Law Articles

1. Life Insurance. Life Insurance is a frequently misunderstood topic as it relates to estate planning. Most of the time life insurance policies are payable to a designated beneficiary or beneficiaries. If that is the case, the life insurance proceeds are not covered by the terms of a Will at all.

Did you know that?

This really hits home for people who have been married more than once. Consider the impact to a current spouse if her husband passes away and the former spouse was inadvertently still listed as the beneficiary on the life insurance policy taken out during a prior marriage.

As an aside, I am often asked if there is a way to control the life insurance policy under the terms of the Will. This can be accomplished by designating "The Estate of the Insured" as the beneficiary on the life insurance form. But, does this necessarily make sense in every situation? Not necessarily. Consider the effect as it relates to creditors. For example, if a life insurance policy is payable to the estate, the proceeds would be subject to the claims of creditors. Whereas, if the insurance policy remains payable to the designated beneficiary, it is not subject to the claims of creditors.

So, not only is it important to periodically review one's life insurance policies to make sure that the beneficiary or beneficiaries designated still make sense and a former spouse is no longer listed unless you are feeling generous, make sure you understand the implications of your decisions and how proceeds will be disbursed.

2. Bank Accounts. If a bank account is registered solely in one individual's name and unless that person has designated someone as a beneficiary of the bank account, the account balance will become a general asset of the estate. On the other hand, did you know that if the bank account is held jointly with someone else, that other person would have the right to withdraw the funds in the account and/or close the account? Consider the situation where an older client, Jane, (who is widowed) adds one of her three children as an authorized signatory on a bank account in the event of an emergency. But, Jane's desire is for her three children to share equally in her estate upon her death. In this scenario, the possibility exists that upon Jane's death, her one child (who is listed as the signatory) could close Jane's bank account and retain the funds. Does this sound like it could happen? How many times have I heard clients say that everyone in their family gets along and there is no cause for concern? That's great. But, money can influence things. Be careful. And to make sure this problem is avoided, appropriate language can be included in Jane's Will about these funds and the bank account to ensure the proceeds go to her estate.  

3. Year's Support. Georgia provides for a Year's Support to a surviving spouse and minor children. Did you know that the main advantage for Year's Support is that the amount awarded takes priority over everybody and everything with the exception only of a secured creditor for an asset that is awarded? But, is Year's Support appropriate in every instance? As an example, consider the situation where someone has been married before and he/she wants to provide for the children from the prior marriage. Contrast that with the situation where a couple is newly married and has no children. Depending upon the financial circumstances of the decedent, it may be a good idea for the surviving spouse to have the right to elect Year's Support and to receive the benefits under the Will versus one or the other. Bottom line: it's important to make sure to review your Will and ask the questions as it relates to Year's Support so as to make sure everything is drafted appropriately for your particular situation.

Of course a lot could be said about these areas and it is always recommended to talk with the appropriate professional regarding specific situations, but I hope this high level summary was helpful. 

 

Social media is an excellent way to expand and maintain your network. While much of it is informal, a recent Minnesota lawsuit is creating quite the stir as it is the first known case to involve restrictive covenant violations via social media networks.

In March, TEKsystems, Inc. ("TEKsystems") an IT staffing firm, filed a lawsuit involving the professional networking site of “Linkedin”. In its suit, TEKsystems claimed violations of non-competition, non-solicitation and non-disclosure agreements entered into by three former employees, including a woman named Brelyn Hammernik. TEKsystems alleges Hammernik wrongfully contacted former clients and coworkers and that her “Linkedin” page would provide the evidence. Her new employer, Horizontal Integration, Inc., was also named as a defendant.

As a result of recent discussions I have had with others and in an effort to shed some light on this evolving area, I put together the following questions and answers.

Key Questions and Answers:

Q. What does TEKsystems mean for social media and the practices of employees?

A. Well, this case could certainly prompt employers to become a bit more aggressive with regards to enforcement of restrictive covenants in employment agreements and alleged violations of social networking. 

Q. How exactly does social media fit in with a non-solicitation and/or non-compete clause anyway?

A. It's important to review the language. Does it specifically prohibit any and all communications to former co-employees or former clients? If so, the use of social media to communicate with those individuals could be problematic. An email, a status update, or comments on a newsfeed are all forms of communication. We are beyond the arena of sending a letter or picking up the phone. There are a lot more options now. Be careful. If you are unsure about the interpretation of a clause in your employment agreement, make sure to talk with a professional.  

Q. What can employers do?

A. Employers should talk with employees to ensure they understand their contracts and any limitations on communication. Employers need to make sure their contracts are thorough. Employers should try to anticipate as many disputes as possible and build those into the contract so as to avoid litigation.

Q. What can employees do?

A. Employees should review their contracts and make sure they understand what is and what is not appropriate before engaging in the behavior. If in doubt, employees should not hesitate to ask.

Of course, there are many levels to this. Think of the following questions:

• Taken to the extreme, would this require an individual to de-friend or remove previous contacts?
• Who owns customer lists? What about a status update talking about a new job posting?
• What about a status update where an employee expresses his love for the job and says others should work at the company too? Is that considered a violation of a non-solicitation clause?

Perhaps this Minnesota case will shed some light on the issue of social networking. Given the prevalence of social networking, especially among co-workers, this is an issue that will not go away anytime soon. And, with certain proposed changes in Georgia's restrictive covenant laws coming up for a vote in November with Georgia House Bill 173, the entire landscape in this area already seems poised for change.

Stay tuned. In September's newsletter, I'll write about the proposed changes to the law in Georgia.

Small Business Owners and Entrepreneurs often ask me about legal problems facing most small businesses and for suggestions on how to avoid those problems.

Here are the 5 key mistakes I see being made and my suggestions on how to avoid them:

1.  Failing to Maintain or File Proper Organizational Documents.  

Individuals interested in forming small businesses do not necessarily spend the time researching the proper organizational structure of their new businesses and the implications of such decisions. You have a brilliant idea and are anxious to begin earning money.  Do you read the necessary materials? Do you conduct research? Do you ask experts for advice and counsel?  Are there pitfalls if you don’t?  Possibly.  

It’s not enough just to decide on the right ownership structure for your business. If you decide on a business structure that requires documentation  (such as a corporation) you must follow all the requisite formalities and maintain all documents in good working order.  You must also keep up with all filings.

My suggestion?  If you are considering starting a small business or know someone who is, I can’t stress enough the importance of thoroughly researching all your options and talking to an expert or even two.  Laws do change.  Take the time and go through the process.  Educate yourself.  I did the very same thing when starting my own law firm as well as my organizational company, Paige of All Trades, L.L.C.  Then, create a list of all required documents and filings and have everything in a clearly marked binder.  Make sure to timely comply with all filings.   Otherwise, you could be exposing yourself to personal risk because courts may “pierce the corporate veil” and find you personally liable if they believe that the corporation wasn’t properly established or maintained.

2. Failing To Check An Employee’s Non-Compete Agreement.

Many employment agreements contain non-compete provisions that prohibit employees from competing with their former employers for a period of time after the conclusion of employment. 

My suggestion? If you are planning to start your own business, thoroughly review any employment agreement  you may have signed with your former company to see if there are any restrictions.  It is not a bad idea to have an attorney review it to see if you would be bound by any of these provisions.  If you are working with others to start a business, review each other’s employment agreements to make sure everyone has full knowledge and understanding of the landscape.  Or, once again, have an attorney review these agreements.  If you fail to take the time to do these things,  not only may you  be restricted in the activities you can perform in your new venture, but you could risk your own credibility, have a former employer  possibly damage your new business or worse, even haul you into court.  It doesn’t hurt to be too careful.

3. Weak or Non-Existent Employment and/or Independent Contractor Agreements.

Many small business owners utterly fail to create, or have an attorney create, the requisite employment agreements for their employees. If you fail to have proper and executed documents on file, your employee (who may very well have had access to confidential or proprietary information while employed by you) could suddenly decide to leave his job and compete with you. Or, if your employee stays, there could be trouble down the road because your company policies were not clearly defined and understood. Verbal agreements can often be difficult to uphold in court. Why experience the hassle of added aggravation and possibly additional legal expense when trying to enforce your rights, absent such written agreements? 

If you aren’t hiring employees but are working with independent contractors, the same advice holds true. 

My suggestion? Protect your interests and rights with a properly worded employment agreement and/or independent contractor agreement, depending on the situation.  Consider having an attorney help you draft these. Yes, there will be some legal expense involved up front.  But the investment and the security will likely be worth it because in the long-term, you will be using these documents with every employee and independent contractor that comes through your door. And, know that your being proactive will likely save you money and time on the back end.

4. Litigation!

Litigation is expensive. VERY expensive. I know, that is not a shocking revelation to many of you. I spent six years as a litigation associate before striking out on my own.  Legal fees can mount rather quickly and it is not uncommon for a company to pay MORE in legal fees than it would have cost to settle the dispute. It is highly unlikely that a small business owner, or any business owner for that matter, wants to spend precious time and money focused on litigation.

My suggestion?  Seek legal advice before you make important decisions with respect to your business. You very well will end up saving more money in the long run.

5. Failing To Get Legal Advice When Appropriate.

Many small businesses and startups try to save on legal costs by simply avoiding hiring an attorney. Some try to get by on their own by cutting and pasting from legal documents found from websites.  This may work out, but oftentimes, it can be a dangerous practice.  You don’t know whether the sources are credible or whether the documents that you’ve cobbled together from a myriad of sources are appropriate and/or complete.  You may inadvertently be using a different state’s laws.  Or, you haven’t shared the entire picture with that attorney who you’ve spoken with for thirty minutes during a free consultation.  If you make the wrong decisions or enter into legal agreements that don’t protect your interests, those actions might end up costing you MANY times more than what it would have cost you to talk to an attorney at the outset.  In the long run, you likely may threaten your business interests if you fail to ask for legal advice when appropriate.

My suggestion? Retain an experienced attorney who understands the needs of small business owners. Experienced attorneys can save you time, aggravation and money by providing the right advice at the right time.  Please don’t fall into the trap of trying to cut costs and compromise your business by failing to get legal advice when necessary.

Items in this article may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This article is general in nature and is not intended to provide specific legal or other advice.