Blog Posts

Delaware Movie Theater Liquor License Changes Proposed

In April 2014, Representative Quinton Johnson introduced House Bill 299 to authorize the issuance of a movie theater liquor license in the State of Delaware. The bill was signed by the Governor in July 2014 and alcoholic beverages subsequently became available in Delaware movie theaters. See 5/11/15 News Journal Article.

Recently, in June 2019, the same legislator introduced House Bill 237 that would make operations under the movie theater license slightly less burdensome for the theatre licensee. The proposed changes would remove remote monitoring requirements (video cameras), and remove the requirement that a licensee or employee of the licensee walk through each theater during every showing. The current law requires that the employee passing through each theater be trained in serving alcohol. See 4 Del. Code § 522(f).

The proposed legislation is unlikely to be detrimental to the public because theaters are still only permitted to sell one beverage at a time per patron, with a maximum of two drinks per movie. See 4 Del. Code § 522(f).

The legislature is not currently in session but the bill will likely be considered during the next session.

Wholesaler Termination in Delaware

As the second-smallest state in the United States, Delaware’s size generally means that wholesalers sell products throughout the entire State. Given the small market, there are only about twenty (20) licensed wholesalers in the State of Delaware, many of which are also licensed in surrounding states. In the event that a supplier is not satisfied with a wholesaler, termination of that wholesaler’s services can occur by showing that there is “good cause.” See Del. Administrative Code Title 4, Rule 901, Section 7.0, formerly Del. Administrative Code 4-046.

Notably, no statute governs the termination of wholesalers in Delaware. The Delaware regulations do, however, cover the issue. The regulations do not distinguish between the different types of alcoholic beverages for purposes of termination of wholesalers. A supplier can terminate a contract by purchasing the distribution rights from the wholesaler with permission from the State. The amount owed to the wholesaler shall be the average annual gross profits based upon the past three years unless the contract specifies a higher amount. See Del. Administrative Code Title 4, Rule 901, Section 6.1.  

Except where waived, the wholesaler shall have sixty days notice and may request a hearing. Aside from the to-be-expected definitions of good cause (i.e. bankruptcy), the Delaware regulations consider the failure to meet “standards of performance” as found in a written contract or defined by the regulation, to be grounds for good cause termination. The wholesaler may attempt to cure certain deficiencies within the sixty days. See Id. at Section 7.3.2.

Although written agreements are not required between wholesalers and suppliers in Delaware, it is always a prudent practice in Delaware to draft a distribution agreement. Investing time and expenses in a well drafted distribution agreement will help defray legal costs when the relationship breaks down. In one case, while Rule 901 did not apply to a supplier who surrendered its Delaware license, the oral agreement caused litigation beyond the Delaware Alcoholic Beverage Control Commissioner’s hearing. See World Class Wholesale, LLC v. Star Industries, Inc., Delaware Superior Court C.A. No. N17C-05-093 MMJ, Decided May 22, 2018.  

Estate Planning Across The Border

Drafting wills, financial powers of attorneys, and other documents requires attention to detail. One major issue for estate planning attorneys in small, East Coast states such as Delaware, is that clients often move, work, and frequently seek services across a state boundary. In Delaware, for example, clients routinely move to Maryland or Pennsylvania in retirement. Similarly, many Pennsylvania residents move to neighboring Delaware or Maryland to avoid the 4.5% inheritance tax on bequests to their children.

People inherently do not want to think about their own death. This understandable mentality often leads to putting off estate planning and is among the top reason for calls from Christiana Hospital, Union Hospital, Wilmington Hospital, or other health care facilities requesting urgent assistance with estate planning. Further complicating client meetings in a hospital is the fact that often, a resident of Maryland or Pennsylvania may be hospitalized in Delaware.

One complication, for example, is that Pennsylvania law provides that when a Power of Attorney is silent as to which jurisdiction’s laws will be applied for definitional purposes, “the law of the jurisdiction in which the power of attorney is executed” will be applied. 56 Pa.C.S. § 5613. Therefore, if a Pennsylvania resident seeks a power of attorney while physically outside of the Commonwealth, care must be taken that a choice of law provision is inserted into the document.

State laws can complicate the actual signing of documents. For example, in Maryland, a Notary is specifically authorized by statute to act as both a notary and one of the two witnesses to a power of attorney. See Maryland Estates & Trusts § 17-110(b). While a Pennsylvania power of attorney requires two witnesses and a notary, the Pennsylvania law specifically prohibits the notary from acting as one of the two witnesses. See 56 Pa.C.S. § 5601(b). It is thus critically important to understand the distinctions between the state of residence and state of signing so as to not run afoul of a specific requirement found in the statute of the signer’s home state.

As an attorney licensed in Maryland, Delaware, and Pennsylvania, Gregory F. Birney assists residents of the tri-state area with estate planning, and is cognizant of the issues faced when clients find themselves in a health care facility outside of a client’s home state.

With House Bill 99, the Maryland General Assembly passed a major reform to the elective share during its 2019 session. The elective share allows a surviving spouse to elect against their late spouse’s will and receive a percentage of the deceased spouse’s probate estate. In theory, this ensures that a spouse cannot be disinherited. In reality, a spouse is able to place everything outside of their probate estate in so-called non-probate assets. When all assets are placed in non-probate assets, one can effectively disinherit their spouse by ensuring that there is no probate estate for the surviving spouse to elect against. Non-probate estate assets typically include joint bank accounts, beneficiary designations on other accounts (such as an IRA), and life estate deeds. The Bill would count non-probate assets when computing the spousal election.

According to witnesses appearing before the General Assembly, the law has not changed since 1978. Several prior versions of this legislation failed to pass the General Assembly over the past five years. According to testimony, Maryland joins 21 other states using the augmented estate. The augmented estate includes non-probate assets and probate assets and advocates for the bill believe it brings fairness into the distribution of assets to a surviving spouse. The bill awaits Governor Hogan’s signature or veto. If signed, the law becomes effective October 1, 2020.

Retailers Unknowingly Violate Law by Marrying Bottles

While watering down bottles of alcohol to stretch profits is clearly illegal, many long time licensees and untrained staff members at bars and restaurants fail to realize that it is illegal in the United States to “marry” bottles of alcohol. See 27 CFR 31.201. This practice is also illegal under Maryland law. See Alcoholic Beverages Article § 6-313. Delaware also prohibits refilling of bottles. See 4 Del. C. § 711. Evidence of refilling or marrying bottles can be easily spotted by a trained liquor inspector or agent of the Maryland Comptroller’s Office. As reported in a recent Cecil County case involving the Hilltop Inn, the Comptroller spotted sticky prints and overfilling. See 4/29/18 Cecil Whig Article. Typically, the Comptroller’s agent will forward a report to the local liquor board which may then set a hearing for the alleged infraction. Local liquor boards can suspend or revoke a license or fine a licensee for a violation of a State or federal law.

Disgruntled customers frequently make complaints, but when they allege a retailer is watering down their favorite drink, interactions with licensing authorities are sure to follow. One way to determine whether you have been the subject of a disgruntled customer’s complaint is to engage in conversation with the inspector and accompany them on their inspection of your premises. During an inspection, an agent or inspector may mark bottles to indicate fill levels and return days or weeks later to observe whether the marked bottles are filled above those marks.

In some instances, the Comptroller’s Agent may seize bottles for laboratory analysis. Restaurants and bars can expect large fines for refilling bottles, even where no watering down is alleged. In Washington County, Maryland, the liquor board fined an establishment $2,500 for refilling smaller bottles from larger bottles of the same type of alcohol. See 3/30/16 Herald Mail Media Article. In cases where a retailer is deliberately watering down liquor bottles, harsher penalties can be expected.

House Bill 411 Imposes Training Requirements on Cecil County Liquor Licensees

On April 10, 2018 the Governor signed House Bill 411 imposing more stringent training requirements on Cecil County liquor licensees. The legislation was approved by the General Assembly after testimony was given in February 2018 by Step Mika, Chief Inspector Earl Bradford, and Liquor Board Chairman Tim Snelling. No witnesses opposed the bill before the General Assembly. Cecil County joins a number of other counties requiring a trained employee be on the premises while alcohol is or may be served to the public. The bill also requires that each bartender receive state approved training. Bartenders were not specifically required to be trained before, however, the Bill did not define the term “bartender.” Previously, licensees in Cecil County were required to have at least one certified employee on staff, though not necessarily on the premises at all times.

The training itself, while minimal, can be difficult to attend for part-time employees who have full-time day jobs because the Comptroller approved trainings that occur in Cecil County typically take place during the day on weekdays.  A licensee violating the provision is subject to a $100 fine for a first offense.  Licensees should have evidence of training (usually in the form of a wallet sized card) readily available for inspectors. Inspectors are required by statute to conduct quarterly inspections. See Alcoholic Beverages Code §17–205(d).

The Cecil County Strategic Prevention Framework, Drug Free Cecil, and other organizations believe this training requirement will lessen binge drinking. See April 26, 2018 Cecil Whig article.  The new requirements take effect on July 1, 2018.

Avoidable Estate Planning Mistakes: Giving Directly When A Judgment Exists Against Beneficiary

A drafting attorney overlooking minutiae can undermine even the most thoughtful estate plan. One recent Cecil County example of this problem is seen in the Estate of Theresa Sposato. Mrs. Sposato passed away on June 9, 2015. Her last will was executed on July 16, 2013.

In the July 2013 will, Mrs. Sposato attempted to disinherit her son Anthony and his children by treating them as predeceased. Clearly, Mrs. Sposato’s intent was to leave nothing to Anthony and any individuals claiming through Anthony. Mrs. Sposato died owning Century Development Company, Inc. in her name alone. In her will, she left all of her interest in Century Development Company, Inc. to her other son, Charles. According to court filings, the Century Development Company was valued at $292,129.05, including $121,688.19 in certificates of deposit and a life insurance policy valued at $170,440.86. The Company had ceased doing business years before.

Several months before Mrs. Sposato signed her will, Anthony had obtained a judgment against Charles for $258,150.68 in the Circuit Court of Baltimore City. See Anthony Sposato vs. Charles F. Sposato, Case No. 24C12002360. On April 28, 2017, Anthony filed a limited exception to the distribution of his mother’s estate with the Cecil County Orphans’ Court. Anthony, acting as a creditor and not as a disinherited son, intervened in the estate and requested that the Court order distribution to Anthony as a creditor in lieu of allowing the inheritance to Charles.

Ultimately, Charles conceded the funds in a filing dated January 30, 2018. Absent Anthony’s Baltimore City Circuit Court judgment, Charles had other creditors that would have become apparent by asking the right questions. See May 30, 2015 Baltimore Sun Article detailing other cases filed against Charles Sposato.

Had the attorney drafting Mrs. Sposato’s will taken a moment to search the names of the parties on the Maryland Case Search website, the judgment could have been discovered and Mrs. Sposato’s wishes could have been effectuated with trust planning. The Estate probably incurred litigation expenses needlessly. A simple trust could have dissuaded Anthony from pursuing the funds from the Century Development Corporation. The fight between the brothers, however, is probably not over. The judgment is not marked satisfied even after application of the inherited funds, likely due to the accrual of interest. Anthony can attempt to pursue the funds wherever located. In fact, records indicate that the Baltimore City judgment was registered with the Clerk of Courts in Monroe County, Florida, where Anthony resides.

At the very least, an estate planning attorney should inquire about the financial health of intended beneficiaries. Where questions exist, the attorney should search appropriate court records to determine whether active judgments exist.

Ancillary Issues In Estate Planning

As part of the intake process, every client generally receives the same screening process. Prior to a first meeting, basic personal information is obtained so that the attorney can search land records and the unclaimed property database.

Searching the land records allows the attorney to determine how real property (land) is titled so that clients can understand what happens with real estate after an owner dies. See Blog Post addressing non-probate assets. It is not unusual for a deed to be solely in one name, while both spouses have signed the mortgage (known as a deed of trust in Maryland), or vice versa. When a deed is in one spouse’s name alone, it is sometimes advisable to consider adding the second spouse. A search of the land records will also reveal whether the client has ever filed for the Maryland Homestead Tax Credit, which serves to limit the amount property taxes can increase should property values begin to drastically increase.

While not common, it is not unusual for a client to have unclaimed property held by the Comptroller of Maryland. While the claims process is not overly complicated, it can be difficult to prove the address the Comptroller has on file if the client resided at that address years ago. In one case, the Cecil County Board of Elections was able to provide old address records from the 1970s and 1980s. If necessary, the attorney will assist the client with filing the claim as part of estate planning process.

After the first meeting the attorney is able to conduct a search of local court records for judgments or liens filed against an intended beneficiary under the estate plan. Judgments, liens, pending cases, and other situations personal to a beneficiary may frustrate the client’s intent. In such a case, a creditor might force the estate into litigation to force any distribution to be made to the creditor rather than the beneficiary. Where large judgments exist, it is worth considering a trust or other vehicle which benefits the beneficiary but is inaccessible to the creditor.

What amounts to about five to ten minutes of time of reviewing records can often save the client or the client’s estate substantial sums of money years from the time of drafting.

Wills As Public Documents

After a Maryland resident’s death, their will must be delivered to the Register of Wills. See Estates & Trusts § 4–202. This applies even if the document is not to be offered for probating. See, e.g., Page 10, Montgomery County Register of Wills Publication dated September 8, 2014.  It is not unusual for a will to be provided to the Register of Wills but to be disregarded. This may occur, for example, if the will is handwritten or fails to follow the required formalities.

The will or wills delivered to the Register of Wills become available for public review, even if they are not allowed to be probated. In other words, even if the will is found to be defective and is not controlling, the document still appears in the Register of Wills’ files.

It is very common for survivors to inquire about the process of seeing the estate planning documents of a deceased individual. While not every document will be available for inspection, the last will and testament of a decedent, if any, is available for the general public to review. In Cecil County, wills are available for review at the Circuit Courthouse located at 129 East Main Street in Elkton. Using the decedent’s name, the public can access the documents related to an estate on a computer available on the first floor of the courthouse located just outside of the Register of Wills main office.

Prior to making a trip to the courthouse, you can search for the estate online to determine if an estate has been opened and if a will was provided. If a will was provided for probate, the online database will tell you the date it was executed (signed). You can then request online, at fifty cents per page, copies of the will, or visit the courthouse in person to read the documents. Printing in person also costs fifty cents per page. Ordering documents online requires a credit card and there is a small service charge on top of the fifty cents per page charge. Viewing documents is free in person.

Once a will is in hand, it is common for people to have questions about the terminology and what can be expected. If you need assistance interpreting a will, trust, or other document, please contact me.

Maryland’s Unique Imposition of Both Inheritance and Estate Taxes

Maryland is a unique State in a variety of ways, but beginning in 2018 it gains another unique distinction when it becomes the only state to impose both an estate tax and an inheritance tax. See Joel Michael, Estate and Inheritance Taxation: An Overview of Taxes in the States, Updated Dec. 2016. The Minnesota legislative report explains that only two states, Maryland and New Jersey, impose both an estate tax and an inheritance tax, but that New Jersey’s estate tax has been repealed for those dying in 2018. Changes to New Jersey’s inheritance and estate tax regime are discussed here.

While the Maryland estate tax applies only to wealthier individuals, with estates valued at more than $3,000,000 in 2017, the Maryland inheritance tax can snag unsuspecting residents. It is common for estate planning clients to give substantial sums to friends, cousins, nieces, and nephews. Each of these individuals is generally subject to the 10% inheritance tax when receiving $1,000 or more. See Register of Wills Administration of Estates Pamphlet; Tax General 7-203(g).

The inheritance tax can be assessed on assets gifted prior to death. Assets transferred outside of the probate process, for example by beneficiary designation, can still be subject to the Maryland Inheritance Tax. Creating even a basic estate plan can result in substantial inheritance tax savings under the right circumstances and can provide peace of mind that 10% of your hard-earned assets will not be handed over to the Register of Wills.