Now that the hustle of the holiday season is over, everyone is looking forward to the new year. January tends to be the month where people look for a fresh start and catch up on the tasks that were pushed off during the holiday season. For many people, that involves making new year’s resolutions. While some resolutions are harder to keep than others, a very simple resolution to make and keep is to review and update your estate plan.
Here are factors to keep in mind when considering updating your estate plan:
1. Life changes in your family: An estate plan is not one-size-fits-all; it is customized to meet your family’s unique circumstances and needs. Perhaps you had an estate plan prepared when your children were very young, but now they are older and capable of managing their own financial resources. In contrast, perhaps you have concerns about a child’s ability to make prudent financial choices, and would like to know your options for protecting any inheritance they might receive. Maybe you have a child or other family member with disabilities, and you are concerned about how the receipt of an inheritance will affect their public benefits. Perhaps you now have grandchildren that you would like to provide for as part of your estate plan. An estate plan can take all of these areas into consideration and be drafted to best fit your needs.
2. Your personal financial profile: Everyone’s financial profile changes over time. You may have accumulated significant assets since the last time you reviewed your estate plan, or you may be retiring and drawing down on your hard-earned assets. An estate plan created when you had a very different financial profile may not provide the best treatment of your estate based on its current and projected status.
3. Fiduciary roles in your estate plan: Creating an estate plan involves selecting various individuals (or entities) as fiduciaries, such as the Executor of your estate, Trustee of any trusts created under your estate plan, Guardian of your minor children, Agent during your life under your Power of Attorney, and Surrogate to make end-of-life decisions in your Living Will. Each of these roles is very important, so you should consider if the individuals who are named in these roles in your current estate planning documents are still the people you would want to serve. Your documents may name individuals who have gotten older and may be unable to serve in these roles due to health concerns, or individuals who have moved away and may not be able to effectively serve due to geographical distance. You may have created documents when your children were younger, but may now feel that your children are mature enough to take on these responsibilities. While anyone named in an estate planning document may resign or renounce if they are unable to serve in a fiduciary role, updating your documents now will avoid the time and delay involved in appointing the appropriate individuals to these roles in the future.
4. Changes in the tax laws: There is a saying that the only two constants in life are death and taxes, and your estate involves both. Your estate may be subject to various estate, inheritance, and/or generation-skipping taxes, and the law in these areas is constantly evolving. Depending on the law and your personal financial profile, your estate plan can be crafted to reduce your estate’s exposure to these taxes. Documents designed to account for one set of tax laws may not be as effective once those laws change, so it is important to update your documents to ensure they stay current.
For more information about our mediation services, contact:
Denise M. Bowman
Jessica A. Pritchard
William T. MacMinn
Commercial & Orphans’ Court Matters
Alan G. Wandalowski
Orphans’ Court Matters
Mediation is an alternative dispute resolution process which serves as an option to civil litigation in the court system. It is a voluntary, non-binding, structured process where people in conflict can work with the guidance of a neutral party toward the best, most mutually agreeable outcome. Mediation eases the friction between people so that they can pursue a common end without the stress, trauma, cost and uncertainty of civil litigation. Antheil Maslow & MacMinn has a strong team of seasoned attorneys who are trained mediators in the areas of commercial litigation, family and Orphan’s Court matters. With comprehensive knowledge of each court system, and the challenges and costs inherent to litigating disputes, our mediators bring a high level of legal acumen and interpersonal skill to every mediation.
As commercial litigators, Antheil Maslow & MacMinn’s mediation team is able to leverage extensive trial and litigation experience to work with the parties and their counsel in a collaborative and thoughtful way to achieve an agreeable resolution. Much of our practice as commercial litigators involves analyzing and resolving the competing claims and interests of shareholders, owners, general contractors, design professionals, suppliers and subcontractors. As a result, we are well versed in the essential elements key to commercial conflicts and necessary to achieving agreeable resolutions. Our years of representing stakeholders to business conflicts lends itself to mediation, as AMM mediators are comfortable and experienced in negotiating the resolution of strongly contested multi-party disputes.
Individuals who are parties to estate, trust or guardianship matters may find themselves in situations which are difficult, emotional, financially challenging and life-changing. Our estate and trust attorneys are accustomed to assisting executors, trustees, guardians and beneficiaries come to a resolution. When parties are at an impasse, or emotions too strong for effective progress in their conflict, using a mediator is a highly effective approach to avoid more stress, cost and pain for all involved. •
For families going through the process of divorce or separation, the path ahead can be difficult, emotional, stressful and frightening. Going through costly and adversarial court battles only makes a bad situation worse. For couples who can work together toward a resolution, choosing a skilled mediator who can facilitate a discussion between the parties and their counsel with as little trauma and acrimony as possible can significantly minimize the emotional and financial cost to the family. The aftermath of successful divorce mediation can help the parties to amicably and move forward toward the future.
All of our mediators take an active, persistent, conciliatory approach to their role. Our focus is to defuse emotional drivers which may impede progress toward agreement, and boil the conflict down to its practical realities, thereby helping the parties to generate and analyze options, and identify ways to overcome barriers to reach their settlement objectives.
Part 2 of our Noncompete Series will focus on employers. Noncompetes, when well drafted, are a powerful tool to protect customer relationships, confidential information, trade and training secrets, and key employee relationships. But, the law does not favor these agreements, so drafting requires care, and, as a practical matter, timing is everything.
While noncompetes are disfavored and maligned, they do serve useful purposes for certain employers. There are two types of restrictions that such agreements can impose: general prohibits on certain kinds of competition; or, prohibitions on soliciting customers, vendors, employees, contractors, or other valuable relationships. For the most part, restrictions on soliciting customers, employees and other key relationships are easier to enforce. They allow the employee to continue to work, and protect those relationships for the employer. For some employers, these restrictions, tailored to their business and in place for a sufficient period of time, are enough. Generally, these restrictions tend to last a year or perhaps two. Employers will need to weigh the dangers of making the restriction too long, and thus unenforceable, as against the time it takes for those relationships to go stale.
Restrictions on competition generally are another matter. The general principle applied by the court is this: a court will not enforce the restriction if it is not designed to protect a legally recognized protectable interest, renders an employee unable to pursue his chosen profession, or appears designed to eliminate fair competition. The court will only act to protect the following interests: trade secrets or confidential information, specialized training the employee received from the employer, or customer good will developed using the employer’s resources. Given these competing factors, it is best to narrowly tailor the restriction to the employer’s business. An employee is more likely to comply with such a restriction (thus avoiding court), and a court is more likely to enforce it as written.
Employers next must consider when to ask employees to sign noncompetes. These agreements are enforceable when signed at the beginning of the employment relationship. A noncompete executed by an employee after the employee has worked for the employer for a period of time is not enforceable unless accompanied by a raise or promotion, or some other benefit. This creates a practice problem for employers. Often, a noncompete is not required at the beginning of employment, but circumstances change: employees are promoted, the nature of the business changes, the employer becomes more sophisticated about its internal procedures, for example. A skilled employee with options in the marketplace may very well refuse to sign such a restriction where the new consideration offered is simply not worth it. So, for example, while a bonus of $500 is enough to make the agreement legally enforceable, it may also not be enough to cause the employee to sign. This creates a difficult situation for the employer – should the employer terminate and lose the key employee, or allow the employee to stay without a noncompete?
Creating a noncompete program for employees is complex, and many of the issue are interrelated. In addition to the legal concerns, employers must consider what concerns and relationships truly require protection, as well as retention and morale issues. We have helped many employers sort through these issues and are uniquely equipped to help businesses navigate difficult noncompete issues.
Elaine Yandrisevits,an associate in Antheil Maslow & MacMinn’s Estates and Trusts practice group, will participate as faculty on December 3rd at a National Business Institute continuing education program focusing on the requirements, procedures and pitfalls of fiscal planning with supplemental needs trusts. This legal briefing will provide an overview of the specialized skills required to provide special needs beneficiaries with financial structure and stability and enable accountants, attorneys and financial planners to offer clients guidance on this important estate planning tool and find creative cost-effective ways of funding supplemental needs trusts. To Register, visit Special Needs Trusts and the ABLE Act,
• Get tips for accurate assessment of the client's present and future disability and needs.
• Determine whether a client qualifies as a beneficiary of a special needs trust.
• Don't reinvent the wheel - modify our sample trust documents and use our drafting tips to create airtight trusts.
• Understand and communicate the limitations of SNTs and ensure reasonable client expectations.
Who Should Attend
This legal briefing offers a simple guide to supplemental needs trusts that will benefit attorneys. Others who may benefit from this course include trust officers, estate planners, accountants, and paralegals.
• What SNTs Can and Cannot do for Your Client
• Assessing the Degree of the Beneficiary's Current and Future Disability and Needs
• Types of SNTs and Their Uses
• Basic Drafting Considerations
• SNT Funding, Administration and Termination
In the corporate setting, it has long been the case that a shareholder can assert a claim on behalf of the corporation when management of the entity refuses to do so – a so called derivative action. Under Pennsylvania’s limited partner statute, a partner (general or limited) can now do the same. A derivative action is one brought by a partner to assert a claim on behalf of the partnership where the general partner refuses to do so.
To bring a derivative action, unless the requirement to do so is excused, the limited partner must first make a demand that the general partner take steps to assert the partnership’s right. The demand must be in “record form” and “give notice with reasonable specificity of the essential facts relied upon to support each of the claims made in the demand.” As will be seen, it is important to carefully craft the demand, since the scope of the derivative claims that can be asserted is limited to those claims identified in the demand and because making the demand also temporarily tolls the statute of limitations on such claims.
After receipt of the demand, the general partner may choose to appoint a special litigation committee (SLC) to investigate the claims asserted in the demand and determine whether pursuing any of them is in the best interests of the partnership. The statute gives the general partner wide discretion to appoint members of the committee, so long as they are not interested in the claims and can exercise objective judgment. Indeed, other limited or general partners may be committee members.
The SLC is then charged with conducting an investigation. The scope of that investigation is limited by the claims set forth in the demand letter and is subject to the good faith requirements of the statute. Within these limitations, the investigation conducted is left to the committee.
Upon conclusion of the investigation, the SLC can make one of several recommendations authorized by the statute. These range from recommending that the claims not be brought (and if brought, discontinued) to recommending that the limited partnership itself assert them. The SLC has ultimate power over the claims as Court is bound to enforce its decision with judicial review limited to whether the members of the committee met the qualifications required under the statute and whether the committee “conducted its investigation and made its recommendation in good faith, independently and with reasonable care.”
I recently used the SLC procedure in a case involving a limited partner who owed a large sum of money to the limited partnership. The general partner authorized a claim against the limited partner to collect the balance due. The limited partner defended the case by asserting that the general partner was improperly appointed and therefore did not have authority to commence the collection action. The limited partner issued a demand for removal of the general partner under the act. I suggested that a special litigation committee be appointed. In this instance, I suggested that one committee member be a retired judge from the county in which the action was pending to defuse any argument that the SLC was not qualified or that it did not act in good faith and independently. As I represented the limited partnership, separate counsel was engaged to represent the general partner before the SLC.
In proceedings before the SLC, the limited partner’s counsel sought to expand the claims to include mismanagement and breaches of fiduciary duty alleged to have been committed by the general partner. Illustrating the importance of properly crafting the demand, the SLC refused to consider any of these expanded claims, holding that its review was limited to the issue raised in the demand – whether the general partner was validly appointed. .
Ultimately the SLC found that the general partner was validly appointed and directed that no claim be brought on this issue. As this claim had already been asserted, the limited partnership was preparing a motion to be filed with the Court to enforce the SLC’s determination when settlement negotiations, which had stalled over a year before, resumed, leading to a prompt settlement. The entire SLC process, from demand letter to decision, took four and one half months – a much quicker resolution, and at less cost, than fully litigating the issue.
The SLC procedure allows an independent review of the merits of derivative claims. If appropriate, such claims can be asserted on the partnership’s behalf or by the partnership itself. However, where such claims are found to be without merit, they can be summarily dismissed. The SLC is a powerful tool to address the merits of derivative claims on an expedited and reduced cost basis.
It seems that Labor Day has just come and gone, but the snow is already moving in and the holiday season will be here before we know it. You have already transitioned the children from summer vacation into another school year, hopefully without too much stress. While it can be hard to focus on the details of the season, if you have minor children and a custody agreement or order, it is time to take a look at your custody documents and give some thought to what lies ahead in the next month and a half. Prior to scheduling family dinners, holiday celebrations and travel, it is important to see what the holiday schedule is for this year. Which days of the holidays are your children with you, what times are they with you, and who is responsible for transporting the children? It is important that you know the answers to all of these questions. Take out your custody agreement or order now and look through the schedule for Thanksgiving through New Year’s. If you have questions, now is the time to ask your attorney, not on Thanksgiving morning. We all know that a lot of advance planning occurs for the holidays, and family gatherings are scheduled. If it is important to you that your children celebrate with you and your extended family, you want to be sure to make your plans around when you have physical custody of the children. The last thing that you want to do is put your children in the middle of a dispute and have them miss plans with either parent that they were looking forward to. Knowing the details of the holiday schedule now will enable you to make plans based upon the custody schedule and keep everyone happy, which should result in a more peaceful holiday for you.
Many of our previous posts delve into the benefits of resolution of a commercial or shareholder dispute without litigation. Cost, uncertainty and business distraction are factors which often weigh in favor of settlement even at a price which seems unfair. But making a deal necessitates a desire to do so from both sides. As they say, it takes two to tango. If one party is simply not so inclined or the final best offer is simply unacceptable, litigation may be inevitable, and the only mechanism available to bring about resolution.
In a corporate setting, that litigation may take several forms. Choosing the right path is fact intensive and dependent on the relative positions of the parties. Of course, the terms of agreement between business owners may either provide mechanisms for resolution or limit potential alternatives. Regardless, every course of action comes with significant consequences which must be carefully considered prior to embarking on what can be both emotionally taxing and expensive.
Minority Shareholder Strategies
A minority shareholder who is not actively involved in the business has limited options. Unless a shareholders’ agreement provide a mechanism for redemption or transfer, it may be difficult for a minority shareholder to compel a purchase. That minority shareholder would be left to argue that he or she has been “frozen out” from the business, i.e. excluded from information relating to management, oppressed or treated inequitably in terms of distributions of profits so as to trigger an obligation that the company redeem their shares at “fair value”. An action for the appointment of a custodian or receiver is the minority shareholders weapon of choice in that instance. Majority and controlling shareholders are loathe to lose control of what is often their economic life blood.
Majority Shareholder Strategies
A majority shareholder desirous of consolidation of ownership faced with a minority owner not interested in selling also has limited options to compel a sale. In the absence of an agreement which provides for same, there is no provision at law relating to corporations to simply expel a shareholder. With regard to llc’s, the Pennsylvania Limited Liability Company Act provides a limited number of circumstances where the right of expulsion may apply. In either case, involuntary expulsion of a minority interest is no easy task.
The Nuclear Option
The above being said, the nuclear option available to a controlling interest is dissolution. Blow it up, resign all positions which impose fiduciary obligations at law, liquidate the assets and start something new. While the process may be incredibly disruptive to the continuity of business and the personal finances of all the parties, if the separation of the minority interest holder is imperative dissolution may be the only option. The minority may scream breach of fiduciary duty, but in the absence of an agreement among shareholders that the shareholders would not move to dissolve, the success of such a claim at law is speculative at best.
In the end, the decision of whether to engage in such explosive tactics involves a financial analysis but also other factors such as whether the long term interests of the parties require same. In some cases, such as in professional settings, potential irreparable damage to reputation may demand action regardless of the short term pain such action may cause.
Regardless of whether you are a liability insurance provider or the person being covered by a liability policy, a threshold issue to nearly every coverage dispute is whether or not the insurance provider is obligated to defend its insured in court. If an insurer is not obligated to defend its insured, the insured party is left to his or her own devices to secure and pay for legal counsel.
If an insurer is obligated to defend, but breaches its duty to do so, then it leaves itself exposed to potential liability since it did not perform its obligations under the insurance policy. Both sides of the conflict benefit from understanding the circumstances under which an insurer must defend its insured at the onset of a lawsuit.
Pennsylvania, like many states, has adopted the general rule that a liability insurer’s duty to defend is determined by comparing the allegations of the complaint to the terms and exclusions of the policy. This approach is informally known as the “Eight Corners Rule” due to the law’s emphasis on limiting the analysis to those two documents (each document has four corners – get it?).
The Eight Corners Rule requires that an insurer treat all allegations of a complaint as true, even if there is reason to believe the allegations could be groundless or false. If the allegations set forth at least one injury that is or could potentially be covered by the policy, then the insurer has an obligation to defend its insured against the lawsuit.
There are circumstances where an insurance provider can be relieved of its duty to defend. Usually, this occurs where the insurance provider reserves its rights to disclaim coverage and later discovers facts that would operate to exclude coverage. For example, an insurer may accept defense of a waste management company when it is sued and the plaintiff’s complaint alleges that he or she was injured when she tripped on a dumpster that was negligently placed in a dangerous location by the company. But what if, during litigation, it is revealed that the plaintiff actually tripped while avoiding a dumpster as it was being unloaded by the company’s trash truck? Most commercial liability policies exclude coverage from any damages arising from the use of the insured’s vehicle, including any loading or unloading of that vehicle. In that scenario, the insurance company may be legally entitled to withdraw its defense, leaving the insured party to hire, and pay for, its own defense and ultimate liability.
While an insurer’s obligations to its insureds can evolve throughout a lawsuit, understanding the Eight Corners Rule can be used by insurance companies and policyholders at the start of litigation to determine whether any genuine dispute relating to the insurer’s duty to defend exists, allowing the parties to more efficiently navigate the initial stages of a lawsuit