BizLawBuz …. The Power of Know

One of Michigan’s premier business journals, DBUSINESS, recently announced its 2010 “Top Lawyers” in metropolitan Detroit. Dan Penning, Dirk Beamer and Lee Flaherty – all principals with Wright Penning & Beamer – made the list. Penning was recognized for his business planning acumen; Beamer for his expertise in business and commercial litigation; Flaherty for her work with non-profits and charitable organizations.

DBUSINESS compiles its list as a resource and reference guide for its readers. Selection criteria include: legal knowledge, analytical capabilities, judgment, communication ability, and legal experience. The list was published in the journal’s November/December 2009 edition. According to the publication, selected lawyers “possess the highest professional ability and ethical standards.”

Penning is a founding shareholder of the firm and works primarily in succession planning for individuals, families and business owners. Dan’s practice focuses on planning for business entities including family businesses, estate planning for business owners, individuals, families with special needs children, and succession planning for family cottages and farms. He has also established himself and the firm as a leading resource for individual and business clients in property tax appeals and related matters.

Beamer oversees our firm’s diverse litigation practice, focusing primarily on business and commercial litigation. He spearheads the firm’s efforts in insurance law, unfair competition, trademark infringement, employment matters and contract disputes. Dirk has litigated in state and federal courts across the country. He also counsels business owners and managers concerning employment practices and management.

In addition to her work with non-profits, Lee Flaherty is well versed in real estate, business law, estate planning and probate. Lee’s business expertise encompasses the support of ongoing businesses, business purchases and sales, and representation in commercial real estate transactions. Her estate planning practice focuses on the preparation of a wide variety of trusts and other documents to assist clients in avoiding probate, preserving assets and minimizing taxes.

We take pride in our colleagues’ accomplishments, and we continue to strive daily to deliver the highest quality legal services to our clients throughout Michigan and beyond.

In Michigan, an employer could be held liable for an employee’s actions while traveling if the trip involved a service or benefit to the employer. This is true even if the employee is driving his or her own vehicle, especially if the employee is traveling on business or to an important business meeting. Generally, if an employee has a primary place of business, an employee’s actions while traveling to and from that location do not expose the employer to liability. But in a recent case, the Michigan Court of Appeals considered that an employee’s normal place of employment could be her vehicle.

In the case, the employee had struck another woman with the employee’s own vehicle while “going to work.” Because the employee’s job entailed traveling in her car 60% of the time, the Court determined that she could have been acting within the scope of her employment at the time so as to impose liability on the employer for the other woman’s damages. The Court reasoned that “driving to work” is different for employees who travel significantly than it is for someone who works at one primary location.

Rulings such as this could open the door for more attempts to hold an employer liable for actions of an employee while traveling. Maintaining detailed travel records for employees might help employers defending such cases. Also, comprehensive general liability insurance policies should be reviewed to make sure coverage extends to these situations.

Julie Pfitzenmaier

It has long been said that the only things certain in life are death and taxes. While most Americans pay any number of local, state and federal taxes while living, depending upon the extent of one’s property and the estate planning techniques used, additional taxes may be owed at death. According to the IRS website, “The Estate Tax is a tax on your right to transfer property at your death.” While the federal estate tax, therefore, has an impact on estate planning, the extent of that impact is currently in a state of flux. While death remains a certainty that all will face, the amount of federal estate tax is not.

In 2001, the Economic Growth and Tax Relief Act of 2001 (the “2001 Act”) was signed into law, significantly changing key provisions of the Internal Revenue Code dealing with the federal estate tax. Changes included an incremental increase in the estate tax unified credit exclusion from the pre-2001 amount of $650,000.00 per person, to $3.5 million per person in 2009, with no federal estate tax at all in 2010. In addition, the top estate tax rate declined from 55% to 45%. However, the 2001 Act contains a sunset provision and is set to expire on December 31, 2010. At that time the federal estate tax exclusion is scheduled to revert to $1 million per person and the maximum tax rate of 55% will be restored.

At 2009 rates, only inheritances above $3.5 million for an individual and $7 million per married couple were subject to the federal estate tax, at a tax rate of 45%. While it was estimated that only 1% of all inheritances would exceed those thresholds (encompassing an estimated 6,000 estates), Congress expected the federal estate tax to generate upwards of $25 billion in taxes in 2009.

Although there is no federal estate tax in 2010, the 2001 Act replaces the federal estate tax with a 15% capital gains tax on property inherited in 2010. Prior to 2010, beneficiaries of appreciated assets received those assets at their fair market value at the time of the decedent’s death (”stepped-up basis.”) Under stepped-up basis rules, the difference in the value of the asset from the time it was acquired by the decedent (the decedent’s “basis”) and the value of the asset at the time of the decedent’s death (the “gain” or “appreciation”) was not taxed as capital gains to the beneficiaries. This total exclusion no longer applies in 2010. While the capital gains scenario for 2010 is complicated and has its own system of exemptions, experts agree that many who thought that the elimination of the federal estate tax in 2010 would amount to a windfall may be in for a surprise.

The new capital gains treatment in 2010 notwithstanding, it is uniformly acknowledged that Republicans and Democrats alike are not going to accept the total elimination of the federal estate tax in 2010. In fact, on December 3, 2009, the House passed the Permanent Estate Tax Relief for Families, Farmers and Small Business Act of 2009, making permanent the $3.5 million per person exclusion, the 45% top tax rate, and stepped-up basis rules. However, the Senate, while focused on healthcare reform in the closing weeks of 2009, did not address the federal estate tax. As a result, the 2001 Act remains controlling — at least for now. Some Democratic Senators have vowed to reconvene early in January in order to pass an act that will be retroactive to January 1. As of this writing, the only thing that is certain is uncertainty.

We at Wright Penning & Beamer will continue to monitor this situation and the impact of future federal legislation on the estate planning needs of our clients. Stay tuned.

Duane L. Reynolds