Mette, Evans & Woodside

Six Mette, Evans & Woodside Attorneys Named “Best Lawyers”

Mett, Evans & Woodside - Recognized as Best Lawyers 2020

Attorneys pictured left to right: Howell C. Mette, Timothy A. Hoy, James A. Ulsh, Thomas A. Archer, Gary J. Heim, Mark S. Silver

Six Mette, Evans & Woodside attorneys have been selected by their peers for inclusion in The Best Lawyers® 2020. Attorneys Howell C. Mette, Timothy A. Hoy and James A. Ulsh were recognized again this year.  Attorneys Thomas A. Archer, Gary J. Heim and Mark S. Silver were recognized for the first time.

Best Lawyers is the oldest and one of the most respected peer review publications in the legal profession. The Best Lawyers designation is based on an exhaustive peer-review survey in which more than ninety thousand leading attorneys cast over ten million votes on the legal abilities of other lawyers in their specialties.

Selected in the tax law category, Howell C. Mette, the founding shareholder of Mette, Evans & Woodside, has long been recognized for his work in trusts and estate planning. Mr. Mette was first named Best Lawyer in 1987.  He is also AV rated by Martindale-Hubbell and has earned the recognition of Super Lawyer.

Timothy A. Hoy, current President of Mette, Evans & Woodside, was recognized for his work in banking and finance law. Mr. Hoy focuses his law practice on assisting businesses and financial institutions. In addition, Mr. Hoy has taught Payment Systems at Pennsylvania State University – Dickinson Law and at Widener Law Harrisburg.

James A. Ulsh, a long-time shareholder, was recognized for business organization law. Mr. Ulsh concentrates his law practice on banking, commercial law, healthcare issues, employee benefits programs and estate planning and administration. He has previously been named a Super Lawyer and is also AV rated by Martindale-Hubbell.

Thomas A. Archer, Chair of the firm’s Litigation Practice Group, who was selected for personal injury law, has more than twenty-five years’ experience in civil litigation. In his practice, he represents injured people and their families throughout Pennsylvania and New Jersey. He regularly serves as an adjunct faculty member in Widener University’s Intensive Trial Advocacy Program.

Named “Best Lawyer” in trusts and estates, the focus of Gary J. Heim’s practice during his legal career of over 35 years has been agricultural law. He provides a broad range of legal services to Pennsylvania’s farm and agri-business community and has counseled thousands of the state’s family farms with the transition of those businesses to the next generation through his statewide practice.

Mark S. Silver, who has been recognized in real estate law, serves as Special Counsel to Mette, Evans & Woodside. Mark concentrates his practice in eminent domain. In addition his work in eminent domain, Mark’s legal practice encompasses other areas of real estate law including: land use, subdivision and zoning, and transactions.

Mette, Evans & Woodside has a long-standing tradition of providing comprehensive legal representation in Litigation, Estates and Trusts, Business and Real Estate. Founded in 1969, the firm provides clients throughout Pennsylvania with sound legal counsel for all facets of their professional and personal life.

If You are the Only Member of a Limited Liability Company (LLC), What Steps Should You Take to Protect Your Family if You Should Unexpectedly Pass Away?

LLC-agreement-paperworkBy Timothy A. Hoy, Esq.

A: First, you should understand Pennsylvania law on the effect of your death on the limited liability company (LLC). Unless you have an operating agreement for the company which says something different, the law provides that the company will cease to exist within 180 days of your death. The law obligates the executor of your estate to wind up the affairs of the company, which generally means liquidating the assets of the company (e.g., selling equipment and collecting accounts receivable), paying the company’s creditors, and distributing any leftover funds to your estate. Do not assume that your executor or your heirs have the authority to continue the operations of the company, except as necessary to wind up the company.

Second, you should consider creating an operating agreement for your company. The rules summarized in the preceding paragraph can be changed in the operating agreement. Many single member limited liability companies view an operating agreement as unnecessary, but specifying what will happen to the company following your death is one good reason to have one. For example, you may want to specify in the operating agreement that your entire interest in the company, including the authority to govern the company, may be transferred via your will.

Finally, you should consult with an attorney to prepare the operating agreement and either an attorney or a financial advisor about succession planning for your business. This short summary of the law in Pennsylvania and the value of an operating agreement should be supplemented by comprehensive advice from your advisors.

Revised Rules Regarding Garnishment of Federal Benefits

by Tim Hoy and Melanie Vanderau

Garnishment of Federal Benefits

The final interim rule governing garnishments of accounts containing certain federal benefits (31 CFR § 212.1 et. seq.) has been amended. The final interim rule, effective May 1, 2011, was established by the Department of the Treasury, the Social Security Administration, the Department of Veterans Affairs, the Railroad Retirement Board, and the Office of Personnel Management (“Agencies”) and created a procedure financial institutions were required to follow when receiving a garnishment order for accounts containing direct deposits of federal benefit payments. This procedure established a “protected amount” in connection with federal benefit payments that could not be held, frozen or otherwise garnished.

The amendments primarily serve to explain and clarify vague or otherwise unclear provisions of the interim final rule. They were effective June 28, 2013 and were in response to public comments solicited and received by the Agencies. An overview of the amendments follows:

The definition of “benefit payment” now states that such payment will be made by direct deposit and will have the character “XX” encoded in positions 54 and 55 or the Company Entry Description field and the number “2” encoded in the Originator Status Code field of the Batch Header Record of the direct deposit entry. The amendments add the requirement of the number “2” in the Originator Status Code, which serves to verify that the payment is in fact a federal benefit.

The definition of “garnishment order” now states that garnishment orders specifically include (1) levies; (2) orders issued by states, state agencies, municipalities or municipal corporations; and (3) orders to freeze assets in an account. These types of actions were all omitted from the definition in the interim final rule, which led to a need to clarify the definition to provide broader protections to federal benefits and guidance to financial institutions.

The definition of “protected amount” has been clarified to provide that the “protected amount” is the lesser of either (a) the amount of federal benefit payments deposited during the lookback period, or the balance in the account when the account review is performed. This was amended from “the balance in the account at the open of business on the date of the account review”, clarifying that the account balance will include intraday items such as ATM or cash withdrawals.

The rules regarding a financial institution assessing a garnishment fee have been amended. The prior rule provided that a financial institution may not assess a garnishment fee against a protected amount, and may not charge or collect a garnishment fee after the date of the account review. The amendments now provide that while the financial institution may not assess a garnishment fee against a protected amount, it may charge or collect a garnishment fee up to five business days after the account review if funds other than a benefit payment are deposited to the account within this period, provided that the fee may not exceed the amount of the non-benefit deposited funds. This permits financial institutions, if they choose, to monitor accounts for up to 5 days after the account review for a deposit of funds that is not a benefit payment in order to assess a garnishment fee. The Agencies also reaffirmed that the rules provide no restriction with respect to charging a garnishment fee against an account that does not contain any protected amount whatsoever.

With respect to the notice requirement, pursuant to the amendments, a financial institution is only required to send the statutory notice to account holders in cases where there are funds in excess of the protected amount. The prior rule provides the notice in even cases in which there are not funds in excess of the protected amount and thus no funds are held. In light of concerns about this leading to confusion for the account holder, this notice requirement was eliminated.

The Agencies’ comments to the final rule also clarify that the account review is only necessary if the financial institution will give effect to the garnishment order. If the financial institution has made the determination to give no effect to the garnishment order, there is no need to perform the account review under the federal rules. This would occur, for example, in the event that the account was exempt from attachment under state law, e.g. an account titled in the name of husband and wife in Pennsylvania.

As a general matter, applicable state law may provide greater protections than the federal law, and, to the extent not inconsistent with the federal procedures, should be followed. For example, Pennsylvania law requires that in the absence of a court order, a financial institution shall not attach the first $10,000.00 of each account containing any funds which are deposited electronically on a recurring basis and are identified as exempt. In most cases, this will offer greater protection to the account holder that is not inconsistent with the federal rule, and so the Pennsylvania rules will govern.

If you have any questions related to the amendments, or to the interpretation of the federal rules generally, please contact Mette, Evans & Woodside. Additionally, if you would like analysis or interpretation on the interplay between the federal rules and any applicable state garnishment rules, we can assist you.

Timothy a. Hoy, Esquire
tahoy@mette.com
Melanie L. Vanderau, Esquire
mlvanderau@mette.com
(717) 232-5000

The Perils of Joint Bank Accounts

by Timothy A. Hoy

The Perils of Joint Bank Accounts

Many people set up joint bank accounts with a friend or child for “convenience,” so that the other person on the account can easily write checks, pay bills, and otherwise assist with daily financial chores. Other times, joint bank accounts are used as a rudimentary form of estate planning – to provide for the automatic ownership of the funds by the surviving owner. However, there are several risks involved when adding another person to a bank account for “convenience” or “just in case” purposes. Before creating a joint bank account, one should be aware of some of the potential consequences of that decision.

The real benefit to establishing a joint bank account is that it is a simple and easy way to make sure that someone else will be able to access your funds. There is little paperwork to set up the joint account, and it is very easy for everyone to get money out. While sometimes this situation will work out perfectly fine for the original account holder, often there are several problems that will arise.

The Other Joint Account Holder Will Have Unrestricted Access to the Funds

Typically, either party to a joint bank account has the right to make unlimited withdrawals, regardless of who deposited the money. Each joint owner will be able to withdraw money from the account freely, without the other owner’s permission.

Some people unfortunately take advantage of the easy access to money in a joint account. In some cases, joint owners who were supposed to be managing an older relative’s money have improperly used the money for their own benefit. With a joint bank account, the once trustworthy niece faced with financial difficulties can now invade her aunt’s savings without knowledge or consent. While it is possible to take legal action under these circumstances, it is often very difficult, expensive, and time-consuming to attempt to get the money back.

The Money Could Get Caught in the Middle of the Other Joint Owner’s Legal Problems

A joint bank account may be vulnerable to legal attacks by creditors of either joint owner. For instance, if a joint bank account owner goes through a divorce, his spouse could claim a right to some of the funds in the account. Even if the joint owner who deposited all of the money could prove that he contributed all of the funds to the account, he might have to go to court to stop the other owner’s spouse from getting the money. Another possible scenario is that an adult child, whom has been added by his parent to a joint account, is sued by a creditor, or gets involved in a serious automobile accident and is sued for more than the policy limits of his insurance. If a judgment is entered, the judgment creditor has the right to ask the child, under oath, about all of his assets and the location of any bank accounts in which he has an interest. The parent may not have notice of the looming disaster until the joint account is garnished. At that time, the account could be frozen, and the money could be turned over to the creditor, unless the parent were to appear in court and succeed in having the garnishment set aside. In the meantime, outstanding checks may bounce, credit may be affected and legal fees will be incurred – without a clear path to a successful outcome.

Other Considerations

There are other pitfalls that are associated with joint bank accounts. For example, the estate may have to pay an inheritance tax on the funds in the account to which someone else’s name was added, even though it was assumed the account would automatically pass to the joint account owner outside the estate probate process. Pennsylvania imposes an inheritance tax on jointly held property upon a joint tenant’s death. For example, if a parent contributes 100% of the funds in an account held jointly with a child and survives the child, one-half of the proceeds held in the account will be deemed taxable to the deceased child. This result can seem unjust and may be an unintended consequence of hasty planning. Another consideration that is not as common, but should be considered, is the impact on Medicaid. Transferring property into joint ownership with other people can be considered divestment under the Medicaid regulations. The penalties for divestment include, among other potential items, disqualification from receiving benefits and a disqualified person may have to sell property which is otherwise exempt to pay nursing home expenses.

Conclusion

Jointly held property ownership can be a very effective and inexpensive way to transfer property at death, if everything goes according to plan. However, unforeseen developments can make this a very expensive substitute for a proper estate plan. If one is thinking about adding someone to a bank account for convenience or estate planning purposes, the risks and benefits should be weighed carefully. There are better and safer ways to make sure that one’s heirs receive deposited funds after death. Alternatives, such as pay-on-death accounts, durable powers of attorney and the benefits of implementing a comprehensive estate plan, should be discussed with an attorney.