Frederick Focke Mischler, Attorney

Health Care Powers of Attorney

Below is copied an old email message I sent out to some friends.  It is difficult to recall the precise emotions as I watched the Schiavo family and their tragedy rehashed ad nauseum in the media.  In the end, I hoped the public awareness of Terri's situation would inspire some of us to take steps to avoid a similar fate.  Only then can we say that Terrri's passing would not have been in vain and little more than a circus ring used by others in media and politics to push their own agenda.

-----Original Message-----
From: Frederick Mischler
Sent: Thursday, March 31, 2005 11:43 AM
Subject: Take care of yourself and your loved ones

Terri Schiavo died this morning.  It is hard to imagine anyone in the US who does not know something about this particular tragedy and the tribulations that her family and loved ones have gone through for the last 15 years. 

What has gotten lost in the discussions and analysis on news shows is that much of this public tragedy could have been prevented if Terri had made her choices clear on a simple piece of paper.

This, of course, does not diminish the anguish that a family will feel when they begin to understand that their loved one will likely not recover from a terrible event.  However, by addressing such issues at a time when everyone can discuss them to their fullest extent, we can each feel that we understand the choices to be made and can accept the choices made by those we love.  And, we can accept the awesome weight of the decisions necessary when our loved ones can’t speak for themselves.

In Ohio, Living Wills and Health Care Powers of Attorney have been available for years.  I recommend that you consult with your family and friends, and with your legal advisor to understand how these documents work and what they mean in the context of your own health care and quality of life. 

American Bar Association is committed to encouraging competent adults to take the time to complete advance care plans stipulating who should make decisions in the event they should become unable to speak for themselves, and what their basic health care preferences are.  As part of that effort, the ABA has made available a wide variety of free on-line resources designed to make it easier for people to make the necessary preparations.  Those resources, which can be found at www.ABALawInfo.com, include forms and information available to the public for download free of charge.

Further, Living wills and health care powers of attorney are typically one part of a larger estate planning process.  If you have any questions about this or have never considered your own estate plan, please contact me.  I will be glad to help you begin to understand the issues related to such planning.

            

            Best Regards,

            Frederick Mischler

Ohio Real Estate Deeds

The Deed is a document that transfers title in real estate.  In the sale of a piece of property, the seller is the "grantor" and the buyer is the "grantee".  There are 6 statutory forms for deeds in Ohio.

• General Warranty Deed
• Limited Warranty Deed
• Quit Claim Deed
• Survivorship Tenancy
• Transfer on Death Deed
• Executor or Trustee Deed

The General Warranty Deed is used when the grantor will provide to the buyer warrantee promises that the grantor lawfully owns the property to be transferred, that the property is free from all encumbrances; that the grantor has good right to sell and convey the property, and that the grantor does warrant and will defend these statements of ownership forever, against the lawful claims and demands of any person.

So, a general warranty can be a pretty tall order.  They are the most desireable deed to have since you should get the protection of prior owners if there are any questions raised about your ownership of property.  This can mean that there has been some error or problem in the past which has caused some questions about who actually owns property.  If such title errors come up, past owners who transferred property with a general warranty deed can be called upon to defend against people who make a claim of ownership on property.

A limited warranty deed does the same thing, except the grantor only warrants against his or her own encumbrances, and not all encumbrances.  A grantor transferring with a limited warranty deed only promises to defend against claims that challenge that grantor's prior ownership of property.  A quit claim deed transfers property with no promises about the ownership of the property and no promises to defend against claims made on the ownership of the property.

Survivorship tenancy relates to the usual joint and survivor type of ownership that a husband and wife might have.  But, this is not a deed which only married couples can use.  Any 2 or more people can own property jointly, with rights of survivorship.  Thus, 2 sisters might own a house with a survivorship tenancy deed and when the first sister dies, the property is automatically (or rather, still) the property of the surviving sister.  Similarly, 2 friends might jointly own property and if one dies, the other becomes the sole owner.  And, this deed can be used by more than 2 people.  A group of people might own a house and they each have joint ownership with the others.  If any die, then the ownership of the deceased person goes to all the remaining owners in proportion to their ownership of the property.

A Transfer on Death deed is a relatively new form of transfer in Ohio.  It allows an owner to transfer property to another person (the beneficiary) directly, upon the death of the owner.  The beneficiary has no rights to the property at all, until the death of the owner.  This can be a very useful device for making efficient estate planning arrangements.

Finally, the Executor or Trustee Deed is used by a person who is the executor of a person's estate, or the trustee of a trust (among other fiduciary actions).  It is not so common in relative terms, but is necessary when dealing with an estate or with property held in trust.

I highly recommend that people speak with their attorney to determine how to best recognize their ownership of real property.  Our homes are typically one of our most valuable assets and represent a significant portion of our net worth.  It is important to get good advice on how best to manage our property.  Commonly, these issues are examined in a larger estate planning process.  But you don't have to have millions of dollars to justify making an estate plan.  It does require some thought about what you want to do, and who you want to benefit as time goes forward.  Even for most middle class individuals, this requires some thought and preparation to be sure you benefit from the available tools, such as the proper deed on your property.

Tax Evasion Arguments

Here's a post from the National Association of Tax Professionals, that says it as well as I think I can.  Most of these arguments are good for a chuckle or two.  It continually amazes me how people can put forth these ideas and appear to sincerely believe them.  But, I guess that is all a testament to human nature, greed, and that we tend to believe what we want to hear.   -- FM

Lawsuit-Happy Tax Protesters Tax the Legal System

The Verdict – Pay What You Owe

National Association of Tax Professionals (NATP) Appleton, WI – Paying taxes violates the first amendment (or the fifth or thirteenth or fifteenth…); I am a citizen of my state, not of the United States; the war goes against my religious beliefs so my taxes should not fund it; if I don’t file a tax return, the government is responsible for filing for me; because I am disabled or a minority, I am exempt from paying taxes; my assets are in a trust not subject to taxation. All of these arguments to protest paying taxes, plus many more, have floated around for years, and every year there’s a new twist on the old story. Currently there are over 40 general categories of tax evasion arguments, none of which are successful. Instead, buying into these false ideas is a good way to lose money.

The courts have little patience for those who avoid paying their fair share of taxes, but they see plenty of cases. The outcomes are almost always the same – defendants must pay the taxes they owe and often with civil penalties of 20 to 75 percent of the underpaid tax and fines of up to $25,000. Some evaders are imprisoned. Yet every year a new crop of tax evaders think they have the magic reason, legitimate grounds, to not pay, and they clog the court system with frivolous cases.

“Taxpayers need to avoid being taken in by groundless theories suggesting that they don’t have to pay taxes or file returns,” said IRS Commissioner Mark W. Everson. “The truth about these frivolous arguments is simple: They don’t work.”

Bruce Hicks, a professional NATP tax preparer at Freedom Income Tax in Nashville, TN says, “Friends, family, and your golf buddies, despite meaning well, are the worst sources of information on your taxes. As a tax professional a lot of my time is spent debunking the myths that people have heard from others. Another problem is that promoters of these tax evasion schemes will take a percentage of your refund (if they prepared the return) and then disappear when the IRS shows up.”

“Remember, your fair share does not mean ‘overpaying’ your taxes because you do not claim ‘legitimate’ deductions, etc. Rather, it means taking every deduction, deferment, etc. that is legitimately available to you,” adds NATP professional preparer Ken Morales of Lexington, KY. “Our taxation system is a self-imposed system, where the taxpayer is expected to avail themselves of every tax benefit. There is a difference between tax savings and tax evasion, one being legitimately avoiding tax, the other illegally evading taxes. Your professional tax preparer is trained, and in many instances has years of experience, to properly advise you on this difference. And, the bottom line is that the taxpayer is responsible for his or her tax return and the facts contained therein.”

According to NATP member Doug H. Moy, Lake Oswego, OR, who is a consulting specialist in estate/gift taxation and planning, abusive trust tax shelters rank high on the IRS list of "Dirty Dozen" tax scams. "The proliferation and use of sham trusts in estate planning is remarkable in view of the fact that not one single taxpayer who has used a sham trust has prevailed against the government."

If you bought into a scheme to hide your income from the government, no matter how legitimate the method may have sounded, seek the help of a professional tax preparer and make things right. There is no defense to not fulfill your obligations to the government. Don’t get taken in by falsehoods; pay your fair share and really think about what those tax dollars buy for you and your family. If you have any questions about the tax system or for help in legally minimizing your tax burden, consult a professional tax preparer who is an expert that keeps up on tax law changes year-round.

Stuff to Keep

We get inundated with documents and things in life.  Some of us are better than others, either we are better at staying uncluttered, or we are better at finding new places to keep new stuff that "needs" to be kept.

Either way, there's a fundemental recognition that there are some things that should be kept.  Here's a list of documents and information that you should have on file some where accessible to at least one other person who will know what to do with it (even if that means to give it to someone who will handle it).

Keep a list of important names and contact information: your lawyer, your accountant, your financial advisor, your insurance agent, the boat house manager where you keep your boat or the airport manager where you have your airplane, etc.  Name, address, telephone, fax, email and any other relevant info (directions to get there, perhaps).

Keep your will and other estate plan documents (trust agreement, health care power of attorney, living will, durable power of attorney for finances, etc.) in a safe place.

Be sure your health care power and living will is on file with your current primary physician and any health facility you use or expect to use in the future.

Insurance policies: health, life, property.  If you have a house, have the policy in a safe place; the same goes for any assets you have that are insured.  Life policies need to be easily accessible when the time comes for them to be handled. 

Real estate and other titles to property.  (car, boats, etc.)

Safe deposit location and key should be in a secure place.

Marriage certificates, birth certificates, military papers, naturalization documents, divorce documents, separation agreement, shared custody papers, adoption documents, etc.

Passports, social security cards and records, etc.

List out all your bank accounts, investment accounts, retirement savings, etc.  Need account numbers and contact information for person to help manage the account.

There are probably a few things I have not mentioned here.  In short, consider anything you have in your life that has value.  Certainly all your property and assets, but also, your family members, and their health, safety and welfare.  Keep in a safe place all the information and documents that are in any way related to these things and people.  It will be a much easier process to handle life's events when the necessary documents and information is available to you when you need it.

Ethical Basis of Taxation

I am sorry that I have not posted lately.  Sickness and busy-ness have kept me away.  Hopefully the current tax season won't conspire to keep me away so much.  Happy Valentine's Day, by the way.

I recently became aware of the work of a law professor in Alabama who, after attending classes at a  seminary, made a critical examination of the basis for taxation in Alabama.  Her results were published in a law review article, here:  Susan Pace Hamill's law review article

The article is titled "AN ARGUMENT FOR TAX REFORM BASED ON JUDEO-CHRISTIAN ETHICS".  It reviews the current structure of the Alabama tax regime and compares that to the principles that are espoused from the Judeo-Christian viewpoint.

I don't intend to have a significant political (or religious) aspect to this website, but where one discusses law and taxes, it is fairly difficult to avoid politics completely.  My main thought regarding political issues is that we must always keep in mind the fundamental principals by which we choose to organize ourselves.  Often, this is summarized by reference to the Constitution, and usually that is my starting point.  We are best served when we remember that the nation is strongest when it maintains strong connections to the concepts of fairness, equality, liberty, freedom, privacy and other similar broad objectives embodied in the United States Constitution.

When we ask ourselves, on any given issue, "are we choosing a path that maintains our connection to these fundamentals?", I believe that is how we as a diverse nation can guide ourselves into the future and include the entire population, not just me, or those like me, or those that will benefit me.  Ethically, and I believe Constitutionally, I am bound by my citizenship to consider my neighbor in making decisions that affect each of us.  My neighbor is of course similarly bound.

Susan Hamill's law review raises important issues for us to consider when we analyze and discuss tax policy.  It may not be an answer, or a solution easily implemented, but that is not the message I take away from it.  I hear that we need to examine our underlying assumptions about our society and the principles by which we maintain fairness, equality, liberty, freedom, privacy and the other grand notions of the founding fathers.

Buy-Sell Agreements

Small business owners often need special struturing to aid them in managing the transfer of the business to their business partners.  Business succession planning, of which buy-sell agreements are important tools, require some careful examination to be sure that the business survives the possible crises that can occur when an owner or key employee is suddenly unavailable to the business, often through sickeness or death.

Consider a small business with two owners, each with 50% of the business.  They know each other well and are confident in their relationship.  But this confidence does not extend to other people who might also know that industry well, nor does it extend even to the owners' family members.  At the same time, the business is a large part of the owners' personal assets and their lives.

A Buy-Sell agreement addresses the needs of these owners by allowing them the ability to get out of the business or to sell their stake in the business and obtain a fair value for that stake, while still protecting the other owner by preventing the sale of the business to new partners who do not have the confidence of the current owner.

Essentially, the owners agree that if one of them wants or needs to sell, an agreed mechanism will come into play that will value the business and set in motion the process of selling the business so the selling owner gets a fair share of the business and the remaining owner gets some control over how the business is sold.

Usually, these agreements will say that if an owner dies, becomes disabled, or desires to sell, the other owner or the corporation shall buy the stake of the selling owner.  These agreements are typically tied to insurance policies on the lives of the owners such that if one owner dies, the policy will provide the cash necessary to buy that owner's share of the company.

That way, the family of the deceased owner gets the value that the owner built in the company, and the remaining owner gets to have a company that he or she can control without having to deal with a new partner who might not be agreeable with that remaining owner.

As I indicated, these agreements are one part of a larger strategy of the business owners to protect the business, protect their families, and protect their estate.  If you are a business owner, be sure to consider these issues as you grow your company.

Gift tax basics

Gift taxes are something that most of us don't need to worry about.  But, if you or someone you know has a large gift to consider, then you need to think about the gift tax effect on that decision.

For the majority of us, all we really need to know is that in 2006, there is a $12,000 exclusion that we can take advantage of (up from $11,000 in 2005).  That is, if you want to give something of value to someone (either cash or other property), you can give up to $12,000 to that person every year without worrying too much about gift taxes.

So, if you own a small business that is worth, say, $60,000, you can give $12,000 worth of stock in the business every year, for 5 years, to your child, in order to transfer the entire business to them.  Or, you can give $12,000 each to your 5 children and the transfer can be complete in 1 year.  As long as no one receives more than $12,000 in one year, no gift tax will be owed when the gift is made and the gift will not be taxed at death as part of the estate tax.

Note the connection to estate taxes.  This was done so that whether your estate is taxed at your death, or when you give it away while still living, the IRS will get some portion of it at some time.  But, as I noted, both these taxes are not likely to affect the majority of taxpayers.  Right now, the gift tax exclusion over a lifetime is $1,000,000.  So, you will have to give away that much before you pay any gift taxes.  The estate tax exclusion is even higher.  For 2006, it is $2,000,000.

As an example, if you gave your $60,000 small business to your child all in one year, you would be required to report that gift on a gift tax return.  You would be able to exclude $12,000 as a gift exclusion in that year to your child, and $48,000 would be subject to gift taxes.  However, you have the $1,000,000 lifetime exclusion so the amount subject to tax would be subtracted from the exclusion and no tax would be due until you gave away more than $1,000,000 during your lifetime.

In the end, if you believe you have some possible exposure to gift taxes or estate taxes, you should consult with an attorney to review your net worth and the strategies you can employ to minimize your tax exposure.

Ohio Tax Amnesty

The State of Ohio has implemented a tax amnesty program due to the many changes to the tax code in recent years and the likelihood of taxpayer confusion because of the changes.

The main idea is to give taxpayers an opportunity to self-report their tax liabilities that might otherwise be subject to late filing penalties and interest in an effort to increase compliance and tax revenues.

The Amnesty Program will allow taxpayers to pay outstanding taxes without penalty and only 50% of the interest due.  Speak to your tax advisor if you think you might be able to take advantage of this program.

For more information, see the website from the Ohio Department of Taxation:  http://tax.ohio.gov/amnesty/about/payer.html

Trust Fund Recovery Penalties

If you own, or want to own, a business that has employees, you should know about this issue.  The Trust Fund relates to the employment taxes that employers withhold from their employees' paychecks.  It is a trust fund because the employer simply holds this money in trust for the employees until it is sent to the IRS to pay their taxes.  It is not the employer's money.  Ever.  And because it is held in trust, the employer can be held to fiduciary standards regarding the money.

So, if you are an employer, be sure to get the employment taxes withheld from employees' wages paid out to the IRS every month.  This is critical to your continued existence as an employer.

If this does not happen, then the penalty can be applied by the IRS.  The tax law gives the IRS the authority to go after any and every "responsible person" in order to collect the unpaid employment taxes that were not paid by the business.  If you are a responsible person in your business, you could be held personally liable for these taxes.  This is true even if you did not have direct day-to-day control or decision-making authority over the payment of liabilities in the business.

There is no "bright line" definition of who a responsible person is.  The IRS will look at various factors like who is active in the day-to-day management of the business, who has knowledge or control of the payment of liabilities, who owns the business, who has check signing authority, and who has knowledge or control of the hiring and firing of staff.  Sometimes these functions will be handled by a staff person.  Such people can also be held responsible even if they report to the owner or another person in the management team.

Identity Theft

Identity theft is a topic that has gotten increasing amounts of attention in recent years due to the rise of new ways to perform transactions, especially on the internet.  The damage caused has been increasing many fold as well.

In the past, we were all told to protect our credit cards and checkbooks from thieves.  It's not hard to figure out how they might be able to steal from you if they have your credit cards or checkbook.  But now, with increasing use of Social Security numbers as identifiers, that too needs to be closely protected, as well as bank account numbers, and all manner of other personal information.  There are 2 prime ways to be an identity theft victim:

1) account takeover
This refers to the theft of existing bank or credit account information and the use of that information to complete purchases or obtain cash.
2) true identity theft
This involves the theft of a Social Security number or other identification which is then used to open other accounts to obtain financial gain.

It has been shown to be very easy to get personal information about people.  Some of the ways it is done include dumpster diving, that is digging through trash at the dump, or even outside your own home, stealing mail from your mail box, taking credit card copies left at a store or restaurant, and  getting information from internet sites.

There are ways to protect yourself that are very easy to do.  The most important is to examine the bank and credit card statements for your accounts.  They are not just garbage, they are your key to keeping track of your money.  This leads to the second excellent way to protect yourself: rip up or shred ALL documents that contain private information.  If you are going to throw away a bank statement, shred it first.  Here's one that almost got me.  Almost every credit card statement I receive includes a page of checks that I can use to pay bills to transfer the balance to my credit card.  Well, if you just throw that away, someone can pick it up and write themselves a check (or pay one of their own bills) and it goes on your credit card.  SHRED everything that has your personal information!  This also includes credit card applications you get as junk mail.

Anymore, every application I get is preprinted with my name, and almost certainly with some kind of code to attach that application to my credit report.  Someone filling this out and signing my name with their address will get a card in my name, and I would never know it until the card company tracks me down to say I owe them thousands of dollars.  Shred those applications when you throw them away.  (As I strongly suggest you do!)

Get your credit report from all three credit reporting agencies at least once each year.  Check it for errors and follow up on all errors to be sure they get corrected.

Another way to protect yourself is to be VERY careful who gets to see your private information.  Take your SS# off your driver's license and checks; don't let identification, like driver's license, social security card sit around unattended or open to other's to see; be sure to keep all credit card reciepts and rip them up if you don't intend to keep them

Now, to be sure, there have been some protections against identity theft written into law.  But the first defense is your own wisdom in protecting yourself.  Even if you can't be legally responsible for someone else's theft, you still have to deal with the creditors banging on your door, or calling you demanding money.  You might even have to hire a lawyer to represent you, which can be very expensive.  So, the cheapest and most effective way to protect yourself is to use your head and keep an eye on everything that might have your personal information on it.  Rip it up if you don't need to keep it, and keep it in a safe place if you do need to keep it.