Alan B. Epstein Selected to 500 Leading Plaintiff Employment Lawyers By Lawdragon™

By SGR October 8, 2018

Alan B. Epstein, Chair of the Employment Law Group of Spector Gadon & Rosen, P.C., has been selected as one of the 500 Leading Plaintiff Employment Lawyers by Lawdragon™ in its inaugural list of the nation’s best plaintiff employment attorneys.

Those honored were selected in Lawdragon™’s research-driven, journalistic process that vets the views of peers and competitors. Practitioners who were recognized have been securing positive results for workers for 10 years to more than 50 years. Epstein was one of only 14 Philadelphia lawyers chosen for the distinction.

Epstein concentrates his practice in civil litigation representation in the areas of employment rights, civil rights and constitutional torts and the provision of transactional advice in all areas of corporate governance, including personalized advice to corporate officers, boards and board members regarding adherence to state and federal regulations. He is frequently called upon to provide transactional advice to, negotiate employment contracts and severance agreements on behalf of, and litigate matters for, corporate entities, corporate officers and directors, and licensed professionals (and their entities), including lawyers, doctors, bankers, accountants, pharmacists and architects, as well as insurance, real estate and security brokers.

Epstein has litigated complex claims before courts throughout the United States and has been admitted to practice in cases pending before numerous state and federal trial and appellate courts and administrative agencies in Pennsylvania, California, Delaware, Illinois, Louisiana, Maryland, New Jersey, New York, Texas and Washington as well as the United States Supreme Court. He is a frequent lecturer in his areas of concentration across the United States, and has served as an expert witness in state and federal courts regarding employment law and the professional and ethical responsibilities of lawyers.

He is a Fellow in the prestigious international College of Labor and Employment Lawyers and has served on its Board of Governors as an officer (Secretary, Treasurer, Vice President and then President) since 2011. He continues to serve on the College’s Board as its Past President. He holds an AV rating from Martindale Hubbell™, has been named as one of the Best Lawyers in America™ in the publication of that name for more than 10 years, and has been awarded Lifetime Achievement Awards by the Philadelphia’s The Legal Intelligencer and Marquis Who’s Who. He has been named a top 100 Superlawyer™ in Philadelphia and Pennsylvania and has also been selected as one of the nation’s 500 Leading Lawyers (2010), Top 500 Plaintiff’s Lawyers (2009), and Top 500 Litigators (2006) by Lawdragon™. He has served as a volunteer mentor and Panel Coordinator for the Employment Litigation Panel of the United States District Court for the Eastern District of Pennsylvania, and as a national leader and Inn President in the American Inns of Court movement.

In the context of significant litigation in the employment law area, Epstein is well known for his participation in high-profile litigation for individuals and corporate entities (including his representation of a young, HIV-positive attorney against a prestigious Philadelphia law firm that received national attention because of the daily televising of the trial by Court TV and CNN and the award-winning film “Philadelphia” starring Tom Hanks and Denzel Washington) and for his frequent representation of local and national sports figures, broadcast personalities, and officers and directors of large national corporations.

Epstein was also the founder and President/CEO of JUDICATE, The National Private Court System, a publicly held company coordinating private dispute resolution services through approximately 700 former judges throughout the United States and its territories. In the area of alternative dispute resolution, he has additionally lectured and served as a mediator and arbitrator by private appointment and through certification by state and federal courts.

Spector Gadon Rosen Vinci P.C. has represented clients nationally and internationally for nearly 50 years and provides counsel and expertise across the entire spectrum of legal practice, from complex litigation to sophisticated transactional and corporate matters. The firm has offices in Philadelphia, New Jersey, Florida, and New York.

The firm represents businesses, corporate boards, and highly placed individuals. Its clients are engaged in a variety of industries including finance and banking, manufacturing, hospitality, gaming and entertainment, real estate and commercial development, insurance and venture capital, energy, financial services, health care, security and telecommunications.

The firm’s practice areas include high stakes litigation, business disputes, commercial litigation, professional liability, products liability, securities, trust and estates, fiduciary litigation, bankruptcy and creditors rights, civil RICO, trade secrets, trademark and restrictive covenants, intellectual property, antitrust, white-collar criminal defense, banking and financial services, corporate formation and governance, employment, entertainment and amusements, environment and energy, wealth management, healthcare, hospitality, insurance coverage and insured casualty litigation, mergers, acquisitions and divestitures, real estate, sports and tax law.

Leslie Beth Baskin to Be Honored With Prestigious David T. Sykes Award

By SGR October 4, 2018

Spector Gadon & Rosen, P.C. is pleased to announce that Leslie Beth Baskin has been selected to receive the prestigious David T. Sykes Award from the Eastern District of Pennsylvania Bankruptcy Conference and the Consumer Bankruptcy Assistance Project.

The Award was presented to Baskin at the 30th Annual Forum of the Eastern District of Pennsylvania Bankruptcy Conference in January 2019. She was selected because of her embodiment of the qualities exemplified by Sykes, a founding member of both organizations. They include excellence and integrity as a bankruptcy attorney, unsurpassed professionalism, courtesy to and respect for all, and unwavering dedication to the bankruptcy community and the less fortunate in Philadelphia.

As a Member of Spector Gadon & Rosen and Chair of the Bankruptcy and Creditors Rights Group with more than 35 years of experience, Baskin represents creditors and debtors in non-bankruptcy work-outs and in commercial bankruptcy proceedings including Chapter 11 reorganizations. She has handled a wide array of commercial, transactional and bankruptcy-related matters including several high-profile cases in the region. She has also represented high-profile real estate enterprises in Chapter 11 reorganizations, and has been involved in many aspects of healthcare reorganizations, in and out of bankruptcy proceedings. She also has served as Chapter 11 Trustee in a high profile case involving fraud and universal violations

Baskin currently serves on the Executive Committee and Board of Directors of the Consumer Bankruptcy Assistance Project (CBAP) and was its Chair for two years. She received CBAP’s Award for Outstanding Volunteer in 2005. Founded in 1992, CBAP assists low-income qualified individuals and families in the Delaware Valley with their Chapter 7 bankruptcies.

Baskin is a past Chair of the Eastern District of Pennsylvania Bankruptcy Conference (EDPABC), a nonprofit organization that promotes the education and interests of lawyers, other professionals and paraprofessionals who work in bankruptcy and creditors’ rights law in the Eastern District of Pennsylvania.

Baskin has been elected by her peers as a Pennsylvania Super Lawyer for numerous years. She is also one of the founding members of the Greater Philadelphia Chapter of the International Women’s Insolvency & Restructuring Confederation (IWIRC) and serves as the organization’s Vice Chair.

Daniel J. Dugan and Bruce Bellingham Recognized for 15th Largest Verdict in Pennsylvania by The Legal Intelligencer

By SGR September 25, 2018

Spector Gadon & Rosen, P.C. attorneys Daniel J. Dugan and Bruce Bellingham were recognized by The Legal Intelligencer, the oldest law journal in the United States, for achieving the 15^th largest verdict in Pennsylvania as part of the newspaper’s annual list of “Top 20 Verdicts Cases” reported in its Top Pennsylvania Verdicts & Settlements of 2017. Dugan and Bellingham were recognized for their work as plaintiff attorneys in an intentional tort case involving the founder of a family business who suspected embezzlement. In T. Levy Associates, Inc. v. Michael Kaplan, Nina Kaplan, BLC Beauty, Inc., a federal court jury found in favor of the plaintiff, T. Levy Associates, Inc., in the amount of $2.13M in June 2017. Hon. Mark A. Kearny, U.S. District Court for the Eastern District of Pennsylvania, presided over the case.

The annual list includes cases reported to VerdictSearch, an affiliate of The Legal Intelligencer, for the preceding calendar year. Reports are based on information as issued after trial.

Combat Cyber Exposures Head-On With Pre-Breach Analysis

By Edward Dunham September 20, 2018

By every measure, the incident rates of cyber-attacks and confidential information disclosure across all businesses are increasing exponentially. Spector Gadon & Rosen, P.C. emphasizes pre-breach services to assist our clients in preventing breaches in the first place. Because breaches are costly, intrusive and not going away, we developed the Cyber Exposure Analysis process (CEA) to combat cyber exposures head-on. CEA is straightforward, easy to use and generates a detailed cyber risk exposure profile report based on information furnished by our clients in CEA’s assessment survey.

CEA addresses the issues that keep CEOs, General Counsel and Risk Managers awake at night by targeting the major cyber-risk areas including:

Breach of privacy claims, including non-consensual, misuse and misappropriation of personal data, identity theft and contravention of international privacy laws applicable to online businesses
Contractual exposures inherent in the use of cloud computing
Copyright, patent and trademark infringement claims
The advantages and risks associated with the use of social media in an organization
Non-Compliance with local, state, federal and foreign regulations pertaining to the safeguarding of privacy information
Liability arising from systems failures and outages, viruses, worms and data corruption, hacking and other vulnerabilities in online offerings
Trade secret protection, including questions of encryption, e-mail, extraordinary intercept measures, social media, discussion groups and Internet acquisition and distribution of trade secrets.

In the CEA process, we process the clients’ information feedback and issue a report that includes detailed responses to the clients’ answers, exposure evaluations keyed to the individual responses in the areas surveyed, graphical comparisons of the exposure areas surveyed, remediation check lists and an executive summary. Our proprietary algorithm-based technology makes possible the delivery of the report within five business days. Importantly, when the client retains us for the CEA process, what the client tells us in answering the questionnaire and what we recommend in the report is attorney-client privileged. The CEA report enables our clients to make informed cyber risk management decisions as to whether to fix the exposures, ignore them or transfer them by way of cyber risk insurance. We can assist our clients in carrying out whatever decisions they make.

For further guidance in this area, please contact Ned Dunham, Esquire, at 215-241-8802 or edunham@lawsgr.com.

Yogi Does Privacy: What US Businesses Must Do Now

By Stanley Jaskiewicz September 12, 2018

This year’s flood of privacy policy updates seem like déjà vu all over again, to quote the noted American intellectual, Yogi Berra.

Such notices to US businesses hit their stride in 2017, ahead of the May 25, 2018 effective date of the GDPR, the European data privacy law known officially as the “General Data Protection Regulation”.

However, many correctly (in my opinion) chose not to do anything in response. Whether the result of legal advice, or simple “why should I care” attitude, a purely domestic US business probably had no obligation to act under the European rule.

This year’s boom of such notices, however, hits much closer to home.

The California Consumer Privacy Act was passed in June, 2018. It regulates many firms that obtain personal information about “consumers”, defined as California residents – over 12% of everyone in the US, according to recent US Census data. https://www.census.gov/popclock/?intcmp=w_200x402

Since California is the world’s fifth largest economy, according to recent US government data, US businesses can’t ignore its requirements.

Although California law’s doesn’t become effective until 2020 – seemingly leaving plenty of time for changes, or typical legislative postponements, especially after the law’s hasty passage in June – compliance could take some time.

• Any business that sells to California consumers must give accurate privacy policy notices.

• Businesses must police their supply chain for compliance with California’s law, whether or not the suppliers are located in California.

• The law gives consumers the right to know what personal information about them is collected, how it is used, and even to require that it be eliminated from business records – the so-called “right to be forgotten”.

• The law also gives consumers the right to sue for violations, including in class actions.

But why should businesses be concerned about yet another “urgent” call to action, or dire warning?

After all, no one who spent money on Y2K compliance wants to repeat that fiasco.

But this time should be different:

• Businesses today collect more and more data in the ordinary course, whether online, or through smartphone apps.

• After many highly publicized data breaches, consumers and lawmakers alike will demand more protection as the price of giving up that data for free.

• The e-commerce revolution has led to much more data collection, regardless where a business or consumer may actually be located.

• California regulators are known to be relentless.

• The breadth of duties under the new law could take some time and considerable expense.

So, to answer the question in the title of this article – what to do now? – businesses should begin to understand what data they collect, where it is stored, and, more importantly, how it is protected.

For further guidance in this area, please contact Stanley P. Jaskiewicz, Esquire, at 215-241-8866 or sjaskiewicz@lawsgr.com or Ned Dunham, Esquire, at 215-241-8802 or edunham@lawsgr.com.

Mark A. Tarasiewicz Appointed Executive Director of Administration for Spector Gadon & Rosen, P.C.

By SGR September 11, 2018

Spector Gadon & Rosen, P.C. has announced the appointment of Mark A. Tarasiewicz as the firm’s Executive Director of Administration. In his position, Tarasiewicz will direct strategic communications, marketing and human resources for one of the nation’s top ranked full-service law firms providing counsel and expertise from complex litigation to sophisticated transactional and corporate matters.

Tarasiewicz previously served as Executive Director of the 12,000-member Philadelphia Bar Association, the oldest association of lawyers in the United States, from January 2014 to June 2018. During his tenure as Executive Director, he made significant contributions to the Association’s success, including directing an award-winning external and internal communications program, negotiating affinity and sponsorship agreements that secured several million dollars in revenue, and advancing the Association’s commitment to diversity and inclusion in the legal profession. He also served successfully in several previous capacities at the Association including Associate Executive Director, Director of Communications, Director of New Media and Publications, and Senior Public Relations Associate starting in 1995.

Tarasiewicz is a three-time recipient of the Luminary Award presented by the American Bar Association’s National Association of Bar Executives. He has also served as an elected or appointed leader within several ABA affiliate organizations. Last year, Tarasiewicz was recognized with the Pennsylvania Bar Association’s Arthur J. Birdsall Award for excellence in bar association executive leadership. He was inducted into the Philadelphia Public Relations Association Hall of Fame in 2012.

Tarasiewicz also served as Senior Communications Manager for Dechert LLP, directing marketing communications for its U.S. and international offices.

“I am proud to be working with Spector Gadon & Rosen, P.C.’s exceptionally talented team of attorneys under the leadership of Chairman Paul R. Rosen, George M. Vinci, Jr., and Managing Partner of the Executive Committee Daniel J. Dugan,” said Tarasiewicz. “For more than 40 years, Spector Gadon & Rosen, P.C. has built a reputation for quality, value, creativity and strength. I look forward to advancing the firm’s well-known reputation for putting client needs first and working tirelessly to achieve their objectives.”

“We are thrilled to appoint Mark to this important role to help guide the firm’s continued growth and success,” said Rosen. “Aligning Mark’s exceptional strategic communications, marketing and executive administration experience with our dynamic capabilities is a win-win. He is joining a respected, successful team at the perfect time as we continue to position Spector Gadon & Rosen, P.C. for the future.”

Materiality, Knowledge and Disclosure in Representations and Warranties

By Milton Cross October 2, 2017

In the April, 2016 Recent Development, I referred to Representations and Warranties that should be included in the Sale and Purchase Agreement for the sale of a business. A Representation is an assertion of fact true on the date that the party makes the Representation. A Warranty is a promise of indemnity if the Representation is inaccurate.

Buyer: The Buyer wants comprehensive representations and warranties that are not qualified by knowledge or materiality.

Seller: The Seller wants to narrow the scope of its representations and warranties and qualify by:

Materiality: qualifying the representation or warranty by materiality or what might cause a material adverse affect.
Knowledge: limiting the representation or warranty to the knowledge of certain individuals of Seller.
Disclosure: qualifying a representation or warranty with information disclosed on a disclosure schedule.

An example (there are many creative variations for each of these examples) of materiality, knowledge and disclosure follows.

Financial Statements. Seller has delivered to Buyer true, correct and complete copies of balance sheets and the related statements of income and of cash flows for the Company including its subsidiaries and partnerships for the period ended December 31, 2016 (including the related notes and schedules thereto) (the “Financial Statements”). To the best of Seller’s knowledge, each of the Financial Statements is complete and correct in all material respects, and has been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved and presents fairly the assets, liabilities, financial position, results of operations and cash flow of the Company as at the dates and for the periods indicated.

Survival of Representations and Warranties. All Seller’s representations and warranties contained in this Agreement or any other agreement, schedule, certificate, instrument or other writing delivered by Buyer, Company or Seller in connection with this transaction shall survive for ( ) years after the Closing Date, unless otherwise expressly stated herein. If a party hereto determines that there has been a breach by any other party hereto of any such representation or warranty and notifies the breaching party in writing reasonably promptly after learning of such breach, such representation or warranty and liability therefor shall survive with respect to the specified breach until such breach has been resolved, but no party shall have any liability after such ( ) year period for any matters not specified in a writing delivered within such ( ) year period.

Absence of Certain Developments. Except as set forth on Schedule _____ hereto, since the date of the Financial Statements: (a) there has not been any material adverse change in the effect of the business or assets of the Company which would materially effect the business; (b) there has not been any damage, destruction or loss, whether or not covered by insurance, with respect to the assets of the Company; and (c) the Business of the Company has been conducted in ordinary course, consent with past practice.

Termination. This Agreement may be terminated and the transaction contemplated hereby may be abandoned at any time prior to the Closing Date as follows:

(a) By the Buyer, upon a breach of Seller, or failure of Seller to perform in any material respect (which breach or failure cannot be or has not been cured within thirty (30) days after the giving of notice of such breach or failure), any representation, warranty, covenant or agreement on the part of the Company.

(b) To Seller’s knowledge, the Company has complied with all Environmental Laws and the Company has not received any notice alleging any violation of an Environmental Laws with respect to Company or the Seller’s Business or the Included Assets. Any past noncompliance with Environmental Laws by or with respect to the Company or the Seller’s Business is identified by the Company on Schedule ____, and has been resolved without any pending, ongoing or future obligation, cost or liability. To Seller’s knowledge, there has been no Release of Hazardous Materials in violation of any Environmental Law on any property occupied or leased by the Company.

If you have any questions regarding how to best sell or buy a business, please contact Milton Cross at 215-241-8811.

Federal Jury Awards $2.13 Million in a Civil RICO

By Daniel Dugan July 19, 2017

After a 4 day trial and four and ½ hours of deliberation, a jury in Philadelphia June 28, 2017, found in favor of T.Levy Associates, Inc., and held that defendants violated the civil RICO act, embezzled funds, diverted sales from the company’s customers and breached their fiduciary duties to the company. Attorneys Daniel Dugan and Bruce Bellingham of Spector Gadon & Rosen represented the company. The court entered judgment against the defendants the next day for a total of $2.13 million. Michael R. Kaplan was the longtime Executive Vice President of the company, a beauty products corporation based in Philadelphia. After building the business from scratch, Ted Levy entrusted complete management of the entity to Kaplan, his son-in-law, upon his retirement. In 2016, due to his suspicions about poor results by the business under Kaplan’s control and observation of various suspicious problems, Levy terminated Kaplan and hired a forensic accountant to review the company’s books and records. The investigation uncovered the financial wrongdoings that formed the basis for the suit, which the firm filed in September 2016. The trial focused on claims that Kaplan and Kaplan’s wife, Nina, embezzled from and defrauded T.Levy in an attempt to support Nina’s competing businesses, which lost almost $1 million over the last 8 years, and to help fund her gambling habits. The company sued the Kaplans and Nina Kaplan’s business, BLC Beauty, Inc., alleging a pattern of RICO activities, tortious interference with a business contracts, conversion, and racketeering. The company specifically alleged that the defendants used a company-issued credit card to make unauthorized purchases of personal items and inventory for BLC Beauty, failed to pay rent for T.Levy Associates’ main office/warehouse, diverted business from TLA to BLC and used company funds to repay Nina Kaplan’s personal gambling debts as well as BLC’s business-related debts. The company’s forensic accountant testified to damages in excess of $1.6 million.

The case is T.Levy Associates, Inc. v. Michael Kaplan, Nina Kaplan, BLC Beauty, Inc., No. 16-4929 (U.S. District Court, Eastern District of Pennsylvania, Philadelphia). The judge was the Honorable Mark A. Kearney.

Are You Volunteering to go to Jail?

By Stanley P. Jaskiewicz March 9, 2017

Our society is fortunate that so many of us devote hours of time to unpaid, volunteer service.

Whether at a youth sports organization, school or place of worship, the best parts of our lives run on volunteer labor. At Spector Gadon & Rosen, PC, we are proud that many of our staff and professionals have invested countless hours of their own, unpaid time to improve our community.

For all the good that volunteers do, however, do you know that volunteer activities could lead to a criminal record?

That could be the result of laws recently passed in Pennsylvania and other states, which require that volunteers get “clearances” before they may come in contact with minors.

These new laws expand on more stringent existing rules for paid employees.

Unfortunately, the definition of who must get such clearances is often not clear – and as a result the complex rules are often ignored.

In my experience, the new laws’ attempts at the complex balance between the competing goals of weeding out predators and not discouraging volunteers often frustrate both potential volunteers and leaders.

Yet despite such ambiguity, the laws specify possible criminal penalties for leaders who do not enforce them, even if no child is ever harmed.

Many organizations have tried to provide “plain English” guidance, but often use undefined terms that reinforce such ambiguity – not a useful feature when volunteers risk criminal penalties for innocent mistakes.

For example, one prominent youth organization’s website touts “interpretations” of how the law affects its volunteers, without explaining their source, or how to get them.

Stanley Jaskiewicz, a business lawyer with Spector Gadon & Rosen, PC, has worked closely with these laws as a board member of several nonprofits.

To clarify his and his colleagues’ obligations, he spoke with the legislative staffers who wrote the law. He also attended continuing legal education training sessions on legal responsibilities of nonprofit leaders.

If you are involved with an organization that relies on volunteers who may come into contact with minors, he may be able to use his experience to help you determine what you must do – before you risk the bigger problem of allowing a predator access to children.
Moreover, as a practical matter, prosecutors may not want the negative publicity of going after a coach, or teacher.

But no organization wants the negative publicity or stigma that could arise just from the mention of possible charges, especially involving youth protection.

Please call Mr. Jaskiewicz at 215-241-8866, or write to him at sjaskiewicz@lawsgr.com, to discuss whether he can help your organization stay compliant, protect your volunteers from spurious abuse claims, and, most importantly, protect your children from predators.

New Federal Law For Trade Secret Misappropriation

By Jennifer Chalal March 2, 2017

President Obama signed into law the Defend Trade Secrets Act of 2016 (“DTSA”) last week which provides a federal cause of action for misappropriation of trade secrets. Prior to its enactment, trade secret misappropriation claims were generally governed by state laws. Companies who are victims of misappropriation will now have the opportunity to litigate trade secret misappropriation claims in federal court. Notably, the DTSA does not preempt the state laws governing misappropriation so trade secret litigation can still be pursued in state court.

The substantive rights under the DTSA are largely the same as those rights provided under the Uniform Trade Secrets Act (“UTSA”) which has been adopted by most states. However, unlike the UTSA, the DTSA permits ex parte seizure of the misappropriated material under extraordinary circumstances. The DTSA also forecloses the possibility of obtaining injunctions based upon the “inevitable disclosure doctrine”. In other words, there must be evidence of a threatened misappropriation to obtain injunctive relief and injunctions cannot be based on simply on the fact that the information is known to the former employee.

Most significantly, the DTSA permits whistleblowers and individuals bringing retaliation claims to disclose trade secrets to their counsel and law enforcement officials for purposes of reporting violations of law without civil or criminal liability. The DTSA also permits the disclosure of trade secret information in court documents filed by a whistleblower or retaliation claimant as long as the documents are filed under seal. Employers are required to provide written notice of this available immunity under the DTSA in any non-disclosure agreements, confidentiality agreements and/or any other policies or manuals that govern disclosure of trade secret information. Employers who do not provide this notice will be foreclosed from recovering exemplary damages and attorney’s fees available under the DTSA. Accordingly, employers seeking to take advantage of recovering exemplary damages and fees should update their agreements and policies used with employees and contractors.

If you require assistance updating policies and agreements regarding confidentiality and non-disclosure of trade secrets or have any questions regarding the DTSA, please contact Jennifer Myers Chalal at jchalal@lawsgr.com or (215) 241-8817.

Long Term Care Planning

By Alan Mittelman December 2, 2016

Family Limited Partnerships (“FLP”) have been a great estate planning tool for many years. FLP’s can enable a family to shift significant assets and income to children or grandchildren at a very high discount. The discount can range from 25% to 50% depending upon the type of assets in the partnership. Therefore, it should come as no surprise that the IRS dislikes FLPs and sometimes examines very carefully the valuations used for gifts and in estates.

When the IRS finds an FLP that looks abusive, it will do its best to attack the tax planning used by the family. The IRS found such a partnership in Holliday V. Comm’r, a 2016 tax court case. In the Holliday case, the IRS was successful in bringing the entire partnership back into a parent’s taxable estate as if the FLP did not exist. In Holliday, this meant that the decedent’s 89.9% interest in the FLP was ignored and she was treated as owning 100% of the FLP at her death. Also, the 40% discount the estate took on the value of the FLP on her estate tax return was eliminated. Instead 100% of the value of the FLP’s assets were subject to federal estate tax.

Some of the mistakes this family made were (i) the formation of the FLP, funding of the FLP, the transfer of the general partner interests to the decedent’s children and the gifts of limited partnership interests were all made on the same day, (ii) the partners never held partners’ meetings, (iii) the general partner was not paid for managing the FLP, (iv) the FLP made only one distribution instead of regular annual distributions, (v) the court could find no “non -tax reason” for the FLP, (vi) the court was convinced there was a deal to hold the money in the FLP for the parent just in case she needed it during her lifetime and (vii) the FLP was formed by the son using a power of attorney after his mother (the decedent) went into a nursing home. This combination of bad facts resulted in a FLP being disregarded and brought back in the parent’s estate when she died.

What to do if you have a FLP and want to preserve the value for your family? The following is a partial list: (i) have annual meetings of the partners, (ii) pay some modest compensation to the general partner, (iii) make annual distributions to all of the partners, (iv) wait at least 6 months after formation of the FLP to transfer any portion of the parent’s interest to children or trusts and (v) don’t wait until the parent is in a nursing home. And just because you made gifts of FLP interests and filed a gift tax return, you still need to follow these guidelines. Otherwise there is a risk of the FLP being brought back into one’s taxable estate and the loss of substantial discounts on the assets. It is an excellent idea to have an annual checkup of your FLP to see how it complies with the tests that the IRS now is using to evaluate FLPs. Please give us a call to review your FLP or to help you take advantage of a fine estate planning tool when used right.

Please feel free to contact Alan Mittelman 215-241-8912 or amitt@lawsgr.com if you have any questions.

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