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From a case upholding the validity of a Delaware domestic asset protection trust to rulings that a trust formed under a springing power of attorney is void and the structure of the National Labor Relations Board is likely unconstitutional, we have recently seen significant developments in estate planning, elder and special needs law, and business law.
To ensure that you stay informed of these legal changes, we have highlighted some noteworthy developments and analyzed how they may impact your estate planning, elder law, and business law practice.
Estate Planning
Creditor May Not Reach Real Property Held by DAPT-Owned Limited Liability Company
In re CES 2007 Trust, No. 2023-0925-SEM, 2025 WL 1354268 (Del. Ch. May 2, 2025)
In 2014, Can IV Packard Square, LLC (Can IV) loaned money to a company owned by Craig Schubiner to finance a development project in Michigan. The project was unsuccessful and, in 2018, Can IV sued Craig for repayment of the loan and additional relief. In 2019, Can IV obtained a $14 million judgment against Craig. The court granted Can IV’s motion to enjoin Craig from transferring assets pending satisfaction of the judgment. Craig asserted that he had no assets to satisfy the judgment, which remained unpaid. Can IV continued to try to collect the unpaid judgment from Craig and the entities he controlled.
In September 2023, Can IV filed an action seeking to either void a spendthrift provision in, or invalidate, a trust Craig had established in 2007 (seven years before Can IV made the loan) that named his wife (if any), parents, and issue as beneficiaries. The trust named a professional trustee (replaced by a successor trustee in 2017) that had the sole and absolute discretion to distribute the income and principal for the benefit of the beneficiaries; however, Craig was an “advisor” to the trust and retained full power to manage the investments of the trust in a fiduciary capacity. The trust document barred Craig from acting as trustee. Craig’s brother was named a trust protector empowered to remove the trustee and appoint a successor trustee or advisor, co-trustees, or co-advisors.
The trust included a spendthrift provision prohibiting the beneficiaries from transferring their interests and precluding creditors from reaching the trust’s assets. Can IV’s petitioned the court to declare the spendthrift provision void or to invalidate the entire trust. It claimed that Craig was the de facto trustee and that several transfers of real estate to several limited liability companies (LLCs) that were 90 percent owned by the trust, formed in Delaware and managed by Craig, were fraudulent. Craig and other interested parties filed a motion to dismiss.
The Delaware Chancery Court determined that the trust met the requirements under Delaware’s Qualified Dispositions in Trust Act (the Act) to qualify as a domestic asset protection trust (DAPT).
The court noted that the Act defines a qualified disposition as “an irrevocable transfer, conveyance, or assignment of real or personal property (or the interests therein) to one or more trustees, at least one of which is a ‘qualified trustee.’” In re CES 2007 Trust, No. 2023-0925-SEM, 2025 WL 1354268, at *6 (Del. Ch. May 2, 2025) (citing 12 Del. C. §§ 3570–76). The court rejected Can IV’s attempt to conflate the parcels of real property, which were assets of the LLCs, with the LLCs, which were assets of the trust. The trust had a membership interest in the LLCs: Because LLC members do not have a specific interest in specific LLC property, the trust did not have an interest in the real property owned by the LLCs. Thus, real estate transactions at the LLC level could not be fraudulent transfers to or from the trust that could justify voiding the trust’s spendthrift provisions.
In addition, the court determined that the original and successor trustees met the statutory definition of a qualified trustee under Delaware law, i.e., a Delaware resident or entity authorized to act as a trustee and subject to supervision by certain state regulatory bodies. Craig’s role as an advisor, whereby he managed, operated, and controlled LLCs owned by the trust, did not undermine the trustee’s authority. The trustee could enforce its rights as an LLC member as set forth in Delaware’s LLC Act.
In addition, the trust agreement satisfied the statutory requirements to be treated as a DAPT under Delaware law: It expressly incorporated Delaware law, included a spendthrift provision consistent with the requirements of Delaware law, and was irrevocable.
The court also ruled that Can IV’s pleadings were insufficient to show a basis for invalidating the trust or its spendthrift provision based on common law principles of public policy or merger, i.e., that the trust was a spendthrift trust that enabled the grantor to enjoy or control its assets without limitations, as if no trust existed. In the present case, a qualified trustee held the trust’s assets—its membership interests in the LLCs—to benefit the trust’s beneficiaries. Therefore, the court granted Craig’s motion to dismiss for failure to state a claim.
Takeaways: DAPTs are permitted by statute in a minority of states. If properly structured, a DAPT enables a trustmaker to protect assets from future creditors using an irrevocable trust even when the trustmaker has retained a discretionary beneficial interest. A transfer of assets to a DAPT can be designed to be a completed gift to the trust if the trustmaker wishes to minimize estate taxes and protect assets.
As noted, the DAPT at issue in In re CES 2007 Trust was formed in Delaware. Craig created a double layer of asset protection by forming LLCs (also created in Delaware) to hold real property and transferring a majority interest in the LLCs to the trust. In the present case, the DAPT had been created and funded long before the creditor’s claim arose. Further, the alleged fraudulent transfers were not of the LLC interests held by the DAPT but of real estate transactions at the LLC level: The court found that because the creditor had not alleged any fraudulent transfers to or from the trust, it had failed to state a valid basis for the court to invalidate the DAPT. In addition, Craig’s role as a trust advisor with the power to manage the trust investments was sufficiently limited so that he could not undermine the trustee’s powers. Craig was also the manager of the LLCs—a potential point of vulnerability that could be mitigated by having another party serve as manager.
Beneficiary Who Accepted Trust Distribution Acquiesced to Lower Court’s Judgment and Was Barred from Appeal
Tharrett v. Everett, No. 125,999, 2025 WL 2267780 (Kan. Aug. 8, 2025)
Roxine Poznich had a revocable living trust naming her daughter Sarah as successor trustee and all five of her children as beneficiaries. After Roxine died in 2020, her son David filed an action to remove Sarah as trustee. The suit was dismissed, and in October 2021, Sarah sent a final trust report with an accounting and a proposed distribution of the trust’s assets to the beneficiaries. The other beneficiaries approved the documents, but David objected, precluding the trust’s closing.
In June 2022, Sarah, as trustee, filed a declaratory action seeking the court’s approval to distribute the trust as recommended in the trust report and for David to pay costs due to his actions delaying the winding up of the trust. The court closed the trust, released Sarah from trustee duties, and ordered Sarah’s attorney to distribute the remaining funds from the trust account to the beneficiaries. In addition, the court awarded Sarah $4,000 in attorney’s fees from David’s share of the distribution.
David accepted his distribution check and filed a notice of appeal. The court of appeals dismissed the appeal, holding that David was barred from appealing the judgment because he had accepted the benefits of the district court’s judgment—namely, the distribution check. It also denied Sarah’s request for costs and appellate attorney fees. The Kansas Supreme Court granted Sarah’s and David’s petitions for review.
The Kansas Supreme Court rejected David’s claim that he should not be deemed to have acquiesced to the district court’s judgment due to his acceptance of the trust distribution check because the judgment was void. The court determined that David’s allegations that the district court violated his due process rights by entering its order without allowing him a meaningful opportunity to be heard and issuing its judgment without a full copy of the trust document were insufficient to void the judgment. A judgment is void only when the due process violation extinguishes a party’s opportunity to be heard to such an extent that the court has no personal jurisdiction over them. The court found that because David was served, filed multiple pleadings and motions, and appeared twice in person, his argument that the judgment was void was meritless.
The court agreed with the court of appeals that acquiescence could be raised at any time because it implicated subject matter jurisdiction. Further, it ruled that the trust attorney was entitled to an amount from the trust’s residuary beneficiaries for services rendered. In addition, David had no cognizable claim that he had accepted the trust distribution check as a means of self-protection. The court also rejected David’s argument that his right to the additional trust distribution he sought was separable from the distribution he received from the trust pursuant to the district court’s judgment, finding that he had acquiesced to the judgment and impermissibly sought to challenge the amount distributed on appeal.
The court disagreed with the court of appeals’ denial of Sarah’s request for appellate attorney fees, finding that the court had jurisdiction to award attorney fees even if it lacked jurisdiction to consider the merits of the appeal. Although Sarah was not entitled to attorney’s fees because David’s appeal was frivolous, the evidence supported an equitable award of appellate attorney’s fees in the amount of $11,320. The court reversed in part and affirmed in part.
Takeaways: The Kansas Supreme Court’s decision in Tharrett clarified that a trust beneficiary who accepts trust distributions may not appeal a lower court’s judgment ordering the distributions, even if the beneficiary’s acquiescence is raised for the first time on appeal. In addition, the court acknowledged appellate court decisions indicating that a party cannot acquiesce to a void judgment, but ruled that not every due process violation will void a judgment: Where the facts show that the complaining party has had an opportunity to be heard on the merits, a judgment is not void even if a due process violation has occurred. In addition, an appellate court has jurisdiction to address a request for attorney fees despite lacking jurisdiction to consider the underlying merits of the appeal.
Elder Law and Special Needs Law
State Officials Immune from Federal Claim Alleging Insufficient Medicaid Termination Notice Violated Due Process
Filyaw v. Corsi, No. 24-3041, 2025 WL 2462965 (8th Cir. Aug. 27, 2025)
In 2020, Gillian Filyaw obtained Medicaid benefits administered by the Nebraska Department of Health and Human Services (NDHHS). In April 2024, Gillian received a notice from NDHHS that she was no longer eligible for Medicaid coverage because her income exceeded the standards and that she could request a fair hearing within 90 days. The notice stated that if she requested an appeal within 10 days, NDHHS would not take adverse action until a decision was made at a fair hearing. Gillian did not appeal, and her Medicaid coverage ended in May 2024.
In June 2024, Gillian filed an action against NDHHS officials in their official capacities under 42 U.S.C. § 1983 for herself and a class of Nebraskans who had or would in the future receive a written notice from NDHHS that it proposed to terminate their Medicaid eligibility because their income exceeded the standards. She sought certification as a class action, a declaration that NDHHS’s notice violated due process and thus was unconstitutional, and a preliminary and permanent injunction ordering NDHHS to reinstate her, the proposed class’s, and the future class’s property interests in Medicaid coverage until a notice that met constitutional due process requirements was provided. The district court granted NDHHS’s motion to dismiss the complaint. Gillian appealed.
The Eighth Circuit Court of Appeals noted that an unconsenting state is generally immune under the Eleventh Amendment to the US Constitution from suits in federal court brought by either its own citizens or citizens from other states, but that suits seeking injunctive and declaratory relief against state officers—in their individual capacities—based on ongoing violations of federal law are not barred. However, the court also stated that the exception is narrow and requires a plaintiff to allege an ongoing violation of federal law and seek prospective—not retrospective—relief.
In a case of first impression, the court held that Gillian had not alleged an ongoing violation of federal law but was experiencing the effects of the allegedly unconstitutional pre-termination notice. The only alleged violation of federal law was the discrete violation that occurred when Gillian received the notice—a completed act that was not repeated. Although Gillian did not experience the effects of the allegedly unconstitutional notice until the loss of her Medicaid benefits, she failed to allege an ongoing violation of federal law but only sought a remedy for a past violation. Further, her assertion that she faced an imminent risk of receiving the same deficient notice in the future was insufficient to show a real likelihood that her due process rights would be violated in the future: She was no longer enrolled in Medicaid and had not alleged that she would be eligible for it if she applied.
The court also determined that Gillian’s request for a declaration that the notice provided by NDHHS and an injunction reinstating her Medicaid enrollment were retrospective in nature and barred under the Eleventh Amendment: There was no ongoing violation and thus no prospective injunction that a federal court could issue. The limited exception to sovereign immunity did not allow a judgment against a state official declaring that they had engaged in a past violation of federal law. As a result, the court affirmed the district court’s order.
Takeaways: Although the Eighth Circuit had not previously addressed whether the termination of a Medicaid recipient’s benefits following a state official’s issuance of an allegedly constitutionally deficient pre-termination notice was an ongoing violation, the court noted that its decision was consistent with analogous decisions, both in the Eighth Circuit and in other circuit courts of appeals. The court distinguished the facts of the present case, which involved an allegedly deficient notice, from cases in which the plaintiffs had alleged that they were deprived of benefits with no notice at all and were not afforded an opportunity for a hearing. In those cases, ongoing federal law violations were found because the complete absence of any process was an ongoing violation of federal due process rather than a discrete past act.
Trump Administration Intends to Rescind CMS Nursing Home Staffing Mandate
Medicare and Medicaid Programs; Repeal of Minimum Staffing Standards for Long-Term Care Facilities, Pending Exec. Order No. 12,866 Regulatory Review (Aug. 22, 2025)
In May 2024, the Centers for Medicare and Medicaid (CMS) released a final rule requiring nursing facilities to have a registered nurse on site 24 hours a day, seven days a week, to provide direct resident care (the 24/7 requirement). The final rule also required all nursing facilities to comply with several hours-per-resident-day (HPRD) ratios, setting baseline staffing requirements. In August 2025, the Trump Administration indicated its intention to rescind the final rule.
The rule was challenged in court and vacated in American Health Care Ass’n v. Kennedy, 777 F. Supp. 3d 691 (N.D. Tex. 2025). In June 2025, the Department of Justice filed an appeal. However, the One Big Beautiful Bill Act, Pub. L. No. 119-21 (2025), enacted in July 2025, deferred enforcement and implementation of the rule until September 30, 2034.
Takeaways: See our May 2024 monthly recap for additional information about the CMS final rule. Many in the long-term care industry were concerned that the rule’s unintended consequences would be that nursing facilities would have to reduce the number of beds available or even close due to their inability to hire adequate numbers of nurses to meet the mandates. There is currently a shortage of nurses, and many nurses do not choose careers in long-term care facilities, making it difficult for long-term care facilities to comply with the mandate. However, advocates for the rule argued that these long-needed patient care considerations would have resulted in better outcomes in an industry often prone to cutting corners in search of profit maximization.
Trust Purportedly Formed Under Springing POA Void: POA Never Triggered Because Physician Did Not Confirm Disability as Required
Doolin v. Owen, No. 2023-CA-1457-MR, No. 2025-CA-0148-MR, 2025 WL 2009921 (Ky. Ct. App. July 18, 2025)
In 2015, Linda Miller executed a general power of attorney (POA) that would become effective only upon her disability, as confirmed by her personal physician in writing, and would be considered a durable POA pursuant to Kentucky statute. She was later declared partially disabled in managing her personal affairs and wholly disabled in managing her financial affairs as part of a related district court case. In 2017, Linda’s attorney established a trust agreement naming Marcy Doolin as the beneficiary, purportedly under the authority of the POA. Linda died in September 2022.
Marcy filed a petition in the circuit court seeking a declaratory judgment concerning the validity and enforceability of her rights under the trust. David Owen, the administrator of Linda’s estate, filed a motion to dismiss for failure to state a claim. The circuit court determined that the 2015 POA was never triggered because the record did not show that Linda’s physician had confirmed her disability in writing. As a result, the trust was void ab initio. The circuit court granted David’s motion to dismiss. It also denied Marcy’s motion for postjudgment relief based on newly discovered evidence. Marcy appealed.
The Kentucky Court of Appeals determined that the issue of whether the 2015 POA was triggered was a contract issue. Because Linda’s personal physician had not confirmed her disability in writing as required by the contract at issue—the 2015 POA—there was no evidence that the circuit court was incorrect in finding that the trust agreement created and funded under its authority was void ab initio. Further, Marcy’s other arguments lacked preservation or sufficient explanation or were unpersuasive.
The court also agreed with the circuit court’s denial of Marcy’s postjudgment motions that relied on newly discovered evidence: a 2017 MRI report and a report by another physician establishing that Linda was disabled when the trust agreement was created. The court found that the circuit court did not abuse its discretion in determining that the 2015 POA was a springing POA that became effective only upon Linda’s disability, as confirmed in writing by her personal physician, and that the subsequent reports Marcy relied on did not meet the springing condition set forth in the POA. As a result, it affirmed the circuit court orders.
Takeaways: Attorneys should advise clients about the risks posed by springing POAs, which take effect only when a triggering event occurs. In Doolin, because the decedent’s disability was not confirmed in writing as required by the terms of the springing POA, the trust purportedly formed under the POA was void, causing her estate plan to fail. A durable POA, effective immediately, helps avoid that risk. If clients choose to use a springing POA, they should be advised that their agent must promptly and completely fulfill any conditions, such as obtaining a physician’s letter.
Business Law
Fifth Circuit: Structure of National Labor Relations Board Likely Unconstitutional
Space Expl. Techs. Corp. v. Nat’l Lab. Relations Bd., No. 24-50627, 2025 WL 2396748 (5th Cir. Aug. 19, 2025)
Several employers faced unfair labor practice complaints under the National Labor Relations Act. Before the commencement of administrative proceedings, the employers challenged the constitutionality of the National Labor Relations Board (NLRB), asserting that its structure, which provided dual for-cause removal protections for both the NLRB members and its administrative law judges (ALJs), violated the president’s power of removal under the US Constitution, Article II. The federal district court granted a preliminary injunction in favor of the employers, halting the administrative proceedings. The NLRB appealed, asserting that the district court lacked jurisdiction to enjoin NLRB proceedings and that it had abused its discretion in granting the injunction because the employers were unlikely to prevail on the merits and had not shown that they would suffer irreparable harm.
The Fifth Circuit Court of Appeals held that the Norris-LaGuardia Act, which provides that district courts do not have jurisdiction to issue injunctions in cases “involving or growing out of a labor dispute,” did not withdraw the jurisdiction from district courts to enjoin the administrative proceedings in the present case. This case did not involve a dispute between employers and employees or seek to block the NLRB from adjudicating an unfair labor practice complaint. Rather, the actions involved the employer and the NLRB, and Article II of the US Constitution and the separation of powers.
The court also found that the district courts had properly exercised their authority to enjoin the NLRB’s proceedings. The court relied on Jarkesky v. Securities & Exchange Comm’n, 34 F. 4th 446 (5th Cir. 2022), which held that dual for-cause protections for Securities and Exchange Commission (SEC) ALJs were unconstitutional. The SEC ALJs could be removed by the SEC only for good cause as determined by the Merit Systems Protection Board (MSPB) (an independent agency that adjudicates appeals of agency personnel decisions brought by federal employees), and SEC commissioners and MSPB members could only be removed for cause. In Jarkesky, the Fifth Circuit found that the SEC ALJs were inferior officers who may receive some for-cause restrictions, but the dual for-cause protections only allowed the SEC’s principal officers—and by extension, the president—to intervene in rare cases: Thus, the president did not have the control necessary to meet the fundamental constitutional obligation under Article II of ensuring that the laws were faithfully executed. The court rejected the NLRB’s attempts to distinguish NLRB ALJs from SEC ALJs, holding that the dual for-cause protections for NLRB ALJs were likely unconstitutional.
In addition, the court ruled that the dual for-cause protections for NLRB members were also likely unconstitutional, distinguishing Humphrey’s Executor v. United States, 295 U.S. 602 (1935), in which the US Supreme Court upheld removal restrictions for the Federal Trade Commission (FTC), finding that the FTC commissioners did not wield substantial executive power. In contrast, the court found that NLRB members exercised substantial executive power and that other mechanisms promoting their independence provided unconstitutionally excessive insulation from presidential control.
The court found that the employers would suffer irreparable harm without injunctive relief because the injury of being subjected to unconstitutional agency authority is irreparable, as it cannot be undone: The proceeding itself would be the injury. In contrast, neither the government nor the public interest in the enforcement of laws would suffer irreparable harm due to halting unlawful agency action. Consequently, the court held that the balance of equities and the public interest favored injunctive relief. As a result, the court affirmed the district courts’ decision to grant the employers’ preliminary injunction, with one judge concurring in part and dissenting in part.
Takeaways: The Fifth Circuit’s ruling signals that a restructuring of the NLRB may be coming soon. This may delay enforcement actions when employees assert claims of unfair labor practices. President Trump fired Glynn Wilcox from the NLRB in January 2025. Although a federal district court granted her request for reinstatement, the US Supreme Court stayed the order pending the disposition of the appeal and writ of certiorari, if one is sought. See Trump v. Wilcox, 145 S. Ct. 1415 (2025). Although the Court did not make a dispositive decision, it noted that “the Government is likely to show that both the NLRB and MSPB exercise considerable executive power,” signaling that it may ultimately find that the NLRB’s current structure is unconstitutional.
Nonsolicitation and Confidentiality Agreements Control Over Protocol for Broker Recruiting to Prohibit Financial Advisors from Soliciting Clients of Former Firm
Salomon & Ludwin, LLC v. Winters, No. 24-1728, 2025 WL 2314652 (4th Cir. Aug. 12, 2025)
Salomon & Ludwin (Salomon), a wealth management firm, hired Jeremiah Winters and Catherine Atwood as financial advisors. Jeremiah and Catherine (and other employees) were required to sign an employment agreement in March 2022 providing that Salomon had all rights to its current and future clients and revenue generated from those clients, that client information was a trade secret, and that the employees were prohibited from soliciting clients for two years after the end of their employment. In addition, they agreed not to disclose Salomon’s trade secrets and client information.
In 2018, Salomon had employees sign a separate, voluntary, industry-wide agreement called the Protocol for Broker Recruiting (Protocol). The Protocol allows financial advisors who depart from a member firm to take certain client information with them when leaving to join another member firm without incurring liability as long as they provide written notice of their intention. The Protocol did not prohibit firms from bringing an action for raiding.
However, the 2022 agreements that Jeremiah and Catherine signed stated that Salomon was not part of or subject to the Protocol, and if Salomon decided to join the Protocol, the agreement would take precedence over the Protocol in the event of a conflict between their terms.
In 2024, Jeremiah and Catherine left Salomon, formed Founders Grove Wealth Partners, LLC (Founders Grove) (initially named Albero Advisors, LLC), and joined the Protocol. They provided the written notice specified in the Protocol and began soliciting Salomon’s clients. As a result, more than 400 Salomon accounts moved to Founders Grove, representing millions of dollars in client assets.
Salomon sued Jeremiah, Catherine, and their new firm for violations of federal and state trade secrets acts, tortious interference with business relations, breach of the duty of loyalty, and breach of contract. It sought a preliminary injunction in federal district court. The district court granted Salomon’s motion, holding that Salomon was likely to succeed on the merits because its client information was likely a trade secret, and, if the Protocol controlled over the agreements, Jeremiah and Catherine had likely raided Salomon. Jeremiah and Catherine appealed.
The Fourth Circuit Court of Appeals disagreed with the district court’s interpretation of raiding—a term not defined in the Protocol or case law. The district court relied on expert testimony in determining that raiding was “a severe economic impact on the prior firm resulting from a raider’s malice/predation and/or improper means.” Salomon & Ludwin, LLC v. Winters, No. 24-1728, 2025 WL 2314652, at *3 (4th Cir. Aug. 12, 2025) (citation omitted). The court found that the district court’s definition was inconsistent with the Protocol’s text, the ordinary meaning of raid, and the industry-specific meaning, all of which evinced that raiding involved one firm preying upon the employees of another firm. Raiding did not contemplate liability when financial advisors leave a firm and take clients. Language in the Protocol indicated that it was not actionable for financial advisors to take clients to a new firm. Further, the ordinary and industry-specific meanings of raid also suggested a competing firm luring away a firm’s employees rather than employees leaving of their own volition. As a result, the court determined that Jeremiah and Catherine’s conduct did not constitute raiding and did not affirm the injunction on that basis.
However, the court determined that the plain language of the agreements provided grounds for a determination that Salomon was likely to succeed on the merits against Jeremiah and Catherine. The agreements stated that their terms would control over the terms of the Protocol, even if Salomon became a member of the Protocol. The fact that Salomon was already a member of the Protocol on the date when the agreements were executed did not change that result.
However, the court found that the district court had abused its discretion in enjoining Founders Grove, which was not a party to the agreements. Therefore, the court affirmed the district court’s preliminary injunction as to Jeremiah and Catherine but reversed it as to Founders Grove.
Takeaways: The Salomon decision clarifies that wealth management firms that join the Protocol may still prohibit their employees from soliciting or using client information when they leave a firm by requiring them to execute nonsolicitation and confidentiality agreements that expressly state that their terms control over the Protocol. As a result, attorneys should remind financial advisors who are leaving their current firm to start a new firm that the Protocol may not shield them from liability for soliciting its clients if the firms have inconsistent contractual obligations. Notably, only the departing financial advisors, not their new firms, are bound by their employment agreements and thus may be subject to injunctive relief.
IRS Releases Fact Sheet Addressing OBBBA Provisions on No Taxes on Tips and Overtime
IRS Fact Sheet, One, Big, Beautiful Bill Act: Tax deductions for working Americans and seniors, FS-2025-03 (July 14, 2025)
On July 14, 2025, the Internal Revenue Service (IRS) issued a fact sheet describing several tax cuts included in the One Big Beautiful Bill Act (OBBBA), including two of interest to employers: No tax on tips and no tax on overtime.
No tax on tips. In October 2025, the IRS will publish a list of occupations that customarily and regularly receive tips. Eligible employees and self-employed individuals who receive qualified tips may benefit from a maximum annual deduction of $25,000. The deduction is effective 2025 through 2028 and is available for both itemizing and nonitemizing taxpayers but phases out for individual taxpayers with modified adjusted gross income exceeding $150,000 and joint filers exceeding $300,000.
No tax on overtime. Individuals who receive qualified overtime pay required by the Fair Labor Standards Act may deduct up to $12,500 annually, effective 2025 through 2028. The deduction phases out for taxpayers with modified adjusted gross income exceeding $150,000 and joint filers exceeding $300,000 and is available for both itemizing and nonitemizing taxpayers.
Takeaways: Business attorneys should advise employers to work with their tax advisors to ensure the successful implementation of these changes, which are retroactive to January 1, 2025.
Important Related Legal Developments
New Generative AI Platform Built for Courts
The Michigan Supreme Court has entered into a contract with Learned Hand, a generative artificial intelligence (AI) platform specifically designed for the court system for use by judges and their staff. The platform is promoted as helping burdened and understaffed courts lessen delays by accepting case filings, building a database of relevant authorities, summarizing files, conducting neutral legal analysis, drafting bench memos, drafting orders and opinions, and validating the accuracy of memos, orders, and opinions.
Takeaways: In recent, highly publicized scandals, attorneys and now courts (see Shahid v. Esaam, 918 S.E. 2d 198 (Ga. Ct. App. 2025) (vacating a lower court order that relied on fictitious AI-generated case citations submitted by an attorney), have relied to their detriment on cases that have been hallucinated by generative AI tools with no human verification. Learned Hand asserts that its platform has a process to verify all information against the record and authoritative legal sources.
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