Posts in: December

Estate Planning After a Spouse’s Death

December 28, 2016 Estate Planning Comments Off on Estate Planning After a Spouse’s Death

It’s hard to consider the grief and sorrow that comes when a spouse passes. However, the year following the death of a spouse is an important one for the surviving spouse as there are number estate planning considerations and decisions to be made. This article is primarily concerned with those who survive the deceased, specifically the “surviving spouse”.  Here are a few estate planning items for the surviving spouse to consider:

  • Take care of your deceased spouse’s estate. Hopefully the deceased spouse had all of his/her assets inside a trust or through other means of avoiding probate court, such as joint tenancy or using beneficiary designations.  If not, then the deceased spouse’s estate will need to be administered via the probate court process.  This is a state-specific process and one that should be handled by a licensed probate attorney in the state where the deceased spouse was living at the time of their death.  Often times this responsibility falls on the surviving spouse to oversee this process, unless the deceased spouse had a will and appointed someone else to be the Executor/Personal Representative of the state.  If the surviving spouse is tasked with this responsibility, since there are typically deadlines that need to be met (again, state specific) and because the surviving spouse will likely be in mourning, I strongly recommend engaging a licensed probate attorney to handle this.
  • Comply with the provisions of the family trust, if one is setup, as it pertains to your spouse’s death. Hopefully you and your spouse have a trust (either a joint family trust or some version wherein sub-trusts are created, or a separate trust for each spouse depending on the circumstances).  If so, then such a trust very likely provides instructions as to what needs to happen upon the death of the first spouse.  The surviving spouse is probably the trustee who has the legal responsibility to carry out the provisions of the trust, in which case, like #1 above, it is strongly recommended to receive legal advice on how to accomplish this.  But sometimes the surviving spouse is intentionally not selected as the successor trustee in which case if the surviving spouse is the beneficiary of such a trust, they should make sure they have a copy of the trust reviewed by an attorney to ensure that their rights as beneficiary are recognized by the trustee.
  • Make the portability election as needed. As you may have heard, there is the dreaded estate tax. Well, actually, similar to income tax, there is an exemption amount.  In the case of estate tax, the exemption amount is currently $5.45M.  That is per individual, so with a married couple, it’s $5.45M x 2 = $10.9M!  That’s a fairly large exemption so it’s not as common as it once was for estate tax to be due.  Portability is when the surviving spouse claims the deceased spouse’s unused portion of the deceased spouse’s estate tax exemption limit.  For example, assume the deceased spouse dies with a taxable estate of $1.5M.  The deceased spouse still has $3.95M ($5.45M-$1.5M) available that is not used.  The surviving spouse, unless the law changes, still has $5.45M available as an estate tax exemption but by making the portability election on the deceased spouse’s estate tax return, they can claim the deceased spouse’s unused portion as well thereby increasing the available exemption amount for the surviving spouse to $9.4M ($5.45M + $3.95M).  Although it might not be necessary in all situations, this can be very helpful to a surviving spouse, particularly one who has taken over the family business and/or real estate, which value could appreciate significantly over their lifetime.  The surviving spouse should talk with a competent estate planning professional as soon as possible following the death of the deceased spouse because there are deadlines to make the portability election (typically 9 months from the death of the first spouse).
  • Make any disclaimers as appropriate. Although most of us wouldn’t intentionally pass up our inheritance, there are many, who for various reasons choose to do so.  A surviving spouse for example, particularly one who is well-off or has significant assets, may decide to disclaim a certain portion of the assets that would otherwise transfer to them from the deceased spouse as a way to mitigate the estate tax liability that might confront the surviving spouse upon their death.  Like the portability election, there are deadlines to make disclaimers (no later than 9 months following the death of the deceased spouse).
  • Revise your estate plan as needed. If you and your spouse had an estate plan before his/her death, the chances are likely that some updates will need to be made now that it’s just the surviving spouse.  If no estate plan was created before the death of the deceased spouse, it is critical that the surviving spouse meet with a competent estate planning professional to setup an estate plan because, unless the surviving spouse re-marries, there is no way to take advantage of the unlimited marital deduction (under estate tax law, a spouse can give un unlimited amount to their spouse as a deduction against any estate tax that would otherwise be due).  In reality, a lot of the nuts and bolts of estate planning occurs once it’s just the surviving spouse because now we’re inevitably looking for the most efficient way to transfer the assets to the next generation.
  • Revise Beneficiary Designations. If the surviving spouse receives a retirement account from the deceased spouse such as an IRA, the surviving spouse can elect to rollover that account to an IRA in their own name.  The surviving spouse should counsel with their attorney and tax professional regarding the best manner to receive the retirement account from the deceased spouse, but regardless of which manner is preferable, the surviving spouse should revise/update beneficiary designations on such accounts.

It can be a very stressful and sad time when someone has recently lost their spouse, and unfortunately, it’s not a good time to put your head in the sand when it comes to these matters.    If you would like to schedule a consult to discuss these matters, please contact our office at 602-761-9798.

The Law of Christmas Light Displays according to the Hon. Clark W. Griswold

December 20, 2016 Business planning, Law, Small Business, Tax Planning Comments Off on The Law of Christmas Light Displays according to the Hon. Clark W. Griswold

According to a 2011 survey, Americans spend in excess of $6 billion per year on Christmas decorations – and there’s no truth to the rumor that more than half of that number was spent by Clark Griswold for his annual Christmas light extravaganza.

What is true is that displays get bigger and more expensive every year, and the desire to have the best and brightest Christmas display in the neighborhood (or maybe in the town, the state, or even the country!) could land you in a lawsuit if you’re not careful.  Let’s take a look at three of the biggest issues to watch out for as you enjoy your Christmas lights this year:

1) Is Your Display a Nuisance?

Many among us look forward to driving around with our kids looking for the most ostentatious displays we can find.  Even here in little Cedar City, Utah there are some very impressive presentations, including one neighborhood where all the houses are involved with thousands of lights, and hand-painted signs retelling ’Twas the Night before Christmas.  However, what happens when your lights are too much for your neighbors?  Remember, not everyone loved Clark Griswold’s “25,000 tiny twinkling lights,” along with the miniature sleigh and eight tiny reindeer.

Holiday decorations can create additional traffic and noise from those coming by to get a look (or noise from the displays themselves).  They can also result in parking issues, blocked driveways, and unwelcome late-night revelers.  The display itself can also be a nuisance to the folks next door or across the street who have to deal with flashing lights at all hours of the night.  Displays using older incandescent bulbs also use much more electricity and could cause power outages.

While I’m not aware of any particular case law, it’s absolutely conceivable that an aggrieved neighbor could sue and demand a restraining order for a particularly gaudy holiday display.  However, in the spirit of Christmas, I would certainly hope that before it gets that far, neighbors could get together to work out a compromise that is acceptable to everyone.  While being on a court docket during the holidays doesn’t necessarily guarantee you’re on Santa’s naughty list – it is pretty close!

2) Getting “Professional” Help to Hang Your Lights

If you’re like me, you love how your house looks when it’s decorated with a dazzling Christmas display, but you’re not a huge fan of the work it takes to get there (and you’re not in a huge hurry to place yourself on your roof to make it happen).  Those of us in that rather large boat are in luck – there are plenty of “professionals” out there who are ready, willing and able to do that work for us – for a reasonable fee of course.

Seems like a win-win, right?  What could possibly go wrong?  Well, a lot of the folks who perform this work are unlicensed.  So, what happens when the wind kicks up and one of the workers is blown off your roof and becomes seriously injured?  If the contractor you hired is licensed, then they will carry worker’s compensation insurance and you can rest easy.  On the other hand, if you hired an unlicensed contractor, then you may wake up on Christmas morning to a present you didn’t want to receive – a process server handing you a summons and a complaint for a lawsuit from the guy who fell off your roof.

3) Issues with Laser Lights

The past two or three years have seen a huge proliferation in the number of homeowners eschewing the traditional strands of Christmas lights, and going instead with one of several different “laser” holiday light products, which project lights onto the exterior of your house.  The main selling point of these systems is that they produce attractive displays with less work and less danger than hanging actual lights yourself.  While all of that is true, these systems are not without their issues.

Several news outlets have highlighted concerns with these lights, claiming that they can cause issues for pilots.  There are also reports of arrests coming after people “intentionally” pointed the lights at aircraft.  Because these systems are so new, this is still a developing area of the law.  However, it’s probable that cities and other municipalities will begin implementing regulations on these systems – including how close they can be used to airport facilities.

These systems have also been in the news for how easily then can be pilfered.  While it’s fairly difficult for a Grinch to steal lights that are affixed to your residence, he will have very little trouble making off with the compact device that sprays laser light all over your house.

Being aware of these issues and taking steps to mitigate them can help you enjoy the holidays without needing to get your attorney involved – after all, we all know the Child Born in Bethlehem wasn’t the biggest fan of lawyers!

Hulk Hogan & Asset Protection Lessons from Bollea v. Clem

December 6, 2016 Asset Protection, Business planning Comments Off on Hulk Hogan & Asset Protection Lessons from Bollea v. Clem

In one of the more highly publicized cases of this year, in March 2016, a Florida jury in the case  Bollea v. Clem  awarded Hulk Hogan $115 Million in compensatory damages and $25M in punitive damages against the owners and operators of the Gawker website.  Gawker was a website founded by Nicholas Denton devoted to media news and gossip.   In the lawsuit, Gawker was accused of violating Hulk Hogan’s privacy by posting private videos of Hogan engaged in sex acts.

Several months after this jury award, both the LLC and corporation which allegedly ran the Gawker website, along with Nicholas Denton filed for bankruptcy.  The Gawker website which reportedly had over 23 million visitors per month in 2015 was permanently shut down in August 2016.   A review of the case along with Gawker’s structure as revealed in the bankruptcy documents illustrates some important asset protection principles to remember.

  1. Keep your Asset and Businesses Separate. In general, our approach to asset protection involves separating your assets from your business so that if your business gets hit with a big lawsuit, your assets are less likely to be at risk because they are held in entities separate from the business.   In this case, the Gawker website was operated by Gawker Media LLC.  Bankruptcy documents show that Gawker Media LLC was in turned owned 100% by Gawker Media Group, Inc.  Nicholas Denton owned approximately 30% of the shares of Gawker Media Group, Inc.   Certainly there could be other practical benefits from this hierarchical parent/subsidiary structure, but one of the risks of having everything owned in this linear structure is the possibility that a significant liability could cause the entire house of cards to fall.     Moreover, bankruptcy documents further show that the operator of the website, Gawker Media, LLC also owned substantial interests in real estate and intellectual property, all of which would be exposed to a significant liability from the website activities.   If you are running a website that posts negative information about rich and famous, does it make sense to also own valuable real estate and other assets in the same entity?  In the case of Gawker Media, LLC,  it also owned other websites and branding which were eventually sold to Univision through the bankruptcy process, but whenever you own significant assets, you should consider whether to segregate these assets into different entities to spread out the risk so that a liability coming from one direction does not infect the entire pool.
  1. Entities are not a License to Engage in Misconduct. One of the main reasons for using an entity like a corporation or LLC is to take advantage of the “corporate veil” which generally protects the owners from being personally responsible for debts incurred by the entity.  However, the corporate veil is not absolute.   In the Gawker case, despite the existence of a multi-entity structure, the jury specifically found that Nicholas Denton personally participated in the posting of the explicit videos that resulted in the lawsuit, in addition to allegations that he personally edited the video that ultimately appeared on the site, which contributed to a finding of personal liability.   Courts will generally disregard or “pierce the corporate veil” if the owners are using the entity to perpetrate fraud or engage in other wrongdoing, and so don’t think that the corporate veil will be there to protect you if you are committing fraud or other intentional misconduct.
  1. There is no 100% Guaranteed Asset Protection Strategy, but the Goal Should be a Multiple Barrier Approach.  As further discussed in Mark Kohler’s book “Lawyers are Liars,” there is no 100% guaranteed approach to asset protection.  Instead, the goals should be to implement as many barriers as you are willing to utilize depending on the cost, complexity and degree of protection afforded by the strategy.  Whether it is having the right insurance, ensuring your contracts are sound, stripping your assets of equity available to creditors, or multiple LLCs, the goal is to implement as many strategies as you can to make it as hard as possible for a creditor who would pursue you.

The Gawker case is a good illustration of the possibility that any asset protection strategy could be toppled if you have a motivated, resourceful litigant.   It was no secret that Hulk Hogan’s lawsuit is and was assisted by financing from billionaire venture capitalist Peter Thiel, who was also a previous target of Gawker’s posts, and was therefore motivated to financially assist Hulk Hogan and other litigants suing Gawker.  Denton has reportedly admitted that Thiel’s campaign against Gawker Media made the Gawker.com website too risky for Univision to purchase, and as a result, the website that had previously drawn the ire of Peter Thiel had to be shut down.

The outcome of litigation is often impacted by the financial resources of the parties, and having a well-designed multiple barrier asset protection strategy could make other adversaries (Peter Thiel excepted) think twice about how far they are willing to go.

The Gawker case, currently on appeal and in bankruptcy, is still pending and given the unpredictability of litigation, the ultimate outcome has yet to be decided.   Nevertheless, Denton has reportedly admitted that, even if the judgment is reversed on appeal, “Peter Thiel has already achieved many of his objectives.”     Therefore, the case is just another reminder that, regardless of whether you are an entrepreneur/executive worth hundreds of millions of dollars, or simply have a 401K and a rental, we all need to be cognizant of the potential legal consequences of our actions, and have a concrete strategy for protecting the fruits of our labor if and when an unexpected liability arises.