Articles Posted by Insights

Disposition of Estate Assets – Real Estate

Published on: November 7, 2017 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

Real estate is oftentimes one of the more valuable assets an individual may own, and thus can comprise a substantial asset in the estate following an individual’s death. Typically, it is the personal representative of the estate who has responsibility to dispose of a decedent’s real estate.¹ Real estate can either be conveyed directly to one or more of the estate beneficiaries or it can be sold. The disposition of real estate in an estate can be one of the more significant responsibilities for the personal representative. This article will address a number of issues facing a personal representative involved in the disposition of real estate through sale of the property following an owner’s death.²

The first issue generally faced by a personal representative is determining the fair market value of the property. For purposes of the federal estate tax law, fair market value is defined as “the price at which the property would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.” Treas. Reg. §2031-1(b). For New Jersey estate and inheritance tax purposes, tax is “computed upon the clear market value of the property transferred.” N.J.S. 54:34–5. See also N.J.A.C. 18:26–8.10. In general, an appraisal of real estate prepared by a member of the Appraisal Institute will be recognized as an acceptable appraisal by taxing authorities.³ An arms-length purchase by an unrelated third party, if completed within a reasonable time period after death, is generally accepted by the taxing authorities as an alternative to an appraisal.

The actual process of selling real property owned by an estate can also present challenges to a personal representative. Oftentimes a personal representative will wish to minimize the expenditure of funds to “update” an estate property, preferring instead to enter into a contract selling the property in “as is” condition without addressing any repair issues. While this is often an attractive approach, particularly when a personal representative has never resided in the property or has limited or no knowledge concerning its condition, there are limitations to this approach in New Jersey, which a recent case points out.

It’s Never Too Early to Plan for Management Transition

Published on: October 16, 2017 | by David R. Pierce

Lindabury Partner and President, David Pierce, shares his insight on developing, adopting and implementing strategic management transition plans in the Leadership Issue of Law Practice Today by the American Bar Association (ABA) Law Practice Division.

“Navigating a transition in the management of a law firm can be daunting and troublesome, but it is an absolutely necessary endeavor for the long-term survival of the firm. While many firms have been in operation for 50-plus years, it is easy to rattle off a list of firms that have imploded or disintegrated after experiencing decades of success. Nothing lasts forever. As the Second Law of Thermodynamics says, entropy (disorder) is always increasing in an isolated system. That does not mean that one shouldn’t try to preserve a law firm that has strong name recognition and a good internal culture. It does mean, however, that doing so requires an investment of considerable effort and energy to keep it from following the natural tendency to splinter and dissolve.”

To read the full text of the article click here.

Establishing, Revising And Enforcing Time-Sharing With Children

Published on: October 12, 2017 | by James McGlew, II

In all cases of divorce or separation where children are involved, the issue of time-sharing (previously referred to as “visitation”) is a significant issue to be addressed. Unless the parents have agreed to an equal shared custodial arrangement, an appropriate schedule of time-sharing is particularly important for all those involved: the custodial parent, the non-custodial parent, and the children.

Determining a schedule of time-sharing with the children is sometimes resolved between the parties. However, in those cases where the parties are unable to do so, the Court will order mediation in an attempt to resolve the issue. If the mediation is unsuccessful, the Court will (and has the authority to) determine the time-sharing schedule which will be binding on all involved.

Traditionally, time-sharing consisted of alternate weekend overnights for the non-custodial parent, a division of legal and religious holidays, extended time during the summer, and perhaps one evening per week for dinner. Recently, time-sharing schedules have become more flexible with non-custodial parents demanding (and receiving) more time with their children. Busy work schedules for the parents and academic and activity schedules for the children demand a more fine-tuned approach to time-sharing.

Check the Details of M&A Before Putting up a “For Sale” Sign

Published on: October 2, 2017 | by Robert W. Anderson

Lindabury partner, Robert Anderson, shares his insight in NJBIZ’s recent article: “The inside scoop on M&As: Plenty of big companies have learned the hard way how difficult mergers can be”

Sometimes, a planned M&A can get torpedoed because of decisions that were made long ago, notes Robert W. Anderson. So a potential seller may wish to review its books and records long before putting up a “For Sale” sign.

One suggestion: do some housecleaning, and scour around for any loose ends. That’s because for a buyer, a “big part of an M&A involves due diligence; understanding what they’re buying and how the target company fits in with the acquirer’s business operations and goals,” says Anderson. “If they see a lot of issues, like unsigned contracts, or potential tax and other liabilities, they may back away from the deal.”

Post-Equifax: What Do We Do Now?

Published on: September 22, 2017 | by Eric B. Levine

By now, everyone has likely been inundated with information about the Equifax data breach. If you are one of the few who has not heard about what happened, here’s the short version: Equifax suffered an enormous security breach as a result of its poor data privacy hygiene resulting in over 143 million people having their credit information, including their social security numbers, names and addresses, potentially exposed. The impact will be felt for a long time and the consequences if you are affected could be significant.

So what exactly did Equifax do wrong? To be blunt, EVERTYTHING. First, according to industry experts, Equifax failed to install a readily available security update that left it vulnerable to hackers. Second, the lack of security updating was compounded by the fact that Equifax’s administrative passwords were simplistic, certainly for a company that’s primary purpose is to store sensitive information, and was easily decipherable by the cyber-intruder. Third and what makes matters worse is that the security update was available to Equifax two months before the breach. Fourth, in addition to the lax cyber-hygiene of Equifax was the fact that Equifax waited for months after it knew of the breach before reporting it to the public. Fifth, when Equifax finally reported the breach, the message it sent was a weak one that left the public feeling exposed and betrayed, especially when it turned out the certain Equifax executives sold large quantities of company stock after the breach was discovered but before it was reported. It is hard to envision any worse corporate conduct both leading up to the breach and continuing until today.

In the aftermath of such an historic cyber-breach, what lessons can companies and individuals learn and what steps are to be taken to mitigate the damage? On the corporate level, companies need to take cybersecurity and data privacy seriously, invest adequate resources to addressing the issue and partner with professionals versed in all aspects of today’s cybersecurity environment, including legal counsel, technical/forensics experts and insurance professionals. Develop and implement prudent Information Technology practices that include continuous system maintenance, updating/patching of software, mapping, segregating and encrypting data as well as actively being vigilant for intrusions or data loss. Prepare a plan for how to respond to breaches or data losses. Perform vulnerability assessments under the guidance of counsel, to determine where you need to shore up your defenses while maintaining the confidentiality of the assessment results through attorney-client privilege. Obtain insurance policies to blunt the impact of data breaches and to obtain resources to assist with specific breaches like ransomware/malware.

EEOC’S Pay Reporting Requirements Suspended

Published on: September 21, 2017 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

On August 29, 2017, the Office of Management and Budget (“OMB”) announced that it was immediately suspending the revised Equal Employer Information Report (“EEO-1 Report”), which included burdensome pay reporting obligations for employers. Previously, the EEO-1 Report directed federal contractors and employers with 100 or more employees to report annually the number of individuals that they employ by job category, race, ethnicity and gender. The proposed EEO-1 revisions, however, expanded the information collected to include pay ranges and hours worked. This expansion was aimed at identifying pay gaps and focusing employers on the issue of equal pay between male and female employees.

In response to the proposed reporting requirements, employers expressed concern over privacy and confidentiality issues surrounding the disclosure of pay data and also questioned the overall utility in collecting such data. In suspending the revised EEO-1 Report, the OMB recognized similar concerns, stating that some aspects of the proposed collection of information “lack practical utility, are unnecessarily burdensome, and do not adequately address privacy and confidentiality issues.” Accordingly, the OMB directed the EEOC to publish a notice advising that the proposed wage and hour reporting requirements were immediately suspended and further directed the EEOC to provide additional information for its future consideration.

As a result of this directive, employers can put aside plans to collect data reflecting pay ranges and hours worked for the time being. However, in doing so, employers should be mindful to stay abreast of any updates in reporting requirements following any further review by the OMB. In addition, employers are still required to submit EEO-1 Reports using the previously approved form, which requires employers to disclose their employees’ race, ethnicity, and gender by job category. The deadline for submission of this report remains March 21, 2018.

Moving With Your Children Out-Of-State After a Divorce

Published on: September 7, 2017 | by James McGlew, II

One of the most contentious issues faced by many divorced parents has always been whether the custodial parent has the right to relocate with the parties’ children out of state. In an increasingly mobile society this has become an issue for many parents. Often custodial parents decide that they cannot continue to reside in New Jersey. They need to explore job opportunities in other states and/or move back to a state where they were raised and may have a family-type support system in place. They may have started a relationship with someone who resides out-of-state or may be contemplating marriage with that person who has an established career in another state. For years, the custodial parent could not permanently remove the children from the state of New Jersey without the written consent of the other party or a court Order. If there was no agreement, the party wishing to move would petition the court for permission. Over the past several decades the standard our Courts have used to make this determination has evolved. For more than 15 years, the standard has been that the prospect of moving the children out of state would be granted unless it was “inimical to the child’s interest.”

Last month, the New Jersey Supreme Court changed the standard that lower courts are to utilize when determining whether or not a custodial parent may relocate the children out of New Jersey. It was also determined that this new standard would apply whether or not the party seeking to move has been the child’s primary residential parent. This ruling represents a significant departure from existing law by changing the standard a court is obligated to interpret. It also gives the noncustodial parent considerably more input and seeks to protect the rights of both parents.

When examining the issue of relocation our courts are now charged with determining whether there is “cause” (to be interpreted under the existing statute) to authorize a child’s relocation out of New Jersey. To do so, courts are now obligated to weigh many factors including, but not limited to: “the parents’ ability to agree, to communicate and cooperate in matters relating to the child; the parents’ willingness to accept custody and any history of unwillingness to allow parenting time not based on substantiated abuse; the interaction and relationship of the child with its parents and siblings; the history of domestic violence, if any; the safety of the child and the safety of either parent from physical abuse by the other parent; the preferences of the child when of sufficient age and capacity to reason so as to form an intelligent decision; the needs of the child; the stability of the home environment offered; the quality and continuity of the child’s education; the fitness of the parents’ homes; the extent and quality of the time spent with the child prior to or subsequent to the separation; the parents’ employment responsibilities; and the age and number of children.”

Protecting Your Credit; Before, During and After a Divorce

Published on: August 10, 2017 | by James McGlew, II

Unfortunately, at the time a divorce is finalized an individual can encounter new and unanticipated financial obligations. Any debt that was incurred during the marriage and will not be paid off at the time of divorce needs to be addressed in the parties’ settlement agreement. It is important that any written settlement reached between the divorcing parties be thorough and clear as to which of the parties is responsible for a particular debt and how and when that person will satisfy that debt. Unfortunately, at the time a divorce is finalized an individual can encounter new and unanticipated financial obligations. Any debt that was incurred during the marriage and will not be paid off at the time of divorce needs to be addressed in the parties’ settlement agreement. It is important that any written settlement reached between the divorcing parties be thorough and clear as to which of the parties is responsible for a particular debt and how and when that person will satisfy that debt.

The entry of a divorce judgment does not alleviate the joint responsibility for a joint debt. As an example, should one party agree to pay the balance due on a joint credit card debt in its entirety, and then fail to subsequently do so, the credit card company can pursue its claim against both of the individuals named on the account. The creditor is not bound by any agreement made between the divorced parties.

Additionally if payments are late or not made, the Lender or the bank that provided the credit can report negative information to the credit reporting companies. This can affect not only the credit rating of the party who was responsible to make the payments but possibly the other party as well.

NJ Law Journal Quotes Mary Pat Magee in Recent Article Regarding NJ Estate Tax Phaseout

Published on: July 25, 2017 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

Mary Pat Magee discusses the increased NJ estate tax exemption and impending elimination in the New Jersey Law Journal article “NJ Estate Tax Phaseout Hasn’t Haunted T&E Practices”.

Mary Pat says “We’ve always been faced with a planning environment full of tax uncertainty” as she recalls her early days when she began her practice in 1982 and the exemption was then $225,000 and T&E practitioners were anxious over business. “We are really lawyers that advise families as to the dispensation of their assets, and taxes are just one aspect of that” she says.

Click here to view Mary Pat’s comments on the issue.

IRS Issues Revenue Procedure 2017-34, Announcing Simplified Method To Make A Late “Portability” Election

Published on: July 15, 2017 | by Anne Marie Robbins

In June of this year, the IRS published a revenue procedure that allows certain estates to make a late portability election if a timely election was not made. Rev. Proc. 2017-34. The portability election allows a decedent’s unused basic exclusion amount (known as the deceased spousal exclusion amount, or DSUE) to be transferred to the surviving spouse for his or her use during life or at death. In effect, this allows married couples to double the amount of assets they can shelter from federal estate and gift taxes.

In order to make a portability election, the personal representative of the estate of the first spouse to die must file a timely (including extensions) federal estate tax return (Form 706) following the death of the first spouse, even if the estate of the first spouse to die is not otherwise required to file Form 706. For example, if a decedent’s assets and lifetime adjusted taxable gifts do not exceed a certain amount (in 2017 the amount is $5.49 million), a 706 is not required. Many taxpayers, not knowing the rules and not otherwise required to file Form 706, fail to make the portability election timely.

In January of 2014 the IRS had issued Rev. Proc. 2014-18, which provided an automatic extension for certain estates of decedents dying after December 31, 2010 and on or before December 31, 2013 to elect portability of the DSUE by filing Form 706. However, after December 31, 2013, the only way to make a late portability election was to seek a private letter ruling from the IRS pursuant to Treasury Regulations. Despite the fact that private letter rulings can be time-consuming and expensive, the Service has issued many such rulings in the last few years by estates seeking to make a late portability election. Hence the new revenue procedure provides a welcome and lest costly method for preserving the DSUE.