Comerford & Dougherty, LLP Blog

You may have signed several affidavits over the years, without fully knowing what they are.  You might have signed one to register to vote or obtain some government benefit.  An affidavit can also be used as evidence in a lawsuit.

An affidavit is a written document.  The person signing it (the “affiant”) declares under oath that he or she is making voluntary and truthful statements.  Requirements for an affidavit vary based on the circumstances and jurisdiction.  In most jurisdictions, an affidavit must contain the affiant’s name, physical address and the affiant’s signature.  

The contents need to be voluntary and limited to what the affiant knows to be true because of direct observation or experience.  Before signing an affidavit, be certain of the basis of your knowledge.  Do you know these statements to be true or just think that they’re true?

Most jurisdictions require the affiant swear under oath that the statements are true before signing the document.  That signature needs to be witnessed and certified by a notary public, attorney or other public official authorized to take oaths.  The affiant must understand the content of the affidavit, the importance of an oath and the consequences for violating an oath.  A person who lies on an affidavit may be deemed to have committed perjury and face considerable penalties. Given the significant consequences, anyone who is not mentally competent shouldn’t sign an affidavit or be asked to sign an affidavit.

You may be asked to sign an affidavit if you witnessed an incident that may lead to, or has already resulted in, legal action.  Parties, or their attorneys, may want a formalized, written statement of what you saw.  If you’re in this position, make sure the affidavit is complete and accurate.  Consult your own legal counsel before signing.  The party contacting you may want an affidavit that puts them in the best light, not one that tells the whole story.

Be very careful about what’s stated in the affidavit, as opposing counsel may focus in on the document and investigate every aspect of it during litigation.  In a deposition or during a trial, opposing counsel may press you on the contents of affidavits to impeach your credibility.  

Many of us have been lucky enough to acquire timeshares for the purposes of vacationing on our time off.  Some of us would like to leave these assets to our loved ones.  If you have a time share, you might be able to leave it to your heirs in a number of different ways. 

One way of leaving your timeshare to a beneficiary after your death is to modify your will or revocable trust.  The modification should include a specific section in the document that describes the time share and makes a specific bequest to the designated heir or heirs. After your death, the executor or trustee will be the one that handles the documents needed to transfer title to your heir. If the time share is outside your state of residence and is an actual real estate interest, meaning that you have a deed giving you title to a certain number of weeks, a probate in the state where the time share is located, called ancillary probate, may be necessary. Whether ancillary probate is needed will depend upon the value of the time share and the state law.

Another way you could accomplish this goal is to execute what is called a "transfer on death" deed. However, not all states have legislation that permits this so it is imperative that you check state law or consult with an attorney in the state where the time share is located. A transfer on death deed is basically like a beneficiary designation for a piece of real estate. Your beneficiary would submit a survivorship affidavit after your death to prove that you have died. Once this document is recorded the beneficiary would become the title owner.

It is also important to investigate what documents the time share company requires in order to leave your interest to a third party. They may require that additional forms be completed so that they can bill the beneficiary for the annual maintenance fees or other charges once you have died.

If you want to do your best to ensure that your loved ones inherit your time share, you should consult with an experienced estate planning attorney today. 

Healthcare directives can be vitally important, as recent cases, like that of Terry Schiavo, clearly brought to light. These important documents can mean the difference between your health care wishes being carried out or family members fighting over whether a loved one should be placed in a nursing home or removed from life support. Healthcare directives usually include both a healthcare power of attorney and a living will, or a form which is a combination of the two. In a healthcare power of attorney, an individual authorizes another individual to make healthcare decisions for him or her if the individual becomes unable to do so. A living will expresses an individual’s preferences about life support.

Once you have executed your healthcare directives, you may be uncertain as to what to do with them. First, you should make copies of the documents and inform others of their existence. In addition to your health care agent, persons you should consider notifying of the directives include family members and your health care providers.  Ideally, the originals should be kept in a place that is both safe and easily accessible.

You may wish to consider using a secure registry service to store your healthcare directives. Such services allow you to access healthcare directives any time and in any location with access to the Internet.  Some also allow the documents to be accessed via an automated fax-back service. In addition to providing the healthcare directives, many registries also allow caregivers to access information like emergency contacts, allergies, and other pertinent medical information.

You should review your healthcare directives regularly.  As individuals get older, their preferences about health care and life support change, and it’s important that your directives reflect your current health care wishes.   Of course, life changing events such as marriage, divorce, or the death of a loved one typically require changes in those documents to ensure that the people named in them are still those you wish to make decisions on your behalf.  

Moving to another state? Many states provide that healthcare directives prepared in another state are valid, but you should consult an attorney to make sure your wishes will be carried out in the manner you desire.

Establishing your healthcare directives can spare your family a great deal of anguish if they need to make decisions at a time that is already very emotionally-charged. By keeping the documents in a secure place, providing copies to loved ones, and reviewing them regularly, you can be more certain that your healthcare wishes will be carried out.
 

The recent proliferation of online estate planning document services has attracted many do-it-yourselfers who are lured in by what appears to be a low-cost solution. However, this focus on price over value could mean your wishes will not be carried out and, unfortunately, nobody will know there is a problem until it is too late and you are no longer around to clean up the mess.

Probate, trusts and intestate succession (when someone dies without leaving a will) are governed by a network of laws which vary from state to state, as well as federal laws pertaining to inheritance and tax issues. Each jurisdiction has its own requirements, and failure to adhere to all of them could invalidate your estate planning documents. Many online document services offer standardized legal forms for common estate planning tools including wills, trusts or powers of attorney. However, it is impossible to draft a legal document that covers all variations from one state to another, and using a form or procedure not specifically designed to comply with the laws in your jurisdiction could invalidate the entire process.

Another risk involves the process by which the documents you purchased online are executed and witnessed or notarized. These requirements vary, and if your state’s signature and witness requirements are not followed exactly at the time the will or other documents are executed, they could be found to be invalid. Of course, this finding would only be made long after you have passed, so you cannot express your wishes or revise the documents to be in compliance.

Additionally, the online document preparation process affords you absolutely no specific advice about what is best for you and your family. An estate planning attorney can help your heirs avoid probate altogether, maximize tax savings, and arrange for seamless transfer of assets through other means, including titling property in joint tenancy or establishing “pay on death” or “transfer on death” beneficiaries for certain assets, such as bank accounts, retirement accounts or vehicles. In many states, living trusts are the recommended vehicle for transferring assets, allowing the estate to avoid probate. Trusts are also advantageous in that they protect the privacy of you and your family; they are not public records, whereas documents filed with the court in a probate proceeding are publicly viewable. There are other factors to consider, as well, which can only be identified and addressed by an attorney; no online resource can flag all potential concerns and provide you with appropriate recommendations.

By implementing the correct plan now, you will save your loved ones time, frustration and potentially a great deal of money. In most cases, proper estate planning that is tailored to your specific situation can avoid probate altogether, and ensure the transfer of your property happens quickly and with a minimum amount of paperwork. If your estate is large, it may be subject to inheritance tax unless the proper estate planning measures are put in place. A qualified estate planning attorney can provide you with recommendations that will preserve as much of your estate as possible, so it can be distributed to your beneficiaries. And that’s something no website can deliver.

Child support disputes can bring out the worst in many parents, conjuring images of greedy ex-spouses and children who are used as pawns in games of parental posturing and revenge. While there may be a certain degree of truth to some of the stereotypes, there are many myths that are prevalent in the context of children and divorce.

Myth: Child support payments are based on the needs of the children.
Fact: Support payments are based on the parents’ ability to earn income and have no basis in the actual costs to raise a child.

Myth: Child support payments must be spent on the child.
Fact: No state requires child support recipients to account for expenditures or prove they were necessary to meet the child’s needs, or even whether they were spent on the children at all. In fact, many states view the purpose of child support as protecting the standard of living of the custodial parent.

Myth: I can move out of state to dodge my child support obligations.
Fact: Each state has its own child support enforcement agency and these agencies all work together. You cannot escape this obligation.

Myth: I can quit my job in order to avoid making child support payments.
Fact: The courts are permitted to “impute” income to a parent who intentionally quits a job, whether or not that parent is currently earning a paycheck. Obligations will continue to accrue and payments must be made.

Myth: I have lost my job and can’t make my child support payments, so I will be sent to jail.
Fact: You can only be incarcerated if you have the ability to pay but refuse to do so. If you have lost your income and do not have the ability to pay, you will not be criminally liable for non-payment.

Myth: My ex-spouse uses child support payments for shopping, dining and to support a lavish lifestyle; therefore, my support payment should be reduced.
Fact: So long as the custodial parent pays expenses to feed, clothe and house the minor children, which is the ultimate purpose of child support payments, whatever else she spends money on is generally not scrutinized.

Myth: My living expenses are high and I cannot afford the child support payments; therefore, my support payment should be reduced.
Fact: Generally, expenses must be necessary and extreme in order to be considered as a basis for child support calculations.

Myth: Child support payments are deductible on my income taxes.
Fact: Child support payments are not deductible to the paying parent; nor are they considered “income” to the receiving parent.

Myth: If I have children with a new partner, my child support payments will decrease.
Fact: The birth of a new child will not reduce your obligations to make child support payments to a prior spouse. New children may affect the existing child support order if you get another divorce and must pay child support for the second set of children.

Myth: My ex-spouse claims she can modify the child support order and take my house, bank account or other assets.
Fact: A future child support modification can only address the amount of child support payments going forward. Assets cannot be seized and typically are not considered in modifications.
 

Many grandparents who are financially stable love the idea of making gifts to their grandchildren. However, they are usually not aware of the myriad of issues that surround what they may consider to be a simple gift. If you are considering making a significant gift to a grandchild, you should consult with a qualified attorney to guide you through the myriad of legal and tax issues that are involved in making such gifts.

Making a Lifetime Gift or a Bequest:  Before making a gift, you should consider whether you want to make the gift during your lifetime or leave the gift in your will. If you make the gift as a bequest in your will, you will not experience the joy of seeing your grandchild’s appreciation and use of the gift. However, there’s always the possibility that you will need the money to live on during your lifetime, and in reality, once a gift is made it cannot be taken back. Also, if you anticipate needing Medicaid or other government programs to pay for a nursing home or other benefits at some point in your life, any gifts you make in the prior five years can be considered as part of your assets when determining your eligibility.

What Form Gift Should Take:  You may consider making a gift outright to a grandchild. However, once such a gift is made, you give up control over how the funds can be used. If your grandchild decides to purchase a brand-new sports car or take an extravagant vacation, you will have no legal right to stop the grandchild. The grandchild’s parents could also in some cases access the money without your approval.

You could consider making a gift under the Uniform Gift to Minors Act (UGMA) or the Uniform Transfer to Minors Act (UTMA), depending on which state you live in. The accounts are easy to open, but once the grandchild reaches the age of majority, he or she will have unfettered access to the funds. You could also consider depositing money into a 529 plan, which is specifically designed for education purposes. Finally, you could consider establishing a trust with an estate planning attorney, which can be more expensive to set up, but can be customized to fit your needs. Such a trust can provide for spendthrift, divorce and creditor protection while allowing for more flexibility for expenditures such as education or purchase of a first home.

Tax Consequences: If you have a large estate, giving gifts to grandchildren may be a great way to get money out of your estate in order to reduce your future estate tax liability. In 2011 and 2012, a single person can pass $5 million at death free of estate tax, and a couple can pass a combined $10 million without paying estate taxes. In addition, a person can give $13,000 in 2011 to any number of individuals without incurring any gift taxes. A grandparent with 10 grandchildren could give $130,000 per year to all grandchildren (and a married couple could give $260,000), thereby removing that property from his or her estate.

Creating a Will is not a one-time event. You should review your will periodically, to ensure it is up to date, and make necessary changes if your personal situation, or that of your executor or beneficiaries, has changed. There are a number of life-changing events that require your Will to be revised, including:

Change in Marital Status: If you have gotten married or divorced, it is imperative that you review and modify your Will. With a new marriage, you must determine which assets you want to pass to your new spouse or step-children, and how that may relate to the beneficiary interest of your own children. Following a divorce it is a good practice to revise your Will, to formally remove the ex-spouse as a beneficiary. While you’re at it, you should also change your beneficiary on any life insurance policies, pensions, or retirement accounts. Estate planning is complicated when there are children from multiple marriages, and an attorney can help you ensure everyone is protected, which may include establishing a trust in addition to the revised Will.

Depending on jurisdiction, this may also apply to couples who have established or revoked a registered domestic partnership.

If one of your Will’s beneficiaries experiences a change in marital status, that may also trigger a need to revise your Will.

Births: Upon the birth of a new child, the parents should amend their Wills immediately, to include the names of the guardians who will care for the child if both parents die. Also, parents or grandparents may wish to modify the distribution of assets provided in their Wills, to include the new addition to the family.

Deaths or Incapacitation: If any of the named executors or beneficiaries of a Will, or the named guardians for your children, pass away or become incapacitated, your Will should be revised accordingly.

Change in Assets: Your Will may need to be changed if the value of your assets has significantly increased or decreased, or if you dispose of an asset. You may want to modify the distribution of other assets in your estate, to account for the changed value or disposition of the asset.

Change in Employment: A change in the amount and/or source of income means your Will should be examined to see if any changes must be made to that document. Retirement or changing jobs could entail moving to another state, thus subjecting your estate to the laws of that state when you die. If the change in income modifies your investing, saving or spending habits, it may be time to review your Will and make sure the distribution to your beneficiaries will be as you intended.

Changes in Probate or Tax Laws: Wills should be drafted to maximize tax benefits, and to ensure the decedent’s wishes are carried out. If the laws regarding taxation of the estate, distribution of assets, or provisions for minor children have changed, you should have your Will reviewed by an estate planning attorney to ensure your family is fully protected and your wishes will be fully carried out.

For some couples, the end of the marriage parallels the end of their working relationship—and possibly the end of the business itself. There are a number of options in such cases. The couple can sell the business and split the proceeds as part of the divorce settlement, or one partner can buy out the interest of the ex-spouse.  Or they can try to split the business, with each taking half. Speak with an experienced business lawyer about the pros and cons of these options for your situation.

However, some former spouses do figure out a way to maintain their business partnership after the divorce. The personal relationship may have hit a dead-end, but the investment involved in building and growing a successful company can make it hard to walk away—and unless the business is wildly successful, with plenty of prospective buyers waiting in the wings, it is feasible that neither party can afford to walk away.

Overcoming the Challenges

There are challenges in every business partnership, and ex-spouses can adopt some basic business strategies to cultivate and maintain a healthy working relationship:

• Sign a partners agreement. Be clear about your separate and joint responsibilities, and matters of liability. Make a contingency plan outlining how assets will be divided in case either partner decides to leave.
• If necessary, divide up responsibilities or tasks you once did together so you each have more autonomy.
• Establish a board of directors. Trustworthy business people may have valuable perspectives about the direction and goals of your company.
• Keep the company finances transparent. Money is often one of the most difficult issues in a divorce. Get help if necessary to streamline your accounting processes.
• Be professional around other staff members and employees. It is not fair to put employees in a position where they feel pressured to take sides or respond to inappropriate complaints about their other boss. A toxic work environment is never good for business.

Thinking Outside the Box

Even with the best intentions, a divorced couple may keep falling back into their old patterns at the workplace. If you still think that the business is viable and worth the effort to make a go of it, get professional help. A good marriage therapist is trained to help couples understand the point of view of the other person and gain insight into their dynamics, and this can be valuable information post-divorce, as well. 

Most entrepreneurs have a knack for thinking outside the box. Maybe you and your ex- can alternate day and night shifts for a few months.  Build a partition between your desks. It might take a while before you move from being unhappy exes to friendly partners - but it just might be worth it.
 

Marrying someone with substantial debts can impact major life decisions like buying a house, raising a family and even the type of wedding you can afford. It’s therefore essential that you sit down with your future spouse and get an idea of the condition of their credit and any hidden monstrous debts that may be lurking in the background, prepared to spoil your honeymoon.

Types of Debt
Debt can generally be divided into two categories?good debt and bad debt. Good debt is usually long-term low interest debt and is often backed by a government guarantee?think student loans, mortgage loans and even some small business loans. If your future husband or wife just finished their residency in endocrinology, they probably have some intimidating student loan debt from med-school. You should be aware of that debt, but it’s not the kind of thing that should scare you away from saying, “I do.”

Bad debt, on the other hand, is the type of short-term, high-interest debt that has the potential to cause serious problems?think credit cards, personal loans and some car loans. If your beloved has been earning a middle-class income but dresses in enough designer apparel to impress even the red carpet crowd, there might be some nasty high-interest credit card debt just waiting to cause some added wedding day stress. Some credit card companies can charge interest rates up to 34% in addition to high fees and enormous penalties. This type of debt can really put a dent in your monthly income and lead to the kind of lover’s quarrels you want to avoid.

To Delay or Not to Delay
Once you know where your future partner’s finances lie, you can make an informed decision about whether it makes sense to get married now or delay for a while. For the most part, you won’t be personally responsible for the debts your partner incurred before the marriage. There are some exceptions to this rule (the comingling of funds or assumption of debts) but they can be avoided with careful planning.

However, just because you’re not personally responsible for the debt doesn’t mean it won’t present problems. Most married couples operate their household as a single unit. That is, they contribute their earnings and assets to make ends meet. If a substantial portion of your partner’s income is diverted to old debts, there will be less money in the “pot” for things like rent, fuel, entertainment and food. Also, it will be difficult, if not impossible, to apply for a mortgage together if your partner’s credit is in the gutter. If you’re fine with these prospects, and head over heels in love, then by all means go forward with the wedding?at least you, unlike thousands of other couples, will have an understanding of the challenges you are facing.

If, however, you’re not comfortable with your partner’s finances, there are a few things you can do. First, you can delay the marriage and work together with your partner at restoring their credit and paying down their debts. You can still set a wedding date. In fact, the certainty of the wedding date is often an impetus to get down to the brass tacks type of financial sacrifice it takes to properly repair a credit rating and pay off those bad debts. In some cases, it takes only a year or less to get things in good shape.

Every year, each individual who dies in the U.S. can leave a certain amount of money to his or her heirs before facing any federal estate taxes. For example, in 2013, a person who died could leave $5.25 million to his or her heirs (or a charity) estate tax free, and everything over that amount would be taxable by the federal government. Transfers at death to a spouse are not taxable.

Therefore, if a husband died owning $8 million in assets in 2013 and passed everything to his wife, that transfer was not taxable because transfers to spouses at death are not taxable. However, if the wife died later that year owning that $8 million in assets, everything over $5.25 million (her exemption amount) would be taxable by the federal government. Couples would effectively have the use of only one exemption amount unless they did some special planning, or left a chunk of their property to someone other than their spouse.

Estate tax law provided a tool called “bypass trusts” that would allow a spouse to leave an inheritance to the surviving spouse in a special trust. That trust would be taxable and would use up the exemption amount of the first spouse to die. However, the remaining spouse would be able to use the property in that bypass trust to live on, and would also have the use of his or her exemption amount when he or she passed. This planning technique effectively allowed couples to combine their exemption amounts.

For the year 2013, each person who dies can pass $5.25 million free from federal estate taxes.  This exemption amount is adjusted for inflation every year.  In addition, spouses can combine their exemption amounts without requiring a bypass trust (making the exemptions “portable” between spouses). This change in the law appears to make bypass trusts useless, at least until Congress decides to remove the portability provision from the estate tax law.

However, bypass trusts can still be valuable in many situations, such as:

(1)  Remarriage or blended families. You may be concerned that your spouse will remarry and cut the children out of the will after you are gone. Or, you may have a blended family and you may fear that your spouse will disinherit your children in favor of his or her children after you pass. A bypass trust would allow the surviving spouse to have access to the money to live on during life, while providing that everything goes to the children at the surviving spouse’s death.

(2)  State estate taxes. Currently, 13 states and the District of Columbia have state estate taxes. If you live in one of those states, a bypass trust may be necessary to combine a couple’s exemptions from state estate tax.

(3)  Changes in the estate tax law. Estate tax laws have been in flux over the past several years. What if you did an estate plan assuming that bypass trusts were unnecessary, Congress removed the portability provision, and you neglected to update your estate plan? You could be paying thousands or even millions of dollars in taxes that you could have saved by using a bypass trust.

(4)  Protecting assets from creditors. If you leave a large inheritance outright to your spouse and children, and a creditor appears on the scene, the creditor may be able to seize all the money. Although many people think that will not happen to their family, divorces, bankruptcies, personal injury lawsuits, and hard economic times can unexpectedly result in a large monetary judgment against a family member.

Although it may appear that bypass trusts have lost their usefulness, there are still many situations in which they can be invaluable tools to help families avoid estate taxes.

Should you incorporate your business in your home state? What about Delaware or Nevada, long known as havens for corporate entities? This decision should not be taken lightly because incorporating your business in a particular state will determine, to a significant extent, the laws that will apply to your business.

Often times, the best choice for corporate jurisdiction is the home state where your business is located.  There are several reasons for this. First, filing in a different state will not absolve you of the obligation to pay corporate taxes and comply with filing requirements in the state where your corporation has its operations. For example, if the corporation is located in California it will be subject to California fees and taxes, either as a domestic California Corporationor as a “foreign corporation” doing business in California. Additionally, if you are incorporated in a state other than where you are physically located, you will likely incur another set of filing fees and expenses for a registered agent who is physically located in the state of incorporation.

Many companies opt to incorporate in the State of Delaware, even though very few of them are actually based there. Approximately 60% of Fortune 500 companies are incorporated in Delaware. These major companies do so because Delaware’s corporate laws are generally favorable to business and management.  Delaware also has a special Court of Chancery that hears only business law cases. These courts afford companies a degree of consistency and predictability in rulings, which may or may not be found in other states.

Many entrepreneurs also consider the State of Nevada. Many companies are attracted to Nevada’s pro-business laws and favorable tax policy. Nevada also has a special business court, similar to Delaware’s Court of Chancery, although it is not as well established and lacks the breadth of case law that Delaware has.

If your company is engaged in risky or litigious business, then Delaware,Nevada or Wyoming may provide some additional liability protection.  For businesses that are essentially holding companies or otherwise lack operations as a traditional business would, forming a company in these states can also make a lot of sense since the business would not be subject to the laws of multiple states.