Tips & Traps

Trap:
Tax on Early Distributions.  Internal Revenue Code Section 72(t)(2)(E) provides an exception to the 10 percent additional tax on early distributions from individual retirement accounts (iras) for higher education expenses.  In general, distributions from iras are considered “early” if made before the taxpayer is age 59 1/2.  Higher education expenses include such things as tuition, fees, books, supplies, expenses for special needs services, and equipment required for the enrollment or attendance at an eligible educational institution.  The ira higher education exception does not apply, however, to an early distribution from a 401(k) account.   So was the Tax Court ruling in Henry Uscinski, et ux., tcm 2005-124 (2005).

William Forsberg
Parsinen Kaplan Rosberg & Gotlieb
Minneapolis
wforsberg@parlaw.com

Tip:
Mandatory Mediation.  Arbitration clauses are becoming increasingly common in contractual employment agreements.  As an alternative to conventional litigation, arbitration generally saves time and money, maximizes expertise in the decision-making process, and maintains greater confidentiality.  But some arbitrations take on a life of their own and become mini-lawsuits.  Often these are devoid of any meaningful opportunity for appellate review, due to multiple Minnesota precedents establishing that the decisions of arbitrators generally are impervious to appeal in the absence of fraud, corruption, or other egregious circumstances.

Achieving the desirable goals of adr can be enhanced by including a mandatory mediation clause in a typical arbitration agreement.  Including a provision in an agreement calling for mediation of disputes prior to arbitration can focus the parties on dispute resolution economically and efficiently.  A typical clause might read as follows:  “In the event any dispute arises under this agreement, the parties shall first attempt to resolve the dispute through mediation pursuant to the provisions of Minnesota Civil Mediation Act, Minn. Stat. §572.31, et. seq.”

Since there is a high rate of settlement in mediation, requiring the parties to mediate prior to resorting to arbitration increases the likelihood of early dispute resolution for the benefit of all of the parties.

Marshall H. Tanick
Mansfield, Tanick & Cohen, PA
Minneapolis
mtanick@mansfieldtanick.com 

Tip:
Profitable Hours. A few hours spent reviewing your practice expenses and shopping for better prices may prove to be the most profitable hours of your year.  Areas to consider include:

   Long distance and cellular phone service:  can you save money by changing plans with your current carrier, or by changing carriers? 

   General liability, auto and professional liability insurance:  Can you reduce expenses by changing carriers, reducing coverages or increasing deductibles?  

   On-line legal research:  Can you reduce your monthly cost by eliminating features you don’t need or use?

Keep in mind that cheapest is not necessarily best. 

Mary Martin
Law Offices of Mary K. Martin
South St. Paul
MMinlaw@aol.com

Tip:
Wills; Interested Witnesses. Does your client want to use close relatives as witnesses to ensure privacy or as a matter of convenience? What the law allows, common sense and professional duty oppose. Witnesses attest that the testator is of “sound mind and under no constraint or undue influence,” Minn. Stat. §§524.2-504. In a dispute, the testimony of witnesses as to capacity or undue influence could be discounted if they are also beneficiaries interested in the outcome. Even if there is no challenge to the will, in any falling-out after death complaints from disgruntled family members may make the lives of related witnesses miserable. A witness also named as a fiduciary by the will may face similar credibility problems.  The better practice may be to put convenience aside and ask the testator to select friends, remote relatives, your office staff, or other disinterested parties as witnesses.

Theresa K. Readio
Law Office of Theresa K. Radio
Savage
treadio@mcleodusa.net 

Trap:
Procedures vs. Customs.  Does your firm have uniform practices and procedures or informal customs to guide members of the firm in getting things done?  Law firms with customs tend to be run like a prehistoric tribe: whoever is around the campfire when a new process is created learns and perhaps follows that process.  Others are left to wonder how the law firm started doing things that way. By contrast, a law firm with a carefully conceived, written set of practices and procedures is able to closely replicate outcomes on similar matters. 

Every law firm thinks that it is organized, but few are.  Try these questions to assess your situation: 

Are your “ways of doing things” in writing or simply in the heads of those doing them?  If the latter, you are not organized. 

Can you readily suffer the departure of a key employee, knowing their replacement can quickly come up to speed by reviewing the law firm’s practice and procedures manual?  If so, you’re well on the way to getting organized.

Are members of your firm continually asking who is responsible for certain functions, e.g., benefits, cle, ordering supplies, etc.?  If so, you’ve got some organizing to do. 

Customs or procedures; catch as catch can, or organized and thought out: the choice is yours.

Michael J. Ford
Quinlivan & Hughes
St. Cloud
mford@quinlivan.com