Ruggiero Law Blog

Friday, April 4, 2014

Protect your Business with the Right Insurance

Protecting Your Business with the Right Insurance

Starting a business is the dream of a lifetime for many Americans. While most entrepreneurs prefer to focus on the aspects of the business that will result in profit, it’s equally important to consider what will happen in the event of an emergency, injury or even sudden death. In preparing for the “worst case scenario”, insurance coverage must be carefully considered. Selecting insurance policies can be challenging; there are dozens of options and the necessity of some will depend largely on the type of business, the number of employees (if any) and the physical location(s).

To help you get started with your planning, we’ve compiled a quick checklist of different types of insurance that all business owners should consider:

General Liability Insurance – Regardless of the type of business or where it is located (even if it is in your home office), all owners should purchase this type of insurance which provides protection if you or your employees cause bodily harm or property damage to a third party. This type of insurance can protect against a customer who brings legal action after taking a sip of hot tea that you served in the reception area or even a vendor who was injured when an item from a closet shelf fell on him during a delivery to your office.

Commercial Property Insurance – If you own an office building, or have valuable business property such as equipment, inventory or tools, you should carefully consider this option which protects your company from any damage or loss which might occur as a result of fire, theft, vandalism, etc. In assessing which policy you need, also take time to consider whether you need business interruption insurance which may protect your business from a loss of earning when you are unable to operate; this may be helpful in the aftermath of a natural disaster where your building is without power for several days.

Product Liability Insurance – If your company manufactures, distributes or retails products to consumers, you might consider purchasing this insurance which protects against financial loss suffered as a result of a product defect that causes injury to the user.

Business Owners Policy (BOP) – This type of package is essentially a bundle offering of all of the required policies that a business owner would need. This will often include property, liability, vehicle, business interruption, etc. These policies often save business owners more money than if they were to purchase each one separately.

Professional Liability Insurance – If you provide a professional service to consumers, you may consider carrying this type of coverage which provides defense and damages for improperly rendering professional services, or failure to deliver them at all. Depending on your industry, this insurance may be mandated by your state. Professional liability insurance has become quite standard among healthcare professionals, attorneys, veterinarians, pharmacists and architects.

Commercial Auto Insurance – If you have a single vehicle, or an entire fleet, that is used to carry employees, equipment or products, you should consider purchasing commercial auto insurance which protects from damages and collisions. If your employees use their own vehicles, you may have the option to purchase non-owned auto liability, which protects your business in the event that an employee has an accident but does not have sufficient coverage to pay for the damages.

Data Breach Insurance – Also known as cyber insurance, this type of policy protects against any damages incurred as a result of a hacking attack or loss of sensitive client date. Due in large part to recent high-profile data breaches where customers’ credit card numbers were compromised, one in three U.S. companies now carries this type of coverage.

Directors and Officers Liability Insurance – This type of insurance protects your board of directors and officers from any legal action resulting from their performance of duties as it relates to your company. Many investors and potential board members will require this type of policy to ensure their personal assets are not jeopardized.

Life Insurance – In a company where there are multiple shareholders, it’s not uncommon to find life insurance policies in the mix. Generally, the policy is structured in such a way that upon the passing of one of the shareholders, the remaining shareholders or the company will receive compensation so they can buy out the shares of the deceased. This can help to protect the business and ensure continuity despite the loss of one of its leaders. In small businesses, a partner may purchase a life insurance policy on a fellow partner or key employee who is crucial to the business. The reasoning behind this coverage is that in the absence of this individual, the company would suffer severely and could even lead to its closing.

If your business has employees, there are a number of other policies which you will want to consider. These include:

Workers Compensation Insurance – As the name explains, this insurance simply provides wage replacement and covers medical expenses for employees who are injured on the job. All states require this type of coverage if you have any W2 employees.

Disability Insurance – This type of employer-sponsored insurance provides income replacement to disabled employees who are unable to work and receive their regular wages. This type of coverage is only required by law in five states: California, Hawaii, New Jersey, New York, and Rhode Island.

Unemployment Insurance Tax – While you don’t have to purchase an unemployment insurance policy, any company with employees must pay unemployment insurance taxes as determined by the state. This program is designed to provide benefits to unemployed workers who have been terminated by no fault of their own (e.g. think of a company that has major cut backs and “lays off” an employee). It’s important that you consult with your state’s workforce agency for up to date information and to learn what’s required of you.

In some cases, your state may require certain insurance coverage based on your industry and the services or product provided. To ensure compliance and make sure you properly protect your business and your own personal assets, it’s important that you consult a knowledgeable business law attorney and insurance advisor who can advise you on the best course of action and review your needs annually.


Wednesday, March 26, 2014

Family Businesses: Simple steps for Success

Family Businesses: Simple Steps to Avoid Common Pitfalls

If you have a family business or are thinking about starting one, kudos to you! There are few better ways to create tradition, meaning and bonds within a family, and a family business can be a gratifying way by which to build wealth.

Family enterprises, however, can bring conflict, legal challenges and financial distress when simple preventative steps are not taken. A business law attorney can assist you with the following issues commonly faced by family businesses:

  • The absence of a succession plan. If the leader of a business dies, sells or becomes incapacitated, the business he or she leaves behind will appoint a leader, somehow, by necessity. The succession process at that point, however, will likely be complicated, and the result may not be optimal for the business or your family. An attorney can assist in identifying all of your options, and help you select one that works best for you and your business. For instance, if the business belongs exclusively to you, you can simply leave it to the person you feel should own and run it. If the business is professional in nature, such as a medical or legal practice, you can identify an outside buyer/successor and prepare him or her using a process agreeable to both of you. If the business belongs to two or more family members or other individuals, a contractual succession plan can be devised, lessening stress both now and at the time the succession occurs.

  • The lack of employment agreements. It’s rare that families who start businesses together are initially comfortable discussing the particulars of vacation and sick days, wages, raises and absenteeism. Yet these issues affect every business and will affect yours. The time for all parties to discuss expectations and rules is now, before issues arise, not later, when issues have already led to resentment and confusion.

  • The failure to acquire a business license. Often, small business start-ups skip the step of acquiring a business license that may be required in a particular industry, perhaps choosing instead to wait and see whether the business will succeed. It’s important, though, not to avoid this step. By not acquiring a business license and necessary zoning permits and by not meeting other legal requirements, you expose your business not only to penalties but also the possibility of being shut down with financial and reputational consequences that accompany an unexpected closing.

  • Mixing personal and business funds. The separation of personal and business funds isn’t just good business; it can save you money. When personal money “disappears” into a business owned by you and others, you’ve lost at least part of those funds regardless of how successfully they’re put to use by the business. An issue related to separating personal and business funds is that of separating personal liability from that of the business. By housing the business in a legal entity, such as a corporation or limited liability company, you can shield yourself from liabilities faced by the business.

Drafting contracts, obtaining needed licenses, negotiating with municipal entities and selecting and creating a business entity can involve complex legal issues. To ensure success and to protect your interests, contact Ruggiero Law Offices LLC or a qualified business law attorney in your area.

 


Friday, March 21, 2014

James J. Ruggiero Jr. earns board certification as Estate Planning Law Specialist

PRESS RELEASE: For Immediate Release

MEDIA CONTACT: Beth Ruggiero, Phone: 610-889-0288, beth@paolilaw.com

James. J. Ruggiero, Jr. Earns Board Certification as an Elite Estate Planning Law Specialist

PAOLI, PA  February 14, 2014 - James. J. Ruggiero, Jr. has demonstrated a high level of professionalism and commitment to specialization in estate planning by earning board certification as an Estate Planning Law Specialist (EPLS), awarded by the Estate Law Specialist Board, Inc. This is an organization accredited by the American Bar Association and affiliated with the National Association of Estate Planners & Councils. Mr. Ruggiero is the managing partner of Ruggiero Law Offices LLC with two locations in Pennsylvania: Paoli and Saucon Valley. 

“Technology has caused information to be commoditized. I believe there is no substitute for knowledge, and I am proud to expand my education in estate planning with the EPLS certification,” said James Ruggiero.

In addition to the prestigious EPLS board certification, Mr. Ruggiero was named a Top Attorney in Trusts and Estates & Elder Law in Main Line Today Magazine in 2009, 2011, and 2012. He has earned the Five Star Wealth Manager, Best in Client Satisfaction Award from 2009 to 2013. And he is an Accredited Estate Planner® (AEP®), a graduate-level specialization in estate planning awarded to professionals with a minimum of 5 years of estate planning experience.

To become Board-certified as an Estate Planning Law Specialist, an attorney must have:

  • Favorable recommendations from at least five unaffiliated colleagues
  • At least 36 hours of continuing legal education credits within last three years
  • Passing grade on the comprehensive examination in estate planning
  • One third of his or her practice devoted to estate planning for a minimum of five years

Candidates cannot self-nominate, and they must demonstrate the enhanced level of skill and expertise required for this designation. Attorneys cannot pay a fee to be considered.

The Estate Law Specialist Board, Inc. is an attorney-run affiliate of the National Association of Estate Planners & Councils in Cleveland, Ohio. It is the only ABA-accredited program for certification of an attorney as an Estate Planning Law Specialist.

For more information about the Estate Law Specialist Board, Inc. program, contact Susan Austen Carney, Administrator, Estate Law Specialist Board, Inc., 1120 Chester Avenue, Suite 470, Cleveland, Ohio 44114. Or call toll-free: (866)226-2224. For more details, see www.naepc.org.

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Thursday, March 13, 2014

What to do after a Loved One Passes Away

What to Do after a Loved One Passes Away

The loss of a loved one is a difficult time, often made more stressful when one has to handle the affairs of the deceased. This may be a great undertaking or rather minimal work, depending upon the level of estate planning done prior to death.

Tasks that have to be performed after the passing of a loved one will vary based on whether the departed individual had a will or not. In determining whether probate (a court-managed process where the assets of the deceased are managed and distributed) is needed, the assets owned by the individual, and whether these assets were titled, must be considered. It’s important to understand that assets titled jointly with another person are not probate assets and will normally pass to the surviving joint owner. Also, assets such as life insurance and retirement assets that name a beneficiary will pass to the named beneficiaries outside of the court probate process. If the deceased relative had formed a trust and during his life retitled his assets into that trust, those trust assets will also not pass through the probate process.

Each state’s rules may be slightly different so it is important to seek proper legal advice if you are charged with handling the affairs of a deceased family member or friend. Assuming probate is required, there will be a process that you must follow to either file the will and ask to be appointed as the executor (assuming you were named executor in the will) or file for probate of the estate without a will (this is referred to as dying "intestate" which simply means dying without a will). Also, there will be a process to publish notice to creditors and you may be required to send each creditor specific notice of the death. Those creditors will have a certain amount of time to file a claim against the estate assets. If a legitimate creditor files a claim, the claim can be paid out of the estate assets. Depending on your state's laws, there may also be state death taxes (sometimes referred to as "inheritance taxes") that have to be paid and, if the estate is large enough, a federal estate tax return may also have to be filed along with any taxes which may be due.

Only after the estate is fully administered, creditors paid, and tax returns filed and taxes paid, can the estate be fully distributed to the named beneficiaries or heirs. Given the many steps, and complexities of probate, you should seek legal counsel to help you through the process.


Friday, February 28, 2014

What does the term "Funding the Trust" mean in estate planning?

What Does the Term "Funding the Trust" Mean in Estate Planning?

I am about the start the estate planning process and have heard the term "funding the trust" thrown around a great deal. What does this mean? And what will happen if I fail to fund the trust?

The phrase, or term, "funding the trust" refers to the process of titling your assets into your revocable living trust. A revocable living trust is a common estate planning document and one which you may choose to incorporate into your own estate planning. Sometimes such a trust may be referred to as a "will substitute" because the dispositive terms of your estate plan will be contained within the trust instead of the will. A revocable living trust will allow you to have your affairs bypass the probate court upon your death, using a revocable living trust will help accomplish that goal.

Upon your death, only assets titled in your name alone will have to pass through the court probate process. Therefore, if you create a trust, and if you take the steps to title all of your assets in the name of the trust, there would be no need for a court probate because no assets would remain in your name. This step is generally referred to as "funding the trust" and is often overlooked. Many people create the trust but yet they fail to take the step of re-titling assets in the trust name. If you do not title your trust assets into the name of the trust, then your estate will still require a court probate.

A proper trust-based estate plan would still include a will that is sometimes referred to as a "pour-over" will. The will acts as a backstop to the trust so that any asset that is in your name upon your death (instead of the trust) will still get into the trust. The will names the trust as the beneficiary. It is not as efficient to do this because your estate will still require a probate, but all assets will then flow into the trust.

Another option: You can also name your trust as beneficiary of life insurance and retirement assets. However, retirement assets are special in that there is an "income" tax issue. Be sure to seek competent tax and legal advice before deciding who to name as beneficiary on those retirement assets.


Wednesday, February 12, 2014

Changing a Trust

Removal of a Trustee

In creating a trust, the trustmaker must name a trustee who has the legal obligation to administer it in accordance with the trustmaker’s wishes and intentions. In some cases, after the passing of the trustmaker, loved ones or beneficiaries may want to remove the designated trustee.

The process to remove a trustee largely depends on two factors: 1) language contained with the trust and 2) state law. When determining your options, there are a number of issues and key considerations to keep in mind.

First, it is possible that the trust language grants you the specific right to remove the named trustee. If it does, it likely will also outline how you must do so and whether you must provide a reason you want to remove them. Second, if the trust does not grant you the right to remove the trustee, it may grant another person the right to remove. Sometimes that other person may serve in the role of what is known as a "trust protector" or "trust advisor." If that is in the trust document you should speak to that person and let them know why you want the trustee removed. They would need to decide if they should do so or not. Finally, if neither of those is an option, your state law may have provisions that permit you to remove a trustee. However, it may be that you will have to file a petition with a court and seek a court order. You should hire an attorney to research this for you and advise you of the likelihood of success.

Another option may be to simply ask the named trustee to resign. They may do so voluntarily.

Assuming the trustee is removed, whether by you, a trust protector, or by court order, or if the trustee resigns, the next issue is who is to serve as the successor trustee. Again, looking at the terms of the trust should answer that question. Perhaps a successor is specifically named or perhaps the trust provides the procedure to appoint the successor. Before proceeding, you will want to make certain you know who will step-in as the new trustee.


Tuesday, February 4, 2014

Family business

Family Business: Preserving Your Legacy for Generations to Come

Your family-owned business is not just one of your most significant assets, it is also your legacy. Both must be protected by implementing a transition plan to arrange for transfer to your children or other loved ones upon your retirement or death.


More than 70 percent of family businesses do not survive the transition to the next generation. Ensuring your family does not fall victim to the same fate requires a unique combination of proper estate and tax planning, business acumen and common-sense communication with those closest to you. Below are some steps you can take today to make sure your family business continues from generation to generation.

  • Meet with an estate planning attorney to develop a comprehensive plan that includes a will and/or living trust. Your estate plan should account for issues related to both the transfer of your assets, including the family business and estate taxes.
  • Communicate with all family members about their wishes concerning the business. Enlist their involvement in establishing a business succession plan to transfer ownership and control to the younger generation. Include in-laws or other non-blood relatives in these discussions. They offer a fresh perspective and may have talents and skills that will help the company.
  • Make sure your succession plan includes:  preserving and enhancing “institutional memory”, who will own the company, advisors who can aid the transition team and ensure continuity, who will oversee day-to-day operations, provisions for heirs who are not directly involved in the business, tax saving strategies, education and training of family members who will take over the company and key employees.
  • Discuss your estate plan and business succession plan with your family members and key employees. Make sure everyone shares the same basic understanding.
  • Plan for liquidity. Establish measures to ensure the business has enough cash flow to pay taxes or buy out a deceased owner’s share of the company. Estate taxes are based on the full value of your estate. If your estate is asset-rich and cash-poor, your heirs may be forced to liquidate assets in order to cover the taxes, thus removing your “family” from the business.
  • Implement a family employment plan to establish policies and procedures regarding when and how family members will be hired, who will supervise them, and how compensation will be determined.
  • Have a buy-sell agreement in place to govern the future sale or transfer of shares of stock held by employees or family members.
  • Add independent professionals to your board of directors.

You’ve worked very hard over your lifetime to build your family-owned enterprise. However, you should resist the temptation to retain total control of your business well into your golden years. There comes a time to retire and focus your priorities on ensuring a smooth transition that preserves your legacy – and your investment – for generations to come.


Monday, December 23, 2013

Year End Gifts

Year End Gifts

If you’re like most people, you want to make sure you and your loved ones pay the least amount of tax possible. Many use year-end gift giving as a way to transfer wealth to younger generations and also reduce the overall potential estate tax that will be due upon their death. Below are some steps you can take to make gifts to your heirs without triggering any gift tax liability. Some of these techniques may also reduce your own income tax liability.

A combination of estate and gift tax exemptions can be used to significantly reduce the overall tax liability of your estate. Upon your death, federal estate tax may be owed. A portion of your estate is exempt from the tax. That exemption amount is set by Congress and can change from year to year. 

Many taxpayers make annual gifts to loved ones during their lifetimes, to reduce the overall value of the estate so that it does not exceed the exemption amount in effect at the time of death. It is important to consider that gifts made during your lifetime are subject to a gift tax (equal to the estate tax). However, certain gifts or transfers are not subject to the gift tax, enabling you to make tax-free gifts that benefit your loved ones and reduce the overall taxable value of your estate upon your death.

The annual gift tax exclusion allows each individual to make annual gifts of up to $14,000 to each recipient. There is no limit to the number of recipients who may each receive up to $14,000 totally tax-free. Married couples may gift up to $28,000 to each recipient without triggering any tax liability. This annual exclusion expires on December 31 of each year, and larger gifts may be made by splitting it up into two payments. By making a payment in December and one the following January, you can take advantage of the gift tax exclusion for both years. Keeping annual gifts below $14,000 per recipient ensures that no gift tax return must be filed, and that there is no reduction in the estate tax exemption amount available upon your death.

Annual gifts may also be made in the form of contributions to a §529 College Savings Plan. These, too, are subject to the $14,000 annual gift tax exclusion. Additionally, such contributions may afford the giver with a state tax deduction.

Payment of a beneficiary’s medical expenses is also excluded from the gift tax. There is no limit to the amount of medical expense payments that may be excluded from tax. To qualify, the payment must be made directly to the health care provider and must be the type of expenses that would qualify for an income tax deduction.

If you have a large estate that may be subject to taxes upon your death, making annual gifts during your lifetime can be a simple way to reduce the size of your estate while avoiding negative tax consequences.


Thursday, December 5, 2013

Gifts for Grandkids that will make a difference

Selecting the "Perfect"gift can be daunting especially if grandchildren live far away and you don't really know their likes and dislikes. Here are a few suggestions for every budget.

  • Make a family photo album
  • Give a collection of your favorite recipes
  • Magazine subscription
  • A craft project completed together at home or at an art studio
  • PA 529 college savings contribution
  • Savings bonds
  • Money Camp
  • If age 18 or above, a HIPAA release, Health Care Power of Attorney and a Will

Any of the above gifts will be remembered for many years and provide education and benefits for a lifetime.

Happy Holidays!


Wednesday, November 27, 2013

Using a trust to help plan for long-term care

Planning for long-term care involves the consideration of many factors.  There are a number of reasons that trusts can be used as part of an individual’s long-term care plan.  Sometimes an individual may place assets inside of a revocable living trust.  If the individual becomes incapacitated, the trustee will have the ability to manage the trust assets immediately, and those assets can be used for the care of the individual.  Revocable trusts are more commonly used as part of planning for an individual’s death to deal with issues such as probate (or multi-state probate), or privacy.

Irrevocable trusts are more commonly used in planning for an individual’s long-term care.  If an individual does not have a long-term case insurance policy, they are self-insured for any long-term care needs they may have.  That means it is up to the individual to pay for all of the costs associated with long-term care.  Medicaid is the federally-funded, state-implemented program which pays the costs of long-term care for individuals who qualify.  To qualify for Medicaid, an individual must generally have a very limited amount of assets in his or her name. 

Irrevocable trusts can be used, either alone or in conjunction with other planning strategies, to reduce the amount of assets in an individual’s name for Medicaid purposes. By transferring assets into an irrevocable trust, that individual may qualify for Medicaid sooner; and at 5 years after the time of the transfer into the irrevocable trust, those assets are protected from having to be spent on long-term care.  The Medicaid rules are very complex, and implementing a planning strategy using trusts should only be done with a qualified elder law attorney to avoid any potential planning failures or pitfalls.


Friday, November 8, 2013

2014 COLA increases Impact Social Security & SSI

The Social Security Administration has announced the payments to retired and disabled beneficiaries will increase by 1.5% in 2014.  The increase will take effect starting Dec. 31 for Supplemental Security Income recipients and in January  2014 for people receiving Social Security retirement payments.


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