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Thursday
Jun272013

Post-DOMA for Employers

Lawyer for EmployerWage and Hour Defense

 

by Nicole Kamm
818.907.3235

 

 

 

 

With the dust just settling on Wednesday’s ruling on the Defense of Marriage Act, or DOMA, and Proposition 8 federal court opinions, now is the time for employers to consider the potential impact on their businesses.

Among the workplace-related issues raised in the cases are: continuation of benefits under the Consolidated Omnibus Budget Reconciliation Act (COBRA), eligibility for leave under the Family Medical Leave Act (FMLA), taxation of spousal health benefits, eligibility for spousal retirement benefits, and surviving spouse social security benefits.  And there are more.

In view of this, let's take a look at what the court opinions will mean for business.

 

Part of DOMA Definition of Marriage Unconstitutional

 

The U.S. Supreme Court ruled in a 5-4 decision in United States v. Windsor, that Section 3 of DOMA is unconstitutional. This is the section that defines marriage as the union of one man and one woman only, excluding same-sex marriages and polygamy.

Chief Justice John Roberts delivered the 5-4 opinion:

By seeking to injure the very class New York seeks to protect, DOMA violates basic due process and equal protection principles applicable to Federal Government…Its unusual deviation from the tradition of recognizing and accepting state definitions of marriage operates to deprive same-sex couples of the benefits and responsibilities that come with federal recognition of their marriages.

 

By applying the DOMA definition of marriage, over 1,000 federal benefits were denied to same-sex married couples. Many same-sex spouses were left without healthcare, pension and retirement benefits, tax benefits (see Kira S. Masteller's blog regarding Edith Schlain Windsor's claim, when her partner Thea Spyer passed) and leaves of absence privileges when a spouse serves in the military, has a child, or needs medical care – to cite just a few examples.

 

Proposition 8 & DOMA - Employer Checklist

 

Now that the U.S. Supreme Court has deemed the definition of marriage under DOMA void, you may need to:

  1. Review employee handbooks
  2. Review employee benefit packages
  3. Revisit retirement plans, since many define marriage by DOMA standards
  4. Prepare to garnish wages in the event of an employee's divorce or child support obligations, when s/he has been unable to meet those demands.
  5. Ensure employees know their spouses may qualify for benefits

If your company has staff outside of California, consider the possible implications of having employees who live and/or work in states that do not authorize gay marriage.

To the extent they already provide benefits to same-sex spouses or domestic partners, employers should consider whether further changes are required.  Finally, employers can expect to hear from workers wanting to add a spouse to a benefit plan.  Be ready to promptly handle such requests.

There are still many open questions.  In the meantime, make sure you take steps to comply with the law, including treating same-sex employees and their spouses the same way you would treat any other employee or spouse – without discrimination in pay, working conditions, or benefits.

Nicole Kamm is an Employment Defense Attorney at our Firm. If you have questions regarding compliance with state and federal employment law, contact her via email: nkamm@lewitthackman.com. 

Wednesday
Jun262013

Prop 8 and DOMA: Where Do We Stand Now?

Encino Tarzana Divorce LawyerDivorce Attorney

by Vanessa Soto Nellis
818.907.3274

 

San Fernando Valley Los Angeles Divorce Lawyer

In two 5-4 decisions this morning, the U.S. Supreme Court dismissed a Proposition 8 appeal that denied same-sex couples the right to marry in California, as well as an important part of the federal Defense of Marriage Act, or DOMA.

The judicial majority in Hollingsworth et al. v. Perry et al., headed by Chief Justice John Roberts – and joined by Justices Antonin Scalia, Ruth Bader Ginsburg, Stephen Breyer and Elena Kagan – did not hand down an opinion on a broader and more key question: Is same-sex marriage an equal protection right that should apply to all states?

Justice Roberts explains the majority decision to deny the California Prop 8 appeal, which denial in effect, reinstates legal marriages for same-sex couples:

Once Proposition 8 was approved, it became a duly enacted constitutional amendment. Petitioners have no role—special or otherwise—in its enforcement. They therefore have no “personal stake” in defending its enforcement that is distinguishable from the general interest of every California citizen. No matter how deeply committed petitioners may be to upholding Proposition 8, that is not a particularized interest sufficient to create a case or controversy under Article III.

The four dissenters (Justices Anthony Kennedy, Clarence Thomas, Samuel Alito and Sonia Sotomayor) however, say there was a missing element in the decision-making. Justice Kennedy elaborates:

The essence of democracy is that the right to make law rests in the people and flows to the government, not the other way around. Freedom resides first in the people without need of a grant from government. The California initiative process embodies these principles and has done so for over a century.... In California and the 26 other states that permit initiatives and popular referendums, the people have exercised their own inherent sovereign right to govern themselves. The court today frustrates that choice.

As for DOMA, Justice Kennedy wrote the opinion (and Justices Ginsburg, Breyer, Sotomayor and Kagan joined) regarding United States v. Windsor:

DOMA’s principal effect is to identify and make unequal a subset of state-sanctioned marriages. It contrives to deprive some couples married under the laws of their State, but not others, of both rights and responsibilities, creating two contradictory marriage regimes within the same State.

Same-Sex Couples - Legal Timeline

 

In 1996, Congress adopted DOMA, which denied all benefits or legal standing to same-sex couples. But in 2000, California began registering same-sex couples as domestic partners, and allowing them certain government and insurance benefits, child custody, and hospital visitation rights.

CALIFORNIA'S PROP 8 TIMELINE - Source: huffingtonpost.comA lot of back-and-forth among politicians, political groups, and religious authorities resulted in state and federal court battles, but currently Washington D.C. and 12 states authorize gay marriages.

Though the Court's decisions regarding DOMA and California's Prop 8 are significant wins for same-sex marriage proponents, the arguments are not over.

 

Vanessa Soto Nellis is a Family Law Attorney and Shareholder at our Firm. Contact her via email: vnellis@lewitthackman.com.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.
Tuesday
Jun252013

Divorce Finance: What is a Retainer Fee?

Encino Tarzana Divorce LawyerVisitation & Custody Lawyer

by Vanessa Soto Nellis
818.907.3274

San Fernando Valley Custody Lawyer Los Angeles

 

What is a retainer fee and how does it work? Essentially, a retainer fee is, and works like, a down payment for legal services and expenses. It is required to engage the services of a family law attorney. The fee will be put into an account earmarked for you, the client – and serves as security for fees earned. 

Some attorneys draw funds from the retainer account as services are rendered. Others apply the retainer only to the final bill – the clients pay their monthly bills in full. In that situation, the initial retainer, or what is left of the retainer, is returned to the client on completion of their legal matter.

The retainer fee serves two purposes. Obviously, it ensures that you are serious about pursuing a matter and that the attorney will get paid for the work done – most reputable law firms will require one upfront. But the retainer fee also protects the client. Once you submit a retainer, it ensures that the lawyer won't take on other clients pursuing interests that are adversarial to yours.

When seeking a divorce for example, the retainer ensures your family law attorney only represents you, not you and your ex or your ex's family, etc. If the attorney is serving as a mediator, the retainer ensures that the mediator can never represent either party, against the other party.

The retainer does not represent the total amount of fees a divorce will cost – it is merely a starting point. Clients are expected to pay all fees and costs for work done on their case.

Divorce Tip: the more reasonable you and your spouse can be in resolving matters to mutual benefit, the more likely it is that the retainer will cover your divorce costs from initial filing to resolution.

Remember Ben Franklin's maxim: Time is money. The faster a case is resolved, the less you spend on attorneys' fees.

It is important that you select an attorney you trust, and who will not churn a case (drag it on). Please read my last blog, How Do I Find a Divorce Lawyer for more information.

 

What is a Fee Agreement?

 

In California, non-contingent matters (personal injury lawyers tend to work for contingency fees for example, most other legal matters, including divorce, are non-contingent) require an executed Fee Agreement between the client and the attorney, for any case that will foreseeably exceed $1,000 in costs.

The fee agreement will include a description of the legal services provided, responsibilities of both the attorney and the client, and the costs that will be charged to the client, such as:

  • Hourly rates
  • Court Costs
  • Service Fees
  • Other rates, fees and charges

It is important that you understand your fee agreement so there are no surprises in your bill.

 

Vanessa Soto Nellis is a Divorce Lawyer in our Family Law Practice Group. Contact her via email vnellis@lewitthackman.com.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.
Wednesday
Jun192013

Designated Beneficiary Assets: Consider Your Income, Capital Gains & Estate Taxes

Trusts & Estate Planning Attorney

by Kira S. Masteller
818.907.3244

 

In the third segment of our series regarding Gift Tax & Estate Planning, we'll examine assets that require designated beneficiaries, specifically: IRA accounts, retirement accounts, life insurance, accidental death insurance, annuities and payable on death accounts, which pass outside of a probate or a living trust.

Designated beneficiary assets must be looked at individually because different types of assets require different designations depending on their income tax consequences.

For example, a life insurance policy does not suffer any negative income tax consequences when being distributed upon the death of the insured – although it is exposed to estate tax consequences. Because of this, your revocable living trust can be named as the primary beneficiary of a life insurance policy.

There are important advantages to naming the trust as the primary beneficiary: 

1. If you are married and have a trust that splits into two or more trusts upon the first spouse’s death for death tax planning purposes, the insurance proceeds can be utilized in the allocation of assets between the two trusts so that none of the decedent’s estate tax exemption is wasted.

If a surviving spouse is named as the primary beneficiary of the life insurance, the proceeds of the policy are not in the trust for allocation purposes and some or all of the decedent’s estate tax credit could be wasted.

2. If you have minor children and you name them as the direct beneficiaries of the life insurance policy, the proceeds will be subject to a Guardianship proceeding (court supervised) and held in an FDIC insured account (ensuring the account is held in an insured banking institution), which will be distributed to a child upon attaining age 18. This limits the asset’s growth possibilities, the ability for an adult to use those assets for that child during that child’s lifetime, and it gives a windfall to a child at age 18 when they may not be mature enough to manage money or get assistance managing money.

Remember: If minor children are direct beneficiaries of any asset, there will be a Court Guardianship proceeding which is expensive and time consuming. 

It is better to name your trust as the beneficiary of life insurance for children so that the problems discussed here, do not occur. You may consider using a life insurance trust for the same reasons mentioned above, as well as for estate tax planning purposes – the life insurance trust will keep the proceeds of the death benefit out of your taxable estate upon your death.

If you have any questions about who to designate as a beneficiary for your assets, please contact me for help.

In my next blog, we'll look into Retirement Assets, some of their potential problems and solutions to those problems. If you'd like to catch up on previous posts in this Gift Tax and Estate Planning series, click on the embedded links above to read about Living Trusts and Life Insurance.

Kira S. Masteller is a Gift Tax and Estate Planning Attorney and a Shareholder at our Firm. Contact her via email: kmasteller@lewitthackman.com for more information.

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Wednesday
Jun052013

Using Life Insurance and Irrevocable Trusts in Estate Planning

Trusts & Estate Planning Attorney

by Kira S. Masteller
818.907.3244

 

Continuing with Part 2 of our Gift Tax and Estate Planning blog series (we discussed Living Trusts in Part 1 of the series), we now turn to life insurance – one more helpful tool in accomplishing your goals – if used in conjunction with an irrevocable life insurance trust.

Many people own life insurance so that their family will have sufficient capital to replace their income for a specific period of time. Others own life insurance to enable a business partner to buy out the family's interests in a jointly owned company upon their death. Still others have life insurance specifically to pay estate taxes. 

However, a problem arises if you own your life insurance policy. The death benefit of your life insurance will be included in your estate for estate tax purposes if you are the designated Owner. You might not have a taxable estate with your home, savings and retirement, but when you add your $1,000,000 death benefit to your estate, your tax situation changes. 

You can avoid including life insurance in your taxable estate by using an irrevocable life insurance trust. An irrevocable trust can be set up specifically to own your life insurance and receive the death benefit. 

You cannot be the Trustee of the trust, but you can appoint a trusted family member, friend, or professional Trustee who will own the life insurance on your life as Trustee, pay the premiums annually (which you will gift to the Trust each year), and who will ultimately file a claim upon your death and receive the insurance proceeds available for your family, or to pay estate tax as you plan. 

The use of a life insurance trust can determine whether or not you have a taxable estate, as well as provide liquidity to an estate that is already taxable. It is an inexpensive tool available to anyone who is going to purchase life insurance or who already has life insurance. 

There are specific Internal Revenue Code rules that must be followed with respect to a life insurance trust, but they are well worth the cost and effort when you are saving up to 40 percent in estate taxes on the life insurance proceeds. Contact me if you have any questions regarding how best to maximize your tax savings.

In the next installment of this series, I'll be blogging about Designated Beneficiary Assets, specifically, income tax, capital gains tax and estate tax.

Kira S. Masteller is a Gift Tax & Estate Planning Attorney in our Trusts and Estate Planning Practice Group. Email her at kmasteller@lewitthackman.com for more information.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

LEWITT HACKMAN | 16633 Ventura Boulevard, Eleventh Floor, Encino, California 91436-1865 | 818.990.2120