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Legal Blog - Law Offices of Richard Palumbo

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.


Monday, April 11, 2016

Your Wishes in Your Words

During the estate planning process, your attorney will draft a number of legal documents such as a will, trust and power of attorney which will help you accomplish your goals. While these legal documents are required for effective planning, they may not sufficiently convey your thoughts and wishes to your loved ones in your own words. A letter of instruction is a great compliment to your “formal” estate plan, allowing you to outline your wishes with your own voice.

 

This letter of instruction is typically written by you, not your attorney. Some attorneys may, however, provide you with forms or other documents that can be helpful in composing your letter of instruction. Whether your call this a "letter of instruction" or something else, such a document is a non-binding document that will be helpful to your family or other loved ones.

There is no set format as to what to include in this document, though there are a number of common themes.

First, you may wish to explain, in your own words, the reasoning for your personal preferences for medical care especially near the end of life. For example, you might explain why you prefer to pass on at home, if that is possible. Although this could be included in a medical power of attorney, learning about these wishes in a personalized letter as opposed to a sterile legal document may give your loved ones greater peace of mind that they are doing the right thing when they are charged with making decisions on your behalf. You might also detail your preferences regarding a funeral, burial or cremation. These letters often include a list of friends to contact upon your death and may even have an outline of your own obituary.

You may also want to make note of the following in your letter to your loved ones:

  • an updated list of your financial accounts with account numbers;
  • a list of online accounts with passwords;
  • a list of important legal documents and where to find them;
  • a list of your life insurance and where the actual policies are located;
  • where you have any safe deposit boxes and the location of any keys;
  • where all car titles are located; the
  • names of your CPA, attorney, banker, insurance advisor and financial advisor;
  • your birth certificate, marriage license and military discharge papers;
  • your social security number and card;
  • any divorce papers; copies of real estate deeds and mortgages;
  • names, addresses, and phone numbers of all children, grandchildren, or other named beneficiaries.

In drafting your letter, you simply need to think about what information might be important to those that would be in charge of your affairs upon your death. This document should be consistent with your legal documents and updated from time to time.


Monday, March 28, 2016

When Is It OK to Fire an At-Will Employee?

The overwhelming majority of employees are considered to be at-will employees. If an employee works without a contract stating otherwise, that person’s employment is considered at- will for its duration. This means that the person serves at-will and either party may terminate the employment at any time. Even though an explanation is not always given as to why an employee is being fired, there are still some reasons for termination that are unacceptable in the eyes of the law. It is important to be aware of these instances to avoid the appearance of improper behavior and the potential for economic repercussions  as a result.

Termination is not the only action that may be actionable. Under specific circumstances, an employee is permitted to file a claim against an employer for any negative employment actions, including cutting back available hours, pay reductions, or demotions in title. Any negative employment action may give rise to a lawsuit if the employee can prove that the basis of the negative employment action is improper or discriminatory.

Federal law prohibits discrimination against employees on the basis of race, gender, national origin, disability, religion, genetic information, or age, if the employee is over the age of 40. Many states add additional protections including protection from discrimination against employees due to sexual orientation or gender identity.

Other restrictions against firing or other actions that negatively affect job status also exist. It is illegal to fire someone one, or otherwise negatively affect their employment, in retaliation for their filing of a legal claim, whether for discrimination, sexual harassment, or workers compensation. An employer also may not use a person’s ability to work as an incentive to force him or her to take a lie detector test. No individual can be legally fired for complaining about OSHA violations, for refusing to commit an illegal act, or for reporting an illegal act committed by a co-worker or employer (whistle blowing). If an employee exercises a legal right, like voting or taking family leave based on the Family Medical Leave Act, he or she cannot legally be fired for the lost time.

Terminating or otherwise negatively affecting an individual's employment because of any of the above-mentioned events is illegal. Employers should go out of their way not to fire employees contemporaneously with such events, even for other causes, since this may give the appearance of impropriety,and potentially provoke an expensive lawsuit.


Monday, March 21, 2016

Estate Planning for the Chronically Ill

There are certain considerations that should be kept in mind for those with chronic illnesses.   Before addressing this issue, there should be some clarification as to the definition of "chronically ill." There are at least two definitions of chronically ill. The first is likely the most common meaning, which is an illness that a person may live with for many years. Diseases such as diabetes, cardiovascular disease, lupus, multiple sclerosis, hepatitis C and asthma are some of the more familiar chronic illnesses. Contrast that with a legal definition of chronic illness which usually means that the person is unable to perform at least two activities of daily living such as eating, toileting, transferring, bathing and dressing, or requires considerable supervision to protect from crisis relating to health and safety due to severe impairment concerning mind, or having a level of disability similar to that determined by the Social Security Administration for disability benefits. Having said all of that, the estate planning such a person may undertake will likely be similar to that of a healthy person, but there will likely be a higher sense of urgency and it will be much more "real" and less "hypothetical."

Most healthy individuals view the estate planning they establish as not having any applicability for years, perhaps even decades. Whereas a chronically ill person more acutely appreciates that the planning he or she does will have real consequences in his or her life and the life of loved ones. Some of the most important planning will center around who the person appoints as his or her health care decision maker and also who is appointed to handle financial affairs. A will and/or revocable living trust will play a central role in the person's planning as well.  Care should also be taken to address possible Medicaid planning benefits.  A consultation with an estate planning and elder law attorney is critical to ensuring all necessary planning steps are contemplated and eventually implemented. 


Monday, March 7, 2016

Things to Consider When Picking an Executor

The role of an executor is to effectuate a deceased person’s wishes as declared in a will after he or she has passed on. The executor’s responsibilities include the distribution of assets according to the will, the maintenance of assets until the will is settled, and the paying of estate bills and debts. An old joke says that you should choose an enemy to perform the task because it is such a thankless job, even though the executor may take a percentage of the estate’s assets as a fee. The following issues should be considered when choosing an executor for one's estate.

Competency: The executor of an estate will be going through financial and legal documents and transferring documents from the testator to the beneficiaries. If there are legal proceedings, the executor must make all necessary court appearances. There is no requirement that a testator have any financial or legal training, but familiarity with these areas does avoid the intimidation felt by lay people, and potentially saves money on professional fees.

Trustworthiness: The signature of an executor is equivalent to that of the testator of an estate. The executor has full control over all of an estate’s assets. He or she will be required to go through all of the papers of the deceased to confirm what assets are available to be distributed. The temptation to transfer assets into the executor's own name always exists, particularly when there is a large estate. It is important to choose a person with integrity who will resist this temptation. It makes sense to utilize an individual who is an heir to fill the role to alleviate this concern.

Availability: The work of collecting rents, maintaining property, and paying debts can take more than a few hours a week. Selecting an executor with significant obligations to work or family may cause problems if he or she does not have the time available to devote to the task. If an executor must travel great distances to address issues that arise, there will be more of a time commitment necessary, not to mention greater expenses for the estate.

Family dynamics: Selection of the wrong person to act as executor can create resentment and hostility among an estate’s heirs. A testator should be aware of how family members interact with one another and avoid picking someone who may provoke conflict. Even the perception of impropriety can lead to a lawsuit, which will serve to take money out of the estate’s coffers and delay the legitimate distribution of the estate. 


Monday, February 29, 2016

What Is the Spousal Share of an Estate?

There are many reasons why a person might leave a spouse or another loved one out of his or her will. It is possible that the will in question was executed prior to a marriage and was never properly updated. It may also be the case that the husband and wife, though still technically married, are estranged, and do not contribute to one another’s support. An end of life revelation of a past infidelity may anger a spouse enough to rewrite his or her last will and testament. Individuals may make rash decisions to disinherit spouses based on a single argument or misunderstanding. This can be exacerbated by symptoms of dementia. Regardless of the reason, a person who is not named in his or her spouse’s will may petition the court for the spousal share to receive a portion of the estate.

The spousal share of an estate, also called an elective share, is a holdover from the concept of dower in English common law. Traditionally, dower is a portion of a man’s estate guaranteed to a wife when she is widowed to ensure that she does not fall into poverty after her husband dies. The practice continues today without the same restrictions on gender. Every state in America has a provision in its laws to protect an individual whose spouse dies from being left with nothing. Similar provisions for children also exist in some states. Attempts have been made to introduce legislation to protect unmarried romantic partners the same way as married couples, but these attempts have had little success.

The structure of these protections vary from state to state. The value of the estate for the purposes of establishing the spousal share may include the widow’s assets depending on the jurisdiction. Some states provide a widowed spouse a larger share of the deceased’s estate than others, but almost every state prohibits an individual from disinheriting a spouse entirely. The one state that does not permit an elective share to the spouse in a probate case requires that an estate pay a disinherited spouse financial support for up to one year after the death.


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The Law Offices of Richard Palumbo, LLC assists clients with Real Estate Law, Business Law, Probate, Evictions for Landlords and Property Damage matters in Rhode Island including Cranston, Warwick, Coventry, Johnston, Providence, Pawtucket, Central Falls and all areas throughout RI.



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