weird banking regulatory/law question - help banking/law parents please?

[mctlaw]

This question is for my parents, who have several business investments some of which they really need to get rid of because my dad has early Alz :( My dad was very tightly controlling over finances and investments and my parents had a very traditional marriage. My mom is now trying to take over and get stuff handled as she sees that my dad is no longer capable of making wise decisions, and plus even before she realized the extent of the problem, it is now evident that he was hiding problems in an attempt to hide his memory issues. Unfortunately in the past, before I had to tell my mom she really needed to run everything by me first, my parents had a slew of bad legal/CPA advice which has ended up in a ton of problems, inclusing with the IRS.

The latest issue is that my parents are piecemeal selling off a set of apartments. There has been one closing and my parents are in possession of one check they have not been able to cash. Here is why. The apartments were owned by a corporation of my parents. During the stream of bad advice, they were advised a couple years ago to dissolve the corporation, which they did. There was a sale around that time that did not close and hence thereafter, the apartments were just owned by my parents vs. their corporation because it was dissolved.

They recently closed on another portion of these apartments. They check at closing was made out to the corporation, because the corporation was listed as the entity on the mortgage and I guess on the deed (I believe mortgage is paid off so there is no mortgage to complicate the picture). They were told it had to be this way because of this. Their own lawyer told them it was no big deal and they could just open an account under business/corporation name, maybe have to show their articles of incorporation (yes he knew corp. was dissolved) and cash the check.

So, they did what he told them. Bank now has check and won't release the funds b/c they say they need to see a current business license to do so. Well, they do not have one b/c the corporation is dissolved. My mom is trying to figure out how to get the funds w/o running afoul of any regulations. I am afraid they will make their IRS situation worse if they re-open their corporation.

It just seems to me there should have been a way to make the check out to my parents intead of a defunct corporation which has now created this huge hassle. They were officers of the corp and I would think as part of the legal winding down process they should have been entitled to take possession of the funds. I am afraid they have gotten or will get more bad advice which will get them in deeper. Obviously this is not my area of law but I know enough to know there has to be a proper way to do this!

[daisysmom]

I am a corporate lawyer. When the corporation was dissolved, there would have been Articles of Dissolution filed with the state's corporation commission (some states have different names for that state office, but the same place where the articles of incorporation were filed). In those articles of dissolution, it should have been specified how the assets and liabilities were to be distributed. Presumably, those would govern. The check's proceeds were an asset. I woudl take those articles to the bank and someone should be able to sign for the corporation, as dissolved.

I disagree that filing a new set of articles would work.

[elektra]

Don't have any legal advice. ;) I am sorry to hear about your dad. As someone who has gone through this with my mom, I would advise to try and get power of attorney sooner rather than later. It can be easier said than done though, especially if the afflicted person is at all in denial, is stubborn, etc..
The alzheimer's association had support groups and people who helped my dad navigate the whole thing. They have lawyer recommendations who have dealt with alzheimer's cases.
In the support groups I have attended I have heard really sad stories about people spending all of their life savings. It happened to my parents to a lesser degree, where my mom canceled the long term care policy that they set up before her diagnosis, but after she started seeing signs of her decline, which would have saved them hundreds of thousands of dollars in care. (I think it was some sort of denial/lashing out thing for us trying to take over?)
Good luck with figuring out the corporation thing. Hope it's a simple solution. I'm afraid it won't be the last time you have to help deal with this kind of thing though. :grouphug:

[mctlaw]

Daisymom, thank you so much. That makes perfect sense. I will have my mom obtain the articles of dissolution....though I am wondering if they even have any; I recall when they tried to obtain proof of the dissolution from one of the lawyers that screwed up (the one who did the dissolution in the first place), my mom said all they ended up getting was a one page form. I am wondering if any were even done. I will find out.
To clarify re: the articles, I think the real estate lawyer was suggesting my mom use the old ones, not file new ones, but my mom was the one wondering if they might need to prepare new ones...I already told her definitely NOT to do this until she heard from me.

[mctlaw]

Thank you, Elektra. I know you have been through this with your mom so I really appreciate your words. Fortunately my mom does have power of attorney for my dad. Though, my dad has not been declared incompetent, and so unfortunately, he does from time to time get a wild hair and goes and closes, opens, etc. an account or some such, and my mom has to go and fix the mess. Fortunately, they live in a small town, most business people that my mom deals with know the deal with my dad and will call her to alert her if my dad does something off.

I will suggest to her to look into a local support group for the resource referrals if nothing else (she already goes to therapy to deal with this).
I really hate this for my mom. She has never caught a break. This started happening a few years after my parents were able to get my quadriplegic brother off on his own and until then she spent years doing much of his physical care after he became injured.

[elektra]

I will suggest to her to look into a local support group for the resource referrals if nothing else (she already goes to therapy to deal with this).
I really hate this for my mom. She has never caught a break. This started happening a few years after my parents were able to get my quadriplegic brother off on his own and until then she spent years doing much of his physical care after he became injured.

Yes, even if she doesn't want to do the support groups, they do have some really helpful resources and individuals who are experts in how to navigate the whole process. And your poor mom. So unfair.

[daisysmom]

Daisymom, thank you so much. That makes perfect sense. I will have my mom obtain the articles of dissolution....though I am wondering if they even have any; I recall when they tried to obtain proof of the dissolution from one of the lawyers that screwed up (the one who did the dissolution in the first place), my mom said all they ended up getting was a one page form. I am wondering if any were even done. I will find out.
To clarify re: the articles, I think the real estate lawyer was suggesting my mom use the old ones, not file new ones, but my mom was the one wondering if they might need to prepare new ones...I already told her definitely NOT to do this until she heard from me.

In Virginia, the state office (here called the State Corporation Commission) keeps the copy of the articles of dissolution. You might try there for your state? The one pager is the receipt (here, it is called "Certificate of Dissolution") which is given after the actual Articles of Dissolution are filed. I agree the one pager won't help, but that might be all that the atty kept. Try calling the state.

I am not sure what to do if they don't have them... I don't think the check can be in the name of any other than the name on the deed, so I can understand why they won't make it out to a person instead of the corporation. The key is finding the document that gives a person the right to sign for the corporation. For bigger entites, there would be minutes reflecting that. Any chance there is a minute book somewhere?

Another way to proceed-- clearly the corporation has had an individual sign before. Maybe the bank has in its records the old signature card when an account was first opened up giving a person authority to sign?

Good luck. It is hard, I have said here before that my MIL has alzheimers. We are dealing with vast issues and powers of atty etc. It is a very hard situation. I second the PP's mention of the support groups. My DH and I went to an Alzheimers Association breakfast in our "small city" a few weeks ago, there were 3,000 people there. There are many many people dealing with this right now.

[mctlaw]

Daisymom,

I spoke with my mom and she thinks she does have articles of dissolution. They are out of town but coming back tomorrow. I am hoping this is a simple solution for once! I just wanted to say thanks for pointing us in this direction and also for your words of support - I am sorry your family is also going through similar issues.

[Giantbear]

not a lawyer but a cpa, you are also going to need to get a competent accountant to help with the tax filings fro the sale of the property's. Since the properties were distributed fromt he corporation, there may be income issues from the distribution and there will be basis carryover calculations to be done. This is not going to be a simple return, i strongly urge you to find a good cpa.

[mctlaw]

Thanks, Giantbear, I could not agree more. They do have a CPA and in fact are on their third in 2 years. Long story, but their first 2 cpas and first lawyer screwed them up royally and they are now paying penalties and taxes as a result.

[codex57]

In CA, for certain small corps (typically the one owner/shareholder type; like what your parents' sounds like), you can do a short form dissolution under certain situations in which it only is 1 page long. If so, it won't have instructions on how assets are to be distributed b/c one of the ways to be eligible for that short form is that all assets have already been distributed.

I can totally see the lawyer claiming that at that time and doing that short form dissolution (cuz it's easy), which kinda would still leave your parents a little stuck still.

[mctlaw]

In CA, for certain small corps (typically the one owner/shareholder type; like what your parents' sounds like), you can do a short form dissolution under certain situations in which it only is 1 page long. If so, it won't have instructions on how assets are to be distributed b/c one of the ways to be eligible for that short form is that all assets have already been distributed.

I can totally see the lawyer claiming that at that time and doing that short form dissolution (cuz it's easy), which kinda would still leave your parents a little stuck still.

Just saw this and it made me think. I looked up the Sec of State's form articles of dissolution as I am sure the lawyer who did the dissolution used the forms. There are two types depending on the type of corporation (which I am not sure of as I write) but in essence they both just say the corporation has already wound up its business affairs and there are no debts.

Clearly, while the debt part is true, the winding up part is not and this lawyer should have asked some questions before he just filed this!

My parents are getting back today so I haven't yet seen the language on the actual doc. But, I did find out that the bank went ahead and released the funds, but are still calling my parents for the business license (which does not exist)), I guess to complete their records. Hopefully my parents haven't violated some major regulation by doing what they did (which was all at lawyer's advice!!!!) I may call their current lawyer to see what he says about all this - he is the one that told them to set up the account under the corporate name. It is another guy that dissolved the corp, who I might add is a childhood friend of mine and was a year behind me in law school, (and is AV rated at that). They fired him after this and I've held my tongue on him because of this.

[codex57]

Pure guess, but I'm thinking it's one of those, if no one finds out, no harm, no foul. As in, the biggest problem would be for your parents in trying to actually wind up the business.

If you dig, don't go making too much noise about it. It sure looks like one of those situations where if you go digging around and make a lotta noise while doing so, you stir up trouble that wouldn't have existed if you'd have just let things be.

[mctlaw]

I think you're right, but I believe they are going to run into this time and time again, since there are assets yet to be disposed of, mostly real estate. So I'm flummoxed at how to help them the next time this comes about. I'm thinking they need to have new deeds recorded at the least. And I'll make sure they have their CPA and lawyer talking so one doesn's screw up the other.