Category Archives: Legal

An annuity is a contract between you and an insurance firm. It allows you to pay a lump-sum payment or a series of payments in exchange for regular payments. It may start right away or at some after the date. An annuity’s purpose is to provide a consistent flow of income, usually during retirement. Funds grow tax-deferred. If you reach the age of 59.5, it can be done without any pay. The question arises that Can a trust own an annuity?

Corporate and government securities, stocks, mutual funds, separately managed accounts (SMAs). Trust can only use a few assets and Annuities is one of them. Financial advisers and trustees, on the other hand, may ignore the annuity option.

Irrevocable trusts are considered as their own taxable entity. It should take advantage of the same benefits that people can get from annuities: tax deferral, income control, and a variety of investment options.

This isn’t a particularly uncommon situation. Holding an annuity in a trust will work in certain situations, as long as you choose the right annuity and the right trust. The annuity recommendation most often does not include a trust, so each case is unique.

Benefits of owning an Annuity- 

1. Trust Issues With A Twist

Volatile markets and low-interest rates present problems for trustees today. The confidence standards do not vary with the markets. Trustees must nevertheless adhere to the trust’s terms. And attempt to fulfil beneficiaries’ expectations for revenue, development, capital preservation, and cost and tax control. Annuities should assist with these issues.

2. Obligations of Dual Trust

Individuals who receive revenues from the trust as well as those who receive assets after the trust allocates are the beneficiaries of several trusts. It can be tricky to balance these competing interests. Through income control and tax productivity. An annuity may assist a financial professional with dual trust responsibilities.

3. Asset Allocation That Works

When trust is first established, the asset allocation is usually determined by the trust’s terms, long-term goals, and the current economic climate. However, the trust assets’ allocation may need to be altered or amended over time. 

A reallocation of assets may result in higher transaction costs for many financial instruments. And the sale of one asset to purchase another may lead to capital gains taxes. A trustee should reduce transaction costs and redistribute assets without causing taxable incidents by using a variable annuity.

4. Control of Income and Efficiency of taxes- 

The trustee of an annuity should have jurisdiction over the acknowledgement of revenue, which is a taxable event. Many annuities held by trusts qualify for tax deferral.

Any percentage of trust assets that benefit from tax deferral is not subject to annual taxes for capital gains, interest, or dividend with a tax-deferred annuity. As a whole, trustees should avoid tax-motivated distributions, allowing the trustee to reduce income allocations while allowing any profits to grow tax-deferred.

Deferred annuity Trust – 

1. Can a trust own a deferred annuity? Unlike brokerage assets or money at the bank, annuities forever have named beneficiaries and upon death. Provisions help contractually to know the income is paid out. The qualities inside the rente are asset protected to varying degrees in most states. Despite whether or not the rente is commanded in an exceedingly trustworthy way. 

2. Additionally, a number of the newer “stretch provisions” permit your beneficiaries.  They distribute rent financial gain over their time period are unobtainable with trust-owned annuities. As a result, we frequently question the shopper and also the lawyer on why they like a rente to be trust owned. 

3. In several cases, it’s merely a previous habit, and also the lawyer. And comptroller is typically unaware of the downsides that will exist. A straightforward discussion can establish the right type of possession.

4. As a result, we always ask the client and the attorney if they prefer a trust-owned annuity. In many cases, it’s just a bad habit, and the attorney and CPA aren’t aware of the potential drawbacks. A straight forward debate can help in determining the correct form of ownership.

Investing in an Irrevocable Grantor Trust with an Annuity-

1. If a trust is holding a deferred annuity for the benefit of others. One should consider a grantor irrevocable trust. You should make cash donations using your annual gift tax exclusion if you use an irrevocable trust. 
2. The cash is used by the trust to buy annuity policies for you as the named annuitant. When the annuities begin to payout, the funds are transferred to the trust, which can then distribute the funds to beneficiaries. For this trust to be considered outside of your estate. The beneficiaries must be living individuals, not organisations.
3. If you’re in good health and want to provide continuing financing for your beneficiaries. This can be a wonderful way to take some of the tax burdens off your estate. This strategy will help you raise funds while you’re still alive and get your legacy off to a good start.
4. The laws of the annuity, however, cannot change after you pass away. Only two choices will be available to the trust. It has the option of receiving the annuity in one lump sum or over a five-year period. This is where those who employ this strategy run into difficulties.

Trust shouldn’t use annuity?

When the annuitant dies, it will be more difficult to use annuities in trust. The contract should only pay out consistent payments if you’re alive because it’s based on your life. After the death, the annuity contract will need to be dissolved. After that, the trust will be taxed.

When you withdraw money from an annuity, you must pay royalties on the profits. The biggest advantage of annuities is that they grow tax-free once you’re alive. When payments are made, they must be organised in such a way that they can last for a long time in order to reduce the tax burden.

It is possible that you will need to make changes to your Will at some point. Can a will be changed? Making a Will ensures that one’s property is distributed as desired. And that the appropriate heirs receive their fair share. A Will is a legal declaration of the testator’s intention regarding his property that he wishes to be carried out after his death. 

When a major life event occurs, such as marriage, divorce, separation, the birth of a child, the death of a relative, or a change in your financial situation, it is critical to review your Will. These events may have an impact on both your estate distribution wishes and the validity of your current Will.

A testator has the ability to alter his or her Will.

A testator has the right to change his Will at any time and in any way he sees fit. A Will can be made by anyone of sound mind who is not a minor. If a person is not of sound mind when making a Will, the Will is unenforceable.

A Will obtained by force, coercion, or undue influence is a void Will because it removes the person’s free agency. A will made under the influence of intoxication. Or in such a state of body or mind as to deprive the testator of free agency is null and void.

A Will can be written at any point in a person’s life. A testator may make a Will as many times as he or she wishes. However, only his last Will and Testament made before his death is enforceable. A Will must be signed or affixed with the testator’s thumb impression before it can be executed. It must be attested by two or more witnesses, each of whom must have witnessed the testator signing the Will.

Wills are registrable – 

Although the registration of a Will is not required, it can be done with the sub-registrar. If the testator wishes to withdraw the Will at any time, he may do so. A Will can also be sealed and kept in a safe place. An executor of the Will or an heir of the deceased testator can apply for probate after the testator’s death. The court will then ask the deceased’s other heirs if they have any objections to the Will. If no objections are raised, the court will grant probate. A probate is a court-certified copy of a Will that serves as conclusive evidence that the Will is genuine.

A will can be changed due to factors like :

1. Civil Partnership/Marriage

Any previous Will that you may have made is automatically revoked when you marry. The only exception is if your Will expressly states that a marriage is about to take place. And includes explicit instructions that the Will will continue to be valid after marriage and will be changed

Members of a Civil Partnership have been treated in the same way as married couples since the Civil Partnership Act was passed in December 2004. When a civil partnership is registered, any previous Will made by either partner is automatically revoked.

2. Separation or Divorce

If you divorce or dissolve your civil partnership, your Will remains valid. However, many of its provisions will no longer be effective if you die before making a new Will. For example, any gift you left to your former spouse or civil partner in your will would take effect as if they had died on the date your divorce was finalised.

This usually means that the gift is returned to the estate residue for the benefit of the residuary beneficiaries. If your Will specifies that everything goes to your spouse. It is the same as if you died intestate and a will be changed(leaving no valid Will).

3. A child is born.

Even if you name your other children as beneficiaries, if you have a child after writing your Will, they will not automatically become a beneficiary. As a result, you should update your Will and a will be changed as soon as possible after the birth of a child to ensure that your wishes are carried out.

How to Modify Your Will?

You cannot simply make changes to an existing Will in order to change it. Such alterations are presumed to have occurred after the Will was executed and a will be changed. Thus, do not constitute a part of the original legally valid Will.

1. The only way to legally change a Last Will and Testament is to either add a codicil to the existing Will or
2. Create an entirely new Will.

Using a Codicil to Modify a Will

A codicil is an addition to an existing Will that makes some changes while leaving the rest of the Will untouched. It is a legal document that has the same legal force as the original Will.

A codicil must be signed, dated, and witnessed in the same manner as the original Will on a separate sheet of paper. The witnesses, however, do not have to be the same as in the original Will. There is no legal limit to the number of codicils that can be added to a Will. But they should only be used for minor and straightforward changes.

After the codicil has been executed, it should be kept in a safe place with the original Will. It is suggested that codicils be numbered so that executors know how many documents to consult in addition to the Will. Do not attach the codicil(s) to the Will, as doing so would render the Will null and void. It is best to notify your executor(s) and provide them with the location of the codicil.

Changing a Will After Someone Has Died

It is possible to change a person’s Will regarding the distribution of their assets if they die with or without a valid Will. In some cases, beneficiaries may find it advantageous to change a Will and a will be changed for tax purposes after the deceased’s death. This can be accomplished through the use of a Deed of Variation, also known as a Deed of Family Arrangement.

This must happen within two years of death and only if all of the beneficiaries agree to the changes. A Deed of Variation must be in writing and signed by the beneficiaries agreeing to the changes. And if more tax is payable as a result of the Deed, the Deed must be in writing and signed by the beneficiaries agreeing to the changes. The executors will be required to sign the document as well.

The following are the most common reasons for changing a Will after death:

1. To reduce the amount of Inheritance Tax that must be paid.
2. Provide for someone who has been left out of a Will or who has not been adequately provided for in a Will (such as new grandchildren).
3. To make provision for someone who has a legal claim to the estate.
4. Redirect a joint tenancy property that would otherwise pass to the surviving joint tenant.
5. To clear up any doubts or flaws in the Will.

To be valid and effective, a Deed of Variation must include significant changes to the way assets are to be distributed. It is not legal to transfer assets on paper to another person while the original beneficiary continues to benefit from them. Spouses cannot pass assets to their children and then pass them back to the parent to avoid inheritance tax charges. When establishing a Deed of Variation, there should be no reciprocity at all.

An LLC can become a corporation. You can convert the LLC to a corporation if the other members of the LLC agree. Some states have a fast and painless procedure for converting your LLC to a company. Some states’ procedures are more complicated, taking more time and documentation. 

Changing the company structure would have implications, both positive and negative. Examine the functional discrepancies between the two company groups, such as reporting standards, taxation, and corporate formalities, before making the switch. If you don’t like what you hear, you can adjust the company’s tax status instead of converting to a corporation and keep your business structured as an LLC.

Differences and Similarities Between LLCs and Corporations

Before converting your LLC to a corporation, make sure you understand the implications of the new structure. First, consider the parallels between the two. Both LLCs and corporations are separate legal entities from their owners. And they do not exist until the owners file the necessary paperwork.

These companies, unlike sole proprietorships and partnerships, can own assets and incur liabilities. Corporations and LLCs both provide limited liability protection. It means that the owners are typically not personally liable for the business’s debts and obligations.

Complexity in management

Corporations have a more rigid management structure than LLCs. The LLC owners (referred to as “members”) manage the business, or they may hire a third party to handle the day-to-day operations. Your state may require LLCs to file annual reports, but the reports’ content is limited to basic details such as the company address and registered agent.

Managing a company is more structured. The formalities include holding daily meetings, taking minutes, keeping notes, and submitting annual reports. According to state law, corporate annual reports must provide comprehensive details about the company and its finances.

Taxation

When it comes to taxation, LLCs have advantages that companies do not. By design, LLC owners register and pay taxes as sole proprietorships or partnerships. A company, on the other hand, must pay taxes as a C Corporation or an S Corporation. A-C Corporation faces “double taxes.” The corporation pays corporate tax on income that enters the company. After distributing the profits, the owners and shareholders pay taxes on the same income on their personal tax returns a second time.

Reasons to Convert from a Limited Liability Company to a Corporation

Now that you’re aware of some of the practical implications of converting, rethink if you still need to become a company. Changing a company’s structure to a corporation may be advantageous for certain businesses, but it is not for all. If you need funds, you’ll find that investors tend to deal with companies because it’s easier to sell stock in a company than it is to pass ownership in an LLC. Creating a business requires you to issue stock and “go public” with the company. It helps you to expand the company by selling shares to the general public.

If you do not wish to draw investors or go public, the challenges of transforming your LLC and sustaining a company are unlikely to be worth the effort. It is not necessary to alter the structure of your company in order to expand or increase revenues, and many large and profitable businesses continue to function as LLCs.

Understanding the Various Conversion Types

If you’ve agreed that converting your LLC to a company is a smart idea, here’s what you’re in for. The paperwork and procedure for converting your LLC will be determined by the laws of the state in which your company was created. In all states, the LLC members must support the transition. And develop a transfer plan outlining how member ownership will be converted into shares of stock. Following conversion, the members become shareholders of the company, and the owners transfer all of the LLC’s properties and responsibilities to the corporation. The three conversion options are as follows:

Statutory Conversion:

Some states permit “statutory” conversion, which applies to a statute that establishes a simplified procedure for modifying the business structure. In states where this option is available, you can convert an LLC to a company by filing conversion forms with the Secretary of State. The state dissolves the LLC and passes debts and responsibilities to the company until the Secretary accepts your filings. To form the company, you do not need to file any additional paperwork.

Statutory Merger:

If your state forbids conversions, you might be able to seek a merger, which is a more complicated procedure. To begin, you create a new company and add your LLC members as shareholders.

Non-statutory merger:

In this case, you do not use either of the state-mandated procedures. Instead, you create a new company, distribute corporate stock to LLC members, move LLC properties, and then dissolve the LLC. Since shifting assets and liabilities can be complicated, it is best to consult with an attorney before pursuing a non-statutory merger.

Steps to Form a Corporation That Are not really Needed

If you seek a conversion or a merger, you must first create a new company, which includes

1. establishing corporate bylaws.
2. conducting an introductory board meeting, and
3. issuing stock certificates
4. requesting a new Employer Identification Number (EIN).

When the corporate conversion is complete, you will be expected to conform to new corporate formalities, such as conducting daily meetings of directors and shareholders, maintaining corporate minutes, and filing annual reports with the state.

The Tax Implications of Converting from an LLC to a Corporation

In certain instances, the company would not owe taxes as a result of the conversion. However, if you move all or less than all of the assets of the LLC to the company, or if the members of the LLC are not owners of the new corporation, you might be subject to additional taxes and filings. To assess your reporting conditions, consult with an accountant or a tax attorney.

Changing the Tax Status of the LLC

Instead of converting your LLC to a corporation, you can elect S Corporation or C Corporation tax status by filing paperwork with the IRS. You will still run your company as an LLC under this option, but you will pay taxes as a corporation. Although you will not be able to issue stock or go public as a result of this. You will be able to reap the advantages of corporate taxes, such as avoiding self-employment tax on a portion of the company income. 

So, it can be concluded that the LLC can become a corporation. It has its own advantages and disadvantages that matter from company to company. The LLC can either change to S- corporation or to C corporation. There are three methods of conversion and some additional steps involved.

An executor (also known as an administrator) is the person in charge of the estate of a deceased person. (i.e., their assets, property, shares, bank accounts, and so on). Can an executor appoint a power of attorney?

Being appointed executor does not obligate you to accept the position. It might take years to get from agreeing to be someone’s executor to having to carry out those responsibilities. Conditions may change over time, and an executor may have less time due to family. Also, have work responsibilities may live abroad, be ill, or the estate may be complicated. And, with the potential of a family feud (if certain family members have been left out of a Will, etc.)

Renunciation 

Renunciation of an executor’s duties is a reasonably easy procedure. If an executor wishes to completely relinquish their right to act. Then, they may renounce (step down) from their duties. An executor must ensure that they have not “Intermeddled” in the estate before agreeing to renounce. This assumes they haven’t done something that an executor would do when handling an estate. Such as paying debts, selling personal belongings, and so on.

To renounce, the executor must sign a renunciation document. That releases the executor from the burden of handling the estate indefinitely. The renunciation form is then filed with the Probate Registry, along with the remaining executor’s application for Grant of Probate (s). Renunciation decisions are usually reversible except under rare situations after they have been registered with the Probate Registry.

Can an executor appoint a power of attorney?

The executor is not issuing a “right of appointment,” but rather delegating some of his or her responsibilities to someone else. It must be followed as power of attorney is a distinct legal form. However, the executor will usually assign duties. When our office assists an executor in probating a will. We usually hire an outside appraiser and/or real estate agent.

When we draft a will or trust, we have a provision that explicitly grants the executor or trustee the authority to delegate. So, the will is the first place to look for an answer to this question. If the will was written by a qualified solicitor, there will almost certainly be a provision granting the executor the authority to delegate any of his or her duties.

In fact, this is often a point of dispute between beneficiaries and executors. The beneficiaries may have one real estate agent in mind, while the executor may have another. When the beneficiaries want a fast sale to collect the proceeds, the real estate agent may want to hold the property on the market in order to gain the true value. Again, a knowledgeable probate lawyer has dealt with this issue before. And typically has resources that have proven to be useful in resolving the issue.

What happens if I am unable to act? Is it necessary for an executor to nominate another executor?

If an executor is unable to function but does not want to relinquish the right to administer completely, he or she has many options:- 

– If they are suddenly unable to act, for example, because they reside overseas. The executor may grant the power of attorney to another person on the behalf. The executor may delegate the duties he or she is responsible for to the solicitor.

-If one of the executors refuses to act when there are more than two executors named. The executor will have power reserved for them. This means that they are not actually serving as executors but retain the right to do so in the future if necessary.

-If someone really wants to be an executor but considers the administration of the estate too onerous or time-consuming. They may nominate a solicitor to manage the administration on their behalf. The executor retains possession of the estate, but the attorney is in charge of securing the Grant of Probate. Or gathering properties, settling debts, and distributing the estate, among other things.

An executor may appoint an agent to carry out certain responsibilities on his or her behalf. In contrast, to represent the executor in the court, the power of attorney cannot be used. While an agency will accept power of attorney to act on behalf of an executor under some cases. It is possible that such entities would require the individual who has been given letters testament to acting. And a power of attorney to act on such a person’s behalf will be rejected. Acceptance of a power of attorney is subject to the laws of the particular organisation.

Author’s Note – 

Basically, when it comes to Can an executor appoint a power of attorney, the answer is mostly Yes. The executor most of the time appoints another executor on behalf of him/her. Unless the will has mentioned something else, the executor can appoint a power of attorney. Some powers are in the hands of the executor and at times, they are not.

If you are a business owner or have worked under some organization for a specific field. Then you probably have assigned a non-compete clause contract. The main question that arises is that- Can I Fight Non-compete Clause In Florida Court? Just like any other contract, there are certain limitations and restriction you have to keep in consideration. These agreements are enforceable by law.

What is a non-compete clause?

 In contract law, a non-compete clause is an agreement under which one party agrees over they would not enter while working in the course of hiring for the same business or trade or for the competition against the second party. The extent of the non-compete clause is legally acceptable but varies in a jurisdiction. For example, if there is any breach in the contract, there will be no consideration of the non-compete clause.

• In the states of Florida, some law firms practice the agreement of non-compete clause for an employer’s confidential terms and conditions. But it is nearly impossible to stretch the contract for a long span. If the contract crosses two years of binding, then the contract becomes unenforceable under the state of Florida.
• However, Florida courts rarely refuse to enforce this Act, as its range and scope are narrow. The contract of non-compete clause includes some time period, qualifications and geographic location.
• The burden is on the employer about the restrictions and enforcement should be necessarily legitimate. If the contract is not legitimate and fair, then the employer is not answerable for the enforcement of the contract.

When is the Contract unenforceable?

When parties enter into a contract, then they mutually agree over the terms and conditions of a contract. The consent of both parties is one of the most important factors in a contract, agreement. Without the will of any other party would make the contract null. There are several cases when the contract becomes unenforceable. Under such circumstances, resulting in the employee is not reasonable for the agreement anymore.

• There is a case of Minor Breach of Contract, where the important aspects of the contract were received. But some small parts of the contract remain incomplete. It is also called an Immaterial Breach. In this case, it is hard to show the damages of a breach.

Example- In shipping of the refrigerator, the seller didn’t provide the user manual. So it is almost impossible to show harm caused as there is no loss of money caused.

• This is a very common breach of contract, when one party is unable to fulfil the obligations to another party, resulting in, breach of contract. After the breach, the contract is entitled to void.
• An actual breach kind of contract is the contract in which the wronged party is answerable for compensation to another party for their damages.

Example- Buyer ordered a pink maxi dress, but he gets a tank top instead of the maxi dress. Then the seller is responsible for the damages caused to the buyer.

• The employer’s failure to pay the compensation in the favor of the agreement is a very common breach of contract, in this case, the injunction or termination of the contract may occur.

Consideration Of Breach In The Florida State

When an employee faces any lawsuit of a non-compete clause, then he can defend himself by challenging the enforceability of the contract. There are many aspects working at the same time. If there is any breach in the contract, then the employee can defend himself as there are no restrictions if the contract is void. You cannot make a penalty if there is no contract. For common defence, the employee should just claim that there is a breach.

Can I Fight Non-compete Clause In Florida Court?

Whether talking about Florida, the agreement of non-compete is unreasonable and unenforceable. But the agreement still remains enforceable, but the court cut the duration or area in which it was applicable.

In Florida, the contract lasts only for two years. As this contract is specialized and very specific, so this is almost impossible to make it long last. The contract should be almost six months old to keep it under consideration and if the contract is an infant, then, court work on different aspects of legitimacy of business like the period of hiring, the duration of working before leaving, etc.

The main concern that arises is that- Can I Fight Non-compete Clause In Florida Court? If the Florida court is in the favor of an employee then the temporary injunction may take place, however, Florida mostly do not concentrates look on the injunctions.

Case Law

Can I Fight Non-compete Clause In Florida Court?

Consider AB is a company, who hired an employee to work in New York City. Both parties assigned the terms and conditions for the duration of work and hiring, also agreed to the contract of a non-compete in Florida. And they decided the contract will be considered as it is in New York too. The employee worked for the AB Company in New York and made good progress over there, built customer relationship nicely. After some years the termination period dawn, AB company terminated her job after a month of termination of the contract took place.

Now the employee got hired in another company which was the competitive body of AB Company, filed a lawsuit against the employee which was working for their competitors, in the urge of spoiling the secrecy of their company, in the courts of Florida, the contract of restrictive covenants were same in both Florida and New York City.

The court of Florida concluded that this agreement mainly focuses on the interests of an employee, refusing the prohibition against the employee. The ramifications under this contract may vary from each other in cases, as the aspects change the jurisdiction also change, the basis on the circumstances. Court studies all the ramifications and mostly don’t want to sanction any of the party’s livelihood.

Summary

The contract is based on some basic rules like conception, obligations, acceptance, capacity and legality, these elements that make the contract legally binding. If there is no balance in these elements, the contract makes no sense of existence. The elements may change as the subject matter changes. Intention involves a genuine legal relation. The contract should have a legal purpose and transparency, which will make it legally enforceable. In certain circumstances, the agreement becomes void and unlawful leading to injunction, but that is just to overrule the statute.