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IRS Issues Revenue Procedure 2017-34, Announcing Simplified Method To Make A Late “Portability” Election

Published on: July 15, 2017 | by Anne Marie Robbins

In June of this year, the IRS published a revenue procedure that allows certain estates to make a late portability election if a timely election was not made. Rev. Proc. 2017-34. The portability election allows a decedent’s unused basic exclusion amount (known as the deceased spousal exclusion amount, or DSUE) to be transferred to the surviving spouse for his or her use during life or at death. In effect, this allows married couples to double the amount of assets they can shelter from federal estate and gift taxes.

In order to make a portability election, the personal representative of the estate of the first spouse to die must file a timely (including extensions) federal estate tax return (Form 706) following the death of the first spouse, even if the estate of the first spouse to die is not otherwise required to file Form 706. For example, if a decedent’s assets and lifetime adjusted taxable gifts do not exceed a certain amount (in 2017 the amount is $5.49 million), a 706 is not required. Many taxpayers, not knowing the rules and not otherwise required to file Form 706, fail to make the portability election timely.

In January of 2014 the IRS had issued Rev. Proc. 2014-18, which provided an automatic extension for certain estates of decedents dying after December 31, 2010 and on or before December 31, 2013 to elect portability of the DSUE by filing Form 706. However, after December 31, 2013, the only way to make a late portability election was to seek a private letter ruling from the IRS pursuant to Treasury Regulations. Despite the fact that private letter rulings can be time-consuming and expensive, the Service has issued many such rulings in the last few years by estates seeking to make a late portability election. Hence the new revenue procedure provides a welcome and lest costly method for preserving the DSUE.

The Benefits Of Divorce (And Post-Divorce) Mediation

Published on: July 13, 2017 | by James McGlew, II

Many couples who are contemplating divorce or separation believe that litigation is their only option. The truth is that many couples can utilize mediation as a means of resolving their marital issues. Additionally, many couples who have been divorced but are dealing with issues which have arisen after their divorce settlement can use mediation as a cost-effective means of achieving a resolution. Mediation is a fair, unbiased and less confrontational alternative to the parties returning to Court. Many discover they have more individual control in the mediation process than when utilizing the Courts. Divorce mediation offers the possibility to avoid the lengthy and costly process of litigating disputes.

Mediation is a private process for discussing and resolving the parental and financial issues that are part of your divorce or the issues that often arise after your divorce has been finalized. Instead of choosing to pursue the resolution of their disputes through the court system, couples voluntarily agree to work out issues between themselves with the assistance of a neutral third party (an accredited family law mediator).

In some cases one spouse sees the advantages in mediation while the other party is reluctant; mistakenly believing that mediation is a form of marriage counseling. This is not the case. Mediation is a completely non-binding process where the parties attempt to resolve the issues that arise in a separation or divorce or where issues have come about after the parties are divorced (e.g. a party’s loss of employment, a child’s emancipation or their selection and cost of college, relocation of children out-of-state, compliance with Court Orders). Mediation does not include any form of therapy or counseling.

Corporate Deadlock – When Shareholders Seek the Courts’ Assistance in Forcing Buy-outs

Published on: June 28, 2017 | by David R. Pierce

Corporate deadlock is often cited as a reason why the court should invoke its powers and order the sale of one shareholder’s stock in minority shareholder litigation. While deadlock is a legitimate reason to bring a lawsuit seeking the court’s intervention, it is not a magic bullet that will automatically lead to the court ordering a buyout of one or more shareholders.

Deadlock is defined under the New Jersey Business Corporations Act and can be found under one of two circumstances. Deadlock can be found to exist when “the shareholders are so divided that they have not been able, for two consecutive meetings, to elect successors to directors whose terms have expired or would have expired if successors had been elected and qualified.” N.J.S.A. 14(a):12-7(1). The second manner in which deadlock may exist is if “the directors or other persons having management authority are unable to effect action on one or more substantial matters respecting the management of the company’s business.” N.J.S.A. 14(A):12-7(1).

The first deadlock provision may seem like an easy one to satisfy in closely held companies since many small companies do not hold formal shareholder meetings as required under the statute. The owners of small closely held companies are so focused on running the business that they forget about the formal requirements. Instead, since the shareholders in such companies generally work together closely and see each other practically every day, they make management decisions informally as necessary to operate the business and without formal meetings or corporate resolutions.

Court Sets Forth a Formula For Employers to Avoid Liability in Disability Discrimination Claims

Published on: June 22, 2017 | by Sergio D. Simões

Employers who take proactive measures and engage in an interactive process with their employees could avoid liability in disability discrimination lawsuits. One recent case, Grau v. AHS Hospital, Docket No.: A-3959-15T1, sets forth a good model of how employers should approach an employee’s demand for disability accommodation for purposes of avoiding liability. Grau involved a long time employee, a hospital nursing assistant, who suffered a shoulder injury after she fell at her workplace. The employee’s physician cleared her to work on light duty, and restricted her from lifting and pushing, key functions of her daily work activities. Despite the fact that she could not perform these key functions, the employer accommodated the employee by placing her on a light duty desk position, but could only do so for ninety days. The employer had also tried to find the employee a permanent sedentary position but no such positions were available. It also tried to retrain the employee for a computer job, but the employee could not be retrained because of her limited ability to use a computer. Because the employee was unable to find another position at the hospital, the employee retired and successfully applied for social security benefits. She thereafter filed a disability discrimination lawsuit against the hospital system, which was ultimately dismissed on summary judgment by the trial court. The employee appealed and the Appellate Division affirmed the dismissal, agreeing with the trial court that the employer had offered the employee sufficient reasonable accommodation, actively engaged with her in the interactive process, and ultimately finding that the employee was unable to perform the essential functions of the job. The court agreed that even with reasonable accommodations, the employee could not perform the job of a nursing assistant in her disabled state, and was satisfied that the employer had no other open positions for which the employee was qualified. In other words, the hospital had done absolutely all it could to reasonably accommodate the employee, but her condition would not allow her to perform the essential functions of the job. It would benefit all employers facing claims for accommodation based on disability to immediately consult qualified employment law counsel, so that reasonable accommodations may be planned, and the interactive process could be commenced with the employee. As the Grau case demonstrates, a proactive strategy could avoid substantial liability and headaches down the road.

Lessons Learned from Target’s Data Breach Settlement

Published on: June 15, 2017 | by Eric B. Levine

By now, most people are familiar with the 2013 data breach reported by Target. Described as one of the largest data breaches in U.S. history, Target acknowledged that hackers gained access to credit card and debit card data from up to 40 million of its customers. In the time since the breach, much attention has been given to its aftermath and what impact it would have on the future of cybersecurity. That future appears to have arrived, at least in part, with the announcement of a record-setting settlement between Target and forty-seven states, as well as the District of Columbia.

Under the settlement agreement, Target will pay $18.5 million to the participating states, which is in addition to $10 million that Target has already paid to consumers in a settlement of a private class action lawsuit and $39 million Target paid to several banks that serviced MasterCards used by Target’s customers. Yet, the settlement is noteworthy for several reasons beyond the staggering financial component, and the implications that are left behind offer some useful guidance for companies hoping to avoid suffering a similar fate to Target’s.

First, anyone looking for direction on how to structure their own company’s internal cybersecurity protocols and defenses in a way that would ostensibly comply with the standards acceptable to their respective state’s Attorney General can now look to the settlement agreement as a model (except if you live in Alabama, which did not participate in the settlement as it lacks a state data breach notification law, or Wisconsin or Wyoming, which chose to not participate in the settlement). While the settlement is not binding on anyone but Target, it represents a joint effort by nearly every state’s Attorneys General to insure future cyber-breaches of the same magnitude as Target’s do not occur. This means that it is likely a strong indicator of what state enforcement agencies are going to look for in future investigations when determining if a company had proper cybersecurity safeguards in place. For instance, the agreement mandates that Target implement corrective measures such as maintaining appropriate encryption policies, implement password rotation policies and two factor authentication and even segmenting cardholder data from the rest of Target’s computer network. Incorporating such protections into your company’s cybersecurity and data privacy protocols is a sound practice and now appears to be one that carries at least some unofficial governmental approval.

Executive Order to Bolster New Jersey’s Cyber Security

Published on: June 6, 2017 | by Robert W. Anderson

On June 1, 2017, New Jersey Governor Chris Christie signed Executive Order 225 directing NJ’s Chief Technology Officer to set in motion actions to deliver a more secure, efficient, and reliable information technology platform and services across the Executive Branch.

Previously, each state department and agency oversaw its own information technology services, software and hardware integration. Under the new Executive Order, the Chief Technology Officer of the State of New Jersey is granted broad authority to oversee and integrate the hardware, software, and other information technologies used by departments and agencies within the Executive Branch. In speaking to the Chief Technology Officer at the signing of the Executive Order, Chris Christie stated:

“This is a big day in changing state government. To take away that authority and personnel from every one of the state departments and agencies and put it in your hands is a sea change in the way government is managed given how integral information technology is to the everyday operation of government. This is about a common-sense approach to taking us to a new level in terms of our information technology, and what we know is our customers, the 8.9 million people of the State of New Jersey are going to demand we do it.”

Understanding New Jersey’s Child Custody Arrangements

Published on: June 5, 2017 | by James McGlew, II

In New Jersey, there are two basic concepts of child custody. The more familiar concept is “physical” custody which refers to where and with whom the child will live. When parents share “joint physical” custody, the child lives with each parent for a certain amount of time during the year. A parent with whom the child spends most of their time is designated as the Parent of Primary Residence (“PPR”) or the primary caretaker. The parent with whom the child has time-sharing is designated as the Parent of Alternate Residence (“PAR”) or secondary caretaker. Generally, unless there is a concern that the parent of alternate residence will harm the child, parenting time or visitation rights will not be withheld.

The less familiar but equally important concept is “legal” custody which refers to a parent’s right to make decisions concerning their child, such as medical treatment, selection of healthcare providers, education, engaging in what might be considered hazardous activities and other significant decisions. In most cases, parents will have joint legal custody of a child and share the decision-making responsibilities. In some instances, however, the judge may award sole custody where only one parent has legal and physical custody. This is a relatively rare occurrence that is ordered only when the other parent is absent or legally unfit. A parent may be unfit if he or she has engaged in child abuse or neglect or is struggling with an addiction to alcohol or drugs. Absent such circumstances, a joint legal custodial relationship among parents is the preferred arrangement since it is likely to foster the best interests of the child.

A recent Court decision restated that “the prime criterion for establishing a joint legal custodial relationship between divorced or separated parents centers on the ability of those parents to agree, communicate, and cooperate in matters relating to the health, safety, and welfare of the child notwithstanding animosity or acrimony they may harbor towards each other. The ability of parents to put aside their personal differences and work together for the best interests of their child is the true measure of a healthy parent-child relationship.”

Fiduciary Duties Owed by Business Owners to Their Company: A Primer on Common Causes of Shareholder Oppression Claims

Published on: May 22, 2017 | by David R. Pierce

Because of the fiduciary duties owed by business owners to each other, whether they are shareholders in a closely held corporation, members in a limited company, or partners in a general or limited partnership, a business owner generally is prohibited from competing with the company. This general prohibition can be modified by an agreement among the owners, but in the absence of such an agreement the prohibition stands.

Failure to do so is referred to as the diversion of corporate opportunities. An owner of a closely held business has a duty to bring to the company any business opportunity that the company would normally expect to seek to pursue. The opportunity must be presented to the company and cannot be pursued individually unless the company decides not to pursue that opportunity.

As with the prohibition on competition, the requirement to present all opportunities to the company can be altered by contract. Pursuant to N.J.S.A. 14A:3-1, a corporation can renounce its interest in, or expectancy of the opportunity to pursue, specific opportunities. One manner in which corporate opportunities can be relinquished is to insert the pertinent language in the Certificate of Incorporation. When starting a new business, if there is any thought that one or more owners might want the right to pursue competing opportunities, you want to include language in the Certificate of Incorporation, or a separate shareholder agreement, that specifies what competing businesses the shareholder may appropriate.

Cybersecurity: The legal response | NJBIZ

Published on: May 22, 2017 | by Eric B. Levine

Lindabury’s Cybersecurity and Data Privacy Practice Group Co-Chair Eric Levine spoke at the NJBIZ Cybersecurity conference on May 17th at the Raritan Valley Country Club in Bridgewater, explaining how companies can get hurt by doing the right thing when it comes to cybersecurity.

“To protect any small business, you need to have legal involved, if for no other reasons than to cloak what you are doing with privilege or confidentiality — by that, I mean communications with your attorney that nobody else can get to,” he said.

“Think about it,” he told the audience. ‘You hire (an expert) who comes in and does a vulnerability assessment and they find out you have a gaping hole in your security. That’s great. You fix it.

Recent Changes to a Parent’s Child Support Obligation

Published on: May 18, 2017 | by James McGlew, II

Parents who are either currently going through a divorce or were divorced many years ago often ask “at what point do I no longer have to pay child support for my children?” It surprises some parents to learn that there has been no specific age at which time parents are no longer obligated to pay child support.

Parents who are already divorced should review their settlement agreement which usually spells out the conditions which must be met for the child to be deemed “emancipated.” It is at the time of emancipation when parents no longer are financially responsible to support their children.

A recent change in New Jersey law provides more certainty. As of February 1, 2017, unless otherwise specified in a Court order or judgment, the obligation for a parent to pay child support stops without a Court Order on the date of a child’s marriage, death or their entry into military service.