Congress outlaws genetic discrimination

A company can’t refuse to hire people because they are genetically disposed to develop a particular disease or condition, even if this would cause the company’s health care costs to skyrocket.

That’s the result of the federal Genetic Information Nondiscrimination Act, which was recently signed into law by President Bush.

The law also prohibits insurance companies from using genetic information to deny coverage or increase premiums. [Read more…]

Pre-paid funeral plans can be risky business

Many people like the idea of pre-paid funeral plans because they allow funeral services to be locked in at today’s prices, and save family members the trouble of selecting caskets and attending to other matters at a time of great sadness and stress. 

But if you’re thinking of such a plan, be cautious.  After you’ve paid, there’s always a risk the funeral home will go out of business, or the owner (or a new owner) will abscond with the money. [Read more…]

You can ‘swap’ for property you gave to a trust

Can you put property into a trust, but keep the power to take it back again as long as you substitute other property of equal value?  Yes in some cases, according to an IRS ruling. This means you could put real estate, artwork, an insurance policy or other property into a trust, and keep the power to take it back for yourself, as long as you’re willing to pay the fair market value of it to the trust.

Under the ruling, this is true if the trustee (someone other than you) certifies the substituted property is of equivalent value.  Also, the substitution must not benefit one beneficiary at the expense of another.

Do you want to leave someone your mortgage?

If you plan to leave a house, car, business, or other property to one of your heirs, and the property is subject to a mortgage or other debt, do you want o leave it with the debt? Or do you want the debt to be paid off from your other assets so the person receives the property debt free?

Surprisingly, many people don’t think about this question when they write their will.  But it can have a very big impact on how your assets are divvied up among your heirs.  In some cases where the heirs don’t get along, it can even lead to a lawsuit. [Read more…]

Trust can’t deduct full cost of investment advice

A trust can’t deduct on its tax return the entire amount it spends for investment advice – at least in most cases, the U.S. Supreme Court has decided.

The case involved a trustee who paid $22,000 for investment advice.  He tried to deduct this amount from the $625,000 in income the trust reported on its tax return. For an individual, investment advisory expenses are a “miscellaneous itemized deduction” and they can be deducted only to the extent they exceed 2 percent of adjusted gross income. [Read more…]

Tax-smart ways to pay for your grandchildren’s education

With the cost of education skyrocketing, many people want to contribute to their grandchildren’s tuition costs.  A variety of ways are available to do this, which also have estate-planning benefits.

All these ideas apply not just to grandchildren but to grandnieces, grandnephews, great-grandchildren and others.

The simplest solution is for grandparents to pay the tuition costs directly.  Not only does this provide a benefit to the grandkids, but it also gets assets out of the grandparents’ estate tax free.  [Read more…]

Employee could be required to work on Sabbath

For 10 years, a U.S. Postal Service letter carrier in Ohio was allowed to avoid working on Saturdays to accommodate his Jewish faith. But when budget constraints forced the Post Office to reduce staffing levels and require more carriers to work on Saturdays, other employees became unhappy with the man’s arrangement. The accommodation was eliminated after union members voted to recommend its termination.

The postmaster suggested to the man that he reserve some of his vacation time for Saturday absences, and that he use leave time and exchange days with other carriers. The man sued for religious discrimination under federal law. He claimed that being forced to take days off from work without pay reduced his compensation and his eventual pension. [Read more…]

Workers’ comp may cover ‘recreational’ injuries

If employees get together for a recreational activity and someone gets hurt, is that covered by workers’ compensation? It depends. It can be, but there are usually many factors involved, including whether the recreation occurred during company time; whether the company encouraged, sponsored or required the activity; and whether the company benefited from the activity.

In one case in Hawaii, an employee was injured at an after-work bowling tournament. The tournament was intended to thank employees, and the employer encouraged everyone to attend. However, the Hawaii Court of Appeals said the injury wasn’t covered by workers’ comp because participation in the tournament was voluntary, it didn’t occur during paid time, and the employer got no particular benefit from the activity beyond improved morale. [Read more…]

Handwritten contract leads to $10.5 million verdict

A contract that an executive quickly scrawled on two pieces of notebook paper was not only binding, but was the basis for a $10.5 million jury verdict. This case goes to show that just because a business agreement isn’t contained in a formal document doesn’t mean you can’t be held to it.

The chairman of a telecom company met at his office with a former employee who was considering starting a new venture. Unexpectedly, the chairman suggested that he start the venture within the company. He took out two pieces of notebook paper and sketched out an employment agreement that would pay the employee $200,000 a year for five years plus a hefty cash bonus and shares of stock. [Read more…]

Employees can sue even if they’re only ‘perceived’ as disabled

Employees don’t have to be disabled to sue under the Americans With Disabilities Act – they merely have to be regarded as disabled by their employer. That’s why it’s essential, whenever you have an employee with any sort of impairment, to fully understand the nature of the impairment and not leap to conclusions about what the employee can and cannot do.

A recent case illustrates the potential problems. An electrician at an aluminum can factory suffered a stroke. The stroke left him with vertigo and some problems with balance, and his doctor ordered him not to work high up on ladders or catwalks. Otherwise, though, he was cleared for work. [Read more…]

Congress outlaws genetic discrimination

A company can’t refuse to hire people because they are genetically disposed to develop a particular disease or condition, even if this would cause the company’s health care costs to skyrocket. That’s the result of the federal Genetic Information Nondiscrimination Act, which was recently signed into law by President Bush. The law also prohibits insurance companies from using genetic information to deny coverage or increase premiums.

Supreme Court limits out-of-state taxes

A new ruling from the U.S. Supreme Court is good tax news for companies that operate in multiple states. The case involved a packaging company that was based in Ohio and did business in Illinois. The company had a separate Ohio-based subsidiary with an unrelated information-technology business. When the company sold the subsidiary, it had a significant capital gain.

Illinois wanted to impose a tax on a part of the capital gain. It said it should be able to do so because the parent company did business in Illinois, and the subsidiary was part of its operations. But the Supreme Court unanimously sided with the company. It said the subsidiary was a separate entity that was unconnected with the larger packaging business. The subsidiary had its own separate management, was not functionally integrated with the parent business, and provided no economies of scale. Therefore, Illinois had no right to tax it.

Your business loan could mess up your estate plan

If you own a business and you plan to leave it to one of your children when you die, be aware that taking out a business loan or line of credit could affect your estate plan. The reason: Many wills that provide that a child will inherit business assets don’t specify whether the child will inherit the assets subject to any debts, or whether the child will inherit the assets free and clear and any debts must be paid off by the other heirs.

In the past, unless the will was clear, the assumption was that the other heirs had to pay off any loans. But recently many states have changed their laws, and now say that the child who inherits the business also inherits the debt. You can change these assumptions if you want, but you have to be very specific about it in your will. In any event, it’s wise to consider the effect of business loans on your estate plan, and make sure your will specifies exactly how you want your property to be divided.

$100 million Starbucks verdict shows danger of ‘tip pools’

A recent $100 million verdict against Starbucks for the way it required employees to participate in “tip pools” should jolt employers with all the force of a Venti extra-shot Caramel Macchiato. Tip-pool lawsuits have been filed recently not only against restaurants, but also against hotels, transportation companies, delivery services, casinos and sports facilities.

Recently, many companies have been tempted to expand the number of employees who participate in tip pools. This can seem like a good way to save money, because the employer gets a tip credit against the minimum-wage requirements. But there is a complex set of legal rules for who can participate in a tip pool. There are both federal and state laws, and often multiple laws overlap so the requirements are hard to follow. These rules cover who can participate (hosts and hostesses, greeters, drink servers, kitchen staff, shift supervisors, etc.) as well as how much can be pooled. [Read more…]

Which remodeling projects pay for themselves?

Wondering which remodeling projects are most likely to pay for themselves in terms of resale value? The latest edition of Remodeling Magazine’s annual survey of builders and real estate agents is out, and it offers some answers, both nationally and for different regions. Of course, every house, every community, and every remodeling project is different, and the results will vary widely from home to home. But the national averages make for interesting reading.

Nationally, the project with the highest recoupment percentage is a fiber-cement siding replacement. This costs an average of $13,212 and increases resale value by $11,633, or about 88%. This is followed by adding a wooden deck (85.4%), installing vinyl siding (83.2%), a minor kitchen remodeling (83%), and a window replacement (about 80%, depending on the materials). [Read more…]

Homeowners association could prohibit owners from renting their homes

A homeowners association in a development could prohibit homeowners from leasing their homes, says the Indiana Supreme Court. In this case the homeowners association sued an owner for renting her house, which violated the terms of her deed. (The homeowner had broken her hip and moved to a nursing home, and wanted to rent her house to help pay her nursing home costs.)

The homeowner argued that the “no-lease” provision in the deed was illegal. She said it violated the federal fair housing laws because it discriminated against racial minorities, who were statistically more likely than whites to rent a home rather than buy one. But the court said that even if this were true, the “no-lease” rule was still valid. [Read more…]

Get a tax break if relatives finance your house purchase

Some people borrow money from their parents or other relatives to purchase a house. If a relative has enough money on hand to be able to finance a home purchase, this can be a very “friendly” alternative to a traditional mortgage. In addition, for some people without a sufficient down payment or credit history, it might be one of the few ways to arrange buying a home.

If you borrow money from relatives and you plan to pay them back in regular installments over time, it can be a good idea to “formalize” the loan and legally record the mortgage. Why? If you do, then you can deduct your mortgage interest on your income taxes. [Read more…]

Landlord couldn’t use lease to avoid personal injury lawsuits

A landlord can’t put a clause in a lease that says it won’t be liable if a tenant has a slip-and-fall injury, says the Idaho Supreme Court. The law on this issue varies from state to state, but the Idaho ruling is interesting and points out that landlords need to be very careful if they want to limit their responsibility for injuries.

The lease in this case said that the landlord was not liable for any slip-and-fall injuries either inside or outside the premises, or “from any other sources.” A tenant was walking between two buildings and fell into a sinkhole. The court said a landlord has a legal duty to use reasonable care to make sure leased premises are not hazardous to tenants. And it said that if the lease allowed the landlord to escape this duty, it was invalid.

The court said a landlord presumably could limit its liability in some ways. For instance, a lease probably could prevent lawsuits for injuries that were not caused by a lack of reasonable care on the landlord’s part. But the lease in this case went too far.

Cities are sued for dragging their feet on eminent domain

A landowner can sue a city for announcing that it was going to take some property by eminent domain, and then doing nothing else for a long time. That’s the result of two recent decisions by the highest courts in Nevada and Missouri.

In the Nevada case, the city of North Las Vegas announced that it was going to condemn an acre of a business’s property for a flood control project. However, the city did nothing for a year, after which the business sold a 20-acre parcel that included the disputed acre. [Read more…]

New rules for home mortgages will protect consumers

The Federal Reserve Board has issued a number of new rules for home mortgages that are designed to protect consumers. The rules apply to “subprime” mortgages and to some “Alt-A” mortgages (which are given to buyers whose credit is less than ideal but is better than subprime).

The rules include:

  • Lenders cannot offer a mortgage unless they first verify the borrower’s income. [Read more…]

An equity line of credit could mean rethinking your estate plan

If you take out a second mortgage or a home equity line of credit, be aware that it could affect your estate plan.

The reason: Many people plan to leave their house to one child, and the rest of their property to their other children (or other heirs). But their will doesn’t say specifically whether the child who inherits the house will receive it subject to any debts, or whether the debts must be paid off by the other children. This can lead to some hard feelings between the children. [Read more…]

Congress makes ‘jumbo’ mortgages easier

Should you refinance now?

Mortgages are often divided into two types, “conforming” and “jumbo.” For some time, a “conforming” mortgage has been any loan up to $417,000, and a “jumbo” mortgage has been any loan over that amount. The reason is that $417,000 was the largest loan that could be repurchased by Fannie Mae and Freddie Mac, the two quasi-governmental mortgage-buying agencies. Because lenders could not re-sell a loan over $417,000 to these agencies, they often charged a higher interest rate for them.

To help borrowers, Congress recently raised the “jumbo” amount from $417,000. The new limit is $417,000 or 125% of the median price for houses in the geographic region, as determined by HUD, up to a limit of $729,750. [Read more…]