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Monday, December 18, 2017

6 Events Which May Require Modification of Your Estate Plan

6 Events Which May Require a Modification of Your Estate Plan

Creating a Will is not a one-time event. You should review your will periodically, to ensure it is up to date, and make necessary changes if your personal situation, or that of your executor or beneficiaries, has changed. There are a number of life-changing events that require your Will to be revised, including:

Change in Marital Status: If you have gotten married or divorced, it is imperative that you review and modify your Will. With a new marriage, you must determine which assets you want to pass to your new spouse or step-children, and how that may relate to the beneficiary interest of your own children. Following a divorce it is a good idea to revise your Will, to formally remove the ex-spouse as a beneficiary, and also change your beneficiary on any life insurance policies, pensions, or retirement accounts.

Estate planning is complicated when there are children from multiple marriages, and an attorney can help you ensure everyone is protected, which may include establishing a trust in addition to the revised Will. Depending on jurisdiction, this may also apply to couples who have established or revoked a registered domestic partnership. If one of your Will’s beneficiaries experiences a change in marital status, that may also trigger a need to revise your Will.

Births: Upon the birth of a new child, the parents should amend their Wills immediately, to include the names of the guardians who will care for the child if both parents die. Also, parents or grandparents may wish to modify the distribution of assets provided in their Wills, to include the new addition to the family.

Deaths or Incapacity: If any of the named executors or beneficiaries of a Will, or the named guardians for your children, pass away or become incapacitated, your Will should be revised accordingly.

Change in Assets: Your Will may need to be changed if the value of your assets has significantly increased or decreased, or if you dispose of an asset. You may want to modify the distribution of other assets in your estate, to account for the changed value or disposition of the asset.

Change in Employment: A change in the amount and/or source of income means your Will should be examined to see if any changes must be made to that document. Retirement or changing jobs could entail moving to another state, thus subjecting your estate to the laws of that state when you die. If the change in income modifies your investing, saving or spending habits, it may be time to review your Will and make sure the distribution to your beneficiaries will be as you intended.

Changes in Probate or Tax Laws: Wills should be drafted to maximize tax benefits, and to ensure the decedent’s wishes are carried out. If the laws regarding taxation of the estate, distribution of assets, or provisions for minor children have changed, you should have your Will reviewed by an estate planning attorney to ensure your family is fully protected and your wishes will be fully carried out.


Friday, December 8, 2017

Is Birth Tourism a Shortcut to US Citizenship ?

Is Birth Tourism a Shortcut to US Citizenship?

Ever since the post-Civil War adoption of the 14th Amendment to the Constitution, all persons born on American soil have been automatically granted citizenship. This policy was common sense in the era it was adopted, a time when international travel was cumbersome and relatively rare, but today its wisdom is being questioned. Is birthright citizenship being abused by people who want to short-circuit America’s labyrinthine immigration law?

The Citizenship Clause of the 14th Amendment states:

“All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.”

From the moment it was adopted, this clause has motivated foreigners to give birth in America. For many years the number of these birth-tourists were limited by the nature of travel, but in today’s world, where air travel drastically cuts down the time it takes to get from one country to another, the path to citizenship guaranteed by the 14th Amendment is well-trod.

Stories abound of pregnant women visiting the U.S. on tourist visas who stay long enough to have their children, get American birth certificates and passports for them, then go back to their native countries, American tot in tow. The Chinese film industry even made a popular romantic comedy about the practice

Having a child that is an American citizen does not, however, guarantee that the child will grow up in America, or allow the family of the child to stay in this country indefinitely. Unless the parents have legal status in the United States, the entire family must return to their home country. It is not until an American-born baby is 21 that they are able to come to the United States and stay without being in school or having to show that they have a legal guardian here.

Once they reach the age of majority, the birthright citizen can enjoy the full benefits of citizenship, and can even sponsor his or her parents’ applications for citizenship.  It is important to remember that having an American-born child is a way to short-cut the system, but will likely take at least 21 years to capitalize on the investment.. In most cases applying for citizenship through other means will be just as fast.


Monday, November 27, 2017

At-Will Employment

At-will Employment: Does it Apply to You?

It may seem unfair, but an employer can fire an “at-will” employee at any time, without good cause – or even without any cause at all. It is a bitter pill, and one that many workers must swallow. Under Kentucky law, you are generally deemed to be employed at-will, unless you can prove otherwise.

Workers who are employed at-will can be fired for no reason, but they cannot be fired for a protected reason. Some reasons are illegal under federal or state law, exceptions to the general doctrine of at-will employment. For example, you cannot be fired for complaining about discrimination, harassment, or safety violations in the workplace, or for complaining about illegal activity. The majority of employers are subject to anti-discrimination laws and cannot fire you based on certain characteristics, such as gender, race or religion. Similarly, you cannot be fired because you have exercised a legal right, such as taking time off for family and medical leave, military service, jury duty, or voting in an election.

Many employers take steps to ensure that the at-will nature of the employment is clearly established and agreed-to by all parties. This is typically spelled out in employment applications and contracts, employee policy and procedure manuals, and may be described as “at-will employment” or simply contain statements that you can be terminated at any time “without cause” or “for any reason.”

Still others have implemented written policies that protect their employees against being fired without good cause, and specify the reasons for which an employee can be terminated. If your employer has adopted such a policy, you are entitled to those protections.  Likewise, if you have signed an employment contract guaranteeing you job security, your employment is not at-will and you are entitled to the protections contained in the written agreement.

Should you sign an at-will employment agreement? Courts have generally held that an employee can be terminated, or not hired, for refusing or failing to sign an at-will employment agreement.While you are not technically required to sign the agreement, if you want to get hired or keep your job, it may be in your best interest to sign the agreement.

Nevertheless, if the at-will agreement contradicts what your employer previously promised you, you may want to think twice about signing on the dotted line. If you relied on the employer’s promises of job security when you accepted the position, you should consult an attorney before signing an at-will agreement. Courts will presume the signed at-will agreement controls your employment, regardless of any prior statements to the contrary.

Just because you sign the at-will agreement does not mean your employer will use it to fire you without cause. There is little to be gained in terminating a productive employee, and most employers will attempt to work with you to resolve any issues. Ultimately, the best way to avoid the perils of at-will employment is to be an outstanding employee. Delivering exceptional job performance is good for the company’s bottom line – and your own.  


Monday, November 20, 2017

Overview of Life Estates

Overview of Life Estates

Establishing a Life Estate is a relatively simple process in which you transfer your property to your children, while retaining your right to use and live in the property. Life Estates are used to avoid probate, maximize tax benefits and protect the real property from potential long-term care expenses you may incur in your later years. Transferring property into a Life Estate avoids some of the disadvantages of making an outright gift of property to your heirs. However, it is not right for everyone and comes with its own set of advantages and disadvantages.

Life Estates establish two different categories of property owners: the Life Tenant Owner and the Remainder Owner. The Life Tenant Owner maintains the absolute and exclusive right to use the property during his or her lifetime. This can be a sole owner or joint Life Tenants. Life Tenant(s) maintain responsibility for property taxes, insurance and maintenance. Life Tenant(s) are also entitled to rent out the property and to receive all income generated by the property.

Remainder Owner(s) automatically take legal ownership of the property immediately upon the death of the last Life Tenant. Remainder Owners have no right to use the property or collect income generated by the property, and are not responsible for taxes, insurance or maintenance, as long as the Life Tenant is still alive.

Advantages

  • Life Estates are simple and inexpensive to establish; merely requiring that a new Deed be recorded.
  • Life Estates avoid probate; the property automatically transfers to your heirs upon the death of the last surviving Life Tenant.
  • Transferring title following your death is a simple, quick process.
  • Life Tenant’s right to use and occupy property is protected; a Remainder Owner’s problems (financial or otherwise) do not affect the Life Tenant’s absolute right to the property during your lifetime.
  • Favorable tax treatment upon the death of a Life Tenant; when property is titled this way, your heirs enjoy a stepped-up tax basis, as of the date of death, for capital gains purposes.
  • Property owned via a Life Estate is typically protected from Medicaid claims once 60 months have elapsed after the date of transfer into the Life Estate. After that five-year period, the property is protected against Medicaid liens to pay for end-of-life care.

Disadvantages

  • Medicaid; that 60-month waiting period referenced above also means that the Life Tenants are subject to a 60-month disqualification period for Medicaid purposes. This period begins on the date the property is transferred into the Life Estate.
  • Potential income tax consequences if the property is sold while the Life Tenant is still alive; Life Tenants do not receive the full income tax exemption normally available when a personal residence is sold. Remainder Owners receive no such exemption, so any capital gains tax would likely be due from the Remainder Owner’s proportionate share of proceeds from the sale.
  • In order to sell the property, all owners must agree and sign the Deed, including Life Tenants and Remainder Owners; Life Tenant’s lose the right of sole control over the property.
  • Transfer into a Life Estate is irrevocable; however if all Life Tenants and Remainder Owners agree, a change can be made but may be subject to negative tax or Medicaid consequences.

Monday, November 13, 2017

Construction Accidents

CONSTRUCTION ACCIDENTS

Because construction work is inherently dangerous, the risk of injury to workers is greater than in other industries and workplaces. However, construction workers have a right to a safe work environment. While construction injuries are usually covered under workers' compensation laws, it may be possible to pursue a lawsuit based on negligence against site owners, contractors, subcontractors, their employees and agents for violations of applicable safety laws.

There are number of causes of construction accidents, including:

  • Falls - from roofs, ladders scaffolding and other heights
  • Falling objects - improperly secured tools, equipment and construction material can fall and strike a worker, causing head, neck, brain and spinal injuries
  • Equipment accidents - workers can be injured by machinery and equipment such as forklifts, cranes, nails guns and dumpsters
  • Fires and explosions - hazards arise from exposed wires, flammable materials, blow torches and leaking pipes which can lead to catastrophic injuries and fatalities
  • Trench/ Building Collapses - workers can be buried, injured and killed in trench collapses or by buildings that are being constructed or demolished
  • Repetitive Motion Injuries - physical labor often requires bending and lifting that can lead to muscle and joint damage
  • Respiratory illnesses - as a result of exposure to dust, asbestos, and other pollutants

Construction accidents can lead to a variety of injuries. For example, many injuries require fingers, toes and limbs to be amputated. In addition, broken bones and fractures are common as are shoulder, knee and ankle injuries. Workers can suffer head or brain injuries from falls or falling objects as well as spinal cord injuries or paralysis. Other common injuries include eye injuries or loss of vision, and hearing loss.

If you are a construction worker who has been injured on the job, you have the right to be treated for your injuries and the right to receive workers' compensation benefits. If the injury was the result of negligence, however, you may be able to pursue a personal injury lawsuit.


Tuesday, October 31, 2017

A Primer on Irrevocable Trusts

A Primer on Irrevocable Trusts

Many individuals are aware that a will is one way to plan for the distribution of their assets after death. However, a comprehensive estate plan also considers other objectives such as planning for long-term care and asset protection. For this reason, it is essential to consider utilizing an irrevocable trust.

This estate planning tool becomes effective during a person's lifetime, but it cannot be amended or modified. The person making the trust, the grantor, transfers property into the trust permanently. In so doing, the grantor no longer owns property, and a designated trustee owns and manages the assets for the benefit of the beneficiaries.

In short, irrevocable trust provide a number of advantages. First, the property is not subject to estate taxes because the grantor no longer owns it. Moreover, unlike a will, an irrevocable trust is not probated in court. Finally, assets are protected from creditors.

Common Irrevocable Trusts

There are a variety of irrevocable trusts, including:

  • Bypass Trusts -  utilized by married couples to reduce estate taxes when the second spouse dies. In this arrangement, the property of the spouse who dies first is transferred into the trust for the benefit of the surviving spouse. Because he or she does not own it, the property does not become part of this spouse's estate when he or she dies.

  • Charitable Trusts - created to reduce income and estate taxes through a combination of gifting and charitable donations.  For example, charitable remainder trust transfers property into a trust and names a charity as the final beneficiary, but another individual receives income before,  for a certain time period.

  • Life Insurance Trusts - proceeds of life insurance are removed from the estate and ownership of the policy is transferred into the trust. While insurance passes outside of the estate, it is factored into the value of the estate for tax purposes, so this vehicle is designed to minimize estate taxes.

  • Spendthrift Trusts – designed to protect those who may not be able to manage finances on their own. A trustee is named to manage and distribute the funds to the beneficiary or directly to creditors, depending on the terms of the trust.

  • Special needs trusts - designed to protect the public benefits that many special needs individuals receive. Since an inheritance could disqualify a beneficiary from Medicaid, for example, this estate planning tool provides money for additional day to day expenses while preserving the government benefits.

The Takeaway

Irrevocable trusts are essential estate planning tools that can protect an individual's assets, minimize taxes and provide for loved ones. In the end, these objectives can be accomplished with the advice and counsel of an experienced estate planning attorney.

 


Wednesday, October 25, 2017

Employment Discrimination Laws in a Nutshell

Employment Discrimination Laws in a Nutshell

There are a variety of state and federal laws that make it illegal for employers to discriminate based on certain characteristics when making decisions about hiring, terminating, promoting, demoting or compensating employees, or any other terms and conditions of employment. Employers are also barred from retaliating against employees who file a discrimination-related complaint or engage in other protected activities. While the laws vary from state to state, all employers have an obligation to adhere to the following federal laws.

Title VII of the Civil Rights Act of 1964

This law prohibits discrimination in the workplace based on race, color, national origin, religion and gender. Title VII also established the Equal Employment Opportunity Commission (EEOC), the government agency that is tasked with investigating employment discrimination claims.  Before an employment discrimination lawsuit under federal law can be brought, it is necessary to file a claim with the EEOC. Title VII applies to employers with 15 or more employees.

Age Discrimination in Employment Act (ADEA)

The ADEA prohibits employers with 20 or more employees from discriminating against individuals who are 40 years or older and their age cannot be used as a factor in any employment decision.

The American with Disabilities Act (ADA)

The ADA prohibits employers with 15 or more employees from discriminating or harassing disabled employees and requires employers to make reasonable accommodations that will enable a qualified disabled worker to complete his or her job functions.  

The Pregnancy Discrimination Act (PDA)

The PDA prohibits discrimination based on pregnancy regarding any aspect of employment in businesses with 15 or more employees. Women who are temporarily unable to perform their jobs due to pregnancy must be treated similarly to other temporarily disabled workers. The ADA may also protect a woman who suffers from a pregnancy related medical condition.

The Bottom Line

In sum, employers are prohibited from discriminating against employees and potential job candidates because of race, religion, sex, age, disability, pregnancy or national origin. Not only can violations lead to financial penalties, a discrimination lawsuit can damage a business' reputation. By engaging the services of an experienced employment law attorney, you can establish policies and procedures to ensure that your business is in compliance with these laws. 

 


Friday, October 20, 2017

The Risks of Tenant-In-Common Investments

The Risks of Tenant-in-Common Investments

Historically, tenant in common (TIC) projects were owned by a relatively small group of investors who knew each other, such as long-time friends, business partners or family members. Strategies to maximize tax savings and preserve equity typically guided investors to this type of structure, rather than creating a limited liability company or partnership to own the property.

In the late 1990s, real estate sales in the form of tax-deferred 1031 exchanges created a new industry. Promoters began soliciting and pooling funds from investors to purchase real estate. Participation in the pool helped investors find replacement property to guarantee their capital gains tax deferment continued.

In 2002, the IRS clarified when this type of pooling is considered a partnership interest as opposed to a TIC interest, a critical distinction for investors using funds from a 1031 exchange transaction. Following that, investments in TIC interests grew considerably due to the numerous advantages. For those who needed a place to invest their 1031 exchange funds quickly, TIC interests provide a relatively simple way to ensure the funds are spent within 180 days of the sale of the previous property, without the hassle of researching, investigating, negotiating and financing a property in less than six months. TIC investors do not have to burden themselves with the day-to-day management of their investment property. Finally, TIC investors can pool their resources to purchase fractional shares of investment-grade property which would otherwise be out of reach.

With all of its advantages, the TIC interest also carries its share of risks. For example, many TIC promoters charged fees that were excessive, or sold the property to the investors for more than it was worth. If property values decline or purchase loans mature, it may be difficult to refinance, forcing the property into foreclosure and taking the entire investment with it.

Other promoters failed to maintain reserve funds separate for each property. If a promoter filed for bankruptcy and did not properly use the reserve funds, TIC investors were left with no recourse and were forced to cover the reserves out of their own pockets or risk losing their investment.

Further risks are caused by the investors themselves and the nature of their relationship to one another – or lack thereof. Owners of TIC typically do not know each other. Decisions regarding TIC governance often require unanimous agreement by all owners, and just one objection can grind the action to a halt. When owners don’t know each other, or are spread across many states, it can be difficult to communicate and obtain a unanimous agreement.

Despite the risks, TIC interests can still be a good place to park your money – but you must be a cautious, diligent purchaser. Visit the property, seek information from sources other than the promoter, and carefully review the past and projected financial data.
 


Thursday, September 28, 2017

Oral Contracts & the Statute of Frauds

Oral Contracts & the Statute of Frauds

 

There is a widespread misconception that verbal contracts are unenforceable.  Nevertheless, a contract made orally with another party, without embodying the particular terms in a signed writing, can still be valid and binding. Even so, any disagreement concerning the deal may pose multiple problems for both parties.  In order for the court to give a verbal contract legal effect, the terms of the deal will have to be demonstrated. This could involve pricey litigation and an extensive discovery process.  Therefore, it is advisable to have an attorney draft any contractual agreement.

Moreover, according to the Statute of Frauds, there are certain contracts that must be in writing in order to be legally binding.  This may include contracts for the sale of land or real estate, surety agreements, in which one person guarantees to take over another's contractual obligations, and service agreements that take over one year to complete.  Other agreements that must be written to be legally binding may include agreements “made in the consideration of marriage,” or those made for the sale of goods valued at $500 or more. If the requirements for contractual validity are not met, either party runs the risk of the other party rescinding the contract by declaring it void.

The Statute of Frauds not only aims to prevent deception or fraud; it requires precise terms to be set in writing for a contract to be valid. The Statute of Frauds typically requires the document to include a description of the “subject matter” of the agreement, the main stipulations to the deal, and the signatures of the parties.  Nevertheless, these requirements may vary with the sale of goods under the Uniform Commercial Code, where a signature by the “party to be charged” may be sufficient.  For a sale of goods, the terms typically should include the price and quantity of the goods. 

Sometimes, if the contract is unenforceable under the Statute of Frauds, it may be saved if one party suffered by relying on the contract and if the injured party can prove this reliance in court.  Likewise, an exception may exist if “specially manufactured goods” were provided under the contract or one party “partially performed” what was required by the agreement.  The outcome may also vary if two merchants were the contracting parties.  Seek advice from a licensed business law and contract attorney to evaluate agreements and determine whether they are legally enforceable. 


Monday, September 18, 2017

Benefits of Incorporating in Safe-Haven States

The Benefits of Incorporating in Safe Haven States

Many business owners believe it's best to incorporate in their home state, but there are often business and tax advantages available in other states. In particular, Delaware and Nevada are attractive to those who are looking to form a corporation. These so-called corporate haven states are considered to be business friendly.

The State of Delaware is well regarded for its supportive business and corporate laws, said to be among the most favorable in the United States. In addition, the state has a judicial body, the Court of Chancery, that is dedicated to business matters. This exclusive focus allows the court to hear cases quickly and efficiently.

Delaware also features a government agency that is focused on supporting businesses, the Division of Corporations. In particular, this agency has streamlined procedures for incorporating that allow businesses to hit the ground running. The Division boasts long hours and provides new businesses with easy access to important resources.

Lastly, the tax law in Delaware is amenable to corporations. A corporation that is formed, but does not conduct business, in the state is not liable for corporate income tax. Moreover, there is no personal income tax for those domiciled in the state or for shareholders that do not reside in Delaware.

Nevada is the second most popular state in which to incorporate. The state's business law affords favorable treatment to corporations. In particular, owners and managers of a corporation are rarely held responsible for the actions of the corporation in the state. Nevada also offers advantageous tax treatment to corporations with no personal income, franchise or corporate income tax.

Depending upon the exigencies of your business,  incorporating in Delaware or Nevada might be the best alternative. By engaging the services of an experienced business and tax law attorney, you can take advantage of these corporate safe havens.

 


Friday, September 8, 2017

What is a Spendtthrift Trust ?

What is a Spendthrift Trust ?

When it comes to estate planning, there are many factors to consider, not the least of which how to provide for loved ones. Although we like to believe that our heirs are deserving and capable of managing an inheritance, some beneficiaries may not be responsible or lack an understanding of financial matters. Fortunately, it is possible to leave assets to a troubled heir by creating a spendthrift trust.

This estate planning tool limits a beneficiary's access to trust property in order to protect it from him or herself as well as creditors. Rather than providing assets or funds directly to the beneficiary, the trust maker (or grantor), designates a trustee to manage the trust property and provide regular payments to, or purchase goods and services for, the beneficiary.

Spendthrift trusts are typically created when an heir does not know how to manage money or is frequently delinquent with debt. In addition, a spendthrift trust can protect those who have drug, alcohol or gambling problems or who are at risk of being manipulated.

The role of the trustee

The trustee is responsible not only for managing the trust, but also protecting the assets from being squandered by the beneficiary. This requires the trustee to manage the trust in a manner that preserves the value of the assets while providing for the beneficiary.

In order to do so, the trustee should have the power to make set payments to the beneficiary on a regular basis. Similarly, the trustee must also be able to withhold payments under certain conditions, particularly if the beneficiary gambles or gets into debt. However, this would also require the trustee to monitor the beneficiary's behavior, which could be problematic.

Finally, the grantor could also specify conditions under which payments should be released to the beneficiary. For example, the grantor could instruct payments be made directly to a landlord or a creditor rather than the beneficiary. In some cases, the beneficiary could also be required to undergo drug or alcohol testing before receiving a payment from the trustee.

In sum, a well designed spendthrift trust must consider the unique relationship of all the parties. It is crucial for the grantor to name a trustee who is honest and capable, and who will fulfill his or her obligation to preserve the trust assets and provide for the beneficiary.

Contact us for all of your Wills, Trusts, or other Estate Planning needs. 


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