Insights Archives — Page 2 of 44 — Lindabury, McCormick, Estabrook & Cooper, P.C. Firm News & Events

The Uses of Grantor Trusts in Estate Planning

Published on: February 6, 2023 | by Anne Marie Robbins

Grantor trusts can provide substantial estate and income tax savings to those who establish them. The grantor of a “grantor trust” is treated as the owner of the trust assets for federal income tax purposes. The grantor continues to pay the income tax generated by the assets contributed to the trust and receives the benefit of all deductions and credits. Whether the grantor trust property is excluded from the estate of the grantor, and thus escapes estate tax, is dependent on the drafting of the trust. The rules regarding grantor trusts can be found in Sections 671 through 679 of the Internal Revenue Code. [1]

It is beneficial for the grantor to be treated as the income tax owner of a trust because trusts have more compressed tax brackets than do individuals. For example, in 2022, individuals were taxed at the highest marginal rate of 37% on income over $539,900, or $647,850 for married taxpayers.[2] Trusts, however, reached the top marginal rate of 37% at income above $13,450.[3]

In general, the following provisions in a trust will create a “grantor trust.”

New Jersey Implements WARN Act Amendments Mandating Severance for Mass Layoffs and Business Closures

Published on: January 19, 2023 | by Kathleen M. Connelly and Alexander Avellan

On January 10, 2023, Governor Murphy signed legislation implementing amendments to the Millville Dallas Airmotive Plant Job Loss Notification Act (“NJ WARN Act”) that were placed on hold during the COVID-19 pandemic. The amendments, which go into effect on April 10, 2023, impose new requirements on employers of 100 or more who implement mass layoffs or plant closures.

Background

Governor Murphy initially signed an amended NJ WARN Act on January 21, 2020, which was scheduled to take effect on July 20, 2020. However, in April 2020, the Governor signed Executive Order 103 declaring COVID-19 a public health emergency and postponing the effective date of NJ WARN Act amendments until 90 days after the conclusion of the state of emergency. Although the COVID-19 state of emergency remains in effect, the Legislature “unlinked” the amended NJ WARN Act from the state of emergency, thus permitting the implementation of the amendments to take effect on April 10, 2023.

Pay if Paid Provisions in New Jersey

Published on: January 19, 2023 | by Alexander Avellan

Recently, the New Jersey Appellate Division affirmed the Superior Court’s decision in Jersey Precast v. Enterprises, Inc. et al. Particularly, the December 7, 2022, decision affirmed the lower court’s finding that a “pay-if-paid” clause in a material supplier’s purchase order with a general contractor was binding and enforceable. The court in Jersey Precast, acknowledged that New Jersey has no statute or published caselaw that addresses the enforceability of “pay-if-paid” clauses. As such, the court relied upon the authorities and approaches of other jurisdictions. For example, various courts in other states require such a clause to include clear and unambiguous language in order to for a “pay-if-paid” to be enforceable. See e.g. Main Elec., Ltd. v. Printz Servs. Corp., 908 P.2d 52, 528 (Colo. 1999) (stating “…the relevant contract terms must unequivocally state that the subcontractor will be paid only if the general contract is first paid by the owner and set forth the fact that the subcontractor bears the risk of the owner’s nonpayment”); DEC Elec., Inc. v. Raphael Constr. Corp., 558 So. 2d 427, 429 (Fla. 1990) (stating risk-shifting provisions of a pay-if-paid term must be clear and unambiguous or, if ambiguous, interpreted as setting a reasonable time for payment). Moreover, at the federal level pay-if-paid clauses are typically enforceable where there is express contractual language that clearly demonstrates the intention of the parties to shift the risk of payment from the contractor to the subcontractor. See Fixture Specialists, Inc. v. Global Construction LLC, 2009 WL 90431, at *4-6 (D.N.J. March 30, 2009).

Using the above standards as guidance, the Appellate Division in Jersey Precast, critically pointed out that in New Jersey freedom of contract is a “‘is a factor of importance'” within “the framework of modern commercial life.” See Whalen v. Schoor, DePalma & Canger Grp., Inc., 305 N.J. Super. 501, 505-06 (App. Div. 1997). It is a “settled principle that parties bargaining at arm’s-length may generally contract as they wish.” Id. at 505. To that end the court held that, “parties may make contractual liability dependent upon the performance of a condition precedent.” See Duff v. Trenton Beverage Co., 4 N.J. 595, 604 (1950). The Appellate Division further articulated that a prohibition against the use of pay-if-paid provisions as conditions precedent in construction contracts should come from the legislature rather than the courts, and as such, held that as long as the contract specifies a clear and unambiguous intent and agreement by the parties to shift the risk of nonpayment, a pay-if-paid provision is enforceable subject to the parties’ implied duty to not frustrate conditions precedent to their performance.

Key Takeaways

Congress Passes the Speak Out Act Prohibiting Nondisclosure and Non-Disparagement Agreements in Sexual Harassment and Assault Cases

Published on: November 29, 2022 | by Kathleen M. Connelly and Alexander Avellan

Following a unanimous vote in the Senate, on November 16, 2022, the House of Representatives passed the Speak Out Act (the “Act”) which now heads to President Biden’s desk for signature. The Act is just the latest effort by legislators at the federal and state levels to shine the light on instances of sexual assault and harassment in the workplace. This new legislation renders unenforceable certain non-disclosure and non-disparagement provisions that prevent individuals from disclosing the details of sexual harassment or assault claims that may occur in the future.

In practice, this Act will have a limited impact because its prohibitions only apply to employment or other agreements signed prior to a claim of harassment arising. Thus, the Act will not bar the inclusion of non-disparagement/nondisclosure provisions in separation agreements or settlements of sexual harassment or assault claims. In addition, the Act does not prohibit non-disclosure agreements that bar disclosure of other forms of discrimination (e.g., age, race religion) or workplace misconduct. Finally, the Act explicitly states that nothing in the new law limits employers’ prevalent use of non-disclosure and confidentiality agreements designed to protect trade secrets or critical propriety information.

Impact On New Jersey Employers:

What Divorcing Parents of Special Needs Children Need To Know

Published on: November 2, 2022 | by Nicole A. Kobis and Elizabeth Candido Petite

Divorcing parents of minor children are faced with many hard decisions that must be addressed while separating. These considerations include resolving custody, parenting time and support for their children, which are often much harder and more emotionally charged than the issues involving dividing assets and calculating financial support between spouses. When there’s a child with special needs in the family, there are additional decisions to be made surrounding their continued care, often well past the time that other children would be deemed to be emancipated, and the finances surrounding the support they’re receiving. Special needs children are best served when their parents fully address these issues during the divorce proceeding and are able to focus on the best interests of the children, and the divorcing parents are best served by attorneys who fully understand the issues and can offer practical solutions based on the specific circumstances.

Child Support

In any divorce involving children, the parties need to resolve custody, which involves both the legal and physical sharing of their children. In most cases, parties will agree or a court will order that the parties share joint legal custody of their children. Joint legal custody generally means joint decision making for all major decisions in a child’s life. These major decisions typically fall into three larger categories, which are the child’s: (1) health, (2) education, and (3) well being. For example, both parties would need to participate in the decision-making process and agree on whether the child will attend public or private school or whether the child will have their tonsils removed on a nonemergency basis. If parents are unable to agree on these decisions, they can enlist the help of attorneys, mediators or the court, who will help decide these issues with or for them. For parents of a child with special needs these decisions may involve the continuation of certain therapies or treatments or their continued care if they’re no longer able to reside at home.

New York City’s Pay Transparency Law

Published on: October 27, 2022 | by Lisa Gingeleskie and Alexander Avellan

As previously advised New York City’s Pay Transparency Law (the “Transparency Law”) requiring most New York City employers to disclose salary ranges in their job postings, takes effect on November 1, 2022. Guidance recently issued by the New York City Commission on Civil Rights (the “Commission”) gives further insight into the employer requirements of this new law.

Under the Transparency Law, employers with four or more employees or one or more domestic workers, must include a good faith minimum and maximum salary range in all job advertisements, promotions, and transfer opportunities for work to be performed in New York City.

Job advertisements for temporary employment at a temporary help firm, such as a staffing agency, are specifically exempted from these disclosure requirements.

Confidentiality and Privilege in the Mediation Process

Published on: October 26, 2022 | by Nicole A. Kobis and Honorable Katherine Dupuis, (Ret.)

Imagine you attended a mediation in a hotly contested matter which turns out to be a total waste of time because your adversary was late, unfamiliar with the file or unwilling to entertain settlement discussions. Is it permissible to tell the trial judge about your adversary’s failure to act in good faith? What if you are able to reach an agreement but one side later refuses to acknowledge that agreement? Is there any recourse?

Imagine you participate in a mediation which is unsuccessful. Your adversary files a motion wherein it is disclosed that your client was willing to waive alimony at mediation. You, of course, are furious at this misrepresentation because that is only part of the story. What has been omitted is that your client was only wiling to waive alimony in exchange for receiving 100% of the property in equitable distribution. How do you respond?

The General Rule

Inheriting & Bequeathing Firearms in New Jersey: How to Lawfully and Responsibly Transfer Possession

Published on: October 19, 2022 | by Donald C. Pierce

According to the Giffords Law Center to Prevent Gun Violence, New Jersey has the second strictest gun laws in the nation behind California. As demonstrated this past summer, that legal landscape is ever-changing. While much attention was paid to the U.S. Supreme Court’s June 23rd ruling expanding the right to carry concealed handguns outside the home, many families have given little thought to the implications raised by the transfer of a firearm following a death. This article will discuss the appropriate way to bequeath and inherit firearms in New Jersey and help current gun owners continue their legacy of responsible ownership beyond their passing.

Is a Firearms ID Card or Handgun Purchase Permit required?

Under typical firearm transfers, the receiving party must be a federally licensed dealer (“FFL”) or have a valid Firearms Purchaser Identification Card (“FPID”) and the parties must complete a Certificate of Eligibility. In the case of handgun transfers, the receiving party must obtain a Handgun Purchase Permit (“HPP”). These requirements exist even in transfers between family members.

Can a Last Will and Testament Require that Beneficiaries Arbitrate their Disputes?: In a case of First Impression, New Jersey Court says No.

Published on: October 18, 2022 | by Elizabeth Engert Manzo

Whether a Testator can compel beneficiaries of an Estate to arbitrate potential disputes regarding the enforcement, interpretation, and administration of a Last Will and Testament by including a mandatory arbitration provision is a novel legal issue which, until recently, had not been considered by the courts in New Jersey. For those hoping that an arbitration provision could be used when drafting a Last Will and Testament to bar litigation in court and thereby reduce the possible time and expense of estate disputes, a recent New Jersey decision dashed such hopes and held that arbitration provisions in a will are unenforceable.

In the case of In Re Estate of Hekemian, the plaintiff, Richard E. Hekemian, one of the Decedent’s four sons and a beneficiary of his Estate, filed a lawsuit seeking compensation from two of his brothers, Peter S. Hekemian and Edward G. Imperatore, in their capacities as Co-Executors of their late father’s Estate. Upon notice of the litigation, the defendants filed a motion to compel arbitration based on an arbitration provision in the Decedent’s Will. In turn, the plaintiff opposed the motion claiming that the arbitration provision in the will is invalid under New Jersey.

While noting that the State of New Jersey, as a matter of public policy, generally favors arbitration as a dispute resolution mechanism, the New Jersey Superior Court determined that an arbitration provision in a Decedent’s Last Will and Testament was unenforceable. The court began its analysis by noting the hallmark principle that a testator’s intent should be honored and upheld. To wit, the court cited to the statute at N.J.S.A. 3B:3-33.1 which states that “the intention of a testator as expressed in his will controls the legal effects of his dispositions”.

The NLRB is Once Again Set to Expand Joint Employer Liability

Published on: October 13, 2022 | by Lisa Gingeleskie

On September 6, 2022, the National Labor Relations Board (NLRB) released a Notice of Proposed Rulemaking (NPRM) addressing the standard for determining joint-employer status under the National Labor Relations Act. Under the proposed rule, two or more employers would be considered joint employers if they “share or codetermine those matters governing employees’ essential terms and conditions of employment.” If finalized, the rule would explicitly rescind the NLRB’s most recent overhaul of the joint employer standard that raised the bar to attain joint employer status and will undoubtedly result in many more joint employer situations.

The Joint Employer Standard’s Seesaw History

Over the past decade, joint employer status has been gone back and forth dramatically as the composition and political control of the Board has shifted.