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RICHARDSON AND TYLER, LLP NEWSLETTER
Spring 2007
• Estate Planning
and Incapacity
• "Earn
Outs" and Business Law
• Real Estate, Zoning,
and Buildable Lots
• Family Law, Taxation
and Planning
• Estate Planning
For Your Pet
Welcome!
Richardson and Tyler, LLP is pleased to bring you the spring
edition of our 2007 newsletter.
This newsletter is to share new matters of general interest
with our clients. It is not intended to provide legal advice.
Please speak to an attorney before applying this information
to your specific situation.
Estate Planning and Incapacity
Wills and Trusts are excellent estate tools to plan for the
inevitable end of life. But don't overlook physical or mental
incapacity, which is likely to affect the largest growing
demographic group in the US: those aged 85 years and older.
With proper planning, you and your loved ones can control
the process, rather than ceding control to the state or the
courts. Important facts to keep in mind:
• The Patient Self Determination
Act requires health care providers to ascertain your intent
if you are a patient.
• A 1992 study determined that
having a health care proxy or living will saved almost $65,000
per patient in the final stay in the hospital.
• A living will is a written
directive, intended to govern when you can no longer speak
for yourself. While not legally binding in Massachusetts,
it is honored in some states.
• A health care proxy (also
called a medical power of attorney) may be used to appoint
a loved one to speak for you, when you can no longer speak
for yourself.
• A change in marital status,
such as a subsequent marriage or a divorce, may annul a health
care proxy in some states – as would a death, of course.
It is often prudent to name an alternate.
• The Uniform Anatomical Gift
Act permits you to express your wishes simply with a declaration
on your driver's license.
Concerned about how a proxy may use their legal power? We
can provide a detailed directive, designed by the American
Medical Association, that outlines numerous medical situations
and possible treatment options. If you complete the directive
and provide it to your proxy, your proxy will more likely
be guided by your actual wishes, instead of having to guess
what you intended.
"Earn Outs" and Business Law
Selling or buying a business? There are many factors to consider:
• Asset sale or stock sale?
• Cash or seller financing?
• How secure is seller financing
if it is "behind" the buyer's bank?
• Where do non-competition and trade secret agreements
fit in?
An "Earn Out" provision may be suitable in the
right circumstances … is the Buyer concerned whether:
• Revenues will hold up or increase as expected?
• Key customers will stay with the business?
• Key managers or part owners will remain to boost
profits?
A carefully crafted "Earn Out" provision can use
key measurements to determine post-closing purchase price.
A Buyer can be more comfortable "buying in" to a
Seller's business plan and projections, and a Seller can receive
a potentially larger sale price. Typical provisions would
make payment amounts contingent upon variables such as:
• Net profits
• Gross profits
• Growth rates of revenues or profits
• Revenue levels
• Other measures
Sellers will want to assure transparency and control by:
• Insisting on GAAP accounting measures
• A degree of management participation
• Financial covenants
• Prohibition of transactions such as inter-company
transfers that could adversely affect measurements
As with all such transactions, carefully consider tax treatment
as well, to ensure that – whether capital gain, installment
sales, tax free reorganization, or ordinary income –
payments receive expected treatment by the IRS.
Real Estate, Zoning, and Buildable
Lots
Do you have an oversized lot, or more than one lot? Many
homeowners do.
Many people view that "extra lot" as a nest egg,
which could be sold for retirement or used as a safety net
in hard times.
But to landowners' dismay, if zoning laws change to increase
the minimum lot size in your town or city, two lots could
be combined into one lot.
How to protect your nest egg?
If lots are held by one owner, they may be "combined"
for zoning purposes into one lot when minimum lot sizes are
increased. Consider planning ahead by splitting them into
separate ownership. Separately owned lots are afforded "grandfather
rights" if zoning should change.
The Massachusetts zoning laws are exceedingly complex. The
statutes are confusing – they have been interpreted
differently by judges in different circumstances, and local
bylaws vary. If you are in doubt, consult experienced real
estate counsel.
Family Law, Taxation and Planning
We are often called upon to review a "simple" set
of divorce documents. Careful review may result in good news
and bad news.
The bad news may be that the divorce is not so "simple"
after all.
The good news may be that a little re-structuring of the
separation agreement can save money and avoid later headaches.
• Small business owners. The value of many businesses
lies not in hard assets, but in their ability to generate
income. Is your business counted as both an "asset"
for division of assets purposes, and an "income source"
for child support or alimony sources? If so, you may be penalized
twice by "double dipping".
• Estate Planning. It is prudent to review your will,
trust, and estate plan at such a time. Don't overlook other
arrangements, such as life insurance pension plans, annuities,
and IRA's. Your beneficiary designations should reflect your
new circumstances.
• Debt and Credit Rating. Most separation agreements
provide who will bear debt incurred during the marriage. However,
the non-paying spouse may still be liable under a mortgage
or guarantee or credit card agreement. If the paying spouse
defaults, you may be liable. Even if there is no default,
it is better to seek a release from the creditor. Otherwise,
your credit rating and ability to borrow (for a new home,
business, etc.) may be impacted for years to come.
• Income Tax. Have you checked the relative advantages
of filing separately or jointly? Have you structured division
of pensions and IRA's so they will be tax free?
The lesson? Even "simple" transactions can have
effects on you, your business, and your life for years to
come. Review by thoughtful counsel can pay dividends.
Estate Planning For Your Pets
Many of us know that a sweet meow, a wagging tail, or a lick
on the face can boost spirits at the end of a long day.
Did you know that in the USA:
• There are 60 million dogs
• There are 70 million cats
• We spend $40 billion per year caring for them?
What are the benefits of pet ownership? Studies have shown
that pets:
• Reduce patient anxiety before medical procedures
• Reduce cortisol (stress hormone) in blood levels
• Increase esteem and reduce fear levels in children
In return, pet owners provide food, water, shelter, medical
care and love. Who will care for your pet upon your illness,
death or incapacity?
What does the law say? The law views animals as "property",
so special arrangements are necessary:
• A power of attorney may authorize use of funds to
care for a pet.
• A trust may contain a clause authorizing funds for
pet care or placement with a caregiver.
• A will or trust may provide clear instructions to
your legal representative on your wishes regarding your pet.
Further information is available from your lawyer, or at
the website of the Humane Society of the United States: www.hsus.org.
These materials
are offered for information purposes only. Do not act or rely
upon any of the resources and information available in or
from this site without seeking professional legal advice.
This material may be considered advertising under the rules
of the Supreme Judicial Court of Massachusetts. |