By Matthew A. Quick The case of Board of Managers of Hidden Lake Townhome Owners Association v Green Trails Improvement Association shows the importance of understanding the difference between a license and a covenant. A license is permission to use another's property, but is generally revocable or has a specific termination date. A covenant is a promise that runs with the land and is generally irrevocable. This case concerned a pathway that the home owner's association could utilize, but contribute to maintenance. The agreement was only for 50 years. At the end of 50 years, the agreement regarding the pathway (a license) expired and neither party could enforce their interests based upon the original agreement. If the arrangement would have been a covenant. Then the agreement would have run with the land for an indefinite period of time.
LLCs and Creditor Attachment of Membership Distributional Interest (Illinois)
By Matthew A. Quick The holding in First Mid-Illinois Bank & Trust v Parker, highlights a concern of the protections afforded by a limited liability company (LLC). In the case, the Plaintiff succeeded in having the court enter a judgment against the Defendants. To enforce the judgment, the Plaintiff joined an LLC in which the Defendants owned membership interests. 805 ILCS 180/30-20 states that a court "may charge the distributional interest of the [LLC member] to satisfy the judgment." In addition, 805 ILCS 180/30-20 provides, "A charging order constitutes a lien on the judgment debtor's distributional interest. The court may order a foreclosure of a lien on a distributional interest subject to the charging order at any time. . . ."
Furthermore, 735 ILCS 5/4-101 states:
In any court having competent jurisdiction, a creditor having a money claim, whether liquidated or unliquidated, and whether sounding in contract or tort, or based upon a statutory cause of action created by law in favor of the People of the State of Illinois, or any agency of the State, may have an attachment against the property of his or her debtor, or that of any one or more of several debtors, either at the time of commencement of the action or thereafter, when the claim exceeds $20, in any one of the following cases: 1. Where the debtor is not a resident of this State. 2. When the debtor conceals himself or herself or stands in defiance of an officer, so that process cannot be served upon him or her. 3. Where the debtor has departed from this State with the intention of having his or her effects removed from this State. 4. Where the debtor is about to depart from this State with the intention of having his or her effects removed from this State. 5. Where the debtor is about to remove his or her property from this State to the injury of such creditor. 6. Where the debtor has within 2 years preceding the filing of the affidavit required, fraudulently conveyed or assigned his or her effects, or a part thereof, so as to hinder or delay his or her creditors. 7. Where the debtor has, within 2 years prior to the filing of such affidavit, fraudulently concealed or disposed of his or her property so as to hinder or delay his or her creditors. 8. Where the debtor is about fraudulently to conceal, assign, or otherwise dispose of his or her property or effects, so as to hinder or delay his or her creditors. 9. Where the debt sued for was fraudulently contracted on the part of the debtor. The statements of the debtor, his or her agent or attorney, which constitute the fraud, shall have been reduced to writing, and his or her signature attached thereto, by himself or herself, agent or attorney. 10. When the debtor is a person convicted of first degree murder, a Class X felony, or aggravated kidnapping, or found not guilty by reason of insanity or guilty but mentally ill of first degree murder, a Class X felony, or aggravated kidnapping, against the creditor and that crime makes the creditor a "victim" under the Criminal Victims' Asset Discovery Act. 11. When the debtor is referred by the Department of Corrections to the Attorney General under Section 3-7-6 of the Unified Code of Corrections to recover the expenses incurred as a result of that debtor's cost of incarceration.
When the statute provisions cited are read together, they allow for prejudgment attachment by a potential judgment creditor to preserve an LLC member's distributional interest. Once a judgment is entered and a charging order is obtained, the order relates back to the date of the prejudgment attachment order for purposes of lien priority.
Property Tax Appeals (Illinois)
By Matthew A. Quick In light of the decision in Cook County Board of Review v Property Tax Appeal Board, if a violation of uniformity (an unfair assessment when considering the value of comparable properties) is proven by clear and convincing evidence to a property tax appeal board, then property is not equitably assessed for levying tax thereon and a new assessment must be given. This is true regardless of whether two condominium buildings have the same physical characteristics and percentage of ownership in the common elements. The assessments of the condominiums should not rest merely on these factors. Rather, the assessments of the condominiums should differ depending the means by which they had been subdivided or any other characteristics.
The Estate, Issue Seven
By Matthew A. Quick Real Estate Taxes
Real estate taxes are the main source of revenue for local municipalities, which are used to provide benefits and services such as schools, community colleges, police and fire departments, health care facilities, museums, water and sewer, roads and sidewalks, parks, libraries and so forth. Real estate taxes are calculated using the value of the property, which is called an ad valorem (according to worth) tax. Once the value of a parcel is established, a tax rate is applied, thus yielding the property tax owed. Determining the value of a piece of land (also referred to as a “parcel” or “tract”) and levying the appropriate tax is a process that involves several factors.
For administrative purposes, a property identification number (referred to as a “PIN”) is initially given to each piece of land (usually a 10 to 14 digit number), allowing land and tax records to be easily identified and transferred between municipal departments. Then, to figure the value of the parcel, an assessment is performed by the county or city assessor, who is a public official that appraises the property. The property assessment may be according to one or more appraisal methods, such as market value, replacement cost or income value. In Illinois, parcels are assessed every three to four years; in Michigan, parcels are assessed upon transfer and the assessed values are increased annually by an appreciation factor (the lesser of either the rate of inflation or 5%).
While some municipalities assess the property at its full value, others determine the taxable value of a parcel based upon a percentage. The determination of the assessor as to the taxable value of a parcel of property may be appealed by the property owner, typically within a limited timeframe.
In Michigan, after the property is assessed, there are no further calculations to determine the taxable value. However, after the property is assessed in Illinois, the calculations can get tricky by including such figures as an established assessment rate and state equalization factor, which are set by the county and state (basically, a means to manipulate property taxes without changing the property’s assessed value).
When the taxable value of the property is determined, the tax rate is then applied to determine the amount of tax owed. In Michigan, the taxes are levied as a millage rate, which is equal to 1/1000th of a dollar. Thus, to figure tax on a millage rate of 4.19, simply multiply .00419 by the taxable value of the property. On the other hand, Illinois property taxes are computed on a percentage basis of the taxable value of the property. Additionally, some exemptions are available to homeowners, seniors, veterans and the like, which are dollar for dollar reductions in the amount of tax owed.
When buying or selling property, prorating property taxes is an issue. In Illinois, property taxes are paid in arrears, which means that 2009 taxes are due this year. Therefore, the seller will pay the buyer for the days the seller spent occupying the property that have not yet been paid. In Michigan, however, taxes are paid in advance, which means the buyer will pay the seller for the days the buyer will spend occupying the property that have already been paid.
Property taxes vary in each municipality, be it by tax rate or mode of assessment. Because property taxes represent a substantial expense for property owners, each property tax bill should be independently examined to ensure it is accurate. If there are any questions regarding the accuracy of a tax bill, do not hesitate to contact the assessor, treasurer or a property tax professional.
-IRAs-
Regardless of age or proximity to retirement, one of the most important decisions to be made regarding one’s financial future is the source of retirement income. The federal government and many individual workplace organizations have retirement programs that are offered to employees, such as 401(k) (private sector retirement plan), 403(b) (non-profit sector retirement plan) and 457 (government retirement plan) plans. However, many questions have surfaced as to the reliability and security of these programs in the years to come. Also, many individuals are seeking investment options in addition to workplace plans, which has prompted an interest in individual retirement arrangements (referred to as “IRAs”). IRAs are a great way to diversify investments and secure retirement resources with beneficial tax treatment. IRAs come in many different varieties, thus allowing an IRA to easily be tailored to an individual’s investment and estate plan.
Introduced in 1974, an IRA is a specific retirement plan that can be built to one’s needs. Even though IRAs have developed significantly over the years and have taken several different forms, the traditional IRA and the Roth IRA illustrate the greatest difference that remains among the several types; that is, the method by which each is taxed.
The government has provided beneficial tax treatment for IRAs. Instead of taxing each transaction that occurs within an IRA, which is typical of a common investment, such as buying and selling stock, all transactions within an IRA have no tax impact. With a traditional IRA, a contribution is tax deductible, which means that no income tax is paid on the contribution. Instead, withdrawals are taxed as income. On the other hand, with a Roth IRA, a contribution is not tax deductible, which means income tax is paid on the contribution and withdrawals are not typically taxed.
Currently, the government allows a $5,000.00 per year maximum contribution for those under the age of 50 and a $6,000.00 per year maximum contribution for those over the age of 50. A contributor will be allowed to fund a traditional IRA over the annual contribution limit, but will not be allowed to make a tax deduction of any amount contributed over the annual limit. Alternatively, a contributor is altogether barred from funding a Roth IRA beyond the annual maximum contribution.
In addition to contribution limits, an IRA investor must also fall under an income threshold to enjoy the tax benefits of an IRA. For instance, to make a tax deductible contribution under a traditional IRA, a contributor who is married and filing jointly cannot have a modified adjusted gross income (referred to as “MAGI”) over $177,000.00. To contribute to a Roth IRA at all, a contributor who is married and filing jointly cannot have a MAGI over $177,000.00.
Conversions from a traditional IRA to a Roth IRA have gained substantial popularity this year because there is no income limitation on who can convert. Anyone with any MAGI can make a conversion. While a contributor continues to be barred from directly funding a Roth IRA with a MAGI that exceeds the income limitation, a traditional IRA may still be converted to a Roth IRA. There are several benefits of converting a traditional IRA to a Roth IRA, which include, but are not limited to, tax-free growth, tax-free withdrawals, and no minimum distribution requirements. Taxes would have to be paid on a conversion to a Roth IRA; however, so long as the conversion is done in 2010, the taxes on the conversion may be spread out over the 2011 and 2012 tax years.
Due to the income limitation, some contributors may not qualify to make a tax deductible contribution to a traditional IRA or any contribution to a Roth IRA; however, setting up a traditional IRA that is non-deductible would allow a contributor to convert to a Roth IRA in the future. If the laws remain unchanged in years to come, a contributor that is above the income limitation would be allowed to contribute to a traditional IRA that is non-deductible every year, then convert it to a Roth IRA.
An IRA can only be funded with cash or cash equivalents. Attempting to transfer any other type of asset into the IRA, such as collectibles (art, baseball cards and rare coins) and life insurance, is a prohibited transaction and disqualifies the fund from its beneficial tax treatment. Once a contribution is made to an IRA, the IRA owner can direct the institution that is holding the IRA to use the contribution to purchase most types of securities and investment products.
Although funds can be distributed from an IRA at any time, there are limited circumstances when money can be distributed or withdrawn from the account without penalties. In most situations, to avoid penalty, funds cannot be withdrawn before two circumstances exist: the contributor reaches 59 and a half years of age and a five year period has lapsed since the contribution was made. There are additional exceptions that apply to early withdrawals, such as disability, a distribution to a beneficiary after the contributor’s death and when the funds are used to buy, build or rebuild a first home.
IRAs can be included in several investment arrangements that may be used to achieve sufficient retirement resources. If you have any questions, please be sure to consult a financial professional for more information on IRA eligibility, conversions, contribution limits, when the funds must be used, and what type of IRA would best suit a particular financial profile.
-Update-
Michigan Enacts E-mail and Text Message Prohibition while Driving. As of July 1st, there is a ban on sending, typing or receiving text messages or e-mails while driving (MCL 257.602b). A first offense is punishable by a $100.00 fine; a second or subsequent offense is punishable by a $200.00 fine. There are no points assessed to the driver’s record for violation of this statute.
Illinois Modifies the Process by which a Red-Light Camera Issues Tickets. Effective January 1, 2011, Public Act 96-1016 changes the use of red-light cameras that give tickets automatically as follows: (1) a law-enforcement officer must review and approve all determinations that a car committed a red-light camera violation; (2) additional fees cannot be charged to an alleged violator for exercising his or her right to an administrative hearing; (3) the motorist must be given at least 25 days after an administrative hearing to pay any penalties; (4) governments must produce a recorded image of a red-light camera violation and make the images available on the internet; and (5) a red-light violation cannot be given if the motorist moves past the stop line or cross walk and the vehicle comes to a complete stop, but does not enter the intersection.
Illinois Increases the Surviving Spouse Award in Probate. Public Act 96-968 increases the minimum surviving spouse award from $10,000.00 to $20,000.00 and increases the minimum award for a surviving minor child or an adult dependent child from $5,000.00 to $10,000.00 in estates in which the decedent passed after July 2, 2010.
-Conclusion-
I hope this issue of The Estate has been helpful. Please feel free to contact me with any questions or concerns, or to schedule a complimentary consultation. As a service to all current and prospective clients, I travel at no charge to all meetings and consultations throughout Michigan and Illinois. In addition, informational sessions regarding special needs planning and estate planning are provided free to groups of any size. Please let me know if there is any way I can help.
Corporations: Derivative Actions and Dissolution (Illinois)
By Matthew A. Quick The case of Hall v Chu illustrates that a shareholder cannot maintain a derivative lawsuit where the corporation is dissolved at the time the lawsuit is filed, outside of extenuating circumstances.
GPS Vehicle Tracking Just Got A Little Tricky (Michigan)
By Marc F. Herron Michigan, as of July 1, 2010, has a new law that applies to the use of GPS vehicle tracking devices. So… all you do-it-yourselfers out there take note.
Under the new law, placing a GPS tracking device on a motor vehicle without the knowledge and consent of the owner or lessee is a criminal misdemeanor. This crime is punishable by up to one (1) year in jail or a fine of up to $1000.00, or both. The same applies to a person who tracks the location of a motor vehicle with a tracking device without the knowledge and consent of the owner, lessee, or the authorized operator of the vehicle.
Professional investigators are exempted from this statute.
To sum it all up… be careful when placing a tracking device and when monitoring a vehicle with a tracking device.
For more information, contact Karma Investigations, LLC, at 248-990-4274 or online at KarmaInvestigations.com.
The Estate, Issue Six
By Matthew A. Quick HIPAA
The Health Insurance Portability and Accountability Act of 1996 (referred to as “HIPAA”) was enacted as federal law to address two main issues: (1) health care insurance coverage of employees and their families when the employees change or lose their jobs; and (2) the establishment of a national standardized means of transferring health care information. When creating the standards regarding the transfer of health care information, privacy rules evolved concerning the dissemination of certain health information. These privacy rules regulate the use and disclosure of Protected Health Information that is held or transferred by Covered Entities. Protected Health Information is considered any information held by a Covered Entity which concerns health status, any provisions of health care, or payment for health care that can be linked to an individual. Protected Health Information has been interpreted rather broadly and, in practice, includes any part of an individual's medical record or payment history. Covered Entities include hospitals, health care professionals, mental health care professionals, health care clearinghouses (billing services, health information management services, etc.), health insurance providers, and any other entity that processes or facilitates the processing of Protected Health Information.
Generally speaking, Covered Entities must keep Protected Health Information confidential, with the exception of a few limited circumstances: (1) Covered Entities must disclose Protected Health Information to the individual upon request and when required to do so by law, such as reporting suspected child abuse; (2) Covered Entities may disclose Protected Health Information to facilitate treatment, payment or health care operations regarding the individual; and (3) most relevant to this article, Covered Entities may disclose Protected Health Information to identified agents if authorization is obtained from the individual.
It is important to address the HIPAA privacy rules when planning one’s estate in order to allow health care attorneys-in-fact (agents or patient advocates that make health care decisions for another) to lawfully receive protected health care information so that the attorney-in-fact can make educated and informed health care decisions. The authorization required to allow Covered Entities to disclose Protected Health Information to health care attorneys-in-fact is called a HIPAA Waiver. A HIPAA Waiver (also referred to as an “Authorization for Use and Disclosure of Protected Health Information”) waives the privacy rules of HIPAA as to Protected Health Information disclosed to certain, identified individuals (health care attorneys-in-fact).
The people who make health care decisions for us when we are unable need to be given broad access to our medical information to make the most informed decisions possible concerning our health care. For that reason a HIPAA Waiver is required for every estate plan.
-Educational Savings Programs-
On March 30, 2010, the Education Reconciliation Act was signed into law, which changes the repayment schedules for student loans. Students who borrow money starting in July 2014 will be allowed to limit payments to 10% of their income and, after 20 years, any remaining balance will be forgiven. Those who enter public service (military, teachers, nurses, and the like) will have any balance forgiven after 10 years.
The costs associated with this new legislation will not be the burden of the taxpayers. The savings associated with ending government subsidies to banks and other financial agencies that have been making and maintaining student loans will absorb the cost and allow a large increase in funds available for grants (money that does not need to be repaid). For example, the new law makes an additional $40 billion available for the need-based Pell Grants, which do not have to be repaid. In other words, by cutting the unnecessary middleman out of the process, the federal government is making the rising higher-education costs more bearable. Even while accounting for the savings associated with this new student loan policy, students will still have to bear significant education costs that continue to rise. In the interest of making the costs a bit more tolerable, there are a few saving techniques that have become quite popular over conventional savings or the use of funds earmarked for retirement. Of note, beginning in 2010, those financing a student’s education will be eligible for tax credits up to $10,000 over 4 years (a tax credit is a dollar for dollar reduction of the amount of tax owed, as opposed to a deduction that just reduces the amount of taxable income). The ability to take the tax credits has an adjusted gross income ceiling of $80,000 ($160,000 for joint filers).
The three main educational savings programs are Section 529 prepaid tuition plans, Section 529 college savings plans, and Coverdell education savings accounts (Section 529 refers to the Internal Revenue Code). A Section 529 prepaid tuition plan is state run and only available in a limited number of states (Michigan has the Michigan Education Trust and Illinois has the College Illinois! 529 Prepaid Tuition Program). A prepaid tuition plan typically locks in the current tuition rate for the amount deposited. For example, if an amount deposited today is equal to 50% of a year of tuition, then 50% of a year of tuition will be credited regardless of the future cost of tuition (even if the tuition has sincedoubled). This plan is simple and does not involve choosing investments or building a portfolio. Locking in the current tuition rate usually offers a better return on investment than a certificate of deposit, money market account or conventional savings account and the funds deposited are tax deductible, with some limitations. If, however, a contributor wishes to make investments rather than lock in the tuition rate, thus potentially resulting in more money over time, a Section 529 college savings plan or Coverdell education savings account may be preferable.
Similar to Section 529 prepaid tuition plans, Section 529 college savings plans are tax-exempt college savings utilities. Unlike Section 529 prepaid tuition plans, there is no lock on tuition rates and no guarantee of return on investment, because a Section 529 savings plan is an investment in a portfolio, which is subject to the market. The investment allocation under a Section 529 college savings plan can only be changed twice per year and must be invested through a money manager. Withdrawals from a college savings plan may only be used for qualified higher education expenses (college and up) in order to be withdrawn tax free. However, unlike the Coverdell education savings accounts, as discussed below, there is no age limit for contributions to a Section 529 savings plan and no income limit for contributors.
Similar to Section 529 college savings plans, Coverdell education savings accounts are funded through investment portfolios and are subject to the market, however, no money manager is required and there is no limit on investment allocation changes—investments may be controlled by the contributor. The student must be under the age of 18 to receive contributions and under the age of 30 to make withdrawals. The current maximum annual contribution amount is $2,000 and the current adjusted gross income limit is $95,000 for single filers and $190,000 for joint filers. Contributions to the Coverdell education savings account are generally not tax deductible, but the withdrawn funds are tax-free if used for qualified education expenses. Coverdell education savings withdrawals may be used for any level of education (K-12 and higher), as opposed to the Section 529 college savings plans that can only be used for post-secondary education.
Each of the programs discussed can be used together to effect the greatest possible outcome. Because this article could only consider the basics of each program, be sure to consult a financial professional for more information on eligibility for student loans, transferability of the plans, contribution limits, and when and how the funds must be used.
Divorce and Marital Property (Illinois)
By Matthew A. Quick In the case of In re Marriage of Abrell, the court held that a spouse's accrued sick time and vacation days are not to be treated as marital property and thus should not be assigned a value and included in marital estate; value is speculative as it is unknown whether days would be used prior to employment termination or retirement.
Minimum Wage Law (Michigan)
By Marc F. Herron For some, starting a small business is a way to bridge the gap between employment opportunities. For others, it is the fulfillment of a dream. Regardless of one’s motivation, the Minimum Wage Law applies equally.
As Michigan employers, small business owners must be acquainted with the applicable wage law. In Michigan, that would be the Minimum Wage Law of 1964, MCL 408.381 et. seq., which requires all employers to pay a minimum wage. As of July 1, 2008, the lowest hourly rate for employees is $7.40. However, an employer may pay a training wage of $4.25 for the first 90 days to employees who are under 20 years old. Pursuant to the law, an employer cannot displace an employee to hire someone at the training wage. As for overtime, employers must pay one and a half times the regular pay rate for an employee in workweeks that exceed 40 hours.
The Estate, Issue Five
By Matthew A. Quick Trusts
A Trust is a legal arrangement where one person (the “Settlor” or “Grantor”) gives legal title of property to another (the “Trustee”) to hold for the use and benefit of a third-person (the “Beneficiary”). The Settlor is the owner of the property that is to be placed into the Trust, thus becoming Trust Property. Trust Property can be money, stock, real estate or any other form of real or personal property. The Trustee is the person or entity (such as a bank) that agrees to maintain or invest the Trust Property for the use and benefit of the Beneficiary. It is common for a Settlor to also be the Trustee, meaning the person who creates the Trust maintains or invests the Trust Property for the use and benefit of the Beneficiary (so no one else needs to be nominated or hired as Trustee so long as the Settlor/Trustee is able to act). The Beneficiary is the person or entity for whom the Trust is created.
To create a Trust, the Settlor transfers ownership of property to a Trustee based upon certain terms and conditions that are listed in a Trust Declaration. The terms and conditions of a Trust Declaration are instructions that the Trustee is bound to follow in maintaining or investing the Trust Property.
In practice, when a Settlor is also going to be the Trustee, the Settlor will transfer property to himself as Trustee and select a person or entity to succeed him. Upon death or disability of the Settlor/Trustee, his successor will then become Trustee and follow the terms and conditions of the Trust.
There are three main reasons to employ the use of a Trust. First, a Trust keeps the Settlor’s estate from having to endure probate, as a Trust outlives the Settlor and can distribute the Settlor’s estate after his death. Second, a Trust can be used to gain significant tax-saving advantages by reducing the taxable portion of an estate. Last, a Trust can shelter property from creditors, loved-ones who cannot handle large amounts of money, and the government. Consider a Trust that regulates the amount of funds children receive or a Supplemental Needs Trust, which is a Trust used when one needs to retain eligibility for government benefits (specific trust arrangements will be discussed in future issues).
Trusts are a great tool to achieve one’s future planning objectives. If you seek greater control and protection of your property and its distribution, a Trust is the ideal utility to include in your estate plan.
-Seasonal Affective Disorder-
Now that the holidays have come and gone it can be hard to believe there is still a stretch of winter yet to endure—the cold, the snow and the bleak skyline. Referred to as the “winter blues,” it is common to feel the effects of the winter season on an emotional level. Moods may decline, frustration levels may rise, and a general sense of sadness may seem to set in. Symptoms of the winter blues tend to persist during the cold, dark months and dissipate with the arrival of the spring season. As with most aspects of mental health, it is important to differentiate between the experience of one or two symptoms during a brief period of time, and several signs and symptoms that persist on a more long-term basis. While some may experience a lighter level of the winter blues, others may be coping with a more serious condition known as Seasonal Affective Disorder (referred to as “SAD”).
According to the National Mental Health Association, SAD affects more than half a million people who live in environments of variable climate change. Common factors linked to the onset of SAD include sunlight depravation that alters our circadian rhythms (or internal biological clock) and an increase in the hormone melatonin (which is tied to symptoms of depression and actually rises during long-term exposure to darker environments). Also, a family history of depression may lead to a genetic predisposition for SAD and other depression-related symptoms.
Common signs and symptoms of SAD include frequent changes in mood, feelings of fatigue or apathy, and an overall decline in self-esteem. There can also be shifts in sleeping and eating habits, as well as a decline in social interest. Previously enjoyed activities that do not inspire the same sense of happiness can also be a noticeable symptom of SAD. Differentiating itself from other depression-related concerns, symptoms of SAD are relieved with the change in season and tend to return around the same time the following year.
Treatments for SAD include light-exposure therapy, melatonin-suppressing medications, and talk therapy with a qualified mental health professional. For anyone experiencing mild symptoms of SAD or winter blues, there are several ways to alleviate your symptoms at home. By taking a long walk once a day, you are exposed to fresh air and daylight that are key factors to the biological components of your symptoms. Also, increasing the levels of light in your home (via windows or additional light sources) can be extremely helpful. Talking to a trusted family member or friend can be very beneficial in creating an understanding of your thoughts, feelings and actions, which is important for both yourself and those who are close to you. In addition, setting time aside once a day to do something you enjoy, whether it is reading a book or going to the gym, can be crucial to increasing your overall sense of well-being during these long, dreary months.
If you observe significant signs and symptoms of SAD over the course of several winter seasons, it is recommended to discuss these findings with your doctor. Given that our mental health is equally as important as our physical health, awareness and appropriate decision-making in this area can greatly impact your friends, your family, and your future.
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Carly Quick is a licensed clinical social worker who practices at Lake Bluff Middle School in the northern Chicago suburbs and invites any questions or comments via email at carlyjacks@hotmail.com. More information on SAD can be found at www.nmha.org.
-Update-
Federal Deposit Insurance Coverage (“FDIC”) Has Been Extended. The standard insurance amount for FDIC of $250,000 was set to expire January 1, 2010, but has been extended until December 31, 2013. On January 1, 2014, the amount will return to $100,000 for standard insurance. The $250,000 amount is permanent, thus will remain viable after January 1, 2014, for certain retirement accounts, which includes IRAs. For more information on the amount and applicability of Federal Deposit Insurance Coverage, please visit www.fdic.gov.
Michigan Enacts Smoking Prohibition. Beginning May 1, 2010, it will be unlawful to burn any matter or substance that contains a tobacco product in an enclosed, indoor public area. The new Act, which can be found after it takes effect at MCL 333.12601, et seq., and MCL 333.12905, et seq., will continue to allow smoking at cigar bars, tobacco specialty retail stores, and the gaming area of casinos, but only if these entities are in existence at the time the law takes effect.
-Conclusion-
I hope this issue of The Estate has been helpful. Please feel free to contact me with any questions or concerns, or to schedule a complimentary consultation. As a service to all current and prospective clients, I travel at no charge to all meetings and consultations throughout Michigan and Illinois. In addition, informational sessions regarding special needs planning and estate planning are provided free to groups of any size. Please let me know if there is any way I can help.
Bond Holders and Condemnation (Illinois)
By Matthew A. Quick In City of Chicago v Prologis , Tax Increment Financing Bonds (commonly known as "TIF Bonds"), which are created to finance current municipal improvements and are repaid on the tax gain resulting from the improvements, were used to redevelop land bordering O'Hare Airport. The City of Chicago filed a condemnation action to take the property upon which the TIF Bonds had been levied in order to expand the airport. Several parties that held TIF Bonds brought an action to determine the bondholder's stake. The Court held that any loss in a TIF Bond's value resulting from a condemnation proceeding is a consequence of a lawful taking by the government, therefore those holding TIF Bonds are not eligible for just compensation. The Court further opined that those holding the TIF Bonds may not have known of this particular airport expansion, however, the holders of the TIF Bonds could have reasonably foreseen that property bordering airport could have been taken for future airport expansion.
Naming A Business (Michigan)
By Marc F. Herron Shakespeare’s Juliet said:
“What’s in a name? That which we call a rose By any other name would smell as sweet.”
Romeo and Juliet (II, ii, 1-2)
Well, under Michigan law, it does matter what is in a business’s name. There are some specific words that are required to be in business entity names. For Michigan domestic profit corporations, a corporation’s name must contain one of these words; “Corporation,” “Company,” “Incorporated,” or “Limited.” Alternatively, the abbreviations of these words may be used, which are “Corp.,” “Co.,” “Inc.,” and “Ltd.” If the business entity is a professional service corporation, then the name must contain either “Professional Corporation” or “P.C.” For limited partnerships, the words “Limited Partnership” are required. For limited liability companies, the required words and abbreviations are “Limited Liability Company,” “L.L.C.,” “LLC,” “L.C.,” or “LC.” For low-profit limited liability companies, the word and abbreviation requirements are “Low-Profit Limited Liability Company,” “L.3.C.,” “L3C,” “l.3.c.,” or “l3c.” Continuing on, the required words and abbreviations for professional service limited liability companies are “Professional Limited Liability Company,” “P.L.L.C.,” “PLLC,” “P.L.C.” or “PLC.” Finally, when naming a limited partnership or limited liability company certain words and abbreviations must not be used. The excluded words and abbreviations are “Corporation,” “Incorporated,” “Corp.,” and “Inc.”
It is noteworthy that when naming a non-profit corporation, the use of the required words associated with naming a for-profit corporation is not statutorily required.
(Michigan Act 284, Public Acts of 1972; Act 192, Public Acts of 1962; Act 213, Public Acts of 1982; Act 23, Public Acts of 1993.)
Nonprofit Corporations: Articles of Incorporation
By Marc F. Herron Aside from the Internal Revenue Service’s requirements for tax-exempt status, this article discusses Michigan’s statutory requirements for nonprofit corporation articles of incorporation. Pursuant to section 202 of the Michigan Nonprofit Corporation Act, MCL 450.2202, a nonprofit corporation’s articles of incorporation must contain the following information:
1. The corporation’s name. 2. The corporation’s purpose. This must be stated with detail. 3. The corporation’s registered office’s street address. If the mailing address is different from street address, it must be additionally listed. 4. The corporation’s resident agent’s name at the registered office’s address. 5. All the incorporators’ names and addresses. This applies regardless of their signature on the articles of incorporation. 6. If the corporation’s duration is any amount of time other than perpetual, the duration must be listed.
Where the corporation is formed on a non-stock basis, in addition to (1) through (6), the articles of incorporation must contain:
1. A description and statement of the value of any assets of the corporation, classified as real or personal property. 2. A statement of the terms of the general scheme for financing the corporation. 3. A statement as to whether the corporation is organized on a membership basis or a directorship basis.
Where the corporation is formed on a stock basis, in addition to (1) through (6), the articles of incorporation must contain:
1. The total number of shares the corporation has authority to issue. 2. If the shares are to be divided into classes, to the extent this information has been determined, a statement as to each class’ designation, number of shares, relative rights, preferences, and limitations.
Workers' Compensation (Michigan)
By Marc F. Herron Let’s take a look at some information small business owners should familiarize themselves with regarding workers’ compensation coverage in Michigan. Pursuant to Michigan’s Worker’s Disability Compensation Act, MCL 418.101, et seq., all private employers employing three (3) or more workers at the same time must have workers’ compensation insurance. MCL 418.115.
Maybe your small business regularly employs less than three employees. Well, the act addresses your situation, also. If during the preceding fifty-two (52) weeks your business employed at least one (1) employee for thirty-five (35) hours or more per week for thirteen (13) weeks or longer, then your company must have workers’ compensation insurance.
Let’s recap: 1. Private employer with 3 or more employees… coverage required. 2. Private employer with less than 3 employees... prior 52 weeks, 1 regularly employed worker, employed for 35+ hours, for 13+ weeks…coverage required.
Please note: the Act has different requirements for agricultural businesses than those mentioned in this article.
Prevailing Wage Act (Illinois)
By Matthew A. Quick In light of the recent holding in Town of Normal v Hafner, when individual sole proprietors construct private residences on privately owned land with financing from private banks are not obligated to pay prevailing wage to laborers working on the project, because they are not considered a public body and private multifamily residences are not considered public works under the Prevailing Wage Act, to wit, Chapter 820 of the Illinois Compiled Statutes, Act 130. The court opined that the purpose of the Prevailing Wage Act is to ensure prevailing wage is paid on public projects, not to interfere with private economic development.
Basics of Non-Profit and Charitable Organizations (Part One)
By Marc F. Herron The Internal Revenue Code breathes life into charitable organizations. For an organization to be recognized as a non-profit or charitable organization it must be limited in its activities to the purposes set out in Section 501(c)(3) of the Internal Revenue Code (26 USC 501(c)(3)). Such purposes are as follows:
-charitable, -scientific, -religious, -educational, -literary, -testing for public safety, -fostering of national or international amateur sports competition, and -preventing the cruelty to children and animals.
Moreover, none of the net earnings of the organization (the profit of the organization after paying salaries and other expenses) can benefit any shareholder or individual and all of its assets must be permanently dedicated to one of the exempt purposes.
Let’s recap: 1. Section 501(c)(3) of the Internal Revenue Code governs. 2. Limit purpose to those set out in 501(c)(3). 3. No net earnings to benefit any shareholder or individual. 4. Assets permanently dedicated to charitable purpose.
Please remember these series of articles are for informational purposes only and to ensure compliance with requirements imposed by the Internal Revenue Service, please note that any tax advice contained in this website is not intended or written to be used, and cannot be used, for the purpose of avoiding tax-related penalties under the Internal Revenue Code, nor for promoting, marketing or recommending to another party any matters addressed herein. For more information please visit www.irs.gov.
Transfer of Vehicle Outside of Probate at Death of Owner (Michigan)
By Matthew A. Quick Michigan law allows for the transfer of vehicles of deceased owners outside of the probate process with Secretary of State Form TR-29. The controlling law, MCL 257.236(2), provides:
If an owner of 1 or more vehicles, which vehicles do not have a total value of more than $60,000.00, dies and the owner does not leave other property that requires issuance of letters as provided in section 3103 of the estates and protected individuals code, 1998 PA 386, M.C.L. 700.3103, the owner's surviving spouse, or an heir of the owner in the order specified in section 2103 of the estates and protected individuals code, 1998 PA 386, M.C.L. 700.2103, may apply for a title, after furnishing the secretary of state with proper proof of the death of the registered owner, attaching to the proof a certification setting forth the fact that the applicant is the surviving spouse or an heir. Upon proper petition, the secretary of state shall furnish the applicant with a certificate of title.
Real Estate and a Certificate of Trust Existence and Authority (Michigan)
By Matthew A. Quick As provided in MCL 565.431, et seq., a certificate of trust existence and authority (referred to as a "certificate of trust") or the entire trust declaration may be filed at a register of deeds office. Filing either a certificate of trust or the entire trust declaration when real property is placed into trust is beneficial and, in some cases, necessary for the orderly administration of the trust (allowing for smoother transfer of real property held by the trust). Filing a certificate of trust over the entire trust declaration is beneficial for several reasons. First, a certificate of trust is a shorter document, which does not cost as much to file with a register of deeds office. Second, a certificate of trust is a much more private option because it only contains excerpts of the actual trust document and does not include distribution provisions, among others. Third, an updated trust declaration must be filed with a register of deeds office if portions of the trust declaration are modified or revoked. If a certificate of trust is originally filed, a new certificate of trust is only required if the excerpted portions contained in the certificate of trust are changed.
The requirements of a certificate of trust are as follows, pursuant to MCL 565.432:
(a) The title of the trust. (b) The date of the trust agreement and any amendments to the trust agreement. (c) The name of the settlor or grantor and the settlor's or grantor's address. (d) The names and addresses of all of the trustees and successor trustees. (e) The legal description of the affected real property. (f) Verbatim reproductions of provisions of the trust agreement, and any amendments to the trust agreement, regarding all of the following: (i) The powers of the trustee or trustees relating to real property or any interest in real property and restrictions on the powers of the trustee or trustees relating to real property or any interest in real property. (ii) The governing law. (iii) Amendment of the trust relating to the trust provisions described in subdivision (a) to (f)(ii). (g) Certification that the trust agreement remains in full force and effect. (h) A list of names and addresses of all persons who, at the time the certificate of trust is executed, are trustees of the trust.
Pursuant to MCL 565.433:
A certificate of trust existence and authority shall be executed by the settlor or grantor; an attorney for the settlor, grantor, or trustee; or an officer of a banking institution or an attorney if then acting as a trustee. The certificate shall be in the form of an affidavit.
On the issue of third-party reliance, MCL 565.435 provides:
A purchaser or other party relying upon the information contained in a recorded certificate of trust existence and authority shall be afforded the same protection as is provided to a subsequent purchaser in good faith under section 29 of chapter 65 of the Revised Statutes of 1846, being section 565.29 of the Michigan Compiled Laws, and shall not be required to further examine the trust agreement, unless an instrument amending or revoking the trust agreement or certificate of trust existence and authority is recorded in the same office in which the trust agreement or certificate of trust existence and authority was recorded.
Powers of Attorney and Living Wills (Illinois)
By Matthew A. Quick A health care power of attorney appoints an agent to act on a patient's behalf when he or she is unable, pursuant to a list of directives. On the other hand, a living will sets out a list of wishes, but does not give anyone the power to act on a patient's behalf (akin to a note to the doctor). Pursuant to Illinois law, if an agent is acting under a health care power of attorney, a living will is rendered inoperative. 755 ILCS 45/4-11.
Mechanic's Liens and Notaries (Illinois)
By Matthew A. Quick In light of the holding in Weydert Homes, Inc v Kammes, No. 2-08-0768, a contractor's statement under oath is not sufficient to fulfill the requirements of the Mechanic's Lien Act if it does not contain a notary's signature and seal. The failure to secure a notary's signature and seal renders a mechanic's lien invalid in an action to foreclose, but does not prohibit contractor from suit for breach of contract or quantum meruit recovery.