• Real Estate: Reverse Mortgage
• Estate Planning: Family Owned Businesses
• Reasonable Accommodation for Disabled Employees
• Family and Medical Leave
• Technology: Digital Millennium Copyright Act
• Finders Not Keepers
• Y2K and Bank Deposits
• Spring 1999 Topics: Technology and the Workplace; Homeowner's Insurance Coverage; Home Office Tax Deduction; Y2K; Environmental Law; Federal Estate Tax Exclusion; Estate Planning: IRA Conversions
• Winter 1999 Topics:Photocopying and Copyright Law, Private Mortage Insurance, Estate Planning, Taxes on Tips, Credit Reports 
• Fall 1998 Topics: Employment: Sexual Harrassment; Real Estate: Lead Paint Hazards; Estate Planning & Life Insurance; IRS Reforms; Credit Unions
• Summer 1998 Topics: Limited Liability Companies, Elder care, Commercial Leases, Real Estate, Estate Planning
• Spring  1998 Topics: Employment Law; Technology; Health Care; Drug Testing in Schools; Legal Protection for Volunteers; Credit Card Fraud
• Wills & Trusts Seminars
• Legal News

Reverse Mortgages

Senior citizens who own their homes outright but lack sufficient income to meet their immediate financial needs may want to consider a reverse mortgage. A reverse mortgage enables you to convert equity in your home into spendable income without having to move or sell your home. 

The amount you receive from a reverse mortgage is based on the appraised value of the property. The amount of the monthly payment you receive depends on your age and life expectancy and the term of the loan. 

Unlike a conventional mortgage, your income has no bearing on eligibility for a reverse mortgage. With a reverse mortgage, no repayment is required to the lender until you sell the home or no longer use it for a primary residence. Then, you or your estate must repay the loan with interest and any applicable finance charges. Any proceeds beyond what is owed belong to you or your estate. 

The commitment to a reverse mortgage should not be made without professional advice aimed at weighing all of the legal ramifications of the decision. For example, if you receive, or expect to receive, needs-based benefits, it will be important to understand whether and how receiving the proceeds from a reverse mortgage may affect eligibility for a range of benefits, such as Social Security, food stamps, VA benefits, state welfare programs, energy assistance, and property tax postponement for senior citizens. 

Another important consequence of a reverse mortgage is its future effects on your heirs. The flow of cash without an immediate need for repayment should not obscure the fact that a reverse mortgage, like any loan, has a day of reckoning. A substantial mortgage on your home could eventually exhaust what originally was contemplated as the primary asset in your estate. This remains your choice legally, but involvement of family members in the decisionmaking process is prudent. This will allow you and your family to consider all alternatives to attain the same goals and to reduce the likelihood that an heir might later challenge the transaction. 

Earlier this year, the federal Department of Housing and Urban Development (HUD) issued a final rule implementing measures to tighten limits on fees charged for reverse mortgages under HUD's Home Equity Conversion Mortgage Program. The rule is intended to protect homeowners in reverse mortgage loan programs from paying excessive fees to third parties for services that are of little or no value. The rule requires that a reverse mortgage be executed by a borrower who has received complete disclosure of all costs, including specifications as to which charges are required to obtain the reverse mortgage and which are not. The reverse mortgage also must be made with HUD-approved restrictions that will prevent the borrower from paying for any unnecessary or excessive costs. 

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Buy-Sell Agreements for Family-Owned Businesses 

A family-owned business is often far more than just the engine that drives the family's economic well-being. It is an entity to which family members may have an attachment that is nearly as much emotional as commercial. For that reason, a key concern of shareholders in a family-owned business is assuring that full ownership of the corporation remains within the family in the event of the death of a stockholder or upon the decision by a family member to liquidate his or her holdings. 

Shareholders in a closely held family business can utilize a variety of estate planning strategies in order to assure continued ownership of the business by members of the family. The most common strategy is a buy-sell agreement, under which all the stockholders agree that, upon the death of one of them, or upon the decision by one of them to sell his or her shares, the remaining stockholders will have the right to purchase the shares from the decedent's estate or from the selling shareholder. The purchase need not be obligatory, and thus any remaining shareholder would be free to opt out. Those stockholders who elect to participate in the buyout acquire the deceased or selling stockholder's shares pro rata, based upon their respective holdings. 

Alternatively, an agreement may be structured whereby the corporation itself, rather than the remaining shareholders, has the right (or perhaps the obligation) to purchase the shares of the deceased or selling shareholder. Many jurisdictions, seeking to protect creditors, place restrictions on the power of corporations to purchase their own shares. For example, reacquisition of its own shares by a corporation may be subject to a statutory requirement that the corporation's purchase of its own stock can be made only to the extent of accumulated surplus, or that after the purchase the corporation must be solvent. 

A hybrid of these approaches is possible as well. The shareholders' agreement may provide that the corporation can buy its own shares to the extent of its accumulated surplus (or to the extent permitted under other statutory constraints), and any unpurchased shares would then be subject to a purchase option in favor of the remaining shareholders. 

Whether shares of a family corporation's stock are to be purchased by the corporation or by the remaining stockholders, it is possible that neither will have sufficient, readily available funds to make the purchase. The problem of funding the purchase of deceased shareholders' stock may be addressed by purchasing life insurance policies on the lives of shareholders. This is particularly important in the case of older and/or controlling shareholders. 

Whatever approach is taken, a critical issue is valuation: At what price are the deceased or selling stockholder's shares to be bought? Market value would be a legitimate valuation, but it is often difficult to calculate. Family businesses are, by definition, closely held, with little or no liquidity in their stock. Thus, market value may be difficult or impossible to determine accurately. 

Book value has the advantages of relative ease of determination and apparent objectivity. However, care must be taken in situations where book value may differ significantly from actual economic value. This is true of companies with substantially appreciated assets that are carried on their books at acquisition cost. A court may refuse to enforce a transfer restriction providing for a buyout at book value when the evidence shows that the shareholder had received an offer to purchase the shares for much more than their book value. 

Additionally, situations may arise where the business's accounting methodology is questionable. Under a buy-sell agreement, an understated book value may cause a substantial hardship upon the estate of a deceased shareholder, while an overstated book value may unfairly hinder the efforts of the remaining shareholders to keep the business within the family. 

As with any estate planning issue, always seek qualified legal counsel before pursuing a business buy-sell agreement. 

The EEOC elaborates on what "reasonable accommodation" means and who is entitled to receive it. For example, the right to reasonable accommodation is available even to part-time or probationary employees. The Guidance covers the form and substance of a request for accommodation and an employer's ability to ask questions and seek documentation after a request has been made. 

Generally, the disabled individual, or someone on his or her behalf, must inform the employer that an accommodation is needed, but the request can be made in plain English, without having to mention the Americans with Disabilities Act (ADA) or use the correct legal buzzwords. The request should begin an informal dialogue to identify the person's needs and a suitable accommodation. If the disability or the need for accommodation is not obvious, the employer may ask for reasonable documentation to establish the disability and the resulting functional limitations. 

There are three categories of reasonable accommodations. They include modifications or adjustments to (1) the job application process; (2) the work environment or the circumstances in which a job is customarily performed; and (3) policies that set out the benefits and privileges of employment. 

The Guidance emphasizes that an employer should assess the need for accommodations for the job application process separately from those that may be needed to perform the job. For example, an employer must avoid any tendency to exclude a qualified individual from the application process because of speculation by the employer that it will not be able to provide reasonable accommodations necessary for satisfactory job performance. 

The Guidance goes into detail about some of the forms of reasonable accommodation, especially regarding the work environment and how a job is performed. A partial list of accommodations includes: making existing facilities accessible; job restructuring; part-time or modified work schedules; acquiring or modifying equipment; and reassignment to a vacant position. The Guidance says that an employer is required to give a vacant position to a disabled employee who requests reassignment to that position and has the minimum qualifications for it, even if other more qualified individuals have applied. 

There are limits to what the ADA requires of an employer that receives an accommodation request. For example, an employer cannot be forced to eliminate an essential function of a position, such as one of its fundamental duties. Nor does an employer have to lower qualitative or quantitative production standards that are applied uniformly to employees with or without disabilities. The employer may choose among several reasonable accommodations as long as the selected method is effective in allowing the individual to perform the essential functions of the position. 

The most significant exception to the duty of accommodation is undue hardship on the employer. The undue hardship issue concerns quantitative, financial, or other limitations on an employer's ability to provide reasonable accommodation. The focus is on the resources and circumstances of the particular employer in relationship to the cost or difficulty of providing a specific accommodation, but the required considerations go beyond a rigid cost-benefit analysis. Excessive costs can lead to a finding of undue hardship, but so can the fact that a requested accommodation is unduly extensive, substantial, or disruptive, or the fact that it would fundamentally alter the nature or operation of the business. 

You can read the Guidance on the EEOC's website .

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When Mark applied to be rehired almost two years later, the "poor" attendance rating came back to haunt him. When he did not get the job, he sued, contending that the employer had discriminated against him for having exercised his right to take medical leave. A federal trial court dismissed the claim, agreeing with the employer that the FMLA only protects "employees," not job applicants. 

Unlike the Americans with Disabilities Act, for example, the FMLA does not explicitly say that it covers applicants as well as employees. A Labor Department regulation does state, however, that it is a violation of the FMLA to discriminate against job applicants who have taken FMLA leave. Moreover, although the FMLA section allowing lawsuits refers only to "employees," the specific antiretaliation provision on which Mark relied protects "any individual" engaged in protected activity. 

A federal appellate court overturned the lower court and reinstated Mark's case. The language in the FMLA was ambiguous, as "employees" could mean prospective or former employees, not just current employees. It also helped Mark's case that the Supreme Court has interpreted the term "employees" in another federal employment discrimination statute to include former employees. The Labor Department's interpretation was reasonable and in keeping with the broad overriding goal of the FMLA: to help working men and women balance conflicting demands of work and personal life. 

Preventing Mark and others in his situation from suing under the FMLA allows employers to evade the Act by blacklisting employees who have used leave in the past or by refusing to hire individuals if the employers suspect they might take advantage of the law. 

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Late last year, the President signed into law the Digital Millennium Copyright Act (DMCA). The DMCA amended federal copyright law in several important respects, all of which are meant to update the law's application to technology that did not exist at the time of the last major revision of copyright law. The DMCA also enabled Congress to ratify the World Intellectual Property Organization Treaties. 

The DMCA prohibits circumvention of a "technological measure" that controls access to copyrighted material on the Internet. Such measures include encryption, scrambling, password protection, or other methods of access requiring the use of a "key" from the copyright owner. Going to the source of the problem, Congress also prohibited the manufacturing, importation, and sale of any technology that can be used to circumvent protective technological measures. 

Also included in the DMCA is a "fair use" provision for nonprofit libraries, archives, or educational institutions that are open to the public. They may gain access to a commercially exploited copyrighted work solely for the purpose of making a good-faith determination of whether to acquire a copy of that work. The fair use provision does not apply if an identical copy of the work is reasonably available in another form. 

To protect the integrity of "copyright management information" concerning a work, the DMCA prohibits intentionally removing or altering such information, or providing such information, knowing it to be false, with the intent to cause or conceal a copyright infringement. The main goal of this provision is to prevent removal of copyright notices, a first step in fraudulently passing off works as not copyrighted. 

The sections of the law on circumvention of copyright protection systems and on violating the integrity of copyright management information are enforceable by a civil action for damages and injunctive relief and by criminal prosecution. 

The most anticipated part of the DMCA exempts online service providers from copyright liability if certain conditions are met. The term "service provider" is broadly defined and includes not only commercial vendors but also providers of other online services, such as Internet access, e-mail, chat rooms, and web page hosting. The substance of the requirements for the "safe harbors" varies somewhat depending on the type of activity engaged in by the provider, but the requirements have these prerequisites in common: (1) implementation of a policy of terminating service to repeat online copyright infringers; (2) accommodation and noninterference with standard technical measures used to identify and protect copyrighted works; and (3) designation of an agent to receive notifications of claimed copyright infringement.

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The basis for the court's ruling is even older than the shipwreck. The judge interpreted the 1763 treaty that ended the French and Indian War as making Spain the rightful owner of Spanish ships that sank off the United States coast after 1763, while defeating any Spanish claims to ships that went down before that date. 

The salvage company did win the rights to a second ship that had sunk in the same area in 1750. The partial victory will do little for the company's bottom line, however. The second ship was not known to have been carrying any treasure. 

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