Helping Clients Thrive!
Helping Clients Thrive!
Guide Posts
Helping Clients Thrive!
Tim Buynak
805.963.1950
523 Brinkerhoff Ave., Santa Barbara
433 Alisal Rd., Solvang
TRADEMARK, PATENT AND COPYRIGHT REGISTRATIONS REQUIRE
SIGNIFICANT, SUBSTANTIAL HUMAN INVENTION; NOT AI
The United States administrative entities and courts are all aligned in requiring significant, substantial human (natural persons) involvement for issuance of a trademark, patent or copyright. AI systems can be supportive; they cannot be listed as an applicant. “Inventors” are to be natural persons, humans. Fed. Regs 10043.
Trademarks and Patents. The United States Patent Trademark Office has issued guidelines on how to allow registrations of AI- assisted inventions. It followed an Executive Order of the Biden Administration issued on October 30, 2023 as well as the Federal Circuit’s case of Thaler v. Vidal, Thaler had tried to register an invention for a flickering light which was created by his AI system and was listed as the inventor, both of which the USPTO and court did not accept.
Copyrights. The United State Copyright Office (USCO) has stated that “A work must have human authorship in order to be protected by copyrights”. Creative works with small portions created by AI may be protected if there is sufficient human authorship, however, the push in created by AI will be excluded from copyright protection.
The legal system is attempting to keep up with the development of AI in many, many ways. Interestingly, the precedent for these determinations came from the United States Supreme Court case of Burrow-Giles Lithographic Company v. Sarony, 111 U.S. 53 (1884). We now have guidelines; they require significant and substantial human involvement in the process. One cannot simply put a term into an AI platform, such as ChatGPT , and then copyright the resulting product that the system provides. As a practice tip, please be sure to properly state the substantial human inventor’s involvement in the intellectual property developed; don’t follow the missteps of Dr. Thaler (from the case above), who ascribed everything to his AI system.
Tim
EMPLOYER OF FARM WORKERS – FARMER OR LANDOWNER / MARKETER
Clear Responsibilities with “tight” agreements can protect an owner of growing fields from liability to employees of a grower who leased the fields. And that’s so even if the owner is also the marketer of the produce grown. The landowner and marketer (even if the same entity) do not become a “client employer” under state and federal laws. It all depends on who has “direct control or supervision of the worker (s) or the work performed”. Code of Federal Regulations, Title 29, Section S 500-20 (h)(5)(iv)(A). Both the California Supreme Court (Martinez v. Combs, 231 P2nd 259 (2010) and the Ninth Circuit Court of Appeals (Morales – Garcia v. Better Produces (2023) have now so held interpreting the Migrant and Seasonal Agricultural Worker Protection Act, United States Code, Title 29, Sections 1801 – 1872 and the California Labor Code, Section 2810.3.
The 2023 Morales-Garcia case involved strawberry pickers in Santa Barbara County, California. The actual farmers who employed the pickers were liable but went bankrupt. The two high courts in California have determined that the landowner and marketer, even though on either side of the farmer, were not liable even though they were the same entity. Wise choice by the marketer who owned the land to have subleased growing the produce, the strawberries. Significantly, the Ninth Circuit held that the marketer did not have significant control even if the berries had to be picked for the marketer’s consignment sales. Downstream liability of sales entities has thus been limited; the Ninth Circuit stated that such an extension of liability would cause supermarket liability and was not appropriate.
Clear responsibilities and clear leases/ agreements with an understanding of state and federal court determinations, are essential. Sloppy documents without clear assessment of who is controlling the employee (s) can lead to significant liability for the landowner or the marketer of the produce. Specifically,
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Marketers and Retailers should make sure that their activities and agreements do not control agricultural workers and farmlands to avoid joint- employer or “client-employer” liability for wages.
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Landowners should lease their property by clear leases that do not “direct, control or supervise the worker (s) or the work performed”. Morales – Garcia, supra
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Growers are liable for their employees and compliance with California’s and federal wage in our laws.
All of this should be made clear by a comprehensive set of agreements, leases and other documents that do not contradict one another. “Extra” supervision or activities should not be undertaken. The controlling farmer alone should be liable for the working employees.
Beneficiaries
Under California law, the trustee must send a notice of trust administration to the beneficiaries of the trust. These are the individuals named in the trust to receive the trust’s assets. The notice must also be sent to the heirs at law of the settlor of the trust. These individuals would have inherited the decedent’s assets if he had died without a will.
Creditors
A trustee is not required, but may wish to consider, sending notice to creditors of the trust as well. The following is a general overview of this process:
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There is generally no legal requirement that a trustee provide notice of a trust administration to the creditors of the settlor.
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This is true regardless of the fact that the trust assets may be liable for the settlor’s debts.
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Giving notice to creditors can be useful to guard against unknown or contested claims against the settlor’s estate, because the creditors will only have 120 days to file a claim before it is barred. Otherwise, the deadline for filing a Creditor’s claim is one year from the date of death.
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Providing notice to creditors may be handled differently than providing notice to beneficiaries of the trust. The trustee or personal representative may file a probate proceeding for the estate and publish notice of that proceeding in the local newspaper. Therefore, the trust’s assets will be protected from the claims of unknown creditors.
Always, always connect with your attorney. There are many strategies when dealing with creditors. As a Trustee, you do not want to suffer a claim by a creditor because of providing or not providing notice to a creditor.
DUTIES OF TRUSTEE IN ADMINISTRATION OF A TRUST
(Coordinate All Actions with your Attorney)
Immediate Matters:
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Make proper funeral and burial arrangements and pay funeral expenses. (Review Disposition Instructions)
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Retain an attorney and through him/her, gain a competent certified public accountant. (Your attorney lends this process).
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If prior year income tax returns were not completed, file (or arranged to have filed) income tax returns for year of death and for all prior years which are due but were not filed at the time of death.
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Determine, locate and notify beneficiaries of their interest. Send formal notice.
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Determine, secure and protect assets. Liquidate any asset in a high-risk investment.
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Dispose of all perishables; secure the home and its personal property. (No one should take anything).
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Open estate/trust bank account and all monies (collection and payment should be sent through it; not your personal or deceased’s account).
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Review insurance coverage and insure estate against fire and other perils.
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Make provision for the immediate needs of the deceased’s spouse and any other dependents of the deceased.
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Collect income generated by the estate’s assets or payable to the deceased.
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Pay bills, mortgage payments, insurance premiums, credit cards.
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Re-direct mail.
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Cancel health insurance coverage, driver’s license, cable, telephone, club memberships, subscriptions, credit cards and obtain any refunds where appropriate.
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Notify Social Security.
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Locate all insurance policies to determine what coverage applies and if a claim for life insurance proceeds should be made.
Interim Matters:
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Prepare inventory of original assets including safety deposit box listing, real estate, monies on deposit at financial institutions, life insurance, any interest in an estate or trust and any other investment such as mortgage.
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Arrange valuation of assets where necessary.
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Advertise for creditors, prepare inventory of debts and give notice to known creditors (but contact your attorney – one year statute of limitations).
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Ascertain any debts to family members and locate evidence regarding loan balance.
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Consider any claims or potential claims against the estate and obtain legal advice if necessary.
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Set aside reserve funds for estimated debts, taxes (including potential taxable capital gains on property and any possible litigation) and estate trustee’s compensation.
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Prepare interim release and make interim distributions to beneficiaries if appropriate; where a clearance certificate has not yet been obtained and there are no outstanding prior year income tax returns, interim distributions should seldom exceed one-half the estate value; if there are outstanding prior income tax returns or the estate trustee is not familiar with the affairs of the deceased, no interim distribution should be made until a clearance certificate with respect to the terminal return has been obtained.
Final Matters:
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Convert investments and other assets to cash and deposit to estate account or, if estate balance is substantial and final distribution will be delayed, invest balance in interest-earning investments pending final distribution to beneficiaries.
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Re-register assets in estate’s/Trustee’s name, if applicable.
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Prepare transfer/deed for conveyance of real property.
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Settle to pay all legitimate claims against the estate; Set aside reserve sufficient for any outstanding litigation.
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Apply for any benefits payable on death, life insurance proceeds, death benefits from pension plans or annuities, and deposit to estate account.
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File a Trust Return, if appropriate.
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Prepare and maintain estate accounts for approval by the beneficiaries or examination by the court if a passing of accounts is appropriate or required.
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Prepare checks and pay shares to beneficiaries.
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Advise beneficiaries regarding the inclusion of income form estate in income tax, if appropriate.
PROVIDING NOTICE OF A TRUST ADMINISTRATION TO BENEFICIARIES AND CREDITORS
AVOIDING SELF-EMPLOYMENT TAXES FOR PARTNERS IN PARTNERSHIPS (GENERAL & LIMITED) AND LIMITED LIABILITY COMPANIES
AVOIDING SELF-EMPLOYMENT TAXES FOR PARTNERS IN PARTNERSHIPS (GENERAL & LIMITED) AND LIMITED LIABILITY COMPANIES
Self-employment taxes are substantial – 15.3% of an individual’s wages. Here are the general rules governing partnership (general and limited) and limited liability companies:
1.If you are a general partner in a general partnership or other entity taxed as a general partnership, you must pay self-employment tax on your entire distributive share of the ordinary income earned from the partnership’s business.
2.Limited partners don’t pay self-employment tax on their distributive share of the partnership’s profits.
3.Both general and limited partners pay self-employment taxes on any guaranteed payments for services performed for the partnership.
4.LLC members classified as general partners pay self-employment taxes on their distributive shares but avoid such tax if classified as limited partners, i.e., separate your participation.
5.IRS proposed regulations provide that LLC members are classified as limited partners only if they lack authority to enter into contracts for the LLC or work less than 500 hours per year in the LLC business.
6.IRS proposed regulations always classify members of service LLCs as general partners.
7.The Tax Court has held that LLC members can be classified as limited partners for self-employment tax purposes only if they are passive investors who do not actively participate in the LLC’s business.
Be sure that your partnership and limited liability company’s Operating Agreements properly restrict your activities, duties and responsibilities they should be consistent with these Rules. The IRS has proposed regulations, but Congress has not approved them. The Tax Court is developing its own criteria for inclusions/exclusions of self-employment tax liability with partnerships and LLCs. Cease being a partner and legally avoid self-employment taxes if you are not actually a partner in the business with decision making entitlements. Under number 5. It is possible for participants to be general and limited partners in these entities and thereby avoid being classified as “employees”.
Be Careful; Don’t be overzealous; Don’t have your documentation undermining your position when you are audited by the IRS.
AVOIDING THE UNIFORM PARTITION OF HEIRS PROPERTY ACT IN CALIFORNIA TO GAIN THE FULL VALUE OF JOINTLY HELD REAL PROPERTY
AVOIDING THE UNIFORM PARTITION OF HEIRS PROPERTY ACT IN CALIFORNIA TO GAIN THE FULL VALUE OF JOINTLY HELD REAL PROPERTY
To solve disputes among co-owners of real property who are relatives, California has enacted the Uniform Partition of Heirs Property Act. It broadly applies to real property in which a co-tenant acquires the property from a relative and there’s no agreement in a record binding all of the co-tenants concerning partition of that property.
The law was meant to keep property “within the family” but it is broadly written so that a relative co-owner who does not request a partition of the real property has an option to buy all of the interest of the other co-tenants. In other words, this law creates a right of first refusal for non-partitioning relative parties. If you wanted to gain full value for your co-owner interest and avoid substantial court proceedings, it is advisable to have an agreement concerning partitioning and sale of the jointly owned real property before one of the co-tenants passes by will or trust that interest to another relative. This way the owners of the property can determine the future of their home or other real property. It is best to avoid putting your family (and other partners) through a costly, divisive and acrimonious dispute and/or court proceeding that will undo your family for generations.
DIRECTORS’ OVERSIGHT LIABILITY
Directors can be held liable for failing to provide oversight of company operations. The Boeing Board gave no oversight to any safety issues during the 737 MAX software problems that were known to management, in fact, the public. Specifically,
- No board committee was specifically tasked with overseeing airplane safety and every committee charter was silent with respect to airplane safety.
- The audit committee focused on financial and production risks, not on airplane safety risks.
- The enterprise risk visibility process overseen by the audit committee focused on financial and production risks and did not specifically emphasize airplane safety.
- The Board’s yearly updates on compliance did not address airplane safety; airplane safety was not a regular agenda item at Board meetings.
- Management did not report to the Board on safety issues, the Board did not have a means of receiving internal reports and complaints about safety.
Some take aways:
- Have Board processes to gain information about actual and potential company problems, all on a regular basis.
- Take action as a Board and individually concerning company issues, especially those known to the public, as is part of the “job”.
- Boards guide the company; they are not just auditors for company profitability.
- Directors of the Board should ensure that they are adequately indemnified and insured for their activities (or inactivities) for the company, all to avoid personal liability.
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FAMILY CHRONICLES
Every one of us has a family (and extended families). With our “inner circle”, we have shared many experiences and loving times. Those who follow in our footsteps always want to know their roots as well as the experiences and stories that shaped their development, their opportunities in life, and their destiny.
Recently, we found No Story Lost, a company that captures your life experiences. They have a simple process through which you respond to questions and then a writer prepares a hard-bound booklet for you, with text by the writer (which you edit to your satisfaction) and photographs that you supply. It’s a superior product from everything on the market; their rating is a “5”. The pricing is inexpensive from under $1,000 to about $1,500, depending on how many pages you elect.
Take the time to tell your stories, your memorable experiences, your challenges, opportunities, accomplishments, and how you’ve made the family and the world around you a little better during your lifetime.
It’s a fun project and one your great, great, great, great-grandchildren will cherish and thank you for taking the time to tell them about your life experiences.
Website: www.NoStoryLost.com
EMPLOYERS MUST PROVIDE HARASSMENT PREVENTION TRAINING
California law requires that businesses that employ five (5) or more employees MUST provide harassment prevention training by January 1, 2021 and retrain every two (2) years thereafter. If you have not already administered this requisite training, the time to do so is now.
Employees are required to have 1 hour of training within six (6) months of hire. Supervisors and managers are required to have two (2) hours of training within six (6) months of hire or promotions.
If you hire seasonal or temporary employees, or any employee that is hired to work for less than six (6) months, those employees must be trained within 30 calendar days after the hire date or within 100 hours, whichever occurs first. Temporary workers employed by a temporary employment agency must be trained by the agency, not the client.
The harassment prevention training must include information and practical guidance about federal and state sexual harassment laws, including harassment prevention and correction and remedies that are available to victims. The training must also include a component on the prevention of “abusive conduct,” as well as a component on harassment based on gender identity, gender expression and sexual orientation.
The training must be “interactive” and can be conducted by in-person classroom training, individual computer-based training, or by real-time webinar.
Employers are required to track compliance and keep documentation for a minimum of two years. You must be able to provide copies of certification documents upon request.
The California Chamber of Commerce (CalChamber) has online training programs available for a very reasonable cost. Those programs can be accessed and purchased on the CalChamber website.
Please contact me if you would like assistance in setting up a training program for your supervisors and employees.
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OUT-OF-STATE TRUST CAN AVOID CALIFORNIA TAXES ON OUT-OF-STATE INCOME
Many individuals from States with no state taxes (Nevada, Texas) enter California and become California residents. Properly structured, income from outside of California can legally avoid California state taxes, the highest state taxes in the United States. Out-of-State Trusts with Out-of-State Trustees and administration will only be subject to California taxes on the income received by the California resident. North Carolina Department of Revenue v. The Kimberley Rice Kaestner 1992 Family Trust, 1395 S.Ct. 2213 (2019). Without proper structuring, an individual may be subject to tax on 100 percent of such income as being California sourced. Steuer v Franchise Tax Board (2020).
The United States Supreme Court has determined that States may tax income if there is exists (1) a minimum connection between the State and the person, property, or transaction it seeks to tax and (2) that there is a rational relationship between its tax and the activities occurring within the State. Particularly, States may tax trust distributions to an in-State beneficiary and the Trust income if the Trustee administered the Trust in that State. Safe Deposit and Trust v. Virginia, 280 US 83 (1927) and Brooke v. Norfolk, 277 US 27 (1928).
In summary, it is important to consider all the factors that bear upon the particular situation, all of which, if properly structured, may allow for avoidance of California state taxes on income from outside of the state of California. Some of the factors that the US Supreme Court provided for consideration are:
- Income Distributed to an In-State Resident
- Residence of Trustee
- Site of Trust Administration
- Residence of the Grantor/Settlor
- Control, Composition, and Ability to Use and Enjoy an Intangible Asset in the Trust
- Trustee’s Exclusive Control
- Governing Law
- Physical Location of Trust Record
- Physical Location of Asset Custodians
- Direct Investments in the Taxing State
- The Number of Meetings between the Trustee and Beneficiary
- Geographic Location of Meetings Between the Trustee and the Beneficiary
- Termination of Trust at a Specified Age; Ability of Resident Beneficiary to Become the Trustee, Automatically or Having the Right.
In conclusion, in coming into California, the California Franchise Tax Board will probably consider you to be a California resident (see FTB Publication 1031). By appropriately structuring your assets in an Out-of-State Trust with an Out-of-State Trustee and administration, it may be possible to avoid California State Taxes on the income within your Trust that is not received in California.
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CALIFORNIA NON-PROFIT TAX RETURNS – DO NOT DISCLOSE DONORS
For non-profit organizations, it is no longer necessary (or appropriate) to display donors on California’s tax returns. The United States Supreme Court in Americans for Prosperity v. Bonta held on July 1, 2021, that such disclosures on California tax returns violated First Amendment rights.
Chief Justice John Roberts is a strict constitutional constructionist and wrote the majority opinion. He found that the disclosure requirements were overly broad and were not narrowly tailored to meet California’s needs --- this is the legal test for justifying governmental intrusions on all Constitution rights.
What’s next --- striking down the federal IRS donor disclosure requirement and/or the federal campaign financing disclosures. For the moment, do not make donor disclosures on your California state non-profit organizations tax return. As otherwise you may draw a lawsuit for such disclosure by the donor (and the loss of those donations).
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AVOIDING PRIVACY POLICY LITIGATION
The California Consumer Privacy Act of 2018 (CCPA) secured privacy rights for California consumers as of January 1, 2020. The courts are starting to adjudicate legal cases, mainly class actions, as the CCPA provides a private right of action to “any consumer who has nonencrypted and nonredacted personal information… or whose email address is subject to a unauthorized access and infiltration, theft or disclosure as a result of the business’s violation of the duty to implement and maintain reasonable security procedures and practices appropriate to the nature of the information.”
The CCPA secures privacy rights for California consumers, including:
•The right to know personal information a business collects about the consumer and how it is shared and used;
•The right to delete personal information that a business collects about the consumer;
•The right to opt-out of the sale of one’s personal information; and
•The right to non-discrimination in exercising one’s CCPA rights.
To enforce these rights, businesses can expect lawsuits, especially class-action suits, for infringement of these rights. Particularly, there are statutory (automatic) damages “in amounts not less than One Hundred Dollars ($100) and not greater than Seven Hundred Fifty Dollars ($750) per consumer per incident or actual damages, whichever is greater”.
Best practices-
•Have a privacy policy in place on your website or other communication with consumers; and
•If a data breach occurs, take immediate action as required by statute to notify consumers and to stop the activities underlining the breach through which data is being collected.
“Standing” to bring a case for data breaches under the CCPA is the current line of defense. In order to succeed in litigation; there is a need for damages and the Ninth Circuit Court of Appeals (the Federal court for our area) has issued decisions to indicate when a plaintiff has “standing” to proceed with a lawsuit under the CCPA. These cases are Krottner v. Starbucks, 628 Fed 3rd 1139 and more recently, Ree v. Zappos.com, Inc., 888 Fed 3rd 120. For data-breach standing, Zappos.com held that that occurs when (1) there is theft by outside hackers, (2) of highly sensitive personal information, (3) leading to the misuse of at least some named plaintiff’s personal information.
In evaluating this criteria, the recent case of Arifur Rahman v. Marriott, the California Central District Federal Court in Los Angeles, recently determined that the complainants “had not plausibly pled here that any of their more sensitive data… such as credit card information, passports, social security numbers… has fallen into the wrong hands. Without a breach of this type of sensitive information, plaintiff has not suffered an injury in fact and cannot meet the constitutional requirement of standing.”
Businesses should not rely on the court system, however. Please have a privacy policy for your business and systems that preclude a data-breach and/or adequately deal with it, but winning in court on these consumer cases cannot be assured.
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CALIFORNIA FRANCHISE TAXES DUE FROM OUT-OF-STATE LLC
Out-of-state limited liability companies are required to pay California’s franchise tax in spite of very limited investments in California LLCs. Recently, a Delaware LLC with a 0.78% membership interest in a Delaware LLC, which owned and managed property in San Diego, was required to pay California’s franchise tax. Under Section 23101(b) of California’s Revenue and Taxation Code, if an LLC’s real and tangible property exceeds Fifty Thousand Dollars ($50,000), as adjusted by inflation, then the LLC is deemed to be “doing business” in California. Under Revenue and Taxation Code section 23101(b), an LLC’s property includes the LLC’s “distributed share of past-through entities”. In this instance, a 0.78% interest equaled $481,000, significantly over the threshold. Thus, if you are an out-of-state LLC invested in a California LLC, please realize that franchise taxes are due to the State of California. In your interest is worth more that $50,000 as adjusted by the cost-of-living rate yearly.
For California corporations, the rule is the opposite under Swart Enterprises, Inc, v. Franchise Tax Board, and Revenue and Taxation Code, Section 23101(a). Swart, a corporation, held a 0.2% membership interest in a manager-managed California LLC. The court determined that it was not “doing business” in California under Revenue and Taxation Code, Section 23101(a). The court found that such a passive interest, without management authority, and did not meet the section’s standard of “actively engaging in a transaction for the purpose of financial profit or gain”. The Franchise Tax Board obviously is frustrated with this decision and vows judicial and/or legislative intervention.
The Takeaway: If you are an out-of-state entity investing in California LLCs, do that investment by an out-of-state corporation and do not have any active involvement in the California entity. It is also highly suggested that you have the entities and investments reviewed by a California attorney, as we have done for other out-of-state investors.
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LIABILITY PROTECTIONS – WAIVERS AND INDEMNIFICATIONS
Your potential liability for negligent activities can be waived or you may be indemnified from damages by the other person(s) signing a contract.
Liability waivers, exculpatory clauses, and indemnity provisions must be clear, explicit, and unambiguous to be effective. This means if written correctly, that you can be relieved of your liability for your negligence toward the other contracting party or someone may be responsible for the damages caused by your activities.
Waivers and indemnity clauses should unequivocally apply to “active” and “passive” negligence; otherwise, they are usually interpreted to only apply to passive negligence. Further, if a waiver seeks to release personal injury claims, it must be drafted in a manner that clearly reflects that the intent of the document is to release personal injury claims caused by the negligence of the party seeking the release. For example, if you are a landlord contracting with a tenant through a lease, you can release yourself from liability claims related to COVID-19, provided it is clearly drafted, notifies the tenant of the potential risk of COVID-19 exposure, and that his/her rights are being waived.
There are two areas that such waivers, however, are unenforceable. Particularly,
•When liability waivers are contrary to public policy. Particularly California Civil Code, Section 1668 states, “All contracts which have as their object, directly or indirectly, to exempt anyone from responsibility for his own fraud or willful injury of the person or property of another or violation of law, whether willful or negligent, are against the policy of the law.
•Waivers for violations of law are particularly unenforceable. California case law has firmly established that waivers that exempt a party from violations of law are void and against public policy. If you place a broad exculpatory provision in a lease waiving claims against you for “any claim arising at any time”, the court is not going to enforce them if there is property damage caused by a fire sprinkler system, which was installed by a landlord in violation of municipal code.
As a landlord, protect yourself and your property through waiver and indemnification clauses to the maximum extent possible, recognizing the restrictions under Civil Code, Section 1668. Tenants should be careful and know what risk they are undertaking when leasing premises. Similarly, the parties to a contract or parties to a business venture have like positioning. When contracting, please read all the provisions and make sure that you are protected to the maximum extent possible and/or know the risks that you are taking. Always read and understand the fine print!
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ESTATE TAX AVOIDANCE – FAMILY LLCS AND LIMITED PARTNERSHIPS
If your estate is close to $11.7MM (individually) or $23.4MM (couple), family LLCs or Limited Partnerships are an easy way to legally avoid Federal estate taxes that apply after these levels …………. And place your current estate with your loved ones without including the IRS. This just involves a little estate planning in advance to form one of these entities and include your loved ones for a small splinter of your assets.
The reason for the reduction of the estate from its current (and future) market value is that discounting is applied to the gross value since the full value is not being transferred. The discounts are for the lack of marketability (usually about 25%) and for the lack of control (about 10%). Thus the fair market value of the estate you are transferring falls about 35% total.
This approach was just confirmed in a Tax Court Memorandum (Decision) in Grieve v Commissioner, TCM 2020-28. Parents thru LLCs transferred over $40MM of assets in which they owned 99.8% thru Class B nonvoting ownership interests and their daughter owned .2% interests thru Class A voting interests. Discounts were 35% and 38% so that $25MM passed to the daughter tax-free of any estate taxes.
This result required significant advance planning with attorneys & appraisers. Everyone prostiganites on estate planning but this is an example in which $15,000,000 transferred that otherwise would have gone to the IRS rather than their daughter. Whether your estate is large or small, take the time – do the planning and make sure that your heirs receive the benefits of your hard work over your lifetime.
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WATER RIGHTS, FOR YOU TO GUARD AND NOT LOSE!
Water … Water … Water – If you are a landowner, this is an important asset as you own the water under your land. Protect it so it is not lost & your land loses a portion of its value or becomes valueless for agriculture and other operations. Basin adjudications are occurring, mandated by the state, so if you snooze, you lose. You should have a straw (a well) in your basin and be pumping water.
Santa Barbara County is surrounded by water – the ocean, State Water, our reservoirs, streams, and aquifers. The water history of Santa Barbara, however, is one of feast & famine. We have always had too much & too little water. This history of water is chronicled by Michael F. Hoover, renowned local geologist, in Drought & Flood, which you can purchase at www.HooverGEO.com. So do not give away your valuation water asset or render your land useless. Do not count on expensive governmental water assistance when you have rights right under your feet.
We are regularly engaged to enforce water rights or provide water agreements and easements as well as form water system/sharing arrangements and entities. We look forward to helping you.
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BUSINESS (INDEPENDENT CONTRACTORS) EMERGENCY LEGISLATION ALLOWS MANY, MANY MORE INDEPENDENT CONTRACTOR RELATIONSHIPS, RATHER THAN REQUIRING EMPLOYMENT. WRITTEN AGREEMENTS WITH QUALIFYING REPRESENTATIONS ARE IMPORTANT.
In response to the public outcry after AB 5 (which made almost every worker an employee), immediate legislation (AB 2257) has been enacted which allows many work situations to be an independent contractor arrangement and not employment. Some of these arrangements that are exemption (that can be a independent contractor arrangement) are
•Business to Business Relationships, where a contractor “acting as a sole proprietor, or a business entity formed as a partnership limited liability company or corporation contracts to provide services to another such business”. Pretty broad – does it override previous legislation (no) so make sure that there is a written agreement with all of the qualifications of the business/entity stated. Further, this law provides that the “employees” working for the contracting parties will be scrutinized as being properly classified – employee or contractor.
•Single Engagements which the “a stand-alone non-reoccurring event at a single location or a series of events in the same location no more than once a week”.
•Specialty Professions such as consulting, caddying, wedding planners, interpreters – and the list is expected to grow – but it does NOT include gig economy workers, transportation, franchising, and the motion picture and television industries. We are awaiting the upcoming vote on some of these.
•Professional Services such as appraisers, photographers, photojournalists, videographers, translators, editors, etc which are determined by the common law test for employment, called the Borello test
•Music Industry & Performers but musicians & vocalists who do not receive a royalty from the sound recording or musical composition must be paid minimum & overtime wages.
And more is coming as there are 34 stand-alone bills still pending – that’s a lot of lobbying effort by groups that want to be treated “special”. If you are going to employ an independent contractor, it is important to have a clear written agreement that sets forth the terms of the engagement and qualifies the person as exempt from employment laws. Don’t take the risk as an employer and find that yourself faced with an individual employee claims and a PAGA (see below) claim when they leave or are terminated. These agreements are a usual part of having an outside general counsel for your business to rely on from time to time.
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BUSINESS (EMPLOYMENT) – IN SETTLING EMPLOYEE WAGE & HOUR LAWSUITS, EMPLOYERS MUST GAIN FULL RELEASES OF THE INDIVIDUAL CLAIMS AND PAGA REPRESENTATIVE ACTIONS.
The California Labor Code Private Attorney General Act of 2004 (PAGA) allows private citizens to sue individually in court on behalf of the state for violations of the California wage and hour laws and to recover substantial attorney fees for violations on behalf of “aggrieved” employees. These type of cases are not subject to arbitration as they are brought on behalf of the state of California by “private attorney generals”. These are “representative actions” and not class actions. Individual actions and representative actions can be brought by the same person --- and settlement of the individual action does not settle the representative action. Kim v Reins (2020) 9 C5th 73. Settlement releases of both actions must be gained if a business is to be completely released of liability to the employee. Follow this link for Typical Settlement Language to Resolve the PAGA Action.
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TRADEMARK INFRINGEMENT (IP) – DON’T USE SOMEONE’S TRADEMARK; MISTAKES ARE COSTLY; YOUR PROFIT IS THE TRADEMARK OWNER’S GAIN.
The U.S. Supreme Court just made it easier for a trademark owner to recover damages (including your profits) against an infringer. The past standard of “willful” use or infringement is NOT necessary; all that is necessary is that the infringement occurred and then it is up to the adjudicator as to the level of damages, including the possibility of treble damages. Damages include your profits, as those same sales/income should have gone to the trademark owner. When you start a business or use of trademark, logo, slogan, etc., check whatever you are going to use with the United States Patent & Trademark Office on their website or have us do the same. Don’t make a very costly mistake. If you are a trademark owner, it is still good practice to send a “cease & desist” letter as that might resolve the problem or if litigation is necessary, it will increase your damages. A “cease & desist” letter should be very thorough, including the requirement of certification under oath by the infringer that they have ceased use of the infringing slogan, logo, etc. and that all products carrying it have been destroyed.
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