Page Tag: Spring2012

On January 1, 2012, the Oregon Estate Tax law became a little simpler to calculate, and the title of the law changed from “Inheritance Tax” to “Estate Tax.” Estates below $2 million now owe less tax than previously due, and estates more than $2 million owe more. Originally, the 2011 legislation raised the Oregon exemption to $1.5 million in an effort to follow, but not match, the federal exemption increase to $5 million. However, in order to maintain revenue neutrality, the exemption increase required the highest marginal tax rate to be raised from the rate of 16% to 19.8%, which was higher than Washington’s top marginal rate of 19%. On May 10, 2011, the Oregon House passed the bill with the higher exemption and the higher rates.

But the rate increase hit a “buzz saw” when the bill was reviewed by the Senate Finance and Revenue Committee. Kevin Mannix, a longtime citizen advocate who served ten years in the Oregon House of Representatives, objected to the rate increase and told the committee that if the bill passed the legislature, it would have completed a “trifecta” (referring to the income tax increases in Measures 66 & 67 that passed last year). He has launched an initiative to repeal the Oregon estate tax.

Tax Fairness Oregon, presenting a different perspective on the issue, also objected to the bill stating that the exemption increase from $1 million to $1.5 million created an unnecessary tax break for the rich. Tax Fairness Oregon recommended keeping the exemption at $1 million. Also, some members of the legislature were opposed to any tax rate increases at all. So the Senate Committee amended the bill to reduce the maximum tax rate back to 16% and keep the exempt-ion to $1 million.

It’s important to note that Oregon and Washington are the only states in the western 13 states that have a state estate tax. Some may ask why Oregon doesn’t follow the majority of western states and simply repeal its estate tax. The revenue from this tax averages approximately $100 million per year, which is less than 2% of Oregon’s total collected revenue. However, the legislature was not willing to replace the lost revenue with another tax.

Since the $1 million exemption remained the same and the top marginal rate stayed the same, what changed?

• Single Rate Table: The new law adopts one tax rate table beginning with a tax rate of 10% for estate values over $1 million with steps up to 16% for estates over $9.5 million. This change replaces the complicated two rate schedules and the add-back tax calculations under prior law.
• True $1 million exemption: Under the old tax system when a tax-able estate exceeded $1 million the tax rate calculations reached back to tax the first $1 million as well. Thus, for estates over $1 million, there was no $1 million exemption. Under the new law there is a true $1 million exemption, and the tax rate calculations begin with the first dollar over $1 million.
• Tax Break for Non-Residents: Prior Oregon tax law is really confusing. It exempted a non-resident decedent’s intangible personal property situated in Oregon only if the state in which the decedent lived exempts intangible personal property of Oregon residents. This complicated tax rule was very difficult to figure out. Also, if a non-resident invests in Oregon real estate through a limited liability company, should the membership interest be exempt from Oregon tax? Or if a non-resident invests in a number of real estate properties in multiple states through a limited liability company, what portion should be exempt from Oregon tax? These issues proved to be too complex to resolve in an equitable manner, so the best practical resolution seemed to be simply to exempt all intangible personal property owned by non-resident decedents from Oregon tax.

  As a result, intangible personal property — such as Oregon bank accounts, brokerage accounts, and limited liability company membership interests owned by non-resident decedents — will no longer be subject to Oregon estate tax. However, real property located in Oregon and tangible personal property, such as a recreational vehicle located in Oregon, will continue to be subject to tax.

• Updated Internal Revenue Code Reference Date: Prior Oregon law tied to the federal estate tax law in the Internal Revenue Code (“IRC”) as it existed on December 31, 2000. Very few tax professionals retain copies of the IRC going back that far. So changing to a more current date was necessary, and the new law changed the IRC reference date to December 31, 2010. This change includes the Tax Relief, Unemployment Insurance

  Authorization, and Job Creation Act of 2010 (“TRA 2010”) that became law on December 17, 2010.

• Portability For Surviving Spouse In Oregon: TRA 2010 increased the federal estate tax exemption to $5,120,000 in 2012 and added a provision allowing the remaining unused portion of the $5 million exemption of the first deceased spouse to be transferred to the surviving spouse, if both spouses die on or after 1/1/2011 and on or before 12/31/2012. Generally, Oregon tries to synchronize its tax laws with related federal law provisions. However, the Oregon Department of Revenue has indicated that it will not allow the federal portability provisions to apply to Oregon estates.
• Lower Interest Rates for Extended Payment Plans: Due to liquidity issues, some estates need additional time to pay the Oregon estate tax. Under current law the interest rate for an approved Oregon plan, 9% per annum, is considerably higher than the federal rate of 2% per annum for extended payment plans. The new law reduces the interest rate from 9% to 5% per annum. 5% is still higher than the federal interest rate, but at least it’s a step in the right direction. Estates needing additional time to pay the tax can apply for an installment plan up to a maximum 14 years.
• Natural Resource Property: Oregon allows a tax reduction for estates holding natural resource property such as farms, forestland and fishing operations, provided the property continues to be used by family members as discussed below. Significant definitional clarifications were added to the natural resource property statute. For example, natural resource property was expanded to include a cash or cash equivalent operating allowance of up to the lesser of 15% of the claimed natural resource property or $1 million.

  Taxpayers who make a natural resource property election will have to continue to report the status of their natural resource property to the Oregon Department of Revenue on an annual basis.

• Continued Natural Resource Use Requirement and Disposition Tax: Family members who inherit natural resource property must continue to use the property for farm, forestry, or fishing business for five out of eight calendar years following the decedent’s death. If natural resource property is sold or its use ceases prior to satisfying the five-out-of-eight-year requirement, a disposition tax will be due six months after the disposition event. However, most, but not all, sales or transfers of natural resource property followed by the replacement with natural resource property continue to qualify and are not subject to the disposition tax.
• Lifetime Gifts: The non-taxability of lifetime gifts has been clarified for Oregon Estate tax purposes. After 2011 Oregon no longer “adds back” lifetime gifts to determine the Oregon Estate Tax (“OETax”).
• 2012 Planning Opportunity: As long as the Federal exemption remains at $5,120,000, there is an opportunity for taxpayers to reduce their OETax exposure without incur-ring Federal gift taxes. For example, if “Joe” dies in 2012 holding assets valued at $2.5 million, his estate would owe approximately $152,500 in OETaxes. But if “Joe” had given away $1.5 million before his death, his OETax would be zero, and his Federal gift tax would be zero. Even though this gifting opportunity is attractive, one must review the income tax basis of the assets prior to making the gift.

  If the gifted assets have a low cost basis, the recipient of the gift will acquire the gifted assets at the same low basis as the donor. Later, when the recipient of the gift sells the gifted property, the OETax savings may be exceeded by Oregon and Federal income tax costs.

  As long as the federal exemption remains at $5 million many Oregon decedents will never pay federal estate tax, but quite a few will have to pay OETax. With the relatively low exemption of $1 million, many Oregon residents will continue to need to plan for the OETax in their estate plans. The Oregon Department of Revenue is in the process of reviewing its Administrative Rules to determine the revisions that need to be made to comply with the new changes.

  As Oregon residents continue to struggle with the economy, some may consider possibility that the OETax will be repealed in the November 2012 election. A spokesperson at Kevin Mannix’s office confirmed that he is working on an initiative for the November 2012 ballot to repeal the Oregon Estate Tax. If that initiative passes, then Oregon may no longer have an estate tax.

Jeff Cheyne was a member of the inheritance tax workgroup of the Oregon Law Commission. He represents individuals and businesses in the areas of estate, tax, business and real estate planning.

Contact Jeff directly at jcheyne@samuelslaw.com

After a year in our new office location in downtown Portland, we are well settled. If you have not been able to come by and see us, please stop in when you get the chance.

Throughout the last year, we’ve been presenting seminars to familiarize people with newer developments in the law and with general information on specific areas of the law. Recent seminars, each lasting about an hour, explored the following areas: Estate Tax Changes, Including Pets in Your Estate Plan, Understanding and Assessing Testamentary Capacity, Famous and Infamous Wills, and Estate Planning in Oregon. The Estate Planning in Oregon seminars are part of a series that focuses on Oregon-specific estate planning information.

If you’d like to be added to our seminar series invitation list, please contact us and we’ll make sure you have the opportunity to participate. If you have a group of people (up to 15) who would be interested in one or more of the seminars, we’d be happy to schedule a session either at our office or yours. And, if you’d like some general information about an area of the law, and you know of others who are interested in the same topic, please contact us and we’ll see if we can arrange a special session for you.

These seminars are free. We enjoy the opportunity to visit with our clients and other friends and meet new people. We hope to hear from you soon.

Would you like more information on the firm’s 2012 Seminar Series? Please contact us at events@samuelslaw.com or by phone at (503) 226-2966.

We’re excited to welcome three new attorneys to the Samuels Yoelin Kantor LLP family: The Honorable Donald W. Hull, Denise Gorrell and Ben Leedy.

The Honorable Donald W. Hull has joined the firm as senior counsel. Judge Hull retired in December 2011 after serving 22 years on the bench for Circuit Court, District 7, which includes Gilliam, Hood River, Sherman, Wasco and Wheeler counties. Judge Hull has presided over an incredible variety of cases throughout his 22 years on the bench. His extensive knowledge of complex and, oftentimes, emotional cases — as well as his experience in private practice — provides a valuable resource for our attorneys and clients.

You can contact Judge Hull directly at dhull@samuelslaw.com.

Denise has joined the firm as a partner focusing on business and litigation. Prior to law school, Denise spent 11 years on the Seattle restaurant scene, including stints at the award-winning Wild Ginger restaurant and wine retailer Esquin. This first-hand experience helps her understand the unique challenges that food and beverage entrepreneurs face when planning, launching and running their businesses. Denise also maintains a successful business and fiduciary litigation practice, frequently representing clients in real estate disputes, business dissolutions, and trust contests.

Contact Denise at denise.gorrell@samuelslaw.com

Ben joins the firm as an associate, with a focus on the areas of commercial real estate, real estate development and finance, and retail and office leasing. He frequently represents clients in purchase and sale transactions, as well as real property secured lending transactions, including loan modifications, workouts, and deeds-in-lieu of foreclosure. An experienced presenter and author, Ben has spoken and written about a variety of topics including commercial mortgage loan workouts, employment contracts and legal developments affecting the management of golf courses and private clubs.

Ben can be reached at ben.leedy@samuelslaw.com.

• Being an active community member is important to our attorneys, and we’re pleased to announce that Victoria Blachly has been named a Member-at-Large for the Elder Law Section of the Oregon State Bar. She is also a member of an Oregon State Bar work group to address modifying statutes to clarify that a personal representative, trustee, or conservator has the legal authority to access online information. In addition, she has been named to the Multnomah Bar Association’s Equality and Diversity Committee.
• Jeff Cheyne has been elected to the Portland Tax Forum Board, and was also named Treasurer for the Oregon State Bar’s Estate Planning and Administration Section.
• Eric Wieland is a member of Leadership Portland’s class of 2012. He also serves on the CLE Committee for the Oregon State Bar’s Estate Planning and Administration Section.
• Glen Goland has joined the board of Housecall Providers, the only nonprofit primary care medical practice in the Portland metropolitan area to provide in-home physician and nurse practitioner services to homebound seniors and persons with disabilities.
• Ben Leedy has been appointed to the Education Committee of the Real Estate and Land Use Section of the Oregon State Bar.
• Five of our attorneys were named to the 2011 lists for Oregon Super Lawyers and Rising Stars. Firm partners Merritt Yoelin, Stephen Kantor, Steve Seymour and Jeff Cheyne were all named Oregon Super Lawyers, and Eric Wieland was named an Oregon Rising Star. Attorneys from the firm have received recognition from Super Lawyers for the past six years.
• In addition, the firm earned a “Best Law Firms 2011” ranking from U.S. News and World Report for Tax Law and Trust & Estate Law categories.
• The Samuels Yoelin Kantor letterhead, envelope, notecard and business card designs received a 2011 Gold Award from Neenah Paper, a leading international producer of fine paper products. Jeff Fisher, of Jeff Fisher LogoMotives, designed the stationery package for the firm as an element of last year’s rebranding effort.
• Our attorneys are offering a full slate of educational seminars to help keep clients and colleagues informed on recent developments and industry best practices. Most of the seminars take place here in our state-of-the-art conference room on the 38th floor of the US Bancorp Tower. Seminars are complimentary, and CPA participants may qualify for (1) Continuing Professional Education (CPE) credit.
• Upcoming topics through June include (dates subject to change):
  • March 15: Planning for married couples and domestic partners in Oregon
  • April 19: Trusts 101: maximizing control over your assets
  • May 24: Understanding transfer tax fundamentals
  • June 7: Trust and Estate Litigation

For details, please email events@samuelslaw.com

After a year in our new office location in downtown Portland, we are well settled. If you have not been able to come by and see us, please stop in when you get the chance.

Even employers without union employees can run afoul of the National Labor Relations Act (“NLRA”), which is enforced by the National Labor Relations Board (“NLRB”). Although the total number of unionized employees in the United States has been dropping over the past 70 years (private sector union membership alone dropping from 16.8{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} in 1983 to just 6.9{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} in 2010), the provisions of the NLRA apply to many employers, not just those with a unionized workforce. This article will touch on a few provisions of the NLRA, and explain how employers – regardless of their size or number of workers – can get in trouble by enforcing what they thought were reasonable workplace rules and policies.

Concerted Activity: The NLRA protects “concerted activity” in both union and non-union contexts. The NLRB defines concerted activity as “two or more employees taking action for their mutual aid or protection regarding terms and conditions of employment.” Even a single employee can be engaging in concerted activity if that person is acting on the authority of other workers, bringing group complaints to an employer’s attention, or trying to induce or prepare for group action. One simple example of concerted activity is an employee talking to another employee about the size of a raise or bonus. Some employers would like to have a “compensation is confidential” rule in place – but that sort of rule is a violation of the NLRA’s “concerted activity” protection for workers. Employers need to be cautious about restricting employees from discussing workplace concerns – pay, work assignments, safety concerns, workplace conditions, complaining about co-workers or supervisors – because all of these can fall under the “concerted activity” rubric, and are potential grounds for an unfair labor practice case before the NLRB.

Social Media and the Workplace: An entire Fine Print article could (and probably will, in the future) be written about social media issues in the workplace. For the purpose of this article, the issue is how social media (e.g. Facebook, Twitter, personal blogs, etc.) can implicate the NLRA. According to the NLRB, in the last twelve months workers have filed labor complaints (called “charges”) against more than 100 (mostly non-union) employers for improper activity related to social-media practices or policies. The agency now faces applying labor principles dating back to the 1935 origin of the NLRA to the increasingly online 21st century. It is very likely that many of a company’s employees have a “Facebook” account. Facebook has over 800 million users, and those users “like” or comment on more than 2 billion posts per day. One study found that 77{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} of Facebook users log on during work hours. So it is likely that employees will post a comment about a workplace related issue – either during or after work hours. If an employee is “friends” with another employee on Facebook, the posts and comments to posts can easily be considered “concerted activity.”

Similarly, employees posting photos online can also fall under the “concerted activity” protection. In a recent NLRB case, a car salesman posted a photo of a car that had crashed into a pond during a test drive – the photo was quite embarrassing to the luxury car dealership. He also posted photos of a luxury car sales event, where the food served was less than deluxe (hot dogs and popcorn). Nevertheless, the commentary along with the photos was held to be protected under the “concerted activity” standard. The car salesman (who was not a union member) was terminated by his dealership, but ordered reinstated following a challenge to the NLRB.

That is not to say that everything an employee says, writes about (some people still do write letters to the editor), or posts online is protected. Comments that are so disloyal, reckless, or maliciously untrue can lose NLRA protection. A newspaper reporter’s “tweets” on Twitter were found to be unrelated to her workplace (they were offensive comments about a television reporter), and her termination was found to be lawful by the NLRB. Another employee who posted comments on her senator’s Facebook wall, complaining about her workplace conditions and pay policies, was lawfully terminated. The NLRB found that the employee was not raising group concerns, and had not discussed her Facebook post with her co-workers. Therefore the Facebook post did not qualify as “concerted activity,” and was not protected under the NLRA.

Workplace Policies: Employers should have a social media policy in place – in addition to an employee handbook — to define relevant workplace policies and procedures. The terms of any social media policy will be unique to the nature of a particular company’s business. But it is important that all workplace policies recognize the rights employees have under federal, state, or local law; and at the same time provide reasonable protections for the company. Despite the recent influx of charges, the NLRB has yet to provide specific guidance for employers on what is “protected concerted activity” in the realm of social media. The attorneys at Samuels Yoelin Kantor are carefully watching this developing area of labor law to best advise both employers and workers.

Timothy J. Resch is a civil litigator with an impressive local and international history helping employers and small businesses find success in federal and state court litigation matters.

You can contact Tim directly at tresch@samuelslaw.com.

My wife and I recently rescued a six-year-old border collie/blue heeler mix named Kingsley. The first time we left him alone in our apartment he barked over 200 times in 10 minutes. We searched the internet for solutions to his separation anxiety and we tried everything from scented plug-ins and herbal powders to various food and toy combination strategies, all to no avail. It was not until we hired the right trainer that we were able to calm Kingsley down. The barking went away entirely, and he now spends hours alone in our apartment quietly.

I tell this story for two reasons. First, because planning for Kingsley and Kyle (our cat) is what led me to write this article. Second, because I think that there is a type of “separation anxiety” that attorneys can address in the estate planning process when we ask the question “What will become of our animals when we die?” (And while we are at it: who will take our pets in and/or feed them when we are injured, temporarily disabled, hospitalized or otherwise unavailable?)

The average annual cost of basic food, supplies, medical care and training for a dog or cat is $700-875. As pet owners, we need to think about who will pay this bill when we are gone. We need to think about whether our animals will have the same routine they have now. Most importantly, we need to ask whether they will end up at a shelter.

This last question is critical: in the United States, close to 500,000 pets end up in shelters every year when their owners die or become disabled. In shelters, five out of ten dogs and seven out of ten cats are euthanized because there is no one to adopt them. If we plan ahead for these events, we can ease our own separation anxiety and help our pets to live the way that we want them to when we are gone.

• Oregon’s History on Animal Rights:
  Oregon has a strong judicial and legislative animal rights history, going back to early last century. In 1914, an Oregon state court ruled that when an animal was hurt or killed, its owner should receive more than just the market value of the animal. This “Special Value” law recognized that Kingsley is worth more to my family than the $80 adoption fee we paid at the shelter.

  More recently, ORS 130.185 became law in 2005, allowing Oregon residents to create legally binding pet trusts. Forty-four states (including Washington) now recognize some form of pet trusts. Additionally, ORS 114.215 allows friends and/or family members to take immediate pos-session of an animal and be reimbursed for any reasonable expenses incurred in caring for the animal during the probate of the owner’s estate.

  The Oregon State Bar is one of the few in the country that has an entire section devoted to animal law. Oregon’s Lewis & Clark Law School was the first college in the country to publish an animal law review, its students were the first to organize a chapter of the Animal Legal Defense Fund, and it launched the world’s first post-graduate degree in animal law in 2011. Oregon is one of 43 states that classify animal cruelty as a felony, and 2010 saw Oregon become the third state in the country to ban sow stalls and gestation crates – small containers that limit the movements of pregnant pigs.

• Short-Term Planning
  The first step in planning for pets is to address the question “who will take care of the animals in an emergency?” The short-term caretaker may be identified by an informal agreement like the one we have with our neighbor: he has a house key, knows the animals, and knows where their food is kept. We have listed him as an emergency contact at our pets’ day care locations, kennels and veterinarian offices. We have spoken with him about this arrangement and received his consent.

  Some of our clients have taken a more formalized approach to caring for their pets by executing powers of attorney that include clauses authorizing an agent to care for their animals. The decision on whether to make a formal or an informal agreement with the caretaker depends on a number of issues: proximity of friends and family, the amount of time and/or work the animals require and the animal’s expenses, to name a few.

  Pet owners should put together caretaker instructions for the animal’s day-to-day care. This should include vet contact info, where important documents are kept, where the food is, and what the animal’s exercise routines are – among other things. The U.S. Census Bureau estimates that 22 percent of the nation’s dogs and 25 percent of our cats live in single person households. Creating a detailed set of instructions is particularly important for these pet owners, as it is less likely there will be another individual who is familiar with the pets’ day-to-day routines. A detailed instruction letter is also crucial if your pet has special dietary needs, medical concerns or training issues.

• Long-Term Planning
  There are several tools that may be used to provide for animals upon the death of an owner. One popular method is through a bequest of money to a caretaker. There are two potential problems to be considered: the pet owner has no way of knowing that the assets will be used to cover pet-related expenses and there may be negative tax consequences to leaving the caretaker a sum of money outright. The first issue is one of trust between the pet owner and the individual. The second issue has been reduced somewhat over the last few years by increases in estate tax exemptions ($1 million in Oregon, $2 million in Washington and $5 million federal). Pet owners may consider providing additional compensation to the caretaker to cover any tax liability imposed due to the financial bequest. If a pet owner makes no provisions for his or her animal, the pet will become part of the owner’s residuary estate.

  Another option is to make a bequest in the owner’s will to the local Humane Society. In some cases the Humane Society will guarantee the placement of your pet in a home if you leave assets to the Humane Society. The Oregon Humane Society (the “OHS”) in Portland will make such a guarantee if you leave a gift of any amount to the OHS under their Forever Friends program.

  The final way to address pet planning issues is through the use of a pet trust. A pet trust determines custody of the animal, provides instruction to the caretaker and pays for the animal’s expenses. Pet trusts can be stand-alone documents or they can be incorporated into the pet owner’s will or trust. A well drafted pet trust will include a primary caretaker and several back-ups, a trustee who is in charge of tracking expenses, preparing tax returns and managing bank accounts — and in some cases — a trust protector to monitor the overall performance of the trust to ensure the pet is being cared for properly. The Trustee may be the same person as the caretaker, however we often recommended selecting different parties to serve in these roles.

  Regardless of whether pet owners take a formal or an informal approach to planning, it is most important that they have a plan and they write it down. ORS 130.185 instructs Oregon courts by providing for, “the liberal construction of oral or written instruments as enforceable pet trusts and not unenforceable honorary trusts.” The more evidence a friend or family member can show a court about the incapacitated or deceased owner’s intent, the more likely it is that he or she will be reimbursed for expenses and allowed to care for the pet in the manner the owner wanted.

• Conclusion
  Sixty-three percent of American households have a pet. Many pet owners consider their pets to be part of the family. Unfortunately, hundreds of thousands of these “family members” are not considered when their owners prepare their estate plans. The results are often tragic.

  Proper planning for a pet’s needs involves analyzing the expenses, headaches and joys associated with pet ownership. It requires pet owners to be proactive in creating instructions for care and in seeking legal advice tailored to the owner’s needs. If done properly, this sort of planning can provide for the well being of the pet and can ensure the pet owner that their animals will be properly cared for. If done improperly, planning for pets may leave the beneficiaries, trustees and family members scratching their collective heads and asking, “What did the pet owner want us to do?” The concerned pet owner should seek the counsel of an experienced attorney, carefully consider the needs of each pet, invest the time to develop a plan, and then write it down.

Glen Goland is an estate planning attorney who utilizes his years of experience in both the financial and legal sectors to create estate plans that work for his clients, assess tax issues and efficiently administer trusts and estates. Contact Glen directly at ggoland@samuelslaw.com.