Many people employ the use of joint financial accounts as a matter of convenience, such as an elderly parent placing a child’s name on the parent’s checking account so that checks and deposits can continue if the parent is travelling or incapacitated. There is nothing necessarily wrong with this, but many well-meaning people are uninformed about the consequences of placing a non-spouse on their financial accounts.
Losing Control of the Account.
Requiring that withdrawals from the account require all the signatures of all the joint owners is entirely inconvenient, but allowing withdrawals upon the signature of any single owner of the account subjects the account to being emptied on the action of any one individual. This can leave a parent’s funds at risk of being depleted without any authorization from the parent.
Many business owners form several types of business entities to hold their assets and operate different aspects of their businesses. A common strategy is to form limited liability companies to hold real estate. The operating entity, such as a manufacturing entity, pays monthly rent to the real estate LLC and this can work to keep liability of the operating entity separate from the real estate LLC. Some LLCs are formed to hold other assets, such as personal property that is leased to the operating entity. Also, LLCs are commonly used to manage family-owned assets and facilitate transfers among family members. LLCs are not required to have the formalities of meetings, minutes, and notices which are required for corporations. However, for an LLC to maintain its liability protections and protect itself from IRS attacks, it is prudent to exercise some formalities to evidence that the LLC is maintained as a separate entity and is not the alter ego of its owner(s). We advise many of our Cottage Law clients and business owners and families who use LLCs to hold and manage assets that they should treat the LLC as a business by following the pointers below.
With all the publicity of the new protections afforded consumers with the passing of the Credit CARD Act of 2009, business owners can be surprised to learn that the business credit card in their wallet is not covered by the CARD Act. Business credit cards do not fall under the protections of the Truth in Lending Act and the Credit CARD Act of 2009. This means that card issuers can raise rates at will (even on existing balances), bill on any date each month, and squeeze the time frame between the receipt and payment date–all practices that have been banned on consumer cards.
Business cards, however, can offer benefits that are attractive to business owners, such as more flexible payment options, business reward programs, and the ability to detail and break out spending records for accounting purposes. To be fair, some business card issuers voluntarily incorporate many consumer protections into their fine print policies.
The general rule is that any debt of a deceased person, including credit cards and medical bills, are solely the responsibility of the decedent or the decedent’s estate. The general rule assumes that no other person was the signer or joint obligator on any particular account or debt of the deceased person. If an account is the deceased person’s alone, the debt is the deceased person’s alone.
Creditors use employer garnishment errors to collect entire debt from employers
Employee wage garnishments appear to be informal and somewhat routine proceedings from the perspective of the employer. Employers are routinely sent writs of garnishment on printed forms, and employers can simply respond to writs of garnishment without using an attorney. Employers, however, face a huge risk relative to its employees’ garnishment proceedings because in the State of Michigan, employers can be held liable for the entire debt of the employee that is subject of the garnishment, including court costs and attorney’s fees, if the employer fails to comply with certain requirements. Some creditors are paying attention to the small details that the employer may overlook, because the creditor wants to be repaid and rather than wait around to be paid from the debtor, creditors are using employer garnishment errors to collect the entire debt from the employer. Employers are commonly not represented by counsel in this process and creditors are represented by counsel, providing the creditor a significant advantage.
Failure by employers to respond within 14 days could cause courts to take action against the employer
If an employer is named as the garnishee in a writ of garnishment, the employer must provide information as to the debtor-employee’s money that the employer controls on the Garnishee Disclosure Form, including a calculation of the amount that is available for garnishment from the employee’s paycheck. The properly completed form must be mailed to the court and the parties within 14 days after the employer receives the writ of garnishment. If the employer fails to disclose within the 14 days, the court can take action against the employer and can order the employer to pay the full amount owed on the judgment as stated in the writ of garnishment. A friendly letter to the creditor stating that the employee is no longer in the employer’s records or other information is unavailable is insufficient. The creditor can go to court and obtain a default judgment for the entire amount of the debt because the employer did not properly respond to the writ.
Going, Going, Gone!
U.S. taxpayers are experiencing a “perfect storm” of opportunity to make tax-free transfers (gifts) of assets such as family businesses, real estate and other wealth from one generation to the next. The gift tax was first enacted in 1932 by the federal government. Over the coming months, we all have what may be the best opportunity since 1932 to gift family assets without a gift tax now and to avoid significant estate taxes later.
Two notable exceptions to the gift tax
Some people are not aware that giving away assets to their children or other individuals may create a taxable event. The “gift tax” referenced above applies to anything of value transferred by one individual to another. There are two notable exceptions to the gift tax. One is an “annual exclusion” which is an exception that allows individuals to gift up to $13,000.00 per year per person without any gift tax consequences. A second exception is an overall gift tax exemption which historically has been limited to $1M during an individual’s lifetime.
Judge Rules on Employee and Facebook Post
We have previously provided information regarding social media and how employee postings on various websites may or may not affect the employment status of employees. The Acting General Counsel for the National Labor Relations Board (“NLRB”) recently released a report on August 18, 2011, summarizing the results of 14 employment related cases that center on employees’ use of social media relative to their employment and their employer’s social media policies for employees. The report provides insight into what the NRLB regards as protected speech and also the enforceability of certain social media policies that employers implement. Remember that the NLRB and the National Labor Relations Act apply to most employers, union and non-union alike.
Protected, Concerted Activity
Have you ever stood at an automobile rental counter while traveling staring at a rental contract trying to figure out what the insurance options mean? “Should I buy additional coverage through the rental car company or am I paying for coverage I already have based on my insurance coverage for my own vehicle?”
Consider the following information the next time you rent a car while traveling or need a replacement while your vehicle is being repaired.
Fireworks Aren’t Just for Kids!
Our “thank you” to our community
I know you’ve had a busy summer filled with plenty of activities, however, I hope you and your family will add one more special and local event to your calendar. I would like to invite you to be our guest to attend the annual Fireworks Display at the Suttons Bay Marina Park on Saturday, September 3rd of Labor Day Weekend. This is a very special evening for business owners who come together to sponsor an event for “locals” to say “thank you” to our community for a great summer. We are proud to be one of four senior sponsors, along with Hansen Foods, Bahle’s of Suttons Bay and Bonek Insurance Agency.
So fill your picnic basket with summer snacks and grab your blankets and lawn chairs and join us at dusk, along with your friends and neighbors, to enjoy an evening of “Oohs and Aaahs” as fireworks light up the night sky over Suttons Bay. You too will discover that fireworks aren’t just for kids!
Many of us know someone or will possibly be responsible for someone that is affected by mental illness. Yet, many patients have not executed patient advocate designations for psychiatric care. Psychiatric illness may come on quite suddenly and can be traced to metabolic imbalances, drug interactions, and other situations that, initially, may not appear to pose a threat to someone’s mental health. There are numerous stories of patients being erroneously diagnosed and treated for an extended time for a condition that did not exist. This can result in severe depression and anxiety disorders. When treatments fail, the patient can sometimes be persuaded to undergo therapies that may provide relief but have severe side affects. For example, I recently read about a woman who agreed to undertake electric shock therapy after her course of treatment failed to successfully combat a supposed infection. Electric shock therapy is known for wiping out years of memories which can force the patient into losing their career and being unemployable. If the patient is depressed, maybe to the point of suicidal tendencies, can they be competent to consent to treatment and therapy? On the other hand, individuals with severe psychiatric illnesses such as bipolar disorder, post-traumatic stress disorder, and schizophrenia can have time periods where they are stable, lucid, and handle a high-level career.
Everyone should have input, at some point, into the treatment of their medical and psychiatric issues in the event of an emergency. Individuals can make these decisions while they are still competent, and generally, these decisions are addressed in a Patient Advocate document (a power of attorney designation for health care and mental health). We encourage our clients to appoint a trusted surrogate (a “patient advocate”) with a power of attorney to authorize psychiatric care on behalf of the client in the event of mental illness. An individual may prefer to combine the appointment of a patient advocate with an expressed declaration of his or her preferences when the patient advocate encounters certain situations and choices that affect the patient.
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