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Gifting

To most people, gifting comes naturally and without analysis. However, it is important to make certain that you understand the legal and tax consequences to any gifts that you make prior to making the gifts. This article, while it discusses tax consequences, is not tax advice. Hypothetical 1: Rosie is not married and has one adult child. She recently had some health issues and decides it is now time to start gifting assets to her daughter. Her estate is worth $3,500,000. She knows that in Minnesota the estate tax exemption is $3,000,000 and there is no gift tax. So, she gifts...

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Removing Personal Property

A common reaction when someone dies is to remove personal property, such as household goods, furniture, furnishings, sporting equipment, vehicles and the like from the decedent’s home and other real property. However, more likely than not, doing so will result in you having to explain your actions to a judge who may still hold you personally accountable. Unless you are 100% certain you are the sole heir (note: you cannot be 100% certain that you are the sole heir), do not remove anything from a home or any real property such as a second residence unless it is already in the...

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Legal Entity Formation

Choosing the correct legal entity formation will save you from headaches and stress, and even more importantly it will provide you financial savings. Best practice is working with your business accountant and business attorney to make certain that your business structure provides the best protection. There are several different aspects to take into consideration, such as tax advantages, administration of the entity, liability, ownership restrictions, outside capital, need for outside transfers/etc. For example, are you aware of the following? For tax purposes, your corporation is automatically taxed as a C-Corporation unless you file for and obtain S-Corp status from the...

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The Mistake of a Business Owner Regarding a Commercial Lease

Hypothetical #1: Sarah owns Sarah’s Fancy Cakes, LLC. She rents out retail space at a local mall. When it became clear to Sarah that she no longer could afford her space as consumer spending habits had changed, she decided it was time to terminate the commercial lease. However, she signed a five-year lease and she was only two years into the five-year lease. Sarah seeks the advice of a business attorney. Sarah’s attorney points out that the commercial lease for Sarah’s Fancy Cakes, LLC is in Sarah’s personal name. Sarah explains to the attorney that she signed the lease prior to...

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Common Employment Issues

With the current pandemic, employment issues are becoming more complicated. However, there still remain common employment issues that we see on a frequent basis unrelated to the pandemic. One of the most common employment issues is the misclassification of workers as independent contractors. The misclassification of workers as independent contractors has been a priority of governing agencies for several years. However, in Minnesota, since 2019, the stakes are even higher with the sweeping wage and hour “reform” laws. As part of these laws are increased penalties for wage theft. Employers in Minnesota should be extremely concerned about the potential of...

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Gifting from a Legal Perspective

While gifting is admirable, it is important that you understand the legal consequences of gifting to prevent unintended consequences. In addition to legal consequences, there are potential tax consequences. It is important that you consult with your accountant prior to making any gifts. This article, while it discusses tax consequences, is not tax advice. Hypothetical 1: Jack and Jill are excited that their son, Robert, is marrying Amy because she is wonderful. As a result, they decide to gift to Robert and Amy, as their wedding gift, $50,000 for the downpayment of Robert and Amy’s new house. Currently, the annual federal gift...

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Minnesota Professional Firms Act

If your business (aka professional firm) provides professional services in Minnesota, you must agree in your legal entity documents, filed with the Minnesota Secretary of State, to be subject to the Minnesota Professional Firms Act (“Act”). Generally, professional services mean the type of services that are provided under a license, registration, or certificate by the state of Minnesota. In addition to this requirement, before your business can provide professional services, your professional firm must first register with the board(s) having jurisdiction over the professional services that you are subject to under the Act. Subsequent to the initial registration, your professional...

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Beware of “Cribbing” Documents from the Internet

Hypothetical #1: Hypothetical: Sarah owns Sarah’s Sauces, Inc. She has 7 employees. Sarah had her employees sign an employee handbook and a non-compete agreement five days after her employees started working for her.   She took both the employee handbook and the non-compete agreement from the internet. The employee handbook states that Sarah’s business follows FMLA (Family Medical Leave Act). One of the employees, Amy states that she needs FMLA.  Sarah says no because that is her busy time. Another employee, Joe quits and starts a competitor business across the street.  Sarah sues under the non-compete. FMLA only applies to employers...

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Random Tips on Common Issues

Tip #1: Are you aware that if your child is under the age of 18, it is in your child’s best interest to have a guardian that you have named in a proper legal document, such as a will? Tip #2: Are you aware that once your child reaches the age of 18, your child should execute a power of attorney and health care directive? Tip #3: Are you aware that you should have an authorization for use and disclosure of protected health information executed that is valid for five years after your death? Tip #4 Are you aware that if you are...

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Ownership Interest in Real Estate and Its Effect on Estate Planning

As a general rule, individuals own real estate property as tenants-in-common unless the deed specifically states that the property is owned as joint tenants. If the property is owned as joint tenants, the surviving “tenant” automatically receives 100% of the property interest upon the non-surviving “tenant’s” death. If the property is owned individually as tenants-in-common, then probate needs to be established in order to lawfully transfer the interest in the real property. Furthermore, if there is a transfer-on-death deed that transfers the property, the transfer on death deed trumps any contrary transfer in a will. The person entitled to the...

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