Newsletters
Insights and Developments in the Law Fall 2009
Estate Planning: Avoiding a Gift of Debt
By Attorney Timothy J. Bupp
If you inherit property, you should of course be grateful and count your blessings. Consider, however, the possibility that the gift may come with a big string attached—a debt linked to the property, such as is very common with real estate or a car. In such an event, the question arises as to whether the debt must be satisfied from the particular asset or from the decedent’s estate more generally. How this question is answered can cause a drastic difference in the amounts that beneficiaries receive from an estate.
Historically, the law presumed that the debt was not to be paid from the property that was connected to it. The reasoning for this was that a true gift should not come laden with such a burden. Over time, however, as mortgage debt became more commonplace, this thinking changed and statutes flipped the conventional assumption. Increasingly, the law came to the view that property left to someone includes the debt on such property, unless the decedent clearly indicated a different intent in his or her will.
This is where careful estate planning, with professional legal guidance, comes in. It is best to use carefully-crafted specific language in a will so that readers of the will can be certain of its interpretation. A general directive in the will to pay all debts of the testator is probably not sufficiently clear enough to avoid conflict related to debts of a decedent. Instead, if one’s intent is have the estate pay the debt on an asset, language something like this should be used in a will: “If [the specific asset] is subject to a mortgage, security interest, or other lien, I direct that my executor pay the debt from other property of my estate which is not given to a specific person or entity.”
Consider this example of how such language can avoid later problems: a farmer left to his (favored?) son three different farms, each of which was encumbered by debt. To his other son he left the residue of the estate. When the father died, the executor used part of the estate proceeds to pay off the loans to the farms, so that the first son would receive them debt‑free. Not surprisingly, the second son, whose inheritance was thereby diminished, brought the matter to court.
The second son prevailed, forcing payment of the debts for the farms to come from the farms themselves. The father’s will directed in a general way that debts were to be paid from the estate. However, under the relevant state statute, such a general direction was not sufficiently explicit to satisfy the debts on the farms from the residuary estate. Therefore, the court found that the will had not clearly shown an intent that the first son was to receive the farms debt‑free, and as a result, the first son got the three farms, but also the responsibility for paying off the attached debt.
The safest way to assure that your intentions will be correctly stated in your will, and that your beneficiaries will receive their inheritance without conflict or confusion, is to obtain the advice of an attorney in the preparation of your estate planning. Such advice is not expensive, and can provide significant savings in both money and good will in the long run. If you need assistance with your will or estate planning, call CGA Law Firm and ask to speak with one of our estate planning attorneys. You and your family will be glad that you did.
Attorney Timothy J. Bupp practices in the estate planning and real estate groups at CGA Law Firm.
Job References
By: Attorney Benjamin L. Pratt
Whether an employer-employee relationship ends on good terms or with acrimony, the common final act of an employee requesting a reference for a new job has increasingly lead to litigation against employers. From the former employer’s standpoint, they find themselves in a predicament where they would like to give former employees a reference to assist them in finding another job, however they know they need to be cautious in how they go about responding for requests for references.
Employers have found that a candid, negative response to a request can invite suit by the former employee which could entail a possible defamation of character, liable or even slander action. As a result, some employers provide only the typical “name, rank and serial number” response which in essence does not help the former employee find employment. It also does not help the prospective employer. In some cases where employers have declined to say anything about the employee, except perhaps dates of employment, a new employer who would have preferred to be warned about a sub-par employee has brought litigation against the former employer. With the current economic downturn and thousands of lay-offs being conducted across the country, these concerns are prevalent and employers need to understand their obligation and/or exposure to liability in these cases.
The growing dilemma is such that employers are telling their employees from the outset that they will get no job reference good, bad, or indifferent when they leave. Under such a policy, inquiring prospective employers would not get enough information as to the prospective employees’ qualification for the job. Other employers are willing to give a reference, but only after an employee signs documents consenting to release all there is to know to prospective employers and waiving their right to sue over anything that is said in the reference. This policy will also lead to employers possibly not getting certain information about a prospective employee based on the fact that they have not provided that consent to their former employer in the past.
Many companies and employers have these types of policies; however, the good news for businesses in Pennsylvania is their exposure to liability is constrained by statute. An employer who discloses information about a current or former employee’s job performance to a prospective employer is presumed to be acting in good faith unless lack of good faith is demonstrated by clear and convincing evidence. If clear and convincing evidence is provided, an employer is immune from civil liability for such disclosure or its consequences in any case brought against the employer by the current or former employee. Even with this statutory immunity, some employees do challenge former employer references as to whether or not they were in “good faith”. The presumption of good faith may be rebutted only by clear and convincing evidence establishing that the employer disclosed information that:
- the employer knew was false or, in the exercise of due diligence, should have known was false;
- the employer knew was materially misleading;
- was false and rendered with reckless disregard as to the truth or falsity of the information; or
- was information the disclosure of which is prohibited by any contract, civil, common law, or statutory right of the current or former employee.
Therefore, the burden on the former employee is great, but employers must make sure that all letters of reference are backed by truth and documentation to support their good faith reference. Furthermore, Pennsylvania case law supports immunity for employers who are providing references and/or letters outlining why an employee is no longer working for that certain employer.Courts look extensively at the intent behind the writing of the reference to determine the meaning that exists. Without clear and convincing evidence of the employer’s lack of “good faith” in providing the letter, the courts will find employers immune. As in the case of Goralski v. Pizzimenti, the Court found that the use of the word “misconduct” in a letter did not entail a second meaning, and therefore any defamation claim against the former employer was found not to prevail. Therefore, when employers write letters of reference they need to make sure the language of the letter is clear and precise, as well as supported by documentation in one’s personnel file.
Should you have any questions in regard to job references and how to respond, please do not hesitate to contact CGA’s Labor and Employment Department.
Website Terms of Use
By: Attorney Jeffrey L. Rehmeyer II
The terms for using websites, often taking the form of legalese to which many users pay little attention, are more important than they are interesting to read. The terms restrict how the public can use a website to obtain information, purchase goods and services, or take part in web-based social networking. Largely because of the federal Computer Fraud and Abuse Act (CFAA), the terms of use can now be used offensively either by prosecutors charging individuals with wrongdoing emanating from a violation of the terms, or by website owners themselves seeking civil remedies for legal injuries to them from what amounts to a breach of contract.
The growing and evolving body of court decisions concerning terms of use and the CFAA should prompt owners of websites to adopt and regularly review the terms for using their sites, giving special attention to the following considerations:
- Instead of using just any boilerplate legal language, the terms of use should be tailored to fit the particular risks posed to the business and users of the site;
- The terms of use must be easily seen and understood to have their intended effect. This means that they should be conspicuous on the site and written so as to clearly indicate conduct that is and is not authorized. There may be no one fail-safe approach, but one court has said that there is adequate communication of the terms of use if the terms can be accessed from all pages on the site;
- Website owners may want to make the agreement to abide by the terms of use explicit by including “clickwrap” or “browsewrap” agreements that make consent to the terms of the agreement a condition of using the site. If the user clicks on “I accept,” but then violates the terms of use, this essentially nails down the fact that the user lacked the necessary authorization for his actions, which may be pivotal in later criminal or civil court cases. For example, in a recent criminal case in which a university student secured access to a university computer site and stole Social Security numbers and other confidential data, the prosecution was aided by the fact that the student had signed an “acceptable use” computer policy that prohibited the very actions which led to the criminal charges;
- Putting the terms of use in place is one thing, but then monitoring compliance and notifying users of suspected or confirmed violations result in enhanced protection. In the case of the university student who was improperly gathering sensitive personal information, the university had on three occasions detected that the student’s computer was performing unauthorized and suspicious functions, and had informed him of its discoveries. When the student nonetheless continued to scan and infiltrate computers without authorization, adding to his database of stolen information, his fate in the ensuing criminal case was sealed.
CGA Law Firm provides counseling for businesses on internet law, intellectual property and technology.
Firm Updates
Awards and Appointments
Anne E. Zerbe will be honored among the region’s top, young, dynamic business leaders under the age of 40 who are working to shape the future of Central Pennsylvania. The Central Penn Business Journal will present awards during the fifteenth annual Forty Under 40 reception at the Hilton Harrisburg on October 23, 2009, from 6:00 to 9:00 p.m.
Jeffrey L. Rehmeyer II and Glenn J. Smith were appointed solicitor to the Pennsylvania State Association of Mayors.
Speaking Engagements
Timothy J. Bupp, Richard K. Konkel and Leanne M. Miller will present “How to Leverage Your Wealth Without Additional Tax” an estate planning seminar hosted by the York County Heritage Trust on October 20, 2009 from 9:00 a.m to noon. For more information or to register call 717.848.1587 ext. 216.
On October 21, 2009 at 6:00 p.m. Richard K. Konkel will present “A Sensible Approach to Planning Your Estate”. For more information or to reserve your spot call 717.848.4900.
On November 11, 2009, Anne E. Zerbe is presenting a seminar to the York Society of Human Resource Managers (YSHRM) on the H1N1 virus and legal issues regarding wage and staffing.
Benjamin L. Pratt, a faculty member of the PSBA’s Institute for Collective Bargaining and Labor Relations, recently taught a course in “Formulating Strategies for Successful Negotiations”, the last in a three part series.
Lawrence V. Young was a course planner and presenter at the PBI’s14th Annual Bankruptcy Institute held in September. Craig S. Sharnetzka was also a presenter and spoke on “Recent Third Circuit Decisions”.
Professional Development
Timothy J. Bupp attended the 43rd annual Heckerling Institute on Estate Planning. Heckerling is the nation’s leading conference for estate planning professionals, providing comprehensive and in-depth analysis of recent developments in estate planning issues and the legislative and economic factors which are driving the current changes in tax laws.
Eric Suter is enrolled in the 2009 Leadership York Training program, a nine-month program designed to prepare leaders to make a positive impact on the York community through service on boards and in non-profit organizations.
Announcements
Evah Pearl was born on August 31, 2009 at 6:30 p.m. weighing 8 lbs. and 19 1/2 inches long. She is the baby sister of Corrine and Levi and the third child of attorney Craig Sharnetzka and his wife, Rachel.
Chris Bland, municipal paralegal, and her husban Jim welcomed identical twins Conor Joseph and Zachary Louis on August 27, 2009. They are the baby brothers of Danielle and Andrew.
Juliana Faye was born on June 29, 2009, weighing 8 lbs., 9 oz. She is the third grandchild of Deborah Ribar, legal assistant.
For a complete listing of CGA Law Firm’s news and events, please visit our website at www.cgalaw.com.
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