Parental Waivers: The Continuing Saga
In June of last year, we informed you that the Michigan Supreme Court held that parental waivers were unenforceable. At the same time, we were optimistic that the Michigan Legislature would pass a law that would give effect to parental waivers. Well, the Legislature did give us a law – MCL 700.5109: “Release for injury of minor during recreational activity” – but many are questioning whether the law changes anything.
Statute carves out large exceptions
MCL 700.5109 states that a parent or guardian of a minor may “release a person from liability… for personal injury sustained by the minor during the specific recreational activity for which the release is provided.” So, mom or dad can release the YMCA from liability for Jimmy’s soccer injury if the release was specific to the soccer activity. That’s not a bad start, but the statute goes on to carve out large exceptions, whittling away the strength of the statute.
Statute only applies to non-governmental non-profit organizations
The first exception (and the most glaring problem) is that the statute only applies to non-governmental non-profit organizations. If you operate a for-profit business that provides recreational activity, this statute does not apply, and you are not protected from liability – period. Representative John Walsh, R-Livonia, sponsored the bill and said that private, for-profit organizations weren’t included in the statute because “they probably have a greater opportunity to buy insurance.”*
When an individual or organization initially released is open to a lawsuit
Next, if the statute does apply to your organization, the release can only apply to an injury or death that resulted “solely from the inherent risks of the recreational activity.” Therefore, if Jimmy trips on a little divot in the soccer field and injures himself, as long as no one knew about the divot, the release could block a lawsuit against the non-profit organization. This is because tripping on an uneven patch of grass while running on a soccer field is likely an inherent risk of the sport. But, if the organizer, sponsor, owner, lessee, employee, agent, or other person causes or contributes to the injury or death through negligence (for instance, if the employee knew about the divot and forgot to warn the kids or take corrective action), the release is ineffective, and the individual or the organization initially released is now open to a lawsuit. With regard to this carve-out, Rep. Walsh stated, “[W]e still preserve the right to sue if there’s negligence involved, improper equipment, poor coaching, things of that nature. We didn’t want to leave the parents without any recourse, but we wanted to protect volunteer coaches and non-profits[.]“*
Unfortunately, it appears that we find ourselves in precisely the same situation as last year – parental waivers do not count for much. Accordingly, we continue to recommend that organizations and individuals act prudently, maintain adequate insurance, and continue use of pre-injury waivers (understanding the limits of those waivers). Additionally, contracts that provide for the parents themselves to “indemnify” (or reimburse) the organization for any losses that arise from a child’s injuries may still be a viable option. While parents cannot contract for their children, they can enter contractual commitments of their own and agree that, “If my child is injured while participating in your activity – and if that injury leads to a claim against you – I will reimburse you for the cost of that claim.” Again, this tool is not nearly as clean or risk free as a release, but it might be useful in defending an injury claim.
*Brian Frasier, Esq., New Law Allows Some Parental Waivers, 25 Michigan Lawyers Weekly, 1 (2011).
Dan A. Penning
There is a little known exception to the rule that a homeowner can claim a Principal Residence Exemption on only one residence at a time. In response to the sluggish real estate market, Michigan enacted a law in 2008 allowing a homeowner who has acquired a new residence to claim a Principal Residence Exemption (PRE) on both the new residence and the homeowner’s prior residence if certain criteria are met.
What the Conditional Rescission allows
In order to take advantage of the dual exemptions, the homeowner must file a Conditional Rescission of Principal Residence Exemption form with the local assessor. The Conditional Rescission allows the homeowner to claim dual principal residence exemptions for up to three tax years if the previous residence (1) is not occupied, (2) is for sale, (3) is not leased out, and (4) is not used for any business or commercial purposes.
When you must file
If you happen to move out of your home and rescind your principal residence exemption at that time in order to claim it on your new residence, you can reverse the rescission by later filing the Conditional Rescission Form if it appears that your old home will remain on the market for a while. Just remember that the form must be filed by May 1 in order to be effective for the current year. Also remember that the conditional rescission must be renewed annually. If you have a conditional rescission that is effective for 2011, you must file again by December 31, 2011, in order to claim the exemption for 2012.
There are several other restrictions that apply. For example, if you move out of your previous residence and do not purchase a new one, the conditional rescission is not available. It is also not available if you move to another state, or if you lease out your former home even if it later becomes vacant again. If you need assistance in determining whether dual principal residence exemptions may be available to you, please call me, or visit our Michigan Property Tax Appeal website www.PropertyTaxAppealSpecialist.com where we have provided answers to frequently asked questions about the Conditional Rescission of Principal Residence Exemption.
Dan A. Penning
Every day my in box fills with information from many sources. Some is from mainstream media, trade journals, special reports and various reviews and findings from the legal and wealth advisory community. Often, while reading an article or report, many people come to mind that I think might also share an interest in the information.
For example, earlier this year I read through a Special Survey Report published by WealthCounsel and Trusts & Estates magazine. I read it again this week. Even though the survey was directed to estate planning attorneys about emerging industry trends within our profession, there were some items that were of interest to me because they addressed those of us who are moving in 2011 from the “Baby Boomer” and “Generation Jones” generations to being “Golden Boomers”.
Yes, the truth of the matter is, we are maturing into “Golden Boomers” and as “we” begin to approach and enter into retirement age our spending habits and where and how we spend – or not spend – our money will have an affect on the economy.
Planning as “Golden Boomers”
Another key finding from the survey dealt with the concern that most Americans don’t have an estate plan or even a basic will. It’s believed that most people fail to plan because they aren’t aware of the benefits of creating an estate plan nor are they aware of the negative consequences of not having an estate plan.
Estate planning is not just for the wealthy
Another assumption revealed from the survey is that many people think estate planning is only for the wealthy, and because of that they fail to realize the legal limitations of joint tenancy and beneficiary designations.
Why you should plan
It doesn’t matter how old you are, whether you’re a “Baby Boomer,” “Golden Boomer,” or even a member of “Generation X,” without a trust-oriented estate plan your heirs will undoubtedly find themselves walking through the doors of a probate court system. Even though it’s easy to understand the need to plan, the urgency to plan often gets overlooked.
Life doesn’t wait
Many think they can do their estate planning next quarter, or even next year, but reality has proven many times that life doesn’t wait for your estate plan. There are many benefits to having an estate plan, and many consequences to not having one. If you want to minimize estate taxes, prevent family disharmony after death and avoid having your estate tied up in probate, plan to begin planning now.
Control is prime motivator for planning
With planning you can preserve and manage your wealth effectively and you can make sure your assets are distributed as you direct.
If you have questions about creating your estate plan give me a call so we can begin planning now to care for your financial well being and personal legal health.
Dan A. Penning
Determining Whether Your Business is Covered
Few pieces of federal employment legislation have proven more difficult to untangle and to administer than the Family and Medical Leave Act of 1993 (FMLA). At its core, the FMLA allows eligible employees to take as much as twelve weeks of unpaid leave to deal with their own or a family member’s medical needs with the assurance that their jobs will be held pending their return. That sounds simple enough, but administering FMLA leaves with your work force can be a real challenge. And if you run afoul of the FMLA’s requirements, your business can face a claim for back pay, future pay, liquidated damages (basically a penalty), mandatory interest and attorney fees. For all of these reasons, it is imperative that covered employers understand and comply with the FMLA.
Who is a Covered Employer?
An employer is covered by the FMLA if it has employed at least 50 employees for each work day of 20 or more workweeks in the current or prior calendar year. This includes all full or part-time employees on the payroll, including unpaid employees (e.g., someone out on an unpaid FMLA leave still counts toward the 50). It does not include employees who work outside of the United States or its territories.
Notice that the test is not whether the employer currently has 50 employees. It is based on the current or prior calendar year, and it is based on any twenty weeks in that year. The weeks need not be consecutive.
Joint Employers and Integrated Employers Beware!
More than once, I have had clients tell me they needn’t worry about the FMLA since they lease their employees from a Professional Employer Organization (PEO). In most of these instances, the business will be deemed a “joint employer” along with the PEO and will be equally responsible for assuring compliance with the FMLA.
Likewise, two or more businesses with closely entwined ownership or management may be deemed “Integrated Employers” whose workforces will be counted collectively to test the 50 employee FMLA threshold. According to the applicable federal regulations, courts will analyze the following factors to decide whether multiple employers are integrated under the FMLA: (1) common management; (2) the interrelationship between the companies; (3) whether control of labor relations is centralized; and (4) the degree of common ownership or financial control. Typically, courts will be especially influenced by common management and shared control of the labor force.
You Can’t Comply if You don’t Know Your Obligations
Though cumbersome, compliance with the FMLA can be managed effectively with proper attention and planning. The first step is determining whether your business is covered and conducting periodic checks for any change in its status. If you need help, please feel free to give us a call.
Dan A. Penning
As we counsel clients during the preparation of their estate plans, one concern is usually very evident – parents are worried that their children will squander the funds and assets that they worked very hard to accumulate. This concern can be addressed in many ways, but usually, parents request specific provisions in their estate planning documents that control an heir’s access to distributions based upon age, accomplishments, and certain life choices. Therefore, the assets are distributed largely because a specific milestone has been reached. The thoughtful nature of the distribution planning, however, leaves a primary problem unaddressed – preparing the heirs for wealth transition from one generation to the next.
Studies conducted by various institutes demonstrate that many estate plans that have been completed and then updated carefully and competently throughout the years, successfully address the issues relevant to the parents’ wishes. The attention to detail, however, cannot necessarily fill the gap of the heirs’ lack of direction and instruction that results in chaotic estate administration, family disharmony, and relationships that remain broken forever.
The “soft” skills that are necessary to develop the maturity and wisdom for the successful transition of family wealth should be given more attention by parents and grandparents. Most of the care and thought given to such considerations as tax-planning, beneficiary designations, and other details are very important to the preservation of family wealth, yet no matter how well those matters are addressed in the estate plan, if the heirs have not been prepared to accept and manage the responsibility that comes with an inheritance, the investment that was made in the estate plan may not provide the return the client was hoping for (after his or her death).
Ask business owners what the most important asset of their business is, and they usually respond with “our employees.” Their answer does not consider the banking account balance of the business. A family’s most important assets are the people- the parents, children, grandchildren, uncles, aunts, grandparents, cousins, etc.- the understanding and knowledge that these individuals have learned and will, ideally, integrate into the family.
During the summer months when families can spend more time together, such as on vacation, the opportunity is provided to work on communicating family values and stories that impart learning experiences, reading excellent books that promote stories of character, and deliberately using intelligence and common sense to tackle problems. Parents can encourage their children to develop the ability to work through problems while dealing with difficult personalities and people, to consider other options to solve seemingly incompatible ideas that siblings may have amongst themselves, and to place the most value on the people that are a part of the family organization rather than on the financial assets that will eventually become theirs.
Parents can begin by encouraging shared values and the enhancement of the individuals and the family as a whole. A family can preserve itself through many, many generations if the proper estate plan is in place and if the attitude toward the family’s assets is that of the assets serving the harmony, growth, and human capital of the family.
Dan A. Penning
As the world grows smaller thanks to technology, Wright Penning & Beamer finds itself with clients and friends literally across the globe. We welcome new friends and new opportunities, but we still trace our values, like our roots, to the Michigan communities we call home. Like many of you, we are grateful for opportunities to give back when and where we can.
The entire Farmington area – and much of southeast Michigan with it – celebrates its roots annually at the Founders Festival. Throughout the weekend, festival goers will enjoy fine wine, great food and live music at Alley Regally – hosted by the Greater Farmington Area Chamber of Commerce and Legato Salon, with proceeds to benefit the Farmington/Farmington Hills Afterschool Program. Wright Penning & Beamer is happy to join other local businesses as a sponsor of this venue.
Annual Duck Race
Capping off the Festival weekend, the Farmington/Farmington Hills Foundation for Youth and Families sponsors its 7th Annual Duck Race on Sunday, July 17th at 3:00 p.m. at Shiawassee Park. As a corporate sponsor, Wright Penning & Beamer will launch its decorated duck. (Artwork courtesy of the Beamer children but with no resemblance to any attorney they might know). If you have ever thought we’re “all wet,” come out on Sunday for proof!
Farmington Farmers and Artisans Market
Starting in May and running through harvest time, the Farmington Farmers and Artisans Market brings fresh Michigan produce, exceptional baked goods, fine art and a variety of unique, artisan-made products to downtown Farmington. Wright Penning & Beamer is delighted to join with our friends at Mid-American Studios and Montgomery, Wiethorn and Burke, CPAs, in sponsoring live music at the market every Saturday. Enjoy the sights and sounds every Saturday from 9:00 am to 2:00 pm at Riley Park in downtown Farmington.
Leelanau Conservancy Annual Picnic and Auction
In Suttons Bay we are supporting and serving as a sponsor of the Leelanau Conservancy’s 2011 Picnic and Auction. The Conservancy’s Annual Picnic and Auction will be held Thursday, August 4, 2011. Over 700 people attended the 2010 auction and over $100,000 was raised to help the Leelanau Conservancy in its mission to conserve the land, water and scenic character of Leelanau County. If your schedule permits, attend the picnic, donate an item, make a bid online or in person and volunteer to make this annual event a success. Visit their website at www.theconservancy.com to get your tickets to support this event too!
Suttons Bay Fireworks Display and Celebration
Another important community event Wright Penning & Beamer sponsors is the Suttons Bay Annual Fireworks Display and Celebration held during Labor Day weekend. It’s a way for us to give something back to the families of the local community at the close of the summer season. Held at dusk at the Suttons Bay Marina Park. Grab a blanket and pack a picnic basket full of snacks and beverages and join us after sunset to enjoy the fireworks display as it lights up the night sky over Suttons Bay. It’s a fun night for all who attend.
None of these events would be possible without the tireless efforts of community leaders and countless volunteers. We share our heartfelt thanks with our many friends and neighbors who work hard to celebrate and strengthen our communities. Whether in Farmington or in Suttons Bay, we look forward to seeing you “downtown” and “down by the bay.”
Dan A. Penning
New Regulations Shift Focus for Disabilities in the Workplace
On March 24, 2011, the Equal Employment Opportunity Commission (EEOC) published the much-anticipated final regulations regarding the Americans with Disabilities Act Amendments Act (ADAAA), which was signed into law by President Bush in September 2008, and took effect on January 1, 2009. These regulations significantly change the existing legal framework on disability law, and employers should be aware of how the regulations impact their obligations. A couple highlights of these new regulations and their impact are addressed below.
Impairment that “Substantially Limits” a “Major Life Activity”
The ADAAA defines “disability” as:
The regulations now provide more guidance to assist in determining whether a “substantial limitation” exists. Employers should note that the regulations make it clear that the term “substantially limits” should be construed “broadly in favor of expansive coverage.” It is not intended as a “demanding standard.”
Furthermore, the term “major life activity” should not be interpreted strictly so that it unintentionally creates a demanding standard for determining existence of a disability. “Major life activities” include major bodily functions such as hemic, lymphatic, musculoskeletal, special sense organs and skin, and cardiovascular functions, to name a few. The activity need not be one that is “of central importance to daily life.” Consequently, many more activities may be covered by the ADAAA.
Examples of Impairments
Impairments can be permanent or long-term, or episodic and short-term, and under the regulations and rules of construction, there are certain impairments that will always be considered disabilities: including, for example, diabetes, epilepsy, major depressive disorder, autism, HIV infection, obsessive compulsive disorder, bipolar disorder, cancer, and post-traumatic stress disorder.
At the end of the day, employers should focus on how they might reasonably accommodate an employee’s impairment, rather than on determining whether a disability (or substantial limitation) exists. While the regulations are useful in clarifying the focus and meaning of the ADAAA, they also may increase employers’ exposure to liability if reasonable accommodation for an impairment is not afforded to the employee. The analysis will center on whether the employer met its obligations and whether discrimination occurred, and no longer on the question of whether the individual is substantially limited in a major life activity.
Please contact me if you have additional questions regarding the ADAAA and how it might apply to your business.
Dan A. Penning
On Thursday morning, June 23, 2011, the IRS announced that it was increasing the optional business standard mileage rate for the final six (6) months of 2011. The rate will increase from 51 cents per mile to 55.5 cents per mile and will apply to all business miles driven between July 1, 2011 and December 31, 2011. Also increased was the rate for computing deductible medical or moving expenses. The new rate, which will likewise apply for the last six (6) months of 2011, will be 23.5 cents per mile, up from the current 19 cents per mile. The rate for providing services to charitable organizations is set by law, as opposed to the IRS, and will remain at 14 cents per mile.
While the IRS typically considers adjusting this rate in the fall of each year, to be applicable in the next calendar year, this mid-year adjustment was made in recognition of increased gas prices and the impact of those prices on all Americans. In addition to gasoline, the calculation of the mileage rate includes other factors such as depreciation, insurance, and other fixed and variable costs associated with operating a vehicle.
A simpler method
While taxpayers always have the option of tracking and deducting actual costs associated with using their automobiles for business, the optional business standard mileage rate provides a much simpler method. As opposed to keeping track of actual expenses, mileage alone is sufficient to compute the deductible costs of operating an automobile for business. The business standard mileage rate is also used by many businesses as the rate at which they will reimburse employees for the business use of their personal automobiles.
Further information can be found in IRS Announcement 2011-40.
Dan A. Penning
For several years now, Michigan Medicaid recipients have been waiting apprehensively for the state to implement a program whereby Medicaid benefits paid out during a person’s lifetime will be recovered from that person’s estate after death. Generally called “estate recovery,” this program is required by federal law. Michigan submitted its proposed program to the federal government four years ago, but cannot implement it until the feds approve it. That approval is expected at any time.
In anticipation of the federal approval, on July 1, 2011, the Michigan Department of Human Services will publish new policy detailing how it proposes implementing estate recovery. According to the new policy, estate recovery will only affect people who began receiving Medicaid after September 30, 2007, Medicaid recipients over age 55, and recipients who are permanently institutionalized regardless of age.
When estate recovery takes place
Estate recovery will not take place until after the Medicaid recipient dies. If the Medicaid recipient is survived by a spouse, by a child who is under age 21, or by a child who is blind or permanently disabled, then there will be no estate recovery until after those persons die.
The state may decide not to pursue recovery at all if recovery will create an “undue hardship.” Undue hardship exists when the assets of the Medicaid recipient are the sole source of income for surviving family members, such as a family farm or business. It also exists when the home is of “modest value” or when a survivor would become eligible for Medicaid if estate recovery were to occur.
Asset preservation strategies
Importantly, the state will only seek recovery from a decedent’s assets which pass through probate court. This means that a number of asset preservation strategies are still available, such as joint ownership, ownership subject to a life estate, and beneficiary designations on accounts and life insurance policies.
Assets exempt from estate recovery
Finally, there are certain assets that are exempt from estate recovery. For example, the state will not pursue recovery if the cost of recovery is expected to exceed the value of the asset.
The Department of Human Service’s new policy answers a number of questions, but it does not contain a lot of detail. We will still have to wait for the program to be put into practice to see just how it will affect Medicaid planning.
Dan A. Penning
It doesn’t matter what time of day you arrive, everything always looks the same. Granted, the trees are taller and wildflowers seem to be growing everywhere. But your family cottage is the same to you today as it’s always been.
Cubby holes filled with trinkets and treasures
While waving hello to neighboring friends you realize every family cottage and summer home is as different as the memories gathered by families every summer. Each cottage has a special cubby hole filled with trinkets and treasures from sandy beaches and hiking adventures through surrounding woods. Weathered hinges guarantee screen doors will squeak open and slam shut right on cue announcing that this is summer. It’s easy to get caught up in the moment of racing down to the lake and assuming every summer will be just like the last.
My son Casey has been crossing out days on the calendar as the school year winds down into his summer up north. He’s been talking non-stop about everything he wants to do this summer, and spending time with those who are a part of his summer. Without fail, his list includes everything he wants to do each summer. I’ve also been thinking about these excursions and of how to keep our lunch dry during our annual trip down the Crystal River (see photo).
As much as family cottages and memories stay constant, change and different circumstances ultimately visit families over time. Your family cottage is often one of your most valuable legacy assets and attention should be directed to new options and enacted tax laws available to you to protect your family cottage now, and for future generations.
Family goals remain the same
It’s no surprise that in spite of our busy lives some things never change. Family goals remain the same of protecting those you love, the place you love, and protecting the experiences and cottage memories you love.
When your family begins to gather this summer consider talking with them about the future of the family cottage. Now might be the time to begin the discussions about developing a cottage succession plan, if you haven’t already, and looking at short- and long-term strategies and legal structures to avoid the uncapping of your property.
At the minimum, a solid cottage succession plan protects your family cottage from passing outside the family, solves future conflicts between family members about how the family cottage is operated, maintained and improved, and probably most important of all, avoids, through the right to partition governed by real estate laws, the forced sale of your family cottage.
Even a simple plan, which you can easily change and update, is better than the consequence of not having a protective cottage succession plan in place.
Protecting a special place
You know deep in your heart this is where your family memories live, and like a protective mother bear you’ll do whatever you need to do to protect this time, this special place for future generations.
If you have questions or need additional information about planning for your cottage, please call and also visit our Cottage Law website about how to protect the family cottage at www.Cottage-Law.com.
Now if I could just figure out a way to protect my brown-bag lunch during my upcoming water adventures with Casey….
Dan A. Penning