Written by: Sterling Miller, JD

It’s difficult to be part of any business and not hear about “risk.” It’s everywhere. If risk were a woman, it would be the Hollywood “It Girl” of 2019. Put another way, risk is the new black. It’s on the lips of every CEO, CFO, and board member, as it should be. And, anything that is important to the board and the C-Suite, is important to the Legal Department. In fact, over the past five or so years, one of the key responsibilities businesses are placing on in-house lawyers is spotting and managing risk. The business wants its in-house lawyers to be the ones who sniff through virtually every situation looking for risk (legal or otherwise). What this means is that, more and more, in-house counsel need to be masters of the company’s business operations and strategy (both short and long term), because you cannot successfully spot and manage risk unless you understand how the company operates and where it wants to go.

Congratulations! You’ve created a comprehensive estate plan for your client. Now that all documents are signed and handed over to the client, does that mark the end of an estate planner’s job? According to the book Estate Planning for the Post-Transition Period, the majority of estate plans that fail do so because of non-legal/non-technical aspects. These errors have nothing to do with your perfectly drafted estate plan. Rather, they are issues related to lack of communication and inaction on the part of your clients’ family. Today, the most common reasons for failure are:

Due-on-sale clauses are a common element of most mortgages and other loans. The provision is a protection for lenders specifying that if property rights of an encumbered asset are transferred, the lender has the right to demand immediate payment for any amounts due from the debtor. A transfer could be any change in the debtor’s rights to the property – like selling a home or quitclaiming a deed. Logically, upon the sale of a home, a lender would want to recover the balance of the loan owed by the debtor-seller. The original note may say that the debtor has 100 more months to pay, but with the due-on-sale clause, payment is due right away due to the transfer. Fortunately though, not all transfers are treated as “transfers” that trigger the clause.

When there is a dispute as to whether the due-on-sale clause has been activated, challengers look to two different authorities for guidance: the Garn-St. Germain Act and the Office of the Comptroller of the Currency (OCC). Debtors look to the former; lenders look to the latter. Frustratingly, the two provisions do not align entirely.