In a recent decision issued by the United States District Court for the District of New Jersey, the issue presented was whether an alleged oral agreement between divorced spouses was sufficient to overcome NJ’s automatic “revocation on divorce” statute. See Banner Life Insurance Company v. Song, 2024 WL 1270815 (D.N.J. Mar. 26, 2024).
By way of background, more than half of all U.S. states have enacted some type of revocation on divorce statute that automatically revokes a former spouse as a beneficiary under wills, trusts, life insurance policies, bank accounts and certain retirement accounts.
New Jersey’s revocation on divorce statute provides, in relevant part:
“a. Except as provided by the express terms of a governing instrument, a court order or a contract, . . . a divorce or annulment:
(1) revokes any revocable:
(a) disposition or appointment of property made by a divorced individual to his former spouse in a governing instrument . . . .”
N.J.S.A. 3B:3-14 (emphasis added).
In Banner Life Insurance, the decedent took out a $300,000 life insurance policy which designated his then-spouse as the sole beneficiary. Four years later, the couple divorced, but pursuant to an oral agreement between the parties, the decedent’s former spouse continued paying the policy premiums to remain listed as the sole beneficiary on the policy.
After the decedent passed, the premium-paying former spouse made a claim for the proceeds that the insurance company refused to process based on N.J.S.A. 3B:3-14. In addition, since the policy did not list any contingent beneficiaries, the insurance company sought out the decedent’s heirs who opened an estate for the decedent and ultimately made a competing claim for the proceeds.
To resolve the dispute, the insurance company filed an interpleader action in Federal District Court and paid the entire amount of the proceeds into court. After the pleading stage of the case concluded, the estate filed a motion for judgment on the pleadings arguing that an oral contract was insufficient as a matter of law to overcome NJ’s automatic revocation on divorce statute.
In deciding the motion, the district court framed the issue as follows: “[D]oes a contract contemplated by the statute need to be reduced to writing?” After reviewing relevant caselaw, the district court ultimately held that “[n]either the plain language of the statute nor the legislative history dictate that a ‘contract’ must be in writing to satisfy the exception to the statute’s automatic revocation.”
While revocation upon divorce statutes are meant to protect what might simply be an oversight after dealing with a divorce, there are many situations in which revocation of your former spouse as beneficiary is not the intended outcome. Conversely, it is never a good idea to rely on the default provisions of New Jersey law to remove your former spouse from your estate planning if that is your desired outcome. It is prudent to, with the help of an experienced estate attorney, review all beneficiaries after any significant life event, including marriage and divorce, in order to ensure your intent is carried out after death regardless of your state’s stance on revocation upon divorce.
Anyone who listens to the radio or watches late-night cable TV has heard or seen the seemingly endless stream of advertisements from tax debt companies promising to settle anyone and everyone’s tax debt for pennies on the dollar. And the aggressive marketing tactics of these tax debt companies—aptly labeled offer in compromise (OIC) “mills” by the IRS—don’t stop at just radio and TV waves. Anyone who has had a federal or state tax lien filed against them or their business has also likely been inundated with similar direct mail and telephone solicitations.
Given the sheer number of OIC mills and the apparent size of their marketing budgets, it begs the question: Is it really possible to settle a massive federal tax debt for pennies on the dollar?
The short answer is yes, it’s possible, but only under the right set of circumstances. Take for example, a recent client of Eyet Law who owed over $900,000.00 in back taxes that we successfully settled via an OIC based on doubt as to collectability for a one-time payment of approximately $6,000.00. Percentage-wise, that’s less than one percent, or stated differently, less than one full penny on the dollar.
Unfortunately, this astounding result is definitely the exception, not the rule, because in reality most taxpayers do not qualify for an OIC based on doubt as to collectability, and any seasoned tax defense practitioner can accurately predict the chances of success under those grounds after asking only a handful of questions. A reputable practitioner will first obtain key financial data from potential customers before giving them a realistic assessment of what their options may be.
The good news is that even if your circumstances preclude you from qualifying for an OIC based on doubt as to collectability, you still may qualify under one of the other two lesser-known and harder to achieve OIC grounds or you may even be eligible for other forms of mitigating relief.
If you have any amount of tax debt and have been contemplating calling one of the OIC mills, we recommend contacting a local CPA firm, or tax attorney, like Eyet Law, where instead you will be able to speak directly with a tax professional and receive an honest, professional assessment of your available options. Even if you have already tried using an OIC mill and did not receive the favorable result that was promised to you, we have successfully found ways to allow our clients to achieve favorable results under other available options.
On July 9, 2024, the Committee on the Unauthorized Practice of Law (the “UPLC”) appointed by the Supreme Court of New Jersey issued guidance in response to an inquiry from the New Jersey Society of Certified Public Accountants regarding the filing of beneficial owner information reports (“BOI Reports”) under the Corporate Transparency Act (the “CTA”).
UPLC Guidance
In response to an inquiry from the NJCPA, the UPLC issued guidance on whether the filing of BOI Reports constitutes the practice of law in the State of New Jersey. In general, the UPLC determined that (i) the filing of Beneficial Owner Information Reports under the Corporate Transparency Act does constitute the practice of law, but that (ii) “a licensed CPA can engage in this conduct provided the CPA notifies the client that it may be advisable to consult with a lawyer.” See NJ UPLC Dkt. No. 01-2024, at 4. The guidance goes on to further state that “[c]omplex filings require a lawyer’s judgment, training and expertise” because “the analysis may be tricky and the risk of penalties, if the analysis is faulty, is greater.” Id. In making the determination of what constitutes a complex BOI Report filing, the UPLC expressly “relies on the professionalism of CPAs to ensure that such licensees will recognize when a filing is more complex and it is in the client’s interests for a lawyer to be retained in the matter.” Id.
When is a BOI Report filing complex enough to require advice from an attorney?
Unfortunately, the UPLC guidance does not provide any examples of when a BOI Report filing is complex enough to require a lawyer’s judgment, training and expertise. It does, however, acknowledge that “most filings will be straightforward,” and provides an example of such a straightforward filing: “For example, all matters where there is a single owner of a limited liability company will be simple—that single owner is the beneficial owner of the entity for purposes of the [CTA].” Id.
Takeaways
Although not stated in the UPLC guidance, the “complex filings” contemplated therein likely revolve around the definition of what constitutes a “reporting company” and who is a “beneficial owner” of the reporting company under the CTA. On the first definitional question, the CTA identifies twenty-three categories of exempt entities. See 31 U.S.C. § 5336(a)(11)(B). On the second definitional question, a beneficial owner is defined as an “individual who, directly or indirectly . . . (i) exercises substantial control over the entity; or (ii) owns or controls not less than 25 percent of the ownership interests of the entity.” 31 U.S.C. § 5336(a)(3)(A).
Thus, it seems that the initial determination of whether a particular entity is exempt from the CTA’s filing requirements would most easily satisfy the complexity threshold discussed in the UPLC guidance. And for entities who have corporate officers and/or tiered ownership structures, the secondary determination of which individuals have “ownership interests” or exercise “substantial control” over the entity would seem to most easily rise to the level of complexity requiring a lawyer’s judgment, training and expertise to complete the filing as contemplated by the UPLC.
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