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Rhode Island Legal Blog

Monday, July 25, 2016

What are the powers and responsibilities of an executor?

An executor is responsible for the administration of an estate. The executor’s signature carries the same weight of the person whose estate is being administered. He or she must pay the deceased’s debts and then distribute the remaining assets of the estate. If any of the assets of the estate earn money, an executor must manage those assets responsibly. The process of doing so can be intimidating for an individual who has never done so before.

After a person passes away, the executor must locate the will and file it with the local probate office. Copies of the death certificate should be obtained and sent to banks, creditors, and relevant government agencies like social security. He or she should set up a new bank account in the name of the estate. All income received for the deceased, such as remaining paychecks, rents from investment properties, and the collection of outstanding loans receivable, should go into this separate bank account. Bills that need to be paid, like mortgage payments or tax bills, can be paid from this account. Assets should be maintained for the benefit of the estate’s heirs. An executor is under no obligation to contribute to an estate’s assets to pay the estate’s expenses.

An inventory of assets should be compiled and maintained by the executor at all times. An accounting of the estate’s assets, debts, income, and expenses should also be available upon request. If probate is not necessary to distribute the assets of an estate, the executor can elect not to enter probate. Assets may need to be sold in order to be distributed to the heirs. Only the executor can transfer title on behalf of an estate. If an estate becomes insolvent, the executor must declare bankruptcy on behalf of the estate. After debts are paid and assets are distributed, an executor must dispose of any property remaining. He or she may be required to hire an attorney and appear in court on behalf of the estate if the will is challenged. For all of this trouble, an executor is permitted to take a fee from the estate’s assets. However, because the executor of an estate is usually a close family member, it is not uncommon for the executor to waive this fee. If any of these responsibilities are overwhelming for an executor, he or she may elect not to accept the position, or, if he or she has already accepted, may resign at any time.


Monday, July 18, 2016

Pitfalls in Providing Employee References

Employees do not always depart on the best of terms. When that is the case, what are your obligations in terms of disclosure when a prospective employer contacts you to check for references? Keeping negative opinions to yourself might seem like a surefire way to stay out of court. A bad reference might lead an employee to file a lawsuit, but that does not mean he or she would be successful. Theories of liability include defamation, negligent misrepresentation and negligent referral.

Particularly risk-averse employers follow a policy of only confirming employment when someone calls for a reference. This approach does not necessarily insulate you from liability, however. In workplace violence situations, for example, you might find yourself in litigation for simply providing dates of employment for an individual when you were aware of his or her tendency toward or history of violence or other misconduct.

When providing a reference, share only factual information. Hunches, gut feelings and bad vibes are not good topics for discussion. For example, if you suspected a former employee was stealing from you, but you never had conclusive proof, it is probably advisable not to mention your suspicion. The best course of action is usually providing complete and accurate information to anyone checking a reference. Some states have passed laws providing varying degrees of immunity to employers who provide honest references about former employees.

When you are asked for a reference, you should keep track of:

  • which employees you were contacted about;
  • who contacted you;
  • the date of any conversations;
  • the method of communication (phone, email, in person); and
  • what you said, particularly if you provided anything more than confirmation of employment.

An experienced business law attorney can effectively advise you about providing employee references and other challenging issues you face in running your business.


Monday, July 11, 2016

Costs Associated with Dying Without a Will

When someone dies without a will, it is known as dying intestate.  In such cases, state law (of the state in which the person resides) governs how the person's estate is administered. In most states, the individual's assets are split -- with one third of the estate going to the spouse and all surviving children splitting the rest. For people who leave behind large estates, unless they have established trusts or other tax avoidance protections, there may be a tremendous tax liability, including both estate and inheritance tax.

For just about everyone, the cost of having a will prepared by a skilled and knowledgeable attorney is negligible when compared to the cost of dying intestate,  since there are a number of serious consequences involved in dying without a proper will in place.

Legal Consequences

The larger your estate, the more catastrophic the consequences of dying intestate will be. If you die without a will, the freedom to decide how your property will be divided will be taken from you and the state in which you reside will divide your assets.

Not only will you not be able to decide on the distribution of your property, but a stranger will be making personal, familial decisions. This may be divisive among your family members; instead of leaving your loved ones in peace, you may leave them engaged in bitter disputes over a family heirloom or even a simple memento. This can be especially true in situations where there are children from a previous marriage.

Tax Consequences

In addition to the legal and personal problems associated with dying intestate, the tax results can be severe as well. This is particularly true for clients who have not consulted with an estate planning attorney in order to protect themselves through tax avoidance methods. Both the state and federal governments can tax the transfer of property and an inheritance tax may be imposed on the property you have left to your heirs.

The most effective way to avoid all of these negative tax consequences is to create a will with a competent attorney. Your lawyer will help you to choose a proper executor (the person who will administer your estate, distribute your property and pay your debts), and will assist you in finding ways to limit your tax liability. There are several ways your attorney can help you to do this:

  • By gifting some of those you want to inherit before you die
  • By creating one or several trusts
  • By purchasing a life insurance policy
  • By buying investments in your loved one's name

These methods will ensure that your loved ones receive the assets you desire them to have, while simultaneously protecting them from possibly enormous tax burdens after you pass.

For those who have no family, dying without a will can be even more troublesome and costly, since their entire fortunes can be left to the state. If a genealogical search doesn't turn up any blood relatives, all of your assets will be claimed by the government. This means that any individual, group, organization or charity you wished to endow will receive nothing.

It is never easy to think of one's own mortality, but it is even more painful to contemplate leaving a messy, uncomfortable situation behind when you pass. By engaging the services of an excellent estate planning attorney, who will help you fashion a legally binding, precisely designed document,  you can make sure that your loved ones are well taken care of and that your final wishes are respected and implemented.


Monday, June 27, 2016

Commercial Lease Disputes

Sometimes a business grows more rapidly than expected and its leased space is no longer large enough. Other times a business finds itself losing money and unable to pay rent. In those instances, it is the commercial tenant that desires to break its lease. There are times, however, when a commercial landlord seeks to break a lease and even threatens eviction for reasons that may lack merit.

A commercial lease is basically a contract that establishes a relationship between the parties and outlines the respective rights and obligations of each. These documents can be confusing and complex. Resolving a commercial lease dispute often involves business, contract and real estate laws.

Unlike residential leases, where the law heavily favors tenants, in the commercial world, the law tends to be more even-handed. The terms of the lease (even if all you have is an oral agreement) are most often going to be what governs the outcome of the dispute. This reflects the view that both parties involved in commercial lease agreements are sophisticated business entities that can protect their interests.

Since the terms of the lease are most likely going to govern if you file a lawsuit and take your dispute to court, it is essential that anyone evaluating your case examines your lease in depth. Even if an out-of-court settlement is negotiated, familiarity with your particular lease agreement is crucial for anyone advising you. Many commercial leases contain a dispute resolution clause that might require mediation or arbitration. These options can often lead to a resolution in less time and with less expense than traditional litigation.

Assessing damages and amassing the means to prove those damages is another important component to handling a commercial lease dispute. Typically, monetary damages are sought. There might be a clause in the lease regarding attorneys' fees. Again, it is vital that a competent and informed review of your particular lease is made to properly guide your case.

Contact an experienced business law attorney today to discuss your commercial lease dispute and learn what legal options are available.

 


Monday, June 13, 2016

Should a Power of Attorney be a part of my Estate Plan?

A durable power of attorney is an important part of an estate plan. It provides that, in the event of disability or incapacitation, a preselected agent can be granted power over the affairs of the individual signing the document. This power can be limited to specific decisions, like the decision to continue life sustaining treatment, or it can be much broader in scope to allow the agent power over the individual’s financial dealings.

Estate planning is meant to prepare for contingencies beyond an individual’s control. A traumatic accident could leave an individual without the ability to manage his or her own financial affairs. Debilitating diseases, like Alzheimer’s, can affect a person’s ability to make sound decisions for him or herself. In these scenarios, someone must be appointed to do make decisions on behalf of the incapacitated individual. Preparing a durable power of attorney as a part of an estate plan accomplishes three things. First, it gives the power of appointment to the individual, instead of to a judge. Second, it avoids the need for a potentially expensive court proceeding necessary to make that appointment. Finally, a power of attorney may be used to respond to time sensitive issues without waiting for a court hearing to grant an agent the power to act.

A power of attorney provides much flexibility for the individual signing it. It can take effect only upon disability, or right away, regardless of disability. It can specify what funds may or may not be used for. If a person does not want to live in an assisted living facility, he or she can make sure that money from his or her own bank accounts is not used for those purposes. Different assets can be managed by different agents. The power of attorney can give an agent power to distribute assets as gifts on a specific schedule to collaborate with an existing estate plan. The level of detail and amount of instruction that is possible as a part of the document is unlimited. It will always be quicker and more economical than a guardianship or conservatorship proceeding, and it will always serve the disabled person’s interests better than the broad powers granted to an individual by a court.


Monday, June 6, 2016

Common Frivolous Suits Filed Against Small Businesses

Frivolous lawsuits are an all-too-common problem for small businesses. This is because, under current laws, there is almost no risk to trial attorneys or their clients for bringing even absurd cases to court. While large companies routinely retain attorneys and have the financial means to protect themselves from frivolous lawsuits, small businesses may be left out in the cold if served with an unwarranted lawsuit. Regardless of whether there is any validity to the plaintiff's claim, the small business owners will have to hire attorneys and will typically incur legal fees even if they win the case.

 

Disturbing Statistics about Frivolous Lawsuits against Small Businesses

There are two common types of frivolous lawsuits small business owners have to deal with: product or professional liability and personal injury. According to a recent survey, such unnecessary lawsuits cause financial, not to mention emotional, damage throughout the country. Some of the alarming statistics concerning small business owners in the U.S. are:

  • Over 50 percent of all civil lawsuits target small businesses annually
  • 75 percent fear being targeted by a frivolous lawsuit
  • 90 percent settle frivolous lawsuits simply to avoid higher court costs
  • Owners pay $20 million out of their own pockets to pay tort liability costs
  • U.S. tort costs have increased more than the gross domestic product since 1950
  • On average, those earning $1 million per year spend $20,000 of it on such lawsuits

How Can Small Business Owners Protect Themselves from Frivolous Lawsuits?

The best way for small business owners to protect themselves from frivolous lawsuits is to consult with an experienced, reputable business attorney to help them evaluate possible areas of vulnerability in their company. The attorney should assess their potential exposure in terms of:

  • Employment law, including harassment, discrimination and wrongful termination
  • Intellectual property (IP), protecting them from unintentional theft of IP
  • Contracts management
  • Electronically stored information (ESI)
  • Fraud, establishing internal controls to prevent employee fraud

 

Beyond retaining helpful legal counsel to protect their businesses, small owners must, of course, ensure that they are taking proper precautions in terms of quality control of their own products, services, plant maintenance and staff behavior.

Insurance against Frivolous Lawsuits

If small business owners want optimal protection against frivolous lawsuits, they should look into the possibility of purchasing property or liability insurance for their company. After having an attorney examine their business practices to ensure that they are taking all possible precautions against being sued, they may want to consider buying an insurance policy their lawyer deems appropriate.


Monday, May 30, 2016

When is a person unfit to make a will?

Testamentary capacity refers to a person’s ability to understand and execute a will. As a general rule, most people who are over the age of eighteen are thought to be competent to make and sign the will. They must be able to understand that they are signing the will, they must understand the nature of the property being affected by the will, and they must remember and understand who is affected by the will. These are simple burdens to meet. However, there are a number of reasons a person might challenge a will based on testamentary capacity.

If the testator of a will suffers from paranoid delusions, he or she may make changes to a testamentary document based on beliefs that have no basis in reality. If a disinherited heir can show that a testator suffered from such insane delusions when the changes were made, he or she can have the will invalidated. Similarly a person suffering from dementia or Alzheimer’s disease may be declared unfit to make a will. If a person suffers from a mental or physical disability that prevents them from understanding from understanding that a will is an instrument that is meant to direct how assets are to be distributed in the event of his or her death, that person is not capable of executing a valid will.

It is not entirely uncommon that disinherited heirs complain that a caretaker or a new acquaintance brainwashed the testator into changing his or her will. This is not an accusation of incapacity to make the will, but rather a claim of undue influence. If the third party suggested making the changes, if the third party threatened to withhold care if the will was not changed, or if the third party did anything at all to produce a will that would not be the testator’s intent absent that influence, the will may be set aside for undue influence. Regardless of the reason for the challenge, these determinations will only be made after the testator’s death if the will is presented to a court and challenged. For this reason, it is especially important for the testator to be as thorough as possible in making an estate plan and making sure that any changes are made with the assistance of an experienced estate planning attorney.


Monday, May 16, 2016

Common Lawsuits Brought Against Small Businesses

It is impossible to predict every lawsuit that a small business might possibly face. There is nothing to prevent angry vendors, entitled customers, or disgruntled employees from filing a lawsuit, even if there is no legitimate basis for it. The more a business owner delegates responsibilities to employees, the greater the risk that an employee makes a mistake and exposes the business to a lawsuit. Even the most vigilant, hands on business owner is bound to make a mistake that can lead to a complaint filed against the business.

The most common lawsuits brought against businesses are wrongful termination suits brought by employees or candidates who have suffered a negative employment action. This can be anything from being fired to being demoted or even passed over for an advancement opportunity. If the employee or candidate believes that the action was taken for a reason related to race, gender, religion, identity, or another protected classification, that employee might file a lawsuit. For this reason, it is important to document any sort of negative or positive behaviors at work, so that if an employee does complain of discrimination, the courts can see the employee’s work history and the real reason why he or she may have been passed over for a promotion. Disparaging remarks made about any of these protected classes have no business in a work place as they can create a hostile work environment and lead to lawsuits as well.

Many employers choose to save money by denying their employees overtime pay. This can create many extra costs, as employees will sue for the money they are owed, and the legal fees can be significant. It is a good idea to have contracts establishing the boundaries of a relationship between an employer and an employee to minimize confusion.

It also makes sense to put agreements with vendors and customers in writing. The contracts should include a general description of the work to be performed, a list of any items to be delivered, a project schedule with deadlines, the fee, and the circumstances under which additional fees might be charged, warranties included with the work, how long the contract lasts, how it can be terminated, and how disputes will be resolved.

Personal injury lawsuits against businesses are also common, so it is important to make sure that a place of business is kept in safe condition. Floors should always be dry and warnings should be presented to customers of any dangerous conditions. Drivers should be selected carefully as any accident they cause can be made the responsibility of the business that employs them. Employees who are injured at work are usually precluded from suing their employer and are instead referred to worker’s compensation courts which have their own legal fees. Most states require employers to carry insurance in case of a workplace injury.


Monday, May 9, 2016

How does life insurance fit into my estate plan?

Life insurance can be an integral part of an estate plan. Policies can be set up to be paid directly to the beneficiary, without the need to pass through the estate, and without the need for any taxes to be paid. Having a life insurance policy ensures that some assets will be liquid, so that debts and expenses can be paid quickly and easily without the need to dispose of assets. Beneficiaries can be changed at any time as can the benefit amount. The policy can be used to accumulate savings if the plan is surrendered before death. Life insurance policies, especially those purchased later in life, can pay out significantly more than what was invested into them. There are many benefits to purchasing a life insurance policy as part of an estate plan.

An attorney can set up a life insurance trust to help avoid estate taxes. A life insurance trust must be irrevocable, cannot be managed by the policy holder, and must be in place at least three years before the death of the policy holder. Any money received from the life insurance trust is not a part of the taxable estate. The need for this is rare as the exemption for estate taxes is currently almost five and a half million dollars, but it is a useful tool for some nonetheless.

There is a limit to how much life insurance an individual is permitted to purchase. A person may carry a multiple of his or her gross income which reduces with age. A twenty five year old can buy a policy worth thirty times his or her annual income. A sixty five year old may only purchase ten times his or her annual income worth of life insurance. This is an important factor to consider when deciding whether life insurance should be a part of your estate plan.

Life insurance as a part of estate planning is a complicated issue. It makes sense to consult with an estate attorney and a tax professional before meeting with an insurance broker. Both can help an individual understand the benefits of insurance over other means of transferring assets.


Monday, April 25, 2016

Why shouldn't I use a form from the internet for my will?

In this computer age, when so many tasks are accomplished via the internet -- including banking, shopping, and important business communications -- it may seem logical to turn to the internet when creating a legal document such as a will . Certainly, there are several websites advertising how easy and inexpensive it is to do this. Nonetheless, most of us know that, while the internet can be a wonderful tool, it also contains a tremendous amount of erroneous, misleading, and even dangerous information.

In most cases, as with so many do-it-yourself projects, creating a will most often ends up being a more efficient, less expensive process if you engage the services of a qualified attorney.  Just as most of us are not equipped to do our own plumbing repairs or automotive repairs, most of us do not have the background or experience to create our own legal documents, even with the help of written directions.

Situations that Require an Attorney for Will Creation

 In certain cases, the need for an estate planning attorney is inarguable. These include situations in which:

  • Your estate is large enough to make estate planning guidance necessary
  • You want to disinherit your legal spouse
  • You have concerns that someone may contest your will
  • You worry that someone will claim your mind wasn't sound at the signing

Mistakes and Omissions 

It has always been possible to write a will all by yourself, even before the advent of the typewriter, let alone the computer.  Such a document, however, is unlikely to deal with the complexities of modern life.  Many estate planning attorneys have seen, and often been asked to repair, wills that have mistakes or significant omissions. These experts have also become aware of situations in which the survivors of the deceased wind up in court, spending thousands of dollars to contest ambiguously worded or incomplete wills. Without legal guidance from a competent estate planning attorney, creating a "boxtop" will can result in tremendous financial and emotional risk.

Evidence that Online Wills Are Not Foolproof

Evidence that many other complications can arise when an individual creates a will using generalized online directions can be found in the following facts: 

  • Each state has its own rules (e.g. requiring differing numbers of disinterested party signatures)
  • Even uncontested wills can remain in probate if not executed in an exacting fashion
  • Estate planning attorneys find legal software programs inadequate
  • Even legal websites themselves recommend bringing in an attorney in all but the very simplest cases
  • Some legal websites provide inexpensive monthly legal consultations with attorneys to protect their client and themselves

Areas that Frequently Cause Problems 

Self-constructed wills often become problematic when the testator:

  • Names an executor who has no financial or legal knowledge
  • Leaves a bequest to a pet  (legally, you must leave the bequest to an appointed caretaker)
  • Puts conditions on payouts to an that are difficult, or impossible, to enforce
  • Makes unusual end-of-life decisions or puts living will information into the will
  • Designates guardians for children, but neglects to name successor guardians
  • Neglects to coordinate beneficiary designations where, for example, the will and  insurance policy designations contradict one another
  • Leaves funeral instructions into the will since the document will most likely not be read until after the funeral has taken place
  • Leaves inexact or ambiguous instructions dealing with blended families
  • Neglects to mention small items in the will which, though of small financial value, are meaningful to loved ones and may cause contention

In order to ensure that you leave your assets in the hands of those you wish, and to avoid leaving your loved ones with bitter disputes and expensive probate costs, it  is always wise to consult with an experienced estate planning attorney when making a will.  In this area, as in so many others, it is best, and safest, to make use of those with expertise in the field.


Monday, April 18, 2016

What is a 501(c)(3)?

A 501(c)(3) nonprofit is one of a class of 29 different types of tax-exempt, nonprofit organizations under section 501(c) of the tax code. Most charitable organizations that receive donations from individuals in the United States are organized as 501(c)(3) nonprofits. The 501(c)(3) status is the most coveted type of nonprofit status because donations to these organizations can be deducted from income for tax purposes by the donors. This makes fundraising significantly easier.

501(c)(3) tax exemptions are reserved for businesses that operate for religious, scientific, literary, charitable, or educational purposes. They are also permitted when the organization provides services to test products for public safety, aims to prevent cruelty against children and animals, or fosters national or international amateur sporting competitions. A group trying to convince an American city to host the Olympics can be a 501(c)(3) even if it is not a charity in the traditional sense. In order to qualify as a religious organization, a church must comply with the rules outlined in IRS publication 1828 or risk losing its tax exempt status. All 501(c)(3) organizations are prohibited from engaging in supporting political candidates, and there are hard limits to the amount of lobbying a charitable organization may make to influence legislation.

To qualify as a 501c)(3), an organization must include in its articles of incorporation or bylaws restrictions on its power to operate for profit. Without this restriction, the organization’s tax exempt status will be denied, both by the Internal Revenue Service and by the state government. A 501(c)(3) company must receive a substantial portion of its funding by soliciting donations from the general public or government grants. If the organization raises most of its money by selling products or providing services, it cannot operate as a 501(c)(3), even if all the money raised is used for charitable purposes, though for small fundraisers, like carwashes or bake sales, exceptions may be permitted. An organization that receives significant income from private donations and government grants is called a public charity. Another type of 501(c)(3) is a private foundation, which is also tax exempt, and which may also receive tax-deductible donations. Private foundations, however, earn the bulk of their money through investments and endowments. This money is then donated to other charitable organizations.


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