Attorneys Selected as 2014 Michigan Rising Stars

CMDA is pleased to announce that the following attorneys have been named by Michigan Super Lawyers & Rising Stars as the top up-and-coming attorneys in the state for 2014:

Andrew Brege, Partner, Grand Rapids office
Gregory Grant
, Associate, Traverse City office
Lindsey Kaczmarek
, Associate, Livonia office
Kali Lester
, Associate, Livonia office

Each year, no more than 2.5 percent of the lawyers in the state receive this honor.  Christopher G. Schultz, managing partner of the Firm, explains, “Having several attorneys at CMDA named as the top up-and-coming attorneys in the state is validation for the hard work they put into the Firm and the superb level of service they offer our clients. It is also a positive reflection of the Firm’s future direction and leadership.”

Attorneys Selected as Michigan Super Lawyers

We are pleased to announce that the following attorneys from CMDA have been named Michigan Super Lawyers for 2014: T. Joseph Seward, Jeffrey Clark, Allan Vander Laan, and Haider Kazim. Each year, no more than five percent of the lawyers in the state receive this honor.

Christopher G. Schultz, managing partner of the Firm, explains, “Having numerous highly-skilled and experienced attorneys at CMDA named as Michigan Super Lawyers comes as no surprise. All our attorneys are completely dedicated to obtaining the best possible outcome for every client.”

Attorneys Selected as Michigan Super Lawyers

We are pleased to announce that the following attorneys from CMDA have been named Michigan Super Lawyers for 2014: Jeffrey Clark, Allan Vander Laan, and Haider Kazim. Each year, no more than five percent of the lawyers in the state receive this honor.

Christopher G. Schultz, managing partner of the Firm, explains, “Having numerous highly-skilled and experienced attorneys at CMDA named as Michigan Super Lawyers comes as no surprise. All our attorneys are completely dedicated to obtaining the best possible outcome for every client.”

Attorneys Selected as 2014 Michigan Rising Stars

CMDA is pleased to announce that the following attorneys have been named by Michigan Super Lawyers & Rising Stars as the top up-and-coming attorneys in the state for 2014:

Andrew Brege, Partner, Grand Rapids office
Gregory Grant, Associate, Traverse City office

Each year, no more than 2.5 percent of the lawyers in the state receive this honor. Christopher G. Schultz, managing partner of the Firm, explains, “Having several attorneys at CMDA named as the top up-and-coming attorneys in the state is validation for the hard work they put into the Firm and the superb level of service they offer our clients. It is also a positive reflection of the Firm’s future direction and leadership.”

Eleven Estate Planning Mistakes to be Avoided

We have all heard the probate horror stories. Someone’s last will and testament took five years to be probated, generating hundreds of thousands of dollars in attorneys’ fees. All of the assets from someone else’s estate were stolen by the personal representative (executor), leaving the family with nothing. The probate judge was unfair. Such stories instill fear about probate administration, which can lead to estate planning decisions with unintended consequences.

The following are the top eleven mistakes one should avoid:

  1. Adding a Child’s Name as Co-Owner to Residential Deeds, Vehicle Titles, Brokerage Accounts, etc.

Adding a child’s name to a deed, title, or account as a co-owner conveys ownership, with all the legal rights and responsibilities that go with it. Parents usually regret this decision once they learn that they cannot sell, mortgage, or even refinance their home without their child’s consent and involvement. For bank or brokerage accounts, distribution checks cannot be cashed or rolled over without the signature of all listed owners. Perhaps the most important concern is liability exposure. Assets to which child’s names are added are at risk for levy by their creditors.

Capital gains taxes are a rarely considered, but very important concern. In most situations, when one sells a capital asset such as a home, the capital gains tax would be based on the difference between the sales price and the original purchase price. This is known as the “tax basis.” Typically, when a child inherits a home from his parents, he enjoys a “step up” basis, meaning his tax basis would be the value of the home at the time of his parents’ death. Then, if the child immediately sells the home, there would be no capital gain.

If the child is added to the deed prior to the parents’ death, however, he will only enjoy the step up in basis for the percentage of the home he did not own prior to his parents’ death. Depending on the value of the equity in the home, adding a child’s name to the deed may create a “taxable event,” requiring the filing of a federal gift tax return.

  1. Leaving Everything to One Child, with the Understanding that He or She “Will do the Right Thing”

Many parents will add the name of just one of their children to their assets, with the understanding that this child “will do the right thing” for his siblings. Typically, the selected child is either the oldest, the perceived smartest, or simply the one who happens to be still living at home. These arrangements are almost always an invitation for probate litigation, especially when the selected child feels entitled to more than his fair share.

  1. Having Estate Planning Documents Prepared by an Inexperienced Attorney

Some inexperienced attorneys present seminars for the sole purpose of scaring people away from probate and toward more costly estate plans involving the use of trusts. These attorneys may not mention, however, that some smaller probates may be completed quickly in Probate Court, with just a simple will. While estates with complex tax considerations typically require the use of trusts, some estates would be better served by administration through the Probate Court. For example, if there are concerns regarding the trustworthiness of the named trustee, then court supervision may be necessary to ensure the proper distribution of assets. An experienced planning attorney will take a detailed history for each client, analyze it, and then provide the pros and cons for each estate planning option.

  1. Poor Trustee Selection

If an estate plan requires a trust, the most important decision with respect to the plan will be selection of the trustee.  Michigan law provides enormous power to trustees. In most situations, the selected trustee will manage and distribute your assets without court supervision. Too often, the person for whom the trust is drafted will select a favored son-in-law or best friend who happens to be “good with numbers.” This should not be the primary consideration.

Trustees are usually permitted to hire attorneys, accountants, financial planners, and other professionals to assist in the administration of the trust. Instead, the individual selected to serve as trustee should be the one believed to be the most trustworthy. The trustee should share the person’s goals and values and should have a clear understanding of how the person would want his assets to be managed and distributed.  Absent court intervention, the trustee will have complete control over the trust’s checkbook.

  1. Improper Tax Planning

An estate plan that reduces probate fees will not necessarily reduce the federal estate tax. Probate fees are governed by state law, and the federal estate tax is calculated according to the Internal Revenue Code and corresponding Treasury Regulations. For example, naming a beneficiary on an insurance policy will avoid probate, but the face value of the insurance policy could still be subject to the federal estate tax.

The estate tax exclusion amount was finally made permanent by Congress in 2012. For 2014, single taxpayers may now exclude up to $5,340,000 from the federal estate tax.

Married couples, if proper planning is in place, may exclude up to $10,680,000 by either using credit shelter trusts or by electing portability as provided by the 2012 Tax Act. To elect portability, an Estate Tax Return (IRS Form 706) must be fi led by the deadline.

With over $10,000,000 available for their applicable exclusion amount, married couples may be tempted to ignore estate planning altogether. However, couples who have credit shelter trusts in place as part of their estate plan should meet with an experienced estate planning attorney to determine whether the use of credit shelter trusts is still necessary to achieve their goals. Otherwise, surviving spouses could find that access to their once joint accounts is unnecessarily restricted by an outdated estate plan. An outdated estate plan may also subject certain trusts to the new 3.8% Net Investment Income Tax imposed by the Affordable Care Act, also known as “Obamacare.”

  1. Failure to Plan by Same-Sex Couples with Recognized Marriages

In United States v. Windsor (June 26, 2013), the U.S. Supreme Court overturned the Defense of Marriage Act (DOMA) on constitutional grounds. Specifically, the Court found that DOMA violated the Equal Protection Clause of the Fifth Amendment. The IRS then issued Revenue Ruling 2013-17, and IRS News Release 2013-72, which state that the terms “marriage” and “spouse” in the Internal Revenue Code will be interpreted as including same-sex marriages. The Revenue Ruling also provides that a same-sex married couple’s state of residency is irrelevant for purposes of Federal recognition of the marriage, so long as the individuals are lawfully married in a domestic or foreign jurisdiction whose laws authorize same-sex marriage. This means that the IRS will recognize same-sex marriages only, and not registered domestic partnerships, civil unions, or other similar formal relationships that are not specifically denominated as a marriage under the particular jurisdiction’s law.

Just as importantly, the IRS will apply this Revenue Ruling retroactively, for “open tax years.” For most taxpayers, open tax years will generally mean within the three-year statute of limitations. So same-sex married couples may file amended tax returns and claim refunds going all the way back to 2010 or earlier for special circumstances, such as if the taxpayer had signed an agreement with the IRS to extend the statute of limitations.

  1. Failure to Complete the Estate Plan

This is perhaps the saddest and most frustrating mistake. Probate attorneys see many beautifully drafted trusts with nothing in them. To fund a trust, one must legally place the desired assets into the trust by either designating the trust as the owner, naming the trust as a beneficiary, executing an assignment, or by executing a pour-over will with the appropriate provisions. Assets should also be listed in the trust’s schedule of assets. Each method of funding has a different purpose and tax consequence.

A failure to fund a trust means that the assets will pass to beneficiaries through probate or in accordance with the last beneficiary designation on the account or insurance policy. The result could be that the wrong beneficiaries receive the wrong assets, with possible adverse federal estate tax consequences. Expensive litigation could then follow.

Equally important to the failure to fund a trust is the funding of a trust with inappropriate assets. For example, it is not always advisable for a married couple to place their primary residence into a trust, because this would alter their ownership as a “tenancy by the entireties.” The result could be decreased protection from creditors. While there are circumstances in which it would be appropriate to place a primary residence into a trust, this should never be done without the advice of an experienced estate planning attorney. The same rationale applies to Individual Retirement Accounts (IRAs).  Changing the ownership of an IRA from an individual to a trust creates a “taxable event” and could have adverse tax consequences.

  1. Failure to Preserve Homestead Exemption

If a primary residence is placed into a trust, the correct statutory election should be made with the local municipality in order to preserve the Homestead Exemption. This is necessary in order to limit the rate at which the local municipality can increase property taxes.

  1. The Unknown Estate Plan

All the money, time, and effort that one puts into an estate plan will be useless if no one can find it. Fiduciaries and/ or beneficiaries should know that an estate plan exists and where the documents are located.

Depending on the bank, beneficiaries may need a court order to gain access to a safe deposit box. Some banks will allow limited, supervised access to a safe deposit box in order to allow family members to view a will. One should be familiar with the bank’s policies and procedures regarding access. Other options for storing planning documents include a fireproof safe at home or the attorney’s office. Wills may be filed with the County Probate Court.

If confidentiality is not an issue, some insurance claims adjusters have recommended that important documents be stored in the refrigerator. If the seal remains intact, the refrigerator may provide better protection from fire and water damage than a desk drawer.

  1. Burial Instructions Contained in Wills

In most cases, wills are not reviewed until after the funeral. So, if one wishes to be buried in a Corvette, arrangements should be made outside of the estate plan.

  1. Unequal Distributions among Children

An estate plan that provides for unequal distributions among children is not a mistake, per se. However, unequal distributions may cause discord among the children and then lead to probate litigation. Such estate plans should be created only after careful consideration.

Some parents may leave more money to an irresponsible child, under the belief that this child “needs the money more.” The unintended message, however, could be that the irresponsible child is being rewarded, while the responsible children are being punished. Other parents amend their estate plans often, disinheriting children and then bringing them back as a form of punishment or reward for particular behavior. When creating an estate plan, parents should be mindful that this could be their last word to their children.  There may not be time to amend the estate plan after the family fight of the week is resolved.

Attorneys at CMDA are available to prepare estate plans, answer questions, and review estate plans currently in place to ensure that the plans are updated as tax laws and family situations change.

Linda Davis Friedland is an attorney in our Livonia office where she concentrates her practice on commercial litigation, employment and labor law, corporate and business law, estate planning, utilities law and municipal law. She may be reached at (734) 261-2400 or lfriedland@cmda-law.com.

Officer and Public Safety Justify Force Against Recklessly Fleeing Motorists

Recent decisions issued by the U.S. Supreme Court and the U.S. Sixth Circuit Court of Appeals have clarified the law regarding the force police officers may use to stop a person attempting to flee from police by driving away in a motor vehicle. The Supreme Court had previously established in Tennessee v. Garner (1985) that officers can apply potentially deadly force to stop a fleeing suspect if the officer has probable cause to believe that the suspect poses a threat of serious physical harm to the officer or others. In Garner, however, the suspect was on foot. Subsequently, the Supreme Court approved an officer’s use of injurious force in the form of colliding his police vehicle against the car of a fleeing suspect to end a high-speed chase. Now the Court has addressed the applicability of these principles to the shooting of a suspect fleeing in a car.

In Plumhoff v. Rickard, 134 S.Ct. 2012 (2014), addressed an “excessive force” claim arising from the death of a suspect who drove recklessly away from a traffic stop, rather than comply with directions to exit his vehicle. The suspect swerved through traffic at speeds exceeding 100 miles per hour, with the original officer and others in pursuit. When finally cornered after spinning his car into a parking lot, the suspect collided with two police vehicles and attempted to escape by driving away in reverse, forcing officers who had exited their vehicles to jump out of his way. Before the suspect could exit the parking lot, three officers fired a total of fifteen gun shots into the vehicle, fatally wounding the suspect.

The Supreme Court held that a police officer’s act of shooting in an attempt “to terminate a dangerous high-speed car chase that threatens the lives of officers or innocent bystanders does not violate the Fourth Amendment, even when it places the fleeing suspect at risk of serious injury or death.” Moreover, once an officer begins shooting “at a suspect in order to end a severe threat to public safety, the officers need not stop shooting until the threat has ended.” Because the suspect in Plumhoff had continued trying to drive away during the entire “10-second span when all the shots were fired,” the suspect had “never abandoned his attempt to flee,” and the officers were justified in firing all fifteen shots.

Subsequently, in Cass v. City of Dayton (decided October 16, 2014), the U.S. Sixth Circuit applied the Plumhoff ruling in the circumstance where a suspected drug dealer attempted to drive away from a police drug sting. In doing so, the suspect struck two officers, knocking one officer on the ground and striking the hand of the other such that the officer’s gun inadvertently fired. Hearing the gunshot and assuming other officers to be in peril, the officer on the ground fired a single shot that missed the suspect driver and killed the vehicle passenger. Although the officers were disciplined for violating departmental policy, the Sixth Circuit found no constitutional violation. Relying on Plumhoff and earlier Sixth Circuit precedents, the Court held that the officers “were not required to step aside and let the [suspect vehicle] escape, particularly after it had struck two of their fellow officers.” Although the officers who had already been struck were not in danger of being struck again, “no reasonable officer would say that the night’s peril had ended at that point,” because there were other officers on the scene, and the suspect had shown “a willingness to injure officers trying to prevent him from fleeing.”

These cases establish that officers may properly use deadly force in the form of shooting a suspect if the suspect’s attempt to flee police threatens the safety of officers or the general public. It can be expected that the Plumhoff decision will have a significant impact upon future cases involving the fatal shooting of suspects by police. The shooting of a suspect whose flight in a motor vehicle jeopardizes the safety of officers or the public can be reasonable under constitutional standards.

Douglas Curlew is an attorney in our Livonia office where he concentrates his practice on appeals, premises liability and insurance law. He may be reached at (734) 261-2400 or dcurlew@cmda-law.com.

Attorney Receives Favorable Published Opinion

Karen Daley, head of the Firm’s appellate division, successfully defended on appeal a local police department in a case involving a fatal police shooting. The case arose out of a standoff with a suspect who barricaded himself in a room after U.S. Marshals attempted to arrest him on a warrant for felony possession of cocaine. The suspect had multiple weapons that he had pointed at law enforcement officers, he had made multiple threats to kill law enforcement officers, he repeatedly threatened to “come out shooting,” and he refused to surrender. After ten hours of negotiations, cameras revealed that the suspect appeared to be asleep, so the SWAT team entered the room. The officers were armed with automatic weapons and a “flash bang” distraction devise was deployed. However, upon entry, the suspect fired at an officer. The officer returned fire, killing the suspect.

The Sixth Circuit Court of Appeals held, in a published opinion, that the officers are entitled to qualified immunity because they did not violate the suspect’s constitutional rights. Specifically, the Court determined that the use of the flash bang was reasonable, the use of automatic weapons was reasonable, and the officer’s use of deadly force did not violate the Fourth Amendment. Despite the fact that the suspect was shot twenty times, the Sixth Circuit held that once the suspect delivered on his threat and fired at the officers, it was reasonable for the officer to fire back and could keep firing until the threat was over.

Ms. Daley can be reached at (734) 261-2400 or kdaley@cmda-law.com.  For updates on additional police cases, follow @policedefenders on Twitter.

Attorneys Present Seminar on Litigation Avoidance to Police Department

Livonia attorneys Jim Acho and Karen Daley recently gave a presentation to a local police department’s command staff on litigation avoidance and also provided an update on qualified immunity.

If your police department or municipality is interested in a similar complementary presentation, please contact Mr. Acho at (734) 261-2400 or jacho@cmda-law.com.

Signs of Identity Theft and How to Dispute Errors on Your Credit Report

Identity theft is occurring more often, due in part to the recent data breaches with merchants, hospitals, and various websites. Identity theft also results from so-called “phishing scams,” in which the victim is tricked into revealing personal information. Even if you do business only with trusted companies, and you keep your personal information to yourself, you should still be aware of the following signs of identity theft:

  • You see withdrawals from your bank account that you cannot explain.
  • You suddenly stop receiving your bills or other mail.
  • Merchants refuse your checks.
  • Debt collectors call you about debts that are not yours.
  • You identify unfamiliar accounts or charges on your credit report.
  • Medical providers bill you for services you did not use.
  • Your health plan rejects your legitimate medical claim because their records indicate that you have reached your benefits limit.
  • A health plan will not cover you because your medical records show a condition that you do not have.
  • The Internal Revenue Service notifies you that more than one tax return has been filed in your name, or that you had income from an employer for whom you do not work.
  • You receive a notice that your information has been com promised by a data breach at a company where you do business or have an account.*

* Source: Federal Trade Commission

The best way to beat identity theft is to catch it early, and the best way to accomplish this is by reviewing your credit report as often as you can. Each year you are entitled to receive a free credit report from each of the three credit reporting agencies (Equifax, Experian, and TransUnion). By contacting only one agency at a time, you may spread this out by receiving one credit report every four months. The only website sanctioned by the Federal Trade Commission (FTC) is www.annualcreditreport.com. A link to each one of the three credit reporting agencies can be found on the FTC website. Other websites that advertise free credit reports will give you your first credit report for free, but will then start billing your credit card for any additional credit reports ordered.

Occasionally, you may have a genuine dispute with a furnisher of credit report information, such as a merchant. Perhaps you returned an item of clothing; the merchant failed to provide you with the proper credit, and has now inadvertently reported it on your credit report. This is where the Consumer Financial Protection Bureau (CFPB) may be helpful. To correct errors on your credit report, take the following steps:

Step 1: Submit a dispute to both the credit reporting agency and to the source of the incorrect information (the merchant or furnisher).

Step 2: Visit the CFPB website at www.consumerfinance.gov, click “Submit a Complaint,” and then click “Get Started.”

With this complaint, you may attach documents, such as statements, contracts, receipts, and letters to help the CFPB better understand your issue. Once you have begun the complaint process, be sure to indicate that you have already submitted a dispute with the credit reporting agency and/or merchant, if you have in fact done so. This will prevent the CFPB from mistakenly believing that you have two complaints instead of one.

Once completed and submitted, your complaint will be forwarded to the three credit reporting agencies that will be required to furnish your complaint, along with any other information you have provided, to the merchant or furnisher of information.

The federal government recognizes the severity of the identity theft problem, however identity thieves are becoming more sophisticated, requiring all of us to be vigilant in protecting our identities and credit.

Linda Davis Friedland is an attorney in our Livonia office where she concentrates her practice on commercial litigation, employment and labor law, corporate and business law, estate planning, utilities Law and municipal Law. She may be reached at (734) 261-2400 or lfriedland@cmda-law.com.

Michigan Investment Markets Bill Would Permit Local Stock Exchanges

On May 22, 2014, the Michigan House of Representatives passed House Bill 5273, Michigan Investment Markets (MIM). This Bill amends the Michigan Uniform Securities Act to provide for the creation and regulation of intrastate security markets or exchanges. It is designed to complement the Michigan Invests Locally Exemption (MILE), recently signed into law by Governor Snyder, which permits investment crowdfunding for small businesses.

The Bill is currently pending before the Senate. Given the strong support for the previously enacted crowdfunding legislation and the strong vote in favor of the Bill in the House of Representatives, it is expected to pass when brought to a vote later this year.

A Liquid Market for Crowdfunding Investments

The purpose of the MIM Bill is to legalize and facilitate the transfer of crowdfunding investments. The exchanges created under the proposed law will allow companies, after raising capital through crowdfunding, to apply for listing so shareholders could trade their shares.

The Bill defines “Michigan Investment Market” as a broker dealer, exempt from registration under federal securities laws, which provides a market or exchange, and includes an online market or exchange operated through a web portal. These markets will conduct the purchase and sale of crowdfunded securities issued under the intrastate offering exemption created by the MILE Act. Connecting buyers and sellers of interests in crowdfunded businesses will create liquidity of shares, enlarge the market for companies seeking money through the crowdfunding mechanism, and increase the value of these interests to investors.

A Michigan Investment Market will only serve businesses that are resident and doing business in the State of Michigan at the time the business conducts any offers, sales, or resales of its intrastate securities. The Bill would require the Market to be solvent, not subject to a disciplinary court order or injunction, and not a defendant in a pending court proceeding. It would also require the Market to keep records of transactions that would be subject to examination by regulators, and provide sanctions and penalties for violations of the law or fraudulent conduct or transactions.

Challenges

The MILE Act and the Michigan Investment Markets legislation present new and untested opportunities for Michigan entrepreneurs and business owners. Although the crowdfunding movement is spreading across the country, it is still in its infancy and complex issues need to be resolved in order for it to succeed. One critical question is the relationship between the State law, the Michigan Invests Locally Exemption, and the crowdfunding provision of the Federal JOBS Act recently signed by President Obama, which appear to be in conflict. Anecdotal evidence suggests that this conflict has created confusion in the business community and has slowed implementation and use of the MILE Act.

In addition, it will be necessary to construct the infrastructure to permit issuers and investors of crowdfund interest’s access to reliable information and transaction hubs for the sales of interest by investors. It will be important to create confidence in valuation of the interest, permit proper price discovery, and ensure accurate settlement of transactions. In other words, the infrastructure of the markets must be developed in order to draw investors and foster the growth of small business as intended by the MILE Act and the Michigan Investment Markets legislation. It can be anticipated that as the regulatory environment takes shape, standardized business practices will emerge. With time and use, greater certainty will emerge that will permit these new opportunities to fulfill their promise.

In future articles we will look at developments in crowdfunding and the establishment of liquid markets in crowdfunded securities. We will also discuss the use of crowdfunding by municipalities to develop local business and improve communities.

Robert J. Hahn is an attorney in our Livonia office where he concentrates his practice on corporate and business law, commercial litigation, utility law and collection and creditor’s rights law. He may be reached at (734) 261-2400 or rhahn@cmdalaw.com.