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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.


Monday, February 22, 2016

What is a Surety Bond?

A "surety bond" is a legal tool used to guarantee that a promise will be kept.  It ensures that contractual requirements will be met and work will be done according to specifications.  If they are not, the bond will cover some or all of the damages that result.

The "surety bond" commits three parties to a binding contract. 

First, there is the "principal," the contractor, business or individual purchasing the "surety bond" as a way to assure others that work will be done as agreed.

Second, there is the "obligee," the party seeking assurance that the "principal" will fully complete the task.  Obligees are sometimes government agencies putting out bids, or any company or institution trying to be certain that it does not suffer financial loss at the hands of a contractor.

Third, there is the "surety," often an insurance company, which backs the bond and makes payment to the obligee in the event that the principal fails to meet its responsibilities.

How Does a Surety Bond Work?

A contractor  (the principal) usually pays an annual premium to an insurance company (the surety) in exchange for the insurer's commitment to uphold the contractor's promise to the organization or company that hired the contractor (the obligee).  If the contractor misses a deadline or breaches some other term of a contract, the organization it contracted with can ask the insurer to cover any losses that have ensued, up to the amount of the surety bond.  If the company has a valid claim, the insurance company will make payment.  After making good on the bond, whether the maximum amount or a lesser sum, the insurer usually tries to recover the funds from the contractor.

When Is a Surety Bond Required?

There are a number of circumstances in which an individual or business may need to buy a surety bond. 

  • To receive contracts from the government or from some general contractors, a construction firm or other bidder may need to have a surety bond.  Varieties of surety bond can include:  "bid bonds" guaranteeing that a contractor will accept a contract if its bid is successful; "performance bonds" guaranteeing that a contractor will complete a contract according to its terms; "payment bonds," guaranteeing that a contractor will pay subcontractors and suppliers, particularly on federal projects; and "maintenance bonds," guaranteeing that a contractor will provide upkeep and repairs for a certain amount time.
  • A surety bond such as a "license bond" or "permit bond" is sometimes a requirement for receiving certain business licenses or permits.
  • A business may need a "business service bond" or "fidelity bond" to protect itself or its clients against theft or other crimes by its employees
  • "Judicial bonds" may be needed by parties in civil or criminal litigation to guarantee court remedies or penalties.  These can include "bail bonds."
  • "Fiduciary bonds" are sometimes needed by individuals working with probate courts.  These ensure that these individuals will care for the assets of others professionally and honestly.

If you need advice relating to surety bonds, a business law attorney can help.


Monday, February 8, 2016

Is There Anyway a Disinherited Child Could Receive an Inheritance From an Estate?

If your estate plan and related documents are properly and carefully drafted, it is highly unlikely that the court will disregard your wishes and award the excluded child an inheritance.  As unlikely as it may be, there are certain situations where this child could end up receiving an inheritance depending upon a variety of factors.

To understand how a disinherited child could benefit, you must understand how assets pass after death.  How a particular asset passes at death depends upon the type of asset and how it is titled. For example, a jointly titled asset will pass to the surviving joint owner regardless of what a will or a trust says. So, in the unlikely event that the disinherited child was a joint owner, that child would still inherit the asset because of how it was titled.

Similarly, if you left that disinherited child as a named beneficiary on a life insurance policy or retirement plan asset, such as an IRA or 401k, that child would still receive some of the benefits as the named beneficiary even if your will stated they were to take nothing. Another way such a "disinherited" child might receive a benefit is if all other named beneficiaries died before you.

So, assume you have three children and you wish to disinherit one of them and you state you want all of your assets to go to the other two, and if they are not alive, then to their descendants.  If those other two children die before you and do not have any descendants, there may be a provision that in such a case your "heirs at law" are to take your entire estate and that would include the child you intended to disinherit.

If you wish to disinherit a child, all of these issues can be addressed with proper and careful drafting by a qualified estate planning lawyer.  


Monday, January 25, 2016

Investment Strategies for Minority Investors

As a minority business investor, it is essential to have an investment strategy that will maximize your returns. Once an investment decision is made, it is critical that a target business will enhance value of a broader investment portfolio.  At the same time, many minority investors are also business owners who know what makes for a successful enterprise. This post is a discussion of what minority investors should look for in a privately held business.

What makes for a great minority investment?

Since a minority investor has a significant but non-controlling ownership interest in a business, the first rule of thumb is to invest in business enterprises that you understand and with which you are comfortable. At the same time, great investments can also be found outside your business comfort zone provided that you have good management skills and the acuity to understand your target's business model.

Investing in a small business starts at the top,  that is with the owners. Accordingly, getting to know the owner and understanding how they do business is critical in your decision-making process. One key attribute you should look for in an entrepreneur is passion. Without it, he or she will lack the vision to steer the company toward success. It is also wise that you exercise caution by conducting background checks particularly with an eye toward ascertaining any legal actions in which the owner and other key people have been involved.

Of course, it's not only a matter of the people, it's about the numbers. The onus is on you to do your own due diligence, perform your own research and undertake an analysis of the proposed business plan. An investment proposal can be filled with numbers that amount to nothing more than smoke and mirrors. It's your job to ensure the numbers add up.

Level of Investment

Once you've done your homework on the target business, you need to decide how much to invest and how closely you will be aligned with the entity. Determining how much to invest is really a matter of risk management. In order to safeguard your investment, it is critical to negotiate a deal that is mutually beneficial. In particular, you should consider having an exit strategy with an understanding that your investment will be repaid by a certain date at an agreed upon rate of return.

You must also decide whether you will have no active participation in the decision-making and operations of the business or if you will be involved in the management of the entity. Even as a minority investor, your stake in the business may be significant enough to warrant having a seat at the table in order to advise on policy and evaluate management's performance.

Business Categories

As a minority investor, there are many business categories to consider that depend on your investment strategy. For example, investing in a start-up tends to be high-risk since management may not have a track record of success or a proven business model. Nonetheless, start-ups can also offer great rewards if they are breaking ground in a new business method or technology. The caveat is that the majority of start-ups are short-lived and destined for failure within the first 5 years.

If you are looking for a growth opportunity, there are business enterprises that have successfully launched but need another infusion of capital to grow. These businesses have an initial track record that will allow you to determine if your investment will be rewarded, even if it is subordinated to original investors. On the other hand, opportunities can also be found in companies that have stopped growing because of insufficient capital but still have a solid business plan.

For investors with a greater appetite for risk, companies that are failing can be ripe for a turn- around, provided that your stake comes with a hand in the decision-making and that the business fundamentals remain sound. Even bankrupt entities with cash flow potential offer investment opportunities for investors who are willing to have a high level of involvement.

The Bottom Line

For the minority investor, the nature of investing is high-risk, and every opportunity is unique - some offer greater rewards as well as higher risks. Your ability to make a decision on the merits of a business plan depends on your capacity to be a good business manager as well as a shrewd dealmaker. Investing in a privately held business requires a lot of up-front sweat equity in researching your target company, analyzing financial reports, evaluating the businesses track record, and ascertaining management's skills.

In particular, investing in a closely held business is an investment in the owners as well as the business. These entrepreneurs need to be innovative and have the ingenuity and passion to grow the business. In the final analysis, investors and owners need to be honest partners and strike a deal that is a win-win. The goal for both parties is to ensure the enterprise is successful and offers a worthwhile return on investment.

If you do your homework, your investment in privately-held businesses can be quite lucrative. That being said, it's always in your best interest as a minority investor to have a lawyer on your side of the table to craft an investment agreement, advise you of your responsibilities and shield you from potential litigation.


Monday, January 18, 2016

Can an Individual be held responsible for his or her deceased loved one's debts?

When a loved one dies, an already difficult experience can be made much more stressful if that loved one held a significant amount of debt. Fortunately, the law addresses how an individual’s debts can be paid after he or she is deceased.

When a person dies, his or her assets are gathered into an estate. Some assets are not included in this process. Assets owned jointly between the deceased and another person pass directly to the other person automatically. If there are liens on the property at that time, they will stay on the property, but no new liens can be placed on the property for debts in the name of the deceased. Similarly, debt jointly in the name of the deceased and another party may continue to be collected from the other party. In community property states, all assets and debts are the joint property of both spouses and pass automatically from one to the other. The community property states are Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 

From the pool of assets in the estate, an executor is required to pay all just debts. This means that, before a beneficiary may receive anything, all debts must be satisfied. Property might be sold to create liquidity in order to accomplish this. If there are more debts than there are assets, the estate must sell of as many assets as possible to pay off the creditors. If there is no money in the estate, the creditor can not collect anything. Rather than force people into this tiresome process, many creditors will agree to discharge a debt upon receipt of a copy of a death certificate or obituary. This is particularly true of small, unsecured debts. Life insurance proceeds were never owned by the decedent and should pass to a beneficiary without consequence to the estate. Proceeds of a retirement account may also be exempt from debts.

If creditors continue harassing the beneficiaries of debtors, they may be violating federal regulations under the FDCPA. They can be held accountable by their actions, either by the FTC, the state attorney general, or a private consumer law attorney.


Monday, January 11, 2016

Why Should I Incorporate my Small Business?

Not every small business needs to form an LLC in order to function. A child selling lemonade by the side of the road has no use for a Tax ID number. It doesn’t seem practical to set up a new business entity to host a garage sale or a Tupperware party. As a venture starts to grow from a hobby to a full-time job, however, there are questions every business owner should ask to determine whether it is best to incorporate the business into a legal entity.

Do I need to protect my personal assets?

The greater the risk of being sued, the more necessary it becomes to file the necessary paperwork to form a Limited Liability company. This will limit the owner’s financial liability to the assets invested in the business. This means that, if a business gets sued, the business owner’s personal assets, like his or her home, automobile, personal bank accounts, and belongings, may not be targeted by the lawsuit. Common lawsuits of concern are for the satisfaction of contracts and leases and personal injury claims for accidents on the premises. Similarly, a bank may not seek a business owner’s assets to repay a loan unless the business owner signs a personal guarantee. Banks often require such a guarantee for new businesses that have no credit history.

Do I need flexibility in my obligation to pay income taxes?

A C corporation, which is a type of Limited Liability Company, has the flexibility to shift the business’s tax burden from one year to another. Normal business expenses and salaries can be deducted from a business’s taxes that may ultimately reduce a business owner’s tax burden depending on the income he or she derives from the business and from other sources.

Do I need to protect my company name?

In most states, companies register their names with the state to ensure that only one business can operate under that name. This is important for branding and marketing purposes. Adding LLC to the end of a company’s name can also add legitimacy to a new business, thus enhancing the brand.

Do I want to sell all or part of the business?

Ownership of an LLC or corporation can be shifted easily compared to those of a sole proprietorship. Adding partners and selling the business can be difficult if there are no lines between where the business ends and the owner begins. Once a business is incorporated, it lasts until it is dissolved, meaning it continues to be an asset for a business owner’s estate after the individual passes on.


Monday, December 28, 2015

When Can I Refuse Service to a Customer?

Many businesses have a sign hanging on the wall, often near the cash register, that says something like “We reserve the right to refuse service to anyone.” The reality is not as straightforward as the sign's message.

First, members of legally protected classes cannot ever be denied service based on their membership in their respective class.

  • The Federal Civil Rights Act guarantees all people the right to “full and equal enjoyment of the goods, services, facilities, privileges, advantages, and accommodations of any place of public accommodation, without discrimination or segregation on the ground of race, color, religion, or national origin.”
  • The right of public accommodation is also guaranteed to disabled citizens under the Americans with Disabilities Act, which precludes discrimination by businesses on the basis of disability.
  • In addition to these federal protections, many states also protect people from discrimination based on gender, sexual orientation or other personal attributes.

Second, putting up a sign does not create the right to refuse service; the right exists, but you must be careful about when you exercise it. When a customer is not a member of a federally protected class, you can generally deny service so long as you have a legitimate business reason. Some reasons that have been found to be legitimate include:

  • When a customer is not properly dressed. Hence the other common sign, “No shirt, no shoes, no service.”
  • When a customer has poor hygiene, such as extreme body odor or being excessively dirty.
  • When a customer is being disruptive. This includes customers that are intoxicated.
  • When a customer harasses your employees or other customers.
  • When there are safety concerns, such as when there are too many people to serve.
  • If you are certain a customer cannot or will not pay.
  • When a customer comes in just before closing time or when the kitchen is closed.
  • Patrons accompanied by large groups of non-customers who wish to stay on premises.

Even the most compelling business reason cannot overcome obvious discrimination. Legitimate reasons for denying service cannot be used as a shield when the actual reason for the refusal of service is discrimination.

When creating policies and considering guidelines for your business, it is important to consult an experienced business law attorney for advice on how to comply with federal and state law.


Monday, December 14, 2015

Executors Fees

An executor's fee is the amount charged by the person who has been appointed as the executor of the probate estate for handling all of the necessary steps in the probate administration. Therefore, if you have been appointed an executor of someone’s estate, you might be entitled to a fee for your services.  This fee could be based upon a variety of factors and some of those factors may be dependent upon state, or even local, law.

General Duties of an Executor

  1. Securing the decedent's home (changing locks, etc.)
  2. Identifying and collecting all bank accounts, investment accounts, stocks, bonds and mutual funds
  3. Having all real estate appraised; having all tangible personal property appraised
  4. Paying all of the decedent’s debts and final expenses
  5. Making sure all income and estate tax returns are prepared, filed and any taxes paid
  6. Collecting all life insurance proceeds and retirement account assets
  7. Accounting for all actions; and making distributions of the estate to the beneficiaries or heirs.

This list is not all-inclusive and depending upon the particular estate more, or less, steps may be needed.

As you can see, there is a lot of work (and legal liability) involved in being the executor of an estate.  Typically the executor would keep track of his or her time and a reasonable hourly rate would be used. Other times, an executor could charge based upon some percent of the value of the estate assets. What an executor may charge, and how an executor can charge, may be governed by state law or even a local court's rules. You also asked whether the deceased can make you agree not to take a fee. The decedent can put in his or her will that the executor should serve without compensation but the named executor is not obligated to take the job. He or she could simply decline to serve. If no one will serve without taking a fee, and if the decedents will states the executor must serve without a fee, a petition could be filed with the court asking them to approve a fee even if the will says otherwise. Notice should be given to all interested parties such as all beneficiaries.

If you have been appointed an executor or have any other probate or estate planning issues, contact us for a consultation today.


Monday, December 7, 2015

Are employees owed overtime for checking and answering email after hours?

Technology is a double-edged sword. It allows us to work remotely and to have greater flexibility as to where and when we work, but the freedom it affords can also be a burden. When you can work from anywhere, and at any time, it often feels like you should be doing so!

Studies suggest people are caving under the pressure - whether explicit or implicit - to work while technically off the clock. According to the Pew Research Center, approximately 44% of Internet users regularly perform some job tasks outside the workplace.

All the work that is being done outside of work hours is creating a compliance problem for many businesses. The federal Fair Labor Standards Act (FLSA) requires employers to compensate employees that are not exempt from the law for all time worked. These non-exempt employees must all be paid time and a half for all hours worked over 40 per week. This means that employees need to be paid (at overtime rates if applicable) for time spent checking and responding to emails, calls, texts, etc. during non-work hours.

In order to remain FLSA compliant in this technology-driven age, we advise our clients to take the following steps.

Develop a Timekeeping Policy that is Compliant with the FLSA

Explicitly tell your non-exempt employees, preferably in writing, whether or not they are allowed or required to work during non-work hours.  Make it clear that “working” includes checking emails and taking phone calls.

Implement the Timekeeping Policy

A policy is not worth the paper it is printed on if it is not actually implemented. Make it easy for employees to report their off-the-clock work, and discipline employees who do not report their off-the-clock time.

Enforce the Timekeeping Policy

When off-the-clock time is reported, pay your employees for it. Be clear about how much, if any, off-the-clock time employees are expected to work, and do not be afraid to discipline employees who do not comply with expectations.

If you have any questions about paying employees for work done off-the-clock or any other business related issue, contact an experienced business law attorney today.


Monday, November 30, 2015

Employee Rights in the Workplace

Relationships between employers and employees are regulated under various federal laws. It is essential to be aware of these regulations. Those who violate their provisions risk lawsuits and penalties for failure to comply.

Family Medical Leave Act 

Under the Family Medical Leave Act, or FMLA, an employee is afforded up to 12 weeks of unpaid leave to recover from pregnancy, serious illness, or to aid a sick family member.  No adverse employment actions are permitted upon return.  That means after 12 weeks of such leave, an employee must be permitted to return to their previous position with no reduction of hours or pay.

Federal Minimum Wage

The federal minimum wage is presently $7.25 an hour. Some local governments have increased the minimum wage above the federal level. For non-salaried, non-commissioned employees, an employer is required to pay one and a half times the normal hourly wage for any hours worked in excess of 40 hours a week.

Harassment and Discrimination

An employee has the right to work in a place free from harassment and discrimination.  Sexual harassment can take the form of unwelcome sexual advances or a hostile work environment. Adverse employment actions taken for the reason of race, religion, gender, and in some states, sexual orientation, may result in a lawsuit. It is also against the law for an employee who files a lawsuit for workplace discrimination, sexual harassment or another wrong doing to face retaliation for whistleblowing.

Federal Occupational Safety and Health Administration

Under Federal Occupational Safety and Health Administration (OSHA) regulations, an employee has the right to work in an environment free of dangerous conditions, safety hazards and toxic substances. Employees dealing with potentially dangerous equipment must be trained to use it safely, and all employees should undergo training on workplace safety. The OSHA handbook has 19 subsections, each dealing with a specific topic such as fire prevention, heavy machinery, hazardous materials and walking/working surfaces.

National Labor Rights Act

The National Labor Rights Act, or NLRA, allows employees to organize a union to negotiate working conditions and compensation through collective bargaining and the use of strikes.  The NLRA does not apply to public employees, domestic employees, agricultural employees, railroad employees, airline employees, supervisors, management, independent contractors or close relatives of the owners of the company that employs them.  


Monday, November 16, 2015

An Overview of the Family Medical Leave Act (FMLA)

The Family Medical Leave Act is a federal law that allows employees to take significant time off from work to take care of a loved one with an illness, medical problem or condition. The law does not require an employer to pay the employee for the time missed, but allows the employer to substitute accrued paid vacation/sick time for unpaid leave taken during the FMLA, meaning that the employee’s leave cannot be extended beyond the statutory period by using his or her vacation time. The FMLA prohibits employers from enforcing any negative consequences against the employee for exercising his or her rights under the FMLA. These would include termination, cutting back on hours, reducing pay, or diminishing the employee’s title or responsibilities.

The FMLA applies to businesses with more than 50 employees. To qualify, an employee must have worked for the employer for at least one year and must have worked at least 1250 hours in that year. The law allows the employee to take up to 12 non-consecutive weeks of unpaid leave a year to care for a spouse, parent or child who has a serious medical condition. There is special consideration given to family members caring for ill military service members. The parents, spouses, and children of these individuals are permitted to take up to 26 weeks off each year to care for their loved one. 

The most common use of the law is to allow an employee to take time off work after a child is born, even though most would not call pregnancy a “serious medical condition.” This is commonly referred to as maternity leave. Although it is not customarily exercised, fathers have an equal right to take time off to bond with their children after birth. The FMLA also allows new parents to take time off work immediately after an adoption. Some people use the Family Medical Leave Act to care for family members dealing with mental health issues, including dementia, addiction, or schizophrenia. The law covers any medical condition which require an overnight stay in the hospital, chronic conditions that require treatment at least twice a year, and conditions that incapacitate the affected person for more than three consecutive days. 


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