The year 2010 was often called "the best year to die rich." Let me be the first to coin 2011 and 2012 as "the best years for the rich to gift." Estate tax levels were set to revert back to pre-2001 levels at the end of the 2010, but, thanks to the last minute actions of the current administration, the estate tax holiday was extended through 2012.
This extension, with the passing of the 2010 Tax Relief Act (TRA), provides significant estate planning opportunities to consider. With the passing of the TRA, not only are the individual estate tax exemptions extended ($5 million/individual or $10 million combined portable marital exemption), additionally the gift tax exemption was unified with the estate tax exemption. In other words, you don't have to die to take full advantage of this 2 year extension!
In 2010, the gift tax exemption was limited to $1 million, and taxed at up to 35% thereafter. For 2011 and 2012, an individual or married couple can make tax exempt gifts up to $5 million (individual)/$10 million (couple). Keep in mind this gift tax exemption is unified with the estate tax exemption, thus any amounts passed by gift or estate over and above these amounts will be subject to the applicable gift/estate tax rates in place at that time.
However, given the uncertainty of how long these exemptions will last, gifting over the next two years is an attractive consideration. This two year window is not only an ideal opportunity to reduce the size and tax exposure of your estate, it is also as favorable of a climate we have seen for transitioning family businesses.
Wednesday, March 30, 2011
Thursday, February 17, 2011
Walker's Budget Repair Bill
The Wisconsin constitution requires a balanced budget. In recent years, the legislature has knowingly operated with a budget deficit. Additionally, our representatives have robbed from Peter to pay Paul, including the recent raid of the patient's compensation fund which the state has been ordered by the Wisconsin Supreme Court to return to the fund. The time has come that something needs to be done before the state is insolvent. The question is, "should it come at the expense of state employee unions?"
Unions have generally served a significant and purposeful role in employment matters. The right to unionize has been recognized for the better part of the last century. Governor Walker has claimed the state and local governments can not bargain when they have nothing to offer. Do these circumstances give rise to disregarding collective bargaining agreements?
Regardless of one's position on this issue, one thing is clear: the time has come for our government to be fiscally responsible. Requiring state workers to contribute to benefits similar to those employed in the private sector would appear to be a better alternative than mass layoffs.
Unions have generally served a significant and purposeful role in employment matters. The right to unionize has been recognized for the better part of the last century. Governor Walker has claimed the state and local governments can not bargain when they have nothing to offer. Do these circumstances give rise to disregarding collective bargaining agreements?
Regardless of one's position on this issue, one thing is clear: the time has come for our government to be fiscally responsible. Requiring state workers to contribute to benefits similar to those employed in the private sector would appear to be a better alternative than mass layoffs.
Wednesday, July 22, 2009
UPDATE: AAA Follows NAF
In a very interesting announcement, the American Arbitration Association has announced that it will follow the NAF in ceasing to do consumer debt arbitrations.
It appears that the not-for-profit AAA did not have the same legal issues that the NAF had, nor had the AAA been sued for the same things the NAF were sued for. However, the AAA said it will cease taking this type of arbitration cases “until some standards or safeguards are established.”
Read more about the AAA decision here: http://blogs.wsj.com/law/2009/07/22/an-arbitration-revolution-aaa-joins-naf-stops-taking-new-cases/
This furthers the questions I raised in my earlier blog post. As a consumer, now that NAF and AAA are out of the picture, does this now grant me the right to sue in state court, even though I signed away that right in the agreement?
It appears that the not-for-profit AAA did not have the same legal issues that the NAF had, nor had the AAA been sued for the same things the NAF were sued for. However, the AAA said it will cease taking this type of arbitration cases “until some standards or safeguards are established.”
Read more about the AAA decision here: http://blogs.wsj.com/law/2009/07/22/an-arbitration-revolution-aaa-joins-naf-stops-taking-new-cases/
This furthers the questions I raised in my earlier blog post. As a consumer, now that NAF and AAA are out of the picture, does this now grant me the right to sue in state court, even though I signed away that right in the agreement?
Monday, July 20, 2009
National Arbitration Forum Stops Arbitrating
It appears that the National Arbitration Forum has closed its doors (mostly). In settlement of the claims against it by the Minnesota Attorney General, the NAF has agreed to cease almost all arbitrations that it currently offers (it has retained the right to do internet domain name arbitrations).
This is significant in that the NAF was one of the go to arbitration panels utilized by credit card companies in their mandatory arbitration clauses. What will this do to the arbitration clauses? Who will become the arbitrator of record? What does this do to cases that went through arbitration to conclusion? At this point we will wait and see.
Thanks to http://www.indisputably.org/ for their coverage of this case.
This is significant in that the NAF was one of the go to arbitration panels utilized by credit card companies in their mandatory arbitration clauses. What will this do to the arbitration clauses? Who will become the arbitrator of record? What does this do to cases that went through arbitration to conclusion? At this point we will wait and see.
Thanks to http://www.indisputably.org/ for their coverage of this case.
Thursday, July 16, 2009
When Your Brilliant Business Mind Can Get Your Business in Trouble
There is a legal adage that every first year law student has likely heard, if not recited numerous times: “the man who represents himself has a fool for a client.” While there are certainly instances of untrained intelligent people winning cases in a court of law, the saying might never be truer than for business owners in Wisconsin. This is because in many instances, the failure to hire an attorney might not only be unwise, but also give the opposing party the easy route to an automatic win.
One popular business form boasts well established rules. Wisconsin corporations are bound by statute to be represented in court (excluding small claims cases) by an attorney. This provision can be especially relevant for business owners choosing the S-corp form of business. While many attorneys advise their clients on the tax benefits of pass-through taxation for an S-corp, relatively few address the ramifications with their new business owner clients.While nearly every entrepreneur gets into business with the intention of running an honest, respectable business that is beyond legal reproach, lawsuits are inevitable. Whether it be a customer who can not be satisfied, a vendor who overcharges, or simply someone not paying a bill, if any controversy exceeding $5,000 (with few exceptions) ends up in court, the corporation may be in a precarious position. Many business owners, whether for economic reasons, or the belief that they are equipped to handle the opposing party in court, choose to represent themselves. The effects can be far reaching. As a practical matter, this means the owner is in violation of the Wisconsin statute and the judge may not be forgiving.
When a Complaint is filed in any lawsuit, an Answer needs to be filed shortly thereafter. Failure to do so can result in the court granting the party filing the lawsuit a default judgment, which in effect, means the non-answering party admits all of the allegations in the lawsuit, and the plaintiff is usually granted whatever relief they sought. When a business is a party to the lawsuit, many owners believe they may appear in court and file an Answer on behalf of the company they own. In many cases, owners file their Answer within the statutory period for doing so. However, savvy Plaintiff’s lawyers are increasingly recognizing the lack of an attorney’s signature on the Answer. Wisconsin cases have recognized that the statute requires an attorney to represent the corporation, and the Answer, unsigned by a licensed practitioner of the law, is not legally recognized. The Plaintiff is able to ask the court for a default judgment as if no action had been taken by the Defendant at all, and they had simply let the time period for answering lapse.
Once the default judgment has been granted, even the subsequent hiring of an attorney might not be enough to get a fair hearing in court. The attorney must move to reopen the case, and judges are not always inclined to allow a reopening, even for parties with compelling cases that may have attempted to make an answer previously. Upon receiving a judgment, the Plaintiff can establish a lien against the assets of the corporation.
While the rules for the corporation are well defined, the rules for an entity operating as a Limited Liability Company or “LLC” are less absolute. The statutes do not specifically mention an LLC as an entity that requires representation by an attorney in lawsuits, and to date, there is no case clearly defining whether the LLC falls within the scope of the statute. However, there are good reasons to believe the requirement of legal representation extends to this type of entity. The LLC, in most legal respects, is treated like a corporation. Members, like shareholders of a corporation, enjoy legal protections from liabilities of the company. While there are differences between the types of business entity, this seems the most compelling and important one when considering the LLC. If the LLC is treated like the corporation, and indeed, in lower courts it has happened on numerous occasions, the LLC may also face the possibility of having default judgment entered against it, even in cases where a member or owner has filed an otherwise appropriate Answer.
A new business owner has many choices when deciding upon the type of entity for its operations. Do not let your company incur debt by failing to follow the statutory requirements of legal representation.
One popular business form boasts well established rules. Wisconsin corporations are bound by statute to be represented in court (excluding small claims cases) by an attorney. This provision can be especially relevant for business owners choosing the S-corp form of business. While many attorneys advise their clients on the tax benefits of pass-through taxation for an S-corp, relatively few address the ramifications with their new business owner clients.While nearly every entrepreneur gets into business with the intention of running an honest, respectable business that is beyond legal reproach, lawsuits are inevitable. Whether it be a customer who can not be satisfied, a vendor who overcharges, or simply someone not paying a bill, if any controversy exceeding $5,000 (with few exceptions) ends up in court, the corporation may be in a precarious position. Many business owners, whether for economic reasons, or the belief that they are equipped to handle the opposing party in court, choose to represent themselves. The effects can be far reaching. As a practical matter, this means the owner is in violation of the Wisconsin statute and the judge may not be forgiving.
When a Complaint is filed in any lawsuit, an Answer needs to be filed shortly thereafter. Failure to do so can result in the court granting the party filing the lawsuit a default judgment, which in effect, means the non-answering party admits all of the allegations in the lawsuit, and the plaintiff is usually granted whatever relief they sought. When a business is a party to the lawsuit, many owners believe they may appear in court and file an Answer on behalf of the company they own. In many cases, owners file their Answer within the statutory period for doing so. However, savvy Plaintiff’s lawyers are increasingly recognizing the lack of an attorney’s signature on the Answer. Wisconsin cases have recognized that the statute requires an attorney to represent the corporation, and the Answer, unsigned by a licensed practitioner of the law, is not legally recognized. The Plaintiff is able to ask the court for a default judgment as if no action had been taken by the Defendant at all, and they had simply let the time period for answering lapse.
Once the default judgment has been granted, even the subsequent hiring of an attorney might not be enough to get a fair hearing in court. The attorney must move to reopen the case, and judges are not always inclined to allow a reopening, even for parties with compelling cases that may have attempted to make an answer previously. Upon receiving a judgment, the Plaintiff can establish a lien against the assets of the corporation.
While the rules for the corporation are well defined, the rules for an entity operating as a Limited Liability Company or “LLC” are less absolute. The statutes do not specifically mention an LLC as an entity that requires representation by an attorney in lawsuits, and to date, there is no case clearly defining whether the LLC falls within the scope of the statute. However, there are good reasons to believe the requirement of legal representation extends to this type of entity. The LLC, in most legal respects, is treated like a corporation. Members, like shareholders of a corporation, enjoy legal protections from liabilities of the company. While there are differences between the types of business entity, this seems the most compelling and important one when considering the LLC. If the LLC is treated like the corporation, and indeed, in lower courts it has happened on numerous occasions, the LLC may also face the possibility of having default judgment entered against it, even in cases where a member or owner has filed an otherwise appropriate Answer.
A new business owner has many choices when deciding upon the type of entity for its operations. Do not let your company incur debt by failing to follow the statutory requirements of legal representation.
Thursday, April 9, 2009
Wisconsin Legislature Brings Back Protections Against Fraud in Real Estate Transactions
The Wisconsin Supreme Court in Below v. Norton, 2008 WI 77, 751 N.W. 2d 351, expanded the reach of the Economic Loss Doctrine (ELD) to bar claims of fraud and intentional misrepresentation in residential real estate transactions. The Wisconsin Legislature has fought back:
"In addition to any other remedies available under law, a transferee in a residential real estate transaction may maintain an action in tort against the real estate transferor for fraud committed, or an intentional misrepresentation made, by the transferor in the residential real estate transaction." Please see the full text of the Senate Bill here: http://www.legis.state.wi.us/insession/insessiondocs/docs/SB-9.pdf
This new legislation does three (3) things: 1) it protects purchasers of land in WI, without creating the duty to draft veracity warranties as was required by Below. 2) it strengthens the ELD as to all other contracts. Below came down July 1, 2008 and by January 21, 2009, the Senate was working to overturn this decision. ELD decisions in commercial real estate contracts came down long before Below, but no such legislation has been created and passed for commercial protection. 3) Creates an arbitrary deadline for the cessation of fraud. The first two effects are self-explanatory, the third desires further comment.
The legislation (creating Wis. Stat. § 895.10) includes a provision that this statute will not apply retroactively, but will apply to transactions that close on the effective date of the legislation. As Governor Jim Doyle signed the legislation on April 8, 2009, all falsehoods told before that date are immune, but after are punishable by tort. Yes, according to Below you can go after a seller for "false advertising" carrying far lessor penalties and a greatly shorter statute of limitations. So, for the next six (6) years, attorneys in this state must remember the magical April 8, 2009 deadline in determining whether tort actions can occur.
"In addition to any other remedies available under law, a transferee in a residential real estate transaction may maintain an action in tort against the real estate transferor for fraud committed, or an intentional misrepresentation made, by the transferor in the residential real estate transaction." Please see the full text of the Senate Bill here: http://www.legis.state.wi.us/insession/insessiondocs/docs/SB-9.pdf
This new legislation does three (3) things: 1) it protects purchasers of land in WI, without creating the duty to draft veracity warranties as was required by Below. 2) it strengthens the ELD as to all other contracts. Below came down July 1, 2008 and by January 21, 2009, the Senate was working to overturn this decision. ELD decisions in commercial real estate contracts came down long before Below, but no such legislation has been created and passed for commercial protection. 3) Creates an arbitrary deadline for the cessation of fraud. The first two effects are self-explanatory, the third desires further comment.
The legislation (creating Wis. Stat. § 895.10) includes a provision that this statute will not apply retroactively, but will apply to transactions that close on the effective date of the legislation. As Governor Jim Doyle signed the legislation on April 8, 2009, all falsehoods told before that date are immune, but after are punishable by tort. Yes, according to Below you can go after a seller for "false advertising" carrying far lessor penalties and a greatly shorter statute of limitations. So, for the next six (6) years, attorneys in this state must remember the magical April 8, 2009 deadline in determining whether tort actions can occur.
Tuesday, April 7, 2009
Tenant Rights in Wisconsin Foreclosures
The Wisconsin Legislature passed 2009 Senate Bill 62, which was signed into law as 2009 Wisconsin Act 2 on February 19, 2009. For full text of the Act, click here: http://www.legis.state.wi.us/2009/data/acts/09Act2.pdf.
This Act changed many laws in the State, however one is of particular importance and interest to me. The Act created Wisconsin Statute § 846.35 Protections for tenants in foreclosure actions. The title gives you a good idea of what this is about.
In looking at the newly enacted § 846.35 (1), it requires that the foreclosing plaintiff must give notices to tenants in the subject property at different points in the litigation. This makes sense. These required notices must be given within 5 days of the start of the foreclosure action, within 5 days of the grant of a foreclosure judgment, and notice of the date and time for the judicial confirmation of the sheriff’s sale. I find these to be appropriate times for the tenant to be informed of the progress.
The Statute goes on to discuss how a plaintiff must give these notices. The first option is to personally serve each tenant pursuant to Wis. Stat. § 801.11 (1), in an manner similar to the serving of a complaint. The second is to send the notice via certified mail, with notice completed upon mailing.
Finally, the Statute delineates that each tenant that did not receive a notice may receive $250, plus reasonable attorney fees, from the plaintiff, with a maximum of one award (two missed notices does not entitle a tenant to $500).
So why does this new statute make my skin crawl? Three reasons. First, the Legislature has not defined to whom this applies. Second, it appears that a tenant may force a plaintiff to pay them, even when the plaintiff does nothing wrong. And third, how does a mortgage holder know the names of the tenants?
The wording of the first portion of the statute states "If residential rental property is the subject of a foreclosure action, the plaintiff shall provide the following notices at the following times to the tenants who are in possession of each rental unit when a notice is given." However, in looking at the penalty provision, it states "the court shall award the tenant to whom the notice should have been given $250 in damages, plus reasonable attorneys fees." There is an inherent contradiction: tenants vs. tenant.
Wisconsin courts recognize that when the Legislature puts specific language in a statute, the courts must construe the statute to not make any portion of it meaningless. As such, the difference between tenant and tenants may be significant.
Presume that three students are renting an apartment in a building that is being foreclosed upon. Does the foreclosing plaintiff need to give notice to each of the three students? The requirement for notices requires that notices be given to the tenants (plural) in possession of each rental unit (singular). It appears that the Legislature is requiring that notice be given to each tenant. Especially when you consider the punitive sentence allowing the tenant (singular) to whom the notice should have been given to recover damages. This gives further credence to the each tenant must receive notice theory.
However, in all of Chapter 846, there is not a definition of tenant. Consider the possibility that a husband and wife enter into a lease and later produce a child. The leased premises begins to be foreclosed upon, to whom must the plaintiff give notices? Under the above analysis, it appears that both the husband and wife must be given notices. But what about baby? Does the baby need to be placed on the lease in order to have tenant rights?
Moving to the manner of serving the notices, there is nothing wrong with personal service pursuant to § 801.11 (1), however it can be expensive for a plaintiff. Personal service of papers can cost between $30 and $75. To perform this three times during the litigation brings the total to between $90 and $225. And as discussed above, it is unclear whether this is per unit or per tenant. Bringing back the three students renting an apartment, the service fees for their one unit could cost upwards of $500 during the litigation.
So, it seems pretty clear that personal service is very costly, so consider the certified mailing method. Certified mail costs approximately $5 per notice. This is a significant cost savings. However, the statute states, "Notice given under this subdivision is considered completed when it is mailed, unless the envelope enclosing the notice is returned unopened to the plaintiff."
Anyone who has received mail returned unopened knows that this process can take some time. So, if the three students are on winter break, the notices are mailed, not accepted (because no one is home to do so), they are returned to the plaintiff (or their attorney). The time period to give the notice has now passed and the plaintiff is deemed to have not given notice, clearly through no fault of their own, and is subject to an award of damages.
Further, certified mail can be refused by the recipient. The Legislature does not put forth a provision regarding refused mail, only unopened mail. So, could a tenant see the Gerbers Law, S.C. envelope for the second notice (knowing that Gerbers Law had sent the first notice), refuse this mail, and then seek damages for failure to give notice? Equity states no, but a strict reading could lead to such a conclusion.
It is hard to imagine a lawsuit for $250 dollars, but with "reasonable attorneys fees" in the balance, there is a possibility that it could be tried.
Finally, as an attorney that has represented financial institutions in foreclosure actions, the foreclosing plaintiff usually does not know the names of all tenants within 5 days of instituting the action. A defendant has 30 days to respond to discovery (and that is when the responses are done timely, which is not always the case). So, a plaintiff may not rely upon the standard discovery to ascertain the names. Then must a plaintiff request this information prior to instituting the action? I do not think that a defendant landlord will be very forthcoming with the information when they receive the "we are going to foreclose on you, but first we need the names of all of your tenants" telephone call.
So then, does this place the onus on the foreclosing plaintiff to keep records of every lease entered into by the defendant? This would create a bureaucratic nightmare for even the smallest of mortgage lenders, let alone the large financial institutions.
While the intent of the Legislature and the statute is good, I feel that there are several glaring issues with the statute that must be addressed.
This Act changed many laws in the State, however one is of particular importance and interest to me. The Act created Wisconsin Statute § 846.35 Protections for tenants in foreclosure actions. The title gives you a good idea of what this is about.
In looking at the newly enacted § 846.35 (1), it requires that the foreclosing plaintiff must give notices to tenants in the subject property at different points in the litigation. This makes sense. These required notices must be given within 5 days of the start of the foreclosure action, within 5 days of the grant of a foreclosure judgment, and notice of the date and time for the judicial confirmation of the sheriff’s sale. I find these to be appropriate times for the tenant to be informed of the progress.
The Statute goes on to discuss how a plaintiff must give these notices. The first option is to personally serve each tenant pursuant to Wis. Stat. § 801.11 (1), in an manner similar to the serving of a complaint. The second is to send the notice via certified mail, with notice completed upon mailing.
Finally, the Statute delineates that each tenant that did not receive a notice may receive $250, plus reasonable attorney fees, from the plaintiff, with a maximum of one award (two missed notices does not entitle a tenant to $500).
So why does this new statute make my skin crawl? Three reasons. First, the Legislature has not defined to whom this applies. Second, it appears that a tenant may force a plaintiff to pay them, even when the plaintiff does nothing wrong. And third, how does a mortgage holder know the names of the tenants?
The wording of the first portion of the statute states "If residential rental property is the subject of a foreclosure action, the plaintiff shall provide the following notices at the following times to the tenants who are in possession of each rental unit when a notice is given." However, in looking at the penalty provision, it states "the court shall award the tenant to whom the notice should have been given $250 in damages, plus reasonable attorneys fees." There is an inherent contradiction: tenants vs. tenant.
Wisconsin courts recognize that when the Legislature puts specific language in a statute, the courts must construe the statute to not make any portion of it meaningless. As such, the difference between tenant and tenants may be significant.
Presume that three students are renting an apartment in a building that is being foreclosed upon. Does the foreclosing plaintiff need to give notice to each of the three students? The requirement for notices requires that notices be given to the tenants (plural) in possession of each rental unit (singular). It appears that the Legislature is requiring that notice be given to each tenant. Especially when you consider the punitive sentence allowing the tenant (singular) to whom the notice should have been given to recover damages. This gives further credence to the each tenant must receive notice theory.
However, in all of Chapter 846, there is not a definition of tenant. Consider the possibility that a husband and wife enter into a lease and later produce a child. The leased premises begins to be foreclosed upon, to whom must the plaintiff give notices? Under the above analysis, it appears that both the husband and wife must be given notices. But what about baby? Does the baby need to be placed on the lease in order to have tenant rights?
Moving to the manner of serving the notices, there is nothing wrong with personal service pursuant to § 801.11 (1), however it can be expensive for a plaintiff. Personal service of papers can cost between $30 and $75. To perform this three times during the litigation brings the total to between $90 and $225. And as discussed above, it is unclear whether this is per unit or per tenant. Bringing back the three students renting an apartment, the service fees for their one unit could cost upwards of $500 during the litigation.
So, it seems pretty clear that personal service is very costly, so consider the certified mailing method. Certified mail costs approximately $5 per notice. This is a significant cost savings. However, the statute states, "Notice given under this subdivision is considered completed when it is mailed, unless the envelope enclosing the notice is returned unopened to the plaintiff."
Anyone who has received mail returned unopened knows that this process can take some time. So, if the three students are on winter break, the notices are mailed, not accepted (because no one is home to do so), they are returned to the plaintiff (or their attorney). The time period to give the notice has now passed and the plaintiff is deemed to have not given notice, clearly through no fault of their own, and is subject to an award of damages.
Further, certified mail can be refused by the recipient. The Legislature does not put forth a provision regarding refused mail, only unopened mail. So, could a tenant see the Gerbers Law, S.C. envelope for the second notice (knowing that Gerbers Law had sent the first notice), refuse this mail, and then seek damages for failure to give notice? Equity states no, but a strict reading could lead to such a conclusion.
It is hard to imagine a lawsuit for $250 dollars, but with "reasonable attorneys fees" in the balance, there is a possibility that it could be tried.
Finally, as an attorney that has represented financial institutions in foreclosure actions, the foreclosing plaintiff usually does not know the names of all tenants within 5 days of instituting the action. A defendant has 30 days to respond to discovery (and that is when the responses are done timely, which is not always the case). So, a plaintiff may not rely upon the standard discovery to ascertain the names. Then must a plaintiff request this information prior to instituting the action? I do not think that a defendant landlord will be very forthcoming with the information when they receive the "we are going to foreclose on you, but first we need the names of all of your tenants" telephone call.
So then, does this place the onus on the foreclosing plaintiff to keep records of every lease entered into by the defendant? This would create a bureaucratic nightmare for even the smallest of mortgage lenders, let alone the large financial institutions.
While the intent of the Legislature and the statute is good, I feel that there are several glaring issues with the statute that must be addressed.
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