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In Brief, A VJG Blog


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In Brief, A VJG Blog


At Vandeberg, Johnson & Gandara, our attorneys stay up to date on the latest developments in the law around the state and country.   

To better assist you, our blogs are organized according to the practice area.  You may jump to the specific practice area you are seeking by selecting the appropriate button on the right then scrolling to the article you are seeking.  If you are looking for a specific term, ctl+f will allow you to search the entire page for the term.  

 

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Business News


Business News


NEWS OF INTEREST TO BUSINESSES AND PROFESSIONALS

 By Jim Krueger

Vol. 2017-4

 2017 Fourth Quarter Tax Calendar

 

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October 16, 2017

2016 individual income tax return (Form 1040) due for those who filed an extension.

2016 federal income tax return (Form 1120) due for C corporations which filed an extension.

December 15, 2017

Calendar year C corporations are required to deposit the estimated income tax (fourth installment) for 2017.

Reminder to employers:  You should request new W-4 forms from employees whose withholding exemptions will change in 2018. 

 

Beware of Internet Scams

             The Washington Department of Revenue recently issued a warning that there have been an unusually high number of phishing scams targeting Washington State businesses. Emails appear to come from the Department of Revenue and purport to give instructions on renewing business licenses, etc. Accordingly, every business (and individual) receiving an email from the Department of Revenue should not respond without first verifying that the email is in fact from the Department of Revenue and not from an alternate website. Genuine emails from the Department of Revenue should show a sender’s email address as: cms@dor.wa.gov. Now that the State of Washington has gone exclusively to renewing business licenses on the internet, it is more important than ever to verify that a license renewal request is genuine and not the object of a phishing scam. If you are in doubt that an email from the Department of Revenue is genuine, you can verify it by calling 1-800-451-7985. 

            Speaking of internet scams, businesses in the State of Washington have recently been experiencing increased ransomware attacks. I know from conversations with clients that some of you may have been victims in the past of ransomware attacks. In these attacks the criminal entices the victim into clicking on an internet link, which then results in the victim’s computer being infected with a virus. The virus locks up all of the data in the victim’s computer network, and then the thief sends the victim a message demanding ransom,  usually in the form of Bitcoins, to unlock the ransomed data. Upon payment of the ransom, the criminal sometimes releases the information, but oftentimes does not, leaving the victim unable to use his entire network.

            The IRS and FBI have issued bulletins warning businesses of recent ransomware scams whereby victims are notified they face imminent seizure of their bank accounts and arrest, and are directed to a link to download an “FBI questionnaire.” Upon clicking on the link, the ransomware infects the victim’s computer network, and then the victim receives a ransom demand. The FBI recommends against paying a ransom, as it maintains that encourages the criminal activity. Unfortunately, faced with a virtual business shutdown, many businesses consider they have no alternative but to pay the ransom as demanded.

            Accordingly, you should instruct everyone on your network not to respond to any threatening contacts from either the IRS or the FBI without first verifying it is a legitimate message. You can ascertain whether or not the contact is legitimate by contacting the IRS at phishing@irs.gov, and the FBI at www.IC3.gov

 

After Hours

            It is now the time of year where our thoughts necessarily turn to what is the perfect wine to serve with Thanksgiving dinner. Unfortunately, the answer to that question is there is no perfect wine to serve with Thanksgiving dinner. My experience is we oftentimes pick the best wine to go with turkey, but then that wine is far from the best wine to go with the many side dishes that are traditionally served with the Thanksgiving meal. A wine that showcases the turkey will probably be far from the best wine with sage dressing, sweet potatoes and Aunt Sadie’s cranberry mold. 

            My recommendation is instead of focusing on the turkey, you select a wine which may not be the perfect wine for each of the individual dishes, but will work well with most of them. My recommendation is this year try a Rose, which is heavier than a white but lighter than a red wine, and therefore hits that “sweet spot” where it will work well with most, if not all, of the dishes. In my opinion, an excellent Rose to go with a Thanksgiving meal is AIX from Provence, France. This wine is fairly widely available in the $15-$18 range at some supermarkets and most wine shops. If you want a more festive wine, then I recommend you try Michelle Brut Sparkling Rose from Washington’s St. Michelle Winery. It is also widely available in area supermarkets and wine shops, ranging in price from about $11 to $14.

            However, if you are a traditionalist and want to perfectly match only the turkey, then I recommend you try a Pinot Noir from Oregon’s Willamette Valley. One of my favorites is Patricia Green Cellars Reserve (which is one of her cheaper wines, but to my palette is superior to many of her more expensive wines), which is widely available in Oregon and a few supermarkets and wine shops in Washington, for around $25. 


NEWS OF INTEREST TO BUSINESSES AND PROFESSIONALS

 

August 8, 2017
by James A. Krueger

2017 Third Quarter Tax Calendar

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July 31, 2017

IRS Form 5500 or 5500-EZ due for calendar year 2016 for employer retirement plans.

September 15, 2017

Third installment of 2017 estimated income tax for individuals due.

2016 S corporation tax returns due if a 6-month extension was obtained. 

Calendar year corporations must deposit third installment of 2017 estimated income tax.

2016 Partnership tax returns due if a 6-month extension was obtained.

 

Get Ready for New Area Code

             You are probably aware by now that beginning on July 29th all local calls in Western Washington are required to use 10-digit numbers, including the area code.  This is in preparation for the use of a new additional area code (564) throughout Western Washington, which will begin effective August 28th.  If you already have an assigned area code (253, 360, 206 or 425), that will not change.  However, beginning on August 28th new phone service may be assigned the new 564 area code.  This will apply to both business and residential service. 

            If you have any questions or concerns regarding this new area code, you can contact the Washington Utilities and Transportation Commission Help Line at 1-888-333-9882, or email consumer@utc.wa.gov

After Hours

 

            When warm weather finally arrives in Western Washington, we are all anxious to get out our barbecues, if they haven’t completely rusted through during the long rainy winter.  That means hamburgers, ribs, steaks and chops.  For wine drinkers this may present a dilemma, as there are very few wines which can stand up to a barbecued piece of meat.  While some subscribe to the theory that any wine can be drunk with any food, it is often disappointing when a wine is overpowered by barbecue.  For those of you who have a favorite wine you like to drink with barbecue then you should, by all means, continue to enjoy that wine.  However, for the rest of us who have struggled to find a wine which complements barbecue, I have a suggestion which I recently discovered.  Zinfandel was really made for barbecue.  No, I am not talking about White Zinfandel, but the real thing.  The deep, rich, red classic Zinfandel.  Although I have not tasted a large number of Zinfandels, my favorites are Dashe Dry Creek Zinfandel and Cline Zinfandel.  These wines are not expensive.  The Dashe retails for around $18 and the Cline for around $14.  This time of year, they often can be found on sale for less.  If you haven’t already tried Zinfandel with barbecue, I suggest the next time you get out your barbecue grill you grab a bottle of your favorite Zinfandel to complement the meal.  The Zinfandel (like all red wines) is better if served slightly chilled (around 55°-60° or so). 

            For those who want a lighter wine to go with barbecued seafood or who just want something lighter with their barbecue, try a glass of Rose such as Barnard-Griffin Rose of Sangiovese or A to Z Rose of Pinot Noir. 

 


TIME FOR SOME SPRING CLEANING!

May 12, 2017
by James A. Krueger

 

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Now that spring is here and summer is not far away, this is a good time for us to all do some “Spring house cleaning” and get rid of old files and documents.  This blog will focus on how long businesses and professionals should hold onto files before they can be purged.

 

However, first let’s take a look at the IRS tax calendar:

2017 Second Quarter Tax Calendar

March 15

S corporation tax returns due (Form 1120S).

S elections must be made by this date for calendar year 2017.

Partnership tax returns due (Form 1065-B).

April 18

2016 Individual income tax returns due (Form 1040, 1040A, 1040EZ).

Contributions to an IRA for 2016 due.

First installment of 2017 estimated taxes due.

2016 tax return for C corporation due (Form 1120).

June 15

Second installment of 2017 estimated taxes due.

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Document Destruction

             I don’t think a month goes by that I don’t receive at least one phone call from a client asking how long files, tax returns, etc., should be retained.  Unfortunately, there is not an absolutely failsafe period of time one can rely upon in determining the answer to this question.  However, the answer is usually driven by the state or federal statute of limitations applying to causes of action which the individual or business could be subjected to, as well as the statute of limitations pertaining to tax matters pursuant to the Internal Revenue Code and Regulations.  My response is usually governed by the specific document involved.  Therefore, I’ll briefly outline my thoughts based upon the following categories of documents:

            Federal Income Tax Documents.  Under the Internal Revenue Code and Regulations, there is generally a three-year statute of limitations beyond which the IRS cannot assert additional tax, penalties or interest.  However, an exception to this is if there is underreporting of 25% or more, and then the statute of limitations is extended to six years.  If a tax return which was due was not filed, then there is no statute of limitations.  Accordingly, my general advice is in all but extraordinary circumstances is it is safe to dispose of federal income tax records after seven years from the date the return was due (or such later date it was actually filed).

            General Business Records.  Since there are many statutes of limitations which potentially could apply to general business records, depending upon the industry of the business and the specific transactions, I believe it is normally safe for a business to dispose of its usual and ordinary business records after seven years.  There are some rare exceptions to this general rule, but normally businesses operating in those circumstances are well aware of them through trade associations, etc.

            Medical Records.  Medical records are an exception to the general rules discussed above for the reason that if a patient is a minor, any applicable statute of limitations does not begin to run until the minor reaches the age of majority, which is 18 years old in the State of Washington.  Physicians, dentists and many other professionals who deal with minors are routinely subject to these exceptions.  Therefore, my rule of thumb when advising professionals is to wait seven years plus the number of years until the minor reaches the age of 18.

            Electronic Records.  An increasingly popular method of dealing with records is to store records in electronic form.  Electronically stored information is becoming more and more popular as the cost to store voluminous paper records increases.  The IRS, the State of Washington and other departments of the federal government generally permit records to be stored in electronic form, so long as certain minimal standards are met.  Therefore, before digitizing paper documents, you should always check with the appropriate agency to make certain you are conforming to its electronically stored information standards.  Once paper records have been converted to electronically stored information the electronic version should likewise be safeguarded for at least the same time period applicable to the paper version of these records before they are destroyed.

            The time periods I am recommending are admittedly very conservative, but given the inconvenience of storing files an additional year or two versus the risk of a claim being made years from now, I’ve always opted to recommend clients retain their files a year or two longer than many recommend, just to be on the safe side.

 After Hours

            I have always looked forward to Spring when the new Rose´ wines are released.  When the sun comes out and it is warm enough to sit outside and enjoy the weather, nothing is better than a glass of Rose´ wine.  It wasn’t all that many years ago when one would visit a wine shop or a supermarket and find less than a half dozen choices of Rose´.  Recently I was in a supermarket which had eight shelves devoted exclusively to Rose´.  While about half the Rose´ we find locally comes from France there are ever increasing wineries in Washington, Oregon and California that produce excellent Roses´.

Barnard-Griffen Rose´ of Sangiovese is one of my favorites.  It is widely available in Washington (where it is made) and is almost always on sale for around $11.00.  This wine consistently wins double gold  medals at the prestigious San Francisco Wine Competition.

Another favorite of mine is A to Z Rose´ of Pinot Noir.  This Oregon wine is available almost everywhere in Oregon, but less so in Washington.  However it shouldn’t be too difficult to find usually on sale for around $12.00.

One word of caution.  I like my Rose´ to be somewhat dry so if you prefer off-dry Rose´ you should have no trouble finding a little sweeter Rose´ among the myriad selections available at any wine shop or large supermarket.  


A new year, and new laws! 

 

January 19, 2017
by James A. Krueger

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January is always a big letdown after the holidays. As much as we try, it is difficult getting back to “normal” after overeating and taking time off from work. January is also the beginning of a new tax year for most businesses and professionals. So in keeping with our blah month theme, we will begin the year by looking at some IRS information.  

2017 First Quarter Tax Calendar

1/17    Final installment date for payment of 2016 estimated taxes.  

1/31    Copies of Forms W-2 to employees due.

2/15    New Form W-4 due to employers if exemption from income tax withholding is claimed.

3/15    Partnership returns (including limited liability companies not disregarded entities) due.

3/15    S corporation federal income tax returns due.

3/15    Last day to make a new S corporation election for calendar year 2017.

A Few New Federal Income Tax Provisions for 2017


•    Social Security tax is payable on the first $127,200 of employee wages (up from $118,500).  
•    For 2016 and 2017 an employee can exclude up to $255 a month of employer-provided qualified parking benefits (and transit passes).
•    The maximum employee contribution to a health FSA is raised to $2,600.  
•    The 2017 standard mileage rate for business travel is 53.5¢ (down from 54¢ per mile for 2016).  
•    Charitable donors may deduct a contribution in full if any benefit received is considered “inconsequential.”  The inconsequential test is met if:
1)    The fair market value of all benefits received in connection with the donation isn’t more than 2% of the payment, or $106 for 2016 and $107 for 2017, if less; or
2)    The payment is at least $53 for 2016 or $53.50 for 2017, and the donor receives only token benefits such as mugs, t-shirts, posters, etc., costing no more than $10.60 for 2016 and $10.70 for 2017; or
3)    The charity mails or otherwise distributes free, unordered items to its donors.
•    The basic standard deduction for joint filers (and surviving spouses) is increased to $12,700, and for single individuals to $6,350 for 2017.
•    The provision allowing up to $100,000 in distributions from IRAs paid to a charity to be non-taxable is made permanent.
•    Taxpayers may pay taxes due the IRS in cash at participating 7-Eleven Stores.  

After Hours

    Since January is such a blah month, I thought it appropriate to take a look at a couple of wines which are the Rodney Dangerfield of wines – they get no respect (but are actually marvelous wines and exceptionally good values).  A white and a red.  

    Chateau Ste. Michelle Dry Riesling.  Forget everything you know about Riesling, as this wine doesn’t taste like any Riesling you have ever tasted.  The best way to describe it is it tastes like a cross between Pinot Gris and Sauvignon Blanc.  This is a 100% stainless steel fermented wine which has never seen oak, with less than 1% residual sugar.  Therefore, it is very bright and lively because of its high acidity, but actually very well balanced.  Ste. Michelle bottles almost 100,000 cases every year, and therefore it is available everywhere.  This wine sells for $10 at the winery, but I have rarely paid more than $7.  This wine pairs particularly well with fish, shellfish, vegetarian dishes and chicken picata.  It also makes a great aperitif.  This wine gets no respect - because of its high volume and low price many dismiss it as an inferior “supermarket wine.”  I find if you hide the label when you first serve it, your guests will love the taste.  Make sure it is the Dry Riesling you purchase and not one of the many other varieties of Riesling which Chateau St. Michelle produces.  

    Kiona Lemberger.  It is obvious why this wine gets no respect.  Upon hearing the name, almost everyone equates the wine with stinky Limburger cheese.  So this is another wine you have to hide the label.  This medium body red is produced from Lemberger grapes which originated in Austria and Germany.  Kiona is a small Washington winery which has been producing this wine from grapes grown in the Red Mountain AVA for over 30 years and is hands down the best producer in the U.S.  There is one winery in California which produces Lemberger, and it also sources its grapes from the Red Mountain.  This fruit forward wine is marvelous with pizza and pastas of all types.  The wine sells for $15 at the winery, but is usually available for around $12.

 


TO PROTECT AND PRESERVE: WASHINGTON ADOPTS THE UNIFORM POWER OF ATTORNEY ACT

 

October 7, 2016
by Kelley Ann Orr

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Washington State enacted a modified version of the Uniform Power of Attorney Act that will become effective January 1, 2017.  The Uniform Law Commission recommended that states adopt the legislation to “preserve the durable power of attorney as a low-cost, flexible, and private form of surrogate decision making while deterring use of the power of attorney as a tool of financial abuse of incapacitated individuals.”  The Act is intended to provide more protection to the principal, the agent, and third parties who deal with the agent.  

The following are some of the important changes between the current law and the new law:

  • Divorce.  Current statutes do not terminate a power of attorney for spouses upon filing a dissolution petition; the new law will terminate the power of attorney upon filing a dissolution petition.
  • HIPPA.  Current law is silent regarding authorized access to records under HIPPA; the new law explicitly states that the attorney-in-fact is authorized to access records under HIPPA
  • Signing.  Current law is silent as to whether the signature on a power of attorney must be notarized; the new law requires either a notarized signature or two witnesses to the signing, although a notary is still required for recording purposes.
  • Duties.  Current statutes are silent regarding the duties of the agent, although the courts have imposed a broad fiduciary duty on agents; the new law provides a list of specific duties for the agent.
  •  Gifts.  Current law does not have specific provisions for which gifting is permitted; the new law includes guidance for an agent making gifts, unless the power of attorney provides otherwise.
  • Resignation.  Current law is silent on resignation of the agent; the new law gives specific ways for an agent to resign.
  • Co-Agents.  Current law is silent regarding the actions of co-agents; the new law provides that co-agents must act jointly unless specifically provided otherwise in the document.

Rather than trying to determine if your current power of attorney is valid, call us and we will ensure that your documents are consistent with the new law.


WRAPPING UP SOME BUSINESS WITH JIM

 

December 14, 2015
by James A. Krueger

Latest News of Interest to Businesses and Professionals
Tax Calendar
Reminder of 2015 IRS Standard Mileage Rate
After Hours

Latest News of Interest to Businesses and Professionals
            Over the past year or so the annual entity registration renewal process for the State of Washington has gone paperless.  For those of you for whom we act as registered agent, we have been renewing your licenses electronically.  Linda Palmer of our office, who handles all of our license renewals and other corporate and LLC compliance tasks, reports the process has been going well, and with a very few minor exceptions there have been no problems encountered in this transition.

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            The Secretary of State’s Office advises us its goal is to ultimately transition all entity filings in the State of Washington to an electronic format, and thereby eliminate all paper filings.  We have begun to utilize this new system as it becomes more and more available, and so far we have not experienced any major problems.  It is the goal of the Secretary of State’s Office to not only eliminate most paperwork, but to greatly reduce the turnaround time for most routine corporate and LLC filings.  So far most of our experiences with the electronic filing have been positive and have enabled us to provide you with quicker service for many routine matters. 

Tax Calendar
            It is easy to forget IRS deadlines—especially those for estimated taxes.  Therefore, don’t forget to calendar these important dates:

September 15, 2015

  • Third installment of 2015 estimated tax due.
  • 2014 calendar year income tax returns due for C corporations or S corporations which obtained an extension. 
  • Third installment of 2015 corporate estimated income tax due.
  • 2014 calendar year income tax returns due for partnerships which received an extension.

October 15, 2015

  • 2014 income tax returns due for individuals who filed an extension.

December 15, 2015

  • Corporations must deposit the fourth installment of 2015 estimated income tax.

Reminder of 2015 IRS Standard Mileage Rates
            Next April when you are finalizing your 2015 federal income tax returns, you will be glad if you thought to keep a log of your automobile mileage for the following matters:

Business use of automobile                             56 ¢/mile
Charitable mileage                                          14 ¢/mile
Medical mileage                                              23.5 ¢/mile
Moving expense mileage                                 23.5 ¢/mile

After Hours
            As the nights start to get a little bit chilly, we are reminded summer will soon be coming to an end, and therefore we may wish to include more red wines instead of the whites and rosés most of us have been serving during the hot summer months.

            However, for those of you who, like me, wish to stretch enjoyment of rosés a little longer, I suggest you try A to Z Rosé.  This delightful rosé comes from a company which was founded by four friends whose families were some of the original vineyard pioneers in the Willamette Valley of Oregon (Eyrie, Domain Drouhin, Archery Summit and Chehalem).  This Rosé is made primarily from the Sangiovese Grape grown just north of the California border.  It is widely available for $10-$12 a bottle.  This is hands down my second favorite rosé.

            When you are ready for a medium-bodied red wine that is great with food (pasta, lentil soup, bratwurst, all grilled meats, etc.) or for just sipping in front of an open fire, I suggest you give the Rodney Dangerfield of wines a try.  The reason I call it the Rodney Dangerfield of wines is because of its name – Lemberger.  Everyone hearing the name immediately has visions of Limburger cheese and almost instinctively begin holding their noses!  Due to our ideal climate, some of the world’s best Lemberger grapes are grown in Washington.  Washington Lemberger is absolutely delicious with soft tannins and very balanced acidity. A wonderful and affordable example of this really delicious wine is Kiona Vineyards Lemberger, which sells for $10-$12 a bottle.   


THE LLC MANAGER’S DUTY OF LOYALTY

 

August 27, 2015
by Mark R. Patterson

You may have heard that the Washington legislature enacted a new limited liability company act this year.  The new law becomes effective January 1, 2016.  It affects both new companies and LLCs formed prior to that effective date.

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Much of the new law restates existing requirements.  However, the new statute contains a few important changes to LLC law.  One of the important changes is the addition of specific language concerning fiduciary duties an LLC manager owes the LLC and its members.  The prior law did not contain a definite description of some of these fiduciary duties, although a few court cases had defined such duties in broad terms similar to those used in the new statute.

“Fiduciary duties” are higher standards of conduct based on trust -- like the relationships between   people.  The new law describes two such duties that an LLC manager owes to the company and its members:  the duty of care and the duty of loyalty.  These duties may sound familiar because similar concepts have long existed between directors and officers and corporations, under corporate law, and between general partners under partnership law.

The duty of loyalty is a particular concern.  The new statute generally defines the duty of loyalty to include (1) the duty to account to the LLC and hold “as a trustee” any property, profit or benefit derived from LLC activities or the use of LLC property, (2) the duty to refrain from having an interest adverse to the LLC and (3) the duty to refrain from competing with the LLC.  At first glance, imposing these obligations on an LLC manager does not seem surprising and some of these duties existed either in the former LLC statute or in case law.  However, given the language in the new statute, how far do these duties extend?  What is meant by manager interests “adverse” to the company?  What “competition” by the manager with the LLC is prohibited?  Many limited liability company operating agreements do not address the parties’ expectations in this area, in part because some of the specific terms now in the statute were not part of the prior LLC statutory scheme.

The manager of an LLC and the members should always try to have a specific understanding about which activities of the manager are potentially adverse or competitive with the LLC.  Such an understanding prevents potential disputes between the manager and the members.  An understanding of the scope of the duty of loyalty is particularly important when the manager operates more than one business or other separate LLCs with different members.  The parties’ understanding should be documented in the LLC agreement.

As a result of the new law,existing LLC agreements should be reviewed to determine whether the parties need to enhance the provisions concerning the manager’s duty of loyalty, conflicts of interest and competition with LLC activities.  I suggest several initial steps:

 

  1. The manager and members should look carefully at the provisions in the LLC agreement and certificate of formation concerning the purpose of the company.  Although in the past it may have been useful to describe the purpose broadly to give the company flexibility to engage in future new activities, under the new LLC act the broader the purpose the more opportunity for claims of manager conflicts and competition.  Based on the new law, the purpose of the LLC should be reasonably narrow to encompass only the business the members actually intend to conduct.  If the original purpose changes, it is easy to amend the LLC agreement to add additional purposes.
  2. The manager and members should determine whether the LLC agreement specifically authorizes key contracts between the LLC and the manager or other businesses affiliated with the manager.  Management agreements, real estate development agreements and construction contracts are examples of common agreements between managers and LLCs that should be specifically authorized in the LLC agreement.
  3. The manager and members should consider adding specific provisions in the LLC agreement that describe what is and is not “competition” with the LLC.  For example, if the purpose of the LLC is to own and manage income-producing real estate, the LLC agreement could say that the manager’s management or ownership of other real estate investments is not competitive with the LLC.  Or the LLC agreement could impose geographic limits for competitive activity similar to limits found in noncompetition covenants in employment or other agreements.

Within certain limits, the new LLC act allows the parties to modify or limit the fiduciary obligations of the manager in the LLC agreement.  A clear understanding between the manager and the members of the scope of those fiduciary duties, documented by specific provisions in the LLC agreement, has always been important.  The new LLC law raises the focus on these issues by LLC managers and members to an even higher level.

 

 

 

 

 

 

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News in Estate Planning


News in Estate Planning


FOREVER YOUNG...WITH STUFF

by Kelley Ann Orr

LAST WILL AND TESTAMENT

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You will need to name a personal representative to carry out your wishes and distribute your assets as you see fit, if you are married you will likely name your spouse and select an alternate to serve if they are unable.  In Washington you don’t even have to distribute all of your property in a Will!  You can reference what is called a “bequest by list” and distribute your father’s stamp collection, your prized trophy from badminton, etc. to whomever you put on that list.  

BENEFICIARY DESIGNATIONS

Make sure all of the beneficiary designations on your accounts in which you named a beneficiary are correct...think life insurance policies, your retirement plans, your 401(k), 403(b), 457 plans, GET accounts, bank accounts, IRAs, online brokerage accounts, etc.  This is so important!  I have witnessed people’s jaws dropping when they realized the person named as the beneficiary on their life insurance policy they bought in 1998 was still the ex-boyfriend.  Obtaining actual copies of the beneficiary designations for each account and reviewing them with your attorney is the best way to protect your heirs from costly probate litigation that will likely result if you do not have the proper beneficiary designation. 


GIVE TO CHARITIES BUT RETAIN AN INTEREST

by Kerry E. Brink

There are many ways of giving to charities that can have a tremendous benefit to the charity and a tax benefit to the donor. Clients have asked me the difference between Charitable Trusts and Charitable Gift Annuities. Here is a quick summary:

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Charitable Trusts

Charitable trusts are an extremely helpful tool in estate planning, although the terminology can be confusing. Some explanation may be helpful. Charitable trusts may be set up as “inter vivos” trusts, during a donor's life, or as “testamentary” trusts, through a donor’s last will and testament to take effect at the donor’s death. A charitable trust may be also be set up as either a “remainder trust” or a “lead trust.” 

Remainder Trusts. Charitable remainder trusts are irrevocable trusts established by a donor to provide an income stream to one or more income beneficiaries. A public charity or private foundation receives the remainder value when the income stream ends and the trust terminates. These “split interest” trusts (split between income and remainder interest beneficiaries) are defined in §664 of the Internal Revenue Code of 1986 as amended and are normally tax-exempt. A remainder trust pays either a fixed amount (charitable remainder annuity trust §664(d)(1)(D)) or a percentage of trust principal (charitable remainder unitrust §664(d)(2)(D)), to whomever the donor chooses to receive the income. 

Normally, the donor may claim a charitable income tax deduction in the year of the donation on the full value of the remainder passing to charity. The donor should not be required to pay an immediate capital gains tax when the trustee of the charitable remainder trust disposes of the appreciated asset and purchases other property as it diversifies its portfolio of trust property.

Lead Trusts. Charitable lead trusts make payments, either of a fixed amount (charitable lead annuity trust) or a percentage of trust principal (charitable lead unitrust), to charity during its term, which may be a specified number of years or for a beneficiary’s lifetime. At the end of the trust term, the remainder can either be distributed back to the donor or to heirs named by the donor. The donor may claim a charitable income tax deduction or a gift/estate tax deduction for making a lead trust gift, depending on the type of a charitable lead trust.

Charitable Gift Annuity

What is It?     A Charitable Gift Annuity involves a contract between a donor and a charity, whereby the donor transfers cash (usually) or property to the charity in exchange for a lifetime stream of annual income from the charity. When the donor dies, the charity keeps whatever remains of the gift. The amount of the income stream is determined by many factors including the donor's age and the policy of the charity. Most charities use payout rates defined by the American Council on Gift Annuities. 

A charitable gift annuity can result in income and estate tax benefits. A donor may claim a current income tax deduction for the gift of the remainder to the charity. None of the assets transferred to the gift annuity will be included in the donor’s estate for estate tax calculation purposes. Depending on the tax basis of the assets transferred, the payments to the annuitant (the beneficiary receiving annual payments) may not be considered income to the annuitant.
Payments from a charitable gift annuity to the annuitant are fixed from the outset. Payments will neither increase nor decrease, regardless of what happens to interest rates or the stock market. A charity is contractually obligated to make the payments, even if it has to dip into its general funds to do so. Gift annuities can be very attractive to individuals who want simultaneously to support a favorite charity and provide payments to themselves or others.

Gift Annuity Rates. Since 1927, the American Council on Gift Annuities (ACGA) has periodically published a schedule of suggested charitable gift annuity rates. Although a charity is free to offer any schedule of rates it wishes - so long as its rates don't exceed the limits imposed by federal and state laws - most charities, in fact, follow the rates suggested by the ACGA. Thus, donors generally find that the rates offered by various charities are identical. This encourages donors to make philanthropic decisions based on the cause of the charities they consider supporting, rather than the rates offered.

Taxation of Gift Annuity Payments. If the gift annuity is funded with cash, part of the payments will be taxed as ordinary income and part will be tax-free. If funded with appreciated securities or real estate owned more than one year, and the donor is receiving the annuity payments, part of the payments will be taxed as ordinary income, part as capital gain, and part may be tax-free. The charity that issues the annuity will send a Form 1099-R to the annuitant. This form will specify how the payments should be reported for income tax purposes. For details regarding the taxation of gift annuity payments, it is wise to consult with representatives of the charity as well as financial advisors.


FOREVER YOUNG...WITH CHILDREN

by Kelley Ann Orr

CHILDREN’S TESTAMENTARY TRUST

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If you have children, you will also want to create a trust in your will (“testamentary trust”) in the event that both you and your spouse die before your children have attained a certain age.  Creating a testamentary trust in your will ensures your children will not receive a huge chunk of money before their prefrontal cortex (the part of the brain that is in charge of cognitive and executive functioning) is fully formed, usually around age 25.  There is a reason you have to be 30 to be elected to the Senate!  A testamentary trust is a loving, kind gesture to demonstrate your desire for your children to succeed and keep them from making really bad choices if you are not physically here to guide them while their brain is still developing the region that transmits goal-directed behavior.  A trustee will be able to mitigate your children’s poor executive functioning and prohibit them from buying sports cars rather than college credits.

GUARDIAN

Your most prized possession is of course your child!  In your Will you can also designate a guardian for your minor children in the event that both you and your spouse are deceased.  This is a gut wrenching decision and of course no one is good enough to raise your child but you, however, you must make this decision otherwise the State will do it for you...remember what I said about Uncle Vinnie?  

If you have children, you will also want to create a trust in your will (“testamentary trust”) in the event that both you and your spouse die before your children have attained a certain age.  Creating a testamentary trust in your will ensures your children will not receive a huge chunk of money before their prefrontal cortex (the part of the brain that is in charge of cognitive and executive functioning) is fully formed, usually around age 25.  There is a reason you have to be 30 to be elected to the Senate!  A testamentary trust is a loving, kind gesture to demonstrate your desire for your children to succeed and keep them from making really bad choices if you are not physically here to guide them while their brain is still developing the region that transmits goal-directed behavior.  A trustee will be able to mitigate your children’s poor executive functioning and prohibit them from buying sports cars rather than college credits.

GUARDIAN

Your most prized possession is of course your child!  In your Will you can also designate a guardian for your minor children in the event that both you and your spouse are deceased.  This is a gut wrenching decision and of course no one is good enough to raise your child but you, however, you must make this decision otherwise the State will do it for you...remember what I said about Uncle Vinnie?  


DO YOUR WILL. YOU COULD CHANGE THE WORLD.

by Kerry Brink

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Alfred Nobel changed the world when he sat down a few weeks before he died in 1895 and wrote out his Will that established the very rough outline of what became the Nobel Prize Foundation.  That foundation has given out life-changing awards since 1901.  

Each of our Wills might not change the whole world, but we can change our sphere of family and friends.  We can state our directive - our Will - as to how our belongings can best be used to help the people we love and perhaps even the world beyond!

Here's a short, entertaining and interesting message about Alfred Nobel and his Will.  

Documents That Changed the World: Alfred Nobel’s Will, 1895
http://overca.st/d9JnC36Q


FOREVER YOUNG...BUT WITH A PLAN

by Kelley Ann Orr

At dinner with a large group of my thirty-something friends, we were marveling at the oddity that we still see ourselves as 20 year olds.  Is it because we grew up listening to hit songs entitled “Forever Young” with lyrics promising immortality and the hope of staying young forever? 

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As my friends and I were talking about growing up in a “forever young” themed decade, the topic took a shift to the flip side; youth fades and death is certain.  I found a perfect segue to my topic of interest; estate planning!  I was excited for a lively discussion about the testamentary trusts everyone had for their kids, but instead, I got blank stares and uncomfortable silence.  No one wanted to admit the truth; not a single person, other than me, had a Will.  How could this be?  Are my friends brainwashed by the 80’s youth mantras and do they honestly believe they are immortal?  They may think they are forever young, but they can’t be forever irresponsible.  My advice to them and anyone without a Will, consult one of our estate planning attorneys!

LOYALTY TO FAMILY FIRST

 Estate planning sounds intense, but in reality it is not.  In fact an estate plan usually consists of a handful of documents.  When I asked my friends why they did not have a Will the consensus (other than their dream of being forever young) was they “don’t need a Will because if they die their spouse knows what they want and they trust their spouse to do the right thing.”  My friends were under the impression that making a Will might be a slap in the face to their spouse and a discredit to their loyalty.  Quite the contrary, making a Will is an act of love and respect for your family.  A Will memorializes your wishes and allows you to decide how your assets should be distributed upon your death.  Making a Will shows your family that your loyalty to them transcends time.  If you do not have a Will, the State of Washington decides on the distribution of your assets through “intestate” laws.  If you think it is a show of disrespect to make a Will and have your assets pass according to your wishes, imagine how your spouse would feel if your assets had to be split with your parents?  That is the risk you take if you die intestate; some part of your separate assets would be distributed to your parents, not outright to your spouse.

Even if you aren’t sure who you want your property to be distributed to, you can still make a Will. In Washington you don’t have to distribute all of your property in a Will.  You can reference what is called a “bequest by list” and distribute your stamp collection, your prized badminton trophy, or other tangible personal property to whomever you put on that list. 

PROVIDE FOR YOUR CHILD WITH SPECIAL NEEDS

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by Kerry E. Brink

 

One of the biggest concerns that parents have is how to provide for a child with special needs when both parents have died.  Parents of a child with special needs often know that the child will never be able to manage assets on his or her own behalf, and further that if the child is eligible for very valuable public benefits, receiving monies outright or in the wrong kind of a trust can render the child ineligible for services and may require an expensive court-supervised financial guardianship. 

We have experience in customizing Special Needs Trusts that will enable the child with special needs to continue to qualify for benefits, while at the same time allowing for distributions to be made to improve the quality of the child’s life and care.  When preparing estate planning documents, don’t forget to talk to your estate planner about your wishes for your child with special needs, or other family member, regardless of age.  


WHEN A DEATH OCCURS

 
by Kelley Ann Orr

Give yourself adequate time to experience what has happened.  The mortuary does not need to be contacted immediately, allow enough time to call immediate family or close friends to say goodbye and hold or touch your loved one.

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When you have said your goodbyes, it is time to call the mortuary, funeral home, or medical school to take your loved one into their care.

Once the body has been moved, you can begin planning the funeral or memorial service. If your loved one bought burial property and paid for funeral prearrangements you will want to locate this paperwork.

If your loved one was a Veteran, they are entitled to burial benefits in a national or state Veteran’s cemetery.  For more information you can visit www.cem.va.gov or call 1-800-827-1000.  You will need the following information:

❑ Date and Place Entered Service

❑ Service Number

❑ Separated from Service Date and Place

❑ Grade or Rank

❑ Organization and Branch of Service

Once the arrangements have been made the family may want to write and submit an obituary to the local newspaper and include information on donations, flowers, etc. You should ask friends or family members to assist calling people to inform them and provide the details for the service.   

The following documents should be located:

  • The Last Will and Testament should be given to the named Personal Representative;

  • Birth certificate

  • Social Security card

  • Marriage license, if you are the spouse you will need proof of marriage when applying for Social Security benefits as well as receiving some insurance and investments.

  • Military discharge papers

  • Life insurance policies for death benefits.

    The attending doctor or medical examiner will supply and sign the death certificate, but the following information about your loved one will be needed for the funeral home to finalize the death certificate:

    ❑ First, middle, and last name

    ❑ Residence and length of time at residence

    ❑ Father’s and Mother’s Name

    ❑ Social Security Number

    ❑ Birth date and Birth place

    ❑ Whether they are of Hispanic origin

    ❑ Race/Ethnicity

    ❑ Tribal Affiliation

    ❑ Marital Status and spouse’s name

    ❑ Highest level of education attained

    ❑ Occupation/Industry

    ❑ Whether they were a member of the US Armed Forces

     

A Survivor’s Checklist
When a Loved One Dies

  • If employed, contact the employer and inquire about death benefits.

  • If applicable, notify the agent under a Power of Attorney.

  • Notify organizations, church, or clubs your loved one was a member of.

  • Arrange for the care of any pets.

  • All perishable food items, plants, and garbage should be removed from the home.

  • A change of address form needs to be completed in person or by visiting www.usps.com.

  • Remove loved one’s name from marketing and mailing lists

  • Contact the Social Security office and other government agencies that may have been making automatic deposits. If you are the spouse, you must apply for Social Security benefits; they are not automatic.

  • File beneficiary claims with life insurance companies.

  • Cancel all automatic payments and home services (cable, newspapers, etc.)

  • Cancel all auto-refills on prescriptions.

  • Cancel the driver’s license.

  • Notify all three credit bureaus.

  • File any claims for health insurance or Medicare.

  • Notify the Registrar of Voters.

  • The Personal Representative should inventory and remove all valuable items, secure the home, and take steps to make the home appear to be occupied.

  • Within forty (40) days of your loved one’s death, the personal representative named in the Will should call the attorney regarding the probate of the estate.

  • The Personal Representative should take the following with them to meet with the probate attorney:

    • Death Certificate

    • Names, addresses and ages of all heirs, legatees, and beneficiaries

    • Original Last Will and Testament

    • Basic understanding of the location and value of assets

  • The probate attorney will eventually also need:

    • Real estate deeds

    • Automobile titles

    • Stock certificates

    • Loan paperwork

    • Bank and retirement account statements

    • Last 2 years of tax returns

    • List of all creditors

    • List of personal property

 

IMPORTANT CONTACT INFORMATION

DEPARTMENT OF VETERAN’S AFFAIRS

1-800-827-1000 www.benefits.va.gov/benefits/

SOCIAL SECURITY ADMINISTRATION

1-800-772-1213 www.ssa.gov/pgm/links_survivor.htm

CREDIT REPORTING AGENCIES

EQUIFAX

1-800-685-1111 • www.Equifax.com

TRANS UNION

1-800-888-4213 • www.TransUnion.com

EXPERIAN

1-888-397-3742 • www.Experain.com

 

CREATE A LOGBOOK

Take notes of each contact made on behalf of your loved one.  Include the following:

  • Date
  • Person Called/Number
  • Purpose/Outcome

SAVE MONEY. HIRE AN ATTORNEY.

by Kerry Brink

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So many times, clients come in with a big mess.  They have done things on their own and now, it is a mess and it will cost WAY more to fix it than to do it right in the first place.

Here's a recent example.  A client (I will call Joe) came in with his mother's Will that she had put together 2 years before she died last fall.  The Will left 60% to Joe and 40% to his brother (I'll call him Bill").  A year or so before she died, she made a gift to Joe of a substantial amount that was in part for the work and money he had given her and in part to help pay for Joe's daughter's wedding.  

Bill is objecting to that gift.  Joe cannot tell the Court that his mother told him she did not want to leave anything to Bill, because those kinds of statements are prohibited by the "Deadman's Statute" that prohibits a person with an interest in an estate from telling the court what the now-deceased person may have said.  So now, Joe is having to get statements from other friends and neighbors that show the bad things the mom said about Bill, so that Bill (and his attorney) will understand the mother intended to make the gift to Joe.  How awful is that? 

If mom had written a note indicating her desire to make the gift, none of this would have been necessary.  It would have saved lots of money and the brothers would not have been pitted against each other.


REMEMBER YOUR ESTATE PLAN DURING YOUR DIVORCE!

by Kerry E. Brink

Of course divorce is a hugely emotional, difficult time.  The heart wrenching events leading to the decision to file for divorce are excruciatingly difficult, especially if there are children involved.  So then you, or maybe your spouse, files for dissolution of the marriage, and figuring out who gets what and what the parenting schedule will be for the children becomes the focus. 

Don’t forget, though, that when times weren’t so rocky, you may have done estate planning, providing that in your Will or a Community Property Agreement you left everything to your spouse. 

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The fact that you are now in the middle of a dissolution does not revoke those estate planning documents.  Unless the terms of the estate planning documents themselves revoke the Will or

Community Property Agreement, you will need to take affirmative steps to change your Will and other estate planning documents. 

For example, the Power of Attorney in which you appointed your spouse to act on your behalf is not automatically revoked when your spouse files a Petition for Dissolution of Marriage, unless that is specifically provided in the Power of Attorney. 

Likewise with the Community Property Agreement, unless the agreement itself specifically provides that it is revoked if one of you files a Petition for Dissolution of Marriage, even though you are in the throes of a contentious dissolution, if you die and your spouse survives the Community Property Agreement is still in effect and  all community property will pass to your surviving spouse. 

Your Will operates the same way.  As long as you are married, gifts to your spouse under your Will are unaffected.  As soon as the dissolution is final, Washington statuses change that, but until it is final, spousal gifts are unaffected. 

Also consider beneficiary designations that you may have made in your retirement or life insurance that you have through work or independently.  It may be that you have designated that your spouse be the beneficiary, and this will be the prevailing beneficiary designation unless you make a change! 

So, the moral to this difficult tale is:  If you are involved in a dissolution of marriage or a legal separation, then bring all of your estate planning documents into your attorney’s office, along with a copy of this message, and talk with your attorney about making changes to your estate plan as part of the dissolution process.


DISCOUNT TRANSFERS OF MINORITY INTEREST MAY DISAPPEAR

October 7, 2016
by Kerry E. Brink

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The discounts that have been allowed for gifts of minority interests in a family business, to other family members, may be eliminated in 2017!  The IRS has proposed changes to regulations that are intended to eliminate the ability of an appraiser to take minority ownership into consideration when valuing a gift of closely held businesses to family members.  It is not clear what the timeline of implementing these regulations might be – but there is a push for the regulations to be finalized in early 2017.  The proposed regulations are out for comment and there are many criticisms, so an actual implementation date is hard to calculate.

So – You may want to consider making those gifts sooner, rather than waiting!


MY GRANDFATHER'S LIST

by Kerry E. Brink

 

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At 97 years old, my grandfather died after living a life that took on big issues – agricultural methods in Zimbabwe (then, Southern Rhodesia), originating and organizing Child Protective Services in southern Washington and in his retirement years, promoting and supplying food banks in the Gig Harbor and Tacoma areas.  So it was a little surprising that he was so incredibly detailed in putting together his Bequest by List – in a spiral notebook – that gave away absolutely everything with specificity.  His gifts included the canned food in the pantry and the cleaning supplies under the kitchen sink (which were designated to come to me).

 Of course he also gave away treasured family items to each of his children and grandchildren, which were all the more meaningful because he gave them directly to us.  The fact that he remembered us specifically made receiving the item a direct connection with this remarkable man.

 Very few people ever fill out the Bequest by List forms, but I think it means a lot to the beneficiaries to receive a direct gift from a parent, grandparent or a friend.  By the time my grandpa passed away, there weren’t many cleaning supplies under the kitchen sink, but I treasure the circa 1972 Encyclopedia Britannica set he left me and his copy of Man’s Search for Meaning by Viktor Frankl that contained Grandpa’s comments and underlines from numerous readings.  Oh yes – and the silver tea set.  That was special, too.


TRANSFER ON DEATH DEED

by Kerry Brink

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Effective June 12, 2014, Washington state law allows an individual to transfer real property to one or more beneficiaries effective at the transferor's death by executing and recording a transfer on death (TOD) deed. The TOD deed must be recorded prior to the transferor's death in the public records office of the county auditor in the county in which the property is located.  A TOD deed is fully revocable during the transferor's lifetime, even if the deed or another instrument contains a contrary provision. In some circumstances, this may avoid the need for probate altogether or the use of a revocable living trust as a means to avoid ancillary probate in Washington state for an out of state resident.


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News for Employers


News for Employers


COMPLEX COMP CLAIMS: WARNING SIGNS

 
by Erin Sullivan-Byorick

 

The majority of claims are not complex.  Sure there may be some hiccups along the way, but claims are usually administered, workers get timely and proper treatment, and claims will close.  

Unfortunately, it is not the typical claim that costs the employer the most.  It is the atypical, expensive, drawn out claim with the unusual medical condition or the condition that evolves to include multiple body parts  without any logical explanation that costs the employer.  

How does an employer avoid those complex claims and control costs?  

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Of course there's no magical crystal ball, and there's no box for the claimant to check to let you know that their claim is going to turn into a years-long adversarial relationship between the employer and worker.  However, an employer can get a sense of the beginnings of a complex claim by paying attention to some warning signs.  

For instance, were there disciplinary issues immediately prior to filing of the claim?  For instance, is the date of injury within a matter of days of a disciplinary action?  Or perhaps the worker's spouse has a medical condition that requires care, and the only available caregiver is the worker? Or how about the case of a "normal" condition that suddenly evolves to involve multiple body parts?   

Another factor that may make the claim complex is the nervous claimant.  Let's face it, the worker's comp system in Washington involves a lot of laws, rules, and policies that are sometimes in conflict with each other.  Your claimant may  not understand how the system works, and may be confused, distrustful, or just scared of what may happen in the future.  

What about the worker's attorney?  Is the worker's attorney facilitating administration or putting barriers in the way to delay administration?  Does the attorney have a reputation for making claims worse, taking every case to litigation, or engaging in other questionable conduct? 

While a single one of these "red flags" may not be indicative of a complex claim, they do provide some warning to the employer to proceed with caution.   

So what do you, as the employer do?  Follow my blog as I discuss both general and specific strategies for handling the complex claim.  Of course, I am happy to answer any questions you may have, so please contact me and I will be happy to discuss your specific case with you! 

Erin 

esullivan-byorick@vjglaw.com