Autism and Estate Planning

What is Autism?

Autism Spectrum Disorder (ASD) is a complex disorder of brain development. ASD can cause difficulty in social interaction, communication, motor coordination, and sometimes physical health issues. The most obvious signs of autism tend to be noticeable between 2 and 3 years of age, and it affects boys five times more often than girls. It is estimated that 1 out of 42 boys and 1 in 189 girls are diagnosed with autism in the United States. There is no one cause of autism, and there are many types of autism. The research is not conclusive as to who gets it and why.


What is the capacity of an autistic individual?

Each individual is unique. On the autistic spectrum, many individuals have exceptional abilities and unique ways of viewing the world. There are others on the spectrum that have significant physical or mental disabilities and will never be able to live independently. It really depends on the individual. Typically, the parents are in the best position to know the capabilities and mental capacity of their child, and at some point after the child turns 18, decisions will need to be made by the entire family about the continuing care of an autistic child.

What are the rights of parents of autistic children who have reached 18 years of age?

For parents of children with autism who are about to turn 18, this can be a really confusing time. Many parents of disabled children assume that they will remain their child’s guardian for the child’s lifetime, but this is not automatically the case. Once your child turns 18, you are no longer that child’s legal guardian, and he or she has the right to make his or her own decisions, regardless of whether that child should have been under a guardianship or conservator arrangement. This applies to medical decisions, special education decisions, and ability to be bound to legal documents (such as a power of attorney or a lease, contract or credit card agreement).


What is the difference between a Power of Attorney document and a Guardianship?

There any many differences between a guardianship and a power of attorney. Look at the chart below and you can see that a power of attorney, although less expensive, and easier to create, comes with many risks and problems for both the parents and the adult-incompetent. The choice of whether a guardianship is appropriate is ultimately a decision that may need input from the entire family.



Power of Attorney

A court-appointed guardian is a fiduciary (has a duty to serve the best interest of the ward) in both financial matters and life decisions of an incompetent.*   The court must be persuaded that there are no “less restrictive alternatives” to guardianship, such as a POA.  The guardian must prove that the incompetent person is incompetent in at least one important area of their lives.  There must also be a present need for a guardianship. A person might not be able to handle their affairs independently, but may have a support network of friends, family and service providers that make guardianship unnecessary. The agent has equal ability with the principal to handle assets, but cannot make medical decisions for the principal or have access to medical information, unless they are also the agent on a Health Care Power of Attorney document.  Neither document gives the agent the power to make life decisions over personal matters.
In the event of a conflict between the ward’s opinion and the guardian’s opinion, the guardian should consult the ward and try to incorporate input from the ward.  But the court will make the ultimate decision and can decide against the wishes of the ward, in favor of the guardian’s opinion, if the judge feels that the decision is in the “best interest” of the ward. The agent in a POA is not a fiduciary per se, but instead a signatory.  The principal cannot typically recover from the agent decisions that were made in good faith, but there is no “best interest” test in a POA.
A guardianship is comprehensive over both financial matters (estate) and life matters (personal).  A guardian may determine where the person will live, what type of medical treatment he or she receives, and most other aspects.  In certain situations, the guardian must obtain prior court approval before acting, such as sterilization or withdrawal of life-prolonging treatments.  If the court feels that it’s necessary, it can also place the ward under the guardianship of the person with one guardian, and under the guardianship of the estate with another guardian. A POA is not comprehensive, and instead only covers financial issues if they are explicitly spelled out as powers in the POA document.  Some personal decisions can be addressed by also signing a Health Care Power of Attorney, but not all life decisions, such as education, will be covered by that document, and until the principal lacks the ability to voice his or her opinion on health care matters, the agent is not even consulted, and has no access to medical records, charts or files.
The Probate Court has oversight in a guardianship.  The Court will review the actions of the guardian, and can remove or replace a guardian for cause.  The Probate Court also gives permission for the guardian to make any large or unusual expenditures. There is no oversight in a POA.  The principal can change his or her agent at will and this leaves an incompetent adult open to the risk of someone coming into his of her life with ulterior motives, and taking advantage of the principal.  An unscrupulous agent has the power to wipe out all of the funds of the principal.  Recovering those funds would take time and expense.
Guardians are entitled to compensation from the ward for the work that they do on the ward’s behalf. An agent in a POA has no compensation for the power that they exercise for the principal, unless that is written into the document.
Guardians represent a ward in all legal actions, such as the ability to accept or decline settlements and/or choose to pursue a claim.  The ward does have the ability to make some decisions, based on the capacity of the ward. The POA must be written to include all powers that would be necessary for legal representation.  The agent does not have the “standing” that would be required to file a lawsuit, unless the POA gave them that right.  The suit would still be brought on behalf of the principal who suffered damage.
There is often a surety bond in place for a guardianship, to protect the ward from loss. There is no bond required for a POA document, which means that the entire funds of the principal are at risk.
A guardianship, if uncontested, can be a simple process where everyone in the family and the legal professionals involved are working to accomplish an outcome that is in the ward’s best interest. A POA can be a simple document to create, is not very expensive, and can be accomplished fairly quickly.
If the guardianship is contested, it could be difficult, time consuming, and expensive.  It can be highly emotional and can involve attacks on the potential guardians’ characters.  The potential ward can argue that he or she is not incompetent (see definition below the table).  If it gets very complicated, to the extent that the judge cannot make a decision about any of the potential guardians, the judge can appoint a professional guardian (a non-related attorney), and then no one is happy with the outcome. A POA is not only a simple document to create, but also a simple document to revoke.  Because of this, the risk of theft can be quite high.  There can be complications if there are more than one agent in power at one time.  There is no court involvement or oversight of a POA, and therefore no continuity of care if the agent keeps changing.
The process of obtaining guardianship involves filing specific forms with the probate court.  At that time, a hearing is scheduled and notice of that hearing is given to all concerned parties (family members).  After the hearing, the court will decide if a guardian is necessary, and whom that should be.  If a guardian is appointed, the Court will issue Letters of Guardianship.  The Guardian is then responsible for filing annually with the Court the financial accounting, and bi-annually, the Guardian’s Report.  This report gives the Court information that it needs to determine the ward’s condition and whether guardianship should continue.  The ward’s Last Will and Testament must be filed with the court as well.  In 2014, the initial filing of a Guardianship for an Incompetent Adult in Montgomery County is $325.00.  This is the filing fee, but the initial attorney costs can be substantially higher, especially if the hearing ends up being contested and drawn out. A POA costs between $50 and $100 typically, and once executed, the principal can make copies to distribute to all 3rd parties who might need them (banks, financial institutions, etc.).  A Health Care Power of Attorney is an Ohio form that should be available at most health care institutions and online.  If you have an attorney prepare it for you, the cost is typically also between $50 and $100.  If you revoke the POA, you must give notice to 3rd parties or they are not bound by the revocation.  This can get confusing if you execute multiple POAs over time.  A revocation of the document is roughly the same cost as preparing the document itself, and when you have multiples, this could get expensive over time.
 * incompetent – Defined by Ohio as:  ”any person who is so mentally impaired as a result of a mental or physical illness or disability, or mental retardation, or as a result of chronic substance abuse, that the person is incapable of taking proper care of the person’s self or property or fails to provide for the person’s family or other persons for whom the person is charged by law to provide, or who is confined to a correctional institution within this state.”


What is a Special Needs Trust?

Generally, a trust is a legal plan for placing funds and other assets in the control of a trustee for the benefit of an individual with a disability. A “special needs trust” (SNT) is a trust that makes it possible for the beneficiary to receive extra income without losing valuable state and federal benefits. The assets in a SNT can’t be used to purchase goods and services that government benefits provide, without invalidating the trust, and putting government benefits at risk. Instead the assets are used for recreation, vacations, special therapies that the government doesn’t cover, paid companions, and personal items, among other things. A SNT is irrevocable, which means once it’s set up, you can’t change your mind and alter the trust or revoke it, and get the money back without restriction. Also, in a SNT, only the trustee, not the beneficiary, can control how the funds will be used. A pooled SNT is a great option for those persons whose funds are not so great as to warrant the cost of managing and maintaining a private SNT. Remember, the trustee must be able to separate those goods and services that the trustee is able purchase, and those purchases that will cause the trust to convert from a SNT to a general trust, thereby putting government assistance benefits at risk.

A SNT trustee cannot make life decisions for the beneficiary of the Trust. A trustee can only make financial decisions as to whether or not to pay for a particular good or service. Access to medical records and decisions about education, medical procedures, and where the beneficiary will live are decisions that are not up to the SNT trustee, but they are of interest to him or her because the trustee must decide whether or not to fund them, or if there are funds available in the trust, not whether or not they are in the best interest of the beneficiary.

So, what do we do next?

Every autistic individual is unique, just like every family. In many families, the decision as to whether or not to involve the court will depend on what the family dynamics are. The adult with special needs may have full-functioning capacity to create legal documents, and to make his or her own decisions. On one hand, that’s great, because it gives him or her the ability to live semi-independently and to grow as an adult. But on the other hand, as the adult expands his or her social circle and meets new people, that same high functioning capacity can put him or her at risk of someone taking advantage.
In the alternate, where there is a low-level of independent function by the autistic adult, the parents may have spent most of their lives taking care of all of the needs of a disabled child, without the need of government benefits or court involvement in the form of a guardianship. The question then becomes, “Who will take care of the child when and if something happens to the parents?” This is where the family dynamics become extremely important, because we’re looking to siblings, if there are any, and whether those siblings are capable of continuing that high level of care, both financially and emotionally, without the needs of a guardianship or government benefits.

There is also the option in Ohio of having a limited guardianship. A limited guardianship is either guardianship over the person or guardianship over the estate. A limited guardianship can also be for medical purposes only (that is to provide consent for medical procedures), or for placement purposes only (such as approving behavior plans or the use of psychotropic medications). A full guardianship (also called a plenary guardianship) takes away nearly all of the rights of the person, and there are some instances where that would not be appropriate. In fact, the court will look very carefully at the case when a plenary guardianship is requested to see if there might be a limited guardianship that would accomplish the ultimate goal, which is protecting the individual.

No matter which guardianship you believe your family needs, there are fundamental rights that a court will typically not take away from a ward, which include the right to decide to have an abortion, or the right to consent to sterilization. The ward can get married, but usually only with the guardian’s consent. The Court can prevent or nullify the marriage of a ward, especially if the marriage takes place without the guardian’s consent. A guardian cannot make a will or execute a power of attorney for the ward, but guardianship doesn’t automatically take away the right of the ward to make a will if the ward has the capacity to understand what he or she is doing. Voting is always a fundamental right, which is not taken away, even in a plenary guardianship.

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Power of Attorney Revocation

When it comes to revoking a General Power of Attorney, notice is the most important element. When you put together a POA, you are essentially giving another person the authority to handle financial transactions for you. But that power is limited by the document itself. The document terms and conditions will establish how long the power lasts, whether it is effective immediately, and how it can be revoked.

In Ohio, if the document is silent as to its effective date, a durable financial power of attorney is effective the moment you sign in, and remains effective even if you’re incapacitated. If there is a suspicion that your agent on the power of attorney document is not acting in your best interests, then you need to move quickly to revoke the power.

First, contact your agent by phone and revoke his or her authority verbally. Your next step is to reduce that revocation to writing, and then send a copy of the revocation to your agent by mail, with a return receipt. This gives you proof that the agent knows or should have known about the revocation. Keep in mind that the revocation must identify the correct power of attorney that you are revoking. In other words, make sure that the date it was signed, who the parties are, and the specific powers that you are revoking are included in the revocation document. Your revocation document does not need to be notarized, but it’s not a bad idea, so that you can avoid questions about the validity of your signature later.

After the agent has been notified, you then turn to notification of any third parties that may be involved in transactions where your power of attorney was on file. Third parties are entities like your bank, or your financial planner, and perhaps your tax preparer, among others. You must send a copy of the revocation document to each of these individuals who may have a copy of your power of attorney on file. If there is a suspicion that time is of the essence, you can hand-deliver the revocation so that they can recognize the revocation of the power to your agent, immediately.

If you have already revoked the POA, but a third party uses it because they were never given notice that the document was revoked, the third party isn’t liable to you for any losses that you have suffered as a result. If your agent uses the document after you’ve revoked it, but before you’ve notified him or her, your agent is not liable to you for any damages resulting, as long as the actions of the agent were in good faith.

If you sold, bought or mortgaged real estate in an Ohio county, and you used a POA during that transaction, your POA would have been filed in the county’s land records. It is your responsibility to file your revocation with the county land records as well.

For your new POA, keep good records of who has a copy on file of the document. This will save you much time if the document needs to be revised again in the future.

NLRB Makes Landmark Ruling Regarding College Student-Athletes

The National Labor Relations Board (“NLRB”), on Wednesday, March 26, 2014, issued a ruling that, potentially, may change the entire landscape of collegiate sports. For possibly the first time, student-athletes have been classified as employees. The resulting consequence of such a classification is that now Northwestern University football players may form a union and engage in collective bargaining.

Northwestern has already indicated its intent to appeal the ruling and I can guarantee that this matter is far from resolved. However, I can also guarantee that other private Division I Universities, nationwide, are keeping a very close eye on this situation.

The College Athletes Players Association (“CAPA”) petitioned the NLRB for a decision classifying the Northwestern student-athletes as “employees”, thereby permitting the football players to unionize. The attempt to unionize is led by Kain Colter, former Northwestern quarterback and co-founder of CAPA. The student-athletes have indicated that they are seeking better medical coverage, concussion testing, four-year (guaranteed) scholarships and the possibility of being paid. My guess is that the final aspect of what is being sought, i.e., getting paid, is what makes this situation so disturbing, to many.

The entire ruling of the NLRB focused on whether or not the student-athletes were employees based on the common-law definition of employee. According the NLRB and citing previous rulings, “under the common law definition, an employee is a person who performs services for another under a contract of hire, subject to the other’s control or right of control, and in return for payment.” Using this common law definition of employee, the NLRB determined that scholarship football players at Northwestern University are employees. The focus of the NLRB’s decision seemed to be that (1) student-athletes are compensated in the form of scholarships: (2) work between 20 and 50 hours per week; and (3) generate millions of dollars for their institutions.

Many have expressed disappointment in the NLRB decision. The NCAA, which was not a party to the proceeding, commented through its Chief Legal Officer, Donald Remy, as follows: “We frequently hear from student-athletes, across all sports, that they participate to enhance their overall college experience and for the love of their sport, not to be paid. While improvements need to be made, we do not need to completely throw away a system that has helped literally millions of students over the past decade alone attend college.”

Ramy further stated the goal of the NCAA, as it relates to student-athletes, “we want student-athletes – 99 percent of whom will never make it to the professional leagues – focused on what matters most – finding success in the classroom, on the field and in life.”

The fallout from this decision, which is far from conclusive, may be significantly more than what was intended. Northwestern University, which is a prestigious institution, could, quite possibly, withdraw from Division I football and/or sports. Similarly, if other private university sports teams intend to go down this same path, the result could be the same. According to Henry Bienen, Northwestern‘s President Emeritus, “if the players won their fight, private institutions with high academic standards –he specifically cited Duke and Stanford –could abandon the current model in order to preserve academic integrity.” Such a statement clearly indicates how the attempt to unionize could backfire on the petitioners.

Technically, the Northwestern football players, armed with a favorable NLRB decisions could take the steps necessary to form the union. Considering the unsettled nature of this matter and the fact that Northwestern has indicated its intent to appeal the ruling, which could go all of the way to the U.S. Supreme Court, it remains to be seen if the Northwestern players will exercise their right to collectively bargain.

For more information regarding this situation, please see the following article and NLRB ruling.

As with any rule, there are exceptions.

Please seek professional assistance with any questions or specific situations.

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Breastfeeding Mother Was Not Constructively Discharged

The 8th Circuit Court of Appeals recently upheld the 2012 dismissal of a case of gender and pregnancy discrimination filed against Nationwide Mutual Insurance Co. (“Nationwide”). The case highlights some interesting questions in the areas of constructive discharge and breastfeeding mothers.

Typically, to assert a claim of employment discrimination, whether the basis be gender, pregnancy, race, disability, age, etc., there must be an adverse employment action. In the normal situation, this element of the cause of action is easily met because most of the employment discrimination cases stem from a termination. A termination is clearly an adverse employment action. Therefore, the plaintiff’s efforts are more often devoted to establishing other elements of the cause of action, namely, that their termination was based upon their membership in the protected class. However, the case against Nationwide was not a typical case.

Angela Ames was not terminated; instead, she voluntarily resigned from her job the day that she returned from maternity leave. This brings up the question of constructive discharge. Constructive discharge occurs when a person is treated so badly that any reasonable person would have resigned under the same circumstances. The 8th Circuit determined that Ms. Ames, given the circumstances, was unable to meet the legal burden of constructive discharge.

Ms. Ames claimed that Nationwide denied her a room to allow her to pump breast milk and that she was pressured by her department head to resign. Nationwide has on-site lactation rooms for the employees to utilize. However, apparently unknown to Ms. Ames, to be able to use the room, Nationwide required mothers to complete paperwork seeking security access, which takes three days for processing. Ms. Ames was told that, in the meantime, she could use a wellness room in order to pump her breast milk, but was cautioned that doing so would expose her milk to germs.

Unfortunately, at the time, the wellness room was occupied. While waiting for the room to be vacated, Ms. Ames, naturally, experienced a great deal of pain. Additionally, she was informed that she would be expected to work overtime to catch up on her work, for the time spent in the lactation room, or face disciplinary action. Feeling lost, Ms. Ames approached her department head for assistance in finding a place to lactate and was told that was not her responsibility. However, the conversation between Ms. Ames and her department head did not end there. According to Ms. Ames, she was handed a paper for the purpose of drafting her resignation and told “I think it’s best that you go home to be with your babies.”

The U.S. Equal Employment Opportunity Commission filed a brief, in support of Ms. Ames, claiming that the department head’s statement was evidence of discrimination because it invoked stereotypes about the role of women.

The Court of Appeals disagreed that Ms. Ames was able to prove constructive discharge, i.e., any reasonable employee would resign under the same circumstances. According to the opinion, “rather than intentionally rendering Ames’ work conditions intolerable, the record shows that Nationwide sought to accommodate Ames’ needs.” Additionally, according to the Court, even if the department head’s comment was enough to prove that she intended to force the employee to resign, the employee did not give Nationwide a reasonable opportunity to repair the conditions that allegedly made the workplace intolerable.

The ultimate result of the decision is that Ms. Ames will not receive a trial on her claims of gender and pregnancy discrimination. This case highlights some obstacles of claims that involve constructive discharge. The “reasonable person standard” is a daunting standard to satisfy. Does it sound as if Ms. Ames was treated poorly and possibly unfairly? Yes. Should Nationwide have been more considerate of the breastfeeding mother? Yes. Would a reasonable employee have reacted the same way, given the facts? Not so sure. If unable to establish constructive discharge, Ms. Ames voluntarily resigned her position with Nationwide and is unable to proceed with her discrimination claims.

The result would have been completely different, in my opinion, had the department head terminated Ms. Ames instead of suggesting that she resign. Additionally and probably more to the point, had Ms. Ames been aware of the policy regarding the lactation room, this situation would have never occurred. She would have been permitted to use one of the lactation rooms and then would have, merrily, went about her business. Chances are that the policy was located in the Employee Handbook. If not, it probably is now.

As with any rule, there are exceptions.

Please seek professional assistance with any questions or specific situations.

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Wills and Intestate Succession in Ohio

Wills and Intestacy in Ohio

In the State of Ohio, if you die intestate (or without a Last Will and Testament), your property must still be transferred out of your estate. By not leaving a valid Last Will and Testament (also called a Will), or in some other way transferring your property (such as through insurance, pension benefits, or joint ownership), you have, in effect, left it to the laws of your State to write your Will for you. This does not necessarily mean that your money will go to the State. It does mean, however, that the state will make certain assumptions about where you’d like your money to go – assumptions with which you might not agree. For example, intestate descent laws prefer “blood” over “marriage,” assuming that the more closely related you are to someone, the more likely it is that you’d want your property to go to him or her. By writing a Last Will and Testament, you decide who gets your property, when they get it, how they get it, and how much they get.
Property that Does Not Pass via a Will

 Property held in joint tenancy.
 Life insurance payable to a named beneficiary.
 Property held in a trust.
 Retirement plans payable to named beneficiaries, including IRAs, Keogh accounts, and pensions.
 Pay-on-death accounts payable to a named beneficiary.
 Deeds in which the deceased held only a life estate, with the property going after death to a named beneficiary.
 Gifts made in contemplation of death.

The Essentials of a Valid Will

Whether your Last Will and Testament is valid or not, depends on the laws in the State where you reside. Here in Ohio, to have a valid Will, you have to satisfy the following statutory requirements:
 The maker must be of sound mind and memory
 The maker must be at least 18 years old
 The maker must not be under any restraint
 The maker must sign the Will on the last page
 The maker must sign in the presence of two disinterested witnesses

What does all that mean? Well, does the person making the Will understand what’s going on? This doesn’t necessarily mean that they can tell you what the date is. Maybe they can’t even recognize certain family members that at one time they were really close with. But when asked the question, “Do you understand that you are making a Will,” they will know what they are doing. They will be sharp-minded as to the task at hand.

They must be at least 18 years old. And they must not be coerced into writing a Will. How can you tell if someone is being coerced or forced? Sometimes it’s not easy. A good attorney will make sure that the right questions are asked…For example, if “Junior” brings his mom in to the lawyer’s office to make a Will, and he is the only sibling there, and her prime caretaker, I might suggest that he leaves the room for a few moments, so that I can ascertain whether she feels comfortable with what she’s doing. The attorney can ask the mom what are her thoughts about her family members, and if she generally wishes to make everything “equal” it would not make sense if one child is telling the attorney that mom wanted the terms to be unequal.
The person making the Will must sign it. A signature is defined as the mark of the maker. This could be an “X” or it could be someone else signing the document as a proxy for the maker…these are unusual cases, so it’s best to check with your State law as to what is an acceptable “mark.” As to the “disinterested witnesses,” you have to have at least two people sign that they witnessed the maker’s signature, and those witnesses cannot be beneficiaries of the Will. In small families, this can sometimes mean that you have to invite Fred and Ethel from next door to come over when you are signing the Will, since Fred and Ethel are not named in the Will as beneficiaries.

So, what is “intestate succession?”

Intestate succession simply means that, in cases where there is no valid Last Will and Testament, the property of the deceased person will pass by law to who the State determined are the closest relatives. In Ohio, under Ohio Revised Code Sec. 2105.06, the law reads as follows:

(A) If there is no surviving spouse, to the children of the intestate or their lineal descendants, per stirpes;
(B) If there is a spouse and one or more children of the decedent or their lineal descendants surviving, and all of the decedent’s children who survive or have lineal descendants surviving also are children of the surviving spouse, then the whole to the surviving spouse;
(C) If there is a spouse and one child of the decedent or the child’s lineal descendants surviving and the surviving spouse is not the natural or adoptive parent of the decedent’s child, the first twenty thousand dollars plus one-half of the balance of the intestate estate to the spouse and the remainder to the child or the child’s lineal descendants, per stirpes;
(C) If there is a spouse and one child of the decedent or the child’s lineal descendants surviving and the surviving spouse is not the natural or adoptive parent of the decedent’s child, the first twenty thousand dollars plus one-half of the balance of the intestate estate to the spouse and the remainder to the child or the child’s lineal descendants, per stirpes;
(D) If there is a spouse and more than one child or their lineal descendants surviving, the first sixty thousand dollars if the spouse is the natural or adoptive parent of one, but not all, of the children, or the first twenty thousand dollars if the spouse is the natural or adoptive parent of none of the children, plus one-third of the balance of the intestate estate to the spouse and the remainder to the children equally, or to the lineal descendants of any deceased child, per stirpes;
(E) If there are no children or their lineal descendants, then the whole to the surviving spouse;
(F) If there is no spouse and no children or their lineal descendants, to the parents of the intestate equally, or to the surviving parent;
(G) If there is no spouse, no children or their lineal descendants, and no parent surviving, to the brothers and sisters, whether of the whole or of the half blood of the intestate, or their lineal descendants, per stirpes;
(H) If there are no brothers or sisters or their lineal descendants, one-half to the paternal grandparents of the intestate equally, or to the survivor of them, and one-half to the maternal grandparents of the intestate equally, or to the survivor of them;
(I) If there is no paternal grandparent or no maternal grandparent, one-half to the lineal descendants of the deceased grandparents, per stirpes; if there are no such lineal descendants, then to the surviving grandparents or their lineal descendants, per stirpes; if there are no surviving grandparents or their lineal descendants, then to the next of kin of the intestate, provided there shall be no representation among such next of kin;
(J) If there are no next of kin, to stepchildren or their lineal descendants, per stirpes;
(K) If there are no stepchildren or their lineal descendants, escheat to the state.

You will see that the words “per stirpes” are repeated throughout this section of the law. There are two legal concepts that determine how property passes by intestacy. The first is “per capita” and the second is “per stirpes.” Let me give you an example about how these work. Imagine that there is a grandfather with two children, a boy and a girl. Each of his children also have two children. If the grandfather’s Will leaves his estate to his children equally, per capita, and the son passes away before the grandfather, the son’s share is absorbed by the daughter, leaving her with 100% of the grandfather’s estate. If that same grandfather left his estate equally to his children, per stirpes, and again the son passed away before the grandfather, the son’s share would be split between the two grandchildren that were born of that son.

As you can see from the Code section “K” above, if there are no lineal descendants, then your property will go to the State as a default. The bottom line is that estate property has to go somewhere, but by making a Last Will and Testament, you get to spell out where you want it to go, as opposed to letting the State decide.

What is the Future of the Constitutional Appointment Power?

On Monday, January 13, 2014, the U.S. Supreme Court heard oral arguments in National Labor Relations Board v. Noel Canning.  However, as is the case with most cases that the U.S Supreme Court determines worthy of certiorari, this case will, potentially, have an impact far greater than that experienced by the parties to the case.  In fact, Noel Canning has both Congressional Republicans and Democrats on high alert.  Additionally, the National Labor Relations Board (“NLRB”) is figuratively “holding its breath,” pending the outcome of this case.

The facts of Noel Canning are not really that important to the case.  Noel Canning is a Washington State bottling company.  Noel Canning engaged in a dispute with the Teamsters Local 760 union regarding a pay raise that had been agreed upon.  The Teamsters claimed that Noel Canning had reneged on the agreed upon pay raise for union employees.  The NLRB issued a ruling in favor of the union and against Noel Canning.  Noel Canning did not seek review of the NLRB’s decision in a court tribunal.  Instead, Noel Canning brought suit, against the NLRB, arguing that the NLRB lacked the authority to even decide the matter.

Unfortunately, at the heart of this matter, (as is often the case with U.S. Supreme Court cases) is partisan politics.  The NLRB is a body composed of five (5) individuals and is tasked with investigating and preventing unfair labor practices and adjudicating disputes between labor unions and companies.  Importantly, the NLRB requires a quorum of three members to issue decisions and orders.  Members of the NLRB are nominated by the President and approved by the Senate.  As I am sure you can surmise, this created a problem for the President’s nominations.  Senate Republicans sought to block approval of President Obama’s nominations.  While frustrating, initially there were still three (3) members of NLRB serving (two vacant seats), thereby constituting a quorum.  However, the number of NLRB members, thereafter, dropped to two (2), one below the requisite number needed for the NLRB to act.  However, the blockade of nominations continued.

In January, 2012, the Senate was out of town holding only pro forma sessions for a three week period.  Typically, no legislative activity takes place during pro forma sessions.  Instead, the members of the Senate (or the very few that show up) meet very briefly, possibly mere minutes and then the session is adjourned.  This occurred every three days for three weeks in January, 2012 (to satisfy the constitutional requirement).

The problem is evident.  The Senate refuses to approve the President’s nominees.  Additionally, for a three week time period, absolutely no legislative activity is occurring in the Senate.  Meanwhile, the NLRB is completely devoid of any authority to issue decisions and orders because it lacked a quorum.  What is a President to do?  In the case of President Obama (and many of his predecessors), he looked to Article II, Section 2, Clause 3 of the U.S. Constitution, which states:  “The President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.”

Based upon this Constitutional provision, President Obama made three “recess” appointments to the NLRB, restoring it to the intended five person membership, more than that needed to constitute a quorum.  Once the NLRB was “up and running” again, it issued a decision concerning Noel Canning.  Noel Canning, thereafter, filed suit claiming that the “appointments” of President Obama to the NLRB were unconstitutional because the Senate was not in recess, pointing to the pro forma sessions.  If the appointments are determined to be unconstitutional, then all decisions rendered by the NLRB, while lacking a quorum, are, potentially, invalid.

The D.C. District Court of Appeals held that the because the Constitution refers to “the recess” instead of “recesses”, that the President can only make recess appointments during the break between Congressional sessions, not during the periods when the Senate is away during the sessions.  The D.C. District Court of Appeals went further by holding that the power extends only to appointments to vacancies that occur during the recess (between sessions) and not those that were vacant prior to the recess.  Additionally, three federal appeals courts have held that President Obama overstepped his authority.

It is important to note that President Obama is not the first U.S. President to utilize Article II, Section 2, Clause 3 of the U.S. Constitution to make such “recess” appointments.    Based upon the possible far-reaching impact of the Court of Appeals decision, all interested parties agreed that the U.S. Supreme Court should grant certiorari.  The U.S. Supreme Court’s decision could, potentially, affect other boards and other presidential appointments; not just those of President Obama.

Surprisingly, the implication of Article II, Section 2, Clause 3 of the U.S. Constitution has, never before, been addressed by the U.S. Supreme Court.  The NLRB is arguing that if the Court of Appeals decision is affirmed that the recess appointment power will be, effectively, written out of the Constitution.  Noel Canning, on the other hand, supported by a good number of Senate Republicans, argues in favor of a plain reading of the text of the Constitutional provision.

The U.S. Supreme Court will be considering three issues:  (1) Whether the term “the recess”, in the appointments clause, only refers to the once a year recess between sessions (narrow construction) or any time the Senate is away (broad construction); (2) Whether the President is confined to the appointments necessary to fill vacancies that occur while the Senate is in recess (regardless of the construction); and (3)  Whether pro forma sessions of the Senate can prevent the President from making recess appointments (assuming recess is construed broadly).

While oral arguments have occurred in Noel Canning, it will be quite some time before the Court’s decision is released.  In the meantime, the President’s authority, pursuant to Article II, Section 2, Clause 3, is unsettled.  Until the Court’s decision is released, all involved parties (Noel Canning, NLRB, Senate, the Administration, legal scholars, etc.) are waiting with bated breath to see how the Supreme Court resolves this issue.  And to think, this all started because Noel Canning believed that its union workers were not entitled to a pay raise.

As with any rule, there are exceptions.

Please seek professional assistance with any questions or specific situations.

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The Choice Between an S Corp and a LLC

With the New Year upon us, some of you may be resolving that 2014 will be the year that you finally open your own business, as you have always dreamed.  Whether you plan to quit your current employment and devote yourself, entirely, to this new opportunity, or maintain a “side business”, it is essential that you spend some time considering how you wish your new business to be established to maximize the benefit to you.

While most people are, understandably, excited about the prospect of “being their own boss”, pitfalls await you if leap first without considering the legal ramifications of your actions.  Prior to making your dream a reality, you should seek the advice of both an attorney and an accountant.  Only by explaining your specific needs, can you be guaranteed a business structure that accomplishes those needs.

At the end of the day, one of your main priorities, in establishing your new business. should be to isolate yourself from personal liability.  You are only isolated from personal liability if your business is a separate entity.  Therefore, your first step, on the advice of your counsel, should be to choose the type of business structure.  The three most popular business structures, in the State of Ohio, are the Corporation, the S Corporation (S Corp) and the Limited Liability Company (LLC).  Small business tend to prefer either the S Corp or the LLC.

Both the S Corp and the LLC are beneficial because they protect the owners from personal liability (like a Corporation) with the added benefit of allowing “pass through taxation.”  This means that the business is not subject to federal tax liability.  Instead, the gains and losses flow through the business structure to either the corporate shareholders or the LLC members.  Regular corporations, i.e., not S corps, realize tax liability at the corporate level and at the shareholder level.  It does not take an accountant to recognize that this is “double taxation”.  Most people’s goal is to retain as much of their earnings for themselves, not to pay more than they must to the government.  Quite simply, reducing the overall tax implication, is the primary reason why S Corps and LLCs are so popular.

While they are similar in their primary benefit, S Corps and LLCs, also, have some significant differences.  Typically, once you choose the LLC form, the election is effective until you decide otherwise.  However, the S Corp structure is more formalized and, therefore, it could be lost, possibly inadvertently, if you are not vigilant.  In order to elect S Corp status, pursuant to the Internal Revenue Code, the business (1) must be a domestic corporation; (2) must have 100 or fewer shareholders; (3) must have the permitted types of shareholders; (4) cannot have any nonresident aliens as shareholders; (5) can only have one class of stock; (6) cannot have lost its S Corp status within the four prior taxable years; and (7) must use a permitted taxable year.  Even if proper when the S Corp election occurs, if circumstances later change which affects one of these provisions, the S Corp status terminates.  If that occurs, the business will be treated as a regular corporation, in all respects.  Additionally, there are specified types of business that, typically, cannot elect S Corp status.  Examples of those types of business include, Financial Institutions, Insurance Companies, 936 Corporations and Domestic International Sales Corporations.

Both S Corps and LLCs require certain filings with the Ohio Secretary of State and other, internal documents.  Once the pros and cons of each have been weighed and the decision is made, an attorney can assist you with completing and filing the necessary documents.  However, please note that this decision should not be made lightly.  Additionally, no business should be conducted until the proper documentation has been filed.

As with any rule, there are exceptions.

Please seek professional assistance with any questions or specific situations.

ADVERTISING MATERIAL ONLY: If you need legal services, please seek professional counsel.

Tax Advice Disclosure: To ensure compliance with requirements imposed by the IRS under Circular 230, we inform you that any U.S. federal tax advice contained in this communication (including any attachments), unless otherwise specifically stated, was not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any matters addressed herein.

Employer Beware: Independent Contractor or Employee?

Employers often believe that the manner in which they label an individual working for/with the company is the accurate label, simply because the employer says so. Such is the case with the labels of independent contractor and employee. To truly understand the importance of these labels, it is essential that you know the ways in which the law treats independent contractors and employees, differently. Typically, employees receive more protection than independent contractors on the basis that independent contractors are, essentially, in business for themselves and do not serve at the will of the employer. Therefore, independent contractors do not benefit from an employer’s health insurance policy, are not entitled to FMLA leave, do not receive overtime pay, are not required to be paid a minimum wage and, often, cannot benefit from unemployment compensation insurance, all of which employees are likely entitled to. Additionally, for the most part, independent contractors do not have taxes withheld from their earnings, though, it should come as no surprise that the income must still be reported and taxed.

Given the ways in which independent contractors are treated differently than employees, it is not hard to understand why employers, at times, strive, to label those who work for/with the company as independent contractors even though the facts and circumstances do not necessarily support such a designation. According to the U.S. District Court for the Southern District of Ohio, that is exactly what Cascom, Inc. (“Cascom”) did and that is why Cascom is now liable for $1,474,266 in damages.

The lawsuit, which was filed by the U.S. Department of Labor, alleged that Cascom misclassified approximately 250 cable installers as independent contractors in violation of the Fair Labor Standards Act (“FLSA”). The outcome of the misclassification and the resulting violation of the FLSA was that Cascom cable installers were denied overtime compensation for hours worked in excess of forty (40) hours per week. As a result of this FLSA violation, Cascom was found to be liable for $737,133 in back wages (the amount that the 250 cable installers were entitled to for hours worked in excess of forty (40) hours per week) and an equal amount in liquidated damages. The damage award is collectible against both the company, which has now, ceased operations, and against the owner of the company.

Secretary of Labor Thomas E. Perez has heralded the decision as bringing “justice to workers and their families by providing them with their rightfully earned wages” and restated the Labor Department’s commitment to ensuring compliance with the FLSA to “protect middle-class workers and to level the playing field for responsible employers.

In order to act in accordance with the law, employers must become knowledgeable as to what distinguishes an employment relationship from an independent contractor relationship. “An employee-as distinguished from a person who is engaged in a business of his or her own-is one who, as a matter of economic reality, follows the usual path of an employee and is dependent on the business that he or she serves.” While it may sound simple enough, making the proper designation is not that simple. According the U.S. Depart of Labor website, the relationship designation is not based upon a single characteristic, but is, instead, based upon the entire circumstance surrounding the relationship.

“The factors that the Supreme Court has considered significant, although no single one is regarded as controlling are:

(1) the extent to which the worker’s services are an integral part of the employer’s business (examples: Does the worker play an integral role in the business by performing the primary type of work that the employer performs for his customers or clients? Does the worker perform a discrete job that is one part of the business’ overall process of production? Does the worker supervise any of the company’s employees?);

(2) the permanency of the relationship (example: How long has the worker worked for the same company?);

(3) the amount of the worker’s investment in facilities and equipment (examples: Is the worker reimbursed for any purchases or materials, supplies, etc.? Does the worker use his or her own tools or equipment?);

(4) the nature and degree of control by the principal (examples: Who decides on what hours to be worked? Who is responsible for quality control? Does the worker work for any other company(s)? Who sets the pay rate?);

(5) the worker’s opportunities for profit and loss (examples: Did the worker make any investments such as insurance or bonding? Can the worker earn a profit by performing the job more efficiently or exercising managerial skill or suffer a loss of capital investment?); and

(6) the level of skill required in performing the job and the amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent enterprise (examples: Does the worker perform routine tasks requiring little training? Does the worker advertise independently via yellow pages, business cards, etc.? Does the worker have a separate business site?).”

This area of law seems to be confusing, at best. Employers should tread lightly in the hopes of not succumbing to a hidden pitfall. Quite frankly, when in doubt as to what type of relationship exists, employers should probably err on the side of the employer-employee relationship. To label an individual as an independent contractor when the argument could be made otherwise, could open up an employer to a significant amount of liability, as is clear from the Cascom case. Moral of the story: do not assume that a designation is correct because you [employer] say it is. Instead, seek the advice of an attorney.

As with any rule, there are exceptions.

Please seek professional assistance with any questions or specific situations.

ADVERTISING MATERIAL ONLY: If you need legal services, please seek professional counsel.

The Use of Criminal Background Checks in Employment Decisions

Most of us have probably experienced, in the course of our employment history, a request for a criminal background check. It is such a common occurrence that most employees or prospective employees do not think twice about the request and believe it to be a natural part of the employment process. However, the U.S. Equal Employment Opportunity Commission, in April, 2012 issued an Enforcement Guideline regarding the consideration of arrest and conviction records in employment decisions. The EEOC determined that the use of criminal background checks can, at times, constitute employment discrimination in violation of Title VII of the Civil Rights Act of 1964. As a result, the EEOC is actively pursuing cases against companies for discriminatory use of criminal background checks. At this time, EEOC is pursuing cases against both BMW Manufacturing and Dollar General as a result of the companies’ criminal background check policies.

That is not to say that criminal background checks cannot provide a basis for disqualifying a candidate for a job position. However, instead of having an across-the-board policy that a candidate is disqualified if their criminal background check reveals one of an enumerated list of crimes, employers are being asked to engage in a case by case analysis. If a prospective employee’s criminal background check reveals a criminal record, employers are being asked to (1) prove a business justification; (2) examine the nature of the job; and (3) consider the crime’s nature, gravity and time passed since commission. No longer can an employer automatically disqualify a candidate for a job position simply because he or she has a criminal record. Instead, the specific circumstances must be analyzed.

The EEOC’s Enforcement Guideline is based upon two separate issues, both of which could be considered employment discrimination in violation of Title VII of the Civil Rights Act of 1964. The first type of discrimination, according the EEOC, that can result from using criminal background checks to make employment decisions is disparate treatment discrimination. Any time that people are given discretion in the application of a policy there is the possibility that their own biases may influence the use of that discretion. Disparate treatment discrimination is the type of discrimination that appears to exist when a White candidate, with a criminal record, is referred and a similarly educated and experienced African American, with an identical criminal record, is not. The only factor that would separate the two candidates is the race of the candidates and that, at least, appears discriminatory.

The second type of discrimination, in violation of Title VII of the Civil Rights Act of 1964, is disparate impact discrimination. Disparate impact discrimination exists when an employer’s neutral policy or practice has the effect of disproportionately screening out a Title VII-protected group and the employer fails to demonstrate that the policy or practice is job related for the position in question and consistent with business necessity.

The EEOC Enforcement Guideline identifies employer best practices, when utilizing a criminal back check. All employers should review the best practices in order to determine whether or not they are using criminal background checks in accordance with the law.

That being said, going forward, employers may find themselves at a loss, as new rules replace the old rules. By using background checks in making employment decisions, they run the risk of being sued by the EEOC. However, on the other hand, if applicants are not properly screened and disqualified, accordingly, the employer could find itself being sued for negligent hiring if the employee exhibits violent behavior and/or fraudulent behavior that would possibly have been revealed by a criminal background check.

This area of law is ever-changing and employers are going to have to adapt to the changes in the best way that they can.

As with any rule, there are exceptions.

Please seek professional assistance with any questions or specific situations.

ADVERTISING MATERIAL ONLY: If you need legal services, please seek professional counsel


On June 4, 2013, the Ohio Supreme Court, in a 5-2 decision, changed the landscape of Workers’ Compensation law as it relates to claims for mental conditions. In order to fully comprehend the Ohio Supreme Court’s decision, the work-related traffic accident must be discussed.

In 2009, the claimant was working for John Jurgenson Company and was the driver of a dump truck. The traffic accident occurred when another vehicle crashed into the back of the stopped dump truck. According to claimant, he watched the other vehicle approaching, at a high rate of speed, and, therefore, braced himself for the collision, fearing serious injury to himself. In the wake of the collision, claimant observed the other driver, with his head down, and fluids leaking from both vehicles. Not knowing the full extent of his injuries but concerned that a fire would start, claimant exited his vehicle and called 911. The claimant then noticed that the other driver was not moving and had blood coming from his nose and, consequently, suspected that the other driver was dead. A suspicion that was later confirmed while he was been treated in the emergency room for his physical injuries.

Because claimant was in the course of his employment when the accident occurred, he filed a claim for workers’ compensation benefits for his physical injuries. The Bureau of Worker’s Compensation (“BWC”) allowed his claim for cervical strain, thoracic strain and lumbar strain. Later, claimant requested an additional allowance for post-traumatic stress disorder (PTSD). The BWC allowed the additional claim, finding that the PTSD was casually related to his injury. The employer appealed to the Industrial Commission of Ohio, which refused the administrative appeal. Thereafter, the employer appealed the award to the Clark County Court of Common Pleas.

It is important to know that the existence of claimant’s PTSD was not in dispute. Instead, the parties stipulated to the PTSD. The dispute was whether claimant was entitled to benefits for the PTSD. What ensued, during the bench trial before the Clark County Court of Common Pleas, was a “battle of the experts”, as is often the case. The claimant’s expert testified that the PTSD resulted from the accident and claimant’s physical injuries contributed to and were casual factors in the development of PTSD, thus testifying that under the law, he was entitled to benefits for PTSD. However, the employer’s expert painted quite a different picture of claimant’s PTSD. The employer’s expert testified that it was his belief that the PTSD did not arise from claimant’s physical injuries but from the trauma of the accident, i.e., witnessing the accident, acknowledging the severity of the injury of the other motorist, the fatality and the knowledge that he could have lost his life. The employer’s expert’s testimony can be summarized that he believed that claimant would have developed PTSD even had he walked away completely unscathed by the accident.

At the end of the bench trial, the Clark County Court of Common Pleas found the employer’s expert to be more credible and held that claimant’s PTSD, while not disputed, was not compensable because it did not arise from the physical injuries. The Second District Court of Appeals affirmed the decision causing the claimant to appeal the decision to the Ohio Supreme Court.

The Ohio Supreme Court affirmed the lower court’s decision based upon the plain language of the statute. In other words, Justice French, author of the majority opinion, stated that “[a] psychiatric condition is not a worker’s compensation injury except when the condition has ‘arising from an injury or occupational disease sustained by the claimant…” Justice French based the decision on trial court’s opportunity to hear the contradictory expert testimony and determine which expert was more credible. The Ohio Supreme Court would not overturn the finding of the trial court that the employer’s expert was more credible, therefore, affirming the decision.

More interesting, though, were the dissenting opinions. Justice Pfeifer, in his dissent, raised many questions that this author finds quite compelling. Such questions included the following: “Where does today’s decision leave employees who suffer from PTSD?”; Are those the kind of distinctions the General Assembly really intended—depression over injuries is compensable but psychological effects arising from the accident causing the traumatic injuries is not?”; “Hasn’t [the claimant] paid the required pound of flesh.”

Likewise, Justice O’Neill, in his dissent, describes a forfeited opportunity to right a wrong in the area of workers’ compensation law. From Justice’s O’Neill’s standpoint, which he believes is supported by law, it is sufficient that the psychological injury occurred contemporaneously with the physical injury and the actual cause of the psychological injury is irrelevant.

While I agree with the basis of the Supreme Court’s decision, i.e., the trial court was in the best position to weigh the evidence, this decision seems to “muddy the waters” regarding the receipt of worker’s compensation benefits for psychological injuries. It would seem, to me, that it would not always be easy to determine the cause of the psychological injury. In fact, as was probably the case with the claimant, often psychological injuries are caused by a multitude of things and it would be difficult to pinpoint “the cause”. It may, in the end, come down to who has the more credible expert witness, as that was the basis of this decision.

As with any rule, there are exceptions.

Please seek professional assistance with any questions or specific situations.

ADVERTISING MATERIAL ONLY: If you need legal services, please seek professional counsel