If you want to be able to have control over what happens to your assets once you die, it’s highly recommended that you create some sort of estate plan, which can be done with the help of an estate planning lawyer. While creating an estate plan can vary in complexity depending on your situation, there are a range of mistakes that you can easily make if you create one without the assistance of an attorney.

What Is Estate Planning?

Estate planning is the process of making plans for how your assets are going to be handled when you die. The estate that you have extends to every kind of property that you own. The types of property that can be a part of your estate include savings accounts, investments, cash, cars, clothes, homes, and retirement accounts. The main objectives of estate planning include making sure that the majority of your estate is given to your beneficiaries, that guardians are assigned for any minor children, and that you pay the lowest amount of taxes on the estate. 

The main components of an estate plan include a will and a trust. A will is a type of legal document that details what happens to your property once you die. When creating a will, you can denote how your property is spread to your beneficiaries. For instance, if you have two children, you might consider transferring your home to your children in a 50/50 ownership split. A trust is a type of arrangement wherein a third-party trustee manages your estate on behalf of any beneficiaries.

1. Not Planning for Unexpected Events

The most common mistake that people make when creating an estate plan is forgetting to plan for the unexpected. Maybe there’s a sudden change to your assets or one of your children gets divorced. These big life changes may require you to make alterations to your estate plan. It’s important that you update your estate plan whenever these changes occur. 

However, you might also want to consider placing your assets in a trust, which will allow you to control when your assets are distributed and to whom they are distributed to. You don’t have this level of control with a will. With a trust, you could set the ages at which your children receive assets from your estate. However, you could also deem that these assets aren’t provided to your children if they are a danger to themselves, which is a possibility that you need to take into account because of potential unseen issues such as drug addiction or other issues that you can’t fully plan for. 

2. Not Planning for Potential Death of Beneficiary

It’s also important that you plan for the potential death of a beneficiary. Many people make the mistake of believing that their beneficiaries will ultimately live long enough to obtain the assets from their estate plans. If you have two beneficiaries and one of them dies, you might want to make a note of where the money will go. You could have the assets go to the immediate family of the deceased beneficiary or to the other beneficiary. If you don’t make a note of this in your estate plan, there will likely be complications that the remaining beneficiary will need to handle. 

3. Other Beneficiary Problems

There are a range of additional beneficiary problems that you should keep in mind. If you don’t name a contingent beneficiary for your insurance policies and retirement accounts, your beneficiaries may not be able to benefit from a stretch IRA tax break. Some individuals also forget to remove an ex-spouse from an IRA once they become remarried, which can create an array of issues in the future. While your spouse will automatically become your beneficiary for a retirement account on the day that you’re married, this isn’t the case with an IRA. 

4. Not Coordinating Retirement Plans and Trusts

Many individuals will place a living trust or other type of trust as the beneficiary of their various retirement plans. While this can be advantageous in many situations, placing certain types of trusts as beneficiaries of an IRA can actually increase taxes. A trust that is the beneficiary of your retirement account must have specific language in it that marks it as a see-through trust, which should get rid of any tax issues. 

5. Not Updating Your Powers of Attorney

A power of attorney is a kind of document that denotes another individual as being able to act on your behalf when you’re no longer able to do so. The actions that a POA takes care of include handling your assets as well as a wide range of other personal, business, and financial matters.

It’s recommended to name a power of attorney for your financial decisions and a separate power of attorney for your medical decisions. Many people forget to update their powers of attorney, which can lead to numerous complications if you unexpectedly fall ill or are no longer able to make your own decisions.

If there’s an issue with your estate plan or you’re having difficulties understanding an aspect of your will, contact Wilson Ratledge today so that we can provide you with the legal assistance that you need.

Whether you’re starting a new business and wish to incorporate it or are looking to convert your general partnership or sole proprietorship into a corporation, incorporating a business takes only a few short steps along with a small fee.

Before you get started, it’s essential that you understand everything that goes into incorporating a business in North Carolina, which should help you avoid making any costly mistakes. 

Select a Name for Your Corporation

The first step of incorporating a business in North Carolina is to select a name for your corporation. The name that you select must be original, which means that it can’t be used by any other business in the state. It can sometimes be difficult to find the right name for your business, which is due mainly to very similar names being rejected as well.

If you find that the name you prefer has been reserved but has not yet been used, it’s possible that you could transfer the name over to your business once an agreement has been made with the current owner. 

Keep in mind that every corporation must include an ending like “corp”, “inc”, or “incorporation”. Other corporate endings that you can choose from include “limited”, “corporation”, or “company”. These words aren’t considered when the Secretary of State is deciding if your name is too similar to other business names in NC.

The name that you choose cannot imply or state that the company is going to be used for some other purpose than the one that is currently indicated. Some of the words that you’re unable to use unless you receive legal qualification to do so include wholesale, realtor, architect, architectural, bank, banker, insurance, mutual, certified public accountant, surveyor, or engineer.

Once you’ve found a name that you like, you’ll have the option to reserve if for a small fee if you are still going to wait a couple months before fully incorporating the business. 

File the Proper Forms

Once the company name of your choice has been verified, Articles of Incorporation will be filed with the North Carolina Secretary of State. There’s a substantial amount of information that must be included in these forms in order for your application to be accepted. You’ll need to list your exact corporate name, which includes all of the necessary abbreviations and proper punctuation.

If you have any classes of stock with your business, the total number of shares for each stock class will need to be listed. Any limitations or preferences regarding this stock must also be included. 

The street address, county, and name of the registered agent will need to be provided as well, which can be the same address as your company’s. This address is where all of the official correspondence from the state will be delivered.

In order to file Articles of Incorporation, there must be one or more incorporators. The address and name of each incorporator should be listed on the forms. If you wish to set some bylaws for your corporation, these can be included as optional provisions on the document. In order for your filing to be accepted, a standard cover sheet must also be placed on the document.

Pay the Requisite Filing Fee

Currently, the state filing fee that you will be required to pay to incorporate your business is $125. It may take around 8-15 days for your business to become incorporated in North Carolina. However, it’s possible to pay an additional fee to expedite the process. If you want a decision to be made within 24 hours, you can pay an additional fee of $100. An extra fee of $200 can be paid if you want them to provide you with a same-day response.

Once the documents have been filed and the fees have been paid, all that’s left for you to do is to wait. You are not allowed to use the business name that you’ve chosen until the document is approved by the North Carolina Secretary of State. 

Our North Carolina Business Lawyers Can Help

While incorporating a business in North Carolina is a relatively straightforward process, there are a range of mistakes that you could make if you don’t know exactly what you’re doing, which is why it’s highly recommended that you retain the services of an experienced business attorney.

The team at Wilson Ratledge will be able to help you fill out all the paperwork and answer any questions that you might have about the process. If you find that the response to your application is taking longer than you expected, we can find out what’s causing the delay. 

If you require assistance with incorporating your business in North Carolina, call us today to schedule your consultation.

A new business of even a modest size is bound to have some interaction with an attorney. When disputes arise, the attorney-client privilege can become an important question in business litigation. If you’re beginning a business, it’s important to understand how attorney-client privilege works in the context of business. It’s also important to be aware of recent developments in the law in North Carolina bustiness-related attorney-client privilege as stated in the Technetics Group Daytons, Inc v. N2 Biomedical, LLC case from late 2018.

Attorney-client privilege in North Carolina

Understanding attorney-client privilege for business matters in North Carolina begins with understanding the basics of the attorney-client privilege. The attorney-client privilege prevents the attorney from disclosing things that the client tells the attorney in confidence in the course of litigation. North Carolina’s rules for attorney-client privilege are found in Rule 1.6 of the North Carolina Rules of Professional Conduct.

In addition, the United States Supreme Court has long acknowledged the public importance of the attorney-client privilege because it allows clients to fully communicate with their attorneys in a way that allows the attorney to efficiently represent the client and provide sound advice. As a matter of public policy, courts have ruled that the benefits of open communication between lawyer and client outweigh the loss of relevant information when a dispute arises.

The privilege belongs to the client and not to the attorney. The client must consent to the waiver of information. Any kind of expression by which the client conveys information to the attorney is covered by the attorney-client privilege. The privilege extends to agents of the attorney but doesn’t extend to facts or information obtained from independent sources.

Communications from third parties also aren’t privileged. Also exempt from privilege is the fact that the client consults with the lawyer, the date of the consultation and the identity of the lawyer.

North Carolina’s attorney-client privilege for business matters

In any business relationship, agents speak on behalf of the business. So it makes sense that the attorney-client privilege extends to certain employees or representatives of the business. The question becomes to whom the attorney-client privilege applies. To put it another way, who from the company is a representative of the company such that attorney-client privilege applies to communications between the individual and the business attorney?

The answer to the question depends on the facts of each case. In addition, the guidelines for determining whether an individual is a representative of the business continues to grow and change. The General Court of Justice Superior Court Division recently offered some insight in its ruling in the Technetics Group Daytona, Inc v. N2 Biomedical, LLC case.

North Carolina’s Technetics Group Daytona, Inc v. N2 Biomedical, LLC case and attorney-client privilege in business relationships

At issue in the Technetics v. N2 case was the creation of a patent through mutual agreement between the companies. Although the two companies had a cooperative working agreement, they disagreed about who had the legal rights to the patent created as a result of the work. Technetics sought to obtain documents that N2 claimed were protected by the attorney-client privilege. The documents involved communications between an independent contractor working for N2 and the attorney.

Technetics argued that because the communications involved an independent contractor rather than an employee, the communications could not be protected from disclosure by the attorney-client privilege. N2 argued that the contractor acted in the place of an employee, that the communications were necessary for effective communication between the business and the attorney and that the business and the contractor had a common legal interest that extended the privilege to the contractor’s communications. The court sided with Technetics on all of these issues.

Does attorney-client privilege extend to consultants in North Carolina?

The North Carolina court rejected these three arguments when ruling that attorney-client privilege did not extend to the independent contractor in the Technetics v. N2 case:

1. Functional equivalent argument

Until the court ruled in the Technetics case, North Carolina didn’t have a test for when a representative counts as an employee for the purposes of the attorney-client privilege. N2 argued that the contractor was essentially an employee of the corporation. While it’s true that some federal courts extend attorney-client privileges to non-employees like accountants, the court ruled that the contractor in the case didn’t meet the standard to qualify as a non-employee contractor.

The court ruled that the standard is whether the individual is the functional equivalent of a person with primary responsibility for a key corporate job. Among the questions is whether the individual is likely to have information not possessed by anyone else at the company. The court ruled that an independent contractor like the person at issue in the Technetics case didn’t meet this high standard.

2. Necessary communications argument

The next argument that the North Carolina court rejected was the Kovel doctrine. The doctrine states that a third party’s communications are privileged if they’re necessary for the attorney to provide effective services to the client. The court rejected the argument in the Technetics case saying that the third party’s involvement must be more than just convenient. Rather, the third party must have indispensable information or a specialized purpose in being present at the communications.

Essentially, the third party must be more or less an interpreter to explain technical information to the attorney or the client in order to make the attorney’s representation effective. The court ruled that the N2 independent contractor was not necessary to make the attorney-client communications effective for the business.

3. Common interest doctrine

The common-interest doctrine says that when the client and a third-party have a common legal interest or endeavor, communications may be privileged. The privilege may apply whether the business and third party have the same or different legal counsel. The purpose of the common interest doctrine is to allow parties to share information freely in order to build their respective cases.

However, the court ruled that the independent contractor in the N2 case didn’t have any legal interest at all. He couldn’t possibly have had a common legal interest with the business because he had no legal interest in the subject matter of the litigation. The court rejected N2’s assertion of the common interest doctrine and all of the proposed assertions of attorney-client privilege based on the independent contractor’s relationship with the business.

Attorney-client privilege and North Carolina corporations

In the age of contractors, micro-task workers and other limited-service relationships, it’s important to understand that attorney-client privilege has its limitations. Communications between non-employee workers and company attorneys may not receive the benefit of attorney-client privilege.

In addition, even employee communications may not be subject to privilege depending on the role and rank of the employee making the communication.

When you’re starting a business and running your business, it’s important to understand that the attorney-client privilege is not without its limitations.

Our qualified North Carolina business attorneys can help you understand best practices for handling sensitive information and protecting your business interests and all stages in the life of your business.

Did you know that the federal Internal Revenue Service (IRS) and the North Carolina Department of Revenue (NCDOR) don’t always have to give you notice before they can take your property? Sometimes, the tax authorities can take your property without any notice at all. When the tax authorities seize your property without notice, it’s called a jeopardy assessment.

There are strict rules that apply for when the government can seize property through a jeopardy assessment. There are also rules that allow you to challenge the assessment and demand return of your property. Here’s what you need to know about jeopardy assessments from our North Carolina tax dispute attorneys:

What is a jeopardy assessment?

A jeopardy assessment is a special tax liability that occurs without notice. In cases where the government taxing authority believes that a person is actively taking steps to conceal assets in order to avoid a tax levy, they may immediately seize assets. A person who faces a jeopardy assessment may challenge the assessment including asking for a hearing in front of a judge.

How does jeopardy assessment work?

When a person has an outstanding tax liability, the government may seize their assets in order to collect the tax liability. Both the IRS and the North Carolina Department of Revenue allow for jeopardy assessments in certain situations. If the tax authority believes that it’s necessary to seize assets without giving notice, they may use the jeopardy assessment procedures and take the property immediately. The tax authority may dispose of the property to satisfy the tax debt after a waiting period.

How do I know if a jeopardy assessment reasonable?

In order to make a jeopardy assessment, the taxing authority must have reasonable, objective facts that the person is taking steps to conceal property or planning to conceal property. Preparation to leave the United States, transfer of the property to a third person, attempts for the taxpayer to render themselves insolvent or attempts to take any other action to evade tax collection may justify a jeopardy assessment. Here are just some of the considerations that a tax assessor may rely on to determine whether a jeopardy assessment is reasonable:

• Whether the debtor does business using large amounts of cash
• Low reported income tax compared to the amount of cash in the taxpayer’s possession
• Dissipation of assets
• Assets available for tax seizure
• Use of aliases that may make it harder to find the taxpayer or find what assets belong to them
• Using multiple addresses that make it harder to find the taxpayer
• Whether the taxpayer provides necessary financial information on their tax documents
• A history of criminal behavior and whether there is evidence that the taxpayer has participated in illegal activity
• A history of overseas asset concealment
• Recent property sales and transfers
• Transferring property to friends or relatives for less than the value of the property
• Transferring property during an investigation

The purpose of a jeopardy tax assessment is to allow the tax authorities to seize the property before the debtor can conceal or transfer the assets. The tax authority must defend the seizure on the basis that it’s reasonable under all of the circumstances.

North Carolina jeopardy tax assessment laws

North Carolina jeopardy tax assessment laws are found in North Carolina General Statutes 105-241.23. The law says that if the tax assessor believes that immediate collection is necessary to realize the collection of a tax, they may seize the property with no waiting period. Within five days, the Secretary must provide a written statement of the facts that they rely upon in order to initiate the property seizure.

The taxpayer has 30 days after receiving the notice to initiate a review. If the debtor requests a review, the Secretary has 30 days to issue a written decision withholding or rescinding their decision to seize the property. If the debtor is still unhappy with the decision, they may request a judicial review of the seizure within 90 days.

If the debtor chooses to challenge a jeopardy assessment in civil court, the debtor files their appeal in the Superior Court of Wake County or in the county of their residence. The court has 20 days to hear the appeal. The grounds for court review is whether the seizure is reasonable.

United States federal tax assessment laws

The U.S. federal tax assessment laws come from Internal Revenue Code §§ 6851 and 6861. The laws say that when the date has passed for filing and there’s a reason to question assessment of property, IRS officials may make an immediate assessment without the normal notice and collection procedures. In typical assessment cases without jeopardy action, the IRS must provide notice of intent to levy and a demand. The debtor may request a hearing. But when jeopardy applies, the debtor doesn’t have the right to notice.

The IRS may initiate a jeopardy assessment when a person doesn’t file or pay taxes or when a person understates their tax liability. There must also be a reason to believe the person is actively taking steps to protect their assets from lawful seizure. Within five days of the assessment, the IRS must provide notice of the assessment and an explanation of the right to review. The debtor has the right to appeal the decision for judicial review within 90 days of receiving the results of the administrative review. The question for judicial review is the reasonableness and appropriateness of the jeopardy assessment. The only issue available on appeal is whether the court based the assessment on the reasonableness of the seizure.

What to do if you’re facing a jeopardy tax assessment

Are you facing a jeopardy tax assessment in North Carolina or from the IRS? You can fight the seizure, and you can also fight the underlying tax assessment. You must work quickly. You have only days from the notice of the seizure to fight back. One of the experienced North Carolina attorneys at Wilson Ratledge can help you evaluate your case and pursue all of your options. We can give you advice that’s unique to your situation and help you defend your rights under North Carolina and federal law.