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Common Types of Will Contests

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The most basic estate planning tool is a will which establishes how an individual’s property will be distributed and names beneficiaries to receive those assets. Unfortunately, there are circumstances when disputes arise among surviving family members that can lead to a will contest. This is a court proceeding in which the validity of the will is challenged.

In order to have standing to bring a will contest, a party must have a legitimate interest in the estate. Although the law in this regard varies from state to state, the proceeding can be brought by heirs, beneficiaries, and others who stand to inherit. While these disputes are often the result of changes to the distribution plan from a prior will, some common types of will contests are as follows.

Lack of testamentary capacity

The testator, that is the person making the will, must have the mental capacity and be of sound mind at the time the will is executed , modified or revoked. Further, being of sound mind means that the testator knows what property he or she owns and understands the effect of executing the will. Although these are considered to be low standards, claims that the deceased lacked the mental capacity when the will was executed are common.

Undue influence

If the deceased was coerced into executing the will, it may be considered invalid. In order to ensure that the testator is not subjected to undue influence, the will should be prepared by an attorney. Moreover, heirs and beneficiaries should not take part in meetings and discussions between the testator and his or her attorney.

Will improperly executed

There are certain formalities that must be followed in order for a will to be considered validly executed. While some states require a notarized signature, others insist on a certain number of witnesses being present when the will is executed. If these formalities are not strictly followed, the will may be found to be improperly executed.

Fraud

A will can also be considered invalid if a person is intentionally deceived when preparing and executing the document.

The Takeaway

If a will is successfully contested, it can be declared invalid by the court. This means that the assets will be distributed either according to the terms of a prior will or if no such will exists, the state’s intestacy rules. Ultimately, engaging the services of an experienced estate planning an attorney can minimize the risk of a will contest.

The Benefits of Incorporating in Safe Haven States

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

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

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

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

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

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

 

What is an Estate Tax?

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While the terms “estate tax” and “inheritance tax” are often used interchangeably, they are not synonymous. Let’s try to clarify the difference.

Estate Tax

Estate tax is based on the net value of the deceased owner’s property.  An estate tax is applied to these assets when they are transferred to the beneficiary. It is important to remember that an estate tax doesn’t have anything to do with the beneficiary or that person’s resources.

Federal estate tax only affects individuals who die with more than $5.45[s1]  million in assets and individuals with such large estates can leave that amount to their beneficiaries without being subjected to a  tax liability. Ninety-nine percent of the population will not owe federal estate tax upon their death.

In most circumstances, no federal estate tax is levied against spouses. As of the Supreme Court’s recent ruling, this includes gay married couples as well as heterosexual couples. Federal estate taxes can, however, be charged if the spouse who is the beneficiary is not a citizen of the U.S. In such cases, though, a personal estate tax exemption can be used.  Even where remaining spouses have no liability for federal estate tax, they may be charged with state taxes in some states, taxes which cannot be avoided unless the couple relocates.

Inheritance Tax

Inheritance tax, as distinguished from estate tax, is imposed by state governments and the tax rate depends on the person receiving the property, and, in some locations, on how much that person receives. Inheritance tax can also vary depending upon the relationship between the testator and the benefactor. In Pennsylvania, for example, a spouse is not taxed at all; a lineal descendant (the child of the deceased) is taxed at 4.5 percent; a sibling is taxed at 12 percent, and anyone else must pay 15 percent.

Exemptions

There are exemptions that can reduce the amount of inheritance tax owed by significant amounts, but it is important that there be proper documentation of such exemptions for them to be applicable. Any part of the inheritance that is donated to charity does not require inheritance tax payment on the part of the beneficiary. Because of the inherent complexities of tax law and the variations from state to state, working with a tax attorney who has expertise with state tax laws s the best way to make sure you take advantage of any possible tax exemptions or avoidance.

 

What Does “Goodwill” Mean When Buying a Business?

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Goodwill is an asset that is an intangible part of a business being purchased. In spite of its intangibility, goodwill may be worth more than concrete assets, such as property, buildings, machinery or inventory. Goodwill is the essence of the company’s value to its customers, clients, and employees and, as such, is invaluable to any buyer. It is easier, as many people intending to purchase a business will tell you, to maintain goodwill than to establish it, since, among other things, goodwill takes time to build. Purchasing a business that already has established goodwill in the community can give the new owner a strong competitive edge.

What Intangible Assets Compose Goodwill? 

Prospective buyers and sellers should be aware of the various aspects of goodwill. Not all will apply to every business, but aspects of goodwill include:

  • Brand name
  • Solid customer base
  • Good customer relations
  • Good employee relations
  • Patents or proprietary technology
  • General reputation
  • Future sales projection

 

Goodwill is a saleable asset, presumed to generate sales revenue and customer continuity. Having been established over years of honest and efficient behavior by the previous owner, it is transferable to the buyer, assuming the buyer maintains the pre-established excellent business practices.

How Is Goodwill Established?

As mentioned, goodwill can only be established over a period of years during which it is nourished and maintained. In business, it is assumed that expenditures have been involved in creating and preserving goodwill. Steps taken to do this include:

  • Healthy and continuous investment in promotion
  • Maintenance of necessary quantity of high quality customer supplies
  • Support of excellent relationships with both customers and suppliers
  • Maintenance of efficient and respectful management and employees relationships
  • Establishment and maintenance of corporate identity and image
  • Keeping up an appropriate location

How Is Goodwill Evaluated?

There is no set price for goodwill, though it very definitely features in sales negotiations. Generally speaking, goodwill is reflected in the amount in excess of the firm’s total value of assets and liabilities. In well-established businesses, goodwill may be reflected in a price several times higher than the firm’s physical assets alone would be reasonably worth.

There are several complex methods by which business goodwill can be calculated so it is essential to have a highly competent business attorney involved in the negotiation process

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Do I need an attorney if I am buying a home?

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Buying a home can be an exciting experience, but the process can be complicated. While some homebuyers may think hiring an attorney will be too expensive, not having proper legal representation can be even more costly. Although real estate agents typically bring buyers and sellers together, a highly skilled attorney can perform critical due diligence, anticipate problems, and be your advocate at the closing table.

It’s often been said that real estate is all about the price and “location, location, location,” but there are a number of factors to consider such as purchase and sales contracts, home inspections, title issues as well as arranging for financing. An experienced real estate attorney who knows the local housing market can help a buyer navigate these issues and protect his or her investment.

Once a buyer selects a home, it is crucial to have an attorney review or prepare a contract of sale. In short, a contract must adhere to all state and local laws, address issues about the use of the property, and specify the rights and obligations of each party. In some states, the buyer and seller have a limited time to review the contract before it becomes legally binding.

In addition to price and location, it is essential for the structure of the dwelling and its heating, cooling and electrical systems to be in good condition. An attorney can coordinate a home inspection to ensure that any defects are repaired prior to the closing or arrange to have the seller reimburse the borrower from the proceeds of the sale.

In some cases, an attorney can also perform a title search to verify that property is being sold free of any liens, judgments or other encumbrances. If outstanding items need to be paid before the deal closes, there can be costly delays, especially for buyers who are simultaneously selling an existing home. Lastly, after the closing, the deed must be filed in the county in which the property is located, which can easily be handled by an attorney.

Ultimately an attorney can protect a homebuyer’s interests, anticipate and resolve problems and help to avoid conflicts. Because buying a home is the largest financial transaction that many individuals will ever undertake, the role of an attorney cannot be underestimated.

Responsibilities and Obligations of the Executor/ Administrator

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When a person dies with a will in place, an executor is named as the responsible individual for winding down the decedent’s affairs. In situations in which a will has not been prepared, the probate court will appoint an administrator. Whether you have been named  as an executor or administrator, the role comes with certain responsibilities including taking charge of the decedent’s assets, notifying beneficiaries and creditors, paying the estate’s debts and distributing the property to the beneficiaries.

In some cases, an executor may also be a beneficiary of the will, however he or she must act fairly and in accordance with the provisions of the will. An executor is specifically responsible for:

  • Finding a copy of the will and filing it with the appropriate state court

  • Informing third parties, such as banks and other account holders, of the person’s death

  • Locating assets and identifying debts

  • Providing the court with an inventory of these assets and debts

  • Maintaining any assets until they are disposed of

  • Disposing of assets either through distribution or sale

  • Satisfying any debts

  • Appearing in court on behalf of the estate

Depending on the size of the estate and the way in which the decedent’s assets were titled, the will may need to be probated. If the estate must go through s probate proceeding, the executor must file with the court to probate the will and be appointed as the estate’s legal representative.

By doing so, the executor can then pay all of the decedent’s outstanding debts and distribute the property to the beneficiaries according to the terms of the will. The executor is also is also responsible for filing all federal and state tax returns for the deceased person as well as estate taxes, if any. Lastly, an executor may be entitled to compensation for the time he or she served the estate. If the court names an administrator, this individual will have similar responsibilities.

In the end, being name an executor or appointed as an administrator ultimately means supporting the overall goal of distributing the estate assets according to wishes of the deceased or state law. In either case, an experienced probate or estate planning attorney can help you carry out these duties.

Why Your Business Needs an Email Policy

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In the contemporary workplace, email is an essential and efficient form of communication. Whether it’s used internally among staff members, or for exchanges with vendors and customers, email is a necessary business tool. At the same time, misuse of this technology can expose an organization to legal and reputational risks as well as security breaches. For this reason, it is crucial to put a formal email policy in place.

First, an email policy should clarify whether you intend to monitor email usage. It is also necessary to establish what is acceptable use of the system, whether personal emails are permissible, and the type of content that is appropriate. In this regard, the policy should prohibit any communication that may be  considered harassment or discrimination such as lewd or racist jokes. In addition, the email policy should expressly state how confidential information should be shared in order to protect the business’ intellectual property.

By having employees read and sign the email policy, a business can protect itself from liability if a message with inappropriate content is transmitted. Further, it personal emails are not permitted, employees are more likely to conduct themselves in a professional manner. Because personal emails tend to be more informal and unprofessional, these messages pose a risk to the company’s image if they are accidentally sent to customers. Lastly, email that is used for non-business reasons is a distraction that can adversely affect productivity.

The Takeaway

In order for a policy to be effective, it is necessary to provide training to all the employees, enforce it consistently and implement a monitoring system to detect misuse of the email system. Ultimately, establishing formal email policy and providing it to all employees will ensure a business remains productive and efficient. If an employee violates the policy, a company will also have the ability to take disciplinary action. Lastly, a well designed policy will ensure the company’s image and brand is protected.

The Rule against Perpetuities

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The law allows a person preparing a will to have almost complete control over his or her assets after the testator passes on, but there are limits to such power. A person can restrict a property from being sold, or make sure that it is used for a specific purpose. A property can be bequeathed to a family member as long on condition that the person maintains the family business in a specific city, or exercises daily, or places flowers on the deceased’s grave every week, or engages in any other behavior the testator desires. This freedom, however, is not without limits. The time limit on this ability is called the rule against perpetuities. The rule is also referred to as the “dead man’s hand” statute.

The rule against perpetuities is complex and rarely utilized. At the time of the passing of the testator, the heirs of the estate are locked in. These heirs are referred to as “lives in being.” For the purposes of this rule, if a child is conceived but not yet born at the time of the testator’s death, it will be considered a life in being. Once the last living heir named in the will passes away, the restrictions on the property will continue in place as the testator desired for 21 years. The idea is that a testator may control his assets for a full generation after his or her death. The rule is notoriously difficult to apply properly. When it does apply, the conditions on the bequest are abandoned and the gift returns to the residual estate.

What makes this rule so confusing is that, when an individual writes a will, he or she may make gifts to potential children or grandchildren. These children and grandchildren, however, may not be born until years later. If a child has been born at the time the decedent passes away, he or she is subject to the restrictions on the bequest during his or her lifetime. If a grandchild is conceived and born after the decedent’s death, however, the child may avoid the restrictions 21 years after the death of the last heir alive at the time of the decedent’s death. There is no way to predict when this might occur. The rule is archaic and easily avoided. A knowledgeable attorney can help a person planning his or her estate set up an equitable trust. Similar to a will, a trust may impose conditions on the use of assets, but is not subject to the rule against perpetuities. There are other advantages to a trust, but one of the most important is avoiding this unpredictable and confusing rule.

Patents

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Inventors have a right to protect their inventions through the United States Patent and Trademark Office (USPTO). With the creation of a device come a bundle of property rights issued by the United States Government.   A patent prevents all “others from making, using, or selling the invention in the United States.”  The patent may survive for varying periods of time, depending on what type of patent is applied for and issued. Typically, protection does not activate until the patent is legally granted.

Not all creations can be patented.  Only a device that is “new, non-obvious and useful” may qualify for a “utility patent.”  Abstract or theoretical concepts or ideas may not be protected by means of a patent.  Likewise, an invention is not patentable if it has been “publically disclosed.”  In order to determine this, patent searches should be conducted prior to filing an application. These searches may be very complex and an attorney’s instruction is advised.

Creations that cannot be approved under patent law may still be protectable through another method, such as trademark or copyright law. An intellectual property (IP) attorney can help advise clients about making the appropriate distinctions. An IP attorney is available not only to educate clients on the various application requirements for all types of intellectual property, but is prepared to provide provisional or non-provisional applications for patents. A non-provisional application establishes the filing date of the patent application, beginning the application process.  A provisional application only establishes the filing date and automatically expires after one year.

If there is more than one person involved in the creation of an invention, the partners may need to file an application as “joint inventors.” Unfortunately, there are often disputes concerning which individual actually created the invention; sometime both parties claim to be the “sole inventor.” Usually, after thoroughly analyzing all the facts, the attorney(s) can determine whether one or both inventors have the right to file the patent or whether they should file jointly.

There are several fees involved in obtaining a patent license, including filing, issuance, and maintenance fees.  An experienced IP attorney can inform clients of the timetable they will be responsible for, and clarify when various terms, such as “patent pending” or “patent applied for” are supposed to be used to keep the public updated regarding where the inventor is in the patent application process.

The Revocable Living Trust

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There are many benefits to a revocable living trust that are not available in a will.  An individual can choose to have one or both, and an attorney can best clarify the advantages of each.  If the person engaged in planning his or her estate wants to retain the ability to change or rescind the document, the living trust is probably the best option since it is revocable. 

The document is called a “living” trust because it is applicable throughout one’s lifetime.  Another individual or entity, such as a bank, can be appointed as trustee to manage and protect assets and to distribute assets to beneficiaries upon one’s death. 

A living trust will also protect assets if and when a person becomes sick or disabled.  The designated trustee will hold “legal title” of the assets in the trust.  If an individual wants to maintain full control over his or her property, he or she may also choose to remain the holder of the title as trustee. 

It should be noted, however, that the revocable power that comes with the trust may involve taxation. Usually, a trust is considered a part of the decedent’s estate, and therefore, an estate tax applies.  One cannot escape liability via a trust because the assets are still subject to debts upon death.  On the upside, the trust may not need to go through probate, which could save months of time and attorneys’ fees. 

The revocable living trust is contrary to the irrevocable living trust, in that the latter cannot be rescinded or altered during one’s lifetime.  It does, however, avoid the tax consequences of a revocable trust.  An attorney can explain the intricacies of other protections an irrevocable living trust provides. 

Anyone who wants to keep certain information or assets private, will likely want to create a living trust.  A trust is not normally made public, whereas a will is put into the public record once it passes through probate.   Consulting with an attorney can help determine the best methods to ensure protection of assets in individual cases.