Newsletter Archives: Summer 2006

RICHARDSON AND TYLER, LLP NEWSLETTER

Summer 2006

• Employment Law
• Tenancy Law
• Independent Contractor or Employee?
• Protect Yourself From Identity Theft
• Estate Planning

Welcome!

Richardson and Tyler, LLP is pleased to bring you the summer edition of our 2006 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.

Employment Law: Wages, Vacation Pay, & Sick Pay

Failure to pay wages when due can result in a judgment for damages, treble damages, attorneys fees, as well as criminal charges, fines, & imprisonment. Can the employer request a release before paying the wages or commissions due? The answer was "no" in a recent case.

Once the employee has rendered the services, the employer cannot condition the payment on any other obligations, including the signing of a release.

While it is often prudent to obtain a release when any controversy surrounds termination of employment, wages cannot be "held hostage" for that purpose.

What about accrued vacation pay and sick pay?

They are "wages", too!

Employers: Minimize your liability with a clear vacation pay and sick pay policy within your employee handbooks and engagement letters. Are accrual and vesting schedules clear? We would be happy to review them for you.

Employees: If you have a question about your rights on the job, give us a call.

Tenancy Law: Renters, Know Your Rights; Landlords, Know Your Obligations

Renters, are you near the end of your lease and unsure whether you'll recover your security deposit?

Landlords, do you need to retain a security deposit due to property damage?

Landlords need to comply with Massachusetts' complex security deposit law, otherwise:

• Landlords must return the deposit, even if property damage has occurred;
• Landlords may have to pay multiple damages;
• Landlords may have to pay attorneys fees.

Landlords who take security should:

• Maintain security deposit funds in a separate account, not co-mingled with landlord's own funds;
• Pay interest on the deposit (can not require tenant to forego interest by waiver);
• Provide a detailed statement of condition of premises at the outset of the tenancy.

Security deposits are just one pitfall. How may we help? We can:

• Prepare your next lease;
• Review and improve your existing lease;
• Review your procedures & documentation for security deposits and last months' rent;
• Assist with evictions;
• Assist with inadequate maintenance or repairs.

Independent Contractor or Employee?

In July 2004, Massachusetts revised its independent contractor statute. The amendment narrows the definition of independent contractor for purposes of workers compensation and minimum wage requirements. As a result, many employers must now reclassify persons as employees who were formerly considered independent contractors. The new definition of independent contractor applies to all employers, regardless of size or nature of business.

To complicate matters, the Massachusetts Department of Revenue has issued a statement rejecting the amendment for purposes of wage withholding. As a result, a worker may now qualify as an independent contractor for wage withholding purposes, but still be entitled to benefits as an employee under the new law.

If you would like more information on this new law and how it may affect your business, please call.

Protect Yourself From Identity Theft

We have all read about institutions losing personal information contained on laptops, CD's, back up tapes, and the like. First, protect yourself.

• Watch your purse and wallet. Co-workers and pickpockets have been known to steal personal information.

• Shred financial statements and other documents before disposing of them.

• Lock up tax records and other personal documents.

• Do not respond to unsolicited e-mails that appear to be from financial institutions. Such e-mails are broadcast by thieves "fishing" for information.

• Keep your social security number confidential. If it is still on your driver's license, obtain a new number from the Registry of Motor Vehicles.

• Check bank and credit statements closely for unauthorized withdrawals or purchases.

Second, act upon suspicious activity.

• Report e-mail "fishing" expeditions to your bank or financial institution.

• Close tampered accounts promptly.

• Report theft to the Federal Trade Commission at www.ftc.gov/idtheft.

• Place a fraud alert on your credit, at these sites: www.equifax.com, www.experian.com, and www.transunion.com.

Estate Planning: Elder Law, Medicaid & Nursing Homes

Smaller estates and larger estates each present their own planning issues.

Of interest to those with smaller estates, earlier this year, Congress enacted yet another sweeping Medicaid "reform". What does this mean for you? The bottom line is that Congress is trying to save money, by reducing benefits paid to the sick and elderly. Specifically, if you or a loved one may need nursing home assistance, beware the following traps for the unwary.

• Owning more than $500,000 equity in your home will disqualify you from benefits.

• If you transferred an asset in the last five years (it used to be three) this can also disqualify you.

• Beware of purchasing annuities – this can also disqualify you.

• "Hardship Waivers" are more difficult to obtain.

• Time no longer "heals all wounds". Formerly, a disqualification period started when you transferred an asset. Now, it starts when you apply for benefits.

Many tools that lawyers and financial planners used to preserve family assets will no longer be effective.

Suggestion? Whether or not you've consulted an attorney about Medicaid planning in the past, you should consult one now if you or a family member may need long-term care or Medicaid assistance. Without a good plan, benefits may be stopped or denied.

Those with larger estates face different issues, one being how to prevent estate tax, which can range close to 50%, from taking assets from your children and heirs. Many options are available to shrink the size of your taxable estate.

• Gifts. You may gift $12,000 per year without filing a gift tax return. Strategies? You may make such a gift to each child, grandchild, or other beneficiary … if your spouse joins in the gift, you may double the amount … consider gifting non-cash assets likely to appreciate (real estate, stocks, etc.), thereby removing future appreciation from your estate … "fractional interests" in real estate or a small business may permit you to continue to control the asset and will be discounted in value, permitting you to more quickly shrink your estate.

• Irrevocable Trusts with "Crummey" provisions. These are designed to permit gifts to children, grandchildren and others, without giving them outright ownership and control, if you are concerned about their age, maturity, or ability to manage outright gifts.

• Life Insurance Trusts. Life insurance proceeds are subject to estate tax. Why buy insurance to benefit the IRS, if they are going to take up to half the proceeds? These trusts ensure that 100% of the proceeds go to your loved ones.

• Custodian Accounts. The Uniform Transfer to Minors Act permits a responsible custodian to hold assets until a child reaches age 21.

• Tuition. You may "gift" an unlimited amount by paying college tuition directly to an educational organization.

• 529 Accounts. You may transfer funds to these specialized accounts, to be invested and used for college tuition. As an extra bonus, income earned between the date of the gift and the date it is used for tuition payments will be tax-free.

Many of these techniques require specialized planning, paperwork, and possibly filings with the IRS to achieve most beneficial tax treatment. If they are of interest to you, feel free to give us a call.

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.