bmemhlaw

MAKING A WILL DURING A PANDEMIC

tmcleod@bmemhlaw.com (Tyler McLeod) — Wed, 29 Jul 2020 02:34:04 GMT

3 Options for Estate Planning During COVID-19

Estate Planning has likely been on many people's minds during the past few months due to the pandemic, and many may have wondered how to create a Will, Trust or Power of Attorney during a time when many people want to reduce face to face contact with other people. The typical estate planning documents consist of a Will, Power of Attorney for Financial and Health Care Decisions and a Living Will (Declaration for a Natural Death). The following are three different options for creating these documents during a pandemic:

Option 1- ONLINE LEGAL SERVICE

The first Option, which has no doubt become more popular during the pandemic, is to use an online legal service such as LegalZoom to create your Estate Planning Documents. The convenience of this option is the obvious benefit, though most experts in estate planning may tell you that it is a little like using WebMD to do your own heart surgery.

In States which do not currently allow Electronic Wills, the online legal service does not completely solve the problem, as you still must sign the Will in the presence of a notary and two witnesses. Therefore, while the online legal service may help you create a Will, it does not help you execute the Will, which is necessary to make the Will legal and give it any effect at all.

Option 2- CONTACT AN ESTATE PLANNING ATTORNEY

In general, creating a Will with an attorney consists of two meetings. The first in person meeting is the initial consultation with the attorney to provide the attorney with the information regarding family, finances and wishes for the estate plan, and for the attorney to advise the client as to options for the estate plan. Typically, the second in person meeting is when the client comes in to review and sign the documents to complete the estate planning process. In between the first and second meeting, the attorney will work on the documents, and likely communicate with the client via email or telephone to confirm details and discuss any issues which were not discussed in the first meeting. The attorney would then send the documents to the client to review and schedule the second in person meeting in which the client will sign and finalize the documents.

Option 3- A COMBINATION OF THE FIRST TWO OPTIONS

The third option, and most likely the best option during a pandemic, is using an estate planning attorney who uses technology to minimize the contact between client and lawyer. Attorneys can offer video conferences for the initial meeting, while using client intake forms and email to gather any necessary information or documentation from the client. The first meeting can certainly be avoided through the use of technology, but the second meeting to actually sign the documents is much more difficult to avoid.

The main problem with using an online service is you do not have the guidance or instruction of an attorney to assist in helping you create your Will and other estate planning documents. However, using an estate planning attorney to create your Will is difficult during this COVID-19 Pandemic, especially if you are fearful of being around other people, and that is mainly because the law still requires you to be physically present with a notary public and two witnesses during the execution (signing) of the Will. There are many States that have recently issued executive orders which allow for some form of electronic signing for Wills, with the requirements for such varying among the states. However, it appears that many attorneys are not utilizing this option as many attorneys still prefer the in person signing that they have always used in the past. Our firm primarily practices in South Carolina which has not allowed any form of electronic signing for Wills.

Our firm is utilizing the third option by offering to use video conferencing technology (typically skype or zoom) for the first meeting and communicating with client using email, text and telephone to gather information and advise of the plan. For the second meeting, since South Carolina does not allow electronic Wills, clients must still come in to sign the documents, but we are taking precautions such as masks, outdoor tables and sanitizing after every meeting. We are trying to make the process as easy as possible to enable people who want the peace of mind of an estate plan while also reducing the risk of in person meetings at this time.

If you would like to setup a zoom call for a consultation please fill in the information below to send us a Message and one of our estate planning attorneys will be in touch shortly.

Tyler McLeod is now a Member of the Firm.

Thu, 06 Feb 2020 14:37:06 GMT

Brown Massey Evans McLeod & Haynsworth, LLC announces that Tyler McLeod has become a Member of the Firm.

Tyler McLeod , an associate at Brown Massey Evans McLeod & Haynsworth, LLC for the past five years, has become a Member of the firm. Tyler worked hard and excelled in all areas of his work to earn this opportunity. Tyler will continue to serve his clients in the areas of estate planning, probate/corporate litigation, corporate law, tax law and real estate. He will also continue his work on the Probate Planning Estate and Trust committee on Electronic Wills and work to help develop legislation for an Electronic Wills Act for South Carolina. The firm is very proud to announce Tyler McLeod as a Member of Brown Massey Evans McLeod & Haynsworth, LLC.

EMPLOYMENT LAW GUIDEBOOK

grow@rootedbrands.com (Hayes Wynn) — Sun, 22 Feb 2015 20:02:51 GMT

23 FEB EMPLOYMENT LAW GUIDEBOOK

The U.S. Department of Labor publishes a guidebook to provide businesses with general information on the laws and regulations that the Department enforces. The guidebook describes the statutes most commonly applicable to businesses and explains how to obtain assistance from the Department for complying with them.

The authority of the Department of Labor extends to many statutes, but the following are several that affect most employers: Employee Retirement Income Security Act (ERISA); Occupational Safety and Health Act (OSHA); Fair Labor Standards Act (FLSA); and Family and Medical Leave Act (FMLA).

The Employment Law Guide: Laws, Regulations and Technical Assistance Services can be accessed at www.dol.gov/compliance/guide.

LIFE INSURANCE CAN BE PART OF YOUR ESTATE PLAN

grow@rootedbrands.com (Hayes Wynn) — Fri, 30 Jan 2015 14:45:01 GMT

30 JAN LIFE INSURANCE CAN BE PART OF YOUR ESTATE PLAN

Even if you have a relatively modest estate, life insurance can be an important aspect of estate planning for the obvious reason that it can substantially increase the value of your estate. Where the death of a person is premature and a young family is in need of support, life insurance may be the primary means for the family’s financial survival.

Even in larger estates, life insurance can be useful by providing the liquidity necessary to pay estate taxes and expenses without the necessity of selling off assets that a family would prefer to keep intact. Additionally, life insurance, unlike many other assets, does not have to go through a time‑consuming administrative process before it becomes available to beneficiaries. Therefore, life insurance can be an immediate source of funds for a surviving family.

Estate Taxes and Life Insurance

As is true of any aspect of estate planning, one objective is to minimize the federal estate tax effect that life insurance can have. The primary tax issue that arises is whether the insurance proceeds are included in the estate for federal estate tax purposes. Including the proceeds could generate additional estate tax liability and reduce the amount of the proceeds that are available to the decedent’s heirs.

The fundamental rule is that the gross estate will include the value of life insurance proceeds if (1) the proceeds are payable to the decedent’s estate and are thus receivable by the executor, or (2) the proceeds are payable to other beneficiaries, but the decedent possessed at his or her death any of the “incidents of ownership” with respect to any policy.

The term “incidents of ownership” is defined more broadly than to be limited to the legal ownership of the policy. The term includes the power to change the beneficiary, to surrender or cancel the policy, to assign the policy or pledge it for a loan, and to obtain a loan from the insurer against the surrender value of the policy. There are other indirect ways that the decedent can be found to possess incidents of ownership. For instance, if the decedent is the controlling shareholder of a corporation that possesses an incident of ownership, such possession is attributed to the decedent.

Another scenario that will result in the inclusion of life insurance proceeds in the decedent’s estate arises under certain circumstances where the decedent was the initial owner of the policy but transferred such ownership to another person or entity within three years of his or her death. Thus, even where the decedent has rid himself or herself of all incidents of ownership in the policy, there is still the possibility of inclusion under this three‑year rule.

Keeping Life Insurance Proceeds Out of Your Estate

A common device for handling the life insurance aspect of an estate plan is the life insurance trust. Typically, a person would initiate the life insurance coverage by acquiring the policy. He or she would then transfer all incidents of ownership of the policy to a previously created irrevocable trust, which would be the named beneficiary on the policy. Assuming that the person survived until at least one day more than three years after the transfer of the policy to the trust, there would be no inclusion of the proceeds in the settlor’s estate. If a policy is transferred within three years of death, the proceeds are included in the estate.

If the trust itself acquired the policy, the person would never be the owner and the three‑year rule would not apply. The problem would be that the person could neither direct nor require the trust’s acquisition of the policy without risking the possibility that he or she would be regarded as the original owner of the policy for purposes of applying the three‑year rule. Therefore, it is important that the trustee be completely independent of the decedent.

An insurance trust can also have the practical effect of serving as a means of coordinating the collection, investment, and distribution of the proceeds of several policies. An insurance trust can hold other assets that the decedent transferred to it during his or her life. The trust can also receive assets “poured over” to it by the decedent’s will.

If life insurance is to be an element of your estate plan, it should be carefully integrated with the other aspects of the plan. Be sure to seek the guidance of a qualified professional to assist you.

PUBLIC USE REQUIRED FOR EMINENT DOMAIN

grow@rootedbrands.com (Hayes Wynn) — Mon, 17 Nov 2014 14:46:26 GMT

17 NOV PUBLIC USE REQUIRED FOR EMINENT DOMAIN

“Eminent domain” is the power of the federal, state, or local governments (and, in some limited circumstances, private parties, such as utilities and railroads) to take, or to authorize the taking of, private property for a public use without the owner’s consent and upon payment of just compensation. That right to compensation is rooted in the federal and state Constitutions. While the delegation of the power of eminent domain is for legislatures, the determination of whether the condemnor’s intended use of the land is for “the public use or benefit” is a question of law for the courts.

The public use or public benefit issue has spawned countless legislative and judicial reactions, especially since a controversial U.S. Supreme Court decision on the topic in 2005. In that case, owners of condemned property challenged a city’s exercise of eminent domain power on the ground that the takings were not for a public use but, rather, for the benefit of private developers.

The Court held that the city’s exercise of eminent domain power in furtherance of an economic development plan satisfied the constitutional “public use” requirement even though the city was planning to lease the condemned land to private developers for execution of the city’s plan. The plan nonetheless served a public purpose, in the form of enhanced economic development, including such beneficial effects as the increased tax revenues and new jobs expected to come with such redevelopment.

Recently a city withstood a similar challenge to its use of eminent domain to acquire an easement on a private landowner’s property in order to expand a sewer system by connecting city‑owned property to a sewer pump station underneath the landowner’s property. The taking was for a public use even though the city ultimately planned to sell its property to a private affordable housing developer, because the sewer easement area would be available to the public at large in accordance with the appropriate rules, regulations, and standards of a metropolitan sewer district.

Apart from the constitutional requirements, the taking of the easement satisfied a state statutory mandate that a taking by a governmental entity must be for a “public use or benefit.” Under the public benefit test for eminent domain, the city’s desired use of the condemned property was for “the public use or benefit” because that use would contribute to the general welfare and prosperity of the public at large, not just particular individuals or estates.

In the case before the court, extending the sewer lines would allow development of the city’s neighboring property, which the city sought to sell to the private developer to construct affordable housing. The existing pump station had sufficient capacity to service the city’s land, and requiring the city instead to construct a sewer pump station on its land would have resulted in wasteful and unnecessary duplication of the city’s resources. These facts added up to a public use or benefit justifying the taking, notwithstanding some benefits undeniably accruing to private parties as well.

TAX-FREE GAINS FROM HOME SALES

grow@rootedbrands.com (Hayes Wynn) — Mon, 27 Oct 2014 14:47:33 GMT

27 OCT TAX-FREE GAINS FROM HOME SALES

One of the most significant tax advantages to owning a home comes at the back end of ownership, when you decide to sell it for a profit. A homeowner can exclude up to $250,000 of such profit from the federal capital gains tax. For married couples filing a joint tax return, the exclusion jumps to $500,000.

This big tax break does come with some basic requirements. It applies to the sale only of a principal residence, not of a vacation home or investment property. With some limited exceptions for poor health, job changes, and unforeseen circumstances, the taxpayer must have owned and used the home as a primary residence for at least two of the five years preceding the sale of the home. (But the two years need not be an uninterrupted time span.)

If the history of the home includes some business use, the owner cannot exclude that part of the gain that is equal to the depreciation claimed while the house was used as rental property. This scenario could arise when the owner rents out the house for a period of time but then moves back in, sells it, and otherwise qualifies for the exclusion related to that sale.

There is another two‑year rule that comes into play after a taxpayer claims the home‑sale exclusion. There is no limit to the number of times that the exclusion can be claimed for multiple sales, but, as a rule, once the exclusion is claimed, the taxpayer must wait two years before claiming another such exclusion.

For a married couple to qualify for the exclusion, it is sufficient if either spouse meets the ownership requirement. However, both spouses must meet the use requirement. Neither spouse is rendered ineligible for the exclusion because he or she had already excluded the gain on a different primary residence during the two years preceding the date of the current sale.

RECREATIONAL-USE IMMUNITY FOR GOLF INJURY

grow@rootedbrands.com (Hayes Wynn) — Mon, 06 Oct 2014 14:48:35 GMT

06 OCT RECREATIONAL - USE IMMUNITY FOR GOLF INJURY

The purpose of recreational‑use tort immunity statutes, which are common across the country, is to encourage private and public landowners to make their property available for public recreational use. To advance this public interest, these laws usually immunize the owners or occupants of real property from negligence liability toward people entering the land for recreation, often on the condition that the property is made available for use free of charge.

Typically the statutory immunity stops short of protecting defendants from liability for greater degrees of wrongdoing, such as acts or omissions that can be characterized as willful, malicious, or grossly negligent. Originally the perceived need for immunity arose because of the impracticability of keeping large tracts of mostly undeveloped land safe for public use, but the concept has evolved so that it need not necessarily involve vast expanses of wilderness.

The conditions for recreational‑use immunity can vary somewhat with the wording of the states’ statutes, requiring case‑by‑case rulings depending on the facts before a court and the wording of each state’s law. In keeping with a commonly recognized rule of statutory construction, because recreational‑use immunity statutes limit common‑law liability that predates such laws, a court must strictly construe language in the statutes in order to avoid any overbroad statutory interpretation that would give unintended immunity and take away a right of action for injured persons.

When a golfer at a city‑owned golf course slipped and fell on a walkway leading to a tee box, he claimed that the walkway was dangerously steep and narrow, causing his injuries. The city defended on the basis of a state recreational‑use immunity law. Before an intermediate appellate court, the city prevailed on one issue, about the golf course’s coming within the statute, but the case was sent back to the trial court for resolution of a second issue, concerning the legal status of the injured golfer.

The golf course was sufficiently similar to “park” lands to be included in the definition of “premises” under the recreational‑use immunity statute even though there is no express mention of golf courses by the legislature. The golf course fit within the common definition of a “park,” as it was a parcel of property kept for recreational use that was designed and maintained for the primary purpose of allowing users to engage in a recreational activity. Not only that, but the statute’s list of types of land uses constituting covered “premises” includes a catch‑all reference to “any other similar lands.”

However, for the immunity to apply to the city, it was also necessary for the golfer to have been a “recreational user” under the law. This, in turn, meant that the golfer must have paid either no admission fee or no more than a “nominal fee,” to use the term from the statute. In this case, there was no question that a fee was paid to play golf, but since the lower court had not reached the question of whether that fee was “nominal,” it would have to decide that issue.

Generally a nominal fee is one charged only to offset the cost of providing the educational or recreational premises covered by the immunity statute. Some of the factors affecting this issue might include, for example, the amount of the fee, the extent to which it approximates the value of the service received in exchange for it, and the fees charged for similar recreational uses in the community.

In something of an ironic twist, if it were to be found that the golfer had paid no more than a “nominal fee,” then in exchange for that inexpensive round of golf, the golfer will have ultimately paid a higher “price” in the form of being precluded from recovering damages from the golf course owner for negligence.

ESTATE PLANNING – POWERS OF APPOINTMENT

grow@rootedbrands.com (Hayes Wynn) — Mon, 22 Sep 2014 14:49:37 GMT

22 SEP ESTATE PLANNING - POWERS OF APPOINTMENT

A power of appointment is the power given to someone to allow that person to designate who will receive property or an interest in property. The creator of the power is called the donor, the individual having the power is the powerholder, and the possible recipients of the property are permissible appointees.

Powers of appointment used for estate planning have many variable forms. The powerholder may hold the power in a fiduciary capacity (such as the trustee for a trust) or nonfiduciary capacity. The power may be presently exercisable by the powerholder or may be exercisable only in the future, such as by the powerholder’s will. The powerholder may or may not be the creator of the power. There may be multiple powerholders who must act jointly or a single powerholder. The persons in whose favor the power may be exercised may be unlimited, including the powerholder (sometimes called a general power of appointment), or may be limited. The beneficial interests that may be created in the appointees in whose favor the power may be exercised may be unlimited or limited. Various legal consequences in regard to powers of appointment will be affected by the restrictions imposed on the powerholder.

The trustee of a trust, a common type of powerholder, may be given discretion by the donor to invade principal for a life income beneficiary or for some other person, or discretion to pay income or principal to a named beneficiary, or discretion to allocate income or principal among a defined group of beneficiaries.

In short, the discretion given to the trustee gives the trustee the power to designate beneficial interests in the trust property as future developments indicate. This discretion in the powerholder underscores the primary advantage of using powers of appointment—they provide flexibility to adjust an estate plan to deal with circumstances that may arise years, or even decades, after the estate plan is created. The flip side to this flexibility is the power of appointment’s main disadvantage for some—it means that the donor must give up some control over the ultimate disposition of assets in the estate.

There are other potential ramifications for powers of appointment that should be taken into account. For example, assets subject to a general power of appointment will be included in the estate of the powerholder, which could create unfavorable tax consequences. In addition, an improperly exercised limited power of appointment may become a general power of appointment under the law. All in all, whether to use a power of appointment and, if so, with what characteristics, are questions best answered with the advice of a lawyer well versed in estate planning.

REAL ESTATE DEAL GONE WRONG

Fri, 05 Sep 2014 14:51:54 GMT

05 SEP REAL ESTATE DEAL GONE WRONG

The ageless advice to read, understand, and expect to be bound by language in a contract you sign is as sound now as ever. It is especially important with respect to contracts to buy real property, where the financial stakes are often high. Jerome contracted to buy property, delivering a $5,000 deposit to be credited toward the purchase price. An addendum to the contract agreed to by the parties stated that in the event the seller breached the agreement or defaulted, Jerome was entitled to the return of his earnest money and cancellation of the contract, as his “sole and exclusive remedy.”

When the seller did not close on the deal within the time set by the contract, according to Jerome because there had been a defect in its title to the property that was later remedied, Jerome sued to enforce the contract. That is, he sued to force a sale of the property to him, as he was not content with the prospect of simply getting his $5,000 back, terminating the deal and returning to square one.

A court held Jerome to the terms of the contract addendum, ruling that he was entitled to no more than his money back from the seller. In some cases, an aggrieved party may be relieved of the limitations or burdens of a contract when the unequal bargaining positions of the parties are such as to deprive the aggrieved party of a meaningful choice and where the terms of the contract are unreasonably favorable to the other party. Jerome made this argument in an attempt to rid himself of the limitation on his contractual remedy, to no avail.

The problematic addendum, in bold language no less, warned the parties to read it carefully before signing and included an acknowledgment that Jerome was knowledgeable and experienced in financial and business matters and able to assess the transaction’s merits and risks. The court also declined to find that limiting Jerome to the return of his earnest money deposit was unreasonably tilted in the seller’s favor. It simply restored the parties to their positions prior to signing the contract. In a loose sense, Jerome may have been the “victim” of a broken contract, but he was not such a disadvantaged victim under the law as to be entitled to set aside any of the terms of his contract, including the one that boxed him in when he was seeking a remedy.

No less important than reading and understanding all parts of a real estate sales agreement is the need to be up front with the other party to the transaction about the condition of the property, especially as to a problem that is not obvious. In another case, this was an expensive lesson to learn for a seller of a home who was less than forthright with the buyer about defects in a basement wall.

In the litigation that ensued when the buyer sued the seller for fraud and negligent misrepresentation, the buyer testified that at first he was actually impressed with the finished basement in the house, with its drywall all around and a polished floor you could eat off of. But some months after he moved in, the buyer noticed a worsening problem with water leaking from one of those basement walls. When workers removed the drywall to explore further, they exposed a basement wall that was bowed, had cracks both small and large, and had mold and mildew. Layers of caulking in some of the cracks suggested that someone had tried in vain to fix the problem on the cheap. The new owner then did fix the problem, but at great expense.

Although the seller had answered no on a disclosure form to questions about any known water problems or cracks and settling issues in the basement, other evidence suggested that the real answer should have been yes. The seller claimed that he just happened to put up the drywall in the basement as the last item on a to‑do list, at a time when he was not intending to sell the house. Records showed that there was no drywall when the house was first listed and did not sell, but that the drywall was in place less than a year later for the second listing that resulted in the sale.

For his lack of candor, the seller paid a high price. An appeals court upheld an award of tens of thousands of dollars in damages to the buyer. In addition to damages for mental anguish, there was compensation to the buyer for those costs of repair he incurred for such items as the installation of an exterior drainage system, the repair of the footer drains, and the installation of multiple straps to repair the bowed wall. Last but not least was a significant award of punitive damages, based on the trial court’s conclusion that the seller had acted with “conscious disregard” for the rights and safety of the buyer, where there was a great probability of causing substantial harm. All in all, the case stands as an object lesson: In selling real estate, as in most undertakings, honesty is the best policy.

ESTIMATED TAXES FOR BUSINESS OWNERS

grow@rootedbrands.com (Hayes Wynn) — Mon, 25 Aug 2014 14:52:41 GMT

25 AUG ESTIMATED TAXES FOR BUSINESS OWNERS

Estimated tax is the method used to pay tax on income that isn’t subject to withholding, most notably earnings from self‑employment. Many owners of small businesses—whether operated as S corporations, partnerships, limited liability companies electing partnership taxation, or sole proprietorships—pay their estimated tax using the same IRS Form 1040‑ES that individuals use.

Payments of estimated taxes are spread out over four payments, falling due in April, June, and September of the current year, and January of the following year. Generally a taxpayer must file estimated taxes if he or she owes $1,000 or more in taxes when an annual tax return is filed. An underpayment penalty can be avoided if tax payments for the year, including withholding and any tax credits, cover the ultimate tax bill, or at least are short by less than $1,000. There are special rules for farmers, fishermen, certain household employers, and some higher‑income taxpayers.

A taxpayer who also receives salaries and wages may be able to avoid having to make estimated tax payments on other income by asking his or her employer to take out more tax from such earnings. In addition, in a given year a taxpayer does not have to make estimated tax payments until there is income on which income tax will be owed.

Given the difficulty in anticipating the year’s total tax obligation in April, or even June, there are two “safe harbors” for avoiding a penalty for underpayment of estimated taxes: Pay either 90% of your current year’s tax obligation or 100% of the previous year’s tax.

Corporations are subject to similar, but slightly different, rules for paying estimated taxes. A corporation must make equal installment payments on the 15th day of the 4th, 6th, 9th, and 12th months of its tax year if the expected tax for the year is $500 or more. Corporations use IRS Form 1120‑W. The safe harbors for corporate taxpayers are each set at 100%. Accordingly, to avoid a penalty, a company should make each payment at least 25% of the current year’s income tax or 25% of the prior year’s income tax, whichever is smaller.

ENSURE YOUR FINANCIAL PRIVACY

grow@rootedbrands.com (Hayes Wynn) — Tue, 05 Aug 2014 14:53:33 GMT

05 AUG ENSURE YOUR FINANCIAL PRIVACY

There is a federal law that affords consumers significant say over the privacy of their financial information while still allowing financial institutions to share information for normal business purposes. This Act covers banks, savings and loan institutions, credit unions, insurance companies, securities firms, and even some retailers and automobile dealers that extend or make arrangements for consumer credit.

There may be more forms of personal information gathered by the institutions than you realize. They may have credit reports and records of how much you buy and borrow, where you shop, and how well or poorly you pay your bills on time.

The Act protects your financial privacy in three basic ways: First, in a privacy notice, the institution must tell you what kinds of information it collects and the types of businesses that may be provided with it. Institutions must send out a privacy notice once a year. Second, if the institution is going to share your information with anybody outside its corporate family, it must give you the opportunity to “opt out” of that kind of information sharing. The third layer of protection requires the institutions to describe how they will go about protecting the confidentiality and security of your information.

A privacy notice from your bank may not be the kind of mail you rip open with eager anticipation, but you should take the time to look it over carefully all the same. Somewhere in the formal verbiage you should look especially for these items:

What kinds of information may be shared, both with affiliated companies and with outsiders? Don’t expect great specificity on this in the notice itself. The Act requires only a description of basic categories of information, with some examples.

What information can you not prevent your financial institution from sharing? Recognizing some circumstances in which the institutions should be allowed to share financial information with outsiders without the consumer’s consent, the Act does not allow you to stop the sharing of information that is needed to help conduct normal business (such as for outside firms that process data or mail statements); to protect against fraud or unauthorized transactions; to comply with a court order; or to comply with a “joint marketing agreement” entered into with another institution.

How do you go about “opting out” of the sharing of information of outside entities? Sounds simple enough, but the institution may require you to exercise this option by calling a specific phone number or by completing a form and mailing it to a particular address. If you opt out by phone, to be safe you may want to follow up with a written version, keeping a copy for your records.

LONG ARM OF THE LAW

grow@rootedbrands.com (Hayes Wynn) — Mon, 04 Nov 2013 14:54:21 GMT

04 NOV LONG ARM OF THE LAW

Long‑arm statutes permit a court in a particular state to bring within its jurisdictional reach nonresident persons who, by their actions, have had at least such “minimum contacts” with the forum state that it is fair and just to subject them to the powers of a court in that state. In earlier times such contacts were as likely as not to take a physical form. But today, as a recent case illustrates, in the age of computers and the Internet the only thing physical about the contact may be someone’s clicking a mouse or striking a keyboard from his or her home in another state or country.

A chemical company based in Connecticut decided to terminate the employment of Jackie, an employee of a Canadian subsidiary of the company. Jackie lived and worked in Ontario, Canada. According to the company, upon learning of her impending termination and just before it, Jackie forwarded from her company email account to her personal email account some confidential and proprietary data files belonging to the company.

She had previously agreed in writing to safeguard such information and to use it only for proper company purposes. The company sued Jackie in a federal court for unauthorized access to, and misuse of, a computer system and for misappropriation of trade secrets, in violation of Connecticut statutes.

Jackie’s contention that she was beyond the reach of Connecticut’s long‑arm statute was ultimately unsuccessful. Her conduct while she was domiciled and working in Canada, in accessing a computer server located in Connecticut to misappropriate confidential information belonging to her employer, was sufficient to confer personal jurisdiction over her under Connecticut’s long‑arm statute.

While even more generally worded parts of the long‑arm statute may have supported this result, the statute specifically provides for personal jurisdiction over persons who use a “computer” or a computer network located within the state, and the court found that the company’s server, which Jackie had used, was a “computer” for jurisdictional purposes.

For a court to exercise personal jurisdiction over a nonresident, not only must the jurisdiction be authorized under the state’s long‑arm statute, but such an exercise of power must satisfy the requirements of the Due Process Clause of the Fourteenth Amendment.

Under well‑settled U.S. Supreme Court precedents, this means that the nonresident must have engaged in some act by which it availed itself of the privilege of conducting activities in the forum state, and the resulting exercise of personal jurisdiction must be “reasonable.” The facts of the chemical company’s case against Jackie met these constitutional tests.

First, Jackie had purposefully availed herself of the “privilege” of conducting activities within Connecticut by allegedly accessing a computer server located in Connecticut in order to misappropriate confidential information belonging to her employer. She was allegedly aware of the centralization and housing of her employer’s email system and the storage of confidential proprietary information and trade secrets in Connecticut, and she used that email system and its Connecticut servers in retrieving and emailing confidential files. Moreover, it was also significant that Jackie had directed her allegedly tortious conduct towards a corporation in Connecticut.

As for the reasonableness of bringing the nonresident defendant before a court in Connecticut, the court explained that although Jackie would have to travel to Connecticut to defend the suit, both Connecticut and the employer company had sufficient interests in resolving the matter in Connecticut. Not only was the employer based in Connecticut, which was where the majority of the corporate witnesses were located, but also Connecticut itself had an interest in the proper interpretation of its laws.

CAREFUL WHOM YOU ADD TO ACCOUNTS

grow@rootedbrands.com (Hayes Wynn) — Tue, 01 Oct 2013 14:55:17 GMT

01 OCT CAREFUL WHOM YOU ADD TO ACCOUNTS

Various types of bank accounts held in the name of a single individual or entity have the virtue of simplicity, and the added bonus that the accountholder does not have to wait to make decisions until after a consensus has been reached with others. But sometimes other considerations make it desirable to add someone else, usually a relative, to an account.

That is a perfectly reasonable step to take, but it is important to consider the ramifications, especially as it may affect federal deposit insurance for accounts insured by the Federal Deposit Insurance Corporation (FDIC). Of course, another overriding consideration having more to do with human nature than federal regulations is whether there is a trusting relationship between or among everyone whose name is on an account.

Joint Bank Accounts

Under FDIC rules, a joint account is a deposit account owned by two or more people who have equal rights to withdraw all of the deposits and to close an account. Married couples, assuming they want to share the funds in the account, like the convenience of such a joint account so that either person can write checks on the account and pay bills from it. At an FDIC‑insured institution, each co‑owner is insured for up to $250,000 for his or her share in all joint accounts in that institution. But if all persons on the account do not have equal withdrawal rights, the account will not necessarily be FDIC insured up to the same amount as for a true joint account under FDIC rules.

If the goal is to give someone limited access to a bank account when needed but not to grant ownership rights to the account, an alternative is to grant that person a power of attorney. Powers of attorney, which typically authorize someone to represent or act on another’s behalf in financial matters, can be crafted to permit the desired amount of access to bank accounts.

Safe‑Deposit Boxes

The various states and banking institutions have their own rules and procedures for access to safe‑deposit boxes. Since granting a second person access to a safe‑deposit box amounts to giving that person the right to empty the box without the need for anyone else’s approval, this is a step that should be taken only with care and forethought.

Credit Card Accounts

There are two different ways to give a second person the ability to use a credit card. Making that person a co‑owner means that he or she will be financially responsible for all of the debt incurred with the credit card, regardless of which co‑owner authorized a particular charge. In the alternative, an authorized user of the card may or may not be financially responsible for the debt, depending on the cardholder agreement. The card owner can put restrictions on authorized users, such as how much debt the authorized user can incur with the card.

Cosigning Loans

Succinctly put, a cosignor on a loan has agreed that the creditor can look to him or her for satisfaction of the debt if the debtor does not pay the debt. This obligation may well extend to any late fees and collection costs made necessary by the debtor’s delinquency. On top of that, the cosignor’s own credit rating could take a hit if the debtor doesn’t pay the debt or pays it late. All in all, the watchwords for cosigning on a loan are “proceed with caution.”

NEW HIPAA RULE

grow@rootedbrands.com (Hayes Wynn) — Thu, 12 Sep 2013 14:56:12 GMT

12 SEP NEW HIPAA RULE

The U.S. Department of Health and Human Services has adopted a new rule concerning privacy and security for health information, to take into account changes that have occurred in health care since enactment of the Health Insurance Portability and Accountability Act (HIPAA) of 1996. Some of the key features in the 563‑page final rule are outlined below.

Privacy notices given by covered entities, such as health‑care providers and health plans, must now include a statement about a patient’s right to restrict the disclosure of his or her health information when paying out of pocket for the service.

“Downstream” business associates of covered entities are also covered by the new HIPAA rule. Thus, such subcontractors as billing and phone services, document and data storage companies, and other such entities whose functions involve the disclosure of protected health information are subject to liability for violations and the potential for agency enforcement action and penalties. This aspect of the new rule was meant to prevent covered entities from effectively skirting their HIPAA obligations by farming tasks out to subcontractors.

Before the new rule, a breach had to be reported to a patient if it posed a significant risk of financial, reputational, or other harm to the individual. Now, if health information is compromised, a data breach is presumed, with the attendant notification requirements, unless there is a low probability that the protected information was in fact compromised.

Factors to consider as to whether a breach must be reported are the nature and extent of the information, the person to whom the data was disclosed, whether that person actually viewed it, and whether the risk was mitigated in some manner.

While patients already had a right to a copy of their health records, the new rule changed the default form of production from a hard copy to an electronic copy when the information is maintained electronically. Entities may charge a reasonable fee for providing the information, and now the information must be provided within 30 days of the request.

The new final rule took effect on March 26, 2013, and compliance with all applicable requirements must occur by September 23, 2013.

TAXES ON GAMBLING WINNINGS

grow@rootedbrands.com (Hayes Wynn) — Thu, 05 Sep 2013 14:56:57 GMT

05 SEP TAXES ON GAMBLING WINNINGS

Hitting the jackpot while gambling may feel a lot more like manna from heaven than remuneration for a good day’s work, but as far as the government is concerned, those winnings might as well be wages as the results of wagering.

In short, the proceeds are ordinary income on which the winner owes income tax. By “gambling,” the federal income tax code means coming out ahead in a wide range of betting settings, such as casinos, racetracks, and lotteries. Not only that, but income tax will be imposed where someone wins a prize instead of cash, in which case the provider of the prize will put a fair market value on the item won and report that to the IRS.

As a method of ensuring compliance, gaming establishments are required to report to the IRS, on Form W‑2G, certain winnings, such as $1,200 or more from a slot machine or $5,000 or more won in a poker tournament. Also, in many instances, 25% of winnings over $5,000 will be withheld and sent to the IRS, not unlike the treatment of wages from employment.

Gamblers who are not in the trade or business of gambling need to report any of their winnings as “other income” on their Form 1040s. In some cases, especially where people have won large sums of money in lotteries, they may decide to sell the rights to future payouts from the lottery so as to reap most of the benefits from their good fortune immediately rather than having to wait a period of years for annual payouts. Depending on the individual, this may be a prudent choice to make, but it probably should not be driven by income tax ramifications. The money received from such a sale of the right to future payments is taxed as ordinary income, notwithstanding arguments made by some in that position that such a sale should receive capital gain treatment under the tax laws.

But what of the gambler who doesn’t strike it rich but, rather, in the end has mainly squandered his money in pursuit of quick wealth, typically winning some and losing some along the way? There is no tax benefit, strictly speaking, to gambling and losing. However, if the gambler keeps good records of his losses for a given tax year, he may be able to offset taxable winnings with his losses, thereby reducing his income tax bill.

To take this approach, the taxpayer must itemize deductions on Schedule A of Form 1040. The gambling losses can be claimed up to the amount of reported gambling winnings. The appeal of this strategy is slightly diminished by the fact that gambling winnings will increase adjusted gross income (AGI) and that a higher AGI may make it more difficult to claim other tax deductions and credits.

So, if you are a regular rail bird at the local track, you just have that gut feeling that using a lucky set of numbers will do the trick in the state lottery, or high‑stakes bingo is your thing, enjoy yourself, but understand from the outset that if you strike it rich, Uncle Sam will want his piece of that action. You can bet on it.

TAKE THE TIME TO UPDATE YOUR WILL

grow@rootedbrands.com (Hayes Wynn) — Wed, 14 Aug 2013 14:57:44 GMT

14 AUG TAKE THE TIME TO UPDATE YOUR WILL

By some accounts, 70% of adult Americans do not have a will. If you have at least gone to the trouble of making a will, consider yourself ahead of the curve and pat yourself on the back. Then come back to earth and understand that your work is not completely done. A will is not a static instrument. To serve its purposes, it must keep current with life changes, including an individual’s financial circumstances, and with some external factors, such as tax laws. With the help of a professional, you should periodically review your will, staying alert to new or different circumstances that might call for updates.

MARRIAGE, DIVORCE, AND REMARRIAGE

Obviously, a marriage usually brings a new beneficiary into the picture, and a divorce may remove one. Some of the changes in a will prompted by a change in marital status may not be so apparent. For example, when a widow or widower remarries, the will may need to be updated to show how children from the previous marriage and the new spouse are to be provided for.

ADDITIONS AND SUBTRACTIONS

A new child is a new beneficiary, but a will can and should cover more than just the distribution of property to heirs. Parents can name a guardian, and even an alternate guardian, to care for their children in the event that something happens to both parents. Absent such a provision in a will, a court will appoint a guardian.

The death of an executor, guardian, beneficiary, or trustee creates a gap in how the will is supposed to operate. Fill in the gaps by making necessary changes, such as naming a new individual or, in the case of a deceased beneficiary, simply removing him or her from the will.

CHANGING FORTUNES

If you enjoy an unexpected windfall, you may still want the larger pie divided up as before. But it is likely that some changes in your will are called for. If the increase in the potential estate is large enough, it might trigger the need for planning to avoid or minimize estate taxes. A reversal of fortune could also suggest some changes. For example, you may have to revise downward that fixed sum you were planning to leave to a favorite charity.

MOVING OUT OF STATE

You will not have to start from scratch if you move to another state, because all of the states recognize a will that was properly created in another state. Nonetheless, legal advice should be sought in the new state because changes in the law from state to state could require some tinkering with the will. There may be more than tinkering involved if you move to or from a community property state.

CHANGES IN TAX LAWS

The government’s intentions can change even if your intentions have not. Some of the changes benefit individuals with wills, but you can take full advantage of them only if you are aware of them. The big item here is changes to the federal estate tax exemption, which is the amount an estate can reach before it is subject to a (hefty) estate tax. In recent years the exemption has headed up, but there are no guarantees about what Congress will do with the exemption going forward.

YOU CHANGE YOUR MIND

If you decide you want to change beneficiaries, a guardian, an executor, or anything else in a will, you can do so. For example, you want to make sure that the beneficiaries in your will are the same as the beneficiaries you have named in your insurance policies and retirement accounts. Otherwise, the beneficiaries actually named in those documents, not the beneficiaries under the will, will get the money from the policies and accounts. Bear in mind that no amount of talking about your new intentions will make them happen. The changes must be indicated in a properly executed will.

You should keep the finished (at least until the next update) product in a safe place. When “they” say “keep this with your important papers,” think of your will. Your family should know where to find the executed will. An unsigned copy of your will in its latest form is a good starting point for the next periodic review.

LETTER OF INSTRUCTION

Even the best‑drafted will is not likely to cover everything needed for a smooth disposition of your estate. To supplement the will, consider executing a letter of instruction. It generally is not legally binding, but it can go a long way to expedite the process and provide information not to be found in the will.

Some items appropriate for a letter of instruction include a list of bank, brokerage, and mutual fund accounts; directions on where to find important documents or personal property; user names, PIN numbers, and passwords necessary for access to electronic records; and contact information for legal and financial advisors. Be sure to list any life insurance policies, as beneficiaries will collect on those policies outside of the will. Any advance plans for the funeral and burial also should be mentioned in the letter of instruction.

FINANCIAL FRAUD AGAINST THE ELDERLY

grow@rootedbrands.com (Hayes Wynn) — Tue, 18 Jun 2013 14:58:46 GMT

18 JUN FINANCIAL FRAUD AGAINST THE ELDERLY

It is a sad and sobering reality that scam artists intent on committing financial fraud or the outright stealing of money, property, or valuable information prey upon vulnerable senior citizens. The threats can take many forms, but the elderly and those watching out for them can have some measure of protection by taking a few basic precautions.

Do your homework when selecting a professional advisor, even if the advisor comes highly recommended by a friend or family member. This means confirming that the person is registered or licensed and has not left a trail of mistreatment of other clients.
Powers of attorney (POA) are helpful, maybe even essential, as age takes its toll on an individual’s capacity to handle financial matters. But the potential for misuse of a POA is great, since the appointed person generally has free rein to do whatever the elderly person could do on his or her own. The selected person must be trustworthy, and it is a good idea to have an attorney review the POA document.
The array of account numbers, Social Security numbers, pins, passwords, and other such sensitive information that most of us accumulate over time can serve as a thief’s key for raiding your savings and investments. Guard this information carefully.
It may be an after‑the‑fact measure, but check your credit card and bank account statements carefully for any unauthorized or suspicious transactions. If you see one, contact the financial institution right away.
Reverse mortgages allow homeowners who are at least 62 years old to borrow money from the equity in their homes. This device has its place under the right set of circumstances, but a reverse mortgage can also become a device for scam artists. Be wary of deceptive, too‑good‑to‑be‑true offers and high‑pressure tactics.

FACEBOOK POSTING LEADS TO AN “F”

grow@rootedbrands.com (Hayes Wynn) — Tue, 23 Apr 2013 14:59:33 GMT

23 APR FACEBOOK POSTING LEADS TO AN "F"

We all know that the right of free speech has its limits. There is no right to shout “Fire!” in a crowded theater. Those limits apply even in settings most closely associated with the free exchange of ideas, such as colleges and universities. In that academic setting, limits also exist even for speech that takes place off campus, such as on a social networking website, but that is connected to a student’s academic program.

A student in a state university’s mortuary science program learned these constitutional law lessons the hard way when the university gave her a failing grade in an anatomy class and imposed other sanctions against her for comments she had posted, to hundreds of her “friends,” on her Facebook account.

The hard lesson for the student continued when a state high court rejected her lawsuit asserting that the disciplinary measures were invalid because they were an infringement of her right to free speech. Of course, words matter, so what the student had actually said was pivotal to the outcome of her case.

While she was taking an anatomy lab, the student posted what she thought were humorous comments about a cadaver she had been assigned to dissect. That was bad enough, but the student also posted a comment about wishing to “stab a certain someone in the throat” with an embalming instrument.

Not surprisingly, university officials were not amused when they learned of the postings, though the student portrayed her remarks as “satirical.” But the university’s defense of the subsequent disciplinary actions rested on more than just the sensibilities of the university officials—though, to be sure, the whole story caused much embarrassment and a public relations problem for the school.

The student’s postings, in which she gave the cadaver a name derived from a comedy film about a corpse and wrote about “playing” with the cadaver, taking her “aggression” out on it, and keeping a “[l]ock of hair” in her pocket, resulted in letters and calls to the university’s anatomy bequest program from donor families and the public.

Most importantly from a legal standpoint, the student’s conduct violated clear program rules prohibiting both disrespectful conversational language outside the laboratory about cadaver dissection and Internet blogging about cadaver dissection or the anatomy lab. In order to be in the mortuary science program, the student was aware of, and had to agree to abide by, such rules. There is no free speech infringement when the conduct in question, as in this case, violates academic program rules that are narrowly tailored and directly related to established professional conduct standards.

Even as it rejected the student’s First Amendment contentions, the court acknowledged some settled principles of law that could allow free speech claims by students to succeed when based on more defensible factual scenarios. A university’s interest in academic freedom does not immunize the university altogether from First Amendment challenges.

For example, a university generally cannot use a code of ethics as a pretext for punishing a student’s protected speech; nor can it impose a course requirement that forces a student to agree to otherwise invalid restrictions on her free speech rights. But a university can discipline students for violation of professional conduct standards that are in keeping with the academic environment of the student’s particular program of study.

ARBITRATION AGREEMENTS CAN GO TOO FAR

grow@rootedbrands.com (Hayes Wynn) — Tue, 16 Apr 2013 15:00:30 GMT

16 APR ARBITRATION AGREEMENTS CAN GO TOO FAR

Strong public policies support the appropriate use of arbitration over litigation in settling legal disputes and, in fact, such policies underlie the Federal Arbitration Act. That said, an agreement to arbitrate disputes is subject to well‑established principles rooted in the law of contracts. This means, among other things, that courts will step in and declare void an ostensible agreement to arbitrate if its effects are too heavily weighted in one party’s favor. Two recent examples of this overreaching by the more powerful party illustrate the point.

In the first case, a former employee sued his former employer under the Fair Labor Standards Act for overtime wages. A federal appellate court prevented the employer from enforcing an arbitration agreement that was in the company’s employee handbook. The fatal flaw in the arbitration provision was that rather than being a legitimate contract, the bargain was “illusory,” a legal term meaning that one party, the employer, could effectively avoid its promise to arbitrate by amending the provision or even terminating it altogether.

Although the employer was required to provide an official written notice of any changes to the handbook, a change‑in‑terms clause gave the employer the “right to revise, delete, and add to the employee handbook” with retroactive effect. There was no savings clause excepting pending disputes from any changes made by the employer.

In the second case, the lopsided bargain that led a court to declare an arbitration agreement unenforceable was more a matter of dollars and cents. A couple purchased a home, contingent upon a satisfactory home inspection. They engaged the services of a home inspection company, which had an arbitration clause in its standard contract. The couple signed the contract, but its most objectionable parts were tucked away in the contract, either in fine print, or hidden among other clauses, or both.

The contract’s provisions relating to arbitration were so one‑sided in favor of the home inspection company that it effectively “exculpated” the company from liability in a way that violated public policy. In particular, the contract limited the clients’ recovery from the inspector for a negligent inspection to the $285 contract fee; it also required binding arbitration of any dispute, even requiring the party seeking arbitration to pay, among other costs, an initial arbitration fee of $1,350, plus $450 per day after the first day of a hearing.

In short, clients could well end up paying out in fees and costs many times the maximum amount they could recover from the company. Also influencing the court’s decision were the facts that home inspection services are generally thought suitable for public regulation and that the services provided by home inspectors are a matter of practical necessity for their clients and are crucial to the clients’ decision to purchase a home.

To top it off, the court noted that the wife, who had been primarily responsible for the house purchase, had only a high school diploma and no expertise or experience in home construction and that the couple had never purchased a home and were entirely at the mercy of the inspector, without any means of protection if the inspector performed a careless inspection.

LLC MEMBER PERSONALLY LIABLE

grow@rootedbrands.com (Hayes Wynn) — Thu, 25 Oct 2012 15:01:14 GMT

25 OCT LLC MEMBER PERSONALLY LIABLE

The owner of a lot on which a four-unit condo complex was to be built contracted with a small residential construction company to build the condos. The construction company was formed as a limited liability company (LLC), the only members of which were a licensed home builder and his wife. The licensed builder served as general contractor on the project, overseeing subcontractors that the LLC had selected.

A couple of months into construction, some structural problems surfaced. At first the builder’s assurances that the problems would be fixed calmed the tensions with the owner, but over time, old defects weren’t fixed and new ones arose, and the relationship deteriorated. Eventually the builder walked off the project, leaving dozens of defects unremedied. When the owner sued for damages, based on negligence and breach of warranties, he named as defendants not only the LLC but one of its individual members, the licensed builder.

One of the appealing characteristics of a limited liability company, as its very name indicates, is that a member of the LLC generally is not personally liable for the LLC’s liabilities. In fact, the state LLC statute that applied in this case states that a “member or manager is not personally liable for a debt, obligation, or liability of the company solely by reason of being or acting as a member or manager.”

As the individual builder discovered when he was found personally liable for a judgment of nearly $1 million, the LLC shield against personal liability is not impenetrable. The state supreme court ruled that the protection against personal liability applies only to vicarious liability for nontortfeasor members. An individual who has done nothing wrong will not be held liable simply by virtue of being a member or manager of the LLC. Where, as in this case, the individual is guilty of negligence, the protection of the LLC business form is lost.

The court acknowledged that, at least at first blush, its decision appeared to strip away one of the main reasons why a person chooses to form an LLC. But it was satisfied that there are other unaffected benefits to choosing to start a business as an LLC. The controlling rationale is akin to the concept of “piercing the corporate veil,” that is, under some circumstances holding an individual corporate officer liable for wrongful conduct. Or as the court put it: “You don’t buy immunity from suits for your torts by being a member of a business corporation.”