Denver Estate Planning

In Business--Nothinng matters until there is an enforceable contract.

I recently had a client call wanting to sue a consulting firm she had been negotiating with to help her in a start-up business, becuase they had failed to communicate with her for several months in response to her last counteroffer on their proposed consulting contract.

She had just gotten off the phone with the consultant's receptionist, who acknowledged that her counteroffer had been received some time past, but who failed to put her through to any of the principals and gave her no satisfactory response as to what might be the next step in the process if any. My client was so angry and expressed an intent to sue the consulting firm for loss of revenue and bad faith.

I had to advise her to send a letter withdrawing her counter offer and to move on to another consultant or contact. There is no basis for suit, just because someone is unresponsive to a contract proposal. Under contract law, her counter offer amounted to a rejection of the consultant's original proposal and a new offer to contract on the terms with which my client was comfortable. There is no duty to respond to a proposal within any given time or at all for that matter. The period of time she decided to wait for a reponse was up to her, whether a week or three months. It was up to her to decide when to move on and the consulting firm can not be held responsible for any delay she encountered in the process.

The step of withdrawing the counter offer was a precaution to avoid any further complications. Technically, an offer without a specified time limit for acceptance might be accepted at any time and once accepted, may constitute an enforeceable contract.

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Want to get paid for family help?--Keep good records!

Having signed contracts, paper invoices, and good record-keeping are just as important in a family setting as they are in business.

Failure to have those records can result in an awful headache for even
the best of us. The maxim proves itself once again Forbes' recent re-telling of the story of Anthony Olivo, a tax lawyer who neglected proper record keeping of his services to aged parents and the IRS had little sympathy.

Anthony had been a tax lawyer for nearly two decades, with his own practice. However, when the needs of his aging parents grew too great. Anthony turned to become a full-time, live-in caregiver for his parents from 1994-2003, receiving negligible income from his practice and working long, hard hours just trying to support everything. He even became the estate-planning attorney for his parents’ estates and in this
capacity brought the matter of deductions before the tax court in the case of Olivo v. Commisioner.

Anthony was hoping to deduct his services from his mother’s estate in three payments: $55,000 in accountant and attorney fees, $44,200 in administrators commissions, and finally a whopping $1.24 million for care services over the 9 year period. The deductions were denied.

The tax court didn’t doubt that services had been rendered, and admirable ones at that, as far as care was concerned. After all, without his care it would have taken round-the-clock care from nurses to support his parents. Nevertheless, the court found that there simply weren’t enough records. The family had never formally established that
Anthony’s care services were intended to be paid for as there was no agreement and no paperwork. There wasn’t even an estimate of the value of his services as he was not a professional care-giver. Of course, he was a a professional tax lawyer but even those services were contested by the court. He didn’t keep records, invoices. He had nothing but sparse notes and estimated hours. In fact, there was even some question as to whether Anthony could bill the estate at all for legal services, much less deduct them from the estate. It simply wasn’t enough on all counts.

The bottom line is that the minutia of detailed documentation and burden of formal arrangements are absolutely necessary within the family, even as they are in business, at least so far as the IRS is concerned.

The same would be true in almost any court of law which is asked to approve payment for services to one's family, whether as an executor, personal representative, agent under power of attorney, or trustee. If you want to be paid, keep good records. And if you want to avoid a contest with the other members of your family, get a written agreement approved upfront as to what services will be rendered, the fees to be charged and the source and timing of payment.

Reference: Forbes (July 18, 2011) “Tax Lawyer Son’s Help, Priceless?”