Suttons Bay Law

“In response to this increased risk, we have developed a comprehensive MIOSHA manual that addresses the areas most cited by MIOSHA inspectors.”

With the current economic climate, many businesses are having to re-evaluate their workforce and reduce the number of employees based on economic constraints. This can result in terminated employees filing complaints with various agencies regarding alleged labor violations, including MIOSHA violations. Inspections by governmental agents under MIOSHA can be very costly both in time and money to a business. In response to this increased risk, we have developed a comprehensive MIOSHA manual that addresses the areas most cited by MIOSHA inspectors. It should be noted that MIOSHA inspections do not only occur in manufacturing businesses but can occur in all types of businesses.

Many businesses do not have a full understanding of their rights when a MIOSHA inspector walks in the door unexpectedly to conduct an inspection. For example, employers are entitled to a pre-inspection conference, they may appoint a representative to walk with the inspector during the inspection, and many more rights are available to protect an employer. At the very least, each business should have a plan in place before an inspection occurs. A designated employer representative should prepare a MIOSHA inspection plan, with names and telephone numbers of top management and counsel to contact immediately. Also, a prepared and updated list of trade secrets to be protected should be readily available due to the fact that citation information is available via the Freedom of Information Act, and to protect trade secrets, an employer must, at the beginning of the inspection, identify the trade secrets that should be protected. Other management personnel should be trained not to consent to an inspection without proper procedures being followed. The more people involved in an inspection usually results in more inconsistent statements to the inspector and thus more scrutiny.

If you are interested in discussing this matter further, please contact me and I would be happy to provide you with more information regarding how you may want to proceed to protect your company with respect to possible MIOSHA inspections and other labor related types of claims.

Dan A. Penning

Tags: Employment Law, Know Your Business by Dan Penning
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DIVORCE / SECOND MARRIAGES / FAILURE TO PLAN

LET THE DEATH WARS BEGIN!

If you have been divorced and are now remarried, you should take great caution in planning your estate and assets in the event of your disability or death. If you also have a child or children from a previous marriage or with someone you never married, these are all special situations that should be examined to avoid future problems. No estate plan is just that – no plan. These situations are ripe for conflict and lawsuits when someone plans poorly or not at all. We call these cases “death wars”. These cases literally drain tens of thousands of dollars out of an individual’s estate with respect to attorneys’ fees and court costs where, with a little expenditure of time and a fraction of the money, the whole war could have been avoided.
The best approach when getting married for a second time, or any time, is to see an attorney well in advance of the wedding date to discuss your situation. This is especially true when one or both of you have children from a previous marriage or relationship.

The following are the 10 most common causes of “death wars”:

1. Spouses lie about the value of assets or when or how the assets were acquired.

2. Spouses conceal a child from a prior relationship or marriage from their current spouse.

3. Couples fail to create pre-nuptial or post-nuptial agreements.

4. Spouses fail to change estate plans that they may have created before meeting their current spouse.

5. Spouses fail to consider that, by default, a spouse is the beneficiary of the other spouse’s qualified retirement plan such as a 401k or 403b account creating a different disposition of these assets other than as intended by the deceased spouse.

6. Failure to plan where spouses have a significant disparity in the age; and the age of one spouse is the same or close to the ages of the other spouse’s children from a previous marriage or relationship.

7. Failure to double-check beneficiary designations on life insurance policies that were in effect before meeting the individual’s current spouse.

8. Failure by spouses to review and address changes in estate plans when there has been a significant change in the health or wealth of the other spouse which may impact their ability to take care of themselves in the event of the death of the other spouse.

9. Failure to give consideration as to how real estate is titled when purchased with a second spouse.

10. Failure to clearly define the ownership and intended disposition of assets without title such as family heirlooms, jewelry, etc.

If you or anyone you know is planning on getting married for a second time or getting married with unique circumstances with respect to age, children from previous relationships or marriages, or any other unique circumstances, please feel free to refer them to us for estate planning review.

Dan A. Penning

Tags: Estate Planning, Know Your Business by Dan Penning
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According to a 2007 census bureau survey, some 6.2% of children ages 5 – 15, a total of 2.8 million children, have disabilities. Individuals with disabilities are living longer than ever. Many disabled children will outlive their parents who support them. The Wall Street Journal published an article on October 9, 2008 titled “An Estate Plan Built for Special Needs”. The piece emphasized the need to make sure that relatives’ estate plans are coordinated. The article pointed out that often times, grandparents and parents of disabled children do not coordinate their plans which can result in a disqualification of the disabled child for certain medical and other supplemental government benefits. In addition, unless a qualified trustee or guardian and conservator are appointed in a parents’ estate plan for their disabled child, assets can be squandered by unscrupulous individuals in charge of these assets. If you have or know of anyone with a special needs child, please do not hesitate to refer them to us for a consultation and review.

Dan A. Penning

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Tags: Know Your Business, Special Needs Children by Dan Penning
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Now that we know who our 44th president will be, the landscape has become clear as to what our income and estate tax will be like under the new administration.

Under the current estate tax law, in addition to an unlimited marital deduction resulting in no tax on the death of the first spouse, each individual has the ability to transfer up to $2,000,000.00 tax free to individuals other than a spouse with that credit increasing to $3,500,000.00 effective January 1, 2009. The current law eliminates estate tax for the year 2010 with the reinstitution of the estate tax thereafter with various reductions to the unified credit in January 2011 and thereafter.

President-elect Obama has stated he supports a continuation of the estate tax as well as maintaining the higher unified credit of $3,500,000.00. The realities of the current financial crisis, two wars and the level of national debt, inevitably would have resulted in a continuation of the estate tax in some form regardless of the election’s outcome.

Although many of the Bush income tax cuts will remain in place, we will likely see an increase of income tax rates for higher wage earners and an increase in the capital gains tax. One obvious strategy to avoid capital gains tax is to sell highly appreciated assets before the end of this year to take advantage of the current tax rate. However, what if you own illiquid highly appreciated assets such as real estate or even a business that would be difficult to sell by the end of this year?

One significant tax planning tool is a charitable remainder trust (CRT). A CRT provides both income and estate tax relief. An individual can form a CRT and then transfer ownership of an asset (or multiple assets) into the CRT. Once the title to the asset has been transferred to the CRT, the Trustee of the CRT may sell the asset with no capital gain tax on any portion of the appreciation of the asset. A CRT can last for a certain term of years up to a maximum of 20 years or for the lifetime of the person forming the CRT. During the CRT’s term, the Trustee pays a percentage of the CRT’s assets to the individual forming the CRT. When the CRT expires, the remaining assets are then transferred to a charity or multiple charities as designated by the person forming the CRT. In addition, the person establishing the CRT receives a current charitable income tax deduction that can be carried forward for up to 5 years. Finally, the value of the CRTs assets are not includable in a deceased individual’s estate for estate tax purposes. Therefore, there is no estate tax on the assets in the CRT.

While the thought of having proceeds being distributed from the CRT to a charity as opposed to ones relatives may be disconcerting, consider the following example:

Mr. Smith has real estate he intends to sell. He could transfer title of the real estate to the CRT without uncapping the property for real estate tax purposes pending sale. The property sells for $1,000,000.00 and the CRT’s term is 20 years. The income to be paid would be 6% of the resulting sale proceeds which would be produced by the Trustee of the CRT investing the proceeds in securities. This income would be paid to Mr. Smith and any other designated beneficiary by him in the CRT if he died before the end of the 20 year term.

Given these facts, the total amount paid from the CRT to Mr. Smith or his designated beneficiaries over the 20 years would be approximately $1,400,000,000.00 (a return of the original value of the asset plus excess return) and the remainder interest which would be distributed to charities would be valued at approximately $632,000.00.

The income tax benefits of no capital gains tax, a current charitable deduction, plus excluding the remaining property from estate taxes is a very favorable result. In the example above, Mr. Smith to the extent he didn’t need the income could also implement a gifting program to his children or others to further reduce the assets subject to the estate tax.

Please contact us at 231-271-4500 if you are interested in discussing the possibility of implementing a Charitable Remainder Trust as part of your overall estate plan.

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The information contained in this publication is meant for informational purposes only and is not intended as legal advice. Laws and their application vary based upon a client’s unique facts and circumstances. Wright Penning & Beamer disclaims any responsibility for action taken in reliance on this publication without further consultation and analysis. For questions, please contact us at (231) 271-4500 or at dpenning@wrightpenning.com.

Tags: Asset Protection, Estate Planning, Know Your Business by Dan Penning
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We are pleased to announce that attorney, Dan A. Penning, has become a member of the American Agricultural Law Association (AALA) which is the only national professional organization focusing on the legal needs of the agricultural community. AALA is an independent forum for development of innovative and workable solutions to complex agricultural law problems.

Tags: Know Your Business by Dan Penning
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Know Your Business

Suttons Bay – August 2008

If you were a previous client of Stuart Hollander who transferred your file to our firm, you received a letter indicating that I would be happy to meet you, even if you do not have a current need for services. I have met with several clients and enjoyed the opportunity to get to know them and learn more about how Stuart may have helped them. If you have not taken the opportunity to meet me, please do not hesitate to contact me to schedule a time to meet. Please feel free to call the office in Suttons Bay at 271-4500. It would be my pleasure.

Thank you, Dan A. Penning

Tags: Know Your Business, Suttons Bay Depot by Dan Penning
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Know Your Business

Suttons Bay – August 2008

In addition to the typical decisions facing parents in estate planning such as who should be a child’s guardian if both parents are deceased, the parents of special needs children are faced with additional estate planning challenges. One such challenge is how to provide for all their loved ones without jeopardizing the special needs child’s current (or potential) eligibility for government benefits. There are several strategies and planning opportunities available to assist in developing estate plans for parents of special needs children. If you or someone you know has a special needs child, please don’t hesitate to contact us to discuss these planning opportunities.

Tags: Know Your Business, Special Needs Children by Dan Penning
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Know Your Business

Suttons Bay – August 2008

Generally, taxpayers may exclude up to $250,000 of gain on a principal residence every two years. Husbands and wives who file a joint return for the year of sale may exclude up to $500,000 of gain on the sale of a principal residence if one of the spouses owned the residence for at least two years and both spouses resided in the premises as their personal residence for at least two years.

Starting in 2008, the law was modified in situations involving a surviving spouse of a decedent. Under previous law, the surviving spouse could only exclude up to $500,000 if he/she sold the residence before the end of the year in which the spouse died. As of January 1, 2008, the sale of a residence that had been either jointly owned, or owned by one of the spouses, and occupied by the surviving and deceased spouse, is entitled to the $500,000 gain exclusion, provided the sale occurs no later than two years after the date of death of a spouse.

In the case of a jointly-owned residence, the surviving spouse continues to be allowed a step-up in basis in the residence for the deceased spouse’s one-half share. The $500,000 exclusion is a benefit for surviving spouses that is in addition to the step-up in basis for the decedent’s half of the property. As a result, a significant amount, if not all, of the sale price could be free of any income tax.

In 2007, Congress enacted the Mortgage Forgiveness Debt Relief Act. This Act excludes from gross income amounts attributable to a discharge of indebtedness after 2006 and before 2010 incurred to acquire a principal residence. This Act does not apply to vacation homes or other kinds of secondary residences. It basically means that if a taxpayer’s residence is foreclosed on and the bank sold the property at auction and realizes only a portion of the debt owed, any excess amount owed by the taxpayer that is forgiven by the bank is not includable in the taxpayer’s income for tax purposes.

There are several other details and rules governing various issues in this area of the law. If you have a question or are attempting to develop a strategy for the sale of your principal residence, and even vacant land adjacent to a residence, please contact us at 271-4500.

Tags: Know Your Business by Dan Penning
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Know Your Business

Suttons Bay – June 2008

Fortunately, there is a traditional alternative to wills and probate. It is called a revocable living trust. It avoids all probate and makes sure your plan won’t be altered by the court or relatives at your death or disability.

Probate is the legal process through which the court makes sure that, when you die, your debts are paid and your property is distributed according to your will. If you don’t have a will, the state has laws that govern how your assets are distributed among your relatives. The probate court can also take control if you become physically or mentally incapacitated.

What’s so bad about probate? Well, probate can be an expensive, time consuming process in which your family has no privacy in that all probate proceedings are public and they also may have very little control.

The solution to avoid probate is to have a living trust. A living trust is a legal document that looks a lot like a will. In fact, it does what most people think a will does–and much more. It says who will inherit from you, but it also spells out how and when your heirs will receive their inheritances. In addition, because there is no probate with a living trust, all expensive court proceedings and delays are eliminated, your privacy is preserved and emotional stress on your family is minimized. A living trust can also reduce/eliminate estate taxes on larger estates, is hard to contest, and even can provide very effective pre-nuptial protection in a multiple marriage situation.

Everyone should consider having a living trust. The chart on the back of this page provides a good comparison for an individual having no will, a will or a living trust.

Advantages of a Living Trust
• Avoids all probate and related costs
• Can reduce or eliminate estate taxes
• Allows quick distribution of assets to beneficiaries
• Preserves privacy – completely confidential
• Allows for professional asset management with selection of corporate trustee
• Very hard to contest
• Lets you keep control, even upon physical or mental incapacity, and after your death
• Prevents a conservatorship if you become incapacitated
• Minimizes emotional stress on your family
• Prevents unintentional disinheriting
• Avoids problems of joint ownership
• Relatively inexpensive, easy to set up and easy to maintain
• Can be changed or cancelled at any time
• Protects minor children from court-imposed conservatorships
• Can protect dependents with special needs

With No Will

At Physical/Mental Incapacity Probate: Court appoints conservator, must keep detailed records and report to court. Court controls your finances and assets, approves all expenses.
Court Costs You pay all court costs, legal fees
At Death Probate: Court orders your debts paid and possessions distributed according to state law, which may not be what you would have wanted.
Court Costs Your estate pays all court costs and legal fees.
Time Often 1-2 years or more before heirs can inherit.
Flexibility & Control None. Your property is controlled and distributed by probate court according to state law.
Privacy None. Probate proceedings are public record. Exposes family to unscrupulous solicitors and greedy heirs.

With a Will

At Physical/Mental Incapacity Probate: Same as with no will.
Court Costs Same as with no will
At Death Probate: After verifying your will, court orders your debts paid and possessions distributed according to your will.
Court Costs Same as with no will, or higher if your will is contested.
Time Same as with no will.
Flexibility & Control Limited. You can change your will at any time, but it can easily be contested. Family has no control over probate costs.
Privacy None. Same as with no will.

With a Living Trust

At Physical/Mental Incapacity No probate. Your successor trustee manages your financial affairs according to your instructions for as long as necessary.
Court Costs None
At Death No probate. Debts are paid and possessions distributed to beneficiaries by successor trustee according to your written instructions.
Court Costs None
Time If the trust does not require delaying distributions to beneficiaries, the trust will customarily be administered much faster than a probate estate.
Privacy Total: You can change your trust at any time, even discontinue it. Your property remains under control of your trust, even if you are incapacitated. Hard to contest.

Tags: Know Your Business by Dan Penning
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Know Your Business

Suttons Bay – June 2008

Many businesses use leased employees to fill their workforce. These leased workers are hired and paid by employee leasing companies, often referred to as Professional Employer Organizations or PEOs. Employee leasing offers certain benefits, but businesses that use leased workers cannot ignore certain traditional obligations of an employer. In dealing with most civil rights or similar employment claims, courts will typically treat a business that uses leased employees as a joint or secondary employer subject to liability.

In a recent decision from the Federal Sixth Circuit Court of Appeals, a leased worker took a leave of absence under FMLA. Once she returned from leave, she tried to return to the same position she had filled before taking the leave. The company who had used her services filled her position with another leased worker. She sued both the PEO and the company that had leased her services. The latter argued that it was not an employer since it only leased her services.

The federal appellate court sided with the worker and ruled that the leasing company was at least a “secondary” employer with some measure of control over the employee’s work and working conditions. It relied in part on language in the Department of Labor’s FMLA regulations which state that “joint employment will ordinarily be found to exist when a temporary or leasing agency supplies employees to a secondary employer.”
In a particularly troubling aspect of the opinion, the court also found that the “secondary” employer could be liable for interfering with the worker’s ability to return to work even if the secondary employer did not have the 50 or more employees typically required to invoke coverage under the FMLA. The ramifications of this portion of the decision remain unclear. For the time being, companies with a work force that is smaller than 50 workers but that includes some leased workers should pay close attention to FMLA requests from those leased workers.

This recent court opinion serves as a reminder that businesses using leased workers cannot afford to delegate to PEOs sole responsibility for analyzing and implementing compliance with state and federal labor laws.

Tags: Know Your Business by Dan Penning
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