Articles by Our Attorneys

In the last series, we discussed updating your beneficiaries, as well as your estates documents. As you have learned by now, life continues to happen. At some point you may begin a new relationship. After the long and hectic process of your divorce, you hopefully now appreciate the importance of protecting your interests in the event anything should happen. There are a few different agreements that could help you achieve this goal.

If you are unmarried, but living together with your partner, you should consider a co-habitation agreement. A co-habitation agreement essentially protects the interests of individuals who a living together, sharing the lives with a significant other, but are not married at the time. It can state who stays and goes in the residence, what your separate property is, and how things should be divided in the event you part ways or if someone dies during the period of cohabitation.

Should you and your partner end up getting married, you can change your co-habitation agreement to a prenuptial agreement. A prenuptial agreement similarly protects your interests and makes clears who obligations the parties may have to the other during the course of the marriage. In the event of a divorce, it would help streamline the process. Matters such as equitable distribution, spousal support, and alimony can be decided in advance. So this time around, you can avoid the drawn out and costly divorce process, and focus on moving forward with your life.

In the event you already got remarried without even giving any of this a thought, it is not too late, you can still look into a postnuptial agreement. It does everything a prenuptial agreement does, it is just entered into after the parties have already wedded.

Do not be afraid to take control of your life and protect your interests. Speak to an attorney and find out what is available to you and what your best options are.

If you need guidance with your estate planning needs, please do not hesitate to contact a member of our team.

The Spousal Lifetime Access Trust (“SLAT”) has become a popular estate planning strategy employed by married couples. Currently the Tax Cut and Jobs Act of 2017 (“TCJA”) increased the federal gift and estate tax exemption to a current $11,700,000 per spouse. Therefore, a married couple could exempt a total amount of $23,400,000. However, this exemption is scheduled to revert to pre-2018 exemption levels on January 1, 2026. Furthermore, President Biden has stated he would like to reduce the exemption to $3,500,000 per person prior the scheduled reversion. The Treasury Department has issued regulations stating that once the estate and gift tax exemption reverts to its pre-2018 levels, taxpayers who had taken advantage of the increased exemption during the time it is available by making gifts will not be adversely affected when the exemption returns to its pre-2018 levels. This is very important as it gives taxpayers the right to make gifts to exempt $23,400,000 from their estate as long as the TCJA is still in place.  Therefore, considering the prospect of a 2026 reversion to the lower exemption amount as well as the political uncertainty in the United States to lower the exemption amount, it makes sense to utilize the increased exemption by making gifts before it either decreases due to the sunset provision or due to a congressional act.

The issue for many tax payers is that they do not want to give up control of assets during their lifetime by making a gift outright or in Trust and lose the ability to utilize those funds. Yet taxpayers would still like to make a gift to reduce their estates. One of the estate planning vehicles that can be used where taxpayers would still have use of the money and yet the assets would be out of your estate is the creation of a Spousal Lifetime Access Trust. The Spousal Lifetime Access Trust is a gift from one spouse (“donor”) to an irrevocable trust for the benefit of the other beneficiary spouse. The beneficiary spouse can receive distributions from the SLAT during his or her lifetime, yet the SLAT will be excluded from the beneficiary spouse’s gross estate and will not be subject to estate tax when the beneficiary spouse dies. It is one of the only estate planning vehicles where you can gift an asset yet still have limited access to the funds albeit through your spouse.

The terms of a SLAT can be flexible. A SLAT does not need to provide for the beneficiary spouse to receive trust income for life. However, in many situations it is advisable especially if the donor spouse would still like access to the funds. The SLAT must be an irrevocable trust, therefore the donor spouse must irrevocably transfer assets to the trust. However, as long as the donor spouse and beneficiary spouse are still married, then the donor spouse would still have access to those funds through the beneficiary spouse. However, once the beneficiary spouse dies or in the event the taxpayers become divorced, the donor spouse would no longer have access to those funds.

However, the donor spouse can be protected by creating another irrevocable trust in which the beneficiary spouse also creates an irrevocable trust for the benefit of the donor spouse with similar provisions so each spouse would have access to funds. However, please note that the Trusts cannot be a reciprocal as the IRS has rules in regard to the creation of reciprocal trusts in which both trusts may end of being included as part of your estates. There are a myriad of ways this can be avoided.

In most instances, a SLAT is treated as a grantor trust. A grantor trust means that the grantor of the SLAT is for income tax purposes treated as owning the assets of the SLAT. Therefore, any income from the SLAT would be included in the donor spouse’s gross income requiring the donor spouse to pay income tax thereon, thereby further reducing the taxpayers taxable estate.

One of the issues taxpayers wrestle with is who should be trustee of the SLAT. The donor spouse should not be the trustee of the SLAT.  In the event you would like to make the beneficiary spouse the trustee of the SLAT, then distribution should be mandatory or subject to an ascertainable standard. An ascertainable standard restricts distributions from the SLAT to provide for the beneficiary’s health, education, maintenance and support. You should consider appointing a trustee who does not have an interest in the trust to make discretionary distributions.

If you need any additional information in regard to a SLAT or other estate planning techniques, please contact Joseph A. Bellinghieri, Esquire at 610-840-0239 or via email at [email protected].

May 2021 brought a welcome change in the weather and two interesting Supreme Court rulings that could impact Pennsylvania businesses. 

1. U.S. Supreme Court ruling permits Philadelphia-based Uber drivers to take Uber to trial over allegations of improper worker classification.  The drivers, who work under Uber’s higher-end “UberBlack” service, allege that Uber misclassified them as independent contractors to deny them proper minimum wage and overtime wages.  Earlier in the case, the U.S. District Court granted summary judgment to Uber, holding that the drivers could not meet their burden to show that they were employees under the Fair Labor Standards Act (“FLSA”) or Pennsylvania wage-and-hour laws, effectively upholding Uber’s classification of the drivers as independent contractors.  The District Court cited in support of its decision that the drivers were entitle to make their own hours, worked as much or as little as they wanted, and largely invested in their own equipment.  The drivers appealed to the Third Circuit, which reversed the District Court, holding that other factors could alter the outcome of the case that needed to be resolved through a trial.  These factors included whether Uber exerted “control” over its drivers tasks and whether the drivers had opportunity for profit or loss depending on their own managerial skill.  The U.S. Supreme Court this month declined to hear Uber’s appeal from the Third Circuit ruling, setting the stage for a trial on the merits.  Accordingly, the decision of an eastern Pennsylvania jury could have nationwide effects on the ride-hailing industry.
2. Pennsylvania Supreme Court holds “No Poach” Agreement Unenforceable.  A “no-poach agreement” is an agreement between employers not to hire or solicit to hire each other’s employees.  By way of example, these agreements may be put in place where employees from multiple companies collaborate together in a joint venture, and the companies do not want the other businesses to use the venture as an opportunity to recruit their best employees. In a decision that could have far-reaching impacts for Pennsylvania businesses, the Court ruled in Pittsburgh Logistics Systems Inc. v. Beemac Trucking LLC, No. 31 WAP 2019, J-32-2020, 2021 WL 1676399, 2021 Pa. LEXIS 1853 (Apr. 29, 2021), that one-such arrangement was unenforceable.  Pittsburgh Logistics Systems (“PLS”) is a freight broker, and its agreement sought to forbid the carriers with which it entered into formal service contracts from hiring or soliciting PLS’ employees anywhere in the world for the length of the contract plus two years.  Notably, PLS introduced no evidence that the relevant employees had ever had direct contact with the relevant carrier.  The Court condemned the lack of consent of the affected employees and the failure to provide the employees with consideration.  The Court also applied a public policy test, noting harm to the general public through non-competition.  While the case does not suggest an outright ban on no-poach agreements in Pennsylvania, it underscores that such agreements are disfavored and that businesses will need to demonstrate a compelling reason for putting these agreements in place.

Jeff Burke is an attorney at MacElree Harvey, Ltd., working in the firm’s Employment and Litigation practice groups. Jeff counsels businesses and individuals on employment practices and policies, employee hiring and separation issues, non-competition and other restrictive covenants, wage and hour disputes, and other employment-related matters. Jeff also represents businesses and individuals in employment litigation such as employment contract disputes, workforce classification audits, and discrimination claims based upon age, sex, race, religion, disability, sexual harassment, and hostile work environment.

With a roar of their trimmers’ two-stroke engines, a husband and wife advance across their yard toward the mass of hemlock branches spilling over from their neighbors’ property. They trim the branches hanging over their yard all the way back to – but not over – the property line. Weeks later, their neighbors sue them for damaging the trees. Was the couple within their rights when they trimmed the branches? 

Yes, held the Pennsylvania Superior Court in Jones v. Wagner, the case from which our lightly fictionalized couple are drawn. In Jones, the court addressed the scenario where a tree is located on an owner’s property but its branches or roots hang above or encroach onto the property of another person (who we’ll call an “affected owner”), and what affected owners can do in response. 

The Court began with the principle that a continuing trespass occurs if the branches of a tree located on one owner’s property overhang the property of another person without the affected owner’s consent. The same principle applies where the roots of a tree on one property extend onto the affected owner’s property. Often, an affected owner sees no reason to take action. Affected owners like those in Jones, however, may want the branches removed for any number of reasons. 

The Court in Jones held that affected owners who want overhanging branches or encroaching roots removed have a few options.

First, an affected owner may file a lawsuit alleging continuing trespass. The affected owner will need to prove both the location of the property line and the branch’s or root’s location over that line. The complaint would request that the court order the owner of the tree to remove the branches or roots to the extent they hang or encroach over the property line. The affected owner should also request money damages for any harm suffered or costs incurred because of the trespass, although a showing of harm is not necessary to prove trespass itself. The downside to lawsuits are that they are expensive and can take a long time – often years – to resolve.

Second, an affected owner may – like those in Jones – simply trim the branches or roots back to the extent they hang over or encroach onto their property. This remedy is referred to as “self-help.” Self-help is an attractive remedy because, in theory at least, it is quick and cost-efficient compared to a lawsuit. Affected owners exercising self-help must be precise to ensure they are trimming only that portion of the branches or roots which cross over the property line and above or onto their property. Even owners who precisely perform self-help still risk being sued by the owner of the tree, especially where there is disagreement as to the location of the property line or the branches or roots that are removed. For these reasons, affected owners who plan on exercising self-help should still consult an attorney before acting.

Finally, affected owners may exercise self-help and then also sue the owner of the tree for the expenses incurred in removing the branches or roots. Given the cost of lawsuits, an affected owner considering this combined remedy should consult with an attorney to confirm that the expense of lawsuit will not exceed the expenses incurred removing the branches.

Property owners involved in tree-related disputes or have questions about liability for damage caused by their tree or a neighbor’s tree should contact an attorney with experience in these matters. You may contact Matthew McKeon at [email protected], or by telephone at 610-840-0225. This article provides a general overview of the law. It is not intended to be, and should not be construed as, legal advice for any particular fact situation.

In my practice I come across many situations where some decisions are made and not communicated to people who it may affect.  This article will briefly discuss three scenarios that I have come across in my practice which could have been made less difficult if communications were made.

Wills

Often I see the following language in Wills: “no provision is made for my nephew Bobby for reasons he well knows.”  Very often, the opposite is true.  The nephew does not know.  It would be better if you communicated that to the nephew.  Usually the Testator wants to avoid bad feelings or confrontations.  I often find it necessary to videotape the Testator to memorialize the thoughts of the Testator in creating the Will.  I often just use my iPhone.  That way you have a record of the thinking by the Testator, as well as a view into the mental condition of that Testator.  Of course, it would be advisable to make sure that the Testator is capacitated, at least in the attorney’s estimation.

Powers of Attorney

Another problem that exists is that in Powers of Attorney, an alternate agent is chosen, without communicating that to the agent.  Things go a lot smoother if the original agent, should he or she not be able to perform their duties, knows that the alternate agent is ready, willing and able to serve.  Communicating that to the alternate agent is critical, before problems happen.

Estate Administration

Lastly, I often see co-Executors, co-Administrators or co-Trustees acting individually without communicating.  Sometimes this happens when the co-Executors, co-Administrators or co-Trustees are angry at each other or are not talking.  Also, in these scenarios, one person will “take over” the process.  The other co-Executor, co-Administrator or co-Trustee does nothing to prevent this from occurring.  It is better to communicate rather than have some very uncomfortable moments, often in Court, when real problems occur.  If there is an impasse, my final suggestion would be to try mediation, as opposed to running to the courtroom.  Many times in these situations Judges will, certainly in Chester County, require mediation to resolve the dispute.  This is a cheaper and more efficient way to resolve issues.

In sum, it is best to communicate at all times, especially before problems occur.  Unfortunately, human nature often dictates that the person will do anything to avoid confrontation, only to find out that things only got worse by ignoring the problem.

Communicate! Communicate! Communicate!

In part I, we discussed that one of the first steps you should take after getting your divorce decree in hand is changing the beneficiary designations for any of your relevant accounts. It is a five minute process that would save your loved ones immeasurable confusion and contention later on.

As you review and change your beneficiary designation, you should begin thinking about and updating your estate planning documents and reviewing your retirement plans. If your estate planning documents are not updated to remove your spouse, they may still be able to receive what you previously allocated to them in the event of your death. Even if state law precludes this outcome, your documents will likely not reflect your current intentions.

If you have not already done so, you should either create or revise the following types of estates documents following your divorce:

• Will;
• Living Will;
• Durable Power of Attorney;
• Healthcare Power of Attorney; and
• Trusts

Meet with your attorney to review these documents. This will provide you some peace of mind and control over who will be taking care of you in your older years and who will be getting your possession when you pass. Avoid putting this off, in the event of your untimely death you want to ensure that your wishes are carried out when it comes time to disburse your assets.

Life is hectic and unpredictable, but taking the right steps now can help reduce your stress and help you take back control of your life after divorce.

If you need guidance with your estate planning needs, please do not hesitate to contact a member of our team.