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Excerpts from…
Ø You’re Begging To Be
Sued! ™ Landlords
Protect
Yourself From Your Tenants, Lawsuits &
Taxes! ™© 2001
Ø The
13 Secrets of the Rich or Informed™
By Richard Rydstrom, Esq. © 1989-2002
California Attorney/Accountant/National Speaker & Author
Courtesy of LandlordsClub.Com ™ and EntityPros.Com™
Ø
The
Ø
LLCs, Entity Options & Comparisons ™ © 2001
(Liability & Tax Items)
Ø Is
Toxic Mold really a Serious Health Problem?
Should Landlords & Insurers really be Responsible?
The State of the Law - A Neutral Analysis - Both Sides!
By Richard Rydstrom, Esq.
Attorney/Accountant/Author/National Speaker
[*The
author is on the
implementation of the new mold law. Landlords input and personal experiences
are invited]
1-877-946-4968
v v
By Richard Rydstrom, Esq. Attorney/Accountant/Author
v v
1-877-946-4968
(Call For
Full Versions)
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You’re Begging To Be
Sued! ™ Landlords
Protect
Yourself From Your
Tenants, Lawsuits & Taxes! ™© 2001
(Excerpts with Legal Cases)
“Jury Awards $14
Million!; $1.4 Million To
Tenant!” Can you remember reading or
hearing similar sad stories against landlords? There are plenty more, with much
more to come! Landlords are a fertile ground for increased lawsuits and
personal liability. Did you know that one partner may be 100% liable for
the acts of all partners under joint and several liability?
Did you know that lawsuits and liability can come from any number of sources
ranging from partners, investors, co-owners, tenancies in common, joint
tenancies, joint ventures, managers, guests, tenants, tenant applicants,
vendors, contractors, premises liability, slip & falls, dog bites, any
systematic code enforcement program violations and government authorities?
Moreover, with new laws, come new lawsuits. New laws will prove to devastate
the unprotected landlord. Lawsuits concerning Mold, Lead, Asbestos, Disabilities,
Discrimination, Harassment, and Wrongful Hiring/Firing will
likely crumble some hard earned empires.
Did you know that not all lawsuits are covered by insurance, and not all
types of judgments are dischargeable in bankruptcy?
Are you
protected from personal liability? Who did you hire to protect yourself from
personal liability? While your CPA is primarily used for tax reasons, you may
not be aware of the great risk of personal liability by keeping your
rental units in your personal name, or in the name of your spouse,
a dba or your living trust. (Generally a
living trust does not protect your assets from the reach of creditors. Rest 2nd Trusts 220 (1959), 4
Scott Trusts 330.1-330.2, Ca. Prob. Code,
Sections 18200, 15304 (a), 15304 (b), 15400, 19000-19403) until the death of
the first spouse, then only to extent of the ByPass
Trust and creditor actions (Ca Prob C 15300-15309). Your CPA will usually say, all
you need is insurance! But the painful truth is insurance does not
cover all types of lawsuits and potential liability. What happens if your
insurance company denies your claim for legal defense and indemnity? Are
your assets really safe from lawsuits, creditors, and tenants? Can you
really afford to pay legal fees out of your own pocket? Your personal assets
are vulnerable to loss in the event of a personal judgment against you (your
spouse, co-owners, or partners). Remember your personal assets subject to loss
include (with some restrictions) your rental building, your $1,000,000 IRA,
your $850,000 home, your $45,000 bank account, your CD’s, brokerage accounts,
mutual funds and other toys. Should your
goal be to merely save taxes, or to protect your empire and save taxes as well?
Warning Owners (Landlords),
Partners (Silent Partners) & Employers – New Laws Bring New Liability!
Agency
law generally holds the principal liable for third parties for its
employees’ wrongful conduct. (ie:
2nd Restatement of Agency
213Ca, CC 2330-2339, Ca LC 2750.5). The hirer of an independent
contractor who fails to take peculiar risk precautions may be liable for
all persons injured. (2nd Restatement of Torts
413, 416, 427-427a (1965). An owner, general or prime
contractor is “presumed” liable for the acts of a licensed contractor
that it hired. (ie: Ca LC
2705.5, Sabella v Wisler
(1963) 59 C2d 21). More and more, the law has refined itself to hold
responsible the trades that have control, knowledge or supervision
over the construction process.
Liability,
Standards & New Laws in 2001: The Toxic Mold Act!
A review of all
of the mold cases in the country will reveal that there is no universally
accepted standard for mold exposure and its causal link to claimed injuries.
Although, most cases are proving successful without such standards,
In
addition, Gov. Davis signed AB 284 to direct the California Research Bureau to
study and report by Jan., 1, 2003, the effects of toxic mold on health. While
the DHS is working on SB 351 (the Brockovich chromimum 6 pollution standard due by Jan. 1, 2004), Gov.
Davis signed SB 463 (Sen. Don Perata, D-Alameda)
requiring a revised and updated standard of permissible levels of arsenic in
our drinking water, by June 30, 2004. (National Academy
of Sciences report 1999).
Lawsuits
Are Moving Into The
- A building owner was held vicariously
liable with a demo-sub under the ‘particular risk doctrine’ who
failed to turn off the electric, causing death to the electric-sub worker.
The jury awarded $2,884,557. (Thompson et al v Estate of Ken Davis, et al
10-20-00.
o
o An apartment builder
owner (husband and wife) went bankrupt to allegedly avoid
execution of a judgment for sexual battery. A new fraudulent conveyance of
$5,000,000 of real property (to wife) action was then sought
against defendants (landlord-owners).
o
o
Owner of apartment building failed
to clean and repair loose tiles caused by a leak and accumulation in the
kitchen from the above unit which landlord was aware. Plaintiff’s wheelchair
caught the edge of a loose tile causing him to fall off the chair causing soft
tissue injuries. Binding arbitration
awarded $893,550 on a $1,000,000 policy. (Cordier v AP
Reyes,
o
o
The apartment management
company and the employer-roofer were held jointly and
severally liable for $3,279,000
to a roofer-employee who slipped and burned himself with hot tar. Since,
it was held, that the roofer did not have valid workers compensation insurance
(Labor Code 3715 et seq) and
a valid contractor’s license (Ca Labor Code 2750.5) both were liable at law,
precluding plaintiff from contributory negligence (Labor Code 3708).
o
o
Owner of a commercial restaurant
hired a New Year’s Eve party coordinator (general who hired several subs) to
build a band platform for the party. He was jointly and severally liable
for injury to sub’s worker, as the duty was nondelegable.
(Magana Jr v John
Morris dba Mums Restaurant Long Beach, No NC 023815,
Dec 12, 2000).
o
o
Buyer of commercial
car dealership property sued the seller for pertroleum
(oil and gas) pollution contamination. The insurance company denied coverage
under the owned property exclusion. After losing the lawsuit, a bad faith suit
was brought against the insurance company for bad faith and presenting false
documents (etc.). The jury awarded $30,750,090
($30 million in punitives). (Earnest v
Truck Ins. Exchange,
o
o Employers! As an employer, be on notice that an insurer denied
coverage to employer on an insurance policy which did contain coverage
for discrimination on a racial discrimination-demotion lawsuit
from an African-American employee. After much time and out of pocket expense
the jury awarded some $13.5 million (later reduced to approx.
$5.5 million). FUSD v Coregis Ins
Co No 99AS00773 (10-5-00).
o
o
The general contractor and the worker’s employer
were sued along with the concrete-sub and safety rebar cap supplier for
injuries to a negligent iron-worker who fell some 40 feet impaling himself on
vertical rebar with only 8’ rated rebar safety caps. The jury awarded $1,285,000.
o
o Farmers wrongfully fired (fraud and breach of contract)
manager in an effort to drive him to disability. It cost the employer
$17.5 million! Reverse
discrimination cost an employer $1.5 million (Copley v BAX
Global In
- $4.65
Million! Retaliatory
Discharge from employment resulted in a $4.65 Million jury
award ($100,000 emotional distress, $4.3 million punitives). (Reust v Alaska Petroleum
Contractors, Inc. 3KN-99-132 CI
o
o
No LIMITS or CAPS apply when co-worker sexually harassed
employee. (Intentional Discrimination allows for compensatory and punitive
damages without limits). Federal Civil Rights Title VII Pollard v E.I. du
Pont de Nemours & Co., 121
o
o
ELEVATORS! Commercial Property!
o
o The building owner and the general
contractor were liable for $10.3 million when a cable
snapped and the elevator fell 180 feet causing personal injuries (NY Lab Law
5240, 5241 due to their subcontractors failure to provide plaintiff with proper
protection for worked performed). (Alvarez v Morse Diesel Int’l NY NY Sup Ct No 116146/99, May 16, 2001).
o
o
A jury awarded $5,750,000
to a legal secretary who was injured when the commercial elevator
fell from the 31st to the 8th floor. The owner, maintenance service and
management companies were held liable. (Palmer v Schindler Elevator, et al. LA Central No BC 154349, Sept,
29, 2000).
o
o LEAD PAINT!
o
o Landlords may be liable for lead paint based
injuries even if they do not have knowledge of the hazard! “Just as a
motorist is presumed to know the laws regulating motor vehicles, the court
reasoned, so a landlord is presumed to know the requirements of the local
housing code pertaining to the habitability of leased premises. Landlords need
not inspect the premises before leasing, the court said, but because of the
implied representation of habitability that accompanies the making of the
lease, they fail to do so at their peril.” (Benik v Hatcher 750
A2d 10 (
o
o
ASBESTOS! $15,000,000!
o
o An operating engineer at an office building for 21 years
was diagnosed with mesothelioma from exposure to
asbestos fire proofing material sprayed inside. Plaintiff and his wife sued the
building owner and other operating engineers. They settled for $5 million.
(Hoskins
v Business Mens Asssurance
Co of Am., Mo Jackson Cty Cir Ct No 00-CV-206172, Feb
23, 2001). Plaintiff also sued the
manufacturer and won $10,000,000. (Hoskins v Federal
Mogul Corp 20 PLLR 135 (Aug. 2001).
o
o
MOLD!
o
o A $14,000,000 verdict was upheld in the
appellate court against the construction manager for mold growth due to
dampness and excessive humidity in the county courthouse (from faulty HVAC and
mechanical systems, leaking windows, curtain walls EFIS and other defects from
wet and damp building materials which fed the growth of mold, mildew and other
organisms). The water damaged building becomes the covered property damage for
coverage under the CGL insurance claim. (Centrex-Rooney Construction Co., Inc v
Martin County, Florida 706 S2d 20 (Fla App 1998)).
o
o Judgment was entered for $14,200,00 in Marin
County, Indian River Florida against a construction manager (CM) and three bond
sureties for construction defects causing leaks to the exterior envelope and
air conditioning. In
o
o Water leakage and mold caused personal property and
structural damage to a family living in a
o
o
o
o Employees of a newspaper seeks $10,000,000
from the owner (landlord) of their building for injuries from
exposure to toxic mold. (J.J. Acquisition Corp. v Pacific Gulf Properties __).
Homeowners sued developers and contractors for construction
defects from the growth of toxic mold. (Spectrum Community Association v
o
o 1700 students, parents and teacher filed suit for $67,000,000
for injuries caused by exposure to toxic mold and flood pollutants at an
elementary school for failure to remediate flood damage causing growth of mold.
(Andrejevic et al v Board of Education of
Wheaton-Warrenville School Dist No 200 Dupage County
IL).
o
o Plaintiffs in Ontario Superior Court seek $2 Billion in
a proposed class action lawsuit for students exposed to mold at
various schools for the period September 1995 to June 1999, and their parents.
(MacDonald v Dufferin-Peel Catholic Dist Sch Brd).
o
o 125 lawsuits is seeking $8 Billion in
o
o $48,500,000 was
agreed to in settlement for defective construction causing mold contamination
against the general contractor for $13,500,000 and surety bonds for
$35,000,000. (
o
o The general contractor, subcontractor and designer
(architect) were sued for faulty construction, which fostered growth of mold in
a home causing injuries. (Confidential Settlement). (O’Hara v Stangland et al).
o
o Erin Brockovich sued Robert Selleck, in
o
o DEFECTIVE GALVANIZED PLUMBING!
o
o It cost some 40 builders, developers, owners
and pipe manufacturers $41,000,000 for leaking
rusty or corroded clogged galvanized Korean pipes (plumbing) in an approved
class action settlement in Los Angeles County Superior Court. Over 3552 single family home and 1124 condos
in 15 new-home communities in Santa Clarita Valley build from 1986-1994. (Newhall Land & Farming Co., American
Beauty Homes, Dale Poe Dev., Presley Homes, Pacific Bay, Paragon Homes, Monteverde Devl., Dong Du Steel
Ltd,. Et al. LASC)
o
o Warning! Gas Stoves, Ranges Or
Furniture! Gas stoves and ranges have caused serious
injury to tenants and children when the unit tips over causing crush or
burn injuries. Landlords and installers of gas
stoves/ranges will not be excused for failure to inspect and retrofit
(properly secure and bracket) stoves and ranges. Although manufacturers
and sellers have escaped strict liability since tort reform, all proper
defendants may be liable for negligence. Rest. (3rd) of Torts: Product
Liability; Tipping Stoves: A Risk You Need To Know About, CPM Aspects, Mar/Apr
1994 at 12 (Copies at
- Bad Faith Denial of Insurance Coverage &
Punitive Damages:
- Insurance companies may defend you under a reservation
of rights, and then seek reimbursement from you of
all amounts paid to defend, settle and/or satisfy the claim. Or, at times,
insurance companies deny claims and leave you out in the
cold with respect to your legal defense and indemnity. Many of these
denial cases result in bad faith wrongful denial of coverage (Egan v Mutual Of Omaha
Ins 24 C3d 809, Gruenberg v Aetna Ins 9 C3d 566 (1973)) by the
insurance company, but the denials keep coming anyway! Punitive damages
are meant to punish or deter further wanton or reckless conduct. 22 Am Jur 2d Dam 243,245 (LCP 1965), CCC 3294(a).
Punitives are allowed in most states in some
form, including
- Landlords! Punitive damages can be
awarded even with no compensatory or nominal damages in race discrimination
cases, under the
Fair Housing Act of 1968, 42 USC 3601 et seq., and the Civil Rights Act of
1966, 42 USC 1981, 1982. Owner (landlords) lied to prospective tenants
about the availability of apartment, while waiting for the ‘right tenant’.
(Alexander v
o
o
For example, a jury gave $41,897,797
to a silent partner of a general contractor’s construction
company sued for defective and unfinished work and fraud, who was
denied coverage in bad faith in part for not being a named
insured! Plaintiff was forced to file bankruptcy, he lost his home, his
license, his business, and ultimately he suffered a heart attack! Stay tuned;
this one is on a vigorous appeal with case consolidations and extensions of
time.
Hanstad v. Truck Insurance
o
o LEAD PAINT!
o
o Insurer denied coverage on lead based
paint injuries causing brain damage to 3 children tenants. The insurer
said it was liable only for years in which elevated lead levels were detected
in the children (not before). The court found liability as the injury is not
commensurate with external manifestation. Some bodily injuries occur before
manifestation of symptoms. Warning! However, language could be
placed in policies to limit the occurrence-based policy during policy period,
here ‘year by year policy’, which is like a ‘claims made’ limitation). (Campell v Metro Prop & Cas
Ins Co __FSUpp2d__, No 09-CIV. 5328 NRB, 2000 WL 297174 (SDNY Mar 21, 2000)).
o
o
MOLD!
o
o In Texas, the jury found that Farmer’s committed fraud in a
bad faith handling and denial of coverage in a black mold case
for water damage by allowing toxic mold to advance in the insureds
22 room mansion. It cost Farmers prox. $32
million! (Ballard v Fire
Insurance Exchange, Judge John Dietz Travis Cty
o
o
o
o A Texas family sued Farmers Insurance Company for $100,000,000
for bad faith breach of contract for failure to settle flood damage causing
toxic (Stachybotrys) mold growth in the plywood subfloor.
o
o Apartment builder owners were sued by a class (group of tenants) in
o
o
The construction bond was denied! Plaintiff, a small-mid sized construction management firm
was awarded $1,962,000 by a jury against a sub’s bonding
company and a concrete-sub constructing public school parking garages
and building foundations for failing to properly man the job and
complete the concrete work timely. The sub’s bonding company denied
coverage and was a named defendant for bad faith, after
plaintiff refused to sign a Takeover Agreement limiting coverage
to stated bond penalty amount. Bonding company later nonsuited
with responsibility to pay. (Lewis Jorge Construction Mgt v Tely
Construction, Am. Moto.Ins.Co.(12-7-99)
Santa Ana No 789768 Appeal Pending (Confidential Settlement Conference due
10-29-01)).
o
o Landlords
insurance coverage was denied (in bad faith) in a wrongful death
(negligent security) lawsuit brought by tenant’s estate for the murder of
the tenant by an unknown assailant. (Agoada Realty Corp., v
United Int’l Ins Co 733 NE2d 213 (NY 2000).
- Employers! Warning re Workers Compensation
& Bad Faith! An employer and insurance administrator
wrongfully denied coverage (in bad faith) for workers leg treatment. It
cost a confidential amount! (Skiba v Fresjh
Mark Inc Ohio Columbiana Cty CCP No 98-VC-434,
Jan. 14, 2000). Watch out as more and more insurance companies
deny coverage when the applicant merely alleges (1) a serious or willful
violation (ie: Ca LC 4553), and/or (2) wrongful
discharge (ie: Ca LC 132a). Regardless of the
truth, the law facially allows the insurance company to deny coverage (ie: Ca IC 11611) if the lawyer for the claimant
alleges such wrongful conduct. The law is not certain in this area and
more cases need to test such denials. States, like
o
o
Builders “Leased Employees”! A 19-year-old “leased” woodworker employee
from a builders payroll services company on his first
day, cut off 3 fingers with a saw. The insurance company denied the workers
compensation claim, and denied the cabinetmakers demand for legal
defense. After years of expense and pain, the insurer was held liable for bad
faith for $14,678,090. Diamond Woodworks v Argonaut Ins Co (
Insurance
Tips For Landlords!
An owner
should require its general and sub contractor(s) to name
the owner as an additional insured on the contractor’s policies
(for that project). In return the contractor should require the subcontractors
to name the contractor as an additional insured on the subs’ insurance
policies. You should state in your agreement that … the contractor and
subcontractors represent and intend that insurance will be made available to
owner (landlord) to cover any claims made against the job, project or property
from anyone, for a period no lesser than the effective statute of limitations
on said alleged claim. It is common to also request to be an additional insured
of the contractors and subcontractors for several years after the completion of
the job. (ie: 4 or 5 years).
Insurance companies are obligated to defend (a developer) named as additional
insured on policies issued after the job was completed, since
they were “completed operations” policies. Pardee Constr. Co v. Ins. Co West (2000) 77 CA4th 1340. Obtain actual
evidence of insurance policies, certificates and actual endorsements. Seek
assurance that the broker/agent has authority to bind the insurance
company. Also, have your Insurance
Service Office Inc (ISO) endorsement reviewed by your attorney to determine
which endorsement is necessary or appropriate (ie:
Pre-1993-2010 Form (for “completed operations” coverage or
coverage that continued after completion of the project), the Revised ISO 2010
Form (with coverage for “ongoing operations”), or an automatic
contractually defined coverage. The ISO 2009 may not be appropriate if “completed
operations” are intended to be covered.
Call you attorney for guidance.
Ensure
that the subs are covered as well as the general contractor!
Insurance
Policies for subcontractors, such as CGL
should be reviewed to determine if the policy excludes
coverage for liability assumed by contract or for employee injuries. Since most subcontracts have some form of
indemnity clause, the sub may be exposed to liability with no insurance
coverage for defense and/or indemnity. Gonzales v R.J. Novick Constr. Co. 20 C3d 798
(1978), 22 CEB Real Prop L Rep 234 (Nov. 1999), CC2782,2778,2778(1),
Moreover,
claims made after the effective policy period (Waller v Truck
Ins. Exch. 11CA4th 1 (1995)) on a “claims
made” policy are not covered.
Make sure that the general and the sub are not using a claims made policy,
as you may find that they will not have insurance coverage if a claim is
presented after the claims made period (ie: the year
after the job was completed). Moreover, the language contained in your sub’s
insurance policy, and the language of the indemnity clause in
the generals’
contracts are key factors to coverage protection. With state
statutes holding preemptive transfers of sole negligence to fault-free subs
against “public policy” (ie: Ca 2782), language of indemnity
clauses become critical. Certain express language (or in equivalent terms)
does satisfy an indemnity against liability (ie: Ca CC 2778(1)
For more information on asset and
litigation protections with respect to integrated entities (i.e.: LLCs, Corporations,
Author,
Richard Rydstrom, Attorney/Accountant/Author
International
Who’s Who of Professionals
Speaker
for LandlordsClub.Com ™
1-877-946-4968
All
Rights Reserved. Titles, Competition, Trademarks, Servicemarks,
TM © 2001 Richard Rydstrom
v
v
v
The 13 Secrets of the Rich or Informed™
By Richard Rydstrom, Esq. © 1989-2002
California Attorney/Accountant/National Speaker & Author
Courtesy of LandlordsClub.Com ™ and EntityPros.Com™
Business
and Estate Protection Plans!
When discussing business and estate planning
matters the following devices and alternatives should be discussed with your
attorney. This list is non-exhaustive and only given as a tool to afford easier
discussions with your professional team. This article is not intended as legal,
tax, accounting or insurance advice, and as such you may not rely upon same for
that purpose. It is recommended that you hire an attorney experienced in this
area to plan your business, estate and protection matters.
13 Most Common Business and Estate Protection
Planning Tools or Devices!
1. Revocable Living Trust (or Living Trust). In
tax circles this trust is called the Section 671 Trust. This document is most
often used to avoid Probate, its costs and delays. Contrary to myth, generally
it is not intended as an asset protection safeguard, at least during life
(while it is revocable). Also assets held in your living trust are not
protected from the reach of creditors. (Ca. Prob. Code, Sections 18200, 15304
(a), 15304 (b)). However, you can achieve some measure of property
"characterization" protection (as separate, community, etc.) if the
husband and wife maintain separate living trusts. With proper business and
estate protection planning, the living trust is commonly used to hold 'select'
property and all of your (personal) property "interests". Such
interests are usually derived from your ownership of property or real estate
(rental units) held or owned in one or more of the entity devices mentioned hereinbelow (or other devices not mentioned herein).
However, most persons commonly use the living trust in business and estate
protection planning as a central planning device. It is part of most business
and estate protection plans, as it can avoid probate and act as the directing
authority for all or most of your property disposition plans. This device alone
is not sufficient as a business and estate planning solution. To have maximum
effectiveness, it should be used with one or more of the other devices or
techniques mentioned hereinbelow.
2. Pour-Over Wills. This device is used in
conjunction with your Living Trust. It directs property disposition directions
to the Living Trust. It is intended to be a "catch-all" over property
left out of your Living Trust for one reason or another. Each client will
generally use one Pour-Over Will.
3. Durable Power of Attorney for Health Care. This
document is used primarily to direct your attorney-in-fact on how you wish to
be cared for in the event of certain illnesses, incapacity, or disability. It
is similar to the so-called Living Will. Different states have varying rules on
such device(s).
4. Durable Power of Attorney for Asset Management.
This document is used primarily to direct your attorney-in-fact on how to
manage, run, control or dispose of your assets (or certain assets) in the event
of certain illnesses, incapacity, or disability. In the event of disability,
this document is critical. It will allow you to direct the person(s) of your
choice in making business decisions over certain real or personal property (and
businesses). It can be very effective for small and family businesses, and
landlords (rental properties). For example, per your direction, it could allow
for the refinance or sale of real estate.
5. Family Limited Partnership. This is a very
popular business and estate planning instrument (especially before the LLC came
to your State) used for many purposes, some of which include asset protection,
favorable pass-thru taxation, ability to control transferred property (as
managing member or per the LLC), reducing estate or income taxes, life
insurance ownership, and fractional Gifting with use of beneficial
All rights reserved, TM, TN, SM, Competition, Copyright Professional Education
Seminars entity dba 1989-01
(Continued) 13 Secrets of the Rich or Informed™ ©
1989-2001
"discounts"
(e.g. a tax free gift of $20,000 may be worth conservatively (approximately)
$30,000 thereby reducing income tax on its appreciation or growth, and
eventually, estate taxes). This device is a limited partnership, which requires
a general partner and at least one limited partner. By definition the general
partner has "control", and also unlimited liability. The "limiteds" have no management powers and are afforded
limited liability. The family limited partnership will protect its assets from
partner creditors. It has the power of the favorable asset protection charging
order law. (Ca.Corp.C 15522, 15673; Fla. Stat.
620.22; Ariz.Rev.Stat.Ann. 29-341; Nev. Rev. Stat.
88.535; NY Partnership Law 111 McKinney; Tex, Code Ann art. 6132a-1 7.03,
etc.). A charging order will only allow the creditor to obtain certain
distributions from the entity, if any! The creditor would receive a taxable
event (RevRule 77-137) upon the issuance of a
charging order (as constructive income), even if he/she receives nothing! By
tax definition the "limiteds" are
"passive investors" with passive income or loss. To obtain limited
liability for all members, see the Limited Liability Company (LLC) below. To
allow passive investors some voice in management without fear of losing limited
liability, see the LLC. To make passive investors active without loss of
limited liability status, see the LLC. To obtain family limited liability
protections including the charging order, and favorable pass-thru taxation, or favorable
single-member ownership taxation, see the LLC below!
6. Irrevocable Life Insurance Trust. This
non-amendable document is often used to hold and receive Life Insurance. This
is one of the most effective methods to avoid taxation of life insurance proceeds,
reduce the value of your estate, and reduce estate taxes! Otherwise, contrary
to common myth, Life Insurance is generally taxable at your death. However, the
use of insurance is key to the financial health of the upper middle class and
rich. Life insurance is often used for 'tax cost wealth replacement', and as a
'wealth creator' for surviving spouses, heirs and future generations. Also,
disability insurance is often used as a means to income stability.
7. Children's Trust. Although a creature of many
forms, usually it is couched in IRC 2503 (c). Generally it is an Irrevocable
Trust used to hold property for the benefit of your children. Parents may gift
or sell assets to the children's trust and lease or loan certain assets back.
This device does carry a high measure of estate and asset protection from
creditors. It can also reduce estate and income taxes.
8. CRT. Charitable Remainder
Trust. This irrevocable trust is usually used to receive and hold
property for the purpose of making charitable gifts, supplying income from such
assets for life, achieving current charitable donations, or reducing Capital
Gains Tax. It requires the making of a "complete" charitable gift. It
may also be used in conjunction with your estate plan including a family Foundation,
or "your" own charity. In the most basic sense, your property is
transferred to the trust, and the trust sells the property, deferring certain
taxes. The trust then invests the sale proceeds, and you receive an income
and/or principal payout therefrom (depending upon the
device, and factors including the term of the trust and your life expectancy).
The trust monies (or res) are protected from most outside liability attacks.
Life insurance must also be seriously considered for wealth replacement and also
as a wealth creator! Life insurance is effectively used in a CRT to replace any
so-called "gift", and often times results in an increase in wealth
for your heirs. See you Attorney, and Life Insurance specialists before acting
upon such a plan.
9. LLC. Limited Liability Company. An LLC is a
creature of state statute; it varies from state to state. It most often takes
the form of a limited partnership for purposes of liability, accounting and
taxation. It is rare, but certain LLCs can be
corporations for taxation purposes. Most clients will desire it to take the
form of a "limited partnership" (not a "corporation"),
especially if residential or commercial rental properties or other capital
assets are to be held or owned by the LLC. (See Landlord's Asset & Insurance
Protections Kit ™ ©, Courtesy of LandLordsClub.Com ™). Generally all of the
favorable attributes of the (family) limited partnership discussed above apply
to the LLC, including but not limited to: asset protection, favorable pass-thru
taxation (Subchapter K partnership taxation), ability to control transferred
property (as managing member or per the LLC), reducing estate or income taxes,
life insurance ownership, fractional Gifting with use of beneficial
"discounts", allows the passive investor some voice in management
without fear of losing limited liability, can make passive investors active
without loss of limited liability status, favorable asset protection charging
order laws (Ca.Corp.C 15522, 15673; Fla. Stat.
620.22; Ariz.Rev.Stat.Ann. 29-341; Nev. Rev. Stat.
88.535; NY Partnership Law 111 McKinney; Tex, Code Ann art. 6132a-1 7.03,
etc.), and the LLC allows favorable single-member ownership taxation! For more tax and liability distinctions, See LLCs,
Entity Options & Comparisons™©, LandLordsClub.Com™.
10. Will. (Warning!) The
old-faithful estate planning tool, the Will, is outdated and often times not
the appropriate estate planning choice in modern times. With modern business or
estate planning, the Revocable Living Trust (with a Pour-Over-Will) is often
the best choice. The historical Will is possibly the simplest document to implement, however, it does not avoid Court Probate! The
Will may cost your family great Probate expense (2-10%), delay and court
battles (with Will challenges and lawsuits). It can cost estate taxes ranging
from 37-55%, Unintentional Disinheriting, Conservatorships,
Guardianships, or general unintended results. However, the marital deduction
provisions often used in Revocable Living Trust may also be used in the Will, but
probate, its delay and costs will not be avoided by doing so!
11. The Corporation ("S", "C",
etc.):
"C" Corporation. The "C" corporation is often the best entity for
front line business operations that affords maximum tax write-offs.
Corporations are often used to operate a business with limited liability, and
to divide up your business activities for creditor and lawsuit protection
reasons. It is often beneficial to segment your "risky" business
activity (or assets) from your "safer" activity (or assets), or to
have certain corporation(s) act as partner(s) to other devices. The
"C" or "S" corporation may be used to as your front line
business entity, which in this day and age, is expected to be sued. The
"C" corporation is often used to "conduct" business with
minimum of asset ownership. However, certain capitalization rules must be
satisfied with legal contributions, insurance and credit. The "C"
corporation is often used to maximize corporate and "fringe benefit"
deductions. However, if "C" deductions and fringe benefits are not
used, the "C" corporation will be vulnerable to "double
taxation" (taxation once at the corporate tax return level and again at
the personal "wage" level). The corporation may have superior payroll
tax opportunities. (See Sole Proprietorship vs. Corporations - Lower Corporate
Tax Rates vs. Double Taxation - A Payroll Tax Comparison).
"S" Corporation. Like the "C", the "S" is often used to
achieve the same level of limited liability protection, but with little if any
"fringe" benefit tax deductions. However,
the "S" comes with pass-through taxation, which is often advantageous
to many clients who expect (some) losses in the first years of operation, or
use the "S" with other devices named herein, etcetera. The tax
attributes of income, deduction, credit and loss are passed-through to the
shareholders personal tax return. The "S" corporation does have
several limitations that you must be aware off, including but not limited to:
limited health and fringe benefit deductions, and a limited tax write-off basis
(stock, loans). See LLCs, Entity Options &
Comparisons™©, Courtesy of LandLordsClub.Com™.
12. The Business Trust. The business trust is
often used as an alternative to the other business devices to operate a
business and add a level of privacy and potential creditor protection. The
trustee may be a person not owning the beneficial interests therein. Often
family members may be effective holders of the generally "private"
beneficial interests of the business trust.
13. Other Devices:
a. Note On Minimizing Income & Estate Taxes On
Sale of Appreciated Property, With Liability Protection:
How to choose, form, integrate and use the appropriate combination of
techniques or devices mentioned in this article to save taxes and shield your assets
from liability are deferred to you and your professional team. Beyond the 1031
Exchange, Refi Cash-Out and Installment Sale to defer
income or estate taxes, your professional team should consider a Charitable
Remainder Trust with Insurance and/or Annuities (CRT-IA), Private UniTrust (PUT-I), 5-10 year (or more) Irrevocable Trust,
Private Or Charitable Foundation with Insurance and/or Annuity Trust (PFAT-CI)
among other devices (or creative combinations or attributes thereof). Such
devices afford a great measure of liability protection to the corpus principal
and income. These devices are generally so-called "irrevocable" trust
instruments. In the most basic sense, your property is transferred to the
trust, and the trust sells the property, deferring certain taxes. The trust
then invests the sale proceeds, and you receive an income and/or principal
payout therefrom (depending upon the device, and
factors including the term of the trust and your life expectancy). The trust
monies (or res) are protected from most outside liability attacks. Life
insurance must also be seriously considered for wealth replacement and also as
a wealth creator! Life insurance is effectively used in a CRT to replace any
so-called "gift", and often times results in an increase in wealth
for your heirs. Many rules and restrictions apply so you must get professional
legal, investment or tax advice before making any such decision to embark on
using these techniques or devices. You may not use this article as legal,
investment or tax advice.
b. Private annuities: Ask you attorney about using
a Private Annuity in conjunction with your business and estate planning. Ask
him/her about how you can realize a Tax Deduction for gifting Stock to the
Private Annuity; and how the benefits can be passed down to the next
generations. Ask your attorney and advisors how you can use a Private Annuity,
Life Insurance and an International Business Corporation. Ask him/her to
explain how you or your beneficiaries can realize a non-taxable, non-U.S. reportable
surplus of insurance proceeds, (i.e: $1million
policy, at Federal Rate, for initial period may yield a reportable $2million,
but a higher rate at a longer period offshore may also yield another non
reportable $4million).
c. Offshore entities: offshore international
business corporation (IBC): The offshore business corporation and/or an
offshore protection trust, in different offshore jurisdictions, may supply a
great measure of increased protection over your assets, as well as in some
circumstances, an elimination of
d. Offshore insurance investments: Only non-U.S.
citizens may invest in certain offshore Variable Universal Life Policies
(contracts). Ask you attorney if you need an offshore Protection Trust, or if
you could invest in such a policy. Ask your Offshore Attorney specialist how
you may use these devices with an Offshore Trust, or International Business
Corporation. Ask your Offshore Investment Advisor or Offshore Insurance Company
about if or how the investment is 100% guaranteed?
e. State of
All rights reserved, TM, TN, SM, Competition, Copyright Professional Education
Seminars entity dba 1989-01
Courtesy of LandLordsClub.Com™ & Courtesy of EntityPros.Com™
1-877-946-4968
v
v
The
Courtesy of ClubLegal.Com ™ © 2001
The Nevada Corporation
Smart-StartUps! ™©
TM 2001 By
Richard Rydstrom, Esq.,
Part I -
Yes,
However, with that said, I do support and
encourage Nevada entity formation, again not to lessen your State's share
of rightful taxes, but for the favorable entity and liability rules and laws of
Nevada. For example two important practice advantages are:
*APPRAISALS!
* FORMS OF STOCK & PRIVACY!
THE
Although the quick Nevada benefits list is
literally a true and correct list of Nevada benefits, the non-attorney quick
sale artist often omit the practical truth: ...when conducting business in your
home state or various states, many of the touted benefits are not obtained...for
example, most states require you to register with them and thereafter file a
tax return for the prorata share of income (tax)
produced or attributed to that state. When you file your tax returns, you have
submitted your (so called private) information to the state taxing authority,
who does have an info-sharing relationship with the IRS. Also, you would be
responsible to pay those prorata state taxes, and
franchise fees, as applicable. Here is a short list of those familiar items:
* No personal or Corporate Income Tax
* No Franchise Tax
* No Tax On Corporate
Stock Shares
*
* Stockholders and VP's are not public record
* Easy Annual Reporting ($85est. Annual Officer
Statement, $125est. Registered Agent Fee, plus Mail & Office Service,
Nevada Bank Account Maintenance. Check current law as fees and costs vary from
year to year and state to state).
* Non-residents, and
Non-citizens can be Stockholders,
Officers, and Directors of a Nevada Entity, without ever going into
* The Nevada Entity itself may buy, sell, retain,
or transfer its own stock.
* You may capitalize or issue stock of a Nevada
Entity for a number of items of value with little restrictions, such as, money
or capital, personal property, real property, lease contracts, option
contracts, and services (past, present or future). As stated above, these items
are subject to the conclusive but rebuttable
presumption of valuation by the entity directors under Nevada Law.
Important Note On Out-
of- State Entities!*
* It is important to know that the
laws of the state of entity formation will generally govern its organization,
internal affairs, liability and authority of its members and managers (ie: in Ca by the LLC statute, Ca Corp C 17450). So if the
benefits of
CLICK HERE TO REQUEST MORE INFO TO FORM
YOUR OWN ENTITIES FROM A LAW OFFICE!
v
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v
v
LLCs, Entity
Options & Comparisons ™ © 2001 By Richard Rydstrom, Esq. Attorney/Accountant/National Author & Speaker 1-877-946-4968 More
sad stories of assets lost due to
lawsuits and taxes. Every year that I teach the ClubLegal™
seminars, I hear more and more actual stories of sad personal losses (usually
told by seemingly innocent landlords, contractors, doctors, and
professionals). If you’re waiting for
the politicians to save you, you’re making a big mistake. So wake up! The
answer is not to merely seek “tax” advice from your CPA, but to get protection
from your tenants, customers, clients, taxes, lawsuits and new laws! What
Can I Do To Protect My Business, My Family & Myself From Loss &
Personal Liability? B.I.G. T.E.A.M. ™
(Together Everyone Accomplishes More!)™© You need to assemble your
own B.I.G. T.E.A.M.™ to advise you about your options, alternatives, and
choices in business, tax, investments, retirement, estate & business
entity planning and integration. Inherent in your options are the necessity
of legal entities, such as corporations, trusts, limited
liability companies (LLC), etcetera.
1st:
Seek an Attorney & CPA
(Business, Estate Planning & Litigation Protection Attorney) 2nd:
Seek a qualified insurance expert 3rd:
Gain the knowledge of integrated
entities: “The 13 Secrets To The Rich Or Informed”™ ©. WHAT
ARE MY OPTIONS? LLCs, Liability Protection and Other
Entities! WARNING: Everyone, and every entity must have their own
independent attorney or cpa before making entity,
tax or entity formation and integration decisions. This document would be a
good example of a law office memo for client education. (Note: generally an
entity must be represented by an attorney in the state of litigation). Segregation
of Risky & Safer Activities Doctrine! One
of the key strategies often overlooked to limit your liability exposure is to
use one or more entities - because then you will not have all of your eggs
in one basket! This simply stated strategy is often the most effective
and overlooked strategy for basic liability protection. Nevertheless, it is
always the cornerstone behind any effective plan. In a
nutshell, you should separate your risky and safer assets or
businesses into separate entities. You should not commingle your risky and
safer activities into the same entity. To do so, will cause the safer assets
to be vulnerable to creditors of your risky activities. Rental apartment
businesses are generally considered very risky activities as to liability
exposure, even if not to real estate investment appreciation. There
are various techniques or devices available to use to segregate your risky
and safer assets or businesses. As I can only mention a few of them here
since such detail is beyond the scope of this article, I refer you to learn
more about these in my article entitled "The 13 Secrets To The
Rich Or Informed"™ ©. First of all, you must understand that
there are only two categorical types of activities (including assets,
businesses, or conduct). They are Risky and Safer! Not Safe! Nothing is 100%
safe from the potential list of legal and government predators that circle
your life everyday. With that said, personal liability is reduced or
eliminated by using integrated entities (such as the Corporation, Limited
Liability Company, etc.) to run or hold your Risky or Safer activities. You
must never put all of your eggs in one basket, and you must never
unintentionally mix your Risky and Safer activities and baskets! Of course
there are rules, techniques and experience trade secrets that will govern the
formation, integration and implementation of your baskets. The
techniques or devices commonly used in business and estate planning include,
but are not limited to those listed in the chart below.
The
reason that we use these techniques or devices is because certain unique tax
and liability rules apply, respectively. For example, generally, a judgment
creditor may not reach the assets held in your LLC (eg:
business equipment, apartment building). Most all states have certain laws
that restrict the judgment creditor's remedy to a "Charging
Order" (Ca.Corp.C 15522, 15673, 16501-2, Dosanjh
v Takhar (2001) WL1301222 (CA 1 Dist.), Hellman v.
Anderson (1991) 233 CA3d 840, In re Dreske
(Bankr.E.D.Wis.1982; Fla. Stat. 620.22; Ariz.Rev.Stat.Ann.
29-341; Nev. Rev. Stat. 88.535; NY Partnership Law 111 McKinney; Tex, Code
Ann art. 6132a-1 7.03, etc.). A
charging order will only allow the creditor to obtain certain distributions
from the entity, if any (not the assets held by the LLC)! The creditor would
receive a taxable event (RevRule 77-137) upon the
issuance of a charging order (as constructive income), even if he/she
received nothing! The LLC may protect claims against you, co-owners, LLC
assets or rental property, and give you potential tax benefits at the same
time. One
key feature of the liability protections offered by an LLC is that all
members, investors or owners are protected with limited liability.
However, that is not the super-key to it all. In addition to that principle,
a judgment creditor can not reach the assets held by the LLC! This is a
super-key feature when compounded with the general liability protections just
enuciated. This benefit is often called the "Charging
Order". To understand what this means, you need to contrast this
concept with the basic liability features or disadvantageous of the
corporation as well as the limited partnership with respect to this specific
legal discipline. Limited Liability Companies (LLCs)
Limited
Liability Companies often termed LLCs, are becoming
increasingly popular. They combine the best basic liability protection
and favorable tax characteristics of corporations and partnerships, while
avoiding many of their disadvantages. An LLC offers limited liability
protection to all its members or owners and allows for favorable federal
partnership income tax treatment. State
law authorizes the formation of an LLC, whether it be
a single owner or multi-member LLC. After losing much business to Nevada and
Delaware, California as one of the last states, finally amended its law to
allow LLC’s (1994 Beverly-Killea
Limited Liability Act) and single member LLCs (in
Ca eff. Jan.1, 2000, AB 831 (Leach), Ca Corp C
17001, 17050, 17101, 1999 Cal. Stat. ch. 437, 90). LLCs can be taxed as corporations or partnerships. It is
the rare situation to seek to be taxed as a corporation stead of a
partnership. Usually it is more suitable for certain large operating LLC's (that do not hold appreciating capital assets) to
be classified as corporations for tax purposes. However, most small business LLCs seek the favorable
pass-thru taxation of a partnership. Tip
On Tax Treatment of LLCs! The
key tax attribute of LLCs is that they can
be treated as pass-thru partnerships for federal income tax purposes.
Your distributable share of income, deductions, credit and expense (profit or
loss) are passed to you in a K-1 tax form, as an owner. Only LLCs offer both the legal advantage of limited liability
for all owners and the tax advantage of partnership taxation—which combines
pass-through treatment with maximum flexibility. This unique combination of
legal and tax benefits is the driving force behind
the growing use of LLCs. LLC
TAX TIP! Remember the LLC member has a better opportunity to write
off more tax losses because the LLC's basis
increases for loans incurred. The LLC is more appropriate for debt-financed
losses! “S”
Corporations In Contrast! In
contrast the S corporation shareholders do not benefit by an increase
in their outside basis (for stock or loans to entity) when the
corporation incurs more debt. This is a serious limitation of the S
corporation with respect to practical loss of tax-loss benefits. "S"
Corporate Tip! To increase your outside basis, and realize more or
sufficient basis to write-off certain losses from borrowed money (debt),
first borrow the funds personally from a bank (etc.) and then either: a.
make a capital contribution of those funds to the corporation b.
lend the funds to the corporation directly c. or a hybrid of a and b. "S"
corporatee shares may be transferred to single
member LLCs without terminating the "S"
election status (Private Letter Ruling 9739014, June 26, 1997). Single
member LLCs are generally termed ‘disregarded
entities’. This does not mean that they are disregarded for liability
protection reasons,
it does mean that they are disregarded for tax purposes only! (See
Treas. Reg. 301.7701-3 (b)). To be clear single member LLCs
are afforded the same level of liability protection as multi-member LLCs! (Cal Corp C 17101(a); Chief Counsel Advice
199930013 (April 18, 1999)). A single member LLC is also a legal employer for
payroll taxes (Chief Counsel Advice 199922053, April 16, 1999). A single
member LLC by default (or check-the-box, Cal. Rev. & Tax. C
23038(b)(2)(B)) is treated as a disregarded entity for tax purposes and it
taxed as a sole proprietorship on a schedule "C" (and
self-employment tax at 15.3% on Schedule SE, and rental income on Schedule E)
on the owners 1040 Federal tax form (and divisions or branches of its owner).
However, in Gross
Receipts: Ca. Additional Fee $250,000
… < $500,000 … $865 $500,000
… < $1,000,000 … $2,595 $1,000,000…<$
5,000,000 …$5,190 $5,000,000
or more …$7,785 However,
small businesses or Landlords generally limit income producing assets (ie: buildings) to separate LLCs
(for liability protection) thereby avoiding such fees or paying same for
liability protection reasons. |
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Contrast
The Corporation - A judgment creditor (who wins a lawsuit) can seek to
foreclose the stock certificates of a corporation and by virtue of that
success, he/she can obtain the percentage of voting control attributable to
the aggregate shares of stock foreclosed. Hence, he/she could gain control of
your corporation, sell off the assets, and take the money and go home. Of
course the plaintiff or judgment creditor could attack the corporation for
proper structure and seek to pierce the corporate veil by using the legal
theories of alter ego, undercapitalization and fraud. You either have
complied with these legal, tax or liability issues or you have not. However,
the LLC allows you to protect against these theories depending upon the state
of formation, and the laws of the state of operation. For example, the LLC
does not require you to obligate yourself to maintain corporate like resolutions
(which are required of the corporation). However, you need to have your
attorney properly draft the operating agreement to exclude such a
requirement. Although
a necessary part of a business and liability protections plan, the
corporation is uniquely vulnerable to attack by a judgment creditor on
several distinguishing fronts:
Fraud! When
plaintiff makes a cause of action for fraud, he/she/it is in essence saying
that you as the representative of the corporation, knowingly and
intentionally mislead the plaintiff with false facts, by constructive or
active misrepresentation, deceit or concealment, which plaintiff reasonably
relied upon to his/her/its loss or detriment. By definition, you should be
personally liable, not just the corporation. Hence, you as a shareholder are
now exposed to personal liability. Undercapitalization! This is
really an accounting principle with legal implications. Proper capitalization
of the corporation means that you as a shareholder contributed a sufficient
amount of cash, "credit", property (or certain service value) to
the corporation in return for your capital stock. The legal question or
principle is really: Is there sufficient assets in the corporation to meet
the reasonably foreseeable creditor exposure to the corporation in the business
that it is engaged? Another test is the debt to equity test wherein the court
will weigh the amount of paid capital stock against the debt on the books of
the corporation. If the debt is excessive (ratios fluctuate) in terms of the
amount of equity, your corporation may be insufficiently capitalized and
vulnerable! Alter-Ego!
Alter-ego is probably becoming a more important test than ever
with the wide spread use of the LLC. Some professionals would say that both
the corporation and the LLC are equally exposed to the threat of personal
liability exposure via piercing the corporate veil. However, that view is not
refined to the true state of the law. Although shareholders of corporations
are vulnerable to review with a test of whether or not the corporation is
merely an extension of one’s self and not a true substantive separate legal
entity and business, the LLC is allowed by the terms of its operating
agreement limit the full extent of obligations normally imposed upon the
corporate shareholders. For example, corporations are required to keep formal
books of resolution by the board of directors and shareholders in certain
circumstances. Failure to do so will generally expose the shareholder to a
successful alter-ego attack. However, the LLC by statute is authorized to
define (and exclude) certain obligations imposed upon its members, including
the corporate-type resolutions. If the LLC expressly renounces
this obligation, it is probable that a court could not rightfully (at law)
impose this specific item as a violation of the corporate-type resolution
duty. As such, both the corporation and the LLC (as
well as most entities) should keep separate books, records and its identity
legally and in its dealings with the public and business to ensure a higher level
of confidence against a successful alter-ego test. Contrast
The Limited Partnership - Although the limited partnership has the same superior
charging order features of the LLC (unlike the corporation) the law requires
by definition that a limited partnership be made up of at least one
general partner and one limited partner. The problem is by definition the
general partner has unlimited liability! The
solution often termed is use a corporate general (make the general partner a
corporation). The problem with this is the corporation is especially
susceptible to attacks via the stock certificate foreclosure and pricing of
the corporate veil procedures, which can cause you to lose not only the
assets of the corporation, but control over the general partner
of the limited partnership. The
simple answer in 2001 on is to use the LLC! All members of the LLC are
afforded limited liability protection, and the charging order also allows
protection over the assets inside of the LLC (ie:
your apartment building). Of
course the personal assets of LLC members and managers are protected from
"general" LLC debts and obligations, individuals are always
responsible for the their own tortious
acts and their own professional errors and omissions. State laws apply so we
recommend that you consult with your own attorney in your state. Personally
guarantees of certain entity’s debts obligate the guaranteeing member
personally. (See tax effects of Personal Guarantees below). Entity
Integration & Appreciated Property Solutions! How
to choose, form, integrate and use the appropriate combination of techniques
or devices mentioned in this article to save taxes and shield your assets
from liability are deferred to you and your professional team. Moreover
for those looking to minimize income and estate taxes on the sale of your appreciated
property, with liability protection integration should
consider the following. Beyond
Family Limited Partnership (or LLC) income shifting, 1031 Exchange, Refi Cash-Out and Installment Sale used to defer income
or estate taxes, your professional team should consider a Charitable
Remainder Trust with Insurance and/or Annuities (CRT-IA), Private UniTrust (PUT-I), 5-10 year (or more) Irrevocable Trust,
Private Or Charitable Foundation with Insurance and/or Annuity Trust
(PFAT-CI) among other devices (or creative combinations or attributes
thereof). Such devices afford a great measure of liability protection to the
corpus principal and income. These devices are generally so-called "irrevocable"
trust instruments. In the most basic sense, your property is
transferred to the trust, and the trust sells the property, deferring certain
taxes. The trust then invests the sale proceeds, and you receive an income
and/or principal payout therefrom (depending upon the
device, and factors including the term of the trust and your life
expectancy). The trust monies (or res) are protected from most outside
liability attacks. Life insurance must also be seriously considered for
wealth replacement and also as a wealth creator! Life insurance is
effectively used in a CRT to replace any so-called "gift", and
often times results in an increase in wealth for your heirs. Many rules and
restrictions apply so you must get professional legal, investment or tax
advice before making any such decision to embark on using these techniques or
devices. You may not use this article as legal, investment or tax advice. Limited
Liability Partnerships (LLPs) LLPs are a relatively new type of entity that can be
particularly useful for the operation of professional practices. LLPs are formed and operated pursuant to state LLP
statutes. Liability
of LLP Partners Like
the partners of a general partnership, LLP partners in some states remain
personally liable for the general debts and obligations (so-called
"contract liabilities") of the LLP. Contract liabilities include,
but are not limited to, bank loans, lease obligations, and vendor accounts
payable. In
most states, LLP partners are not personally liable for the LLP’s contract liabilities unless the liabilities are
expressly guaranteed by the partners. In other words, these states offer
"LLC-like" liability protection to LLP partners. In
all states, LLP partners generally remain personally liable for their own tortious acts and their own professional errors and
omissions. However, LLP partners are generally not liable for the
professional errors and omissions of the other LLP partners and employees. In
other words, LLPs offer much greater liability
protection than general partnerships, and in many states they offer LLC-like
protection. LLP
Advantages and Disadvantages An
LLP is a Limited Liability Partnership (not Company). IT is useful or
necessary when an LLC (Limited Liability Company) is not allowable, usually
for professionals, and certain licensed activities not allowable in LLCs. LLPs are partnerships
(both for state law and for federal income tax purposes). They are afforded
the benefits of pass-thru partnership taxation. They are not restricted to
"S" corporation rules such as one-class of stock, equal proration of profits and losses with ownership
percentages, debt basis limitations for tax write-offs, among others.
However, personal liability of the partners for professional liability is not
shielded from judgment creditors. These laws vary from state to state. See
your attorney for proper guidance. General Partnerships
It a
nutshell, general partnerships are extremely dangerous by definition, as each
member has unlimited liability. This is even worse than I make
it sound. I say this because, any member of the
partnership may cause personal liability to each and any member of the
partnership, a theory often called joint and several liability.
What all this means is you may be wiped out, personally and in your business
by a judgment creditor of your business, yourself (or family member) and/or
any of your partners. Beware! It is
at least for the above named reasons that I would not recommend a
general partnership. Moreover, I note that these partnerships cause
disastrous results to the unwary, commonly in the real estate investor or
landlord rental businesses, with associations of doctors, with the
entertainment writer or musical band businesses, with retail shops, and other
general non-entity joint ventures! All
partners are considered general partners and are jointly and severally liable
for contractual agreements made, partnership liabilities for tortious acts and professional errors and omissions of
the other general partners and the partnership’s employees. Additionally,
partners are personally liable for their own tortious
acts, errors, and omissions. Entity
Joint Ventures As An Alternative To Non-Entity General Partnerships! If
you take heed and do not use the general partnership form, how do you conduct
business with investors and other joint venturers?
The answer is you simply form a joint venture (including a general
partnership entity joint venture) with the respective entity of each party to
your venture. For example, two members investing in real estate should either
form a new entity (ie: LLC, etc.) with all holding
interests defined therein, or each form their own entity (without the other
holding an interest therein) and make a joint venture entity general
partnership including each respective entity in an agreement defining the terms
and conditions. Either method will result in favorable pass-thru taxation
(and accounting) with limited liability. Do Not Use A Non-Entity General
Partnership! Subchapter K – Partnership Taxation &
Advantages of Pass-Through Taxation!
Pass-thru
taxation passes each member of the entity or partnership his/her/its
respective share of income, gain, expense, credit, loss and deduction. Such
tax items are entered on a K-1 form for each member. The K-1 amounts are then
booked in each respective personal tax return (ie:
Federal form 1040, Ca State form 540). Distinguishing
features of pass-through taxation are as follows:
Generally,
a partnership does not recognize gain or loss on current or
liquidating distributions including depreciation recapture (IRC 1245
(b)(3);(b)(6);1250(d)(3);(d)(6)). However, if recharacterized
as sales or exchanges, gains or losses will be recognized under IRC 751(b).
IRC 751(b) intends to preclude partners from creatively using distributions
to reallocate among the partners ordinary income and capital gains. "Outside
basis" generally refers to the basis of the partner’s interest
in a partnership. "Inside basis" generally refers to
the partnership’s basis in property held by the partnership. Simply stated,
to avoid corporate "C" type double taxation principles, a partner’s
outside basis is adjusted up for income, and down for losses. Payments
by a partnership to a partner are generally considered distributions
(IRC 736(b)) unless it is made for another purpose, for example:
For
example, a partner with an outside basis of $15,000 who receives a cash
distribution of $18,000 must recognize either $3000 of gain or reduce the
partner’s outside basis to less than zero (which is generally not allowed,
Treas. Reg. 1.755-1(b)(3)). When cash distributed exceeds the partner’s
outside basis immediately before the distribution, IRC 731(a)
requires recognition of gain. (See exceptions at IRC 731(c), investment
partnerships, etc.). However,
a distribution of a partner’s share of appreciated stock/securities does not
trigger gain recognition if the partnership purchased the stock/securities.
Gain is reduced by the amount to f the distribution attributable to the distributee’s share of partnership appreciation (IRC 731(c)(3)(B). If
within 7 years of the date of contribution of property with a fair market
value greater than its basis, which the contributed property is distributed
to another partner, the partner who originally contributed the property [in
excess of basis] will recognize gain or loss under IRC 704(c)(1)(B)). This is
so even if other property is distributed to the contributing partner (IRC
737). Loss
is never recognized to a partner on a current distribution. If a liquidating
cash only distribution which is less than the distributee’s
outside basis, loss will be recognized by the distributee.
Loss will be recognized when a liquidating distributee’s
outside basis (IRC 731(a)(2) is less than cash
received plus the aggregate basis of unrealized receivable (IRC 751(c)) and
inventory items (IRC 751(d)). Under
IRC 704 (c) a $5000 gain would be recognized if a partner contributed a
non-depreciable asset with a $10,000 basis worth $15,000 if the partnership
sold the asset at a gain or distributed it to another partner. If other
property was distributed, that partner must recognize the lesser of (a) the
net pre-contribution gain (IRC 704(c)(1)(B) concerning distributions within 7
years), or (b) the excess value of the distributed property other than cash
over the partner’s outside basis less cash distributed. "C"
Corporations vs. Partnership (LLC) Tax Rates C
corporation tax rates on the first $75,000 of annual income are 15%, lower
than the individual tax rates attributable to pass-thru partnership or
"S" corporation entities.
The
most repeated phrase used to dissuade the client by the CPA is: opening a
"C" corporation will cause "double taxation This scare tactic
has the effect of causing many clients to forego maximum potential tax
write-offs by using the "C" corporation. Yes, generally, the
"C" corporation has greater tax write-offs than the
pass-thru entities including the partnership, LLC, and the "S"
corporation. Of
course, if the client does not have or expect to have the type of expenses
and deductions necessary to take advantage of this reality, the client may be
well served with an "S" corporation or a partnership pass-thru
entity (ie: LLC). Corporations
vs. Partnerships! Partner’s
who perform services for their partnership may receive preferable
above-the-line tax deductions that reduce taxable income dollar for dollar
(under IRC 62(a)(1)) as business expenses for
self-employed workers, not "employees". (Treas. Reg. 1.707-1(c)).
This may be especially favorable for high-income partners. (IRC 151(d)
exemptions, 68 I.D. – reduction in phase-outs). By contrast employee business
expenses are generally miscellaneous itemized deductions deductible only to
the extent of they exceed 2% of AGI (adjuster gross income), if at all! (IRC
67). However, "C" corporations may be more favorable for employee
structures for tax favored fringe benefits. In another example, a
"C" corporation with a reimbursement medical plan can deduct full
medical expenses not covered by insurance with no income recognition to the
employee (owner) under IRC 106 wherein a partnership only the amount in
excess of 7.5% of AGI will be deducted as a misc. itemized deduction (IRC
213), while increasing the partner’s gross taxable income for 100% of the
medical expense amount. Other employee benefits include free qualified
transportation and free parking fringes under IRC 132(a)(5),
premiums on group term life insurance under IRC 79, and dependent care
assistance payments under IRC 129. It is
generally understood that double-taxation is avoided by proper use of the "C"
corporation available write-offs and by the proper use of the zero-out
procedure with salary, bonus, and pension contributions. Even
at higher income levels, the "C" corporation rates are still lower
than the individual rates. (See Chart Above – Tax Rates.) If
all income is expected to be retained to finance business expansion,
receivables, and inventory levels, the "C" corporation rates can to
some extent offset the negative effects of double taxation. In those
circumstances the "C" corporation may be preferable to pass-through
entity status. Partnership
and S Corporation Taxation: There
are also significant differences between partnership taxation and S
corporation taxation. Most differences favor partnerships. For example:
Generally,
partnership taxation is more favorable than "S" corporation
taxation. Limited
Partnerships (See LLC Discussion Above)! Our
discussion of LLCs applies in all aspects to limit
partnerships as well. Liability and taxation are nearly identical with the
exception of the "unlimited liability" requirement of
the "general partner". The key factor to understand
is that by definition the limited partnership requires at least 2 persons or
entities to satisfy its formation. The
first is the general partner. By definition, the general partner has
unlimited liability. Although the general is often allocated a small 1 or 2 %
interest in the limited partnership, the general is burdened with the
exposure of unlimited liability. The LLC on the other hand does not require a
general partner and no members have unlimited liability. In fact by
definition, all members have limited liability. Moreover, it is noteworthy to
note that limited partners are by definition precluded from active
participation and are "passive" by definition. By contrast, the LLC
may have members that are active in the business. Members may be
characterized as passive or active. This may reveal additional tax planning
opportunities (i.e.: income and expense offsetting, etc.). For further
discussion, see the LCC discussions above. Subchapter
"S" - S Corporations Although
the "S" corporation has the same level of asset protection as the
"C" corporation, it is a pass-thru taxation entity, more similar to
the partnership than the corporation in certain tax respects. With
respect to liability protection, both the "C" and "S"
corporation are a good first line of offense and defense in the business
world. Although the corporation is usually a necessary and key device used in
a proper business and estate plan, it is not impenetrable. This author does
not believe that alone the corporation is sufficient to operate a business as
a going concern in terms of protection of the business assets and the
shareholders’ personal assets. This discussion also applies to the
"C" corporation to the exception of the pass-thru taxation issues. Shareholders
are personally obligated when they personally guarantee certain corporation’s
debts, for example, debts as a condition of obtaining financing. 2553
Election of S Corporate Status The
2553 form election of S corporation status is made by filing Form 2553
(Election by a Small Business Corporation). The 2553 form must be filed for
the current tax year by the fifteenth day of the third month of that
year or after the activation date of the corporation. This is the earliest
date the corporation has shareholders, assets, or begins business operations. Special
Restrictions on S Corporations "S"
corporations must meet a number of strict eligibility rules, including but
not limited to: (1) being a domestic corporation; (2) have no more than 75
shareholders; (3) have no shareholders other than individuals who are U.S.
citizens or resident aliens, estates, or certain types of trusts and
tax-exempt entities; and (4) have only one class of stock issuing voting and
nonvoting shares. Preferred stock or common stock classes’ holding differing economic
rights is not allowed. "S"
corporations may incur problems with raising capital. Transfers of stock are
also restricted for income, estate, tax, and business succession planning.
See your CPA before filing your 2553 election form. Regular
Corporations ("C Corporations") The
same liability discussion applies here as to "S" corporations. "C"
Corporation Income Taxation: C
corporation tax rates on the first $75,000 of annual income are 15%,
considerably lower than the individual tax rates that are
applied to pass-thru partnership or "S" corporation entities. The
most repeated phrase used to dissuade the client by the CPA is: opening a
"C" corporation will cause "double taxation". Double
taxation is the taxation first, on income at the corporate level tax return
(Federal 1120), and second the taxation of payments to its shareholders at
the shareholder level. This scare tactic (which has a measure of truth) has
the effect of causing many clients to forego maximum potential tax write-offs
by using the "C" corporation. Yes, generally, the
"C" corporation has greater tax write-offs than the
pass-thru entities including the partnership, LLC, and the "S"
corporation. Of
course, if the client does not have or expect to have the type of expenses
and deductions necessary to take advantage of this reality, the client may be
well served with an "S" corporation or a partnership pass-thru
entity (i.e.: LLC). Double
taxation items:
Appreciating
assets such as real estate, patents, and copyrights should not be owned by
the C Corporation for double taxation purposes. A pass-thru entity (ie: LLC, etc.) should own same instead. The LLC could
lease or license such property to the C corporation. The C corporation could
obtain a tax deduction by making deductible license, rental, or lease
payments to the LLC. The LLC is not subject to double taxation on the sale of
such assets. How
Do You Avoid Double Taxation With Proper Deductions? Favorable Corporation
Employee Fringe Benefits: Corporations
vs. Partnerships Illustration! Partner’s
who perform services for their partnership may receive preferable
above-the-line tax deductions that reduce taxable income dollar for dollar
(under IRC 62(a)(1)) as business expenses for
self-employed workers, not "employees". (Treas. Reg. 1.707-1(c)).
This may be especially favorable for high-income partners. (IRC 151(d)
exemptions, 68 I.D. – reduction in phase-outs). By contrast employee business
expenses are generally miscellaneous itemized deductions deductible only to
the extent of they exceed 2% of AGI (adjuster gross income), if at all! (IRC
67). However, "C" corporations may be more favorable for employee
structures for tax favored fringe benefits. In another example, a "C"
corporation with a reimbursement medical plan can deduct full medical
expenses not covered by insurance with no income recognition to the employee
(owner) under IRC 106 wherein a partnership only the amount in excess of 7.5%
of AGI will be deducted as a misc. itemized deduction (IRC 213), while
increasing the partner’s gross taxable income for 100% of the medical expense
amount. Other employee benefits include free qualified transportation and
free parking fringes under IRC 132(a)(5), premiums
on group term life insurance under IRC 79, and dependent care assistance
payments under IRC 129. C
corporations hold their losses on the books of the corporation tax return.
They are not passed-thru tot he shareholders. This may be a disadvantage to
certain high-income shareholders. However, when the C corporation operations
result in gains or income for the tax-year, high-income shareholders benefit,
as they are not burdened with more taxable income and taxes at presumably
39.6% individual rate! A shareholder does not maximize taxation when a
corporation has tax-exempt income, significant long-term capital gains, or
capital losses. Entertainment
Clients Warning! Personal
service corporations (PSCs) are ineligible for the
favorable "C" corporate graduated tax rates. All PSC are taxed at a
flat 35% rate. If a
C corporation meets the definition of a QSBC, shareholders (other than C
corporations) potentially are eligible to exclude from taxation up to 50% of
their gains on sale of the corporation’s stock. In addition, shareholders may
be able to roll over gains tax-free by investing in new QSBC stock issued by
a different company. A number of rules must be met for a corporation to
qualify for QSBC status, and shareholders must own their stock for more than
five years to benefit from the gain exclusion provision and for more than six
months to take advantage of the gain rollover rule. Conclusion The
choice of entities is complex. Consult your attorney and CPA before making a
final decision. Chart-
2000 Combined C Corporation and Individual Effective Tax Rates - C Corp Average
Individual Rate Combined Tax Rate on Long Term Capital Gains Rate 15%*
20% 32.0% 18.33%**
20% 34.7% 34%***
20% 47.2% *15% average rate applies to taxable income
up to $50,000. **18.33%
average rate applies to taxable income of $75,000. ***34%
average rate applies to taxable income between $335,000 and $10 million. |
Author,
Richard Rydstrom, Attorney/Accountant
International
Who’s Who of Professionals
Speaker
for LandlordsClub.Com ™
1-877-946-4968
All Rights Reserved. Titles, Competition, Trademarks, Servicemarks, TM © 2001 Richard Rydstrom
* * *
Is Toxic
Mold really a Serious Health Problem?
Should
Landlords & Insurers really be Responsible?
The State of the Law - A Neutral Analysis - Both Sides!
By Richard Rydstrom, Esq.
Attorney/Accountant/Author/National Speaker
[*The
author is on the
implementation of this new law. Landlords input and personal experiences are
invited]
1-877-946-4968
New Laws in 2001 - 2003
The building, insurance and landlord industries
are effectively at odds with consumers, homeowners and tenants! Why are they
fighting? Where's the beef? Is one side right and the other wrong? Is there a
real problem between the building, insurance and landlord industries on one
quasi-side, and new homeowners, consumers and tenants on the other! Or is it
simply greed, or some other form of extremism on behalf of one side, or the
other? Neither side would concede to greed or extremism as their motivator, so
what do they want?
One side would say they are running a business and
simply can't afford to "insure" any and every health problem that
junk science experts conjure up - the other - would say they are not trying to
make millions from a jury, but simply seeking repairs of uninhabitable property
and reconciliation from health injuries caused by toxic mold (lead, asbestos,
etc.) or 'sick buildings'.
It appears that a person in the following
categories, or with the following conditions, may be more sensitive to serious
mold health risks than others because "…(e)xposure to mycotoxins can
suppress or alter the immune system, inflame the lungs and result in toxic pneumonitis, cause irritation of the eyes, nose and throat,
headaches, diarrhea, and increase the susceptibility of the exposed person to
infectious disease and cancer.":
seniors, asthma patients, cancer patients, persons with suppressed
immune system, HIV patients, Epstein bar patients, etc
What is Toxic Mold!
The Office Of Senator Deborah Ortiz of the State of
Mold Lawsuits Are On The Rise - Is This Evidence
of Serious Mold Risks?
It appears the courts are in fact experiencing an
onslaught of consumer (homeowners and tenant) lawsuits. The homeowners and
tenants are claiming health injuries and property damages caused by
construction defects and/or toxic mold. They say they are seeking new laws to
help them get repairs made before the manifestation of property damage and
personal injury. The building industry says they are seeking new legislation to
offer new and better building standards, a new 10-year warranty and in effect
restricting the wide-open lawsuit exposure environment.
Very recently the consumers in California won some
victories by defeating building industry sponsored bills (AB 2112 CBA, AB 600
Dutra), and passing SB 732 (Ortiz), now known as the Toxic Mold Protections Act
of 2001! Until October 5, 2001 when California Governor Davis signed SB 732, there
was no effective legislation governing mold standards and related obligations
in the nation. Of course we still have a few governmental agency and industry
pronouncements on mold suggesting certain methods of assessment and
remediation.
The Toxic Mold Protections Act of 2001 directs the
California Department of Health Services (DHS) to develop and adopt standards
for mold exposure limits for indoor mold environments by July 1, 2003 (Section
26105 (d)). Will this law make it easier to successfully sue or more difficult?
Since the law has several seemingly uncertain provisions, language
contradictions or unanswered questions, one could expect both plaintiffs and
defendants to exploit these new opportunities (or burdens). Does the law create
a higher negligence per se duty on the owner and/or landlord who gets a
citation from an authorized "enforcement" officer? Will that create a
presumption at law of breach or uninhabitability?
What is meant by "standards" and "guidelines" and are they mis-used in the Act? Will or did the law adopt the DHS
standards of Cal OSHA (ie: permanent exposure limits
(PEL))? Is 'bacteria' covered under this Act? Although the law still has many
interpretation questions, as most new laws do, the judiciary will be forced to
answer them in the upcoming lawsuits. Remember, historically new laws mean new
lawsuits!
The
"Just as a motorist is presumed to know the
laws regulating motor vehicles, the court reasoned, so a landlord is presumed
to know the requirements of the local housing code pertaining to the
habitability of leased premises. Landlords need not inspect the premises before
leasing, the court said, but because of the implied representation of
habitability that accompanies the making of the lease, they fail to do so at
their peril." (emphasis added) (Benik v Hatcher 750 A2d 10 (
Protection from liability is up to you, insurance
alone is insufficient! You should engage the services of an attorney and seek
information on business and estate entity integration! Call for my free
articles: "You're Begging To Be Sued ™ © 1998-2001, and "The 13
Secrets Of The Rich or Informed" ™ © 1988-2001.
Lawsuits Across The
Moreover, many lawsuits in
Mold! $14,000,000!
A $14,000,000 verdict was upheld in the appellate
court against the construction manager for mold growth due to dampness and
excessive humidity in the county courthouse (from faulty HVAC and mechanical
systems, leaking windows, curtain walls EFIS and other defects from wet and
damp building materials which fed the growth of mold, mildew and other
organisms). The water-damaged building becomes the covered property damage for
coverage under the CGL insurance claim. (Centrex-Rooney
Construction Co., Inc v Martin County, Florida 706 S2d 20 (Fla
App 1998)).
Asbestos! $15,000,000!
An operating engineer at an office building for 21
years was diagnosed with mesothelioma from exposure
to asbestos fire proofing material sprayed inside. Plaintiff and his wife sued
the building owner and other operating engineers. They settled for $5 million. (Hoskins v Business Mens Asssurance Co of Am., Mo Jackson Cty
Cir Ct No 00-CV-206172, Feb 23, 2001). Plaintiff also sued the
manufacturer and won $10,000,000. (Hoskins v Federal Mogul
Corp 20 PLLR 135 (Aug. 2001)).
Defective galvanized plumbing! $41,000,000
It cost some 40 builders, developers, owners and
pipe manufacturers approximately $41,000,000 for leaking rusty or corroded
clogged galvanized Korean pipes (plumbing) in an approved class action
settlement in Los Angeles County Superior Court. Over 3552 single-family homes
and 1124 condos in 15 new-home communities in Santa Clarita Valley built from
1986-1994. (Newhall Land & Farming Co., American Beauty Homes, Dale Poe
Dev., Presley Homes, Pacific Bay, Paragon Homes, Monteverde
Devl., Dong Du Steel Ltd,. Et al.
LASC).
Some Other Lawsuit Examples!
* Water leakage and mold caused personal property
and structural damage to a family living in a
* 125 lawsuits are seeking $8 Billion in
* A
* Employees of a newspaper are seeking $10,000,000
from the owner (landlord) of their building for injuries from exposure to toxic
mold. (J.J. Acquisition Corp. v Pacific Gulf Properties).
Homeowners sued developers and contractors for construction defects from the
growth of toxic mold. (Spectrum Community Association v
* 1700 students, parents and teachers filed suit
for $67,000,000 for injuries caused by exposure to toxic mold and flood
pollutants at an elementary school for failure to remediate flood damage
causing growth of mold. (Andrejevic
et al v Board of Education of Wheaton-Warrenville School Dist No 200 Dupage County IL).
* Plaintiffs in Ontario Superior Court are seeking
$2 Billion in a proposed class action lawsuit for students exposed to mold at
various schools for the period September 1995 to June 1999, and their parents. (MacDonald v Dufferin-Peel Catholic Dist Sch Brd).
* Erin Brockovich sued
the builder and former owner in
Mold & Bad Faith Insurance Denials!
Briefly, insurance bad-faith is a term used to
describe the wrongful conduct of, or lawsuits brought against, an insurance
company for failure to proper handle or pay an insurance claim. My associates
have recovered over $200,000,000 for such wrongful conduct. This is your
warning! It is time for you to take steps to protect yourself in the event that
your insurance company denies your insurance claim. No, not all claims are denied, however, new laws bring new lawsuits, which bring
new insurance claims and a percentage of new denials. The following are some
lawsuits that paint the state of the law:
* In
*
* $48,500,000 was agreed to in settlement for
defective construction causing mold contamination against the general
contractor for $13,500,000 and surety bonds for $35,000,000. (
State of the Law!
Despite the numerous lawsuits, all is not doomed
for the building industry as evidenced by a recent major win in the California
Supreme Court against consumers (homeowners and tenants), concerning
construction defects (and potentially mold). In Aas
v. Superior Court 24 Cal 4th 627, 101 Cal Rptr. 2d
718 (2000) the court held that homeowners and associations (ie:
consumers) could not bring a negligence construction defect lawsuit against a
developer and general contractor (ie: builder) until
they experienced actual 'property damage'. Speculative, future or the threat of
harm was simply not sufficient. Apparently this case may mean that a plaintiff
would not be able to bring a case for negligence for code violations until it
causes actual property damage, personal injury or death. Moreover, will
insurance companies be held responsible? Or is it time for the insurance
companies to stand up and announce that they are not financially able to ensure
redress for every (now common) contingency? More legislation?
More lawsuits?
The majority and the dissenting Chief Justice Ron
George in the Aas case opined that the legislature is
the proper place to change the law, as the law of negligence may be inconsistent
with social policy. Justice George said that - "the obligation falls upon
the Legislature to correct this court's unfortunate misstep in the development
of the law, and to provide the protection that
On November 10, 2001 CNN reported that Farmers
Insurance Company would not renew most homeowners
insurance policies in the state of
Richard Rydstrom, Esq.
Attorney/Accountant/National Speaker & Author
International Who's Who of Professionals
Author & Speaker for: LandlordsClub.Com ™
Call 1-877-946-4968 for More Info
RydstromLaw@yahoo.com
All Rights Reserved. Titles, Competition, Trademarks, Servicemarks,
TM © 2001 Richard Rydstrom