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How to Set Up a Special Needs Trust in North Carolina

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Planning for the future of a loved one with special needs is a critical task that demands careful consideration. Many North Carolina families are unaware of the estate planning tools at their disposal, specifically Special Needs Trusts. These trusts provide an efficient way to ensure a better quality of life for your loved one while preserving their eligibility for government benefits.

What Is a Special Needs Trust?

A Special Needs Trust (SNT) is a legal instrument designed to manage assets for the benefit of a person with disabilities. This type of trust aims to supplement, rather than replace, governmental assistance programs such as Medicaid or Supplemental Security Income (SSI). The trustee manages the assets for the benefit of the disabled individual while ensuring that the assets are not counted for means-tested programs.

When Should a Special Needs Trust Be Used?

A Special Needs Trust becomes crucial in several circumstances:

Inheritance Planning

Leaving an outright inheritance can disqualify your loved one from receiving essential government benefits. A Special Needs Trust allows them to inherit assets without affecting their eligibility.

Litigation Awards

If your loved one receives a significant amount of money due to personal injury or other litigation settlements, the sum should ideally go into an SNT to protect their financial future.

Lifetime Gifts

If you or other family members wish to gift assets during your lifetime, placing them in an SNT ensures these gifts won’t jeopardize the individual’s eligibility for government programs.

How to Structure a Special Needs Trust

While the creation of an SNT can be complex, the basic components are as follows:

Choosing a Trustee

Selecting a capable trustee is critical. They will manage the trust assets and make disbursements. The trustee should be familiar with the beneficiary’s needs and also understand the rules surrounding government benefits.

Funding the Trust

You can fund an SNT with various assets such as cash, real estate, or investments. Depending on your situation, the trust can be either revocable or irrevocable.

Type of Trust

There are different types of SNTs, including first-party trusts funded with the beneficiary’s assets and third-party trusts funded with assets from someone other than the beneficiary.

Legal Formalities

Drawing up the trust document should only be done by a qualified North Carolina special needs trust attorney, as state laws can have unique provisions affecting SNTs.

Key Takeaways

If you’re looking to create a special needs trust to protect your loved one after your passing, here are the key takeaways you need:

  • A Special Needs Trust preserves government benefits eligibility while enhancing the quality of life for your loved one.
  • An SNT is essential for inheritance planning, litigation awards, and lifetime gifts.
  • Proper structuring of an SNT is complex but necessary for its effectiveness.

Schedule a Consultation With Our North Carolina Estate Planning Team Today

Securing the future of a loved one with special needs requires diligent planning and legal expertise. At Wilson Ratledge, we are committed to offering you the best legal guidance tailored to your unique needs. Contact us today to schedule a consultation and discuss how a Special Needs Trust can be a critical part of your estate plan.

Seven Ways To Keep Your Business Compliant With North Carolina Payroll Tax

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Navigating the intricate web of tax laws and regulations can be daunting, especially when it comes to payroll taxes. Over the years, we’ve seen many businesses and individuals (“responsible persons”) run into payroll tax issues, sometimes inadvertently. It is important to understand that a portion of the required withholdings is your employees’ money, and you are being entrusted to submit those funds to the Internal Revenue Service (IRS) and the North Carolina Department of Revenue (NCDOR) on their behalf.  Failure to remit your employees’ funds as required will result in trust fund liability and significant penalties and interest not just on your business, but on the individuals responsible for ensuring employee funds are properly remitted.

Here are some key tips to help you and your North Carolina business remain compliant and avoid payroll tax problems.

1. Properly Classify Workers

Misclassifying workers can lead to significant tax penalties. It’s crucial to determine if individuals working for you are employees or independent contractors. Remember, independent contractors are not subject to payroll tax withholdings, but misclassifying an employee as a contractor can result in back taxes and penalties.  IRS and NCDOR may not respect your classification if the duties and work arrangements of your so-called independent contractor resemble those of an employee.  You can find more information on IRS’s view here.

2. Understand the Basics

Before anything else, familiarize yourself with both federal and state payroll tax requirements. Employers are generally responsible for withholding federal and state income tax, Social Security and Medicare (FICA), and federal and state unemployment insurance taxes (FUTA) from employee paychecks. Here are some helpful links: Employment Tax Publications & Withholding Tax Frequently Asked Questions 

3. Obtain Properly Completed W-4 and NC-4 from Employees.

These forms are crucial in determining the proper withholdings for your employees.  As a result of the Tax Cuts and Jobs Act, if your employee is married, your employee and his or her spouse should coordinate their completion of these forms for their respective employers, even if the spouse previously completed a W-4, the spouse should update their form based on the new employment status of your employee.

4. Submit Payments and Filings On Time

Penalties can quickly accumulate for late payments or filings. Set reminders for all tax deadlines, including monthly, quarterly, or annual filings and deposits. For North Carolina state withholdings, consult the NC-5 series of forms and their respective deadlines on the North Carolina Department of Revenue’s website.

5. Maintain Accurate Records

Keep detailed records of all wages paid, taxes withheld, and any tax payments made. Not only is this a good business practice, but it will also be invaluable if you’re ever audited. Retain these records for at least four years, as recommended by the North Carolina Department of Revenue.

6. Stay Educated

Tax laws and regulations can evolve. Consider attending workshops, webinars, or conferences on payroll taxes, or ask your tax professional to keep you up to date as changes are made. Joining local business associations can also provide networking opportunities and access to shared resources.

7.  Use Reliable Payroll Software and/or Professional Services

Modern payroll software can help automate tax calculations and withholdings, reducing the risk of errors. When selecting software, ensure it is updated regularly to reflect any tax rate changes. If you’re not comfortable handling payroll internally, consider outsourcing to a reputable payroll service.  Your CPA or an experienced bookkeeper can be a valuable resource in this and many other areas of your business, allowing you to focus on doing what you love.

Our North Carolina Business and Tax Attorneys Can Help

If you have fallen out of compliance with your payroll taxes, the team at Wilson Ratledge welcomes the opportunity to work with you, your CPA, and internal team to get you and your business back on the right track.  Contact us today for a consultation regarding your payroll tax compliance or audit issues.

The Rise of ChatGPT in the Legal Field: A Cautionary Tale from New York

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Artificial Intelligence (AI) tools like ChatGPT have been growing in prominence in the legal industry. While these tools have proven valuable in various ways, a recent incident in the federal district court for the Southern District of New York serves as a clear warning of the risks and challenges of relying solely on AI for legal research.

The Rise of AI in the Legal Field

In recent years, the use of AI and machine learning tools, like ChatGPT, has become more prevalent in the legal profession. These technologies have enabled lawyers and legal professionals to automate repetitive tasks, perform document analysis, and provide general legal information.

  • Cost-Effectiveness: AI tools are often used for cost reduction, as they can process large quantities of information in a fraction of the time it takes a human.
  • Efficiency: By automating processes like document review and data extraction, AI tools can free up time for lawyers to focus on more complex tasks.
  • Accessibility: For the general public, AI chatbots can provide basic legal guidance, potentially bridging the gap for those who cannot afford professional legal consultation.

A Troubling Incident: Mata v. Avianca, Inc.

In the case of Mata v. Avianca, Inc.,(Case No. 22-cv-1461 (S.D.N.Y.)), a situation arose where ChatGPT, the AI program used for legal research by the plaintiff’s lawyers, provided citations to nonexistent court decisions. This issue led to an inquiry by the court, revealing a number of fabricated decisions and incorrect citations.

Key Details and Timeline:

  • Initial Submission: The plaintiff’s lawyer filed papers that included citations to several non-existent court decisions. The court directed an affidavit attaching the problematic decisions.
  • Bogus Decisions: The court discovered six bogus decisions, with one fabricated case supposedly from the Eleventh Circuit Court of Appeals.
  • Revelation: The plaintiff’s counsel explained that the research was performed using ChatGPT and admitted to being unaware that the content could be false.
  • ChatGPT’s Response: Screenshots of chats with ChatGPT revealed that the tool had assured the validity of the cases and even stated they could be found on Westlaw and LexisNexis.
  • Court’s Reaction: A hearing was scheduled, demanding that the plaintiff’s counsel show cause for not being sanctioned for citing “fake” cases.

Important Lessons Learned

The incident demonstrates several crucial points:

  • Inaccuracy and Fabrication: AI tools like ChatGPT can create fluent responses that appear legitimate but may include inaccuracies or even wholly fabricated information. This includes creating non-existent court decisions, citing fake endorsements, or providing incorrect procedures for legal tasks.
  • Question Phrasing: The way questions are asked to AI software may affect the information provided, but even artful prompts cannot prevent incorrect responses.
  • Need for Human Oversight: Despite the benefits of AI, human supervision and review remain critical. Any output generated by AI should be double-checked and verified through independent sources.

In addition, several other considerations cause challenges using AI tools in the legal field…

  • Lack of Specific Understanding: AI tools may lack the nuanced understanding of legal principles and jurisdiction-specific laws, leading to incorrect or overly general advice.
  • Ethical Considerations: There may be ethical concerns related to client confidentiality, conflicts of interest, and unauthorized practice of law. These concerns are part of the ongoing debate within the legal community.
  • Regulatory Compliance: Legal professionals must adhere to specific rules and regulations, which may be violated unintentionally through the use of AI. Compliance requirements may differ from state to state, adding to the complexity.
  • Dependence on Quality of Data: AI tools rely on the quality and accuracy of the data they are trained on. Any biases or inaccuracies in this data can lead to incorrect conclusions, especially in a field as sensitive and precise as law.
  • Liability Issues: Determining liability in the event of incorrect legal advice or actions taken based on AI-driven conclusions can be a legal grey area, potentially opening firms to risks and disputes.

Use AI Carefully When Preparing For Cases

The incident in the Mata v. Avianca case underscores the importance of exercising caution and understanding the limitations of AI in the legal field. ChatGPT and similar AI tools are not yet reliable for complex legal research, whether in litigation, transactional work, or other legal contexts.

Lawyers should heed the warning from this case and utilize AI tools as supplementary resources only, ensuring proper human oversight and validation.

While AI, including ChatGPT, has significant potential to revolutionize legal practice, this case serves as a sobering reminder that the technology is still evolving. Ensuring ethical compliance, accuracy, and reliability in legal practice must remain paramount, and the role of human expertise and judgment should not be underestimated.

Estate Plan Changes When Moving To North Carolina: What You Need To Know

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When relocating to North Carolina, it’s important to take into consideration the various legal changes that may impact your existing estate plan. This is essential to ensure that your assets and beneficiaries are taken care of according to your wishes. 

Although each situation is different and you should speak with one of our North Carolina estate planning attorneys to make sure you are covered, this article will cover some of the most common differences we see in estate planning between other states and here in North Carolina.

What Are Some Common Areas North Carolina Differs From Other States?

The Probate Process

  • North Carolina’s probate process can be more streamlined and may differ in terms of fees and timelines compared to other states.
  • Some states may offer more or less simplified probate procedures depending on the size of the estate.

Power of Attorney Laws

  • North Carolina has specific statutes governing both financial and healthcare powers of attorney, and these laws might not be consistent with those in other states.
  • Requirements for making these documents legally binding may vary.

Trust Laws

  • North Carolina has particular provisions and protections related to trusts, and the treatment of revocable and irrevocable trusts may be unique compared to other jurisdictions.
  • The rights of trustees and beneficiaries could be affected differently under North Carolina law.

Health Care Directives

  • North Carolina has specific requirements regarding health care directives and living wills that may differ from those in other states.

Marital Property Laws

  • North Carolina is an equitable distribution state, which means that marital property is divided in a manner deemed fair, though not necessarily equal, in the event of divorce or death. This can impact estate planning differently from community property states.

Taxation

  • North Carolina does not have a state estate tax or inheritance tax. This is in contrast to some states that may levy a tax on estates or inheritances, so tax planning strategies might differ.

Homestead and Creditor Protections

  • North Carolina has specific laws regarding homestead exemptions and creditor protections that might influence strategies for protecting assets.

Estate Plan Changes When Moving to North Carolina: A Step-by-Step Guide

Step 1: Review Your Existing Documents

Analyze your current estate plan and identify potential conflicts with North Carolina law. Look at all relevant documents, including wills, trusts, powers of attorney, and healthcare directives.

Step 2: Consult with a Raleigh Estate Planning Attorney

Finding a local team in Raleigh to guide you through the estate plan changes when moving to North Carolina is crucial. The estate planning team at Wilson Ratledge understands the nuances of North Carolina law and can help you make the necessary adjustments.

Step 3: Update Your Will and Trusts

Make the necessary changes to your will and trusts, ensuring they align with North Carolina law. This may include updating witnesses, notarization, or other specific requirements.

Step 4: Address Power of Attorney and Healthcare Directives

Ensure that your powers of attorney and healthcare directives comply with North Carolina’s specific requirements. Adjusting these documents can be vital in a medical emergency.

Step 5: Reassess Beneficiary Designations

State laws can affect how beneficiary designations are handled. Review and update these designations as needed to ensure they are in line with your wishes and North Carolina laws.

Wilson Ratledge Can Help Navigate Estate Plan Changes When Moving to North Carolina

Making the necessary estate plan changes when moving to North Carolina can seem daunting, but with proper guidance, the process can be smooth and straightforward. By understanding the legal landscape in North Carolina and working closely with the team at Wilson Ratledge you can rest assured that your assets and loved ones will be cared for according to your desires.

For personalized assistance with your move to North Carolina and the accompanying estate plan changes, reach out to the skilled estate planning team at Wilson Ratledge. We are here to help you navigate these changes – contact us today for peace of mind with your estate planning needs.

Four Strategies for Rebuilding Your Post-Chapter 11 Bankruptcy Credit

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As one of Raleigh’s leading commercial bankruptcy litigation firms with decades of experience navigating the challenging terrain of financial insolvency, we’ve witnessed firsthand the impact of Chapter 11 bankruptcy on businesses and their subsequent journey towards rebuilding their credit. 

Bankruptcy can be a profound setback, but it’s important to remember that it’s also an opportunity for a fresh start. This article provides practical, achievable strategies for businesses that are working to reestablish their financial standing. 

While the road to credit recovery may seem daunting, a proactive and disciplined approach can significantly aid your business in regaining its financial footing and improving its credit profile post-bankruptcy.

What Strategies Can We Use To Rebuild Business Credit?

Here are four solid strategies for a business to rebuild its credit after filing for bankruptcy:

  • Regular and Timely Payment of Commercial Debts: A significant part of any business credit score, similar to personal credit scores, is the history of payment. After filing for Chapter 11 bankruptcy, it is crucial to keep all existing financial obligations updated. This includes leases, utility bills, supplier payments, business credit cards, or any other type of ongoing business-related debts. Making consistent, timely payments will gradually help to rebuild the business’s credit.
  • Establish Business Credit with Secured Business Credit Cards or Loans: Post-bankruptcy, a business may find it challenging to obtain traditional credit products. Secured business credit cards or loans can be an alternative in such cases. These often require collateral (usually a cash deposit) equal to the credit limit. Responsible use of this credit—keeping balances low and making regular payments—can improve the business credit score over time.
  • Regularly Monitor and Review Business Credit Reports: Businesses should check their credit reports from the major business credit reporting bureaus (Dun & Bradstreet, Experian Business, Equifax Business) regularly for any discrepancies or fraudulent activities. Incorrect information can negatively impact the business’ credit score, so it’s important to promptly contest any errors.
  • Employ a Business Credit Repair Service: If the process appears too complex, you could consider working with a reputable business credit repair service. These types of services can assist in disputing errors on the business credit report, negotiate with creditors, and offer advice on methods for enhancing credit. As with individuals, businesses should beware of scams, and avoid any company that guarantees quick fixes or requires payment in advance.

Rebuilding business credit is not a quick process, and significant improvements will take time. Establishing and maintaining good financial practices is paramount to ensuring long-term creditworthiness.

Contact Our North Carolina Commercial Bankruptcy Litigation Attorneys Today

In the complex world of commercial bankruptcy, it’s crucial to have a knowledgeable and dedicated attorney by your side. If you’re in North Carolina and facing the challenges of bankruptcy, or need assistance in rebuilding your business credit post-bankruptcy, Wilson Ratledge can help. 

Reach out today for a consultation and let our experienced Commercial Bankruptcy Litigation Attorneys guide you through this process, providing the expert advice and support your business needs to navigate its financial future successfully. Remember, taking the right step today can put your business on a stronger footing for tomorrow. Act now to start your journey toward financial recovery.

Should You Purchase Tenant-Occupied Real Estate in North Carolina?

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Sometimes, purchasing a piece of tenant-occupied real estate is a great choice. But, other times, it isn’t.

By being aware of the advantages and disadvantages that can come from purchasing tenant-occupied real estate, you can assess whether or not doing so is the right choice for you. The North Carolina real estate attorneys at Wilson Ratledge can help review the pros and cons of tenant-occupied real estate as they apply to your specific situation.

What Is Tenant-Occupied Real Estate?

Tenant-occupied real estate refers to properties that are owned by a landlord or investor but are rented or leased out to tenants. 

The tenants may be individuals, families, businesses, or even other entities depending on the type of property (residential, commercial, industrial, etc.). The property may include houses, apartments, offices, retail spaces, and more.

What Are The Advantages Of Purchasing Tenant-Occupied Real Estate In North Carolina?

A variety of advantages can come from purchasing tenant-occupied real estate in North Carolina. Some of the most notable benefits that can come from doing so are as follows:

  • You have access to an immediate cash flow due to the presence of existing tenants.
  • You no longer need to search for good renters to occupy your new property.
  • You may benefit by having a property that is at very low risk of being left vacant in the near future.
  • You have tenants that may have a track record of taking good care of the property.
  • You can save time/money by not needing to find tenants to assist in paying any property costs.

Even though these advantages exist, there are a variety of disadvantages that can come from purchasing tenant-occupied real estate in North Carolina.

What Are The Disadvantages Of Purchasing Tenant-Occupied Real Estate In North Carolina?

A variety of disadvantages may come from purchasing tenant-occupied real estate in North Carolina. Some of the most notable disadvantages that can come from doing so are as follows:

  • You may find that the current tenants are bad tenants who fail to pay their rent.
  • You may find that the current tenants are bad ones who fail to care for the property.
  • You will be forced to rely on the previous landlord’s tenant-screening process.
  • You may find that the current tenant-screening process is inadequate and it’s difficult to evict bad tenants.
  • You might need to find new tenants if the current tenants are about to move out.

Some of the problems these disadvantages can lead to will necessitate speaking with a real estate lawyer.

Outside of those disadvantages, it’s worth noting that many tenant-occupied properties house tenants that have lived there for an extended period of time. Given this fact, if there are any rent increases you plan on proposing, the current tenants may be less than receptive to them.

Should You Purchase Tenant-Occupied Real Estate In North Carolina?

The simple answer to this question is “It depends.” 

Some people may find purchasing tenant-occupied real estate to be the best possible choice. But, others may find doing so to be a very poor choice that fails to lead to the desired security and abundance.

To determine whether or not purchasing tenant-occupied real estate is the best possible decision, it is worth considering the advantages and disadvantages that can come from doing so.

After you do so, you must go over the current tenant agreements, as well as the tenant-screening process that the previous landlord relied upon. By going over both of these, you can determine whether or not they meet your current needs and your future goals.

If you are comfortable with those advantages and disadvantages, as well as the current agreements and tenant-screening process, then it’s worth doing so. But, if you aren’t comfortable with them, then it’s best not to purchase a piece of tenant-occupied real estate.

Speak With A North Carolina Real Estate Lawyer Today

No one can determine whether or not purchasing tenant-occupied real estate is the appropriate choice for you. But, by speaking with a North Carolina real estate lawyer at Wilson Ratledge, we can assist you in determining whether or not you should buy a particular piece of real estate, and we can help you do so.