Estates and Trusts
Protecting a Loved One’s Benefits With a Special-Needs Trust
Caring for someone with special needs is both a burden and a privilege. Although the challenges can be all-consuming, the rewards are often deeply gratifying. Few of us who don’t bear this burden can fully understand the level of commitment required. For many caregivers, this commitment extends to remembering the individual with disabilities in their wills. This is a commendable impulse, but it is important to proceed cautiously. Without proper planning, an inheritance left to someone on government assistance can lead to nothing short of disaster. The difficulty stems from the nature of public assistance. Some benefits, such as Medicaid and Supplemental Security Income (SSI), are “means-tested.” This means they are available only to individuals with disabilities whose assets are below a certain level. Leaving any kind of inheritance to someone who receives means-tested assistance can cause these benefits to be taken away. And for the person with disabilities, government benefits can be critical. SSI is a federal program administered by the Social Security Administration that pays monthly stipends to people who are elderly or disabled. Medicaid provides health care benefits and many other programs that can enhance the quality of life of people with disabilities. Importantly, Medicaid coverage is automatically granted to individuals receiving SSI in Maryland and many other states. Under Social Security rules, a person with disabilities with more than $2,000.00 in assets cannot receive SSI and, therefore, will not qualify for Medicaid. As a result, leaving a bequest to an individual with disabilities can do more harm than good. This problem can be circumvented by setting up a special-needs trust. This type of trust includes language that requires the trustee to pay only for items the government isn’t paying for. In this way, the trust supplements the person’s public benefits without jeopardizing them. Because the beneficiary cannot compel the trustee to make a distribution, the government does not take the trust assets into account when determining whether the beneficiary qualifies for public assistance. In other words, a special-needs trust creates the illusion of poverty, which allows someone with special needs to receive an inheritance while leaving their government benefits intact. Choosing the right trustee is essential. In addition to having the beneficiary’s needs at heart, this person must understand special-needs trusts and their rather arcane rules. For example, the trustee may not pay for the beneficiary’s food or shelter unless they are enjoyed while the beneficiary is away from home—say, on a vacation. Sending the beneficiary a gift card is also not allowed unless it’s for an establishment like a gas station that sells only things that are allowable expenses under the trust rules. The trustee should consult with an attorney to avoid any missteps. As a practical matter, a special-needs trust is typically set up through the caregiver’s will. Called a testamentary trust, it can be funded with the caregiver’s ordinary assets like bank accounts and real estate. In addition, the trust can be named as the beneficiary of the caregiver’s life insurance policy or retirement account. Another approach is to establish the trust in the caregiver’s lifetime. This type of trust, called an inter vivos trust, can be funded directly by contributions from the caregiver or from the friends and family of the beneficiary. These individuals can also name the trust as a beneficiary of their wills and other assets. Whether a testamentary or inter vivos trust is to be established, the assistance of an attorney is essential. The tax implications of setting up a special-needs trust are numerous and complex, and the laws affecting trusts in Maryland have recently changed. Properly done, however, the trust can be an essential legacy to help someone with special needs. Lee Carpenter is a Principal at the law firm of Offit Kurman, P.A., and can be reached at (410) 209-6426 or lee.carpenter@offitkurman.com. This article is intended to provide general information and should not be construed as legal advice.
October 29, 2024
Estates and Trusts
Estate Planning for the Newly Divorced Woman: A Critical Step Toward Your Future
Divorce is an emotional and often life-changing experience, regardless of whether it is amicable or contentious. For many women, especially those who have been married for years, it can feel like stepping into the unknown. As a newly divorced person, you may find yourself grappling with a whirlwind of financial, emotional, and logistical challenges. One crucial aspect that often gets overlooked during this transitional period is estate planning. After a divorce, the financial landscape shifts dramatically, necessitating an urgent need to review and potentially restructure your estate plan. Whether you had an estate plan in place during your marriage or are considering one for the first time, having a proper plan is essential to safeguard your assets, protect your children, and secure your future. Suffice it to say estate planning should be a top priority for newly divorced women. Update Your Will and Trust: Control Over Your Legacy During your marriage, your Last Will and Testament or Revocable Trust likely reflected decisions made with your former spouse in mind. After a divorce, these documents require a comprehensive overhaul. One immediate change to consider is removing your former spouse as a beneficiary unless there are specific legal obligations, such as alimony or child support, that necessitate their inclusion. Additionally, if you have children, your prior will may have named guardians for them. In light of your changed family structure, consider appointing different trustees for the funds you intend to leave to your children. While your former spouse retains certain rights as a biological parent, your estate plan allows you to designate who will manage your children's inheritance if something were to happen to you. Change Beneficiaries on Life Insurance and Retirement Accounts It is imperative to change the beneficiaries on life insurance policies, retirement accounts (such as IRAs and 401(k)s), and any other accounts where your former spouse is named. Accounts with designated beneficiaries pass directly to the listed beneficiary, bypassing the terms of your Will or Trust. Failing to update this information may result in your former spouse receiving these funds, regardless of your divorce. Many mistakenly assume that their divorce automatically revokes outdated beneficiary designations; however, this is not always the case. To ensure your assets are allocated to the correct beneficiaries, update these designations immediately. Consult your matrimonial attorney before making changes if your divorce is not yet final, as restrictions may apply. Revisit Powers of Attorney and Health Care Proxies An often-overlooked aspect of estate planning post-divorce is updating your powers of attorney (POA) and health care proxies. If your former spouse was named to make financial or medical decisions on your behalf, this designation should be revisited. While some states automatically revoke these fiduciary appointments upon divorce, others do not. Depending on your state, failing to update these documents could allow your former spouse to control your medical decisions and finances during a vulnerable time. Taking charge of this now is one of the most empowering steps you can take toward your newfound independence. Even if your state automatically revokes a former spouse’s right to act as a fiduciary under a POA or a health care proxy, it is imperative that you have a successor to act in your former spouse’s stead. As with any fiduciary role, you must appoint someone you trust: whether it is a family member, a close friend, or an adult child, someone should be appointed to handle these responsibilities should you become incapacitated. Planning for Your Children’s Future Divorce significantly impacts your minor children’s future—emotionally, financially, and legally. Although your former spouse retains certain financial and custodial rights, you can use your estate plan to specify your wishes regarding their upbringing and financial care. Consider establishing a trust for your children to ensure their inheritance is managed responsibly by someone you trust, particularly if you have concerns about your former spouse’s financial management. Appoint a trustee who will oversee the disbursements to your children over time, even if your former spouse is their guardian. Post-divorce is also a good time to reassess your life insurance needs. You may need additional coverage to ensure that your children are well provided for in the event of your passing, especially if you are the primary caregiver or breadwinner post-divorce. Protect Your Assets and Build a New Financial Legacy It is well-known that divorce has a disparate financial impact on women versus their spouses. Divorce often leaves the divorced woman in a starkly different financial position than what she had during her marriage. You may now own a home solely in your name, with the bills to match. Proper estate planning and consultation with a trusted financial planner provide you with knowledge and control over how these assets are distributed when the time comes. Proper planning provides a platform for you to rebuild and protect your financial legacy for the future. If your spouse previously managed the family finances, it is not uncommon to feel uncertain about your financial independence. Even if you were the primary financial manager, your current financial landscape may differ significantly from what it was during your marriage. Working with an estate planning attorney and a trusted financial advisor will help you get organize your finances, understand your current standing, and plan for long-term security. Moving Forward with Confidence Divorce marks the end of one chapter while opening the door to new beginnings. Though the process can be overwhelming, estate planning is an essential tool that offers clarity and control. By taking proactive steps now, you can ensure that your assets, loved ones, and legacy are protected as you embark on this new phase of your life. Partnering with a trusted estate planning attorney will guide you through this process, allowing you to focus on rebuilding your life with confidence. You have the power to shape your future, and estate planning is one of the most empowering steps you can take.
October 28, 2024
Mergers and Acquisitions
Risk Challenge: Bridging the Gap
Typical Professional Advisor Approach: Hates risk Paralyzed by risk Gap and Disconnection Between Typical Advisor and Typical Entrepreneur Typical Entrepreneur/Business Owner Approach: Embraces risk Views risk as gateway for opportunity My Approach to Bridge Marrying my 25+ years of practical understanding of business to specific clients’ risk tolerance profiles in order to educate and empower clients to make informed decisions. Entrepreneurs are a different than most people. Entrepreneurs embrace risk…every day. Business and personal risk to an entrepreneur are always present. Just ask an entrepreneur about their personal guarantee of the business’ debt (as an example). The smart management of risk by an entrepreneur is how he or she advances the business and sleeps at night. The problem is that most advisors working on behalf of business entrepreneurs approach risk from a position of fear and absolute avoidance. Thus, with the entrepreneur embracing and needing risk to advance business on one side of the spectrum, and the typical advisor on the other side of the spectrum, a large divide is created between the two parties and miscommunication and disconnect are often the end result. Like an entrepreneur being different, my approach is also different than most advisors. My job is to advise the entrepreneur of the potential risks associated with an action – and the job of my entrepreneurial client, once educated, is to let me know how little or much he or she “cares” about the risk. If my client does not “care” about the risk, I don’t waste valuable resources on it. However, if my client does “care” about the potential risk, I spend my time working to manage and mitigate the associated risk. Knowing that proper risk management is the key to helping entrepreneurs advance their business allows me and my clients to sleep well. Originally posted 7/18/2018, no content changes.
October 24, 2024
Business
Why Are the Fees to Sell a Business So High? It’s a Matter of Expectations
“How much will it cost to sell my business?” It seems like a reasonable enough question—and a business owner is wise to plan ahead and think about the financial impact of merger, acquisition, or other business transactions early on. However, focusing on what you’ll pay to sell a business is a classic example of “missing the forest for the trees.” Or, to put it another way, missing the sale for the fees. I get it. Legal costs are never pretty. Most business owners are fortunate enough to only pay attorney’s fees periodically, on an as-needed basis, for relatively small projects. We’re talking about document review, collections, intellectual property development, and so forth. If you’re really unlucky, you may need to bring on a lawyer for litigation. The associated bills aren’t pleasant, but they won’t bankrupt you (and if they do, you hired the wrong attorney). When you have the opportunity to consummate the sale of your company, on the other hand, you can expect to receive the largest legal bill of your lifetime. Depending on the size of the deal, your attorney may charge you upwards of six figures. In any other situation, the price would seem exorbitant—outrageously so. But a business transaction isn’t like other situations. It’s an extraordinary event with exponentially higher stakes than an owner is used to. No business milestone compares. Yes, you’ll receive the largest legal bill of your lifetime—because you’re earning the biggest payday of your lifetime. It’s a matter of scale and complexity. You will not get a good second “bite of the apple.” For sellers, some level of legal “sticker shock” is understandable. Few people on Earth can normalize earning several million dollars, or several hundred million, at once. The problem arises when a business owner handcuffs their advisors due to fee constraints. The handcuffs could have unintended implications for a seller. I recently represented a client who had grown accustomed to relying on legal assistance from a family friend. He was used to essentially paying his lawyer a couple of bucks and a case of beer. When it came time to sell his business, the client realized he needed a different caliber of attorney—but failed to adjust his expectations accordingly. When he learned he owed approximately $300,000 in legal fees, I watched the color drain from his face. Keep in mind my client’s business sold for $75 million. Our fees amounted to less than 1% of the total sale price. That’s in line with (admittedly loose) industry standards—if not below. My client knew how many hours were invested in the matter—and he had the budget in mind before the deal commenced. He knew a substantial bill was coming. But it wasn’t tangible for him until the end. The moral of the story? Don’t wait until after you’ve sold your business to think about the costs of selling your business. Develop a financial plan—and speak to your advisors to understand the moving parts and inputs to a transaction. Be prepared to spend substantial fees paying your attorney, investment banker, accountant, M&A advisor(s), and any other professionals involved in your team. After all, the sale of your business likely will be the largest financial transaction of your lifetime. Then, move all that to the back of your mind and prepare yourself for the biggest question ahead: what you’ll do with all that money after you close?
October 17, 2024
Family Law
Creative Co-Parenting Ideas for a Memorable Halloween Celebration
Halloween is a magical time for kids, filled with costumes, candy, and spooky fun. However, for co-parents, it can also pose challenges when it comes to sharing the holiday. With a little planning, it's possible to ensure that Halloween remains special for your children while also making co-parenting during this festive season easier for both parents. Here are some creative custody arrangements to consider: Split the Day: One parent can take the morning and early afternoon with the kids, filled with activities like Halloween crafts, pumpkin carving, or a spooky movie marathon. The other parent can then take over for trick-or-treating in the evening, letting each parent create special memories. Alternate Years: One year, the kids spend Halloween with one parent, and the next year, they switch. This arrangement allows each parent to create their own unique traditions every other year, ensuring everyone gets their turn to enjoy the holiday. Double the Fun: If you and your co-parent live nearby, consider splitting the trick-or-treating route. Start in one neighborhood and finish in the other, allowing both parents to share in the excitement while creating a seamless and fun experience for the children. Host a Joint Halloween Party: If you have a friendly co-parenting relationship, why not throw a joint Halloween party? This allows both parents to celebrate with the kids together, fostering a fun and inclusive environment while building positive memories as a family. Halloween Week: Extend the festivities! One parent could focus on pre-Halloween activities like haunted house visits or costume shopping while the other takes charge on Halloween night. This gives the kids a full week of fun and ensures both parents get quality time to enjoy the season. The key is to create an arrangement that works best for your family. Open communication and flexibility are crucial in ensuring your children have a fun and memorable Halloween, regardless of where they celebrate. Even if co-parenting presents its challenges, thoughtful planning can make Halloween a joyful and fun occasion for everyone. Wishing you all a Happy Halloween filled with wonderful memories!
October 15, 2024
Labor and Employment
Top California Court Rules Gig Workers are Independent Contractors
In a recent ruling, the Supreme Court of California has allowed Prop 22 to stand, meaning more than 1.4 million Californians who work as app-based gig workers for companies such as Uber, Lyft, DoorDash, and Instacart can continue to be categorized as independent contractors as opposed to employees. This is just the latest development in the evolution of employee classification in the state, and it surely will not be the last. In this case, the Court upheld Prop 22, a 2020 voter-approved law allowing gig economy platforms to classify drivers as independent contractors rather than reclassify them as employees in California. The Court rejected claims brought by drivers and a labor union that the law is unconstitutional, citing interference with lawmakers’ authority over matters dealing with workers’ compensation. Prop 22 defined a new classification for workers entitled to limited benefits, including healthcare subsidies, occupational accident insurance, disability insurance, and a net earnings floor based on the state minimum wage, but not necessarily all rights granted to full-fledged employees. Numerous challenges have been raised to the legislation, which was reversed in 2021 and then reinstated in 2023 by the courts. The July 25, 2024 Supreme Court ruling ends the long legal fight over Prop 22 for now and is a significant win for rideshare giants Uber and Lyft, which have fought to classify their workers as contractors. While this ruling permits gig-work companies to treat their California drivers as independent contractors, it's important to note that there is still the possibility of future legal challenges to Prop 22. The potential for further legal action adds an element of intrigue to the ongoing debate about the classification of gig workers, which has been scrutinized in several state legislatures recently. However, this decision applies specifically to rideshare drivers in California.
October 14, 2024
Business
What Message Are We Sending When We Say, “We Are Busy?”
Have you been busy lately? I’ve been busy. We’ve all been busy. Everyone, it seems, is really busy—super busy, incredibly busy—so, so busy. It’s become something of a greeting, in fact: “How are you?” “I’m all right—really busy.” “How’s work?” “Oh, you know, work’s been busy.” “How’s your family?” “Well, with school, and the kids, and the dog… things are busy!” Frequently, we’re not just busy but “swamped” or “crushed” by our daily activities and obligations. It’s almost as if we take pride in how out of control it all seems or how overwhelmed we feel. And yes, busyness is a feeling. So, why do we frequently tell others we’ve been “busy” or “swamped?” If I had to guess, I think we use these terms as a means of communicating success. No one wants to say they have no work or no clients—or no life, for that matter. Busyness also (conveniently) obfuscates the choice to prioritize one thing over another. Consider how often “I’ve been busy” follows “I’m sorry.” But just as “sorry” loses meaning with repetition, “busy” can’t insulate us from the consequences of our decisions. Nor can it affect how our words are received by others. If you’re not careful, a client may hear “I’m busy” as “I don’t have time for you” or “I can’t give you my best effort.” I’ll give an example. A few weeks ago, I approached a landscaping business. I knew the current season—late spring, early summer—would be a busy time for the company, but I figured they would be prepared for it and happy to take my business. The company was too busy to take my work. So, I went with a competitor. I wonder how the owner of the first business will feel when January comes around, and the business is not so busy. Missed opportunities are one of the many risks the always-busy face. I recently heard about a company that lost a multi-million dollar award because the would-be customer thought the organization lacked the time and capacity to handle the work. Employees had transmitted the company’s busy status to the prospect—a couple of offhand remarks was all it took. Of course, if you run a business, there will be times—many times—when your company is unable to meet a certain deadline or deliver results within a given timeframe. In these circumstances, the wise move is not to turn clients or customers away or stunt the conversation with a blanket “I’m busy” but to manage expectations. Take a moment to think past your current feelings of stress and consider the other party’s needs: Can the project wait a week? Would the client be willing to pay rush fees? Use that busy period as an opportunity to negotiate, consider your boundaries, learn, grow, and establish better lines of trust and communication. You should never promise what you can’t deliver, but that doesn’t mean you always have to say “no.” The old saying holds true: make hay when the sun is shining. When there is business, work harder and work longer. There is no guarantee a customer or client will come back if you turn them away now. Every relationship is important, and work arrives when it arrives—not always when it’s convenient. And remember: words have meaning. The next time someone asks how things are going, try something besides “I’ve been busy.” How about “business is good?” It is the truth, after all. Originally posted 6/13/2019, no content changes
October 10, 2024
Commercial Litigation
Does Neurodiversity Matter?
Is your organization “neurodiverse?” Do you care? Should you? I recently caught a podcast promoting "neurodiversity" and “neurodivergence” - terms with which I was not previously familiar. If you, like me, are new to the concepts, I commend you to the following vocabulary lesson: Neurodivergent & Neurodiversity: Meanings & Examples (exceptionalindividuals.com). Seems my ADHD affliction casts me unexpectedly among an often-marginalized minority group of "exceptional individuals." Trust me, the dual entendre is not lost on me. I've not yet fully looked into the naming decision. However, I am confident the dual meaning of "exceptional" was purposefully adopted. As a newly self-aware neurodivergent and one serving on our law firm’s DEI Steering Committee, I now find myself questioning the measures and manners of diversification we choose to promote (and how many more we consciously choose or unknowingly fail), both individually and collectively, to recognize. How narrowly or broadly should we be promoting diversification of our firm’s workforce? Much like the LGBT community itself has struggled and still struggles today to determine and agree upon who to welcome under the tent, to be true to its name, ought, perhaps, those promoting DEI initiatives take a moment to appreciate and address the reality that the pillars of the movement, focusing for the moment only on diversity and inclusion, might be more narrowly or broadly defined. How many cynics and skeptics pre-disposed to reject DEI initiatives as inappropriate race, sexual preference, and/or gender-based proxies might soften their opposition if the storyline were recast so as to avoid altogether a "we-they" lens and be contextualized instead by the guiding concept that a heterogeneous workforce benefits everyone? President John F. Kennedy self-deprecatingly credited his success to having surrounded himself with a diversity of opinions, believing that a cabinet of like-minded “yes-men” would be self-defeating (and mostly redundant). Leaving for another day a more thoughtful look at the inequities sought to be addressed by the “E” in our collective DEI efforts (and noting in this context as well, the separate quest of some to expand such initiatives and their overarching acronym to recognize a “B” for Belonging, where everyone is not only invited to have a seat at the table but also is made to feel welcome to do so), encouraging and promoting diversity and inclusion ought, fundamentally, be founded upon a conscious effort to achieve a sum greater than its parts by bringing together those of differing perspectives. As another exceptional individual shared with me on this point, it’s not a “zero-sum” situation where one group’s loss is another’s gain. Everyone benefits! So, I ask again . . . is your organization neurodiverse? Should you care? Hopefully, we can all agree, at least, that knowing and appreciating what neurodivergence means is a good first step in answering the question. Understanding the potential value of incorporating neurodivergent individuals in professional work environments and, in turn, harnessing such potential virtually assures “group-think” avoidance. What naturally flows from this recognition is an appreciation that diversity, in general, is a favorable objective. Striving to achieve a more diverse and inclusive work environment is important because, just as a rising tide lifts all boats, diversity, by definition, brings a broader depth of experiences, perspectives, and ways of looking at problems, everyday situations, and, yes, even legal issues and arguments. Whether to consider and promote diversity -- neurodiversity or otherwise! -- is not simply an objective (or subjective!) question of doing the right or wrong thing. Nor, I suggest, is promoting a DEI agenda necessarily a matter of identifying and overcoming biases or prejudices (although these certainly play an unfortunate and unacceptable role in environments developed absent DEI considerations). Rather, I believe caring about issues such as neurodiversity and diversity more generally leads to avoiding tendencies towards like-mindedness and “group-think,” and, speaking apolitically, I believe that President Kennedy had it right when he made a point of assuring that a diversity of opinions informed his ultimate decision-making. Should you care if your organization is neurodiverse? Of course you should.
October 7, 2024
Business
What M&A Buyers Lose by Keeping Their Closing Checklists to Themselves
I recently represented a group of business owners in the sale of their company. As with any merger or acquisition, the transaction demanded tremendous patience, effort, and commitment from all people involved. For my clients, however, the deal was far more onerous than it needed to be — because the buyer’s attorney chose not to work from a closing checklist. A closing checklist can be thought of as a shared roadmap for an M&A transaction. It lays out all the steps that must be taken to bring the deal to fruition, specifying the roles and responsibilities of the buyer, the seller, and any other participants. Checklists cover everything from sophisticated legal and financial considerations (e.g. intellectual property searches, lien releases, third-party consents) to minute particulars such as signatures and wiring instructions. Whatever its level of detail, any checklist is better than none. Deals without closing checklists sometimes waffle as parties experience distrust, restlessness, and confusion over priorities. While this transaction fortunately did go through, my clients faced significant friction and frustration. At times, a collapse appeared likely. Instead of providing a closing checklist, the buyer essentially assigned us several dozen to-dos, which was just a rundown of tasks we needed to complete in order to satisfy their pre-closing requirements. It was a one-sided, opaque way of doing business. It left us feeling as though we were operating in a vacuum and never working fast enough. This kind of approach not only strains the lines of communication between a buyer and seller, but also tends to dissolve any kind of meaningful negotiations. When you’re rushing through line items without the larger context of the deal in mind, you give up your leverage. A closing checklist is essential because it situates parties within the same universe and keeps their attention oriented on a shared goal. It’s a common point of reference for discussions and perspective — a constant reminder that all that labor and stress is in service of a mutually beneficial transaction. If you don’t have a closing checklist, you become blind to the other side’s objectives as well as your own. What is particularly baffling about the decision to keep the seller in the dark is that it creates more work for the buyer. Closing checklists are generated in almost every transaction. They flow naturally from the buyer’s documentation and due diligence. There’s no additional effort or risk to making them generally available to the other party. By refusing to share their checklist, the buyer chooses instead to dole out the information in a piecemeal manner, potentially causing errors and slowing down the deal. It’s the difference between telling a seller what you aim to accomplish and telling them what to do. It’s turning what should be a partnership into a managerial relationship. And ultimately, it’s unproductive. Few owners can put up with being bossed around—especially when they’re in the middle of exiting their business. Originally posted 09/26/2019 - no content changes.
October 3, 2024
Family Law
Navigating Family Law Matters During Rosh Hashanah: Insights from a Family Law Attorney
As Rosh Hashanah approaches, Jewish families prepare to usher in a new year filled with hope, reflection, and renewal. This sacred holiday is an opportunity to consider how we can strengthen our relationships and align our actions with our values. For those facing family law matters—whether divorce, custody disputes, or estate planning—Rosh Hashanah is a meaningful moment to reassess, reset, and renew our commitment to family harmony. A Time for Reflection and Reconciliation Rosh Hashanah's themes of introspection and reconciliation resonate deeply in family law. This period encourages us to reflect on the health of our family relationships. Are there unresolved conflicts that need attention? For example, if you're navigating a divorce or custody dispute, consider initiating open dialogues or seeking mediation to address these issues constructively. Reflecting on how to approach these matters with empathy and understanding can provide clarity and pave the way for more amicable resolutions. Embracing Teshuvah in Family Law The concept of teshuvah (repentance or return) is central to Rosh Hashanah and can guide the resolution of family law matters. In a legal context, teshuvah may involve mediation or collaborative divorce, where both parties work together to reach a fair agreement. For separated or divorced parents, teshuvah can mean recommitting to co-parenting with kindness and respect. Common challenges, such as difficulty communicating or differing parenting styles, can be addressed through parenting coordination or counseling. These approaches not only reduce conflict but also model positive behavior for the next generation. Renewal Through Estate Planning Rosh Hashanah is also an ideal time to consider the future. For many, this season of renewal is an opportunity to review or update estate plans. Stephanie F. Lehman, Executive Advisor to the Family Law Practice Group at Offit Kurman, highlights the importance of regularly revisiting these plans: "Life changes—such as marriage, divorce, birth, or death—often require adjustments to wills, trusts, or guardianship designations." Schedule a review with your attorney to ensure your estate plan reflects your current wishes. Common updates might include changing beneficiaries, adjusting asset distributions, or revising guardianship designations. Prioritizing Clear Communication and Harmony As families gather during Rosh Hashanah, it's a good time for open, honest conversations about important issues like prenuptial agreements or future care plans for aging parents. These discussions, grounded in mutual respect, can prevent misunderstandings and foster a sense of security and peace of mind. Addressing potential concerns early, such as planning for long-term care or discussing financial responsibilities, can help avoid conflicts and ensure that everyone's needs are met. Focusing on the Best Interests of Children For families navigating divorce or custody disputes, Rosh Hashanah serves as a reminder to prioritize the best interests of the children. This holiday offers a chance to reassess parenting plans and schedules to ensure they meet the children's needs. It's also a time to model forgiveness, flexibility, and cooperation, demonstrating to children that even amid conflict, their well-being remains paramount. Strategies such as regular parenting plan reviews or involving a child specialist can help align parenting arrangements with children's evolving needs. Moving Forward with Hope Rosh Hashanah teaches us that every ending is also a new beginning. For those facing challenging family law issues, this holiday encourages us to create positive change, find common ground, and move forward with hope. Whether resolving disputes amicably, planning thoughtfully for the future, or nurturing our most important relationships, Rosh Hashanah inspires us to embrace renewal. Shanah Tovah Umetukah—Wishing you a Good and Sweet New Year filled with renewal and harmony.
October 2, 2024
Elder Law and Advocacy
Elder Abuse Exposed: Understanding the Crisis and Lessons from Stan Lee’s Story
Elder abuse is a widespread issue that impacts millions of elderly individuals worldwide. It often manifests in different forms, including physical abuse, emotional or psychological mistreatment, neglect, and, most commonly, financial exploitation. Vulnerable older adults—particularly those experiencing cognitive decline, frailty, or social isolation—are particularly at risk. Among the most high-profile cases of elder abuse in recent years involves Stan Lee, the legendary creator of Marvel Comics. Understanding Elder Abuse Elder abuse can happen anywhere, including in homes, nursing facilities, or even public spaces. A common factor among these cases is that the abuser is generally someone trusted by the elder, such as caregivers, significant others, or family members. In fact, statistics reflect that nearly 60% of financial abuse is committed by a spouse, significant other, or family member. According to the World Health Organization (WHO), one in six people aged 60 and older has experienced some form of abuse in community settings within the past year. The actual numbers are likely much higher, as many cases of elder abuse go unreported due to fear or shame. Stan Lee: A Victim of Elder Abuse Stan Lee, the co-creator of iconic superheroes like Spider-Man, the X-Men, the Avengers, and many other beloved superheroes, passed away in 2018 at the age of 95. His final years were overshadowed by a deeply troubling elder abuse scandal. After losing his wife and advocate of 70 years, Lee's physical and mental health deteriorated significantly, leaving him increasingly dependent on others to manage his personal, financial, and creative affairs. Allegations emerged that Lee fell victim to financial and emotional abuse at the hands of his former business manager, who had become a trusted confidant. As with most elder abuse cases, the manager allegedly isolated Lee from his family and longtime associates, seized control of his finances, misappropriated millions in assets, coerced him into public appearances, and restricted access to family members and those who had supported Lee for decades. Furthermore, this manager even relocated Lee into a new home without informing his only child. The Financial Exploitation of Elders Lee's case is not an isolated incident; financial exploitation is the most common form of elder abuse. While Lee's situation is noteworthy due to the unusual occurrence of financial exploitation among wealthy individuals with significant assets, elders of all economic backgrounds—especially those with diminished mental capacity—are at risk of manipulation and exploitation. In Lee's case, the exploitation was particularly egregious, given his status as a global pop culture icon with a multimillion-dollar estate. Although Lee experienced rapid exploitation within a year following his wife's death, most financial abuse unfolds slowly and subtly. It is important to keep in mind that this financial abuse can manifest as forgery, coercion in managing finances under the guise of assistance, or through more sophisticated and deceptive schemes involving multiple perpetrators. Sadly, statistics indicate that abuse and exploitation disproportionately affect elders with more modest means—those least equipped to handle economic setbacks in their later years. Alarmingly, nonwhite elders are particularly vulnerable, with reports showing they are 200% more likely to suffer from elder abuse compared to their white counterparts. Legal Protections and Reporting Cases like Lee's illustrate the urgent need for improved legal protections and reporting mechanisms for elder abuse. Although laws aimed at combating elder abuse exist, enforcement is frequently lacking. Most elderly individuals lack the capacity to seek help, which is often what makes them vulnerable in the first place. Alarmingly, those who might normally report such abuse are often perpetrators themselves. These factors, combined with the shame and fear associated with reporting, severely hinder the prosecution of these crimes. While many elder abuse units exist within law enforcement, significant gaps remain in the system due to a lack of resources and, from my perspective, a lack of empathy for senior victims. What We Can Learn from Stan Lee's Story The tragic story of Stan Lee's elder abuse serves as a powerful reminder that even the most celebrated individuals can fall victim to exploitation in their later years. It underscores the critical need for planning ahead and vigilance from both loved ones and legal authorities to protect vulnerable elders from abuse. For those caring for elderly loved ones, staying engaged, monitoring financial activities, and advocating for their well-being is essential. Preparation for potential incapacity can also help prevent victimization. Aging loved ones should have the proper legal documentation in place, such as a Power of Attorney and Trust instruments, which empower them to designate trusted individuals prior to their incapacity. Proper legal authority and the appointment of reliable individuals in positions of trust reduce the risk of exploitation by bad actors. Preparing for potential incapacity can also help prevent victimization. Aging loved ones should have essential legal documentation in place, such as a Power of Attorney and Trust instruments, which empower them to designate trusted individuals before they become incapacitated. Proper legal authority and the selection of reliable individuals in positions of trust reduce the risk of exploitation by bad actors. Despite the flashy headlines of Mr. Lee's case, elder abuse remains a largely hidden crisis. Greater societal acknowledgment of its existence, coupled with stronger legal protections, will better ensure that our elderly population can live with dignity and security. Protecting elders from exploitation is a moral imperative that requires collective awareness, legal guidance, and action. Whether famous or not, senior adults deserve respect, care, and protection in the twilight of their lives, allowing them to age with dignity.
October 2, 2024
Intellectual Property
It’s a Plaintiff, it’s a Baby, it’s SUPERBABIES!
Able to cancel 4 trademark registrations in a single filing, a comic book company called Superbabies Limited has done what once seemed impossible: They have achieved the cancellation of trademark registrations for SUPER HERO and SUPER HEROES, registered since as far back as 1967 and jointly owned by comic behemoths Marvel and DC Comics. Superbabies claimed that SUPER HERO and SUPER HEROES are generic, and also that Marvel and DC had abandoned any trademark rights by failing to use the terms as trademarks. Although Marvel and DC entered an appearance in the Trademark Trial and Appeal Board (TTAB) proceeding, they never answered the petition for cancellation, leading Superbabies to file a motion for a default judgment. The TTAB, noting that Marvel and DC Comics did not contest the motion, ordered the cancellation and faster than Spiderman can scale a skyscraper, the registrations were canceled the same day. It's safe to say that Marvel and DC did not miss two deadlines by accident. Rather than bring out the Avengers to fight this tooth and nail, it is likely that they realized they couldn't win and instead opted for truth (that the marks are generic), justice (SUPER HERO and SUPER HEROES should be free for all to use), and the American way (allowing the judicial process to make the determination). Superbabies' Petition for Cancellation is fun. The first allegation is: "We live in a world of superheroes. For the better part of a century, superheroes and the superhero genre have ruled the imagination and inspired millions to achieve greatness." From there, it contains snippets of comics, including Marvel and DC comics, in which the heroes and villains alike make use of the legal system to achieve their means. It goes on to demonstrate why Superbabies believes that SUPER HERO and SUPER HEROES are generic. When Marvel and DC saw this, they probably realized that this was the sixth Infinity Stone and that their claim of trademark ownership had turned to dust.
September 27, 2024
Business
The Entrepreneur’s Lab Video Series: Definitive Sales Agreement
Definitive sales agreement – the sales agreement is the key document for the seller in a transaction. It encompasses the hard work of the parties from LOI through diligence. Definitive agreements typically are drafted by the buyer’s counsel and will be a large document with many moving parts. A few of the key parts are as follows: The business terms: A seller needs to make certain the key terms in the LOI are accurately and fully reflected in the agreement. Typically, the first portion of a definitive agreement speaks to the price, the payment terms, and the related items. Representations, warranties and covenants: The largest part of the agreement will be the various reps and warranties required of the seller. These reps are statements of truth about the business and will need to be carefully reviewed with legal counsel to make certain no modifications are necessary. Conditions to closing: A seller needs to be keen on any conditions in the agreement that need to be satisfied prior to closing. Such conditions could include buyer’s financing or the obtainment of certain customer consents. Indemnifications: Remember the buyer will want to pass the risk of any issues arising prior to closing back to the seller. A seller needs to fully understand the risk of indemnification and make efforts to cap and/or limit future exposure. Disclosure schedules: These schedules supplement the agreement, especially the reps and warranties. In many respects, disclosure schedules culminate and complement the diligence process. As a seller, disclosure and completeness is your friend. Make certain that your sell-side schedules are accurate. Originally posted 2/16/18. No content changes.
September 26, 2024
Family Law
Understanding Alimony in Maryland: Types, Factors, and How It's Awarded
When a marriage ends, financial considerations often play a significant role in the divorce process. One key financial aspect is alimony, also known as spousal support. Alimony provides financial assistance to a spouse who may be at an economic disadvantage post-divorce, helping them to transition to their new circumstances. In Maryland, courts award alimony based on specific guidelines and factors to ensure a fair outcome for both parties. This blog explores how alimony is awarded in Maryland and what factors influence the court's decision. Types of Alimony in Maryland Maryland law recognizes three primary types of alimony: Temporary Alimony (Pendente Lite): Awarded during divorce proceedings, temporary alimony helps the financially dependent spouse maintain stability until a final decision is reached. This type of alimony ensures that immediate financial needs are met while the divorce is ongoing. Rehabilitative Alimony: This is the most common type awarded in Maryland. It is intended to provide financial support for a specific period, allowing the recipient to become self-sufficient through education, training, or employment. The goal is to equip the recipient with the skills or resources necessary to achieve financial independence. Indefinite Alimony: In some cases, the court may award indefinite alimony when the recipient spouse cannot reasonably be expected to become self-supporting. This type is less common and is typically granted when there is a significant disparity in earning capacities or if the recipient is of advanced age or has health conditions that prevent self-sufficiency. Understanding these types of alimony is crucial as they set the stage for how courts assess individual cases. Factors Influencing Alimony Awards When determining whether to award alimony, as well as the amount and duration of the payments, Maryland courts consider several key factors: Ability to be Wholly or Partly Self-Supporting: The court examines the recipient's potential to gain employment or improve their financial situation through education or training. Time Necessary to Gain Sufficient Education or Training: The court considers how long it will take for the recipient to acquire the skills needed to become self-supporting. Standard of Living During the Marriage: The court aims to maintain a standard of living for the recipient that is reasonably comparable to that enjoyed during the marriage. Duration of the Marriage: Longer marriages are more likely to result in alimony awards, particularly indefinite alimony, especially when there is a significant disparity in earning capacities. Contributions to the Family: The court evaluates the monetary and non-monetary contributions made by each spouse, including homemaking and child-rearing responsibilities. Circumstances Leading to Estrangement: Fault-based factors, such as adultery or abuse, may be considered when determining alimony awards. Age and Physical and Mental Condition: The court assesses the physical and mental condition of both spouses health and age of both spouses, as these factors can impact the recipient's ability to become self-supporting. Paying Spouse's Ability to Meet Their Own Needs: The court ensures that the paying spouse can afford the alimony payments without undue hardship. Agreements Between the Parties: Any prenuptial or postnuptial agreements may influence the court's decision regarding alimony. Conclusion: Alimony is a crucial aspect of divorce proceedings in Maryland, designed to provide financial support to a spouse in need. Understanding the various types of alimony, the factors that influence the court's decision, and the potential for modifying alimony awards can help individuals navigate this complex aspect of divorce more effectively. If you are facing a divorce and have questions about alimony, consulting with an experienced family law attorney can provide valuable guidance, ensuring your rights are protected.
September 26, 2024
Family Law
Divorce and the Professional Athlete: Managing Assets, Custody, and Public Scrutiny
Representing an athlete through a divorce requires a unique blend of legal expertise, emotional intelligence, and public relations savvy to guide a high-profile client through this complex and challenging period. Professional athletes live under constant public scrutiny and media attention, with their personal lives often under a microscope. This heightened visibility can add significant pressure during a divorce. To effectively advocate for their client's interests, legal representatives must understand and navigate this unique environment. Navigating Asset Division The legal landscape for divorcing athletes is intricate, with elements that differ from a typical divorce case. Professional athletes often possess substantial and complex asset portfolios, including endorsement deals, contracts, and investments. Accurately, valuing these assets and negotiating their division can be challenging. Recommendation: Work with professionals who specialize in high-net-worth divorces and understand the nuances of athletes' contracts, including potential future earnings. Determining spousal support or income for child support can be particularly complex, as factors such as the athlete's contract, endorsement deals, current income, future earning potential, age and health must all be considered. Custody Considerations When children are involved, their well-being is paramount. Navigating custody arrangements requires sensitivity and an understanding of how the athlete's career demands may impact their parenting. Recommendation: A creative attorney will collaborate with child psychologists or family counselors to develop a custody schedule that prioritizes the children's emotional needs while accommodating the athlete's career obligations. Managing Public Scrutiny The athlete's personal life will likely attract significant media attention, making the management of public perception and privacy a critical aspect of representation. Developing a proactive media strategy is essential for controlling the narrative, and the sooner this is implemented, the better. Recommendation: This strategy may include preparing public statements, managing press inquiries, and addressing rumors before they escalate. It's vital for the divorce legal team to work with a PR team experienced in handling high-profile cases to mitigate potential damage to the athlete's public image and their family. Ensuring the client's privacy during the divorce process is also paramount, which includes managing court documents and legal filings to minimize leaks and public scrutiny. Virtual platforms like Zoom and Teams can also provide a secure way for athletes to meet with their attorneys without the risk of paparazzi intrusion. Emotional Support Divorce can take a significant emotional toll, particularly for those in the public eye. Athletes may experience heightened stress due to media scrutiny, public pressure, and potential career impacts. Providing emotional support is as important as legal representation. Recommendation: Encouraging athletes to seek counseling or therapy can provide a valuable outlet for dealing with the emotional strain; a support network of trusted friends, family, and mental health professionals can be instrumental in this process. It is essential to help the athlete stay focused on their career and personal well-being during the divorce process, which may involve collaborating with their coaching and management teams to ensure their professional commitments are managed effectively. Strategic Future Planning Divorce can have significant and long-lasting implications for an athlete's career and personal life, making strategic planning for the future essential. Assessing how the divorce may impact the athlete's career trajectory, endorsements, and public image is important. Recommendation: Developing strategies to mitigate potential negative effects is crucial for preserving their professional reputation. Additionally, post-divorce financial planning should address changes in income, expenses, and asset distribution. Collaborating with financial advisors to develop a robust plan for managing their finances is vital for long-term stability. Conclusion In summary, representing a professional athlete through a divorce requires a comprehensive approach that integrates legal, emotional, and public relations considerations. By understanding the unique aspects athletes face — such as complex asset portfolios, custody arrangements, and the need for media management — legal representatives can effectively navigate this difficult period. Ultimately, the goal is to protect the athlete's interests while preserving their personal and professional integrity in this high-stakes process. Implementing these recommendations can enhance the effectiveness of representation and support the athlete through this challenging transition.
September 25, 2024
Estates and Trusts
The Estate Planning Benefits of Marriage: What Unmarried Couples Need to Know
It is becoming increasingly commonplace for people to enter long-term romantic relationships without legally marrying. While there are no exact statistics on how many Americans fall into this growing category, a 2019 Pew Research Center study estimated that 12% of Millennials were living with an unmarried partner, compared to 8% of Gen Xers—an increase of 50% from one generation to the next. While this trend is influenced by various social and political factors, many of these couples may not fully appreciate the extensive economic and legal benefits they forgo by remaining unmarried to their partner. In fact, over 1,000 federal laws provide legal benefits and privileges to married couples. It is beyond this article's scope to discuss every way in which the law favors married couples. Rather, this article will highlight just a few of the many estate planning benefits and opportunities that are conferred on married couples that are not shared by unmarried couples. As I will illustrate, often with little planning, married couples can defer, reduce, or completely eliminate taxes. Unlimited Marital Deduction - Lifetime Gifting Any gift exceeding the annual gift tax exclusion amount, which in 2024 is $18,000 per donor per recipient, is a taxable gift that must be reported by filing a gift tax return (IRS Form 709). However, there is a very significant exception to this rule. One spouse may convey to the other spouse an unlimited amount of assets at any time and as often as desired without incurring any gift tax liability. This creates many estate planning opportunities. As just one example, married couples can strategically retitle assets between each other to maximize the “step-up” in the capital tax basis that these assets receive at death. The “step-up” means that any appreciation in an asset from when the decedent first acquired it gets wiped away at death, and the recipient receives the asset with an adjusted capital tax basis as of the decedent’s date of death. Thus, married couples can convey assets to each other so that upon the death of the first spouse, the surviving spouse receives highly appreciated assets with a one-half or even full step-up, saving significant capital gains taxes when the asset is later sold. Unlimited Marital Deduction – Inheritance The unlimited marital deduction also applies to transfers between spouses at death, shielding the surviving spouse’s inheritance from any estate taxes. This powerful tool allows the surviving spouse to defer the payment of any estate taxes resulting from the first spouse's death for their entire lifetime. This gives the surviving spouse time to spend down or gift these assets to minimize or eliminate estate tax liability for their future heirs at the time of their death. The unlimited marital deduction is also key to “by-pass” trust planning, a technique that ensures that no estate taxes are owed at the death of the first spouse while maximizing the use of their estate tax exemption. By-pass trust planning works as follows: upon the first spouse’s death, two trusts are established for the surviving spouse’s benefit. One trust is funded with assets up to the estate tax exemption amount, allowing these assets to continue to appreciate outside the surviving spouse’s estate. When the surviving spouse passes away, this trust terminates, and the assets are distributed to the ultimate beneficiaries free of estate tax. The second trust is funded with the remaining estate assets and is structured to take advantage of the unlimited marital deduction. Portability A spouse may claim the deceased spouse’s unused exemption (DSUE) for their later use via a concept known as portability. To claim the DSUE of the deceased spouse, the surviving spouse must timely file a federal estate tax return (IRS Form 706). Unlike a “bypass” trust plan, portability requires no advanced estate planning and incurs no administrative costs or inconvenience. Regardless of any subsequent changes in the law, the DSUE will be available for the surviving spouse to benefit from in their estate. With the current estate tax exemption amount at a historical high, it is a particularly advantageous time to file an estate tax return solely for portability purposes. Those intending to rely on portability planning should be cautious, as the surviving spouse cannot claim any unused state estate tax exemption amount. Therefore, portability planning may be sufficient for residents of New Jersey, which abolished its estate tax in 2018, but it may not be adequate for residents of New York, which has an estate tax. Unused generation-skipping transfer tax exemption amounts are also not portable between spouses. Inheritance Tax For New Jersey residents, an inheritance tax is imposed on certain classes of recipients of a decedent’s estate assets. The surviving spouse, a Class “A” beneficiary, is wholly exempt from inheritance tax liability. For those married clients who wish to provide an inheritance for beneficiaries in a class that would be subject to the inheritance tax, making lifetime gifts outright or in an irrevocable trust remains a valid strategy for avoiding the inheritance tax. Inherited IRAs Before the enactment of the SECURE Act, beneficiaries of inherited IRAs were permitted to take required minimum distributions (RMDs) based on their life expectancy. A beneficiary younger than the original account owner would have much smaller RMDs, allowing the IRA assets to appreciate over a long period of time income tax deferred. The SECURE Act largely eliminated this strategy. Under current law, most beneficiaries must liquidate their inherited IRA within ten (10) years of the death of the original account holder. The SECURE Act carved out an exception to this rule; it allowed those deemed an “eligible designated beneficiary” (“EDB”) to take RMDs based on their life expectancy. Among the limited categories of EDBs, you guessed it, the surviving spouse is deemed an EDB. A husband or wife who outlives their spouse for many years could see these assets significantly appreciate over their lifetime. Moreover, the surviving spouse has significantly more flexibility in taking withdrawals above the RMD in years when the assets will be taxed at lower marginal income tax rates. Challenges for Unmarried Couples The flip side to all the planning opportunities available to the married couple is that the unmarried couple cannot benefit from any of them. Any gifts between the unmarried couple above the annual exclusion amount would be taxable. Unmarried couples who receive the inheritance of their deceased partner’s estate may be subject to estate taxes, significantly reducing the assets that the surviving partner would otherwise have available for their support. In New Jersey, in addition to any estate tax liability, a non-married surviving partner may be subject to inheritance tax liability. Lastly, the surviving partner may not be an EDB; thus, they will need to withdraw the entire amount of the IRA within ten years, potentially losing out on years of further appreciation. Of course, the unmarried couple still needs estate planning. Indeed, if an unmarried person were to die without preparing a will or trust, the intestacy laws of most states would direct their assets automatically to children, parents, or siblings. There are also tax planning techniques available for the unmarried couple to reduce estate taxes, such as the establishment of one or more lifetime irrevocable trusts. This kind of planning, however, is more expensive, and the administration is costly and burdensome. State legislatures have taken some meaningful steps to protect the rights of unmarried couples in recent years. For example, both New York and New Jersey recognize domestic partnerships, a legal arrangement that confers some of the benefits afforded to married couples on unmarried couples. For example, a domestic partner in New Jersey is a Class “A” beneficiary, exempt from inheritance tax. However, most tax planning opportunities available to married couples remain unavailable to domestic partners. I am hopeful that future legislatures will address some of these disparities, particularly as the unmarried share of the population continues to grow. However, until that legislative fix occurs, sometimes the best planning advice for an unmarried couple in a long-term relationship is to change their marital status.
September 24, 2024
Business
Not Sure if Your Company Is Ready to Sell? Consider the PAEI Model
For most business owners, the chance to sell your enterprise is a once-in-a-lifetime opportunity. But if you take that offer too early or at the wrong stage of business development, the sale could result in a number of undesired outcomes: a low valuation, difficulty finding a buyer, management disputes, contract issues, and other legal problems. Selling a business is like preparing a meal. It’s crucial for a business owner to be able to recognize if their business is either under or overcooked before taking it to market. Unfortunately, it’s not as simple as using a meat thermometer. Instead, owners rely on systems such as the PAEI Model, which Dr. Ichak Adizes developed in the 1970s to track business growth and stability. To this day, business owners use the model to understand their organizations’ lifecycles through the lens of management dynamics. How the PAEI Model Works “PAEI” stands for four different yet common management personae that affect a business’s short-term and long-term performance. Producers are managers who are task-oriented and focused on tangible results. They demonstrate big-picture thinking with little regard to interpersonal or individual concerns. Administrators are managers driven by procedure and planning, with a strong focus on routine and structure in order to maintain success. Entrepreneurs are managers driven by dreams and future achievement. They’re concerned less with day-to-day operations and more with a broad, long-lasting vision of the business. Integrators are managers who work well with others. These individuals are adept at both considering and balancing the concerns of other managers and employees. Each of these roles is important to business development, but each has its own time. The PAEI model lays out an arc of business growth, starting with “Courtship” (when an owner “flirts” with the business idea), which leads to “Infancy,” “Go-Go,” “Adolescence,” “Prime,” and ultimately stability. Which Stage Is the Ideal Moment to Sell? Every stage can spin off into a negative conclusion. For instance, Infancy can result in “Infant Mortality” when there’s nothing left but a Producer. Adolescence, meanwhile, can result in “Divorce” (the owner and the company split), which may lead to “Premature Aging” (the company peaks early without an entrepreneurial vision) and an “Unfulfilled Entrepreneur.” To avoid the potential pitfalls during every stage of a business’ lifecycle, each one of the four management styles must be present. But not everyone comes to the foreground in every stage. Instead, a single management style or combination of styles takes dominance at certain points along the way. For example, in Courtship, the very beginning stages of a new business, the Entrepreneurial management style is required for crafting the initial big ideas and long-term goals that will sway investors and fund the enterprise into Infancy. Once the money rolls in and the business reaches Infancy, it’s important for a Producer to recognize how to responsibly use the startup funds to survive on a daily basis. After some inevitable growing pains, a business reaches Adolescence with the help of an Administrator, whose management style shifts the focus away from sales and revenue generation—and toward cost-cutting, boosting profits, and keeping the company lean. At this stage, an organizational structure is key in order to reach the Prime period of a lifecycle. When the business is in its Prime—when profits are up, operations are running smoothly, and customer satisfaction is at an all-time high—that’s when it’s time to sell. Yes, believe it or not, the best time to sell your business is usually right before it reaches the Stable stage. While further growth can seem all but guaranteed at the Prime stage, according to the PAEI model, most companies begin to falter and precipitously lose value once they’ve become Stable. This is the period in which the Entrepreneurial management style begins to fade, and the Administrative and Integrator styles achieve dominance. In other words, the initial visionary is replaced by people who excel at bureaucracy and longevity. In the realm of mergers and acquisitions, the Integrator is frequently the buyer. As a seller, it’s up to you to ensure the business has reached its Prime and that all the elements are in place for continued success—and to get out right before the business peaks and starts to lose value. While the PAEI Model is not a guaranteed method of success, I believe it can provide rare insight into the business lifecycle. It presents a valuable framework for the roles and traits it takes to reach success and ultimately earn the highest possible sale price for your company.
September 19, 2024
Estates and Trusts
Protecting Your Legacy: Trust and Estate Planning for Musicians
Understanding how to protect and transfer these invaluable assets can ensure that a musician's creative legacy endures and continues to benefit future generations. Embarking on the journey of music copyrights and estate planning is like composing a symphony of legal and financial strategies for musicians and their heirs. Unlike many professions, a music career brings a distinct set of legal and financial challenges, making it crucial for artists to manage their legacies with care. Given the unpredictable nature of the music industry and the substantial value of intellectual property (IP) assets, having a solid plan is not just advisable—it’s essential. Understanding how to protect and transfer these invaluable assets can ensure that a musician’s creative legacy endures and continues to benefit future generations. One of the most important things musicians must pay attention to is their IP rights. It’s important to recognize that with music copyrights there can be multiple copyrights involved in a single song, including the copyright of the composition and the lyrics if they were composed with a partner and separately from the score. So, there are a lot of moving parts to track with a musical piece. Understanding the basics of music copyright is essential before delving into estate planning. A copyright is a collection of legal rights initially owned by the author, including the right to perform the work publicly. These rights are treated like other intangible assets and can be owned jointly, held in trust, or transferred by gift or at death. Properly inventorying and valuing your music copyrights is a critical first step in estate planning. A qualified appraiser can help determine the worth of these assets by examining their income history or market value, which aids in evaluating estate planning options and predicting potential gifts or estate taxes. Ensuring that copyrights for compositions and recordings are registered correctly and that proper powers are provided to trusted successors is key to a portfolio, inheritance, and a comprehensive estate plan. For example, assigning these rights to a trust is an excellent way to provide ongoing income to beneficiaries. Musicians must also account for how royalties should be managed and distributed. This can involve setting up trusts specifically for royalty income. One idea is for musicians to set up management companies to handle their IP assets that can provide continuity and professional management of the musician’s works after death. Let’s take a lesson from Taylor Swift. The key lesson is to protect yourself early. Swift owned the composition of her music; however, she didn’t own the master recordings, and they were purchased without her blessing. To remedy that, Swift famously and with fanfare re-recorded her songs to secure rights to master recordings for most of her catalog. Musicians must also carefully consider who will oversee monetizing their music and brand after they die. Who do they want to decide how their image is used, whether their songs can be used in movies or TV shows, or whether they want to be a hologram? Musicians often have dependents, such as children or elderly parents, who rely on their income. Like many who pass without advance planning or an estate plan, a musician’s assets may go through probate, a time-consuming and public process. Estate planning tools like trusts can help avoid probate, ensuring a smoother transition for heirs and provide for these dependents long-term. Estate planning for musicians also involves navigating complex tax issues, especially when significant estates that may be subject to federal and state estate taxes are involved. Proper planning, including using trusts and charitable donations, can help mitigate these taxes. Beneficiaries may have to pay taxes on royalties and other income from the musician’s IP. Structuring the estate to minimize these taxes is crucial. Musicians making substantial gifts during their lifetime should be aware of potential gift tax implications. Key Legal Instruments in Estate Planning Several legal instruments are crucial in the estate planning process for musicians: Wills: A will is a foundational document in estate planning that outlines how a musician’s assets should be distributed upon death. A will provides for the distribution of property you own at the time of your death. This can include your instruments, gear, and assets related to your music career. You can also designate who will be responsible for managing your music and other intellectual property after your passing. Generally, you may gift your property in any manner you choose. However, wills must go through probate, which can be avoided with other tools. Trusts: A trust is a legal arrangement that allows you to transfer ownership of your assets to a trustee, who can manage those assets for the benefit of your beneficiaries. This can be a useful for musicians to ensure that their loved ones are taken care of after their passing. Trusts are flexible tools that can manage and distribute a musician’s assets according to specific instructions. They can be beneficial for managing ongoing royalty streams and providing for dependents. Of importance for artists is how the handling of the intangible assets known as digital assets are managed post-mortem. These are issues properly handled in an estate plan. In a comprehensive estate plan, there can be multiple trust structures for planning and gifting. Revocable Trusts: A trust created during one’s lifetime may be revocable. Like it suggests, this means it may be revoked or changed by the settlor (“Introduction to Wills—American Bar Association”). These trusts allow musicians to retain control over their assets during one’s lifetime and provide instructions for distribution after death. Irrevocable Trusts: An irrevocable trust means it cannot be revoked or changed by the settlor. This is useful in gifting strategies for artists considering their taxable estate. Health Care Power of Attorney: You have the right to decide who can make decisions about your health care. These documents allow musicians to designate someone to make healthcare decisions on their behalf and outline their instruction for medical treatment if they become unable to communicate. It is not only important to create an estate plan for musicians, but also critical that the estate plan is kept up to date. Things change, mangers change, people get divorced, and children get added, as do grandchildren. Perhaps the person who was first designated as the manager of the estate is out of the picture. It is essential to keep the estate plan up to date as circumstances change, and to make sure that family is aware of updates. In the world of music, where creativity and complexity blend, trust and estate planning strike the right chords for crafting a lasting legacy. By partnering with legal experts who understand the intricacies of intellectual property and the unique needs of entertainers, musicians can craft a plan that not only safeguards their legacy but also ensures their artistic vision endures. This thoughtful approach transforms a vibrant career into a timeless legacy, preserving the essence of their contributions for future generations. Reprinted with permission from the September 10, 2024, issue of The Recorder. © 2024 ALM Media Properties, LLC.
September 18, 2024
Estates and Trusts
Navigating NIL Deals: Why Estate Planning is Essential for College Athletes
As September brings students back to school across the country, college athletes are encountering new opportunities and challenges, particularly with the recent developments in Name, Image, and Likeness (NIL) rights. Now able to leverage their personal brand as a valuable commodity while competing at the collegiate level, athletes face a paradigm shift that requires financial literacy and strategic planning. This transformation has turned student-athletes into potential entrepreneurs, with their talents and popularity becoming marketable assets. One crucial element of a strategic plan that is often overlooked is estate planning, which can protect a student-athlete’s newly acquired assets and ensure long-term financial security. The NIL “Revolution” The National Collegiate Athletics Association’s (NCAA) decision to allow athletes to profit from their NIL rights has opened a significant and long-overdue financial door for college athletes. Now, they can capitalize on endorsement deals, social media partnerships, and even personal business ventures during their college careers rather than waiting for professional opportunities to unlock financial rewards. However, with these new earnings come added complexity. For young athletes, rapidly growing income and brand recognition introduce significant financial and legal considerations. Estate planning—often thought of as something for older individuals—becomes crucial for these athletes to manage their wealth, mitigate taxes, and ensure long-term security. Estate planning involves organizing how assets will be managed and distributed in the event of incapacitation or death. It typically includes creating wills, trusts, powers of attorney, healthcare directives, and implementing tax strategies. For college athletes, however, estate planning is not just about planning for life after death—it is about protecting assets, managing new income, and ensuring their families and loved ones are cared for in case of the unexpected. Why Should the College Athletes Plan Ahead? Asset Protection: NIL deals can yield substantial income, with earnings likely to increase as an athlete’s career progresses. A comprehensive estate plan helps protect this wealth from creditors, lawsuits, and other risks. Trusts, for instance, can provide a layer of legal protection, ensuring that the newfound fame and exposure do not lead to financial vulnerability. Trusts can also facilitate smooth transfers in the event of incapacity. Tax Efficiency: Significant earnings from NIL deals can result in hefty tax liabilities. An estate plan can implement strategies to reduce tax exposure during an athlete’s career, into retirement, and beyond. Since tax laws vary by state, working with an expert can help athletes navigate complex tax requirements and avoid overpaying. Disability Planning: In high-contact sports like football, soccer, or basketball, the risk of injury is always present. Estate planning can include provisions for medical or financial decision-making in case of incapacitation due to injury. This ensures that a trusted individual is in place to manage the athlete’s financial affairs and act in their best interests, even if they are unable to make decisions themselves. Brand Management: For student-athletes whose personal brand significantly contributes to their earnings, estate planning can safeguard their image, likeness, and business ventures, even after their retirement. A well-structured trust or corporate entity can hold and manage these rights, ensuring that the athlete’s brand remains protected and managed according to their wishes. The Foundational Elements of an Athlete’s Plan Last Will and Testament: The cornerstone of any estate plan. It outlines how assets should be distributed and designates guardians for any dependents, ensuring that loved ones and interests are cared for according to the athlete’s wishes. Trusts: Offer flexible tools for asset protection, tax planning, and managing income over time. They help avoid probate, reduce tax burdens, protect trust assets from potential lawsuits, and provide tailored terms for beneficiaries. Power of Attorney: This document grants a trusted individual the authority to make financial and legal decisions on behalf of the athlete if they become incapacitated or even if the athlete is unavailable due to in-season travel, ensuring that important matters are handled effectively in their absence. Healthcare Directives: These directives detail medical care and treatment preferences and designate someone to make healthcare preferences and appoint someone to make healthcare decisions if the athlete is unable to do so due to injury or illness. This ensures that their medical treatment aligns with their wishes. Business and Brand Succession Planning: For athletes with substantial earnings from NIL deals, succession planning is crucial. This includes strategies for protecting intellectual property, trademarks, or businesses tied to their name and image. Proper planning ensures their brand and business ventures are preserved and managed in alignment with their long-term goals, even after death, to ensure that their loved ones reap the benefit of their brand well into the future. The Importance of Estate Planning in the NIL Era In the fast-paced and often unpredictable world of college sports, estate planning provides student-athletes and their families with a crucial safety net. As NIL deals continue to grow in both value and complexity, so too does the need for thoughtful estate management. Estate planning equips athletes with the tools to protect their assets, preserve their brand, and ensure their legacy both on and off the field. For any college athlete navigating the new NIL landscape, estate planning is not just a financial strategy but a pathway to long-term security and peace of mind for themselves and their loved ones. If you or your family are navigating the opportunities and challenges of NIL agreements, it’s worth considering a conversation with someone who understands both the legal and financial landscape. Candace Dellacona is available to discuss how estate planning can fit into your broader financial strategy, ensuring you’re prepared for the future.
September 17, 2024
Commercial Litigation
Does Maryland’s Anti-SLAPP Statute Achieve Its Intended Purpose?
"Originally published in the Maryland Bar Journal, Vol. 6, Issue 2, Summer 2024." An anti-SLAPP law is designed to prevent strategic litigation against public participation (SLAPP), which is litigation that, in its essence, seeks to chill protected speech. Thirty-three states and the District of Columbia have anti-SLAPP laws. Maryland, which promulgated its anti-SLAPP Statute in 2004, is included in this group, but despite being in effect for 20 years, the Statute has only been successfully invoked twice. Courtney Fix is one of those who found relief under this Statute. When Courtney Fix posted “be careful of the tequila in Baltimore, only drink from who you know personally” to her 16,000 Instagram followers in early April 2021, she had no idea that the events that would follow would dramatically change her life. This post, which was vague to many, had a specific meaning - a friend confided in her that she was sexually assaulted by a then-emerging Baltimore restaurateur who gave her a “special” tequila. Courtney did not anticipate the number of women that would contact her directly asking if that post was about the very same restauranteur. As those direct messages came in, Courtney felt the need to do something, and so she confronted the restauranteur directly. He denied any wrongdoing, but nevertheless, Courtney, who believed the women that contacted her, posted a warning to women on her Instagram to avoid associating with this individual. After Courtney’s “warning” post, she began receiving hundreds of direct messages from women detailing incidents of sexual violence, abuse and misconduct committed by various men who primarily worked in the restaurant and hospitality industry in the Baltimore area. While Courtney did not know the women who were messaging her, she felt a responsibility to listen and help. A common thread amongst these messages were requests for Courtney to share their stories as well and to disclose other men who committed wrongful acts. Wanting to help the women messaging her, Courtney decided to honor their requests and share their stories to her 16,000 followers. She posted screenshots of the direct messages, while withholding the identity of those who contacted her. Notably, Courtney only shared survivors’ stories if she received multiple messages from different people that showed a similar pattern of behavior committed by any alleged perpetrator. While Courtney did not actually author any content that detailed allegations of criminal or other sexual misconduct, she posted content that included her own commentary and opinions of the individuals identified by her posts. Courtney’s posts were met with intense reactions. On the one hand, many people applauded and celebrated her efforts for giving a voice to victims and for outing the men responsible for causing harm. On the other hand, there were people who dismissed her as being “crazy”, “reckless”, or “neurotic.” Included in this camp were people who targeted her small business, Full Circle Doughnuts, which was located in Baltimore’s Hampden neighborhood. Others submitted complaints to Instagram regarding her posts, which caused Courtney’s account to be disabled. Unfazed, Courtney created another Instagram account and resumed posting until that account was also disabled. Then she started posting to her business’s Instagram page, which was disabled as well. There were also the reactions of the individuals that were named in Courtney’s posts, which led to three defamation lawsuits being filed against Courtney and her business in June 2021. Because her business was named as a Defendant, Courtney was provided with defense coverage pursuant to her business insurance policy, but by the time the carrier responded to the lawsuits, all three cases were in vastly different procedural posture – one matter had a pending motion for default judgment and sanctions; another had other pending discovery issues; and the third, Joshua Harris v. Courtney Fix, et al., had not been served. By November 2021, the Harris lawsuit was at a standstill despite there already having been two motions for temporary restraining orders, which were heard and denied by the Circuit Court for Baltimore City. Joshua, a former candidate for multiple elected offices, including the 2018 Maryland House of Delegates District 40 election and the 2016 Baltimore mayoral election, labeled him as a “psychopath womanizer”, “scammer”, “narcissist and manipulator”, “abuser”, “sexual predator”, and “classic fuck boy.”[1] In response to these allegations, Courtney moved to dismiss the Harris complaint. Courtney’s motion argued that pursuant to Section 230(c)(1) of the Communications Decency Act of 1996, she could not be treated as a publisher or speaker of the screenshots she posted, and that any commentary that she authored was opinion speech protected by the First Amendment. Additionally, Courtney’s motion argued that the Harris suit was a “SLAPP suit” requiring dismissal under Maryland’s Anti-SLAPP Statute. Beginning with the Section 230 argument, “Section 230 was enacted, in part, to maintain the robust nature of Internet communication and, accordingly, to keep government interference in the medium to a minimum. In specific statutory findings, Congress recognized the Internet and interactive computer services as offering a forum for a true diversity of political discourse, unique opportunities for cultural development, and myriad avenues for intellectual activity.”[2] As a result, Section 230 creates immunity from defamation, when the defendant is 1) the provider or user of an “interactive computer service”; 2) the asserted claims treat the defendant as a publisher or speaker of that information; and 3) the challenged communication must be “information provided by another information content provider.” See 47 U.S.C. § 230(c)(1). The screenshot posts of direct messages met these criteria. It was without dispute that Courtney was a “user” of an “interactive computer service” (i.e., Instagram), and that the Harris lawsuit treated her as the publisher of the posts. Through affidavit, Courtney affirmed that the content was indeed screenshots of direct messages from other users. As such, pursuant to Section 230, Courtney could not be the publisher of these statements. As for Courtney’s own commentary, which did include labeling Harris as a “womanizer” and “sexual predator”, Courtney’s motion argued that these statements were not actionable because she was expressing loose, figurative or hyperbolic speech rather than objectively verifiable facts.[3] Of all the appellations Courtney used herself, “sexual predator” was perhaps the most salacious. While Maryland courts have not addressed this term specifically, sister-state courts have explained that this is “opinion and thus not actionable.”[4] As for the Anti-SLAPP argument, Maryland’s Anti-SLAPP statute provides that the court must dismiss lawsuits that are “1) brought in bad faith, 2) brought against a party who has made protected communications to a government body or the public on a matter within the authority of government body or on an issue of public concern, 3) materially related to the protected communications, and 4) intended to inhibit or to have inhibited the making of those protected communications. If all four criteria are satisfied, then the defendant is entitled to civil immunity if he or she acted ‘without constitutional malice’ when making the protected communications.”[5] Courtney argued that bad faith was evidenced by the relief that Harris sought: a request to chill Courtney’s speech about him entirely such that she could never speak about him again, whether in public or private, other than a forced apology; a demand for compensatory damages in excess of $75,000 and punitive damages in the amount of $1 million; and a request requiring Courtney to submit to a mental health examination in a motion for a temporary restraining order. Additionally, continued delays in service despite Courtney’s counsel offering to accept service was also argued to be an act of bad faith. Courtney argued further that all of her posts – whether third-party content (i.e., screenshots of direct messages) or her commentary on that content – were protected communications. Specifically, as already stated, Courtney’s commentary was opinion speech protected by the First Amendment. Similarly, Courtney also argued that the First Amendment protects her right to exercise editorial control over her platform and distribute others’ speech concerning issues of public concern. The Supreme Court has explained that “speech on public issues occupies the highest rung of the hierarchy of First Amendment value, and it is entitled to special protection”[6], and this rule is not “restricted to the press, being enjoyed by business corporations generally and by ordinary people engaged in unsophisticated expression as well as by professional publishers.”[7] The issues of “public concern”[8] relative to Courtney’s posts about Harris were twofold. First, Harris was a candidate for multiple elected offices, and it was argued that Courtney’s posts about him concerned his character and suitability for those offices. Second, Courtney’s speech was inextricably linked to ongoing public discussions concerning sex, consent, morality and power (e.g., the “Me Too” movement). It was clear and uncontested that Harris’ lawsuit was materially related to Courtney’s speech. The complaint also did not include a single allegation that Courtney made any statements with actual knowledge of their falsity, which could not be tested in any event.[9] The Honorable Jeffrey M. Geller heard arguments on March 30, 2022, and ruling from the bench, he granted Courtney’s motion on every basis that was raised.[10] It is believed that this is just the second time a party has prevailed under Maryland’s Anti-SLAPP Statute.[11] Joshua appealed this ruling, but his appeal was ultimately dismissed. This was a great outcome for Courtney, but it is easy to imagine that Maryland’s appellate courts would have appreciated the opportunity to address this matter. While Courtney prevailed, it was a Pyrrhic victory. The fact of the matter is that once the lawsuits were filed, her speech was chilled entirely. Courtney did make a few posts about the litigation once it was filed, but as soon as some litigants started incorporating that into their filings, she stopped altogether. There was also the damage caused by the allegations against her that painted her as a liar. She never really had an opportunity to defend against these allegations either, and even if she did have that chance, it is unclear if it would have mattered or if the court of public opinion had already judged her. Critically, Courtney’s business also suffered. She closed Full Circle Doughnuts in November 2021, just four years after it opened. Shortly after that, Courtney moved away from Baltimore. There is no doubt that the burden of the litigation was a critical factor in her decision to close her business and move. Courtney’s reality begs the question of whether Maryland’s Anti-SLAPP Statute is a paper tiger. For example, the Statute does not include an attorneys’ fee provision. The practical effect of this is that even a party eligible for relief under this Statute will still be burdened by the commencement of a SLAPP Suit. For Courtney, because her company was a co-defendant, she had no choice but to hire counsel. Additionally, the requirement to show “bad faith” does not necessarily distinguish the Statute from Rule 1-341 – Bad Faith – Unjustified Proceeding. No matter the damage the litigation caused Courtney, her strength and resolve will carry her through. She will tell her story one day, and it will be an incredible one. Until that day, the hope is that her case sets a precedent that will protect others that are as courageous as she was. [1] Mr. Harris also alleged that Courtney was responsible for posts concerning him that appeared on a website known as “outyourabusers” despite having nothing more than speculation that she was behind that content. These allegations were addressed through an affidavit from Courtney where she affirmed that she was not responsible for the website. This affidavit was not countered. [2] See Zeran v. Am. Online, Inc., 129 F.3d 327, 330 (4th Cir. 1997) (internal quotations and citations omitted). [3] See Thacker v. City of Hyattsville, 135 Md. App. 268, 313 (2000), cert. denied, 363 Md. 206 (2001) (explaining that if a statement is not provable as false or is not reasonably interpretable as stating facts, then it cannot form the basis of a defamation suit) (quoting Milkovich v. Lorain Journal Co., 497 U.S. 1, 18, 110 S.Ct. 2695, 2705 (1990)). [4] See Mogged v. Lindamood, No. 02-18-00126-CV, 2020 WL 7074390, at *16 (Tex. App. Dec. 3, 2020), review denied (June 11, 2021) (holding that the label “sexual predator” is “mere opinion”); see also Rosado v. Daily News, L.P., No. 157674/13, 2014 WL 883648, at *3 (N.Y. Sup. Ct. Jan. 31, 2014) (holding that being labeled a “sex predator” is not actionable). See also Burgoon v Delahunt, 2000 WL 1780285 (Minn. App) (reasonable person could apply “sexual predator” to inappropriate touching and offensive sexual comments); Terry v Davis Community Church. 131 Cal App 4th 1534, 1555 (2005) (inappropriate relationship with minor) [5] See MCB Woodberry Developer, LLC v. Council of Owners of Millrace Condominium, Inc., 253 Md. App. 279, 297 (2021). [6] See Snyder v. Phelps, 562 U.S. 443, 452, 131 S. Ct. 1207, 1215, 170 L.Ed. 2d 172 (2011) [7] See Hurley v. Irish-Am. Gay, Lesbian & Bisexual Grp. of Bos., 515 U.S. 557, 574, 115 S. Ct. 2338, 2347, 132 L. Ed. 2d 487 (1995). [8] In Woodberry, the Appellate Court of Maryland explained that “First Amendment jurisprudence in the context of actions for defamation … establish that a matter of ‘public concern’ means ‘fairly considered as relating to any matter of political, social, or other concern to the community’.” See 253 Md. App at 304. [9] See Batson v. Shiflett, 325 Md. 684, 728 (1992) (explaining that constitutional malice “is established by clear and convincing evidence that a statement was made ‘with knowledge that it was false or with reckless disregard of whether it was false or not.’”) (quoting New York Times Co. v. Sullivan, 376 U.S. 254, 279-80, 84 S. Ct. 710, 11 L.Ed.2d 686 (1964)). [10] The motion also argued that the complaint failed to state a claim upon which relief could be granted. [11] Shortly after this ruling, the other lawsuits pending against Courtney were resolved.
September 16, 2024
Business
Letters of Intent (LOI) – Buyer’s Exclusivity
I’ve reviewed many LOIs over the years – some we’ve prepared and others the client prepared. I’ve found that too many people view LOIs as form documents containing commercial terms. Yes, LOIs are vital documents establishing the commercial terms of a transaction. However, LOIs should not be considered “throwaway” forms in the M&A process. I think the lax attitudes relate to the non-binding nature of most terms in the LOI. Yet, there should be specific binding terms in every LOI. For a buyer, one important binding term is the exclusivity provision. Most recently, I needed to enforce this provision due to a seller’s breach. My client invested much of their time and money evaluating a transaction and documenting the same (legal, accounting, and banker time). The exclusivity provision protects a buyer from a seller “two-timing” them by not committing fully to the contemplated transaction and not negotiating in good faith. In my instance, the seller committed to another transaction during my client’s exclusivity period, leaving my client with much frustration and wasted costs. Buyers rightly demand a fair time frame to evaluate and work with a seller to consummate a transaction. Buyers invest substantial front-end costs in this regard. Fairtrade is for the seller to commit to an exclusivity period (30, 60, 90 days) to allow the parties to finalize a transaction in good faith. My client had an exclusivity period with “teeth” that allowed him to recoup these costs – and the seller did reimburse. But buyers beware. Without an adequate exclusivity provision, among other protective provisions, much time and money can be lost when a seller changes course.
September 12, 2024
Construction
Some Practical Pointers for Following the Claims Process in Your Contract Documents
When a problem arises on a project, it can cause significant impact to the schedule, costs, design, and sequence of work. The problem might also require significant technical analysis to determine and ascertain the cause and best cure or remediation. It’s therefore no surprise that contractors and subcontractors, in the midst of such situations, sometimes fail to properly focus on the contract process for formally noticing the issue and submitting it as a claim; they are too busy addressing the issue directly. Most contract documents have specific clauses that govern the claims process, and each project might have variations to the process. Regardless, there are certain fundamental steps that tend to be common, and all contractors and subcontractors should consider these steps when evaluating the problem because (a) your contract probably requires it, and (b) these steps tend to facilitate a proper submission, negotiation, and resolution of a claim. Notice the Issue The first step when encountering a problem is typically to issue a written notice of the issue. Most contracts require notice of delays, differing site conditions, change orders, or claims within a specified period of time. It is often confusing to initially determine if the issue is a claim or not because a claim usually indicates a dispute; meanwhile, notice of an issue could be as simple as submitting an RFI. It depends on the circumstances. Nevertheless, the first step is to notify the proper parties of the issue in writing. The contract documents may require that specific issues be noticed as an RFI, change order, or request for adjustment. The contract documents might require that the notice be submitted to the Architect of Record, owner’s representative, or a construction manager. Typically, when initially noticing the issue, the notice will take the form directed by the contract, and it will identify the issue at hand, with any supporting documentation to explain or present the issue. It should also identify whether additional time or costs are likely to result from the issue. Transitioning the Notice of an Issue to a Formal Claim Often, a problem on a project will start with notice of the issue, and it will progress and develop into a claim. For example, a sinkhole on a project will typically result first in an RFI, project meeting minute, or change order proposal that identifies the sinkhole and declares it to be a differing site condition or issue needing the attention of the owner or Architect of Record. Thus, the first discussion of the item is typically a notice, not a formal claim. Typically, in response to the notice of the issue, instruction or direction will be provided by the owner or Architect of Record on the work to be performed. The instruction might be in the form of a change order, change directive, or a response to an RFI. If the directed action is agreeable and provides an acceptable adjustment to the time or price for the work, then the issue is often resolved through this natural course of conduct. But if the parties disagree on the direction, lack of direction, or the proposed compensation or extension of time, then the matter has developed into a claim/dispute. The cautious and prudent contractor recognizes that if it fails to lodge and preserve its disagreement and instead simply signs a change order, it could potentially waive its rights to additional time or compensation, depending on the circumstances. Typically, the contract documents will provide a specific process for progressing the claim, and the first step of the claim process is to submit a written claim within a specified time period. Thus, in the hypothetical example at hand, once the issue has been noticed and developed into a disagreement, that is when the notice of claim should be submitted. I often see contractors that initially notice the issue but then fail to submit a formal claim once the issue has reached an impasse. The submission of the claim might be rather simple, or it might be complex. For example, the AIA A201 requires that claims be submitted to the “Initial Decision Maker,” who is typically the Architect of Record. The Architect of Record then responds to the noticed formal claim, and if the matter is still in dispute, the claim proceeds to either mediation, arbitration, or litigation. Some contracts have very extensive and complicated processes for submitting the claim, which require specific information or supporting documentation. And some contracts have extensive processes where the initial decisions on the claim, either from the owner or Architect of Record, may take several steps with decisions rendered at each step. It is important to properly present the claims to the correct persons, with the correct information, and if the claim is denied to promptly notice the appeal of the decision in conformance with the contract. Proper notice and submission of a claim is important because a failure to do so may result in a waiver of the claim. Thus, it is important to issue both a written formal notice of the issue and an additional notice of claim when the issue has not been resolved to satisfaction. Additionally, a properly developed and presented claim—containing supporting documentation and clear explanation of the issues with legal and expert analysis if necessary—is in a significantly better position for negotiated resolution. The best practice is to consult with trusted, experienced counsel that is knowledgeable on the intricacies of construction law. Offit Kurman construction attorneys are available to advise and counsel contractors, construction managers, design-builders, design professionals, subcontractors, and developers on construction contracts, risk, and project disputes.
September 12, 2024
Labor and Employment
OK at Work: Effective Strategies for Utilizing Your Attorney
On this week's OK at Work, Sarah Sawyer and Russell Berger discuss strategies for leveraging your attorney to help your business mitigate legal risk. Listen to learn more.
September 10, 2024
Intellectual Property
Pre-Emptively Filing a Trademark Application Over a Viral Catchphrase, Not Very Demure
On August 5, 2024, the life of TikTok content creator Jools Lebron changed after she posted a video that went viral. In the video, Lebron uses the phrase “very demure, very mindful, very cutesy.” That TikTok has since been viewed over 23 million times. Lebron has gone on to appear on Jimmy Kimmel Live and snagged endorsements with Zillow, Verizon and K18 hair. However, Lebron’s joy was dampened after she discovered that an individual named Jefferson A. Bates filed a trademark application with the United States Patent and Trademark Office (“USPTO”) for the wordmark “very demure .. very mindful ..” Bates’ application was filed on August 20, 2024, for advertising, marketing and promotional services related to all industries for the purpose of facilitating networking and socializing opportunities for business purposes. Since then, a few other trademark applications involving the words “demure” and “mindful” have popped up. But what even is the implication of these trademark applications to Lebron’s growing popularity and association with the catchphrase “very demure?” Can she continue to use the phrase in her videos or for the sale of merchandise? Under the Lanham Act, the standard test of trademark ownership is a priority of use in the marketplace. This means that ownership of a trademark is acquired by use in the ordinary course of trade, for example, by selling merchandise with the mark. On the other hand, trademark registration creates a legal presumption of ownership and provides notice of such ownership to the public. A trademark registration is obtained by submitting an application to the USPTO for the registration of the trademark. Such an application may be based upon actual use in federally regulated commerce. However, it is quite common to submit a trademark application as a way to reserve trademark rights prior to, but in anticipation of, actual use of the mark, as long as a declaration of bona fide intent-to-use in federally regulated commerce is submitted with the application, although an applicant under the intent-to-use category, will ultimately be required to submit a declaration of actual use before registration is granted. Bates’ trademark application alone does not reserve or guarantee his ownership of the “very demure .. very mindful ..” mark. Registering a mark involves a review by an examining attorney from the USPTO, and the process can take up to 18 months. During the review process, the examining attorney reviews the application to make sure it meets all legal requirements for registration. In fact, the USPTO may even reject the application for various legal reasons. For example, if the application conflicts with a mark that has already been registered or that is pending registration, the USPTO will issue an office action. An office action is a letter from the USPTO informing an applicant of the issues with a trademark application. An office action must be resolved before registration can be granted. After the review process, the trademark is published in the Trademark Official Gazette. At this point, any member of the public can oppose the registration of the trademark within 30 days of the publication. Alternatively, a letter of protest may be submitted with the USPTO. Even though filing a federal trademark application could provide Bates with some protection, trademark rights are automatically acquired through use of the mark in the marketplace. Thus, any protection that Bates may have received from his application may be subject to the rights of earlier users of the mark in the marketplace. However, can Lebron’s iconic use of the phrase in her TikTok videos be considered prior use in commerce? In decided cases, the Trademark Board has explained that mere advertising without rendering services under a mark could, in some circumstances, constitute use sufficient to prove priority. Every case is different, and the decision of the Trademark Board depends on the specifics at hand. Lebron can certainly continue to make videos using the viral catchphrase, but the clock may have started ticking on a race to the marketplace. Navigating the trademark application process or opposing the registration of a trademark can be confusing. If you are concerned about understanding how trademark rights can protect your business and brand name, we recommend consulting with an intellectual property attorney to discuss your options.
September 9, 2024
Mergers and Acquisitions
In M&A, a Seller’s Greatest Asset Is Their Engagement in the Deal
Every business owner understands the importance of employee engagement. Keep your team motivated and energized, and you’ll maximize profit, productivity, retention, and customer satisfaction. When the time comes to sell your business, you'll need to cultivate that same level of engagement within yourself. You’re the one in the driver’s seat; no one else can steer the process for you. If you aren’t totally invested and enthusiastic about the deal, you risk missing out on the best possible sale price or letting the transaction fall apart. Keep in mind that during a merger, acquisition, or other business transaction, a seller takes on two jobs: selling a company and running a company. Neither job is easy. Both require full engagement, attention, and leadership acumen. I like to say that during an M&A transaction, you operate your business from 9 a.m. to 5 p.m., and you sell your business from 5 p.m. to midnight! During the transaction, the business owner needs to make themselves readily available to evaluate buyers, negotiate terms, produce documents, answer questions, and actively engage in other elements of the transaction. As a seller, the owner must also sell their business — convincing the other party of their vision, of the company’s valuation, and why the organization is an excellent buy. At the same time, the owner is still involved in the day-to-day operations of the business. We’re talking about governing organization-wide initiatives, developing strategies, making decisions, communicating to internal and external stakeholders, and everything else leaders do on a daily basis. In addition to these full-time responsibilities, the owner is typically hard at work on the transition — readying employees for the changes ahead, locking down key contracts, keeping vendors and business partners updated, and so on. If that sounds like a lot to handle, it’s because it is. It’s like undergoing an extended federal investigation while pushing your business as aggressively as a used car salesman would. Sellers need to prepare financially, emotionally, and psychologically for the difficult road ahead. They need to figure out their goals and objectives early and stick to them resolutely. Fortunately, sellers don’t need to manage it all alone. Business attorneys, investment bankers, valuation professionals, and other M&A advisors can provide much-needed support and sanity checks. That said, we can’t get the deal done without your direction and continual involvement. Again, the operative term is engagement. I’ve worked with clients who lacked engagement and damaged their deals as a result. You need to consider decisions, read every document, and follow through all the way. If your attorney asks you for your business contracts, they don’t want to hear “here’s most of them.” You need to provide all of them, not 80%, not 90%. “Good enough” doesn’t cut it. The buyer who’s going to pay you millions of dollars isn’t going to stand for “good enough” or “most of what I could find;” they need everything, or they need to know what you can’t find and why. On the flip side, there’s such a thing as getting too engaged in the transaction. Micromanaging is a form of sabotage. Trust the members of your team to do their jobs. Insisting that you need something done by Friday has no impact on your attorney’s ability to do it. Deadlines should be based in reality. Moreover, the attorney may have a good reason for taking their time. Sometimes, it’s simply smarter to wait and see how things play out so you can make better-informed decisions. Remember that a business transaction is a dance, a push-and-pull between buyer and seller. If the only reason you’re rushing through it is to check a box, you could be losing perspective on the deal and giving up your leverage. Any effective arrangement between a business owner and an M&A advisor is a partnership. While healthy discussion is good, each partner fundamentally needs to do their part and stay in their lane. A lawyer shouldn’t be asked to provide guidance on net-working capital—that’s an investment banker’s job. By the same token, the banker’s input on legal matters shouldn’t supersede the attorney’s recommendations. And as the business owner, you’re ultimately the one calling the shots. It’s your business, your transaction, your future. Grab hold of the wheel and put your foot on the pedal. Originally posted 10/25/19, no content changes.
September 5, 2024
Family Law
Navigating the Division of Private Investments in a New Jersey Divorce: A Simplified Guide
Divorce can be a complex process, especially when dividing financial assets. The process can seem even more daunting for those who own private investments, such as shares in a closely held business or investment partnerships. If you're facing a divorce in New Jersey and have private investments, understanding how these assets are divided can help you navigate this challenging time with more confidently. Here's a straightforward guide to help you through the process. What Are Private Investments? Private investments are assets that are not traded on public exchanges. They can include: Shares in Private Companies: Owning stock in a company that is not publicly traded, is considered a private investment. Partnership Interests: Investments in business partnerships or joint ventures. Real Estate Ventures: Investments in real estate projects that are not part of a publicly traded real estate investment trust (REIT). How Are Private Investments Divided in a New Jersey Divorce? In New Jersey, divorce laws require that marital assets be divided fairly, which is known as "equitable distribution." This doesn’t always mean a 50/50 split but rather a fair division based on various factors. Here's a step-by-step look at how private investments are typically handled: Identify the Investments: The first step is to identify all private investments owned by either spouse. This involves compiling detailed information about each investment, including its value, ownership percentages, and any relevant agreements or documentation. Determine the Value: Valuing private investments can be more complicated than valuing publicly traded stocks. Since private investments are not publicly traded, they lack a clear market value. You might need to hire financial experts or appraisers specializing in valuing such assets. They will consider factors like the company's financial statements, revenue, profits, and market conditions to estimate a fair value. Assess the Marital Portion: Only the portion of the private investment acquired during the marriage is subject to division. If the investment was made before the marriage, its pre-marital value is generally considered separate property. However, any increase in value during the marriage is typically divided if the asset requires the active efforts of either spouse. This can be particularly complex if the investment has appreciated significantly over time. Consider the Type of Investment: Different types of private investments might require different approaches:Business Interests: If one spouse owns a business, determining its value and dividing ownership can be particularly intricate. The court may consider whether the business was started before or during the marriage and how much of the business’s value is attributable to the marital period. Partnerships: If you are a partner in a business, your share might be divided based on the partnership agreement or subscription agreement, which might outline how to handle such situations. Negotiate and Reach an Agreement: Once the value of private investments is determined, you and your spouse can negotiate how to divide these assets. This might involve selling the investment and splitting the proceeds, or one spouse might buy out the other’s share. Another option to consider may be a transfer of shares directly to your spouse (if permitted) or an offset against another marital asset. Negotiations should be guided by fairness and consider each party’s financial and non-financial contributions to the marital enterprise. Legal and Tax Considerations: Dividing private investments can have tax implications. It’s important to consult with tax professionals to understand the potential tax consequences of transferring ownership or selling investments. Legal advice can also ensure that all agreements comply with New Jersey divorce laws and are properly documented. Asset Protection and Estate Planning Considerations: It is also extremely important to consider how any division may impact your asset protection plan and/or your estate planning objectives. Seek Professional Guidance Given the complexity of valuing and dividing private investments, it’s advisable to work with professionals who have a deep understanding of these areas. Financial advisors, business valuators, and seasoned matrimonial attorneys can offer valuable guidance and help ensure that your interests are protected. Conclusion Dividing private investments during a divorce in New Jersey involves a careful assessment of their value, understanding which portions are subject to division, and navigating the complexities of asset division. While the process can be intricate, you can work towards a fair and equitable resolution with the right support and a clear understanding of your assets. If you’re facing a divorce and are unsure how to handle private investments, we strongly recommend consulting with a knowledgeable family law attorney licensed in your jurisdiction, as every case is unique and fact-sensitive. With the right expertise, you can manage this challenging aspect of divorce and move forward with greater clarity and confidence. If you would like to discuss your matter or have any questions, please contact Rawan Hmoud, Esq. by email at rhmoud@offitkurman.com or by phone at D: 347-589-8528. In addition to her more than 17 years of experience in family law, Ms. Hmoud is the Practice Group Leader of the Family Law North group at Offit Kurman, PA. She works with a team of matrimonial attorneys covering New Jersey, New York, Pennsylvania, and our Asset Protection and Estates and Trusts teams.
September 5, 2024
Estates and Trusts
Writing Your Own Epilogue: How Estate Planning Can Shape Your Legacy
William Shakespeare said, “A good play needs no epilogue.” When a story is compellingly told, in other words, there is no need for commentary after the curtain falls. Like a play that is well written, a life that is well lived speaks for itself. But living well includes knowing that you have planned for what happens after you are gone. This foresight includes how easily your estate will be passed down to the people you care about. Have you written a will that names someone to settle your estate? If something were to happen to you, do you know who would receive your assets? If you have children, have you appointed a guardian to look after them and a trustee to manage their inheritance? If not, the commentary on your life could well include tales of confused intentions and mismanaged assets, of hurt feelings and squandered wealth. Fortunately, all it takes is a phone call to an estates and trusts attorney to make your epilogue your own. With your guidance, the attorney can prepare your will, durable power of attorney, and advance medical directive. These essential documents name a cast of characters who can take charge if you should die or become incapacitated. Your Last Will and Testament names a “personal representative,” or executor, who will administer your estate. Dying without a will, or “intestate,” would require someone to step into this role. The person they select could be an estranged sibling or disapproving parent, who will then have the legal authority to go through your home and distribute your possessions and other assets to your heirs. By preparing a will, you ensure that the right person is in charge of settling your affairs. Writing a will also enables you to leave your assets to the people you select. Shakespeare himself did this when he bequeathed his “second-best bed” to his wife. In addition to your spouse or partner and any children, you might consider including a charitable organization, such as an alma mater or house of worship, among your beneficiaries. Working with an attorney is an opportunity to coordinate assets like life insurance and retirement accounts with the provisions in your will. These “non-probate” assets are not controlled by your will and instead transfer directly to the named beneficiary upon your death. It’s essential, then, that these beneficiary designations work in tandem your will and are not at odds with it. Even a well-lived life can include periods of struggle. If you ever become incapacitated, a durable power of attorney can name someone you trust to manage your finances. The duties of your “attorney in fact,” as the person is called, could include paying your bills, filing your taxes, or even selling your house in order to move you into assisted living. An advance medical directive is like a power of attorney but relates to your health care. It enables you to state your wishes for managing an end-of-life illness and to name a trusted individual who will ensure that your wishes are carried out. If you lose capacity and don’t have an advance directive, the authority to make medical decisions on your behalf will fall to your next of kin. Surprisingly, this could be several people, like a group of siblings, who could have very different ideas about how to manage your care. By preparing an advance directive, you can instead name someone with your best interests at heart to take on this essential role. Of all the benefits of having an estate plan, perhaps the greatest is the reassurance of knowing that the actors you have chosen are prepared to step into their roles when the need arises. With that in mind, when is the best time to have your estate-planning documents drawn up? As Shakespeare said in the Merry Wives of Windsor, “Better three hours too soon than a minute too late.” Lee Carpenter is a Principal at the law firm of Offit Kurman, P.A., and can be reached at (410) 209-6426 or lee.carpenter@offitkurman.com. This article is intended to provide general information and should not be construed as legal advice.
September 3, 2024
Commercial Litigation
Gut Punch...No Regrets
Sometimes a “win” feels like, well, . . . not a win. Sometimes a “win” comes at such a significant cost that the diminished value of the victory forces one to question whether it was a win at all. The Battle of Bunker Hill is a notorious “pyrrhic victory” during which the British troops occupying Boston eventually overran the vastly outnumbered rag-tag assemblage of defending militiamen but not without suffering substantially greater casualties than expected. The battle, nominally a British victory, proved to be an encounter the British would much rather forget than tout as a win. Similarly, a prize fighter’s successful defense of his boxing title by technical knockout leaving him perceptively weak and vulnerable to challengers, perhaps even severely injured, might leave him questioning whether, in hindsight, the public beating taken in the ring was truly a “win” for which it was worth fighting. I recently experienced an unqualified “win” for a client followed by a sucker punch I didn’t see coming . . . a “gut punch” unexpectedly bringing me to my knees and requiring the equivalent of a “standing 8-count” to shake off and get my head right. While it didn’t come with bloodshed or a championship belt, it did come with loss of life and a serious cause for pause. The Set-Up I’d been contacted and engaged by a non-familial attorney-in-fact on behalf of a lovely 90-year-old, bed-ridden, “stage 4” diagnosed, short-timer. For these purposes, I’ll call her “Joy” -- because she certainly was! Joy was a pistol. Although end-stage, unable to leave her bed, and receiving hospice care when I met her, Joy was feisty. I certainly had no doubts about her mental capacity. She knew what she wanted and had no issue telling you! What she didn’t want was a guardian or conservator appointed for her – least of all her 30-year estranged family member (“Pat”) who, from thousands of miles away, had only begrudgingly made the trip to see Joy and, even then, chose to disrespect her by removing and requisitioning Joy’s dining room chandelier before bothering to say “hello!” Soon thereafter Pat had returned home and engaged local Virginia counsel to assist Pat in securing complete control over Joy as both guardian and conservator. Suit was filed and a Guardian ad litem (GAL) already appointed by the time I got the initial call. Joy was having none of it and was non-plussed. For her part, Joy, with the help of her attorney-in-fact, had engaged reputable counsel to redo her estate plan writing Pat (and Pat’s equally estranged sibling, who couldn’t be bothered to pay respects) completely out of her will. I know what you’re thinking at this point – was the non-family member taking advantage of Joy and now the object of all of her bounty? Nope. Joy kept it in the family but skipped a generation leaving everything she owned to the grandchildren she’d never been allowed to know. In what turned out to be her final days, Joy wanted nothing more to connect with and meet the now adult grandkids she’d never met, but my requests through counsel on her behalf went unanswered. The “Win” Having personally met with and preliminarily concluded Pat needed no guarding or conservation, I was easily able to convince Pat’s counsel that there was no need to rush to judgment and coordinate a cooperative approach to allowing an independent assessment by the court-appointed GAL – who, by the way, was equally easily convinced of Pat’s mental acuity and just as willing to minimize her involvement so as to avoid unnecessarily running up legal fees. I convinced Joy to allow me to share her new estate plan documents so Pat’s counsel could see and share with Pat that mom was not giving it all away to who knows who and clearly had a plan – a plan reflective of the non-existent relationship Joy had had with her children . . . a plan without Pat. With no basis for denying Joy her freedoms of choice, Pat’s counsel pursued a voluntary dismissal. With everyone doing the “right thing,” a lot of money and heartache was spared and I had successfully defended Joy’s interests without so much as having filed a single pleading or attended a single hearing. No formal discovery was needed; judicial economy was maximized. Joy was happy. Joy’s attorney-in-fact was happy. I was happy. Joy was at peace. Joy passed several days later. The “Gut Punch” With Joy’s passing, there was still work to be done, of course. In keeping with Joy’s wishes, Joy’s attorney-in-fact, now Executor under Joy’s will, made arrangements for the final disposition of Joy’s remains with no public service or ceremony. I reviewed the published eulogy with interest and a strange deference, considering I’d only twice met Joy in person and only known Joy for a few weeks. Count this one as a “win,” I thought. Hold this out as a case study on how every case should go, I concluded. I’d even begun composing the article in my head. That’s when I got the call. Joy’s other long-lost offspring had been given my number. It seems there’d been no love lost between Joy and himself over the years and he’d deferred to Pat to address mom’s final illness. With news of Joy’s death still fresh, he was calling to let me know that Pat had just taken her own life. There it was – his own self-described “1-2 punch combination” which had apparently left him feeling weak in the knees, was the punch to the gut I didn’t see coming. I sat dazed and speechless as he shared the unsolicited gruesome reality of Pat’s disposition as his story morphed into the impact on Pat’s situation on the grandkids – remember the grandkids? He transitioned effortlessly again to talk of wanting to be “fair to the kids” (appearing now to be indirectly referencing Joy’s estate and believing, based on apparently nothing in particular, that Pat’s kids would somehow be short-shrifted with Pat’s untimely demise). In that moment, I caught my breath and lifted myself off the mat with the revelation that he had been written out of the will and the grandkids were to receive everything. “So that’s it, then, huh.” “Yes.” Conversation over. After an awkward silence, he hung up. The Aftermath I’m not sure which had hit harder, news of Pat having taken her own life or the impact of her doing so on the sibling and children she’d left behind. I suppose that in my line of work I ought to be grateful I’ve not faced more such situations. Quite candidly, I’ll concede I’m not sure this would still be my line of work! There was no championship belt for my performance, nor was one deserved. Still, a win’s a win, right? I take solace in knowing that I served my client’s interests cost-effectively, efficiently, and professionally. I successfully protected her legal rights and helped her die with dignity and at peace. The tragic aftermath left in her wake was not of my doing, but rather the apparent consequences of lifetimes of regret about which I know little more than hinted at here and with which I had no involvement. I think it’s important to recognize that our wins and losses as litigators are life-altering events for our clients and their “adversaries” (aka family members, in my specific line of work). I think the struggle comes from the juxtaposed need to be independent-thinking, dispassionate, third-party trained professionals and the inherent value in appreciating the emotional toll and impact the circumstances have on not only our clients but also those caught up in outwardly expanding ripples left in litigation’s wake. My takeaways? If nothing else, I learned I could take a punch. I still what I do . . . for now, at least. Personally, I suggest calling your mom; hug your kids before it’s too late. Professionally, in a personal services context, caring still matters. It’s important to remember that people generally don’t care what you know unless they know that you care, but if they don’t care that you care, you don’t need them.
August 30, 2024
Business
I’m a Potential M&A Buyer; Should I Focus on Buying Stocks (Equities) or Buying Assets?
When an M&A buyer is looking into a target company, they’re faced with the decision whether to buy stocks (the equities) or acquire assets. But what’s the difference? A stock purchase involves the purchase of the selling company’s stock only. Simply put: the buyer acquires all of the outstanding stock of the target company directly from the target company’s stockholders, including the assets, rights, and liabilities. The buyer then steps in the shoes of the selling stockholders (switches places). Stock purchases are generally straightforward transactions. Both parties sign a Stock Purchase Agreement (a sales agreement used to transfer and assign ownership in a corporation) and any other related documents that outline the terms of the deal, and the sellers then transfer their stock to the buyer. It seems simple enough, right? For the most part. There are risks, such as unknown or undisclosed liabilities of the target company. Again, when you purchase the stock, you become the stockholder; thus, nothing at the company level changes (save perhaps change of control issues). Operations remain intact as do all risks and liabilities. In addition, stock sales generally have favorable tax treatment for sellers. But what if you don’t want to buy everything and/or you want to limit your risk exposure? You might then be more interested in an asset purchase. An asset purchase is an agreement between a buyer and seller to acquire a company’s assets. This means: the buyer only acquires the assets, rights, and liabilities it identifies and agrees to acquire and assume. Assets can be both tangible, such as offices and equipment, and intangible, such an intellectual property and corporate name. Asset purchases are a good option if you’re looking for more flexibility and don’t want to pay for unwanted assets. Further to that point, it means less risk of assuming unknown or undisclosed liabilities. Asset purchase transactions are generally more favorable to a buyer and at times less favorable to a seller. Some buyers may be deterred by asset acquisitions because they’re more complex than stock purchases. The buyer has to spend time identifying the assets it wishes to acquire/assume. By doing so, the buyer may potentially overlook an important asset required to run the business it’s acquiring. Asset purchases have more formalities and documents since they require a separate transfer for each of the identified assets and liabilities of the target company. They may also require more third-party consent since the contracts assumed by the buyer are likely to contain anti-assignment clauses (which prevents either party the ability to assign tasks to a third party without the agreement of the non-assigning party). Whether you’re considering a stock purchase or an asset purchase, it’s always best to discuss it with an M&A attorney first. Selecting the form of the transaction is a key consideration when targeting the purchase of a business. There are many variables to consider as to why a transaction is set as a stock purchase versus an asset purchase. Originally posted on 9/9/2020, no content changes.
August 29, 2024
Family Law
New Jersey vs. California: A Divorce Law Comparison Through JLo and Ben's Separation
Recent media coverage has been swirling with rumors surrounding Jennifer Lopez (JLo) and Ben Affleck’s separation. On August 20, 2024, it was reported that JLo filed for divorce in California, where they both primarily reside, after just two years of marriage. While the separation was not unexpected, it came as a surprise that JLo and Ben did not have a prenuptial agreement prior to walking down the aisle in July 2022. Without a prenuptial agreement, the earnings, profits, and assets acquired during the marriage are subject to division. In determining how marital property should be divided, courts will consider a variety of factors, which can differ depending on the state where the divorce is filed. While their divorce is being filed in California, exploring how New Jersey would handle a similar situation offers an interesting perspective on the differences in divorce law across states. Unlike California, which is a community property state where marital assets are generally divided 50/50, New Jersey follows an "equitable distribution" model, meaning that marital property is divided in a manner deemed fair based on the circumstances — not necessarily equally. Equitable Distribution in New Jersey If this matter were pending in New Jersey, the allocation of marital assets between spouses would be governed by N.J.S.A. 2A:34-23.1, regardless of ownership. Unlike California, New Jersey is an equitable distribution state, meaning that marital property is not necessarily divided equally but, in a manner, deemed fair based on the circumstances. In conducting an equitable distribution analysis, New Jersey courts follow a three-step process: Identification: The court first identifies the specific property and liabilities of each spouse that are subject to distribution. Valuation: The court then determines the value of this property. Distribution: Finally, the court analyzes and decides how to distribute the property fairly. At Step 3, the court has broad discretion to determine the most equitable way to distribute marital assets, guided by the factors outlined in N.J.S.A. 2A:34-23.1. Among the 16 factors considered, the most important include: The length of the marriage. The economic circumstances of both parties. Each party’s financial and non-financial contributions to the marriage. Additional factors such as the age and health of both parties, the standard of living established during the marriage, and the tax consequences of proposed distributions. Considerations for High-Profile Divorces For high-profile clients like JLo and Ben, a New Jersey court might consider a variety of assets when determining the distribution of their assets and liabilities. This list includes, but is not limited to: The earnings from films in which either party starred or was involved as a director/producer during the marriage. For Ben, this includes films such as Air and Hypnotic, This Is Me… Now: A Love Story, Small Things Like These, Kiss The Future, The Greatest Love Story Never Told, The Instigators, and The Accountant 2, while JLo’s films include Shotgun Wedding, The Mother, This Is Me… Now: A Love Story, and Atlas[1]. The court would also take into account their Beverly Hills home, Promotional contracts, streaming dividends, and royalties earned during the marriage. In certain circumstances, the appreciation of separate property may be considered a marital asset subject to equitable distribution. However, given the short duration of JLo and Ben’s marriage, it is uncertain whether a New Jersey court would divide any increase in the value of their separate property or premarital assets. Typically, prenuptial agreements address this issue directly and provide protection against such outcomes. How New Jersey Differs from Other States It is important to note that each state’s approach to divorce can differ significantly. For instance, New York, like New Jersey, is an equitable distribution state but has its own unique guidelines and considerations that could lead to different outcomes. These variations emphasize the importance of understanding the nuances of divorce law in your jurisdiction. Protect Your Interests: Consult with a Family Law Attorney High-profile cases like this often involve complex financial portfolios and unique challenges that require careful planning and attention. If you’re concerned about protecting your assets or understanding how your property might be divided in a divorce, we strongly recommend consulting with a knowledgeable family law attorney licensed in your jurisdiction, as every case is unique and fact-specific. If you would like to discuss your matter or have any questions, please contact us by email at emily.ingall@offitkurman.com and rhmoud@offitkurman.com or by phone at 929-476-0046 or 347-589-8528. [1] This list may not be all-encompassing and may not include unreleased projects.
August 28, 2024
Page 16 of 36
About the Blog
Receive timely content, newsletters and event information delivered to your inbox.
