Why Every Business Owner Needs an Estate Plan — Even Before You Think You Do

from Brett Lee Shelton, licensed Family Business Lawyer™

Most business owners build a business with an endgame in mind: either cashing it out or passing it on.  Whatever your scenario is for what happens to your business when you retire or die, it is not likely to happen without a comprehensive plan that aligns your personal and business objectives.

If you plan to pass on your control of the business to one or more of your children, then you may want to consider giving them direct voting interests via your will or a trust.  If you own business real estate that is separate from your primary business, you will want to establish a mechanism for passing on that real estate to your heirs.

Some things to consider for protecting your business interests in your estate plan include:

Buy/Sell Agreement. If you don’t have one, you need one now.  If you do have one, you need to ensure it is up to date and that the valuation mechanism used – appraisal, formula or fixed valuation — will still work for your purposes.

Liquidity.  Will there be enough cash flow from the business to still support the business, provide income to your surviving spouse and pay estate taxes?   If not, you need to consider having the business own a life insurance policy or set up an irrevocable life insurance trust to meet these needs.

Authority.  Does your will provide your executor with the necessary authority to protect and preserve your business interests?  More importantly, does your executor have the expertise to manage your business interests?  This is especially important if you have ownership interests in multiple business entities.

These are just a few of the considerations you need to make when taking the necessary steps to align business planning with estate planning.

This week is National Estate Planning Awareness Week, so take this opportunity to call us today at 303-255-3588 to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.  Normally, this session is $1,250, but if you mention this article and we still have room on our calendar this month, we will waive that fee.

Why Estate Planning is for Life, Not Death

from Brett Lee Shelton, licensed Family Business Lawyer™

We know that no one likes to think about death, especially their own.  Which is why many people procrastinate when it comes to estate planning.  Because it’s for when you die, right?  Wrong!  When done with a Personal Family Lawyer, creating an estate plan makes your life better.

Here are some of the things that estate planning does for you while you are alive:

●     Gets you thinking about the real meaning of your life, what you want to pass on beyond your life and what’s most important to you to do now;

●     Gets you thinking about how you want to be cared for at the end of your life and lets you name someone to make those good decisions for you;

●     Has you think about your money, who you want it to go to, how you want it handled, what you want it to do in the world after you aren’t here;

●     Names someone to care for your children in case you can’t;

●     Helps you minimize taxes;

●     Lets you provide for a special needs child or other loved one without disrupting their governmental benefits;

●     Protects your assets from divorce – yours or your children’s – as well as lawsuits and creditors;

●     Enables you to gift portions of your estate to your children or charities while you are still alive in a tax-advantaged way that inspires wealth creation instead of depletion;

●     Helps you plan for your own long-term care in a way that won’t deplete your estate

Of course, having an estate plan also offers you peace of mind that you have done what you could to protect loved ones and pass on your assets efficiently after death.  Having an estate plan in place before you pass guarantees that:

●     Your personal property and assets will pass to the people you want to have them

●     You spare your family the expense and pain of having to go through the probate process

●     Your minor children are provided for in the way you choose, with a guardian named to raise them with your values and a trusted adviser in place to manage their finances until they come of age

●     Your assets are protected for your heirs by setting up a trust with a distribution option for when they reach adulthood (or other milestones of your choice)

●     Beneficiaries have been named for retirement and other financial accounts as well as life insurance policies so the assets in these accounts go to the people you choose

●     The financial privacy of your family is protected

This week is National Estate Planning Awareness Week, the perfect time to create a plan that spells out how you will pass on your values, beliefs and your money to your children.  You can begin by calling our office today to schedule a time for us to sit down and talk.

We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call 303-255-3588 today and mention this article.

If You Build It, You Best Protect It

from Brett Lee Shelton, licensed Family Business Lawyer™

Consider all the time you have spent or will spend building your business – and then consider how much energy you have spent on how to protect it or protect your family from it.

Unfortunately, many small business owners don’t give much thought to asset protection until it’s too late – when a suit is filed, a divorce happens or a creditor comes after them.

The National Federation of Independent Business says that small businesses make excellent targets for frivolous lawsuits because they will usually settle out of court rather than spend what it takes to go to trial.  It is estimated that the average number of times a business is sued over the lifetime of its owner is five times.  Even if you are a good person.

Here are 5 tips for small business owners to protect assets:

1.  Don’t hide your assets. If you get sued, prepare to divulge what you have.  You will likely face a deposition with opposing counsel asking about your assets, so lying is committing perjury.  Instead, have a good asset protection plan in place – then you can disclose without worry.

2.  Don’t transfer assets to family or friends. They may have bigger problems than you do. Giving away your assets as a form of asset protection is a risky strategy. There’s far better ways to handle things.

3.  Don’t put assets in a spouse’s name.  Anyone can be sued for any reason, so putting assets in a spouse’s name is no guarantee that your assets are protected and if you get sued and a judgment is issued, you can be sure your spouse’s assets will be looked at closely.

4.  Follow the law.  Tax evasion and fraudulent conveyance are crimes.  There are many ways to legally protect your assets; don’t get sucked into seriously risky business that could put you in jail or subject to huge fines.

5.  Put assets in a protected entity.  At the bare minimum, your businesses (and real estate) should be put into an LLC or an S-Corporation.  Doing that will protect your personal assets from the activities of the business. But what about protecting the business itself from your activities, such as divorce, bankruptcy or other creditors?  For that kind of asset protection, we have an airtight strategy that is completely legal, onshore and not only protects your assets from creditors, but saves big money on estate taxes for future generations as well. It’s a big win all around.

If you have questions about asset protection for yourself and your business, contact us at 303-255-3588 today.  We would also be happy to schedule a comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.  Normally, this session is $1,250, but if you mention this article and we still have room on our calendar this month, we will waive that fee.

Tips & Rules for Estate Executors and Administrators

from Brett Lee Shelton, licensed Family Business Lawyer™

If you have been named the executor of someone’s estate or the Trustee of a Trust, you may be unaware of all the details this responsibility entails.  Most parents name a child as an executor, but seldom do children then do the necessary research to see what estate administration is all about – and when it comes time to take over these responsibilities, they panic or miss important deadlines and details.

Immediately following the death of the estate owner or trust grantor, executors/trustees should:

Secure tangible property.  It’s amazing how many things “walk away” from a decedent’s home right after they die.  Someone may feel that Aunt Betty would have “wanted” them to have the silver collection, so they just take it.  So it is important that executors secure all tangible property – especially if that property may require an appraisal – so they can plan for the distribution of the property as outlined in the decedent’s will.

Take your time. After you have secured the tangible property, take a little time to grieve before worrying about most financial matters.  You will probably want to pay bills, but these can wait a month or two without repercussion.  However, you do need to notify Social Security within 30 days of the death.

Talk with your attorney. Meet with your Personal Family Lawyer® to receive the guidance you need to properly administer the estate.  Any fees incurred will be paid out of the estate, not your pocket.  And the advice you get will be invaluable.  If you have prepared a plan with us and you are on one of our VIP Membership programs, your executor will have a no-charge meeting with us after your passing and then we will support with administration of the estate and trust at a 50% discount off of our regular fees.

Here are some general rules, which vary from state to state, for estate executors regarding the steps that need to be taken to properly administer the estate:

1. Notify probate court.  You must file the will and petition at the probate court to be officially recognized as executor.  If there is no will, the heirs must petition the court to be appointed administrator.

2.  Inventory the assets.  You will need to compile a list of everything the decedent owned and provide that list to the probate court.

3.  Open a checking account. You will need to open a single checking account on behalf of the estate to pay bills and taxes.

4.  File tax returns. You must file a final income tax return for the decedent.  If the estate has any assets that earn interest, you must file an income tax return for the estate.  If the estate exceeds $5.12 million, you will need to file a federal estate tax return within nine months of the date of death.

5.  Distribute property. After any creditor claims are satisfied and bills paid, you will need to distribute the remaining property to heirs.

6.  File a final account. You must file a final account with the probate court in order to close out the estate.

If you would like to have a talk about estate planning and administration, call our office today to schedule a time for us to sit down and talk. We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call 303-255-3588 today and mention this article.

Organizational Structures for Socially Conscious Companies

from Brett Lee Shelton, licensed Family Business Lawyer™

Social consciousness at the corporate level has become an increasingly more important point of differentiation for many companies, and some companies today exist primarily to fill a social purpose.  So what is the best business structure for these companies?  There are several from which to choose:

Benefit Corporations. Seven states, including California, allow for Benefit Corporations, which require companies that choose this structure to have social and environmental goals that guide operational decision making.  Benefit corporations are required to issue an annual report detailing their progress in meeting these goals, audited by an outside party.

Flexible Purpose Corporations.  Available only in California, this corporate structure exists to provide firms with the flexibility to operate for one special purpose to pursue charitable or social goals.  The FPC is required to issue an annual report with financial statements that outlines the FPC’s special purpose and reports on activities and expenses to fulfill that purpose.

L3Cs.  Low-profit Limited Liability Companies (L3Cs) is a structure typically used to facilitate investments in for-profit ventures with a charitable or social purpose.  Using a L3C makes it easier for socially conscious companies to attract investments from foundations – which the IRS requires to invest five percent of their assets annually to charitable causes — and is legal in nine states:  Illinois, Louisiana, Maine, Michigan, North Carolina, Rhode Island, Utah, Vermont, and Wyoming.

B Corporations. This is a bit of a misnomer, since B Corps are not corporations but a certification by the nonprofit organization B Lab to meet established standards for social and environmental performance, accountability and transparency.  B Lab has certified more than 760 businesses in 27 countries.

Maryland Benefit LLC. A Maryland Benefit LLC operates the same as a Benefit Corporation, but does so as a limited liability company.

If you’re a small or mid-size business owner, call us today at 303-255-3588 to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.  Normally, this session is $1,250, but if you mention this article and we still have room on our calendar this month, we will waive that fee.

Consider Your Estate Plan Before You Travel

from Brett Lee Shelton, licensed Family Business Lawyer™

We are fast approaching the holidays, when travel is the busiest and careful planning is necessary to nab the best airfare or book that New Year’s beach cottage before it slips away.  One thing that is probably not on your travel to-do list is estate planning, but it should be so you can travel with peace of mind.

Here are some tips to pack away your worries before you board that flight:

Complete your estate plan. If you’ve been putting it off, now is the time to complete your estate plan.  If money is a consideration, then start with those the most important items: a will, power of attorney and advance health care directives.

Update an existing estate plan. Has something changed in your life since you last updated your estate plan?   A birth, a death, a marriage, a divorce?  Each of these triggers your need to update your estate plan.

Establish guardianship for minor children.  If you have ever gotten a nagging fear about what would happen to your children if something were to happen to you, then use that fear to follow through on naming a guardian for raising your minor children.  If you have young kids, there is never an excuse for you to neglect this important step.

Review beneficiaries.  Beneficiaries of your retirement accounts, life insurance and other assets must be kept current or your assets will not pass to them upon your death.  If you have minor children, you will need to set up a trust and name the trust as beneficiary so your assets can pass without court intervention.

Review/update incapacity documents. Two very important health care documents – a durable power of attorney for health care and a HIPPA Authorization – will determine who can make medical decisions for you and who has access to your medical records in case of incapacity.  Be sure you have these documents before you travel and that the person/people named are still valid.

Review/update insurance. Does your life insurance coverage still meet your family’s needs?  If not, it is time to update your insurance policy before you hit the road.

In addition, you need to be sure you have an organized file of all your accounts and estate planning documents and you need to tell your family where they can locate the file if and when it becomes necessary.

The time to create a plan that spells out how you will pass on your values, beliefs and your money to your children is now.  You can begin by calling our office today to schedule a time for us to sit down and talk. We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call 303-255-3588 today and mention this article.