Real Estate
This Week in Real Estate: Title Insurance
This Week in Real Estate (TWIRE) has explored different series in previous editions. TWIRE will now focus on a new series of discussions on a topic that is very important in the world of real estate: title insurance. Over the next several week's TWIRE will discuss what it is, the different types and provisions included in title insurance policies. What is Title Insurance? Title insurance is a form of indemnity insurance that protects lenders and real estate owners from financial loss sustained from defects in the title to a property. When a property is financed, bought or sold, a record of that transaction is generally filed in public archives. Similarly, records of other events that may affect the ownership of a property, like liens or levies, are also archived. When you buy title insurance for your property, a title company searches these records to find and remedy, if possible, several types of ownership issues. First, the title company searches public records to determine the property's ownership status. After this search, the underwriter will determine the insurability of the title. Even the most skilled title professionals may not find all problems associated with a property. Some risks, such as title issues due to filing errors, forgeries or undisclosed heirs are difficult to identify. After the title company finishes its search, it provides a title insurance policy that will help protect the purchaser, borrower and/or lender from a variety of issues that might be uncovered later. Types of Title Insurance Policies There are two types of title insurance policies: a lender’s policy and an owner’s policy. Both types of policies are typically offered as a bundle together. Lender's Policy A lender’s policy is required in just about every purchase and refinance transaction, and the borrower typically pays for it. This insurance typically insures that the lender is in the lien position it has contracted to be. Should there be a potential title issue, this policy protects only the mortgage lender in the amount of the loan. Owner's Policy On the other hand, an owner’s policy protects the buyer. Although it’s not required by law for borrowers to purchase an owner’s policy, it is highly recommended to make sure that you, as the title holder, are protected from any potential legal issues that may come up. Next week, we will begin to discuss the different parts of each insurance policy.
November 4, 2021
Labor and Employment
Unexpected Long-Lasting Impacts of the COVID-19 Pandemic on Employers
The COVID-19 pandemic has undoubtedly had long-lasting impacts on the workplace as we now enter the twentieth month of the pandemic. Some effects were expected, such as increased safety precautions, layoffs, rehiring, closed offices, and remote work. However, some of the challenges facing employers have been a bit more unexpected and longer-lasting than initially anticipated. In the later months of the pandemic, companies have been navigating vaccine mandates and increases in Americans with Disabilities Act (ADA) requests against a backdrop of worker shortages and continued safety concerns, which weigh heavily on the decisions they are making as it relates to workplace policies. Vaccine Mandates Since vaccines became available earlier this year, employers have been grappling with whether to mandate or encourage vaccination or stay silent. Initially, the lion’s share of employers were opting to remain silent on vaccination or encourage vaccination through incentives or gentle nudging to avoid the hassle of mandating vaccination and providing religious and medical exemptions. Though, as it became clear over the summer that the COVID-19 pandemic was far from over, many employers began to consider mandating vaccination. This change was largely driven by a shift in public opinion, bold moves at the federal level, and the practical need for many employers with in-person operations to keep their workforce healthy and working. However, with many companies struggling to hire and retain enough employees to staff their operations fully, the analysis for many employers has gone well beyond the health and safety of their employees. Ahead of the implementation of the federal mandate through the Occupational Safety and Health Administration (OSHA) issuing an Emergency Temporary Standard, due to industry-agnostic worker shortages, many employers have opted to encourage vaccination over requiring it since they cannot afford to terminate employees for failing to comply with a vaccine mandate. For those who have decided to mandate vaccination, many have faced walkouts and terminations, sometimes resulting in a mass exodus of their workforce. ADA Requests The COVID-19 pandemic has resulted in many business owners and Human Resource (HR) professionals taking a crash course in ADA compliance. While many employers may typically receive a couple of requests per year, the pandemic has led to an increase in these requests, with some being COVID-19 related and many being COVID-19 adjacent. As it relates to COVID-19 specifically, while temporary COVID-19 illness is not a disability, many employers have received leave and accommodation requests related to managing risk around contracting COVID-19 with a pre-existing condition or COVID-19 long-hauler illness. Additionally, companies have seen an increase in employees needing to take time away from work or needing accommodations for mental health conditions. In many instances, these requests have led employers to dig deep into the EEOC’s guidance on these issues and examine the interaction between the ADA and FMLA and determine how accommodating employee needs impact the business's operations. Overarching in both of these issues are the operational burdens of administering these policies and the impact on the company’s workforce based on employees being unavailable to work or terminated or restricted from returning to the office. As employers continue to navigate employment matters related to the COVID-19 pandemic, they will continue to face increased administrative burdens related to keeping their workforce safe and accommodating and retaining employees. There is no shortage of complex issues and legal landmines involved, and employers must stay vigilant regarding legal compliance and consider the practical and legal consequences of their actions.
October 28, 2021
The Weekly Scenario
The Weekly Scenario: Tax Update
As you have likely heard, there are a number of proposed tax rules under Federal law that are working their way through Congress. One potential change could have a dramatic impact on people who own life insurance policies inside of irrevocable life insurance trusts. The House Ways and Means Committee recently released an outline detailing possible tax increases designed to pay for the administration’s infrastructure plan. Of the proposed modifications, one change would cause so-called "grantor" trusts to be included in the taxable estate of the person who made the gifts into the trust. Many life insurance trusts are considered "grantor" trusts and could fall within the scope of this proposed rule. While the details have not yet been released, it appears that the new rule would cause these trusts to be included in a person's taxable estate only if the person made gifts into the trust after the date the law is passed. This could cause problems for those who make cash gifts to their insurance trusts in order to fund insurance premiums. One potential solution may be to make a large gift to an insurance trust now before the law becomes effective. The gift may be retained inside the trust and used to pay premiums in later years -- thereby avoiding future gifts to the trust that would violate the new rule. Right now, this is only a proposal that is part of a larger outline released by the Ways and Means committee. To become law, the outline must first clear the House Ways and Means Committee, be voted on by the full House, have the same rule be proposed in, and voted on, in the Senate, and then have the final bill be signed by the President. If the proposal does become law, then there may be little time for people to preserve the tax-free treatment that life insurance trusts are intended to provide. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
October 22, 2021
The Weekly Scenario
The Weekly Scenario: Executor of an Estate
An executor of an estate has several duties. Of the many duties, one that is often missed is to ensure that all income tax returns have been filed for the decedent, including filing the final personal income tax return. After a person dies, any income earned prior to their death must be reported to the IRS (and state taxing authorities) on the final income tax return. The deadline is April 15th of the year following death. If a person passed away in 2021 and had income before he died, then by April 15, 2022, the final income tax return needs to be filed or an extension needs to be filed. The filing of the income tax return can sometimes hold up the closing of the estate. An executor would be prudent to wait until the final income tax return is filed to close out the estate. If a decedent was married, keep in mind that the surviving widow or widower may file a joint return. If there is money owed for income taxes, then the executor must make the payment from the estate. If there is a refund, then the executor must claim the refund. In order to claim the refund, an IRS form 1310 must be filed with the final return. Note that there is no requirement they a probate administration be opened to request the tax refund. The form 1310 allows the IRS to pay the refund directly to the executor, therefore, avoiding the need for an estate administration (probate). As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
October 15, 2021
Intellectual Property
Trademark Trial and Appeal Board Finds Reckless Disregard for the Truth Equals Fraud, Cancels Trademark Registration
The U.S. trademark law provides that a trademark registration may be canceled if it was obtained fraudulently. A registration may also be canceled if the registrant commits fraud in post-registration filings, including a Section 15 Declaration of Incontestability. Often filed in combination with the Section 8 Declaration of Use due in the 6th year of a registration, the Section 15 Declaration of Incontestability may be filed if the registrant has been using a registered mark continuously for the previous five years. However, certain other conditions are met, including that there are no pending proceedings, such as a lawsuit in federal court or a cancellation action before the US Patent and Trademark Office (USPTO) or Trademark Trial and Appeal Board (TTAB). This was the issue in Chutter, Inc. v. Great Management Group, LLC and Chutter, Inc. v. Great Concepts, LLC, 2021 USPQ2d 1001 (TTAB 2021). In 2010, when Great Concepts was submitting a combined Section 8 and 15 Declaration of Use and Incontestability for its trademark DANTANNA’S, the attorney for Great Concepts signed the declaration. He was aware that there were pending proceedings involving the trademark registration but, he later admitted, he did not read the declaration before signing it, and he was not familiar with the requirements of the Section 15 declaration. Years later, Chutter, Inc. filed a cancellation action against the registration, claiming that the Section 15 Declaration was fraudulently filed. In its decision, the TTAB noted that fraud requires an intent to deceive; false statements made with a reasonable and honest belief that they are true do not result in a finding of fraud. The TTAB went on to find that the attorney who signed the declaration acted with reckless disregard and held that this reckless disregard rises to the level of intent to deceive needed to find fraud. Moreover, although the trademark law allows for the opportunity in certain circumstances to correct misstatements once they are discovered, the attorney who signed the declaration did not take any corrective steps once he discovered that he had made false statements in the declaration. “By failing to ascertain and understand the import of the document he was signing, far from conscientiously fulfilling his duties as counsel, [the attorney] acted in reckless disregard for the truth; nor did he take any action to remedy the error once it was brought to his attention.” Stating that the attorney’s reckless disregard was “the legal equivalent of finding that Defendant Great Concepts had specific intent to deceive the USPTO”, the TTAB granted the petition to cancel the DANTANNA’S registration. Why does this decision matter to trademark owners? It’s a reminder to review carefully the statements in the documents you are signing and to ask questions if you do not understand something and speak up if something does not sound right. Although there is generally a high bar to a finding of fraud leading to the cancellation of a trademark registration, this case shows that a lack of attention to reviewing and understanding the statements being made in trademark declarations can constitute “willful blindness” that rises to the level of reckless disregard and cancellation of one’s trademark registration could be the result.
October 14, 2021
Business
Skeletons in the Closet: The 5 Biggest Undiscovered Issues that Can Halt the Sale of a Business
You have an interested buyer and they have submitted an exciting letter of intent for the purchase of your business. What could possibly derail the sale? Well . . . the golden rule for a seller is that the business is not “sold” until the closing and the monies hit the account. Before receiving your monies and having the business sold, be aware of a number of issues that could cause problems. By the way, with proper advanced planning these issues can be alleviated/mitigated prior to going to the market. Proper documentation of owner relations. Nothing ices a sale transaction like equity owners not on the same page. Ownership disagreements on the terms of a sale will quickly sour any potential buyer. However, with a proper stockholders’ agreement or operating agreement, the sale of equity can be controlled and “dragged” along into a transaction. Locking up key employees. Too often key employees are not properly locked up. All buyers will compel sellers to lock up their key persons, making such requirement a condition to closing. Going to a key employee on the eve of a sale is a very bad place to be if you are the seller. Poor financials. One of the first intersections a buyer will have with your business is the review of your financial data. Too many sellers have a mess for their financials. A buyer cannot evaluate the value of your business if it cannot review financial statements that are prepared to standard. Wrong corporate form. Many buyers have corporate structures that are not friendly to investors to maximize gains. The form a seller operates their business during normal times (an S corporation for example) may not be the corporate form desired by an acquirer. Uncertain ownership of key assets. Too many sellers rely upon the assumption that they own the assets of their business. This rings especially true with technology and intellectual property. The time to learn that you do not own the source code to your software is not in the middle of your sale transaction. These are a few of the most common pitfalls that many sellers experience during the sales process. Many times a seller is not aware of these items until a buyer brings it up in diligence as part of a larger conversation regarding the path to closing. All M&A transactions spin on leverage. Sellers should be careful to give over leverage to a buyer by falling into one of the traps.
October 13, 2021
The Weekly Scenario
The Weekly Scenario: Naming a Trust as Beneficiary of an IRA
There are certainly valid reasons for naming a trust as beneficiary of an IRA. But if an adult beneficiary is otherwise healthy and responsible, and if there is no desire to control assets after death, then naming a person directly as an IRA beneficiary may be a better option. In cases when a trust is necessary, be sure the trustee – the person responsible for following the provisions of the trust and dispersing its assets — understands the trust and IRA rules. Putting an inexperienced trustee (often an unwary family member or friend of the family) on such a task can lead to a number of egregious mistakes. I’ve reported on botched IRA trust beneficiary articles in the past. In a recent Private Letter Ruling (202125007) relayed a few months ago by the IRS, an IRA owner named a trust as an IRA beneficiary. After her death, the IRA assets were properly moved into a trust-owned inherited IRA. In this case: The adult children of the original IRA owner, as trustees and trust beneficiaries, had total control of the assets. The children wanted to do their own investing in the IRA. They were informed by the custodian that the existing account could not accommodate their request. So, the trustee children decided to transfer the stocks held in the inherited IRA assets to a non-qualified (non-IRA) brokerage account, owned by the trust. This action resulted in a taxable distribution — at trust tax rates of most of the IRA assets. When inherited IRA dollars are withdrawn by a non-spouse beneficiary, there is no putting the genie back in the bottle. Even if the error is discovered within 60 days of the original transaction, a rollover is not allowed, and the distribution is likely going to result in the entire account being subject to tax. Even though the trustees identified their error several months later and requested that the former IRA dollars be returned, there was no remedy that could be done here. The IRS concluded that: “…once the assets have been distributed from an inherited IRA, there is no permitted method of transferring them back into an IRA.” The moral of the story is to be sure that there is a good and legitimate purpose of having a trust that will inherit the IRA account, and if there is a good reason, be sure there are safeguards put in place so mistakes are not made by the Trustee along the way. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
October 8, 2021
The Weekly Scenario
The Weekly Scenario: Legislative Tax Update
About two weeks ago, the House of Representatives Ways and Means Committee released an agenda as part of a $3.5 trillion spending and tax bill that Democrats hope to pass. Many of the details will likely change as the bill makes its way through a series of deliberations and votes. But the initial draft provides a good deal of insight about what we can expect. Below is a summary of the proposed changes in the estate tax and some key takeaways: Lowers lifetime gift/estate tax exemptionto $5.85 from $11.7 million, effective January 1, 2022. Clients looking to maximize exemptions should make their gifts as soon as possible, especially gifts to grantor trusts, in case the date of enactment is moved up. Irrevocable grantor trusts in estates, effective upon enactment. A grantor trust is a common estate planning tool which allows an individual (or ‘grantor’) to establish a trust for another (typically a family member). The new provision pulls the assets held in a grantor trust into a decedent’s taxable estate when the decedent is the deemed owner of the trusts. Prior to this provision, taxpayers were able to use grantor trusts to keep assets out of their estate while controlling the trust closely. Establishes an income tax on sales to grantor trustby grantor, effective upon enactment. Currently, a sale to a grantor trust would not trigger an income tax. Clients looking to sell assets to a grantor trust may wish to consider doing so now. However, the proposal maintains stepped-up basis at death. In conjunction with reducing their taxable estates, clients should continue to keep highly appreciated assets in their taxable estates to the extent possible. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
October 1, 2021
Immigration Law
COMING TO AMERICA How The United States is Changing Travel Restrictions
It’s a slogan that’s been ingrained in us: “fly the friendly skies.” But let’s face it, for the past eighteen months, flying has been anything but friendly, and when it comes to the majority of foreign nationals hoping to enter the United States, well, the sky hasn’t been the limit. In fact, the sky has been nearly non-existent for them. Last spring, as COVID-19 enveloped the globe like an iron fist, the Trump administration clamped down on international travel to the U.S., hoping to slow down the spread of the virus here. On March 13, 2020, President Trump’s proclamation banned travel into the United States from more than 30 countries, and that list of nations quickly expanded. Although there were specific exceptions, such as foreign diplomats or certain family members of U.S. citizens who were allowed to fly into the U.S., most international travel bound for America came to a halt. For instance, flights from the U.K. to the U.S. were down 76% from pre-pandemic times. And while there was a change of administration in early 2021, that didn’t translate to a change in policy. However, as the worldwide vaccination rate has continued to rise, with roughly six billion shots having been administered globally, the Biden administration recently modified the restrictions that have been in place for the past year and a half. The focus is now on individuals rather than the broad restrictions that had been in place for entire countries or regions. So, what does that mean if you are a foreign national hoping to come to the United States for employment, vacation, or to see family? Starting in early November, in nearly all instances, all foreign nationals must show proof of full vaccination as well as proof of a negative COVID-19 test taken within three days of boarding a flight to the United States. Failure to provide proof of both full vaccination and a negative COVID-19 test will preclude a foreign national’s entry to the U.S. Also, all passengers must remain masked for the duration of their flight unless they are eating or drinking. Expect this mask mandate to stay in place at least through early 2022. There are a few exceptions to the new vaccination requirements, including children who are not yet old enough to be vaccinated, COVID-19 vaccine clinical trial participants, and people traveling for an important humanitarian reason who lack access to vaccination in a timely manner. However, if you are exempted from the vaccine requirement, it is important to note that you may be required to be vaccinated upon your arrival in the U.S. Similar to the requirements for foreign nationals, vaccinated U.S. citizens returning to the United States must show proof of vaccination as well as proof of a negative test taken no more than three days before departure. Unvaccinated U.S. citizens are required to provide their airline proof of a negative test result taken within one day of departure. Additionally, unvaccinated U.S. citizens must present proof of having purchased a viral test to be taken after arrival in the U.S. No matter what your vaccination or citizenship status is, the Centers for Disease Control (CDC) is in the process of developing a Contact Tracing Order that will require airlines to collect comprehensive contact information for every passenger coming into the United States and to provide that information promptly to the CDC upon request. This will allow the CDC to follow up with travelers who have been exposed to COVID-19 variants. Airline carriers initially resisted contact tracing measures, but over the last several months, several airlines have taken steps to collect more contact information from customers on a voluntary basis. Expect this to no longer be “voluntary” soon. While airlines have hailed the travel restriction changes, regarding them as “a major milestone that will help spur an economic rebound,” the decision to implement the changes was not fueled by economics for the Biden administration. Instead, the decision was fueled by science, given the rising worldwide vaccination rate and increased availability of testing. These new travel policies will go into effect in early November, and I’m sure there will be more changes coming down the road, or should I say “through the air,” sooner rather than later. We’re dealing with a very fluid situation, both scientifically and politically. But with more than twenty years of experience as an attorney at Offit-Kurman specializing in international law, I’m here to help you with any questions and situations that arise...and to make this a smooth flight...both figuratively and literally.
September 30, 2021
The Weekly Scenario
The Weekly Scenario: Roth Conversion Planning Review
As we all have heard, Congress is targeting apparent tax loopholes used by wealthy people with the goal of raising taxes to help finance proposed spending. Retirement plans happen to be in their scopes too. The way this may have come about is a widely publicized story of a guy who managed to amass $50 million or so in a Roth IRA. Forget that the story was made public due to an illegal release of his confidential tax return information from the IRS! The following proposed changes to personal retirement plan accounts apply, for years after 2021, to a person who: Is a “high income” individual, that is, a married filing jointly taxpayer with taxable income in excess of $450,000 or a single filer with taxable income over $400,000. This appears to line up with President Biden’s campaign promise not to increase taxes on anyone making less than $400,000 a year. The combined balance of a person’s IRAs, Roth IRAs, and other defined contribution plan accounts (e.g., a 401(k) plan) exceeds $10 million in value as of the prior year-end. Here are the tax consequences inflicted on such as person: He/she may not make a regular contribution to an IRA. Since the maximum annual IRA contribution is in the range of $7,000, this is not such a problem for someone who already has over $10 million in plans. The rest are more consequential: He/she must take a “required minimum distribution” equal to half the excess over $10 million. And.... If this person has more than $20 million in combined value in such plans, he/she must take an RMD equal to 100% of the excess over $20 million! And such excess must be taken from Roth accounts first! Note that these new RMD requirements have no age component. There’s one change in the mix that may cause some 2021 action. They propose to outlaw the Roth conversion of after-tax money whether in an IRA or in a qualified plan, and this new prohibition would not be limited to higher-income individuals. The Roth conversion of after-tax money is a true “loophole” and it makes sense for them to close it, but it will also make sense for a lot of individuals to take advantage of the loophole while it still exists and complete conversions of their after-tax money (if possible) this year. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
September 24, 2021
Family Law
What’s the Deal with Adultery in Maryland?
Adultery is a misdemeanor in Maryland, punishable by a $10 fine. It’s doubtful that a prosecutor would ever prosecute that crime, but it may have a consequence in a divorce case. So what’s the big deal? There are two areas where an allegation of adultery has a role in the family law arena. First of all, there are the emotional or psychological considerations. The one who has committed adultery may be embarrassed and may not want those allegations to appear in a pleading that is filed in Court. These pleadings are public record, and, even if no one in the press is interested, children, grandchildren, friends and neighbors may, at some time in the future, access those pleadings. The “innocent” spouse may believe that he/she has a “leg up,” and use the possibility of relying upon those formal allegations in negotiations. The allegation of adultery, however, does not have the same stigma that it did when I began practicing law, many years ago. The “legal” consequences of an allegation of adultery is that, should the case be litigated, the Court is to consider fault as one factor of many in determining both an award of alimony and a division of the marital property. Generally adultery that occurs subsequent to a separation, but while the parties are still legally married, is not nearly as concerning as an adulterous relationship that caused or contributed to the separation. Since even if proven to be true, the allegation of fault is only one of many factors to be considered. And, since that Court has great discretion in making those decisions, the impact of the fault grounds can be significant or minimal. There’s a risk, and that’s the concern/consequence that the parties and their counsel must consider.
September 22, 2021
Family Law
I Received an Inheritance – Will I have to Share the Money with My Ex-Spouse?
The answer to this question can go in two different directions, depending on what the recipient did with the money. When evaluating a divorce, most states view inherited funds as separate property, whether those funds were received before or after the marriage. In Maryland (and in the vast majority of states), inherited funds are considered separate, or non-marital property. Here is the catch, though: the designation of “separate” can change based on what the recipient did with the funds. Generally, marital property is subject to division in a divorce, while separate property is not. However, inherited funds that start out as separate property can become marital property if they are “commingled”—i.e., turned into marital property by using the money for things like remodeling the marital house, paying for a vacation, paying off bills, or other similar things that benefit both spouses. Here are some other specific examples of comingling: If one spouse inherits a house and then adds the other spouse’s name to the deed, the inherited house then becomes a comingled asset. If one spouse receives funds and then puts the money into a savings account for a significant period of time under both their name and their spouse’s names, those funds are now comingled and considered marital property. If one spouse uses inherited funds to renovate the marital home, which is titled in both spouse’s names, the inherited funds become commingled. Because comingling can happen so easily and unintentionally, some couples opt for a postnuptial agreement when they inherit funds. This is an agreement that happens after marriage, wherein the parties agree that the inherited funds used for the renovation, vacation, or other mutually beneficial activity shall be and remain the inherited party’s sole and separate non-marital property, free and clear of any interest of the other spouse. It’s wise to consult with an experienced family law or divorce attorney when one receives a large sum of money from an inheritance. Even if the recipient decides not to pursue a postnuptial agreement, being aware of what actions would be classified as comingling can be extremely helpful when deciding how to use the funds. If you have any questions on this topic, please contact Sandra Brooks at sbrooks@offitkurman.com or 240.507.1716.
September 20, 2021
The Weekly Scenario
The Weekly Scenario: How Can a Trust Protect My Children’s Inheritance?
One of the main reasons for estate planning is to provide loved ones with protection from claims of future creditors and divorcing spouses or lawsuits. If you leave your property to your child as an outright distribution, the property will not necessarily be protected. 'Spendthrift' Protection There is a longstanding concept in trust law known as ‘spendthrift’ protection. These provisions state that the Trustee will have sole control to make distributions from the Trust without interference from others. The spendthrift clause prevents a third party (e.g., creditor) from being able to compel the Trustee into making distributions of trust property for the benefit of the third party. Protection from Creditors Under the spendthrift rules of most states, a person is free to leave assets in the trust for another person, with specific language in the trust specifying who, besides a trust beneficiary, can have access to the trust assets. If the trust includes a ‘spendthrift’ clause that specifically states that trust income and principal is not to be available for payment to a trust beneficiary’s creditors, then as a general rule the trust would be immune from attack by a beneficiary’s creditors. This strong protection would apply regardless of the amount or nature of a beneficiary’s liabilities and would include protection of the trust assets if the child were to go through a divorce. Variation Between States However, the extent of protection offered by a trust with a spendthrift clause will depend upon state law. In some states, certain creditors are still permitted access to the trust. This might include obligations for alimony, child support or payments to creditors who have provided certain ‘essentials of life’ to the beneficiary. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
September 17, 2021
Real Estate
This Week in Real Estate: Fifteen Football Historical Fun Facts
This Week in Real Estate paid homage to Major League Baseball’s Opening Day. Therefore, This Week in Real Estate would be remiss to take the opportunity to honor the National Football League’s Opening Weekend of the 2021 football season and must take a time out from its regularly scheduled program to discuss some historical football Fun Facts (courtesy of mentalfloss.com). Football was essentially rugby until 1882, when new rules were established that gave each team three tries to advance the ball five yards. That’s also why the field looks like a gridiron. Lines had to be established so teams knew how far they had to go. Kickers got more respect in those early days. Originally, touchdowns were only worth four points, while field goals were worth five. In football’s early days, the forward pass was illegal, so most plays were variations on a theme of “ball carrier smashes into the line of scrimmage.” Unsurprisingly, this limited playbook led to a lot of injuries. As president, Teddy Roosevelt threatened to ban football unless new rules were established to ensure player safety. The revised rules introduced the forward pass. The new rules also cut the time of the games by ten minutes. Games were originally 70 minutes long. The huddle was first used in the 1890s by quarterback Paul Hubbard, who was deaf. Hubbard was concerned the other team could interpret his hand signals, so he brought his teammates into a round formation to call plays. The first professional football player was William “Pudge” Heffelfinger. He was paid $500 to play in a game in 1892. The first televised professional football game took place in 1939. It wasn’t quite the huge spectacle that pro football has become—that first broadcast only appeared on approximately 500 TV sets. If you’re talking to a mathematician, the shape of a football is best described as a “prolate spheroid.” But everyone will know what you’re talking about if you just say “football-shaped.” Fans who pay attention to the ball itself will notice a subtle difference between the pro and college balls. While both levels use identically sized balls, college games are played with balls that have white stripes painted on either end. These markings supposedly make a passed ball easier to spot while it’s in flight. The longest field goal made in pro football history was 64 yards. The longest attempted field goal in pro football history was 76 yards. It missed. The name “football” was originally fitting since the game was largely played with players’ feet. The first college game took place in 1869, but modern fans likely wouldn’t have recognized the action. Each team had 25 men, and players weren’t allowed to pick the ball up. Instead, they advanced towards the goal by kicking it or swiping at it with their hands. When future president Herbert Hoover attended Stanford in the early 1890s, he was a student manager of the football team. According to team lore, when Stanford and the University of California met on the field for the first time in 1892, there was a delay after Hoover forgot to bring the ball. Modern games don’t have this problem: Pro rules dictate that the home team has to have 36 balls (for outdoor games) or 24 balls (for indoor games) ready for inspection by the referee two hours before a game’s starting time.
September 16, 2021
Intellectual Property
A Checklist for University Policies Addressing Student-Athlete Name, Image and Likeness (NIL) Issues
In the wake of the Supreme Court's decision in Alston v. NCAA, the National Collegiate Athletic Association ("NCAA") issued an interim policy announcing that it will no longer enforce its rules prohibiting compensation for the use of a student-athlete's name, image and likeness ("NIL"). Other athletic associations have like-wise amended their bylaws to allow student-athletes to profit from the use of their NIL. Additionally, new laws recently enacted by many states, such as Pennsylvania, now require institutions of higher education to publish policies on these issues. To comply with NCAA rules and state law, universities face a range of somewhat complex considerations in forming and implementing NIL policies and procedures. Here are some of the key issues in the form of a practical checklist: Know the NCAA policy or the policy of the athletic association that governs your institution's teams. The NCAA has a Division Manual for each of its three divisions. The Manuals are several hundred pages long and include at least several dozen policies that address issues that may be impacted by NIL activity. These manuals and policies have not yet been revised. Instead, the NCAA's interim policy states simply: "Individuals can engage in NIL activities that are consistent with the law of the state where the school is located. Colleges and universities may be a resource for state law questions. Individuals can use a professional services provider for NIL activities. College athletes who attend a school in a state without a NIL law can engage in NIL activity without violating NCAA rules related to name, image, and likeness. State law and schools/conferences may impose reporting requirements." https://www.ncaa.org/about/taking-action Know what hasn't changed in the NCAA manuals. Subject to state law, the NCAA still prohibits a "NIL agreement without quid pro quo (e.g., compensation for work not performed)." Subject to state law, the NCAA prohibits "NIL compensation contingent upon enrollment at a particular school." Subject to state law, the NCAA still prohibits "compensation for athletic participation or achievement. Athletic performance may enhance a student-athlete's NIL value, but athletic performance may not be the 'consideration' for NIL compensation." Subject to state law, the NCAA still prohibits "institutions providing compensation in exchange for the use of a student-athlete's name, image or likeness." https://ncaaorg.s3.amazonaws.com/ncaa/NIL/NIL_QandA.pdf (See Q. 11) Know your state's NIL law. A majority of states have enacted brand-new NIL laws, and the requirements vary considerably. Some states even require that institutions create funds from ticket sales or other promotional activities to benefit athletes. Pennsylvania's new law contains many provisions similar to those in other states. For example: Pennsylvania's law applies to institutions within Pennsylvania and to students participating in intercollegiate athletics at those institutions. The laws of other states may also apply to their residents regardless of where they attend school. 24 P.S. §20-2001k, et seq. Pennsylvania's law permits college athletes to earn compensation for the use of the athlete's NIL and provides that the compensation must be commensurate with the market value of the athlete's NIL. Pennsylvania's law prohibits college athletes from accepting compensation in exchange for their attendance, participation, or performance at the institution ("pay-for-play"). Pennsylvania's law prohibits college athletes from earning compensation for NIL use "in connection with a person, company or organization related to or associated with the development, production, distribution, wholesaling or retailing" of the following: Adult entertainment products and services. Alcohol products. Casinos and gambling, including sports betting, the lottery, and betting in connection with video games, online games, and mobile devices. Tobacco and electronic smoking products and devices. Prescription pharmaceuticals. A controlled, dangerous substance. Other products or activities prohibited by the institution. Pennsylvania's law also permits institutions to prohibit student NIL use more broadly: (i) in activities that conflict with existing institutional sponsorship arrangements and (ii) based on other considerations that conflict with institutional values, as defined by the institution. The Pennsylvania law requires institutions to have policies that "specify the name, image or like-ness activities [in] which the college student may not engage." Pennsylvania's law requires students to disclose proposed NIL contracts to a designated official of the institution at least seven days before the execution of the contract. Pennsylvania's law prohibits institutions (i) from preventing student-athletes from earning compensation through the use of the student's NIL or (ii) from obtaining professional representation in relation to NIL use. Pennsylvania's law prohibits institutions from arranging third-party compensation for a student-athlete relating to NIL use as an inducement to recruit prospective students. Pennsylvania's law requires any person producing a college team jersey, video game, or trading card for profit to make a royalty payment to each athlete whose NIL or "other individually identifiable feature" is used. Pennsylvania's law does not require institutions to facilitate or enable NIL opportunities for athletes. The law specifically states that it does not require an institution to permit athletes to use the institution's marks, logos, mascots, or other intellectual property. Know your state's student-athlete agency law. Many states, including Pennsylvania, require registration, which may include payment of fees and posting of bonds. See, e.g., 5 Pa.C.S. §3301 et seq. Tell the students where to find a list of "banned products." Pennsylvania's law requires that institutions disclose to students the types of deals that the institution prohibits. Therefore, institutional policies should let students know which products and activities are prohibited by state law and by institutional decree. For example, should student-athletes be permitted to engage in NIL activity for CBD and hemp products? Nutritional supplements? Guns? Professional sports teams? Gambling? Broadcasters? Can they contract with university entities, such as a meal service? Institutional policies should also specify products that conflict with school contracts, such as institutional sponsorship deals that include exclusivity promises. Policies should let students know whether all teams have a conflict or just certain teams. Is certain activity prohibited on social media? Tell students whether and how they can use the school's copyright materials (including game footage, logos, nicknames, mascots, etc.), and if appropriate, how to get permission to do so. Consider requiring all vendors, whether involved through the student NIL process or otherwise, to seek approval in the same way for the use of school marks. Tell students whether they can use the school's facilities and fields for NIL purposes, and if so, how to get permission to do so. Tell students whether NIL activity can interfere with class time or team activities. Warn students of other potential hazards, including: The need to consult with the designated school official for international students (because many students are in the United States on visas that prohibit employment), and The need to consult with the financial aid office (because a successful NIL venture may result in income, which may need to be included in determining income-based financial aid eligibility and awards). Indeed, before rolling out an NIL policy, it might be a good idea to coordinate with the university's financial aid office and international student office. Require disclosure of student-athlete NIL contracts. Pennsylvania law requires disclosure to the institution of all NIL contracts at least seven days prior to the execution of the contract. In other states, some institutions are establishing dollar amount thresholds. Your policy should clarify what happens in the event the institution is unable to respond in a timely manner. Does a failure to respond mean that the student has the institution's approval to proceed? Create a formal process for disclosure of NIL deals by student-athletes and review by the school. Many schools may find it helpful to designate an NIL coordinator. Consider requiring all agents representing student-athletes for NIL activities to register with your school and to provide basic information. Consider advising students of the need to comply with NCAA rules regarding agents, including that students "shall be ineligible… if the individual enters into an oral or written agreement with an agent for representation in future professional sports negotiations that are to take place after the individual has completed eligibility in that sport." NCAA Manual, Div. 1, 2021-22, bylaw 12.3.1.3. Consider providing education to students about (a) the NIL and agent registration laws, (b) protecting intellectual property, (c) financial acumen, and (d) university policies and procedures. Consider an internal appeal process or grievance process for NIL issues. Consider other policies and documents that may require review and revision: School contracts containing licensing provisions. Will the school be responsible for student NIL disputes with a university vendor? Insurance policies. Will the university's insurance respond if there are disputes? Social media policies. Student forms granting the university permission to use the student's NIL in connection with university promotional activity. Student discipline policies which may need to specifically identify the types of discipline that may be assessed on students who violate NIL rules. Student grievance policies. Do existing policies allow students to file complaints if the institution prohibits a proposed NIL contract or fails to respond to a proposed contract? Takeaways. Institutions of higher education must create policies to inform student-athletes of their rights and responsibilities and consider updating related rules across the full range of inter-connected issues within the institution. Institutions must be prepared to make further updates as additional guidance becomes available and as rules change.
September 13, 2021
Intellectual Property
Navigating the New NIL Landscape: A Checklist for Athletes Looking to Profit
On June 30, 2021, the college athletics landscape was significantly altered, as the NCAA announced an “interim policy” concerning the commercialization of college athletes’ names, images and likenesses (“NIL”). NIL includes an athlete’s name, appearance, signature, nicknames and any other signs, slogans, sayings or symbols that can be used to identify that individual. Here is a basic step-by-step guide to help college athletes profit from their own NIL while complying with NCAA, state and school rules: (1) Know the interim NCAA policy. Athletes can now profit from NIL. State law where the school is located will apply. The school’s rules will also apply, even if there is no state NIL law. You can hire professional representation (attorneys, agents) with certain limitations. You must report NIL activities consistent with state law and school rules. Avoid NIL affiliation with NCAA’s banned sub-stances (drugs, performance-enhancing drugs, etc.). (2) Does your state have an NIL law? If so, know it. In order to play the game, you have to know the rules. Therefore, start by learning about your state's NIL law. If you are unsure, contact your athletic department or a local attorney for guidance. What are the “banned categories” in the state (drugs, alcohol, gambling, etc.)? What are the reporting requirements? What makes someone eligible to help you with NIL deals (state agency requirements)? (3) Know your institution’s NIL policy. You must know what your school does and does not allow. Can you use the school’s logo or facilities in your NIL activities with or without pre-approval? Is there a process to request approval to use school logos and facilities? Can you conduct NIL activities during team-sanctioned events? What are your school’s “banned categories”? Are there special NIL social media rules? Does your proposed endorsement conflict with the school’s existing product agreements? What are the school’s NIL reporting requirements? Does your school have a designated NIL administrator to help you? What is the enforcement mechanism and ap-peal procedure if you make an alleged NIL mistake? (You should consider hiring professional representation to help avoid this.) (4) Protect your NIL. If you are in the market for significant NIL deals, you should consider protecting your intellectual property (“IP”). Seek legal counsel with experience in both IP and sports law. The initial consultation will typically be at no cost. Beyond that, a small expense up front can pay off down the road. Register your IP. Register your name, nickname, or slogan as domain names. Protect your right to use your own NIL and prevent unauthorized third-party use by filing for trademark protection. What is a trademark? It is a word (name or nickname), symbol, design or slogan that can specifically identify you in commercial activities. Consider hiring a trademark attorney to assist you. How do I determine if it is cost-effective to take these steps? The NIL market is extremely new and, therefore, tough to judge. However, the more substantial contracts are being executed by players with larger social media followings and on-field presence. Regardless, do NOT sell yourself short. Test the market and see what deals you may attract. (5) Understand the impact of any earned income. Earning income from NIL may affect your personal financial situation, including your tax status and liabilities, your immigration status, and/or your financial aid package. (6) Seriously consider hiring professional representation. In accordance with NCAA, state and school guidelines, consider obtaining professional representation, such as an attorney or agent registered in the state. Also, consider whether obtaining financial, tax, immigration or other professional advice would be helpful. At the end of the day, no NIL deal is worth your NCAA eligibility or institutional good standing. This summary of legal issues is published for informational purposes only. It does not dispense legal advice or create an attorney-client relationship with those who read it. Readers should obtain professional legal advice before taking any legal action.
September 13, 2021
The Weekly Scenario
The Weekly Scenario: Dynasty Trust planning
The reasons for creating a dynasty trust vary depending upon the needs and desires of the trust settlor. Dynasty trusts can be created to provide creditor and so-called ‘predator’ protection for the beneficiaries of the trust generation after generation. Such trusts can shield against divorce proceedings initiated against a beneficiary of the trust or creditors of a beneficiary arising out of a business failure. The dynasty trust can also provide a pool of assets to be managed by a trustee for the benefit of all the beneficiaries, thus preventing individual beneficiaries from squandering their inheritance by misusing the funds or investing poorly. The dynasty trust can also be used to encourage participation in certain worthwhile causes or discourage behavior that is unacceptable. One of the greatest way’s dynasty trusts are used by families who value education is to establish a fund that will pay for the secondary and graduate education of many future generations. When you ask most people to name their great -great grandparents, they are unable to do so. But providing full college tuition and other educational perks for future generations could be helpful to establish a family legacy. The generation skipping transfer tax exemption can be utilized to plan for several generations and build significant wealth. One of the reasons Congress enacted the generation skipping transfer tax is to curb the wealth building effects of dynasty planning. The concept of dynasty planning is to pass the maximum amount of wealth one can to their grandchildren (and subsequent generations) without subjecting the transfer to the tax. In so doing, one can exempt the trust property from future generations skipping the transfer tax. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
September 10, 2021
The Weekly Scenario
The Weekly Scenario: Items that an Estate Plan Should Provide for a Spouse
The objectives that we hear most often from clients regarding a spouse include: I want my spouse to be able to maintain the lifestyle that we currently enjoy after I’m gone. I want to protect what I leave my spouse from people who might otherwise take advantage whether family members or strangers. I am in a second marriage and I want my spouse cared for after I am gone. But I also want to ensure that my estate goes to my children after my spouse passes away. I have handled most of our investments throughout our married life and my spouse has not been involved. I would like my spouse to maintain control, but I’d also like to provide investment guidance. I want to be sure my spouse can, while still benefiting my children, make adjustments in my bequests in order to address changes in the circumstances of my children and grandchildren that occur after I am gone. I want to get any tax protections that are available to my spouse. But what if my spouse remarries? One of the ways to protect a spouse’s assets is to have the estate plan require the surviving spouse sign a prenup if they desire to maintain control of the assets if and when they remarry. The plan could even remove the spouse as trustee or as a beneficiary of the trust if specific criteria are not met. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
August 27, 2021
Labor and Employment
That’s a violation of HIPAA! But is it…
It has certainly been an eventful summer from the reopening of businesses and office spaces, talk of a fall “comeback” with many employers hoping to return the majority of their workforce to working in person or operating in a hybrid model, and the elimination of mask mandates to the reinstatement of mask mandates, a delta surge, increased vaccine mandates, and approval of the Pfizer vaccine. As we have learned over the last 18 months, there is never a dull moment when it comes to the COVD-19 pandemic. Over the last month, I have seen a sharp increase in companies mandating vaccination in the workplace and organizations requiring proof of immunization or a negative COVID-19 test to attend meetings or events. With these increases in mandatory policies, I have also been fielding many questions regarding HIPAA compliance. Namely, what do we need to do to comply with HIPAA when requesting and obtaining medical information, such as vaccination status? Well, I am here to set the record straight-HIPAA probably doesn’t apply to your business. The Health Insurance Portability and Accountability Act of 1996, better known by its acronym, “HIPAA,” is a federal law that created national standards to protect sensitive patient health information from being disclosed without the patient’s consent or knowledge. Since this law covers patients, it only applies to healthcare providers, health plans, healthcare clearinghouses (“Covered Entities”), and business associates acting on behalf of these Covered Entities. HIPAA does not cover businesses that are not in healthcare or acting on behalf of healthcare entities. While HIPAA does not cover most businesses who call me with questions regarding HIPAA compliance, that does not mean they are not responsible for keeping medical information confidential and keeping it secure and out of the wrong hands. When it comes to protecting confidential medical information, other federal, state, and local laws likely apply. For example, when it comes to employees, under the Americans with Disabilities Act (ADA), employers are required to keep all employee medical information confidential and keep it in a confidential medical file separate from the employee’s personnel file. There are also laws, such as the Family Education Rights and Privacy Act (FERPA), that protect the medical information of elementary, secondary, and post-secondary students. While asking whether HIPAA applies is not technically relevant to most companies or organizations, the question has become a colloquial way of asking what they should do with confidential information to stay out of trouble, which is a thoughtful and necessary question. Ultimately, when obtaining or storing personal medical information of employees, clients, or event attendees, companies and organizations need to check federal, state, and local regulations to ensure compliance.
August 26, 2021
The Weekly Scenario
The Weekly Scenario: Where to Keep Your Trust
What if I can’t find a copy of my Trust and how do I prove it exists? Without a copy of the trust instrument, proving that such a trust is in existence can be a challenge. The attorney who drafted the trust, or the attorney or firm’s successor, should keep a record of the trust on file. But sometimes law firms go under or lawyers retire, and files are lost. One potential solution if no copy of the trust can be located is to file a declaratory action with the court. Such an action will provide clarification of the existence of the trust. The hope is that through the filing of the declaratory action, the court will issue an order of the existence of the trust and what the terms of the trust provide. A trustee will need to be appointed and if none exists, the court could appoint one at that time. While there might not be an actual trust document, there will likely be other evidence of the existence of the trust such as references to the trust on titling documents (Deeds, account statements, etc.). There might be an annual tax return that was filed which an accountant could attest to with the tax records. The court can consider these extraneous documents in a ruling of the existence of a trust. Clearly, having a copy of the trust instrument would be ideal. It would not be a bad idea to keep a copy in a safe deposit box or home safe (just be sure you are not the only person with access) with other important papers. You could also keep a copy in a cloud file, though accessing the cloud is not always 100% reliable. Your lawyer should have a cloud backup for all your executed legal documents. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
August 20, 2021
Real Estate
This Week in Real Estate: Commercial Leases — Base Year Lease
This Week in Real Estate continues its discussion on Leases. This week we’ll remain our focus on commercial leasing and discuss the base year commercial lease. In a base year lease, a base year is selected (usually the first year of the lease). The landlord agrees to pay the property’s expenses (Real Estate Taxes, Insurance and CAM) for the base year. The landlord continues to pay the property expenses at the base year level and the tenant agrees to pay its pro rata share of any increases in property expenses in excess of the amount of the base year. For example, if the property expenses for the base year (say 2020) are $100,000 and the expenses increase to $150,000 for the year 2021, a tenant with 20% of the square footage (or its pro rata share is 20%) would pay $10,000 (20% of the $50,000 increase) in 2021 in addition to the tenant’s base rent (with a NNN lease, the tenant would pay its pro rata share of the entire $150,000 in 2021 or $30,000 in addition to the base rent). Each year thereafter, the tenant pays its pro rata share of the property’s expenses but only to the extent that those expenses exceed the $100,000 established in the base year. In most cases, the annual increase in expenses is estimated at the start of each year and tenants pay monthly to spread out the cost over the year. In the above example, if at the beginning of 2021 the landlord over-estimated the increase in property expenses at $60,000, the tenant would pay monthly payments of $1,000 (20% of $60,000 divided by 12 months) totaling $12,000. The tenant thus overpays $2,000. At the end of 2021, the landlord would perform an expense reconciliation resulting in the extra $2,000 being credited back to the tenant. When presented with a base year lease, Tenants should take steps to minimize the uncertainty of their share of future expenses. First, ensure that the base year calculation is accurate. Landlords shouldn’t be reluctant to review their calculations with prospective tenants. Second, ask for historical data and trends to see how expenses have increased over time. This gives tenants a reasonable basis from which to anticipate future expenses. Tenants that move into a commercial space after the first of the year should ask for 12 months of base year protection guaranteeing 12 months of tenancy before expenses become due. Larger landlords are typically more amenable to this request. Tenants should also consider asking for a cap on operating expenses. Most landlords will be reluctant. However, it’s worth asking for as there are certain circumstances that can result in significant unanticipated expenses associated with remodels, improvements and/or tax reassessments after the sale or transfer of ownership of the property. Tenants and landlords should be careful when negotiation gross-up provisions in base year leases. With gross-up provisions, landlords calculate tenants’ pro rata share of variable expenses (expenses that vary with occupancy) based on 95% or 100% occupancy allowing landlords to recoup their actual expenses from existing tenants when occupancy is low. In base year leases, tenants need to ensure that the gross up provisions apply to the base year as well as succeeding years to avoid significant increases in expenses when occupancy levels rise after the base year. Otherwise, if the base year is one with less than full occupancy, tenants will be responsible for the expenses associated with full occupancy later (increases in expenses due to new tenants). As long as the base year is included, tenants with base year leases benefit from gross-up provisions. To avoid future conflict, the lease should specifically identify which expenses will be variable and which will be fixed. Finally, tenants should seek audit rights to ensure that expenses are accurately determined and that landlords are only being reimbursed for actual expenses. So long as landlords accurately account for expenses, base year leases are advantageous to both landlords and tenants. Tenants’ burden for common expenses is limited to increases over the base year level and landlords maintain revenue stability.
August 20, 2021
Family Law
So, What About Your Personal Property - Is It Yours?
Anything that you owned prior to your marriage, that you received through inheritance, or that was a gift to you (not to both of you) during the marriage, is not marital property. It’s yours. You can keep it upon divorce, and you do not need to offset the value of those items with anything that is marital. Usually, the engagement ring, since it’s given prior to the marriage, is not marital property. However, jewelry that was purchased during the marriage, even if it was a “gift” to one party from the other, remains marital, and will be divided, or it’s value will be offset upon divorce. Although that’s the law, to be frank, very few folks fight over marital property. It is expensive to do that, both financially and emotionally. Usually there is some agreement regarding furniture, home furnishings, artwork, etc. When the parties cannot agree, there are some options for resolution. Some of the options that have worked for our clients are: flipping a coin, and the winner gets first choice, then alternating until all of the marital property on the list is divided. Another option is that one party prepares two separate lists that “equitably” divide the property, and the other party gets to choose which of the lists is his/her property. Often, the parties attempt mediation, with the understanding that if they are not able to arrive at an agreement after a certain amount of time, the mediator makes the decision, as an arbitrator, and that decision is binding on the parties. Even when the division of the property that has value has been determined, there usually remains the issue of photographs, videos, movies of the family, etc. Fortunately, almost everything can now be reproduced, so that each of the parties can retain those very important memories. The issue of the cost of reproduction must be addressed. Because it can become very expensive, the parties often agree to share most of the items, rather than reproducing everything. Again, the options, should the parties not be able to agree, may be to resort to the flipping of the coin. Because physical ownership often determines control, one should either consider removing items that have great sentimental value from the marital home that one would be devastated to lose, or take photos or a video of everything in the house, so that a list can later be made that will include all of the marital personal property. In some cases, a personal property appraiser is required to assess the value of the assets. This is especially true in the case of artwork and antiques. Best advice is to keep a record of all significant items, not only in case of separation and divorce, but also in case of loss due to fire or theft.
August 18, 2021
Family Law
The Rundown on Custody Evaluations: A Q&A
When a divorce involves children and a court-issued custody evaluation, the parents can understandably be uneasy about the process, what it will entail and how it will affect the outcome of the custody arrangement. The key to successfully navigating a custody evaluation is understanding how they work and having a strategy in place with your divorce attorney beforehand. Here are the most common questions my clients ask me about custody evaluations. Q: What is a custody evaluation, and when are they used? A: Custody evaluations are sometimes appointed in highly-contested divorces involving children; A custody evaluation is the legal process in which a court-appointed mental health expert (or chosen by the parties) evaluates a family and makes a custody recommendation to the court based on the child(ren)’s best interest. You should expect a series of interviews conducted both alone with the evaluator and with the evaluator and the other parent, and with you and your child(ren). In some cases, psychiatric testing for one or multiple family members will also be part of the process. Q: What is the goal of the custody evaluation? A: The goal of the custody evaluator is to gather data from the parties, witnesses, documents and the children themselves to ultimately render an opinion on physical custody (the visitation/access schedule of the children) as well as legal custody (decision-making authority for the children). Q: What qualifications does a custody evaluator have? A: For the most part, custody evaluators are trained mental health professionals. In some jurisdictions, the custody evaluators are psychologists, but it varies. In my local jurisdiction, the court evaluators are social workers. While psychologists can do psychological testing during an evaluation, non-psychologist evaluators cannot. Most court evaluators are not licensed to conduct the psychological testing that is sometimes needed to help the family understand and address a parent or child’s mental health issues. This is when it might be more beneficial to hire a private evaluator who can do the appropriate psychological testing, but private evaluators can be quite expensive. Q: How much will it cost to get a custody evaluation? A: Some courts have the resources available to appoint custody evaluators at no expense to the parties, which is the case in my jurisdiction. Otherwise, if the evaluation is being commissioned through a court-connected program, the fees will be determined by the court’s policy. Private evaluators typically charge by the hour, and the fees can be significant. Q: How much influence does the evaluator have over the judge’s final decision? A: It is my experience that the courts do not always follow the recommendations of the evaluators; however, the courts do like to hear what the evaluator learned from their observations, and the evaluator’s perspective can certainly sway the judge in one direction or the other. Q: Should I request a custody evaluation? A: This is a question that you should discuss with an experienced divorce or custody attorney. There is some strategy involved as to whether, or not, a custody evaluator makes sense for your specific situation, and your attorney can help you navigate that. For example, if you already have significant leverage and the judge is likely to rule in your favor already, adding another layer of complexity to the case with a custody evaluation may not be the best choice. Q: What if I disagree with my ex-spouse on whether or not to get a custody evaluation? A: If the parties do not agree on whether or not to get a custody evaluation, one side may file a motion requesting a court or private evaluator; the other side will likely oppose the motion, and the court will make the decision. If you have any questions on this topic, please contact Sandra Brooks at sbrooks@offitkurman.com or 240.507.1716.
August 16, 2021
The Weekly Scenario
The Weekly Scenario: Where is the Original Copy of your Will?
You should let someone know where your original Will is stored. If one cannot be found after a person dies, a court may decide it was destroyed. Dying without a Will means intestacy will rule the day and, in that case, state law determines how probate assets will pass. It may be a good idea to keep a copy of the Will in a safe deposit box, but if you put the original there, it may be difficult to retrieve it after death. Most states require that safe deposit boxes be sealed after the renter dies and a Personal Representative will need to be appointed in order to gain access to the box. Other places to store your will include: Store an original in the office of the Register of Wills in the County where you reside. Have your attorney and/or your accountant retain the original will. Some law offices will retain the original in a Will safe file. Store the will at home in a safe place. While there is a possibility that the Will could be lost, inadvertently destroyed, or discovered by an interested party who could deliberately destroy or conceal it, this is generally not a huge risk. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
August 13, 2021
Labor and Employment
Can Public Facing Businesses Deny Entry Based on Vaccination Status?
MAY I DENY A CUSTOMER OR CLIENT ENTRANCE TO MY BUSINESS? YES BUT. Business owners concerned about customers or clients entering their place of business without proof of a COVID-19 vaccine should be mindful of their obligations under Title III of the Americans with Disabilities Act. Specifically, Title III prohibits discrimination on the basis of disability in the activities of places of public accommodations (businesses that are generally open to the public and that fall into one of 12 categories listed in the ADA, such as restaurants, movie theaters, schools, day care facilities, recreation facilities, and doctors’ offices) and requires newly constructed or altered places of public accommodation—as well as commercial facilities (privately owned, nonresidential facilities such as factories, warehouses, or office buildings)—to comply with the ADA Standards. 42 U.S. Code § 12182 et seq. While Title III has general restrictions that businesses have to abide by when they choose to deny accommodations, a business may deny goods or services to individuals if their participation would result in a “direct threat” to the health and safety of others, but only when this threat cannot be eliminated through an alteration of policies, practices, procedures, or providing auxiliary aids and services. See 42 U.S.C.A. § 12182 (b)(3). Unsurprisingly, there is no precedent applying the law of public accommodations to an individual’s inoculation status. And though no court has yet said that the “direct threat” provision of Title III will be an affirmative defense to public accommodation discrimination, the analogous “direct threat” provision of Title I of the ADA, concerning employment discrimination, has been held to be an affirmative defense. Chevron U.S.A. Inc. v. Echazabal, 536 U.S. 73, 78 (2002) (interpreting 42 U.S.C. § 12113(b)); see also Bragdon v. Abbott, 524 U.S. 624, 649 (1998) (§§ 12113(b) and 12132(b)(3), of Titles I and III, are “parallel provisions”). Still the Equal Employment Opportunity Commission, analyzing the analogous provisions under Title I, has said that under the ADA, a “direct threat requirement is a high standard.” See What You Should Know About COVID-19 and the ADA, the Rehabilitation Act, and Other EEO Laws, EEOC Guidance, available at https://www.eeoc.gov/es/node/131879. WHAT IF A CUSTOMER REFERENCES HIPPA? HIPAA does not prohibit businesses or employers from requestinghealth information, including information about vaccination status. Rather, HIPPA protects the disclosure of such by the provider. Here is why: HIPPA applies to the following: Health plans Health care clearinghouses Health care providers who conduct certain financial and administrative transactions electronically. These electronic transactions are those for which standards have been adopted by the Secretary under HIPAA, such as electronic billing and fund transfers. WHAT ARE MY OBLIGATIONS BEFORE DENYING A CUSTOMER OR CLIENT ENTRANCE TO MY BUSINESS? Businesses would be wise to apply the same three step review of their policies and procedures that they would with their customers and clients under Title III, as they would with their employees under Title I. First, businesses should make an individual assessment before turning away a customer or client. In determining whether a customer or client poses a direct threat to the health or safety of others, a business must make an individualized assessment, based on reasonable judgment, that relies on current medical knowledge or on the best available objective evidence, to ascertain: STEP 1: The business must identify the specific risk posed by the individual. Here, the inquiry is whether the unvaccinated customer or client will expose others to COVID-19. STEP 2: Once the risk is determined, then the business must look at the four factors of whether the “direct threat” actually exists: Duration of the risk; Nature and severity of the potential harm; Likelihood that the potential harm will occur; and The imminence of the potential harm. 28 C.F.R. § 36.208(b). Businesses should consult with counsel when conducting this four-pronged assessment. Second, businesses should balance these factors before turning away a customer or client. When balancing factors relevant to determine whether the risk to health or safety of others is significant, each factor does not need to be significant on its own; rather, the gravity of one factor might compensate for the relative slightness of another. See 42 U.S.C. § 12182(a), (b)(3); See also Montalvo v. Radcliffe, 167 F.3d 873, 878 (4th Cir. 1999). Third, businesses should recognize that just as they do under Title I, they maintain a duty to try an accommodation first (before finding a direct threat). If the business determines that the customers and client would pose a significant risk to the health and safety of others, then it must determine “whether reasonable modifications of policies, practices, or procedures will mitigate the risk,” 28 C.F.R. § 36.208(c), to the point of “eliminat[ing]” it as a “significant risk.” 42 U.S.C. § 12182(b)(3). Under the ADA, a failure to make a reasonable modification is itself an act of discrimination unless the business can demonstrate that implementing the modification would fundamentally alter the nature of their business. See 42 U.S.C. § 12182(b)(2)(A)(ii). BOTTOM LINE: Businesses can deny customers and clients entrance to their businesses if they are unvaccinated. Businesses must make individualized assessment and balance those factors before denying unvaccinated customers and clients entrance to their business. Businesses are required to try an accommodation if it would not alter the nature of their business before denying unvaccinated customers and clients entrance to their business. Again, businesses should consult with counsel on issues relating to vaccination of customers and clients. This is a nuanced issue and additional guidance and rules are anticipated.
August 11, 2021
The Weekly Scenario
The Weekly Scenario: Donor-Advised Funds
A donor-advised fund is like a charitable investment account, for the sole purpose of supporting charitable organizations you wish to benefit. When you contribute cash, securities or other assets to a donor-advised fund at a public charity, you are generally eligible to take an immediate tax deduction. Then those funds can be invested for tax-free growth and you can recommend grants to virtually any IRS-qualified public charity. When you give, you want your charitable donations to be as effective as possible. Donor-advised funds (DAF) are gaining in popularity because they are one of the easiest and most tax-advantageous ways to give to charity. But it is important for donors to keep in mind that a donor to a DAF can only claim an income tax deduction for a charitable contribution to a DAF if the donor makes a completed gift and relinquishes dominion and control over the donated property. In making a gift to a DAF, the DAF will generally advise its donors in writing of the following: their donations to the fund are irrevocable and unconditional, the donations are subject to the exclusive legal authority and control of the DAF as to their use and distribution, donors cannot make donations subject to any material restrictions or conditions (such as reserving a right to control or direct distributions or "any other condition that prevents the DAF from exercising exclusive legal control over the use of contributed assets to further its exempt purposes, and the DAF retains final authority over the distribution of all grants and may decline or modify a grant recommendation that is inconsistent with the DAF’s program policies, or for any other reason. It is for this reason, that it is crucial for donors to understand that once a gift is made, the donor gives up most of the control over the asset, other than as an advisory grant maker, and has very little recourse in gaining access to the asset for use other than advisory grant making. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
August 6, 2021
The Weekly Scenario
The Weekly Scenario: Considerations for Trustees and their Deceased Loved Ones
What should a Trustee consider doing for a recently deceased loved one? Here are some items a Trustee should consider. 1. If a residence is owned by the Trust and will be vacant for an extended period of time, consider the following: Changing the locks. Remove valuables from the residence, make a detailed inventory of them and store them safely. Install an inexpensive security system that will call out to a security firm if there is a break-in. In colder climates, consider a temperature alarm to prevent frozen water pipes. Request postmaster to forward mail. Check for perishable items in the residence or storage unit. Decide whether to turn off some utilities (electricity, phone). Stop deliveries. Advise the homeowner's insurance agent that the residence will be vacant and make appropriate arrangements for insurance. If the property is in the trust (the trust needs to be named as the insured). 2. Determine immediate cash needs for any beneficiary and for immediate expenses and identify accounts where cash is immediately available. 3. Cancel charge accounts, credit cards and subscriptions. 4. Make certain that property and casualty insurance coverage continues on personal effects, cars and real estate. 5. If you have personal access or access as the Trustee to a safe deposit box, the box should be inventoried in the presence of a bank officer and only then should contents be removed. 6. Gather personal records, including checkbooks and statements and obtain copies of income tax returns for the last couple of years. 7. Contact individuals who owe money to the deceased and arrange for continued collection. 8. Gather all life insurance policies. 9. Contact the social security administration (if needed). 10. Check to see if there are pets or other animals needing care. The law in each state is different concerning the information given to beneficiaries and when the information must be provided. As early as possible, the person who is the fiduciary (Trustee or Executor) should obtain information about beneficiaries and heirs. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
August 3, 2021
Labor and Employment
Vaccine Mandates: Are the Tides of Public Opinion Turning and Will it Lead to Increased Mandates?
Dr. Anthony Fauci recently expressed his support for more local vaccine mandates for schools and businesses, which was swiftly followed by a barrage of state and local governments and healthcare companies mandating the vaccine. While businesses have always been able to require vaccination, many have shied away from doing so based on the practical and legal implications, which include providing religious and medical exemptions and preparing to enforce a mandatory vaccination policy even if it means terminating high performing employees. Based on these complications, many private businesses have been encouraging vaccination instead of mandating it. However, with more encouragement from federal, state, and local governments and public health officials, the tides of public opinion are turning, and more businesses may opt to mandate vaccination. That said, moving forward, regardless of guidance from governments, the CDC, and public health officials, business owners will still have to consider the practical realities of vaccine mandates and the potential pitfalls. One practical consideration for many employers has been the appetite for vaccination among their employees. When employers mandate vaccination, they have to be prepared to enforce the policy if an employee refuses to get vaccinated, which could cause them to lose top talent in a competitive job market where replacements are hard to find. Another potential pitfall to mandating vaccinations is the administrative costs associated with processing and vetting exemption requests, especially related to religious exemptions, which are often difficult to assess and determine validity. On the flip side, with the cold and flu season on the horizon, unvaccinated workers may miss substantial amounts of work for common cold symptoms. Just last week, after Dr. Fauci encouraged vaccine mandates, I commented on this subject in the Maryland Reporter (view the article here). Since that time, as the infection and death rates related to the delta variant continue to rise, vaccine mandates have rolled out at a rapid pace with vaccine mandates for New York City, California, and Veterans Affairs workers and a wide range of medical groups and long-term care employees. Many of these mandates have been partial mandates giving employees an interesting choice: get vaccinated or get tested for COVID-19 weekly. Providing a testing option encourages vaccination by putting the burden on employees to get tested weekly and reduces the administrative headache of drilling down on exemptions claimed by employees by providing an alternative to vaccination. While there has been an increase in vaccine mandates in the public sector that may result in increases in private business mandates, the change in public opinion does not eliminate the potential pitfalls and challenges private employers face when determining if a vaccine mandate is right for them. Accordingly, employers still have several things to consider before mandating vaccination and should be sure to have a comprehensive policy to ensure their practices are legally compliant.
July 30, 2021
The Weekly Scenario
The Weekly Scenario: Guardians and Trustees
Sometimes the people who are the most nurturing are not necessarily the best at handling money. Although the person you name as guardian of a minor child can also serve as Trustee of a trust established for the child, it may not be the best solution. The dual role of guardian and Trustee presents the potential for a conflict of interest. For example, you name your sister as guardian of your children and name her as Trustee of trusts established for their benefit. Would it be reasonable for her to use the $100,000 from the trust to add an addition on her home? Perhaps it would be reasonable. But what if she uses $600,000 to buy a significantly larger home when her current home is worth $300,000? These types of scenarios are avoidable when there is one person named to raise the children and another to manage the finances. The guardian then simply makes requests from the Trustee when funds are needed. But since the Trustee has discretion in these matters, it doesn’t hurt to give clear guidance to the Trustee so that your children will be cared for in the way you want them to be. Some things to consider: Can the guardian expand the size of their current residence in order to house your children? Should the guardian be given a home improvement budget or car budget? Can trust funds be used to pay for private school? Can the trust funds be used to take her kids and your kids on vacations? Still, for many people, the persons they choose to put in charge of their children (and their finances) are honest and trustworthy and they are comfortable in putting them in charge of both the kids and the money. It really comes down to the people you choose. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
July 30, 2021
Intellectual Property
Not Forgetting Trademarks: Protecting your NFT Brand
To Read Part One of our NFT series, click here »» This latest installment in Offit Kurman’s NFT series looks at protecting NFT’s under trademark law. As of July 21, 2021, a search of the US Patent and Trademark Office (USPTO) database shows that 407 trademark applications have been filed that list “non-fungible tokens” as goods and/or services. Of these, 374 were filed on or after March 11, 2021, the date that news broke that the digital artist Beeple sold an NFT at auction for $63.9 million. Looking at these trademark filings, we see that some familiar names are planning to get in on the NFT action. Fender has filed four applications to register trademarks for NFT’s, including its well-known guitar brand STRATOCASTER. The Andy Warhol Foundation for the Visual Arts, Inc. seeks registration of the name of the famous pop artist for NFT’s. And Lion’s Gate Entertainment, Inc. filed an application to register the trademark JOHN WICK, apparently planning to create NFT’s associated with the successful movie franchise. If you’re entering the NFT space, it’s good to keep in mind that your NFT’s are products, and trademark protection is important just as with any other product you might launch. Below are a few best practices for your NFT trademark strategy: Conduct a clearance search. Especially with this rapidly exploding area, it is important to make sure that there is not already someone else creating or marketing NFT’s under the same or similar trademarks. Consider searching more broadly than just NFT’s. Remember that NFT’s can touch various areas and industries when conducting your search. The examples above involve a music company, an artist’s estate and a motion picture series. Because NFT’s can be used to represent, commemorate or give value to all kinds of goods and services, it will be good to think broadly when conducting a clearance search. Once the clearance diligence has been done, file an intent-to-use application quickly. This will reduce the risk that a third party could apply to register the same or similar mark or commercialize an NFT business under the same name before you secure your rights. Many others are employing this strategy – of the 374 filings since March 11th, 320 are based on an intent to use. Use a watch service to detect similar trademarks or domain names using your trademark. Such uses could be innocent, or could intentionally try to capitalize on your success if your NFT line takes off. A watch service will alert you to such uses and enable you to evaluate and take action quickly. Your Offit Kurman attorneys can help position you to be at the forefront of this new technological wave. If you have any questions, please contact Laura Winston at lwinston@offitkurman.com or 347-589-8536.
July 29, 2021
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