Archive for the ‘Asset Protection’ Category

Michigan’s Super Drunk Driving Law

Michigan’s Super Drunk Driving Law Takes Effect October 31,2010

On January 9, 2009, Governor Granholm signed into law a series of amendments to the Michigan vehicle code dealing with drunk driving and related offenses. Those amendments, referred to by many as Michigan’s “Super Drunk” driving law, take effect on October 31, 2010. In adopting these amendments Michigan joins some 45 other states that have adopted similar laws. Key provisions of the new law include the following:

  1. Beginning October 31, 2010, drivers with a blood alcohol content (or, BAC) of .17 percent or greater will face significantly enhanced penalties. First offenders will face fines ranging from $200 to $700 (up from $100 to $500 under current law), up to 6 months in jail (up from 93 days under current law), up to 360 hours of community service and will be required to attend 1 year of substance abuse treatment, Alcoholics Anonymous or other community based support groups (only required for repeat offenders under current law.) The duration, frequency and type of treatment must be based on an assessment from a licensed alcohol assessor, paid for by the offender.
  2. The new law and enhanced sanctions apply only to offenders convicted of offenses that occur after October 31, 2010. License and punitive sanctions for second and subsequent offenses remain unchanged regardless of the offender’s BAC.
  3. The licenses of offenders convicted under the new law will be suspended for 1 year, and restricted licenses may not be granted for the first 45 days (referred to as a “hard” suspension.) Thereafter, for the next 320 days, the granting of a restricted license is contingent upon an ignition interlock device being installed in the offender’s vehicle, at their expense, including all charges for monthly monitoring of the device. Such devices are designed to prevent a vehicle from being started or driven by anyone with a BAC of .025 or greater (reduced from .04 under current law.) Under current law as applied, the Secretary of State recognizes the potential that these devices may not allow the vehicle to be started for reasons other than a BAC of .025 or greater. As a result, if a “startup” failure is followed by a “clean test” within 15 minutes, the startup failure is not recognized. Under the new law, after the first 2 months that the device is in use, all startup failures will result in sanctions; period.Any tampering or attempted tampering with the device, or, operating or attempting to operate a vehicle equipped with the device with a BAC of .025 or greater, will result in another 1 year suspension, including 45 days of no driving at all. If an offender who has been ordered to have a device installed in his or her vehicle is stopped driving a vehicle that is not equipped with the device, that vehicle may be impounded, the license plate may be confiscated and destroyed and the offender will face additional suspension and criminal sanctions, including up to 6 months in jail and up to a $5,000 fine. The interlock device must remain in the offender’s vehicle until the Secretary of State orders its removal.
  4. The vehicle of anyone who is convicted of knowingly allowing an intoxicated person to drive their vehicle must be immobilized for 90 to 180 days, with the option of avoiding the immobilization if a monitoring device is installed.

Currently, the average BAC of a person arrested for drunk driving in Michigan is .16. It is therefore estimated that the new “Super Drunk” driving law is likely to impact almost half of all persons arrested for drunk driving. Will it result in reduced incidents of drunk driving and greater safety? Only time will tell. What is certain is that convictions for drunk driving will be substantially more expensive and more consequential under the new law.

Duane L. Reynolds

Court Expands IRS Power to Enforce Tax Liens

Michigan permits husbands and wives to own real estate as “tenants by the entireties.” This special form of joint ownership, recognized only in about half of the states, protects real property from the claims of creditors unless the creditor is the joint creditors of both the husband and the wife. In other words, the creditor of one spouse has always been powerless to force the sale or refinance of entireties property in order to collect a debt.

This was true for all creditors until 2002, when the IRS prevailed in a court battle over whether a federal tax lien may attach to a delinquent taxpayer’s interest in real estate owned as tenants by the entireties. The 2002 ruling essentially gave the IRS “super creditor” status, but there was some comfort for taxpayers in that the IRS could not actually force the sale or refinance of entireties’ property. Instead, it could only wait in the wings until the property was either sold or refinanced, at which time the delinquent tax debt would be paid.

The tax collection landscape changed dramatically this August when the U.S. Court of Appeals expanded the reach of the IRS by ruling that the government could foreclose a husband’s income tax debt by forcing the sale of the Michigan home he owned as tenants by the entireties with his wife. As a practical matter, this ruling means that any transfer of a marital home to one spouse or to that spouse’s living trust must be completed well before any tax dispute arises if the home is to be protected from the collection efforts of the IRS against the other spouse.

Lee Flaherty

New EPA Rules Regarding Lead-Based Paint

Contractors Facing $75,000 Fines Unless Certified in Lead-Safe Practices

New EPA Rules Regarding Lead-Based PaintWhen it comes to lead-based paint, the Environmental Protection Agency has long regulated its use, detection and disclosure. The EPA recently expanded its regulation in the area by requiring contractors who renovate, repair or paint pre-1978 homes, child care facilities and schools to be specially trained and certified in the removal and containment of lead-based paint.

Although lead was eliminated as a paint ingredient over 30 years ago, it remains on the walls in countless structures, often buried under several layers of newer paint. New EPA Rules Regarding Lead-Based PaintMany common activities can cause dust or chips containing lead-based paint to be released into the air: sanding, scraping, or even something as simple as replacing an old window.

These new regulations affect anyone that conducts renovations or repairs for a profit. The certification requirement went into effect April 22, 2010, but the EPA recently announced a grace period for those not yet certified. As long as an individual renovator has enrolled in a training course by September 30, 2010, and has completed the course by the end of the year, no fines will be imposed. Contracting firms that are not yet certified, on the other hand, will be subject to fines beginning October 1, 2010.

The fines for violation of the new rules are enormous, up to $75,000 per incident. These are clearly not regulations that can be ignored! A list of the 15 currently-accredited Michigan trainers and other information about lead-safe practices can be found at www.epa.gov/lead.

Lee Flaherty

A Case of Wedding Contract “What-Ifs”

When they’re selling what we want

Pink wedding roseAs I prepare for my upcoming wedding, I am increasingly bombarded with vendor contracts asking me to pay this and waive that. And I will tell you that I am often tempted to do exactly that, especially when the vendor appears to be selling what I want. But, as an attorney, I am always asking (sometimes excessively) the “what if” questions and making sure the answers to those questions are in the contract. Initially, this was uncomfortable for me, as it may be for some of you. First of all, we tend to hire people with whom we are comfortable, and with whom we enjoy working. Second, we may be in unfamiliar territory when negotiating contracts, or specific types of contracts. And, finally, we may see asking tough questions as being negative or putting up road blocks to what we want. If you are parents of a groom- or bride-to-be you might run into resistance from vendors and children alike when asking these same questions.

Ask questions first
But, these “what if” questions and their answers are essential. Clients often come in with a contract issue saying “I never thought anything like this would happen,” and we are forced to look at the contract for what is sometimes an unpleasant answer. Here are examples of the “what ifs” I asked my photographers:

  • What if something happens to your equipment during the wedding?
  • What if something happens to your computer after the pictures are downloaded?
  • What if your children get sick and you need to leave?
  • What if you get sick or there is another emergency?
  • What if we are dissatisfied with the replacement photographers you select in the event you are unavailable?
  • What if there is a snow storm between Grand Rapids and Detroit on the day of the wedding?

Wedding Contract The second step, of course, is making sure that the answers to the “what-ifs” are in the contract. Hand write changes into the contract if you must, but resist the temptation to accept “Just trust me,” or “That has never happened before.”

Minimize the surprises
Of course, things will go wrong. But, you can minimize the surprises and anticipate the solutions if the contracts you sign have the answers. So, take some time, do a little “negative” thinking, and come down with a case of the “what ifs.”

We strive to make “doing business” profitable and advantageous for you. Please call us if you need help crafting the “what-ifs!”

Julie Pfitzenmaier

Short Sale Basics

Short Sale BasicsA few years ago, terms like “short sale,” “upside down,” and “under water,” were not even part of our lexicon. Today, they are common place. Following some 15 years of steady appreciation, peaking in 2006, home values in Michigan have since declined 45% on average. In Oakland County, distressed sales now account for approximately 93% of all home sales. If a short sale becomes your only option, here are some basics to keep in mind.

1. A short sale results when the seller owes more money on the mortgage than the home is worth. As a result, the seller is forced to negotiate a discounted payoff of the underlying mortgage debt with the mortgage lender in order for the sale to take place. Sellers want to avoid having to pay money against the mortgage at closing and to obtain a waiver of any deficiency. Buyers want clear title and a quick closing.

2. It is absolutely essential that a short sale contingency be included in the listing agreement for the property and in the purchaser agreement. Such contingencies will provide that the sale is contingent upon the ability of the seller to negotiate a short sale with its mortgage lender upon terms and conditions that are acceptable to seller, in seller’s sole discretion. If the seller is unable to get such an approval, the purchase agreement can be terminated, buyer’s deposit refunded, and seller has no obligation to the realtor under the listing agreement.Short Sale Basics

3. Mortgage lenders have very specific, detailed and comprehensive procedures that must be followed, exactly, in order for a short sale to be considered. Substantial documentation must be provided, and there must be full and accurate disclosure on the part of the seller. Failure to accurately disclose such things as hardship, income and assets, may result in the short sale being later set aside on the basis of fraud. The process is detailed and time consuming (as long as 6 months or more), ultimately resulting in either the rejection of the request or a statement of the terms upon which the mortgage lender will agree to the short sale.

4. Mortgage lenders are not required to waive the balance owing on the mortgage. They may require that some, or all of it, be paid by the seller at closing, or that the balance owing will remain payable by the seller under the original mortgage note or a new promissory note.

5. A short sale will impact the seller’s credit rating and may adversely impact the ability to obtain certain types of mortgages in the future. And, any part of the loan deficiency that is forgiven must be reported by the mortgage lender to the IRS on Form 1099-C. Short Sale BasicsWhether or not the forgiven debt is taxable depends upon a number of factors, including whether or not the home was the borrower’s principle residence, when the forgiveness took place, and so on.

Based upon historic trends, many believe that it will take another ten years or more for homes to regain the value that has been lost in the past 4 years. Distressed sales (short sales) are therefore a fact of life that will be with us for years to come.

Duane L. Reynolds

Preparing for the Effects of Health Care Reform

The costs and penalties of Health Care ReformStill wondering how the federal Patient Protection and Affordable Care Act (”PPACA”) will affect you or your business? Not sure what changes you may need to implement to avoid penalties? You’re not alone. While the nation attempts to navigate the overhaul of the health care system, here are a few key points to help you understand some aspects of this complex law:

Dependent Coverage
For all employer-sponsored health care plans that provide coverage to dependent children of covered employees, PPACA will now require that the dependents’ coverage continue until the dependents turn 26 years old. This requirement is effective for all plan years beginning on or after September 23, 2010.

Penalties for Individuals
Starting January 1, 2014, individuals will incur a penalty for each month that they do not have health insurance coverage. In 2014, that penalty cannot exceed $95 for the year. In 2015 and 2016, the maximum penalty increases to $325 and $695, respectively, for each year.

Penalties for Large Employers
PPACA defines a “large” employer as one that employs 50 or more full-time employees working 30 or more hours per week. Large employers must offer “acceptable” health care insurance to employees starting January 1, 2014, or face penalties. “Acceptable” coverage means coverage that is affordable to the employee.

The Effect of Health Care Reform for BusinessesIf a large employer does not provide any coverage, and for that reason an employee qualifies for a subsidy (or “premium credit”), the employer faces a monthly penalty, calculated as follows:
No. of full-time employees – 30 x $166.66 = Monthly Penalty
The $166.66 represents 1/12 of $2,000.

If a large employer does not provide “affordable” health insurance coverage, the monthly penalty assessed for each full-time employee that qualifies for a subsidy because of the lack of affordable coverage is 1/12 of $3,000. This penalty is not based on the number of full-time employees; only the number of employees that qualify for a subsidy.

It is still unclear whether the penalties imposed by PPACA might still be less than the cost of providing acceptable health care insurance, as some critics of the law have suggested.

Julie Pfitzenmaier

The Cost of Being a Distracted Driver in Michigan

Michigan’s New Law and Fines On Texting While Driving in Michigan

Accidents attributed to distracted driving
Michigan's New Law on Fines on Testing While Driving in MichiganWith a tremendous amount of hoopla, Michigan’s law banning texting while driving took effect this past July 1, 2010. In so doing, Michigan joined somewhere between 14 and 23 states (the reported numbers vary widely) and the District of Columbia, that have taken this approach in an effort to deal with the growing problem of distracted drivers. A summer 2009 study by the Virginia Tech Transportation Institute found that the act of writing a text message while driving substantially increased the chances of becoming involved in an accident. According to figures published by the National Highway Traffic Safety Administration, accidents resulting from some form of distracted driving resulted in 6,000 deaths and 500,000 injuries in 2008. Overall, distracted drivers accounted for almost 80% of all accidents and 65% of near accidents, nation wide. Here in Michigan, some 3,315 accidents were attributed to distracted driving in 2009, with 900 of those specifically linked to some sort of cell phone use.

The new Michigan Vehicle Code
Despite the media attention, reports of that which the law allows, and that which the law prohibits, have varied widely. It’s not all that long and complicated, so I thought it worth while to reprint it here, in its entirety. The law, now part of the Michigan Vehicle Code, can be found at Michigan Compiled Laws Section 257.602b.

257.602b.
Use of wireless 2-way communication device for text messages while operating motor vehicle; local regulation; penalties

Sec. 602b. (1) Except as otherwise provided in this section, a person shall not read, manually type, or send a text message on a wireless 2-way communication device that is located in the person’s hand or in the person’s lap, including a wireless telephone used in cellular telephone service or personal communication service, while operating a motor vehicle that is moving on a highway or street in this state. As used in this subsection, a wireless 2-way communication device does not include a global positioning or navigation system that is affixed to the motor vehicle.

(2) Subsection (1) does not apply to an individual who is using a device described in subsection (1) to do any of the following:

  • (a) Report a traffic accident, medical emergency, or serious road hazard.
  • (b) Report a situation in which the person believes his or her personal safety is in jeopardy.
  • (c) Report or avert the perpetration or potential perpetration of a criminal act against the individual or another person.
  • (d) Carry out official duties as a police officer, law enforcement official, member of a paid or volunteer fire department, or operator of an emergency vehicle.

(3) An individual who violates this section is responsible for a civil infraction and shall be ordered to pay a civil fine as follows:

First violation $100 fine texting in Michigan(a) For a first violation, $100.00.
(b) For a second or subsequent violation, $200.00.

(4) This section supersedes all local ordinances regulating the use of a communications device while operating a motor vehicle in motion on a highway or street, except that a unit of local government may adopt an ordinance or enforce an existing ordinance substantially corresponding to this section.

Distracted drivers scare the daylights out of me
Distracted drivers scare motorcycle ownersIs the law working? It’s too early to tell. I do know this. As someone who rides a motorcycle, distracted drivers scare the daylights out of me. On a motorcycle, I am pretty much at eye level with drivers, and can easily see what they are doing. Just this past weekend, on a trip to the west side of the state, I encountered numerous erratic drivers; you know the ones, driving too slow, too fast, drifting in and out of their lanes, and so on. In every instance, the driver was either talking on a cell phone or texting while driving. Very scary stuff.

The prohibition couldn’t be simpler: don’t read, type or send text messages while driving.

Duane L. Reynolds

20 Percent of All Nonprofits May Have Lost Tax-exempt Status

Revocation and Restoration of Tax-Exempt Status

Nonprofits subject to IRS annual reporting requirements
IRS LogoUntil recently, most U.S. nonprofit organizations were not required to file an annual information return with the IRS. Beginning January 2007, all that changed when even the smallest of nonprofits became subject to IRS annual reporting requirements. The only exceptions were state organizations, churches and their affiliated organizations, and certain religious groups. Nearly all others were required to file some version of Form 990, and the failure to do so for three consecutive years would mean automatic loss of the organization’s tax-exempt status.

New nonprofit filing requirements

It has now been three years since the implementation of the new filing requirements, and the IRS estimates that perhaps 20% of all nonprofits may have lost their tax-exempt status on May 17, 2010 (the annual filing deadline for nonprofits with a December 31 fiscal year end), for failure to file an information return for three consecutive years.
Non Profit Church Steeple
When nonprofit tax-exempt status is revoked
Revocation of tax-exempt status is a serious matter for a nonprofit. It means that its income is now subject to tax, and that an income tax return must now be filed. It means that the organization can no longer accept tax-deductible contributions, which could potentially mean a loss of its entire base of support.

IRS list of nonprofits whose tax-exempt status has been revoked mailing
So what does this mean for individual donors and grantmakers? The IRS is apparently waiting until 2011 to send out letters of revocation and to publish a list of nonprofits whose tax-exempt status has been revoked. Until that time, individuals can still deduct charitable contributions and grantmakers can still make qualifying distributions to those charities. Beginning in 2011, however, foundations will need to amend their pre-grant due diligence process to include confirmation that a charity has not lost its tax-exempt status.

IRS LogoWelcome relief for small nonprofits only
In the meantime, a press release issued by the IRS on July 26, 2010 offers welcome relief for small nonprofits only. Small exempt organizations have a one-time opportunity to either (1) file their missing returns by October 15, 2010, or (2) engage in a voluntary compliance program. The first option is for very small organizations that are eligible to file Form 990-N (known as the “e-Postcard”). The second option is for somewhat larger organizations that are eligible to file Form 990-EZ.

Organizations that file Form 990-N can simply go online and complete their filings electronically. Organizations that file Form 990-EZ must both bring their delinquent returns up to date and pay a compliance fee.

Regaining nonprofit tax-exempt status
Questions about organization and grantmakers and charitiesFor charities that receive an IRS revocation letter next year, all is not lost. A nonprofit can regain its tax-exempt status by filing a lengthy application (Form 1023 or Form 1024) with the IRS and paying the applicable user fee. (Unfortunately, this application process applies even to organizations that did not have to apply in order to gain their initial tax-exempt status.) Reinstatement will usually be effective as of the date the application is filed. However, if a nonprofit can demonstrate that it had reasonable cause for failing to file returns for three years, reinstatement will be effective as of the date of revocation.

Donor and Grantmaker Questions
Whether you are a donor with questions about an organization, a grantmaker that needs assistance in revamping its due diligence processes or a charity that fears it may have lost its tax-exempt status, the attorneys at Wright Penning & Beamer stand ready to assist you.

Lee Flaherty

Parents Cannot Legally Contract on Behalf of Their Children

…there are still protective measures that businesses and individuals can take to attempt to limit their exposure to liability if a child is injured….

Michigan Supreme Court: Parental Waivers are Unenforceable

Parental Waivers are UnenforceablePreviously, we informed you of a Michigan Court of Appeals decision from 2008, which held that a parent’s waiver of liability for a child’s personal injuries is ineffective. On June 18, 2010, the Michigan Supreme Court decided that the Court of Appeals reached the correct conclusion: parental waivers are unenforceable. The Court reasoned that parental waivers are an attempt to contractually prohibit a minor from filing a lawsuit. Since parents cannot legally contract on behalf of their children, such waivers cannot be enforced.

While the Supreme Court decision solidifies concerns over heightened liability for commercial recreation establishments, schools, and churches, it does not prevent the legislature from crafting a law that specifically authorizes the enforcement of parental waivers. Parental Waivers are UnenforceableIn fact, a bill is currently pending in the Michigan House of Representatives that would allow a parent or guardian of a minor who participates in a recreational activity to sign a written waiver releasing a person (the sponsor or organizer of the activity, or the owner or lessee of the property) from liability for resulting injuries. The bill would authorize parents or guardians to sign the waivers in advance of the activity. It is unknown at this time, however, if and when the bill will become law.

For now, we are operating under the Supreme Court decision; but there are still protective measures that businesses and individuals can take to attempt to limit their exposure to liability if a child is injured. First, to reiterate our advice from our prior email blast, establishments and individuals should act prudently, maintain adequate insurance, and continue use of pre-injury waivers (while at the same time understanding the potential ineffectiveness of those waivers). Parental Waivers are UnenforceableAlso, some establishments may want to investigate the suitability of contracts that provide for the parents themselves to “indemnify” (or reimburse) the establishment for any losses that arise from the injuries that a child suffers while participating in the activity at the establishment. While parents cannot contract for their children, they can enter contractual commitments of their own. An indemnification agreement would essentially have a parent agreeing that, “If my child is injured while participating in your activity – and if that injury leads to a claim against you – I will reimburse you for the cost of that claim.” While not nearly as clean or as risk free as a release, such an agreement would at least provide one additional tool to use in defense of an injury claim.

For additional information, feel free to contact Wright Penning & Beamer.

Julie Pfitzenmaier

“Legally Valid” is Not a Tough Threshold to Meet

online legal formsThese days it’s hard to listen to the radio, watch television or go on-line without being inundated by ads pitching the latest and greatest do-it-yourself, on-line, estate plan documents: who needs those money grubbing lawyers anyway? One thing all of these pitches have in common is the assurance that the forms are legally valid and binding. Truth be told, “legally valid” is not a tough threshold to meet. If the person signing the Will (or trust, or, you name it) has the requisite mental capacity under the laws of the state where the document is being signed, and the document is signed, witnessed, or notarized in accordance with the laws of the state, it is legally valid. Legal validity, however, is only part of the story. Imagine the shock years down the road when it is discovered that an estate plan put in place by well meaning parents, intending to provide for each other and their children upon their disability and eventual deaths, does nothing of the sort.

I recently had the opportunity to help a young couple with very small children, where one spouse was facing a life threatening illness. They were referred to me to review their revocable living trust. I was under the impression that it had been drafted by another lawyer, and, therefore, my initial review was not clouded or prejudiced in any way. As I went through the document I was appalled at what I perceived to be the utter incompetence of a fellow practitioner, and, quite frankly, dumfounded as to why and how any attorney could pass something like this off on unsuspecting clients. The document was grossly deficient in a number of particulars, and, more importantly, would not have accomplished the desired result of providing for the surviving spouse and children upon the disability or death of one of the parents. It was then that I learned that in their haste to insure that the surviving spouse and children would be provided for, the couple turned not to a lawyer, but to one of the popular on-line sites for their estate planning needs, which included a revocable living trust (for which they paid a fairly sizeable sum I might add).

To enumerate and explain the deficiencies in the document would exceed the space allowed here, so I’ll only touch upon three, specifically:

  1. form
  2. concept, and
  3. substance.

First, from the standpoint of form, although touted by the website to be a Michigan specific document, the terminology used was not consistent with, or reflective of, Michigan law. This past April 1, 2010, the Michigan Trust Code went into effect, changing many aspects of Michigan trust law. Those changes had not found their way into the document.

online legal formsSecond, the document was premised upon property law concepts that are not followed in Michigan. Admittedly, this is where the explanation can get technical and complicated, so I’ll convey only the basics. Insofar as property ownership between a husband and wife is concerned, 40 states follow concepts derived from, and based upon, English common law. There are 10 states, however, that characterize property owned by a husband and wife pursuant to concepts that can be traced to French and Spanish civil law. Those states are said to be “community property” states. And, even within these groupings of common law and community property law jurisdictions, there are many variations. The salient fact remains, however, that property owned by a husband and wife is treated differently in community property and common law jurisdictions. Michigan is not a community property state. Yet, this document, although touted to be a Michigan specific document, employed community property terminology and concepts.

Lastly, there are many reasons why people need estate plans, and trusts in particular, ranging from tax savings to probate avoidance. For people with children, the primary need for a trust is to provide for the children upon the death or incapacity of one or both parents. Without a trust, minor children will receive their inheritance when they turn 18; all of it. Because that is rarely a good idea, trusts are the means of providing a method for holding property and administering it for the benefit of the children according to a detailed plan of distribution determined by the parents, in advance. The trust document I was asked to review contained none of these provisions. Although this couple had a number of children, upon the death of the second spouse to die, the trust assets would simply be held for distribution to each child as he or she turned 18. The document contained no provisions for the administration and distribution of the trust property for the care of the children while they were young.

Was this a legally valid and binding trust? It was. Would this trust have fulfilled the intentions and desires of this young couple and the needs of their family? Not even close. The problem is that they had no way of knowing that. For users of these on-line documents, it will be years or decades before the ultimate beneficiaries will learn just how bad the documents are. Merely filling in the blanks on a form is no substitute for the expertise of an experienced estate planning attorney. There is a reason why we dedicate our working lives and energy doing what we do.

Duane L. Reynolds