Jennifer M. Harvey, Estate Planning Attorney

By: Lori T. Williams, Owner/Managing Attorney of Your Legal Resource, PLLC

The saying goes, “People don’t plan to fail, they just fail to plan”.  Estate planning is something many of us have a tendency to put off.  Attorney Jennifer Harvey shares some tips on what you need to consider as a business owner, when planning for your estate.

Jennifer began her legal career as outside legal counsel for Ford Motor Credit Company, handling business contracts, litigation, and estate planning.  She decided to create her own practice to help small business owners protect their families in the event of death or incapacity, and to protect their business from liability. Her company slogan is “taking care of you and your family when you can’t.”

Jennifer, why is it important to utilize the services of an estate planning attorney rather than other resources when it comes to estate planning?

Much of what I do involves making sure that our clients are properly informed about their estate planning options.  I often hear about and experience people who have put their trust in internet resources that are inaccurate and do not speak to their situation.  Estate planning and probate law differs from state to state.  Also, it is difficult for an internet researcher to know who actually drafted an internet article or when it was written.  It is important for each person to find the right attorney who specializes in the area of the law that they need and have candid and thorough discussions with him or her to achieve the client’s goals.

Are there any pressing legal issues to consider in the area of Estate Planning?

Yes, two hot topics come to mind:

(a)    The deed beats the Will! 

In estate planning, the deed always beats the Last Will and Testament – that is, if the deed states that a second person is a co-owner with the client or listed as a beneficiary on the deed, the deed controls which beneficiary receives the property at the client’s death.  If the client set up a Will that contradicts the deed, the Will loses and the deed wins.  It is important for an estate planning attorney to make sure that each client’s deeds cooperate with and achieve the goals of each client’s estate plan.  I can’t tell you how many times I have had to probate an estate just because of poor planning.  Probate and results contrary to what a client wants can be avoided by diligent planning.

(b)   Short sales for a decedent’s real estate.

Due to the current real estate market, I often help clients whose parents died and left a house or condo where the mortgage is greater than the value of the property.  Sadly, family members are often denied the opportunity to buy the home in a short sale from the bank because such a sale is considered by the bank to not be “an arm’s length transaction.”  Sometimes families are faced with whether to use money from a deceased parent to pay off the mortgage or let the home go into foreclosure.  There are both financial and emotional issues to contend with, especially if there are many sibling beneficiaries involved.  I highly recommend that people in this situation seek the advice of a qualified attorney to learn about and weigh their options in this situation.

Since it’s the New Year, what planning tips might you offer business owners to get their affairs in order?

(a)    If you’ve never done estate planning, the time to begin is Now!

If you had an estate plan at one time, find your old plan and legal documents for household and your business and determine the following things:

How long has it been since they were updated?

Has your business or family grown or changed since the documents were prepared?

What else has happened in your life, the lives of your loved ones, or the lives of your business colleagues since those documents were prepared?

If there have been changes, review the documents with a qualified estate planning attorney.

Get the appointment on the calendar, don’t put it off any longer.

(b)   Talk to your parents and elderly relatives about their estate planning.

I find that a good way to make conversation about this is to discuss what happens when celebrities pass away without proper planning – we can learn much from the errors of Michael Jackson, Princess Diana and Sonny Bono.

(c)    Talk to your friends, relatives, neighbors and co-workers who have children under the age of 18 to ensure that they have guardians named for their kids in the event that they die.

We wouldn’t let our kids stay with just any babysitter; so much more important is who would act as their guardian in the event of death.  It is important to choose who the guardian would be, and have the right lawyer put your wishes in place. Don’t leave this important decision up to a probate judge!

If someone has a special needs child, regardless of age, a special needs trust should be put in place to ensure that the special needs child can get an inheritance or support from their parents without losing their valuable governmental benefits.

What are some common misconceptions about estate planning?

That it takes too long, is too complex, and is too expensive.

Nothing is further from the truth, if you hire a qualified attorney to assist you.  That attorney can give you a timeline for completing the documents and handle the matter for you.

As for cost, you can talk to an attorney and know what planning will cost you upfront.  If things go wrong and there is no plan in place, it is going to be much more costly to hire a lawyer after the fact, than if you had hired one to properly plan. Rather than thinking “I can’t afford an estate plan,” business owners and heads of households should be thinking, “I can’t afford to NOT have an estate plan and my family can’t afford for me to NOT have an estate plan.”  It’s important to have these documents in place.  To avoid the tendency to procrastinate, I suggest clients commit to have them finalized within 90 days of our initial conversation, to make sure they get it done and don’t have to worry about it.

If you itemize your taxes, you can often use an estate plan for a partial write off on your taxes.  This might provide another incentive to get your affairs in order.

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Jennifer M. Harvey is the founder and managing partner of Harvey Legal Group, PLLC.  She focuses her practice in the areas of estate planning, probate and business law.  Ms. Harvey is faculty for the Institute of Continuing Legal Education (ICLE) teaching other attorneys about estate planning and estate administration.  For more information, visit her website.

Between Thanksgiving and New Year’s Day, a lot of holiday cheer is shared.  While that’s a good thing, we’ve all seen someone who celebrated a little too much during the holidays.  The consequences of drinking and driving can be devastating. According to the Center for Disease Control, excessive drinking, including binge drinking, accounts for 79,000 deaths per year in the United States.   Click here, to read about binge drinking risks and how to avoid them.  Click here for additional statistics about alcohol impaired driving from the CDC, and from MADD.

Attorney Timothy P. Flynn

Criminal Defense Attorney, Timothy Flynn, points out the legal ramifications associated with alcohol related driving offenses.  ”For most people, getting charged with a drunk driving or other alcohol-related driving offenses is one of the lowest points in their life.  Their driver’s license is affected; fines, costs, and attorney fees, can be very expensive, and no one wants to have a criminal record.”  The drunk driving laws in the State of Michigan have significantly changed over the past few years.  What was formerly known as “operating while intoxicated” or, OWI, has been replaced with the High BAC (Blood Alcohol Content) Offenses, also referred to by some as the “Super Drunk” law, enacted on 10/31/2010.

“Persons caught operating a motor vehicle after binge-drinking, or with a high tolerance for alcohol, will face stiffer penalties now.  If a driver’s blood alcohol (BAC) is measured at more than .17 grams per 100 milliliters, (more than double the legal limit) then the new enhanced penalties will apply,” says Flynn.  ”Those penalties include a one-year license suspension for first-time “super drunks”; an increase in the potential maximum jail sentence from 93-days to 180-days; higher fines; and mandatory use of an “ignition interlock” device.  The new law also features the longest alcohol rehabilitation treatment requirement on the books; one-year.”

Flynn notes how the process occurs:

1.  Once a conviction under this new law is abstracted to the Secretary of State, the driver’s license will be suspended for one-year.

2.  After a 45-day “hard suspension” where all driving privileges are suspended, a person can apply for restricted driving privileges for the balance of the year provided, however, that an ” ignition interlock” device has been installed in the vehicle.  Under the old law, the hard suspension was only for 30-days and there was no interlock requirement. (Click here to read about the interlock device law, from the Michigan Secretary of State’s Office).

3.  Installing an interlock device will cost about $50 and up to $100 per month to maintain.

4.  There are new penalties created under the Super Drunk law relative to operating an “interlocked” vehicle with a Blood Alcohol Content of more than .025.  If a driver’s probation is violated in this fashion, the Secretary of State will double the driver’s license restriction by imposing a new 365-day suspension from the date of violation.

Click here for additional information about Michigan’s substance abuse driving laws.

Flynn notes that “the heightened penalties and closed loop-holes of our contemporary drunk driving laws have changed people’s conduct.  Some people have taken to using friends as designated drivers or hiring designated driver services, while others have purchased their own preliminary breath test devices in an effort to determine whether they are “over the limit”.”  Flynn cautions those who use their own breath test devices.  ”Depending on the manufacturer, make, and model, these devices may not be accurate and could provide a driver with a false sense of security.”

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Timothy P. Flynn is a partner in the Clarkston based law firm of Karlstrom Cooney, LLP.  A 25-year attorney, he practices in the areas of criminal defense and family law.  In addition, Mr. Flynn publishes law-related content for the Oakland Press in The Law Blogger.  For more information or to contact attorney Timothy Flynn, visit his website.

Criminal Defense and Family Law Attorney, Channelle Kizy-White

While attending Loyola University Chicago School of Law, Channelle Kizy-White was first exposed to criminal defense work as a law clerk.  She also handled this type of work as a new associate, while working with other firms after law school. Earlier this year, Ms. Kizy opened her own law practice, known as Channelle Kizy, PLLC, located in Farmington Hills, MI.  Ms. Kizy decided to focus on family law and criminal law, because she felt these were areas of law where she could make the most difference for her clients and help people.

Ms. Kizy recalls, “I became a lawyer to help others in difficult situations and I believe criminal defense and family law encompass some of the most difficult situations individuals face. I enjoy being able to give a fresh perspective to others and I prefer to deal with clients on an ongoing basis, more than handling isolated business transactions or fighting over money.”  Ms. Kizy has aspirations of becoming a Judge one day, and was recently named as a 2011 Up and Coming Lawyer by Michigan Lawyer’s Weekly.  She has also been named as a Michigan Super Lawyer Rising Star in 2010 and 2011, and received the dbusiness Top Family Law Attorney award in 2011.

Now that she has been in practice for 5 years, I asked Ms. Kizy what she perceives to be the common misconceptions about criminal law.  She replied that “often people think that if someone is arrested, they must be guilty and that criminal defense attorneys are trying to get people out of trouble even though they committed the crime.  In my experience, the surrounding circumstances can play a major role in the commission of certain crimes.  Not everyone is predisposed to commit a crime, but out of desperation or the need to put food on the table might make someone feel desperate enough to steal in order to come up with money for food.  Or someone may have been in the wrong place at the wrong time and was not directly involved in the commission of the crime, but was the person accused of committing the crime. ” In other instances, a lapse in judgment can occur, which results in the commission of a crime.

Ms. Kizy believes that it is wrong for the accused to be “punished ruthlessly for an isolated lapse in Judgment.”  Her perception is that few people sympathize with the accused, and that the accused should be given a break when the circumstances warrant it.  ”This disparate treatment is what frustrates me and what I fight against.  I don’t like to see people receive sentences that they don’t deserve.  I seek to make sure that the Judge and/or prosecutor looks at the big picture and the circumstances surrounding the situation.”

There are also misconceptions about Personal Protection Orders (PPOs). “People believe that by getting a PPO, it will resolve their problems involving another person.  The reality is that a PPO is just a piece of paper and if the respondent has no regard for the law, they won’t fear the consequences of violating a PPO.  While having a PPO may provide some comfort and protection for the Petitioner moving forward, sometimes it makes things worse by angering the respondent and his or her family members who may be particularly vengeful.”  A PPO can be obtained without the assistance of an attorney.  However, Ms. Kizy believes it is wise for the petitioner and the respondent to each have independent counsel, so that both parties have an opportunity to have their side of the story heard in or out of court.

”It is more likely that a resolution or a fair result will be achieved if both parties have counsel.  In divorce cases, PPO’s are commonly entered into without a hearing in order to protect the petitioner from harm upon filing for divorce.  The Respondent can file objections to the Ex Parte order, and get a hearing that way,” says Ms. Kizy.  Often both parties are frustrated by the PPO process, because they don’t understand it and there is no uniformity in the system for issuing PPO’s.  ”Petitioners are frustrated when someone they know obtains a PPO in a different county, but find their own petition denied under similar circumstances.  The reason for this is because granting PPO’s is within the individual discretion of the judge.”  PPO’s shouldn’t be entered into lightly by the Petitioner, or ignored by the Respondent, says Kizy.  ”Consequences for the respondents could be the loss of a job or losing a license to carry a concealed weapon.  Additionally, if they don’t file objections timely, the PPO stands and they must live with the consequences.”

Sometimes clients are tempted to represent themselves in criminal matters, especially if they don’t think they have enough money for an attorney, or if they believe the potential consequences associated with the charges aren’t that serious. Ms. Kizy suggests having counsel, even if it is court appointed due to a lack of funds of the accused.  ”Representing yourself is not a good idea because the legal system is not easy to maneuver on your own.  You may fall into a trap or be encouraged to plea by a prosecutor when in reality you may have a strong defense.  You should have a defense attorney assess your case before making any decisions regarding how your case should be resolved.  Additionally, there may be benefits or resources that the courts provide or possible sentencing alternative that you may not be aware of if you represent yourself,” according to Kizy.

Also, when it comes to PPO’s, Ms. Kizy believes an attorney should be utilized to determine what information is useful and should be included in the Petition.  ”If the PPO gets set for a hearing, then having an attorney respond to the Petition and attend the hearing is absolutely essential.   It is very difficult for a petitioner to face a respondent in a PPO hearing without emotions getting the best of them.  Having an attorney handle the process allows the client to make sure everything is done right the first time.”

For more information about Ms. Kizy-White, her practice, volunteer work, and her accomplishments, visit her website.

Enjoy!

Lori T. Williams, Esq.

Section 179 and You

By: Sal Curcuru, CPA, JD, MBA

Sal Curcuru, CPA

Under Section 179 of the Internal Revenue Code (IRC), a taxpayer can elect to deduct as an expense in the year of purchase up to a specified amount of the cost of new or used tangible personal property.  The remainder of the purchase cost is depreciated over the asset’s useful life. For tax years beginning in 2010 and 2011, the dollar limitation on the expense deduction is $500,000. The amount was $250,000 for 2010 before the law changed. The Section 179 expense allowance is reduced dollar for dollar when the cost of property placed in service for the year exceeds $2 million.

Example:  ABC Corp buys machinery and equipment for $2.1 million.  Since the property placed in service exceeds the limit by $100,000, the allowable Section 179 expense is reduced by $100,000 to $400,000.

The Section 179 expense is limited to taxable income from any of the taxpayer’s trades or businesses.  If the taxpayer operates under an S corporation or LLC, Section 179 is also subject to the taxable income of the S corporation or LLC.  However, when determining the taxable income of an S corporation or LLC, shareholder wages (for an S corporation) or guaranteed payments (for an LLC) are added back to the business’ taxable income.  Section 179 disallowed because of the taxable income limitation can be carried forward indefinitely.

• Example:  S Corp has $100,000 of taxable income before Section 179 expense.  If S Corp buys $150,000 of equipment, its Section 179 expense is limited to its taxable income of $100,000.

• Example 2:  Same as above example except that the $100,000 taxable income is after a $60,000 deduction for shareholder wages.  Since shareholder wages are added back to taxable income for Section 179 purposes, the adjusted taxable income is $160,000 and the S corp can claim the full $150,000 Section 179 deduction.

• Example 3:  NEW SET OF FACTS:  Joan operates as a proprietorship and files a Schedule C (Profit or Loss from Business).  She has $2,000 of taxable income from the business and bought $5,000 of equipment.  Her husband has wages of $50,000.  Even though her proprietorship only has $2,000 of taxable income, she can claim the full $5,000 Section 179 expense because her husband’s $50,000 wages count as taxable income from a trade or business for Section 179 purposes.

If a business can immediately deduct 100% of the purchase price under Section 179 up to $500,000, when would 50% bonus depreciation ever be advantageous?

Bonus depreciation would be advantageous if the taxable income limitation prevents the taxpayer from using the full Section 179 deduction.  Bonus depreciation is also helpful if the taxpayer has already used the full $500,000 Section 179 for the year and has bought additional assets for which it can claim bonus depreciation. Bonus depreciation can also be used to create a loss in the business which can be carried back to prior years to obtain an immediate refund.  Section 179 is limited to taxable income for the year and thus cannot be used to create a business loss that can be carried back.

Any tax advice contained in the body of this post was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions. Any information contained in this post does not fall under the guidelines of IRS Circular 230.

For more information visit the Curcuru & Associates, CPA, PLC website.

Guest Blogger, Sal Curcuru, CPA and Partner in Cucuru & Associates, shares his expertise in this 3 part Tax Law Update.  In Part 1, he explained the do’s and don’ts of home office deductions.  See Part 2 below and learn about the Allowable Immediate Deductions for Equipment, Furniture, and Machinery.  Stay tuned next week for Part 3: Allowable Deductions for personal property under Section 179.

Enjoy!

Lori T. Williams, Esq.

Allowable Immediate Deductions for Equipment, Furniture, and Machinery

By: Sal Curcuru, CPA, JD, MBA

Sal Curcuru, CPA

There are new depreciation rules that recently took effect that allow taxpayers to immediately deduct the cost of certain capital purchases such as computers, furniture, machinery and equipment.  The new rules are referred to as Bonus depreciation.  Bonus depreciation allows you to deduct the purchase price of certain assets much faster than if you had to follow the normal depreciation schedules.

The 2010 Tax Relief Act extends and expands additional first year depreciation to equal:

• 100% of the cost of qualified property placed in service between September 9, 2010 and December 31, 2011
• 50% of the cost of qualified property placed in service in 2012.

Example:  ABC Corp bought $1 million of assets on October 1, 2010.  It can fully deduct the $1 million of asset purchases in 2010.  If it creates a net loss for the business, the loss can be carried back or carried forward.

Only assets that meet the following criteria are eligible for bonus depreciation:

It falls into one of the following categories:

1.   Property with a recovery period of 20 years or less

• which includes most physical assets other than real estate
• computer software (generally, off-the-shelf software)
• qualified leasehold improvement property
• ITS ORIGINAL USE BEGINS WITH THE TAXPAYER (I.E., IT IS PURCHASED NEW)

2.   Qualified leasehold improvement property means any improvement to an interior portion of a nonresidential building if such:

• improvement is made pursuant to a lease by the lessee, sublessee, or lessor of such improved portion
• portion is to be occupied exclusively by the lessee or sublessee
• improvement is placed in service more than 3 years after the date the building was first placed in service

Qualified leasehold improvement property does NOT include:

• an enlargement of a building
• any elevator or escalator
• any structural component benefiting a common area
• the internal structural framework of the building
• A lease between related persons (e.g., a lease between a taxpayer and his 80% owned business) does not qualify.

Any tax advice contained in the body of this post was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions. Any information contained in this post does not fall under the guidelines of IRS Circular 230.

For more information, visit the Curcuru & Associates, CPA, PLC website.