FraserTrebilcock Blog
Avoiding a Last Will & Tusslement
May 16th, 2012
Many people leave their assets to their surviving spouse, then equally to their children. What happens when a person leaves unequal shares to his or her children? Is there a way to do this without causing a knock-down-drag-out fight between the kids? Jane Bryant Quinn discusses this in her article, “Leaving a Fair Will,” in the May 2012 AARP magazine. Perhaps the best way to prevent the kids from battling World War III is to plan ahead and plan well. Work with an experienced estate planning attorney. Inform your children of your plan while you are alive; doing this is probably the best way to diffuse a potentially volatile situation after you are gone. For more information in estate planning or engaging your children in estate planning please contact Marlaine C. Teahan, Chair of the Trusts & Estates Department, at (517) 377-0869 or mteahan@fraserlawfirm.com, or visit us on line at www.fraserlawfirm.com.
Mothers Day may be over, but you should still consider giving a gift in 2012
May 14th, 2012
The next seven months provide tax-free gifting opportunities for many that may never be available again. The 2012 federal estate, gift, and generation-skipping transfer tax rates are the lowest (35 percent), and the corresponding exemption amounts the highest ($5,120,000), they have ever been. And, unless Congress takes action, these rates are scheduled to increase (to 55 percent, or 60 percent for estates over $10,000,000), and the exemptions to decrease (to $1,000,000, except that the exemption for the generation-skipping transfer tax will be adjusted for inflation), effective January 1, 2013. Given that no one knows with certainty what Congress will do, if anything, individuals should explore and take advantage of the current tax-free gifting opportunities available to them, and quickly. By taking action in 2012, an individual can remove up to $5,120,000 (or $10,240,00 if married) of assets from his/her estate that would otherwise be subject to the federal estate tax upon his/her death. But this opportunity is not just for the very wealthy. Unmarried couples; individuals who make gifts of more than $1,000,000; and individuals who used up their lifetime gift tax exemption prior to 2012 when it was a lower exemption amount; may also benefit from the current tax-free gifting opportunities available this year. Simply writing a check to effectuate an outright gift is one way to do this. But other options include forgiveness of debts, transfers of real property, and other sophisticated transfer vehicles that maximize the tax-free transfer of wealth, such as: gifting interests in family limited partnerships or family limited liability companies; Grantor Retained Annuity Trusts (GRATs); Intentionally Defective Grantor Trusts (IDGTs); other special types of trusts; intra-family sales; and other bona fide transactions. Now is the time to meet with your team of trusted advisors, including your accountant, financial planner, and estate planning attorney, to explore the options available to you and implement a plan that is unique to your situation before this valuable tax-free gifting opportunity expires at the end of the year. For more information, contact Melisa Mysliwiec at Fraser Trebilcock, 40 Pearl Street NW, Suite 910, Grand Rapids, Michigan 49503, (616) 301-0800, or e-mail her at mmysliwiec@fraserlawfirm.com. You may also reach Melisa, or any other member of Fraser Trebilcock’s Trusts and Estates Department, at its Lansing office, located at 124 West Allegan Street, Suite 1000, Lansing, Michigan 48933, (517) 482-5800.*This article first appeared in the Ingham County Legal News
Borrowers: Foreclosed, Struggling or Underwater? You May be Eligible for Portion of $26 Billion Settlement
April 20th, 2012
In February 2012, 49 states, including Michigan, reached a $26 Billion settlement with five of the nation’s largest mortgage lenders over foreclosure practices previously utilized by these financial institutions. Earlier this month, the settlement was approved by a federal judge. The settlement is designed to provide restitution to borrowers who were improperly foreclosed on between 2008 and 2011. In addition, borrowers who are currently struggling with their mortgage payments or have homes that are underwater may be eligible to receive assistance from the settlement fund. Ultimately, the settlement may provide relief and assistance to countless borrowers struggling with our current housing crisis. The settlement reached with the five financial institutions is incredibly complex and involves hundreds of pages of procedures, guidelines and policies. Below, the Real Estate Practice Group has summarized the main components of the settlement and the groups of borrowers who may be eligible to file a claim against the settlement fund. Payments to Foreclosure Victims A portion of the settlement fund has been earmarked to compensate borrowers who were improperly foreclosed on between January 1, 2008 and December 31, 2011. In order to qualify, your mortgage must have been with either: 1) Bank of America; 2) Citibank; 3) JPMorgan Chase; 4) Wells Fargo; or 5) Ally Financial (formally GMAC, Inc.). In addition to this threshold requirement, there are a number of other criteria that must be met. Mortgage giants Fannie Mae and Freddie Mac are not covered by this settlement. If you qualify, you will likely receive a letter from your lender advising you of your rights to submit a claim for payment from the settlement fund. Eligible borrowers are expected to receive a payment of approximately $2,000. However, this amount will depend on the number of claims that are filed. Borrowers who lost their homes to foreclosure during this time period are unlikely to get their homes back. Relief for Struggling Homeowners The settlement is also designed to assist borrowers who have the intent and ability to stay in their homes while making reasonable payments on their mortgage loans. Here, the settlement fund will be used to reduce the principal balance of home loans for borrowers who are in default or at risk of default on their loan payments to the applicable financial institutions. Principal reductions will likely yield lower payments and may give borrowers an opportunity to preserve their homes. In addition to lowering eligible borrowers’ mortgage payments, the settlement will be used to support a number of important programs. These programs include: relocation assistance for homeowners facing foreclosure, waiving of deficiency balances, funding for remediation of blighted properties, facilitation of short sales, unemployed payment forbearance and benefits for servicemembers. If you believe that you qualify for one or more of these programs, you should contact an attorney to discuss your eligibility and the requirements to receive assistance. Refinancing of Underwater Homes The settlement fund will also be used to assist borrowers who are not delinquent on their payments but cannot refinance to lower interest rates because of negative equity problems. If you are upside-down on your mortgage with one of the covered financial institutions, you may be eligible to refinance your home. At a minimum, a borrower must be current on his or her mortgage payments, have a loan to value ratio in excess of 100% and must have a current interest rate in excess of 5.25% to be eligible to participate in the refinancing program. However, there are a number of types of loans that are excluded from the refinancing program, and there are additional requirements that must be satisfied to be eligible. According to the settlement, a borrower’s refinanced interest rate must reduce monthly mortgage payments by at least $100. Release of Claims Under the settlement, the states will not pursue civil charges against the settling financial institutions related to mortgage abuses. However, state and federal authorities can pursue criminal charges. In addition, borrowers and victims of improper foreclosures are not required to release any claims against the financial institutions and are free to seek additional relief in civil courts. The states’ release of claims does not apply to third parties who may have provided default or foreclosure services for the financial institutions. Payments to the States Michigan and the other states participating in this settlement will each receive a portion of the settlement fund. These funds are designed to be used by the states to avoid preventable foreclosures, ameliorate the effects of the foreclosure crisis, enhance law enforcement efforts to prevent and prosecute financial fraud, deceptive acts or practices, and compensate the states for costs resulting from the conduct of the covered financial institutions. Ultimately, each state will be responsible for developing its own programs and procedures to effectively use these funds to assist its citizens with the current housing crisis. Conclusion The settlement reached with Bank of America, Citibank, JPMorgan Chase, Wells Fargo and Ally Financial (formally GMAC, Inc.) will likely provide relief and assistance to countless borrowers throughout the country. If you have been foreclosed on, struggling with your current mortgage payments or underwater on your existing mortgage, you may be eligible to receive a portion of the settlement fund. You should contact an attorney to discuss your eligibility and the requirements for recovery under the various programs. For more information, please contact an attorney in Fraser Trebilcock’s Real Estate Practice Group.
Avoid Pinning Your Name to a Copyright or Trademark Infringement Lawsuit
April 10th, 2012
Pinterest has quickly developed as the latest innovation in the social media evolution. Pinterest is a virtual pinboard that allows a user to organize and share images with other Pinterest users. A user “pins” an image to his or her pinboard by either uploading an image from his or her computer or using the “Pin It” button integrated into his or her web browser after downloading the Pinterest program. Each pin added using the Pin It button links back to the website where the image was pinned from. Images that have been pinned to a pinboard can be re-pinned by other users that desire to add the image to their own pinboard. Although Pinterest may be the latest tool for social media marketers to engage with their company’s customers and consumers, pinning and re-pinning images may have serious legal consequences. If a company only pins images that it has created or purchased, it will likely avoid legal difficulties. Because the company owns the image, it can publish and distribute the image as it sees fit. However, if a company pins images found on other pinboards or other websites, it runs the risk of violating the copyright protection afforded to the owner of the image. Similarly, if a company pins images that encapsulate the trademarks of other companies or the depictions of celebrities, it may also be exposed to potential trademark infringement lawsuits. How can marketing professionals realize the benefits of Pinterest while avoiding its pitfalls? The only way to ensure that you do not pin your company’s name to a copyright or trademark infringement lawsuit is to only utilize images that are in your company’s image portfolio. Here too though, one must be careful. Often times, a company licenses images from an external source to use in its marketing efforts. Before you pin an image that your company has licensed, it is important to make sure that the applicable licensing agreement allows for this type of use. As for the rest of the images that you find on the web, most will require the author’s permission before you use them in your latest social media marketing campaign. To find out more about the legal implications of your company’s social media marketing activities, visit www.fraserlawfirm.com or contact attorney Daniel Cherrin at 313.965.9039 or attorney Michael James at 517.377.0823. We look forward to assisting you with your social media business needs.
U.S. Supreme Court to Decide Constitutionality of the Affordable Care Act
April 2nd, 2012
The Patient Protection and Affordable Care Act (“ACA”) became law on March 23, 2010. The ACA created sweeping reform to the health care system in the United States. The driving principles behind the ACA are to provide affordable health care to all Americans, reduce the growth of the health care costs and improve the health of our communities. While most agree that the underlying principles of the ACA are fundamentally sound, not everyone agrees with the methodology used to achieve these goals. Opponents of the ACA have questioned the constitutionality of the law. Specifically, the challengers have argued that Congress does not have the authority to force Americans to buy health insurance. Under the “individual mandate” provision of the ACA, nearly all United States residents will be required to maintain a minimum monthly level of health insurance coverage beginning in 2014. If one fails to maintain the requisite coverage, he or she will be subject to a penalty that will be reflected in the individual’s federal tax return. Opponents believe that this penalty is nothing more than an impermissible tax that further invalidates the ACA. Disputes involving the legality of the ACA have sprung up in federal courts across the country and have finally culminated before the United States Supreme Court. Last week, the Supreme Court Justices heard an unprecedented three days of oral arguments regarding the constitutional issues potentially impacting the legality of the ACA. Last Friday, the Justices met to decide the fate of the ACA. However, it will likely be several months before the Court’s decision is finalized in a formal written opinion. Until then, we are left to speculate about the outcome based on the Justices’ questions and comments during oral arguments. Popular opinion about which direction the Supreme Court will lean has teeter beck and forth like a seesaw. Before the start of oral arguments, many believed that the individual mandate would withstand constitutional scrutiny. However, the nature and scope of the inquiries from the traditionally conservative portion of the Court coupled with the lackluster arguments advanced by the Obama administration’s lawyer have caused many to believe that the individual mandate may be in serious trouble. There is some consensus that Justice Kennedy’s vote will ultimately determine the fate of the ACA. Yet, there is no consensus about which side Justice Kennedy will ultimately support. This week’s oral arguments failed to shed light on Justice Kennedy’s position as his questions and comments seemed to acknowledge the legitimacy of positions advanced on both sides of this dispute. The Health Care Practice Group of Fraser Trebilcock will continue to monitor the status of this important case. Once the Supreme Court’s opinion has been issued, Fraser Trebilcock will provide an in-depth analysis of how the ruling impacts our health care system. In the interim, please do not hesitate to contact us regarding all of your health care law needs. For more information visit www.fraserlawfirm.com or contact Lansing Attorney Mike James at 517.377.0823.
Fraser Trebilcock Attorneys Give a Presentation to the Greater Lansing Association of REALTORS Regarding Tax Laws Affecting Real Property
March 30th, 2012
When it comes to the purchase and sale of real property, tax issues require careful attention. Substantial tax benefits are available to a potential seller. For example, from a federal tax perspective, a seller can exclude $250,000 of gain on the sale of his or her home if the seller resided in the home for two of the last five years. The exclusion is $500,000 for married couples who file a joint return. The Internal Revenue Code also provides for a tax-free exchange if certain requirements are met. Generally, the exchange must use a third party intermediary, the seller of the first property must identify three properties within 90 days of the first sale, and the purchase on one of the three identified properties must close within 180 days of the first sale. An exchange meeting these requirements will be tax free. There is also the related issue of how to own real property. Potential purchasers often ask whether it is better to have one LLC own several properties or whether it is better to have a separate LLC for each property. The answer: there is no one size fits all solution, it really depends on risk tolerance and it is best to work with legal counsel to determine what best meets your needs. State property tax appeals and the Michigan Tax Tribunal are also relevant to the purchase and sale of real property. The Tax Tribunal is an administrative court that hears disputes regarding a variety of tax matters, including real and personal property taxes. Some tax appeals, for example, those with a taxable value dispute equal to or less than $100,000, are filed with the Tribunal’s Small Claims Division and are, generally, heard in the county where the property is located. Other tax appeals, for example, those with a taxable value dispute greater than $100,000, are heard before the Tribunal’s Entire Division, which is down the street from Fraser Trebilcock’s Lansing office. In recent years, we have seen a decrease in real property values. In response to this, we have also seen an increased number of tax appeals filed each year. As such, a pending tax appeal has become more common during a real estate sale. When they are, a seller should disclose such matters to a potential real estate buyer and after the transaction has closed, the buyer may be substituted or added as a party to the pending tax appeal. To view our presentation, click on the following link: watch?v=_l0BqSnVPag. For questions regarding federal tax matters, contact Ed Castellani at 517.377.0845 or at ecast@fraserlawfirm.com. For questions regarding property tax appeals, contact me, Loukas P. Kalliantasis, at 517.377.0893 or at lkall@fraserlawfirm.com.”
The constitutional rights of free speech and petition for redress of grievances
March 30th, 2012
The United States and Michigan constitutions guarantee our rights to free speech and to petition the government for the redress of grievances. During the past week, we have seen graphic and contrasting examples of these rights in action. The federal and state constitutions protect both examples equally. However, one would hope to hear less of the local speech and would also hope that the national example would have a positive influence upon the nature of political discourse in this country and state. In Detroit during an open meeting of the financial review team charged with the task of reviewing the City’s financial affairs and working to develop a workable solution to the City’s dire financial condition, the minister of a local church shouted his disapproval of the financial team’s work and said words to the effect that rather than allow the team to “take over the city, we would burn it down first.” The anger, resentment and ignorance which were the foundation for that statement graphically illustrated at least one of the reasons for Detroit’s deterioration during the past 45 or more years. In marked contrast to the speech of the Detroit minister on Monday March 26, the United States Supreme Court on the same day began its unprecedented 3 days of hearings regarding the challenges to the federal health care law. While the streets of Washington DC were filled with opponents and supporters of the law, the attorneys for the law’s challengers and defenders presented their arguments before the highest court in the land. They continued their presentations on the 27th and the 28th; a decision is expected in June of this year. The adoption of the federal health care law has angered many persons and has provided fodder for many in the media and on the campaign trail. In many instances we have heard emotionally-based statements about the law. Regardless of one’s personal opinion about the federal health care law, one had to appreciate the fact that the courts, and at the end of the day the Supreme Court, provided a forum within which the law’s challengers and proponents could make their arguments. Also, during the evening newscasts after each day of the Supreme Court’s hearing, especially those on National Public Radio, guest commentators provided keen and reasoned insight about and comment upon the arguments of the health care law’s opponents and supporters. They also presented their respective predictions as to how the Justices would rule. Sitting side by side in a radio studio or in a court room, the advocates respected each other and respected the process in which they were participating. The contrast with the speech at the Detroit meeting was obvious and striking. Litigation is not always an appropriate avenue to redress one’s grievances. It is certainly not going to solve the City of Detroit’s dilemma. However, our state and federal courts provide a forum and a structure within which one’s claims and concerns can be addressed and ruled upon in a reasoned and rational manner. Time will tell how the Supreme Court will rule in the federal health care case. However, we can be sure that the attorneys who represent the non-prevailing side will not threaten to burn anything. For more information, please contact Lansing Attorney Mike Perry or visit www.fraserlawfirm.com.
Type of Business Entity: Corporation versus LLC
March 13th, 2012
As a business and tax attorney I am frequently asked by clients whether a corporation or an LLC is a better entity for their new business. My response is that each entity has certain advantages and a review of the intended use for the new business and the goals of the owners/investors must be made before that question can be definitively answered. The factors to consider include the following: Organizational structure: From an organizational perspective an LLC’s owners are known as members, and the LLC may provide for managers who would have the management authority in an LLC. If the LLC does not provide for managers the members have all management authority and would sign all agreements and contracts on behalf of the LLC. A corporation’s owners are shareholders and they elect officers and the Board of Directors. The Board makes management decisions and the officers carry them out under their authority as contained in the bylaws. Some business owners like the familiar structure of a corporation with shareholders, officers and directors and their clearly defined roles and authority as opposed to an LLC with members and managers. An LLC Operating agreement can authorize the LLC members to elect officers with the authority listed in the operating agreement if the owners would like to form an LLC but have officers as customarily found in a corporation. Liability protection: Both entities have the same liability protection for owners if properly set up and operated. Federal Tax Differences: One significant difference between the two is the tax consequences. An LLC is a pass-through tax entity so that all profit and loss of the LLC is reported on the owner’s personal tax return and taxed at the owner’s personal tax rate. A single member LLC does not file a separate annual tax return as all revenue and expense is reported on Schedule C of the owner’s personal tax return, while a multi-member LLC must file an annual tax return with the IRS. An LLC is not required to hold an annual member meeting, unlike a corporation which is required to hold an annual shareholder and director meeting. Since a single member LLC does not file a tax return and does not have to conduct an annual meeting it is generally a less expensive entity to operate from an accounting and legal cost perspective. A C corporation (a corporation which has not elected to be taxed as an S corporation) is a taxable entity and any net profit or loss is taxed in the corporation. Under current tax law the first $50,000 of net income left in the corporation is taxed at 15% and rates go up to 34%. This 15% rate is an attractive rate if the corporation intends to re invest earnings in the entity and build up the business. The corporation can later elect to be taxed as an S corporation, which is a pass through tax entity like an LLC, in which case the profit or loss is reported on the shareholder’s personal tax return, similar to an LLC. An S corporation provides an opportunity to pay less payroll tax on earned income if the owner takes earnings out of the corporation as an S corporation dividend rather than compensation since S corporation dividends are not subject to social security and Medicare tax. On the other hand all earnings from an LLC will be subject to 15.3% social security and Medicare tax for those members who have earned income from the LLC. The IRS has been paying close attention to payment of wages versus dividends so a taxpayer must be careful that they pay close attention to the law in this area. When a C Corp converts to an S corporation the S corporation must wait ten years before it can sell its assets and avoid the gain at the corporate level. Because of this so-called built in gains tax, if a sale of the business assets is possible within ten years, you may want to elect S corporation status for the corporation at the time of formation to eliminate the ten year waiting period. A single member LLC can be a shareholder of an S corporation as can grantor trusts but a testamentary trust or estate can only be an S corporation shareholder for two years. Members of an LLC will receive a basis increase for third party loans to the LLC while shareholders of S corporations will not get a basis increase for third party loans to the S corporation even if they have personally guaranteed the loan. Michigan Tax Differences: The new Michigan Corporate Income Tax of 6% of net income, which recently replaced the Michigan Business Tax, does not tax LLCs or S Corps, but does apply to C corporations once gross receipts exceed $350,000. For more information, please contact Edward J. Castellani at 517.377.0845 or at ecast@fraserlawfirm.com. The above information is not intended to be legal, tax, or investment advice. Please consult with your attorney on the issues described above and visit www.fraserlawfirm.com.
Special Estate Planning Opportunity For Estate Tax Portability Election.
February 24th, 2012
The IRS issued a news release on February 18, 2012 announcing the Extension of Deadline for Certain Qualifying Estates to File an Estate Tax Return to Make a Portability Election Benefiting Surviving Spouses. On February 18, 2012 the IRS issued Notice 2012-21, which grants qualifying estates a six month extension of time for filing a Federal Estate Tax Return (Form 706). With this Notice, the IRS is allowing qualifying estates an extension even if the personal representative (executor) did not file a Form 4768 (Application for Extension of Time to File a Return and/or Pay U.S. Estate Taxes) within nine months after the decedent’s date of death, and therefore the estate did not receive the benefit of the automatic six-month extension. A qualifying estate under this notice is for estates of decedents dying in the first six months of 2011. An executor of a qualifying estate that wants to obtain the extension granted by Notice 2012-21 must file the application for a six-month extension (Form 4768) no later than 15 months after the decedent’s date of death. With the extension granted by this notice, the Form 706 of the qualifying estate will also be due 15 months after the decedent’s date of death. For more information, please contact Lansing Attorney Mark Kellogg at (517)377-0890 or mkellogg@fraserlawfirm.com. Also, please visit www.fraserlawfirm.com for more information.
Unclaimed Property – Is it yours??
February 16th, 2012
You might be surprised to find your name on the list of individuals and businesses with items of unclaimed property being held by the State of Michigan. Types of property being held are varied but include things such as undeliverable refund, dividend or payroll checks, life insurance proceeds, and even forgotten bank balances. Recently, Michigan has pushed financial institutions and other companies to turn over unclaimed property to the State. This push has resulted in more and more people showing up on the lists of unclaimed property. To find out if Michigan has any of your property, go to www. michigan.gov/treasury and click on Unclaimed Property. Even if you checked this website a year ago, you might find that additional property has now surfaced. Don’t wait too long though, there are deadlines involved to claim your assets before they escheat (are turned over) to the State for good. While you are checking for your name, don’t forget to check the names of closely held businesses, friends and loved ones, living and deceased. The Estate of a deceased person, or heir, can often file a claim as well. It’s best to first try your last name, then narrow your search if necessary. Also, try variations of your name (with and without middle name or initials, using maiden name and married name). Try various spellings and misspellings too as keystroke errors are evident on these lists. If you find an asset that appears to be yours, another link will lead you to a form to complete to file a claim. The State estimates that the process will take at least four months but — it should be worth the wait! If you need assistance with this process, call me at 517-377-0869.