Checklist for Setting Up Your Business After Forming An LLC

June 12, 2012 by

Clipboard with checklist
After we form an LLC for your business the next steps are to:

1. Open the New LLC business checking account using the LLC Certificate of Organization and the EIN. When you open the business bank account get the following:

  • Just put your LLC name on the business checks not your address;
  • Put “Void After 60 Days” under the dollar line on the checks and begin with number 1001;
  • Get overdraft protection for your business account;
  • Get your monthly statements and check imagines in the mail or print them out or save them every month to your computer or server.
  • Get copy of your signature card. (Per Uniform Commercial Code Article 3)
  • Get a business debit card that you can use to make business purchases or take draws.

2. Then fill in a W-9 with your LLC name and EIN and give it any one that paid you over $600 so they do not issue you a 1099-Misc. under your SSN for the current tax year.

3. You should hire a payroll company to pay you once per month and set up direct deposit and pay yourself at least $12,000 in 2013 so you can maximize your Simple IRA employee contribution for 2013. I would recommend Ryan Russell of Precise Payroll at 302-530-8410.

4. To maximize your retirement you have until October 1 to open a Simple IRA and then you have until April 15, of the following year to make a $12,000 employee contribution and your LLC can make a 3% of your pay employer contribution. If you can afford to, you should also fund a ROTH IRA or a nondeductible IRA by contributing $5,500 by April 15, of the following year assuming you met the AGI limits. If you can afford to make additional contributions for retirement I can recommend a financial planner.

5. Instead of a Simple IRA you can also consider a 401K and make an employee contribution of $17,500 and have your employer match 10% of that.

6. You should get the following insurance under your new LLC’s name:

  • You should get the preferred group health insurance.
  • You should also get business professional liability insurance and workman’s compensation if you have employees.
  • You should also register your business vehicle registration in your LLC’s name and inform your auto insurer to update your policy and add full tort coverage.
  • You should also get a personal umbrella of at least $ 1,000,000 if not more depending on your personal net worth.
  • You should also get disability insurance and pay the premiums out of your personal bank account so if you have to file a claim the proceeds will be tax free. I would recommend Tim Harris of Nationwide at 610-565-1910 for auto, business, umbrella and disability.

7. You should sign up for a business visa or master card that either pays you cash back or pays you rewards like Pentagon Federal Credit Union 800-247-5626, or Chase Ink 800-882-6751. You should use the card to make all your business purchases so when you receive the yearend detailed statement that will list all your business expenses by category, it will simplify your record keeping and maximize your tax deductions.

8. You should use Microsoft Outlook or Google Calendars to schedule your appointments and track your mileage and cash expenses. Also keep receipts for cash expenses that you can total at year end.

9. If you want to accept credit cards using your smart phone sign up for Intuit Go Payment at 888-486-9795, which has no monthly fees and charges about 3% per transaction.

10. If you hire someone else to reconcile your bank statements and or make deposits make sure they are bonded to prevent fraud. You should also review your annual profit and loss statement and tax returns with your tax preparer looking for any unusual increases in expenses. Finally you should review the cancelled checks every month from the business account to ensure there are no missing checks or suspicious transactions.

11. If you rent or own commercial space consider switching to Direct Energy at 888-734-0741, which will charge you a fixed rate of 8.79 cents per kWh for electricity which includes transmission charges and gross receipts tax.

12. If you pay anyone who is not a corporation more than $600 during the tax year get them to fill in a W-9, before you pay them so can issue them a 1099-Misc.

By doing all the above steps you will follow the three rules that every entrepreneur has which are to:

  1. Pay the least amount of taxes legally by following rules 2 and 3 below;
  2. Maximize your retirement contributions by fully funding both a Simple and Roth or nondeductible IRA;
  3. Practice good corporate governance by not paying personal expenses from the business checking account and keeping good business records and using your business credit cards for all your business purchases. Making sure you have the proper amount of insurance listed in paragraph 6 above.

Feel free to contact Gregory Spadea at Spadea & Associates, LLC in Ridley Park at 610-521-0604 if you have any questions.

Filed Under: Business Law Tagged With: , , , ,

What Business Expenses Are Deductible?

March 22, 2012 by

If you are self-employed or have an LLC or S-corporation any expense that your business incurs that is ordinary and necessary is deductible under Section 162 of the Internal Revenue Code. Therefore, please list the total spent on the expense categories broken down as follows:

  • Advertising;
  • Car expense (need business miles plus parking, tolls or actual fuel invoices, insurance, repairs and total miles driven and business miles plus parking and tolls);
  • Fixed Asset – If you bought a vehicle, computer, equipment, office furniture or placed it in service during the tax year, even if you already owned it, bring in the purchase invoice so we can expense it under IRC Sec. 179;
  • W-3 – Salaries that your company paid to others. List officer and shareholder salary separately;
  • Employer share of employment taxes like FICA and FUTA;
  • Commissions or fees paid to other contractors, Get them to fill in W-9 if not incorporated so we can issue them a 1099;
  • If you already issued them a 1099, bring in the 1096 – showing total independent contractors paid.
  • Insurance but list health insurance separately;
  • Supplies;
  • Materials or Purchase of inventory for resale;
  • Travel, Hotel, Airfare and Car Rental;
  • Meals (need date, place, person entertained and business purpose) Only need receipt if you pay more than $75.00 and have a day timer, If you do not have a day timer or digital calendar (such as Outlook or Google Calendar) then you need a receipt for everything;
  • Telephone including local, long distance, fax and mobile;
  • DSL, cable and internet charges;
  • Postage;
  • Continuing education and business seminars and conferences;
  • Interest expense paid on business loans and provide year end balances;
  • Rent;
  • Utilities like electricity, oil or gas;
  • Prior year PA franchise (Capital Stock) tax from Page 2 of the PA RCT-101;
  • Prior Year Local Income Tax paid;
  • Total state sales tax paid if you included it in gross sales receipts.

Contact Gregory Spadea at 610-521-0604, if you have any questions or need your tax returns prepared.

Filed Under: Business Law, Tax Law Tagged With: , , , , , , , , ,

What are the Duties of PA Executor?

March 8, 2012 by

A frequently asked question for clients preparing Wills is, what are the duties of my PA Executor? The short answer is that the Executor’s duties are to gather the assets, pay the bills, file the necessary tax returns, prepare an accounting and make distribution to the beneficiaries.

The basic outline of the duties of a PA Executor include the following:

1. Notice of Probate. Prepare a Notice of Probate for each beneficiary of the Will and each
heir-at-law and next-of-kin. File within 60 days after probate. Send a Proof of Mailing
to the Register of Wills within 10 days of filing.

2. Charitable Bequests. Determine if there are any charitable bequests. If so, send a
Notice to the Attorney General. The Attorney General must also receive an accounting
and copies of all filed Receipt and Refunding Bonds.

3. Specific Bequests. Pay any specific bequests within 1 year.

4. Social Security. Notify Social Security of the decedent’s death and return any Social
Security checks that should not have been received. In the case of direct deposit, Social
Security will automatically make the withdrawal upon receipt of the notification.

5. VA. Determine if the decedent is a Veteran and apply for the appropriate Veteran’s
benefits by calling 800-827-1000. The VA Pension direct deposit phone number is 877-
838-2778. The VA Life Insurance phone number is 800-669-8477.

6. Postal Service. Contact the postal service and arrange for the decedent’s mail to be
forwarded to the executor.

7. Valuation. Value all assets of the estate as of the date of death, including:

  • Tangible personal property (by appraisal, if necessary)
  • Real estate (by appraisal). Deal with all tenants, landlords and lenders.
  • Bank accounts
  • Securities
  • Employee benefits
  • Retirement accounts
  • Motor vehicles
  • Business assets
  • Government bonds
  • Annuities
  • Tax or Insurance Refunds

8. Debts. Obtain balances for any indebtedness owed by the decedent

9. Retitle to Estate. Retitle assets from the decedent to the estate

10. Claims. File claims with life insurance companies, annuities and retirement plans

11. Safeguard Assets. Safeguard any real and personal property, check that all insurance is current, that real estate is secured, and that utilities are dealt with appropriately

12. Taxes

  • Income Tax. File the decedent’s final federal and state income tax returns.
  • Federal Estate Tax. Prepare and file a Federal Estate Tax Return (Form 706), if required.
  • PA Inheritance Tax. Prepare and file a PA Inheritance Tax Return, if required. Remember that Wrongful death claims are not subject to PA Inheritance Tax
  • Income Tax for Estate. Prepare and file a Form 1041, if the estate income exceeds $600.
  • Income Tax for Trust. Prepare and file a 1041 Income Tax Return for any trust, if required.
  • Out-of-State Taxes. Prepare and file any out-of-state tax returns, if required.

13. Executor’s Commission. Determine the amount and appropriateness of executor’s commissions based on the Johnson estate.

14. Accounting. Prepare an informal accounting of all of the financial activity of the estate. List the assets of the estate, income generated by those assets, expenses paid by the estate, what is left and how the remaining assets are proposed to be distributed.

  • Determine whether the beneficiaries want distribution in cash or in-kind.
  • Obtain beneficiaries’ signatures on the accounting.

15. Release and Refunding Bonds. Obtain a signed Release from each beneficiary indicating that they accept the distribution and agree to refund to the estate any amounts that may be due if obligations of the estate are later discovered. The Release only needs to be filed with the Register of Wills if a formal accounting is requested by one of the beneficiaries or by the Orphans Court.

16. Retitle Assets. Make distribution to the beneficiaries, including any trusts that may be beneficiaries and retitle assets to the name of the beneficiaries.

17. If the decedent got divorced after the will was written you also need the divorce decree.

Contact a Ridley Park, PA Estate Planning Attorney

Contact Gregory J. Spadea in Ridley Park, PA at 610-521-0604 if you need help probating an estate or have any questions about your duty as an executor.

Filed Under: Estate Planning Tagged With: , , , , , , , , ,

How Long Do I Have to Keep My Tax Records For?

January 16, 2012 by

A folder of records and a tax form on the table.
The length of time you should keep a document depends on the expense or event that the
document records. Generally, you must keep your records until the period of limitations for that return runs out.

General Rule – The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or that the IRS can assess additional tax. The Statute begins to run from the later of that date the returns are filed or the due date which is typically April 15.

If you owe no additional tax and the following four situations do not apply to you; keep the tax records for 3 years.

However, if
1. You do not report income that you should report, and it is more than 25% of the gross
income shown on your return; keep your records for 6 years.

2. You do not file a return; keep your records indefinitely.

3. You file an amended return for credit or refund or a claim after you file your return; keep your records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.

4. You file a claim for a loss from worthless securities or bad debt deduction; keep your records for 7 years.

Federal Income Tax Returns – Keep copies of your filed federal income tax returns forever. I recommend scanning them into your hard drive or cloud so they don’t take any space. Copies of previous federal tax returns help in preparing future tax returns, filing an amended return or applying for a mortgage or loan. In addition you should check to ensure all your wages and income have been reported correctly and match your Social Security earnings history. You can file Form SSA-7004 to get a copy of your earnings history from Social Security.

Employment Tax Returns and Records – Keep all employment tax returns and records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.

Rental or Business Property – Keep records relating to the purchase and improvements on a rental or business property until the period of limitations expires for the year in which you sell the property. You must keep these records to verify any depreciation or amortization deduction taken in the years you owned the property, as well as to figure the gain or loss when you sell the property.

If you never sell the rental property and fully depreciate it over 29 1/2 years you need to keep a record of all your cost basis and improvements until 3 years after the 29 ½ year period ends to verify the depreciation in the event you are audited.

Section 1031 Property – Generally, if you received property in a nontaxable 1031 exchange, your basis in that property is the same as the bases of the property you gave up, increased by any money you paid. You must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition.

Inherited Property – If you inherit property from an estate, you get a stepped up basis in the property which is the fair market value at the decedent’s date of death. Therefore you should keep a copy of the appraisal taken at the date of death, or the inheritance or estate tax return for as long as you own the property to verify your basis so when you sell the property you can calculate your gain. Keep in mind if you only inherit half of a jointly owned property you only get a stepped up basis in the half that you inherited and did not already own.

Primary Residence – Cost records for your primary residence and any improvements should be kept until the home is sold. Note that a net gain (selling price less the basis and expenses of sale) are less than $250,000 if you are single or $500,000 on a joint return isn’t subject to income tax. However, the home had to be your primary residence for 2 out of the last 5 years prior to the sale. If the net gain profit is more than $250,000 ($500,000 on a joint return), or if you don’t qualify for the full gain exclusion, then you’re going to need those records for another three years after that return is filed.

Brokerage Statements and Cancelled Checks – When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. For example, your insurance company or creditors may require you to keep them longer than the IRS does. Common examples are brokerage statements which should be kept for 7 years and bank statements and cancelled checks which should be kept for 7 years.

If you are not sure how long you should keep a specific document feel free to call Spadea & Associates, LLC at 610-521-0604 or email Gregory J. Spadea at Gregory@SpadeaLawFirm.com

Filed Under: Tax Law Tagged With: , , , , , , , , , , , ,

Tax Preparation Needed for 2011

January 9, 2012 by

Please click on the link below in order to download and print tax preparation information needed for 2011.  This income tax checklist is divided into relevant categories to help you organize your tax information.

Tax Preparation Information Needed for 2011

Filed Under: Tax Law Tagged With: ,

What is Spousal Support and or Child Support and How Much Do I Need To Pay?

December 12, 2011 by

Writing A Check
Divorce/Separation and Spousal Support:  There are three types of spousal support.  The first two are support and alimony pendent lite (APL).  The third is alimony.

Spousal support obligation arises out of the marriage relationship.  Support may be awarded prior to the commencement of divorce proceedings and during the separation/estranged phase.  Alimony pendent lite (APL) can only be awarded after the commencement of divorce proceedings but prior to a divorce decree.  The main difference between the two is the timing of the filing for divorce and the defenses that may be claimed.  Generally there are no defenses to a claim for APL while a person may have a defense precluding a spouse from asserting the need for spousal support.  Defenses that may be asserted as grounds for divorce are also defenses to spousal support such as adultery and cruel and barbarous treatment.  Therefore, a spouse that has committed adultery may not be entitled to receive support during the separation phase but could quite possible receive APL once the divorce action is filed.

Spousal support and APL are calculated the same.  The formula takes into consideration the Obligor’s net monthly income minus support payments obligor may have as result of other dependents or former spouses minus child support payments from current litigation minus obligee’s net monthly income multiplied by thirty (30%) percent.  If the parties have no children or child support orders the number would be multiplied by forty (40%) percent.  This formula has been adjusted to require the court to consider the length of marriage in determining its award.  The primary purpose of this provision is to prevent the unfairness that arises in a short-term marriage when the obligor is required to pay support over a substantially longer period of time than the parties were married and there is little or no opportunity for credit for these payments at the time of equitable distribution.

The third type of support is alimony.  The purpose of alimony is to effect economic justice, but it is a secondary remedy and applies only if economic justice cannot be achieved by way of equitable distribution.  This type of an award is rendered post divorce decree to achieve such justice.  There is no formula Pennsylvania courts use to assist in its award.  Rather courts will rely on the seventeen subjective factors listed in 23 Pa. C.S.A. § 3701 (b).  Some of those factors are: length of the marriage; the ages and physical, mental and emotional conditions of the parties; sources of income of the parties; earning capacities of the parties; the earning powers of the parties and the relative needs of the parties.

Child Support: These are payments due to the support of the child regardless of marital status.  Pursuant to federal law, The Family Support Act of 1988 (P. L. 100-485, 102 Stat. 2343 (1988), requires all states to have statewide child support guidelines.

The guidelines take into consideration the parents’ net monthly income.  Once that figure has been determined the guidelines state what the support payments are monthly.  The total payments increase with each child.  The parties are responsible for that suggested guideline figure.  That total figure will be divided according to the percentage of time the child is with their respective parent.  These figures can also be reduced if there are any ongoing support obligations.  Any deviations are based upon a case by case basis.

If you have any questions or need a divorce attorney contact Spadea & Associates, LLC at 610-521-0604.   We suggest you bring your W-2 and last three pay stubs when you come for you free consultation.

Filed Under: Family Law Tagged With: , , , , , , , , ,

What are the Grounds for Divorce in Pennsylvania?

December 8, 2011 by

Picture of a family being cut in half
The Complaint for Divorce is the initial document filed with the Pennsylvania court requesting the court to terminate the marriage under certain specified grounds.

No-Fault Based Grounds:  The court may decree a divorce where there is mutual consent and it is alleged that the marriage is irretrievably broken or when the marriage is irretrievably broken and an affidavit has been filed alleging that the parties have lived separate and apart for a period of at least two years.

Fault Based Grounds:  Committed willful and malicious desertion period of at least one year; adultery; by cruel and barbarous treatment, endangered the life or health of the injured and innocent spouse; bigamy; incarceration for at least 2 years; offered such indignities to the innocent and injured spouse as to render that spouse’s condition intolerable and life burdensome.

In Pennsylvania, the property and debt issues are typically settled between the parties by a signed Marital Settlement Agreement or the property award is actually ordered and decreed by the Court.  Pennsylvania is referred to as an “equitable distribution” state. When the parties are unable to reach a settlement, the parties will go through a discovery process to classify which property and debt is to be considered marital. Next, a monetary value needs to be assigned on the marital property and debt.  Lastly, the Court will distribute the marital assets between the two parties in an equitable fashion. Equitable does not mean equal, but rather what is deemed by the Court of Common Pleas to be fair.

If either spouse files for support, the court will consider the following: the earning potential and earning capacities of the parties; the ages and health condition of the parties; the income of the parties; the expectancies and inheritances of the parties; the length of the marriage; the contribution by one party to the earning capacity of the other; the extent to which the earning power, expenses or financial obligations of a party will be affected by reason of serving as the custodian of a minor child; the standard of living of the parties established while married; the relative education of the parties and the time necessary to acquire sufficient education or training to enable the party seeking alimony to find appropriate employment; the relative assets and liabilities of the parties; any pre-marital property; the contribution of a spouse as homemaker; the relative needs of the parties; any marital misconduct or fault; tax consequences; whether the party seeking alimony lacks sufficient property; and whether the party seeking alimony is incapable of self-support through appropriate employment.

Either or both parents may be ordered to provide child support according to their ability to pay. The factors for consideration set out by statute are: the net income of the parents; the earning capacity of the parents; the assets of the parents; any unusual needs of the child or the parents; and any extraordinary expenses. Child support payments may be ordered to be paid through the Domestic Relations Section of the court. There are official child support guidelines that the Court will take into consideration in determining the support to be paid.

Contact a Ridley Park, PA Divorce Attorney

Please contact Spadea & Associates, LLC at 610-521-0604 if you need help filing for divorce or custody.

Filed Under: Family Law Tagged With: , , , , , , , ,

Preparing For Your First Deposition

December 2, 2011 by

Deposition
The purpose of a deposition is to find out what your personal knowledge of the facts in the case are, and when you knew them.  It also pins you down to a specific story, so if you testify later at trial you cannot change your story.  It also allows opposing counsel to size you up as a witness to see if you would be credible if you did testify later at trial.

The deposition is typically taken in an attorney’s conference room in the presence of a court reporter along with your attorney and the opposing party and their attorney.  The Court reporter will give you an oath to tell the truth and ask you to identify yourself.  Be sure to speak loudly and clearly so the transcript of your testimony is accurate and understandable.  Do not nod your head or make gestures since they will not be recorded.

To prepare for the deposition you should refresh your recollection by reviewing any notes you made about the case.  You should also read all the pleadings and correspondence from your attorney’s file.  If the other party or witnesses have already given depositions you should also review those to see how they differ from your recollection of the facts.  Do not be afraid if you do not remember something, just tell the truth and state that you do not remember.

The most important thing to remember is to tell the truth.  Do not lie or exaggerate. Listen carefully to each question and answer only to what is being asked.  Do not give additional information.  If you can answer a question with a yes or no you should do so.  Try to make your answers as a short as possible.

Never answer a question if you do not know the answer. Never estimate or guess, as this will destroy your credibility if you are not accurate.  If you realize you gave a wrong or unclear answer, correct or clarify it immediately.

If you do not understand a question ask the attorney to repeat it.  You should only be asked one question at a time, so if you hear a compound question, wait for your attorney to object and it will be rephrased.  If you hear your lawyer object to a question stop talking immediately.  Your lawyer will instruct you on how to proceed.

Do not bring any documents or records to the deposition unless your attorney tells you to. In addition, do not ask for anything from your file during the deposition.

After the deposition do not speak with the opposing party since nothing is off the record.

Contact a Ridley Park, PA Attorney

If you are facing a deposition or have questions feel free to call Spadea & Associates, LLC at 610-521-0604.

Filed Under: General Tagged With: , , , , ,

What Should I do if I get a Subpeona?

December 1, 2011 by

Man at desk thinking

I. General Information:

1. What is a “subpoena”?

Although typically filled out by an attorney, a subpoena is an official request issued from a court. A judge may find an individual in contempt of court for not complying with a subpoena. A subpoena is binding if:

i. the subpoenaed individual receives proper personal service and

ii. there are no objections or reasonable excuses not to comply with the request and

iii. the subpoena is issued under authority of a court or agency with statutory authority to issue subpoenas to persons in Pennsylvania.

2. What can be requested in a subpoena?

A subpoena may require the individual to do any or all of the following:

a. Testify at a trial, hearing, or other judicial proceeding;

b. Produce records including papers, books, or other physical items, or stored electronic information including email, files, activity logs, and data;

c. Appear at a deposition for questioning before trial and /or produce documents at the deposition.

3. What grounds are there to block a subpoena?

A person may object to a subpoena and asked that it be quashed by a judge. A “motion to quash” is a request that a judge nullify or cancel the subpoena. Typically your lawyer will negotiate with the attorney who issued the subpoena if it is unduly burdensome or otherwise objectionable.

Important grounds for opposing a subpoena include:

a. Privileged or confidential information – If the request is for student records (see Family Educational Rights and Privacy Act), medical records, personnel files*, counselor-student communications, attorney-client communications, confidential research, or other protected materials, the subpoena may be quashed or may be subject to a protective order.

b. The subpoena is too vague – If the subpoena is so vague or global as to what records it requests, the recipient may object or negotiate for narrower terms with the attorney who sent it. (See Fed. Rule Civ. Proc. 45(b)(1), Fed. Rule Crim. Proc. 17(d);

c. Inadequate time to respond. This sometimes happens with requests for student records because the University must notify the student (or former student) first. A subpoena that does not allow a reasonable time for compliance may be objected to or a different response time may be negotiated. (Fed. Rule 45 (c)(3)(A)(i)),

*“Personnel file” means any employment – related or personal information gathered by an employer.

d. Burdensome travel. If t he subpoena forces the individual to travel too far, there are grounds for objection. (See Fed. Rule 45 (c)(3)(A)(ii) )

e. Where undue burdens or “adequate excuse” exist for non- compliance, the recipient may be able to object to or negotiate change to the subpoena.

II: Important Facts To Determine When Subpoenaed:

The rules for subpoenas vary on the type of case (criminal or civil) and the issuing authority (state court, federal court, administrative agency). The most important initial aspects to determine when first receiving a subpoena include:

a. What does the subpoena request (testimony, deposition, or production of documents)?

b. What court issued the subpoena (federal, Pennsylvania, another state court, or an administrative agency/commission)?

c. What type of case did the subpoena stem from (civil or criminal)?

III. General Steps to Take for Subpoenas for Documents from Federal or Pennsylvania Courts

1. Check how the service was rendered:

a. For federal subpoenas , some courts hold that there must be personal hand delivery of the subpoena to the individual named in the subpoena. Other courts allow service by certified mail. This rule applies for both civil cases and criminal cases.

b. For Pennsylvania subpoenas, service may be rendered by personal delivery of the subpoena to the recipient, or by certified or registered mail, return receipt requested.

2. Check for jurisdictional limitations:

a. Federal civil subpoenas are only valid if served:

i. Within Pennsylvania if it was issued by a federal district court in Pennsylvania, or

ii. Outside of PA but within a 100 miles from the place selected for the individual to produce the documents.

b. For federal criminal subpoenas, there are no jurisdictional restrictions. Unlike the federal civil cases, service may be rendered anywhere within the United States, without geographical limitation.

c. For all Pennsylvania criminal and civil subpoenas , any state court in PA can issue and serve a valid subpoena to any person within the state. However, the rules for depositions differ. Contact Legal Affairs concerning depositions.

3. Does the person named in the subpoena have control of the documents:

a. In all federal cases, if you do not have control of the documents, you should object by notifying the requesting party in writing.

b. In all Pennsylvania cases, for any requests for public records or medical records, if the custodian lacks custody of the requested documents, the custodian must send an affidavit stating lack of custody to the court.

4. Does the subpoena request confidential information:

For all subpoenas , if any confidential records are requested (including student records, medical records, personnel files, etc.) the procedure for responding may be affected by the specific statutes concerning that type of record. You may file a motion to quash the subpoena, or seek a protective order, if the subpoena requests privileged or confidential information. Under the statutes, you may also have to give notice to the student or employee who is the subject of the records. Improperly disclosing confidential information could harm the University’s case if the University is a party, and it could create possible civil liability.

5. Is the request otherwise objectionable:

Generally, a subpoena is objectionable if it is “oppressive or unreasonable” Contact Spadea & Associates, LLC at 610-521-0604 to determine if there are other grounds to object.

6. Making objections or motions to quash:

a. For all federal cases , any objections should be made in writing within 14 days after service or before the date requiring production of documents. Objections should be made directly to the party or attorney requesting the subpoena. The attorney may then modify the subpoena or seek a court order for the documents. A motion to quash should be made to the issuing court soon after receiving the subpoena.

b. For all Pennsylvania courts, a person must make an objection to the issuing attorney, or a motion to quash directly to the court, within 20 days of service of the subpoena (or before the time specified in the subpoena to comply if that time is less than 20 days).

7. Requests for Production of Documents and Subpoena’s that are not issued by a Court:

A request for production of documents or subpoena sent by an attorney to other parties and non- party witnesses during the discovery phase of litigation is different from a court issued subpoena. In that case the non party witness should not provide confidential information without a court order until consulting with his attorney. To do so may subject the non- party witness to being sued for disclosing the confidential information without proper permission.

Call Gregory J. Spadea immediately at 610-521-0604 if you get a subpoena.

Filed Under: General Tagged With: , , , , , ,

Determining The Purpose of an SNT and the Appropriate Expenditures

November 18, 2011 by

Arriving to Hospital via Ambulance
A Special Needs Trust might have been created to handle proceeds from a personal injury settlement or an inheritance left directly to an individual with a disability. It might be designed to protect eligibility for Supplemental Security Income (SSI), Medicaid or other public benefits programs — or for a number of programs (usually including those two) at the same time. Common questions about use of trust money revolve often revolve around what expenses should be paid from the trust such as travel and entertainment, transportation and housing and other expenditures.

The first place the trustee should look is at the trust document itself. It may be fine that state and federal law permit a particular expenditure, but if the trust does not then the trustee cannot take advantage of the government’s flexibility. Sometimes there is nothing to prohibit a proposed expenditure in public benefits law or the trust document, but that still might not mean that the purchase is appropriate — it might be imprudent considering the circumstances, or a violation of general trust administration principles.

All that said, the very purpose of Special Needs Trusts is usually to provide extra, or supplemental, items to the beneficiary the things that the system, family and other sources cannot or will not provide. One of the very few court cases addressing this concept is a 2004 Minnesota Court of Appeals case, In re: The Irrevocable Supplemental Needs Trust of Collins. The Court of Appeals ruled that the proper approach was not to second-guess the trustee as to each expenditure, but to determine whether the trustee was properly exercising his discretion. Since the whole point of a Special Needs Trust is to provide for extra benefits that are not otherwise available, the trial judge here should have presumed that a trustee/father knows best whether his daughter is mature enough to ride a snowmobile or attend a Britney Spears concert.

The Collins case was an unreported case and therefore sets no precedent for other courts.
Nonetheless, the Collins case can give us some assistance in determining whether a given expenditure should be approved from a Special Needs Trust. Among the items to consider in a given case:

1. Is the expenditure permitted by the trust terms? Is it prohibited by Medicaid or Social Security regulations?

2. Does the expenditure clearly benefit the trust’s beneficiary? Does it also benefit others, such as family members? If it benefits the trustee (as, for instance, a home improvement that clearly aids the beneficiary but also increases the value of the home owned by a parent/trustee), it should be scrutinized much more closely, and may not be permissible in all circumstances.

3. Is there enough money in the trust to make the proposed payment without seriously affecting the ability to provide other benefits in coming years? Not every expenditure that reduces future benefits is forbidden, but the larger the expenditure (in relation to the trust’s size), the harder it is to justify.

4. Is the proposed expenditure related to the purpose for which the trust was established? In other words, if the trust came from a personal injury settlement it will ordinarily be easier to approve expenditures for therapy or adaptive equipment related to the injury for which the settlement was obtained.

5. Are there other sources of funds? If public benefits are available to provide the same items, the money ordinarily should not come from the trust. But if the public benefits are so limited that the quality of the items will suffer, or if it takes an extremely long time for equipment or services to get to the beneficiary, the trust might still be available to make the purchase more quickly or to purchase better supplies or equipment. Where family resources are available, it might be better to save trust funds — especially if the beneficiary is a minor, and parents have a general obligation of support.

There will, of course, be other considerations in each case. We do not mean to give an encyclopedic list here, so much as to suggest that decisions about expenditures can be very difficult. It is not enough for the trustee to really, really want to make the expenditure, or to be completely convinced it is appropriate — it is important to consider the proposal from all sides, admitting that there may be good reasons not to proceed, as well. The key is that the trustee must act reasonably, remain free from self-interest or bias, and above all, be prudent.

How Does a Trustee Act Prudently? The best way to assure that proper decisions are made, and to minimize the possibility of later difficulties, is to seek independent advice from a qualified legal expert.

Payment by the trust for housing and food directly to the organization providing the services (income distributions) will not usually eliminate SSI and Medicaid benefits. Income distributions of food and shelter invoke special rules, known as In Kind Support and Maintenance, or “ISM,” which may reduce but not necessarily eliminate benefits.

What kind of expenses are considered “shelter” or “household” expenses according to the Social Security Administration? Social Security’s rules list these and only these:

1. Mortgage, including property insurance
2. Property taxes
3. Rent
4. Gas
5. Electricity
6. Heating fuel
7. Sewer/Garbage removal
8. Water
9. Food

In general, the benefit is not reduced by more than one third of the maximum Supplemental Security Income plus $20.00.

Sometimes it may be appropriate to consider the options and risks, to make an expenditure and report it to the appropriate government agency and wait for a response. Sometimes it may be better to seek the blessing of the court system, giving notice to government agencies as appropriate and asking for a determination of the validity of the proposed expenditure in advance.

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