Failing to Promptly Return Commercial Security Deposit Creates Costly Mistake for Landlord

Typically when entering a commercial lease, the tenant pays to the landlord a security deposit to ensure that the tenant complies with the lease and returns the space in the proper condition.  Depending on the credit history and specifics of the lease, the commercial lease security deposit can range from one month’s rent to a full year of rent. The lease language describes when and how the deposit is returned.

Under MA security deposit law, residential leases are strictly governed and commercial leases are not. A residential landlord is required to hold security deposits in special bank accounts and return deposits within 30 days of a tenant’s departure unless a written statement of damages is sent in strict statutory compliance. Under the residential security deposit law, tenants can claim treble damages and attorneys’ fees if these steps are not followed. This statute does not apply to commercial security deposits, and return of commercial security deposits are governed primarily by the terms of the lease.

Recently, however, the Massachusetts Appeals Court confirmed that a commercial landlord could be liable for treble damages and attorneys’ fees for failing to promptly return a security deposit, despite terms of the lease that prohibited the tenant from collecting punitive or consequential damages.

The tenant in The Exhibit Source, Inc. vs. Wells Avenue Business Center, LLC, Mass. App. Ct. No. 17-P-1611 (Nov. 20, 2018) had paid to the landlord a security deposit equal to $15,982 at the start of the lease. The lease allowed the tenant twenty days to cure any nonmonetary defaults, and the landlord had not notified the tenant of any issues. At the end of the lease, the tenant and landlord walked through the space, and the landlord did not alert the tenant of any damages. The tenant repeatedly requested return of the security deposit, and the landlord stated that it was being processed. Seven months later, the landlord returned only $1,202 and claimed that the remaining $14,780 had been applied to remedy damages in the condition of the space and would not be returned.

The tenant successfully sued the landlord under Chapter 93A, which prohibits “unfair or deceptive acts or practices in the conduct of any trade or commerce.” The trial court awarded the tenant $44,340 for damages, equal to three times the remaining security deposit, and $60,511 in attorney’s fees.  Accordingly, the landlord’s failure to promptly assert claimed damages or return the $14,780 cost over one hundred thousand dollars, plus the landlord’s own attorney’s fees in defending the claims.

The Appeals Court affirmed the award, noting that the landlord’s conduct was “comfortably” prohibited under Chapter 93A. Specifically, the landlord strung along the tenant without any intent to return the security deposit, manufactured a reason to retain it, and attempted to wear out the tenant’s attempts to recoup the funds. The language in the lease limiting liability did not protect the landlord in this case.

This decision reinforces the principle that parties should understand the terms governing security deposits and lease compliance. Although commercial landlords are not governed strictly like residential, landlords must still understand their obligations to protect from such costly mistakes.  If you have questions before, during, or after a lease regarding security deposits or other matters, please contact one of the Real Estate attorneys at Baker, Braverman & Barbadoro, P.C. to get the expert legal advice you need. – Kimberly Kroha.

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New Non-Compete Law Goes Into Effect On October 1st: What It Means For Employers

It has been a long-time coming, but it is finally here, Non-Compete reform in Massachusetts.  The new law, which was recently signed by Governor Baker, places significant restrictions on how employers can use non-compete agreements with employees and independent contractors.  Here are the highlights:

• The new law, M.G.L. c. 149 §24L (Massachusetts Non-Competition Agreement Act) applies only to non-compete agreements entered into on or after October 1, 2018. It is currently unclear how amendments to pre-October 1^st non-competes will be treated.
• The new law does not apply to all agreements that contain restrictive covenants, which means it does not apply to customer or employee non-solicitation agreements or agreements made in connection with selling a business. It also does not apply to confidentiality and non-disclosures agreements.
• Not all employees can be required to sign non-compete agreements. The new law prohibits employers requiring employees classified as “non-exempt” under the Fair Labor Standards Act (FLSA), employees 18 years old or younger, hourly employees, and undergraduate or graduate students engaged in short-term employment to sign non-compete agreements. Noncompetition agreements are still prohibited for certain professions, including physicians, nurses, psychologists, social workers, lawyers and those in the broadcasting industry.

• If an employee is terminated without cause or if the employee is laid off, the non-compete agreement is no longer enforceable. The only exception is if the non-compete is part of a separation agreement.
• Employers must provide fair and reasonable consideration when a non-compete is executed after employment has begun; continued employment is no longer sufficient consideration.
• Non-compete agreements must be limited to one (1) year; protect a legitimate employer interest as set forth by statue (e.g. trade secrets); and cover a geographical area that is reasonable in regards to the employer’s protected interest. If an employee breaches his/her fiduciary duty or steals employer’s property, the non-compete could last up to two (2) years.
• A huge impact on employers is the addition of “garden leave” or other “mutually agreed upon consideration” provisions. The garden leave provision requires employers to pay at least fifty percent (50%) of the employee’s highest base salary within the last two years of employment for the entire non-compete period. Garden leave pay is required only if the employer chooses to enforce the restrictive covenant; the employee is in compliance with the agreement, and it is only paid for up to a maximum of one (1) year (it would no longer apply if the non-compete period extended to two (2) years as a result of an employee’s breach of fiduciary duty or theft of employer property). Of specific interest is that there is no exception to the garden leave requirement where an employee is terminated for cause or resigns.  This provision will likely be the provision that causes employers to reconsider the use of non-compete agreements.
• There are new procedural notice requirements in order to enforce a non-compete agreement. If the agreement is entered into at the commencement of employment it needs to be in writing and signed by both employer and employee; expressly state that the employee has the right to consult an attorney prior to signing; be provided to the employee before a formal offer of employment is extended or ten (10) business days before the commencement of employment, whichever comes first.  If the non-compete agreement is entered into after the commencement of employment, and is not as part of an employee’s separation from the company, the agreement needs to be supported by fair and reasonable consideration (not the continuation of employment); be in writing and signed by both the employer and employee; provide as least ten (10) days notice to the employee; and state that the employee has the right to have the agreement reviewed by an attorney.
• The new law does not provide guidance as to what is “fair and reasonable consideration”.
• Courts have the power to rewrite the non-compete to make it valid and enforceable, but the law does not require the court to do so.

This new statute will have many employers re-thinking the need for employee non-compete agreements, however if an employer believes a restrictive covenant is necessary to protect their legitimate business interests, the employment attorneys at Baker, Braverman & Barbadoro, P.C. are prepared to help determine what restrictive covenants are necessary to protect your business. – Susan M. Molinari.

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Beach Right Disputes: When the Beach is So Close, Yet So Far Away

Like many seaside areas of Massachusetts, Dennis has a sought-after beach on Cape Cod Bay. So much so in fact that access to one particular beach area is the subject of three appellate decisions.

The seaside neighborhood in dispute consists of approximately 200 acres, which was developed into residential lots beginning approximately 1903. Generally, the inland property owners seek to confirm rights to access the beach through certain ways and rights to use private portions of the beach. The shorefront property owners seek to protect the beach in front of their homes from such use. The area is registered land, which often invokes different legal analysis than recorded land.

The first appellate decision was published by the Supreme Judicial Court in 2015, and the second and third decisions were published by the Appeals Court on July 27, 2018. In the first case (Hickey I), the SJC determined that certain inland property owners had easement rights to use a way leading to the beach despite the fact that language on the certificates of title for the shorefront properties did not expressly, or through explicit reference, reserve any such easement for the benefit of these inland owners.  The decision was somewhat groundbreaking in that the Court applied a particular easement analysis applicable to recorded land to registered land for the first time. Specifically, the Court allowed an inferential leap between the shorefront certificates of title to the inland certificates, a connection that was not explicitly referenced on the shorefront certificates or those documents specifically referenced therein. The Court concluded that shorefront property owners had a burden to review plans and certificates not directly referenced in their certificates of title because language on documents referenced on the certificate suggested that additional documents may affect their property rights. After making the leap to the additional documents, the shorefront owners would have been aware of easement grants in certificates of title for certain inland property owners.

After the Court confirmed certain inland property owners’ rights to use the access way leading to the beach, the inland owners sought to effectuate the rights settled in Hickey I by constructing a walkway and stairs to access Cape Cod Bay and by confirming the scope of their beach rights. The inland owners prevailed in arguing that the shorefront owners lacked standing to appeal a conservation decision granting them authority to construct a walkway. However, the shorefront owners have another appeal pending that could affect authority to construct the walkway. Additionally, shorefront owners prevailed in the second Appeals Court case, where inland owners were found not to have private rights to use the beach in front of the seaside lots.

As to the walkway, the Appeals Court determined that shared easement rights do not automatically grant standing to one easement holder to challenge the attempts of another to improve the easement through appealing a conservation decision. Specifically, shared easement holders can only challenge a conservation project through allegations that they have wetland-related concerns that are within the zone of interest protected by wetlands law.  The court concluded that the damages alleged by the shorefront owners concerned the scope of the easement, a concern that was not implicated in conservation decisions. Accordingly, the shorefront conservation appeal was properly dismissed.

This victory is limited by the shorefront owners’ other avenues available to challenge the proposed project and because the Appeals Court also concluded, on the same day, that even after the inland owners reach the beach, they have no special rights to use the intertidal beach area that lies seaward of the shorefront lots beyond those of the general public.  Massachusetts is in the minority of seaside states that allow private ownership of intertidal beach areas.  Such ownership is limited by reserved public rights generally known as fishing, fowling and navigation. The inland plaintiffs sought to confirm that they have rights to use this beach area beyond those reserved for the public. Applying the analysis in Hickey I, the Appeals Court rejected this argument because language on the applicable certificates of title would not have given any indication the inland property owners had such rights. Although not decided in the case, the court left open the possibility that inland owners may have full beach rights to the area of land that follows the trajectory of the access way in which they were found to have rights in Hickey I.

It can be a long, granular, and uncertain path to enjoy private Massachusetts beaches as an inland property owner, and it can be an expensive component of seaside ownership to protect private beach rights granted with ownership of the land. If you own or are purchasing property in a seaside development, please contact one of the Real Estate attorneys at Baker, Braverman & Barbadoro, P.C. to get the expert legal advice you need. – Kimberly Kroha.

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Reasons Why Financial Advisors Should Partner with Trust and Estate Attorneys when Creating a Client Plan

Unfortunately, a significant percentage of people fail to have any sort of estate planning in place, forcing their families and beneficiaries to navigate the complexities of probate court in order to acquire the deceased person’s property. Probate is a long and costly process, but can often be entirely avoided through proper estate planning and trust funding.

For financial advisors, planners, and investment managers, simply ensuring that a client’s trust is properly funded can provide significant financial advantages and cost savings. Assets placed in a trust, or assets for which a trust is the named beneficiary are not subject to probate in most circumstances, and can therefore be distributed or made available to a surviving spouse or other beneficiaries immediately after the owner’s death.

Assets that are not in trust, or that do not have a named beneficiary, will be subject to the probate process. This can restrict the use of the assets for a year or more, which can place a significant financial burden on a surviving spouse or other relatives who must make ends meet while they wait for probate to conclude.

Financial planners and advisors should discuss these risks with clients and collaborate with clients and their attorneys during the estate planning and funding process. This will benefit both advisors and their clients in the following ways:

1. You may discover assets not yet under management that the client may under your management – prior employer 401ks, scattered IRAs or investment accounts, or individual stocks or savings bonds available for liquidation and/or reinvestment.
2. You may find product opportunities – life insurance needs (new policies, outdated policies, potential 1035 exchanges); annuities that can be cashed in or converted; or large cash balances in bank accounts or CDs that can be invested with your or placed under your management.
3. Your clients will value your hands on, professional approach and your holistic understanding of how financial planning interacts with estate planning.
4. You will increase client retention and improve the lifetime value of your customers by staying involved with clients’ children and other beneficiaries throughout transition times and major life events, including aiding in a smooth transition of ownership between multiple generations.
5. Working with clients’ estate planning attorneys in the funding of clients trusts is a great opportunity to generate referral business and provide meaningful an effective financial advice to your clients.

Given the close relationship between financial planning and estate planning, there are significant benefits for clients in using a team approach. If you are a financial planner or investment advisor and want to learn more about how your clients can benefit from proper trust planning, please feel free to contact our trust and estates attorneys at Baker, Braverman, & Barbadoro, PC. – Thomas P. O’Neill, III.

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Overview of Business Tax Changes for 2018

The recently enacted Tax Cuts and Jobs Act (“TCJA”) is a sweeping tax package. Here’s an overview of some of the more important business tax changes in the new law. Unless otherwise noted, the changes are effective for tax years beginning in 2018.

• Corporate tax rates reduced. One of the more significant new law provisions cuts the corporate tax rate to a flat 21%. Before the new law, rates were graduated, starting at 15% for taxable income up to $50,000, with rates at 25% for income between 50,001 and $75,000, 34% for income between $75,001 and $10 million, and 35% for income above $10 million.
• Dividends-received deduction. For corporations owning at least 20% of the dividend-paying company, the dividends-received deduction has been reduced from 80% to 65% of the dividends. For corporations owning under 20%, 70% to 50%.
• Alternative minimum tax repealed for corporations. The corporate alternative minimum tax (AMT) has been repealed by the new law.

• Alternative minimum tax credit. Corporations are allowed to offset their regular tax liability by the AMT credit. For tax years beginning after 2017 and before 2022, the credit is refundable in an amount equal to 50% (100% for years beginning in 2021) of the excess of the AMT credit for the year over the amount of the credit allowable for the year against regular tax liability.
• Net Operating Loss (“NOL”) deduction modified. Under the new law, generally, NOLs arising in tax years ending after 2017 can only be carried forward, not back. The general two-year carryback rule, and other special carryback provisions, have been repealed. These NOLs can be carried forward indefinitely, rather than expiring after 20 years. Additionally, under the new law, for losses arising in tax years beginning after 2017, the NOL deduction is limited to 80% of taxable income with Carryovers to other years being adjusted.
• Limit on business interest deduction. Under the new law, every business, regardless of its form, is limited to a deduction for business interest equal to 30% of its adjusted taxable income. For pass-through entities such as partnerships and S corporations, the determination is made at the entity, i.e., partnership or S corporation, level. There are computation limitations. Any disallowed interest is carried forward. Generally, the limitation does not apply to taxpayers with an average annual gross receipts of $25 million or less for the three-prior years. Real property trades or businesses can elect under certain circumstances.
• Domestic production activities deduction (“DPAD”) repealed. The new law repeals the DPAD for tax years beginning after 2017.
• New fringe benefit rules. The new law eliminates the 50% deduction for business-related entertainment expenses. The pre-Act 50% limit on deductible business meals is expanded to cover meals provided via an in-house cafeteria or otherwise on the employer’s premises. Additionally, the deduction for transportation fringe benefits (e.g., parking and mass transit) is denied to employers, but the exclusion from income for such benefits for employees continues
• Penalties and fines. Under pre-Act law, deductions are not allowed for fines or penalties paid to the government for the violation of any law. Now, no deduction is allowed for any otherwise deductible amounts that relate to the violation of any law, investigation or inquiry, excepting any payments for restitution, remediation or compliance with any law violated or asserted. The exception must be identified in the court order or settlement agreement as such a payment. An exception also applies to an amount paid or incurred as taxes due.
• Sexual harassment. Under the new law, effective for amounts paid or incurred after Dec. 22, 2017, no deduction is allowed for any settlement, payout, or attorney fees related to sexual harassment or sexual abuse if the payments are subject to a nondisclosure agreement.
• Lobbying expenses. The new law disallows deductions for lobbying expenses paid or incurred after the date of enactment with respect to lobbying expenses related to legislation before local governmental bodies (including Indian tribal governments). Under pre-Act law, such expenses were deductible.
• Family and medical leave credit. A new general business credit is available for tax years beginning in 2018 and 2019 for eligible employers equal to 12.5%( subject to increase) of wages they pay to qualifying employees on family and medical leave if the rate of payment is 50% or more of wages normally paid. The maximum leave is 12 weeks. A written policy must be in place and allowing at least two weeks of paid family and medical leave a year for full time employees and pro-rated amount of leave for less than full time. A qualifying employee must be employed for at least one year in the preceding year, had compensation not above 60% of the compensation threshold for highly compensated employees. Paid leave provided as vacation leave, personal leave, or other medical or sick leave is not considered family and medical leave.
• Qualified rehabilitation credit. The new law repeals the 10% credit for qualified rehabilitation expenditures for a building that was first placed in service before 1936, and modifies the 20% credit for qualified rehabilitation expenditures for a certified historic structure. The 20% credit of the qualified rehabilitation expenditures is allowable during the five-year period starting with the year the building was placed in service.
• Increased Code Sec. 179 expensing. The new law increases the maximum amount that may be expensed under Code Sec. 179 to $1 million. If more than $2.5 million of property is placed in service during the year, the $1 million limitation is reduced by the excess over $2.5 million. The expense election now includes (1) depreciable tangible personal property used to furnish lodging and (2) the improvements to nonresidential real property made after it was first placed in service: roofs; heating, ventilation, and air-conditioning property; fire protection and alarm systems; security systems; and any other building improvements that aren’t elevators or escalators, don’t enlarge the building, and aren’t attributable to internal structural framework.
• Bonus depreciation. Under the new law, a 100% first-year deduction is allowed for qualified new and used property acquired and placed in service after September 27, 2017 and before 2023. Pre-Act law provided for a 50% allowance, to be phased down for property placed in service after 2017. Under the new law, the 100% allowance is phased down starting after 2023.
• Depreciation of real property. The new law modified some rules for the depreciation of residential rental buildings and certain building improvements.
• Luxury auto depreciation limits. Under the new law, for a passenger automobile for which bonus depreciation (see above) is not claimed, the maximum depreciation allowance is increased to $10,000 for the year it’s placed in service, $16,000 for the second year, $9,000 for the third year, and $5,760 for the fourth and later years in the recovery period. These amounts are indexed for inflation after 2018. For passenger autos eligible for bonus first year depreciation, the maximum additional first year depreciation allowance remains at $8,000 as under pre-Act law.
• Computers and peripheral equipment. The new law removes computers and peripheral equipment from the definition of listed property. Thus, the heightened substantiation requirements and possibly slower cost recovery for listed property no longer apply.
• New rules for post-2021 research and experimentation (“R & E”) expenses. Under the new law, specified R & E expenses paid or incurred after 2021 in connection with a trade or business must be capitalized and amortized ratably over a 5-year period (15 years if conducted outside the U.S.).
• Like-kind exchange treatment limited. Under the new law, the rule allowing the deferral of gain on like-kind exchanges of property held for productive use in a taxpayer’s trade or business or for investment purposes is limited to cover only like-kind exchanges of real property not held primarily for sale. Under a transition rule, the pre-TCJA law applies to exchanges of personal property if the taxpayer has either disposed of the property given up or obtained the replacement property before 2018.
• Excessive employee compensation. Under pre-Act law, a deduction for compensation paid or accrued with respect to a covered employee of a publicly traded corporation is deductible only up to $1 million per year. Exceptions applied for commissions, performance-based pay, including stock options, payments to a qualified retirement plan, and amounts excludable from the employee’s gross income. The new law repealed the exceptions for commissions and performance-based pay. The definition of “covered employee” is revised to include the principal executive officer, principal financial officer, and the three highest-paid officers.
• Employee achievement awards clarified. An employee achievement award is tax free to the extent the employer can deduct its cost, generally limited to $400 for one employee or $1,600 for a qualified plan award. An employee achievement award is an item of tangible personal property given to an employee in recognition of length of service or a safety achievement and presented as part of a meaningful presentation. The new law defines “tangible personal property” to exclude cash, cash equivalents, gift cards, gift coupons, gift certificates (other than from an employer pre-selected limited list), vacations, meals, lodging, theater or sports tickets, stocks, bonds, or similar items, and other non-tangible personal property.

If you have questions about the Business Tax Changes for 2018, please contact one of the tax attorneys at Baker, Braverman & Barbadoro, P.C. to set up an appointment. – Warren F. Baker.

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The Massachusetts Equal Pay Act Goes Into Effect July 1st – What Does It Do?

On July 1, 2018, the Massachusetts Equal Pay Act (“MEPA”) will go into effect in the Commonwealth, requiring companies to ensure that they pay male and female workers equally for “comparable work.”  On March 1, 2018, the Attorney General’s office issued guidelines aimed at clarifying certain provisions of the law. The below answers the most frequently asked questions regarding MEPA.

Who does the law apply to?

Virtually all Massachusetts employers must comply with MEPA, including state and municipal employers, irrespective of size. It does not apply to the federal government as an employer. It covers all employees whose primary place of work is in Massachusetts, regardless of where the employee lives.

What constitutes “comparable work”?

The definition of “comparable work” has been the most criticized aspect of the law, as many believe that even the Attorney General’s issuance of guidelines aimed at clarifying the term have left it far too subjective of a standard.  The Attorney General guidelines state that employers must pay men and women equally for jobs that require “substantially similar skill, effort and responsibility” and are performed under “similar working conditions.” This provision will undoubtedly be the most litigated aspect of MEPA.

Do job titles matter?

Although job titles are one factor to look at when determining comparable work, the Attorney General’s guidelines clearly indicate that different job titles alone do not give rise to the presumption that two employees are not doing comparable work. In other words, businesses cannot just use job titles alone to justify pay rates. They must do a deeper comparison to meet the “comparable work” threshold.

Are there exceptions to the law?

Yes, the law does recognize that in certain circumstances, differences in pay for comparable work may be attributable to one of these six factors: (a) seniority with the employer; (b) use of a merit system; © differences tied to meeting sales, revenue or production goals; (d) geographic location differences; (e) additional education, training and experience reasonably related to the job; and (f) travel required for the job.

What is the effect of the law on the hiring process?

A key change in the recruitment and hiring process for employers to be aware of is that employers may no longer ask applicants about salary history. Studies have shown that since women have historically made less than their male counterparts, the use of past salaries to determine future salaries inherently contributes to the continuity of the pay gap problem. In addition, the law makes it illegal for employers to prohibit employees from openly discussing wages with one another.

What can businesses do to protect themselves?

The law provides that businesses can use a “self-evaluation” as an affirmative defense of a lawsuit alleging a violation of MEPA.  To do so the business must show that it has conducted a legitimate self-evaluation of its employee pay rates and gender comparisons within the past three years prior to the litigation. The business would present the self-evaluation to a judge who would have to deem it adequate and find that the company made “reasonable progress towards eliminating compensation differentials based on gender”.

How can your business prepare to ensure compliance with the new law?

The Attorney General’s Office has offered a dedicated website with information, advice and webinars: https://www.mass.gov/massachusetts-equal-pay-law.  It is also advisable to meet with an employment law attorney to review your current pay structure and hiring practices, and to conduct an initial self-evaluation.

Please contact one of the employment lawyers at Baker, Braverman & Barbadoro, P.C. to make an appointment for your business. – Theresa Barbadoro Koppanati.

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How to Avoid Probate and Reduce the Costs of Estate Administration

Today many people are using revocable living trusts as the foundation for their estate plans. When properly prepared, a living trust will avoid the public, costly, and time-consuming court process of conservatorship (due to incapacity) or probate (after death). Still, many people make a big mistake that sends their assets and loved ones right into the court system: they fail to fund their trust.

What Does it Mean to “Fund a Trust?”

Funding can be accomplished several different ways:

• Changing the title of the asset from your individual name (or joint names) to the name of your trust – for example, from John Smith individually, to John Smith, as Trustee of the John Smith Living Trust…
• Assigning your interest in an asset without a title (such as artwork, jewelry, collectibles or antiques) to your trust.
• Changing the primary or contingent beneficiary of the asset (i.e. your IRA, 401(k), 403(b), life insurance policy, etc.) to your trust.

What Happens to Assets Left Out of Your Trust?

For many people avoiding probate is one of the main reasons they set up a revocable living trust. Unfortunately, you may believe that once you sign your trust agreement, you’re done. However, if you fail to take the next step and change titles and beneficiary designations before you become incompetent or pass away, then your loved ones will be forced to complete the probate process in order to distribute your assets.

Which Assets Should, (or should not), Be Funded Into Your Trust?

In general, the following types of assets are typically appropriate to transfer into your trust as soon as it is created:

• Real estate – homes, rental properties, vacant land and timeshares
• Bank and credit union accounts – checking, savings, CDs
• Safe deposit boxes
• Investment accounts – brokerage, agency, custody
• Notes payable to you
• Life insurance – if you don’t have an irrevocable life insurance trust
• Business interests
• Intellectual property
• Oil and gas interests
• Personal effects – artwork, jewelry, collectibles, antiques

On the other hand, the following types of assets are treated differently for tax purposes, and should be evaluated on a case-by-case basis to determine whether they can, or should, be transferred into your trust:

• IRAs and other tax-deferred retirement accounts – only the beneficiary should be changed
• Incentive stock options and Section 1244 stock
• Interests in professional corporations
• Foreign assets – in some countries funding an asset into a U.S.-based trust causes adverse tax consequences, while in other countries trusts aren’t recognized or are ignored due to forced heirship laws
• UTMA and UGMA accounts – your minor grandchild is the owner, not you as the custodian; instead, name a successor custodian
• Cars, trucks boats, motorcycles and scooters –most states allow a small amount of assets, including vehicles, to pass outside of probate, in others a beneficiary can be designated for vehicles, and in others, vehicles don’t have to go through probate at all

However, it may be possible to name the trust as beneficiary of these assets, which is not the same as transferring them into trust. When the trust is named as beneficiary, the asset typically transfers on the death of the owner. It is vitally important to work closely with your attorney to determine what should go into your trust and what should stay out.  Also, before purchasing new assets, you should consult with your attorney to determine the most advantageous way to title your accounts, prepare transfer documents, and determine who to designate as beneficiary.

What Are the Benefits of Proper Funding?

Funding your trust makes it possible to obtain the best results from your trust-based estate plan:

• Your incapacity trustee, rather than a court-appointed conservator or probate judge, will take control of your trust assets if you become mentally incompetent. Having a properly funded trust with backup trustees will allow you to avoid the need for court involvement in the management of your property if you are incapacitated during life.
• After death, your settlement trustee, rather than a probate judge will take control of your trust assets. This will allow your loved ones to avoid the cost, delay, and aggravation of the court-supervised probate process.
• Your trust will be easier to update as your wishes and circumstances change instead of doing things piecemeal through joint ownership, transfer-on-death accounts, or individual beneficiary designations.
• Your final wishes will remain a private family matter instead of being publicized in the local probate court records.
• Your incapacity or settlement trustee (i.e. surviving spouse & dependents) will typically have direct and immediate access to your trust assets without the need for obtaining a probate court order.
• Your incapacity or settlement trustee will be able to manage, invest, sell and reinvest your trust assets without court intervention.

 The Bottom Line on Trust Funding

Trusts can provide certainty with regards to the distribution of assets after death, and can also be used to achieve tax efficiency. Also, regardless of whether or not you have a taxable estate, trusts can dramatically reduce the cost of estate administration, and can significantly reduce the time it takes to distribute your assets after death. However, many people fail to take the additional step of funding the trust once it has been created.

If you want to know more about how you can benefit from a living trust, or if you would like to review your existing trust agreement to make sure it is properly funded, please contact Baker, Braverman & Barbadoro, PC to make an appointment. – Thomas P. O’Neill, III.

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Thinking Of Converting Your Multi-Family Home To A Condominium?

With the skyrocketing real estate values in Greater Boston the last few years, many owners of two, three and four family homes have thought about converting their properties into Condominium ownership so that they can legally sell off one or more units and maximize their total value from the properties.  If you are thinking of converting your multi-family home into a condominium here are some important things to consider.

It is much easier, both from a physical and from a legal standpoint to convert a residential property into a Condominium when the property is completely vacant. Some municipalities have Condominium Conversion rules that will kick in if the converted property is currently tenanted, but not if it is vacant at the time of conversion.  In addition many properties need at least a small amount of physical alteration to work well as a Condominium, such as separating the heating systems, electrical panels and building access as well as striping of reserved parking spaces, all of which are a lot easier if your building is vacant.  Any common area electric needs to be metered separately from the individual unit owner’s service.

The advantage of converting a property into a Condominium is that in most cases, you are greatly increasing the total re-sale value of the property. The preparation of proper Condominium legal documents and the Site Plan and Floor Plans to comply with lender requirements requires both an experienced Condominium real estate attorney and an experienced surveyor/engineer to make the process quick, easy and legally effective.

If you are considering converting one of your multi-unit properties into a Condominium, contact Baker, Braverman & Barbadoro, P.C. for a consultation. – Lawrence A. DiNardo.

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Administering an Estate in the Digital Age

Imagine that a family member has just passed away and you know they have important information stored on the internet. It could be in the cloud, in their email, or on a social media account. How do you access this information? The Massachusetts Supreme Judicial Court (“SJC”) recently decided the case Ajemian v. Yahoo!, Inc., 478 Mass. 169 (2017), has shed some light on this question.

Ajemian was named the Personal Representative (formerly executor/trix, appointed by the Probate Court to administer the decedent’s estate) of her late brother’s estate and needed access to his Yahoo email account. She offered her Letters of Authority (a document from the Probate Court that shows the Personal Representative has the authority to act on behalf of the estate) to Yahoo who refused to grant her access to the email account. Yahoo claimed that a Personal Representative of an Estate did not have the right to access the information because of federal privacy laws and that the disclosure violated Yahoo’s terms of service. The SJC ultimately determined that disclosing the information in the Yahoo email account to Ajemian did not violate federal privacy laws because Ajemian, as Personal Representative, was the only person with authority to consent to the release of the email account on behalf of the deceased. The SJC did not make a ruling on whether or not the disclosure would violate Yahoos terms of service and remanded that decision back to the Probate Court.

While the SJC did not give the total green light to the release of the Yahoo email account to Ajemian, the SJC did rule that the release did not violate federal privacy laws. This decision can have a ripple effect throughout the internet community possibly allowing Personal Representatives to request and access the electronic information of deceased loved ones. Facebook and Instagram already have policies in place allowing court appointed Personal Representatives to delete or memorialize the account of a deceased loved one. Gmail even allows people to appoint someone on their email service who will automatically be able to access account information after the death of the account holder.

One way to ensure that your loved ones will be able to access your electronic information, or to specifically prohibit access, is to make provisions regarding such access in your Last Will and Testament (“Will”). Your Will tells the court who you want to be in charge of your estate and what you want that person to do with your assets. This can include access, or specific prohibitions, to electronic information.

If access to your electronic information after you pass away is important to you, the Estate Planning attorneys at Baker, Braverman & Barbadoro can help you draft a Will that includes your electronic access goals. – Elizabeth A. Caruso.

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