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Rhode Island Legal Blog

Monday, October 31, 2016

Disinheritance

Inheritance laws involve legal rights to property after a death and such laws differ from state-to-state.   Heirs usually consist of close family members and exclude estranged relatives.  Depending on the wording of a will, an individual can be intentionally, or even unintentionally, disinherited.

In most cases, spouses may not be legally disinherited.  Certain contracts, however, allow for a legitimate disinheritance, such as prenuptial agreements or postnuptial agreements.  These contracts are typically valid methods of disinheritance because the presumed-to-be inheriting spouse has agreed to the arrangement by signing the document.  

If there is no prenuptial arrangement, then the state’s elective share statute or “equitable distribution” laws protect the surviving spouse.  Pursuant to the elective share statute, he or she may collect a certain percentage of the estate. 

In states that follow “community property” or “common law” rules, however, the outcome may be different.   An attorney should be consulted for clarification of the differences in the law.  Divorces affect spousal inheritance rights.  Post-divorce, it is prudent to consult an attorney to draft a fresh will, in order to prevent confusion and unintentional dissemination of assets.

If the will is unambiguous, it is usually possible for a child to be disinherited.   It should be noted, however, that it is highly likely that close relatives will challenge or contest a will in which they have been disinherited.  Fighting such a lawsuit may put a great financial strain on the estate's assets.  Depending on how time-consuming and expensive it is to defend the will, less money may be available for distribution to the intended beneficiaries. 

There are ways to protect estate assets from such problems, for example through trusts.  It is essential for an individual to receive the counsel of a licensed lawyer in order to effectively protect his or her estate as inexpensively as possible.


Monday, October 17, 2016

Oral Contracts & The Statute of Frauds - Is the Agreement Binding?

There is a widespread misconception that verbal contracts are unenforceable.  Nevertheless, a contract made orally with another party, without embodying the particular terms in a signed writing, can still be valid and binding. Even so, any disagreement concerning the deal may pose multiple problems for both parties.  In order for the court to give a verbal contract legal effect, the terms of the deal will have to be demonstrated. This could involve pricey litigation and an extensive discovery process.  Therefore, it is advisable to have an attorney draft any contractual agreement.

Moreover, according to the Statute of Frauds, there are certain contracts that must be in writing in order to be legally binding.  This may include contracts for the sale of land or real estate, surety agreements, in which one person guarantees to take over another's contractual obligations, and service agreements that take over one year to complete.  Other agreements that must be written to be legally binding may include agreements “made in the consideration of marriage,” or those made for the sale of goods valued at $500 or more. If the requirements for contractual validity are not met, either party runs the risk of the other party rescinding the contract by declaring it void.

The Statute of Frauds not only aims to prevent deception or fraud; it requires precise terms to be set in writing for a contract to be valid. The Statute of Frauds typically requires the document to include a description of the “subject matter” of the agreement, the main stipulations to the deal, and the signatures of the parties.  Nevertheless, these requirements may vary with the sale of goods under the Uniform Commercial Code, where a signature by the “party to be charged” may be sufficient.  For a sale of goods, the terms typically should include the price and quantity of the goods. 

Sometimes, if the contract is unenforceable under the Statute of Frauds, it may be saved if one party suffered by relying on the contract and if the injured party can prove this reliance in court.  Likewise, an exception may exist if “specially manufactured goods” were provided under the contract or one party “partially performed” what was required by the agreement.  The outcome may also vary if two merchants were the contracting parties.  Seek advice from a licensed business law and contract attorney to evaluate agreements and determine whether they are legally enforceable. 


Monday, October 10, 2016

Testamentary Substitutes

In states that have “elective share statutes,” a surviving spouse is legally entitled to a certain percentage of the deceased's estate, even if that spouse has attempted to disinherit or to provide a lesser bequest, or gift, under the will.  In “separate property” states, an elective share statute is likely to be in effect.  If the estate in question is valued at $50,000 or less, the elective share is likely to be the actual amount of the net estate.  

“Testamentary substitutes” are removed from particular assets that would otherwise pass to the surviving spouse.  Assets passing by will or through intestacy could cause a reduction in the elective share amount as well.  Totten trusts, such as Payable-On-Death Bank Accounts (PODs), Retirement or joint bank accounts, gifts causa mortis ("gifts made by the decedent in contemplation of death,”) U.S. savings bonds, jointly held property, and gifts or transfers that were made approximately one year prior to death, are some examples of testamentary substitutes. 

If a gift was made about one year prior to death, yet involves medical or educational expenses, then the gift may not qualify as a true testamentary substitute.  With regard to PODs, the spouse, offspring, or grandchildren will be named as beneficiaries.  The funds of a POD are only distributed upon the decedent’s death.   Testamentary Trusts are listed in the will until the designated property passes to the trust upon the testator’s death.  

Generally, a gift causa mortis is only active upon the decedent’s expected death and is typically revocable.  Moreover, certain elements must exist to create a valid gift causa mortis.  These include an intent to create “an immediate transfer of ownership,” valid delivery, acceptance of the gift by the donee, and the donor’s “anticipation of imminent death.”  There are also certain circumstances by which gifts causa mortis are not valid.  For example, if the donee passes away before the donor, it is unlikely that a property interest was transferred.  Gifts causa mortis are also taxed as if the testator had listed the gifts in his or her will. 

In such cases, testamentary substitutes are generally put back into the net estate total to determine the elective share amount that the surviving spouse will collect.  The aforementioned may vary if property is held jointly, as joint tenants or otherwise, because the spouse may have a right of survivorship in the property.  Estate planning attorneys are aware of all the ins and outs of testamentary substitutes and how they may affect the distribution of your assets.  It is useful, if not essential, to consult with a knowledgeable attorney when making arrangements regarding testamentary substitutes.


Monday, September 26, 2016

Copyright Protection and Fair Use

Authors often want to understand the eligibility of their writings for copyright protection. Legal copyright registration provides the copyright holder with a collection of special rights. Under the U.S. Copyright Act, a rightful owner maintains the “exclusive right to reproduce, distribute, perform, display, license, and . . . prepare derivative works” founded on his or her creations.  However, these “exclusive” rights are curtailed by the “fair use” doctrine, which typically allows others to use your work legally for certain limited purposes, such as “criticism, comment, news reporting, teaching, scholarship, or research.” 

A court makes the final determination about whether a particular use of a registered work comes within the “fair use” doctrine. Factors that a court may use to verify whether a particular use is permissible under the statute may include “the purpose and character of the use.”  For instance, if a third-party utilizes your registered work for an educational and nonprofit purpose, the use is unlikely to be categorized as copyright infringement.  

The court may also look at “the amount and substantiality of the portion used in relation to the copyrighted work as a whole.”  It is likely to be copyright infringement if a large portion of the work has been used, where the user is effectively usurping the work as his or her own.  The court may also analyze “the effect of the use upon the potential market for, or value of, the copyrighted work.”  Furthermore, if a third party did not publish the work in question, the action may still constitute fair use. 

Copyright protection spans “architectural design, software, the graphic arts, motion pictures, and sound recordings.”  Consulting with an intellectual property lawyer will clarify whether a particular type of work qualifies for legal protection. It is important to remember that legal action may not be brought until work is registered, even if blatant copyright infringement transpires. 

Qualified intellectual property lawyers are dedicated to keeping their clients in compliance with the Copyright Office and protecting them from being subjected to the civil fines that may result from improper actions.  Engaging the services of a licensed intellectual property lawyer will not only protect original creations but provide necessary advice on whatever legal recourse is available.  


Monday, September 19, 2016

Preventing Will Contests

So, you have a will, but is it valid?  A will can be contested for a multitude of reasons after it is presented to a probate court.  It is in your best interest to have an attorney draft the will to prevent any ambiguity in the provisions of the document that others could dispute later. 

A will may be targeted on grounds of fraud, mental incapacity, validity, duress, or undue influence.  These objections can draw out the probate process and make it very time consuming and expensive.  More importantly, an attorney can help ensure that your property is put into the right hands, rather than distributed to unfamiliar people or organizations that you did not intend to provide for. 

At the time you executed the will, you must have been mentally competent, or of “sound mind.”  A court will inquire as to whether you had full awareness of what you were doing.   There will also be an inquiry into your understanding and knowledge of the assets in your name.  If, at the moment you executed the will, you were pressured or influenced by another individual to sign the document, it may be invalidated. 

If the document was signed under duress or undue influence, the provisions are likely to be against your intentions or requests.  Moreover, if you are trying to nullify a will on your own behalf, you are likely to need an attorney because it is very difficult and complicated to demonstrate the existence of duress, fraud, or undue influence.   If drafting a new will, counsel can ensure that your document abides by all of the validity requirements, so the will’s provisions can successfully carry out your intentions after your death.

For example, the will creator or “testator,” is usually required to sign the document before several witnesses who are over the age of eighteen, during a certain period of time.  A will or a certain bequest to a person could be deemed void if the beneficiary was also a witness.   In your state, you may be able to execute a “self-proving affidavit,” which may do away with some of the requirements in order to establish a valid will.  The testator should also designate a person to execute the document.  Consult your attorney to ensure that your will comports with your state’s particular laws and is sustainable against any future contests.  

 


Monday, September 5, 2016

The Federal Trade Commission Act and its Affect on Advertising

The law forbids businesses from including baseless statements or assertions in their advertisements.  According to the Federal Trade Commission Act (FTCA), a business must ensure that their representations are not misleading or unfair, and the entity must have data that supports all claims.  Evidence may, for example, be substantiated based by surveys, expert testimony, or scientific studies and tests. 

A “deceptive” advertisement, as described in the FTC's "Deception Policy Statement" is one that suggests or omits a critical fact in an attempt to mislead customers. Similarly, an “unfair” advertisement is categorized as one using a deceptive practice that may result, or has resulted in, significant customer harm. Typically, the harm caused could not be avoided by the customer, and minimal benefit is experienced by any of the clientele engaging in the same practice.

The Federal Trade Commission (FTC) is charged with investigating national ads to determine whether they are fraudulent. Local advertising, on the other hand, is usually the domain of agencies of the county, state, or city, such as the Better Business Bureau (BBB). In both cases, certain criteria are used to evaluate the “words, phrases, and pictures” within the endorsement to identify potential deception. Deception is characterized as that which a “reasonable consumer” would falsely believe to be true.  All investigations are confidential until legal action is commenced or a claim is settled.   

There are several remedies available for deceptive claims, including the issuance of a cease and desist order.  Such an order prohibits a business from continuing to disseminate misleading or dishonest advertisements.  A cease and desist order is often combined with substantial fines or with a requirement that the offending company authenticate any and all future ads.  Other penalties may compel a business to notify its customers of the false ads, or to provide refunds for falsely advertised purchases.    

Unfair competition may also come into play in cases of deceptive advertising. Companies that feel they have been unfairly treated by competitors may have legal recourse. The National Advertising Division (NAD) is associated with the BBB, and an aggrieved party may file a cause of action against a competitor through NAD.  Depending on the specific circumstances, a business may have the legal authority to sue its rival for posting deceptive ads under the Lanham (Trademark) Act. Individuals who feel their businesses have been harmed by the false or deceptive advertising practices of a competitor may have remedies available to them. A reputable business attorney is in the best position to give advice about which course of action should be pursued.


Monday, August 22, 2016

What Employers Should Not Ask In An Interview

Most employers know that their workers are protected from discrimination while they are employed.  Surprisingly, some are unaware that prospective employees are protected throughout the application and hiring process as well.  Title VII of the Civil Rights Act of 1964, Title I of the Americans with Disabilities Act, the Pregnancy Discrimination Act and the Age Discrimination in Employment Act of 1967, as well as other Federal and state laws, are all applicable to prospective employees.  Therefore, employers must be extremely careful about the questions they ask individuals applying for a position.

Employers should shy away from asking any questions that might give a prospective employee reason to believe they were not selected for a position due to discrimination.  Employers should not inquire about an applicant’s race, unless it is for an Equal Employment Opportunity Commission purpose (which should be noted).  They should also not ask about an applicant’s citizenship status and instead should inquire as to whether the individual has authorization to work in the United States.

Employers should also be sensitive to discrimination based on gender and sexual orientation when conducting interviews.  They should not ask gender-related questions or anything regarding pregnancy or children.  It is also not a good idea to ask a prospective employee about marital status or religion.  An employer might be concerned that a prospective employee will miss work due to young children or religious holidays.  But, if they are concerned about an applicant’s attendance, they should only ask about attendance records at previous places of employment.  Now, many states have laws relating to discrimination based on sexual orientation and employers should be careful not to inquire about this detail as well.

Individuals with disabilities are protected under Federal and state law.   An employer should never ask about a disability.  All that matters is that the individual is able to perform job duties, so an employer should only inquire about functioning in that respect.  For example, if the applicant is interested in an inventory position that requires standing for the entire 8 hour shift and lifting heavy boxes, but the applicant suffers from a disability, the employer should only ask whether their disability prohibits them from performing these duties.  Many states now have or are in the process of passing laws that prohibit discrimination based on criminal convictions, so employers should be aware not to ask about an applicant’s criminal history unless they are sure it is allowed under their state’s law.  For the same reason, employers should not ask about credit history or personal finances unless these characteristics have a direct affect on the applicant’s ability to do their job. 

If you are a business owner, it is in your best interest to put together a list of interview questions for prospective employees and to review that list with an experienced attorney.  You should also be sure that all of the parties conducting interviews are aware of the rules relating to interview questions and abide by them.


Monday, August 15, 2016

Avoiding Common Mistakes in Estate Planning

Estate planning is designed to fulfill the wishes of a person after his or her death. Problems can easily arise, however, if the estate plan contains unanswered questions that can no longer be resolved after the person's demise. This can, and frequently does, lead to costly litigation counter-productive to the goals of the estate. It is important that will be written in language that is clear and that the document has been well proofread because something as simple as a misplaced comma can significantly alter its meaning.

Planning for every possible contingency is a significant part of estate planning. Tragic scenarios in which an estate planner’s loved ones predecease him or her, though uncomfortable, must be considered during the preparation of a will to avoid otherwise unforeseen conflicts. 

Even trained professionals can make significant mistakes if they are not well versed in estate planning. An attorney who practices general law, while perfectly capable of preparing simple wills, may not understand the intricacies of trusts and guardianships. A great many attorneys, not aware of the tax consequences of bequests involving IRAs, may leave heirs with unnecessary financial obligations. If an attorney is not knowledgeable enough to ask the proper questions, he or she will be unable to prepare an estate plan that functions efficiently and ensures the proper distribution of the estate's assets.

In spite of the wealth of an individual, the estate may be cash deficient if that wealth is tied up in assets at the time of the individual's death. Problems can also result if an estate planner has distributed assets into joint bank accounts or accounts with pay on death provisions. If the executor of the estate does not have access to funds to pay the estate's bills or taxes, the heirs of the estate may run into trouble.

Even if estate planning is handled well from a logistical point of view, lack of communication with loved ones can interfere with a will's desired execution. A tragedy that incapacitates the testator can occur suddenly, so it is imperative that a savvy estate planner confers with loved ones as soon as possible, making them aware of any future obligations, such as life insurance premiums that must be paid and informing them of the location of any probate documents and inventories of assets. Such conversations ensure that the individual's wishes will be carried out without complications or delay in the event of an unexpected incapacity.

In addition to communicating logistical information, it is also essential to schedule a personal conversation with loved ones that makes clear any sentimental bequests or large gifts that require explanation. This avoids the shock or discomfort that may arise after one's death during which a well-thought-out decision is questioned as impulsive or irrational. Such direct communication of one's plans avoids unnecessary envy, arguments or rivalry among family and friends.

Consulting with attorneys who specialize in estate planning is the cornerstone of creating a plan to ensure that one's desires are carried out and that all the bases are covered. Estate planning attorneys serve as invaluable repositories of all information necessary to strategizing a plan that not only meets one's personal needs and desires, but is legally binding.


Monday, August 8, 2016

When Must a Business Charge Sales Tax on Out-of-State Purchases?

A 1992 Supreme Court decision Quill Corp. v. North Dakota established the principle that an out-of-state retailer does not have to collect state sales tax if it does not have a physical location—a store, business office, or warehouse—in the state where the purchase originated.

Theoretically, the consumer placing the order in a state that has a sales tax could be responsible for paying the tax on an out-of-state order.  An out-of-state retailer can voluntarily collect sales tax and remit it to the state, but there is no legal obligation for it to do so.  Because requiring consumers to "self-report" on large numbers of small transactions is burdensome, states generally do not do it, except on very expensive out-of-state purchases.

 

Sales Taxes on Online Transactions 

The long-established principle that out-of-state stores with no in-state presence need not collect sales tax has been challenged in the Internet era.  Many brick-and-mortar businesses have complained that out-of-state online companies have an unfair advantage because they do not have to charge customers sales tax.  States have also lost billions in sales tax revenue to tax-free online orders. 

In 2008, New York enacted the so-called "Amazon Tax" forcing Amazon and similar e-tailers to collect sales tax.  New York got around the Quill requirement of a physical presence in the state because Amazon has countless affiliates and "associates" marketing products through it, and some of those are located in New York.  Other states have enacted similar laws.  Illinois, for example, passed the "Main Street Fairness Act" targeting online retailers with affiliates in Illinois.  Currently Amazon collects sales tax in 23 states.

Some online retailers, such as Overstock.com, have cancelled affiliate programs in states with an "Amazon Tax" to avoid having to collect state sales taxes.

 

Which States Have an "Amazon Tax"?

Currently 23 states have sales taxes on online retailers like Amazon:

Arizona

California

Connecticut

Florida

Georgia

Indiana

Kansas

Kentucky

Maryland

Massachusetts

Minnesota

Nevada

New Jersey

New York

North Carolina

North Dakota

Pennsylvania

Tennessee

Texas

Virginia

Washington

West Virginia

Wisconsin

South Carolina will start collecting tax in 2016.  Five states have no sales tax at all -- Alaska, Delaware, Montana, New Hampshire, and Oregon.  Others have yet to target online businesses.

 

Summary

Businesses online or off that have no physical connection to a state, other than shipping products to it, are generally shielded from having to collect sales tax by Quill.  Businesses that have a physical presence in a state may have to collect sales tax if required by state law.  Those with no physical presence but with representatives, affiliates or associates in a state may be required to collect state sales tax by laws like the Amazon Tax.  An experienced business law attorney can assist you in determining whether you are obligated to collect sales taxes.


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.


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