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October 18, 2011 In Estate Planning

Law FAQ: Can I Sell My House to My Children for $1 to Avoid Gift Tax?

Law FAQ: Can I Sell My House to My Children for $1 to Avoid Gift Tax?

Many clients and others have asked if they could sell their house to their children for $1 to avoid gift tax.  The short answer to that question is “no”.  Any transfer for less than fair market value to an individual is a gift.  For example, if the residence being gifted is valued by a real estate appraiser to be $100,000, and the residence is sold to children for $1; there will be a transfer subject to gift tax of $99,999!

Whether or not a transfer results in the payment of gift tax depends on several factors.  Under both Federal gift tax law and Tennessee gift tax law, each individual can gift up to $13,000 to each child without incurring a gift tax.  This is referred to as the Annual Gift Tax Exemption amount.  However, Federal law and Tennessee law differ on how gifts in excess of the Annual Gift Tax Exemption are taxed.

Federal law currently provides for an additional lifetime gift exemption amount of $5 million.  Any exemption not used during lifetime can be used at death.  But Tennessee law does not provide for an additional lifetime gift exemption amount.  In other words, any gifts from an individual to a child in excess of the Annual Gift Tax Exemption amount will be subject to Tennessee gift tax at rates ranging from 5.5% to 9.5% depending on the total value of the taxable gift.  Each state has separate gift tax laws, so residents of states other than Tennessee and gifts made of real estate located in other states may have different tax rules that apply.

Therefore, making gifts (or sales for less than fair market value) to children of assets, especially real estate, can be wrought with potential gift tax traps.  Please contact us if you need assistance in making tax-efficient gifts to your children or if you have any related questions.

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October 14, 2011 In Personal Injury

LAW FAQ: I was hurt at work in a freak accident that wasn’t really anybody’s fault. Does that mean I can’t get work comp benefits?

LAW FAQ: I was hurt at work in a freak accident that wasn’t really anybody’s fault. Does that mean I can’t get work comp benefits?

I got hurt on the job and it’s getting tough to pay the bills because I haven’t been able to work for a few weeks.  I need some help, but my injury was a freak accident that wasn’t really anybody’s fault. Does that mean I can’t get work comp benefits?

No.  Work comp benefits are available regardless of fault or negligence.  In fact, you can receive work comp benefits even if a workplace accident is due to your own mistake.

That may or may not seem fair that employers are liable for claims regardless of fault; however, most employers are required by law to carry work comp insurance to cover such claims.  Plus, there’s a trade off at play here.  There are inherent risks involved with working, and the employer creates, controls and ultimately benefits from the work environment.  Moreover, in exchange for covering all workplace injuries without regard to fault, the law provides a more limited amount of damages that may be recovered in the work comp scenario compared to a “normal” injury claim.

If you require help with an on the job injury claim, please call (901-372-5003) or Email us with questions and/or a free consultation.

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October 13, 2011 In General, Medical Malpractice, Personal Injury

Be careful what you ask for at the Chiropractor

Be careful what you ask for at the Chiropractor

Many people visit the chiropractor for an alternative treatment to many issues ranging from back pain and headaches to allergies and fatigue. An experienced chiropractor will spend time determining why someone is experiencing such poor health and offer a treatment regimen designed to address those specific symptoms.  The examination will likely include x-rays and the treatment may involve spinal manipulation. Spinal misalignments can be a major cause of a person’s pain and spinal manipulations are designed to address these problems.

While millions of folks successfully visit their chiropractor on a regular basis for the maintenance of their good health, there are those instances when things can and do go very wrong.

One serious complication that can occur after spinal manipulation is a stroke.  Manipulations of the cervical region of the neck/back can cause a pinching or tearing of the arteries that feed blood to the brain.   If an artery to the brain becomes blocked or ruptures by a clot that has been stretched or from a rotation of the cervical spine, this could lead to a stroke.

As most people know, a stroke can be very serious health concern. It can lead to long-term brain damage, debilitating muscle weakness and even death. If you are experiencing any symptoms after a chiropractic visit, please let your doctor know immediately.

Symptoms include: weakness, sudden numbness or paralysis on one side of your body including your face; dizziness, loss of balance and coordination; stiff neck and pain around your eyes; vomiting, severe headache and difficulty with speaking or writing; confusion, memory problems, spacial and perception issues.

Also, remember that there could be a delay of many days between your chiropractic visit and the onset of symptoms.

Fortunately, strokes are a rare complication from chiropractic manipulations.  However, they do occur, especially during those occasions when a chiropractor doesn’t use the appropriate amount of force or has the patient in the wrong  position during his treatment.

If you have discovered that you could be the victim of chiropractic malpractice you need to speak to an attorney to understand your legal rights.  Our attorneys have extensive experience representing individuals injured during chiropractic procedures gone wrong.  Call us to see if we can help you.

October 7, 2011 In General

Is Obamacare constitutional? Will the Supreme Court uphold the individual mandate?

Is Obamacare constitutional? Will the Supreme Court uphold the individual mandate?

Three of the 13 federal appellate courts have now ruled on Obamacare.  The 4th and the 6th Circuits upheld the individual mandate, whereas the 11th Circuit deemed it unconstitutional.  (The 6th Circuit is where I clerked.  It covers Tennessee, Kentucky, Ohio and Michigan).

In order to resolve the split amongst the circuits, the U.S. Supreme Court will likely hear and decide the dispute during the next Term of court that starts this month.  The Term runs for approximately 9 months, which means that a decision on the issue — assuming the Court ultimately agrees to hear the cases during this next Term — would be handed down no later than the end of June 2012.

The timing of the decision would be key.  Indeed, Obamacare will no doubt be a central issue for both sides as they head down the final stretch of the presidential campaign, and a timely decision by the Court would provide needed certainty on the issue, which would in turn allow the candidates to engage in more informed debate about how to move forward.

Below is an interesting excerpt from an article by Professor Erwin Chemerinsky in this month’s edition of the ABA Journal:

The most eagerly anticipated cases, though, are those involving the constitutionality of the individual mandate in the Affordable Care Act. Three circuits have decided the issue, and they have come out three different ways. In June, the 6th U.S. Circuit Court of Appeals, in a 2-1 decision, upheld the individual mandate as constitutional. Thomas More Society v. Obama. By contrast, in August, the 11th U.S. Circuit Court of Appeals, in a 2-1 decision, declared this unconstitutional. Florida ex rel. Attorney General v. U.S. Department of Health and Human Services.

And in September, the 4th U.S. Circuit Court of Appeals, in a 2-1 ruling, found that the individual mandate is actually a tax and thus cannot be enjoined under a federal law, the Anti-Injunction Act, which prohibits federal courts from enjoining the collection of taxes. Liberty University v. Geithner. The issue was argued Sept. 22 before a panel of the U.S. Court of Appeals for the D.C. Circuit. A fourth decision is likely to be forthcoming soon.

In light of the importance of the issue and the split among the circuits, it seems certain that the court will hear the issue this term. Already petitions for certiorari have been filed from the 6th and 11th Circuit cases.

It is interesting that, with one exception, every federal judge appointed by a Democratic president has voted to uphold the individual mandate, and, with one exception, every federal judge appointed by a Republican president has voted to declare it unconstitutional. If the Supreme Court were to follow this pattern, the law would be struck down 5-4. But that may be far too simplistic because the court is likely to consider this the most important challenge to the scope of congressional power since the mid-1930s.

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September 29, 2011 In Estate Planning

Law FAQ: I’ve been named as Trustee of a trust….what do I do now?

Law FAQ: I’ve been named as Trustee of a trust….what do I do now?

The most important thing to remember when you step in as trustee is that these are not your assets.  You are safeguarding them for others:  for the grantor (if living) and for the beneficiaries, who will receive them after the grantor dies.  As a trustee, you have certain responsibilities.  For example:

-You must follow the instructions in the trust document.

-You cannot mix trust assets with your own.  You must keep separate checking accounts and investments.

-You cannot use trust assets for your own benefit (unless the trust authorizes it).

-You must treat trust beneficiaries the same; you cannot favor one over another (unless the trust says you can).

-Trust assets must be invested in a prudent (conservative) manner, in a way that will result in reasonable growth with minimum risk.

-You are responsible for keeping accurate records, filing tax returns and reporting to the beneficiaries as the trust requires.

But you can have professionals help you, especially with the accounting and investing.  You will also probably need to consult with an attorney from time to time.  However, as trustee, you are ultimately responsible to the beneficiaries for prudent management of the trust assets.

Please contact us if you need assistance in serving in the role of a trustee or if you have any related question.

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September 28, 2011 In Estate Planning

Law FAQ: Why can’t I name my minor kids or grandkids as beneficiaries?

Law FAQ: Why can’t I name my minor kids or grandkids as beneficiaries?

You can certainly leave assets to your children and grandchildren if you do so correctly, and there are a number of options to choose from when planning for minor beneficiaries. The problem comes in when minor beneficiaries are not properly planned for, which usually occurs when a minor is named as a beneficiary on a beneficiary designation form (e.g. life insurance beneficiary or retirement account beneficiary) or outright in a will or trust (e.g. $15,000 to each of my grandchildren).

Why? Minors cannot legally hold property in their own name. An adult (custodian, trustee or guardian) must hold the assets for the minor’s benefit until the child reaches a certain age. In Tennessee, the legal age at which they can receive or own property directly is eighteen (18). In your estate plan, you can change the age at which you want them to receive the funds, but the minimum is eighteen. When a minor is named as a beneficiary or left an outright distribution in a will or trust, someone has to petition the court to be appointed guardian of the child’s property. Even if a natural parent and legal guardian is involved, the parent would have to seek to be appointed and subject to the court’s supervision in the management and expenditure of any funds. Custody and legal guardianship of the person of the child are not alone sufficient to handle the child’s funds absent a guardianship. I have been involved in many cases where a child’s natural parent has to be appointed as guardian and subject to the court’s ongoing supervision regarding their child’s funds because the other parent is deceased and the child was the beneficiary on the life insurance.

In some cases, the funds can be deposited with the court clerk, and the child can petition the court to release the funds when he or she reaches the age of 18. In other cases, an ongoing guardianship is required, which involves court approval for expenditures, annual accountings and sometimes a great deal of time and expense.

What should you do? I will talk more about some of the options for leaving funds to your beneficiaries in the coming weeks.  But for now, make sure you do not have your minor beneficiaries named on any beneficiary designation form.  If you would like to learn more about the options for your beneficiaries, please contact our office.

September 27, 2011 In Business Litigation, Civil Litigation, Contracts

Are Oral Contracts Enforceable?

Elements of a Contract in Tennessee

With a few limited exceptions oral contracts are enforceable in Tennessee just like a written contract.  Of course, a written contract is much easier to prove because there is hard evidence of the agreement.  However, an oral contract IS enforceable in most cases.  The parties and/or their witnesses can testify about the terms of the agreement, and things such as partial performance or “normal course of dealing” can serve as powerful circumstantial evidence of the terms of the deal.

A contract is a contract – oral or written – so long as it has the following elements:

  1. A legal purpose (e.g. Tennessee courts will not enforce a contract between neighbors to illegally use one cable box);
  2. A mutual agreement that is free from fraud or undue influence;
  3. Terms that are definite enough to be enforced (e.g. a promise to work for a person’s lifetime would be too vague because a lifetime is not a definite duration); and,
  4. Adequate value exchanged by both parties (referred to as “consideration” in legal terms).

Contracts Required to be in Writing

There are certain contracts that are required to be in writing under a legal doctrine called the “Statute of Frauds.”  In Tennessee, the six types of contracts that must be in writing include contracts for the following:

  1. Marriage;
  2. Contracts with a term greater than 1 year (i.e. a 2 year lease must be in writing);
  3. Sale of land/property;
  4. Executor’s/Administrator’s promise to pay debts of the estate;
  5. Sale of Goods/Personal Property that costs $500 or more; and
  6. Suretyship agreements (i.e. a promise to guarantee payment of the debts of another person).

Even after you have successfully navigated all of the above requirements, you should still be careful to file a lawsuit for a violation of an oral contract within 6 years in Tennessee – the same statute of limitation as a written contract.  Additionally,  oral contracts often require the testimony of a witness to verify the terms of the agreement.

We advise avoiding oral contracts.

While oral contracts are enforceable, you should avoid them, if at all possible, simply because written contracts are so much easier to prove and enforce.  Contracts can be difficult to navigate, and if you have any doubts when drafting or entering into a contract, it is best to consult an experienced contract attorney.  If you need help in negotiations, contract drafting, or even contract disputes, please give us a call at 901-372-5003.

 

Patterson Bray

8001 Centerview Parkway, Suite 103

Memphis, Tennessee 38018

(901) 372-5003 Office

www.pattersonbray.com

September 23, 2011 In Personal Injury

Law FAQ: What should I do if I’m seriously injured in a car wreck?

Law FAQ: What should I do if I’m seriously injured in a car wreck?

We have a helpful list of DOs & DON’Ts in the Auto Accident FAQ section of our website.  Here are a few examples:

DO — call the police and be courteous to the other driver and any emergency personnel who come to the accident scene. If the other driver is confrontational or angry, then stay in your vehicle and wait for the police to arrive.

DON’T — move your vehicle until instructed by emergency personnel.

DO — report the accident to your own auto insurance carrier immediately. Our lawyers can handle this for you after we have been retained. (Click here to read more info about your own UM coverage, and click here for more info about not having to worry about your rates going up simply by submitting a UM claim to your own insurance carrier.)

DON’T — make comments at the accident scene or to insurance adjusters like “I’m okay” or “I’m not hurt.” A few days may pass before the full extent of your injuries are known or even felt, particularly with neck and back injuries, and your attempt to be helpful may be taken out of context.  Indeed, a common tactic for insurance company adjusters is to try to contact you shortly after the accident to record a statement before you fully appreciate the extent of your injuries.  Let your medical reports do the talking for you.

DO — hire an experienced, knowledgeable lawyer to assist you early on. While it is certainly possible to handle your own claim, the question is whether you are truly competent to do so.  Remember that insurance adjusters handle personal injury claims for a living.  They are trained and have considerable resources at their disposable to use against you, and their job function is to limit any payouts made by their company.  You may not even know when the deck is stacked against you, and you deserve a level playing field to make sure that you are treated fairly.

September 23, 2011 In Uncategorized

#BeyondaReasonableDoubt

Beyond a Reasonable Doubt

If you are like me, your Twitter Feed and Facebook page have been littered lately with well intentioned people reciting snippets of news stories decrying the Troy Davis execution based on the idea of #Toomuchdoubt.  I would encourage you to read the Court’s Order for yourself.  You may still oppose the death penalty, but you will likely be less worried that Georgia executed an innocent man.

 

September 20, 2011 In Estate Planning

Law FAQ: What is living probate?

Law FAQ: What is living probate?

If you can’t conduct business due to mental or physical incapacity (dementia, stroke, heart attack, etc.), only a court appointee can sign for you – even if you have a will.  Remember, a will only goes into effect after you die.  Once the court gets involved, it usually stays involved until you recover or die and it, not your family, will control how your assets are used to care for you.  This public, probate process can be expensive, embarrassing, time consuming and difficult to end.  It does not replace probate at death, so your family may have to go through probate court twice!

In some cases, a durable power of attorney may prevent the lifetime probate process.  A durable power of attorney lets you name someone to manage your financial affairs if you are unable to do so.  However, many financial institutions will not honor one unless it is on their form.  If accepted, it may work too well, giving someone a “blank check” to do whatever the agent wants with your assets.  It can be very effective when used with a living trust, but risky when used alone.

Please contact our office if you have questions about the living probate process or if you wnat more information on strategies to avoid the process.