Payment?

• “Payment is an affirmative defense which the defendant has the burden to plead and prove. Payments pled by the defendant which are not admitted in the plaintiff’s petition must be specifically alleged.”
• What about trial by consent? “‘The doctrine of trial by consent does not apply when the evidence of an unpleaded matter is relevant to the pleaded issues because it would not be calculated to elicit an objection.’ Milbourn’s testimony was relevant to the Kidwell’s claim for breach of fiduciary duty ... that Bresnahan breached his fiduciary duty by failing to disclose his conflicts of interest and by unilaterally increasing his own wages. ... Because the Kidwells’ evidence of payment [a spreadsheet] was also relevant to their pleaded claim for breach of fiduciary duty, we conclude payment was not tried by consent.”

Haddington Fund, LP v. Kidwell, No. 05-19-01202 (Jan. 11, 2022) (mem. op.) (citations omitted).

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Austin Court Reiterates “Texas Two-Step” in UM/UIM Cases: Severance of Declaratory and Extra-Contractual Claims Required

In an Opinion by Chief Justice Darlene Byrne, the Austin Court of Appeals recently granted mandamus requiring severance in an underinsured (“UIM”) case against Allstate after a parking lot collision. See Cause No. 03-21-00515-CV, In re Allstate Fire and Cas. Ins. Co. (Tex. App.–Austin Jan. 12, 2022, orig. proceed.). Plaintiff had asserted negligence and gross negligence claims against the tortfeasor as well as declaratory and Insurance Code “extracontractual” claims against Allstate.  The Insurance Code claims included alleged misrepresentations, an unreasonable investigation, failure to settle when liability was reasonably clear, and an alleged failure to explain the coverage denial.  Slip op. at 1-2.

The trial court denied Allstate’s motion for severance without explanation and the Austin Court granted mandamus reiterating the dictates of the Texas Supreme Court’s recent decision in In re State Farm Mut. Auto. Ins., 629 S.W.3d 866, 876 (Tex. 2021) (emphasizing the declaratory “car wreck” claims had to be tried first before any litigation of the extracontractual Insurance Code claims).  Slip op. at 4-5.  The Austin Court in Allstate was unequivocal on this point: “severance and abatement is appropriate when . . . an insured seeks a determination as to entitlement to UIM benefits and also brings extracontractual claims against the insured.”  Slip op at 6.  The Court reasoned that because resolution of the “claim for declaratory relief . . . could moot at least some of [the] Insurance Code claims and because trying the Insurance Code claims would involve evidence of settlement efforts inadmissible in trial of the contract claims, the contract claims should be tried first.”  Id.

 This new Allstate case is yet another in a consistent line of Texas UM/UIM cases recognizing a Texas Two-Step:  following severance there must first be a trial of the “car wreck” case addressing the liability of the tortfeasor and the amount of damages and only then can there be consideration of any remaining “extracontractual” claims (if any).

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Changing Your Name After a Divorce

Often, a woman who changed her name when she got married will want to revert her last name back to her maiden name after a divorce is finalized. This is not always the case, of course, there are many women who choose to keep their married last name after divorce. The choice is completely personal and everyone has their reasons for either changing or not changing their last name after a divorce. Should you choose to change your name after a divorce in Texas, however, there is a certain procedure you will need to follow.

Changing Your Name After a Divorce

When you change your name after you are married, your name change can occur when your marriage license is obtained. After a divorce, you can use the Final Decree of Divorce to change your name. To do so, however, the name change should be incorporated into the decree itself. If this has not been done, you must file a petition with the court to grant you a name change. You will need to file an Original Petition for Change of Name in the county where you reside. Should your petition be approved, the court will issue an order granting your name change.

So, as you can tell, obtaining a name change in Texas is actually a fairly straightforward process. This, however, is just the beginning. Consider all of the places your name is registered. Once you obtain your name change order, you will need to go through the steps of changing your name on some important pieces of identification. The best place to start is usually the Social Security office. You will need to change your name that is associated with your Social Security number. To do so, you can book an appointment at your local Social Security Administration office. Be sure to check and see what forms and information you will need to bring with you. You will most certainly need to bring the court order changing your name.

You will also need to change your name on your driver’s license and state identification card. You can do this at your local Department of Motor Vehicles office. Additionally, you will want to change your name on your voter’s registration card before the next election. The sooner this is done the better so that you can be sure everything is all set well in advance of the next time you need to go and vote. You should also remember to change your name on your passport and any of your financial accounts.

Family Law Attorneys

The process of starting your new post-divorce life can be overwhelming and is best taken one step at a time. The trusted family law team at Navarrete & Schwartz is here to help you every step of the way. We are proud to serve the residence of Midland, Texas. Contact us today.

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Avoid These Legal Traps When Launching a Side Hustle

According to some studies, one-in-three Americans has a side hustle, defined as a “job or occupation that brings in extra money beyond one’s regular job and main source of income.” While some employers do not care about such side hustles as long as an employee performs well at their full-time job, other employers can take an issue with it. Thus, before starting a side hustle, employees should do the following to avoid landing themselves in hot legal waters:

Review Your Employment Agreement

Employment agreements will generally state whether an employee can engage in other jobs while working for an employer. Some employment agreements contain what is commonly called No Moonlighting clause, which can say something like: “During the Employee’s employment with the Employer, the Employee agrees not to accept or continue in any job, consulting work, directorship, or employment without the written approval of senior management of the Employer.” Thus, an employee may need to seek permission from management to engage in a side hustle.

A lot of employment agreements have a more limited No Moonlighting clause that only requires permission from management if an employee engages in a business similar to the employer’s business.

Also, employees should review their employment agreements for Non-Compete Restraints to make sure that the side hustle does not violate those restrictions. Most such restraints only prohibit employees from engaging in work that would compete with their current employer’s business. However, many non-compete agreements are written so vaguely that it may not always be clear what is considered “competitive activity.” When in doubt, an employee should have an attorney review their non-compete agreement to make sure that the side hustle is not going to violate the restraints in their employment contract.

Finally, employees should review their employment agreements for any language that addresses who owns the intellectual property created by an employee while employed by the employer, generally called an Intellectual Property Assignment clause. Some employment agreements contain very broad language that states that any inventions or ideas created by employees are property of the employer. Thus, employees whose side hustle involves generation of ideas need to make sure that their ideas do not become an employer’s property. When in doubt, they should consult with an attorney regarding the best way to achieve that goal.

Review Employee Handbook

Employees should also review their employee handbooks or manuals regarding any language that may prohibit them from working for another employer.

Do Not Use Company Resources

It may be tempting, especially when working remotely, to use the company’s computer system, email, or other resources to run a side hustle. However, that is a sure way to upset the employer and give them a justifiable reason for termination. Additionally, using company resources for non-company business is often expressly prohibited in employee manuals. Finally, using company resources, may also lead to an employer having a valid claim that anything created by an employee with the use of company resources or during the work hours belongs to the company (see the intellectual property assignment clause above). In short, using company resources for a side-hustle may have serious legal consequences.

Set Up a Legal Entity

While one is not required to have a legal entity to run a side hustle, it is certainly a wise decision to create one. It may cost $200 – $300 dollars to register a business, but having a company generally protects the owner of the business from potential liabilities arising out of running such business, as long as the owner keeps personal and company expenses and finances separate. Employees should consult with an attorney to set up a company correctly in the beginning, in order to avoid legal issues down the road.

Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice.  Her practice includes commercial, intellectual property and employment litigation.  You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108 or fill out the form below. 

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Former UBS Broker German Nino Allegedly Stole $5.8M From Client

Ex-UBS Financial Services Advisor Faces SEC and Criminal Charges

German Nino, a former UBS Financial Services (UBS) broker and investment advisor, is accused of stealing $5.8M from a customer. Nino, who left the broker-dealer in 2020, is now facing related civil charges brought by the US Securities and Exchange Commission (SEC), and parallel criminal charges.

Our Florida broker misconduct lawyers are looking into claims of significant investment losses by other ex-customers of the financial advisor, German Nino. Contact us at Shepherd Smith Edwards and Kantas today so that we can help you determine whether you have grounds for a FINRA arbitration claim to file for damages.  

Continue Reading ›

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How do you settle an estate without probate?

Being appointed the executor of a person’s estate is a big-time responsibility. You are being asked 2 execute on a person the state plan has told to you through their will. A will is a deceased person’s best thought out and most direct way of telling someone else how they would like to have their property and assets distributed or pond they’re passing. Before a person passes away the will has no legal significance. However, once the person passes away your job as executor comes to the forefront.

They will most likely have to go through the probate court for proper administration. Unless the person is a very small estate or has no property at all it is probably wise to go through probate. This is since you do not want to distribute assets under a will and then find now that the person has creditors that are owed money. Those creditors could potentially come back and attempt to regain any property that has been distributed to others that should have gone to the creditor first period all this creates a mess for you as the executor and any of the beneficiaries who have already received property.

Another circumstance that comes into play is if you suddenly become aware of the enormous responsibility of acting as an executor and instead choose to speed the process up by skipping probate altogether. When the person asks you to be their executor you quickly agreed without knowing much about what it means to act as an executor. However, you eventually learned what kind of commitment it takes to execute the will and to send the will through probate. Having learned all the responsibilities you quickly determined that this was not for you and instead chose to try and distribute property after their passing as quickly as possible and then move on to the next area of your life. 

However, I think this would be a major mistake for you to do and can oftentimes lead to heartache for the deceased person’s family, beneficiaries, and even yourself. What you thought was a good way for you to avoid the time-consuming process of probate ended up as a major issue down the line for the deceased person’s estate and you. In today’s blog post from the Law Office of Bryan Fagan, we are going to talk about what kind of problems could arise if you chose not to probate a will when acting as an executor. Of the many consequences associated with drafting or will and naming you as executor the deceased person probably did not envision a scenario where you would not follow through on their wishes due to having not probated the will. Here are some of the consequences that may become apparent soon after not probating a will.

Consequences of not probating a will

If the deceased person had any assets or debts at the time of their passing, then not probating a will can have significant consequences both for their estate and for you on a personal level. The only legal way to transfer the assets of a deceased person is to go through probate. If, as the executor, you choose not to go through the probate process then the deceased person’s assets that are titled in their name cannot be passed along. This would include items like the deceased person’s house and vehicle. Registrations will no longer be current, taxes most likely cannot be paid and these items cannot be sold. Without the deceased person’s consent or signature, you will be stuck in a difficult situation where those items remain in limbo. The estate for the deceased person will incur taxes and other fees associated with maintaining the property in their name. Think of things like property taxes, car registrations, and insurance premiums on vehicles. Unless you choose to pay those bills personally, they will remain unpaid and there will be consequences for this person’s estate. When and if you ever get these issues sorted out creditors in the government will be able to take money out of the estate before anything can be distributed to beneficiaries.

Aside from any of these issues that we have been discussing today, there are also creditors to be concerned with when it comes to probating a will. Many people only consider the aspects of a will where the property can be distributed according to the terms of the will. However, we also know that a person is a plenty capable of having creditors. Even though it is less pleasant to have to deal with that credit error than with the potential beneficiary under a will that still does not mean you can disregard the rights of creditors. Trust me when I say if your creditor becomes aware of your deceased person has passed, he or she will investigate the matter and determine whether they can intercede into your affairs and stop you from distributing property before they are paid.

Another aspect of this discussion is that you made be personally held liable or at fault for any damages incurred as the result of not probating a will. For example, if you know that you’re supposed to probate the will and you do not do it then you can personally be held liable for any expenses that are incurred by your deceased person’s estate. The deceased person’s beneficiaries may also be able to file suit against you on these grounds if they are harmed because you fail to probate a will. Finally, in this is an extreme example, you may be held criminally liable if you intended to not probate the will to benefit yourself financially.

Let’s say that your mother had a world that expressed her interest in leaving all her assets to your cousin. This is something that you knew and was included in your mother’s will. Your mother had a well-drafted that was otherwise valid left in the top drawer of her desk. If you were the only person to know about the will but you did not tell anyone else about it a probate court could conceivably award you or your siblings, the lion’s share of her property upon her passing. Because you withheld information about the will you could be charged with a crime in Texas.

What is a good rundown of what can happen if you do not probate a person’s will properly?

As we mentioned earlier going through probate is the only legal way to transfer assets to a person’s beneficiaries. If you attempt to transfer the assets listed in the will to the beneficiaries without going through probate you are not following the legal process that is required of you to do so in most situations. The primary reason for this is that there may be creditors who have rights to property that you are neglecting to include in the process. This can leave the estate wide open to future legal actions in costs associated with your having not probated the will. 

Next, the deceased person’s estate can continue to incur expenses granny assets that are not legally transferred out of their name into another person. While it may be fairly simple to transfer a grandfather clock or an autographed football to a beneficiary without going through probate the same cannot be said for items that are titled in the name of the deceased person. These are typically expensive and valuable items such as homes and vehicles. While you can transfer physical ownership of the vehicles and homes to the beneficiaries those people will not hold legal title because they will still be in the name of the deceased person. He must go through probate to complete the process of distributing valuable and physically large assets like these.

 I once again feel the need to mention that creditors have rights after a person passes away. Do not underestimate how diligent or dogged a creditor can be to protect their rights under a will. Of course, this person will not mention creditors in their will. By the same token, he or she may not have been mentioned to you that they have any creditors. However, it is your responsibility to seek to determine if there are any creditors out there that can potentially benefit from the property included in a person’s estate.

All the while, any errors made, or time wasted in properly probating a will can result in expenses or loss of value and property for the I stated the deceased person or their heirs. Imagine a real estate investment that could not be properly cared for while the will is held up in probate. The potential beneficiaries may be losing money due to the delay in having the property transferred to them. These folks may be able to pursue a case against you for having delayed the process unnecessarily.

Finally, if you chose to purposely withhold a will from probate to benefit you or anyone else from a financial perspective you can be criminally prosecuted for having done so. Just because you think you can get away with something doesn’t mean that you should. Things like this have a way of coming back to bite people in the backside if you know what I mean. Rather than trying to act deceitfully think about the person whose estate you oversee. The person trusted you a great deal to follow their wishes. Even if that means hurting yourself financially.

Answering important questions about the probate process

I hope that by reading today’s blog post you come to understand that not going through probate is a bad idea. With that said, if you have a probate case to oversee as executor then you should be as prepared as possible before engaging in the process. For that reason, I would like to conclude today’s blog post with some tips and answered questions on how to best oversee a Texas probate case.

A common question that I receive is whether the executor of a will must file the last will. The answer to that question would be yes once the person has passed away. You should file the will with the probate court. It may not be necessary to go through probate depending upon the size of your estate or if they had no assets or debts. However, it is probably better to be safe than sorry especially if you did not know the person’s situation very well. Even if the person has no assets or had transferred all their assets to a living trust then you should still file the will and inform the court that there are no assets to distribute.

Why go through probate? I think you have seen the answer to this question already presented in today’s blog post. There are a lot of consequences in play for you and the person’s estate, not to mention their potential beneficiaries if you fail to probate a will. However, there is an answer to this question that has to do with the specific legal importance of having filed the will. Settling a deceased person’s estate means being able to pay off creditors and transfer assets to beneficiaries. Without having gone through probate he will not be able to do so legally. Additionally, we have already talked about how expenses and taxes will be continually incurred by the estate if you fail to probate the will properly.

What is the probate process like? The first step that you would take as an executor of a person’s will would be to file a petition to probate. The probate court would then open a case. The next step would be to file the deceased person’s will into then wait for the court to accept the will and appoint you formally as the executor of the will. If a loved one passes away without it will you may still go through the probate process. You could be appointed in that case as the administrator of an estate. From that point forward probate hearings can be scheduled, and any beneficiaries or heirs can’t be notified of the proceedings. 

Going through probate allows for any potential heirs, beneficiaries, or other interested parties the opportunity to contest the will. For example, someone could argue that the will was not properly drafted, is invalid, was created under duress, or otherwise is invalid. The probate court’s job will be to establish whether the will is valid. Usually, this is done by asking the witnesses to the persons who will testify or otherwise provide evidence that the will is a diversion that the person witnessed previously. 

If the court believes that the deceased person’s will is invalid, then their assets would pass 2 their ears under the intestacy laws of Texas. Dying intestate means that you die without a will. Without a will to determine how the property for the diseased person will be divided a court will follow the intestacy laws of Texas and divide property that way. The surviving spouse, if any of the deceased person as well as their children and grandchildren stand to inherit the lion’s share of the property. 

Next, creditors of the deceased person will be notified and given a certain period to claim the estate. The probate court will inventory and appraise the deceased person’s property including Combs, vehicles, bank accounts, and things of this nature. Some property of the deceased person does not have to go through probate to be distributed. These would include brokerage accounts, life insurance proceeds as well as retirement accounts. These assets would transfer directly to the beneficiary as stated in the documents for that financial account. 

Before any property can be divided to heirs are beneficiaries, any creditors would need to be paid. Tax returns and things of this nature will be paid as well, and assets may need to be sold to pay those bills. He was the executor of managing all these transactions and ensuring that it is done promptly. Finally, once all debts are paid you can ask the court for permission to distribute assets to the beneficiaries. This can be a complicated process and as you have seen you stand to incur some degree of liability if mistakes are made. As a result, it is recommended that you consult with experienced probate in estate planning attorney to know what your responsibilities are and to be able to proceed in a fashion that protects the rights of the deceased person to the state and the potential heirs or beneficiaries.

Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan

If you have any questions about the material contained in today’s blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed probate and estate planning attorneys offer free of charge consultations six days a week in person, over the phone, and via video. These consultations are a great way for you to learn more about the world of Texas probate and estate planning law as well as about how your family circumstances may be impacted by the filing of a probate case.

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Estate & Succession Planning Survey – We Need Your Help!

Dr. Justin Benavidez and I are working on a cool project sponsored by Texas Corn Producers.  We are conducting an anonymous survey to look at the current estate and business planning situation for Texas farmers, ranchers, and rural landowners.  We will use the information gathered to plan programming and resources going forward.  

Photo by Jessica Lewis Creative from Pexels

For this to be successful, we need your help!  Please take a couple of minutes and complete our online survey by clicking here.  

If you’d prefer a paper copy, we are glad to send you one along with the envelope and postage to return it to our office.  Just contact Lacrecia at 806-677-5600, and she will get you set up!

Thanks for your help with this project.  We know this is an extremely important issue for rural Texans, and we are excited to be able to have your input on what will be helpful to you in the future!

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Fact Issue Found

A question in Kanen v. DeWolff, Boberg & Assocs. was whether the plaintiff presented a fact issue about a prima facie case of age discrimination; specifically, as to whether he had been “replaced by someone outside the protected class, replaced by someone younger, or was otherwise discharged because of his age.” The Fifth Court found a sufficient question to avoid summary judgment on that point, noting two matters in particular. First –

“Because Kanen presented evidence DeWolff retained and hired substantially younger market analysts after his employment was terminated, and because DeWolff considers the market analysts to be interchangeable and claimed Kanen’s accounts would be randomly assigned to other analysts and conceded that Kanen’s replacement ‘could be anyone in the office,’ a jury could determine that Kanen’s job duties were distributed to younger workers.”

And second –

“In addition, contrary to DeWolff’s assertion of how accounts are assigned, Kanen established market analysts are assigned to a specific outside salesperson and territory. A jury could conclude that DeWolff’s explanation as to how accounts are assigned is not credible and infer that the individual, or individuals, who took over his accounts were among those Kanen identified as being substantially younger than himself.”

No. 05-20-00126-CV (Jan. 18, 2022) (mem. op.).

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Syndicated Conservation Easements (and Other Tax Schemes) Beware

Syndicated Conservation Easements

In an IRS news release of January 17, 2022, the IRS’s Office of Chief Counsel announced that plans to hire up to 200 additional attorneys “to help the agency combat syndicated conservation easements, abusive micro-captive insurance arrangements and other tax schemes.”

Since 2020, syndicated conservation easements have been a focus for the IRS-Criminal Investigations unit. In December 2020, the Department of Justice announced a guilty plea entered in the first ever criminal case by IRS-Criminal Investigations that involved conservation easements to the tune of near $1.2 billion in fraudulent tax deductions. This latest attorney-hire announcement by the IRS’s Office of Chief Counsel indicates that the focus on tax challenges relating to conservation easements will continue, apparently in earnest.

Under I.R.C. section 170(f)(3), and as a general rule, no charitable contribution deduction is allowed for a transfer of property of less than the taxpayer’s entire interest in the property. See also 26 C.F.R. § 1.170A-14(a). However, section 170(f)(3)(B)(iii) of the Code provides an exception to the partial interest rule for contributions of qualified conservation easements.

A “qualified conservation contribution” means a contribution of a qualified real property interest to a qualified organization exclusively for conservation purposes, each term having a technical definition in the Treasury Regulations. See 26 U.S.C. § 170(h)(1)-(h)(1)(C); 26 C.F.R. § 1.170A-14(e)(1) (defining “exclusively” in this context). The “qualified” nature of the contribution means a “perpetual conservation restriction” as to the use which may be made of the property. See 26 C.F.R. § 1.170A-14(b)(2). The donee of the easement contribution must (1) have a commitment to protect the conservation purposes of the donation, (2) the resources to enforce the restrictions, and (3) meet one of the organizational requirements contained in Treas. Reg. sec. 1.170A-14(c)(1)-(c)(1)(iv). “Conservation purposes” means, in short, preservation of land areas for outdoor recreation, protection of natural habitat of an ecosystem, preservation of open space, or the preservation of a historically important land area or structure. See id. at § 1.170A-14(d)-(d)(1)(iv). Each of those conservation purposes has a more detailed definition in the Treasury Regulations.

A “syndicated conservation easement” is essentially an investment vehicle where pre-packaged conservation easements are marketed to investors with the representation that a charitable deduction will accompany the investment in excess of the amount invested. The investment vehicle is usually in the form of pass-through entity, such as a limited liability company or a partnership. Individual investors invest money into the pass-through entity, and the promoter uses those funds to purchase the land. The entity donates a conservation easement on the property to a qualified organization in order to create the deduction for the investors, with the intent that the deduction exceeds the contribution. See IRS Notice 2017-10 at 2-3.  In Notice 2017-10, the IRS describes the nefarious mechanics as follows:

The promoters obtain an appraisal that purports to be a qualified appraisal as defined in § 170(f)(11)(E)(i) but that greatly inflates the value of the conservation easement based on unreasonable conclusions about the development potential of the real property. After an investor invests in the pass-through entity . . . the pass-through entity donates a conservation easement encumbering the property to a tax-exempt entity. Investors who held their direct or indirect interests in the pass-through entity for one year or less may rely on the pass-through entity’s holding period in the underlying real property to treat the donated conservation easement as long-term capital gain property under § 170(e)(1). The promoter receives a fee or other consideration with respect to the promotion, which may be in the form of an interest in the pass-through entity. The IRS intends to challenge the purported tax benefits from this transaction based on the overvaluation of the conservation easement. The IRS may also challenge the purported tax benefits from this transaction based on the partnership anti-abuse rule, economic substance, or other rules or doctrines.

Id. at 2-3 (emphasis added).

The IRS may challenge any one or more requirements of a charitable conservation easement tax deduction, including the purported perpetuity of the transferred interest, the nature of the restrictions, the public benefit to be achieved, and whether or not the donee organization has resources to enforce the restriction as defined in the Treasury Regulations.

Perhaps a “low-hanging fruit” challenge is the valuation of the charitable conservation easement for the applicable tax deduction.

Recently, in the case of Long Branch Land, LLC v. Commissioner, No. 7288-19, T.C. Memo. 2022-2 (U.S. Tax Ct. Jan. 13, 2022) (mem. op.), the court addressed a taxpayer’s procedural challenge to try to overturn valuation misstatement penalties issued pursuant to section 6662 and section 6662A of the Internal Revenue Code and with respect to conservation easements granted to a qualified organization. See 26 U.S.C. § 6662(h) (gross valuation misstatement); id. at § 6662(e) (substantial valuation misstatement); id. at § 6662A (accuracy-related penalties). In that case, the taxpayer claimed a $10,425,000 charitable contribution deduction for a conservation easement it granted to a charitable organization as well as a $3,475,000 charitable contribution deduction for a donation of a fee simple interest in real property associated with that easement. The IRS selected LBL’s return for examination and valuation misstatement penalties were assessed.

In sum, any investor or promoter involved in a syndicated conservation easement should take caution and evaluate whether the deductions represented, taken or pursued are appropriate and defendable under I.R.C. section 170 and corresponding Treasury Regulations because the IRS is seeking to engage hundreds of attorneys to review these transactions to show otherwise.

See More Tax Law Alerts:

• Texas Supreme Court Addresses the Political Question Doctrine
• IRS Announces Tax Relief to Texans due to Severe Winter Weather
• TXCPA Dallas – Chairman Address

Tax Litigation Attorney

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Protect your money in a divorce

One of the most significant concerns that people have heading into a divorce is how to protect their money. It’s not that money is the most important thing in the world or that people are greedy. It’s just that if you are in a position where a divorce appears to be upcoming in your life you start to think about how to play defense and absorb the blows of a divorce. When it comes to getting a divorce, it should not be assumed that the costs of the divorce are only related to attorney’s fees. You may find that hiring an attorney is the least expensive part of a divorce. With that said let’s examine some of the ways that a divorce could cost you and your family money both in the short and long term.

First, we do need to consider the cost of hiring an attorney when it comes to protecting your money in a divorce. Most people who go through a divorce hire an attorney. What that attorney ends up costing you is a completely different subject. For example, you can choose to hire an extremely experienced lawyer, who has a fancy office in an expensive part of town and who charges a lot of money as a result. Or you can choose to hire an attorney who works in your neighborhood does not have fancy office space and can provide you with the same quality of legal services. The difficult part of this discussion is that you have to determine which attorney suits your circumstances better period

The next part of protecting your money in a divorce is figuring out how an attorney bill for their services. Hiring an attorney is not necessarily like hiring a contractor to build you a bathroom. Contractors will typically quote you a price at the beginning of their job. Our family law attorney does not operate like this. Rather, a family law attorney will charge you an upfront amount of money at the beginning of your case known as a retainer fee. This retainer will retain the attorney services for you and your family. This allows him or her to begin working on your case in filing documents or responding to the documents filed by your spouse. 

Next, a family law attorney bills by the hour to work on your case. The significance of this is that every family law attorney will charge a little bit differently from their competitors. You should ask your attorney that you are meeting with and in consultation about how he or she charges and what their hourly rate is also bear in mind that it is not only your attorney who will be working on your case. He or she likely has a staff including legal assistants, paralegals, and other people that will be working in your case. Each of these people will bill for the hours they worked in your case Find out what each of these people would build and how work is divided up in the office. You may find that you were attorneys support staff does more work on a day-to-day basis Then the attorney does. Therefore, hiring an attorney may be more budget-friendly than you would have thought.

Different attorneys allow for Different types of payments to their office. Most attorneys accept payments and forms like cash, check, and credit card. However, with time sees different types of payments be accepted the remains of Bitcoin, online lending services, or even bartering. I’m not saying that you can necessarily trade legal services for a service that you can provide to the attorney but there may be a specific circumstance where this can occur. All it takes is for you to find the right attorney and to have the right number of skills available to assist that lawyer with whatever he or she needs. The attorney would need to verify that whatever payment arrangement you were setting up is ethical. 

Another aspect of this discussion is that the attorney may be willing to work on your case in certain areas. For example, you may not want to have an attorney to help you negotiate your case, but you would like an attorney to be there with you in mediation or even in drafting final orders. I can tell you that the Law Office of Bryan Fagan is very flexible with our clients we represent people frequently in these limited scope arrangements. You and your spouse may have the basis of an agreement already in place but just need a lawyer to help you finalize your paperwork and ensure that everyone is getting a fair shot at things. If you hire an attorney to help review your settlement documents and your spouse does the same, you are more likely to have a fair and equitable settlement. 

Another factor to consider is that many people worked very hard on divorce only to see their final orders end up not being clear or even worse not being enforceable. The whole point of going through a divorce and putting specific language in a final order is to ensure that you can each hold each other responsible for your actions if you fail to abide by the terms of that order. An unclear, incomplete, or otherwise unenforceable final decree of divorce means that the orders are not worth the paper that they are printed on. This will be a huge blow to you and your spouse after you spent time, effort, and money in securing the divorce in the first place. 

One of the interesting things about representing yourself in a divorce is that there are so many circumstances in play in a typical Texas divorce that it is nearly impossible to predict exactly how your divorce will go. Even if do you have little money or no property at all there can still be twists and turns of your case that require people to look at how to adjust for those twists and turns. If you find yourself in a position where you have other obligations, such as working children, and are not fully able to commit yourself to adjust for these changes that occur in a case then you are better off hiring an experienced family law attorney. The attorney is well suited to help guide you and provide you with advice throughout your case. 

If money is truly a challenge for you then you may even be able to find an attorney who can represent you on a pro bono basis. Pro bono simply means that an attorney will offer you their legal services at no charge. For instance, many attorneys choose to offer a particular person a year of legal services at no charge. This is a way of giving back to the community and simply extending a nice gesture towards another person. If you truly have no way of paying for an attorney service, you should make that known to the lawyer in your consultation. The lawyer can either talk to you about offering you services at a reduced or no charge, if he or she chooses, or can point you in the direction of an attorney who may be able to help you.

I think one of the keys to this entire discussion is that you need to be able to understand how an attorney bills and what the cost of your case may end up looking like at its conclusion. This does not necessarily mean that the attorney can or should give you an estimate of the cost of your case. Most of the time it will be next to impossible for an attorney to be able to accurately guess how much your case will end up costing you. There are attorney’s fees, mediation costs, court costs, filing fees in a list of other costs that may be relevant to your case. For that reason, some attorneys are hesitant to even give you an estimate on what your case can end up costing you.

However, that does not mean you should not ask the attorney about how their billing structure typically works with a client. Talk with your lawyer that you are considering hiring about how you will be billed a month for services rendered. Many attorneys require separate retainers made for things like mediation or trials. This can happen in situations where the attorney expects to spend a great deal of time working in a certain area of your case. The second retainer will ensure that there is enough money in your account for the lawyer and their staff to be paid and for you to have the work done on your case that is necessary for success.

It makes a great deal of sense for you to talk with the attorney before signing a contract that commits you to pay him or her a certain amount of money. The last thing you want to do is put yourself in a position where the lawyer has been hired but you do not understand what it means to pay an attorney for services done in your case. From my experience, these are easily figured out situations that you simply need to ask the attorney about before committing to tiring him or her. 

I understand that it can be a difficult time in your life when you are looking to hire an attorney. You may feel like time is of the essence and that you cannot pause to even consider stopping to ask questions about how the attorney charges. However, this is probably the most important consideration that you could make when it comes to saving money at the beginning of a case. Rather than assume that you understand what is going on in the case you should ensure that you do. This begins and ends with understanding how the attorney bills for their services and what you can expect in return from the lawyer. Having this level of trust with the lawyer who will be serving you throughout your case is probably the most direct way to protect your money especially early in the case.

Learn about how much money you have

 this may seem like an obvious piece of advice, but you can’t protect the money that you do not know is out there. This can be done in a few different kinds of ways. The most straightforward would be to begin to examine your financial accounts before your divorce. Do you have retirement accounts such as IRA’s or 401K’s? If so, you should learn the brokerage house or investment company that you have the account with and start to organize statements of those accounts. This will be important to your case for several reasons. Not the least of which is that you need to be able to learn how much money you have at stake in your case so you can negotiate from a stronger position. Next, the more you understand your finances the better you will be able to formulate goals for your case. I have found that clients who have a strong understanding of their goals for a case tend to achieve more in their divorce. At the very least, you will be able to structure your case better and not waste time thinking about things that ultimately will have no bearing on the results of your case. I understand where you are financially, and you will be better prepared when it comes to formulating goals on how to protect the money you do have. 

Another advantage in learning how much money you have is that eventually you’ll be asked to send discovery responses to your Co-parent where each of you answers questions and provide information to the other spouse about finances. That way everyone can be operating off the same information. The more research you can perform on your own at the beginning of a divorce the better for you. Not only does this help you in organizing your case and developing goals but it also saves you money. Keep in mind that your attorney and their staff will need to help you with collecting much of this information if you wait too long to do it. My advice would be to begin organizing this information and thinking about it in detail even before your divorce. You never know what steps will occur in your case or what may happen in the sense of your not being able to access information contained on a computer or in a physical file cabinet at your home.

An emergency fund is helpful

One of the b best pieces of advice that I ever received as a young adult must always have an emergency fund for life’s events that you cannot predict. All of us will encounter a rainy day at some point in our life. That rainy day may come in the form of a broken-down car, a pipe burst in her house, or something else altogether. For that reason, we need to be able to begin planning for those things and two set the course for ourselves in terms of financial success after the divorce. It can go a long way towards protecting your money if you have an emergency fund. 

One thing having an emergency fund does is that it reduces the likelihood that you will need to take out a loan or otherwise borrow money during your case. Sometimes it is practically unavoidable to borrow money for a divorce case. Credit cards, loans from family, and other types of commercial loans may be something that you must take advantage of bearing in mind the circumstances of your case. However, this should be avoided at all costs if possible. Having an emergency fund will allow you to dip into that money for items that come up that you cannot predict. You may need to work a second job or otherwise sell items to have some money in reserve as you lead into a divorce. However, the benefit of having an emergency fund is significant.

Another aspect of having an emergency fund means that you will be better prepared to begin filling out a budget for yourself. I understand that it can be difficult to budget or plan that far ahead when you are going through a divorce. Nobody who goes through a divorce can accurately tell you exactly when your case will end and exactly how much the process will start. However, it is possible to begin working out these muscles so that you will be better equipped to have a budget after your divorce is over the period a budget does not constrain your spending. Rather, the budget permits you to spend and helps you to understand where you are spending your money period from there you can make wiser financial decisions and ultimately protect your money better both during and after a divorce. 

Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan

If you have any questions about the material contained in today’s blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free of charge consultations six days a week in person, over the phone, and via video. These consultations are a great way for you to learn more about the world of Texas family law as well as about how your family circumstances may be impacted by the filing of a divorce or a child custody case.

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No personal jurisdiction in attorney fee-splitting dispute

A Texas law firm sued an Ohio firm, alleging the breach of an agreement about a substantial fee. The Fifth Circuit affirmed dismissal for lack of personal jurisdiction, crisply summarizing key Circuit precedent for commercial tort and contract claims. (To the right is 600Camp’s standard personal-jurisdiction graphic, the classic comic book hero Plastic Man).

• Tort: “Walden and Sangha largely resolve this issue. Danziger alleges in support of its fraud and unjust enrichment claims (1) that Morgan Verkamp failed to disclose its representation of Epp when responding to an unsolicited email from Danziger about the Epp case and (2) that Morgan Verkamp continued not to disclose its representation of Epp while the two firms worked together on other cases. Danziger alleges in support of its tortious interference with prospective contractual relations claim that Morgan Verkamp emailed Epp (who is not alleged to have been in Texas) to convince him not to formalize his relationship with Danziger. Thus, although Morgan Verkamp’s allegedly tortious conduct may have affected Danziger in Texas, none of this conduct occurred in Texas.”
• Contract: “Danziger alleges in support of its breach of contract claim that: (1) Epp reached out to Danziger about a potential qui tam matter; (2) Danziger arranged two conference calls between itself, Morgan Verkamp, and Epp; (3) Danziger and Morgan Verkamp agreed telephonically to split any fees they received from their work on the Epp matter; (4) the parties exchanged several emails with each other and Epp regarding their potential representation of Epp; and (5) Morgan Verkamp ultimately represented Epp in a Pennsylvania lawsuit but refused to split the fees that it received from the case.  Thus, unlike Electrosource, this case does not nvolve ‘wide reaching contacts and contemplated future consequences within the forum state.’ And unlike Central Freight, ‘[t]he plaintiff’s Texas location’ was not
  ‘strategically advantageous to the defendant ..., suggesting that the defendant had purposefully availed itself of doing business in Texas.’ Rather, as in Trois, ‘[t]he only alleged Texas contacts related to contract formation or breach are [the defendant’s] conference calls negotiating the agreement while [the plaintiff] was in Texas.’ ... And like Holt Oil, the defendant’s ‘communications to Texas rested on nothing but “he mere fortuity that [the plaintiff] happens to be a resident of the forum.”‘ As we held in Moncrief Oil, ‘mere fortuity that one company
  happens to be a Texas resident ... is not enough to confer jurisdiction.’”

Danziger & De Llano, LLP v. Morgan Verkamp, LLC, No. 21-20186 (Jan. 27, 2022) (citations omitted, emphasis in original).

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Texas Supreme Court Addresses the Political Question Doctrine

“[T]he Texas Constitution expressly enshrines the separation of powers as a fundamental principle of limited government. Accordingly, under our own Constitution, Texas state courts decline to exercise jurisdiction over questions committed to the executive and legislative branches. ” Preston v. M1 Support Services, L.P., No. 20-0270, __ S.W.3d __ (Tex. Jan. 21, 2022) at pg. 8 (“Preston”).

On January 21, 2022, the Texas Supreme Court issued its opinion in Preston where the court addressed the political question doctrine. In Preston, a Texas-based private contractor, M1 Support Services, L.P. (“M1”), maintained a fleet of Navy helicopters, one of which crashed during a training exercise, killing three servicemembers in January 2014. The families of those servicemembers filed suit against M1, alleging negligence claims under the Death on the High Seas Act (46 U.S.C. § 30301, et. seq.) and maritime law, mainly based upon M1’s alleged faulty maintenance of the helicopter in question. Preston at pg. 3. M1 moved to dismiss, arguing “that the adjudication of this case is inextricable from judicial review of military decisions[,]” and thus, under the political question doctrine, the courts lack jurisdiction to adjudicate the matter. See id. at pg. 5. The trial court agreed and dismissed the lawsuit. The families appealed, and the court of appeals affirmed. The Texas Supreme Court granted petition for review.

Focusing on the political question doctrine, the court described the doctrine as follows:

Congress has the power to declare war and to raise and support the military, and the President is the Commander in Chief of the armed forces. Even as the Supreme Court acknowledged the judiciary’s power to determine whether actions of the political branches are lawful in Marbury v. Madison[, 5 U.S. (1 Cranch) 137, 166, 177 (1803)], it recognized the limits of this principle. When the Executive Branch acts within its constitutional discretion, “nothing can be more perfectly clear than that their acts are only politically examinable.” Thus, as a matter of separation of federal power, the Judicial Branch has declined to review military action “intended by the Constitution to be left to the political branches directly responsible . . . to the electoral process.” The political question doctrine insulates decisions constitutionally committed to the other branches from judicial second-guessing.

Preston at pg. 6-7 (internal citations omitted). The court noted that the United States Supreme Court established factors to consider when evaluating the political question doctrine, “[c]hief among them are whether there is ‘a textually demonstrable constitutional commitment of the issue to a coordinate political department’ or ‘a lack of judicially discoverable and manageable standards for resolving it[.]’” Id. at pg. 7-8 (quoting Baker v. Carr, 369 U.S. 186, 217 (1962)).

 In finding that the political question doctrine did not deprive the state court of jurisdiction over the case, the Texas Supreme Court stated as follows:

Texas has no established standards for resolving disputes over battlefield military housing decisions, or over the reasonableness of military aircraft maintenance schedules, but we possess manageable standards for deciding whether a private contractor complied with an individual helicopter’s maintenance plan—even if the Navy created that maintenance plan. As the Eleventh Circuit noted in rejecting the doctrine’s applicability in another plane- crash case, “[i]t is well within the competence of a federal court to apply negligence standards to a plane crash.” It is within the competence of state courts to do the same.

Preston at pg. 17 (internal citations omitted).

Essentially, the political question doctrine is premised upon constitutional constraints on the judicial branch of government to adjudicate claims that are the clear and sole responsibility of other branches of government. For example,under the political question doctrine, issues that implicate sensitive military decision-making are nonjusticiable in a court of law because those matters are intended to be the direct responsibility of other political branches of government, mainly the executive branch. Notably, the servicemembers’ pleadings in Preston did not allege that the Navy’s instructions to M1 were deficient, and the pleadings did not implicate military strategy or judgment on their face. Id. at pg. 14.

As was argued in Preston, “military control over the details of [a] contractor’s work may implicate military decisions[,]” and thus the doctrine may preclude judicial jurisdiction over suits such as the one against M1. See Preston at pg. 13. However, “‘[o]rdinary tort suits[]’ . . . are not unquestionably committed to the political branches—even when ‘touching on military matters.’” Id. at pg. 23. As the Preston court found, “[w]hen the military’s actions do not involve military expertise or judgment, and judicial history demonstrates the existence of ‘judicially discoverable and manageable standards,’ a state court should not abstain from exercising its constitutional jurisdiction to resolve the dispute.” Id.

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“Technical Debt” in IT Systems

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Privacy, Technology and Perspective 

“Technical Debt” in IT Systems.  This week, let’s spotlight a cybersecurity problem that’s often overlooked – Technical Debt.

In an IT context, you can think of a “Technical Debt” as the accumulation of maintenance needed to address the deficiency, or inadequacy, of an organization’s portfolio of technology solutions which is significant enough to impair performance that’s needed from a system. Technical debt often comes from intentional short-cuts taken by implementation teams to save time or money, failing to keep pace with patches, or failing to do timely maintenance. Thus, technical debt can include end-of-life system issues, performance issues, data issues, look and feel issues, and security issues.

Over the short- to medium-term, this often isn’t a problem.  We’ve never heard of an IT department which has all the money or people it would like to have to keep every one of its systems high performing and up to date.  Priorities must be established, hard decisions made, resources allocated; and legacy systems whose performance hasn’t sunk below an acceptable level – which will still work “well enough” for another year, another budget cycle or two, or till somebody’s replacement takes over – must often yield to more urgent needs, or at least to newer and shinier projects. (In real estate or infrastructure, this is called “deferred maintenance.”) 

What’s different now is that what it means to “work well enough” has changed. Now, to “work well enough” – in nearly every setting – means also to be at least reasonably cyber-secure.  Of course, what is “reasonable” varies by industry, data sensitivity, system criticality and complexity, and much else, and it is constantly evolving.  So when technical debt that have built up over too-long deferred maintenance, upgrades, and replacements encounter the new requirements of “reasonable” cyber-security, the technical debt must often be addressed – right now – at surprisingly high cost. This can be especially challenging for organizations who have historically not provide sufficient budget to maintain their systems and must pay a heavy catch-up cost right when the need for digital transformation is needed.

Take Multi-Factor Authentication (MFA), for example:  MFA is a prominent requirement of “reasonable” security in many contexts. Anecdotally, we’ve heard of a large, responsible, well-run IT department which recently discovered that to establish MFA in one of its important legacy systems, the department would first have to install – sequentially – more than ten (10) patches or versions to bring the system to within range of being able to handle MFA. The system seemed to have been “working” well enough all this time, which is why new releases had been continually deferred for so long.  But now, MFA was essential; and suddenly a serious technical debt was exposed to the light and had to be addressed.    

In the M&A context:  To us, technical debt seems especially important in the Mergers & Acquisitions (M&A) arena. There, the scope and pace of M&A activities have increased, and detailed due-diligence investigation of IT systems has been cut back in favor of hasty reps, warranties, and rep-and-warranty insurance. 

We question this approach and advise against it.  Just like having an inspector in real estate transactions can help surface maintenance issues, having proper due diligence of the IT systems can help surface technical debt issues, especially around end-of-life systems that often lack ongoing system patches by vendors, meaning that the system must be replaced at some point, potentially requiring a significant investment or significant risk.  As pointed out acutely in a Forbes article, a link to which follows: “[a]stute acquirers have strong incentives to look beyond what’s on the books to uncover what may be lurking off-balance-sheet,” especially in relation to assessing technical debt:

https://www.forbes.com/sites/noahbarsky/2021/04/06/mckinseys-tech-debt-solution-perpetuates-cios-it-modernization-problem/?sh=7a9581614427

Consider instead another real-estate simile we hear going around the IT world:  The Log4Shell vulnerability, it is being said, “is like having asbestos in your IT system.” Most “fixes” to this problem have merely been work-arounds by disabling the vulnerability but avoiding true system updates. The problem is still there – and one way or the other, you will have to pay off your technical debts.

—

Hosch & Morris, PLLC is a boutique law firm dedicated to data privacy and protection, cybersecurity, the Internet and technology. Open the Future℠.

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IRS Refunds in Collection Due Process Cases

The refrain from the Rolling Stones song, Satisfaction, says “I can’t get no satisfaction.” That is a common refrain when it comes to the IRS and owing back taxes. Congress has provided a myriad of rules and remedies for taxpayers when it comes to taxes. If the taxpayer is lucky enough to have a remedy,...... Continue reading IRS Refunds in Collection Due Process Cases

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Whose Card Is It Anyway?

American Express National Bank v. Sherwood

Dallas Court of Appeals, No. 05-20-00153-CV (January 27, 2022)

Justices Osborne (opinion available here), Reichek, and Carlyle

Kelli Hinson

American Express brought suit against Christopher Sherwood to collect amounts it alleged were due on two credit card accounts. The trial court entered a take-nothing judgment against American Express, finding the bank had failed to prove it owned the accounts at issue. American Express appealed.

The Dallas Court of Appeals carefully reviewed the evidence presented by American Express to determine whether it conclusively proved its right to recover on the two accounts. Although American Express put on testimony from a custodian of records that the outstanding account balances were owed on accounts opened by Sherwood and owned by American Express, many questions remained. For example, there was no evidence explaining why the account number on one of the cards changed from one ending in 62009 to one ending in 61001. Despite the bank witness’s testimony that he was “one hundred percent” confident the two accounts were for the same card, there was no documentation showing the reason for the change in account numbers. The other card had originated with Citibank. The bank witness testified that American Express “took over the Citibank Hilton portfolio,” but there was no documentation of any transfer or assignment of the account at issue. In addition, there was a balance due when the account was allegedly transferred from Citibank to American Express, and American Express did not have any documentation of the Citibank charges that resulted in that balance. Even though Sherwood testified at trial and did not deny those charges were his, the Court held “Sherwood’s silence does not provide affirmative evidence that was otherwise lacking.”

In the end, American Express could not connect all the dots proving its right to collect on either card, and the take-nothing judgment was affirmed.

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State Bar board approves budget publication, resolution in support of remote proceedings

The State Bar of Texas Board of Directors held its quarterly meeting on January 27. Highlights of the meeting appear below. You can watch video of the meeting at youtube.com/statebaroftexas and read the agenda and meeting materials at texasbar.com/bodmaterials.

State Bar of Texas Budget

The board approved the State Bar of Texas fiscal year 2022-2023 proposed budget for publication in the Texas Bar Journal. You can view the proposed 2022-2023 budget documents here. The State Bar will hold a public hearing on the budget on April 11. The final step in the bar’s budgeting process will be to present it to the Texas Supreme Court for consideration. View the bar’s historical financial documents at texasbar.com/finances.

Resolution in Support of Remote Proceedings

The board approved a resolution in support of the efforts of the Texas Supreme Court and its Remote Proceedings Task Force to remove impediments to remote court proceedings, including the adoption and implementation of rule amendments. Before adopting the proposed resolution, the board agreed to add a clause stating: “Whereas the Board of Directors still acknowledges the importance of in-person proceedings, it hereby wishes to preserve the option of remote proceedings where appropriate.”

Proposed Changes to the Texas Lawyer’s Creed

The board approved the referral of the Diversity, Equity, and Inclusion Task Force’s proposed changes to the Texas Lawyer’s Creed to the board’s Administration Committee for further study and consideration. View the proposed changes here.

Diversity Council

The board referred the Diversity, Equity, and Inclusion Task Force’s recommendation regarding the creation of a State Bar diversity council to the board’s Policy Manual Subcommittee for further study and consideration.

Candidates for 2022-2023 Chair of the Board

The board heard presentations from four candidates for 2022-2023 chair of the board: Chad Baruch (Dallas), David Calvillo (Houston), Lucy Forbes (Houston), and Todd Smith (Austin). You can view the candidates’ nomination letters to the board here under agenda item 8 and watch the video of the meeting to hear their presentations.

Looking Ahead

The next board meeting is scheduled for April 29 in El Paso. If you have comments for the board, please email them to boardofdirectors@texasbar.com. Click here to find your district directors.

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How Much Money Can I Give Without Paying Gift Tax?

Under our nation’s federal tax regulations, it is the person making a gift (the donor) who is responsible for any federal gift tax that is due. The gift’s recipient (the donee) does not have to pay any income taxes on the value of the gift the donee receives.

The annual gift tax exclusion, the maximum amount a donor can give a donee in a single year without filing a federal gift tax return, increased to $16,000 a year in 2022. That means you can give up to $16,000 to any individual without having to pay any gift tax.

But making a gift over $16,000 does not necessarily mean you will have to pay any federal gift tax. That’s because, in addition to the annual gift tax exclusion, Americans can also make lifetime gifts of up to the federal estate tax exclusion.

The federal estate tax exclusion increased to $12,060,000 in 2022. If you make a gift during the year that exceeds $16,000, you can deduct the excess from your lifetime exclusion.

For example, suppose you give one of your children $20,000 this year, $4,000 more than the federal gift tax exclusion. Rather than paying gift tax on the amount that exceeds the gift tax exclusion, you would simply report the excess on a federal gift tax return. Doing so will reduce your lifetime estate tax exclusion by $4,000.

If Congress does not pass any additional legislation, the estate tax exclusion will be cut in half in January of 2026. But since most Americans will never amass $6,000,000 in wealth, the law makes it possible for Americans to transfer a lot of money during their lives without incurring any federal gift tax liability.

This article was originally published on February 16, 2018, and updated on January 28, 2022.

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2 Workers Injured in An Oil Tank Battery Explosion West of Okarche, Oklahoma

Two workers were injured in an oil tank battery explosion west of Okarche, Oklahoma last Monday. The cause of the explosion is still under investigation.

The explosion occurred at about 2:00 P.M. on January 24, 2022. The workers, both men were employed by a contractor, were cleaning equipment. They were brought to nearby hospitals and treated for unknown injuries suffered during the explosion.

OHSA is still investigating the explosion to determine what exactly occurred.

Common Causes of Oil Tank Battery Explosions

An oil tank battery explosion is an event that can occur when a tank filled with oil or another flammable liquid catches fire. The fire can cause the tank to explode, which can damage equipment and property, and injure or kill people.

There are a variety of ways that oil tank battery explosions can occur. Fires, mechanical failures and static electricity have been the most common causes in recent years. The tanks themselves could be made from steel, fiberglass or concrete materials. Oil tank battery explosions can lead to equipment damage as well as injury and death for people nearby at the time of the explosion. In order to prevent this type of incident, it is important to take precautions such as storing flammable liquids separately from other hazardous chemicals and not over-pressurizing containers when filling them with liquid substances like gas or oil which may cause an explosion if enough pressure builds up inside the container during storage.

If you or a loved one has been injured in an oil tank battery explosion and wants to know how we can help, it may be time to contact an oilfield injury lawyer for a free, confidential consultation.

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How Can You Commit Federal Credit Card Fraud?

Credit card fraud can be perpetrated on a very large scale. Some criminal organizations steal information from many people at once, usually through some type of online scam or phishing scam.

 

In the federal system, credit card fraud can be charged forsimply using a credit card fraudulently one time without the permission of the owner. It’s a very serious charge  that can result in a lenghty prisdon term.

 

Here’s what you need to know about federal credit card fraud, including the types of fraud that can be prosecuted and the penalties that can be faced.

 

What Acts Are Considered Federal Credit Card Fraud?

 

Under federal law, credit card fraud covers quite a range of conduct. There are several actions that constitute credit card fraud in federal court, including:

 

Card Theft

 

When you physically take the card from the owner’s possession without their permission and use it to make purchases, then you are committing credit card fraud.

 

Skimming

 

This is a type of credit card fraud that happens quite frequently. A device that can be used to store credit card information is placed on a credit card reader in a way that isn’t easily detectable. When someone uses the credit card reader – like at a gas pump – the skimmer sends information to the perpetrator.

 

Card-Not-Present Fraud

 

This covers the use of credit cards fraudulently when you’re not in physical possession of them. In other words, you have the credit card information of another and use it to make purchases online without their permission.

 

Application Fraud

 

This type of credit card fraud occurs when someone steals identifying information from another person and uses it to open a credit card account in that person’s name. It is also a form of identity theft.

 

With any type of credit card fraud, intent is the key. It must be shown that the fraud was perpetrated knowingly in order for the defendant to be found guilty in the court of law. Federal credit card fraud laws tend to focus on foreign or interstate commerce.

 

Penalties for Federal Credit Card Fraud

 

The penalties associated with federal credit card fraud depend on the nature of the offense and how severe it was. If the credit card is merely stolen but never used, then it can be treated as a misdemeanor – but it could also qualify as a felony. It’s really up to the court.

 

If there is theft of a card involved in a credit card fraud crime, then it’s likely that a person will face up to five years in prison. For any case involving identity fraud, as well, you’re looking at up to 20 years in prison. Tools that are used in the commission of credit card fraud, such as skimmers, can add time onto the penalty as well.

 

Credit card fraud, either at a small scale or a much larger one, is taken seriously. If you are prosecuted in federal court for it, then you can face serious penalties, so make sure to understand the charges against you completely.

 

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Game changing steps taken to finally unite the European patent system, (UPC/UP)

After many years of planning, and threats to implement it, both the Unified Patent Court (UPC) and the Unitary Patent (UP) are (likely) finally becoming reality sometime between mid-2022 and early 2023.  UPs will provide protection in those European Union (EU) member countries that elect to participate in the UPC/UP system (with the hope that [...]

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Newbridge Securities Sold Hospitality Investors Trust To Customers

HIT REIT Investors Continue to Report Investment Losses

It is January 2022 and Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com) continues to offer free, no-obligation case consultations to investors who suffered losses in Hospitality Investors Trust.

The non-traded real estate investment trust (non-traded REIT), also known as HIT REIT, is believed to have cost some investors losses of up to 95%. Our savvy securities attorneys are here to help determine whether you have grounds for a FINRA arbitration claim to pursue damages.

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Taxpayer Wins Tax Refund Despite IRS Claims That The Taxpayer Used The Wrong Form

Dealing with the IRS can be a dangerous labyrinth for the untrained taxpayer or their non-tax advisors. In a recent Federal court case, E. John Rewwer, et al. v. United States, the taxpayers filed the wrong form claiming a refund and both the IRS and the DOJ Tax Division cried foul and tried to dismiss their case.  Fortunately, the court found that the taxpayer’s filing met the “informal refund claim” requirements and denied the government’s motion.

The taxpayers received an unfavorable audit determination increasing their tax liabilities for 2007, 2008 and 2009.  All amounts were paid and the taxpayers then filed IRS Form 843 (Claim for Refund and Request for Abatement) for all three years. The taxpayer’s attorney, not the taxpayers, signed the requests for refund but didn’t include IRS Form 2848 (Power of Attorney). The IRS allowed the 2008 claim but then denied the 2007 and 2009 claims, so the taxpayers appealed within the IRS.  A taxpayer generally has two years from the date of the determination to file a refund suit in federal district court.  The taxpayers didn’t hear from IRS Appeals, and the two years was expiring, so they filed their refund suit.

Refund litigation in federal district courts are handled by the Department of Justice, Tax Division. The DOJ Tax Division filed a motion for judgment on the pleadings claiming that Form 843 is the wrong form to claim a refund of income taxes and that the forms were not properly signed because they didn’t contain the IRS Form 2848. Specifically the government claimed sovereign immunity, which says that the government (i.e. the sovereign) can only be sued when it specifically authorizes the lawsuit.  26 U.S.C. §7422(a) specifically authorizes suits to recover tax refunds, but it requires that a valid tax refund was filed with the IRS.  Essentially, the government argued that it was the wrong form so they didn’t have a valid claim for refund and cannot file suit.

The court recognized that the IRS regulations do, in fact, require that income tax refunds be filed on Form 1040X and not Form 843. It also found that the signature of an authorized representative must be accompanied by a valid power of attorney (Form 2848). However, the court also noted that the Supreme Court has held that a notice fairly advising the IRS of the nature of the claim where formal defects and lack of specificity are remedied after the statute of limitations expired.  In this case, the taxpayers filed the required Form 1040X as part of the litigation to satisfy the requirements raised by the government. The court found that the taxpayers submitted valid informal claims because the IRS understood what the taxpayers were seeking and the tax years involved, even though the proper form wasn’t used. Further, the court noted that the IRS provided correspondence asking for more time to investigate the claims but not indicating any lack of understanding of the claim itself. Also, the fact that the IRS had allowed the claim for the 2008 tax year despite its filing on Form 843 indicated a willingness to grant the refund despite the lack of meeting any claimed formal requirements.

Lessons Learned

Although the taxpayers are undoubtedly grateful for the victory, I’m sure that appreciation is tempered by the costs of having to fight both the IRS and the DOJ Tax Division because of confusion over the proper Forms to use and how to fill them out. It’s a reminder that once the IRS makes its decision and, in this case, has the money it claims it is owed it will use any argument to prevent returning the money. Also, it is a reminder that technical faults claimed by the IRS can often be challenged and overcome – if necessary.

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