Tag: Taxes

Have You Looked at Your Estate Plan Documents Lately?

Does this sound familiar?

“John and Mary kept delaying any discussions about preparing estate planning. After they had their first child, Jack, they finally decided it was time to discuss their estate plan with a lawyer. They set up a trust for Jack if anything happened to John and Mary and designated John’s parents, who were then 65, as Jack’s guardian and the trustee of the trust. Since they had meager assets, they left everything outright to him at age 25. John and Mary ignored these documents and made none of the transfers recommended by their lawyer to avoid probate.

Ten years passed by. They now have three children, Jack, (10) Jackie (7) and Maureen (4). Jack’s parents have moved away to enjoy warmer climates.

John and Mary should revisit their estate planning desires. Are his parents still capable of raising their children? When Maureen is 16, Jack’s parents will be 87. Have Jack and Mary considered planning possibilities for their digital assets? What about their business? Can it operate after they are no longer able to manage it? Are their children able to handle their inheritance as originally planned? Are John and Mary’s health care powers and living will directions up-to-date? Have they considered the effect that taxes and probate might have on their plan? Are there any other special circumstances they need to plan for?

We recommend you review your estate plan every 2-3 years or more often based upon your changes in family and your finances. Isn’t it time you reviewed your estate plan??

To discuss any questions you have regarding your estate plan or for a complimentary estate plan review, please contact:

Morris Saunders at:

msaunders@lgattorneys.com or (312) 368-0100.

Successor Liability-Beware

Often, buyers are advised to buy the assets of a business that is for sale, not the ownership interests.  That is based on the general principle that if you buy the assets of a business, then you are not liable for the business’s obligations unless you expressly agree to satisfy obligations.

However, an exception to this general rule is founded upon “successor” liability.  That is, if the buyer’s newly formed business can be found to be a successor of the seller’s business, then the buyer’s business may be found to be liable for the obligations of the seller’s business.  Such liability can be for the seller’s taxes, employment obligations and even union liabilities.

A recent case in California found that the buyer who set up a new business was a successor employer and therefore liable for the withdrawal liability of a prior business under the Multiemployer Pension Plan Amendments Act.  In this situation, the “buyer” only purchased certain assets of the “seller” at a public liquidation sale but was found to be liable for some of the “seller’s” liabilities.

The prior business, Studer’s Floor Covering, Inc. (“Studer’s”) was in the construction industry.  It ceased doing business on December 31, 2009.  At that time, it was party to a collective bargaining agreement, pursuant to which it made contributions to a multiemployer defined benefit pension plan (the “Fund”).

The owner of Studer’s announced to its sale staff that Studer’s would go out of business in a couple of months.  A member of Studer’s sales staff formed a new company (“Michaels”) two months prior to Studer’s going out of business. Michaels obtained a lease for the same storefront Studer’s operated its business, effective January 1, 2010.  Michael put up a sign “Michaels/Studer’s” on the storefront, obtained the same telephone numbers and purchased 30% of Studer’s tools, equipment and inventory at a public liquidation sale.  He did not obtain the customer list since the owner had personal knowledge of most customers.  Michaels employed eight installers (of whom five had been Studer’s employees) and used mainly independent contractors.

The Appellate Court held that the court should consider “continuity of the workforce” as a major factor.  Continuity could be found to exist if a majority of the new employer’s employees were employees of the old employer.  The court held that the changes in ownership here did not affect successor liability.  An important factor was substantial continuity as measured by customer retention.  The Court also was swayed by the new business using the same telephone numbers, the same location and the sign that incorporated the name of the prior business.

Where putative successors do rely on insider knowledge, similar public presentation (signs, location) to corner their predecessor’s market store, and have a continuity of the work force, courts may find the successor doctrine to apply.  New businesses that are concerned about the liabilities of the prior businesses should carefully consider these factors.

Levin Ginsburg has represented and provided counsel for many buyers and sellers of businesses.  If you have any questions regarding successor liability or any other aspect of your business, please contact:

Morris R. Saunders at:

msaunders@lgattorneys.com or 312-368-0100.

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