2023.02.17

In most cases, from the most sophisticated business people with the highest net worth to those just starting in the workforce and on their path to adulthood, you very likely do not know how to evaluate estimates when shopping for an estate plan.

Shopping for an estate plan based on getting the lowest cost plan possible is often the fastest path to leaving your family with an empty set of documents (maybe in a beautiful binder, but not worth the paper they are written on) that won’t work for your family when they need it.

Unfortunately, we see the negative effects of cheap estate planning when family members come to us during a time of grief with that fancy binder that sat on the shelf for years sending out signals of false security, full of out-of-date estate planning documents, and find themselves stuck in what could have been an avoidable court process,  or even conflict when that’s exactly what their loved one thought they had paid someone to handle for them.

Here Are 5 Reasons Why Shopping For The Cheapest Estate Plan Is Likely To Leave You With A Plan That Won’t Work For Your Family… And Could Leave Them With A Big Mess Instead.

01 | The least expensive plan isn’t worth the paper it’s written on once you’ve left the attorney’s office — your life changes, the law changes, and your assets change over time; your plan needs to keep up with those changes.

And the truth is a lawyer can’t afford to provide anything more than documents that won’t get updated when you only pay a few hundred dollars for a plan. The business model doesn’t work for the lawyer and won’t work for you. 

An attorney who has built a practice specifically to serve your family in their best interests cannot make a living selling $399 (or even $1,500 or $2,000) Wills, Trusts, or estate plans. Only insurance and financial professionals getting paid commissions to sell your family’s annuities and life insurance products can make a living selling cheap documents. Buyer beware!

02 | “Estate planning” is often sold by financial professionals who want to get their hands on your “assets under management,” not necessarily prioritizing doing right by your family or keeping the people you love out of court or conflict. They may not even know how to keep your family out of court or conflict.

When your estate plan has been sold to you by an investment advisor as part of your financial advisory and retirement support services, their focus isn’t on understanding the relational and legal dynamics of families, which can flare up after the death of a loved one. As “relational lawyers,” we’ve got specific expertise and training in pre-emptively identifying potential for family conflict and heading it off before it becomes an expensive problem. We’ve seen it all when it comes to families getting stuck in court, as your Personal Family Lawyer®, we can help you design a plan that prevents your family from court and conflict.

03 | Forms and documents won’t be there for your family when you can’t be — you want to leave your loved one’s relationship with a trusted advisor with whom you have built a relationship during your lifetime and who has met them and they already Trust.

Working with a lawyer who focuses on “the best documents” at the “lowest price” or doesn’t charge enough for their services cannot provide more than form documents. These days, especially with the rise of AI, template form documents are free- for anyone to use, which makes it difficult to know how those documents are handled when it comes to protecting the people you love.

Shopping around for the least expensive plan may get you the cheapest documents, but those documents won’t be there to guide the people you love when they need someone to turn to in a crisis or grief. We will be.

04 | You get what you pay for. It’s your family that will pay the price. Traditional law firms usually use generic forms and documents. These are called “Trust mills” and are a firm that drafts plans but doesn’t ensure assets are owned correctly or stay up to date over time. You might think that’s malpractice, but it’s not. It’s common practice, leaving your family at risk if and when something happens to you!

05 | An estate plan isn’t a set-it-and-forget-it kind of thing, it needs to stay updated with changes in your life, the law, and your assets. 

There’s currently more than $58 billion in unclaimed property held in departments of unclaimed property across the United States. Yep, that is billion with a B.  Assets often land there when someone dies or becomes incapacitated, and their family loses track of it because it wasn’t tracked well during life.  And that’s just one way your family loses out if you’ve shopped around for the cheapest estate plan rather than having a plan that works for the people you love.

Is Something Better Than Nothing?

Sometimes, having something in place is better than nothing, but this is not one of those cases. In this case, having a “something” plan leaves your family holding the expensive, or even empty bag, when it’s too late for them and you to do anything about it. It’s  risky business to leave your loved one’s with a set of documents you aren’t sure are going to work, and our guess is that you love your people too much for that. 

Bottom line: don’t waste your time shopping  around town for the cheapest plan possible. You don’t want the cheap plan, you want the plan that will work for the people you love when they need it.

If you already have an estate plan in place that you may have bought based on price, and are concerned you may have gotten a set of documents  that won’t serve your family when they need it most, call us and ask about our 50-point assessment. We can help you save some money by giving it to do yourself, or you can pay us for a plan review to make sure your loved one’s won’t get stuck with an expensive and painful and unnecessary court process or loss of assets, when it’s too late. 

Use this link https://bookme.name/OfficeWithoutWalls/lite/15-minute-estate-planning-call to learn more and to get on our calendar. We begin our planning process with a Family Wealth Planning Planning Session, during which you’ll not only become more financially organized than ever before, you’ll finally be able to make informed, educated choices about the right plan for your family based on your unique family dynamics and your assets,  instead of just shopping around for an estate plan based on price.

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 $750 session at no charge. 

The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer firms®, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

2023.02.10

4 Fundamental Asset Protection Vehicles For Business Owners

Regardless of the industry you are in, the reality of being a business owner is that you open yourself up to a number of unique risks that most people don’t have to worry about—and the more successful your business is, the more risks you face. 

Unfortunately, most business owners aren’t fully aware of all the potential risks that can affect their company or the options they have available to protect their personal assets from the risks of doing business. This is where asset protection planning comes in.

Asset protection planning is designed to reduce or eliminate the risks of being in business by shielding your business and personal assets from lawsuits, creditors, and other potential threats to the fullest extent legally possible. And it’s absolutely crucial to have your asset protection strategies in place from the moment you open your doors, because once a claim or lawsuit is filed, it’s too late. 

In fact, if you take certain actions to protect your assets after a claim or lawsuit has been filed, you could be charged with fraud. With this in mind, the time to take action is now, while there is nothing to worry about and the full range of options to protect your assets are still available to you.

While the specific protections you require will largely depend on the specifics of your business and your personal assets, the following four vehicles form the foundation of most business owners’ asset-protection planning.

01 – Business Entities

One of the most fundamental asset protection strategies is setting up the proper entity structure for your business from the start. Without the correct entity in place, your personal assets would be at risk if your business ever gets into debt that it cannot pay, or is hit with a lawsuit. 

For example, if your company is structured as a sole proprietorship or general partnership and you go out of business, creditors could come after your personal assets to pay off your business debts. Similarly, if your sole proprietorship or general partnership is hit with a lawsuit, your personal assets could be seized to satisfy a judgment.

By structuring your business as a limited liability company (LLC) or corporation, you can shield your personal assets from liabilities incurred by your business. These structures establish your company as a separate legal entity that’s distinct from you as an individual, which prevents you from being personally liable for the company’s debts or legal liabilities.

As long as you properly maintain your entity’s administrative formalities and keep your business and personal assets separate, both LLCs and corporations effectively create a barrier between you and the activities of your business. Creditors, clients, and other potentially litigious entities can go after your business assets, but not your personal assets. 

That said, you can be held personally liable in certain situations, such as if your entity isn’t maintained properly or you mistakenly commingle your personal and business finances. In that case, a court will hold you personally liable for the debts and liabilities of your business. When this happens, it’s known as “piercing the corporate veil.” 

This is exactly why it’s so important to work with a lawyer to set up and maintain your business entity, and not try to handle this on your own. The consequences of not maintaining your business entity are just too high, and by the time you are facing those consequences, it’s too late to do anything about it.

We offer you a number of legal and financial systems that make keeping up with your entity’s administrative and compliance formalities a snap. Meet with us, your Personal Family Lawyer® with business planning expertise to find out what entity structure is best suited for your business and how we can ensure you have the maximum liability protection possible.

02 – Business Insurance

While setting up a separate legal entity can safeguard your personal assets from your company’s liabilities, an entity will not protect the assets of your business—that’s what business insurance is designed to cover. And since a catastrophic event or lawsuit can wipe out your company, it’s vital to have the proper insurance coverage in place from the start of your business.

The type and amount of coverage your company needs will largely depend on your particular company and its assets. However, most businesses can benefit from the following forms of insurance: general liability insurance, professional liability insurance, property insurance, cyber insurance, and employment practices insurance. Additionally, you should also consider investing in umbrella insurance, which would cover you for any damages in excess of your other individual policies.

Finally, if you are considering letting insurance wait, or not making insurance a priority, remember this: anyone can sue anyone at any time for anything. You don’t even have to have done anything wrong to get sued. Yet whether you are in the wrong or in the right, if you do get sued, you’ll need to pay big money to hire a lawyer to defend you. With the right insurance in place, your insurance will cover paying that lawyer to defend you—and that could be the most important reason to get insurance.

Before you sit down with an insurance agent, meet with us, your Personal Family Lawyer® with business planning expertise. We’ll look at your business assets and underlying risks to identify the optimal levels of coverage you should have in place.

03 – Legal Agreements

Legal agreements are very likely the most important part of your asset protection plan. Legal agreements protect your company’s most essential elements: your personal liability, personal and professional relationships, intellectual property, and trade secrets, to name just a few.

In addition, legal agreements govern the rights and responsibilities of every party you do business with, from clients and vendors to employees and contractors. Given the importance of such documents, you should never rely on generic legal forms you find online when creating your business agreements. Instead, reach out to us, your local Personal Family Lawyer® with business planning expertise to support you in creating, reviewing, and updating your company’s legal documents to ensure you have the most robust legal protections in place at all times.

When creating legal agreements, remember this: the most important part of your legal agreements are the process by which you reach an agreement as well as the clarity of the documented terms, so if there is a later dispute, you’ve already established how you will handle and resolve conflict. Template form documents, or “cheap legal” in the form of a lawyer who really doesn’t understand the relational aspects of your business, simply won’t cut it. You want to work with a relational lawyer who understands how to keep businesses out of court and conflict.

If you are going it alone with legal agreements, be sure to enter into all agreements in the name of your business entity, not in your personal name. And whenever possible, be sure that your legal agreements include provisions requiring conflict resolution through mediation and arbitration before litigation, which should always be a last resort.

Furthermore, in certain cases, the terms of your business agreements can be designed to limit the level of liability and potential damages your business would face should a dispute arise. However, when it comes to limiting liability through legal agreements, state law varies widely, so your agreements should be prepared and reviewed by a business attorney licensed in our state like us, your Personal Family Lawyer® with business planning expertise.

04 – Trusts

Business entities protect your personal assets from the activities of your business, but by using a specially designed irrevocable trust, you can protect your business from your personal activities. Such trusts are set up so your business is owned by the trust, not you, and since you can’t lose what you don’t own, your company and its assets can’t be reached by your creditors or any lawsuits against you due to your personal activities, such as a serious accident, bankruptcy, or divorce.

To be clear, asset protection trusts are not the same as living trusts designed to protect the inheritance you want to leave for your family and avoid the court process of probate in the event of your death or incapacity. Living trusts are revocable, meaning you still own the assets held by the trust while you’re alive, and as such, you can dissolve the trust or change its terms at any point during your lifetime. 

Since you retain ownership of assets held by revocable living trusts, a revocable living trust does not provide your business with any asset protection from creditors or lawsuits. Asset protection trusts, however, are irrevocable.

The most airtight asset protection is provided when you never own your business to begin with, and when the business is started by you as the trustee of an irrevocable trust set up for you by a parent, grandparent, or other relative. Additionally, if you anticipate growing the value of the business significantly, this kind of trust can also protect you from estate taxes. 

The one hitch with such trusts is that you have to have parents or grandparents who thought ahead and left you an inheritance inside an irrevocable trust at their death, or who are willing to set up an asset protection trust for you during their lifetime, so you can start your business with this level of protection.

On the other hand, if your business is already up and running and you want to protect it using asset-protection trusts, you can transfer your business into a creditor-shielded asset protection trust. However, in this case, there are many restrictions, and your protections will only begin after several years, depending on the state in which the trust is established. 

In either case, if an asset protection trust is something you’d like to consider for your business, contact us, your Personal Family Lawyer® with business planning expertise to discuss your options.

Get Professional Support From a Personal Family Lawyer® With Business Planning Expertise

To make certain that your asset protection strategies are put in place and maintained properly, working with an experienced business lawyer like us is a must. Whatever you do, don’t try to handle your asset protection planning yourself by using online incorporation services, do-it-yourself online legal documents, or by purchasing a prepackaged asset-protection plan. These options are a recipe for disaster; asset protection requires complex planning and real legal experience, and you could lose both your business and personal assets if you get things wrong.

Rather than trying to go it alone, get professional support by having us develop your asset protection plan. As your Personal Family Lawyer® with business planning expertise, we will support you to create, implement, and enforce a full array of asset protection strategies at every stage of your company’s evolution. Call today to schedule an analysis of your business’ current risk exposure, so we can ensure your company’s legal foundation is strong enough to withstand whatever threats you might face both now and in the future.

This article is a service of Sahmra A Stevenson, Esq, Personal Family 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.

The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

Investing in life insurance is a foundational part of estate planning, and when done right it’s a primary way to say “I love you” to your loved ones after you are gone. However, when naming your policy’s beneficiaries, several mistakes can lead to potentially dire consequences for the people you’re investing  to protect and support.

The following four mistakes are among the most common we see clients make when selecting life insurance beneficiaries. If you’ve made any of these errors, contact us immediately, so we can support you to change your beneficiary designations on  your policy and  ensure the proceeds provide the maximum benefit for those you love most.

01 – Failing To Name A Beneficiary

Although it would seem common sense, whether intentional or not, far too many people fail to name any beneficiary on their life insurance policies or inadvertently name their “estate” as beneficiary. Both of these errors will mean your insurance proceeds must go through the court process known as probate.

During probate, a judge will determine who gets your insurance death benefits. This process can tie the benefits up in court for months or even years, depending on who the beneficiaries of your estate are under the law. Moreover, probate opens up the proceeds to creditors, which can seriously deplete—or even totally wipe out—the funds.

To keep your insurance proceeds out of court , make certain you designate—at the very least— one primary adult beneficiary. In case your primary beneficiary dies before you, you should also name a contingent (alternate) beneficiary. Name more than one contingent beneficiary for maximum protection in case your primary and secondary choices die before you.

Ideally, we often recommend that the primary beneficiary of your life insurance is the Trustee of a well-considered and thoughtful Trust Agreement to provide maximum benefit and protection for your heirs. 

02 – Forgetting To Update Beneficiaries 

While failing to name any beneficiary is a huge mistake, not keeping your beneficiary designations up to date can be even worse. This is particularly true if you are in a second (or more) marriage and fail to remove an ex-spouse as beneficiary, which can leave your current spouse with nothing when you die.

To prevent this, you should review your beneficiary designations annually as part of an overall review of your estate plan and immediately update your beneficiaries upon events like divorce, deaths, and births. When you are our client, we have built-in systems to ensure your beneficiary designations (along with all other documents and decisions  in your plan) are regularly reviewed and updated.

03 – Naming A Minor (Or Their Guardian) As Beneficiary

You are technically permitted  to name a minor child as a beneficiary of your life insurance , but it’s never a good idea. Minor children cannot receive insurance benefits until they reach the age of maturity—which can be as old as 21 in some states. In the event a minor is listed as beneficiary, the proceeds of your insurance will be distributed to a court-appointed custodian, who will manage the funds (often for a not insignificant fee) until the child reaches the age of maturity. At that point, all benefits are distributed to the beneficiary outright and unprotected.

This is true even if the minor has a living parent. A child’s living parent could petition to the court to be appointed custodian. Still, there is no guarantee that a parent would be appointed custodian, especially if the parent cannot qualify or pay for a bond. In many cases, a court could deem a parent unsuitable (if they have poor credit, for example) and instead appoint a paid fiduciary to control the funds.

Rather than naming a minor as a beneficiary, you may think to name the person you have chosen as guardian of your child. But that’s not the right answer either. In that case, all insurance would pay outright to the named guardian and could be used in any way they choose, or even be at risk of being taken in a divorce or by a judgment creditor of the guardian. 

Instead,  the right answer is to  set up a trust to receive the insurance proceeds and name a trustee to hold and distribute the funds to a minor child you would want to benefit from your insurance proceeds, when and how you determine, or even hold them protected for your beneficiary to control but safe from divorce and creditors if you choose. 

04 – Naming An Individual With Special Needs As Beneficiary

Although a loved one with special needs is likely one of the first people you’d consider naming as beneficiary of your life insurance policy, doing so can have tragic consequences. Leaving insurance directly to someone with special needs could disqualify that individual from receiving much-needed government benefits.

Rather than naming someone with special needs as a beneficiary, you should create a “special needs trust” to receive the insurance proceeds. This way, the money won’t go directly to the beneficiary upon your death. Still, it would be managed by the trustee you name and dispersed according to the trust’s terms without affecting benefit eligibility.

The rules governing special needs trusts are complicated and vary greatly from state to state, so if you have a child with special needs, meet with us today to discuss your options. In the end, special needs planning involves much more than just life insurance—it’s about providing a lifetime of care and protection.

Eliminate Future Problems Now

While naming life insurance beneficiaries might seem simple, if you’re not careful, you can create major problems for the loved ones you’re doing your best to benefit. Meet with us, your Personal Family Lawyer® today to ensure you’ve done everything properly.

We can also support you in planning tools like trusts—special needs or otherwise—to ensure your  insurance proceeds provide the maximum benefit for your beneficiaries without negatively affecting them. Schedule a Family Wealth Planning Session to get 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 $750 session at no charge. 

The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

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