Using Your Power of Attorney

When you need to use a power of attorney, you need to know that the document will work, that it will be accepted to meet your need right at that time. If you “Google” the term “power of attorney”, you will see that very often now, there are problems.

A power of attorney or a durable power of attorney is one of the basic forms attorneys prepare in estate planning work. It is meant to allow one person (the “Agent”) to act for another (the “Principal”) if the Principal is disabled, or unavailable, or for some reason cannot take care of business matters for himself or herself. In some cases, the power is effective immediately and in others it becomes effective if a doctor certifies that the Principal is disabled. There are many variations.

The growing problem is getting a bank or investment advisor to accept your document. Some will and some will not. Even when they acknowledge that the documents are legal, that they are properly written and properly signed, many financial institutions will not accept your documents unless you comply with their individual requirements.

Some of the more common problems include:

-Refusing to accept a power that is not on their own form;

-Refusing to accept a power that is not immediately effective;

-Refusing to accept a power that names more than one person, acting either under a co-power or a successor in case the first person is not available;

-Requiring an affidavit on a regular basis stating that the power is still effective.

By the way, I am not being critical of these companies or their requirements. Please keep in mind that just because the company you are dealing with has some objection to the documents you present, it is not necessarily a bad company, and the documents we prepared are still proper. However, the company you are dealing with may have different rules due to problems they have experienced at other times.

Back to dealing with what you need to do in these situations. These are not problems without a solution. This is what I recommend.

Make a list of the banks, investment advisors and financial institutions you use and contact these companies now. Give your advisor a copy of your power to your and ask if they will accept it now and keep it on file. Ask if they require anything in addition to the power to make sure it is usable when needed. Ask if there is a time limit they will hold a power before a new document needs to be filed, or it needs to be verified as still active. If they say “yes”, get it in writing or at a minimum, get a written receipt or acknowledgement for the document.

Do not be surprised if you encounter obstacles dealing with the new requirements. They can be overcome, but it may take some effort. At times, the answer may be as simple as knowing that you need to use a form from that company for their individual transactions. At times it is as simple as preparing a separate power of attorney or series of powers allowing your Agent to work with that company. And do not sign a form document until it has been reviewed. Many power of attorney forms revoke or conflict with other similar documents and that may not be your intent.

You need to deal with these problems now, not when you need your Agent to use your power of attorney. This is one of the documents that normally will never be used for convenience and will only be used when you cannot help yourself.

The Cost of Retailiation

As of May 2008, the legal standard in any discrimination claim has changed as the result of decisions issued by the U.S. Supreme Court, the highest court in our country. Both cases started as standard discrimination claims, where an employee was fired or denied a transfer because of “alleged” discrimination. In one case, race discrimination was claimed and in the other, age discrimination was the issue. One case involved a private employer and the other involved a government employee.

In the end, neither case was decided on the basis of the original discrimination claim. Instead, both matters were decided on the ground that the employer had retaliated against the employee as the result of the employee filing a discrimination claim. What is unusual in these decisions is that our anti-discrimination laws do not always provide protection from retaliation, or so we thought. In both cases, the complaints were first filed under laws that did not provide protection from employer retaliation. However, to the surprise of most of the legal world, the Supreme Court applied anti-retaliation provisions from the Civil Rights Act of 1964 and the Age Discrimination in Employment Act, which applies only to the private sector.

As the result of these two decisions, employers need to exercise greater caution when firing, disciplining, or considering any other employment related action such as the transfer request which was denied in one of the cases. Because the Court allowed the employees to link the retaliation claim to a prior discrimination complaint, the employee did not need to carry the heavy burden of proving illegal discrimination, which has defeated many claims in recent years. The burden of proving employer retaliation is easier to achieve than a discrimination claim and the Supreme Court has now extended the ability to assert retaliation claims to many more cases.

Employers need to take a global view of an employee’s history and records before making any decision involving any employee who is a member of a protected group, whether by reason of race, sex, age, or in some cases national origin. If an employee has filed a discrimination complaint with an employer, any employment related action or decision needs to be carefully scrutinized by the employer to determine if it can be connected to the job decision. Employees who want to assert a discrimination claim against their employer need to provide a complete history to their attorneys, in order to evaluate whether the claim should include retaliation in addition to discrimination. The failure to include the retaliation claim at the start may mean that the employee is forever barred from asserting that claim.

Employers and employees both need to seek counsel and to provide all relevant information, for their own benefit.

It Is Later Than You Think

The time limit to enforce your legal rights just got shorter. In a controversial and divided decision, the Michigan Supreme Court held that a daughter could not sue the convicted murderer of her mother. The killing occurred in1986, but the murderer was not identified and arrested until 2002, 16 years after the crime.

The daughter sued the murderer for damages. It is common knowledge that there is no statute of limitations for murder, but that is not the case for a wrongful death claim, which must be filed within three years of the person's death. The Michigan Supreme Court ruled that the daughter waited too long, even though she had no idea who to sue until the defendant was arrested.

Three of the seven judges on the court disagreed, stating that the daughter should have been allowed time to discover the facts before she was required to act. This "discovery" period, a long-standing part of our common law, has now been overruled, at least in this type of case. In this case, even the police did not identify the person until 13 years after the limitation period expired under this ruling.

This decision has a real impact on how you should act. If you have a claim to assert in court, your time to file that claim starts to run when the wrongful act occurred, not when you first learned what happened, or as in this case, who did it. The statute varies for different claims, such as 6 years in contract claims, 3 years for non-contract claims and 2 years for professional liability claims.

If you own a business and an employee leaves, you need to review that employee's actions quickly to determine if there was any theft, embezzlement, or whether the employee took information belonging to you (just a few examples). If you are in an accident, you need to investigate your injuries and possible damage claims immediately, so that if you do have a legitimate claim you can file suit on time. It has always been the law that if you wait too long and then find a wrongful act, your right to sue will have expired. Now the concept of "too long" has a different meaning.

What does this mean to you? Act now and see your attorney if you think you have a law suit to pursue, or simply to learn what time periods to be aware of in your business or personal life. Protect yourself by making sure you do not miss a deadline by accident.

What Does It Mean To Retire - a/k/a The Dangers Of Imprecise Contracts

Defining, or redefining, “retirement” is not just a topic of commercials for annuities or RVs. It is a question so meaningful that the Court of Appeals has recently issued an opinion in which a central issue was the definition of the word.

The ubiquitous Google provides a good starting point for an analysis. A Google search for definitions of the meaning of retirement quickly yielded 14 different results. These definitions share some common themes, but they also have some very distinct differences.

This illustrates the problem of using, but not defining, the word “retirement” as part of a contract. As with any legal issue, where a contract leaves a term undefined there is an opening for a dispute that may need the intervention of the courts for resolution.

In an unpublished opinion in the matter of Nardi v. Satellite Servs., Inc., the Court of Appeals took on the issue of defining retirement. As a matter of background, the plaintiff was a former employee of the defendant. As part of an employment agreement, plaintiff was entitled to certain rights if his employment ended by virtue of “retirement.” The plaintiff left the defendant and went to work for another company, he alleged that he had “retired” and was entitled to certain benefits as defined by the contract. The defendants disagreed, alleging that “retirement” meant that the plaintiff was required to stop working in any occupation. In this matter, the Court of Appeals agreed with the plaintiff:

Resolution of this issue turns on the meaning of the word “retirement,” which is not defined in the contract. Defendants argue that “retirement” means that plaintiff was required to stop working in any occupation. However, the word “retirement” means “removal or withdrawal from an office or active service.” Random House Webster’s College Dictionary (1997). As noted by the trial court, however, today Americans often continue working in some capacity after they have begun drawing retirement benefits from a previous employer. See Derr v Murphy Motor Freight Lines, 452 Mich 375, 391 n 6 (Mallett, J.); 550 NW2d 759, amended 453 Mich 1204 (1996). Therefore, the modern understanding of the word “retirement” is an employee’s withdrawal from a particular “office” to collect vested benefits that have accrued to the employee, usually from years of faithful service. The contract’s other provisions support this definition of the word “retirement.”

Keep in mind that this is an unpublished opinion, so it is not binding as a matter of legal precedent, but it is informative on this issue. Moreover, it illustrates the problem that can occur when a contract does not expressly define a key term.

In the employment arena, or with regard to succession planning (such as buy-sell agreements and shareholder agreements), I suggest you take the opportunity to review your agreements. Is the word “retirement” used without definition? Are other key terms undefined?

What other practical advice can you take away? Spending the time with a qualified attorney to carefully draft significant documents may add to the up-front expense of a project. But the additional cost of litigation that can be the direct result from a dispute based on an imprecise contract will far outweigh the benefits of any slight cost savings from trying to cut corners when creating the agreements that will affect you and your business for years to come.

Remembering Our Heroes This Memorial Day

With Memorial Day approaching, my blog will be silent for a few days.

Now I take great liberty with the freedom the blog affords me. This post has nothing to do with the law, it is purely personal. As we honor our nation's heroes, I also honor my personal hero - my brother, Adam Miller, who died far too soon in 1999.

An exceptional student, a visionary as a business-man and web developer, a tenacious and gifted journalist, a true Michigan Man and a brother without equal he is dearly missed by many every day.

You may have noticed a link on the right side of my blog to a memorial fund established in his honor. To learn more about the fund or to make a contribution please click here. Below is an excerpt from the website which gives but a brief overview into his extraordinary life.

Though diagnosed at the age of seven with Neurofibromastosis type 2, Adam neither knew nor accepted boundaries or limitations. While the disease gradually robbed him of his hearing and vision and impaired his mobility, it left his brilliant mind untouched and spirit undaunted. Adam believed it was important on both a personal and professional level, to be actively engaged in life-to have achievability. And achieve he did!

At the University of Michigan, Adam earned numerous academic and journalistic awards. He was a member of several Honor Societies including Phi Beta Kappa, Golden Key Society and Kappa Tau Alpha (Journalism Honor Society). He received the John Rich Award for Journalism Excellence and was twice honored with the prestigious Columbia Gold Circle Award for Journalism for his work on the Michigan Daily. Adam spent four years as a sports writer for The Daily, where he also served as Night Editor, Senior Editor for Sports and as a byline columnist, writing "Miller's Crossing" his senior year.

During his undergraduate years at Michigan, he authored several articles on masculinity and disability. He and his co-author Professor Tom Gerschick are considered national authorities on the issue of the effects of physical disabilities on masculine identities. Their articles appear in many books and magazines, as well as sociological journals and textbooks. Adam was active in the University's Hearing-Impaired Students Organization and helped to maintain the Barrier-Free Computer-Users Group as well. He believed that it was vital for people with disabilities to communicate with and support one another. To further that end, he created and maintained the web site for the NF2 Crew, an international group of people affected by his disease. Because NF2 is such a rare disease, Adam believed it was vital for The Crew to provide a forum where information, treatment options, medical developments and personal support could be obtained. After earning his Masters in Journalism from the University in 1996, Adam concentrated his efforts on computer-assisted reporting. As Founder and President of WebCrossings. Ltd, Adam developed and maintained a variety of award-winning web sites for clients ranging from WDIV-TV4 to Michigan Ear Institute. He served as the Technology writer for HOUR Detroit magazine and was a frequent free-lance contributor to the Ann Arbor News. He was also passionate and devoted fan of the Michigan Wolverines and proud to be a True Blue MICHIGAN MAN.

I don't worry about the meaning of life - I can't handle the big stuff.

What concerns me is the meaning IN life - day by day, hour by hour, while I'm doing whatever it is that I do. What counts is not what I do, but that I DO IT at all?

Adam S. Miller passed away in 1999.

Business Litigation Is Not A DIY Matter

The Internet can be a great resource and with all the available information it is tempting to think about trying new endeavors without professional assistance. Just make sure to cross off "appearing in court on behalf of a corporation" as one of those activities.

An article on allbusiness.com asks "should you hire an attorney?" Do it yourselfers rejoice? Not so fast. The first sentence of the article is already leading to a road for trouble:

The only time you should always be represented by an attorney is when you appear in a criminal matter.

STOP! This statement is far too simplistic. Most notably, in Michigan, a corporation (as well as varoius other entities) may not appear in court without representation of a licensed attorney.

Longstanding Michigan law is that non-attorneys who violate this rule are engaged in the unauthorized practice of law. An ethics article from the Michigan Bar, which arose from the context of a landlord-tenant dispute where one the parties was not an individual, plainly spells out the law:

Lay officers, directors, partners and employees of corporate or partnership entities may not represent the entity in court proceedings or sign court documents without engaging in the unauthorized practice of law.

But that is not all, oh no, that is not all.

Michigan lawyers confronted with a non-lawyer appearing in court for a corporation or partnership have an ethical duty to bring the fact to the attention of the tribunal. Informal ethics opinion RI-10.

Likewise, Michigan judges are also under an ethical duty to prevent the unauthorized practice of law.

A separate ethics opinion reaches the same result in the context of a corporation or partnership which is involved in court proceedings relating to criminal matters or in response to ordinance violations:

We find no pertinent difference between the handling of civil matters and the handling of criminal matters by a layman representative of either a corporation or a partnership.

A layman appearing for a corporation or a partnership in response to an alleged violation of an ordinance is engaged in the unauthorized practice of law.

These ethics opinion are all in line with the Michigan Court of Appeals opinion in Peters Production, Inc. v Densick Broadcasting Company which held that a non-lawyer officer or shareholder may not appear in court on behalf of the corporation:

An individual may appear in propria persona; a corporation, however, can appear only by attorney regardless of whether it is interested in its own corporate capacity or in a fiduciary capacity.

Besides the practical reasons to work with an attorney, such as an attorney's specialized knowledge of the substantive law and the procedural rules, in some cases you must work with an attorney in order to avoid the potential consequences of engaging in the unauthorized practice of law.

Have questions about the boundaries of what is permissible by a non-attorney without running afoul of the law? You can start with the source by viewing the statutes MCL 600.916 and MCL 450.681, or, better yet, post a comment or e-mail me to continue the discussion.

Blogging About Litigants Blogging

This is a blog post about litigants using blogs and websites.

I know, the whole ironic, self-conscious thing is so 1990s, but this topic was too good to pass up.

The Wall Street Journal Law Blog has an oh-so-interesting discussion about the recent trend of litigants using blogs and websites as part of ongoing courtroom, and the attendant public relations, battles.

Progress and time march on, so this trend is likely here to stay, if not increase in popularity. But is it a good thing? As an attorney, and a part-time/novice blogger, I say "aye" - with a caveat, of course.

A blog or a website is merely a tool. As an attorney, or as someone who is not a member of the bar but who is caught up in the litigation process, why wouldn't you want more tools at your disposal? Whether and how to use those tools is up to you.

Information is easier to disburse then ever. Youtube anyone? Whether there is any merit to the content is another question.

Back to the litigation blogs. One question that is most interesting to yours truly is whether an increase in the usage of such devices will empower Davids or will it simply further empower Goliaths.

In concept, a website or blog can be cheaply established and easily maintained, and thus may be a way to level the playing field and allow those of less means to essentially wage an otherwise costly PR battle. Is it not foreseeable, though, that once all parties agree to engage via the same medium that the party that has access to more assets will have an advantage? Possible, but a relatively primitive blog may still be a more than sufficient device when placed in the hands of an effective communicator with a meaningful message.

Bottom lining it - on balance, I like the idea. It's creative, and it will be interesting to see where it takes us.

Lawyers and non-lawyers alike please chime in on this one. What's your take?

Who's Next In Line? Hopefully Many

Let's review - the time to work on a succession plan is now, not after the death or disability of a business owner. The key, though, is not just putting a plan on paper, but crafting a plan that will meet the practical challenges of arranging for an orderly and effective transfer of ownership and management.

In other words, make sure your buy-sell agreement will work.

To that end, Barry S. Cain, managing director for the Family Business Center at the accounting and consulting firm Blackman Kallick, has recently posted a fine article that focuses on the need for diversity in succession planning.

The key to the long-term success of your business lies in a word widely used in business today, although usually in a different context: diversity. Because the future is full of uncertainty, it’s extremely risky to pin all your hopes on one successor, even if a relative is waiting in the wings. The future of your business will be best assured if you have choices ... and good ones, at that.

Some of the key ideas covered in the article by Mr. Cain include:

• The need to have options for the next generation of leaders for the business. Choosing only one successor is very risky. If that individual is not ready when the time comes, either due to changes over time in the needs of the business or because of changes in the professional or family life of the successor, then the succession plan for the business is in peril.

• Mr. Cain also suggests that the next generation of leaders for the business need not come from within the family bloodline. This idea is obviously directly aimed at family businesses, but the idea of looking outside the organization can also be well-applied to most closely held companies.

One other important related topic that is not addressed in the article is the need to maintain appropriate financing arrangements for the buy-sell agreement, through sufficient life and disability insurance or otherwise. Don't let your succession plan fail because there are not sufficient assets to pay for the transfer of ownership to move the plan forward.

Special thanks to author Paul Brown and his New York Times small business tool kit for bringing the article by Mr. Cain to my attention.

This Is A Communication To Consumer Debtors and Debt Collectors

Kudos to Michigan attorney Gary Nitzkin for a very interesting addition to his excellent Michigan Collection Law Blog in which he comments on a recent Court of Appeals for the Fourth Circuit decision (Sayyed v Wolpoff and Abramson) addressing the extent to which the FDCPA applies to attorneys during litigaiton.

If you are still reading this posting it is likely that you are either a collection attorney or you are a debtor who is doing research on the FDCPA. In either event, you have made the right choice as we are about to get to the practical part of this posting.

That the FDCPA applies to attorneys is not new. But, as Mr. Nitzkin does a fine job of highlighting, this matter involved a somewhat novel angle, as well as some carefully crafted, but ultimately rejected, defenses.

Herewith the novel angle: the allegedly violative statements were contained in the pleadings. The consumer debtor alleged that the debt collector was over-reaching in their requested relief, to which the debt collector asserted numerous defenses, including common law immunity from statements in pleadings. The court, siding with the debtor, opined that "common law immunities cannot trump the Act's clear application to the litigating activities of attorneys...".

Herewith the novel angle - part II: the debt collector attorney was unsuccessful in persuading the court that the pleadings were exempt from the FDCPA because they were transmitted to the attorney for the debtor, not directly to the consumer. The court was quite clear in striking down this argument, stating "[t]hus, plainly, the FDCPA covers communications to a debtor's attorney."

Bottom line please? True commercial litigators need not be concerned. The FDCPA has not been extended to cover collections beyond consumer debtors. But for collection attorneys, this opinion needs to be heeded as a warning that the requirements of the FDCPA should be seen as ongoing throughout the course of litigation and will even be applied to "indirect communications" to the debtor via the debtor's attorney. And for any consumer debtors reading this posting, keep in mind that a debt collecting attorney must respect your rights under the FDCPA during litigation.

Don't Let Direct Marketers Follow You To Your Grave

Commercial mail that continues to be addressed to someone who has died can be a source of ongoing difficulty for those who continue to receive the unwanted mail.

Put an end to the problem by registering the deceased person’s information online on the Direct Marketing Association’s Deceased Do Not Contact List, or write to the DMA at P.O. Box 1270, Carmel, MY 10512. Be sure to include the name, date of death, your name, your relationship to the decedent and contact information. There is a $1.00 fee to register on the list.

Is Your Company Prepared For The Threat Of Workplace Violence?

The terribly tragic recent workplace shooting in Troy, Michigan and the horrific massacre at Virginia Tech are dramatic examples of the very real danger of workplace violence. For employers, consider yourselves warned.

In addition to the moral duty to provide a safe work environment, companies also must face the reality of the potential legal and financial damages that can result from failing to take appropriate protective measures.

Although the general rule is that an employer is not liable for the acts of an employee that are outside the scope of employment, a company may still be liable under other theories, such as negligent hiring, supervision or retention. When the liability is related to workplace violence, the potential damages can be enormous and can threaten both the existence of the company and the livelihood of all the people who depend on it.

While there is no way to provide absolute protection against an incident of workplace violence, there are many important steps that your company should take in order to protect fellow employees, the company and its owners.

Take a moment and review your company’s readiness for workplace violence. In doing so, consider the following key areas:

• Are job applicants, including their employment and any criminal history, adequately screened?
• Do you have a clearly defined “no tolerance policy” towards violence and weapons?
• Do your employees know the warning signs of potential violence?
• Does your HR department know how to investigate alleged incidents of violence?
• Have your employees been provided with procedures to follow in the event of a violent incident?
• Does your HR department have a plan for the safest way to handle the termination of a potential hostile or violent employee?
• Are procedures in place to maintain building security?
• Do you have procedures to deal with a bomb threat?

These issues and more can all be addressed in policies for your employees and for management. Regardless of the size of your company, a simple and clearly defined set of workplace violence policies can be an important part of your company’s risk management program.

It is too late to plead ignorance to the threat of workplace violence, and once an incident occurs it is too late to create the policies that could have prevented the incident. Protect your company and its employees by planning ahead. As always, contact me if you have questions or if you want to discuss how these important issues.

Negligent Dancing (and other lurking workplace dangers)

A Chicago court is hearing a case based on an allegation of “negligent dancing”:

A Chicago woman is suing a man she claims flipped her into the air and dropped her on her head in a jitterbug-style dance move at a company event.

Her attorney, David M. Baum, said Prange should be accountable for the alleged injuries caused by "negligent dancing."

Why do I include this in a legal blog? First, because in scouring the internet for current legal topics I got drawn in by the headline.

But beyond the attention-grabbing caption, there are some legal lessons to be learned here.

For businesspeople, perhaps the most important is that your exposure to liability is probably greater than you think. Make sure to take the prudent steps to protect yourself and your company, including using the optimal entity (usually something that provides true limited liability protection, such as an LLC or corporation, not merely a certificate of assumed name filed with the county), always maintaining corporate formalities and keep your corporate records up to date to protect corporate integrity, and making sure you always have proper insurance in place, including any insurance needed for special events.

As usual, it all comes back to planning. Many hazards, such as the threat of being injured or exposed to liability as a result of a “negligent dancing” incident, are hard to predict. The best way to limit the damage from dangers, foreseen and unforeseeable, is to have the proper planning documents in place personally (such as a durable power of attorney, will, and medical power of attorney) and professionally (such as buy-sell agreement, fully funded by insurance, or a carefully drafted operating agreement). Don’t delay – contact your trusted attorney to start planning, or take a few minutes to review your plan, today.

You Are Not Invincible - And Neither Is Your Durable Power Of Attorney

Don’t mistake “durable” for “invincible.” Several times in the past year I have been asked whether a durable power of attorney is still effective after the death of the principle. The answer is no – sort of.

A durable power of attorney (“DPOA”) terminates when the death of the principal becomes known to the agent. See MCL 700.5504.

While the principal is still living, a DPOA allows for the management of the affairs of a principal who has become incapacitated. This is a powerful tool, but it must be created before the principal suffers the onset of the disability, as at that point it is probably too late for the principal to have the capacity to sign a valid DPOA.

What are the alternatives to a DPOA? If property is owned in a trust, under many circumstances a successor trustee can take over during a period of incapacity. For property outside the trust, though, this would not be effective. The other alternatives to a DPOA are a judicial guardianship or conservatorship. These involve judicial oversight and creation, and are generally far more costly and less desirable alternatives.

While many people understand the reality of their own mortality, they do not consider the likelihood or even possibility of their temporary incapacity, and thus they overlook incapacity planning as part of their estate plan. However, incapacity planning is an important part of estate planning and a DPOA is a document that should be included in most estate plans.

Now a word of caution. This is not a document to be drafted without professional counsel. Care must be taken in drafting the DPOA not only to assure that it is effective and controlling when it is needed, but also to include restrictions as appropriate to avoid unintended tax consequences.

This is a good time for me to restate the important restrictions noted at the top of the blog – I cannot, and by way of this blog I do not, offer legal advice without knowledge of all of the relevant facts. This blog does not provide create an attorney-client relationship and does not provide legal advice. It is designed solely to raise issues that merit further discussion and exploration. It is of utmost importance that you contact your own attorney before taking, or refraining from taking, any action that can affect your legal rights.

Does A Michigan LLC Need To Maintain A Minute Book?

In short, yes.

As an attorney, one of the misconceptions I am commonly confronted with is the idea that a Limited Liability Company (LLC) is exempt from the need to maintain the kinds of records that would typically be found in a corporate minute book.

In Michigan, LLCs are required to maintain certain records. By statute, an LLC is required to keep numerous records at its registered office or principal place of business, including copies of tax returns, financial statements, operating agreements, and records relating to distributions and voting rights. To view the statute, click here.

The statute does not use the word “minute book”, but the requirements of the statute are items that you would expect to find in a minute book for a company.

Why is this important? First, because the statute says these records “shall” be maintained. Following the requirements of the statute is not optional. Of equal, or perhaps greater, importance, is that failure to maintain corporate formalities, including keeping proper records, is a key factor in determining whether an adverse party may “pierce the corporate veil”, thereby defeating the limited liability protection of the company and allowing the adverse party to directly take action against individual members.

One other item to keep in mind is that the requirements of the statute should be viewed as a floor, not a ceiling, meaning that as a matter of practice we recommend that our clients maintain more records then just the bare minimum required by the statute. This not only eases administrative work for the company over time, it is also provides the members with greater protection against claims that seek to pierce the corporate veil.

The recordkeeping requirements of the Michigan statute are not overly burdensome and the results of failure to comply with the statute can be significant. On at least an annual basis, our office reviews the records for not only the corporations we represent, but also the LLCs we represent. Give the annual records of your company the attention they need by performing an annual review or, if you have questions, contact me to arrange a consultation to review your company’s records and to help set up an efficient recordkeeping system for your LLC.

Ditch the DBA

For most businesses, doing business under an assumed name certificate filed with the county makes as much sense as using a rotary telephone. It may get the job done, but it is has many drawbacks and there are far more attractive alternatives.

Lets start with the basics. An individual can file an assumed name certificate with the county that allows that person to do business in the county under an assumed name. The form is simple and the filing fee is small. That may sound appealing until you realize that there are few benefits, and many downsides, to structuring your business in this method.

One significant drawback to an assumed name certificate is that it does not provide the business owner with any limited liability protection. In contrast, for businesses that are formed in a way that provides limited liability protection, such as corporations and limited liability companies (“LLC”s), you are not personally liable for most debts and obligations of the business. If you do business under an assumed name filed with a county, you do not have this protection. You are the business, the business is not considered a separate entity, and you are liable for the obligations of the company.

In the past, using a business that provided limited liability protection, such as a “C” corporation, meant also having the cost of “double taxation,” meaning that income was taxed upon receipt by the corporation, and taxed again on distribution to the owners. However, there are now many forms of entities, such as S Corporations or LLCs, which allow a business to have true limited liability protection and enjoy the benefits of “partnership” or “flow-through” style taxation, as opposed to traditional “corporate” style taxation.

There are many other advantages to using a company that provides limited liability protection, such as an LLC, including the ability of the company to continue in existence after the death of an owner, increased options for succession planning and integration with an owner’s estate plan, potential options for tax planning, and value in the form of perceived legitimacy from third parties when dealing with an established company. Also keep in mind that businesses operating an assumed name should file the certificate in every county in which they transact business, in contrast to an LLC or corporation which is protected by a single statewide filing.

If you are a business owner currently using an assumed name certificate filed with the county and you have questions about converting to a more favorable form, or you are considering starting a new business and you have questions about choosing the proper form, I encourage you to contact me or your local trusted business attorney.

Protect Your Home And Your Credit

Your home is probably your largest and most important asset. It is also one of the most attractive assets to criminals and con artists. Not surprisingly, many states report that mortgage fraud is one of the most commonly reported complaints. The effect of mortgage fraud can be devastating, not only as a way of removing equity or destroying credit, but in some cases homeowners also unwittingly sign deeds giving away actual ownership and legal title to the house.

Special thanks to Emil Izrailov, a Certified Mortgage Planner with Kaye Financial Corporation, for providing a recent article that highlights a new twist in mortgage fraud, an “equity disbursement program” purportedly sponsored by the “CRA” (that sounds official, doesn’t it?):

Through direct mail advertising, consumers are being offered special "cash grant or equity disbursement" programs which claim to be linked to the Community Reinvestment Act (CRA) and, in some cases, even endorsed by the Federal Reserve.

The Federal Reserve Board cautions homeowners that "no such federal programs exist". In fact, the Federal Reserve Board does not "endorse or sponsor" any mortgage programs, and the CRA does not "entitle individuals to any grants or loans". Enacted in 1977, the CRA is a federal law designed to address unfair "redlining" practices in low-income neighborhoods, encouraging financial institutions to address the financial needs of the community as a whole.

Click here to download the rest of the helpful article.

How do you keep from falling victim to this or any of the other in a frighteningly wide array of mortgage fraud schemes including equity stripping, loan flipping, bait and switch and deceptive loan servicing? (For a further description of these and other schemes to guard against here is a link to a recent article from Nancy Kreisler). The best way to protect your home and your credit is a twofold process:

First, only work with an experienced mortgage professional who can provide exemplary references. You can even send an email directly to Emil Izrailov if you have questions about how to protect yourself from mortgage fraud or you are looking to obtain financing.

Second, before entering into any agreements for the sale of your home or for financing which is secured by your home, contact me or your other trusted attorney who is experienced in real estate, civil and consumer protection law. That attorney can review the agreements before you sign them to make sure that your interests, your home and your credit are protected.

Keep Your Estate Private

Have you read Anna Nicole Smith’s Last Will and Testament?

I have not read her will, nor do I intend to. For me, the noteworthy aspect of her will is not the contents of the document, but the fact that it is front-page news on the CNN website (This is not meant to be a criticism of CNN, as I expect it is likely to be widely publicized by countless other media outlets).

For those of us who are not celebrities, there is little danger of our will being published by the national media. But if you do not make arrangements to avoid probate, your will, or any other probate proceedings, are public record.

Probate proceedings are less burdensome then they were in the past, but there are still many good reasons to avoid probate, including to protect your privacy. As an attorney who spends a significant portion of my practice dedicated to estate planning and administration, probate avoidance is one of the most common goals of my clients, and there are more options then ever to help clients achieve that goal. To avoid probate and protect your privacy, contact your trusted estate planning attorney.

The Problem With Going Paperless

Does anyone know your password to your online accounts? If not, they should.

That’s right, this is not a warning about security, this is a warning about the problem of making sure that your survivors have access to needed information in the event of your death or disability.

There is a growing trend towards managing assets online, oftentimes leaving your heirs with a lack of paper records and making them entirely dependent upon having access to your online accounts. If you don’t leave behind your user names and passwords, your information can be held so securely that it would require a court order, and costly legal proceedings, for your survivors just to gain access to the information. Special thanks to Michigan attorney William Josh Ard of Howard and Howard in Ann Arbor for bringing a recent article on this topic to my attention. As the author notes:

Keeping track of account passwords and Internet passwords is hard enough. Now imagine what can happen once a loved one is gone.

More and more people are using the Web to manage their financial and personal accounts. However, they don't think to leave behind user names and passwords with a trusted resource.

You may also recall the recent well-publicized court battle between the survivors of a Marine killed in Iraq and Yahoo, after the family, which did not have the account password, was denied access to the email account.

To avoid unnecessarily making your information inaccessible in the event it is needed by your loved ones, be sure to keep a current and complete list of all your accounts and login information. The list should be comprehensive, including everything from email accounts to bank accounts, investment accounts, credit cards - any other account that is password protected. Then, decide who else will receive or have access to the list, such as your spouse, adult children, financial advisor or estate planning attorney.

These problems apply equally to individuals and businesses. If your business depends on online accounts, make sure that the information on those accounts will be accessible to future owners, managers or employees who may need to take over the accounts with little or no advance notice.

Do you have a comment on this article or a suggestion as to how to maintain records of your online comments? I invite you to contact me or post a comment below.

Residential Land Contracts 101

In Michigan, sellers of residential property are more interested than ever in finding ways of making their property attractive to prospective buyers. Many sellers are offering leases as an option. Another alternative is to offer a sale by land contract. As an attorney who handles real estate transactions, from time to time I am asked by clients or prospective clients to review the fundamentals of a land contract. That prompted me to post the following primer.

What is a land contract? A land contract is both a method of financing and an agreement for the sale of an interest in real property. Payments are usually made in installments, and the interest rate cannot exceed 11% unless it qualifies for an exemption. Keep in mind, though, that the land contract itself does not convey legal title to the buyer (legal title is transferred by use of a deed). There are various reasons a buyer and seller may choose to enter into a land contract.

Why would a seller want to use a land contract? One reason is that, unlike a traditional sale whereby legal title is transferred at closing to the buyer and the mortgage holder retains a security interest, when a sale of real estate is conducted by way of land contract the seller retains legal title to the property until the conclusion of the land contract, and thus the seller retains the right to use the property as collateral during the course of the land contract (although this right may be barred by the language of the land contract). Another potential advantage for the seller relates to the seller’s remedies in the event that the buyer defaults. Should the buyer default, the seller has the remedy of “forfeiture”, by which the seller can recover possession of the property, retain all the payments the buyer has made to date under the contract, and the seller can avoid the lengthy process of a foreclosure sale.

Why would a buyer want to use a land contract? The most common reason for a buyer to agree to purchase property by land contract is because the buyer, as a result of their credit history or inability to make the required down payment, cannot obtain a traditional mortgage.

Beware of the “standard” land contract. There are many optional provisions for a land contract, including sections relating to prepayment penalties, rights to encumber, duty to place a deed in escrow, disposition of insurance proceeds, payment of taxes and insurance, rights to assign and remedies in event of default. Also, if you have an estate plan, be sure that the way in which you buy or sell property is consistent with that plan, particularly if your plan involves use of one or more trust agreements. Before entering into a land contract, or any other significant real estate contract, be sure to consult with an attorney who can make sure that your rights are fully protected.

Don't Disinherit Your Heirs By Mistake

Did you mean to disinherit your newly born child? Probably not. But to avoid mistakenly omitting a loved one from your estate it is most important to understand that your will only controls a fraction of what you own.

Many assets will likely pass outside of your will, including assets that are owned jointly (with rights of survivorship), assets held in a trust, and those which have controlling beneficiary designations, such as retirement accounts or life insurance. It is becoming more common for these assets to be the most valuable items in an estate. That makes it more important then ever to make sure that your beneficiary designations are current and consistent with your overall plan.

A recent Newsweek article highlights this important topic:

Your will tells the family how you want your property distributed when you die. But here's something you might not know: your will—and your wishes—can be overridden by other forms you've signed and forgotten about. Take the beneficiary form that came with your life-insurance policy. If it names your two children as beneficiaries and later a third child is born, only the first two will get the money. To include the third, you'll have to change the form.

The article discusses many other pitfalls that can affect you and your heirs in the event that your estate plan is incomplete or out of date. As an attorney who has worked with clients who have been the unfortunate victim of this scenario, I can confirm that this is a very real problem.

The best way to avoid family conflict and to make sure that your heirs are properly taken care of, make sure to not only work with an estate planning attorney to prepare your plan, but also to periodically work with your attorney to make sure that all of your assets will pass according to that plan. That is the best way to make sure that where you have a “will”, you also provide the way.

Transportation Lawyers Blog Launch

I am excited to announce the launch of the Transportation Laywers Blog. The primary contributor will be Alex Miller, an attorney with over 30 years of experience, much of it dedicated to the needs of the transportation industry. From time to time I will also be happy to add my thoughts and comments. This is a fantastic new forum and source of information for anyone with an interest or questions related to transportation law. Visit often, subscribe and spread the word!

Let Me Help You Avoid Probate

You read the title right - this attorney is giving free suggestions on how to help keep you out of court. Interested? Read on.

One of the goals of estate planning for most people is to avoid probate. To understand “why”, you have to start with the “what”, meaning, what is probate? Probate is the process of a court transferring the title of a decedent’s assets to his or her beneficiaries or heirs.

Why do you want to avoid probate? Because it is costly and time consuming. It can cost thousands of dollars in costs and fees and it can take many months to complete.

Why else do you want to avoid probate? To protect your privacy. Probate proceedings are public record, and with more and more court records becoming available online, it will be easier than ever for those records to be accessed by the general public.

The good news is there are ways to avoid probate.

The first way is to use the process of naming beneficiaries or transfer on death or payable on death (“TOD” or “POD”) designations. Michigan has a statute that clarifies this right. This method of contractually transferring title upon the death of the owner of the asset is available for items such as bank accounts, life insurance policies, and retirement accounts. If beneficiaries are designated, upon the death of the owner of the assets the financial institutions will transfer the assets directly to your beneficiaries so long as your beneficiaries follow their processing requirements.

But not all assets can be transferred using beneficiary designations. This is where a trust can be used to avoid probate. If the trust is properly created and funded, it will avoid probate as the successor trustee is able to privately manage your assets in the event of your passing.

Did you catch the word “funding”? That could be the most important word in this posting. The process of changing title of assets so that they are under the control of the trust is called “funding” the trust. A trust provides a plan for management and distribution of assets and designates the person, the trustee, to carry out that plan. But if an asset is not properly conveyed to the trust, then the trust has no control over that asset, and it is likely that a probate estate will need to be opened.

Probate proceedings are less burdensome then they were in the past, but there are still plenty of reasons to talk to your attorney about how you can avoid probate. So talk to your attorney about designing an estate plan to avoid probate, or to make sure that your existing estate plan will keep your estate out of probate court.

Do You Plan To Work Forever?

Nobody lives and works forever so succession is inevitable for every business. But owners can get so busy in the day-to-day workings of the business that they never set aside the time to plan for the future.

If you’ve worked hard to build a business, make sure you have also put together a plan for an orderly transfer of ownership. Poor or non-existent planning has resulted in the end of many businesses and, particularly in the case of family owned businesses, can lead to financial problems and even breaking families apart. Failing to plan can also result in excessive estate taxes and in some cases the need to sell the company or valuable assets in order to pay taxes, administration expenses and debts.

A key part of a succession plan is often a buy-sell agreement, sometimes referred to as a shareholders agreement. This agreement can be used to provide a market for each owner’s interest in the event of certain triggering events (such as death or disability), promote continuity and stability, potentially freeze the value of an owner’s interest for business or estate tax purposes, help to retain S-corporation status and serve as a way to resolve a dispute or deadlock among owners. If nothing else, the agreement can be used to lay the groundwork for long-term planning.

Planning is a process, and it’s never too early to start. To preserve your business for the future, do the practical thing and start working on you succession plan today. To further address this topic or to talk about the options that are available, please contact me to continue the discussion.

New Years Resolution

The blog is back! I'm getting an early start on one of my New Years Resolution - to regularly update this blog. I look forward to expanding the blog in 2007 both in the topics that I will cover and in the participation that I encourage from you.

What is one of your resolutions for 2007? Let me suggest something that is far more rewarding then organizing your closet - update or create your estate plan.

If you have always been putting off creating your estate plan as something to do "someday," well, this is the ideal time to turn "someday" into a firm date in January! If you have a plan that is more than 3 years old, schedule a time to review your plan.

Make sure that you are still comfortable with your selection of fiduciaries, such as agents under a power of attorney, personal representatives or trustees. Also decide if it is appropriate to make any changes in your plan of distribution to your beneficiaries. And if you have a trust, make sure that it is properly funded, so that any new assets you may have acquired are properly titled.

There is nothing more gratifying then knowing you have done everything you can to take care of your loved ones. The start of the new year is the perfect time to set a date to review or create these important documents.

As an attorney I am happy to help with your estate plan. As for cleaning that closet, sorry to say you are on your own...

Ready To Write 600 Mortgage Payment Checks?

A new product is available from many lenders – a 50-year mortgage. Is it right for you? Probably not.

The primary attraction of the 50-year mortgage is that it allows for lower monthly payments. But these lower monthly payments come at a great cost, which for most homeowners would significantly outweigh the benefit.

Three characteristics of the 50-year mortgage that should give any borrower pause before entering into the loan are: (1) slow growth of equity; (2) the substantial amount of extra interest over the life of the loan; and (3) the risk of adjustable rates.

If you take a 50-year mortgage, then be prepared to build equity at a painfully slow rate. Consider a $200,000 50-year, 7.5% mortgage. After the first ten years of payments, you would have paid almost $150,000 in interest payments, and you would have accumulated less than $5,000 in equity. In contrast, consider if you had taken a $200,000 loan at 7.5% interest for 30 years, after the first ten years of the loan you would have paid almost $7,000 less in interest and you would have built over $26,000 in equity.

Clearly the equity builds at a much faster rate under the 30-year loan. This is an important advantage, as one of the main benefits of home ownership is to build equity over time. Also keep in mind that you would be paying an enormous amount of extra interest over the life of a 50-year mortgage. Using the example above, you would pay $264,845.87 extra in interest over the life of the loan!

Of course, the monthly payments on the 30-year mortgage would be $118 higher than the 50-year mortgage. But when taking into account the faster equity growth and the enormous saving in interest expense, it is plainly worth the slightly higher monthly payment.

Also keep in mind that most 50-year mortgages currently offered by lenders provide a fixed rate for the first 5 years, after which the rate becomes adjustable. That means that after 5 years your monthly payment could increase.

With all the potential hazards, who should consider a 50-year mortgage? An ideal borrower would be someone who plans to stay in a home for less than 5 years, and does not want to take an "Interest Only" or "Option ARM" loan. With a 50-year mortgage you do not run the risk of owing more than you borrowed, which is a real possibility with some Interest Only or Option ARM loans that allow a borrower to pay even less than the interest due each month.

While this new product may be a good alternative for a small percentage of homeowners or investors, for most people, entering into a half-century mortgage IS NOT PRACTICAL.