Debunking 4 Popular Myths About Business Entities
Setting up the right legal structure for your business may seem like a boring detail that you don’t need to spend much time on. But, in reality, selecting the right entity for your company is one of the most critical decisions you can make as a business owner.
That said, there are all sorts of myths surrounding business entities, and this can cause confusion and lead to costly mistakes. To this end, here are 4 of the most popular myths about business entities and how you can avoid falling for them.
Myth #1: Small businesses don’t need a business entity.
Although it’s possible to run a business without a business entity, doing so puts you—and everything you own—at risk. Without the proper entity set up, there’s no separation between your business and personal assets, so your personal assets would be at risk in the event your business goes into serious debt or gets hit with a lawsuit.
For example, if your company is structured as a sole proprietorship or general partnership and you go out of business, your business creditors would come after your personal assets to pay off your business debts. The same is true if your business is ever sued.
By structuring your business as a limited liability company (LLC) or a corporation, however, you can shield your personal assets from liabilities incurred by your business. When properly set up and maintained, such structures establish your company as a separate legal entity distinct from you as an individual, preventing you from being held personally liable for the company’s debts or legal disputes.
Meet with us, your Family Business Lawyer™ for help selecting, setting up, and maintaining the entity structure that’s best suited for your particular company, no matter how big or small it may be.
Myth #2: There’s no need to set up an entity for your business until it’s profitable.
It may seem like a good idea to delay setting up your business entity until you are actually earning revenue, or even making a profit, but in reality, you should have your entity in place from the very start. This is true not only because liability can arise well before you are profitable, but also because incorporating your business is likely to lead to even more income and profit.
For example, having the proper entity in place in the early stages allows you to receive credit in your business’ name, and raise money from investors. Not to mention, the act of incorporating itself shows that you take your company seriously, which can inspire increased interest from customers, vendors, and financial backers.
Myth #3: A corporate entity offers absolute liability protection.
When properly created and maintained, entities like an LLC or corporation can shield your personal assets from creditors, lawsuits, and other liabilities incurred by your business. However, the protection afforded by these entities is not absolute.
In fact, there are a number of circumstances in which a creditor can come after your personal assets to settle a claim against your business. When this happens, it’s known as “piercing the corporate veil.”
While the corporate veil can be pierced if you commit fraud or negligence, in most cases, it happens due to innocent mistakes. These errors can include inadvertently mixing your personal and business finances, personally signing off on a business loan, or failing to abide by administrative formalities.
As your Family Business Lawyer™, we will support you with maintaining your business records and keeping up with the required corporate formalities. In fact, we offer special maintenance packages that make meeting these requirements a snap, while maintaining the maximum level of protection for your personal assets.
Finally, while a corporate entity can protect your personal assets from liability, these legal structures do not offer any protection for your business assets. To safeguard your business assets, you’ll need to invest in the proper business insurance, which is always your first line of defense.
Myth #4: Incorporating in Delaware or Nevada is always best.
You may have been told—perhaps even by another lawyer—that establishing your corporate entity in Delaware or Nevada is your best bet for tax purposes. But for most businesses, incorporating in these states is completely unnecessary—and it may even cost your company in the long run.
Although many companies do incorporate in these states, it’s for very specific reasons, such as to raise investment capital or take advantage of favorable securities laws to go public. However, unless you are actually doing business in these two states, your company isn’t going to receive any significant tax benefits or additional asset protection by incorporating there.
While Nevada and Delaware do not have state personal- or corporate-income taxes, that doesn’t mean your business will avoid state-level taxes entirely. The fact is, if you are a resident of, or doing business in, a state that has state income taxes, you must still pay those taxes, even if you are incorporated elsewhere.
Plus, if you incorporate outside of the state where you live or conduct business, you must file as a foreign registrant in your home state. Such double filings can result in extra filing fees and administrative expenses that make out-of-state incorporation financially unfeasible.
However, there are instances where it might make sense to set up your business entity in states like Delaware or Nevada, or even Wyoming or South Dakota. Contact us, your Family Business Lawyer™ for advice on the best location for establishing your entity and for support in navigating the requirements for maintaining the entity in each state you do business in.
We Can Help
Setting up the right entity for your business isn’t something you should take lightly or try to do all on your own—there’s far too much at stake. As your Family Business Lawyer™ we will offer you trusted advice on the legal entity that’s most advantageous for your business. while also ensuring that your entity is properly set up, with all of the necessary agreements and other resources in place.
Additionally, we can provide you with a variety of business systems, which will not only make your operation more efficient, but also establish a clear separation between your business and personal finances, which is a vital part of maintaining your entity’s liability protection. Finally, as your Family Business Lawyer™ we will also make sure that you are in full compliance with the various state laws and administrative formalities required to maintain your entity and safeguard your personal assets. Contact us today to learn more.
This article is a service of Sahmra Stevenson, Esq. Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.
- Published in In the News
SECURING FUNDING FOR YOUR BUSINESS: EQUITY VS DEBT INVESTMENTS
As you grow your company, you may discover that it’s time to move beyond leveraging your personal credit to fund your business, whether through business or personal credit cards, and look for outside investors or lenders.
When it comes to securing funding for your business, you must first decide what form of investment is right for your company: equity or debt. More specifically, are you looking for an investment in exchange for an equity stake in your company, or would you be better off getting a loan to fund your business?
EQUITY INVESTMENT: SELLING SHARES IN YOUR BUSINESS
Equity investors provide capital, either in the form of cash (preferable) or in kind with services, in exchange for a percentage of your company’s profits. Generally speaking, equity investment is only feasible when you have a clear plan for exiting your business, so your equity holders will be able to earn a return on their investment when your equity becomes saleable. If you are not yet at the place where you have a clear strategy for exiting your business, you (and your investors) will likely be better off securing a loan to fund your business.
If you are at the early stages of your business and not yet clear on its value, you may want to structure that investment in the form of what’s called a SAFE investment. SAFE stands for “Simple Agreement for Future Equity.” Basically, a SAFE is an agreement between an investor and your company that provides rights to the investor for future equity in your company.
In exchange for the money invested through the SAFE, the investor receives the right to purchase stock in a future equity round (when one occurs), subject to certain conditions set in advance in the SAFE. SAFEs were created to be a simple replacement for convertible notes, and they are designed for startups seeking initial funding.
A SAFE makes sense when your company is likely to raise money in the future through an established valuation, but your company is in too early of a stage to be valued appropriately. For more information on SAFE investments, check out this video from the seed-money startup accelerator Y Combinator.
You definitely want to bring on a trusted legal advisor like us if you decide to fund your company with complex investment structures, such as a SAFE, or if you are going to raise capital by selling equity in your company. With our support and guidance, we can ensure that you have the proper legal and financial systems in place to secure your investment.
DEBT INVESTMENT: BUSINESS LOANS
Oftentimes, the best place to start looking for outside investment in your company is by reaching out to your friends and family for a loan. Before you take on a loan from a friend or family member, be sure to document the loan with a promissory note.
A promissory note is basically a legal agreement that you are promising to pay back the money you borrowed under certain terms. The promissory note should have clear terms regarding how you will repay the loan and the specific terms under which you will repay, such as the interest rate you are paying on the loan and over what time period the loan will be repaid.
If you don’t have any friends or family who are interested in investing in your business, you may choose to fund your company with a loan from a bank. The best way to do this is to have a relationship with a local banker, who can get to know you and your business. From there, the banker can help you tap into different small-business financing options, generally through loans from the SBA, or Small Business Administration.
It’s never too early in your business lifecycle to establish a relationship with a business banker. Ideally, contact the local business banks in your community, and go meet one or more of the bankers at each of the banks to find a relationship that feels most supportive to you and your business.
When you receive funding from a business bank, make sure the loan is provided to your business, and not to you personally, whenever possible. And it’s most ideal if you can avoid a personal guarantee of the loan, though not always possible. A personal guarantee means that if your business fails, you will be held personally liable for the balance of the loan, and the bank can come after your personal assets to satisfy the terms of the loan.
Once your business has established income, you may be able to qualify for a loan for your business without a personal guarantee. Yet, in the early stages of your business, this likely won’t be possible. However, you should always ask to get your business loan without a personal guarantee required—the worst case scenario is the banker says no.
GAIN CONFIDENCE AND CLARITY WITH LIFT SYSTEMS
Building relationships with investors and lenders can be a great way to fund the future growth of your business. That said, developing such relationships will require you to confront any remaining insecurities or fears you may have about whether or not you are personally worth investing in.
On that note, having solid legal, insurance, financial, and tax (LIFT) systems in place will make you far more confident going into these relationships. If you’ve yet to put LIFT systems in place, contact us, as your Family Business Lawyer™, to take our free LIFT 20-Point Assessment.
Just taking the 20-Point Assessment is a huge benefit, as it shows you the gaps in your foundation that need the most attention. From there, you can meet with us to conduct a more thorough audit of your business, so you can eventually implement the full LIFT Foundation System & Toolkit into your operations.
With a solid LIFT foundation for your company in place, you can finally gain genuine confidence about your business’ long-term success. Armed with that clarity, you can devote all of your energy and passion into growing your business into something truly meaningful for yourself, your clients, and your family.
This article is a service of Sahmra A Stevenson, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.
- Published in In the News
8 ADVANTAGES OF FEDERALLY REGISTERING YOUR TRADEMARK
Given that intellectual property (IP) can make up a significant portion—sometimes up to 90%—of the total value of today’s companies, it’s essential that you do everything you can to protect these intangible assets. And one of the first IP elements you’ll want to protect are your company’s brand name and logo.
To safeguard these brand assets, you’ll need to secure trademarks. A trademark can protect words, slogans, symbols, and other distinguishing features of your brand by allowing you to prohibit other businesses from using the same—or highly similar—branding as yours.
Yet not all trademarks offer equal protection. For example, you can gain what’s known as “common-law” trademark rights for free simply by being the first business to use your particular brand name in commerce. However, as you’ll see below, common law trademark rights are extremely limited and will prove highly inadequate for most companies.
For maximum protection, you should register your trademark with the U.S. Patent and Trademark Office (USPTO). Although registering with the USPTO typically costs around $300 per mark, doing so provides you with numerous advantages compared with common law marks. Some of the leading advantages of registering your trademark include:
01 | NOTICE OF OWNERSHIP
Registration of your trademark provides your company with official documentation and public notice that you are the valid owner of the mark and have the exclusive right to use it across the entire U.S. This is in contrast to a common law trademark, which requires a company to actually use the mark in business to gain ownership, and that ownership is limited to the local area where the business is located.
02 | PREVENTS OTHERS FROM USING A SIMILAR TRADEMARK
Once your trademark is registered, it’s listed in the USPTO’s database, and no one else can register a confusingly similar mark in connection with similar goods and services. To this end, the federal government is essentially assisting you enforce your rights and preventing infringement before it can start, without any additional action needed on your part.
03 | PROTECTS YOU FROM INFRINGEMENT
Because the USPTO will not allow you to register a similar trademark to any others that are registered, this also prevents you from accidentally infringing on another company’s mark. This can not only save you from a financially ruinous lawsuit down the road, but also prevent you from having to completely reinvent your brand from scratch if your mark is too similar to one that’s already registered.
04 | GIVES YOU THE RIGHT TO SUE IN FEDERAL COURT
Having a registered trademark gives you the right to sue for infringement in federal court, where you will receive the presumption of being the valid owner of the mark. The presumption of ownership shifts the burden of proof to the defendant who might try to claim they have common law trademark rights as a defense. Under this burden, the defendant must prove that he/she was first to use the mark and their use has been continuous, which can be extremely difficult, requiring extensive documentation, and/or witnesses.
05 | OFFERS ADDITIONAL LEGAL REMEDIES
Registering your trademark can increase the number of remedies available to you if you sue for infringement. Depending on the circumstances, you can go after the defendant’s profits, seek statutory and punitive damages, as well as collect attorney’s fees and court costs. Such remedies typically aren’t available with only common law rights.
06 | ALLOWS YOU TO PUBLICLY DISPLAY YOUR REGISTRATION
Registration grants you the right to use the ® symbol with your trademark branding. Unregistered marks are only allowed to use the ™ symbol. This designation gives your company more credibility and prestige, while letting competitors know you’re serious about protecting for IP.
07 | ENABLES YOU TO APPLY FOR TRADEMARK REGISTRATION IN FOREIGN MARKETS
While federal trademark registration is usually not enforceable outside of US borders, registering does provide you with a basis for applying for trademarks in many other countries. Having trademarks in other countries can be especially important, with the rapid globalization of the marketplace and widespread use of the internet.
08 | EMPOWERS ENFORCEMENT OF TRADEMARK BY U.S. CUSTOMS OFFICIALS
Federal registration allows you to record your trademark with U.S. Customs and Border Protection. This empowers Customs officials to block the importation of infringing or counterfeit goods and allows you to bring a counterfeiting case to federal court.
ENFORCING YOUR RIGHTS
It’s important to keep in mind that outside of prohibiting others from registering a confusingly similar trademark, the USPTO will not enforce your trademark rights or bring any legal action against an infringer—that’s up to you. That said, if you discover potential infringement, we can help you enforce your ownership rights, and do everything we can to maintain your trademark rights without a lawsuit. Indeed, we often write letters that not only resolve the conflict, but also inspire the other party to join you in an ongoing joint venture that can benefit both parties.
While federally registering a trademark is a fairly simple process—and one you could do on your own—it’s typically a good idea to just let us handle it for you, so you can stay focused on the business of your business, while we handle the underlying structures that support you to grow your business. As your Family Business Lawyer®, we can not only help you secure the proper trademarks, but we can also work with you to develop a comprehensive strategy to protect all of your other intellectual property, as well as support the ongoing strategy of building a great business and a great brand.
This article is a service of Sahmra A Stevenson Family Business Lawyer®. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.
- Published in In the News
How Using the Right Legal Agreements Can Safeguard Your Intellectual Property
Using independent contractors (ICs) can give your company an edge in today’s thriving gig economy, but if you are not careful, contractors can also be a serious liability. In fact, working with ICs comes with a number of unique legal and financial risks that can be potentially ruinous to your business if not handled properly.
Beyond getting sued or hit with hefty fines for misclassifying an employee as a contractor, you must also be careful to properly secure ownership of anything an IC creates for you. This is particularly true when it comes to your intellectual property (IP).
And whether you know it or not, IP is one of your company’s most valuable assets. Indeed, a recent study found that up to 80% of the value of today’s typical business is made up of different forms of IP.
Do You Actually Own The Work You Are Paying For?
Unlike employees, with whom you generally own automatic copyrights to everything they produce while working for you, ICs typically retain full copyrights to their work—unless they’ve signed a written agreement stating otherwise. Indeed, if you don’t have properly drafted agreements in place, you may not even own the work you pay ICs to produce for you.
Fortunately, it’s fairly easy to secure full ownership of these works by using the proper legal agreements. However, this is only possible if you actually put these agreements in place with every IC you work with—and yes, this means every single person, even those you have worked with for years without a single problem.
Work-For-Hire Agreements
When it comes to using legal agreements to secure ownership of the work you hire an IC to produce, you have a couple of options. One option is to include a work-for-hire clause in their independent contractor agreement.
A work-for-hire clause states that you, not the IC, own all copyrights to the deliverables he or she produces for you under the agreement. Such a clause effectively makes it as if you created the work yourself, and as such, it allows you to use the work in any way you wish.
Just be sure to have the IC sign the agreement before he or she starts working. If not, it may be too late to acquire full ownership. Additionally, work-for-hire clauses only cover certain types of materials. According to the U.S Copyright Office, in order for a work-for-hire to apply, the work being created must fall into one of the following nine categories:
- a contribution to a collective work, such as a magazine or anthology
- a part of an audiovisual work or movie
- a translation
- a supplementary work, such as a forward, editorial notes, appendix, bibliography, or chart
- a compilation created by selecting and/or arranging preexisting works
- an instructional text
- a test
- answer materials for a test
- an atlas
If the work you hire an IC to create does not fall into one of these categories, a work-for-hire clause would not give you full ownership. This catches many business owners by surprise, who falsely assume having such a clause is all they need. However, if the work you are paying for doesn’t fit into these categories, you will need a different type of agreement to secure ownership of the IP—and as you can see, the type of work covered by work-for-hire agreements is fairly limited.
Copyright Assignment
For works that fall outside of the work-for-hire domain, you will need to include an assignment clause in the contractor’s agreement, in which the IC transfers some, or all, of their copyrights to your business. Without this clause, the IC would retain all rights to the work, even if the agreement contained a work-for-hire clause.
Adding an assignment clause to the IC’s agreement is fairly simple, and for maximum protection, you can even include such a clause alongside a work-for-hire provision. It’s as easy as simply adding a brief clause in the agreement stipulating that if the work is not deemed a work-for-hire, the IC assigns all copyrights to your company.
Non-Disclosure & Non-Disparagement Agreements
In addition to work-for-hire clauses and copyright assignment agreements, all of your agreements with contractors should also include non-disclosure and non-disparagement agreements, which would keep an IC from disclosing details about their work with you to outside parties, especially your competitors. A non-disclosure agreement could cover trade secrets, confidential business information, and financial information about your business, and even whether the IC worked with you.
Although you may not think of it this way, one of your most valuable items of intellectual property is your reputation. A non-disparagement agreement assures you that an IC is unlikely to tarnish your reputation after working with you.
Don’t Go It Alone
Although work-for-hire, copyright-assignment, non-disclosure, and non-disparagement clauses and agreements are not difficult to create, because each project is unique, there is not a specific template or generic form that would cover every job. What’s more, the wording of each agreement is also important, and some states require specific language for work-for-hire agreements to be legally valid.
Given this, you should steer clear of generic legal agreements you find online, and always have us, your Family Business Lawyer™ review your IC agreements, even if they were drafted by another lawyer. Whether you need your existing agreements reviewed or need help creating new contracts, as your Family Business Lawyer™, we will support you in developing the proper legal agreements that will give you the most comprehensive ownership rights possible with every contractor you hire.
Furthermore, we can perform an IP audit for your company. This audit is a comprehensive, systematic review that identifies all of your IP assets, and evaluates all of the potential risks and opportunities associated with those assets. An IP audit will not only identify your IP assets, it can also help ensure you have all of the necessary IP protections, such as trademarks, copyrights, along with the proper legal agreements governing those projections to ensure you own the full spectrum of rights related to your IP. Contact us, your local Family Business Lawyer™ firm today to get started.
This article is a service of Sahmra Stevenson, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.
- Published in In the News
3 Reasons Why Single Folks With No Children Need An Estate Plan
These days, more and more young people are delaying—if not totally foregoing—a life that involves marriage and parenting. The lack of jobs, crushing student debt, multiple recessions, and the pandemic have pushed many young people into a life path that leaves little room for settling down with a partner and getting married—and even less room for having children.
Yet, for other young adults, staying single and childless is simply a matter of choice. Regardless of the reason, as more young adults opt for non-traditional lifestyles, the number of single childless households is likely to steadily increase in the coming years.
While most adults don’t take estate planning as seriously as they should, if you are single with no children, you might think that there’s really no need for you to worry about creating an estate plan. But this is a huge mistake. In fact, it can be even MORE important to have an estate plan if you are single and childless.
If you are single without kids, you face several potential estate planning complications that aren’t an issue for those who are married with children. And this is true whether you’re wealthy or have very limited assets. Indeed, without proper estate planning, you’re not only jeopardizing your wealth and assets, but you’re putting your life at risk, too. And that’s not even mentioning the potential conflict, mess, and expense you’re leaving for your surviving family and friends to deal with when something unexpected happens to you.
With this in mind, if you’re single and childless, consider these three inconvenient truths before you decide to forego estate planning.
1. Someone Will Have to Handle Your Stuff
Whether you’re rich, poor, or somewhere in between, in the event of your death, everything you own will need to be located, managed, and passed on to someone, which can be a massive undertaking in itself—one that few families are properly prepared for.
In fact, following a loved one’s death, American families spend an average of 500 hours and $12,700 over the course of 13 months (20 month if probate is required) to finalize the person’s affairs and settle their estate, according to the first annual Cost Of Dying report released this March by tech startup Empathy in partnership with Goldman Sachs. Look for additional articles in the coming weeks covering the Cost Of Dying and the new role Empathy is playing in the end-of-life industry.
On top of the logistical complications involved with finalizing your affairs, without a clear estate plan, including a will or trust, your assets will go through the court process of probate, where a judge and state law will decide who gets everything you own. In the event no family steps forward, your assets will become property of the state.
Why give the state everything you worked to build? And even if you have little financial wealth, you undoubtedly own a few sentimental items, maybe even including pets, that you’d like to pass to a close friend or favorite charity.
However, it’s rare for someone to die without any family members stepping forward. It’s far more likely that some relative you haven’t spoken with in years will come out of the woodwork to stake a claim. Without a will or trust, state intestacy laws establish which family member has the priority inheritance. If you’re unmarried with no children, this hierarchy typically puts parents first, then siblings, then more distant relatives like nieces, nephews, uncles, aunts, and cousins.
Depending on your family, this could have a potentially troubling—and even deadly—outcome. For instance, what if your closest living relative is your estranged brother with serious addiction issues? Or what if your assets are passed on to a niece with poor money-management skills, who is likely to squander her inheritance?
And if your estate does contain significant wealth and assets, this could lead to a costly and contentious court battle, with all of your relatives hiring expensive lawyers to fight over your estate. In the end, this could tear your family apart, while making their lawyers rich—all because you didn’t think you needed an estate plan.
As your Personal Family Lawyer®, we will work with you to create an estate plan that ensures that your assets will pass to the proper people, while avoiding both unnecessary court proceedings and family conflict.
2. Someone Will Have Power Over Your Healthcare
Estate planning isn’t just about passing on your assets when you die. In fact, some of the most critical aspects of estate planning have nothing to do with your money at all, but are aimed at protecting you while you’re still very much alive.
Proactive planning allows you to name the person you want to make healthcare decisions for you in the event you are incapacitated and unable to make such decisions yourself. This is done using an estate planning tool known as a medical power of attorney.
For example, if you’re incapacitated due to a serious accident or illness and unable to give doctors permission to perform a potentially risky medical treatment, it would be left up to a judge to decide who gets to make that decision on your behalf.
If you have a romantic partner but aren’t married and haven’t granted him or her medical power of attorney, the court will likely have a family member, not your partner, make those decisions. Depending on your family, that person may make decisions contrary to what you or your partner would want.
And if you don’t want your estranged brother to inherit your assets, you probably don’t want him to have the power to make life-and-death decisions about your medical care, either. But that’s exactly what could happen if you don’t put a plan in place.
Furthermore, your family members who have priority to make decisions for you could keep your dearest friends away from your bedside in the event of your hospitalization. Or family members who don’t share your values about the type of food you eat, or the types of medical care you receive, could be the one’s making decisions about how you’ll be cared for.
To address these issues, you need to implement an estate planning tool that provides specific guidelines detailing exactly how you want your medical care to be managed during your incapacity, including critical end-of-life decisions. This is done using an estate planning vehicle known as a living will.
Bottom line: If you are single with no kids, you need to create an estate plan in order to name healthcare decisions-makers for yourself and provide instructions on how you want those decisions made should you ever become incapacitated and unable to make those decisions yourself.
3. Someone Will Get Power Over Your Finances
As with healthcare decisions, if you become incapacitated and haven’t legally named someone to handle your finances while you’re unable to do so, the court will pick someone for you. The way to avoid this is by granting someone you trust durable financial power of attorney.
A durable financial power of attorney is an estate planning vehicle that gives the person you choose the immediate authority to manage your financial, legal, and business affairs if you’re incapacitated. This agent will have a broad range of powers to handle things like paying your bills and taxes, running your business, collecting your Social Security benefits, selling your home, as well as managing your banking and investment accounts.
Without a signed durable financial power of attorney, your family and friends will have to go to court to get access to your finances, which not only takes time, but it could lead to the mismanagement—and even the loss—of your assets should the court grant this authority to the wrong person.
What’s more, the person you name doesn’t have to be a lawyer or financial professional; it can be anybody you choose, including both family and friends. The most important aspect of your choice is selecting someone who’s imminently trustworthy, since they will have nearly complete control over your finances while you remain incapacitated. And besides, with us as your Personal Family Lawyer®, your agent will have access to our team as their trusted counsel should they need guidance or help.
Don’t Leave So Much At Risk
Given these potential risks and costs for yourself and those you care about, it would be foolhardy if you are single without kids to ignore or put off these basic estate planning strategies. Identifying the right estate planning tools is easy to do, and it begins with a Family Wealth Planning Session. During this session, us, your local Personal Family Lawyer® will consider everything you own and everyone you love, and guide you to make informed, educated, and empowered choices for yourself and your loved ones.
In the end, it will likely take just a few hours of your time to make certain that your assets, healthcare, and finances will be managed in the most effective and affordable manner possible in the event of your death or incapacity. Don’t leave your life and assets at risk or leave a mess for the people you love; contact us, your Personal Family Lawyer® to get your estate planning handled today.
This article is a service of Sahmra A Stevenson, Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $450 session at no charge.
- Published in In the News
How To Pass On Family Heirlooms & Keepsakes Without Causing A Family Feud
When creating an estate plan, people are often most concerned with passing on the “big things” like real estate, bank accounts, and vehicles. Yet these possessions very often aren’t the items that have the most meaning for the loved ones we leave behind.
Smaller items, like family heirlooms and keepsakes, which may not have a high dollar value, frequently have the most sentimental value for our family members. But for a number of reasons, these personal possessions are often not specifically accounted for in wills, trusts, and other estate planning documents.
However, it’s critical that you don’t overlook this type of property in your estate plan, as the distribution of such items can become a source of intense conflict and strife for those you leave behind. In fact, if you don’t properly address family heirlooms and keepsakes in your estate plan, it can lead to long-lasting disagreements that can tear your family apart.
Heirlooms & Keepsakes: Little Things With Big Value
Heirlooms and keepsakes are both prized for their sentimental value, but these possessions are slightly different from one another in terms of the manner in which the items are passed on.
Heirlooms: Heirlooms are passed down among family members for generations, and the passing of heirlooms sometimes involves traditions. For example, the first daughter to marry inherits grandmother’s heirloom wedding ring.
Keepsakes: Keepsakes, on the other hand, are possessions that are given or kept specifically for sentimental or nostalgic reasons, and these items may only get passed on once. For example, photo albums are a typical keepsake that are treasured by many families. If a keepsake gets passed on multiple times, it may eventually become a family heirloom.
Although just about any personal possession could be considered an heirloom or keepsake, some of the most common examples of these items include the following:
- Jewelry
- Photographs
- Books
- Art
- Musical instruments
- Furniture
- Clothing
- Bibles
- Recipes
- Family documents (such as birth certificates, baptism records, and citizenship papers)
- Collections (such as sports memorabilia, coins, stamps, and doll collections)
Issues Raised By Passing On Heirlooms & Keepsakes
In the legal world, both heirlooms and keepsakes are considered “non-titled personal property.” As mentioned earlier, when there is no plan in place for the distribution of these items following the owner’s death, it can create bitter conflicts among family members. Indeed, fights over heirlooms and keepsakes can cause close family members to never speak with one another again.
In her book “Who Gets Grandma’s Yellow Pie Plate?” Professor Marlene S. Stum, an expert in family social science at the University of Minnesota, warns of the infighting that can occur when there’s no plan for who inherits these personal effects.
“What surprises many people is that often the transfer of non-titled personal property creates more challenges among family members than the transfer of titled property,” says Stum. “Research has shown that disputes over inheritance and property distribution are one of the major reasons for adult siblings to break off relationships with one another.”
Given the potential trouble the distribution of heirlooms and keepsakes can cause for your heirs, you’ll want to take extra care in seeing that these family treasures are passed on properly. And this means incorporating them into your estate plan in one way or another.
Strategies For Peacefully Distributing Heirlooms & Keepsakes
While there is no one perfect way to distribute these items in your estate plan, your primary goal should be to maintain harmony among your loved ones during an already emotional time. As with most sensitive issues, clear communication is vital to this process.
Because your family members can have vastly different values associated with certain heirlooms and keepsakes and you may have little idea about how each person feels, you should speak with each family member in advance. By talking with family members about their feelings and expectations regarding your possessions ahead of time, you will have a much better idea how to distribute these items to your loved ones with the least amount of conflict.
Additionally, you should decide ahead of time if you need to have any of your heirlooms or keepsakes appraised. In doing so, you provide your heirs with the necessary documentation to gauge the monetary value of these items, and you can save them from extra work while they are mourning your death.
Again, the manner in which you distribute your heirlooms and keepsakes will depend largely on the items you have to pass on and your specific family situation. That said, here are a few estate planning strategies to consider when passing on these precious possessions.
Gifting during your lifetime: Of course, you don’t have to wait until you die to pass on your heirlooms and keepsakes, and you may prefer to give away certain special items while you are still living. By doing so, you get to personally witness the joy your loved ones experience when they receive the gift, and you can also personally explain the reasons you want each person to have a particular item.
If your heirlooms and/or keepsakes have a high monetary value, you should keep gift tax issues in mind when you give them away. That said, the IRS has a high annual gift tax exclusion ($16,000 in 2022) and an equally high lifetime exclusion ($12.06 million in 2022), so few people will need to worry about such taxes.
Keep in mind, the lifetime exclusion amount will revert back to its pre-2018 level of around $5 million per individual in 2026, so if you are considering gifting high-value possessions, you may want to do it sooner, rather than later. In any case, if you have possessions you want to give away that might trigger gift taxes, meet with us, your Personal Family Lawyer® to discuss your options.
Include items in your estate plan using a personal property memorandum: As with other assets you want to pass on after your death, you should include heirlooms and keepsakes in your estate plan by adding them to your will or trust. The best way to do this is by using what’s known as a personal property memorandum.
A personal property memorandum is a separate document that is referenced in your will or living trust. The memorandum allows you to list which items you wish to leave to each individual and detail the reasons you are giving each item. In many states, if it’s properly incorporated into your will or trust, a personal property memorandum is a legally binding document.
Furthermore, unlike a will or trust, you can create and update your memorandum without a lawyer’s help. You can change your memorandum as many times as you like, just make sure you sign and date it each time to ensure authenticity. Your memorandum can be as long or short as you like, which allows you to account for even the smallest or seemingly insignificant possessions.
Most types of tangible personal property can be included in your memorandum, but it’s important to note that you cannot list certain assets in a memorandum, including titled property, such as real estate and vehicles; assets with a beneficiary designation, such as life insurance, 401(k)s, and bank accounts; or intellectual property, such as works protected by a copyrights or trademark. If you are unsure if you should include a certain possession in your personal property memorandum, consult with us.
Although you don’t need a lawyer to create or modify your personal property memorandum, if you need any help or support with yours, reach out to us, your Personal Family Lawyer®. That said, you should always enlist our assistance if you’d like to create or update your will or trust.
Pass on the values & stories behind the possessions: You may want to consider making audio recordings to accompany your heirlooms and keepsakes. In this way, your loved ones not only get to hear your voice, but they will also be able to learn the stories behind the possessions, as well as the reasons why you gave each person a particular item.
These stories not only help connect you with future generations, but having a strong family narrative also helps young people develop strong personal identities and boosts their self esteem. In the New York Times article, “The Stories that Bind Us,” author Bruce Feiler comments on this phenomenon: “The more children knew about their family’s history, the stronger their sense of control over their lives, the higher their self-esteem, and the more successfully they believed their families functioned.”
Best of all, you don’t have to worry about creating these recordings yourself, as we offer this exact service during our Family Wealth Legacy Interviews. In every estate plan we create for our clients, we will personally guide you to create a customized recording for the people you love, and then we will provide you with the recording digitally to ensure it will survive long after you are gone.
Don’t Let Anything Fall Through The Cracks
Of course, if no one can find your heirlooms and keepsakes, they aren’t going to do anybody any good. For this reason, it’s vital that you create and maintain a comprehensive inventory of all of your assets, including each of your family heirlooms and keepsakes. Fortunately, this is another service we offer all of our clients at no additional charge. Indeed, we will not only help you create a comprehensive asset inventory, we have systems in place to make sure your inventory stays consistently updated throughout your lifetime.
To learn more and get your inventory started for free right now, visit the Personal Resource Map website to watch a webinar by Ali Katz, founder of Personal Family Lawyer®. Then, schedule a meeting with us, your local Personal Family Lawyer® to incorporate your inventory with your other estate planning strategies
Keep The Peace After You Are Gone
To ensure your heirlooms and keepsakes don’t create any unnecessary conflicts among your heirs, make sure that your estate plan includes all of your assets, especially your family heirlooms and keepsakes. As your Personal Family Lawyer, we can support you to ensure these precious treasures are protected and preserved as part of your Life & Legacy Plan, and that they pass to each of your loved ones in exactly the manner you would want, without causing a family feud. Contact us today to learn more.
This article is a service of Sahmra Stevenson, Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $450 session at no charge.
- Published in In the News
Don’t Let Your Kids Leave Home Without Signing These 3 Documents
As we head into summer, many parents will see their children graduate high school and prepare to leave home to attend college or pursue other life goals. This can be an exciting and emotional time, and with so much going on, estate planning probably isn’t at the front of your (or their) mind right now.
However, estate planning should actually be a top priority for both you and your kids.
Here’s why: Once your kids turn 18, they become legal adults, and many areas of their life that were once under your control will become entirely their responsibility, whether you take action or not. To this end, if your kids don’t have the proper legal documents in place, you could face a costly and traumatic ordeal should something happen to them.
If your child were to get into a serious car accident and require hospitalization, for example, you would no longer have the automatic authority to make decisions about his or her medical treatment or the ability to manage their financial affairs. Without legal documentation, you wouldn’t even be able to access your child’s medical records or bank accounts without a court order.
To deal with this vulnerability and ensure your family never gets stuck in an expensive and unnecessary court process, before your kids leave home, have a conversation about estate planning and make sure they sign the following three documents.
1. Medical Power of Attorney
The first document your child needs is a medical power of attorney. A medical power of attorney is an advance healthcare directive that allows your child to grant you (or someone else) the immediate legal authority to make healthcare decisions on their behalf if they become incapacitated and are unable to make these decisions themselves.
For example, a medical power of attorney would allow you to make decisions about your child’s medical treatment if he or she is incapacitated in a car accident or falls into a coma due to a debilitating illness like COVID-19.
Without a medical power of attorney in place, if your child suffers a severe accident or illness that requires hospitalization and you need to access their medical records to make decisions about their treatment, you’d have to petition the court to become their legal guardian. While a parent is typically the court’s first choice for a guardian, the guardianship process can be slow and expensive—and in medical emergencies, time is of the essence.
Not to mention, due to HIPAA laws, once your child becomes 18, no one—not even their parents—can legally access his or her medical records without prior written permission. However, a properly drafted medical power of attorney will include a signed HIPAA authorization, so you can immediately access your child’s medical records to make informed decisions about his or her treatment.
2. Living Will
While a medical power of attorney allows you to make healthcare decisions on your child’s behalf during their incapacity, a living will is an advance directive that provides specific guidance about these decisions, particularly at the end of life.
For example, a living will allows your child to advise if and when they want life support removed should they ever require it. In addition to documenting how your child wants their medical care managed, a living will can also include instructions about who should visit them in the hospital and even what kind of food they would want provided. For example, if your child is a vegan, vegetarian, or takes specific supplements, these things should be considered and documented in their living will.
Additionally, given the pandemic, speak with your child about the unique medical decisions related to COVID-19, particularly intubation, ventilators, and experimental medications. At the same time, your child’s living will should also outline their quality of life decisions to ensure their emergency medical treatment doesn’t end up doing more harm than good.
Although you’ll find a variety of medical power of attorney, living will, and other advance directive documents online, your child has unique needs and wishes that can’t be anticipated by these fill-in-the-blank documents. Given this, we recommend you and your child work with us, your Personal Family Lawyer® to create—or at the very least, review—their advance directives.
3. Durable Financial Power of Attorney
Should your child become incapacitated, you may also need the ability to access and manage their finances and legal affairs, and this requires your child to grant you durable financial power of attorney.
Durable financial power of attorney gives you the authority to manage their financial and legal matters, such as paying their tuition, applying for student loans, paying their rent, negotiating (or re-negotiating) a lease, managing their bank accounts, and collecting government benefits if necessary. Without this document, you’ll have to petition the court for this authority.
Start Adulthood On The Right Track
Before your kids leave the nest, discuss the value of estate planning and make sure they have the proper legal documents in place. By doing so, you are helping your family avoid a costly and emotional court process, while also demonstrating the importance of good financial and legal stewardship, which sets your kids on the right track from the very start.
As your Personal Family Lawyer®, we will not only help you draft these documents, we can also facilitate a family meeting to discuss the importance of estate planning with your kids. From there, we hope this will begin a life-long relationship with your children, as they start on their journey into adulthood and beyond. Contact us today to schedule your appointment.
This article is a service of Sahmra Stevenson Esq., Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $450 session at no charge.
- Published in In the News
Navigating Small Claims Court: What You Should Know
As a business owner, it’s inevitable that you will face minor conflicts and disputes at some point. Whether it’s a client who refuses to pay a bill, an independent contractor who fails to fulfill the terms of their agreement, or a vendor who stiffs you on an order, dealing with such issues is a simple fact of doing business.
However, given the time and expense involved, filing a lawsuit in civil court to resolve such minor disputes typically isn’t worthwhile, especially if you are only trying to recover a few thousand dollars. And taking the matter to a collections agency usually isn’t a viable option either, since average fees run between 25% to 50% of the total amount recovered.
If you can’t resolve the dispute privately, taking the case to small claims court may be your best option. Small claims courts are specifically designed to resolve relatively low-collar cases quickly and inexpensively, without the need to observe the complex formalities of traditional court proceedings, and without incurring costly legal fees.
If you are considering taking a case to small claims court, here are a few answers to some basic questions about the process.
What types of cases are resolved in small claims court?
Small claims courts are real courts, and a judgment issued by a small claims court is just as binding and enforceable as one made in a traditional civil court. Small claims court can be a quick and inexpensive way for your business to collect on unpaid debts and resolve contractual disputes with clients, vendors, and other companies. However, you can only take your case to a small claims court if the money you’re seeking to collect is below a certain amount, which is known as the court’s jurisdictional limit.
These limits are different for each state, with some as low as $2,000 and others as high as $25,000, so be sure to review our state’s jurisdictional limit before filing your claim. Additionally, be aware that no state allows for small claims court cases involving divorce, guardianship, name changes, bankruptcy, or to seek an injunction against another individual. These cases all require you to file a lawsuit in state civil court.
Where should I file my small claims lawsuit?
If the other party does business or lives in our state, the law typically requires you to file your lawsuit in the small claims court district closest to that person’s residence or business headquarters. In some cases, you also may be able to file in the district where a legal agreement was signed or the dispute in question occurred. Check with the local small claims clerk for more detailed information.
Note that if the other party you are looking to sue has no business or other contact within our state, you’ll likely have to file your case in the state where the individual lives or does business. That said, unless the other party lives in a nearby state, out-of-state small claims lawsuits can be cost prohibitive due to travel expenses, so be sure to factor in the cost of traveling before you file your claim.
How does the small claims court process work?
First, let’s get clear on some terminology. The person who initiates the claim is the plaintiff, and the person who is being sued is the defendant. The process begins when the plaintiff files a statement of claim with the county or district where the case will be held. You can typically get all of the necessary paperwork for filing your claim from our local clerk of court website. You’ll also need to pay court fees, but they’re typically small, ranging from $20 to $200. There are also now apps that will help you file your small claims court case.
Once filed, the court may schedule an initial pretrial conference and/or order the parties to mediation. If the case can’t be resolved via mediation, the court will set a trial date, which will typically be a month or so from the time the claim was filed.
Small claims procedures vary by state and district, but in general, the hearings are fairly informal and don’t involve complicated legal procedures or strict rules of evidence. That said, you still need to prepare and present your case before the judge. Be sure to bring all of the documentation needed to help prove your case, such as contracts, invoices, photos of damages, copies of emails, and/or sales receipts. Some states also allow you to call witnesses.
One of the biggest advantages of small claims court is the time it takes for your case to be decided. Unlike traditional civil court, where cases can drag out for months or even years, a small claims judge will typically issue judgment on the spot, once both sides have presented their arguments and evidence.
Do I need an attorney?
Small claims court is designed to be easy to navigate, without the need for an attorney. Indeed, avoiding costly attorney’s fees is one of the primary benefits of these courts. For this reason, some states even prohibit lawyers from being present.
Of course, if you are going to file a case in small claims court and you are a Family Business Lawyer client, you should definitely call and discuss your strategy with us first, and we can advise you about how to proceed, and/or assist with collecting a judgment.
How do I collect a judgment?
Unfortunately, the court won’t collect your money for you. If you win your case and are awarded a judgment, unless the defendant agrees to pay you or you both agree to a payment plan, you may have to go back to court to get a lien on the defendant’s property or have the court order a wage garnishment.
As your Family Business Lawyer™, we can offer you support and guidance on the best ways to collect on your judgment to ensure you get all the money you are owed.
Can I appeal my case if I lose?
In many states, the plaintiff cannot appeal if he or she loses. If the defendant loses, he or she can generally file an appeal, and if it’s accepted, a new trial will be held in a higher court. Upon appeal, the small claims court trial is completely negated, as if it never happened.
We’re Here If You Need Us
As your Family Business Lawyer™, we can help you decide whether or not to take your particular dispute to small claims court, as well as help you prepare your case. And while you likely won’t need us during the trial, we’re here to support you in whatever way you might require, providing you with the best chance to win your case and collect on your judgment. Contact us today to learn more.
This article is a service of Sahmra A Stevenson, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.
- Published in In the News
10 Common Estate Planning Mistakes Your Family Can’t Afford to Make—Part 2
Because estate planning involves actively thinking about and planning for frightening topics like death, old age, and crippling disability, many people put it off or simply ignore it all together until it’s too late. Sadly, this unwillingness to face reality often creates serious hardship, expense, and trauma for those loved ones you leave behind.
To complicate matters, the recent proliferation of online estate planning document services, such as LegalZoom®, Rocket Lawyer®, and Trustandwill.com, may have misled you into thinking that estate planning is a do-it-yourself (DIY) affair, which involves nothing more than filling out the right legal forms. However, proper estate planning entails far more than filling out legal forms.
In fact, without a thorough understanding of how the legal process works upon your death or incapacity, along with knowing how it applies specifically to your family dynamics and the nature of your assets, you’ll likely make serious mistakes when creating a DIY will or trust. And the worst part is that these mistakes won’t be discovered until you are gone—and the very people you were trying to protect will be the ones stuck cleaning up the mess you created just to save a few bucks.
Estate planning is definitely not a one-size-fits-all endeavor. Even if you think your particular situation is simple, that turns out to almost never be the case. To demonstrate just how complicated estate planning can be, last week in part one, we highlighted the first five of 10 of the most common estate-planning mistakes, and here we wrap up the list with the remaining five mistakes.
6. Not Updating Beneficiary Designations
In addition to reviewing and updating your core estate planning documents like your will, trust, and power of attorney, it’s crucial that you also update the documentation for your other assets, especially those with beneficiary designations. Some of your most valuable assets, like 401(k)s, IRAs, and life insurance policies, do not transfer via a will or trust.
Instead, these assets have beneficiary designations that allow you to name the person (or persons) you’d like to inherit the asset upon your death. Oftentimes, people forget to change their beneficiary designations to match their estate planning goals, which can lead to disaster. For example, if you get remarried and forget to update your 401(k), your ex-spouse from 20 years ago could end up inheriting your retirement savings.
Additionally, some people assume that because they’ve named a specific heir as the beneficiary of their IRA in their will or trust that there’s no need to list the same person again as beneficiary in their IRA paperwork. Because of this, they leave the IRA beneficiary form blank or list “my estate” as the beneficiary. But this is a major mistake—and one that can lead to serious complications and expense for your loved ones.
It makes no difference who is listed as the beneficiary in your will or trust; you must list the person you want to inherit the asset in the beneficiary designation, or your heirs will have to go to court to claim the asset.
And you should never name a minor child as a beneficiary of your life insurance or retirement accounts, even as the secondary beneficiary. If a child inherits assets, the assets become subject to control of the court until they reach the age of 18, and then, the assets are distributed outright without any protection or direction.
If you want a minor to inherit assets, you can create a special trust to hold the asset until the child comes of age, and name someone you trust to serve as a successor trustee to manage the assets until that time. As your Personal Family Lawyer®, we can support you to choose the appropriate trust for this purpose to ensure your child gets the maximum benefit from their inheritance.
7. Improper Execution
You could have the best estate planning documents in the world, but if you fail to sign them, or sign them improperly, they will fail. This might seem trivial, but we see it all the time. A loved one dies, their family brings their estate planning documents to us, and we can’t help them because the documents were either not signed or were signed improperly.
To be considered legally valid, certain estate planning documents like wills must be executed (i.e. signed, witnessed, and/or notarized) following very strict legal procedures. For example, many states require that you and every witness to your will must sign it in the presence of one another. If your DIY service doesn’t mention that condition (or you don’t read the fine print) and you fail to follow this procedure, the document can end up worthless.
8. Choosing The Wrong Executors Or Trustees
In addition to laws regarding execution, state laws are also very specific about who can serve in certain roles like executor, trustee, or financial power of attorney. In some states, for instance, the executor of your will must either be a family member or an in-law, and if not, the person you choose must live in the state. If your chosen executor doesn’t meet those requirements, he or she cannot serve.
Moreover, some states require the person you name as your executor to get a bond, which is like an insurance policy before he or she can serve. Such bonds can be difficult to get for someone who has a less-than-stellar credit score. If your executor cannot get a bond, it would be up to the court to appoint your executor, which could end up being someone you would never want managing your assets or a third-party professional, who could drain your estate with costly fees.
As your Personal Family Lawyer®, we will guide you to choose the most appropriate and qualified executors and/or trustees to manage your estate and assets.
9. Unintended Conflict Between Family Members
Family dynamics are—to put it lightly—quite complex. This is particularly true for blended families, where spouses have children from previous relationships. If you try to go it alone using a DIY document service, you won’t be able to consider all of the potential areas where conflict might arise among your family members and plan ahead to avoid such disputes. After all, even the best set of documents will be unable to anticipate and navigate these complex emotional matters—but we can.
Every day we see families end up in lifelong conflict due to poor estate planning. Yet, we also see families brought closer together as a result of handling these matters the right way. When done right, the estate planning process is actually a major opportunity to build new connections within your family, and our lawyers are specifically trained to help you with that.
In fact, preventing family conflict with proactive estate planning is our special sauce and one of the many reasons to work with us, as your Personal Family Lawyer®, rather than relying on DIY planning documents, which will not identify nor prevent unforeseen family disputes.
10. Failing To Properly Name Guardians For Minor Children
If you are a mom or dad with children under the age of 18 at home, your number-one estate planning priority should be selecting and legally documenting both long and short-term guardians for your kids. Guardians are the people legally named to care for your children in the event something happens to you.
If you haven’t named guardians for your kids yet, use the link below to find out how you can take care of this critical task right now. And if you’ve named guardians for your minor children in your will—even with the help of another lawyer—your kids could still be at risk of being taken into the care of strangers.
For instance, if you’ve named guardians for your kids in your will, what would happen if you became incapacitated and were no longer able to care for them? Did you know that your will only becomes operative in the event of your death, and it would do nothing to protect your children in the event of your incapacity?
Or perhaps the guardians you named in your will live far from your home, so it would take them several days to get there. If you haven’t made legally-binding arrangements for the immediate care of your children, it’s highly likely that they will be placed with the authorities until those guardians arrive.
And does anyone even know where you will is located and how to access it? How can they prove they are your children’s legal guardians if they can’t even find your estate plan?
These are just a few of the potential complications that can arise when naming legal guardians for your kids, whether in your will or as a stand-alone measure. And if just one of these contingencies were to occur, your children would more than likely be placed into the care of strangers. Sadly, we see this happen even to those parents who’ve worked with lawyers to name legal guardians for their children, and that’s because most lawyers simply don’t know what’s necessary for planning and ensuring the well-being and care of minor children.
However, as your Personal Family Lawyer® firm, we have been trained by the author of the best-selling book, Wear Clean Underwear!: A Fast, Fun, Friendly, and Essential Guide to Legal Planning for Busy Parents, on legal planning for the unique needs of families with minor children. As a result of this training, we offer a comprehensive system known as the Kids Protection Plan®, which is included with every estate plan we prepare for families with young children.
The Kids Protection Plan® was created by a nationally recognized attorney, who is a mom herself, to make 100% certain that her kids would always remain in the loving care of people she knows and trusts and never be raised by anyone she didn’t want. And now, you can put this same plan in place for your kids.
While you should meet with us to put the full Kids Protection Plan® in place as soon as possible, protecting your children is such a critical and urgent issue, we’ve created a totally free website, where you can visit to get your plan started right now.
⇒ If you’ve yet to take any action at all, visit this easy-to-use and 100% FREE website, where you can take the first steps to create legal documents naming long-term guardians for your children. By doing this, you can ensure that should anything happen to you prior to creating your full estate plan, your kids would be cared for by the people you would want in exactly the way you would want.
After you’ve completed that step, schedule a Family Wealth Planning Session™ with us, your Personal Family Lawyer®, so we can put the full Kids Protection Plan® in place. From there, we can determine if there are any other estate planning measures that your family might need to ensure the well-being and care of your children no matter what happens.
⇒ If you have already named long-term guardians in your will or as a stand-alone measure, either on your own or with a lawyer, we can review your existing legal documents to see whether you have made any of the most common mistakes that could leave your kids at risk. From there, we will revise your plan and put the proper protections in place to ensure your children are fully protected.
Life & Legacy Planning: Do Right By Those You Love Most
The DIY approach might be a good idea if you’re looking to build a new deck for your backyard, but when it comes to estate planning, it’s actually one of the worst choices you can make. Are you really willing to put your family’s well-being and wealth at risk just to save a few bucks?
If you’ve yet to do any planning, contact us, your Personal Family Lawyer® to schedule a Family Wealth Planning Session, which is the first step in our Life & Legacy Planning Process. During this initial meeting, we’ll take you through an analysis of your assets, what’s most important to you, and what will happen to your loved ones when you die or if you become incapacitated.
If, as a result of this process, we determine that you really do have a very simple situation and you want to create your own estate planning documents yourself online, we will support you to do that. However, if as a result of the process, you decide you would like us to create a plan for you, we’ll support you to find the optimal level of planning for a price that’s right for you.
And if you’ve already created an estate plan—whether it’s a DIY job or one created with another lawyer’s help—contact us to schedule an Estate Plan Review & Check-Up. With our support, we will ensure your plan is not only properly drafted and updated, but that it has all of the protections in place to prevent your children from ever being placed in the care of strangers or anyone you’d never want raising them.
In either case, working with us will empower you to feel 100% confident that you have the right combination of estate planning solutions to fit with your unique asset profile, family dynamics, and budget. As your Personal Family Lawyer® firm, we see estate planning as far more than simply planning for your death and passing on your “estate” and assets to your loved ones—it’s about planning for a life you love and a legacy worth leaving by the choices you make today—and this is why we call our services Life & Legacy Planning. Contact us today to get your plan started.
This article is a service of Sahmra A Stevenson, Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $450 session at no charge.
- Published in In the News
10 Common Estate Planning Mistakes Your Family Can’t Afford to Make—Part 1
10 Common Estate Planning Mistakes Your Family Can’t Afford to Make—Part 1
Because estate planning involves actively thinking about and planning for frightening topics like death, old age, and crippling disability, many people put it off or simply ignore it all together until it’s too late. Sadly, this unwillingness to face reality often creates serious hardship, expense, and trauma for those loved ones you leave behind.
To complicate matters, the recent proliferation of online estate planning document services, such as LegalZoom®, Rocket Lawyer®, and Trustandwill.com, may have misled you into thinking that estate planning is a do-it-yourself (DIY) affair, which involves nothing more than filling out the right legal forms. However, proper estate planning entails far more than filling out legal forms.
In fact, without a thorough understanding of how the legal process works upon your death or incapacity and applies specifically to your family dynamics and the nature of your assets, you’ll likely make serious mistakes when creating a DIY will or trust. And the worst part is that these mistakes won’t be discovered until you are gone—and the very people you were trying to protect will be the ones stuck cleaning up the mess you created just to save a few bucks.
Estate planning is definitely not a one-size-fits-all endeavor. Even if you think your particular situation is simple, that turns out to almost never be the case. To demonstrate just how complicated estate planning can be, here are 10 of the most common estate planning mistakes, starting with the worst blunder of all: failing to create an estate plan.
1. Leaving No Estate Plan At All
If you die without an estate plan, the court will decide who inherits your assets, and this can lead to all sorts of problems. Who is entitled to your property is determined by our state’s intestate succession laws, which hinge largely upon whether you are married and if you have children. Spouses and children are given top priority, followed by your other closest living family members.
If you are single with no children, your assets typically go to your parents and siblings, and then more distant relatives if you have no living parents or siblings. If no living relatives can be located, your assets go to the state. It’s important to note that state intestacy laws only apply to blood relatives, so unmarried partners and close friends would get nothing. If you want someone outside of your family to inherit your assets, having a plan is an absolute must.
If you’re married with children and die with no plan, it might seem like things would go fairly smoothly, but that’s not always the case. If you’re married, but have children from a previous relationship, for example, the court could give everything to your spouse and leave your children with nothing. In another instance, you might be estranged from your kids or not trust them with money, but without a plan, state law controls who gets your assets, not you.
Moreover, dying without a plan could also cause your surviving loved ones to get into an ugly court battle over who has the most right to your property. Or if you become incapacitated, your loved ones could even get into conflict around your medical care. You may think this would never happen to your loved ones, but we see families torn apart by it all the time, even when there’s not significant financial wealth involved.
As your Personal Family Lawyer®, we will help you create a plan that handles your assets and your medical care in the exact manner you wish, taking into account all of your family dynamics, so your death or incapacity won’t be any more painful or expensive for your family than it needs to be.
2. Thinking A Will Alone Is Enough
Lots of people, particularly older folks, believe that a will is the only estate planning tool they need. While a will is a fundamental part of nearly every adult’s estate plan, which can ensure that your assets go where you want them to go in the event of your death, using a will by itself comes with some serious limitations, including the following:
- Wills require your family to go through the court process known as probate, which can not only be lengthy and expensive, it’s also completely open to the public and frequently creates ugly conflicts among your loved ones.
- Wills don’t offer you any protection if become incapacitated by illness or injury and are unable to make your own medical, financial, and legal decisions.
- Wills don’t cover jointly owned assets or those with beneficiary designations, such as life insurance policies and 401(k) plans.
- Wills don’t provide any protection or guidance for when and how your heirs take control of their inheritance.
- Naming guardians for your minor children in your will can leave them vulnerable to being placed in the care of strangers.
Given these facts, if your estate plan consists of a will alone, you are missing out on many valuable safeguards for your assets, while also guaranteeing your family will have to go to court if you become incapacitated or when you die. Fortunately, all of the above issues can be effectively managed using a trust. That said, as you’ll see below, trusts are by no means a panacea—these documents come with their own unique drawbacks, especially if you try to prepare one on your own.
3. Creating A Trust & Not Properly Funding It
Many people now know that a trust can keep your family out of court, and you may think you can just go online to set up your own trust, or have a lawyer do it with you as a one-size-fits all solution. And while that might be true, particularly if you have very simple assets and few family members, even in that case, you are likely to overlook one of the most important parts of creating a trust: “funding” it.
An unfunded trust is a trust that exists, but that doesn’t hold any of your assets because you didn’t retitle them properly, or because you acquired new assets after creating your trust. This is all too common, and if this is true for you, it will leave your family with a big mess, even though you have officially created your trust.
Funding your trust properly is extremely important, because if any assets are not properly funded, the trust won’t work, and your family will have to go to court in order to take ownership of that property. And when you acquire new assets after your trust is created, you must make sure those assets are properly funded into your trust as well.
While many lawyers will create a trust for you, few will ensure your assets are properly inventoried and funded into your trust, and even fewer will ensure the inventory of your assets is kept up-to-date as your life and assets change over time. This might sound crazy, but it’s actually common practice among many estate planning firms—but not ours.
As your Personal Family Lawyer® law firm, we will not only make sure all of your assets are properly titled when you initially create your trust, but we will also ensure that any new assets you acquire over the course of your life are inventoried and properly funded to your trust. This keeps your assets from being lost, and prevents your family from being inadvertently forced into court because your plan was never fully completed.
In light of these facts, if your estate plan includes a trust, it’s critical to work with us, your local Personal Family Lawyer® to ensure it works exactly as you intended.
4. Not Leaving An Up-To-Date Inventory Of Assets
As mentioned above, even if you’ve properly funded your assets into your trust, your estate plan will be worthless if your heirs don’t know what you have or where to find it. In fact, there’s more than $58 billion dollars worth of lost assets in the U.S. Department of Unclaimed Property right now. And that’s all because someone died or became incapacitated without letting anyone know how to locate their assets.
This is especially critical for digital assets like cryptocurrency, social media, email, and data stored in the cloud, because if you haven’t properly addressed these assets in your estate plan, there’s a good chance they will be lost forever if something happens to you. For all of these reasons, creating and maintaining a comprehensive inventory of all of your assets is a standard part of every estate plan we create. With our support, you can rest assured that your family will know exactly what assets you own and how to locate them should anything happen to you.
But that’s not all. As your Personal Family Lawyer®, we will not only help you create a comprehensive asset inventory, we have systems in place to make sure that inventory stays consistently updated throughout your lifetime. This is such an important and urgent issue, we’ve even created a unique (and totally FREE) tool called a Personal Resource Map to help you get the inventory process started right now, by yourself, without the need for a lawyer.
To learn more, visit the Personal Resource Map website to watch a webinar by Ali Katz, founder of Personal Family Lawyer®, and then get your asset inventory started for free. That way, no matter what, if something happens to you, your family will know what you have, where it is, and how to find it.
Then, schedule a meeting with us, your Personal Family Lawyer® to incorporate your inventory with your other estate planning strategies.
5. Failing To Regularly Review & Update Your Estate Plan
In addition to keeping an updated asset inventory, it’s vital that you regularly review and update all of your planning documents. Far too often people prepare a will or trust , then put it into a drawer or on a shelf, and forget about it.
Yet, an estate plan is not a one-and-done deal. As time passes, your life circumstances change, the laws change, and your assets change, you must update your plan to reflect these changes—that is, if you want your plan to actually work for your loved ones and keep them out of court and conflict.
We recommend reviewing your plan annually to make sure its terms are up to date. And be sure to immediately update your plan following major life events like divorce, births, deaths, and inheritances. We actually have built-in processes to make sure this happens—be sure to ask us about them.
Beyond sheer necessity, an annual life review can be a beautiful ritual that puts you at ease, and helps you to set the course of your life and keeps your life on course, knowing that you’ve got your affairs in order, all handled, and completely updated each year.
Next week, in part two, we’ll wrap up our list of the 10 most common estate-planning mistakes. Until then, if you are ready to get your estate planning handled and taken care of the right way with ease and affordability, start by contacting us, your local Personal Family Lawyer® for a Family Wealth Planning Session. Your Family Wealth Planning Session is custom-designed to your assets, your family, your wishes, and to educate you on the best way to reach your objectives for the people you love most.
This article is a service of Sahmra A Stevenson Esq., Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $450 session at no charge.
- Published in In the News