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What Is a Letter of Intent?

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If you’re in business or thinking of selling your business, you might hear the term “letter of intent”, or LOI. You might not know what a letter of intent is or how it can help your business. A letter of intent can be a contract, and it can also just be a statement of the future intent of the parties. It’s a written document executed by two parties that may or may not be binding. Here’s how to know when you need a letter of intent and how a letter of intent can help you in the business world:

What is a letter of intent?

A letter of intent is a written document between two parties. It can help you prepare or finalize a business deal. It outlines the major components of a business deal. A letter of intent is different from a contract because it’s often written in shorthand, and it may not be complete. Generally, it outlines the major points of a business deal between the parties so that the parties can work out the details at a future date.

What is the purpose of a letter of intent?

A letter of intent allows the parties to finalize some terms while they negotiate the remaining details of an agreement. If the parties want to begin conducting business without waiting for a complete contract, a letter of intent can give them some binding terms. In the absence of an agreement, the court might imply a contract between the parties. That can leave the terms of their business open to interpretation and uncertainty. A letter of intent allows the parties to formalize the terms they agree to right away. It allows them to state what they agree to now in hopes of negotiating a more complete agreement in the future.

How are letters of intent used in the business world?

There are multiple ways that letters of intent are typically used in the business world. First, the parties might use a letter of intent to make some of the terms of an agreement binding while they iron out the rest of the details. For example, a business might agree to merge with another company but need time to figure out details like a timeline for sale, transfer of assets and salaries for employees. The parties might use a letter of intent to memorialize their agreement and even state a selling price while leaving time for the parties to work out a timeline and other specifics.

A letter of intent might also be used to give the parties time to negotiate whether they want to enter into a deal. The parties might agree to exclusive and confidential negotiations for a period of time. They might use a letter of intent to state their intent to negotiate and also state their agreements regarding confidentiality and exclusivity. These terms can be binding. One letter of intent might look very different from another depending on the purpose of the letter.

You might use a letter of intent when you need fast performance from another party. You might use it when you have a complicated deal and you want some agreement in place before you iron out the details. A letter of intent can give you time to raise capital or do due diligence in order to decide if you want to complete a business deal.

What are the benefits of a letter of intent?

A letter of intent can be beneficial for business by giving each party the confidence to negotiate in good faith and motivation to invest resources in the negotiations. It can be a psychological boost for each party knowing that the other is serious enough about creating a deal that they want to continue negotiations. When a letter of intent helps the parties begin business quickly, it can help the parties avoid the uncertainty that comes from doing business without certain terms.

What are the drawbacks of a letter of intent?

Because of their ambiguous nature, a letter of intent is often vague. If the parties can’t agree on the final terms of the agreement, the deal might fall apart. They might engage in long negotiations for a deal that ultimately doesn’t end up happening. Alternatively, they might lock in terms that they later determine are unfavorable. The parties may also disagree on the enforceability of some or all of the letter of intent. Finally, leaks or publicity of the letter of intent may attract competing buyers or sellers.

What does a letter of intent typically contain?

A letter of intent may contain any of the following:

  • The basics – Most letters identify the parties and contain a brief statement of the deal that they hope to negotiate.
  • Confidentiality – The parties agree not to talk about the negotiation with third parties. The purpose of confidentiality is to prevent third party buyers or sellers from trying to compete.
  • Exclusive negotiations – If the parties want to negotiate only with each other, they might put an exclusivity requirement in a letter of intent. An exclusivity term can give each party confidence that the other party is present to negotiate in good faith.
  • A fee for backing out – A buyer might want a fee if the seller backs out. That can ensure that the seller negotiates in good faith and that the negotiations and due diligence that the buyer undertakes is worth their time.
  • Good faith negotiations – A requirement that the parties negotiate in good faith can encourage both parties to put their best effort into negotiations.
  • Choice of law – In a letter of intent, a choice of law provision states what state or federal law applies if the parties disagree about any terms of the letter of intent. If there’s a choice of law term, that’s the body of law that the court applies in order to decide the dispute.

Is a letter of intent enforceable?

Whether the letter of intent is enforceable comes down to the intent of the parties. In the event of a dispute, the court looks at the letter and the actions of the parties in order to determine if the parties intended for the letter of intent to be binding. One major factor the court considers is whether any terms in the letter are conditional. That is, if one of the parties only has to perform if an event occurs, the agreement likely isn’t enforceable unless the event happens. For example, if the sale of a business is conditional on the approval of shareholders, and the shareholders don’t approve, the agreement likely isn’t enforceable.

How can I make sure that my letter of intent is good?

To make sure your letter of intent does what you want it to do, it’s important to be clear on what’s enforceable and what’s not. Clearly state whether the entire agreement is enforceable or whether none of it’s enforceable. If you want only some parts of the letter to be enforceable, it’s important to clarify what parts you want to be binding. It’s also important to state what penalties you want to apply to either party if the deal falls through.

Done correctly, a letter of intent can help your business by formalizing agreeable terms and allowing the parties to move forward. If you’re considering selling your business, or if you’re looking at buying one, contact our team of experienced M&A attorneys to schedule a consultation.

How To Avoid A Federal Tax Lien (And What To Do If You Get One!)

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The last thing anyone wants to see after going to their mailbox is a notice from the Internal Revenue Service stating that there is a problem with their tax filing.  Mistakes do happen, regardless of who is preparing the return or business tax form submission. But, there are also times when numbers do not comport to government agency calculations, commonly resulting in an audit that produces circumstances the taxpayer does not expect nor want.

While tax avoidance within the guidelines is legal and acceptable, premeditated tax evasion is illegal when the Internal Revenue Service can provide sufficient evidence to press a case strongly. And when they do, they are serious. Very serious.

This leaves the audited delinquent taxpayer in a very precarious situation, to say the least, and the only recourse is to either pay up in full or retain an experienced tax attorney who understands how a tax lien can impact their estate. Here are a few steps that anyone being audited should consider.

Negotiating a Reduction During the Audit

The first step in stopping a potential tax lien is discussing the issue with the Internal Revenue Service agent during the audit. However, this should only be done with experienced legal counsel who can help mediate the discussion and evaluate the government claims based on existing tax laws. There is no code in the federal law statutes quite as extensive as the tax code, and the IRS has wide latitude when selecting a rule to apply.

Sometimes, those rules are technical and do not account for common mistakes, but sometimes minor differences could be negotiated away when the agent sees an opportunity to actually collect a significant portion of the delinquent amount in short order and settle the account quickly. This happens more often than taxpayers realize when they are honest about their return.

Bargain for an Installment Agreement

Installment agreements are a common method of settling a tax liability. An installment agreement allows the tax bill to be paid over an agreed-upon amount of time, which can work well for tax levies of under $25,000, because tax liens are not typically filed below the $25,000 threshold. However, taxes beyond the threshold can result in certain property being placed in lien and cause other issues with your estate.

Submit an Offer in Compromise

An offer in compromise, also known as an OIC, is a common method that many couples use when their tax debt is of any amount, but the delinquent taxpayer must prove they are qualified for this agreement. It is important to note that nearly two-thirds of all OIC submissions are denied. But, it can be a good faith step in getting a classification from the IRS that a debt is collectible but does not rise to the level of a lien motion.

They could also determine the tax debt is not collectible. The primary difference in these two rulings is that payments can be made toward the debt, which can help when there may be extenuating tax problems in following years, or that nothing is required to be paid. However, outstanding tax obligations are always filed against a couple’s credit report and stay in place until the debt is satisfied.

Paying in Full

The best method of settling an IRS tax debt to avoid a lien is paying the debt in full in any way possible, including applying for a loan that could make the matter one of a personal budget. While this may not work for all people, this is actually what the Internal Revenue Service prefers. This will also stop any damage the tax debt may have regarding personal credit ratings as well as ending a tax lien possibility.

One thing is for certain when dealing with the Internal Revenue Service – not paying taxes can assuredly result in final outcomes that no one wants to face. It is always important to address the problem as a serious life event, including how long it may take to emerge from the debt in good financial condition. Having an experienced estate planning and tax attorney who has dealt with estate planning issues and tax liens before can be the difference in an acceptable outcome or a lingering financial problem.

How Do I Contest A Will In North Carolina?

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In North Carolina, there’s a process to challenge the validity of a will. North Carolina laws are in place to give interested parties the opportunity to question a will. A will challenge, or will caveat, has specific procedures that need to be followed. Here’s what you need to know about how to contest a will in North Carolina:

You must have the standing to challenge the will

Only an interested party may challenge a will. A person with standing is any person who stands to gain or lose from the probate of the will. If you’re a family member who would inherit if the will isn’t valid, you have standing. In addition, any person or entity named in the current will or named in any prior wills also has standing. If you have an interest in the outcome, you can file a caveat to challenge the will.

To challenge a will, you must file your caveat with the clerk of court

Challenging a will in North Carolina begins with filing the will caveat with the clerk of superior court. It’s important to file the caveat with the appropriate clerk and in the right court. The court can dismiss a caveat that isn’t appropriately filed. Once you file the caveat, the other interested parties have a chance to respond and participate in the proceedings.

You must notify all interested parties

It’s up to you to notify all of the other interested parties that you’re contesting the will. You must serve them with a copy of the caveat paperwork. Providing service of the paperwork ensures that all of the parties have the opportunity to access the courts and participate in the proceedings.

There are a few legal grounds to challenge a will

There are only a few grounds to challenge the sufficiency of a will. They include:

Lack of capacity

Lack of capacity means that the person who makes the will doesn’t understand what they’re doing when they make the will. It means that they don’t understand their decisions and the impacts of their decisions on the disposition of their estate. There’s a presumption that a person who makes a will has the capacity to understand the choices they’re making. Even a person with some mental difficulties may understand the situation long enough to make an effective will.

Undue influence

The other common ground for a will challenge is undue influence. To demonstrate undue influence, the person who files the will must show that the will creator was open to influence. They must show that a person with access to the will creator tried to exert influence over them. Finally, the person who challenges the will must show the result of the influence is that the will is different than it may have been without the person’s influence.

To decide if undue influence impacts the result of the will, the jury may consider a number of factors. These factors include:

  • The age of the person who makes the will
  • Physical and mental vulnerabilities of the will creator
  • Whether the beneficiary lives with the will creator
  • If the beneficiary supervises the will creator
  • Attempts by the beneficiary to isolate the will creator
  • Revocations of prior wills
  • Changes from prior wills
  • Bequests to someone without blood ties
  • Disinheriting blood relatives
  • Whether the beneficiary helps create the will

A jury decides the case

It’s up to a jury to decide whether the will represents the wishes of the creator. The parties can’t agree to waive the jury. They also can’t stipulate to any facts. A judge can award summary disposition and dismiss the will challenge if the case is clear, but summary disposition in a will case is very rare.

The burden of proof

The jury decides the case by the greater weight of the evidence. That means they decide if the will more likely than not represents the wishes of the will’s creator. Essentially, the jury sides with the person that they think is more likely to be correct.

You may mediate the case with other interested parties

If you’re a party to a will caveat, you may mediate the case with other interested parties. You can agree on a resolution to the case that follows the terms of the will, or you can settle on different terms that you create with the other parties. Not all will caveats use mediation as a case resolution tool. You have the right to reject mediation and try your case before a jury.

You have three years to bring a will challenge

If you think a will may be invalid, you have only a limited amount of time to challenge it. You have three years from the time that probate begins in the case. If you’re under a disability, a minor or in prison, you have three years from the time your disability ends.

Practically, it’s important to bring your will contest as soon as possible. When you file your will contest, distribution of the estate stops until the contest resolves. If you don’t file your caveat until distribution is underway, you risk the added difficulty of needing to find and retrieve assets that have already been distributed to third parties.

The court may order the estate to pay attorneys fees

A will party may be costly for the estate. In most cases, the court charges the cost of the will caveat to the estate. That means the prevailing party’s award is reduced by the costs of attorney fees to all of the parties involved. If the caveat has no merits, the court can refuse to order payment of attorney fees. In addition, the court may order the person who files the caveat to pay a bond that can cover the costs of the caveat in the event that the caveat has no merits.

Each case is different, and will caveat cases are often complex. An experienced will caveat attorney will be able to help you navigate through all the requirements to get the best outcome for you and your family. For a consultation to learn more about will caveats in North Carolina, call our office today at 919-787-7711 or fill out our contact form.

Proposed Skilled Nursing Facility Changes

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Moving a loved one into a skilled nursing facility (SNF) can be a stressful event for the patient and family. Many feel rushed and make rash decisions about placement because of the lack of information and perceived options. It is not always possible to plan for these life changes – sometimes, the need sneaks up without warning. This crisis can be further complicated with the lack of guidance excused as “patient choice”.

Using an estate planning attorney can help decipher the resident’s rights and hospital’s responsibilities. Traditionally, hospitals have cited legal restrictions as the force behind the lack of information and simply provided a list of nearby facilities for the struggling family.

Our professionals can help you sort through the language and stand firm on the resident rights for long-term treatment services. When moving a loved one from a hospital to a skilled nursing facility, you should expect more than a geographically relevant list.

The Centers for Medicare & Medicaid Services have proposed changes starting with a developed discharge plan within the first 24 hours of admittance. This plan needs to be comprehensive with the medications listed and the completed plan in place. The simple proposed changes keep a transparent communication line open from one facility to another. Patients and family members have the opportunity to review the plan in a less stressful timeframe over the course of the stay rather than making an immediate decision.

Traditionally, the decision to transfer to a patient to a skilled nursing facilities has happened in a short period – many times, even the day before. The patient and family did not have time to process the new plan let alone make a good decision, which creates a feeling of hopelessness through the lack of guidance and time. The structured collaborative plan prepares all involved for the possibility and transition.

With the openness of these revisions, the patient can be referred to a high-quality nursing home. Historically, the industry is known for overworked and stressed out nurses and staff. We can guide you through facility ratings – our team knows that the gamut of paperwork, finding quality measures, staffing history, and health inspections can be daunting.

Long-term nursing facilities usually mark the end of living in one’s home, and your loved one deserves the dignity of a voice. The increased sharing of patient information will help reduce the stress level and improve the difficult transition. Because patients, family, and health care providers work together to develop the plan, the patient and family are able to take more ownership in the decision making process.

These improved decisions improve a previously negative experience. With options, patients and their families can self-advocate and weigh the importance of a quality home that is further away versus one with a location closer to the family home.

How A “Gray Divorce” Can Affect Your Retirement Plans

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More and more married Baby Boomers are opting to face their golden years not as part of a couple but as a single individual.

With their children grown and raising children of their own, many older adults can’t see spending another 20 or 30 years with a spouse they no longer love or even have anything in common with.

What Is A “Gray Divorce”?

Although retirement is often thought of as the season of life when couples get to spend time together doing what they have planned for years, for some this period doesn’t live up to what they expected and a parting of the ways occurs. Dubbed “gray divorce”, the number of couples who are aged 50 and older who are splitting up has nearly doubled since the 1990s, according to a recent report by the Pew Research Center. The divorce rate has nearly tripled for those aged 65 and older over the same time period.

The dissolution of these long-term marriages not only impacts the family, but the retirement savings of the couple involved, who must now make changes to their financial plans.

Couples who opt for a gray divorce may find themselves suddenly having to live off half of the income they are accustomed to. That can leave them feeling hurt and resentful, especially since those going through a gray divorce often have less working years in which to rebuild their financial assets. Money that has been accumulated over a lifetime of saving in 401(k) plans, IRAs, or 457 or 403(b) accounts is often split between the couple during the divorce proceedings. The greatest fear of many retirees is that they will run out of money before they run out of life, and divorcing later in life will certainly impact how you spend your retirement years.

Update Your Beneficiary Designations

A gray divorce also impacts the couple’s estate planning. Often, married couples who have been together for a long time have executed estate planning documents such as wills, trusts, powers of attorney and advanced medical directives naming each other as the executors of the document. During a divorce, the couple can overlook changing the beneficiary and executors of these documents, which can lead to future legal problems.

It is vitally important for a divorcing couple, no matter their age, to update their estate planning documents in order to guarantee that their final wishes are adhered to and carried out. An estate planning attorney can craft these documents with language that allows your plan to stay as it is in the event of a divorce should you neglect to change your beneficiary and executor. The documents can also be drawn up in a way that spells out what happens in the event of a divorce.

As with most situations in estate planning, an ounce of prevention is worth a pound of cure – contact our team today for a consultation about your specific situation and to see how you can protect yourself and your future.

Planning For An Aging Parent In North Carolina

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Planning for one’s own potential long-term care needs is something few of us do, and typically only when it comes time that either mom or dad can’t live by themselves do we then try and figure out how to handle that dilemma. While there may be no easy choices, it is far better to be proactive and ahead of the curve than try and play catch up after the fact.

Communication is the Key

Since this issue impacts all members of the family across generations, everyone has a strong interest in addressing the specifics. Who initiates the discussion is far less important than the fact it becomes a topic of discussion. A couple of good questions to address are:

  • Have your parents made any long range plans?
  • Are there financial resources available from your parents? How about from you or your siblings?
  • Is staying in their home an option with either daily or live-in care?
  • Can your home accommodate one or both of your parents if necessary?

These are just some of the questions that must be answered, and as indicated, the sooner the better. A threshold issue is understanding the finances involved in elder care.

The Numbers

Since 2004, the Genworth Cost of Care Survey has studied long term planning costs. The most current data for monthly costs of various care options:

  • Home health care – around $4000
  • Adult day care – around $1500
  • Assisted living facility – between $3000 – $4000
  • Nursing home care – between $7000 – $8000

The Options

  • Insurance – It can truly be said of insurance that it is something you need to have but hope to never have to use. For long term care insurance, the earlier a policy is taken out and the healthier the applicant is, the lower the costs. One option to consider is if mom and dad cannot afford the premiums, perhaps the kids can. This is certainly a less expensive option than the monthly out-of-pocket costs as indicated above.
  • Public programs – Unfortunately, Medicare does not offer long term care as part of its program. For those with very limited income and few assets, Medicaid may be an option. For those who have honorably served our country, the Veteran’s Administration has certain benefits available.
  • The Family – Unfortunately, for too many people, the burden of long term care falls on the family. It’s not so much the individuals offering the care don’t want to help, more often it’s the high cost borne by the caregiver. Caregivers often need to reduce their own hours of work or stop altogether, which can have a long range negative impact on their own retirement security.

An estate planning attorney can assist you not only in financial matters involving the disposition of your estate after you pass, but also in establishing and maintaining a high quality of life in your sunset years.