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In the current real estate market, when obtaining a bank mortgage is difficult and sellers are desperate, buyers should consider negotiating a “seller concession” into their real estate contracts.

In most real estate transactions in New Jersey, the buyer pays most closing costs, which may include title searches and insurance, survey fees, homeowners’ insurance, taxes, document recording fees, inspections, mortgage charges, etc. With a “seller concession,” the seller agrees to contribute funds towards these closing costs, making the transaction more affordable for the buyer. As a result, the buyer has lower closing costs and is in a better position to begin making mortgage payments.

Seller concessions also benefit sellers having trouble selling their property. The offer to contribute a certain, set amount towards the buyer’s closing costs may not only entice a hesitant buyer to agree to the purchase, but also make it more likely that the buyer will be able to obtain a mortgage and close on the property.

The amount of a seller concession depends largely on the lender, the type of loan and the purchase price. With a conventional loan, a seller concession of three percent of the purchase price is typical. With an FHA loan, the concession is likely to be closer to six percent.
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B&O_RR_common_stock.jpgA self-cancelling installment note (“SCIN”) can be used to sell a business interest, stocks, real estate or other types of assets, usually to a family member of the current owner. This is a variation of an installment sale where the remaining payments are cancelled upon the death of the note holder.

When using a SCIN, the person selling assets essentially serves as a bank. They transfer title to the asset to the buyer in exchange for installment payments, including interest, (at regular intervals, i.e. monthly, quarterly or annually) over a specified time period. The SCIN will contain a provision that the unpaid balance of the note is cancelled upon the seller’s death. If the seller lives beyond the term of the note, the cancellation provision has no meaning and is just ignored, because the entire balance will have been paid. However, if the seller dies before the term has expired, the buyer’s obligation to make the installment payment ends at the seller’s death.

The main purposes of utilizing a SCIN to transfer assets are: 1) minimizing estate taxes – the unpaid balance is not includable in the seller’s gross estate; 2) avoiding gift taxes; and 3) prorating capital gains on the increase in value.

Estate taxes are saved because the title to the asset was transferred to the purchaser for value before the seller’s death. This includes all appreciation which accumulated since the seller took possession of the asset. Additionally, any appreciation in value after the sale will be excluded from the seller’s taxable estate.
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fishing.jpgThe irrevocable life insurance trust (“ILIT”) provides an accessible means of avoiding New Jersey and federal estate taxes on life insurance proceeds. The potential savings often outweigh the disadvantages of what you give up.

The New Jersey and federal “estate taxes” are taxes on the transfer of property at your death. Life insurance proceeds are among the types of property that are subject to estate tax. The taxable status of life insurance proceeds is determined by ownership of the policy and payment of the proceeds. If you own a life insurance policy, upon death, your estate will be fully subject to tax if: (1) The proceeds of the policy are payable directly or indirectly to your estate; or (2) if you, while alive, held any ownership rights in the policy, such as the right to change a beneficiary, surrender or cancel the policy or borrow against the policy.

If you leave life insurance proceeds to someone other than a spouse, such as a child, relative, or friend, the proceeds will be taxed as being part of your estate. On the other hand, if you leave life insurance proceeds to a spouse, the proceeds will not be part of your estate at your death, but the surviving spouse’s estate may be taxed. An ILIT can avoid taxes not just on your own estate, but also on the estate of your surviving spouse.

The ILIT itself would own the life insurance policy and is named as its beneficiary. Each year, you gift an amount sufficient to pay the policy premiums to the trust. Then, the trust pays the premiums. You can gift up to $13,000 per year to the trust, per beneficiary named in the trust, without incurring any gift tax liability. Upon your death, the insurance proceeds are paid into the trust. The ILIT is drafted to ensure that the insurance proceeds will not be taxed as part of your estate; however, the beneficiaries of the trust will be able to access the monies held by the trust for health, education, maintenance and support. Typically, the trust is drafted so that the surviving spouse also has a right to receive the income from the trust and perhaps even a limited right to invade principle. This will also protect the monies held in the trust from creditors of the beneficiaries, or in the event a beneficiary becomes divorced. On the death of the surviving spouse, the monies held in trust can either be paid outright to your children, or the trust can continue.
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gym.jpgMany fitness centers have begun to open around New Jersey. Owners should be aware that New Jersey strictly regulates businesses that provide “physical fitness or physical well-being” services.

For example, every health club facility must register with the New Jersey Division of Consumer Affairs and renew the registration every two years. In addition, all health clubs must reregister a change in ownership. Registration can be complicated because the Division of Consumer Affairs may request information about the facility’s ownership and operations. Having an experienced attorney familiar with the registration process is important for any new business owner.

In addition, all New Jersey health clubs must maintain a bond equal to ten percent of the gross income for the last fiscal year. The bond must be at least $25,000. Further, a $50,000 bond must be maintained if the facility is not operating but provides pre-opening memberships sales. All bonds must be filed with the Division of Consumer Affairs. If the facility is closed for longer than thirty days all members are entitled to prorated refunds.

New Jersey law also requires that all facilities offering health club services to have written contracts, with a copy provided to the member. In addition, contracts must have specific language on specific pages. For example, a member’s total payment obligation must be on the first page of any health club services contract. The contract must also advise members that the bond was posted with the Division of Consumer Affairs.
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Creditors in New Jersey should not be dissuaded from trying to collect what is owed to them because debtors transfer their assets. New Jersey law protects creditors’ rights by imposing penalties for debtors who transfer assets to prevent collection of a valid debt.

The Fraudulent Conveyance Act of 1919 has protected creditors’ rights in New Jersey for nearly a century. However, in 1988 the New Jersey Legislature updated New Jersey’s fraudulent transfer laws by passing the Uniform Fraudulent Transfer Act (“UFTA”), which replaced the former Fraudulent Conveyance Act.

The purpose of UFTA is to protect creditors from debtors who hide assets. Debtors are therefore prohibited from transferring assets to avoid paying debts, once creditors have a “right to payment.”

Under New Jersey’s UFTA, there are two ways creditors can establish that a fraudulent transaction has occurred. Creditors can prove that a transaction was done with actual intent to defraud the creditor. However, the burden of proof is on the creditor and it is often very difficult to meet. Therefore, the UFTA also allows creditors to prove “constructive fraud.” To prove this, creditors must show that a transfer was made without exchange of reasonably equivalent value, rendering a debtor insolvent.
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The purpose of New Jersey’s Unemployment Compensation Law is protecting people from the harsh effects of losing their jobs, and providing a safety cushion for this sudden loss of employment.

Most employees are “at will” employees. This means that there are no contractual terms of employment or specific requirements for termination. An employer in such a relationship can fire the employee for just about any reason as long as that reason is not discriminatory or retaliatory, i.e. in response to a valid objection by the employee to the legality of the employer’s conduct.

So, an employer can walk into work one day and decide to fire the first person he sees, no matter who that person is, and no matter how well that worker performs her job. In such a situation, although there is no “good” reason for that firing, it is not illegal. However, that employee is able to make a claim for unemployment compensation since her firing was done though no fault of the employee. After all, this is required insurance for which every employee pays.

 

 

In order to make a claim for unemployment compensation, the employee is required to have had at least 20 “base weeks” of earnings or have earned a certain minimum required dollar amount. These amounts may be periodically adjusted by the State to reflect changes in income rates, for instance taking into consideration the State’s hourly minimum wage. In 2012, this meant that, in order to qualify for unemployment compensation, the employee had to have worked for the employer for at least 20 weeks in which the employee earned $145.00 or more, or at least $7,300.
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When a person dies owning assets, probate is often required to transfer the title. Some assets are “probate assets.” These assets can only be transferred after an executor or administrator has been appointed by one of the New Jersey Surrogates. Each county in New Jersey has its own Surrogate. The county where probate is initiated is determined by the decedent’s residence. If that person died with a will, the executor named in the will will be appointed by the Surrogate, then the assets will be transferred to the beneficiaries named in the will by that executor. If the person died without a will, the surrogate will appoint an administrator, then the assets will be transferred according the New Jersey Intestacy Statutes by the administrator.

There are, however, assets which can be transferred without probate. These assets are transferred to a designated beneficiary under contract law. Examples include: the joint tenant of real estate automatically becomes the sole owner of that real property; the “payable on death” beneficiary on a bank account takes ownership of the entire account; the named beneficiary on a contract for life insurance will be paid the proceeds of the policy without the need for the executor or administrator to take any action. Other assets which typically pass without the need for probate include IRAs, 401(k)s, and employee death benefits. Determining if an asset must go through probate to effectuate transfer is dependent upon how the title to the asset was held at the time of the person’s death.

Personal property, including stocks, bonds and bank accounts, vehicles and real property which are held solely in the decedent’s name require probate for transfer to the beneficiary. These assets are referred to as “probate property” and are transferred to the people designated in the will, or if there is no will, to the people designated by New Jersey’s laws of intestacy.

If probate is required, this is done at the New Jersey Surrogate’s Court in the county where the decedent resided. A will cannot be probated until ten days following the death of the testator (the person who executed the will). The person who is named executor in the will must appear at the Surrogate’s County with the original will, an original certified death certificate, the names and addresses of the next of kin (the surviving family members), a check to pay the Surrogate’s fees for probating the will, and valid identification.
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Estates of New Jersey residents are potentially subject to two types of state taxes: New Jersey Estate Tax and New Jersey Inheritance Tax.

First, an estate is subject to New Jersey Estate Tax if the value of the estate is more than $675,000.00. This tax is based solely on the value of the assets held by a person when they die, whether held individually or jointly with another person. If the value of the estate exceeds $675,000 a New Jersey Estate Tax Return (NJ IT-E) must be filed within nine months after death.

Second, the requirement to file New Jersey Inheritance Tax Return (NJ IT-R) is triggered by the classification of the estate’s beneficiaries. The NJ IT-R must be filed within eight months after death. The tax is determined by the relationship of each beneficiary to the decedent. Class “A” beneficiaries are not required to file or pay New Jersey Inheritance Tax. Class “A” beneficiaries are spouses, children (or lineal descendants), parents, grandchildren, grandparents, or stepchildren. There is also no inheritance tax on bequests to a qualified charity. Since, these are usually who most people leave their estates to, most estates are not subject to the New Jersey Inheritance tax.

If a person leaves property to a brother, sister, son-in-law or daughter-in-law (these are class “C” beneficiaries), the New Jersey Inheritance Tax Return must be filed. The first $25,000 of the bequest is not subject to inheritance tax. However, the next $1,075,000 is subject to tax at a rate of 11%; amounts in excess of that are taxed on a sliding rate scale ranging from 13% to 16%.
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New Jersey’s Law Against Discrimination

New Jersey’s Law Against Discrimination (the “LAD”) protects many people, particularly employees, from discrimination because of their race, ethnicity or religion, among other things. Discrimination can take many forms, but includes direct tangible adverse employment actions, such as firing, demotion, etc., and harassment which cause a hostile work environment. In order to constitute discrimination, harassment must be either “severe or pervasive,” and severe or pervasive enough to create a “hostile work environment.”

The Law on Poorly Aimed Discrimination

The law prohibiting discrimination and harassment is well established. However, an issue arose as to whether discrimination or harassment based not on a person’s actual race, ethnicity or religion, but on his incorrectly perceived religion, race or ethnicity is also protected.

The LAD also protects against discrimination or harassment based on disability. As far back as 1982, New Jersey Supreme Court noted in a footnote, Anderson v. Exxon Co., 89 N.J. 483 (1982), that employers could not discriminate based on a perceived disability, even if the employee was not actually disabled. Although that was not the issue in the Supreme Court’s 1982 decision, the Appellate Division shortly thereafter decided another case, affirming the rule that employers could not discriminate based on a perceived, even if an incorrectly perceived, physical disability.

The LAD also prohibits discrimination in housing. In 1987, the Superior Court’s trial division found that a landlord had violated the LAD by refusing to rent an apartment to three gay men (sexual orientation is also protected by the LAD), based on the landlord’s perceived but on the mistaken perception that they would contract AIDS.
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Background: Due Diligence, Purchases and Sales of Business

In the sale of a New Jersey business, buyers normally perform due diligence such as inspecting profits, losses, revenue, expenses, bank accounts, tax returns and financial statements and the like. Contracts for the sale of a business often say that the buyer is not relying on a seller’s representations, but rather only on its own inspections. In many instances, conducting inspections and due diligence may bar recovery when the buyer believed going in to the closing turn out to be incorrect. The question then becomes, what if those mistaken beliefs were brought about by the seller’s own fraud?

Bridals Gowns Not What They Appear

Anwar and Donna Walid were looking to buy a business. Donna had worked at a high end retail clothing store in New York, studied textile design, and obtained a master’s degree in organization and development. Anwar, Donna’s husband, had a degree in electrical engineering and had worked in research and development for Lucent Technologies. They were highly educated people.
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