800 for loss of rents. Upon further inspection, it was discovered the house was much larger than stated in the application. Total damages were estimated at $371,000 although the policy limit was $133,121 for the dwelling and $13,312 for other structures.

In response, Allstate rescinded the insurance policy and declared it void refunding the premiums to the homeowner. The homeowner filed a lawsuit alleging Allstate breached the landlord’s policy. At trial, the homeowner lost because the Court found that he made material misrepresentations or concealed material facts on his insurance application.

On appeal, the Court agreed that the homeowner made material misrepresentations by not stating the correct size of the house and the number of “family units” residing in the house. Further, the Court found that the homeowner’s landlord policy did not cover the loss. The definition of a dwelling was limited to a one, two, three, or four family structure. Here, the homeowner had rented the home to six separate “family units.” Although the individual units shared a bathrooms and a kitchen, the Court found that they were separate living units and thus beyond the scope of the homeowner’s insurance policy.

Although this case cannot be cited, it provides some guidance to landlords who rent rooms or beds in a house. An insurance policy will generally be void if the homeowner makes material misrepresentations or conceals material facts on the insurance application. Here, the homeowner should have had an insurance policy that would have covered having six individual units and should have been upfront about the size of the structure and the manner in which the landlord was renting rooms in the house. This situation could arise in a sober living home, a house for college students, or other house where the landlord rents rooms with individual leases to each resident (as opposed to one lease for an entire house).