Know Your Business

Suttons Bay – August 2008

We are pleased to have recently launched a new firm website containing updated information on both firm locations in Suttons Bay and Farmington Hills. The website address is www.wrightpenning.com.

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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.
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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.

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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.
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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.

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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.
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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.

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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.
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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.

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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.
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Know Your Business

Suttons Bay – June 2008

There are a few supercharged tax breaks for autos purchased or leased for business use in 2008. If your business buys a new, heavy SUV this year (“heavy” means a loaded weight over 6,000 pounds) for $50,000, it can expense $25,000. The remaining cost is subject one-half to bonus depreciation and one-half to regular depreciation. The result is a total first year write-off of 80% of the purchase price!

If your business leases a car this year worth more than $18,500, IRS tables will allow you to report about 25% less income than in 2007.

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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.
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Know Your Business

Suttons Bay – June 2008

Employers who have 50 or more employees during 20 or more weeks of the current or prior year must extend leave to eligible employees under the Family and Medical Leave Act (FMLA). On January 28, 2008, Congress amended the FMLA to increase protections for members of the United States Armed Forces and their families.

Broadly speaking, employers must make leave available to eligible service personnel or their families in two situations:

• Injured Service Member Leave – the next of kin of a service member injured in active duty is eligible for up to 26 weeks of unpaid leave to care for that injured service member.

• Active Duty Leave – service members called to active duty may themselves be eligible for up to 12 weeks of unpaid leave in order to deal with exigent circumstances arising out of the call to active duty.

The right to Injured Service Member Leave took effect on January 28, 2008. Active Duty Leave is not in effect until the Department of Labor finalizes the regulations covering such leave. Employers should note that, in addition to their obligations to comply with the law as amended, they also are required to post updated notice posters reflecting these changes in the law.

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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.
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Know Your Business

Suttons Bay – June 2008

I-9 FORMS HAVE CHANGED, HAVE YOU?
Every employee working in the United States and hired by the employer after November 6, 1986, must complete a Form I-9. This is true of citizens and non-citizens alike. The Department of Homeland Security recently amended Form I-9, and any employee hired after January 1, 2008, must complete the updated form. Failure to properly complete and maintain Form I-9 can result in significant fines and penalties for the employer. A copy of the updated form can be found online at www.uscis.gov/files/form/i-9.pdf. Check to make sure that you are using the proper form for all of your new hires.

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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.
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Know Your Business

Suttons Bay – April 2008

Even though your intent with respect to domicile is important, your actions are equally as important. To demonstrate that you intend a particular place to be your domicile, you should consider the following:

• Use the address for correspondence, particularly with respect to the IRS or estate tax authorities with whom you may have to argue your position;
• Register to vote there;
• Register and insure your vehicles there;
• Have your driver’s license and, if relevant, other licenses issued there; and
• License or register your pets there.

If you change your domicile, be sure to update your estate plan to reflect your new state as your state of domicile and, as appropriate, as the controlling law.

Determine where you want your domicile to be and take as many steps as necessary to strengthen your argument. After all, just because you have a home in a state, it doesn’t necessarily mean that that state is your “home state.”

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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.
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Know Your Business

Suttons Bay – April 2008

With the onset of global natural disasters, and a tight economy which has strained private charities, there is an increasing demand for charitable giving. There are several ways to provide benefits to charities. Depending on the alternative you choose, helping your favorite charity may help you maximize your tax savings.

Options for charitable giving as part of your estate plan include:

• Cash. The simplest way to contribute both from your perspective and that of the recipient charity is a cash gift. Cash gifts (bequests), like any other contributions you make at the time of your death, are fully deductible for estate tax purposes.

• Marketable Securities. Most charitable organizations are well organized to receive stock and mutual funds that are traded on established markets. In providing a gift of securities, you could also benefit by avoiding any potential capital gain that you would realize if you sold the shares to generate the cash needed to make the contribution. If you wish to get a charitable deduction for the entire value transferred, you must donate securities you have held for more than one year.

• Other Assets. As long as an item can be readily valued, it will generally qualify for a charitable deduction in the same fashion as marketable securities. You should bear in mind that the IRS recently refined the rules for contributing vehicles. So, before contributing a vehicle to an organization, make sure it meets the eligibility requirements.

• Beneficiary Designation. You can make a contribution at death by naming a charitable organization as the beneficiary of your 401(k) or IRA. There is no immediate income tax benefit for designating the charity as a beneficiary; the deduction for the contribution is allowed at death. The contribution, therefore, reduces your taxable estate if the value of your estate is otherwise subject to the estate tax.

• If not given to charity, a retirement fund will increase the taxable value of your estate; it will also be treated as taxable income to a non-charitable beneficiary. Because of this double taxation, many view retirement funds as the perfect asset for charitable giving.

• Private Foundation. A private foundation is a charitable entity that you create to further your charitable intent. The charitable gift must be significant for this option to be cost effective.

• Donor Advised Funds. The establishment of a private foundation is very expensive and also requires a significant initial gift. The “light” version of a private foundation is a donor advised fund, which is created by making a donation to a public charity that segregates your funds and gives you discretion in making contributions to other charities.

• Charitable Trust. There are two basic types of charitable trusts: a charitable remainder trust (CRT) and a charitable lead trust (CLT). With a CRT, you as the grantor reserve the right to receive payments either for your life (yours and others) or for a specified period, limited to no more than 20 years. At your (or the last beneficiary’s) death, or when the term ends, any assets that remain in the trust revert to the charity. Thus, there is an element of risk by creating a trust based on your life. (Note that you may reduce that risk by opting for a CRT for a term instead of your lifetime.) A CLT, on the other hand, flips the timing of the charitable and non-charitable beneficiaries, so the charity receives the right to payment of income during your lifetime and the remainder goes to you or your specified beneficiary or beneficiaries at the end of the term.

• Charitable Gift Annuity. A charitable gift annuity is a strategy which combines the outright gift with an annuity feature, and is similar to a CRT. You make a gift to the charity and, in turn, the charitable organization guaranties a certain return from the asset for a specified period.

SUMMARY: The charitable giving option that fits your needs depends on your goals and financial circumstances. Thankfully, there are many options to consider that will assist you in your estate and income tax planning, while also providing much needed assistance to worthy charitable organizations.

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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.
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