Law FAQ: What is an estimated tax payment, and who is required to make them?

Law FAQ: What is an estimated tax payment, and who is required to make them?

What is an estimated tax payment?

Estimated tax payment is the method used to pay tax on income that is not subject to withholding.  Functionally-speaking, you can view estimated tax payments as a substitute for employer withholding for any income you might receive for which there is no “employer” who is withholding taxes out of your paycheck.  For example, if you are self-employed, or if you earn meaningful income from side jobs for which there is no employer who is withholding taxes, then you would generally be required to make quarterly estimated tax payments as to that income.

Who is required to make an estimated tax payment?

From the IRS website: “If you [file your tax return] as a sole proprietor, partner, S corporation shareholder, and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return.”

If you are a salaried employee who has filled out your W-4 form correctly, and you are having the appropriate amount withheld from your check each pay period, then you are generally not required to make estimated tax payments.  However, if you have a side job where you are essentially self-employed (for example: doing odd jobs, cutting grass on weekends, etc.) and you receive a meaningful amount of income for which there is no employer withholding, then you may be required to make quarterly estimated payments, or to adjust your employer withholding to make up the extra difference.  You can use the worksheet on IRS Form 1040ES to determine whether you might owe estimated tax payments.

When are estimated tax payments due?

There are four payment periods, and each period has a different due date depending on the year.  The remaining due dates for 2011 taxes are Thursday, September 15, 2011, and Tuesday, January 17, 2012.  If you do not pay enough tax by the due date of each of the payment periods, you may be charged a penalty even if you are due a refund when you file your income tax return.  In other words, you can’t skip or underpay on one of the payment dates.

What happens if you are required to pay estimated taxes but fail to do so?

From the IRS website: “If you did not pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.”

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Law FAQ: Questions About Revocable Living Trusts

Law FAQ: Questions About Revocable Living Trusts

What is a revocable living trust?  A revocable living trust is a legal document that, just like a will, contains your instructions for what you want to happen to your assets when you die.  But, unlike a will, a living trust can avoid probate at death, control all of your assets and prevent the court from controlling your assets if you become incapacitated.

How does a revocable living trust avoid probate and prevent court control of assets at incapacity?  When you create a revocable living trust, you transfer assets from your name to the name of your trust, which you control.  Legally, you no longer own anything; everything now belongs to your trust.  So there is nothing for the courts to control when you die or become incapacitated.  The concept is simple, but this is what keeps you and your family out of the courts.

Do I lose control of the assets in my revocable living trust?  Absolutely not.  You keep full control.  As trustee of your trust, you can do anything you could do before – buy and sell assets, change or even cancel (or revoke) your trust.  That’s why it’s called a revocable living trust.  You even file the same tax returns.  Nothing changes but the names on the titles.

Is it hard to transfer assets into my trust?  No.  Your attorney, financial advisor, insurance agent and other professionals can help.  Typically, you will change titles on real estate, stocks, bonds, CDs, bank accounts, investments, insurance and other assets with titles.  Revocable living trusts also own tangible personal property and other assets that do not have titles.  Some beneficiary designations should also be changed to your trust so the court can’t control them if a beneficiary is incapacitated or no longer living when you die.

Doesn’t this take a lot of time?  It will take some time – but you can do it now, or you can pay the courts and attorneys to do it for you later.  One of the benefits of a revocable living trust is that all of your assets are brought together under one plan.  Don’t delay “funding” your trust; it can only protect assets that have been transferred into it.

Feel free to contact us for more information about how a revcoable living trust would work in your estate plan.

Smoke Detectors in Apartments

Smoke Detectors in Apartments


smoke detectors victim injury attorneyLet’s talk about the law on smoke detectors in apartments and rental homes in Tennessee. What should a landlord do? What about a tenant? Do you have a case? Below are questions some of you might have:

Q:  I own and lease a rental house in in Memphis, Tennessee.  Am I required to provide smoke detectors for the tenants who live in the house?

Q:  I rent a house in Germantown, Tennessee, and there was a fire at night.  There were no smoke detectors in the house, and by the time I woke up and called 911 the fire had spread so far that the firemen weren’t able to save anything.  What are my legal rights?

Law on Smoke Detectors in Tennessee

Under Tennessee law, a landlord must install and maintain smoke detectors in any residential unit offered for lease or rent.  Specifically, Tennessee Code Annotated 68-102-151 provides that it is:

unlawful to…[o]wn or operate a one-family or two-family rental unit without installing an approved smoke detector in each living unit; when activated, the detector shall initiate an alarm that is audible in the sleeping rooms of the living unit….

Law on Smoke Detectors in Memphis

The Memphis City Code of Ordinances  Sec. 14-4-88 further provides that

A. No person shall occupy as owner-occupant, or shall let another for occupancy, any dwelling, multifamily dwelling, dwelling unit, rooming house unit, lodging house or lodging unit which does not comply with the applicable provisions of the fire prevention code or the building code and other ordinances of the city and the additional requirements set out in this article for safety from fire.

B. Smoke detectors shall be installed in all residential properties in accordance with National Fire Protection Association Standard No. 74, 1989 Edition, and shall be maintained in an operable condition.

Memphis City Code of Ordinances  Sec. 9-44-6 also states that:

. . .  Smoke detectors are required…[i]n every existing dwelling unit within an apartment house, condominium complex, dormitory, townhouse or duplex….; and [e]very existing guest room in a motel and hotel. . .

*Other municipalities may have similar local ordinances.  The Memphis ordinances referenced here are merely offered as an example of additional law that may or may not apply to a particular situation.

smoke detectors memphis injury lawyer

What happens if a landlord does NOT provide smoke detectors?

First — a quick distinction.  There may be legal claims arising out of  how the fire originated.  For example,  there may be an underlying claim against a manufacturer for a defective product (i.e. appliance) that caught fire, or against a contractor for improper construction or wiring, or against the landlord or management company for negligent maintenance of the house itself.

By comparison, a claim for lack of a working smoke detector would be a claim independent of other claims.  It could potentially constitute an additional claim on top of a fire-origination claim, or it could constitute a stand-alone claim — for example, where the underlying fire was not necessarily due to the fault of any third-party, but where the lack of a smoke detector led to enhanced damages or injuries.

Do I have a case against my landlord?

Under the law, a failure to follow a statutory requirement would likely constitute negligence per se.  Of course, a finding of negligence would not in and of itself result in liability for damages.  There would also need to be proof that the lack of a smoke detector actually resulted in a delay in the detection of the fire, and which caused damages attributable to that delay, and not just due to the underlying fire itself.

Example Our firm filed a $10 million lawsuit arising out of the wrongful death of a 2 year old little girl in a house fire.  The fire allegedly occurred because a child innocently knocked over a space heater.  The lack of a smoke detector, however, allowed the fire to spread for several minutes and ultimately rage out of control before an adult in the back of the house discovered the blaze.  Unfortunately, it was too late for the little girl.  Had there been a smoke detector, that little girl would be alive today.  So, the lawsuit claim in that instance is not about the origination of the fire, or for recovering damage that would have occurred from a “regular” fire.   The lawsuit claim is only about the enhanced damage and loss of life that occurred only as a result of the lack of a smoke detector.

Tips for Landlords

INSTALL. Make sure that smoke detectors are installed in EVERY single rental unit you lease out.  Ideally, you should have smoke detectors that are hard-wired into the electrical system of the rental unit, and that use batteries simply for backup.  Landlords arguably also have the duty to maintain smoke detectors, so hard-wired detectors reduce the need for constant landlord inspection and replacement of batteries.

TEST. If you do not have hard-wired smoke detectors, periodically inspect and push the “test button” on the detectors, and also replace batteries as needed.

LEASE PROVISION. Include a provision in your Lease (and require your tenant to specifically initial it) stating and acknowledging that there are working smoke detectors in the rental unit at the time of move-in,  that the tenant has personally had the opportunity to inspect and test the smoke detectors, and that the tenant acknowledges and agrees that her or she is responsible for replacing the batteries and periodically testing the smoke detectors.

Tips for Tenants 

Never, ever live in a dwelling unit that does not have working smoke detectors, even if you have a difficult landlord and unfairly end up having to purchase and maintain the smoke detectors yourself.  The danger to life and property is simply too great.  Indeed, I can tell you from experience in dealing with clients — a great lawsuit is little comfort for the loss occasioned by a devastating fire.  No amount of money can replace the irreplaceable.

Need a lawyer in Memphis on a Smoke Detector Case?

We’d be honored to help you. Call us at 901-372-5003 or email us here.  We represent clients in Bartlett, Cordova, Germantown, Lakeland, Millington, Atoka, Memphis, Nashville, and the surrounding areas.

Patterson Bray. Small Firm. Better Focus. Big Results.  To meet our team, click here.  To learn what we do, click here.

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Probate Process: How long does it take?

Probate Process: How long does it take?

probate process, how long does it takeHow long does the probate process take? I often pose this question at seminars and get a variety of answers. Two of my favorite answers are “years” and “forever.” While neither answer is correct, it typically indicates that someone in the room (or perhaps a friend or neighbor) has had a bad experience with Probate Court at some point. In Tennessee, a Probate Estate must remain open for a minimum of four (4) months from the time of first publication. This period is designed to give creditors time to come forward and assert a claim against the Estate.  An Estate must remain open the full four (4) months regardless of whether the deceased person had any debts.

Time Starts to Run on the Date of “First Publication”

When an estate is opened in Shelby County Probate Court, the clerk’s office notifies The Daily News, and they publish a public notice regarding the opening of the Estate, typically within a week of the opening of the Estate. This first publication marks the start of the four (4) months, and the Estate cannot be closed until 4 months after the date of first publication.

However, bear in mind that this is a minimum amount of time, and there is no guarantee that the Estate can be closed at the end of the 4 months. I frequently tell clients that 6-9 months is a more realistic average for a straightforward Probate Process. The “first accounting” is not due until 15 months from the opening of the Estate, so if the Estate is closed out within that 15 month period, you are still doing pretty well.

Why does the Probate Process take so long?

So what makes the probate process last beyond the 4 months? A number of factors often contribute to how long a Probate Estate is open. Preliminarily, there are 8-10 steps that must be completed for every Probate Estate regardless of the size of the Estate, the cooperation of the Beneficiaries, or the debts of the deceased person. If these steps have not been completed or if the proper letter has not been received from Tenncare of the Tennessee Department of Revenue, the Estate cannot be closed. If there are minor Beneficiaries involved and the Will does not contain instructions on holding those funds in trust, we often have to seek court guidance and have additional hearings regarding handling these funds. Likewise, if Beneficiaries are fighting, the Probate Process will often take significantly longer than the 4 month minimum. If the decedent left a number of debts, and creditors have filed claims against the Estate, each valid claim must be paid in full or settled before the Estate can be closed. If the decedent had property in more than one state, the process can take much longer. These are just a few of the factors that can contribute to a lengthier Probate Process.

Every Probate Case is Different

Although the correct answer is rarely, if ever, “years” and definitely not “forever,” the Probate Process can last much longer than Beneficiaries are expecting. The Probate Estate that is open for years is not the norm, but most attorneys who do a lot of Probate work will typically have at least a couple of cases that drag on for one reason or another. In many cases, where everything is straightforward, 6 months should be a reasonable estimation of how long it takes. Unfortunately, we often can’t predict when we open an Estate the circumstances that may arise, so while it may seem simple on the front end, it could also turn out to be more complex. If we know some of the complicating circumstances in the planning stages, we can often  incorporate strategies to avoid some of the Probate pitfalls.

Need help with Probate Court?

Please call us at 901-372-5003. We know you have a lot on your mind and the thought of going to court can be overwhelming. We are experienced probate lawyers and we can guide you through the Probate Process.

How to Avoid Probate

Did you know that you can eliminate the Probate Process altogether through revocable living trust planning? If you would like to learn more about Probate or about planning to avoid probate, please call us. We can guide you through an Estate Plan designed specifically for you and your family.

Law FAQ: Doesn’t joint ownership avoid probate?

Law FAQ: Doesn’t joint ownership avoid probate?

Not really. Using joint ownership usually just postpones probate.  With most jointly owned assets, when one owner dies, full ownership does transfer to the surviving owner without probate.  But if that owner dies without adding a new joint owner, or if both owners die at the same time, the asset must be probated before it can go to the beneficiaries.  Click here  to read my post from last week about the problems with a probate court administration.

Watch out for other problems associated with jointly-owned assets.  When you add a joint owner, you lose control.  Your chances of being named in a lawsuit and of losing the asset to a creditor of the new joint owner are increased.  There could also be gift and/or income tax problems.  And since a will does not control jointly-owned assets, you could disinherit your family (click here to read a post by Lindsay Jones about unintended heirs).

With some assets, especially real estate, all owners must sign to sell or refinance.  So if a joint owner becomes incapacitated, you could find yourself with a new joint owner – the court – even if the incapacitated owner is your spouse.

Our firm recommends estate planning strategies that can reduce the problems associated with jointly-owned assets, or even eliminate them altogether.  For example, click here to read my prior post about using revocable living trusts.

Feel free to contact us for more information.

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Law FAQ: NFL & NBA Labor Issues – what is a “CBA” and a lockout? And why would players want to decertify their own union?

Law FAQ: NFL & NBA Labor Issues – what is a “CBA” and a lockout? And why would players want to decertify their own union?

What is a Collective Bargaining Agreement?

The NFL and the NBA players belong to unions which negotiate with owners to establish, among other things, player wages and working conditions.  The contract between the owners and the union is called a Collective Bargaining Agreement, or “CBA” for short.

What are the owners & players fighting about?

There are various issues at the margins – e.g. free agency rules, trade rules, maximum player contract amounts, etc.  However, the big dispute is over money – i.e. the amount of the salary cap that has historically been in included as part of the CBAs for the NFL and the NBA.

What is a salary cap?

A salary cap is the limit on total payroll a team can pay to all players combined.  For example, the salary cap for an NBA team was $58.044 million for the 2010-11 season. There are different types of salary as well, ranging from what is referred to as “hard cap” (an absolute, no-exceptions total dollar limit like in the NFL), to a “soft cap” (a total dollar limit with many, many exceptions like in the NBA).  By comparison, the MLB does not have a salary cap – which is why the Yankees and Red Sox are able year-in and year-out to essentially buy titles by signing multiple players to exorbitant contracts that no other team can possibly pay.

What is the dispute over the salary cap?

The players would prefer not to have a salary cap at all because that would permit wild-west-MLB-style bidding frenzies that would drive up player salaries.  Due to historic momentum, though, it isn’t realistic to expect the cap to be eliminated in the NBA or NFL anytime soon.  Generally speaking, the players are satisfied with the way things are.  The real dispute is over setting the dollar amount of the cap, which is generally negotiated as a percentage of estimated league revenues.  In the NBA, for example, last year’s salary cap of $58.044 million represents 51% of estimated league revenues. The dispute, though, centers not only on the percentage amount – i.e. what constitutes a fair “piece of the pie” for each side – but also on how the underlying estimate of league revenues is calculated.  The owners constantly argue that they are losing money and are thus seeking changes to the CBA, whereas the players believe that the owners purposely under-calculate and/or under-report their revenue figures.

What is a lockout? 

A lockout is where the employer prevents the employees from working – i.e. literally locks out employees who are otherwise willing to come to work.  A lockout is essentially the opposite of a strike, which is where the employees refuse to come to work.

Why would the owners lock out the players?

A lockout is about leverage.  Indeed, since players are locked out and not working, they no longer get a paycheck.  This obviously puts pressure on the players to agree to changes to the CBA in order to get the money flowing again.

What is decertification?

Decertification is where the players vote to basically disband or dissolve their union and thus, at least as a legal matter, put an end to bargaining with the owners as a collective unit.

Why would players vote to voluntarily decertify or disband their own union?  How could that possibly help them? 

Contrary to how it may appear on the surface, a vote to decertify does not necessarily mean that the players lack confidence in the union’s position, or that they somehow desire to “go their own way individually” or “each do their own thing” so to speak.  Decertification is a legal tactic.  Under labor law, there is an exemption/exception to antitrust rules so long as employees are engaged in collective bargaining.  Once the players decertify they can file a lawsuit charging antitrust violations against the owners, which is exactly what occurred during the NFL labor dispute when top players like Tom Brady and Peyton Manning agreed to be the named plaintiffs in a lawsuit filed against the NFL.  Legal experts disagree on whether the antitrust charges would have ultimately been upheld by the courts; however, the idea is that the charges do at least shift some of leverage back to the players.  There is also an argument to be made that if the players were to decertify before the owners declared a lockout (which didn’t occur in either the NFL or the NBA scenario), then the decertification might legally prevent the owners from being able to enforce a lockout.

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Law FAQ: What is Probate and why is it bad?

Law FAQ: What is Probate and why is it bad?

What is Probate and why is it bad?  (a.k.a. Why simply having a will might not be enough.)

Probate is the legal process through which the court sees that, when you die, your debts are paid and your assets are distributed according to your will.  Indeed, a will is a “ticket” to Probate.  If you don’t have a valid will, your assets are distributed according to state law.  But….

Probate can be expensive.  Legal fees, executor fees and other costs must be paid before your assets can be fully distributed to your beneficiaries.  If you own real estate in other states, your family could face multiple probates, each one according to the laws in the state where real estate is owned.  These costs vary, but a good rule of thumb is the cost of Probate will be 6% of your total estate.

Probate takes time, usually nine months to two years, but often longer.  During part of this time, assets are normally frozen so an accurate inventory can be taken.  Nothing can be distributed or sold without court and/or executor approval.

Your family has no privacy.  Probate is a public process, so anyone can see what you owned, whom you owed, who will receive your assets and when they will receive them.  The process “invites” disgruntled heirs to contest your will and can expose your family to solicitors.

Most importantly, your family has no control.  The Judge and the Probate Court process determines how much it will cost, how long it will take, and what information is made public.

Our firm employs estate planning strategies that can reduce the hassle of the probate process, or even eliminate it altogether.

Feel free to contact us for more information.

Law FAQ: I run a small landscape business. Do I need a contractor’s license?

Law FAQ: I run a small landscape business. Do I need a contractor’s license?

In Tennessee, The Board for Licensing Contractors enacts and enforces administrative rules pertaining to the licensing of various contractors operating within the state.  Typically most of us think of a contractor as being someone who builds or remodels a home, perhaps a roofer or brick mason.  But the Board has recently started enforcing certain provisions against smaller companies that until recently have been overlooked or otherwise ignored by the Board.

The most common type of business to get the attention of the Board is the small to mid-size landscape company.  Now, depending on various factors, even small companies that do nothing but cut grass in the summertime may need to obtain a contractor’s license from the Board.  Specifically, grass cutters need the “BC-29” license.  Failure to obtain the license can be costly.  Indeed, I have represented multiple landscape companies after they have been cited and fined by the Board for operating without the required license.  The fines imposed can be expensive – i.e. several thousand dollars.

If you operate a small business that you think may need to be licensed, contact our office.  We can assist you in determining whether or not you need a license and also help walk you through the process.

Law FAQ: My mom’s will leaves everything equally to me and my sister. Why am I not getting anything?

Law FAQ: My mom’s will leaves everything equally to me and my sister. Why am I not getting anything?

A person’s will only applies to assets or accounts that are in the person’s sole name or are payable to the person’s estate.  Typically, we are dealing with assets in someone’s sole name name if we are looking at someone’s will.  I frequently tell clients that assets are often payable to someone’s estate on accident.  For example, assume mom’s husband was named as beneficiary on her life insurance policy.  He dies several years before her, and she never added another beneficiary and does not have a contingent beneficiary on the policy.  In most cases, that policy will say her estate is the beneficiary by default.

The important thing to note is that jointly-owned assets and assets with a beneficiary designation do not pass pursuant to mom’s will.  They pass upon death by operation of law, which means that jointly-owned assets pass to the surviving owner and accounts with a beneficiary designation pass to the named beneficiary on the account, regardless of what mom’s will says or if she has a will.  These assets do not pass through probate, and mom’s will does not apply to these assets.  So, if sister was the joint owner on mom’s checking account and CDs because she was the primary caretaker, the checking account and CDs belong to the sister upon death, even if the will specifically says everything is to be divided equally between the children.  This means that your sister gets everything, and you get nothing.  The will simply does not apply to the distribution of these assets.  To add insult to injury, if your sister wants to fulfill mom’s intent, she may have to deal with gift taxes and the gift tax ramifications of splitting the accounts with you.  Thus, even if sister wants to split the accounts because she knew what mom wanted and wants to comply, she may not want to split the accounts bad enough to pay gift tax on the transfer from her to you.

In many cases, this result is not what mom wanted or intended.  I will be posting more in the coming weeks about intent versus content because all too frequently the content of someone’s will or trust or the structure of their assets do not coincide with what their intent.  After someone dies, it is often too late to reconcile the two, even if most people involved agree as to what the person’s intent was.  An effective estate plan can prevent this disparity between intent and content.   Unfortunately, the true test of an estate plan occurs after someone dies when it is often too late to go back and correct the discrepancy.  Please contact our office if you need assistance in establishing an estate plan or determining if your plan accomplishes your goals and intentions.

Law FAQ: Will my insurance premium go up if I get hit by a uninsured driver and have no choice but to submit a claim on my own UM coverage?

Law FAQ: Will my insurance premium go up if I get hit by a uninsured driver and have no choice but to submit a claim on my own UM coverage?

I explained in a recent blog post about how Uninsured/Underinsured (UM) insurance coverage works, and how your UM coverage basically kicks in to protect you in the event you are involved a car wreck or auto related accident with someone who has little or no insurance.

We’ve found that our clients who find themselves in this situation are frequently worried about making a claim on their own insurance.  Indeed, clients often say something along the following lines:

“The car wreck wasn’t my fault, so why should I have to put this on my insurance?  That’s not fair.  I can’t afford for my insurance premium to go up, or worse yet — what if they cancel my policy?  I mean, I can’t afford the medical bills and damage to my car either, but maybe I’d be better off in the long run just doing the best I can and forgetting the insurance claim.”

On the surface, all of those concerns are perfectly valid.  However, there is actually no reason to worry.  Indeed, the law in Tennessee is absolutely clear on this point — it is unlawful by statute for your insurance carrier to raise your insurance premium or cancel your policy simply because you had the misfortune of getting hit by an irresponsible deadbeat who was driving around illegally with no liability insurance.  That’s exactly why you have UM coverage, and it would be wrong for your insurance company to be able to penalize you for something that isn’t your fault.

Accordingly, Tennessee Code Annotated § 56-7-1201(f) states that “No insurer shall increase the automobile insurance rate or premium of an insured with uninsured motorist coverage nor cancel the coverage due solely to the payment of any claim under uninsured motorist coverage.”

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