Lancaster Law Blog

What Happens to the Money in a Joint Account After One Party Dies?

Derek Dissinger — Thu, 17 May 2012 11:23:12 -0500

Joint accounts are often meant to make the financial lives of the parties involved easier, such as in the case of marriage or in a caretaker situation. But what happens when one party dies? Does the money automatically belong to the remaining party? For example, let's say that a man dies and leaves $20,000 to his grandson in his will. Prior to the man's death, he added his son to the account to help him pay his bills. All of the cash he had was in that account. Who is legally entitled to the money - the son, who was on the account, or the beneficiary who received the gift from his will?

A few years ago my colleague Jon Gruber wrote an article about risks with joint accounts and the law that was enacted in Pennsylvania called the Multiple Parties Account Act (MPAA). This act sets forth the rights of parties to a joint account and applies when an individual dies owning an account jointly with another person.

Under the MPAA, the law presumes that a joint account owner intends his co-owner to take the money in the joint account upon his death, and this presumption is only overcome by clear and convincing evidence to the contrary.

According to the MPAA definition, an account is "a contract of deposit of funds between a depositor and a financial institution, and includes a checking account, saving account, certificate of deposit, share account and other like arrangements." A joint account is "an account payable on request to one or more of two or more parties whether or not mention is made of any right of survivorship." Therefore, unless the grandson initiates a lawsuit and comes up with clear and convincing evidence his grandfather did not intend his father to receive the money in the account upon his death, dad gets the money.

What this means for people doing their estate planning is taking additional steps to ensure that their true wishes are carried out. The primary distinction that must be made when a joint account is established is whether an individual, especially one who is elderly, is adding the other account owner for convenience or whether the person is being added because he is to receive the account balance upon death as a gift. This is true regardless of whether the other person on the account is a relative, friend or spouse.

If the co-owner is being added for gift purposes, you may want to consult an attorney to review your situation and ensure that no other parties will have grounds to raise a claim to those account funds after death. If the co-owner is being added for convenience, meaning this person will assist with paying bills or managing finances, a letter or declaration, which may act as a will amendment or codicil, should be placed with the will stating this. This will overcome the presumption the joint account was intended to give the co-owner the balance upon the other owner's death. In either case, an attorney will be able to assist you in executing the essential legal documents, ensuring that the account funds go to the intended party.

Derek Dissinger is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, Pennsylvania. He received his law degree from Duquesne University and practices in a variety of areas, including Estate Planning and Estate Administration.

Pedestrian Accidents, Part 1: Who Has the Right-of-Way?

Aaron Zeamer — Thu, 03 May 2012 15:36:09 -0500

Each year an alarming number of people die or are injured as pedestrians in motor vehicle accidents. In fact, for 2009, the last year in which pedestrian accident data was available through the National Highway and Traffic Safety Administration, over 4,000 pedestrians were killed in automobile accidents and an estimated 59,000 people were injured as pedestrians in traffic crashes across the United States. That same 2009 study indicated that a pedestrian was killed every 2 hours and a pedestrian was injured every 9 minutes in traffic accidents.

While the number of pedestrian accidents has been trending downward in the last few years, it remains alarming that so many pedestrians are involved in accidents, and that all too often they are seriously injured or killed. Further, many times alcohol or other drugs are involved in the accident, either if the pedestrian was under the influence or more commonly, the driver of the vehicle was under the influence of drugs or alcohol at the time of the accident.

It may also may come as a surprise to many that in Pennsylvania, the right-of-way in these situations is determined by the location of the pedestrian crossing and whether there are traffic or pedestrian control devices on the street. If there are no such traffic control or pedestrian control signals, or if they are not in operation, the driver has the obligation to yield the right-of-way to a pedestrian who is crossing within a marked crosswalk or at an intersection, even if no crosswalk is designated. However, where a pedestrian is crossing a roadway at any other point besides a crosswalk or an intersection, the pedestrian has the duty to yield the right-of-way to the vehicles upon the roadway.

If you are a pedestrian injured in an automobile accident, it is important to speak with an attorney about your accident. Even if a driver wasn't cited or charged with a traffic offense or crime, it doesn't mean that you are out of luck. Understanding who had the right-of-way is just the first step to determining whether you can recover for your injuries.

In Part II, you will learn the legal solutions that are available to you if you are involved in a pedestrian accident. Stay tuned for this upcoming post.

Aaron Zeamer is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, Pennsylvania. He received his law degree from Widener University and practices in a variety of areas, including Personal Injury & Wrongful Death.

National Law Day 2012

Alyson Maris — Tue, 01 May 2012 14:31:25 -0500

The first of May has been National Law Day since a joint resolution of Congress in 1961 so designated the date. Eisenhower was the first president to proclaim a National Law Day, and every president since has issued his own proclamation. You can read their proclamations at the Law Day Presidential Proclamations Archive.

Why is there a National Law Day? There are so many "declared" holidays we barely acknowledge as they pass by. For example, did you know that May 11 is Eat What You Want Day? How about Cellophane Tape Day on May 27? Although cellophane tape is quite significant (even in the legal field), it's more beneficial to take a moment to think about the importance of the law. The holiday is meant to give Americans a chance to reflect on the ideals of equality and justice that our legal system protects, as well as to cultivate a respect for the law. It may come as no surprise that there is a law establishing National Law Day, under Title 36 of the U.S. Code.

The American Bar Association (ABA) is celebrating this Law Day with the theme "No Courts, No Justice, No Freedom." To read more about it and about Law Day in general, please visit ABA's Law Day 2012.

Today, be sure to wish someone you know a Happy Law Day!

The Latest in PA Liquor Sale News

Aaron Zeamer — Fri, 27 Apr 2012 15:31:26 -0500

Pennsylvania lawmakers are continuing in their efforts to find a way to privatize or hybridize liquor sales in the state. House Bill 11, which was introduced last summer, has undergone another round of modifications with a goal of bringing in more revenue and satisfying the interests of legislators, current licensees and the Governor. The latest round of changes would include:

Permitting beer distributors to sell six-packs
Increasing the number of retail licenses to be sold from 1,250 to 1,600
Allowing beer distributors to purchase up to 10 retail licenses to sell wine and liquor, then auctioning off the remainder by counties

These are just some of the changes proposed in the new version of the bill, and while they seem to be a considerable step toward privatization, there is still a long way to go and a lot of groups to convince before this bill becomes a new law in Pennsylvania. For more details about the bill, see Another round for Pennsylvania's wine and liquor store fight.

In addition to the activities in the House, Giant Food Store in Susquehanna Township received approval to sell beer from the PLCB. By the fall, this Giant location will join approximately 75 Pennsylvania grocery stores in giving customers an option to purchase a limited amount of beer.

What Should I Do Before I Separate From My Spouse?

Holly Filius — Thu, 26 Apr 2012 13:51:13 -0500

During my years of practice as a family law attorney, I have met with hundreds of clients who asked me the question, What do I do before I separate from my spouse? In the alternative, I have also been asked, What should I have done? For those clients who have asked me after the fact, close to 50% of them would have fared much better had they come to see me prior to separating from their spouse.

See an attorney first. My first recommendation to someone who is considering separating from their spouse would be to see an attorney right away. There are many misconceptions about what happens in a divorce matter, and everyone seems to have a friend, relative or co-worker who has had some terrible experience, which most likely was innocently exaggerated for effect. That being said, in order to avoid the fear and speculation of inaccurate, anecdotal advice, it is always best to see an attorney first and learn your true rights and responsibilities in a divorce situation.

In addition to simply talking to a lawyer before you separate from your spouse, you can also do the following things to save significant attorneys' fees, delay in your divorce proceedings and quite frankly, some emotional distress.

Make copies of all financial records, including, but not limited to:

five years of all personal and business tax returns, supporting schedules and documentation
current pay stubs
car titles and loan payoffs
mortgage statements for all real estate and copies of appraisals if they are less than three years old and settlement sheets for all real estate purchases and refinances
three months of bank statements for all checking, savings, money markets, mutual funds, retirement and investment accounts
life insurance premium notices and cash value statements
certificates of deposit, stocks and bonds, safe deposit entry logs and loan documentation
credit card statements for three months and any other financial documentation relating to any asset or debt

Obtaining copies of this information at the outset can save you significant attorneys' fees by possibly avoiding formal discovery and also identifying the assets and debts contained within your marital estate preliminarily.

Take an inventory of your personal property. You do not need to inventory every fork, spoon or towel, but try to account for all items of furniture and furnishings, as well as household items of value. A written list is helpful, although pictures and/or videotape is better, particularly if they are date-stamped to identify what items of personalty (personal property) existed at a particular time.

Understand your debt position. You should know what obligations exist at or around separation, including the type of debt, the account number, the contact information for the lender, and most importantly, how the debt is titled. Just because an account is in your spouse's name alone does not mean that you are not obligated to pay for it. Many credit cards that are individually titled include a spouse as an authorized user, which for many creditors is the same as being the account holder. It is important to know how an account is titled so that it may be dealt with post-separation with regard to limiting your liability.

Decide whether to take it or leave it. When dividing items of personal property, in general, you can take with you the items you brought to the marriage, and you should leave the items that you did not. Any items jointly received during the marriage should be divided reasonably. The Court expects that one party will not leave with all of the personal property, nor will all the property stay with the one who stays. If you leave, you should take a reasonable amount of property with you to establish a separate residence, knowing that you will have to purchase additional items. However, you must leave a reasonable amount of personalty for your spouse to maintain residence in the marital home while also having to purchase some additional items. Make sure to take all items that mean something to you, such as family pictures, children's items, etc. These things may have little to no monetary value for purposes of dividing the marital estate, but they may be invaluable to you personally. Often the Court cannot do anything to remedy one spouse destroying or "losing" sentimental items with no monetary value.

Remove your name from utility accounts. If you are leaving the marital residence and you are the listed account holder on a utility, notify the utility company that you wish to have the utility taken out of your name and turned off in 30 days. You or your counsel will then notify the spouse remaining in the marital residence that they have 30 days to contact the utility company to establish the account in his or her name alone. Doing this alleviates you from any post-separation responsibility for utility expenses incurred by the other party, but also allows the other party sufficient time to establish an account in his or her name alone without losing service and incurring charges for having it turned back on.

Review your direct deposits. If your income is being directly deposited into a jointly titled bank account, you should consider stopping that direct deposit so as to protect your earnings post-separation. Please note that this is not appropriate in all circumstances, particularly when there will be a support obligation owed and/or certain expenses are paid based on your specific earnings. You should also not stop your direct deposit if it would result in insufficient funds for outstanding checks. However, if you follow my previous recommendation of obtaining sufficient financial records, you will have an understanding of what expenses are being paid from the account in which your earnings are being direct deposited, and you should be able to stop the direct deposit without disrupting the payment of certain expenses and/or insuring that appropriate monies are being paid per your legal obligation, if any.

Establish separate accounts. When separating, you are not required to keep all accounts and assets intact. Provided there are sufficient funds to meet the immediate expenses to be paid from certain accounts, it is more than appropriate for you to remove a reasonable amount of monies from joint accounts in order to establish a separate account in your name alone or to secure a separate residence and the items necessary to establish that separate residence. Please note that this is not carte blanche authority to wipe out all accounts and leave the spouse who remains at the marital residence without the ability to satisfy expenses, but instead, permission to utilize marital monies to establish your separate residence, or to live on pending establishment of support.

Remember that your neighbor's cousin's brother's divorce is not the same as yours, no matter how much you may relate to his or her story. Also note that my recommendations are general recommendations that apply in most cases. It is important to speak with a legal professional regarding your specific circumstances, and how these recommendations may or may not be appropriate for your situation. Rather than reacting to the horror stories of others who have gone through divorce, speak to a family law attorney. That way, you will not be one of the unlucky people asking the question, What should I have done?

Holly Filius is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, Pennsylvania. She received her law degree from Widener University School of Law and practices in a variety of areas, including Family Law.

Vetting Nonprofit Board Members

Matthew Grosh — Mon, 16 Apr 2012 13:13:42 -0500

For most nonprofit organizations, the board of directors establishes the policies that allow the organization to carry out its mission. As a result, in a perfect world, every board would be filled with qualified individuals who are passionate about and committed to the organization's mission.

Unfortunately, in the real world, the perfect board does not exist. Achieving and maintaining an effective board is difficult for any organization, but it can be especially tough for nonprofits. I have seen clients end up with apathetic or problematic board members who, for one reason or another, actually hinder their organizations' missions. At times, board meetings devolved into dysfunctional bullying sessions where a few directors put their own interests ahead of those of the organization. The selfish actions of a few directors were so damaging in one instance that the organization was in danger of losing its tax-exempt status.

These cases make it clear that, when recruiting new board members, it is important for nonprofit organizations to implement effective vetting policies and thus minimize the possibility of letting a wolf into the henhouse. Here are a few tips that can help you establish such a policy:

Job Description. Adopt a job description for directors that incorporates your mission and clarifies the expectations and duties that the prospective directors will face when they join the board.

Job Interview. Treat the process just as you would a job interview. Go over the job description with candidates and ask them why your mission is important to them. This should help you weed out potential board members with self-serving motives. Ask them for references and follow through in checking them. Ask the interviewees how their skills and experience can support your mission.

Warning Signs. Asking the following questions can help your organization identify warning signs in potential directors:

Will the candidate have the ability to exert undue influence over other board members? For example, are they a substantial donor of money or services that the organization relies on? You don't want a board member manipulating other members by dangling a carrot or threatening to take their money elsewhere.
Does the prospective director work for a nonprofit or serve on a board with a mission similar to yours, or have they done so in the recent past? While it is good to have people with relevant experience, the lean economy over the past few years has forced many nonprofits to compete for income streams. In some cases, boards can be infiltrated by competing nonprofits and revenue sources can be stolen.
Does the candidate stand to gain any private economic or other benefit from the organization? For example, are they a vendor of the company? This could be a sign of self-interest.
Have they been on numerous nonprofit boards for relatively short periods of time? This may reveal that the prospective director wore out his welcome on those previous boards.
This may seem obvious, but are there any indications that the prospective director may have problems getting along with others? It is essential that a board can discuss and debate policy matters in a rational and respectful setting.

Vetting Committee. Form a committee that is responsible for overseeing the vetting and recruiting process for your organization. The committee can include non-board members who have skill sets that will help with the process, such as HR and legal experience.

Test Drive. Consider conducting a "test drive" of the prospective director by placing them on a committee or asking them to serve on a task force.

In addition to the development of a vetting policy, you should check your organization's bylaws to see how directors can be removed and become familiar with the processes involved. If a prospective director joins the board and in turn causes significant problems for the organization, you will want to be sure the other board members can carry out a relatively quick removal of that director. This should allow you to limit the damage and potentially protect the tax-exempt status of your organization.

For many nonprofits the make-up of the board of directors can have a significant effect on the success of the organization. If you have concerns regarding the effectiveness of your current policies or you know that your policies are in need of updating, you may wish to consult with an attorney familiar with nonprofit issues.

Matthew Grosh is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, PA. He received his law degree from Villanova University and practices in a variety of areas, including Nonprofit & Tax-Exempt Organizations.

Mistakes to Avoid When Forming a Limited Liability Company, Part II: Certificate of Organization

Derek Dissinger — Fri, 13 Apr 2012 10:49:06 -0500

This is the second part of a series that covers the most common mistakes people make when trying to form a limited liability company (LLC) themselves. The first part of the series addressed the importance of an operating agreement. This second part will discuss how to avoid common mistakes when filing a certificate of organization.

Unlike an LLC's operating agreement, a certificate of organization is filed with the Commonwealth of Pennsylvania and becomes available to the public. On the form, which comes with an instruction page, there are seven sections to complete. Although it may seem like there are few ways to mess it up, you should be mindful of certain factors while preparing your company's certificate of organization. Avoiding common mistakes can help you save money and will make the formation of your LLC a smoother process.

Business Name

If you are forming an LLC, you should pick a name that is distinguishable from other names registered in the Commonwealth. This may seem like a no-brainer, but if you choose a name that is taken by another company, you may end up wasting money, especially if you order branded products, register a domain name or start purchasing marketing items with the unavailable name. Also, the name must include the words "limited liability company," "company," "limited" or some abbreviation of those terms. An attorney can conduct an appropriate search of the name and give you an opinion as to whether or not it is available.

Registered Address

The Certificate of Organization requires your company to have a registered office in the state. This is so that the Corporation Bureau has an address to mail you documents, such as an annual registration statement or decennial filing. In addition, the address becomes public record as a formal address for your business and can be used for legal purposes such as service of process in the event of a lawsuit.

Most people who have a separate commercial space use that address. You can also choose to use a registered agent service and list that company's address. If you don't have commercial space, you'll either have to use one of these companies or your own address. If you're going into business with a partner or partners and you don't have commercial space, it may be worth it to use a registered agent service so you're not relying on a partner to relay your information.

Organizer

An organizer is not the same thing as a member or owner. Like everything else on the form, the name of your company's organizer will be public information. If you don't want your name to be searchable or for anyone to be able to see that you are a member, you should use an attorney to form your company and act as your organizer.

Certificates

The Certificate of Organization asks if membership interests in your LLC will be evidenced by certificates, like shares in a corporation. Using certificates may or may not be a good idea depending on the relationship between the owners. Certificates can lead to unwanted transfers if they are not endorsed with language stating that their transfer is restricted by the Operating Agreement or a Membership Agreement between the members. In some cases, they can also lead to unnecessary expenses. If you are going into business with distant relatives or unrelated individuals, however, it may be a good idea to evidence your shares with certificates. That way you can put a legend on the certificate stating it is subject to the provisions of the operating agreement limiting the transferability of the membership interests, making it harder for the other owners to let in members without your consent.

Management

You will need to choose whether the company will be managed by members, or you can opt to have it managed by a manager. This is one of the most commonly overused options on the certificate of organization, and it sometimes leads to unwanted tax consequences. The only time a limited liability company should really be managed by a manager is when the owners are not actively involved in managing the company. This setup resembles a traditional corporation and allows members to elect a manager, just like a board of directors would pick a CEO. A manager does not need to be a member of the company and is different from a managing member, who is an owner/member selected by the other owners/members to run the company. If the members do not plan on selecting an outside manager, there's really no reason to be managed by a manager, and in fact, it is unnecessarily confusing (as some may find this section to be, with all its discussion of management, members, managing members, and managers).

Restricted Professional Services

After the section listing your company's effective date, the final section on the certificate of organization asks you to designate whether the company is going to operate as a restricted professional services company. Restricted professional services are limited to dentistry, law, medicine and surgery, optometry, osteopathic medicine and surgery, podiatric medicine, public accounting, psychology or veterinary medicine. If your company will provide any of these services, you must include them on the certificate. If you will not be operating as a restricted professional company, you would not want to be identified as such, because these are the only types of professions who must pay an annual registration fee to be an LLC. There are also certain provisions under the Business Corporation Law that govern the activities of restricted professional companies, so the selection or deselection of this option needs to be accurate.

As you can see, an otherwise simple looking form is deceptively complex. I have witnessed many individuals attempt to form their own businesses and come in later to seek help. Fixing missteps is often more expensive than seeking professional help to form your LLC.

Derek Dissinger is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, Pennsylvania. He received his law degree from Duquesne University School of Law and practices in Business Law.

Veteran Tax Incentives and Lower Unemployment Rates

Matthew Grosh — Wed, 11 Apr 2012 08:13:49 -0500

In December, I wrote about the extension of several tax incentives for employers who hire veterans. According to an article by CNN, those incentives appear to be working.

In the past month, the jobless rate for all generations of veterans has been around 7.5%, although the rate for young veterans returning from Iraq and Afghanistan is slightly higher at 10.2%. These numbers show an improvement from this time last year, when the jobless rate for Iraq and Afghanistan veterans was 12.5%.

The veteran tax incentives are in the form of two tax credits:

The Returning Heroes Tax Credit is a credit of up to $5,600 per employee for employers that hire veterans who were looking for employment for more than six months. If the veteran has been looking for employment for less than six months, the credit is generally up to $2,400 per employee.
The Wounded Warriors Tax Credit can be up to $9,600 per employee for employers that hire veterans with service-connected disabilities who have been looking for employment for more than six months.

Both of those credits took the place of the Work Opportunity Tax Credit (WOTC), which expired at the end of 2011. The WOTC was designed to spur employers to hire individuals from targeted groups that have a high unemployment rate, including qualifying veterans. Both the Returning Heroes and Wounded Warriors Tax Credits are currently scheduled to expire after December 31, 2012. Both credits are also available to tax-exempt employers.

Because some of the calculations and qualification criteria related to the credits are complex, I suggest that you consider consulting with a tax professional if your business or nonprofit organization is planning on utilizing one of the credits. For more information, please see the IRS website.

Matthew Grosh is an attorney at Russell, Krafft & Gruber LLP in Lancaster, Pennsylvania. He received his law degree from Villanova University and practices in a variety of areas including Taxation and Nonprofit & Tax-Exempt Organizations.

Restart Retirement: The ABCs of Retirement Communities

Alyson Maris — Thu, 05 Apr 2012 13:16:25 -0500

For those who are nearing the retirement stage of life, a great resource is Restart Retirement, a blog that offers a wealth of information to retirees or those on the verge of retirement.

Recently, Attorney Jon Gruber, partner at Russell, Krafft and Gruber, guest-authored an article for Restart Retirement. With over thirty years of experience in estate planning and administration, he has helped countless clients achieve peace of mind by being prepared for their retirement years and beyond. His article, The ABCs of Retirement Communities, aims to help retirees better understand the different types of contracts under which retirement communities operate, which in turn can help them find the community that best serves their needs. The article discusses the following contracts that can be found in Continuing Care Retirement Communities (CCRCs):

Type A – Lifecare Contract
Type B – Modified Contract
Type C – Fee-for Service Contract
Type D – Rental Contract

Whether you are facing retirement or already there, you know that choosing a retirement community is a major life decision. It is imperative that you understand what different communities offer in terms of amenities, care and financial security. Having a basic knowledge of these contract types can aid you greatly in making your decision.

Please read The ABCs of Retirement Communities, and stay tuned for future guest posts by Attorney Gruber.

Restart Retirement is lifestyle-oriented and covers everything from financial matters to finding creative outlets during retirement years. It features leading authorities and retirees discussing mature living topics. If you are considering retirement or already retired, you’ll find information to help you make informed decisions about subjects that matter to you physically, emotionally, socially and financially. You will be able to read how others pursue their passions and find new zeal in your own life.

Matthew Grosh to Participate in Nonprofit Panel at PANO Conference

Alyson Maris — Thu, 05 Apr 2012 08:46:28 -0500

On April 17, 2012, Matthew Grosh will be a part of a legal breakout panel at the Pennsylvania Association of Nonprofit Organizations (PANO) annual conference. The session, entitled “Don’t Have Your Story Be a Scandal,” will consist of a panel of nonprofit legal experts discussing a variety of topics to clarify policies and procedures that can help organizations manage their risk levels.

Attorney Grosh previously served on PANO’s Conference Planning Committee. He is also a Preferred Consultant for Millersville University’s Nonprofit Resource Network.

See the PANO 2012 Conference Brochure for more information about this year’s conference.

Can I Claim my Child as a Dependent?

Aaron Zeamer — Tue, 03 Apr 2012 11:16:42 -0500

One of the most frequent questions I get during tax season is: who gets to claim the child/children on their taxes when parents are separated, divorced, or have never been married? It also happens to be an area where I see many people make mistakes that cost them on their tax return and in their bank account. The deduction for a child for the tax year 2011 was $3,700, and the IRS has a child tax credit worth up to $1,000 per child for qualifying taxpayers. These two deductions or credits, in addition to other child related expenses or deductions, can make a significant difference in your tax liability. Therefore, when parents are separated or unmarried it is important to understand your rights when it comes to claiming a child as a dependent.

Generally speaking, the parent who is considered the custodial parent or primary custodian is entitled to claim the child as a dependent for tax purposes. The IRS considers the custodial parent to be the parent who has the greater amount of time with the child during the year. In many cases, it’s clear which parent has the majority of the time. However, many parents have a schedule that intends for parents to share time equally with the child. In these cases, there are specific IRS rules to determine how periods of time with each parent are calculated and who is the custodial parent. In the absence of an agreement to do otherwise, these rules are used to determine who is able to claim the child as a dependent on their tax return.

Often, parents will discuss this issue and reach an agreement on who will claim a child as a dependent. When there are multiple children to the same parents, they may "split" the children, and they each claim one or more. Other parents agree to alternate years so that every other year, each parent gets to take the deduction. Either of these situations are fine, provided that you follow the rules the IRS has set out for a non-custodial parent claiming a child. Those rules provide:

The parents must be divorced or legally separated under a decree of divorce or separate maintenance; separated under a written separation agreement, or lived apart at all times during the last 6 months of the year, whether or not they are or were married;
The child received over half of his or her support for the year from the parents;
The child is in the custody of one or both parents for more than half of the year; and
The custodial parent signs a written declaration that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return.

If parents can meet these four requirements, then their agreement for the non-custodial parent to claim the child can be honored and will be accepted by the IRS.

Many parents are under the mistaken belief that claiming a child is "a race to file." In other words, the first parent to file a tax return and claim the child is the one who gets the deduction. This is simply false and does not affect the rights of the custodial parent to claim the deduction. The order in which the returns are filed does not allow taxpayers to bypass the IRS guidelines.

While every situation is unique and it is always a good idea to ask your tax preparer about your specific circumstances, following these rules and regulations can help ensure that you do not miss out on the opportunity to claim a child as a dependent and that you are following the IRS guidelines.

Aaron Zeamer is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, Pennsylvania. He received his law degree from Villanova University and practices in a variety of areas including Family Law.

To ensure compliance with requirements imposed by the U.S. Internal Revenue Service in Circular 230, we inform you that any tax advice contained on this blog is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the U.S. Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication.

IRS Wage Garnishment and Employment

Matthew Grosh — Mon, 02 Apr 2012 14:10:58 -0500

Wage garnishment – if you haven't heard of it before, you may picture crisp dollar bills surrounded by lettuce and tomatoes on a platter, or perhaps a paycheck "garnished" with a few extra zeroes. Unfortunately, wage garnishment is not typically a pleasant matter. It can occur in a variety of situations, including nonpayment of taxes. When the IRS garnishes a person’s wages, it can also impact his or her employment and, in certain cases, may raise concern in an employer’s mind.

What is Wage Garnishment?

When a person has fallen into certain types of debt, the law allows those who are owed the debt, i.e. the creditors, to obtain a court order requiring the employer of the debtor to withhold payments from his/her wages. The garnished wages are then paid directly to the creditor and are applied to the debt. IRS garnishment arises when it is determined, through the proper channels, that a taxpayer owes past due taxes. As a side note, another common area for garnishment to arise is with child support payments.

Can Garnishment Lead to Job Termination?

In my practice, I have encountered situations where employees had workers whose wages were being garnished by the Internal Revenue Service (IRS). In one instance, an employer asked whether the employee could be terminated because of the garnishment. Often, employees also wonder if the garnishment could jeopardize their employment. Many are surprised to learn that as long as the IRS garnishment is the only garnishment against an employee's wages, it would be illegal to terminate the employee for this reason.

The Law: Title III

With regard to the question at hand, IRS garnishments are surprisingly governed neither by the Internal Revenue Code nor the IRS. Instead, it is covered by Title III of the Consumer Credit Protection Act (Title III) and the United States Department of Labor’s Wage and Hour Division. More specifically, Title III states that “[no] employer may discharge any employee by reason of the fact that his earnings have been subjected to garnishment for any one indebtedness." Other related laws make it clear that Title III applies to the IRS’s tax collection process. Title III imposes a fine of no more than $1,000 or no more than one year of imprisonment on employer’s who willfully violate the requirements of Title III.

The rationale behind Title III is to promote commerce, or more specifically to support the process of collections. The theory is that if employers are allowed to terminate employees because of a garnishment, then the terminated employee won't be able to pay off their debt. This would frustrate the whole purpose behind wage garnishment and serve as a hindrance to commerce in general. In addition, at the time Title III was enacted, there was great disparity among the laws of different states relating to garnishment, so Title III serves to quiet the waters.

When Garnishment Can Lead to Termination

Some courts have ruled that an employer can discharge an employee with more than one past or present garnishment on their wages. Thus, employees who have previously had their wages garnished, or who currently have more than one garnishment from any legitimate source, should not rely on Title III for job security.

For more information on IRS wage garnishment, please visit the Division of Labor's website.

Matthew Grosh is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, Pennsylvania. He received his law degree from Villanova University and practices in a variety of areas including Employment Law & Discrimination and Human Resources & Employment Law.

ARD Program Lightens Court Caseload

Matthew Grosh — Sat, 24 Mar 2012 13:51:55 -0500

The Lancaster Sunday News has recently been publishing a series of articles about the debate surrounding the efficiency of the Lancaster County criminal court system. On March 18, one article addressed the Accelerated Rehabilitation Disposition program ("ARD") and how it helps to lighten the court's caseload by keeping many cases off of the court calendar.

The ARD program is generally available for first time DUI offenders although, as the Sunday News article points out, over the past few years, it has become available for some defendants charged with low-level and primarily nonviolent offenses. The program tends to lighten the court calendar because it offers several advantages to people charged with a crime.

First, ARD allows a defendant to keep a clean criminal record. The successful completion of the program is not considered a criminal conviction, and the charges can be removed from a defendant's criminal record through a process call expungement. This is one of the most attractive advantages to first-time offenders because they will not have to check the "yes" box on job applications and other documents asking if they have ever been convicted of a misdemeanor or felony.

Second, there is generally no jail time involved with the ARD program. As a result, if a defendant is charged with a crime that calls for mandatory jail time, such as driving under the influence of alcohol ("DUI"), the ARD program allows that defendant to avoid jail despite the charges.

Third, if you are charged with DUI, the ARD program will result in a much shorter license suspension. DUI charges normally call for a twelve to eighteen month suspension depending on the defendant's blood alcohol content ("BAC") and whether the defendant has had any prior DUI convictions. On the other hand, and as the Sunday News article points out, ARD will result in a license suspension of zero to ninety days depending on the offender's BAC. In a previous post, I described the stiff penalties, including jail time and significant fines, drivers can face if they are caught driving with a license suspended for DUI or ARD purposes.

The Sunday News article concludes with a good description of an ARD court hearing. However, while the article states that nearly a third of the defendants represented themselves, those defendants did so at their own peril. The ARD application process involves many filings and deadlines. During my time as a prosecutor, I saw numerous ARD applicants summarily rejected from the ARD program because they did not make the appropriate filings or meet the required deadlines.

As a result, if you are facing criminal charges for the first time and are considering ARD, I would consult with a DUI attorney as soon as possible. I prefer to meet with clients within the first few days after charges have been filed, as there is a 30-day deadline to file for ARD. For more information, please see Why You Need an Attorney When Charged With DUI.

Matthew Grosh is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, Pennsylvania. He received his law degree from Villanova University and practices in a variety of areas including DUI/ARD.

An Update on the Adoption Tax Credit for 2011

Matthew Grosh — Fri, 23 Mar 2012 08:39:39 -0500

In previous blog posts, I wrote about the adoption tax credit, which provides qualifying taxpayers who have adopted children with relief from the expenses related to the adoption. While those expenses must be substantiated with documentation, if the child has received a determination from the state that he or she has special needs, then the full credit can be claimed without substantiation. Additionally, because of the substantiation requirements, taxpayers cannot use the Internal Revenue Service's per diem rate tables.

When I had previously written about the credit with regards to the adoption of children with special needs, the Internal Revenue Service had not provided any guidance with regard to substantiating a determination of special needs from the state. Since then, the IRS has issued some guidance on their website. According to the IRS, a state's determination of special needs may be substantiated with the following items:

A signed adoption assistance or subsidy agreement issued by the state;
Certification from the state or a county welfare agency verifying that the child is approved to receive adoption assistance; or
Certification from the state or a county welfare agency verifying that the child has special needs.

Please note that this list is not exclusive.

For the 2011 tax year, taxpayers can claim up to $13,360 for each child they have adopted. The credit limit has gone up from $13,170 for the 2010 tax year and $12,150 for 2009. While the credit can be taken in multiple years, the credit limit is cumulative and includes any adoption tax credit claimed in prior years. That means for each adopted child, once the credit limit is reached, no future credit will be available unless the credit limit is raised. Further, since 2010, the credit is "refundable," meaning that qualifying taxpayers will receive the credit even if they do not owe any tax for that year.

The determination of which year a taxpayer can claim the adoption credit depends on when the adoption was or will be finalized and whether the adopted child is a U.S. citizen, resident alien or foreign national. If the child is a U.S. citizen or resident alien, then the adoption credit is taken in the following order:

For expenses paid before the adoption is final, the adoption credit is taken in the year after the expenses were paid;
For expenses paid in the same year that the adoption is final, the adoption credit is taken in the same year; and
For expenses paid in the year after the adoption is final, the adoption credit is taken in the year the expenses were paid.

For example, if you adopted a child in 2009, but you paid adoption expenses in 2008, 2009, and 2010, your 2008 expenses are taken on your 2009 tax return, your 2009 expenses are taken on your 2009 tax return and your 2010 expenses on your 2010 tax return.

If the child is a foreign national, then you take the adoption credit only in the year when the adoption becomes final. For expenses paid in the year after the adoption is finalized, the credit is taken in the year that you paid them.

Additionally, if you have failed to take the credit for any prior year you were eligible, you may file an amended return for that year to claim the credit. In any event, you should consider consulting with a tax professional if you plan on taking the credit.

For more information, please visit the Internal Revenue Service's website.

Matthew Grosh is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, Pennsylvania. He received his law degree from Villanova University and practices in a variety of areas including Taxation.

Julie Miller Appointed to PBA Collaborative Law Committee

Alyson Maris — Wed, 21 Mar 2012 11:49:23 -0500

In February 2012, Julie Miller was appointed to the Pennsylvania Bar Association’s Collaborative Law Committee. The committee’s purpose, according to its mission statement, is to “address current issues regarding the collaborative law dispute resolution process; educate attorneys and the public about the collaborative law dispute resolution process; recommend standards of practice for attorneys using the collaborative law dispute resolution process; and monitor, propose, and/or support legislation or rules of court that further the development of the collaborative law dispute resolution process.”

Attorney Miller has been offering collaborative law as an option to clients since 2009. She is looking forward to furthering the objectives of the Committee and the opportunity to discuss the benefits of the process with other attorneys throughout the Commonwealth. She is also a member of the International Academy of Collaborative Professionals (IACP), Collaborative Professionals of Central Pennsylvania (CPCP), and a contributor to the Lancaster Law Blog’s Collaborative Law page.

Healthcare Tax Credit for Small Businesses and Tax-Exempt Organizations

Derek Dissinger — Tue, 13 Mar 2012 08:35:20 -0500

It is tax season, and while much of spring is spent discussing what must be paid out in taxes, it is also a great time to take advantage of savings opportunities.

For small businesses, one of the greatest expenditures, healthcare, can now offer additional savings this tax season. The Affordable Care Act (enacted March 2010) intends to help small businesses and tax-exempt organizations afford the cost of providing healthcare to their employees. In particular, the credit is focused on helping employers with low and moderate income workers, and encouraging employers to offer health insurance for the first time or maintain the coverage that they already have.

The Small Business Healthcare Tax Credit provides a credit worth up to 35% of eligible small businesses’ premium costs through 2013. Even if a business did not owe tax in 2011, the credit can be carried back or forward for other tax years. Non-profits are also eligible to receive a tax credit of up to 25% of the cost of the organization's premium through 2013. Even if a business has no taxable income, they may be eligible to receive the credit as a refund. This is particularly beneficial to tax-exempt organizations. In 2014, the rate increases to 50% for small businesses and 35% for non-profits.

To be eligible, a business or tax-exempt organization must meet the following requirements:

The employer must cover at least 50% of the premium for healthcare coverage based on the single employee-only rate.
The employer must have less than the equivalent of 25 full-time workers (for example, an employee with fewer than 50 half-time workers may be eligible).
The employer must pay average annual wages below $50,000. The credit will gradually phase out for businesses with average wages between $25,000 and $50,000.

The credit will phase out based on wages and for businesses with the equivalent of between 10 and 25 full-time workers. The IRS provides a sheet of sample scenarios to illustrate how the credit would be applied in different circumstances.

In order to help small businesses and tax-exempt organizations determine if they are eligible, the IRS has developed a fact sheet to assist employers in determining whether they qualify for the Small Business Health Care Tax Credit. There are three steps to determine the size of the business, the average wages, and the amount of the insurance premium paid by the employer for employees at the single “employee-only” coverage rate. Employers must use the IRS Form 8941 to calculate and claim the credit which will be included as part of the general business credit on income tax returns. For tax-exempt organizations, the credit is included on line 44(f) of the IRS Revised Form 990-T. If you are unsure if you qualify for the credit, you may want to check with a tax professional for assistance.

Derek Dissinger is a lawyer at Russell, Krafft and Gruber LLP in Lancaster, Pennsylvania. He received his law degree from Duquesne University and practices in a variety of areas, including Business Law and Taxation.

2011 Tax Deadline Extended to April 17, 2012

Matthew Grosh — Mon, 12 Mar 2012 10:10:16 -0500

For most tax professionals and many taxpayers, April 15^th stands out every year as the day when tax returns and any related tax payments are typically due. However, this year we will have two extra days to file returns and make payments.

The filing deadline for 2011 returns has been pushed back to Tuesday, April 17, 2012. Why? It turns out that April 15, 2012, is a Sunday and April 16, 2012 is observed as Emancipation Day, a legal holiday in the District of Columbia. Relevant laws state that District of Columbia holidays affect tax deadlines just as federal holidays do because the offices of the Internal Revenue Service will be closed. The April 17^th deadline applies to any return or payment normally due on April 15^th, as well as to the deadline for requesting a tax filing extension and to making 2011 IRA contributions. Taxpayers who request an extension will have until October 15, 2012 to file their returns.

As an interesting side note, Emancipation Day celebrates the day in 1862 when President Abraham Lincoln signed the Compensated Emancipation Act for the release of slaves in the District of Columbia. This occurred approximately nine months before President Lincoln issued the famous Emancipation Proclamation. For more information on Emancipation Day, please see the District of Columbia website.

What Do You Mean, My House is Haunted?

Craig Russell — Tue, 28 Feb 2012 14:14:46 -0500

Buyers want to make an informed decision when they purchase a house because their home is where they spend most of their time. Unfortunately, it is impossible to know the entire history of any particular property. Unwelcome "surprises" may lurk behind walls or under carpets and remain undiscovered until remodeling time. That is why looking over the seller's disclosure statement, ordering a property inspection and obtaining title insurance are such important steps in the home buying process.

Buyers use all of their senses in choosing a property. The first step while walking through the home is to look for problems. Smelling mold or smoke can deter some homebuyers, as can feeling extreme dampness in the air or hearing floors and windows rattle in the wind. All of this can help, but what about the sixth sense?

Very few people want to buy a house that is supposedly "haunted." (Yes, there are some who consider supernatural activity a selling point; see Haunted Real Estate is Scary Good Investment.) Realtors know that homes adjacent to cemeteries, on top of ancient burial ground or with disturbing histories, otherwise known as stigmatized properties, can be difficult to sell. In Pennsylvania, a three judge panel of the Superior Court recently decided that a jury may determine if a home seller is required to disclose a murder/suicide as a substantial defect in a home.

In the case Milliken v. Jacono, the purchaser sued the seller and the real estate agents for fraud and misrepresentation when, three weeks after closing, she learned that a previous owner had allegedly killed his wife and himself in the property. After this discovery, she stated that she would not have bought the house had she known about the crime. This led to the question of whether a murder/suicide falls under Pennsylvania's disclosure law, which requires sellers to disclose any material defect on a property, or anything that "would have a significant adverse impact on the value of the residential real property or that involves reasonable risk to people on the land."

In a two to one decision, the majority of the panel decided that the murder/suicide could be a material defect in the property requiring disclosure. A significant factor in the majority’s opinion was that the seller and agents made numerous inquiries to determine if they were required to disclose the killings. The Court found that a jury could decide if this event was a material defect in the property.

A dissenting opinion stated that the seller should only be required to disclose the physical condition of the property, any legal impairment to the property and any hazardous material on the property. Pointing out that psychological effects will vary greatly from person to person and questioning whether or not disclosure is limited only to murder/suicide, the dissent stated that requiring disclosure of psychological defects would be a descent down a very slippery slope.

Whether a jury determines a murder/suicide to be a defect or not, there are things both sellers and purchasers can do to protect themselves. Besides doing a simple Google search of an address or previous owner (which probably would have helped the buyer in Milliken v. Jacono), buyers can refer to online resources such as Buying a Real Haunted House and Buyers Beware: Was That House a Crime Scene? For sellers and realtors, the National Association of Realtors' Field Guide to Dealing With Stigmatized Properties provides links and advice regarding these types of properties, including disclosure issues. On both sides of the table, consulting an attorney to help navigate the complex world of real estate law will provide the ultimate protection in any transaction.

Craig Russell is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, Pennsylvania. He received his law degree from Temple University and has been practicing in the area of real estate law, both commercial and residential, for over 40 years.

Is Collaborative Divorce Right for Me?

Julie Miller — Tue, 14 Feb 2012 10:24:29 -0500

It's that day again, one of the most difficult holidays for those facing or going through the process of a divorce: Valentine's Day.

A recent study has revealed a 40% increase in divorce filings around Valentine's Day in the past two years. For those experiencing the season of upheaval of divorce, the holiday has nothing to do with roses and candy. Most in this situation have gone beyond asking the question "Is my partner right for me?" and are now asking, "What am I going to do next?" Luckily, for some there is another question to be asked, one that can help alleviate some of the stress of the usual divorce process: is collaborative divorce the right choice for me?

Many divorce clients have described feeling trapped in their situations, as if they have lost control. Court dates and conflict become the new norm, and it seems that their lives and those of their children are at the mercy of the system.

The collaborative process can make some of the toughest parts of divorce a little easier. (See Collaborative Divorce: A Different Way to Divorce). The factors below will help determine if you and your spouse are good candidates for divorce using the collaborative model. If you find yourselves in any one or more of the following categories, you may want to consider moving forward collaboratively:

You wish to protect your children and your family from the harmful effects of a high-conflict dispute.
You and your spouse will be co-parenting together and want to establish the best co-parenting relationship possible for the future.
You value privacy in your personal affairs and do not want the details of your family restructuring to be available on the public court docket.
You and your spouse have a circle of friends and family in common that you both want to remain connected to.
You value control and autonomous decision-making and do not want to hand over decisions about restructuring your financial or child custody arrangements to a judge.
You understand that conflict resolution involves achieving not only your goals, but finding a way to achieve the reasonable goals of the other person.

The collaborative process takes dedication and commitment, but most clients who experience divorce through this model consider it well worth the effort. Avoiding the court process is a major benefit for some, but even more, collaborative divorce helps minimize conflict and negativity by encouraging communication between you and your spouse within a structured setting and with experienced attorneys present. Divorce is never easy, but when you choose the collaborative model, you can experience more flexibility as you go through the process.

If you are interested in learning more about collaborative divorce, please visit the website of the Collaborative Practitioners of Central Pennsylvania (CPCP) or the International Academy of Collaborative Professionals (IACP).

Julie Miller is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, Pennsylvania. She received her law degree from Dickinson School of Law and practices in a variety of areas including Collaborative Law and traditional Family Law.

It Takes a Village: Pastors and the Law

Jon Gruber — Thu, 09 Feb 2012 11:26:21 -0500

Some say it takes a village to raise a child. Others say it takes a family. I recently became convinced that it takes a law firm to advise a pastor who is administering a church. While preparing to participate in a class on church administration as part of the ministerial formation requirement for students at the Lancaster Theological Seminary, I became convinced that any pastor in a parish setting needs a law firm on call. Anecdotes related by the adjunct professor, the Reverend Dr. Barbara Kershner Daniel, about her years in the parish ministry further illustrated the need.

Pastors face many decisions in the course of their work, from choosing a form of organization for their church to managing property matters. Depending upon denominational polity and local requirements, pastors face concerns in the buying, selling and mortgaging of real estate in addition to those which an individual or commercial enterprise would encounter. Real estate law and church law such as the United Methodist "trust clause" intersect.

Changes in worship style and advances in technology now necessitate that each pastor become familiar with licensing and permissions. The new intellectual property issues go far beyond the standard church performance exception to copyright law that for many years made such concerns unnecessary. Printing hymns in bulletins, using screen projections, not to mention sharing podcasts and streaming videos, now demand that each pastor become his or her own intellectual property lawyer.

Having some working knowledge of real estate and intellectual property law is hardly enough. In what can be a highly competitive fundraising environment, pastors must also understand the administration of estates and trusts. The more estate planning knowledge pastors have, the more effective they will be in raising funds for their churches.

Pastors of larger churches with staff need to have some familiarity with employment law to help them in hiring and firing employees, engaging independent contractors and maintaining employment records. Indeed, pastors need a knowledge of insurance law to assess risks in their churches and to deal with casualty losses such as damaged church property or a church member who may slip and fall on the church steps. Pastors must be especially vigilant, whether avoiding charges of defamation in a sermon, policing the handling of funds such as memorials and trust funds under the church management or carefully wording church announcements and prayer chains about a person's health. While they may not be "covered entities" under the HIPAA law dealing with medical records, pastors must nonetheless balance the need to express concern for ailing members against those members' rights to privacy.

A pastor needs to be concerned about his or her own contract, whether he is "called" or "sent" to the parish. This encompasses understanding and being sure to fulfill all requirements of the contract, and also having a knowledge of his or her rights under the same. In addition, a pastor needs legal knowledge as to management of finances, including tax law. In order to get the proper exclusion from gross income, the intricacies of the parsonage and housing allowance must be documented and approved.

A pastor, without the benefit of a law firm, must become functionally knowledgeable about business or organization law, real estate law, intellectual property law, estate administration and planning, employment law, tax law, insurance law and tort law. This is an enormous task for any individual, or even one individual attorney. In short, it takes a law firm. It takes a village.

Jon Gruber is an attorney at Russell, Krafft and Gruber, LLP in Lancaster, Pennsylvania. He received his law degree from the University of Virginia and practices in a variety of areas, including Nonprofit & Tax-Exempt Organizations and Estate and Trust Administration. He currently serves on the Board of Trustees of the Lancaster Theological Seminary.