Ask Your Attorney
My Wife And I Are Separated And May Be Headed Toward Divorce. Do I Wait Until It's Over To Make Changes To My Estate Plan?
Dear Counselor: My wife and I are now separated and living apart. We agreed on dividing our property, and may go ahead and get a divorce, but I don't know how long that may take. Should I wait to make a new Will until the divorce is final ?
Dear Client: We definitely believe that both spouses should change and update their Wills and estate planning documents after a divorce, as well as after any remarriage. But we also believe that the need to make changes to your estate planning documents is an often overlooked, but important part of the divorce process itself. For example, upon separation, you should consider signing an interim Will to attempt to ensure that your entire estate would not pass to your estranged spouse. And, you should also revise any durable powers of attorney so that should you become incapacitated, the responsibility for your care and money will be in the hands of someone you trust. Unless there is a court order telling you differently, you should also consider changing beneficiaries on insurance policies, and other accounts, such as any IRA you might have. If you have children, your estate can be structured so that you can provide for them using a trust agreement that names someone other than your spouse or "ex" to hold and administer the money for the benefit of your children. And, you may want to include a provision in your Will to make your wishes known as far as who would be a suitable guardian for your kids. Although there is no guarantee that your appointment of a guardian will be followed (especially when there is a surviving parent), if you don't say anything, the Court will make a decision for you without ever knowing what your wishes are. As you can see, you are in the midst of a transition in your life that requires proper planning to see you through it. You need to spend time thinking through the issues and planning for them. When you are ready, come on in and we'll discuss further.
Sincerely,
John L. Maier, Jr.
Marcus Weden
Sweet & Maier, S.C., Attorneys
114 N. Church St.
Elkhorn, WI 53121
262-723-5480
www.wisclaw.com
Ask Your Attorney
I Can't Afford To Do It Now, But Is There A Way I Can Give Back To My Community When I Die?
Dear Counselor: I've done well in my life, and have had the good fortune to live in a great community that has done a lot for me and my family. Because of the economy, I can't give anything substantial now, but would like to leave 10% to fund charities at my death. But, hopefully, that won't be for awhile, so do you have any suggestions for what to do since I am updating my Will now ?
Dear Client: In recent years, I've seen the establishment of many locally directed endowment funds which raise money from people such as yourself. Then, the money which is raised is invested, and the income earned is then distributed via grants to local charitable or educational organizations. That is the general idea of these "community foundations". Your gifts stay in the local community. One of the local funds that have been established to accomplish this goal is The Elkhorn Fund, which you can read about on Facebook, or do your own "Google" search. In recent years, The Elkhorn Fund has made grants for such things as holiday food baskets for the Elkhorn Food Pantry, transportation assistance for Hope Now, and help for the Tibbets Elementary School backpack program. In the future, grants may be awarded to support historic and environmental preservation, education, health care, youth programs and the elderly. So, if you want to "give back" to your local community, you might want to look into The Elkhorn Fund, or other similarly established community foundation, and make them a bequest of either cash or a percentage of your net estate when you die. The principal which you leave is added to the Fund, and the income is what is used to make the gifts. So, it is really the "gift that keeps on giving" and a way to say "thanks" to your hometown. More questions? Just give me a call.
Sincerely,
John L. Maier, Jr.
Marcus Weden
Sweet & Maier, S.C., Attorneys
114 N. Church St.
Elkhorn, WI 53121
262-723-5480
www.wisclaw.com
Ask Your Attorney
When I Die Who Legally Controls My Funeral?
Dear Counselor: I just had an awful experience connected to the death of my good friend. He had children of his first marriage, now adults, and they and his second wife got in a huge fight about what was to be done with his remains, his funeral, and even where he was going to be buried. It was terrible. Who legally has control over that when you die? How can I avoid what happened to my friend?
Dear Client: No one likes to think about their demise, and avoiding the topic is the "norm" I've found. But it is exactly this procrastination that will end up causing arguments among your loved ones at the time of your funeral and burial. You can avoid what happened to your friend, but in order to do so, yo need to put your wishes in writing, and discuss them with your family. The more detail the better, and you also need to spell out who is to be in charge of carrying out your wishes. In Wisconsin, the law will enforce your wishes if you complete an "Authorization for Final Disposition" and then sign it in the presence of two adult witnesses or a notary public. This allows you to make your own funeral arrangements, including the disposition of your body, religious observances, viewing, and type of service. You can obtain a form for this purpose, from the Department of Health Services, at no charge. The forms and instructions are available on the internet. If you do not do so, then the law has created a "pecking order" of people who would be legally authorized to determine the nature of your funeral and burial. Standing first in line would be your surviving spouse, then your children (majority controls), your parents, and so on. Obviously the best thing to do is make your own arrangements before you die, and put them in writing. You can keep your directives private, if you wish, to be disclosed at the time of your passing. If you need help, we can assist you to do that as part of your estate plan. In the end you will have done well for your family because there will be no issues to argue over -- your representative will just carry out your own directions.
Sincerely,
John L. Maier, Jr.
Marcus Weden
Sweet & Maier, S.C., Attorneys
114 N. Church St.
Elkhorn, WI 53121
262-723-5480
www.wisclaw.com
Ask Your Attorney
About What I Should Know Before Buying A Condo
Dear Counselor: My wife and I are now retired, and thinking of selling our home and downsizing. We've looked at a nice condo in a complex which seems nice. It's available for a "bargain basement" price, but we don't know what we don't know about condos. We never owned one. Can you give me one or two "must" things to check out?
Dear Client: So, you've found your "dream" condo, but you don't want to get stuck with a lemon. Prices are low, so there are good buys out there -- but these days it isn't necessarily easy to live in a community where former homeowners have to get used to living under rules, and pay monthly fees -- which is how condo associations maintain all of the common areas and amenities used by everyone. So before you decide to close, do some sleuthing on your own, to see whether you are indeed going to be living your dream, or experiencing a nightmare! Besides getting all the condo documents (that show you who owns what, who is responsible for which repairs, and what rules there are), ask for copies of the meeting minutes from the last year, and see who has been complaining about what, and what types of problems the board is dealing with. If you buy in, these will become your problems. Secondly, check the financial statements to make sure expenses aren't exceeding revenues. Ask if there is a "reserve study" you can look at. A reserve study takes a look at all of the long-term anticipated repairs and replacements that take place over time [such as roof replacement], adds up the costs and specifies how much money needs to be put away yearly to pay for the roof when it needs replacing in the future. If no reserves are being saved, when the new roof is put on, every owner will be slapped with a big assessment to cover the cost -- and you don't want that surprise to happen to you a month or two after you close! Find out who manages the condo - the owners, or a professional management company -- talk with them, and get a sense of how well things are being run. Take a look at the common areas to see how well they are being cared for. Find out if the rules permit you to rent your unit, or not, if that is important to you because if the rules say "NO" you won't be able to rent the unit if you can't occupy it yourself. These are my opening set of suggestions. If you get through all that, and still want to proceed, call me and we can go through the next set questions on my condo checklist. Good luck!
Sincerely,
John L. Maier, Jr.
Marcus Weden
Sweet & Maier, S.C., Attorneys
114 N. Church St.
Elkhorn, WI 53121
262-723-5480
www.wisclaw.com
Ask Your Attorney
Whether There Is A Simple Way To Transfer Real Estate At Death?
Dear Counselor: My widowed aunt has no children, and wants to leave her cottage up north to my brother and I, since we’ve been going up there since the 50’s. She doesn’t want to put our names on title now, but wants to know if there is a simple way to get it to us when she dies, and avoid the mess of probate?
Dear Client: People are constantly asking us about ways to transfer property at death, but avoid the time and expense associated with probate. Relatively recently, the Wisconsin legislature authorized the use of a Transfer on Death Deed (“TODD”). A TODD allows the owner of real estate to execute, and then record, a deed that names a beneficiary (or beneficiaries) who will succeed to ownership at the owner’s death. Because a TODD does NOT create any rights in the beneficiary UNTIL the death of the property owner, the owner can change their mind, or sell the property during their lifetime. However, if the owner still owns the property at death, the effect of the TODD will be to transfer the property to the person(s) named in the TODD without probate, at minimal cost. Not every situation is suited to use of a TODD so for a more expansive discussion on the topic, take a look at the article we’ve put on our website (www.wisclaw.com) including an example of what a TODD looks like. And then have your aunt give me a call if she’s interested.
Sincerely,
John L. Maier, Jr.
Marcus Weden
Sweet & Maier, S.C., Attorneys
114 N. Church St.
Elkhorn, WI 53121
262-723-5480
www.wisclaw.com
Ask Your Attorney
About The IRS Rules On Gift Tax
Dear Counselor: I want to cash in a CD and give the money to my daughter who really could use the money. I have friends who said something about having to pay a “gift tax” if I do that. Is it possible that the IRS even taxes gifts?
Dear Client: The IRS enforces the gift and estate tax rules, and it is true that gifts in excess of a certain amount are subject to tax. Although the current law is now being debated, and changes are sure to come in the coming weeks, for years the law provided that everyone could make gifts having a specified value without there being any tax, or any need to file a “gift tax return”. In 2012, an individual can give up to $13,000 (each) to kids, grandkids, or others, without any gift tax consequences. If you are married, and your spouse joins in the gift, the amount you can give is doubled to $26,000. Next year, the amount is scheduled to increase to $14,000 and $28,000, respectively. So, if you wanted to cash in a $25,000 certificate, you could do so, and give the cash to your daughter in two installments ($13,000 at Christmas in 2012, and the balance of $12,000 on New Year’s Day) without any gift tax consequences. Larger gifts can also be made, but are subject to another set of rules which are too complicated to go into here. There are other gift tax rules which authorize you to pay as much as you want for college tuition or other educational expenses. Since rates for taxable gifts can be very high (the rates range from 35% to 55% !), if you are interested in making gifts having a value in excess of the $13,000 exclusion amount (or $26,000 for a couple), you should come in for a consultation so we can help avoid any unexpected tax assessment.
Sincerely,
John L. Maier, Jr.
Marcus Weden
Sweet & Maier, S.C., Attorneys
114 N. Church St.
Elkhorn, WI 53121
262-723-5480
www.wisclaw.com
Ask Your Attorney
About The IRS Rollover Deadline On Withdrawals From Your IRA
Dear Counselor: I recently closed out my IRA account held by a former employer, and took the money myself. I was intending to roll the money into another IRA, but instead had to spend the money to pay for the cost of a medical emergency. I'm concerned about getting penalized. What can I do?
Dear Client: Generally, you have to roll the money into another IRA by the 60th day after you received your distribution. As you know, you do not have to pay tax on an IRA distribution if you roll it over to another IRA [or back into the original IRA]. So, if you do not want to pay tax and any penalty, you have to come up with the funds to make the deposit into another IRA. However, if you are already past the 60 day deadline, then there still may be something you can do. The IRS can extend the 60-day deadline where the failure to complete the rollover is due either: (a) to an error by a financial institution; or (b) to some events that took place beyond your reasonable control -- such as an illness, hospitalization, or a natural disaster. So, if you have a good reason, go ahead and ask for the extension, because the IRS has been liberal in granting them. However, you do have to convince them that it would be "against equity or good conscience" not to give you a break -- so do a good job in giving them a full explanation. And, if you need help, just give us a call and let us help you frame your argument.
Sincerely,
John L. Maier, Jr.
Sweet & Maier, S.C., Attorneys
114 N. Church St.
Elkhorn, WI 53121
262-723-5480
www.wisclaw.com
Ask Your Attorney
I’m Worried About My Parents’ Medicare Account
Dear Counselor: I can’t tell you how anxious all this talk about Medicare going bankrupt is to me, and my parents [who just became eligible]. What happens if it does? They can’t afford being without these benefits. Am I wrong to think there is a national problem? Medicare is a law, isn’t it? How can something that was passed and adopted, and which has been in effect for so many years be in such trouble? Is there anything we do about it?
Dear Client: You are right to be concerned because even the Medicare Trustees who are responsible for administering the program now report that the fund’s hospital benefit will go bankrupt in 2024, which is likely long before your parents both pass away. Obviously, if there is no money in the fund to pay claims, none will be paid. Already, many physicians are refusing to take any more patients whose bills are paid through Medicare. And what is worse [for Medicare at least] is that President Obama has “cut” over $700 billion from the Medicare fund to pay for his new health care plan. What I can report is that you may want to consider a political solution as the best way to act at this time. A plan to save Medicare has been advanced by Presidential Candidate Mitt Romney, and our own Congressman, Paul Ryan, who is the Vice-Presidential Candidate. The most important feature to the Romney/Ryan Medicare Plan is the provision that NO CHANGE WILL BE MADE TO THE MEDICARE BENEFITS FOR PEOPLE WHO ARE NOW AGE 55 AND ABOVE. For those who are younger, there will be a choice of guaranteed coverage and affordability options. So, if you are interested in helping your parents, the Romney/Ryan Plan is something that you may want to support because it guarantees that your parents’ benefits, and those of anyone else now 55 years of age or more, will remain in full effect. The election is on Tuesday, November 6, 2012. Everyone’s vote is important.
Sincerely,
John L. Maier, Jr., Attorney at Law
114 N. Church St.
Elkhorn, WI 53121
262-723-5480
www.wisclaw.com
About Avoiding Death Taxes
Dear Counselor: I know that two things none of us can avoid are death and taxes, but my wife and I have worked our whole lives, and have faithfully paid our income taxes every year. So what is this business about the IRS taking a big chunk out of our estate when we die? What can we do about it?
Dear Client: You are right to be upset because President Obama and the US Senate have sat by and done nothing, and as a result of their inaction, at the end of this year the existing law will expire. When this happens, the amount people can leave without paying Federal Estate Tax to the IRS will be reduced to $1,000,000, and the maximum tax rate will rise to 55%. This is truly more than taxation. In reality, it is more like confiscation! What I can suggest is that in addition to talking with your lawyer about ways to minimize estate taxes, you may want to consider a political solution as the best way to act at this time. In this election there is a real difference between the candidates. Presidential Candidate Mitt Romney, and our own Congressman, Paul Ryan, who is the Vice-Presidential Candidate, have both proposed elimination of the Federal Estate Tax. In general, they believe that people, like you, who have worked hard all their lives, and paid their taxes, should not have their estates raided by the tax man just because they die! They, and Candidate for US Senate Tommy Thompson, support the permanent elimination of the Federal Estate Tax as it wrongfully taxes wealth repeatedly, leads to people spending a lot of money on tax avoidance schemes, and can have a catastrophic effect on family farms or other businesses (if they have to be sold to pay the tax). So, if you are in agreement with that position, the Romney/Ryan Tax Plan is something that you may want to look more into, and decide to support. The election is on Tuesday, November 6, 2012. Everyone’s vote is important.
Sincerely,
John L. Maier, Jr., Attorney at Law
114 N. Church St.
Elkhorn, WI 53121
262-723-5480
www.wisclaw.com
About How To Get A "Fresh Start" On Taxes
Dear Counselor: I need a break. I've been unemployed, have had a lot of bills, and I owe taxes to the IRS. Every time the phone rings, I'm afraid to answer for fear it's the "tax man" ready to take me away. What can I do?
Dear Client: You are in luck. The IRS has announced it is expanding its "fresh start" initiative for struggling taxpayers. The updated program provides relief to the unemployed, and more taxpayers will be able to use streamlined installment agreements to catch up on back taxes. Qualified taxpayers will be able to stretch out payments over six years. Under the new provisions, taxpayers who have been unemployed for 30 days or longer can avoid failure-to-pay penalties. There are rules to the program, and forms to fill out. The IRS website features online resources that can help you better understand the program and the forms you will need to complete. For more help, just give me a call. The best thing to do is face the problem and deal with it before it gets any bigger. Your life will indeed have a "fresh start"!
Sincerely,
John L. Maier, Jr.
Sweet & Maier, S.C., Attorneys
114 N. Church St.
Elkhorn, WI 53121
262-723-5480
www.wisclaw.com
About Whether You Can Save On Taxes By Hiring Your Kids!
Dear Counselor: I have a business and wondered if hiring your kids is a good idea from a tax standpoint.
Dear Client: It is all a numbers game, but three tax incentives for hiring your children come immediately to mind. For example, let's say that you are in a 40% tax bracket, including federal, state and any local income tax. If you pay $3,200.00 in wages to your son, and deduct them as a business expense, you will save $1,280.00 on income taxes, while your child (assuming he has no other income to speak of) will owe no income tax. (This is because your son's income is sheltered by his standard deduction.) You can still claim your son as a dependent as long as he is under 19, or is a full time student under the age of 24 for at least 5 months per year, and you furnish more than half the total support for your son. And if your business is a sole proprietorship, single-member LLC or a husband-wife partnership, and your son is under age 18, the taxpayer will be excused from paying social security, medicare, and federal unemployment tax. So, go ahead and do your own calculation. You might find it makes all the sense in the world tax wise to make that next employee your kid!
Sincerely,
John L. Maier, Jr.
Sweet & Maier, S.C., Attorneys
114 N. Church St.
Elkhorn, WI 53121
262-723-5480
www.wisclaw.com
Whether You Can Operate a Business From Your Home
Dear Counselor: My husband and I want to operate a mail-order-type business out of our home. We live in a residential neighborhood. Are we going to get into some type of trouble with the city?
Dear Client: Zoning laws govern the use of land, and are enforced by government authorities. The regulations on home-based businesses (such as a law office, hair salon, computer repair, or private tutoring) vary from community to community, so you always have to check on what is allowed. Some zoning ordinances absolutely prohibit all in-home businesses in residential areas, and others allow them -- but require a special permit, with conditions (such as hours of operation). Usually, operating a business in a neighborhood depends upon what kind of business it is, and whether there will be delivery people, customers or employees coming to your home, parking issues, noise, hours of operation and things of that sort. There may also be private restrictions which have been recorded, apply to all homes in your subdivision, and speak to the issue of in-home businesses. So, before you go too far, check with your attorney and find out what public laws or private restrictions you need to contend with -- or you might find yourself in "hot water".
Sincerely,
John L. Maier Jr.
jmaier@wisclaw.com
Sweet & Maier, S.C., Attorneys
114 Church St. Elkhorn, Wisconsin
262-723-5480 www.wisclaw.com
About What You Do With Your Section 529 - College Plan When Your Child Drops Out
Dear Counselor: My husband and I have been paying in to a Section 529 Plan to pay for our daughter’s college education. Now she says she’s not going, and wants to use the money to buy a car and move in with her boyfriend! If she takes the money out for that what is the result? What can we do?
Dear Client: Isn’t being a parent fun? Besides trying to maintain your self-control while talking with your child, you can let her know that withdrawals of earnings from a Section 529 Plan are tax-free ONLY if the cash is used to pay for qualified higher-education expenses like tuition, books and supplies. Not only will income tax have to be paid, but there will be a 10% penalty imposed by the IRS on the taxable amount of withdrawn earnings. Eventually, all cash withdrawn from the 529 account for non-educational purposes will be taxable (other than the principal you and your husband contributed). One thing you could consider is that since the account was specifically created to fund educational expenses, and neither a car nor a boyfriend, if you have other children, you could “roll over” your wayward daughter’s account balance tax-free to another 529 Plan set up for her sibling(s). Good luck. Obviously the most important thing here is your daughter. But the practical tax result, including the penalties which will be imposed, will help you get into the discussion of what the “rules” are and why you and the government set up these plans on a tax free basis - because education is so important for a person’s future happiness.
Sincerely,
John L. Maier Jr.
jmaier@wisclaw.com
Sweet & Maier, S.C., Attorneys
114 Church St. Elkhorn, Wisconsin
262-723-5480 www.wisclaw.com
About What An "Evergreen Clause" Is - And How They Are Used In Business Contracts
Dear Counselor: I was so busy getting my taxes done that I didn't get around to cancelling an expensive software contract that I pay monthly for. I called the company and told them my business no longer needed it, but they said I was stuck. They said there was an "evergreen clause" in my contract, and there was nothing I could do for a year. I thought an "evergreen" was a tree or a bush! What can I do?
Dear Client: An evergreen clause provides for the automatic renewal of a contract, and typically reads something like: "The term of this contract shall automatically renew for like periods unless either party gives the other written notice of termination at least 30 days prior to the end of the then current term." So what your software provider is arguing is that the term of their contract with you automatically renewed for another year since you did not give them notice of termination. They are saying you are stuck with that expensive payment, for a service you don’t need! But wait -- there is a new Wisconsin law that might help you out of that deal. Wisconsin Statute 134.49 creates specific disclosure and renewal notice requirements which must be followed, or the "automatic" renewal clause might turn out to be unenforceable. The law protects businesses by requiring notice be given to them before renewal, and if no notice is given, renewal is void. And, the law also provides for damages to be assessed against someone who attempts to enforce a contract that violates the law. Our new law is effective now, so if you received no notice, it is the software company that might be stuck, not you! Check into it, and see whether you have a case. Good luck, and call me for further information. The law is technical, and only applies to business to business contracts.
Sincerely,
John L. Maier Jr.
jmaier@wisclaw.com
Sweet & Maier, S.C., Attorneys
114 Church St. Elkhorn, Wisconsin
262-723-5480 www.wisclaw.com
About An Innocent Spouse - Qualifying For Relief From Back Taxes
Dear Counselor: I didn't know my husband cheated on our tax returns when I signed them, and now the IRS is after me! We divorced due to the abuse I had to endure during our marriage, and now the IRS is threatening to garnish my wages to pay back taxes, and I can’t afford it. What do I do?
Dear Client: More innocent spouses will now qualify for equitable relief from back taxes under new guidelines just released by the IRS. The factors used by the IRS to evaluate an application by a taxpayer that it would be unfair to hold them liable for unpaid taxes attributable to their spouses have just been revised. Greater emphasis will be placed on the effects of physical or emotional abuse which you suffered, and whether you will experience economic hardship if relief is denied. So, if you were being abused, had no real ability to understand the tax return, or the financial information used in preparing it, your husband told you to mind your own business and "just sign here" then you can file an application for relief with the IRS and all of these factors will be evaluated in connection with your request to be released from any liability even though you signed a joint return for that year. These new rules and procedures are effective immediately, so you should definitely apply for relief. If you prove your case, the IRS will be off your back, and you can get on with your life.
Sincerely,
John L. Maier Jr.
jmaier@wisclaw.com
Sweet & Maier, S.C., Attorneys
114 Church St. Elkhorn, Wisconsin
262-723-5480 www.wisclaw.com
About Voting In The Next Election - Voter ID Is Here
Dear Counselor: My parents are elderly, and are worried about voting in the Primary a month from now. They’ve heard about the new Voter ID Law. What do they need to show when they got to the polls?
Dear Client: Reassure your parents that they won't have a problem if they just prepare for the new procedures. The New ID Law requires that voters show an acceptable photo ID before they can vote. There is NO SUCH THING as a "Wisconsin Voter ID Card" because the Law authorizes the use of existing photo IDs for people to prove their identity. Acceptable forms of ID include a Wisconsin DOT-issued driver license or Identification card, or a military ID card issued by a US uniformed service, or a US passport. The address on your ID does not have to be current, and the name on the ID does not have to be an exact match for your name in the poll book [such as Bob for Robert; Sue for Susan]. ID cards are available through the Department of Transportation, for a fee of $18. There are other forms of acceptable ID such as an unexpired ID card issued by a Wisconsin accredited university or college - and for details, you can website set up by the Wisconsin Government Accountability Board. So, as you can see, the requirements are very simple, and it is hoped that having voters show an ID will serve to cut back on voter fraud and make our election process more sound and reliable. Tell your parents not to worry!
Sincerely,
John L. Maier Jr.
jmaier@wisclaw.com
Sweet & Maier, S.C., Attorneys
114 Church St. Elkhorn, Wisconsin
262-723-5480 www.wisclaw.com
About Buying Your Parents' Home And Renting It Back To Them
Dear Counselor: My parents are retired, and need some supplemental funds to live on. They no longer use any of the typical homeownership tax breaks, but don't really want to move out of their home. Even if they wanted to sell, it would be difficult to find a buyer. Any ideas?
Dear Client: You and your parents could consider a purchase and leaseback situation in which you buy your parents' home and then rent it back to them at the "going rate". This will put cash in their pockets, without having to refinance, or take out a home equity loan. And, it gives the family time to let the real estate market stabilize -- rather than forcing a sale now to a third party when the market is down. I've advised other families in similar situations to have a fair market appraisal, to avoid the IRS charging that the price was too low and that there was a gift to you involved in the transaction. As far as a lease, you should charge, and your parents should pay, a fair rental value -- however, the IRS does allow for a 20% discount when renting to your relatives. Once you own the home, you can legitimately take write-offs for expenses, such as utilities, maintenance, insurance, repairs and supplies, and you can also claim depreciation deductions for the value of the home itself (not the land). Your deductions will offset the rental income. And, in the end, your parents will move out and you can sell it, rent it to another tenant, or you can move in! If you move in and make it your principal residence for the prescribed period, you can then sell it and under the current tax code, "shelter" any capital gains!
Could be a good answer for your family!
Sincerely,
John L. Maier Jr.
jmaier@wisclaw.com
Sweet & Maier, S.C., Attorneys
114 Church St. Elkhorn, Wisconsin
262-723-5480
www.wisclaw.com
About The 2010 Tax Relief Act
Dear Counselor: I've been holding my breath waiting to see what our representatives in Congress were going to do about the Bush tax cuts due to expire the end of this year. Now I see on TV that they passed something, and President Obama signed it into law two weeks ago. Is it good or bad news for us taxpayers?
Dear Client: The "Tax Relief, Unemployment Insurance
Reauthorization and Job Creation Act of 2010" (what a mouthful)
was signed into law on December 17, 2010, by President Obama.
The Act provides at least some temporary guidance to taxpayers,
after nearly a year of uncertainty created by the inaction of Congress.
Unfortunately, the Act only provides for a two year extension of
the "Bush tax cuts", ending on December 31, 2012. Thus, we will
have to wait for some additional, hopefully more permanent, tax relief,
in the coming months. The good news is that under the Act,
individual income tax rates will remain the same, and not go up
markedly higher (which is what would have happened
without the Act being passed). Another important aspect
of the new law is that far reaching changes were made to
federal estate and gift tax laws. Beginning on January 1, 2011,
each person will have one exemption for gift and estate taxes of
$5 million, as well as a $5 million exemption from generation-skipping
transfer taxes, and married couples will have a total exemption
of $10 million. This will mean that no estate or gift tax will be
payable by anyone but the most wealthy Americans (assuming
the law doesn't expire after two years). The 2010 Tax Relief Act
has an impact on nearly every American taxpayer, both individuals
and businesses. We've prepared a summary of the important features
of this new tax legislation, and you can find it on our website
[www.wisclaw.com] - or e-mail me and I will forward a copy to you.
Sincerely,
John Maier Jr.
jmaier@wisclaw.com
About Trusts For Disabled People
Dear Counselor: My adult son is disabled, and receives government monetary assistance. I'd like to provide for him in my Will. When I told my insurance man about my plans, he told me I needed to talk with a lawyer about a "special needs trust" because if I left money or property directly to my son, he may lose his eligibility for the government program. Is this true? What is a special needs trust?
Dear Client: If you leave money directly to your son, it would be counted as an asset that could disqualify him from governmental assistance benefits, or at least sharply reduce them. A "special needs" (or "supplemental needs") trust allows a disabled beneficiary to receive gifts, settlements or funds, and yet not lose his or her eligibility for certain government programs. This is because the trust is not designed to provide basic support, but instead to pay for comforts or "extras" for your loved one, that could not be paid for by public assistance funds. These trusts can be used to pay for things like special education, recreation, transportation, needed appliances, equipment, and medical needs beyond those
necessities otherwise furnished through the government program. Such trusts are commonly created by parents or other family members for a child with special needs (even if the child is now an adult), and are also used in connection with a person who has become disabled as the result of an accident or illness. These trusts must be carefully drawn, and are technical in nature. Care must be taken to set the trust up to meet the dictates of law, and the needs of the disabled person. However, once they are set up, they can provide wonderful, long-term, assistance to your loved one.
Sincerely,
John Maier Jr.
Anthony A. Coletti
About How To Get Rid Of A Judgment
Dear Counselor: When I was younger, I was terrible about paying my bills and a few creditors took me to court, and got judgments against me. I am trying to clean up my act (and my credit), and want to get rid of these judgments. I don't have a lot of money. How do I go about it?
Dear Client: Since you say you were not too responsible in your youth, I will assume you really did owe the money and just didn't pay it. For others, who did not owe the money (but just didn't respond when the complaint was filed), it is possible that they could get the judgment reopened or have it set aside -- but we won't worry about that with you. Obviously, the best way to deal with a judgment is to pay it. If you don't deal with it, interest will continue to be added (in Wisconsin at 12%) to the amount of the judgment, and soon, a whole lot more will be owed. In addition, the judgment creditors could go after your wages through garnishment, or seize property that you own, to collect what is due them. With or without an attorney, you can contact the party who got the judgment, and since you may not have all the funds you would need to pay off all the judgments in full, you could offer each of them less than the full amount. Creditors will often take less if cash is offered. Once you come to settlement terms with the creditor, it is very important that you see to it that you have the creditor agree to fully release and satisfy their judgment. That is done through a sort of receipt called a "Satisfaction of Judgment" which is then filed with the Clerk of Court to show the world that you have taken care of the judgment in full. Good luck, and you can be proud that you are taking the steps needed to get your financial house into proper order.
Sincerely,
John Maier Jr.
Anthony A. Coletti
About The Rights of Step Children to Inherit Property
Dear Counselor: My wife and I have four wonderful children between us -- two each from our prior marriages. When we die, will our respective stepchildren inherit equal shares of our estate?
Dear Client: Under the law, a "child" is defined to include an adopted child, but does not include a stepchild. Therefore, if you die without a will, or trust, your stepchildren would not be recognized as heirs to your estate, and would not inherit anything. This is the case even if you had no children of your own. If you and your wife want to provide for both your children and stepchildren, what you need to do is make sure your wishes are not left to chance. You should make a will or a trust for yourselves that sees to it that all your children are treated equally for purposes of passing your estates to the next generation. A will or trust agreement, properly drawn (and witnessed in the case of a will) will then control the disposition of your estate. You can have your attorney include language in such estate planning documents that your respective stepchildren shall be treated as if they were your natural children for all purposes. That way, your wishes are clearly stated, and you've left no doubt about how your estate should be handled.
Sincerely,
John Maier Jr.
Anthony A. Coletti
About Protecting Your Personal Assets From Business Claims
Dear Counselor: My wife and I wondered what is the best way to protect personal assets, such as our home and savings accounts, from suits that arise from our business activities ? For example, if there was an accident involving one of the machines we run, and there is a suit, can the injured person take our home and savings? What does "piercing the corporate veil" mean?
Dear Client: If you own and operate your business personally, then you are personally responsible for everything. But if your business is set up as a corporation, or a limited liability company, its identity is separate from you. As long as you operate your business entity in accordance with the law, and not as your own "alter ego," your personal assets would not ordinarily be exposed to debts of the business, or claims of people who are injured during, or as the result of, business operations. Being a stockholder of a corporation, or a member of an LLC, does not automatically make a person personally liable for its debts and liabilities. The concept of "piercing the corporate veil" means that the business owner has not honored the distinction between the business and him or herself, and has not kept up the formalities of maintaining proper company records, or keeping separate banking accounts. Although piercing the corporate veil is most often hard to prove, if you write checks for personal expenses out of the business checking account, or fail to keep up your books of account, fail to follow corporate formalities (such as having regular meetings of the Board of Directors), or fail to file the required annual reports with the State, then you might find yourself personally responsible for debts -- even if it was formed as a corporation. The answer is not to let that happen. Always keep up the formalities, and keep your personal financial activities separate from business activities, and if you want to come in for a "corporate check up" just give us a call.
Sincerely,
John Maier Jr.
Anthony A. Coletti
About Being Responsible For Business Payroll Taxes
Dear Counselor: Although I have only a very small (2%) ownership interest in the business I work for, the majority owners made me an Assistant Treasurer, and I make out the payroll checks. Now I find out the business is having financial trouble, and the withholding taxes haven't been paid. Will the IRS come after me?
Dear Client: In a just and perfect world, no -- not unless you intentionally diverted the withholding taxes to yourself. However, in the real world, whether you are a 2% owner, or a 92% owner, if you are an officer, and have the responsibility to make out and sign the payroll checks, then it is likely that the IRS will look long and hard at you to see if you can personally be held responsible for making up the unpaid withholding taxes, and also for penalties for failing to see to it that they were paid. If a corporation fails to pay withholding tax, or the employer's portion of social security, the IRS can come after directors, officers and/or other people who are responsible for paying in such amounts and filing the necessary returns (regardless of who owns the business). Having been given the authority to sign checks is one of the first things the IRS is going to look at. So, it might be great for your ego to have been named an Assistant Treasurer, and for you to be able to say you have check signing authority, but with the title comes the responsibility to see to it that business taxes are paid.
You need to come in to discuss this with me right away to see what can be done before the IRS agent "comes a knocking."
Sincerely,
John Maier Jr.
Anthony A. Coletti
About Registering your Trademark
Dear Counselor: I just came up with a terrific logo for my business that I want to use in all my advertising. I'm going to spend a lot of money putting it on all my stationary, labels, checks, shipping and packaging materials, order forms and advertising. So I wonder how I can protect myself from others taking my idea and using it for themselves.
Dear Client: I totally understand your concern. Businesses spend tens of thousands of dollars on advertising, and when you come up with a way to separate yourself from all others through a distinctive logo, label, name or symbol, it is critical to do everything you can to protect it. A "trademark" is a word, name, or symbol which is used to identify a particular product or service offered by a particular manufacturer or from a particular source. It distinguishes the product or manufacturer from other products offered by others. You can protect yourself by registering your logo as a trademark either at the State level or the Federal level, or both. The Wisconsin Secretary of State has a web site devoted to the registration of trade names and trademarks, and for a modest fee ($15) you can register your mark with the State, and the registration remains on record for 10 years. That registration is only effective, though, in Wisconsin. The benefits of a federal trademark registration with the US Patent and Trademark Office far outreach those of a state registration since a federal registration acts nationwide, gives the owner a presumption that the trademark is valid, and carries with it some fairly significant "clout" in terms of the damages that can be imposed upon someone who attempts to use your trademark without your permission. You recognize the need to protect yourself. Now go ahead and do it through the laws available to you, and if you need further help, just give us a call.
Sincerely,
John Maier Jr.
Anthony A. Coletti
About Insulating My Business From My Husband's Creditors
Dear Counselor: My husband and I just moved to Wisconsin, where we are going to "start over." I want to open a new business, and we've agreed that it will be mine alone. I am concerned that my husband still owes a number of creditors from a business he operated before we were married. He is paying them off, but I don't want his creditors (old or new) coming after my business. What do I do?
Dear Client: Some years ago, the Wisconsin legislature enacted a marital property law which applies to married couples who are Wisconsin residents. The general rule for married couples in Wisconsin is that all income, earnings and other property acquired during marriage (except by gift or inheritance) is presumed to be the marital (ie. community) property of the spouses. This general rule will be applied to your new business unless you and your husband agree, in writing, through a Marital Property Agreement, that the business is your separate, individual, property, including any profits generated by the business. You may want to form a corporation or limited liability company to operate your business, and you would be the sole owner. You would then have to be very careful to treat every aspect of the business as your separate property. And, there are special rules that you need to comply with in order to properly advise your household creditors what is marital vs. individual property. Books have been written about this area of Wisconsin law, and there are many court cases that have arisen over the years addressing creditors' rights over marital vs. non-marital property. You need to work closely with us to properly set up your business so that your interests are protected. Come on in, and let's discuss.
Sincerely,
John Maier Jr.
Anthony A. Coletti
About Protesting Your Tax Assessment
Dear Counselor: I just received a notice in the mail from my local assessor that shows that the assessed value of my property is being increased when I think it should be lowered! What do I do?
Dear Client: As you know, your real estate tax bill is based upon the assessed value of your property. The higher the assessed value, the higher the taxes you pay. So, making sure the local assessor has the right information is critically important to a fair assessment. If possible, you should arrange to meet with the assessor to discuss your assessment. Local assessors are typically more than happy to arrange an appointment. An informal discussion can often resolve a problem -- rather than going to a formal hearing before the "Board of Review". If the assessor has made a mistake about the size of your property, or the age or condition of your home, you can call that to their attention. If, on the other hand, their data is correct, but you believe the value is just too high, the best evidence of value is a recent "arm's-length" sale of reasonably comparable property. You can try to get information on your own, or work with a real estate broker, or appraiser. You can also review information on what homes similar to yours are assessed at by reviewing the assessor's tax roll. Showing the assessor that your home is assessed much higher than three similar homes the assessor has set lower values for is a strong argument that yours is too high. If you can't reach an agreement, the next step is filing a written Objection, and going before your community's Board of Review where you can present your case. Good Luck, and feel free to call with more questions.
Sincerely,
John Maier Jr.
Anthony A. Coletti
Can I avoid payroll reporting if I just hire someone as an “independent contractor”?
Dear Counselor: I have a very small company and need to hire two people to help with shipping my products. Payroll reporting is so time consuming and expensive that I was hoping to hire them as “independent contractors” so that I wouldn’t have to worry about withholding taxes. Can I do that?
Dear Client: You have to be very careful here not to violate the law because the IRS, and other Federal and State government departments, are aggressively pursuing employers who misclassify employees as independent contractors. As you know, if the people who are providing services to you are truly employees, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages. There are also workers’ compensation coverage issues. The consequences of attempting to treat someone as an independent contractor, when they are really your employee, can be catastrophic for a small business like yours. Not only can you be held liable to the State and Federal Government, but to the employees as well. Generally speaking if you have the right to control what the worker does, where, with what tools and supplies, and how the worker does it, the person will be classified as your employee. Properly classifying individuals as independent contractors is not easy, and if you will come in to discuss, we can go over the tests and rules which the government uses to make the determination – before you get into more trouble than you would have had doing it the right way in the first place.
Sincerely,
John Maier Jr.
Anthony A. Coletti
How do I protect myself when making an offer to purchase?
Dear Counselor: My wife and I want to make an offer to purchase a home that is being sold by its owner. We talked with the owner and have verbally agreed on a price. The Seller wants us to give him $5,000 to bind the deal, and said he’s willing to wait until we sell our home to close. We want the home, and are willing to give him the $5,000 -- but can’t afford to lose that money. How do we protect ourselves?
Dear Client: The first rule here is that Wisconsin law requires that contracts relating to real estate MUST BE IN WRITING to be enforceable. Your verbal agreement needs to be reduced to a written form, and then signed by all parties. If you do not have it in writing, and the Seller finds someone who is willing to pay more, the Seller might return your $5,000 with a note that says: “Thanks, but no thanks!” And you would likely find out that your “deal” is not legally binding. So, when you write up your “Offer to Purchase” you and the Seller will specify the price, the amount of “earnest money” to be put down to hold the deal, and all of the other terms and conditions for your transaction. Part of these terms will include “contingencies” that you, as Buyer, will specify must be met for you to close. One typical contingency is that you, as Buyer, have to be able to get an acceptable mortgage. Another typical contingency is that you, as Buyer, have to be able to sell your current home. If these contingencies are not met, and you are not willing to waive them and close anyway, you are protected and cannot be forced to close -- in which event, you would be entitled to a return of your $5,000 earnest money payment. Come on into the office, and we can help you write up your deal so that you can sleep easy.
Sincerely,
John Maier Jr.
Anthony A. Coletti
How Can I Settle Up With A Creditor ?
Dear Counselor: I recently hired a handyman to do some painting for me. I bought the paint, and he did the painting. The problem is that he sent me a bill for his work that I feel is way out of line. I called and told him that I wanted to pay him, but not overpay him. He said he’d see me in court. Do you have any suggestions?
Dear Client: If you have a figure in mind that you think is fair for the painting that was done, don’t waste time getting into an argument over the phone, or worrying about what he’s going to do. Send him a check for the amount you think fair, and maybe even a bit more. On the face of the check (not on the check stub), write: “Payment in full for painting services rendered.” Always be very descriptive of exactly what you are paying for. If your painter decides to accept payment, and deposits the check, the law treats this as an “accord and satisfaction” and he cannot thereafter legally collect more. This is an easy solution when relatively small amounts due are being argued over. In cases involving a lot of money, the compromise of a disputed claim is often carried out through payment, in return for a written Release. But in everyday situations, you can make payment, and if you write “payment in full” on the face of your check, and describe for what, the creditor cannot take your check and still claim more is due.
Sincerely,
John Maier Jr.
Anthony A. Coletti
Whether My Mother Will Be Evicted Because Of Her Dog?
Dear Counselor: My elderly mother recently lost her hearing and would benefit greatly if she could have a trained dog to let her know when someone is at the door, and things of that nature. BUT, she lives in a complex that has a "no pet rule". She doesn't want to be evicted, but needs help. Is there anything we can do?
Dear Client: This is actually a pretty common question. Frequently, having a trained "service" animal can mean a world of difference in the quality of life to their owner. If there is a "no pet rule" where your mother lives, just because it sounds final, doesn't mean that it is. The Federal Fair Housing Act requires "reasonable accommodation" and this applies to trained service animals which assist their masters with their disability. You can help your mother by contacting the board or management company at your mother's complex, and providing them with information concerning your mother's disability, together with a letter from her doctor explaining her need to have the trained dog with her. They will then be able to allow her to have the dog as a qualified accommodation under the Act. Best of luck to you, and let me know if you need any further help.
Sincerely,
John Maier Jr.
Anthony A. Coletti
Whether You Must Verify Employment Eligibility?
Dear Counselor: My husband and I operate a business which has done well, and we are now ready to hire our first two employees. We wondered whether we have to verify the citizenship or legal right to work of these new employees. How do we do that?
Dear Client: Yes, you must ask your new employees to present certain original documents to establish their eligibility for employment. The Immigration and Nationality Act requires employers to review these documents, such as a passport, driver's license or State ID card, voter's registration card, social security card, US Military card, or an original or certified copy of birth certificate. Just like most things involving the government, there is a form to be used. It is the "Form I-9, Employment Eligibility Verification" form, which can be obtained pretty easily by downloading it from the internet. You not only must fill out the form, but also must retain it just in case the government wants to inspect it. There is no filing fee for competing it, but if you ignore these requirements, you can be fined or otherwise penalized. When in doubt, call us, and we'll guide you through the process.
Sincerely,
John Maier Jr.
Anthony A. Coletti
About Firing Your Attorney!
Dear Counselor: My widowed sister just can’t get work with the attorney her husband had used for many years. She believes he has charged her too much, and doesn’t believe his bill is fair. But she doesn’t know what to do, and she is afraid he won’t return her legal documents and papers if she goes to someone else. What should I tell her to do.
Dear Client: The relationship between an attorney and client is one built on trust and confidence. Without that, it is difficult, if not impossible, to work with that person. Attorneys know that, and in life, personalities sometimes simply clash. Your sister should advise the attorney in writing that his services are no longer needed, and that he should return her file to her. Attorneys are prohibited from withholding a client’s file when it has been requested, and a failure to return it is a common ground for the lawyer to be disciplined. Hence it is unlikely the lawyer would try to hold the file hostage to payment of his bill. Your sister’s file belongs to her, and is entitled to it -- even if she still owes the lawyer money. As far as the unpaid fee, if your sister and the lawyer can not agree upon what is fair, the State Bar of Wisconsin has a fee arbitration program which has been set up for exactly this type of dispute. Your sister needs only go on-line to the website maintained by the State Bar of Wisconsin, and the forms to request fee arbitration are right there. A final piece of advice, however, is that your sister may first want to simply suggest to the lawyer what she thinks is fair, and offer to pay that. Most lawyers really want to please their clients, and not end up in a dispute. So, they are often willing to discount the fee to avoid further problems.
Sincerely,
John Maier Jr.
Anthony A. Coletti
About Adverse Possession
Dear Counselor: A few years ago, my husband and I had come back from vacation to find that our neighbor had built a fence between our backyards. It looks nice, but he built it more than ten feet on our side of the lot line. We've asked him about it, but he said he couldn't do anything now -- that moving it would be too costly for him. We are wondering what to do. We've avoided the issue ever since, but are concerned about our property rights.
Dear Client: When clients come to us with this kind of a problem, we tell them that they are dealing with what lawyers call a case of "adverse possession". If you aren't careful, after a certain period of time goes by, you could legally lose your right to that part of your property that has been fenced in by your neighbor. Usually, that takes 20 years, but under some circumstances, it can be as little as 10 years. You could find out that title to that strip of property has passed to your neighbor, and you have lost your rights to make him move the fence! When dealing with a residential lot, losing land area like that could mean that your home is now sitting on a lot that is less in land area than the zoning ordinance requires, or that your home now technically is too close to your new lot line than what the zoning laws require. You need to stop worrying about being polite, and protect yourself. In may instances, a written agreement can be recorded that states that your neighbor realizes his fence encroaches on your property, but that you are permitting it for the time being -- subject to your future right to make him move it back. You can be a nice neighbor without losing your property rights. You need to talk to your lawyer right away.
Sincerely,
John Maier Jr.
Anthony A. Coletti
To learn more about this topic, or to submit a question for a future column, please contact us. We look forward to hearing from you.