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As the economy remains depressed, most who still have a job feel fortunate, however, lack of economic growth usually translates into steady or even declining compensation – often in the face of demands for greater productivity.  Hard times like these, in turn, sometimes motivate workers, from the lowest paid to the highest, to seek to supplement their income through skimming profits from their employer  How do you spot a person who is likely to engage in dishonesty within the firm, and how do you prevent it?

Editor: David Bilinsky & Laura Calloway

Currently, Ohio has an exemption amount of $338,333, which is equal to a tax credit of $13,900, dollar for dollar.  Ohio’s Legislature has three different bills working their way through Congress that address updating that current law.  H.B. 61 would increase this “credit” to $15,575 indexed to Consumer Price Index (CPI) and permit townships and municipalities to exempt property within their political subdivision.  H.B.326 would exempt taxable estates under $366,250, indexed for inflation, beginning in 2011 and reduce top tax brackets.  H.B. 456 would repeal the estate tax effective January 1, 2011.  All three have been referred to the Ways and Means Committee of the respective House of Congress.  Because of the extreme budget deficit facing Ohio, the likelihood of a full repeal of the taxes has dwindled greatly.  Look for an increase in the exemption amount indexed to inflation, instead.

Ohio does however provide a few opportunities to defer and/or eliminate estate tax, if planned for appropriately.  First, life insurance is not included in the taxable estate unless the estate is specifically named as the beneficiary.  Second, a trust that qualifies for Ohio’s Qualified Terminable Interest Property (QTIP) marital deduction allows a surviving spouse to defer estate tax until the death of the surviving spouse. Also that same trust allows a surviving spouse to take advantage of a life estate marital deduction, thus altogether eliminating a portion of the Ohio estate tax that would have otherwise been due upon the first spouse’s death.  The bottom line is very simple estate planning can result in tremendous estate tax savings even at the state level. 

On the federal side, the estate tax laws that were enacted as part of the “Bush tax cuts” under EGTRAA in 2001 were set to expire at the end of 2010.   Without further legislation the 2001 act would have expired, leaving the estate tax exemption at a $1 million pre-2001 level with the highest tax rate at a whopping 55%!

However, with the passage of the 2010 Tax Relief Act, the good news is the exemption amount increased to $5 million per person. In addition, for gifts made after 2010, the gift tax is reunified with the estate tax with a top gift tax rate of 35 percent and a maximum applicable exclusion amount of $5 million. Prior law had decoupled the federal gift and estate tax maximum applicable exclusion amount. The 2010 Tax Relief Act reunifies the gift and estate tax maximum applicable exclusion amount for gifts made after December 31, 2010.

Finally, the 2010 Tax Relief Act enacted “portability” into the law for tax years 2011 and 2012 by amending Section 2010(c) of the Internal Revenue Code. It created an election for estates of decedents dying during those two years to make the deceased spouse’s unused exclusion amount available to the surviving spouse, both for gift and estate tax purposes. For example, if the first spouse only used $2 million of the available $5 million exemption, an election could be made on the federal estate tax return of the first spouse to die allowing the unused $3 million exemption to pass over to the surviving spouse in effect giving the surviving spouse an 8$ million dollar exemption. 

Unfortunately, the increased exemption amount, the reunification of the federal estate and gift tax and the “portability” attributes are only in effect until December 31, 2012. In the event Congress does nothing, the 2010 Tax Relief Act will “sunset,” meaning the estate tax exemption amount will once again drop to the $1 million pre-2001 level with the highest tax rate reaching 55%, the federal estate and gift tax will be decoupled and the “portability” feature will disappear.  Well…that should make for an interesting Presidential election year! 

 Please contact Jeff Stagnaro (513-533-2981 or jstagnaro@fssp-law.com) or any attorney in our Estate Planning practice area for assistance in both planning your own estate and assisting you in administering the estates of loved ones. 

The first point to consider is front-end credit evaluation.  Take time and the opportunity to evaluate your current credit review policies and (if applicable) vendors.  Is the information you are receiving current and reliable?  Have you noticed any failures or loopholes in the process that have resulted in credit losses?  It goes without saying that taking the necessary steps up front to evaluate credit risk is a major factor in the long term health of receivables, aging, and profitability.

Next, we recommend evaluating and implementing procedures to structure debt obligations to assure payment to the greatest extent possible, with respect to each of guarantees, security, and lien rights.  Guarantees are necessary to insure payment from a credit-sound person or entity, when the primary obligor is either of questionable risk or is without a significant credit history.  Regardless of the credit-worthiness of the obligor, a guaranty from a company principal is a good idea.

Retaining security against personal property delivered on credit is, more than ever, a necessary device for our corporate clients.  Too often we have seen goods shipped without security, which severely limits the shipper’s ability to recover assets or damages on the back-end of a bad transaction.  A quality security agreement that protects the shipper’s rights to goods and proceeds does require a modest investment of time and capital on the front end.  However, the benefit is a significant increase to assurance of payment, and it should be a planned prerequisite of any manufacturer or distributor. 

Likewise, those companies involved in the construction trades need to preserve lien rights at each of the job evaluation, shipping, and payment stages of their transactions, so as to insure profitability.  Like security agreements against personal property, the lien laws invariably include a number of procedural and substantive requirements that must be followed in order for lien preservation and priority against real estate.  If missed, there are penalty-type provisions in the statutes that may hamper, if not cripple, the seller’s rights to payment.  Proper legal counsel involves outlining each step in the lien process and preparing the forms and documents necessary to secure the seller’s lien for goods and labor. 

Extension of credit is not the proper time or forum for trying to establish friendly and amicable relationships with new customers.  Too often we see sellers who have been burned by making sales on someone’s good nature or word.  Networking or advertising, as the case may be is, the time to drive in new business.  When it comes to credit, focus should remain on properly securing debt and protecting the corporate bottom line.

 Please contact Sean Donovan at 513-533-2705 or sdonovan@fssp-law.com to review your business’ credit extension policies.

Buy-sell agreements serve two functions by (1) restricting transfers of ownership interests in the business, and (2) creating a limited market for the ownership interests. This prevents ownership interests from otherwise falling into the hands of outsiders who aren’t active participants in the business or who lack a long-term commitment to the business. Although few people are interested in purchasing interests in closely held businesses, sales do sometimes occur. In addition, outsiders can acquire interests as a result of involuntary transfers in creditors’ rights or marital dissolution proceedings involving a business owner, and business interests can be transferred by gift or by contribution to the capital of another business entity. Buy-sell agreements typically seek to restrict transfers of all types by giving the business or the other owners the right to purchase any interest that an owner wishes to transfer voluntarily or that has been transferred involuntarily.

The lack of a market for interests in small businesses can create an awkward situation when an owner retires, becomes disabled, or dies. The affected owner will no longer be employed by the business, and the owner, or his or her family, may need to liquidate the business interest to pay living expenses or to seek investments providing a greater current return. At the same time, the other owners may prefer not to have a co-owner who is no longer involved with the business and very likely will be even less interested in having members of the former owner’s family as co-owners. The interests of all parties can be accommodated if a buy-sell agreement requires the business or the other owners to purchase the interest of an owner on retirement, death, or disability. By specifying the price and terms of purchases, the buy-sell agreement can also streamline ownership transitions and avoid costly disputes at times when a business may already be vulnerable as a result of having lost one of its principal owners.

Please contact Jim Keller in our Business Law practice area at 513-533-2983 or

jkeller@fssp-law.com to review and update your buy-sell agreement.