Peacock Tales • Fall/Winter 2019

 

Tips & Trends

 

Our Fall newsletter is focused on current legal tips and trends across several practice areas. We hope that this content will inform you and provide practical advice when considering your legal needs. 
 

BUSINESS LAW

Underfunded and Inadequate Shareholder Agreements

Soon-to-retire shareholders often take comfort in the fact that they have entered into a shareholder or buy/ sell agreement with their business partners. Once the exit date approaches, however, they’re stunned to learn that the value they expected from their nest egg is untenable for the company under present circumstances. No one wants to see a business they helped to build go under, but at the same time, money matters, especially in retirement. These agreements should be examined periodically, if not annually. A business without such an agreement is doomed to fail.

Succession Planning Too Late

Succession planning is a difficult topic. Family businesses are entrenched in the status quo, and a Mom and Pop shop can’t be run by Mom and Pop forever. At least ten years before retirement, Mom and Pop need to think not only about the future of the business, but of the family as well. The next generation is going to be in charge at some point, so the gap should be bridged sooner rather than later. An untimely death or disability, rash retirement, or departure of a key employee can haunt the next generation for years to come.

Unplanned Investments

Real estate is usually thought of as a solid investment, though not without liability. Whether by forming a corporation, limited partnership, or limited liability company (LLC), risk can be mitigated from the outset and personal assets can be protected. However, too often first time investors jump at the chance to buy a prime piece of property without thinking of the legal and tax consequences of the purchase. An investor who purchases first, and worries about the legal aspects later, faces a hefty tax bill: the realty transfer tax (2-4% of the value of the property) to deed the property into a company. This is one of many reasons to consult an attorney before making such a big decision.

ESTATE & TRUST LAW

Incentive Trusts

Mom and Dad have worked hard to give their kids every advantage in life. A problem arises when a child hasn’t yet proven himself or herself able to manage money, gain an education, hold down a job or handle personal problems. An incentive trust is an excellent way to fetter a child’s access to inheritance through performance or behavioral conditions, while still providing a safety net in the event that he or she experiences an unforeseen, unfortunate circumstance such as disability, loss of job, or death of a loved one.

Second Marriages

Whether by divorce or the untimely death of a spouse, second marriages have become commonplace. With love and affection comes complications, usually in the form of children from a prior relationship. Pennsylvania law confers a great deal of benefits on a surviving spouse, which is usually unintended. 

In order to financially care for a new spouse, while still ensuring that your children from a prior relationship receive what you expect, special planning techniques must be employed. Prenuptial agreements, contractual wills and QTIP trusts are among the many ways to cement the protection of your children, while still ensuring that your new spouse lives comfortably.

Testamentary Trust with Trust Protector

There are several reasons why someone who creates a trust would want to appoint a trust protector, in addition to the trustee who is responsible for managing the trust. While the trustee manages the trust’s assets on a day-to-day basis, the trust protector oversees the trust as a whole and can assist the trustee in several ways to ensure that he or she is administering the trust in the proper manner. 

REAL ESTATE LAW

Real Estate Holding Companies

Purchasing a piece of property to use as a rental can provide you with a monthly stream of income, but it also comes with worries about potential liability. Purchasing the property under a separate entity, and not in your individual name, is a great way for you to minimize your personal liability should something happen to the property. As a separate and distinct entity, a real estate holding company is designed to reduce your personal exposure to risks and liabilities inherent in owning investment property.

Easements and Access

Property owners who have to cross someone else’s property to get to their own often say that they have an easement or right-of-way to do so. However, when it comes time to sell their property and the new purchaser conducts a title search, it may be the case that no such easement or right-of-way exists. Your right to cross someone else’s property should always be memorialized in writing and recorded at the recorder of deeds office to ensure that no issues will arise when you go to sell your property.

Leases

Renting property to someone requires more than just a handshake agreement. Whether the renter is someone you have never met or a family member, it is always important to make sure that there is something in writing to delineate who is responsible for what costs. It is also important for a landlord to have the agreement in writing so that in the event the landlord needs to evict the tenant, the procedure for doing so is already set forth and agreed upon by both sides.

ENERGY LAW

Infrastructure the Key to Unlocking the Full Potential of the Marcellus and Utica Shale Formations

As natural gas production flourishes, the need for pipeline infrastructure continues to drive the ability of companies to get their product to market. Recent data from the Marcellus Shale Coalition shows that the Marcellus and Utica Shale formations produced over 6 trillion cubic feet of natural gas in 2018. With the surge in production, having safe and sufficient natural gas pipelines to move the gas to market for processing and sale has become critical. 

There are a number of large scale pipelines currently under construction in the Appalachian Basin, including the Atlantic Coast Pipeline, Constitution Pipeline and Mountain Valley Pipeline, all of which will be key pieces in the puzzle of moving the abundant natural gas found in the Marcellus and Utica Shale formations.

Coal Continues to be a Significant Portion of US Energy Consumption and Economic Driver in Pennsylvania

According to a recent report from the U.S. Energy Information Administration (EIA), coal continues to be a major part of energy consumption within the United States, accounting for as much as 17% of U.S. energy consumption in 2018. Additionally, in a 2019 study by the Allegheny Conference on Community Development, it was reported that coal provided over 17,000 jobs to Pennsylvanians and made a $7 billion impact on the state’s economy. Coal continues to be a significant source of energy throughout the United States and a major driver in Pennsylvania’s economy.

Cracking the Code to Build a Long-term Petrochemical Industry

The allure of regional expansion in the petrochemical industry drives a renewed interest in economic investment throughout the Ohio Valley. “Cracking” natural gas to produce ethylene, a building block of everyday plastics, could soon become the backbone of a new industry in Southwestern Pennsylvania and throughout the Ohio Valley. One plant capable of cracking is currently under construction in Beaver County, Pennsylvania, with another in final design in nearby Belmont County, Ohio. A number of recent studies have shown that production from the Marcellus and Utica Shale formations could support up to 5 cracker plants, each representing a $6-$10 billion dollar investment in the local economy.

 

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Peacock Keller, LLP • 70 East Beau Street • Washington PA 15301 • 724-222-4520