Spring 2007
In This Issue:
Estate Planning: New York's New Law on Disposition of Human Remains
Real Estate/Tax: Postponing Taxes on Real Estate
Corporate Finance: Reverse Triangular Mergers: A Convenient Truth
New York's New Law on Disposition of Human Remains
New York has passed a law to help avoid the type of confusion experienced in the wake of Anna Nicole Smith’s death.
For many years, New York has allowed individuals to name agents to carry out their wishes – whether or not the individual is able to act. The Durable Power of Attorney and Health Care Proxy are two examples of documents which allow individuals to ensure that their wishes are carried out by their agents. Effective August 2, 2006, New York State recognized a new Document, the Appointment of Agent to Control Disposition of Remains. This document allows an individual to put in writing his or her funeral and burial wishes and name an agent (and successor agents in the event the primary agent is unable to act) to carry out those wishes. The Appointment of Agent will be most helpful to those individuals who do not have close family members to see that their funeral and burial instructions are carried out.
For example, you may wish your remains to be cremated. To avoid disputes, you may wish to sign an Appointment of Agent to authorize someone you trust as agent to ensure that your remains are disposed of according to your wishes.
We have already seen decedents' wishes carried
out pursuant to an Appointment of Agent. A number of alternatives
exist that, if properly planned, make the process more cost-effective
and less stressful.
- plan donations of body or body parts to science
- plan cremation in advance with an organization such as the Neptune Society
- give clear burial instructions
- update your will and powers to reflect changes in circumstances
Postponing Taxes on Real Estate
If you sell real property that you rent, or use in connection with a business, or hold as an investment, you may be able to postpone payment of taxes that would be due on gains from the sale through a like-kind exchange under Section 1031 of the Internal Revenue Code.
To qualify under Section 1031, among other
requirements, a "replacement" property must be acquired.
The IRS rules permit some flexibility:
- a transaction may qualify as a 1031 exchange even if you purchase with the sale proceeds a percentage interest in a large property owned in common with other investors
- as many as three replacement properties may be purchased with sales proceeds
- sales and acquisitions of vacation or second home properties held for investment may qualify
Reverse Triangular Mergers:
A Convenient Truth
Sounds complicated. But the "reverse
triangular merger" is an old friend whom we have recently
visited on a number of occasions. Let's review the basics:
a merger takes place when two corporations combine their assets
and operations into one corporate entity; one survives, one
disappears. There are various types of mergers; two-party,
multi-party, triangular and reverse triangular.
The reverse triangular merger has the advantage
of having the target corporation becoming a wholly owned subsidiary
of the acquirer (parent) corporation without the target having
to end its corporate existence. The acquiring (parent) corporation
creates a wholly owned subsidiary. The shares of stock of
the target are converted into the shares of stock of the acquiring
(parent) corporation. A reverse triangular merger requires
fewer third party consents since, absent a specific prior
contractual anti-assignment prohibition with a third party,
a reverse triangular merger generally doesn't trigger an anti-assignment
provision. With respect to intellectual property license agreements,
be careful. Trademarks, copyrights and patents are key assets.
Licensors and licensees of these valuable
rights seek different end results in the event of a reverse
triangular merger. The licensor may block the licensee from
transferring licensed IP rights should the licensee become
party to a merger. The licensee, to make itself more attractive
in a merger, wants transferability of the intellectual property
licenses currently in the licensee's portfolio. If the licenses
were properly drafted, the licenses will not pose any concerns
for the reverse triangular merger. A broadly-drafted anti-assignment
provision in a license agreement may, however, block or delay
a merger. A reverse triangular merger may have a number of
other advantages for the parties to the merger. If vetted
properly, the process may be simpler than it sounds.
Firm Highlights:
- Tom Marino Chairs New York County Lawyers’ Association Federal Courts Committee
- Carol Sigmond appointed to New York State Bar Association House of Delegates
- International tax practitioner John Forry joins Dunnington
- Ray Dowd’s Copyright Litigation Handbook receives acclaim
- Tax partner Joe Michaels notes increased creations of charitable trusts and foundations
- John Dunlap helps corporations facing H-1B visa shortage
- Lou Teitel finds strong Euro driving New York real estate acquisitions
- Mike Kopcsak wins appeal on enforcing foreign judgments in New York
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