Presentation Transcript

1. Legal Topics of Interest to Auctioneers

   Stephanie McGehee-Shacklette Harned bachert & McGeheePSC 324 E. 10th Avenue Bowling Green, KY 42101 Office: (270) 782-2928 Direct: (270) 783-5250 Cell: (270) 202-8470 mcgehee@hbmfirm.com www. hbmfirm.com www.hbm4u.com
2. Topics ● Probate Primer/Estate Sales ● Medicaid Recovery/Elder Law ● Independent Contractor v. Employee
3. Probate Definitions Testate Estate—had a Will Intestate Estate—no Will Personal Representative—person appointed to administer the decedent’s estate.
4. Real Estate Issues ● Real Estate is not a “probate asset” ● Title passes at death ● But—Real Estate may be subject to decedent’s debts
5. Descent of Real Estate ● Testate Estate – by Will ● Intestate Estate – to heirs-at-law ● Laws of Descent and Distribution ● Affidavit of Descent and Distribution – recorded with County Clerk’s office ● By Operation of Law Ex: Joint Tenancy with Right of Survivorship
6. Sales of Real Estate ● By Power of Sale in the Will ● But, Beneficiaries have a say ● Unless sale of real estate necessary to pay debts of estate ● By Deed from Heirs-at-law ● Heirs at law and spouses must sell, not personal representative ● By Order of the Probate Court
7. Concerns Who Should Auctioneer be Dealing with? Who is the Appropriate Person to Sign the Auction Contract? Executor/Personal Rep Can Sell Personal Property
8. Medicaid ● Ajoint federal-state program of medical assistance for low-income individuals who are aged, blind or disabled. ● Income and asset limitations. ● Homestead property and all contiguous property (i.e., the principal residence) is excluded for purposes of determining Medicaid eligibility for married couples. ●For unmarried Medicaid recipients, the home loses its excluded status after the Medicaid recipient has been institutionalized for six months; however, this six-month exemption does not apply if the home is valued over $525,000.
9. Interplay of Medicaid and Real Estate Sales ● Medicaid Eligibility ● Was property sold for FMV or was it gifted in whole or in part? ●If gifted, what’s the penalty (period of ineligibility)? ● Medicaid Estate Recovery ● Can the State recover the benefits it paid from the Decedent’s estate
10. Medicaid Eligibility Medicaid’s Concern: Did applicant give away all of his property to qualify for Medicaid? If so, then we are going to penalize the applicant by subjecting him to a period of ineligibility. Example: Applicant sells the family farm to Son for $50,000. If FMV of farm is >$50,000, then a partial gift was made and applicant will be ineligible for Medicaid for some period. How do we determine FMV?
11. MedicaidEligibility How to Determine FMV: ● Negotiated sale to disinterested 3rd party ● Appraisal Example: Son is not a disinterested 3rd party. And they did not get an appraisal. How does Medicaid determine FMV? Rule of thumb: If the PVA value is $50,000 or less, then there probably wasn’t a gift. No penalty. But: if PVA is > $50,000, Medicaid will say there was a gift unless applicant proves otherwise (get an appraisal).
12. Medicaid Estate Recovery Why: Federal law requires it. Who: Medicaid nursing home residents Exemptions: • Surviving spouse • Minor child • Disabled child of any age on social security disability or SSI (based upon disability, not low income) • Assets under $10,000
13. Medicaid Estate Recovery What: “All real and personal property or other assets in which the deceased recipient had legal title or interest at the time of death, to the extent of the recipient's interest, whether the asset was conveyed to a survivor, heir or assign of the deceased recipient through joint tenancy, tenancy in common survivorship, life estate, living trust or other arrangement.”
14. Medicaid Estate Recovery When: After the nursing home resident passes How: The State will send the Personal Representative a letter asking the estate to repay everything the state paid, and the amount that should be repaid. Ask: Does an exemption apply – if so, no estate recovery.
15. Medicaid Estate Recovery The Home Often, the only asset remaining at the death of the nursing home recipient is their home. Medicaid will want the family to sell it. If the family does not want to sell it, they will need to negotiate a fair price with Medicaid, less liens and costs of sale, and someone will have to come up with the funds to purchase it. If the family does not want to purchase or sell it, then Medicaid has the option to sell the home.
16. Guardianship ● A legal relationship between a capable adult (the “Guardian”) and a person who has been determined legally disabled by a jury (the “Ward”). ● There will be a Court Order appointing the Guardian and defining the scope of the Guardian’s duties.
17. Guardianship What Auctioneers Need to Know ● The appointment of a Guardian VOIDS a POA. You must thereafter need with the Guardian, not the POA. ● An auction contract to sell a Ward’s real property must be approved the Court. A Guardian cannot sell real estate without a court order. This will take time.
18. Independent Contractor v. Employee Workers Compensation and the IRS Different Systems; Different Goals; Different Rules
19. Workers Compensation Social Legislation designed to provide benefits to injured workers. Thus, a tendency to presume workers are “employees”.
20. Workers Compensation Investigation Analysis* Fiscal Years 2006-2011 FY 2006 FY 2007FY 2008FY 2009FY 2010FY2011 Number of Investigations 7,797 10,049 10,415 10,798 11,400 10,497 Number of Citations 1,052 1,000 966 979 1,015 958 Penalties Collected $1,19M $1.36M $1.06M $1.53M $1.70M $1.77M *information taken from OWC Annual Report available at http://www.labor.ky.gov/workersclaims/Pages/Research-and-Statistics.aspx.
21. Workers Compensation Test ●The nature of the work performed as it relates to the possible employer (*Most Important) ● The extent of control over the details of the work ● The professional skill of the Worker ● Intentions of the Parties.
22. Workers Compensation How to Maintain Independent Contractor Status: Have a Written Agreement with IC for each sale Rotate IC’s – don’t use the same people every time Allow IC’s to work with others Allow IC’s to be independent – don’t control their work; don’t supply their tools.
23. Internal Revenue Service General Rule: An individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.
24. Internal Revenue Service 20-Factor Test The three most important factors are: ● Instructions to worker ● Job Training ● Worker’s ability to make a profit or suffer a loss
25. Internal Revenue Service Safe Harbor The reasonable basis test: IRS is prohibited from reclassifying the worker as your employee if have a “reasonable basis” for treating a worker as an IC. Must show that one or more of the following conditions exist: ● A court ruling in favor of treating workers in similar circumstances as non-employees ●A Revenue Ruling stating that similar workers are not employees subject to employment taxes ●An IRS Technical Advice Memorandum or Private Letter Ruling issued to your company, indicating that the particular worker isn't an employee ●A past IRS payroll audit that didn't find workers in similar positions at your company to be employees; or ●A longstanding, widely recognized practice in your industry of treating similar workers as independent contractors.
26. Questions? Contact me: Thank you! Thanks also to Greg Harvey, who prepared the materials on Independent Contractors v. Employees. Probate/Elder Law Questions: Stephanie McGehee-Shacklette mcgehee@hbmfirm.com (270) 783-5250 Employment/Workers Comp Questions: Greg Harvey harvey@hbmfirm.com (270) 783-5255