The Virtual Attorney

Admitting a New Member to an LLC - Everything You Need To Know

michael.brennan@mfblegal.com (Michael Brennan) — Wed, 21 Sep 2022 21:33:37 GMT

It’s a fairly common situation to find yourself in as a small business owner—for one of a wide range of reasons you’ve decided it’s time to being a new partner into your business in some capacity.

Sometimes, there is a new product or development that you may not have the expertise to develop, or maybe it’s purely a financially motivated addition. Whatever the reason, there are some things to think about for both the existing owners and the potential new members before formalizing the agreement. And, once everyone has given the green light to proceed, there are additional considerations to ensure that problems don’t arise later on.

The first place to start when determining how to onboard a potential new member is the LLC’s operating agreement. The operating agreement is the internal company document that describes all of the rights and responsibilities of the members, how decisions are made, how distributions are allocated, and so on. It’s similar to a corporations bylaws or shareholder agreement all wrapped up into one. Usually, the company adopts an operating agreement upon its founding. But, in many states there is actually no formal legal requirement that one exists at all. If that’s the case, then each state has a statute which establishes the default rules for how the LLC must operate.

When it comes to admitting a new member to the LLC, typically the operating agreement will establish procedures for exactly what must be done. Or if there is no operating agreement, the applicable state statute will describe the steps that must be taken. These range from how the decision must be made (by unanimous consent of the members, a majority, etc.), what is required to appropriately document it (whether the new member must join the existing operating agreement, obtain a spousal consent for making the investment, etc.) and how the accounting must be completed to allocate financial rights and obligations amongst the members (for example, does the new member acquire an actual percentage interest in the LLC, or does he only acquire a right to share in the profits and losses from the date of his admission as a member?).

It’s essential that the applicable governing instrument be followed as a roadmap for the admission of the new member (whether via the operating agreement or statute). Failure to do so opens the door to potential arguments that a member did not actually legally acquire the membership interest in the LLC that5 was actually intended.

Once the formal steps are determined, it’s important to follow them and document them appropriately. If a vote is required, it’s necessary to follow any sort of notice requirements and the vote must be formally documented. If the member is being admitted by consent of the existing members (so long as it’s permitted by the operating agreement or applicable statute), then it’s a good idea to formally document the consent.

A major point of discussion when admitting a new member surrounds how the business will be allocated amongst the members once the new member comes aboard. For financial purposes, multi-member LLCs are nearly always treated like partnerships. So, profits, losses, distributions, etc. are allocated to members according to their percentage ownership of the company. Sometimes that percentage ownership legally does not match with what the accounting records of the company actually say, which can lead to issues for an unwary business owner.

For example, pretend that Jill runs Startup LLC. Startup LLC has been in business for a few years to not much success until this year. As she always does, Jill paid the LLCs taxes after the end of last year, reporting a net loss. Then, in January of this year, one of Startup LLC’s products really took off and through a few key sales, Startup LLC had a net profit of $100,000 in the first half of this year. Based on that success, Jill is inspired to product a spin off product, and decides in July that she wants to bring aboard Jack as a 50% partner in the LLC so that he can help develop the new product before the end of the year. She isn’t paying Jack right away, but instead is giving him a portion of the company to develop the product.

Well, let’s say that the product doesn’t do as well as anticipated and Startup LLC only breaks even for the second half of the year. If Jack and Jill weren’t careful about ensuring that the operating agreement, and Jack’s subsequent onboarding were done correctly, even though Jack does not receive any income, he may nevertheless owe tax on the $50,000 of profit allocated to him as a 50% owner for the LLC’s recent fiscal year. Not ideal for Jack.

What Jack should have insisted on was the company “closing the books” as of his admission to the LLC as a member in July. By doing so, the income earned by the company in the first half of the year could have been allocated to Jill as the sole owner, which the income and loss for the second half of the year could have been allocated to Jill and Jack 50/50.

Aside from the financial considerations on how to properly admit a new member to an LLC, the company needs to consider issues around the restructure related to management and control. If the company has a member that is departing as part of the transaction, then it’s a good idea to document the departing member’s resignation from any positions they may hold with the LLC. Depending on the circumstances, it may also make sense to have the existing partner agree in writing to indemnify the company for any acts taken by him or her on behalf of the company which may create a liability for the company. For example, if the departing member handled the accounting and tax returns, and they were negligently prepared, leading to penalties being incurred by the LLC, it would be fair to expect that member to cover the company for those.

There are a number of fact-specific issues to consider whenever an LLC reshuffles it’s owners to ensure that no unintended legal or financial issues arise down the road. As an owner, it’s a good idea to engage an experienced attorney and accountant to ensure things are completed as painless as possible.

Beneficiaries under an Estate Plan: A Few Things to Consider

michael.brennan@mfblegal.com (Michael Brennan) — Tue, 23 Aug 2022 15:28:11 GMT

Have you thought about your beneficiaries under your estate plan? There may be more to it than meets the eye.

One of the primary objectives of an estate planning lawyer when implementing an estate plan for a client is understandably ensuring that the client’s assets flow to the people or organizations to whom they want them to pass. Most of the time, those beneficiaries are loved ones—spouses, children, significant others—and sometimes they are organizations like charities that hold importance for the client.

Often times, however, life may have other plans. I recently read an article about Chris Ballard, the General Manager for the Indianapolis Colts, and his wife Kristin. They make helping foster children a central tenant of their personal lives, and when the decision to commit to that path arose, Kristin recalls thinking, “We plan, God laughs.”

Isn’t that the truth? As an estate planning attorney, my job is to add predictability to a client’s life to produce a sense of comfort and organization for the future. But often, my job has its own worldly limits. We simply never know how our lives or the lives of those around us will ultimately play out.

So, what’s the point of this little metaphysical anecdote?

Well, in this sense, no matter how much we plan for a certain outcome, we cannot make that outcome more or less likely to occur. Often the plan is to live a long and fulfilling live, and when it’s done, we can leave something for those loved ones that come directly behind us. But, as uncomfortable as the thought it, that’s not always what the universe has in store.

As an estate planning attorney, my job is to try to create predictability in light of that very unpredictable reality. So, when a client tells me he wants everything to go to his spouse when he’s gone, and then when his spouse is gone, everything should go to his children, I commend him for coming to me in the first place to implement that plan.

But next, we need to discuss what happens if life doesn’t play out that way. For example, what if—God forbid—a child predeceases him? What if upon his death he has grandchildren with special needs? What if a predeceased child had been married to a spouse for 20 years and who the client considered his own?

Having the ideal plan for how an estate should be administered and distributed is a tremendous first step. But, there’s more work to be done and more hypothetical questions to explore in the event life doesn’t play out according to our ideal vision.

One of the primary benefits of working with an experienced estate planning attorney to set up a will or trust is that the attorney knows the questions to ask to ensure you’ve thought through any number of possible scenarios the universe may inevitably have in store for our lives. He or she has the ability to stretch that sense of agency and comfort so that it encompasses any number of potential outcomes, no matter how remote they may seem.

Implementing an estate plan is a big accomplishment for any family, but having one prepared by an experienced lawyer that can think about the realities of life that may exist outside of an automated document assembly service provides unmatched peace of mind.

[WATCH] Illinois Just Made it Easier Than Ever to Make a Power of Attorney

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 09 Sep 2021 21:37:49 GMT

Illinois' new Power of Attorney Act changes deliver some much needed updates.

Illinois Just Made It Easier Than Ever to Make a Power of Attorney

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 02 Sep 2021 16:03:34 GMT

Post-COVID, Illinois is making it much easier to execute important legal documents.

A power of attorney for health care enables an individual to appoint a trusted agent to make medical decisions on his or her behalf if the individual is unable or unwilling to do so for themselves. For example, if a situation arises where you are in an accident and need emergency medical care, doctors will look to a trusted individual to make decisions on your behalf. Typically, this is family members, and technically, most state laws set an order of precedence on who doctors should turn to in the absence of any specific (and legally binding) instructions from the patient. However, the most ideal situation is one in which doctors rely on the instructions the patient has detailed in a valid power of attorney.

Powers of attorney for health care do not have many specific requirements for validity. But, they do need to be signed by the patient and at least one witness (this varies by state). Often, someone may decide that they need a health care power of attorney in a pinch. For example, an older parent may be going in for surgery and want to cover their bases if something goes wrong. They may decide the day of the surgery that they would like to name an adult child as their health care decision-maker if something happens, so that child cannot serve as the witness. Typically, an estate planning attorney could witness the document, but that may mean scrambling at the last minute for an appointment or coordinating a meeting quickly on the way to the hospital. Not ideal.

Now, however, Illinois has amended the Illinois Power of Attorney Act to permit electronic signatures. The Act states that:

“The signature and execution requirements set forth in this Article are satisfied by: (i) written signatures or initials; or (ii) electronic signatures or computer-generated signature codes .”

The Illinois Electronic Wills and Remote Witnesses Act permits those witnesses not only to sign electronically, but also to sign remotely.

So, instead of a mad last-minute scramble to sign and witness an 11th hour power of attorney, one can be e-signed online through video conferencing with the principal and estate planning attorney quickly linking up on zoom from the comfort of their home, office, or even the hospital bed, with much more simplicity and convenience.

The Power of Attorney Act was further amended to permit powers of attorney for health care to be in electronic format. So, it is no longer a requirement to dig the paper hard copy out of the basement filing cabinet and remember to bring it to the hospital. Instead, an electronic copy can simply be sent to the hospital through its patient portal, once that functionality is set up by the health care provider at least.

The power of attorney can now easily form a seamless part of a health care record, neatly kept in an electronic medical file.

The pandemic of 2020-2021 forced institutions to make things more efficient and reflective of the technologically-centric world we now live in. That is not more evident in many places as it is the area of law. And, few practicing attorneys would tell you that’s a bad thing.

Illinois Electronic Wills and Remote Witnesses Act Enacted

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 05 Aug 2021 17:30:59 GMT

On June 26, 2021, Illinois adopted the Electronic Wills and Remote Witnesses Act. Plainly, the Act is a generational game changer for estate planning. Gone are the days of scheduling a formal office appointment with your attorney to sign estate planning documents as the law office staff witnesses and notarizes those documents on the spot.

Illinois' Electronic Wills and Remote Witnesses Act is a Game Changer

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 30 Jul 2021 21:10:12 GMT

Wills, powers or attorney, and other important estate documents can now be validly signed and witnessed remotely through audio-video communications.

Preparing a last will and testament has always required the inclusion of original signatures of both the person making the will and witnesses. Understandably, coordinating the signing of the will could pose some administrative challenges, especially for small law firms and solo practitioners—not to mention the many people who elect to draft a will without an attorney’s help—who may not have a crowded office full of willing witnesses. Along with wills, estate plans typically include powers of attorney for finances and health care decision making as well. Those documents also require original signatures from their creators, witnesses, and notaries.

Predictably, COVID-19 and the resulting government shutdowns of businesses and encouragement of social distancing and remote work complicated the task of signing and witnessing these important estate documents (Notaries are also now permitted to act remotely under a separate but related piece of legislation).

Luckily, in many states, temporary orders permitted the remote execution of many documents, and a framework for conducting remote document signings began to take form.

Now, under the EWRWA, the need for the conference table signing is gone. Wills, powers or attorney, and other important estate documents can be validly signed and witnessed remotely through audio-video communications. More so, “electronic wills”—those not physically printed on paper—are now an acceptable form of will in Illinois that can be probated just as paper wills have for decades.

Some of the highlights of the new law are below.

Electronic Copies of wills are now valid.

Electronic Wills are now an option. The new law defines an electronic will as simply “a will that is created and maintained as a tamper-evident electronic record.” What is “tamper-evident” exactly? Well, the statute defines it as a “feature of an electronic record by which any change to the electronic record is displayed.” So, popular document signature software like Docusign and Hellosign would do the trick.

Individuals and Witnesses can now sign on multiple signature pages with one master document being compiled later on.

If a platform like Docusign is not used to create and sign an electronic will, there is now an option to use multiple signature pages for the testator and witnesses. In practice, this enables a testator to sign a will while the witnesses watch over audio-video means, like Zoom. They can then each sign the signature page sitting with them at their physical location. The testator and witnesses can then send the originals to a central location (likely the estate planning attorney) to be compiled into one master document.

Previously, this was impermissible, as the document would have had to have been signed in the conscious presence of each other. The Electronic Wills and Remote Witnesses Act redefines “presence” to expressly include, “being in a different physical location from another person, but able, using audio-video communication, to know the person is signing a document in real time.”

Witnesses can witness signings (and sign) remotely through video-conferencing.

As mentioned, witnesses to a will previously had to be physically present with the testator. Under the new law, witnesses can now be remote. If an electronic will is prepared for signatures, the witnesses can simply sign the electronic will after watching the testator sign. If a paper copy is being used, then the witnesses can watch the testator sign his or her own paper copy, and then sign a separate signature page in their remote location.

For paper copies, the witnesses and testator must physically compile all the signature pages within 10 days. The person appointed by the testator to compile all the signature pages must state that the signature pages were attached within 10 business days of signing and that the pages were attached to the testator’s complete and correct will for the will t be admitted to probate. So, best practice is to attach those statements to the will at the time of its signing or the time at which the master document is compiled.

Wills can be signed electronically.

Electronic signatures have previously not been permissible forms of signing a will. Now, however, the new Act changes everything. Testators and witnesses alike can not e-sign wills. To do so validly, the will must designate Illinois as the state of its execution, be signed by the testator or by some person at the testator’s direction and in their presence, and be attested to in the presence of the testator by two or more credible witnesses who are located in the United States at the time of execution. The change of the “presence” requirement is revolutionary, as “presence” now includes being in a different physical location from another person, but able to know the person is signing a document in real time using audio-video communication.

Additional Documents, like Powers of Attorney can now be signed virtually

Wills are not the only estate planning documents that require witness signatures. Powers of attorney and living wills are just as essential to creating a comprehensive estate plan. Illinois’ Electronic Wills and Remote Witnesses Act also authorizes the witnessing of any document other than a will using audio-video communication. The signatures of the principal and witnesses may be on the same or different pages provided the master document is compiled within 10 business days.

While COVID-19 forced the legal industry to adjust, it appears that some of those adjustments were just what was needed to bring estate planning into the 21st century.

New Estate Planning Considerations After the SECURE Act

Mon, 15 Jun 2020 20:39:06 GMT

The Setting Every Community Up for Retirement Enhancement Act of 2019 (the SECURE Act) took effect at the beginning of 2020 and has brought some significant changes to how retirement accounts may need to be planned for.

Prior to 2020, if the owner of a qualified retirements account—like 401(k) and 403(b) accounts—died leaving assets in the account, distributions could be paid out to beneficiaries in installments. Those installments, known as required minimum distributions, could be paid out to the beneficiary annually in an amount measured by the beneficiary’s life expectancy. Until the passage of the SECURE Act, estate planning attorneys drafting living trusts for clients with multiple beneficiaries had some flexibility in crafting arrangements that permitted the beneficiaries to stretch out distributions based on the oldest beneficiary’s life expectancy. For example, the grantor of a living trust would typically name the trust as the beneficiary of a retirement account upon his death. With a properly drafted trust agreement his multiple children would be permitted to stretch distributions out over the life expectancy of the oldest child, often drastically reducing the potential tax liability on those amounts.

However, with the passage of the SECURE Act, many of the benefits of planning for qualified retirement accounts in living trusts have disappeared. Beneficiaries are no longer permitted to stretch distributions over their lives based on life expectancy. Now, generally, a qualified retirement account must be distributed in its entirety within 10 years after the account owner’s death. The 10 year rule does not apply to certain beneficiaries including a surviving spouse and minor children. However, individuals who may be planning to leave retirement accounts to other beneficiaries (including adult children) may want to consider some alternative planning options.

Leave Retirement Accounts to Different Beneficiaries

Individuals with adult children that are financially secure may want to consider bypassing those children as retirement account beneficiaries altogether and instead name grandchildren as the contingent beneficiaries who can take the distributions at lower tax rates with the assets then being reinvested to provide for long-term financial security. Regardless, now is a good time to revisit beneficiary designations and consider whether there are more ideal ways to plan for retirement account inheritance.

Consider a Roth Conversion

A traditional IRA is funded with pretax dollars, meaning that it is funded tax free, but the eventual distributions are taxable. Conversely, a Roth IRA is funded with after-tax dollars. The trade-off, however, is that distributions from a Roth IRA are entirely tax free to the beneficiary. In light of the SECURE Act, individuals may want to consider converting traditional IRAs into Roth IRAs. While tax is due upon the conversion, the assets would continue to grow in the new Roth IRA tax free and not be subject to the SECURE Act’s 10 year distribution requirement.

Revisit Trust Agreements

Estate planning attorneys typically draft contingencies into trust agreements that permit flexibility when it comes to inherited qualified retirement accounts. Commonly, living trusts would be structured as “see through trusts” which permitted the trust to stretch QRA distributions out over the life expectancy of the oldest beneficiary so long as certain requirements were met (the trust was irrevocable upon the owner’s death, the beneficiaries were identifiable, etc.). The beneficiaries would then be permitted to limit the income tax consequences of receiving substantial distributions all at once, or over a shorter period of time.

Those so called “see through trusts” are no longer as helpful as they previously were since the SECURE Act places a 10 year maximum on distributions from a qualified account regardless of the beneficiary’s age. However, without structuring a living trust as a see through trust, retirement accounts still must be distributed within a 5 year window, so there is still a bit of utility to be gained.

Individuals may wish to restructure trust provisions to give the trustee discretion in making payments to beneficiaries of retirement accounts if spendthrift individuals are involved and financial responsibility is a potential issue. Without the benefit of requirement minimum distributions, it may make more sense to value asset protection over maximum tax savings.

Assessing Business Risk After COVID-19

Mon, 01 Jun 2020 21:55:06 GMT

COVID-19 has had a significant impact on businesses in a wide range of industries. Here are 5 things ever business owner should be doing now.

COVID-19 has caused unprecedented to business owners both large and small. The new reality is that things simply are not going to be the same going forward. Business owners must face some tough new realities when it comes to ensuring that disruptions to business operations are minimized in the future. The global pandemic and accompanying stay-at-home orders have provided an opportunity for businesses to step back and reassess areas where risk can be better managed and disruption potentially minimized.

Contractual Force Majeure and Termination Rights

Review existing agreements and assess whether the wording of force majeure provisions is sufficient to protect your interests. Many clauses have previously been written to cover scenarios arising from civil unrest, catastrophic weather, and acts of terrorism, but there is some grey area when it comes to a pandemic or health-related issue that significantly hinders the ability to perform. Governmental orders making performance impossible, potentially like the stay at home orders we are currently seeing, may be sufficient to excuse performance, but the specific wording of the contract is important to consider.

In the context of commercial leases, tenants will need to pay special attention to early termination clauses and force majeure provisions. Landlords commonly require the payment of rent to be carved out in a force majeure provision, even one that effectively covers a pandemic situation. So, with COVID-19 as a background, in the future, tenants may want to invest more negotiation resources into ensuring adequate protection in the event of a future event causing a similar global shutdown.

Termination rights in contracts, leases and other legal agreements should also be given renewed attention. Termination for convenience clauses may warrant closer examination and the investment of resources in their drafting and negotiation will likely be well spent. Ideally, companies who may be committing to significant monetary investment in the provision of long-term service contracts may want to ensure that the right to exist the relationship upon certain triggers or contingencies is preserved. As many businesses have painfully come to realize over the past three months, unforeseen circumstances can dramatically reduce cash flow, and make prioritization of which agreements can be honored and which may need to be breached—even under threat of litigation—necessary.

Likewise, providers or products and services should assess how to best position their businesses for success with customers from both a financial and good will perspective. While pushing to lock customers into long-term commitments may be ideal financially, providing an early termination option can go a long way towards strengthening that customer relationship for the long term. Further, utilizing early termination fees can alleviate and of the potential risk while still appearing on its face as beneficial to the customer.

Insurance Coverage

The general consensus is that traditional business policies do not provide reimbursement for losses caused by a pandemic, and COVID-19 certainly would not be specifically anticipated. Likewise, moving ahead, it’s unlikely that the next significant health event will be specifically predictable. However, in light of what we’ve learned and experienced from the COVID-19 outbreak, insurance companies will no doubt begin to explore new product offerings that may benefit business owners. Likewise, business owners should use this opportunity to assess their current coverage and determine where potential gaps in coverage or abnormal risk exists. Riders to existing business interruption policies to cover for future pandemic events are likely to be developed and marketed by carriers, and new products may fill gaps in risk reduction that COVID-19 has exposed. As it stands, every business owner should nonetheless be looking into existing policies to see if losses due to COVID-19 may be covered in whole or in part.

Business Succession Planning

No matter how grim, COVID-19 has amplified the reality for many business owners that they are an illness or injury away from leaving their business without any path forward or any plan for the future. Business owners should use this situation as an opportunity to review their business succession plans and emergency operations manuals. Determining a clear line of succession so order is retained is essential to any business that intends to have a life separate from its ownership or management. Operating Agreements, Shareholder Agreements and Corporate Bylaws should be reviewed to determine the effects an owner’s death or disability may have on the other owners and the business in general. What rights would a deceased owner’s estate have in the equity and management of the company? Does the company or surviving owners have an option to buyout the estate, and if so, will there be liquidity to do so? If not, a buy-sell agreement with appropriate life insurance issued on each owner may be worth looking into.

Aside from the ability to ensure equity and control is placed in the hands the owners intend, businesses should have written disaster plans in place outlining the significant operations of the company, where important files can be located, how to access cloud-based accounts, etc. This is even more important for single member entities and sole proprietors who are so closely intertwined with this daily operations of the business who should give special consideration to who from outside the company would be charged with stepping in to either act as a gap filler while operations could be transferred to appropriate individuals or wrapping up the affairs of the company.

Business Model Flexibility

The businesses hit the hardest by the pandemic are those that lacked the flexibility to respond. Brick and mortar retail establishments without an online presence, salons and personal service businesses, and restaurants without established delivery functions have been significantly affected. Likewise, there are numerous professional services that found themselves suddenly out of work due to a limited specialization. Civil and criminal litigation attorneys who rely on access to the courts have had their businesses put on pause as government operations screeched to a halt. Family law attorneys saw new clients dry up as couples put the brakes on splitting during a pandemic. Accounting firms specializing in small businesses initially saw an uptick in work navigating the government stimulus programs, but since, are dealing with a clientele that can’t even open for business in many places throughout the country.

For those businesses, assessing how to incorporate complementary products, services and businesses models into existing established revenue streams will reduce the risk of a singular even effecting their business in the future.

Risk Management

COVID-19 has forced the country to rethink the way in which many activities of everyday life are conducted. The “New Normal” going forward presents businesses an opportunity to assess what they can do to ensure the safety of their employees and customers. Examining sanitary processes and screening processes and investing in employee education will reduce risk and enhance business reputation. Adopting new policies for sick employees and implementing protocols for dealing with high-risk customers should be standard going forward.

Executing Estate Planning Documents During COVID-19

Thu, 23 Apr 2020 21:19:53 GMT

Stay at Home and Shelter in Place orders across the country have created challenges for those wishing to finalize estate plans. Our simple guide outlines exactly what is required for successfully executing specific estate planning documents and some options for getting it done.

Wills
Wills are challenging because they require witnesses . But there may be some options. To be valid a last will and testament must:

be in writing,
signed by the person making the will (or by some person in his presence and by his direction) and
be attested in the presence of the testator by 2 witnesses. (See 755 ILCS 5/4-3).

Generally, the witnesses should typically be "disinterested" so using family members or other beneficiaries is not advisable. Notarization is not required in Illinois for a will to be valid. However, by having the document notarized with an appropriate attestation clause, or using a separate notarized affidavit (known commonly as a "self-proving" will), a presumption that the will is valid is created and some potential hiccups when it comes time to probate the will can be avoided (755 ILCS 5/6-4).

Similarly, in Wisconsin a will must be:

signed by the person making the will or by a person signing at their direction, in his presence,
signed by at least 2 witnesses who signed within a reasonable time after the person making the will signed, and in their conscious presence , or explicitly acknowledged their signature or that the document is his will.

Of note, each of the witnesses may witness at different times. A notary is not required in Wisconsin, however, similar to Illinois, a "self proving" will can be created is an affidavit is executed by the person making the will and the witnesses and notarized. (See Wisc. Stat 853.04).

During the pandemic, think about using a living trust.

One of the most efficient ways to ensure that a comprehensive plan can be put in place during the pandemic with estate plan documents that are executed in compliance with applicable law is to use a living trust as the main estate plan instrument instead of a will. Doing so creates an efficient mechanism to ensure the majority of your assets are going where you'd like. See trust execution options here to determine if that may be the right solution for you.

Execute your will now and wait for the Stay-At-Home Order to be lifted to complete a self-proof affidavit.

Remember that a will does not legally need to be notarized to be valid. Figuring out a way to sign the will with two witnesses should be of primary concern.

Here are some non-traditional options to consider for getting your will finalized:

Debate the feasibility of using video conferencing software. It's important to discuss the potential ramifications with your attorney, but in light of the current situation it may be a viable option.
Create a setup out on your driveway. Bring a table outside and ask the neighbors to assist in witnessing the will. Social distancing guidelines can be effectively practiced by signing one at a time and then stepping back from the table to allow the others to sign.
Option 2 can be used along with a mobile notary if one is available and government orders permit it to also make the will self proving.

Once this has blown over and things begin to return to normal, if you choose to execute your will by video conference it may be a good idea to re-execute the will in the physical presence of your witnesses as well as have a notary present to complete the self proving process. If you chose to sign in the physical presence of your witnesses, then gathering with them and a notary to complete the self-proof affidavit may be smart. If you chose to use a living trust as the keystone of your estate plan, then you should have your attorney draft up a simple will known as a "pour over will" which can be used to clean up any loose ends outside of the trust.

Trusts

If properly funded, trusts are tremendously flexible instruments and can be used for everything from appointing an individual that can manage your assets if you are incapacitated (similar to an agent under a power of attorney for finances), ensuring assets pass to your preferred beneficiaries upon your death, and even provide for a way to manage an inheritance for minor children or young adults until they are mature enough to manage it for themselves.

A trust in Illinois does not need to be witnessed and technically does not even need to be notarized, though notarizing the trust is good practice (See 760 ILCS/Art. 4 and Wisc Stat 701.0402). To successfully create a trust, the following requirements must be met:

the person creating the trust must not be incapacitated and must indicate an intention to create a trust,
there must be a definite beneficiary,
the trustee must have duties to perform, and
the same person cannot be the sole trustee and sole beneficiary.

Here's What To Do During The Stay-At-Home Order

Working with your attorney to get your living trust drafted up and funded during the pandemic may be the simplest and most efficient option for putting in place a fairly comprehensive plan. During the pandemic:

Have your attorney draft up a "trust agreement" for you to reflect your wishes. While oral trusts are technically valid, their existence is much more challenging to prove.
Sign your trust agreement.
Work with your attorney to fund your trust. Modifying beneficiary designations on investment accounts, retirement accounts and life insurance is a great first step that can be accomplished easily through access to your accounts online.
Currently, virtual notarial acts are not permitted in Wisconsin or Illinois on estate documents (however, this may change), however if it's a concern, it may be worth looking into a mobile notary that can travel to you. With the weather getting nicer outside, having the notary witness through a storm door, or even setting up a table on the driveway where you and the notary can step up to take turns signing may be feasible (Of course, be sure to follow governmental instructions relating to stay at home orders and essential business operations)

Once things begin to return to "normal" ensure that the trust is getting completely funded. This may include working with your banker to name transfer on death beneficiaries on accounts or turn them into trust accounts and tying up any loose ends.

Even though trusts do not need to be notarized to be valid, having your trust agreement notarized once the stay at home order is lifted is a good idea. Financial institutions may have different instructions on how to deal with trusts and the reality is that all financial professionals may not be familiar with trust requirements and may prefer to see a notarized document.

Another idea raised by some legal professionals is to have your attorney draft up an affidavit explaining that the trust was created during the pandemic and stay at home order and that is the reason for the notary acknowledgement subsequent top the signing of the trust agreement.

Powers of Attorney for Finances and Healthcare
There are two common types of directives naming an agent that is permitted to act on your behalf if you're incapacitated or otherwise unable to act. They may be known by various names depending on location, but typically they can commonly be referred to as a power of attorney for healthcare and a power of attorney for property. As the names suggest, each is used to name an agent that may act on your behalf in regard to specific actions related to your healthcare or financial-related decisions.

To be valid in Illinois a power of attorney for property must be:

Signed
Witnessed by at least one additional individual
Notarized

You must personally appear in front of the notary and the witness and acknowledge signing the power of attorney. So, while the language of the statute does not require you to sign in front of them, generally it is preferred.

Powers of Attorney for Healthcare can take various forms, but most commonly, the statutory short form power of attorney contained in 755 ILCS 45 are used. To be valid they must be:

Signed
Witnessed by at least one other person

In Wisconsin, to be valid a POA for finances and property must be signed. That's it! (See Wisc Stat 244.05).

With that said, in reality you're going to have a tremendously tough time getting a financial institution to acknowledge it as valid unless it is also notarized.

A valid Wisconsin Power of Attorney for Healthcare must be:

Signed and dated in the presence of two witnesses
Signed by the two witnesses (See Wisc Stat 155.10)

During the Lock-down Here Are Some Options

Powers of Attorney should be a priority to get fully executed during the pandemic because they are more likely than other estate planning documents to actually have some applicability. In the event you get sick, it's important to ensure that someone can manage your affairs in your absence.

Some options to get things signed that don't require a notary (i.e. Illinois and Wisconsin POAs for Healthcare):

Create a setup out on your driveway. Bring a table outside and ask the neighbors to assist in witnessing the power of attorney. Social distancing guidelines can be effectively practiced by signing one at a time and then stepping back from the table to allow the others to sign.
If it's essential that you make a trip to the grocery store, think about asking your cashier to sign as a witness (just be sure that they're at least 18).

If the document requires a notary (Financial POAs):

Look into a mobile notary if one is available and government orders permit it. Practice safe social distancing by using the driveway setup.
A potential substitute to a financial POA is to ensure your living trust is properly funded and owns some form of liquid account (a trust checking account, for example) which your agent may access to satisfy any financial obligations (bills, etc.) that need to be taken care of in your absence.
In Illinois, if access to a notary is impossible, at least sign your power of attorney. Barking up the chain at a financial institution to get it to honor a non-notarized power of attorney may be possible if it becomes absolutely necessary.

Once Stay-at-Home Orders are lifted it's important to ensure that anything which may have not been witnessed and notarized (as may be required) gets completed.

Selecting a Guardian For Your Children

Thu, 16 Apr 2020 21:13:00 GMT

It's something every parent thinks about--who will take care of my kids if I'm gone? It's a huge decision, but it may not be as tough a choice as you think.

Estate Planning During COVID-19

Wed, 08 Apr 2020 21:31:40 GMT

Things are a bit uncertain right now, but protecting your family doesn't have to be.

IRS Permits April Tax Deferral In Midst of Coronavirus Outbreak

Wed, 18 Mar 2020 21:43:53 GMT

In the wake of the swift spread of Coronavirus in the U.S., the IRS has issued guidance on the deferral of income tax payments due in April for certain filers.

Washington – Following President Donald J. Trump’s emergency declaration pursuant to the Stafford Act, the U.S. Treasury Department and Internal Revenue Service (IRS) today issued guidance allowing all individual and other non-corporate tax filers to defer up to $1 million of federal income tax (including self-employment tax) payments due on April 15, 2020, until July 15, 2020, without penalties or interest. The guidance also allows corporate taxpayers a similar deferment of up to $10 million of federal income tax payments that would be due on April 15, 2020, until July 15, 2020, without penalties or interest. This guidance does not change the April 15 filing deadline.

“Americans should file their tax returns by April 15 because many will receive a refund. Those filing will be able to take advantage of their refunds sooner,” said Treasury Secretary Steven T. Mnuchin. “This deferment allows those who owe a payment to the IRS to defer the payment until July 15 without interest or penalties. Treasury and IRS are ensuring that hardworking Americans and businesses have additional liquidity for the next several months.”

Today’s guidance will result in about $300 billion of additional liquidity in the economy in the near term. Treasury and IRS will issue additional guidance as needed and continue working with Congress, on a bipartisan basis, on legislation to provide further relief to the American people.

View the notice.

Selecting a Guardian For Minor Children

Fri, 15 Feb 2019 21:58:43 GMT

It's a worry for every parent of young kids- who will raise my children if I die? Often the choice isn't an easy one. But it can be.

It's something every parent thinks about—what will happen to my kids if I die? It’s, understandably not one of the most pleasant things to think about, but having a contingency plan in place in the event something happens can be essential to having piece of mind about a child’s future should something unforeseen happen.

An individual responsible for the care of a child is called a guardian. Sometimes that roll can be confused with a trustee, who is responsible for management of any inheritance a child may receive before turning 18. While they can be the same individual, the rolls can also be separated.

How is a guardian appointed?

The most common way to leave instructions about who you would nominate as guardian of your children is in your will. In Illinois, for example, a guardian can be nominated in writing (including a will) if the nomination is witnessed and attested to by two witnesses. Given that wills must meet that same standard, it is no surprise that it is the most common way for a guardian to be nominated.

Nominating a guardian in your will is prima facie evidence that it is your valid intent. What does “prima facie” mean? Well, it means that unless proven otherwise, it is presumed to be true. Much like an individual accused of a crime is innocent until proven guilty, appointing a guardian in a valid will creates an assumption that you want that person to be the guardian of your children unless evidence arises that would show otherwise.

Who Should I Choose?

Making a decision on who should serve as guardian of minor children is almost never easy. After all, no one is you. And, while many people in your life would make great parents for your children should something happen to you, they all may do things a little differently. But, while no one can replace you, it’s important to find a match that most closely syncs with your values and how you would hope for your child to be raised.

Among the obvious considerations should be:

· Does the person live nearby or will me kids have to be uprooted from their lives?

· Is the person able to live an active lifestyle as would generally be required for someone raising young kids?

· Is the person up to the job?

· Will the person move into your home, or if not, is their home large enough to handle the new additions?

· Does the person already have children, and if so, will they get along with your kids?

Digging deeper, it’s important to consider things like:

· Parenting style

· Religious, educational, relationship values

· Financial means

· Job security

· Discipline style

· General life values

What happens if I do not nominate a guardian for my minor children?

The short answer is “it depends.” Like most things in the law, how the determination is made will depend on state law. In Illinois, absent a valid nomination, a court will appoint a guardian. Who might that be? Well, it could be any number of individuals from a grandparent to an adult sibling, aunt or uncle. The court makes a determination based on what is in the best interests of the child.

While that doesn’t sound too bad, consider a situation when you and your spouse pass away and there is a grandmother on each side that requests that the court appoint her to be guardian of your children. While you both love your mothers dearly, perhaps you and your spouse decided that you would want your children to be raised by your sister. While you and your spouse may have discussed this very scenario while you were still alive, if you did not formally nominate your sister, the court has no way of knowing what your wishes were. So, not only may the court not appoint your sister as guardian, it may lead to strained relationships between the families when the grandmothers essentially fight it out as they make their cases about why each should be appointed over the other.

Without making your wishes known—and making them known in a manner the law respects, your children may not be left to who you would have picked. That’s why it’s essential for all parents to have a valid will and make a nomination of a guardian in that will.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

The information contained herein is intended for informational purposes only and is not legal advice, nor is it intended to create an attorney-client relationship. For specific legal advice regarding a specific legal issue please contact me or another attorney for assistance.

Estate Planning Made Simple

michael.brennan@mfblegal.com (Michael Brennan) — Mon, 21 Jan 2019 22:23:47 GMT

Estate planning doesn't have to be intimidating. In fact, most people are going to be in good shape with a few relatively simple documents. Here's what you should know:

When most people hear the term "estate planning" images of the Monopoly Man likely come to mind. Of course, the very wealthy are commonly associated with the estate planning process because they know how to benefit from a complex web of laws that enable them to most efficiently (and with the least amount of tax burden) leave their assets to future generations.

But estate planning is much more than trust funds and inherited wealth. A comprehensive estate plan can benefit practically anyone--from instructing family members who should care for minor children in the event of the untimely death or disability of the parents, to ensuring that one's medical wishes are followed. Of course, any estate plan will also direct where an inheritance should go, but that's never the only consideration. So what should you know about the process?

Well, there are a handful of documents that you should know about. Whether you're worth $1,000 or $10,000,000, the following estate planning documents are beneficial to have in place:

1) A Durable Power of Attorney for Healthcare (including HIPAA Release)

When it comes to medical decisions, a durable power of attorney, permits the agent to make medical decisions relating to treatment on behalf of the principal and, properly drafted, it allows the agent access to the principal’s important medical records which may be necessary to consider when determining a course of treatment.

Without a valid durable power of attorney for healthcare in place, medical personnel have no obligation to follow anyone’s wishes regarding treatment or consent except for the patient’s. For married couples, this may not be as much of an issue as it is for other people, but it’s still important to cover your bases.

By executing a valid power of attorney, a couple can appoint each other to make heath related decisions if they themselves are unable to do so. The power of attorney ensures that your spouse will be able to take any action which you would be permitted to take on own behalf. Many states offer statutory forms that can be used if you know what you’re doing, or an attorney can draft one up very quickly with a few pieces of information.

2) A Durable Power of Attorney for Finances and Property

Without one, financial institutions like banks, utility providers or even landlords typically will not permit an individual that is not named on an account to access its funds or information. Of course, in the context of marriage, this is not as much of an issue as it sometimes is for single individuals. Nevertheless, it’s good to make one part of your plan to avoid any surprises down the road.

3) Law Will and Testament

If you want to direct where your possessions will go if you die, then it’s important to have a last will and testament , or a will for short.

If a person dies without a will, state law determines how the assets will be distributed. That will mean less money and more stress for the heirs—an unpleasant prospect for family members already dealing with the tragic death of a young person.

In addition, married couples enjoy a number of benefits when it comes to passing property upon death. While others need to consider the tax implications of leaving amounts over a certain threshold, spouses can leave unlimited assets to each other in a will. That means that upon the first death, substantial gifts left to an inheriting spouse will not be subject to hefty taxes. However, it’s important to involve an attorney here, as the death of the second spouse may bring with it a number of unwanted tax consequences. Strategic drafting of a comprehensive estate plan can fully utilize these benefits while also eliminating any unwanted consequences.

If you are married and do not have any children, then 9 times out of 10 your estate will go 100% to your spouse. If you or your spouse instead want to leave certain property or a little bit of money to other loved ones, then you’ll need a will to override the default intestacy laws.

4) Living Will

A living will is a legal document used to indicate which treatments you do or do not want applied to you in the event you either suffer from a terminal illness or are in a permanent vegetative state.

For example, you may indicate whether the use of feeding tubes or other life-prolonging equipment should be continued, or whether, at a certain point should be discontinued if there is no chance of recovery.

A living will does not become effective unless you are incapacitated; until then you'll be able to say what treatments you do or don't want. Without a valid living will, doctors may or may not rely solely on the wishes of your spouse when determining what course of treatment to pursue.

Drafting a living will is important so that nasty disagreements don’t occur if something happens to you.

5) Authorization for Final Disposition

Leaving your loved ones specific instructions regarding funeral arrangements can drastically reduce the stress that they’ll obviously be facing should you pass away and spare them the difficulty of making those tough decisions at a painful time. This can be easily complicated when your family and significant other each believe that you wanted something different.

Items to consider are:

- Burial or cremation

- Contact information for a chosen funeral home, cemetery, etc.

- Details about your desired ceremony

- Details about any marker you may want

Drafting an authorization for final disposition provides details to your family and loved ones you may have never discussed with them and gives you a way to have a say in the final details of your life.

6) Revocable or Living Trust

A living trust , which may also just be referred to generally as a revocable trust by your attorney is a tool which can be used by practically anyone to create efficiency and additional protection in an estate plan. You can learn more about revocable living trusts here.

Appropriate beneficiary designations on retirement (and other) accounts

In order to ensure that these items go to your spouse if you die, it’s important to name him or her as the beneficiary of the policy.

Married couples also enjoy some additional benefits when it comes to planning for the disposition of retirement accounts, if done correctly. For example, a spouse inheriting an IRA will be able to roll the finds over to his or her IRA if appropriate steps are taken which will permit the surviving spouse to space out distributions over a longer period of time.

If changes are necessary you should make sure to file a new beneficiary designation form with the company.

7) Title to Real Estate

If you and your spouse own real estate together, then you should consider your options when it comes to how title should be held .

For example, by holding the real estate as joint tenants with right of survivorship you’ll be able to ensure that, should something happen to one of you, the entire interest in the home will pass to the surviving partner.

Married couples in a number of states are also permitted to hold property as tenants by the entirety- a type of ownership only available to married couples. Joint tenancy and tenancy by the entirety create additional rights and protections that may not otherwise be available to property owners.

It’s a great idea to talk to your attorney about what certain types of real property ownership mean to you and your spouse.

8) Life Insurance/ Life Insurance Trusts

Life insurance can provide a windfall for your spouse should you pass away suddenly, so it’s a good idea to look at your options with your insurance agent.

One drawback of life insurance is that its value gets included in your estate for tax purposes upon your death.

With some policies paying out millions of dollars, this can have a significant impact on your surviving spouse, as it may push your estate over the estate tax threshold, thus reducing the award your surviving spouse will receive.

One way to potentially bypass that unwanted possibility is to have your attorney draft an irrevocable life insurance trust to hold the policy. A policy held in an irrevocable life insurance trust does not get included when calculating the total value of your estate for tax purposes upon your death. By naming your spouse as the beneficiary of the policy, you can ensure that the payout will be maximized in the event you pass away.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

This is the Right Way to Make a Gift to a Child

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 08 Feb 2018 21:18:39 GMT

Kids do not have the legal capacity to own property. If you want to leave money to your children, here's what you should do.

There are numerous considerations for parents and grandparents when contemplating making gifts to minor children. Outright gifts are frowned upon because, under the eyes of the law, children are under a legal disability, which means that they do not have the legal capacity to own property. That means that, without some planning, a guardian is necessary to hold or manage property for a minor child.

But, that doesn’t mean parents don’t have options when it comes to making gifts to minor kids. There are a few options worth exploring depending on why the gifts are being made, including 529 plans, UTMA custodial accounts, and gifts in trust.

529 Plans

529 plans get their name from the section of the Internal Revenue Code that gives them their unique characteristics. Each state has a plan with terms and investment goals varying slightly by state with some making more sense than others.

The way a 529 plan works is that parents, grandparents, or any other generous person makes gifts to the 529 plan account much as one would make a deposit to an IRA. The difference is that the beneficiary of the deposits is not the individual making them. Instead, it is a minor child. The contributions then grow free of federal income tax burden for the benefit of the child of grandchild named as beneficiary of the plan. Previously, the funds in the account had to be used for higher education expenses once the beneficiary child turned 18 (including trade and technical schools). Under the Tax Cuts and Jobs Act of 2017, funds in the account can be used for elementary and secondary private school tuition as well, giving parents an option for saving for private school education.

Of course, the drawback of 529 plans is that the funds must be used for qualified educational expenses. So, if the goal of making gifts to a minor child is something other than to fund his or her education, other options are worth exploring.

UTMA Custodial Accounts

Another option for parents is to create custodial accounts under the Uniform Transfers to Minors Act (UTMA). Making gifts to a custodial account setup under UTMA is fairly straightforward. Instead of the child being the actual owner of the account, an adult is the custodian on the account in charge of managing the funds until the child reaches adulthood, and in the case of UTMA, 21 years of age.

Prior to reaching 21, the custodian can make expenditures for the child’s well-being on the child’s behalf—specifically, the custodian has the discretion to pay any amount for the “support, maintenance, general use, and benefit of the minor.” Perhaps most beneficially, the custodian can act without court supervision or oversight and has very few accounting requirements.

But, upon the child reaching the age of 21, all funds are required to be distributed outright. While 21 isn’t 18, it is still a relatively young age to receive a potentially significant financial gift outright. Think back to when you were 21 and ask yourself if you realistically had access to a significant sum of money whether you would have been responsible with it. The issue is magnified when the beneficiary may have spendthrift issues or substance abuse problems. So, while UTMA custodial accounts are a simple way to leave gifts to minors, they do come with some downside.

Minor Gift Trusts

An alternative to a UTMA custodial account is the creation of an irrevocable gifting trust . Many people assume that trust funds are only associated with the super wealthy, however there is no requirement that any minimum amount must be contributed. Understanding the concepts of a trust can do wonders for a family with some proper planning. If education is the goal, an irrevocable trust can be set up with children or grandchildren as the beneficiaries. A trust has an added benefit over a 529 Plan in that it can make distributions to the beneficiary (i.e. a child or grandchild) not only for college, but for other educational needs, health, maintenance, support or any other legitimate reasons, such as a down payment on a house or to start a business. And, unlike UTMA custodial accounts, if drafted effectively, there is no requirement that trusts distribute assets outright to the minor when he or she turns 21.

Many times in estate planning situations arise in which an individual wishes to place property in trust but does not necessarily want the beneficiary to have the ability to completely withdraw the property or accumulated income of the trust right away. At the same time, the grantor is looking for a vehicle in which to make a gift free of any gift tax (currently gifts up to $15,000 per year, per individual are permitted without the obligation to pay any gift tax under §2503(b) of the Tax Code).

The most common situation in which the desire to structure a trust in this manner arises is when a grantor parent wishes to make gifts to minor children (or non-minor children under a certain age) but does not want the child to have the ability to access the funds immediately, whether out of fear that they will be spent on something foolish or otherwise. In order to prevent the money from being wasted by the child restrictions are drafted into the trust agreement which prevent him from accessing all of the funds until such date as the parent believes he will be responsible with the money.

However, in order to qualify for the exclusions from gift tax the gift must also be one of a present interest, meaning that the person who is receiving the gift has the immediate ability to enjoy the gift. Therefore, in order for a Crummey trust to serve the dual purposes of making tax free gifts to beneficiaries and restricting how those transferred assets are accessed, certain precautions must be taken.

Requirements

1) The trust must be irrevocable .

The first requirement in order to ensure that the grantor’s contributions to the trust are considered gifts, thereby removing the wealth from his estate, is that the Crummey trust must be irrevocable. As I discussed in an earlier post, irrevocable trusts provide some great tax advantages in that they are viewed for tax purposes as a separate entity over which a grantor has no control or ability to modify or revoke. Therefore, any contribution a grantor makes to an irrevocable trust will no longer be considered owned by him, and he will not be subject to estate tax on it upon his death.

2) The beneficiary must have the right to receive something of value immediately at the time a gift is made to the trust.

As discussed above, a gift must be one of a present interest in order to qualify for gift tax exemption. According to the IRS, simply giving the beneficiary the right to receive the gift at some point in the future, even if it is only in a year or two, is not sufficient to qualify a gift for gift tax exemption. Naturally, then, a beneficiary must have some sort of present ability to receive the gift. According to the IRS, the present right to receive something of value must not be subject to a contingency or the will of some other person, the right to receive the property must exist at the time of the gift, the beneficiary’s present interest must be clear and unambiguous and it must be possible for the beneficiary to actually receive the property . That means that a Crummey trust must permit a beneficiary to withdraw annual contributions that are made to the trust when they are made. If the beneficiary does not withdraw the contribution, then it will become part of the trust principal and will be protected against future withdrawals unless made consistent with the trust agreement.

3) The beneficiary must have notice that he or she has a right to demand to receive property.

It may seem like a good idea to simply not inform a beneficiary of the fact that a contribution has been made to the trust for which he has a withdrawal right, however, the IRS has made clear that a demand right can’t exist unless the beneficiary has knowledge that he may exercise such a right. It is ambiguous as to whether the existence of a demand right must be given upon each addition to a trust or only upon creation of the trust, however, in order to ensure that the IRS doesn’t such gifts to the trust back into the grantor’s estate, a cautious planner would consider giving notice each time a contribution is made to the trust.

4) The beneficiary must be given a reasonable time to exercise the demand right.

Perhaps a natural corollary to giving notice of a demand right is giving the beneficiary a reasonable amount of time to exercise a demand. Again, there is no steadfast requirement for how long “reasonable” may be, however, the IRS has indicated that as little as 30 days has been sufficient numerous times.

Michael F. Brennan is an attorney at The Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Estate Tax Changes Made Simple (VIDEO)

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 22:07:08 GMT

Watch this short and you'll be the smartest person in the room when it comes to estate tax changes under the new tax law.

An Excerpt from Solo Out of Law School

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 22:04:24 GMT

"Tune out the Negative Speak"

The following is an excerpt from "Solo Out of Law School--A How Can Guide to Starting a Law Firm as a New Attorney"

Solo out of Law School is a book for both law students thinking about a solo career and attorneys looking to open their own firms. It's about mindset, motivation, and viewing your solo career with perspective that allows you to see yourself and your work as something you can be proud of. It's not a "how to" guide to starting a law practice. It doesn't say anything about the tools you'll need or whether to open a brick and mortar office. Rather, it's a "how can" guide to developing the mental toughness and right mindset to succeed as a solo attorney. It's a collection of little lessons and simple reminders for when your choice to go solo in the first place come into doubt. Solo out of Law School is about finding the strength and motivation to keep pushing. By embracing the words on its pages, my hope is that you'll realize, no matter how much you doubt yourself or second-guess your actions, you are good enough to be successful as your own boss.

If you’re reading this book, then you are probably thinking about starting a law firm. Congratulations on even getting to this point of consideration! That alone is a huge step towards the metaphoric ledge from which you are thinking about inevitably leaping.

Tune out the Negative Speak

Let's get one thing out of the way right from the beginning: There is never a good time to start a law firm. Life has a funny way of creating all sorts of excuses that make it easy for us continually to put things off until the very inspiration we had to start something new—perhaps even revolutionary—fizzles away like a teapot losing steam.

It’s human nature to doubt ourselves, our skills, and our abilities to succeed. For you, that could be a fear of not being able to support your two young children, or maybe it's a worry that your friends will look at your decision to strike out on your own as an indication that you were not "good enough" to get one of those plush Big Law jobs.

Here’s what you need to remember: If everyone thought that going to law school, spending tens (if not hundreds) of thousands of dollars on education, and spending countless hours with your head buried in books and outlines just to say "no thanks" to becoming a big-shot lawyer sounded smart, they would be doing it. If everyone thought what you are about to consider doing was an excellent idea, then they would be doing it themselves.

People are going to doubt you. People are going to critique your decision to open up your own shop, and they are going to let you know about it. To be honest, one of those doubters from time to time is going to be you.

A harsh reality? Yes. One that you can weather? Absolutely. Being in business for yourself means that you are going to need to have incredibly thick skin. You’re going to need to let things roll off your back, because at the end of the day, no one’s views matter except for yours. People are going to judge you regardless of what you do, so it's best to accept that and forget about it.

You are no doubt reading this book for a reason. Whether you're passionate about a growing niche area of law, you think that billing 2200 hours a year at a large firm sounds like the easiest way to drive yourself to an early grave, or you just can't find work anywhere else, you've no doubt had at least a passing thought that starting your own firm may be your best chance at happiness and prosperity. You may have ideas on how to make the law more accessible to clients or more responsive to industry needs. You probably want to do things cheaper, faster, or more efficient than the established law firms that are already out there.

If everyone shared that same belief, they would be doing it too.

If you can’t convince yourself that your reasons for wanting to start a law firm are valid, then you have set yourself up for failure before even getting started.

So, forget what other people think and stop worrying about what they may be saying. Most importantly, turn off that little voice in your head telling you that you can't do it and that you're going to fail. If you can't have confidence in yourself, you are destined to fail. You might as well realize that now because you are going to be your biggest cheerleader for the foreseeable future, so get on your good side now before things get tougher.

Think about why you want to start a law firm in the first place. Whether it's the freedom to work with the clients you want or the ability to make it to all of your daughter's soccer games, put that thought in the front of your mind and keep it there. Positive inspiration becomes your best friend when the road gets bumpy.

The New Qualified Business Income Deduction

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 22:02:27 GMT

This new tax break for small businesses will be significant for entrepreneurs. Here's what you need to know to take advantage

The Tax Cuts and Jobs Act, otherwise known as the tax reform bill includes some provisions which should prove beneficial to pass-through business owners. For those unfamiliar with the concept of pass-through businesses, they are the most common form of business ownership in the United States, particularly when it comes to small businesses. Pass-through entities include limited liability companies, partnerships, S corporations and sole proprietorships. The good news for small business owners with pass-through structured businesses is that beginning in 2019 (for tax year 2018) and running up through 2026, unless extended, they will be allowed to deduct 20% of all “ qualified business income” But, the question then becomes, what exactly is qualified business income?

Qualified business income is defined as “the net amount of qualified items of income, gain, deduction, and loss with respect to any qualified trade or business of the taxpayer.” Less than helpful on its face, the definition turns on the meaning of a number if items, including what items are qualified. Well, put as simply as possible, qualified business income includes all business income except for a number of items, like reasonable S corporation shareholder compensation or guaranteed payments to stakeholders in an LLC, for example. But, overall, the new deduction has the potential to reduce small business taxes for pass-through entities by 20%.

Of course, this is the Internal Revenue Code, so there are a number of caveats, carveouts and specifics to ensure that abuse is curtailed and at least some semblance of fairness is written into the provision, or at least appears to be.

For example, there are phased-in caps on total income that qualify a business for the deduction and the deduction is simply unavailable for certain service trades and businesses unless they fall under certain income thresholds. Professionals in fields like law, accounting, and financial advising are not permitted to claim the deduction unless they fall under certain income benchmarks ($157,500 for single filers and $315,000 for joint filers), showing an obvious policy preference for favoring the manufacturing sector (one of those places we really only see a façade of fairness in the code).

The deduction is also limited to 50% of the W-2 wages paid by the business. So, with those caveats, it’s clear that the exact amount of the deduction is going to depend on the specific facts and circumstances of each business. For a great illustration of how the deduction for qualified business income would apply in various scenarios, I’d recommend reading Mike Piper’s detailed post on the qualified business income deduction over at Obvious Investor . Mike does a great job of using real life examples to show how the various nuances of the deduction may come into play for certain small businesses.

Regardless of the specifics, one thing is clear—the majority of small businesses operating as something other than a C corporation are going to see a benefit from this provision of the new tax law.

Changes to Corporate Taxes under the Tax Reform Bill

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 21:59:15 GMT

Tax reform will have a massive effect on how corporations calculate and pay their taxes.

In a post last week I touched on some of the implications of the new tax law on pass-through business entities , like LLCs, S Corporations, partnerships, and sole proprietorships. Noticeably absent from that list is C Corporations. C Corps are the most common entity structure for America’s largest companies, like Apple, General Electric, Walmart and Target. It would be foolish to think any tax overhaul headed by republicans would be to the detriment of these behemoths. So, here are a few of the major ways C corporations will benefit beginning in 2018.

Corporate Tax Rate

Prior to the new tax bill being signed into law corporations paid income taxes based on their total income, just like individuals with rates ranging from 15% to 38%. Under the new tax law, all corporations will pay a flat 21% regardless of how much or how little the corporation makes.

Corporate Alternative Minimum Tax

Prior to the new tax bill being signed into law, corporations were potentially liable for payment of Alternative Minimum Tax (AMT), similar to higher earning individuals. Under the new tax law, beginning in 2018 corporate AMT is repealed.

Repatriation Incentive

For decades, US companies have been stashing profits internationally without incurring any tax consequences at a domestic level. That’s because under previous law, those international profits were not subject to tax liability immediately, but rather only upon bringing those profits back to the United States. And, doing so, would incur a tax liability of 35%. So, companies have been betting on being able to wait it out, so to speak in hopes that eventually that significant tax burden would be alleviated. Well, that time has come. Under the new tax law, domestic companies with profits abroad are given the ability to bring assets home to the US at an incentive tax rate of only 15.5% (only 8% on illiquid assets like equipment). For the country’s largest companies, that can be equal to billions of dollars in savings. In fact, just last week, Apple announced that it will repatriate its foreign cash holdings of more than $252 billion by paying a one time tax of $38 billion, so it seems the repatriation incentive is already achieving its intended effect.

There are numerous other incentives in the Tax Cuts and Jobs Act including the expansion of bonus depreciation, increasing the limit for Section 179 deductions, and easing the burden for other types of business entities wishing to convert to C corporations. All in all, tax reform will have a significant effect on taxes for the country’s largest corporations for the foreseeable future.

Estate Tax Changes under the Tax Cuts and Jobs Act

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 21:57:02 GMT

The newly passed tax reform bill contains some significant changes to the estate tax. Here's what you can expect.

The newly passed tax reform bill includes some significant changes to the estate tax. Here’s what you can expect.

While the Tax Cuts and Jobs Act made sweeping changes to the estate tax limits, in reality, unless you have significant wealth, you won’t be directly impacted. However, the changes are bound to stir strong emotions in those that feel the reforms are a gift to the wealthy. So what’s new?

Increased Limits

Let’s be honest, for a few years now the chances of actually having to deal with estate tax liability have been pretty low, as most Americans don’t have estates valued at anything close to the limits at which liability is imposed. In 2017, for example, every person could shield nearly $5.5 million from estate tax. Frankly, if you were lucky enough to have an estate worth that much, you would have almost certainly done some effective estate planning to limit any liability you could potentially have.

Well, as if that $5.5 million threshold wasn’t high enough, beginning in 2018, individuals can shield a whopping $11 million (give or take a few hundred thousand dollars, since that’s indexed for inflation) from estate tax liability, and that’s only if you’re not married (more on that later). While that amount is set to sunset in 2025 and revert to the measly $5 million amount in place for 2017, the fact remains that the changes won’t have a direct effect of most people.

Increased Annual Exclusion

Each year, every person is able to make as many gifts of up to $14,000 to as many people as they want without being subject to gift tax. That’s called the annual exclusion. The amount is indexed for inflation, so it does rise a bit each year. For example, in 2018, that amount increases to $15,000. The new tax law does not change the annual exclusion.

No Changes to Portability

Portability refers to the concept that married couples can use any unused portion of their spouse’s estate tax exemption. So, for example if a husband dies first and only passes assets worth $3 million upon his death, then the remaining untouched $2 million can be preserved by his wife. So, upon her death, in 2017 she would have been able to pass assets worth $7 million (her $5 million exclusion plus her husband’s unused $2 million). The concept doesn’t change in the new tax law, but the amounts obviously increase. So, beginning in 2018 married couples can pass a whopping $22 million free of estate tax!

Beware of the Sunset

As they say, “all good things must come to an end.” Or, if you have disdain for the new changes, maybe not so good. But, the fact remains that, if Congress does nothing to extend the provisions of the new law, they will revert back to pre-change, 2017 rates in 2025.

What About State Estate Taxes?

As readers know, on this blog, we focus on the effects of laws on midwestern residents, namely those in Illinois, Wisconsin and Minnesota. So how will the new estate tax changes impact them? Well, it’s not all roses, specifically for residents of Minnesota and Illinois, who, as well as paying federal estate taxes if their net worth is above certain thresholds also have to pay a chunk to the state. In Minnesota, residents who die in 2018 will be required to pay estate taxes at a top rate of 16% for any amounts over $2.4 million—a far cry from the federal limit. That threshold does increase to $2.7 million in 2019 and $3 million in 2020. In Illinois, things are a bit better, but residents will still pay estate tax at a top rate of 16% on amounts over $4 million.

So What Does the Impact Look Like in the Real World?

As is probably apparent, the reality is that the changes to the estate tax under the new tax law won’t have a significant effect on anyone but the most well off Americans, and even then, it won’t matter unless they die prior to 2025. In fact, it is estimated that only around 1,800 estates will be subject to estate tax in 2018 nationwide. So, the real effect is more so along the lines of anger and frustration that a change was even necessary.

Choosing a Guardian for Children

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 21:51:55 GMT

Parents deciding on a guardian for their kids need to consider this when making a choice.

It is something every parent thinks about—what will happen to my kids if I die? It’s, understandably not one of the most pleasant things to think about, but having a contingency plan in place in the event something happens can be essential to having piece of mind about a child’s future should something unforeseen happen.

How is a guardian appointed?

Nominating a guardian in your will is prima facie evidence that it is your valid intent. What does “ prima facie” mean? Well, it means that unless proven otherwise, it is presumed to be true. Much like an individual accused of a crime is innocent until proven guilty, appointing a guardian in a valid will creates an assumption that you want that person to be the guardian of your children unless evidence arises that would show otherwise.

What happens if I do not nominate a guardian for my minor children?

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

The Nuts and Bolts of Virtual Office Technology

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 21:46:52 GMT

What solo lawyers and small firms need to know

Introduction

Technological evolution can be hard to keep up with, especially lawyers accustomed to a more traditional way of doing business. Terms like “the cloud,” “SaaS,” and “virtualization” may seem more compatible with the language in which computer engineers speak, but as a lawyer, incorporating them into your practice enables you to build a practice that is responsive to evolving client demographics. Attorneys can increase efficiency, accessibility and convenience by seeking to understand those technological concepts, assessing their usefulness and weighing the burdens, risks and rewards of their incorporation into existing practices. Appropriate virtual solutions can reduce redundancy and costs while decreasing significant risks, like the potential for data loss or inadvertent breach of client confidentiality.

The idea of virtualization may seem daunting. But, by understanding the terminology, the risks, and the solutions on the market to alleviate those risks, you can make informed decisions about areas of your practice that may be made more efficient by virtualizing them.

Understanding the Terminology of Virtualization

When you begin to explore how to incorporate virtualized solutions into your practice, the key concept to remember is that, at its core, virtualization is just the inclusion of existing technological tools into an existing practice. Just like the rise of personal computers as a replacement for dedicated word processors in the 1990s or the increased popularity of cell phones over landlines in the 2000s, virtualized solutions have evolved from traditional ways of doing business. It is important to have a general understanding of the current technological language so that you can make informed decisions on how to virtualize your firm.

The Cloud

The most common method of virtualizing a law firm starts with moving some law firm functions to the cloud. The cloud refers to an interconnected network of servers, systems and hard drives that enable you to store and access data from multiple devices and locations. While it may sound like an obscure concept for unfamiliar attorneys, it has become a hot topic for law firms looking to stay on the forefront of technology.

Numerous applications and programs exist that enable you to access your data in specific ways and for specific purposes. For example, common practice management platforms, like MyCase and Clio, are cloud-based applications that enable you to manage your firm’s entire presence in the cloud without the need for owned physical servers. Instead of accessing software parked on your personal computer or device, you use personalized login credentials to access an environment that is hosted on remote third party servers which are accessed through the internet. Sound confusing? Think about something you already use: your personal email account—whether Gmail, Yahoo or AOL. To access your email, you login to your account through the internet to a network of central remote servers where your messages are stored securely for your access rather than by opening a software program on your computer. That is a cloud based application.

Common amongst most cloud applications and storage platforms is that the physical servers which house your data are owned and managed by someone else. Whether you use Amazon Cloud Drive, Google Drive, iCloud, or Dropbox when you send data to the cloud it is being sent to servers owned and operated by a third party. For example, if you uploaded a draft of a contract to you Dropbox account and share it with your client by emailing the client a secure link to access the contract, the client is not logging in to view the file on your computer. Instead, the client is accessing the remote server where the draft contract is being stored by Dropbox. Provided you and the client have internet access you can access that document anytime from anywhere from any smartphone, computer or other device.

Virtual Law Office

After grasping the concept of the cloud, the next step is understanding how it applies to the practice of law. Typically, attorneys exploring virtualization will want to become familiar with the concept of virtual law offices because they are illustrative of the numerous potential ways your firm can be virtualized. Virtual law offices take several different forms. At one end of the spectrum are law firms that may still have physical office spaces for client meetings but use a cloud-based practice management platform for central business functions. At the other end are law firms that are completely virtual. These firms incorporate multiple virtual functions and solutions into their operations—from practice management to client video conferencing, to web-based telephone and remote cloud data and document storage—which permits attorneys to work from anywhere at any time with little more than a laptop and internet access.

My firm is entirely virtual. I work from a home office, coffee shop, library or private club space, depending on where I am on a given day with no more than my laptop, smartphone and internet. I manage client matters and communications through MyCase which lets me exchange electronic messages with my clients in a secure space, store and collaborate on document drafts, track my time and send invoices. I use cloud-based video conferencing solutions, like UberConference or Zoom video conferencing to consult with clients that want (virtual) face-to-face meetings, and I use my cell phone for the rest. I use MyCase’s calendaring feature to ensure I don’t miss important meetings or deadlines and sync it with my Iphone’s iCal Calendar so that I can access it even when I’m not online. I create a backup of all data and files through MyCase’s document management feature and create a second backup on a personal cloud device called a Transporter which is physically located in my living room but accessible anywhere I have internet access through secure login.

The virtualization of your firm will not be identical to mine. But, by seeing what a 100% virtual law office looks like, you can get a sense of the areas where your firm may benefit from virtualization.

Differentiating Acronyms: SaaS, HaaS, and IaaS

As lawyers have sought to virtualize their practices by incorporating more cloud-based solutions, several acronyms have worked their way into the common vernacular. Concepts like SaaS (Software as a Service), HaaS (Hardware as a Service), and IaaS (Infrastructure as a Service) have become common abbreviations for various types of cloud-based solutions. For lawyers with limited IT knowledge, the language can sound foreign. But, while there are differences between SaaS and PaaS; between HaaS and IaaS, there are some uniform elements which, when understood, can greatly enhance your understanding of cloud computing and the various considerations involved in choosing appropriate solutions to virtualize your practice.

While HaaS and IaaS are helpful for lawyers looking to modernize their firms, they do little to assist you in virtualizing your firm. In today’s legal industry, Software as a Service, or SaaS as it is commonly referred to, is the primary delivery model driving the virtualization of law firm operations, so it is the one that is most important for attorneys to understand. SaaS applications are cloud based software solutions which are not purchased and installed on your hard drive, but rather are licensed by paying a periodic (typically monthly) subscription fee. Some more common SaaS solutions for lawyers are the aforementioned practice management suites and document and data storage solutions, like Dropbox and SpiderOak, and SmokeBall.

When you are assessing areas for your firm’s virtualization, you will most likely be looking as SaaS solutions.

Considerations When Choosing Virtualization Solutions

While there are newer law firms that are completely virtual in all their operations, 100% virtualization should not be the goal of every firm. The idea is to integrate virtual solutions into your existing business model in a way that works for you. Making changes for the sake of making changes is detrimental to your business model. Overinclusion will lead to inefficiency and waste. But, properly integrated into your practice, virtual solutions offer several benefits. When choosing appropriate solutions for your firm, it is important to weigh the pros and cons of virtualizing specific law firm functions before committing to changes.

A primary benefit of virtual solutions is that they are intuitive to learn and use, even for the least technologically inclined amongst us. That means that there is a little need for the assistance of IT professionals for software setup, maintenance or training. Troubleshooting can generally be handled by browsing the provider’s frequently asked questions page or reaching out to on-call remote support agents. Further, compatibility with operating systems and various devices is of little concern since applications do not require any installation onto local hardware.

Virtual solutions are also incredibly budget-friendly (or at least budget-predictable). Since applications are almost always subscription-based, you can plan expenses accordingly. Unlike traditional software, cloud applications are continually improved upon which means that you do not need to install updates or security patches periodically as is necessary with installed software. The provider is doing all that work automatically.

One additional significant benefit of virtualized applications is that they are very scalable. Subscriptions are typically based on the number of users, so firms are only paying for the access that they need. That makes them customizable to different firm sizes and structures without necessitating any customization of the product itself.

However, virtualization does come with some drawbacks which must be considered before integrating solutions into your law practice. Two significant issues that you need to consider are the level of control, access and security you are comfortable with and the level of periodic downtime you are willing to accept.

While in-house solutions give you complete control over your software, virtualized solutions are controlled by third party providers. Reliance upon third party providers creates an environment where the potential for data breach or loss is not entirely under your control. While most cloud-based applications are as, if not more secure than in-house systems, you will want to do your due diligence when choosing appropriate virtual applications for integration into your firm’s operations. It is important to consider where your data is being hosted—whether it is staying domestic or potentially being moved abroad, potentially creating unwanted exposure to breach. Carefully review user agreements to understand the security measures third parties are taking to protect your data from loss or breach and be sure you understand the provider’s procedures for extracting your data in the event you want to terminate your subscription to an application.

From an accessibility perspective, virtual applications may have occasional periods of downtime to enable providers to address system issues, update security infrastructure or improve features. That means there may be times you will not have access to your data. Of course, access to in-house software is limited by your ability to access your physical office as well, so the issue is not a new one. But, while providers generally give adequate notice for when downtime may occur, if you practice in a deadline heavy area of law you will want to ensure that you have put measures in place that will enable you to access any necessary documents or data when they are needed.

Conclusion

Virtualization s a cost-effective way for practitioners to structure modern law firms that are responsive to rapidly changing client demographics as technology becomes increasingly central to daily life. By examining current law firm operations and identifying potential functions that can be virtualized without detrimentally disrupting established business practices, attorneys can create practices with maximum flexibility, efficiency, accessibility and convenience. While there are potential pitfalls of which practitioners must be aware, by identifying potential risks of virtualization and implementing appropriate security measures, practitioners can set themselves up for success in a continually evolving world.

Michael Brennan, is the principal of The Virtual Attorney (t hevirtualattorney.com ), which uses videoconferencing and other forms of online communication technology to provide clients with a secure, convenient, and accessible means to plan for their businesses or plan for their families. Brennan is licensed in Wisconsin, Illinois, and Minnesota and focuses his practice on estate planning, tax, business formation, regulatory, compliance, commercial transactions, and business development.

Published in GPSOLO, Volume 34, Number 3, May/June 2017 © 2017 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

En Excerpt from Solo Out of Law School

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 21:41:03 GMT

"Turn Downsides Upside Down"

There are endless reasons not to start a law firm. Think about it.

After all, you have no experience, no paying clients, stiff competition from alternative legal service providers with massive marketing budgets and worst of all, a very real fear that people may actually know that you feel like you don't have the slightest clue what you are doing.

Most people would be hard-pressed to name another profession where an otherwise bright individual (you did make it through law school, sit for and pass the bar exam, after all) would look at the current state of his or her industry, see the bleak outlook, and move forward anyways.

So how are you going to use those challenges to your benefit?

As an attorney, you have acquired the ability to think about practically anything from multiple perspectives. In the field of law, two sides can look at the same set of accepted facts and draw two entirely different conclusions based on perspective. I'm a big fan of the television show, Dateline. Dateline has become mostly an investigative and true crime show typically showcasing hour long real life murder mysteries. One of the most frequent themes seen during an episode is police officers confronting a suspected killer (usually an ex-lover or spouse) with news that their loved one has been murdered. Often, the reaction by the unsuspecting interviewee is central to the question of guilt at a subsequent trial. Prosecutors and police very often point to subdued reactions as an indicator of guilt, the logic being that anyone who finds out that someone they care about has been killed will react in an outburst of forlorn emotion. Of course, those that react with such raucousness are also pinned as murders who must just be "putting on an act." Meanwhile, the defense views such reactions very differently. Perhaps the lover was so overcome with shock that the surreal news produced no emotional response. Or, naturally, for those that do react with an outburst of tears and desperate screams are reacting as one should react to hearing such life-altering news.

The point is that the undeniable facts of the situation can be interpreted in two entirely different ways depending on the lens through which they are viewed. As an attorney, you can probably see both sides of that coin. After all, it's your job to take the facts of any situation and use them to your client's advantage.

The ability to take that skill and apply it to building your business is going to be essential to your success. Just like a good prosecutor or defense attorney faced with a client's taped reaction in a murder investigation, you need to take the facts of your situation—whether real or perceived—and make them work to your benefit.

For example, maybe you’re afraid that a potential client, when facing a choice between you—a newly minted attorney without much more than some mock trial experience and a summer internship at the District Attorney's office under your belt—and Joe Lawyer—who has practiced civil litigation for 25 years and successfully negotiated dozens of cases to six and seven-figure settlements—would never realistically chose you over him. But, that lack of experience does not have to be a negative. Instead, maybe it can mean that, unlike Mr. Lawyer, you have no preconceived notions of what the process should be. A settlement may not be in your client's best interests. Mr. Lawyer may know that he can take a quick paycheck by getting out early because he has handled a similar case before. To him, it’s an open and close case.

Meanwhile, because of your lack of experience handling that type of case, you know that you are going to have to spend countless hours poring over statutes and case law to build a working knowledge of the issues involved. During your research, say that you find a rarely seen exception to the law that means your client will easily win on the merits if the case goes to trial, meaning a much higher payout for both you and your client.

The very lack of experience that you were viewing as a negative has all of a sudden turned into one of your strongest traits. Not knowing the law led you to uncover a way for your client to win big. It led you to see the case as a unique set of facts and circumstances while custom fitting a solution to those facts and circumstances.

Your lack of experience isn’t a weakness. It’s a strength. It enables you to represent clients without any preconceived notions of process or outcome.

What about the lack of paying clients? Clearly, your business is doomed to fail if you don't have a steady flow of new business coming in. And, in the beginning, taking on a new client is probably going to feel less probable than winning the lottery. Trust me, I've been there, and it gets better in a hurry. But until it does cash flow will be limited for a time as you get yourself established.

Unfortunate? Sure. But, look at it through a different lens. Without much technical legal work to do, you have ample time to focus on business development. You have the ability to spend your valuable and limited time perfecting your product and your delivery. What makes you stand out from the crowd? What's your angle? Akin to developing a prototype of a new invention, which can be tested and tweaked until it is the best it can be and ready for sale, you are going to need time to test and perfect your product. Honing what you have to offer future clients will give you the foundation you are going to need to survive long-term.

It’s not a negative, it’s a positive.

Lack of paying clients merely frees your schedule so that you can focus on developing a product that paying clients will want to use and recommend.

What about the lack of a steady stream of income? While it obviously may seem bad, try looking at it differently. Right now your funds are limited which means that you're going to need to maximize every dollar you spend, whether on advertising, software, networking or even paying for your personal needs. You simply don’t have the luxury of wasting a single cent. That’s going to force you to think about what expenses are essential to the operation of your firm. It's going to force you to cut out everything that is unnecessary to running a successful business.

Lack of money enables you to stay lean and able to adapt to changing market conditions.

What about all that competition? After all, you're not the only one out there practicing in your area of legal specialty. Stiff competition in a crowded industry may mean fighting harder for each client. But, it also means that there are countless other lawyers and firms from which to learn. Look at the firms that have been around for 100 years. What do they do that is so effective? What about the lawyers that have weathered the storm and figured out how to make it five or ten years on their own? How did they find their footing and how do they distinguish themselves from the masses? There is competition in every industry. Embrace it and make it work for you.

Lack of a client base, lack of income, and stiff competition can all potentially unhinge your fragile business before it gets off the ground by stomping you down mentally. But, viewed through a different lens, they can create an ideal environment in which to build a new business. It's all about perspective, and by turning negatives into positives, you are going to give yourself and your business more than a fighting chance to succeed.

Solo out of School is a book for both law students thinking about a solo career and attorneys looking to open their own firms. It's about mindset, motivation, and viewing your solo career with perspective that allows you to see yourself and your work as something you can be proud of. It's not a "how to" guide to starting a law practice. It doesn't say anything about the tools you'll need or whether to open a brick and mortar office. Rather, it's a "how can" guide to developing the mental toughness and right mindset to succeed as a solo attorney. It's a collection of little lessons and simple reminders for when your choice to go solo in the first place come into doubt. Solo out of School is about finding the strength and motivation to keep pushing. By embracing the words on its pages, my hope is that you'll realize, no matter how much you doubt yourself or secondguess your actions, you are good enough to be successful as your own boss.

Give Your Business a Legal Check Up

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 21:39:07 GMT

It's important for business owners to periodically take stock of whether they are legally protected. Here's what to think about.

In the words of Benjamin Franklin, "an ounce of prevention is worth a pound of cure." Few places is that more evident than in the field of law, where taking proper measures to protect one's interests preeminently can ward off potentially messy situations down the road. Specifically, businesses that spend the time and resources to properly protect their interests before problems arise can limit their exposure to liabilities and lawsuits in the future. For that reason, it's important for every business owner to assess his or her exposure to legal risk from time to time and address any glaring holes in the business' risk mitigation practices.

When performing a legal audit of your business, ask yourself the following questions:

► Are you up to date on required filings, like your annual report, trademark and assumed business name renewals, business licenses and other registrations?

► Have you reviewed your operating agreement (if an LLC) or shareholder agreement and bylaws (if a corporation) within the last year to ensure they accurately reflect your business structure and operations?

► If you have employees have you assessed their status as exempt or non-exempt employees and determined your obligations to pay overtime?

► Have you appropriately classified your workers as employees or independent contractors?

► Do you have a written employment contract with each employer and a written consulting agreement with each independent contractor, and are they properly classified as employees or independents contractors ?

► Do you have an employee handbook with the appropriate policies and procedures ?

► Have all employees signed non-disclosure or confidentiality agreements to protect your business’ sensitive information like client lists, business practices, marketing strategies, etc.?

► Do all directors/shareholders/partners regularly hold formal annual meetings?

► Are all business decisions recorded in writing?

► Have all transactions involving the business been properly documented?

► Is your business having difficulty collecting payment from your customers?

► Does to business have written contracts with all vendors and customers?

► Have you secured your trademarks?

► Have you reviewed your insurance in the past year with your agent to ensure sufficient coverage types and amounts?

► Are your website terms of use and privacy policy up to date and do they appropriately protect your interests?

► Do you have written plans in place for your business in the event of your death ?

If, after thinking about those questions you feel there are potential areas that may need to be addressed, drop us a line. Let's make sure we tackle things before they turn into expensive issues. You've worked hard to build your business, let us help protect it.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Hiring Employees in Illinois

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 21:36:52 GMT

These are the 8 things employers must do when hiring employees in Illinois.

Hiring your first employee is an exiting time for any growing small business. But, it's not as simple as just writing a paycheck to your new worker. Failure to comply with the law can have some serious consequences when it comes to labor and employment, so knowing what you're getting yourself into upfront is essential. Here are 8 standard steps that you’ll want to take before hiring your first employee in Illinois.

Step 1. Obtain an Employer Identification Number (EIN)

Before hiring your first employee, you need to get an employment identification number (EIN) from the U.S. Internal Revenue Service . The EIN is often referred to as an Employer Tax ID or as Form SS-4. The EIN is necessary for reporting taxes and other documents to the IRS. In addition, the EIN is necessary when reporting information about your employees to state agencies. Apply for EIN online or contact the IRS at 1-800-829-4933.

Step 2. Set up Records for Withholding Taxes

According to the IRS, you must keep records of employment taxes for at least four years. Keeping good records can also help you monitor the progress of your business, prepare financial statements, identify sources of receipts, keep track of deductible expenses, prepare your tax returns, and support items reported on tax returns. A payroll system, like Zen Payroll ( zenpayroll.com ) can take care of everything for you for a monthly fee. There are others out there as well, but Zen will actually help with new hire paperwork and reporting, which is something many others don’t include.

Below are three types of withholding taxes you need for your business:

Federal Income Tax Withholding - Every employee must provide an employer with a signed withholding exemption certificate (Form W-4) on or before the date of employment. The employer must then submit Form W-4 to the IRS. For specific information, read the IRS' Employer's Tax Guide [PDF].

Federal Wage and Tax Statements - Every year, employers must report to the federal government wages paid and taxes withheld for each employee. This report is filed using Form W-2, wage and tax statement. Employers must complete a W-2 form for each employee who they pay a salary, wage or other compensation. Additionally, you will be required quarterly to file an IRS form 941 to indicate employment taxes due for that quarter and an IRS Form 940 annually to report any unemployment taxes due. Employers must send Copy A of W-2 forms to the Social Security Administration by the last day of February to report wages and taxes of your employees for the previous calendar year. In addition, employers should send copies of W-2 forms to their employees by Jan. 31 of the year following the reporting period. Visit SSA.gov/employer for more information.

State Taxes - Depending on the state where your employees are located, you may be required to withhold state income taxes. Visit the state and local tax page for more information. In Illinois, you’ll need to register for business tax payments at http://www.revenue.state.il.us/Businesses/register.htm

Step 3. Employee Eligibility Verification

Big thing to remember here is that you need to have each employee complete an I-9. Federal law requires employers to verify an employee's eligibility to work in the United States. Within three days of hire, employers must complete IRS Form I-9, employment eligibility verification, which requires employers to examine documents to confirm the employee's citizenship or eligibility to work in the U.S. Employers can only request documentation specified on the I-9 form.

Employers do not need to submit the I-9 form with the federal government but are required to keep them on file for three years after the date of hire or one year after the date of the employee's termination, whichever is later.

Employers can use information taken from the Form I-9 to electronically verify the employment eligibility of newly hired employees by registering with E-Verify . However, use of E-Verify is not required for private entities.

Visit the U.S. Immigration and Customs Enforcement agency’s I-9 website to download the form and find more information.

Step 4. Register with Your State's New Hire Reporting Program

All employers are required to report newly hired and re-hired employees to a state directory within 20 days of their hire or rehire date. In Illinois, you can register at http://www.ides.illinois.gov/Pages/New_Hire_Reporting.aspx If you go with Zen, I believe they will make the new hire report for you. In addition, in Illinois, once you pay out $1500 in wages over a 20 week period, you’ll be required to contribute to the state unemployment insurance fund. You will be able to make your reports and contributions here , otherwise, I believe Zen can help with that as well.

Step 5. Obtain Workers' Compensation Insurance

All businesses with employees (even a single part-time employee) are required to carry workers' compensation insurance coverage through a commercial carrier or on a self-insured basis.

Step 6. Post Required Notices

Employers are required to display certain posters in the workplace that inform employees of their rights and employer responsibilities under labor laws. If you will be having a principal place of business, you can purchase poster bundles here .

Step 7. File Your Taxes

Generally, employers who pay wages subject to income tax withholding, Social Security and Medicare taxes must file IRS Form 941, Employer's Quarterly Federal Tax Return. in addition to the state equivalents. Again, I’d invest in a good payroll system to automate this for you. For more information, visit IRS.gov .

New and existing employers should consult the IRS Employer's Tax Guide to understand all their federal tax filing requirements.

Step 8. Get Organized and Keep Yourself Informed

Being a good employer doesn't stop with fulfilling your various tax and reporting obligations. Maintaining a healthy and fair workplace, providing benefits and keeping employees informed about your company's policies are key to your business' success. Here are some additional steps you should take after you've hired your first employee:

Set up Recordkeeping

In addition to requirements for keeping payroll records of your employees for tax purposes, certain federal employment laws also require you to keep records about your employees. The following sites provide more information about federal reporting requirements:

Estate Planning Made Simple

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 21:32:44 GMT

Here's what every married couple needs to know.

Chances are at some point or another you and your spouse have brought up the topic of estate planning. Whether it was talking about writing wills or how to plan for retirement, it’s a common discussion for married couples to find themselves in. Often, though, couples are not entirely familiar with the planning doors marriage opens up.

From unlimited lifetime gifting, to passing large sums of money upon the death of the first spouse, married couples enjoy a number of benefits that unmarried individuals do not. But, it’s impossible to utilize those mechanisms without some planning.

Whether you’ve been married one year or 20, these are the minimum estate planning documents that a married couple should have:

A Durable Power of Attorney for Healthcare (including HIPAA Release)

A Durable Power of Attorney for Finances and Property

Will

If you want to direct where your possessions will go if you die, then it’s important to have a last will and testament , or a will for short.

Living Will

A living will is a legal document used to indicate which treatments you do or do not want applied to you in the event you either suffer from a terminal illness or are in a permanent vegetative state.

Drafting a living will is important so that nasty disagreements don’t occur if something happens to you.

Authorization for Final Disposition

Items to consider are:

- Burial or cremation

- Contact information for a chosen funeral home, cemetery, etc.

- Details about your desired ceremony

- Details about any marker you may want

Revocable or Living Trust

Appropriate beneficiary designations on retirement (and other) accounts

In order to ensure that these items go to your spouse if you die, it’s important to name him or her as the beneficiary of the policy.

If changes are necessary you should make sure to file a new beneficiary designation form with the company.

Title to Real Estate

If you and your spouse own real estate together, then you should consider your options when it comes to how title should be held .

It’s a great idea to talk to your attorney about what certain types of real property ownership mean to you and your spouse.

Life Insurance/ Life Insurance Trusts

Life insurance can provide a windfall for your spouse should you pass away suddenly, so it’s a good idea to look at your options with your insurance agent.

One drawback of life insurance is that its value gets included in your estate for tax purposes upon your death.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

What to do After Forming a Corporation

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 21:20:45 GMT

Forming the business is just the first step in ensuring that your new corporation is operating legitimately. So, there are a few major issues to consider starting now.

So you’ve gone through the analysis and decided that a corporation (rather than a partnership, LLC or other entity) is the appropriate formal structure for you business.

You’ve filed your articles of incorporation with the state, paid the required filing fees and received confirmation that your articles have been approved and your business formed.

So now what? Well, forming the business is just the first step in ensuring that your new corporation is operating legitimately. So, there are a few major issues to consider starting now.

Elect Directors and Officers

Every corporation needs directors and officers. These are the individuals authorized and appointed to conduct business on the corporation’s behalf for terms set either in your corporation’s bylaws or by statute (more on this later).

With terms like directors, officers, and shareholders floating around, things can get a bit confusing for the new business founder as to who plays what role. This is especially true when the corporation is small and there is some overlap between the roles with individuals wearing more than one hat.

But, understanding the differences in these individuals and what roles they play within a corporation is essential to ensuring the business runs smoothly and legitimately.

Shareholders make up the crux of the business ownership. As the owners of the corporation, they’re responsible for establishing basic corporate policy and direction, and for appointing directors (who are usually stockholders themselves). T ink about this is terms of any stock you may own in another company, like Apple or GE. As a shareholder, you actually have a voice in determining who is elected to run those companies (of course, in reality that power has little consequence since you own such a small portion). But, you do have a voice. In your corporation, there may only be a couple shareholders. Those individuals, in their capacity as shareholders get to decide who will run the day to day operations of the business.

In turn, directors are responsible for implementing the policies of the corporation as determined by the shareholders. They elect officers of the corporation. You’ve no doubt heard about the Board of Directors for larger companies. Yours has the exact same structure, just at a much smaller level (only for now, we hope!).

Finally, the corporation’s officers run the day-to-day operations of the company. For example, they’re responsible for ensuring that the company conducts its business properly and in accordance with the vision of the Board. Top-level officers, such as the President and CEO, have the power to execute contracts on behalf of the company, and must answer to the Board for any errors they make.

Draft Bylaws

All corporations are governed by a set of rules. These are called “bylaws”. Bylaws set forth the rules under which the corporation will operate. Bylaws are created and adopted by the Board of Directors and describe the roles and responsibilities of the corporation’s officers, directors and shareholders. They also set forth things like the meeting requirements, the matters that may require consent, the nature of the majority required, notice requirements, limitations on expenditures and a host of other matters.

Whether bylaws are legally required varies by jurisdiction. But, in the event your corporation does not have them, it will be governed by default rules contained in state statutes. Sometimes these mirror the rules you’d set for your corporation if you had the choice, but sometimes they don’t.

Obtain a Tax ID number

Your company must to apply for an Employer ID number (EIN) from the IRS in order to open a bank account and conduct business. To obtain an EIN, visit the IRS website and complete Form SS-4 . You may also need to apply for state tax identification numbers, depending on where your corporation is formed and where it conducts business.

Open a Corporate Bank Account

Your corporation is a legal entity entirely separate from its shareholders, directors and officers. As a result, it needs its own bank account so that its finances can be maintained separately. To open an account, the bank will likely want to see a certified copy of your filed and approved Articles of Incorporation, director resolutions appointing the officers, a copy of your bylaws and your EIN number. It’s important to keep corporate and individual finances separate; otherwise, there is a significant risk that, in the event trouble arises down the road, a court will disregard your corporation as a separate entity when determining if you should be personally liable for actions of the corporation . That’s not a situation you want to find yourself in.

Register as a Foreign Corporation

If you’ve incorporated in another state, you’ll need to obtain official permission to transact business in any other states in which you transact business. In the era of ecommerce, this can sometimes be challenging, as products may be sold all over the country. To ensure that you’ve appropriately registered everywhere you may need to, it’s important to enlist a business attorney to make sure nothing is missed (and also that you’re not registering in states in which you may not be required to do so).

Keep Corporate Records

Setting the business up is only a small part of your responsibility. Going forward, you’ll want to keep good books and records for all corporate actions, meetings, elections, appointments and other significant corporate decisions. There’s no required format, so do what works for you. It can be a simple loose-leaf notebook, or electronic records kept safe on your computer or external hard drive. Whatever method you choose, it’s important to keep up with it. Like all other corporate formalities, failure to keep good records could lead to a disregard of the corporate for liability purposes.

Obtain licenses

Your work is not done simply after you’ve formed the corporation. Depending on your state, county and city, you may need to obtain additional business licenses. These may also vary depending on the corporation’s industry. Typically, state and local jurisdiction websites will contain guidance on licenses you may need. But, if you have any confusion, it can help hiring an attorney to make sure all the boxes get checked off.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Unpaid Internships

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 18:17:58 GMT

Ideal, but risky for business

An ever-popular method for small businesses to acquire some extra—albeit temporary—hands on deck is to hire interns. Typically college students with similar career aspirations are eager to gain some real life experience, or at minimum a few lines for the old resume. So, with motivated college students at the ready to perform some of the more mundane tasks that small businesses have to deal with, owners are understandably eager to jump at the chance to bring in some free—or at least low cost—young workers.

But, as good as that may sound, business owners need to remain ever-mindful of the potential risks inherent in hiring unpaid interns. While still technically legal to hire unpaid interns, the structure of the employee-intern relationship must be carefully considered in order to stay out of hot water with state and federal regulators.

The Department of Labor has developed a test to determine whether an intern can be unpaid (or paid less than minimum wage).

If all of the following six criteria are met, the intern does not need to be compensated:

1) The goal of the internship is to train the intern similar to how he or she would be trained in an educational environment.

2) The primary beneficiary of the internship is the intern.

3) No employee is replaced by the unpaid intern; he or she is closely supervised.

4) The employer receives no immediate benefit from hiring the intern; in fact, their operations may sometimes be impeded by the intern.

5) The intern is not entitled to a job at the completion of the internship.

6) The intern is fully aware that he or she will not receive a salary.

A loaded test? Absolutely. But, it’s important for all employees considering potentially bringing on interns to consider if they really meet the requirements. Otherwise, they can face stiff penalties at the local, state and federal level.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Solo Out of Law School

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 18:13:44 GMT

A "How Can" Guide to Starting a Law Firm as a New Attorney

As most know, I’ve been a solo attorney for some time now, and building my own practice has no doubt been immensely challenging but also tremendously rewarding. I’ve learned more about myself through this journey than I ever envisioned. And, going into business for myself has really opened my eyes to what it takes to succeed in building something sustainable from the ground up.

There are plenty of books out there about the technical aspects of opening a law practice. But, it was always a challenge for me to find resources that took a more pragmatic approach to building one.

So, over the past two years, I decided I’d write one.

For my legal-friends, it's not a "how to" guide to starting a law practice. It doesn't say anything about the tools you'll need or whether to open a brick and mortar office. Rather, it's a "how can" guide to developing the mental toughness and right mindset to succeed as a solo attorney. It's a collection of little lessons and simple reminders for when your choice to go solo in the first place come into doubt. And, for my non-legal entrepreneurial minded friends, I think you may find that the lessons I learned in my journey are transferable to any industry or pursuit.

Anyways, it's available on Amazon in Kindle format and in paperback. And, I'd obviously love if you decided to buy a copy. If you do read it, I’d really appreciate if you let me know what you thought and let others know as well by posting a review (even if it’s not great, I appreciate your honest critique!). And, if you know any law students or lawyers that are thinking about hanging out their own shingles, I’d appreciate if you shared it with them.

Employee vs. Independent Contractor

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 18:08:40 GMT

Mis-classification can be costly.

The prospect of hiring workers, while exciting, can be intimidating to new business owners, Employment law can be a confusing and time-consuming minefield, and the consequences of making a mistake can range from costly to financially devastating. Generally, employers must consider a number of new responsibilities, including withholding income taxes, paying Social Security and Medicare taxes,unemployment tax and insurance not to mention the bevy of registration and compliance requirements at the local, state and federal level.

Independent Contractors do not come with the same baggage, so to speak. Generally, companies do not have to withhold or pay any taxes on payments to independent contractors, and are not subject to the numerous compliance issues present when hiring employees. So naturally, many employers, especially smaller ones greatly prefer to treat their workers as independent contractors instead of employees. However, failure to classify a worker correctly can lead to some severe consequences and substantial fines. So,it's crucial for employers to classify their workers correctly to avoid lawsuits and substantial government penalties.

Employee v. Independent Contractor

Generally, the test to determine whether a worker is an employee or contractor boils down to one central issue: control – does the employer control where, when and how the work is performed?

Take an example most homeowners have to face at some time or another- replacing the roof. Say you need a new roof. You do the research and find a company that has good reviews. They come out and give you a good price, and you're on your way. Understandably, you don't give the roofing contractor many directions other than replace the roof (after all, you hired him or her because they have that expertise). You don't tell them which days to show up or what times they can work. You don't require them to hire certain workers to complete the job. You don't require them to submit time cards to you at the end of the day, require them to come to periodic staff meetings, or provide them the tools to replace the shingles on top of your house. You simply hire them to do a job and pay them when it's done. Everything in between is up to them. That's a contractor.

When you begin dictating how and when the work must be completed, the contractor line begins to blur into the employee classification, and that's when things can begin to get dicey. On a general level, it's about control, but, test is much more complicated, and employers ideally would hire employment counsel before classifying workers because the penalties for misclassifying employees as contractors can be huge.

In Illinois, for example, the classification defaults to employer status. An individual performing services for a contractor is considered to be an employee except if is shown

the individual has been and will continue to be free from control or direction over the performance of service,
the service performed is outside the scope of the usual course of services performed by the contractor and
the individual is engaged in an independently established trade or business or the individual is deemed a legitimate sole proprietor or partnership under subsection c of Section 185/10.

The penalties are steep for misclassification. In Illinois, a fine of up to $1,500 per day (!!!) can be imposed for each violation, with a separate violation being considered for each person improperly classified and for each day on which a violation continues. So, for example, if a contractor misclassifies two persons for two days the maximum penalty is $6000. A contractor who willfully violates the Act or who obstructs an investigation can be subject to penalties of double the amount.

On top of that, the IRS imposes additional penalties from 1.5 to 3 percent of the employee’s wages.

Obviously, misclassification can be tremendously costly, especially to small businesses with limited resources. So, if you're an entrepreneur considering hiring some help, make sure to discuss the structure of the relationship with your attorney.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Virtual Law Offices

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 17:51:41 GMT

VLOs are a new option for consumers to get legal services they need from highly skilled attorneys.

*The following article appeared in the June 2016 newsletter of the ISBA Standing Committee on Legal Technology.

Virtual Law Offices (VLOs) have become more common in today’s evolving legal industry than ever before. As technology has become more prevalent, internet access more reliable and software as a service (SaaS) programs more developed to make various aspects of legal practice simpler, the VLO model has developed into a relatively simple platform on which solo and small firm providers can remain competitive in an ever-changing legal marketplace.

An assumption can be made that, by now, the vast majority of practitioners are generally familiar with the VLO concept. At its simplest, a VLO permits the attorney to interact with clients completely online through technological means. This removes the need for a brick and mortar office and the costs associated with one. Or at minimum, it creates a complementary alternative to an already-existing brick and mortar practice. VLOs also give lawyers increased flexibility to work from practically anywhere at any time. Cloud computing, storage and software enable the attorney to essentially “bring the practice” on the road with him to anywhere with internet access. For clients, that portability often means lower costs due to lower attorney overhead, enhanced accessibility to an attorney no matter where he or she may be, and increased flexibility to work on a schedule that fits his or her lifestyle.

Common Characteristics

While the definition can vary depending on who one asks, most VLOs share at least some of the same characteristics. Frankly, most firms today probably incorporate at least a few aspects of “virtual” practice without even realizing it). Whether it is the use of cloud-based document storage or a SaaS accounting platform (QuickBooks, for example) most firms incorporate at least some measure of “Virtual” functionality into their operations.

For the pure VLO practitioner, technology is front and center in all law firm operations. But, VLOs can be characterized by any number of characteristics including, a) lack of a traditional office space, b) a secure web-based client portal with unique client login credentials, c) cloud-based document storage and access, d) SaaS accounting, billing, invoicing, bookkeeping, and calendaring functions, e) video conferencing capabilities, f) real-time document collaboration, g) unbundled, limited scope or “a la carte” legal services, h) web-based phone and fax services, i) virtual secretarial and back office support, and j) minimal in-person contact with clients.

Benefits of Incorporating a VLO into an Existing Practice

Operating a pure VLO is not for every practitioner, but incorporating some virtual characteristics into an existing brick and mortar firm can create new opportunities for client interaction and increased growth.

VLOs offer a number of benefits to both the client and the attorney that include extensive geographical reach, lean operations and operational flexibility, and increased efficiency. Attorneys can use VLOs to potentially reach areas or clients previously unavailable due to geographic restraints, scheduling difficulties or a disconnect between the cost of legal services and perceived client value in the traditional model. For example, an attorney licensed in multiple states can establish a traditional office in one state and use a VLO to offer limited scope legal services to clients in other states without necessitating boots on the ground. Or, an attorney whose target market is busy professionals—people who may be hard-pressed to schedule consultations or case reviews during normal business hours—can use a VLO to engage clients remotely in the evenings or on weekends.

Potential pitfalls to consider

While they present ample opportunity for firm growth, VLOs carry some inherent risks and drawbacks. Naturally, there are limitations on the types of services the firm can effectively provide. For example, drafting and negotiating a contract would be a more appropriate project for a VLO practitioner than attempting to represent a client in a criminal case.

There is also the challenge of effectively differentiating the VLO from other legal industry disrupters like Legal Zoom and Rocket Lawyer. While attorneys are no doubt familiar with the inability of those companies to offer anything more than template documents with auto-populated data fields, the average consumer of online legal services may not necessarily be aware that the DIY model that those companies implement is not backed by any attorney review. It is important for the VLO practitioner to ensure that the client understands that difference and the obvious value inherent in working with an actual attorney.

Finally, when offering limited scope services through a VLO, attorneys must be mindful of potential ethical traps. Limited scope representation is permissible if reasonable and the client gives informed consent. So, it is imperative that a VLO practitioner ensures that the client is aware of exactly what is and is not included in the representation. For example, if the attorney is drafting a trust for the client, the attorney may want to ensure the client is aware that he or she will be responsible for valid execution of the document and funding of the trust. Engaging in comprehensive consultations, using clear engagement letters, and giving potential clients ample opportunity to ask questions can ensure that both practitioner and client are on the same page.

Conclusion

VLOs are becoming increasingly more popular as technology continues to evolve. From pure VLOs that serve clients entirely online to hybrid models which incorporate some virtual characteristics into traditional law office models, these new alternatives to classic brick and mortar practices offer attorneys, both new and old, a means to stay competitive in an ever-changing legal environment. By exploring how VLOs work and what they offer, practitioners can ensure they stay on the forefront of legal service delivery.

__________

Michael Brennan is the founder of The Virtual Attorney, an internet-based law firm based in Grayslake, IL that uses modern day technologies to provide convenient and accessible legal services to individuals, entrepreneurs and small businesses in the fields of estate planning and general business law. Founded in 2010, the firm serves clients throughout Illinois, Minnesota and Wisconsin.

A native of Algonquin, Illinois, Michael received his B.A from the University of Wisconsin-Madison and a J.D. from the University of the Pacific with a concentration in taxation. He is a member if the Illinois State Bar Standing Committee on Legal Technology, frequent speaker on virtual law practices and mentors other attorneys on the utilization of technology to streamline operations. Ever mindful of the rapidly changing needs legal needs of families and business owners, he is continually looking for ways to make legal services more affordable and more convenient for his clients.

Benefits of Incorporating a Revocable Living Trust into your Estate Plan

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 17:39:45 GMT

The type of arrangement that a revocable living trust provides offers some benefits over simple will planning.

A revocable trust is one that is created during the life of the grantor, and its primary uses are to manage property during the grantor’s life and reduce the cost and time associated with probate upon the grantor’s death while permitting the grantor to retain an amount of control over the assets it holds. Along with the ability to retain control over the assets in a revocable trust, a grantor retains the power to amend or even revoke the trust entirely during his life.

How it works

A revocable trust has three main players: 1) the settlor or grantor (who creates the trust); 2) the trustee (who administers and operates the trust); and 3) the beneficiary or beneficiaries (who receive the benefit of the trust and any distributions the trust makes). The revocable trust is established by a trust agreement, which is a writing that sets forth the above relationships and lays out how the property that the trust holds will be managed and distributed. The trust agreement , which is typically drafted by an attorney, is then formally executed in a manner that is specifically dictated by state law.

Once the trust agreement is validly created and executed property must actually be transferred to the trust . This is done by specifically titling assets- such as a residence, stocks, bond, or insurance plans- in the name of the trust. For example, with real estate, this is done by executing and recording a deed evidencing transfer of the real estate to the trust.

Assets that are titled in the name of the trust are managed by the trustee in accordance with the terms of the trust. Typically, when the grantor is alive and well he may manage the assets in the trust as the trustee of the trust for his own benefit as the beneficiary. The trust may set forth a replacement trustee who is to take over trustee duties in the event of the incapacity of the grantor. The trust may also set forth how the property is to be distributed upon the death of the grantor.

The type of arrangement that a revocable living trust provides offers some benefits over simple will planning.

Property management

Perhaps the most beneficial aspect of a revocable living trust is that it provides for the continual management of the property it holds. Initially most revocable living trusts are established so that the grantor is also the trustee. This enables the management of the property that the grantor has legally transferred to the trust to remain a responsibility of the grantor. For example, if the grantor transfers a personal residence to the trust and names himself the trustee, then he may still pay the mortgage, taxes, etc. Even though the trust legally owns the residence, the grantor, as trustee as well as primary beneficiary, may continue to manage the property exactly as he had prior to it being deeded to the trust. The trust may also contain provisions dictating who should manage the property in the event the grantor becomes ill, disabled or otherwise unable to manage the property on his behalf.

Additionally, a common concern of parents with minor children, or even children that are young adults but may still be somewhat dependent on the parentals, is that the children may receive a substantial inheritance before they may be able to maturly understand their responsibilities. We can probably all remember being 18 years old, eventhough we may sometimes want to forget. Imagine yourself at 18 and suddently coming into a substantial sum of money. As much as we'd like to convince ourselves otherwise, we're probably not going to maske the most responsible choices for those funds or consider our long term prospects.

Your children are probably no different. With a revocable trust, you are able to put constraints around when your children may request or receive distributions of their inheritance . Commonly, trusts are written in a way that prohibit a child beneficiary reaching the funds until certain ages. For example, he or she may be restricted from accessing funds until age 25, but perhaps then only a portion. Additional distributions could then be made at 28 and 30 years of age when the child is likely to have more financial wisdom and a different perspective for his or her future.

Without a trust, there's no telling what that child will do with the funds.

Avoid probate upon death

Probate is the process of proving to a court that a will is valid and disposing of the items it lists in the manner in which its creator dictates, paying any due taxes, satisfying debts and generally wrapping up the affairs of a deceased person. The process can become lengthy and expensive so a goal of many estate plans is to avoid the process as much as possible. A revocable living trust that is properly funded and legally holds title to assets will avoid probate proceedings and the assets it holds will be transferred to the beneficiaries named in the trust agreement without court involvement. Thus, revocable trusts have the potential to deeply cut the time and cost sometimes associated with the probate process.

Privacy

Wills must be filed with the court upon an individual’s death while a trust does not. Therefore, a trust’s dispositive scheme, beneficiaries, etc. can remain private while a will’s provisions become public record.

Planning for mental disability or incapacity

The trust may also contain provisions dictating who should manage the property in the event the grantor becomes ill, disabled or otherwise unable to manage the property on his or her own behalf. In such a case the trust agreement sets out that a successor trustee can take over those duties on the grantor’s behalf. The alternative if the asset is not owned by a trust is that a guardian or conservator would need to be appointed to accomplish the same goals. This involves additional expense and court involvement which is avoided if a revocable living trust is in place.

Flexibility to amend or revoke the trust entirely

A revocable living trust is amendable or completely revocable during the life of the grantor So long as the grantor is mentally competent he or she can change the terms or the trust, how it should be administered or even who the beneficiaries should be after he dies. This feature of revocable living trusts makes it an extremely flexible estate planning tool.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Give Your Estate Plan a New Year's Check Up

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 17:35:54 GMT

Periodic audits of your estate plan will help assess whether it is still working for you or whether some changes may be needed.

If you do have a plan in place, it’s important to make sure it continually reflects your goals and objectives. If you put a plan in place this past year or 10 years ago, with the year winding down, it’s a good idea to ensure that it still reflects your wishes. As we all know, those can change from time to time, especially when significant life events have recently occurred. The birth of a child, marriage, moving to a new home and starting a new career are some significant events that may lead to new considerations for your plan. So too are more unfortunate things like a divorce or death in the family.

Remember that, as your life changes, so too should your estate plan.

So, while we are all still trapped inside avoiding the artic freeze outside, take some time to take stock of your current plan and think about making any changes that may be overdue.

Here are 7 areas where a quick review will help you start 2016 on the right foot:

1.Review your current will (and trusts).

A number of changes to tax and inheritance laws have occurred over the past few years meaning that many plans may not reflect the most current laws. A review can help ensure that your will and trust(s) are up to date. At minimum, it’s a good idea to review beneficiary designations, trustee designations, and personal representative designations . If those individuals are no longer living or your relationship with them has changed, a modification may be necessary.

2.Double check healthcare-related planning documents.

Documents to comb through are your a) durable power of attorney for healthcare , b) HIPAA authorization(s) and c) living will . If your current documents don’t reflect your wishes or you have never had these drafted, an estate planning attorney can have them drawn up in relatively short order. Finally, while if you’re up for it, take some time to write down and discuss funeral arrangements or anatomical gifts you may want to make should the unthinkable happen. While the conversation may not be the most pleasant, it sure beats straining family relationships when those people have to try and guess your wishes.

3.Make sure policies match.

Items like insurance policies and retirement plans fall outside of typical estate planning documents, like wills and trusts. In order for the proceeds of these items to pass to a chosen individual, he or she must be named as the beneficiary of the policy. Similarly, if you have a revocable trust , it’s important to review your policies to ensure that beneficiary designations properly name the trustee of the trust as the beneficiary, if this is what you and your advisors have decided upon. If individuals previously named as beneficiaries have passed away, or are otherwise no longer in your life (i.e. ex-spouses) make sure that these items are updated. If you’ve recently created a revocable trust, make sure that it’s actually functional by naming it as the beneficiary of policies.

4.Make sure your trust funding is current.

If you have a trust, you know that it’s only as good as the assets it actually owns or controls. When it was drafted, you and your attorney probably walked through all of your assets, determined which ones should be transferred to the trust, and acted appropriately to make the transfers. But, chances are that some of your assets may have changed since then. So, it’s important to take stock of what your trust currently owns and what may need to be transferred to it. For example, if you have moved or purchased a home, chances are it is not titled in the name of the trust. By filing a new deed or Transfer On Death Instrument, you can ensure that your home ownership syncs up with your estate plan.

5.Double-check joint ownership.

Designating heirs on accounts is a common estate planning mechanism. Often times, naming an individual like a child a joint owner on items like bank accounts is not advisable. However, converting accounts into Payable Upon Death (POD) accounts can accomplish the same objectives without some of the drawbacks that joint accounts carry. This can be a very functional way to ensure that certain liquid assets pass to chosen individuals you’re your death and it can be done with minimal paperwork or change in structure of your existing accounts. Talk with your advisor about exploring the idea as you review the rest of your plan.

6.Don’t keep safe-deposit box inventory a secret.

While safe deposit boxes offer great protection for important documents like wills, trust instruments, life insurance policies, and funeral instructions, they can create quite a headache for your loved ones after you’re gone if you don’t take steps to ensure they can be found and accessed. Make an inventory of the contents of all safe deposit boxes you have and share the list and location of each box with a trusted individual, perhaps the individual you have named in your will as your personal representative. This way if something happens to you, that individual will be able to quickly track those items down and act appropriately.

7.Take care of business.

If you’re a business owner, make sure to review and revise existing buy-sell agreements , or prepare such agreements if none currently exist. Review bylaws or operating agreements and ensure that they are current and reflect the current state of the business. This will ensure that operations won’t be interrupted should something happen to you.

Along with these seven items, if you have gone through significant life changes in 2013 , like divorce, losing a loved one, marriage or having a child now is a good time to sit down with your estate planning attorney and make sure everything is up to date and everyone is taken care of. Spending a few hours to review everything now will provide you piece of mind as you tackle life in 2014.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Estate Planning for Alzheimer's

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 17:21:49 GMT

Failure to properly plan for the potential of a debilitating disease arising later in life can carry a number of consequences for loved ones who are left scrambling to ensure that you are taken care of and your wishes are honored.

In 2015 it was estimated that 5.3 million Americans have Alzheimer's , most of those over the age of 65. Surprisingly though, a few hundred thousand of those cases occur in individuals younger than 65. As everyone knows, Alzheimer’s is a condition that reduces cognitive function due to degeneration of the brain. Unfortunately, the number of patients living with Alzheimer’s is only expected to rise over the next decade. While advancements in medicine offer some promising hope for earlier diagnosis, and hopefully one day, a cure, the reality is that Alzheimer’s can affect anyone. And, by the time it is diagnosed, it can often have progressed to the point that making important decisions about one’s estate and future can pose a challenge.

Due to that reality, estate planning becomes even more important for those that have a family history of the condition or are approaching their senior years. Failure to properly plan for the potential of a debilitating disease arising later in life can carry a number of consequences for loved ones who are left scrambling to ensure that you are taken care of and your wishes are honored. For that reason, it’s vital to complete an estate plan while you still have the mental capacity to do so.

So what can you do now to ensure that you have planned for an unforeseen medical issue down the road?

Here are three things to do right now.

1) Execute advanced directives

A power of attorney is an agreement that grants another individual legal authority to act for you if you are disabled, incapacitated or otherwise unable to make your own decisions. Generally, they come in two types: powers of attorney for health care and powers of attorney for property or financial management . You may have also heard them referred to advance directives. Those are the same thing.

By executing powers of attorney covering both health care decision making and financial decision making authority, you can ensure that a trusted family member or other individual will be able to address your needs legally should something happen to you. An attorney can help you get these checked off your list relatively quickly. One other thing: make sure that any power of attorney you execute is durable . A durable power of attorney is one that will still be valid even after you are found incapacitated. Some states default to powers of attorney being durable, while others require them to contain specific language. So, be sure to address the issue with an attorney familiar with death and disability planning.

2) Write down your wishes for any type of long-term care

Not everything needs to be put into a legally binding agreement. While necessary to grant express authority to someone to legally act on your behalf, writing a narrative containing your preferences for any type of future care can be rather informal. Anything that gives your loved ones details like where you may like treatment, how it should be paid for, whether you’d like to live in assisted living or have home care if you can afford it, etc. will suffice. I like to encourage my clients to draft a simple document explaining some of those choices and then keeping it with other important planning documents so that, even if an agent does need to act, they have plenty of guidance on what your wishes are.

3) Talk with family

The simplest thing you can do right now to ensure that you retain a level of control in the event of a debilitating mental illness is discuss your wishes with loved ones. Make sure they know the choices you’ve made and why you’ve made them. Not only will this prepare them in the event they have to carry out your plan, but it will reduce the likelihood of family disagreements over what care should be provided.

A little planning now can go a long way towards ensuring that, even if you may not be able to make informed decisions for yourself at some point in the future, you’ll still be able to live life on your own terms.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

2016 Changes to the Illinois Power of Attorney Act

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 17:18:58 GMT

The changes are relatively minor compared to some of the most recent statutory restructuring that has occurred over the past few years. But, they are important nevertheless. For those that are bold enough to draft and execute their own statutory short form powers of attorney or maybe even an entirely customized HCPOA, the changes carry implications from document execution and who may witness a principal’s signature, to the powers that are granted via the statutory form and how a determination of mental capacity can be made.

1) Powers of attorney now may not be witnessed by the principal’s psychologist.

Valid health care powers of attorney in Illinois require the signature of an individual who witnessed the principal’s signing of the document. Previously the statute prohibited any attending physician, advanced practice nurse, physician assistant (finally added in 2015), dentist, podiatric physician, optometrist or mental health service provider of the principal, or a relative of any of those professionals, from serving as a witness. Effective January 1, 2016, the term “mental health service provider” will be replaced with “psychologist.”

2) The appointment of successor agents is moved to a more intuitive section of the statutory short form.

This change isn’t substantive, but it corrects an incomprehensible flaw of the 2015 statutory short form rewrite . In the 2015 version, the section of the document which could be used to appoint a successor health care agent who could act in the event the primary agent was unwilling or unable to do so was located all the way at the end of the document, even after the principal’s signature as well as the witness attestation clause and witness signature section! I haven’t studied the legislative history of the 2015 changes in any depth, so I don’t know whether there was any rational basis for drafting the form in that manner or if it was simply an oversight. What I do know, is that the positioning of the “Successor Agent Appointment” section will make more sense in 2016, as it will be moved to the position directly below the “Primary Agent Appointment”. I assume that it will drastically minimize the chance that third-party providers or disgruntled family members will question whether the successor agent designation was made appropriately.

3) The statutory short form HCPOA adds an option to permit an agent access to medical records in order to make decisions.

My critiques of the complete HCPOA rewrite in 2015 are well documented. I remain skeptical that the language used to indicate when an agent may be authorized to act increases the clarity of when an agent shall be permitted to step in. Nevertheless, it’s what we’ve got if we use the statutory short form. So, it is at least a small victory that, beginning in 2016, the new statutory short form contains a check-the-box option that permits an agent to access medical records of the principal beginning on the date of document execution in order to remain knowledgeable about the principal’s current medical situation. The logic, I assume, is that, an agent that has been well educated about a principal's healthcare history prior to being required to act will be better suited to make an informed healthcare decision on the principal’s behalf, should the need arise.

4) Agents may now pursue applications for government benefits in the event an administrator or executor is not appointed.

Typically, a power of attorney terminates upon the death of the principal. At that point, an appointed agent no longer has any legal authority to act- at least in his or her capacity as an agent. However, oftentimes, a principal will die without a will or loved ones may be confused as to the appropriate legal procedures that must be followed to wrap up the principal’s affairs via the probate process. If there are items needing attention- like applications with required response times, then the family can often find itself in a bind. The 2016 statutory amendment provides a bit of relief by expressly authorizing a health care agent to continue to pursue any applications for government benefits if the application was made during the life of the principal.

5) The definition of “decisional capacity” is now included in the statutory short form.

Previous versions of the statutory short form power of attorney did not include any specific definition of capacity, and rightfully so. The term can carry various connotations in different contexts. Frequent debates arise about whether capacity is a legal or medical determination in the context of agent authorization to act. It frequently confuses doctors and lawyers alike, so it’s no wonder that the drafters of the 2015 HCPOA rewrite decided to leave the term absent. However, I’d argue that they did more harm than good, as they instead decided to frame the determination of when an agent should be able to act in terms of “making decisions for oneself.” That creates the risk that patient decisions may be dangerously susceptible to a medical provider or family member’s assumption that a patient is no longer able to act in their best interests because they make a medical decision that may seem contrary to the logical opinion of others. The 2016 amendment will carry forward the definition of “decisional capacity” written into the Illinois Health Care Surrogate Act . So, now a medical provider is only permitted to make a determination that a patient cannot make decisions for himself or herself if “means the ability to understand and appreciate the nature and consequences of a decision regarding medical treatment or forgoing life-sustaining treatment and the ability to reach and communicate an informed decision in the matter as determined by the attending physician.” Not perfect, but a drastic improvement over the elementary language used previously to address such a complex and important determination.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Illinois Trustees Need to Know About Certifications of Trust

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 17:10:11 GMT

An update to the Illinois Trusts and Trustees Act back in 2015 it more efficient for the trustee of an Illinois trust to deal with third parties and trust property. Illinois SB1877 wrote into the Act (760 ILCS 5) a new section expressly authorizing the trustee to use a “Certification of Trust” in order to deal with trust affairs. Previously, when a trustee wished to act in his or her capacity as trustee, he often found that third parties, like financial institutions, would require a copy of the trust agreement before taking any action. That sometimes led to issues of confidentiality for trust settlors that did not wish for the comprehensive terms of their trusts to be disclosed as well as undue burden for trustees who may have needed to deal with dozens of separate institutions with dozens of different policies dealing with required trustee disclosures.

New Requirements for Illinois Certification of Trust

With the signing of the new amendment into law a trustee is now authorized by statute to simply present a third party with a document containing specific information, namely:

► A statement that the trust exists and has not been revoked, modified or amended in any way that would make the certification incorrect;

► The date the trust was executed;

► The identity of the settlor (the trust creator);

► The identity and address of the current trustee;

► The trustee’s powers;

► Whether the trust is revocable or irrevocable

► Whether the trust may be amended, and if so, the identity of the person holding the power to amend it;

► The authority of co-trustees to sign;

► The trust’s taxpayer ID number; and

► The manner in which trust property should be titled.

While the list may seem fairly exhaustive and comprehensive, it is a vast improvement over the old system in which third parties often required a copy of entire trust agreements which sometimes could be dozens of pages long.

Potential Liability for Non-compliant Third Parties

What’s more encouraging is that a third party presented with an accurate and complete certification of trust generally does not have any valid reason for requesting the entire trust agreement. Any third parties that nonetheless require disclosure may be liable for damages if a court determines that the request was not made in good faith.

From an estate planning perspective, this development is great news for those individuals using revocable living trusts (and other trust mechanisms) as part of their estate plan. It greatly reduces the complexity and confusion that can often come with acting as a trustee over one’s assets.

A sample Certification of Trust can be found here .

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Piercing the LLC Veil in Illinois

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 02 Feb 2018 17:04:39 GMT

The analysis may not be what everyone thought.

I often receive questions from small business owners or folks thinking about starting a new business about how best to protect themselves from liability. Not surprisingly, from a legal standpoint, it’s usually the primary concern of new business owners. In the age of Google, it’s possible for curious entrepreneurs to look into that question on their own before coming to me for my opinion. No doubt your trusty search engine is a wonderful source of information, but as the saying goes, “don’t believe everything you read on the internet.”

Eventually, those inquiring minds come across the term, “piercing the corporate veil.” The term refers to a court’s ability to disregard a corporate entity in order to reach the individuals behind that company in order to impose liability on them personally for acts of the company. This can be done for a number of reasons, but the most likely is that the corporation does not have sufficient assets to settle a debt or judgment against it.

So, what’s scary for business owners is that, even if they create an entity specifically meant to separate their business affairs and liability from their own, they still could be liable for the business’s actions.

The concept of piercing the corporate veil has a long and relatively developed history for various reasons beyond the scope of this post. But, everything from the history behind the creation of the corporation concept in American law to the wording of state statutes relating to their creation and a long line of court decisions dealing with a wide range of factual scenarios has provided a substantial base from which courts are able to apply long-developed concepts and principals.

So, how is a business owner supposed to best protect herself from the risk that she may be held liable for the actions of her business? Well, the answer really depends. That’s because the laws around piercing have been developed, at least in Illinois, as the concept specifically relates to corporations.

Piercing the Corporate Veil in Illinois

Generally, a court in Illinois will apply a two-pronged test to determine whether a business owner should be liable for actions of the company. The test is whether:

1) there is such a unity of interest and ownership that the separate personalities of the corporation and the parties who compose it no longer exist, and

2) circumstances are such that adherence to the fiction of a separate corporation would promote injustice.*

In determining whether those prongs are met, Illinois courts may consider a number of factors like:

· Whether the corporation was adequately capitalized (had sufficient assets in relation to its debts and operations);

· Whether it issued stock;

· Whether it followed corporate formalities, like holding meetings, keeping minutes, keeping accurate books and records, providing required notices, etc.;

· Failing to pay dividends or make other distributions;

· Comingling of business and personal assets;

· Generally, whether the corporation is merely a façade for personal operations.

Given the lengthy history of piercing the corporate veil of Illinois corporations, it’s no wonder that new business owners would have questions about whether they are opening themselves up to unnecessary liability simply by starting a business.

But, while it may seem like a high-risk proposition, in general, an owner who treats his business as legitimate will typically not have an issue. Though, it is still important to be aware of the risks and ways to alleviate them.

For the business owner or entrepreneur that may really be worried about the issue, there may be an even safer way to structure the company. That is by creating an Illinois Limited Liability Company.

Piercing the LLC Veil in Illinois

Admittedly, as a practitioner, I generally tended to view the issue of piercing an LLC veil in the same light as piercing the veil of a corporation until very recently.

In the July 2015 issue of the Illinois Bar Journal, Sandra Mertins , of the Chicago firm of Dale & Gensburg, P.C. laid out a convincing case that courts may not have the same ability or willingness to pierce an LLC veil as they commonly have when their actions relate to corporations. Ms. Mertins explains that the language of the Illinois Limited Liability Company Act may specifically prohibit courts from piercing the LLC entity to reach its members and managers. Specifically, 805 ILCS 180/10-10 provides:

“(a) Except as otherwise provided in subsection (d) of this Section, the debts, obligations, and liabilities of a limited liability company , whether arising in contract, tort, or otherwise, are solely the debts, obligations, and liabilities of the company . A member or manager is not personally liable for a debt, obligation, or liability of the company solely by reason of being or acting as a member or manager….

… (d) All or specified members of a limited liability company are liable in their capacity as members for all or specified debts, obligations, or liabilities of the company if:

(1) a provision to that effect is contained in the articles of organization; and

(2) a member so liable has consented in writing to the adoption of the provision or to be bound by the provision. ( emphasis added ).

As the statute states, members and managers are not liable for company debts or obligations unless either 1) the articles organizing the company specifically make them liable, or 2) they consent in writing to liability.

Ms. Mertins notes that since the adoption of that section in 1998, Illinois courts have struggled with piercing LLC veils, as the statute seemingly expressly prohibits it. The majority of Illinois cases dealing specifically with the issue have come to that conclusion while citing the above section. While there have been a handful of cases that have reached a different conclusion, they have not specifically been on point to solely dealing with the Illinois statute at its core (for example, as Mertins notes, Westmeyer v. Flynn, where the court found piercing permissible dealt with an Illinois LLC but the Delaware LLC Act, which does not expressly prohibit piercing, while in On Command Video Corp. v. Roti , the court indicated that piercing may be permissible, but it is noteworthy that neither party argued it would be impermissible.)

So, the takeaway for business owners worried about potential piercing is that LLC’s may provide a level of protection that corporations may not necessarily provide, at least in Illinois. Of course, LLCs have only been around in the state for less than twenty-five years so they don’t enjoy the long history of legal analysis and development that corporations do. Given that, it remains to be seen how courts may develop the concept of piercing as it relates to Illinois LLCs, but at least for the time being, they seem like a relatively safe option for the new business owner worried about personal liability.

* Fontana v. TLD Builders, Inc., 362 Ill App. 3d 491, 500 (2d Dist. 2005).

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Estate Planning for Digital Assets

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 19 Jan 2018 22:16:40 GMT

Law is a slow moving animal. More often than not, changes to laws or adoption of new laws are not so much of a function of foreseeing future issues for which they may be applicable, as they are reactionary- adopted in light of societal changes that require modifications to the formal constructs of society in order to keep up with an ever-changing world.

Perhaps no issue in the field of estate planning and asset management better illustrates that reality better than that of digital asset planning, management and access.

Digital Assets

Very generally speaking, digital assets are those which exist in a solely intangible and electronic realm. Everything from images uploaded to your Instagram account to online banking records can be considered digital assets. With the technological advances of the last twenty years we have become interconnected with a sort of virtual persona of ourselves- one built upon years of Facebook posts and shares, tweets, Linked In resumes, Drop Box documents and electronic bank records that contain our important personal and financial data, and Instagram images reflecting glimpses into our very real and tangible lives.

Dealing With Digital Assets After Death

Those digital assets, while seemingly interconnected with our daily lives pose a problem for those that are tasked with settling our affairs when we pass away. That’s because privacy concerns and archaic laws adopted prior to the growth of the internet (not to mention the invention of texting, instant messaging, social media and the like) scantly address rights of individuals to access intangible data that does not personally belong to them.

Prior to ~1990 intangible assets were few and far between. That was certainly true for an average person. Bank records were on paper, photos needed to be physically developed on film, actual phone calls were made in lieu of emailing or texting. State laws for executors (individuals appointed in a will) and other personal representatives clearly permitted a court to grant access to an individual to access those types of hard-copy records as he or she carried out the task of administering the estate of a decedent. Armed with letters of office (or other similar official forms) an executor could approach a third party, show their authority for collecting a decedent’s documents and walk out the door with what they needed.

Legal Challenges

Of course, those laws are still a very useful tool for estate administrators, but many of them fail to address the ability of the executor to access digital assets with the same authority. That fact coupled with laws like the federal Stored Communications Act , which contains prohibitions for the disclosure of electronic communications to anyone not the owner of such communications creates a complex web of restrictions on data disclosure that poses a challenge to loved ones trying to access and delete a decedent’s online persona.

Thankfully, state legislatures are aware of the issue and are seeking solutions to make estate administration more efficient in the modern digital era. In Illinois, for example, the legislature is currently debating a bill which would make the Uniform Fiduciary Access to Digital Assets Act (UFADAA) law. The UFADAA would grant fiduciaries, including estate executors and other agents, authority to access a decedent’s digital assets. Of course, it remains to be seen how the new law would intersect with federal laws prohibiting disclosures, like the SCA, but it nevertheless is a substantial step in the right direction.

Potential Estate Planning Solutions

Currently, estate planning attorneys are hard-pressed to find failsafe solutions to address the issue. One potential solution is to include specific language and authorization for a personal representative or trustee to access and management digital assets in a will or trust agreement. For example, a trustee may be expressly granted authority to, “obtain full and complete access and control over the content of all digital assets, data, domain names, on-line storage accounts, web pages, email accounts and software programs owned or in which (a decedent) has an interest as licensee at the time of (the decedent’s) death (“Digital Property”). Without limiting the generality of the foregoing, the executor/trustee shall have full and unrestricted rights and access to all Digital Property notwithstanding the possible lack of log-in information, i.e. user names and passwords. No person or entity need inquire beyond the terms of this instrument in transferring Digital Property to the (executor or trustee).”

The effectiveness of such a clause is not guaranteed, since third parties, like Facebook or Drop Box, may refuse to make a disclosure, hesitant to go against the language of the SCA, but it at least provides the executor or trustee with an additional weapon in his or her administration arsenal.

No doubt will laws eventually catch up with the current state of the digital lives we live and more closely reflect a reasonable balance between protecting our data and enabling a trusted fiduciary to manage that data when we are unable to do so. But, given the snail’s-pace at which the issue is currently evolving, there’s no guarantee that a solution- when it does come, won’t already be outdated, yet again surpassed by future technological advances.

Michael F. Brennan runs a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and business issues. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Personal Cloud Storage Options For Law Firms

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 19 Jan 2018 22:11:40 GMT

Attorneys that want the convenience of cloud storage but the security of onsite physical storage have some options.

The cloud, while often intimidating to attorneys, has become a hot topic for law firms looking to stay on the forefront of technology. Terms like cloud storage, cloud computing, and Software as a Service (SaaS) add confusion to the definition. But, generally speaking, the cloud refers to an interconnected network of servers, systems and hard drives that enable a user to store and access data from multiple devices and locations (For a comprehensive overview of working in the cloud, see Ed Finkle’s article, “ Legal Technology: Feeling Secure in the Cloud ” in the January, 2015 issue of the Illinois Bar Journal).

Numerous applications and programs exist that enable a user to access that data in specific ways and for specific purposes. For example, common practice management platforms, like My Case and Clio, are cloud based applications that enable an attorney or even an entire law firm to manage its entire presence on the cloud and without the need for owned physical servers.

Document storage platforms, like Dropbox and Spider Oak are highly popular cloud-based document storage platforms with which most attorneys are familiar. They enable lawyers to store and share documents with clients or opposing counsel who can then view the documents anywhere with internet access- whether at the office or the local coffee shop.

A common thread amongst the vast majority of cloud applications and storage platforms is that the physical servers which actually house the data you have sent to and stored in the cloud are owned and managed by someone else. Whether it is Amazon Cloud Drive , Google Drive , iCloud , or something else, when you send data to the cloud it is being sent to servers owned and operated by a third party. For example, a lawyer that uploads a draft of a contract to his Dropbox account and shares it with a client is actually sending a copy of the file through Dropbox to a physical server owned and operated by a managed service provider. While now accessible by both the lawyer and the client wherever each has internet access, the file itself (or the copy of the file) does not simply fly around the ether like some intangible idea. It stays parked in a secure physical space on a physical server. That creates the potential for data breaches and, in turn, ethical breaches of client confidentiality. While the cloud offers tremendous advantages over traditional physical servers by way of accessibility, sending secure data to some unknown location can lead to unease for the attorney concerned (and rightfully so) about maintaining the confidentiality of his client’s confidential information.

So, where is an attorney that wants the convenience of cloud storage but the security of onsite physical storage to turn?

Well, one option is to set up a private cloud server solution. Most attorneys are familiar with the concept of a Virtual Private Network (VPN). A VPN is a network that uses public infrastructure to establish a private network and enable authorized users to remotely access files and data. Various mechanisms are employed to add security to any exchanges occurring over the network. But, VPNs can carry a number of disadvantages from cost and complexity of setup to ease of use.

Luckily, a company called Transporter ( www.filetransporter.com ) is taking some of that complexity out of the equation and now offers an alternative to traditional private network infrastructure.

About Transporter

Transporter is a private cloud solution that enables users to enjoy the same benefits of traditional cloud storage services like accessibility, sharing capability, collaboration and data backup, but it carries a significant benefit over its public counterparts. Transporter allows a law firm to keep sensitive data under its control. Instead of storing data and documents on remote third party controlled servers by using a public cloud storage platform, like Dropbox, a Transporter user can store data in a secure location, like his office, while retaining the ability to access those files from anywhere with internet access. Just like Dropbox, a user gains access to the Transporter using a unique set of login credentials.

While the largest of the Transporter devices resembles a small server, some of the smaller options are no larger than a computer speaker and can sit right on your desk.

How it Works

Unlike traditional cloud storage services, like Dropbox and Google Drive, which store your (and your clients’) sensitive data on public servers, Transporter stores files locally where they are under your control. There are two options for storing files. The first option is the Transporter Library. Storing files to the Transporter Library is akin to storing files directly on an external hard drive. Users on the Transporter network can then access Library files directly from their own computer, tablet or other device. So, for firms with multiple users, Transporter ensures that every member of the firm is always working on the most recent version of a document by automatically syncing to one centralized location using the Library storage method.

The alternative to Transporter Library is Transporter Folder. Instead of being stored directly to the Transporter, files saved through the Folder method are kept on the user’s computer and automatically synced with the Transporter. The added benefit to this method is that Transporter can effectively serve as a library backup for all important firm files. Additionally, the Folder method alleviates any risk that network downtime could lead to an inability to access files when needed.

Conclusion

Law firms are continually wrestling with how to protect client confidentiality while improving efficiency and accessibility in an age of ever-increasing technological dependence. Solo and small firm attorneys lacking the resources of larger firms are forced to search for new ways to run their practices better and smarter. While cloud-based applications, and specifically cloud storage services, have provided realistic options for storing large amounts of data, the security risks involved in using such services can be substantial. For those firms increasingly worrying about those risks, personal cloud devices like Transporter may prove to be the answer.

LLC vs. S Corporation

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 19 Jan 2018 22:03:23 GMT

There are plenty of things to consider when deciding whether to form a limited liability company or an S corporation.

I'm frequently approached (virtually) by entrepreneurs that have great ideas for a new business to start. They know that they need to form SOME type of business, but often they don't know much more than the terms " LLC " or " Corporation ." That's by no means a knock on them, as most people don't have much reason to know the differences between various types of business entities, much less how their structure can have an effect of operations, management, distributions, taxes and liability. Very commonly, for the types of businesses I work with, the choice boils down to two primary options: the LLC and the S Corporation.

The question of which of those two entities is appropriate for a new business is one of great debate amongst lawyers and accountants. Simply put, there is no one-size-fits-all answer. While practitioners may have a preference for one form over the other (I have a theory that younger practitioners prefer the LLC being as it's a newer animal), when someone asks the question, "should I form an LLC or an S Corp?," it's impossible for me to provide a real answer and my response is always the same, "let's talk about it." \

I need to know the specifics of how you plan to operate your business, who is going to be involved, what roles they will play, what assets are going to be held, how operations are going to be funded, and where an entrepreneur sees his or her business in 5, 10 or 20 years, amongst a host of other things.

Usually, the choice of entity is going to center on a few very specific operational objectives- objectives that, unsurprisingly, typically involve money, and how to avoid paying too much of it to the government. In that sense, I always encourage business owners to consult with their accounts. From a legal standpoint, we can make anything*** work, but often it's going to be easier when the accountant has steered the ship in the right direction. That said, there are some very high-level differences between LLCs and S Corporations which I've pulled together into a handy chart for those that may be curious.

So, to those inquisitive entrepreneurs, I'd encourage you to read a bit about the differences, and then let's talk about it.

	LLC	S Corp
Formation	Formed by filing Articles of Organization with the relevant state institution and paying applicable fees.	Formed by filing Articles of Incorporation with the applicable state institution, paying applicable fees, and filing form 2553 with the IRS.
Period of existence	Perpetual unless otherwise stated in the Articles	Perpetual unless otherwise stated.
Liability	Separate entity from its members for liability for company debts. No member is liable for business obligations solely by reason of being a member. Members are liable for taxes in proportion to their percentage ownership in the LLC. Managers are not liable solely by reason of being a manager.	Separate entity from its officers, directors and shareholders for liability for company debts. Shareholders are liable for company debts up to their capital contribution.
Management	In a manager-managed LLC, the company is managed by elected or appointed managers. The managers do not need to be members of the LLC. In a member-managed LLC, membership is vested in the members.	Managed by elected officers and directors. Officers and directors do not need to be shareholders.
Taxation	May be taxed as a sole proprietorship, if only 1 member; a partnership, if more than 1 member under subchapter K, or a corporation, if an election is filed (Form 2553). Income and losses flow through to the members in proportion to their interest in the LLC. An LLC may elect to be taxed as a corporation by filing appropriate forms.	Taxed under IRC Subchapter S. Owners are permitted to be taxed as a pass-through entity, similar to (but not identical to) partnerships. Income and losses flow through to the shareholders in proportion to their interest in the company.
Who may be a shareholder/interest holder	LLCs may have an unlimited number of members. There are no limitations on who may be a member. Individuals, partnerships, corporations, other LLCs, trusts and foreign individuals are all acceptable.	Only individuals (and some certain qualified trusts. No nonresident alien shareholders, no more than 100 total shareholders.
Classes of stock or capital	LLCs may have multiple classes of capital.	S Corporations may only have one class of stock.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Brian Plain, CFP

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 18 Jan 2018 22:15:19 GMT

The Alternative Advisor Podcast

As an estate planning attorney, I find myself working with clients to protect certain aspects of their financial life at a very high level, meaning, that while we work together to establish the framework that ensures the client and his or her family will be taken care of should something happen, I don't specifically deal with the financial vehicles involved in helping folks grow their assets during life. That's where the financial advisor comes in and why guys like Brian Plain are great to have on your team.

Brian is a financial advisor in Oak Park, Illinois, but like me, he is continually striving to make financial planning more efficiencies and more convenient for his clients through the use of technology. He focuses on lifestyle planning of which the goal is to have an ongoing relationship with a select group of families and individuals to help them identify, achieve and maintain their desired lifestyles from a financial perspective. Through our conversations, we have found a lot of overlap in the way we approach our professions and the way we look to help our clients take the worry out of life.

So, this past week I joined Brian on his podcast, The Alternative Advisor to discuss estate planning, small business law and technology and how we as advisors, while in different professions, can collaborate to ensure our clients are taken care of in life, and in death. Here's the link to the podcast as well as Brian's website .

An Interview with CFP Brian Plain

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 18 Jan 2018 22:05:22 GMT

Plain is a Certified Financial Planner in Oak Park, Illinois helping folks live the lives they want to live.

As any estate planning attorney will attest to, financial planners are some of our strongest allies when we work to help clients ensure that their futures and families are well taken care of. But, not all advisors are alike. Some charge flat fees, like an attorney, for ongoing involvement with your financial affairs, while others don’t charge anything, but rather make a living off of commissions paid to them by the institutions with which they place policies.

Given the wide array of options out there, finding a planner that is a good fit can be a challenge. In an effort to shed some light on the field, I recently asked Brian Plain, a financial planner in Oak Park, IL to share a little bit about financial planning and what clients can expect when they make the decision to work with one. The transcript of my interview with Brian follows.

Brian, why don’t you start off by telling us a little bit about yourself and your business? What led you to where you are today?

My name is Brian Plain and I'm a CERTIFIED FINANCIAL PLANNER (TM) . I started my own independent practice here in Oak Park, IL in 2009 and I specialize in providing lifestyle financial planning.

A number of different things led me to where I am today, but my parents had the biggest influence on my decision to start my own lifestyle financial planning practice. Growing up, my parents both owned their own business, which allowed them to work around myself and my sisters' schedules. I remember at young age realizing that not everyone's parents attended all their tennis matches, coached all their Little League teams or started a local Boys & Girls Club chapter like my parents did. That's something I want to be able to do for my family & community as well. Most important of all, my parents taught me the key to a fulfilling life is helping others achieve theirs.

What types of people do you typically work with?

I have two specific groups I focus on working with:

First, I work with families local to the Oak Park / River Forest community that appreciate having a local advisor. These are folks I run into on the tennis court, at the grocery store or out at dinner. I enjoy being a part of and working within my local community.

Second, I provide virtual lifestyle financial planning to Generation X families all across the country. These families tend to appreciate the convenience of meeting from their own home and working with someone that is tech savvy who keeps things casual and comfortable.

Much like “estate planning”, I think the term “financial planning” has a history of being used to describe something only older wealthy people benefit from. Is working for a financial planner for everyone?

I don't think everyone needs a financial planner, but certainly a large majority of people could benefit from working with one. There is a perception out there that you need to wait until you're retiring or have half a million dollars before you start working with a financial planner. While that may be the case at some firms, it is certainly not your only option.

You could decide to get serious about pursuing your desired lifestyle when you're 35 or 65 or when you have $100,000 or $10 million dollars. Financial planning, or at least lifestyle financial planning, can benefit anyone that wants to identify, achieve and maintain their desired lifestyle and they can start that process whenever they are ready to do so.

Throughout my years of working with them, I’ve come to know that there really are a number of different types of financial advisors- from their preferences for certain financial vehicles to things like oversight and even how they are compensated. You describe yourself as a Lifestyle Planner. Can you talk a little bit about Lifestyle Planning and what sets you apart from the host of other advisors out there?

Lifestyle financial planning is based on what I refer to as the real truth about money and that truth is not about investments, insurance or other financial products. These are merely vehicles, even though this is where many advisors spend your precious time and attention.

I believe the real truth about money is that life is not a rehearsal.

We've all only got one shot at life and make no mistake that time is slipping away. So I believe we should focus on the big important questions like...

What do you want to do with what little time you have left on this earth?

When can you stop doing what you no longer enjoy and start doing what you really love?

Lifestyle financial planning is an on-going process that can help you identify, achieve and maintain your desired lifestyle, both now and in the future, with comfort and confidence. I'm much more concerned with my client's return on life than I am about what their investments did over some past, arbitrary snapshot of time.

Now, as part of the lifestyle financial planning process, we certainly address all of the pieces that can impact your financial well-being (investments, insurance, taxes, estate planning, etc), but only after identifying your desired lifestyle. I find it becomes much easier for you to make educated decisions when you know what you're trying to achieve and why you're trying to achieve it first.

There is a tendency of many advisors to work with any potential new client that walks through the door. You seem to take different approach. Can you talk a bit about your client philosophy? What type of people do you enjoy working with?

I try to practice what I preach and in since I preach lifestyle, I only work with a small, select group of clients who are interested in building mutually profitable, long term relationships. Basically, if we're potentially going to work together for the rest of your life, I think we both owe it ourselves to make sure we're on the same page from the start.

I recently wrote a blog post titled, “ We're Not A Good Fit ”, on how I don't work with alpha males or engineers. Nothing against either group, but I know I'm not the best person to help them.

I typically work best with creative folks, solo entrepreneurs or people who own their own businesses along with people that are open to doing things differently, who see the status quo and think there has to be a better way. I strive to be that alternative option.

Working with profession service providers can be intimidating to folks that have no prior experience with those relationships. What can someone who is interested in exploring the potential of working with you expect when they contact you?

Certainly not a sales pitch! People often ask me why should they work with me. I think they are surprised when tell them I don't know that they should.

If you reach out, you can expect me to listen, ask and answer your questions. I'm happy to tell you whatever you'd like to know about myself and my practice, but I'm interested in learning about you, what makes you tick and what you're looking for help with.

If you're not sure we'd be a good fit, feel free to contact me anyway. I'll always happy to have a conversation and will do my best to point you in the right direction no matter what.

How can our readers learn more about you and your business?

You can find me online at www.BrianPlain.com or reach me directly at 708-406-9775 or via email at Brian@OakParkPlanner.com .

Feel free to also check out my blog or you can catch my podcast, The Alternative Advisor , on iTunes. You can stay updated on my practice, blog posts and podcast by signing up for my free e-newsletter, The Saturday Scoop , which hits your inbox once a month on a Saturday morning.

Safekeeping Estate Plan Documents

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 18 Jan 2018 21:57:11 GMT

Your estate plan only matters if the documents that it's made up of exist. Here's what to do after paying the lawyer to draft your estate plan.

Drafting a complete estate plan can give a person peace of mind in the assurance that he and his loved ones will be taken care of should disability or death come knocking. One of the most common questions I get as an estate planning attorney is,

“What should I do with all these documents you just drafted for me?”

It’s a valid question. Safekeeping estate planning documents to ensure that they won’t be modified, stolen, or destroyed is just as important as drafting them in the first place.

Here are some recommendations for what to do with your estate planning documents once they are validly executed and completed.

► As a document with only one true original copy, care must be taken to ensure a will is going to outlast its creator. Consider storing a will in a safe deposit box with other important files. Be mindful of access requirements at financial institutions so that you can take appropriate actions to ensure that someone else will be able to actually access the safe deposit box after your death.

► As an alternative, here’s an idea: Think about storing your will and other important documents in a waterproof bag in your freezer. Not only is your freezer one of the most durable appliances in your home, but it’s also something that will get the attention of loved ones should you pass away as they throw out perishable goods in your kitchen.

► If you’re more comfortable simply keeping a will in a clearly marked envelope in a file cabinet or other location alongside other important documents, that’s fine as well. There’s no right or wrong way to store a will. Just make sure that the steps you take reasonably protect it from theft, unwanted modification or destruction.

► One more thing—no matter what you decide to do with your fully executed will, make sure that a trusted individual knows where to find it. After all, a will that can’t be found when you’re dead is no better than having no will at all.

What about other documents, like powers of attorney for health care and finances?

► Powers of Attorney for both health care and finances are a bit different than a will, because often times, an individual is encouraged to make multiple copies. That’s because they may be needed at various times or by various institutions. For example, an individual may have three doctors with whom they receive regular treatments of some sort. It’s typically wise for each of those doctor’s files to contain a copy of the power of attorney so that it is easily accessible. In addition, most individuals give a copy to their agent and successor agent so that, should something happen, those people won’t need to come dig through mounds of files when quick medical actions may need to be taken. So here are some suggestions for safekeeping powers of attorney:

► Put a copy on file of your health care power of attorney on file with your primary care physician and any other medical professional from whom you receive regular treatment.

► Request that financial institutions at which you do your personal banking put a copy of your power of attorney for finances on file. Some are receptive to this.

► Ensure that your chosen agent and successor agent have a copy of the power of attorney (or at minimum know that they have been named in that role and where to find the document should they need it).

► Discuss powers of attorney with close relatives so that they are aware of your decisions and the justification behind them. For example, if you have five children and one is named as your agent, it may be prudent to discuss why that sibling was chosen over the others in order to avoid disagreements and potential abuse of power down the road.

► Of course, like anything, it’s advisable to discuss specifics with your attorney. The above mentioned possibilities are simply suggestions that have worked for many people and situations. But, remember that every situation is different, and laws vary by state. So, it’s important that you seek advice from an estate planning attorney in your areas before trying to do anything that affects your estate plan.

Pet Care After Death

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 18 Jan 2018 21:51:28 GMT

Here's what you need to consider when making sure that your furry friends are taken care of after you die.

According to the Humane Society of the United States, pet ownership in the United States has more than tripled from the 1970s, when approximately 67 million households had pets, to 2012, when there were 167 million households that owned pets, or in other words, in 2012, 62 percent of households had at least one pet. That number is sure to be even higher now.

Even the lifespans of companion animals with the most longevity (except maybe tortoises, but who owns a tortoise anyways?) pale in comparison to the human lifespan. So, it comes as no surprise that humans naturally assume that they will outlive their pets.

But, too often, we are all reminded that life, and death, can take unpredictable paths. As an estate planning attorney, my job is to help people plan for those potential unforeseen circumstances, so that, no matter what life throws a client’s way, whether illness, incapacity, or death, she can at least have the confidence that her loved ones will be taken care of. Too often, though, there are loved ones that are forgotten- pets.

We have two little dogs ourselves, and while it’s natural to assume that both my wife and I will outlive them, tomorrow is never guaranteed. Recently, my wife forwarded an article along to me which made me pause and really consider what I can do for clients (and for myself) to make sure that we put contingency plans in place for their pets so that they don’t end up in a shelter, abusive household, or worse. Bela the German Shepard’s owner died leaving some shocking instructions about her wishes for Bela’s fate . Thankfully, though the actions of outside organizations, Bela’s story has a happy outcome. While her owner’s wishes may have been a bit controversial, it is much more common for pets without a living caretaker to be placed in a shelter and put up for adoption into a potentially questionable situation, or in the case of many shelters, euthanized.

Surely, most human caretakers would much prefer a different outcome dictated by their wishes.

So what can you do now to make sure that your pets will be lovingly taken care of, even if it’s not you that is doing the caring?

Petfinder offers up a number of tips , some as simple as making sure neighbors and friends know your pets and are comfortable interacting with them. Make sure that they have access to your home, so that they can serve as emergency caregivers for your animals in the event something unexpected happens to you.

Some other suggestions from Petfinder :

► Make sure your neighbors, friends, and relatives know how many pets you have and the names and contact numbers of the individuals who have agreed to serve as emergency caregivers. Emergency caregivers should also know how to contact each other.

► Carry a wallet “alert card” that lists the names and phone numbers of your emergency pet caregivers.

► Post removable “in case of emergency” notices on your doors or windows specifying how many and what types of pets you have. These notices will alert emergency-response personnel during a fire or other home emergency. Don’t use stickers; hard-to-remove stickers are often left behind by former residents, so firefighters may assume that the sticker is outdated or, worse, they may risk their lives trying to find a pet no longer in the house.

► Affix to the inside of your front and back doors a removable notice listing emergency contact names and phone numbers. Because pets need care daily and will need immediate attention should you die or become incapacitated, the importance of making these informal arrangements for temporary caregiving cannot be overemphasized.

How can I ensure long-term or permanent care for my pet if I become seriously ill or die?

First, it’s important to discuss with chosen contingency caregivers whether they would even be comfortable taking your pets in should something happen to you. Then, it’s important to get things in writing. For example, you’ll want to make sure there is a legal obligation on the part of your estate to provide your pets with funds sufficient to care for the pets. Don’t rely on a simple verbal agreement that you and the caregiver may have had. Chances are that, should you die, the executor of your estate is going to have no knowledge of that agreement and no legal obligation to actually provide the new caregiver with those funds. This is where a pet trust can be a huge benefit . (See Pet Prenups: Planning for Pets if you Breakup for some legal options should you and a significant other separate).

While many individuals make special provisions for pets within a will, while well intentioned, those provisions often can complicate things in the chaos that may arise after a death. Wills typically must be probated in order to be legally recognized as valid after death. That process is not always quick. Failure to take additional planning steps outside of the will can create a risk that pets may be forgotten for days or even weeks. Even if a temporary caregiver steps in, they most likely will not have access to any financial assistance for some time, even if the will makes provision for such assistance.

That doesn’t mean that you shouldn’t use a will to provide instructions for the care of a pet. It can be an effective way to make sure they are taken care of long-term. But, if you choose to plan for their care through a will be sure that there is an emergency caregiver that is ready and willing to take your pets under his care while your estate works its way through the legal system. Also, make sure that your caregiver has the financial means to care for the pet, at least in the short term.

Don’t forget to consider a Power of Attorney

A power of attorney enables a chosen trusted individual to take specified actions on your behalf. Like a sports agent negotiating a contract, an agent under a power of attorney is authorized to make decisions in your best interest in the event you are unable to act for whatever reason. Making specific provision in a power of attorney for a chosen agent to take care of pets and access funds to do so can ensure that there will not be a gap in the care of your animals. For example, should you be stranded out of the country for an extended period, your agent will be able to ensure that nothing will happen to your pets. Similarly, if, due to an accident, you are in the hospital for an extended stay, your agent can step in and care for your pets.

As the saying goes, “an ounce of prevention is worth a pound of cure.” By taking steps now to plan for the care of your pets, you can ensure that they will be well cared for no matter what life throws your way.

Michael F. Brennan runs a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Who to Choose as an Agent Under a Power of Attorney

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 18 Jan 2018 21:47:40 GMT

Deciding who to choose as an agent under a power of attorney is not a decision to be taken lightly.

A power of attorney is a written agreement that authorizes a trusted individual to make decisions on your behalf and in your best interests. That person, or agent is tasked with carrying out your wishes, often times when you are unable to direct them how to do so. That can come with some pretty important consequences when dealing with things like finances or your health .

It should come as no surprise, then, that people often have questions about who they should choose to act as their agent. It is not a decision to take lightly, no doubt. But, with some thought and a thorough understanding of exactly what an agent does, chances are that practically anyone can come up with a choice they are comfortable with and confident in.

Who should be chosen to act as your agent?

The main thing to keep in mind when choosing a health care agent is that you should choose someone that you trust. After all, this person will be making decisions on your behalf, and if there’s any question that the person you have in mind to serve as your agent may not be able to act impartially, you may want to reconsider.

Most people choose a trusted family member, but the agent doesn’t have to be related. Close friends or other trusted individuals can often be just as good, if not better choices, depending on individual circumstances.

Whomever you choose should typically possess the following characteristics:

a) Be at least 18 years old;

b) Be familiar with you and your wishes;

c) Be trustworthy enough to carry on your wishes even when they may not agree with them;

d) have the ability to navigate complex family dynamics and be comfortable disagreeing with what family members or other loved ones may want for you if he or she determines that such choices aren’t in your best interest;

e) is comfortable discussing sensitive subjects with your health care providers and is able to comprehend the consequences of specific courses of treatment;

f) Can be available on short notice to act on your behalf, if needed (often it is more suitable to select someone close geographically rather than someone that may need to fly across the country).

After selecting an agent, what things should the agent know?

Once an agent is selected and agrees to serve, a power of attorney gives the agent the legal authority to act. But, a no matter how well drafted, a power of attorney can’t reflect the intricacies of your wishes, values, individual preferences, morals and desires. Instead, it simply (except for a few exceptions) gives another person the ability to essentially step into your shoes and make decisions for you as you would in a given situation if you had the ability.

Because of that reality, it’s essential to ensure that your agent really knows what’s important to you. Specifically, you’ll want to discuss with your agent:

a) What do you value in life?

b) Are there other trusted individuals in your life that you’d hope the agent would consult with when making decisions?

c) What are your thoughts on life-sustaining treatment, and would you like to live as long as technically possible or avoid prolonging life if it means essentially being attached to machines for the remainder of yours?

d) Should specific religious beliefs that need to be considered as the agent makes decisions?

Not only is it important to make sure your agent knows those things, but I always recommend that those signing powers of attorney make sure that their loved ones know those things as well.

What are some situations where my agent may be called upon to act?

Your agent will act whenever you are unable to do so for yourself. Typically, that is in situations where you are incapacitated or no longer possess the ability to make sound decisions for yourself.

The most common situations when an agent becomes active in making decisions for the principal are:

a) When the principal lacks the mental capacity to act, for example, due to Alzheimer’s or another degenerative disease.

b) When severe injury, like a stroke, leads to the inability to make decisions.

c) When severe trauma has caused a prolonged period of unconsciousness, for example, a car accident that causes a coma to follow.

While the first two situations are much more common amongst older adults, none of us are invincible and, no matter how hard we try, sometimes accidents happen. It’s important in those situations for everyone over the age of 18 to make sure their families know their wishes and they execute the appropriate legal documents to ensure that the right people are able to make decisions for them. Otherwise, the law by default gives that authority to a surrogate, who is typically a family member whose relation depends on your specific situation. Sometimes those results don’t sync up with the choices an individual would necessarily make.

For example, an engaged 25 year old in a long-term relationship may very well wish for his fiancée to make decisions should something happen to him. But, the law usually does not go that route. Instead, it may be the young man’s parents who are looked upon to make decisions.

As an attorney, I far too often see family relationships become strained because family members disagree with how an agent is acting. So, I always tell my clients that the most important thing to do when you appoint an agent is make sure your loved ones know why you made the choice and what your wishes are. Typically, when a power of attorney needs to be relied upon, your family is already facing a trying time. You can do your part to make sure that it isn’t escalated even more by making sure that, should a situation arise where you’re unable to make decisions on your own behalf, your agent’s choices are to be trusted and respected, regardless of who that may be.

How Does an LLC Work?

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 18 Jan 2018 21:42:40 GMT

Here's an illustration of how a limited liability company is formed and operates.

One of the first decisions an entrepreneur must make after deciding to start a business is how the business should be structured. There are a number of options, from C Corporation to S Corporation, to various types of partnerships . But by far, the most common entity chosen by small business owners is the Limited Liability Company, or LLC. The LLC offers a number of advantages over operating a business in an individual capacity as a sole proprietorship , from liability coverage to taxes. But, it's important to understand exactly what an LLC is and how it works before deciding that it's the best bet for your business. The illustration below explains some of the LLC's primary characteristics.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

The Top Six Reasons Your Business Needs an Operating Agreement

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 18 Jan 2018 21:29:07 GMT

Simply forming the business with the state isn't enough. Here's why your LLC needs an operating agreement.

For many new business owners, one of the first questions they need to tackle is what type of business entity to form . From multiples types of corporations and partnerships (or sole proprietorships for individuals) to limited liability companies , the choices are many. But, these days, for typical entrepreneurial types starting typical businesses like ecommerce sites or professional services, the most common entity is the limited liability company, or LLC.

Legally creating an LLC is pretty simple. All that is required is the filing of Articles of Organization with the state and payment of fees (of course). But, that’s just the beginning. See, legally forming the LLC is one thing, but making sure that it does everything you want and need it to do is another thing entirely.

Commonly, business entities are formed for a number of reasons, from limiting liability of the owners to simply projecting a more professional image to clients and customers. But, what any new business owner needs to realize is that, without some additional business planning, they run the risk that their LLC won’t function how they thought it would.

That’s because LLCs, like every other type of business entity are governed by state statutes (and case law). Those statutes contain default rules for how an LLC must be operated. They act as fall back rules for every LLC that doesn’t decide their business should be operated in a different manner. And, sometimes, what the statute requires is at odds with what the business owners intended. So, how do new business owners, specifically those that have formed LLCs make sure their businesses are going to operate in a way that works for them?

Enter the Operating Agreement.

An Operating Agreement is a document drafted by the members of the LLC that lays out the rules for how the business is going to operate. For those familiar with corporate structures, it is similar to corporate bylaws.

There is no formal structure required for an operating agreement, and the topics it can touch on are practically endless. And, for the new business owner who hasn’t thought much past how he is going to sell his product, taking the time to draft an operating agreement can be one of the best startup decisions of his entrepreneurial life.

Why have an Operating Agreement?

Well, a number of reasons, but here are six:

1. Death of a Member

If you start a business with a partner or a few other individual, have you thought about what should happen if one of you dies? It’s safe to assume that, as the business grows, each partner’s interest is the business will become a substantial personal asset that he or she will expect to be able to leave to a spouse or children should something happen. But what does that mean for a business that is all of a sudden forced to deal with the family instead of the founding member? Will the deceased member’s spouse now “step into his shoes” and serve as a voting member of the LLC? What if the spouse doesn’t want to continue on with the business and demands to be bought out? What if the business doesn’t have enough liquid assets to buy back the deceased member’s interest?

These are some very real questions that commonly face the members of LLCs. An operating agreement can set forth how the situation should be handled should something happen to one of the members so that the remaining members can continue to run the business.

2. Divorce

Something like 50% of marriages in this country end in divorce, so if you start an LLC with two other married members, the chances are better than not that one of you will be getting divorced. An unfortunate situation, no doubt, but one that can be made far more stressful for the divorcing couple and the other business owners when it comes time to figure out what the divorce means for the business.

Like the case of a member dying, a divorce is likely going to have a substantial impact on the LLC as the divorcing member’s spouse may end up acquiring an interest in the member’s interest (business interests are commonly characterized as marital property without additional estate planning). What does that mean for the business? Well, depending on the state’s LLC statute, the member’s estranged spouse may now be considered a member as well, meaning that it’s possible he or she will all of a sudden have the ability to vote as a member of the business.

An operating agreement can anticipate divorce of a member and set forth an appropriate plan in order to prevent that sort of situation from occurring.

3. Disagreements

At the onset, the relationship between the founding members of a new business is no doubt rosy. But, as the toll of operating a business begins to take its toll relationships can sour. Members can develop very different visions for the future of the business. Similarly, business interests are valuable and members may vary on if or when the company should be sold. An operating agreement can set forth how disagreements between members will be resolved. By setting rules for how to handle conflicts upfront, business owners can reduce the chance that animosity towards each other will develop down the road.

4. Secures Limited Liability

Forming an LLC by filing Articles of Organization with the state is one thing, but it does not guarantee that the business will shield the members from personal liability. If an issue arises, courts have been known to disregard the LLC if it appears from the facts of the situation that the owners of the business failed to really separate the business operations from themselves personally. Things like treating personal and business accounts as one-on-the-same can lead a court to determine that the business was never really a separate entity from the individual in anything but name. Like opening separate business bank accounts, creating an operating agreement with formal rules about how the business operates (and actually following those rules) can show a court that, in fact, the business was operating independently of its owners. That can be a huge determination from a liability standpoint should certain problems arise.

5. Allows for Future Growth

For a new business owner, simply earning a profit can sometimes be enough of a challenge, but once the business gains some traction most owners naturally think about how to maximize its growth. An operating agreement can anticipate that growth and structure the business with enough flexibility to permit it to happen without changing the management or voting structure.

For example, an individual starting a new business may see an opportunity down the road to open a number of additional locations if only he had the resources to do so. Bringing on a friend or family member with deep pockets would be an ideal situation, but the founder doesn’t want to give up any control over the direction of the business. Without an operating agreement, the rules may default to that new investor getting a voice (and it could even be proportionate to his ownership in the company, meaning he could potentially take control). But, with an operating agreement, the owner can contemplate future growth from the beginning and structure their business in a way that enables him to take on additional investors without giving up and managerial control.

6. Clarifies Expectations

At the end of the day, one of the most important things an operating agreement does is it clarifies expectations.

As I mentioned, the topics an operating agreement can cover are practically endless. Making sure to set forth rules for things like voting, termination, assignment, accounting, allocations of profit and loss, dispute resolution, and a host of other topics ensures that every member of the business has a clear understanding of how the business will operate when presented with specific situations.

That can go a long way towards ensuring success as a growing business.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

A Few Thoughts on Brittany Maynard

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 18 Jan 2018 21:24:22 GMT

As I write this, Brittany Maynard is living the last few weeks of her young life. She’s 29 years old- just a year younger than me, so reading about her story has hit close to home for me. I don’t pretend that my words on this blog are profound, so for those that haven’t read about Brittany or seen her story on the news; you can read a wonderful piece on her journey about it here .

If you didn’t click the link, here's the gist of her story. This year, after experiencing a bout of intense headaches, Brittany sought a medical diagnosis for her headaches only to find out that she had Glioblastoma multiforme. Glioblastoma multiforme is a form of brain cancer which, from everything I can gather, is one of the most common, yet also most aggressive forms of brain cancer. Shortly after the initial diagnosis, Brittany’s doctors informed her that the disease had spread to Stage 4. She was given only months to live. So, she moved to Oregon with her family- one of only five states in the US that permits "assisted suicide". For those unfamiliar, assisted suicide, specifically Oregon's law, the Death with Dignity Act , permits patients with terminal illnesses, in consultation with their medical team, to obtain a barbiturate prescription that essentially shuts down an individual's vital systems, letting them pass peacefully on their own terms and at a time of their choosing. Brittany, though what I can only imagine was no easy decision decided that she would seek out such a prescription in order to have the option to dictate the direction of the time she did have left.

After discussions with family, Brittany set November 1, 2014 as the date on which she would retreat to her bedroom with close family by her side, take her prescription, and pass peacefully on her own terms.

If there’s one common theme that I feel like I always read about with individuals like Brittany presented with such a grim outlook of their reminder of time on this earth is the incredible resolve and courage that they show. It’s an impossible task for anyone that hasn’t been forced to face their mortality in a way like Brittany has to even begin to understand the incredible resolve it must take to face that news with your head held high, but from every indication, including videos on Youtube , Brittany is doing just that.

Her story has really made me think about two things. As an estate planning attorney, Brittany’s story was a reminder to me that we just don’t know when our number will be called. We hope to live long and fulfilling lives, but sometimes that’s not in the cards. For me from a professional standpoint, it reminds me that I do what I do for a reason, and that’s to help give people some control over something that is so uncontrollable and unpredictable.

For those that don’t know me personally, as I mentioned, I’m only 30. I feel like I still have my entire life ahead of me. If I had my way, I would live to 100. But, stories like Brittany’s remind me that we don’t get to make that decision. The most we can do is hope that we’re as courageous as her in the face of something so incomprehensible. Her story has reminded me that living each day to the fullest, while sounding so cliché is really something that we should all strive for. It shouldn’t take a life-altering event or tragic diagnosis for us to live life on our terms, even to the very end.

To learn more about Brittany and her story, visit http://www.thebrittanyfund.org/

An Illustration of a Revocable Living Trust

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 12 Jan 2018 21:50:36 GMT

One of the most common estate planning tools explained.

Most people have heard of trusts, but often times when I begin a conversation with a client about whether a trust should be incorporated into their estate plan, I am met with blank stares and dozens of questions. If you have heard of a trust but don't really know what it does or how it works, you're not alone.

When estate planning attorneys talk about trusts, they can be referring to a number of different planning mechanisms- living trusts , testamentary trusts, GRITs, GRATs, charitable trusts, etc. But, for the average American or married couple, when we use the term trust, we are referring to what is known as a Revocable Living (or inter vivos) Trust .

A Revocable Living Trust, in its simplest sense, is an entity created by an individual (or multiple individuals) during his or her lifetime to hold assets which will be managed by a trustee according to a specific set of rules, directions and terms. As the name suggests, a revocable living trust is revocable or amendable by the grantor (the individual that creates the trust) during his or her lifetime.

So how does a revocable living trust work as part of an estate plan?

When a revocable living trust is incorporated into an estate plan, it typically serves as the main vehicle through which assets are transferred upon death. For example, if a husband and wife transfer their home, investments, bank accounts and other property into the trust while they are living, upon the death of the first spouse, everything will automatically flow to the surviving spouse through the trust. Upon the death of the second spouse, the trust will instruct a successor trustee how all of the assets should be distributed and to whom they should be distributed. There are a number of benefits of using a revocable living trust , including the minimization of necessary probate procedures, asset management in the event of a disability, confidentiality, continuity of management after death and coordinated management with a spouse's property.

The illustration below sets out the basic life of a revocable living trust.

Pet Prenups: Planning for Pets Upon Breaking Up

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 12 Jan 2018 21:37:56 GMT

For couples that decide to bring a furry companion into their mutual lives, things can turn nasty when it comes time to part ways, especially when it relates to deciding what is going to happen to that pet.

Couples are living together before marriage more than ever before . Perhaps unsurprisingly, for many of those lovebirds, a long-term future together is not always in the cards. When breakups happen, it’s challenging enough splitting up tangible property, kitchenware and furniture that was mutually acquired over the course of the relationship. But, there is another issue that far too many couples in this situation have to consider:

Who gets the family pet?

For couples that decide to bring a furry companion into their mutual lives, things can turn nasty when it comes time to part ways, especially when it relates to deciding what is going to happen to that pet. It is often a topic of heated disagreements between couples in the midst of a split.

So what are they supposed to do? Well, my answer to that is I have no idea.

But, for couples that are still on good terms and thinking about potentially bringing a canine or feline friend into their relationship, I suggest considering a ”pet prenup.”

Prenuptial agreements are relatively common amongst couples on the verge of tying the knot, however, the concept has been gaining popularity amongst progressive unmarried couples looking to minimize the chance for heated disagreements to arise over what should happen to a co-owned pet should their relationship hit the skids.

Admittedly, I wasn’t aware of the concept until recently reading about a certain couple in New York locked in a bitter custody battle over their three dogs .

After some reading on the topic, I realized that pet prenuptial agreements and cohabitation agreements specifically dealing with pet custody and care are far more common than I realized.

So, how does it work?

To begin with, pre-nuptial agreements, marital property agreements, or whatever they may be called in your state are meant for two individuals in a legally binding marriage (as the name obviously indicates). So, if you are in a committed unmarried relationship and living together, you aren’t signing a “pre-nup” per se.

Instead, it can be easier to think of this arrangement as a cohabitation agreement . Cohabitation agreements are valid in most states, though not all (ahem, Illinois). So the first thing to consider is whether your state even permits them.

If a cohabitation agreement can be validly executed and enforces in your state, then it can be a convenient mechanism by which to lay out the rights and responsibilities of each partner in the event the relationship falls apart and the couple parts ways.

Items to specifically cover are:

a) how will property and household items be divided amongst the partners- especially when those items were joint purchases during the relationship?

b) Who should keep the apartment or condo? Can they afford to? Should the partner that is staying contribute to utility expenses? Should the partner that is leaving be entitled to some form of payment for agreeing to leave?

c) For couples that have been together a substantial amount of time, should there be an obligation of support payments?

These agreements do not have to only contemplate what happens if the relationship ends, but they can also detail rights and responsibilities during the relationship as well.

When it comes time to discuss what should happen to the couple’s pets, it’s important to consider a number of issues like:

a) Who actually purchased the pet? Remember, that no matter how much we feel like they are akin to children, under the law, pets are treated as personal property. In that regard, they are not much different than your living room sofa. So, in the event a court needs to decide who the pet should live with (yes, people actually fight in court about this), it is going to look to who legally owns the pet. Did one person make the payment to the breeder or pet store? Is there a receipt or bill of sale? If so, this person is likely going to keep the animal absent some other arrangement.

b) Owning a pet is not cheap. Should both partners be responsible for supporting the animal, paying for vet visits and medical care, etc?

c) What about the right of the non-owning partner to visiting the pet? While nothing like custody arrangements of children in a divorce, many people understandable are incredibly attached to their pets and would have a hard time simply giving them up. To ensure that doesn’t happen, the partners can agree on potential shared “custody” arrangements for the pets while they are still on good terms.

The idea of a “pet pre-nup” is an interesting one, to say the least. More akin to a simple contract that a martial property agreement, it can be limited in its content and structure; but coupled with a pet trust , it presents an interesting and creative option for those committed joint pet parents that want to make sure their relationship with their pet stays rosy even if their relationship with each other doesn’t.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Make Your Business Stand Out From the Crowd

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 12 Jan 2018 21:29:00 GMT

As a small business owner myself, here's what I tell them about what makes me different from my competition.

I advise a number of businesses that are just starting out and looking to establish themselves in some competitive markets. While they come to me to help them sort out legal issues associated with starting a business, as a small business owner myself, I always enjoy sharing my story and what I've learned operating my still-very-young business from a business standpoint as well.

One of the most important things I try to instill into folks is that it's absolutely imperative to figure out why they are different than their competition and be able to articulate those differences. Because, when they really sit down to spell it out, they're going to realize that those differences form the foundation of what they are and why customers will be drawn to them, and they're going to be able to incorporate those themes and values into their products, service and day-to-day operations.

As a small business owner myself, here's what I tell them about what makes me different from my competition.

I started The Virtual Attorney with the goal of bringing estate planning and business law into the 21st century. Through the use of technology and the internet he strives to offers modern convenience to young families, small businesses and entrepreneurs. The goal at The Virtual Attorney is to use the latest technology to provide clients with a secure, convenient and accessible means to plan for their business or plan for their family's estate. My motto is that I try to show clients “what they want in a lawyer and what they need in a lawyer doesn’t have to be different”.

So how do I do it?

Lower cost.

As a young attorney, I recognize the need for lowering legal costs in today’s economy and I see technology as a way to do that. Attorneys from my generation are so adept at high tech office management techniques- such as cloud file storage, online research, and wireless business phone systems – that the need for secretaries and receptionists has all but vanished for many young solo attorneys and small firms. That keeps our overhead much lower than that of our more established colleagues. This doesn't just save us the expense of hiring an office paralegal, it also leads to lower office rent costs, savings on office supplies, and more. The result is that, not only do we charge a lower hourly rate, but we can potentially get the job done more efficiently and at a tremendously lower cost, saving our clients a lot of money.

Accessibility.

I have the time to devote to my clients and give them the one-on-one personalized attention that they deserve. Older attorneys are often overwhelmed trying to please the large portfolio of clients that they have built over the course of a long career. Oftentimes what suffers is client communication. At this point in my career I am generally able to return emails and calls within one business day. Better yet, when you deal with "The Virtual Attorney" you're dealing with me. That means responsiveness. You always know that if you have any questions or concerns, it's me that's going to be on the other end of the line ready to help.

As a young lawyer, I am not a member of the “good ol boys” network and don’t face the pressures to conduct business one way or another. Plus, I haven’t been desensitized by the high volume of cases or estates that older attorneys have dealt with during the course of their careers. I haven't developed the bad habit getting stuck in my ways, for example by drafting a will a certain way because "this is how I always write wills.” I still have a tremendous passion for tackling each unique situation as just that and refuse to carelessly fit every estate or young business into a cookie cutter mold.

Innovation.

As a young lawyer, I don’t have preconceived assumptions of how something should be done. This allows me to think outside the box and keeping an open mind. And, it ensures that I’m learning every detail about the specific issues facing my clients and thinking of all potential ways they could be handled.

A lifelong Relationship.

Within the field of estate planning, young lawyers are especially beneficial to clients, as we are more likely to see our clients' estates through probate and to act as executors to their wills.Chances are we're going to around to assist their families during a very difficult time.

You can get great reliable work from a baby boomer lawyer, but you can usually get the same quality work from me or one of my peers at a better price and with more personalized customer service. A lawyer doesn't need to have gray hair to do great work.

I try to incorporate those pillars into my daily work at The Virtual Attorney, and I always encourage my clients to do the same: figure out why they're different, embrace it, and make it part of their brand and their identity. So for all the business owners out there, I'd encourage you to do the same.

What makes you different? That's what your customers are after.

Take Care of Your Pets with a Pet Trust

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 12 Jan 2018 21:22:55 GMT

Pet trusts are ideal for those wanting to make sure their furry companions are well cared for if something happens.

It was not too long ago that pet owners were faced with a challenging dilemma- what happens if they die and there is no one willing to take care of their pet? Far too often, the potential monetary burden of paying to take care of a deceased friend or relative’s pets was enough for most folks to say “no thanks.” Well, while the problem technically still exists, Wisconsin and Illinois have made it potentially easier to find a friend or family member willing to take on that role and give a deceased individual’s pets a loving home. That’s because both states permit the creation of “Pet Trusts” to hold funds specifically earmarked for care of those animals.

What is a Pet Trust?

There are plenty of resources on the blog, and around the internet about what a trust does and what’s involved in its creation, but the basics are these:

An individual called the Settlor transfers property to an individual called the Trustee which the Trustee then manages according to a specific set of instructions left by the Settlor for the Beneficiaries (naturally, the people who benefit from the trust). The Settlor can also be the trustee, so it’s not necessary to immediately give up control of the property being placed in the trust. When the settlor dies, a successor trustee, chosen by him, takes over in that role.

With a pet trust, the settlor would typically be the owner of the pets. The trustee would be a chosen friend or family member that will be taking care of the trust. The beneficiary of a pet trust is technically the individuals who will receive any left-over funds after the animals pass away. However; from a functional standpoint, the real beneficiary is the pet.

How Does a Pet Trust Work?

Well, typically a written trust agreement would be drafted setting forth the terms of the pet trust and naming the trustee. Specific directions would be written into the pet trust which the trustee would be under a legal obligation to obey. For example, the trust terms could specify when the animal will receive medical care, like regular vet visits, whether it should eat specific types of food or go to a certain pet daycare one day per week. The terms can be written so that the settlor is confident that, not only will the pet’s lifestyle be consistent with what it was when it lived with the settlor, but also that the trustee will have the ability to take care of the pet without paying anything out of his or her own pockets.

What Happens When the Pet Dies?

That depends on when the pet dies. If the pet dies before the Settlor, and the trust is never needed, then the trust terminates. A new trust can be written for any new pets the settlor acquires. If the Settlor has passed away and the Trustee has been caring for the pet, who subsequently dies, then any assets that were being held in the trust for the animal’s care are distributed according to the trust agreement. Typically, any leftover funds can go to the individual that was charged with caring for the pet as a sort of “thank you”, or they can be distributed to other friends or relatives.

A pet trust is an easy way to give yourself comfort knowing that your pets will definitely be taken care of should something happen to you. Incorporating one into any estate plan can be done with minimal additional work by your estate planning attorney.

If you’re curious about what the actual law states in regard to pet trusts, I’ve included the language from the Wisconsin Trust Act and the Illinois Trusts and Trustees Act here.

Wis Stat. 701.0408 Trust for care of animal.

(1) A trust may be created to provide for the care of an animal alive during the settlor's lifetime. The trust terminates upon the death of the animal or, if the trust was created to provide for the care of more than one animal alive during the settlor's lifetime, upon the death of the last surviving animal.

(2) A trust authorized by this section may be enforced by a person appointed in the terms of the trust or, if no person is so appointed, by a person appointed by the court. A person having an interest in the welfare of the animal may request the court to appoint a person to enforce the trust or to remove a person appointed under this subsection.

(3) Property of a trust authorized by this section may be applied only to its intended use, except to the extent the court determines that the value of the trust property exceeds the amount required for the intended use. Property not required for the intended use must be distributed to the settlor, if then living, otherwise to the settlor's successors in interest.

760 ILCS 5/15.2 Trusts for domestic or pet animals.

(a) A trust for the care of one or more designated domestic or pet animals is valid. The trust terminates when no living animal is covered by the trust. A governing instrument shall be liberally construed to bring the transfer within this Section, to presume against a merely precatory or honorary nature of its disposition, and to carry out the general intent of the transferor. Extrinsic evidence is admissible in determining the transferor's intent.

(b) A trust for the care of one or more designated domestic or pet animals is subject to the following provisions:

(1) Except as expressly provided otherwise in the instrument creating the trust, no portion of the principal or income of the trust may be converted to the use of the trustee or to a use other than for the trust's purposes or for the benefit of a covered animal.

(2) Upon termination, the trustee shall transfer the unexpended trust property in the following order:

(A) as directed in the trust instrument;

(B) if there is no such direction in the trust instrument and if the trust was created in a non-residuary clause in the transferor's will, then under the residuary clause in the transferor's will; or

(C) if no taker is produced by the application of subparagraph (A) or (B), then to the transferor's heirs, determined according to Section 2-1 of the Probate Act of 1975.

(3) The intended use of the principal or income may be enforced by an individual designated for that purpose in the trust instrument or, if none, by an individual appointed by a court having jurisdiction of the matter and parties, upon petition to it by an individual.

(4) Except as ordered by the court or required by the trust instrument, no filing, report, registration, periodic accounting, separate maintenance of funds, appointment, or fee is required by reason of the existence of the fiduciary relationship of the trustee.

(5) The court may reduce the amount of the property transferred if it determines that the amount substantially exceeds the amount required for the intended use. The amount of the reduction, if any, passes as unexpended trust property under paragraph (2).

(6) If a trustee is not designated or no designated trustee is willing and able to serve, the court shall name a trustee. The court may order the transfer of the property to another trustee if the transfer is necessary to ensure that the intended use is carried out, and if a successor trustee is not designated in the trust instrument or if no designated successor trustee agrees to serve and is able to serve. The court may also make other orders and determinations as are advisable to carry out the intent of the transferor and the purpose of this Section.

(7) The trust is exempt from the operation of the common law rule against perpetuities.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Business Licenses

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 12 Jan 2018 21:15:51 GMT

Figuring out exactly what licenses you may need to operate your business can be confusing. These are the basics you should know about.

The licenses and permits you will need to operate your business vary widely depending on your location and type of business. However, there are a few items that will be necessary for nearly all new businesses.

Federal EIN

FEIN stands for Federal Employment Identification Number. Your company’s EIN will be used as an identifier on federal tax forms. If your business is going to have employees then you will need to obtain an EIN to use when reporting income to the government. While some business owners without employees have the option to file under their social security number, an EIN affords a business flexibility allowing it to set up retirement accounts and pay additional taxes, such as excise taxes. You’ll also use your EIN to do non-tax related taxes, such as set up business bank accounts, apply for credit or set up a smartphone plan.

Note that single member LLCs are disregarded for federal income tax purposes and may just use the member’s SSN in place of the EIN on federal income tax returns. However, an EIN may be necessary for other reasons as stated above.

State sellers permit

Depending on the type of business and the state in which it operates, it may be necessary to obtain a seller’s or resale permit. A seller’s permit is typically required for any business selling tangible goods or taxable services, unless they are specifically exempted by statute. A seller’s permit allows the state to identify those businesses that must pay sales tax.

Any specialized state licenses

Many areas of business require additional licenses in order to operate. For example, businesses such as car dealerships, establishments that sell liquor, real estate agents, cosmetologists, and many more require profession or business specific licenses in addition to a general business license. The types of business requiring additional licenses are set forth in statutes and regulations on a state-by-state and sometimes local basis.

Local registrations and permits

Along with the wide array of required permits and licenses at a state level, some businesses may need to register or obtain licensure at a local city or county-level as well. In order to determine if your business is required to register locally try calling the county or city clerk’s office or going to their website.

Information on Illinois business licenses:

http://www2.illinois.gov/business/Pages/default.aspx

Information on various required Minnesota business licenses:

http://mn.gov/elicense/az_indexes/licensebyname.jsp

Information on Wisconsin business licenses:

http://ww2.wisconsin.gov/state/license/app?COMMAND=gov.wi.state.cpp.license.command.LoadLicenseHome

For more tips on getting started with your business, download our guilde on "10 Legal Pointers to Starting Your Business."

Michael F. Brennan runs a virtual law office helping clients in Illinois, Wisconsin, and Minnesota launch and grow small businesses. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

What is a Virtual Law Office Exactly?

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 12 Jan 2018 21:12:06 GMT

Virtual Law Practice permits the attorney to interact with clients completely online through technological means.

I often speak to other attorneys about virtual law offices and how to incorporate some of the benefits of this model of legal service delivery into their own practice. Perhaps not surprisingly, I am frequently asked by friends, colleagues and others what makes my firm different than a traditional law firm. I thought I'd share a small slice of what us virtual practitioners mean when we say that we operate "Virtual Law Offices". As you'll quickly see, there's no "one-size-fits-all" mold that we all fit into. Instead, we operate our firms based on the belief that the utilization of technology creates flexibility for us to serve our clients for a much more reasonable cost than traditional law firm models while maximizing accessibility and convenience for the client.

Definition

Virtual Law Practice permits the attorney to interact with clients completely online through technological means. This removes the need for a brick and mortar office and the costs associated with one. The virtual law office also gives lawyers increased flexibility to work from practically anywhere at any time. Cloud computing , storage and software enable the attorney to essentially “bring the practice” on the road to anywhere with internet access. This in turn means: a) lower costs for clients; b) enhanced accessibility; c) increased flexibility; and d) high-standard legal service not otherwise seen online with businesses like Rocket Lawyer and Legal Zoom.

Virtual Law Offices can be defined any number of ways depending on who you ask. While technology plays a central role in their operation, the reality is that most, if not all firms are operating, at least in some sense, “virtually”. Whether it is the use of cloud-based document storage or an SaaS (Software as a Service) accounting platform, like Intuit QuickBooks , most firms incorporate at least some measure of “Virtual” functionality into their operations.

A 100% Virtual Law Office incorporates multiple virtual functions into a law firm model that enables attorneys and support staff to access essential firm functions, documents and client files at any time and from anywhere.

Common characteristics

Virtual Law Firms commonly possess most, if not all, of the following characteristics:

► Lack of a traditional office space

► Secure Web-based client portal with unique client login credentials***

► Cloud document storage and access

► SaaS Accounting, Billing, Invoicing, Bookkeeping, Calendaring, etc.

► Video Conferencing and real time document collaboration

► Electronic signature capabilities

► Unbundled, Limited Scope or “a la carte” legal services

► Web-based phone and fax services

► Document Automation

► Virtual support services

► Minimal in-person contact with clients

Benefits

Virtual Law Firms offer a number of benefits to both the client and the attorney. These include:

► Extensive geographical reach

► Lean operations and operational flexibility

► 24 hour accessibility to files and records from anywhere with an internet connection

► Scheduling flexibility

► Minimal operational expense and low overhead which can be converted into more attractive client pricing

► Client flexibility to work with the attorney from their home or work during traditional or non-traditional work hours when it fits into their daily routine

How to Take Title to Real Estate

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 12 Jan 2018 21:09:42 GMT

Did you know that there are multiple ways in which you can hold title to real estate? For first time home buyers, especially couples- both married and unmarried- deciding how to take title to their new home can be confusing

Did you know that there are multiple ways in which you can hold title to real estate? For first time homebuyers, especially couples- both married and unmarried, deciding how to take title to their new home can be confusing. Not only that, but small variants in the words used in a deed can have far-reaching consequences for each person should something happen to the co-owner. That’s why it’s important to know the major characteristics that differentiate the main ways to hold title to property.

Individually

This one is pretty self-explanatory. One person owns the real estate, and should something happen to them, the property would pass according to their estate plan , or if they had no estate plan, then according to the intestacy laws of the state in which the property is located. Disregarding homestead laws, this could have huge implications for some cohabitating couples. Take the following example:

Jack and Jill, an unmarried couple, have made the decision to live together. Even more significantly, they have decided to buy a nice two bed-room condo in the city. Jack, being self-employed for only a few years has trouble qualifying for a loan, so Jill applies, and is approved for funding on her own. She then purchases the condo for both of them to live in together with the understanding that it belongs to both of them.

Fast forward a year, and Jill is killed in a tragic car accident. Jack, distraught, finds out that Jill didn’t have a will, or any estate planning for that matter. As her estate moves through probate, he finds out that under the intestacy laws of their state, property belonging to individuals who die without a will goes to their siblings by law. Not good for Jack.

Since Jack and Jill were not married, Jill had no estate planning done, and she owned the condo by herself, it is now the legal property of her siblings as tenants in common, and not Jack. It’s doubtful that is what anyone wanted, even Jill’s siblings, but it illustrated the dangers of owning real estate and not appropriately planning for what may happen should the owner die.

That's why estate planning is so important for cohabitating unmarried couples .

Tenancy in Common

Tenancy in common is a way for two or more people to hold title to property. As tenants in common, individual owners may own any percentage of the property. For example, Jill’s three brothers in the above example would own the property 1/3, 1/3 and 1/3. But, say that one of her brothers, Jeff, decides that he’d like to gift his portion of the property to his two kids, who split Jeff’s interest 50/50. Now, the property is owned 1/3 by brother 1, 1/3 by brother 2, and 1/6 by each of Jeff’s kids.

Even though the owners all own different percentages of the property, all are allowed to use the entire property. That means that all of them are free to enjoy weekend getaways at the city condo without having to obtain permission from the other owners.

An interest in real estate held as a tenant in common is freely transferrable, whether by gift or sale during life, or by bequest upon death. A nice feature, no doubt; however, it can also have some negative consequences. For example, say that one of Jeff’s kids sells his 1/6 interest in the condo to a friend from college. The friend, like the rest of the owners, is now allowed to use that condo without approval of the other owners. A potential problem since he has a tenancy to throw wild parties and isn’t exactly a clean individual.

All of a sudden, the consequence of holding the property as tenants in common is that the other owners are forced to put up with this crazy college friend trashing the condo and building a negative reputation amongst the other condo owners in the building for all the noise complaints he receives.

Joint Tenancy

Similar to a tenancy by the entirety, a joint tenancy is a way for two or more individuals to hold property. In a joint tenancy, each individual holds an undivided interest in the property. The main differentiating feature of a joint tenancy over a tenancy by the entirety is that, upon the death of an owner, the deceased owner’s interest in the property automatically passes to the other owners by operation of law. This feature, called a right of survivorship is extremely beneficial from an estate planning perspective, especially for unmarried co-owners of property who would otherwise not inherit from each other upon death.

So, in our example of Jack and Jill, a joint tenancy ownership of the condo could have prevented Jack from getting kicked out on the street upon Jill’s death. Instead, even though Jill had no will, and the state intestacy laws said that her property passes to her siblings, the condo, help in joint tenancy with Jack would automatically go to Jack and Jack alone.

Tenancy by the Entirety

Like a joint tenancy, a tenancy by the entirety is a type of shared ownership. While most states recognize tenancies by the entirety, not all do. The important differentiating feature of a tenancy by the entirety is that it is only available to married couples (so, not Jack and Jill unless they tie the knot). Like a joint tenancy, an interest tenancy by the entirety passes automatically to a surviving spouse upon death of the other. Just as important, tenants by the entirety cannot transfer their interest in the property without the consent of each other.

In Illinois, individuals also have the option to hold title to real estate in an Illinois Land Trust , an option unique to Illinois and one that carries some intriguing benefits.

Owning property with other individuals can carry significant consequences depending on how the property is titled. That’s why it’s important for all co-owners to research the potential ways title can be held and, if appropriate, discuss their situation with an attorney who can advise them on the potential benefits and drawbacks of taking title one way over another in their state.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Lawyers and the Declaration of Independence

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 12 Jan 2018 15:15:56 GMT

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”

As the nation pauses from its busy routine to celebrate the signing of a piece of paper- the contents of which contain the collective ideals of dozens of men on freedom, morals and the foundation of a new nation- it’s far too easy to forget the men that played a monumental role in moving America towards its ultimate identification of “the land of the free and the home of the brave.”

Everyone remembers those men present that took on iconic status in the history of our nation- from John Hancock and his infamously flamboyant signature to famous figures Thomas Jefferson, Ben Franklin and John Adams. But, few remember the likes of the aristocrat Charles Carroll of Carleton or the aptly-named Button Gwinnett. The 56 men who signed the Declaration of Independence came from all sorts of backgrounds and professions. They were doctors, merchants, and one was even a minister. But, no profession was more common amongst the signers of the Declaration of Independence than lawyer. Of the 56 men who signed the document, 25 were attorneys. While lawyers can stereotypically get a bad rap, it’s safe to say that this country would not be what it is today without them- especially these 25 men.

John Adams . Massachusetts, Harvard, Admitted to practice (MA) in 1761.

Samuel Chase . Maryland, classically educated in Baltimore. US Supreme Court Justice, 1796-1811.

Abraham Clark . New Jersey, self-taught. Worked as a land attorney (and was said to be quite popular because of his penchant for representing poor farmers in title disputes).

William Ellery . Rhode Island, Harvard, Admitted to practice in 1770. Rhode Island Supreme Court justice, 1778.

Thomas Heyward, Jr . South Carolina, classically educated in England. South Carolina Judge 1783-1798

William Hooper . North Carolina, Harvard, Admitted to practice in 1760. Served one year as a Federal Judge (1789).

Francis Hopkinson . New Jersey, College of Philadelphia. Admiralty judge, 1780. Appointed Judge to the US District Court for the District of Pennsylvania, 1790.

Samuel Huntington . Connecticut, self-taught. Admitted to practice (CT) 1754, superior court judge, 1773, Chief judge of the Superior Court of Connecticut, 1784-1786.

Thomas Jefferson . Virginia, William and Mary. Admitted to practice (VA) 1767.

Thomas Lynch, Jr . South Carolina, Cambridge.

Thomas McKean . Delaware. Admitted to practice (DE) 1754, Chief Justice of Pennsylvania, 1777-1797.

William Paca . Maryland, Chief Justice of Maryland, 1778, Federal District Judge, Maryland, 1789-1799.

Robert Treat Paine . Massachusetts, Harvard. Admitted to practice (MA) 1757. Massachusetts Attorney General, 1777-1796. Judge, Supreme Court of Massachusetts, 1796-1804.

John Penn . North Carolina, Admitted to practice (VA) 1762, (NC) 1774.

George Read . Delaware, Philadelphia College. Admitted to practice (PA) 1753, Delaware Attorney General, 1761, Court of Appeals, 1780, Chief Justice of the State of Delaware, 1793-1798.

George Ross . Pennsylvania. Admitted to practice (PA) 1750, Admiralty Judge (PA) 1779.

Edward Rutledge . South Carolina, Oxford.

Roger Sherman . Connecticut, admitted to practice (CT) 1754. Connecticut Superior Court Judge, 1766-1789.

James Smith . Pennsylvania, Pennsylvania High Court of Appeals.

Richard Stockton . New Jersey, College of New Jersey. New Jersey Supreme Court Justice, 1774.

Thomas Stone . Maryland, admitted to practice (MD) 1964.

George Walton . Georgia, self-taught. Admitted to practice (GA) 1774. Chief Justice of Georgia, 1983-1789. Superior Court Judge, 1789-1798.

James Wilson . Pennsylvania. Admitted to practice (PA) 1767. Associate Justice to the US Supreme Court, 1989-1798.

Oliver Wolcott . Connecticut, Yale.

George Wythe . Virginia, admitted to practice (VA) 1746. Attorney General of Virginia, 1753. Professor of Law (William and Mary) 1769=1789. Judge of the Chancery Court of Virginia, 1789-1806.

Making Gifts to Minors

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 12 Jan 2018 15:10:44 GMT

Gifts under the Uniform Transfer to Minors Act are straightforward but come with some drawbacks.

There are numerous considerations when contemplating making gifts to minor children. Outright gifts are frowned upon because, under the eyes of the law, children are under a legal disability, which means that they do not have the legal capacity to administer property. That means that a guardian is necessary to hold or manage property for a minor child. Without some planning, it may be necessary for a court to appoint that guardian- a process that may outweigh any benefits of making the gift to a minor child in the first place.

One option that parents, grandparents and other loved ones who wish to make gifts to minor children, yet avoid the above scenario, have, is to make transfers under the Uniform Gifts to Minors Act (UGMA) or its successor, the Uniform Transfers to Minors Act (UTMA). Adopted as statutes in some form in every state, UGMA and UTMA provide methods for which to make transfers to minor children without some of the legal consequences of simply making outright gifts. They do so by replacing the requirement of a legal guardian with a custodian and allow for discretionary management of the property under the custodianship.

SO HOW DOES ONE QUALIFY A GIFT FOR UGMA AND UTMA?

Any adult (over 18 years of age) may make a gift to a minor under both Acts by transferring property to himself or herself as a custodian of the gift for that child. The specific manner depends on state statute, but the requirements are typically the same. The custodian then has the power to manage and disburse the gifted property for the minor’s benefit.

WHAT POWERS DOES THE CUSTODIAN HAVE?

A fair amount, actually. The custodian receives the property on behalf of the minor child and then has the discretion to pay any amount for the “support, maintenance, general use, and benefit of the minor.” Perhaps most beneficially, the custodian can act without court supervision or oversight and has very few accounting requirements.

WHO CAN SERVE AS CUSTODIAN?

Eligibility varies by state. But, generally speaking, the custodian must be an adult, even the donor himself, or a trust company.

WHAT ABOUT TAXES?

Income on gifts under UGMA and UTMA are taxed to the minor recipient. That means that an individual return may need to be filed, but the administrative work involved in the filing is much less headache than potentially dealing with court supervision of a guardianship had funds not been transferred to the minor under UGMA or UTMA. Additionally, with the income shifted from the adult donor to the child, with his or her own personal exemption and lower tax bracket, tax rates on the property can be much lower than if the property simply sat in the hands of the donor. What about estate taxes ? Well, typically, the assets transferred under UTMA are removed from the donor’s estate for estate tax purposes, with one substantial caveat. If the donor appoints himself or herself custodian of the account and dies while serving as custodian (i.e. prior to the minor child reaching the age of 21 and the funds being distributed outright), then the assets will be included in the donor’s gross estate for estate tax purposes.

WHAT ARE THE NON-TAX ADVANTAGES?

The main non-tax advantage of a UTMA account is simplicity. They are relatively easy to set up compared to another form of vehicle to transfer funds to a minor while retaining some form of control over their disbursement, such as a Crummey Trust . There are also much simpler and less administratively complex than a guardianship.

ARE THERE ANY DISADVANTAGES TO UGMA AND UTMA GIFTS?

As with any estate planning mechanism, UTMA gifts are not without disadvantages. One glaring drawback is the requirement that all funds be distributed outright to the child upon reaching the age of 21. That means that the protections in place throughout childhood to prevent the beneficiary from squandering the gift disappear just as the child is reaching legal drinking age during college. That very obviously may not be the most ideal time for unlimited access. Note, that there may be ways around this, but additional careful advanced planning is necessary to potentially stretch the time period for distribution to a later age.

CONCLUSION

UGMA and UTMA offer methods for making gifts to children with relative ease when considering other potential options. Careful planning is necessary to ensure that tax implications to the donor and custodian are minimized and required distributions match the goals and objectives of the donor as well as the predicted maturity of the beneficiary. When used correctly, they can be effective additions to any estate plan.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Data Security When Using an Online Lawyer

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 12 Jan 2018 15:08:18 GMT

Accessibility, convenience and ease of use- Online lawyers are a viable option for getting essential legal services.

Cloud Computing is on the rise as a way for companies- specifically, law firms to manage data. Like any new technology, cloud computing doesn’t come without risks, and a recent surge in data breaches at some of the country’s largest companies has understandably left many a bit wary about sharing personal or sensitive data electronically.

As a company that lives by the motto of “Redefining the Law Office”, at The Virtual Attorney, cloud computing is one of the foundations that enables the firm to provide convenience and accessibility to clients and everything related to their estate or business planning. Because of that, it’s important that our clients know that when they share sensitive information with us, it is going to stay with us. An assurance from me is one thing, but I feel it’s important for our clients to have some insight into exactly what precautions are taken and which safety measures are in place to make sure that assurance can and will be followed through upon.

At The Virtual Attorney, we use a platform called My Case to manage data and documents in the cloud. My Case is a third party provider of practice management tools for lawyers and law firms. As a third party provider, My Case takes a number of measures to ensure that your data stays confidential and secure. When you login to the client portal area of the firm’s website, you are accessing the My Case system.

Here are some of the highlights of the protections and security measures in place to make sure your sensitive information stays secure and stays between us.

Physical Security

My Case has built its data management platform on Amazon EC2 cloud servers . Yes, that Amazon. Working with such a goliath of a company means that The Virtual Attorney and My Case are able to keep your data stored and hosted on some of the country’s most advanced servers. According to Amazon, those servers are contained in highly secure data centers that utilize state of the art surveillance systems, 24x7 security staffing and regulated, highly privileged access standards as well as special protection against environmental events that could otherwise jeopardize stored data.

Your data is also physically backed up on two hard drives stored with The Virtual Attorney, so even in the highly unlikely event of a catastrophic failure of our cloud servers; you can rest easy knowing that your data is easily recoverable from our backups.

State of the Art Encryption

According to My Case, your data is encrypted in multiple ways. When you access the system through The Virtual Attorney and your unique secure client portal, all data you share is encrypted before it is transmitted anywhere using 128-bit SSL connections . Those are the same type used for online banking, investing, accessing healthcare information, etc.

Once data is received by My Case, it uses 256-bit AES encryption to protect your data before it is stored to disk. In other words, your data is encrypted in the same way authorized for storage of top secret military information. So, in the highly unlikely case that the physical servers were actually breached, your data is not going to be in a form capable of analysis.

Finally, as an added level of security, My Case assigns a unique identification key to every document uploaded to the system- whether by you or by us. When the document is removed or deleted from the system, the key is deleted as well. That means that, even in the event a redundant copy of the document remains on the server for a few days it can’t be recovered by anyone maliciously looking for it.

These are just a few of the highlights of the lengths we go to to ensure your confidential information remains safe and secure. If you have specific questions or concerns about data privacy and security when using The Virtual Attorney for your estate planning or business law needs, please don’t hesitate to ask. Ethically, attorneys are required to go to great lengths to keep client information confidential. While cloud computing has transformed the way that data is shared and stored, you can rest assured that you are being taken care of.

For more information on specific My Case or Amazon security features you can read My Case’s security whitepaper or Amazon’s Overview of Security Processes .

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Sole Proprietorship Basics

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 12 Jan 2018 14:59:59 GMT

It’s the simplest and by far the most common type of business structure used to start a business, and it comes with some important rights and responsibilities.

LLCs are all the rage these days, but did you know that even without formally forming a business, like an LLC or corporation, you may very well be operating a business without even considering it as a business. For example, do you have an Etsy shop? Cut the neighbors’ lawns around the neighborhood? Sell things on eBay ? Babysit? Do freelance writing? If so, you have a business, and it’s called a sole proprietorship.

So how is a Sole Proprietorship Formed?

Pretty easily actually. Technically, nothing is required to form a sole proprietorship aside from conducting a business activity. As long as you are the only owner, or the only person actually realizing profit from your venture, you are a sole proprietorship.

If I have a Sole Proprietorship, What Do I need to Worry About?

Your worries should be the same things that all business owners are worried about. But, from a legal standpoint, a few items to pay close attention to are taxes, licenses and zoning.

Taxes : As a business owner, you need to pay tax on all income your business generates. That means that, if you sell a musical instrument on eBay, you’ll have to report the income to state and federal tax authorities. Similarly, if you are a hairstylist or run a moving company, you’ll need to report all cash tips as income as well. Failure to do so can lead to substantial fines, among other penalties.

Now that you’re generating income on your own, you’ll also need to make periodic estimated tax payments to the IRS and state taxing authority. The logic is this- when you work for another company, your employer pays periodic taxes on your wages when you’re paid (look closely at your paystub and you’ll notice those items). The government is essentially getting an interest free loan from you. But, when you’re self-employed, the government is missing out on your tax dollars until the end of the year. To bypass this, the government required business owners to file estimated tax payments four times per year. The payments usually coincide roughly with the end of each quarter of the fiscal year (if you have a standard calendar fiscal year for your business).

Licenses : Practically all businesses are subject to state and/or federal licensing bodies. For example, as an attorney, I must be licensed to practice law by each state where I offer my services. Similarly, a cosmetologist is licensed to cut hair, and a daycare is licensed to provide childcare services. Licenses are the government’s way of keeping tabs on who is doing what in order to ensure that some sort of standards are being met in the delivery of those goods or services. Figuring out exactly which licenses your business will need can sometimes be overwhelming. Luckily, there are some convenient tools out there to help you in your search. For example, the U.S. Small Business Association has a nifty business license search tool that will give you a good starting point based on zip code and profession.

Zoning : Zoning is the government’s way of providing some sort of order to the organization of communities. It’s the reason you (probably) don’t live next to a power plant or find your church in the middle of an industrial complex. What zoning means to you as a business owner depends on what your business does. The vast majority of sole proprietors operate their businesses from home. While most jurisdictions permit home based businesses, you should be sure to check with your local governing body prior to setting up shop. There may be restrictions on what you can and can’t do, for example, whether you can put up a sign in your front yard advertising your business or whether you need a certain number of spaces for cars to be parked. Zoning maps and regulations can become a bit tedious to review, so this is an area where an experienced land use or zoning attorney can simplify your job.

What About Naming My Business?

As a sole proprietor, the legal name of your business is your own. For example, John Smith, hairstylist would go by something like John Smith Hair, Hair by John Smith, etc. If you choose to operate under a different business name, then you will need to apply for an assumed or trade name. The requirements for making such a filing vary greatly by state, county and city or village, but typically involve filing an application with the appropriate governing body, publishing notice of your intended use of the name and paying a fee. In John Smith’s case, he could then choose to do business as Crazy Clown Hair, Fun Cuts, etc. SBA.gov , as well as your states business licensing body (typically, the Secretary of State) and especially your county website can be great resources for figuring out the exact requirements to apply for an assumed business name where you live.

So What Are the Advantages of a Sole Proprietorship Over Other Business Structures?

The biggest advantage to operating as a sole proprietorship is simplicity. Essentially, you continue to take actions as an individual without much formality. Another benefit is tax preparation. As an individual operating your business, you’ll simply report all income and loss on a Schedule C when you file your Form 1040 at the end of the year.

Are There Disadvantages to Operating as a Sole Proprietorship?

As with any business structure, there are natural disadvantages to operating a sole proprietorship. By far, the biggest drawback is unlimited personal liability. As a sole proprietorship, there is no separate entity conducting business as there is with an LLC or Corporation. The business is you and you are the business. That means that all actions you take (or fail to take) carry a lot of weight. For example, if you get a loan from a bank to open a home daycare and the business fails, you’ll need to personally repay the bank. In reality, the drawback of unlimited liability is sometimes overblown as financial institutions will be hesitant to lend money to LLCs or corporations without the owner’s personal promise to repay, and an air tight insurance policy can protect against loss or lawsuits. Nevertheless, it’s important to be aware of the legal distinction of a sole proprietorship compared to a formal corporate entity like an LLC when deciding how to structure your business.

Ultimately, the decision on how to structure your business is yours and yours alone. Each form, including the sole proprietorship has its benefits and its drawbacks. But with some research and advice from your accountant and attorney you’ll certainly be able to find the business structure that is most beneficial to your operations as a new business owner.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Requirements for Employers

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 21 Dec 2017 22:32:13 GMT

If you have employees be sure that you know about these 7 things.

Every business owner thinks about how his or her company will grow from a small entrepreneurial idea, to a budding business, to something sustainable and long-lasting. Employees are almost certainly part of that process. But, for many small business owners, employment law is a complex web of seemingly endless laws and regulations which can easily trip up even the savviest and cautious business owner leading to unwanted and often costly consequences. So what’s a small business owner to do? Well, a few things come to mind. First, do some research and become familiar with the potential issues that may face your business if and when you decide it’s time to bring on other bodies. Second, find a knowledgeable business attorney well versed in the employment law issues specific to your industry and geographic area. Step two is up to you- but my hope is that this post will get you off on the right foot in your search for knowledge.

Here is a rundown of some of the potential issues and laws you may be dealing with when you decide it is time to hire your first employee.

Wages & Hours

The Fair Labor Standards Act (FLSA) sets standards for employee wages and hour restrictions. This includes required minimum wage and overtime payments for hourly employees who are not otherwise exempt. It also restricts the hours that children under the age of 16 are permitted to work.

Workplace Safety & Health

The Occupational Safety and Health (OSH) Act is a federal law which sets standards related to workplace health, safety and sanitation. While states have their own laws, for the most part they closely mirror those standards set by OSHA, and at a minimum must meet the requirements of OSHA.

Unions & Their Members

The Labor-Management Reporting and Disclosure Act (LMRDA) sets standards for employer relations with unions and their members, among other things. While most business owners do not have to worry y about dealing with unions, certain trades and manufacturing businesses may find it prudent to discuss the specifics of LMRDA and other federal and state union laws with an attorney specializing in union law.

The Family and Medical Leave Act

The Family and Medical Leave Act (FMLA) is applicable to practically any employer as it sets requirements for time off due to family or medical reasons. Unfortunately for employees, that time off is not legally required to be paid (unless state law states otherwise). The FMLA provides eligible employees of covered employers to take up to twelve weeks (26 weeks to care for a sick or injured service member) of unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave. There are less strict (or potentially no (requirements for businesses under 50 employees, so while you may be viewed as an awful boss for refusing to comply with FMLA, you may not be legally required to do so.

US Department of Labor Postings

As an employer, you may be required to inform your employees of their rights by way of postings in the workplace. The elaws Poster Advisor is a handy tool that can be used to determine which poster(s) employers are required to display at their place(s) of business.

Taxes

As an employer, you are going to be required to withhold and pay certain taxes on behalf of your employees . For the business owner that is used to having someone else do their taxes and accounting, this can become a bit overwhelming. There are payroll companies out there that can take care of all of this for you for a reasonable monthly or annual fee.

Workers Compensation Insurance

Under the workers' compensation system, employers are required to purchase insurance that provides benefits to employees who suffer work-related injuries and illnesses. Workers compensation laws are state-specific, but as a general rule, if you, as the business owner, aren’t the only person working for your business, you are going to need to obtain coverage. The news isn’t all bad, of course. In the event you are sued for an injury that takes place on the job, your insurance is hopefully going to prevent your company from going under. Fines for failure to obtain coverage can be substantial- up to $500 per day that the business doesn’t carry insurance. This is one of those areas where the cost of a policy, while inconvenient, is worth it.

Of course, there are a host of other federal, state and even local laws and regulations that your business is going to have to comply with when you decide to take on employees, but don’t let that scare you. With a little bit of research and help from your attorney and accountant, you can be sure that your business is going to stay out of trouble allowing you to focus on building your business into what you want it to be.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Estate Planning for Retirement Accounts

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 21 Dec 2017 20:17:59 GMT

These significant assets take some special planning

RETIREMENT ACCOUNT BASICS

Retirement accounts, like IRAs, Roth IRAs and 401(k)s are often some of the most substantial assets that people own, so it’s essential to consider them when doing your estate planning. Failure to plan for these assets or poor planning can lead to a number of unintended and potentially devastating consequences.

THE BASICS

Retirement accounts do not pass through an individual’s will or trust unless certain special measures are taken. Instead, retirement accounts pass to chosen and named beneficiaries according to the account agreement and the beneficiary designations the account owner puts in place. Typically, if an account owner fails to name a plan beneficiary, or the beneficiary designation fails for some reason, a contingent beneficiary may be named. Without naming a contingent beneficiary, the plan will determine the beneficiary or beneficiaries, which sometimes may not match the wishes of the account owner.

DISTRIBUTIONS

Distributions, whether discretionary or mandatory made from the account, are subject to income tax. This means that, in the event the account owner dies and the named beneficiary is now the owner of the policy, he or she will pay tax on everything that is withdrawn from the account.

Distributions from retirement accounts can be discretionary or mandatory. Discretionary distributions can occur upon the request of the plan owner, most times with an additional penalty for early distribution. They can also be mandatory. Mandatory Required Distributions (MRD) are made to account owners or beneficiaries after a certain point whether they are desired or not. That means that planning is necessary in order to avoid untimely tax liability on distributions. MRDs are determined by looking at the owner’s life expectancy, and they must begin no later than April 1st of the year after the account owner reaches age 70 ½.

Rules for MRDs vary depending on the owner’s age, whether the plan has an identifiable designated beneficiary, whether the account owner is living at the time required distributions must begin and whether the account owner is married. The chart below illustrates the period used to make distributions.

Did the account owner die before reaching 70 ½?	Is there a designated beneficiary?	Period for Distribution
Yes	Yes	Beneficiary’s life expectancy
Yes	No	Five years from owner’s death
No	Yes	Longer of (1) beneficiary’s life expectancy or (2) deceased owner’s life expectancy
No	No	Deceased owner’s life expectancy

NAMING BENEFICIARIES

More often than not, an account owner will name a spouse as the beneficiary under a policy. That’s usually a good idea, as it will enable the spouse to roll over the retirement account into his or her own account upon the death of the account owner thereby enabling him or her to continue growing the account funds tax deferred. If a spouse is not named, account owners should be sure that someone is named as the beneficiary to the account, as accounts without a named beneficiary will be deemed owned by individuals according to the account agreement. It is also important to name a contingent beneficiary in the event the primary beneficiary passes away or otherwise cannot inherit the account funds upon death.

EARLY WITHDRAWALS

Account assets that are withdrawn before the account owner reaches age 70 ½ are subject to income tax as well as a 10% penalty. Assets withdrawn after age 70 ½ are also (usually) subject to income tax upon withdrawal, however by leaving the assets in the plan until a later date, an account owner permits the assets to grow meaning that, when distributions become mandatory, the increased value of the account will offset the tax incurred.

NAMING A REVOCABLE TRUST AS BENEFICIARY

It is common for account owners that have done some estate planning to want to name a revocable trust as the beneficiary of their retirement accounts. The benefit of such an arrangement is that a trust may provide much needed management and control for minors or beneficiaries that are too young or monetarily unsophisticated to properly manage such a large sum.

Naming a revocable trust as the beneficiary of a retirement account does come with some potential pitfalls and consequences, however. Tax rates on trust income can be substantial and account owners must be very careful to ensure that the revocable trust named as beneficiary of an account has clearly identifiable individual beneficiaries. Moreover, trusts will only be viewed as acceptable beneficiaries if some very specific requirements are met. A four part text is used to determine if the trust is an acceptable beneficiary of a retirement account: a) the trust must be valid under state law; b) the trust must be irrevocable; c) the trust beneficiaries and their ages must be readily identifiable; and d) trust documentation must be provided to the plan administrator by a specified date.

If the four part test is met, then mandatory required distributions will be required based on the age of the oldest trust beneficiary’s life expectancy. That means that younger beneficiaries will be forced to take larger mandatory distributions over a shorter period of time and pay higher taxes on the distributions.

POTENTIAL SOLUTIONS TO CONSIDER

While it may seem convenient to name an already existing revocable trust as the beneficiary of a retirement account, many times a better solution is to create separate individual only trusts for each individual beneficiary. An individuals-only trust requires that all account assets paid to the trust be allocated to a sub-trust, which, if properly drafted permit minimum required distributions to be calculated based on the primary beneficiary’s life expectancy. Using this type of solution requires careful drafting of the beneficiary designations, and care must be taken to each separate trust as the appropriate beneficiary.

As with all estate planning mechanisms, it’s important to evaluate your individual goals, objectives and concerns in order to make the best possible decision on how assets should be planned for.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Irrevocable Life Insurance Trusts

michael.brennan@mfblegal.com (Michael Brennan) — Mon, 18 Dec 2017 19:38:29 GMT

Upon death, individuals are entitled to leave their assets to chosen beneficiaries tax free so long as the total value of those assets is less than the current estate tax exclusion amount in place for the year in which the death occurs. Apart from real estate, one of the most valuable assets that many people own, or will consider purchasing during their lives is life insurance. Often, these policies can payout millions of dollars so when their value is added to the total value of all other assets in an estate, an individual can quickly approach the limit of what the IRS permits to be given away upon death tax free.

With an estate tax rate of 40%, an estate valued at more than the exclusion amount can be faced with a substantial tax bill. Because of this reality, estate planning attorneys use a number of tools and techniques to reduce the total value of what will be included in the decedent’s estate for tax purposes. Once of those tools is the Irrevocable Life Insurance Trust.

So what are Irrevocable Life Insurance Trusts and how do they work?

An irrevocable trust is a trust in which the trust creator, also known as a grantor, gives up the ability to subsequently amend or revoke the trust is any substantial way, unlike a revocable trust which may be amended freely. By electing to make a trust irrevocable, the trust creator triggers a number of advantages, particularly from tax and creditor standpoints, so they can be very beneficial in the right circumstances.

One type of irrevocable trust is the Irrevocable Life Insurance Trust (also commonly referred to as an ILIT). At its most basic, an ILIT is simply an irrevocable trust that holds a life insurance policy. That policy is usually on the life of the trust creator. Typically, ILITs are used to accomplish four main objectives:

1) They provide a means to pay estate taxes, or other debts due upon the death of the grantor. This can eliminate the potential need to sell off assets such as real estate in order to have enough cash to pay the tax bill.

2) They provide a large source of income to the beneficiaries of the trust upon the death of the grantor.

3) They shelter the value of the life insurance policy from estate taxes, which are currently imposed at a whopping rate of 40% for amounts over the exemption amount.

4) They shield a substantial asset from creditors of the grantor and generally cannot be touched to satisfy other debts unless they are the debts of the beneficiary.

Requirements for an Irrevocable Life Insurance Trust to create those benefits.

Generally speaking, the assets included in the trust, known as the trust corpus, will not be included in the gross estate of the individual creating the trust, known as the grantor, if:

1) The trust is irrevocable. This means that once it is created the grantor must give up the ability to subsequently revoke or amend its terms.

2) The grantor is not the acting trustee. This means that someone other than the grantor must ultimately be in charge of managing the trust and bear responsibility for carrying out the terms of the trust agreement.

3) The grantor has no incidence of ownership over the insurance policy. This means that the grantor must give up all rights to subsequently name a different beneficiary, remove the policy from the trust or otherwise direct in any way how the trust will operate or what will be done with the trust corpus. A minor exception to this rule is that, according to the IRS , the grantor may retain the power to remove a trustee and appoint a successor trustee. An exercise of that right is not a violation of the requirement that incidence of ownership be given up.

How is an Irrevocable Life Insurance Trust created?

During life, the grantor creates the trust by having an attorney draft an irrevocable trust agreement. The trust agreement outlines the terms of the trust, when distributions should be made and identifies the trustee and beneficiaries, among a host of other things. The grantor then funds the trust with a life insurance policy on his or her life. Existing policies owned by the grantor before the trust is created may be used, but it is simpler to use a newly purchased policy for reasons outside of the scope of this article.

Of course, it will be necessary to pay premiums on the policy. This can be done in a number of ways, but perhaps one of the easiest methods is for the grantor to make annual transfers of cash to the trust which will enable the trustee to pay the premiums. However, care must be taken in any approach, as well as in drafting the trust provisions to ensure that contributions for payment of policy premiums can be viewed as gifts of a present interest in order to maximize annual gifting exclusion amounts while creating a strong probability that the gifts will actually be used to pay the policy premiums. For more detailed reading of how this may be structured, see a previous post on Crummey Trusts .

Irrevocable Life Insurance Trusts are a relatively simple, yet effective way for individuals to leave substantial amounts of money for their loved ones when they pass away without increasing tax liability and can be used in conjunction with other estate planning tools to create a comprehensive estate plan that is specifically tailored to any number of goals and objectives.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Estate Planning for Married Couples

michael.brennan@mfblegal.com (Michael Brennan) — Mon, 18 Dec 2017 19:23:50 GMT

From unlimited lifetime gifting, to passing large sums of money upon the death of the first spouse, married couples enjoy a number of benefits that unmarried individuals do not.

Whether you’ve been married one year or 20, these are the minimum estate planning documents that a married couple should have:

1. A Durable Power of Attorney for Healthcare (including HIPAA Release)

2. A Durable Power of Attorney for Finances and Property

3. Will

If you want to direct where your possessions will go if you die, then it’s important to have a last will and testament .

If a person dies without a will , state law determines how the assets will be distributed. That will mean less money and more stress for the heirs—an unpleasant prospect for family members already dealing with the tragic death of a young person.

In addition, married couples enjoy a number of benefits when it comes to passing property upon death. While others need to consider the tax implications of leaving amounts over a certain threshold, spouses can leave unlimited assets to each other in a will . That means that upon the first death, substantial gifts left to an inheriting spouse will not be subject to hefty taxes. However, it’s important to involve an attorney here, as the death of the second spouse may bring with it a number of unwanted tax consequences. Strategic drafting of a comprehensive estate plan can fully utilize these benefits while also eliminating any unwanted consequences.

4. Living Will

A living will is a legal document used to indicate which treatments you do or do not want applied to you in the event you either suffer from a terminal illness or are in a permanent vegetative state.

Drafting a living will is important so that nasty disagreements don’t occur if something happens to you.

5. Authorization for Final Disposition

Items to consider are:

► Burial or cremation

► Contact information for a chosen funeral home, cemetery, etc.

► Details about your desired ceremony

► Details about any marker you may want

6. Appropriate beneficiary designations on retirement (and other) accounts

In order to ensure that these items go to your spouse if you die, it’s important to name him or her as the beneficiary of the policy.

Married couples also enjoy some additional benefits when it comes to planning for the disposition of retirement accounts, if done correctly. For example, a spouse inheriting an IRA will be able to roll the funds over to his or her IRA if appropriate steps are taken which will permit the surviving spouse to space out distributions over a longer period of time.

If changes are necessary you should make sure to file a new beneficiary designation form with the company.

7. Title to Real Estate

If you and your spouse own real estate together, then you should consider your options when it comes to how title to the real estate should be titled and held.

It’s a great idea to talk to your attorney about what certain types of real property ownership mean to you and your spouse.

8. Life Insurance/ Life Insurance Trusts

Life insurance can provide a windfall for your spouse should you pass away suddenly, so it’s a good idea to look at your options with your insurance agent.

One drawback of life insurance is that its value gets included in your estate for tax purposes upon your death. With some policies paying out millions of dollars, this can have a significant impact on your surviving spouse, as it may push your estate over the estate tax threshold, thus reducing the award your surviving spouse will receive.

Estate Planning Checklist for Married Couples

► Durable power of attorney for healthcare (with HIPAA release)

► Durable power of attorney for finances and property

► Last will and testament

► Living will

► Authorization for final disposition

► Appropriate beneficiary designations

► Check title to Real Estate

► Irrevocable Life Insurance Trust

Potential additions to any basic plan

► Revocable living trust

► Retirement plan trusts

► Asset allocation between spouses

Red Flags and words of caution

► State law governs powers of attorney, wills and their requirements for execution. So it’s important to familiarize yourself with these requirements BEFORE attempting to draft any of these documents on your own.

► Better yet, find an estate planning attorney that can do it for you.

► Many states, like Illinois and Wisconsin, have statutory forms that can be used to create a power of attorney. If you use them, be sure to follow the instructions very closely. Otherwise, you run the risk of the document being invalid.

► While the statutory form may accomplish much of what you need it does not contain some powers such as the power to make gifts or change beneficiary designations on a trust, so depending on the individual the extent of his assets, the statutory form may tie an agents hands in some ways.

► The requirements for making a valid will vary by state and are VERY SPECIFIC . One mistake in the drafting or execution of the document could invalidate it meaning that your wishes won’t be followed. This is not an area to mess around with DIY options. Hire an estate planning attorney to guarantee that there are no issues down the road.

► Beneficiary designation forms are usually pretty easy to fill out and are typically made readily available by insurance companies and financial institutions. If you’re unsure of the current beneficiary designations on your accounts, contact the institution or fill out a new form just to be safe.

► DO NOT try to modify a real estate deed without consulting an experienced attorney. You run the risk of triggering some unwanted taxes and other negative consequences.

► DO NOT attempt to utilize an irrevocable life insurance trust without an attorney’s guidance. A slip up here can be costly, and reaching in to a poorly drafted trust to remove a policy can be very challenging.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Illinois Land Trusts Explained

michael.brennan@mfblegal.com (Michael Brennan) — Mon, 18 Dec 2017 19:20:41 GMT

In Illinois, individuals have a unique option for holding title to real estate not otherwise available to individuals in the vast majority of other states. The Illinois Land Trust is a creation of common law, though now is governed by a number of Illinois statutes. While less common these days than it has been at times in the past, Illinois Land Trusts can be effective estate planning tools in certain situations.

What is an Illinois Land Trust?

Basically, an Illinois land trust is a mechanism used to handle ownership in real estate. Similar to a revocable living trust , with a land trust, title to the real estate is held by a trustee while the beneficiary (i.e. owner) of the property retains the ability to enjoy all the rights and responsibilities of owning the property. When property is placed into a land trust, the interest is essentially converted to personal property. The consequences of that characterization are that the property becomes simpler to manage and convey than an interest in real property.

The beneficiary of a land trust retains the right to end the trust at any time and transfer the property out of the land trust as well as the ability to direct the trustee when to act and what actions to take in relation to the property.

How is a Land Trust Created?

While setting up a land trust can often be a relatively simple procedure, it’s imperative to involve an attorney experienced with them. A small seemingly inconsequential error in its set up and create the potential for headaches down the road.

Generally, a land trust is set up with these basic steps:

a) A contract known as a trust agreement is prepared by an attorney. Under the terms of the trust agreement you, the owner, instruct a trustee to hold title to your real estate. Among other things, the trust agreement also informs the trustee who has the authority to manage and control the property and who will become the new owner of the property upon your death. Land trust trustees are corporate entities that have a wealth of experience in their management.

b) A Deed in Trust is drafted by your attorney and signed by you. The Deed in Trust is recorded with the Register of Deeds in the county in which the property is located and indicates the property has been transferred to the land trust.

c) The trust agreement is filed with the corporate trustee and necessary fees are paid.

What Are the Benefits of a Land Trust?

Privacy.

After property is placed in a land trust and legal title is passed to the corporate trustee, the identity of the true owner of the property is essentially hidden. That’s because the Deed in Trust on record with the county indicates that the property is owned by the land trust instead of in the individual’s name. Further, the trust agreement is a private document. In reality, anonymity is not usually all that important to individuals who own real estate in a land trust. However, it can be important in some situations. For example, an investor purchasing a number of properties for a special and potentially unpopular purpose, he or she may not want to shoulder the burden of negative public inquiries and perception.

Protection .

Real estate owned by multiple individuals, for example investment property held in a general partnership can be subject to any number of issues due to negligence of one owner, death, disability, divorce or a judgement against one owner. When the property is placed in a land trust, a judgment against one of the owners will not create a lien on the property, so the ownership interests are protected. While creditors may still have claims against the assets of an owner, a land trust provides an additional barrier they must clear in order to assert claims against the property.

Succession of Ownership.

Upon the death of the original beneficiary, property held in a land trust passes to the contingent beneficiaries indicated in the trust agreement on file with the trustee. This means that probating the property is not necessary. The interest passes immediately enabling the new beneficiary (owner) to enjoy the property instead of having to wait a substantial amount of time for probate to close.

Ease of Conveyance.

A land trust offers a convenient way to mortgage and sell property with multiple owners. Since all interests in the property have been transferred to the trust, it is unnecessary to obtain deeds from every single beneficiary and the release of spousal homestead rights.

Disposing of part interests.

Since interests in real estate held in a land trust are deemed to be personal property interests, they may be assigned to other individuals. This includes assigning only part of the interest. Instead of transferring interests in the property by deed, interests in property held in a land trust are managed by modifying the beneficiary designations and rights under the trust agreement. This means that it is much simpler to have a large number of part owners of a property that may frequently change (like a group of investors) than it may be if the property is simple held outright in the names of the owners.

While the Illinois land trust is not for everyone or appropriate for every situation, it can offer a number of benefits to real estate owners. However, before attempting to transfer your property to a land trust it’s important to consult with an attorney familiar with them so that you can be sure it’s the right move for you and everything is done correctly.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Probate in Illinois

michael.brennan@mfblegal.com (Michael Brennan) — Mon, 18 Dec 2017 19:11:30 GMT

Here's what happens when a loved one dies.

When a family member passes away there are often more questions than answers. Naturally, some of those questions are about what needs to be done in order to transfer the deceased individual's assets and property to loved ones, friends or charities. Depending on what the deceased individual owned at the time he or she passed away it may be necessary to go through probate.

What is Probate?

Probate is a legal process that accomplishes three main goals. Probate involves a) collecting all of the deceased individual’s (or decedent as he or she is commonly referred) assets, b) determining and paying the decedent’s debts, if appropriate, and c) distributing the remaining assets to the individuals and entities named in the will , or if there is no will, then according to state intestacy laws . The assets that are included in the probate process depend on how they were owned during the decedent’s life, but generally the probate estate does not include jointly held property, property held in trust, life insurance, and most retirement accounts. These assets are not subject to probate which means that they can be transferred without supervision of or notice to the court.

Is probate necessary?

Whether probate is necessary upon the death of a decedent depends on the state laws of the place of residence of the decedent and at times the place where the decedent’s property is located. It also depends on the decedent’s assets and the value of the probate estate. For example, in Illinois probate is typically necessary if the probatable assets (remember, this doesn’t include the items listed above) is greater than $100,000 or it includes real estate. Estates that are smaller than $100,000 without any substantial outstanding debts may be settled by using a much simpler procedure. In Illinois, that is accomplished through a small estate affidavit . An attorney will help you determine which procedure may be appropriate.

I am named as the executor in the decedent’s will. What do I need to do?

If you are in possession of the decedent’s will, you are legally required to file the will with the court in the county where the decedent resided within 30 days of death. This does not start the probate process. It is merely a legal requirement so that there is a record of the will. In the event you and your attorney determine it is not in everyone’s best interest to probate the estate, creditors of the decedent may open the process on their own if they chose to do so.

I filed the will with the court, now what?

Once the will is filed with the court, the next step is to meet with a probate attorney. The probate process begins with scheduling a consultation with a probate attorney. Typically at the consultation, the attorney will collect a number of documents, ask questions and collect personal information that will enable him or her to determine appropriate next steps. The attorney will typically request for you to bring the following documents with you to the consultation:

► Decedent’s will

► Copies of the death certificate

► Other estate planning documents, such as trust documents and will codicils (amendments)

► Copies of the decedent’s most recent income tax returns

► Personal information of the decedent like social security number, full address, etc.

► Family information including a list of family members, their social security numbers, full mailing addresses, etc.

► A list of the decedent’s assets, including bank accounts, retirement accounts, insurance policies, real estate deeds, and a list of personal property

► Debts like a mortgage, credit card bills, unpaid taxes, other loans

► Whether the decedent is a party to any lawsuits or potential lawsuits that may arise during administration of the estate.

The attorney will ask you questions about the decedent and the family. For example, he or she may want to know about the relationships the decedent had with family, whether all family members are known to you, whether there were previous marriages or children of the decedent and whether the will has been filed with the court.

The attorney’s job at this point in the process is to determine a) whether probate is necessary, b) whether you have standing to open probate (either by being named executor in the will or due to your relationship with the decedent), and c) the next steps that need to be taken.

The decedent had a will, but it does not name me as the executor. Can I probate the estate?

Typically if there is a valid will naming an executor, that executor is the only individual with standing to open probate. So, if that is someone else, you should encourage that person to meet with the attorney. If there is no will, then state law permits a number of people to open probate including the decedent’s spouse or children.

What happens if the attorney and I determine that a formal probate is necessary?

After the initial consultation with the attorney, if it is determined that a formal probate is necessary, then you and the attorney will sign an engagement letter outlining the attorney’s responsibilities and fees for which the estate will be responsible. Once an engagement letter is signed, the executor must file a petition to probate the estate and be formally appointed as the executor. Several other documents will likely need to be filed with the petition.

Once the court has accepted the petition and appointed the executor, the executor will be required to send notices to a number of people, including those named in the will and to heirs of the decedent. Additionally, if there are known creditors or the decedent, the executor must send notice to those creditors. Potential unknown creditors can be served notice through a publication in a newspaper in the county where the probate was opened.

Once notice is provided to creditors, the clock begins to toll. From then on, in Illinois known creditors have six months to file a claim against the estate while unknown creditors have two years. During the claim period, personal property can typically be distributed, but other assets should be held until the end of the claim period, or until the probate is closed, if closed by the attorney at an earlier date.

Once the claims period has passed, a final account and report must be prepared and filed with the court. Once approved, the court will close the probate and the estate assets may be distributed to the appropriate beneficiaries.

Sounds great, so how long should I expect the whole probate process to take?

The timeline for a complete probate depends on a number of factors and whether complications, like a potential beneficiary challenging the validity of the will or trouble tracking down a beneficiary, arise. However, from filing the petition to open probate to closing, a typical timeframe for uncontested probate matters in Illinois is between 8 -12 months.

What is the attorney’s role in the probate process?

You and your attorney will agree on the scope of services to be provided. Depending on your preferences and comfort level, you may decide to take on the majority of tasks and keep costs down. Or, you may determine that the attorney is better suited to do most of the work for a higher fee. Each case is different, but generally speaking, you should look for your attorney to assist with admitting the will to probate and having you named executor, assistance with completing an inventory of all estate assets, preparation of required reports, notices, filings and accountings and general advice throughout the process. You may decide to make formal appearances at hearings on your own behalf or enlist your attorney’s services in that department as well. In addition, tax filings likely will need to be made. Whether you decide to complete them, hire an accountant or your attorney to assist is up to you.

How much does probate cost?

Probate costs vary by county and law firm. Court costs will be part of any probate and can typically be determined by calling the clerk or court’s office in the county where probate will occur. Attorney’s fees will vary depending on the size and complexity of administering the estate, the time involved, whether there are any contested matters and how much the scope of the attorney’s involvement is limited. Generally speaking, expect anywhere from $500-$1,500 in fees and a few thousand dollars in attorney’s fees. It’s a good idea to negotiate a flat rate with your attorney at the beginning of the representation so you know what to expect when the matter is concluded.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Estate Planning for College Students

michael.brennan@mfblegal.com (Michael Brennan) — Mon, 18 Dec 2017 19:09:32 GMT

Every college student should have these.

Upon a child reaching the age of 18 a parent’s right’s in controlling some affairs of that child become significantly diminished.

Of particular note: 1) parents will no longer be able to control the healthcare decisions of their child and 2) parents will no longer be able to act on the child’s behalf in financial transactions.

In the event the child is hospitalized, medical personnel have no obligation to follow anyone’s wishes regarding treatment or consent except for the patient’s , and medical records are going to remain sealed from view absent a court order directing otherwise.

In the event of a debilitating accident, illness, or mishap that leaves the child unable to determine his or her own course of treatment or who can make those decisions on his or her behalf, a doctor’s hands may be tied unless a court intervenes.

Similarly, financial institutions like banks, utility providers or even landlords typically will not permit an individual that is not named on an account to access its funds or information .

This means that if a child is in the hospital for an extended period of time unable to act on his own behalf, the financial repercussions of failing to do things such as pay bills in a timely fashion can be long-lasting in the form of bad credit and collections.

At a minimum, here are the documents every college student should have.

1. A Durable Power of Attorney for Healthcare (including HIPAA Release)

With a valid durable power of attorney for healthcare in place an agent is able to take any action which the principal would be permitted to take on his own behalf.

2. A Durable Power of Attorney for Finances and Property

The durable power of attorney for finances and property functions the same as the durable power of attorney for healthcare; but it addresses powers related to non-medical actions.

The agent can be given authority to act immediately once the document is signed, or he or she can be prohibited from doing anything until a certain time, for example, when the principal is incapacitated.

Estate Planning Checklist – 18+

► Durable power of attorney for healthcare (with HIPAA release)

► Durable power of attorney for finances and property

Optional additional documents

► Last will and testament (Explains where money and property should go should something happen)

► FERPA ( Family Educational Rights and Privacy Act) Waiver (Permits certain family members to access grades and transcripts)

Red Flags and words of caution

► State law governs powers of attorney, wills and their requirements for execution. So it’s important to familiarize yourself with these requirements BEFORE attempting to draft any of these documents on your own.

► Avoid the risk of mistakes and find an estate planning attorney that can do it for you.

► For additional information about getting your estate plan , cont act The Virtual Attorney.

Michael F. B rennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Estate Planning for Young Adults

michael.brennan@mfblegal.com (Michael Brennan) — Mon, 18 Dec 2017 19:00:53 GMT

Even in your twenties, planning for death or disability is not pleasant to do, but it's necessary.

Upon graduation from college, or reaching your young twenties, you should be starting to think about setting yourself up for the future as you build your career. Opening retirement accounts and putting money aside for your later years will become routine. Along with planning for your future financially, it’s important to plan for unforeseen events that may leave your loved ones in a stressful spot should something happen to you. This is why estate planning is important to consider, even in your twenties. planning for death or disability is not always pleasant to do, but doing so now will ensure that 1) you and your loved ones will be taken care of in the event something happens to you and 2) you will have a solid baseline estate plan in place off of which to build as life goes on.

Whether single, in a committed relationship or married, at a minimum, here are the estate planning documents every young adult should have :

1. A Durable Power of Attorney for Healthcare (including HIPAA Release)

A power of attorney is a document in which one individual (the “principal”) grants another individual (the “agent”) the authority to act on his behalf, many times according to a specific list of directions. When it comes to medical decisions, a durable power of attorney , permits the agent to make medical decisions relating to treatment on behalf of the principal and, properly drafted, it allows the agent access to the principal’s important medical records which may be necessary to consider when determining a course of treatment. Without a valid durable power of attorney for healthcare in place, medical personnel have no obligation to follow anyone’s wishes regarding treatment or consent except for the patient’s. However, with one, an agent is able to take any action which the principal would be permitted to take on his own behalf, ensuring that there is always a trusted individual that can make decisions for you.

2. A Durable Power of Attorney for Finances and Property

With a valid durable power of attorney for finances and property an agent should be able to access the principal’s bank accounts and financial records, pay rent, utilities and credit card bills, manage investments and loans and so on. Without one, financial institutions like banks, utility providers or even landlords typically will not permit an individual that is not named on an account to access its funds or information . This means that if you are in the hospital for an extended period of time unable to act on your own behalf, the financial repercussions of failing to do things such as pay bills in a timely fashion can be long-lasting in the form of bad credit and collections.

3. Will

If you want to direct where your possessions will go if you die, then it’s important to have a will. If a person dies without a will, state law determines how the assets will be distributed . That will mean less money and more stress for the heirs—an unpleasant prospect for family members already dealing with the tragic death of a young person. Additionally, laws may not mirror your choices, meaning that, while you may want everything to go to a significant other or close friend, it’s not going to pan out that way without writing it out in a will.

4. Living Will

A living will is a legal document that a person uses to make known his or her wishes regarding life prolonging medical treatments. With a living will , you indicate which treatments you do or do not want applied to you in the event you either suffer from a terminal illness or are in a permanent vegetative state. For example, you may indicate whether the use of feeding tubes or other life-prolonging equipment should be continued, or whether, at a certain point should be discontinued if there is no chance of recovery. A living will does not become effective unless you are incapacitated; until then you'll be able to say what treatments you do or don't want.

5. Authorization for Final Disposition

Items to consider are:

► Burial or cremation

► Contact information for a chosen funeral home, cemetery, etc.

► Details about your desired ceremonyDetails about any marker you may want

6. Appropriate beneficiary designations on retirement (and other) accounts

There are a number of things that a will won’t pass along to beneficiaries, including retirement accounts, insurance policies and other financial instruments that are governed by separate contracts between you and the provider. In order to ensure that these items go to your chosen beneficiaries if you die, it’s important to review the beneficiary designations on each account or policy. If changes are necessary you should make sure to file a new beneficiary designation form with the company.

Estate Planning Checklist for Young Adults

► Durable power of attorney for healthcare (with HIPAA release)

► Durable power of attorney for finances and property

► Last will and testament

► Living will

► Authorization for final disposition

► Appropriate beneficiary designations

Red Flags and words of caution

► Better yet, find an estate planning attorney that can do it for you.

► The requirements for making a valid will vary by state and are VERY SPECIFIC. One mistake in the drafting or execution of the document could invalidate it meaning that your wishes won’t be followed. This is not an area to mess around with DIY options. Hire an estate planning attorney to guarantee that there are no issues down the road.

Estate Planning Checklist for Unmarried Couples

michael.brennan@mfblegal.com (Michael Brennan) — Mon, 18 Dec 2017 18:56:53 GMT

A couple that lives together but is not legally married needs to take some time to get some simple estate planning documents in order.

Cohabitating couples are quickly becoming more common. According to a recent government study, nearly 48% of women move in with men before getting married.

With these committed relationships, however, it’s important to remember that, while you may act like a married couple, you certainly are not viewed as one under the law. That can have some serious consequences if proper precautions are not taken, especially in the realm of estate planning. For that reason, a couple that lives together but is not legally married needs to take some time to get some simple estate planning documents in order.

These are the minimum estate planning documents that a cohabitating couple should have:

1. A Durable Power of Attorney for Healthcare (including HIPAA Release)

A power of attorney is a document in which one individual (the “principal”) grants another individual (the “agent”) the authority to act on his or behalf, often according to a specific list of directions. When it comes to medical decisions, a durable power of attorney , permits the agent to make medical decisions relating to treatment on behalf of the principal and, properly drafted, it allows the agent access to the principal’s important medical records which may be necessary to consider when determining a course of treatment. Without a valid durable power of attorney for healthcare in place, medical personnel have no obligation to follow anyone’s wishes regarding treatment or consent except for the patient’s. For unmarried couples, this may mean that medical professionals will leave decisions to family members of the principal instead of the significant other. This very well may not be what the principal, nor the significant other intended.

However, by executing a valid power of attorney, a couple can appoint each other to make heath related decisions if they themselves are unable to do so. The power of attorney ensures that a boyfriend, girlfriend or fiancé will able to take any action which the principal would be permitted to take on his or her own behalf.

2. A Durable Power of Attorney for Finances and Property

With a valid durable power of attorney for finances and property an agent should be able to access the principal’s bank accounts and financial records, pay rent, utilities and credit card bills, manage investments and loans and so on. Without one, financial institutions like banks, utility providers or even landlords typically will not permit an individual that is not named on an account to access its funds or information . This means that if you are in the hospital for an extended period of time unable to act on your own behalf, the financial repercussions of failing to do things such as pay bills in a timely fashion can be long-lasting in the form of bad credit and collections. If the bank account that rent, utilities, insurance, and the like are paid out of is under your name, it is important to name your significant other as your agent under a power of attorney for finances and property to ensure that they are able to continue to access funds while you are incapacitated.

3. Will

If you want to direct where your possessions will go if you die, then it’s important to have a will . If a person dies without one, state law determines how the assets will be distributed . That will mean less money and more stress for the heirs—an unpleasant prospect for family members already dealing with the tragic death of a young person. Additionally, laws may not mirror your choices, meaning that, while you may want everything to go to a significant other or close friend, it’s not going to pan out that way without writing it out in a will. This is especially true when dealing with a couple in a committed relationship but that was not legally married. Without a will, your assets are going to go to blood relatives and NOT your significant other should something happen to you. The only way to prevent that is to have an attorney write wills for you and your significant other.

4. Living Will

A living will is a legal document used to indicate which treatments you do or do not want applied to you in the event you either suffer from a terminal illness or are in a permanent vegetative state. For example, you may indicate whether the use of feeding tubes or other life-prolonging equipment should be continued, or whether, at a certain point should be discontinued if there is no chance of recovery. A living will does not become effective unless you are incapacitated; until then you'll be able to say what treatments you do or don't want. Without a valid living will, doctors will most likely rely on the decisions of blood relatives, like parents, instead of your significant other when determining what course of treatment to pursue. If you’d rather leave that decision to your significant other, it’s important for you to have an attorney prepare a living will for you.

5. Authorization for Final Disposition

Items to consider are:

► Burial or cremation

► Contact information for a chosen funeral home, cemetery, etc.

► Details about your desired ceremony

► Details about any marker you may want

Drafting an authorization for final disposition provides details to your family and loved ones you may have never discussed with them and gives you a way to have a say in the final details of your life.

6. Appropriate beneficiary designations on retirement (and other) accounts

There are a number of things that a will won’t pass along to beneficiaries, including retirement accounts, insurance policies and other financial instruments that are governed by separate contracts between you and the provider. In order to ensure that these items go to your significant other if you die, it’s important to name him or her as the beneficiary of the policy. If changes are necessary you should make sure to file a new beneficiary designation form with the company.

7. Title to Real Estate

If you and your partner own real estate together, then you should consider your options when it comes to how title should be held. For example, by holding the real estate as joint tenants with right of survivorship you’ll be able to ensure that, should something happen to one of you, the entire interest in the home will pass to the surviving partner.

Estate Planning Checklist for Cohabitating Couples

► Durable power of attorney for healthcare (with HIPAA release)

► Durable power of attorney for finances and property

► Last will and testament

► Living will

► Authorization for final disposition

► Appropriate beneficiary designations

► Check title to Real Estate

Red Flags and Words of Caution

► Many states, like Illinois and Wisconsin , have statutory forms that can be used to create a power of attorney. If you use them, be sure to follow the instructions very closely. Otherwise, you run the risk of the document being invalid.

► DO NOT try to modify a real estate deed without consulting an experienced attorney. You run the risk of triggering some unwanted taxes and other negative consequences.

How to Give Your Estate Plan a Year-End Check Up

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 15 Dec 2017 21:08:39 GMT

Think about year –end gifting.

Individuals are permitted to make gifts up to $14,000 to each individual or charity of their choosing during 2017 without becoming subject to gift tax. If you have been thinking about making any substantial gifts to anyone make sure to do so before the end of the year. Doing so will maximize the amount that you can gift to that individual since you’ll have a new $14,000 exclusion to work with beginning January 1. If you are considering making any gifts, give your estate planning attorney, financial advisor or accountant a quick call because you may be able to maximize your tax savings and increase your gift by giving certain types of assets in lieu of cash.

Double check healthcare-related planning documents.

This is a big one for everyone regardless of age or financial health. Current events illustrate that good health isn’t guaranteed . Make sure to take some time to go over agent designations and wishes relating to treatment. It’s important to discuss those wishes with your loved ones as well so that there is no confusion or disagreement over what needs to be done in the event you are unable to act for yourself. Documents to comb through are you’re a) durable power of attorney for healthcare , b) HIPAA authorization(s) and c) living will . If your current documents don’t reflect your wishes or you have never had these drafted, an estate planning attorney can have them drawn up in relatively short order. Finally, while if you’re up for it, take some time to write down and discuss funeral arrangements or anatomical gifts you may want to make should the unthinkable happen. While the conversation may not be the most pleasant, it sure beats straining family relationships when those people have to try and guess your wishes.

Make sure policies match.

Double-check joint ownership.

Designating heirs on accounts is a common estate planning mechanism. Often times, naming an individual, like a child a joint owner on items like bank accounts is not advisable. However, converting accounts into Payable Upon Death (POD) accounts can accomplish the same objectives without some of the drawbacks that joint accounts carry. This can be a very functional way to ensure that certain liquid assets pass to chosen individuals you’re your death and it can be done with minimal paperwork or change in structure of your existing accounts. Talk with your advisor about exploring the idea as you review the rest of your plan.

Don’t keep safe-deposit box inventory a secret.

Take care of business.

Along with these seven items, if you have gone through significant life changes in 201 7, like divorce, losing a loved one, marriage or having a child now is a good time to sit down with your estate planning attorney and make sure everything is up to date and everyone is taken care of. Spending a few hours to review everything now will provide you piece of mind as you tackle life in 2018.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Co-habitation Agreements

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 15 Dec 2017 21:04:41 GMT

While not all states permit the approach (I’m looking at you Illinois), a couple in a committed relationship that otherwise lives like a married couple, but for the formality, should consider executing a cohabitation agreement.

All but three states will typically enforce a valid agreement, provided certain circumstances are met. For example, in Minnesota , a cohabitation agreement will be enforced if it is in writing and signed by both individuals and enforcement of the contract is sought after the relationship terminates. So what topics should be considered?

Rights to solely owned property

Naturally, each partner will bring his or her own property into a relationship- everything from clothes to kitchen appliances to that mangy college futon that for some reason hasn’t ever been left at the curb or burned. It’s important to indicate in a cohabitation agreement that these items will remain the solely owned items of the partner bringing them into the relationship (unless you want to pawn off that futon, which isn’t a horrible idea). It’s also important to detail what happens when new items are purchased with one partner’s money- should they be owned by only that person or should some of those things be presumed to be owned by both people?

Debts and liabilities

It’s likely that both partners will agree that debts like student loans or car payments which were acquired before the relationship began, or for only one partner’s benefit should stay the sole obligation of that partner. However, what about debts and liabilities that arise during the relationship? Should these be split evenly? Will one partner assume some while the other partner will assume others? What should happen if one partner voluntarily contributes to the other partner’s obligations, for example, by making a student loan payment on his or her behalf? Should the contributing partner be entitled to reimbursement if the relationship falls apart, or should it be viewed as a gift?

Household expenses

Since both partners are living together, it’s likely that they will agree to split all of the bills that arise with that living arrangement. Cable bills, utility bills, rent, food, and the like should be discussed. Should both partners open a joint account and contribute equally for these expenses? Should they be split roughly equally, for example, with one partner paying utilities with the other in charge of groceries and cable? Bills aren’t the only thing that may need to be considered. Think about household goods like cleaning supplies, toilet paper, etc. How should these costs be split? Remember, the objective of a cohabitation agreement is to avoid any arguments or questionable claims for reimbursement or support if the relationship falls apart. That leads to the next BIG consideration…

Division of property

If the relationship falls apart (or one partner passes away), questions are going to linger about what to do with all of the stuff accumulated during the relationship. It’s likely that neither partner will have an issue with each person taking their individual property, but what about everything else? Should it be split evenly? What about items that have a bill of sale or other documentation like a receipt evidencing who purchased the property? One potential solution is to first take each partner’s individual property out of the equation. Items with evidence of which partner purchased them will also be given to that partner. Everything else can be split- whether evenly, or based on the percentage of the couple’s income each partner earned during the relationship. Of course, there is no right or wrong way for things to be divided. It comes down to what seems fair and reasonable to both people.

Maintenance

Like a marriage that dissolves, what obligation, if any, should each partner have to ensure that the other is able to continue to live the same life as he or she was during the relationship? After a divorce, it is common for a court to order one spouse to make maintenance payments to the other spouse- especially in situations where the balance of the relationship leaned towards one spouse working and one staying at home to take care of children and the home. The same situation can arise in a cohabitation situation even if the couple is not married. The difference is that, unlike marriage, there is not a right to any type of maintenance provided by law. However, one can be created through a contract like a cohabitation agreement. It may be best for each partner to make a clean break go his or her separate way if a breakup occurs, but in other situations, it may be fair and reasonable for the couple to agree that one partner will provide some type of support for the other for a specified period of time.

As cohabitating couples become more common, there have been signs that the law is evolving to accommodate them and provide certain protections. However, until states decide that these relationships should be afforded more of the same protections as marriages, or redefine marriage altogether, it’s essential that cohabitating couples plan accordingly.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

There are Different Types of Real Estate Deeds

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 14 Dec 2017 20:17:59 GMT

Here are the differences.

It is common knowledge that certain types of property are titled in one way or another. With real estate, that title is evidenced by a deed. A deed is simply an instrument that contains the names of the seller and buyer and a legal description of the property being transferred, along with the signature of the seller. While everyone knows that a deed to a house or vacation property indicates ownership, far fewer people are aware that there are actually different types of deeds that can show that ownership. While all valid deeds evidence title to real estate they are not all created equal. So, here are some things to know about the different types of deeds.

The basics

Without considering things like deeds of trust, deeds in trust, transfer on death deeds or other instruments that, as their names may indicate, do have an effect on real estate transfers and titles, there are really three basic types of deeds with which an ordinary person may encounter. They are the quitclaim deed, special warranty deed and general warranty deed.

Quitclaim Deed

Unlike its siblings, a quitclaim deed does not contain any covenants of title, meaning that it doesn’t carry some of the assurances that a warranty deed would carry. Covenants of title are essentially guarantees that a purchaser of property is actually receiving the property they have bargained for. That means that the seller is making no promise that the property is free of any encumbrances or even that the seller even owns the property being conveyed. Because of this lack of assurance it is entirely possible (and unfortunately does occur) that the buyer doesn’t actually receive any interest in a property even though he believed that the seller actually had the ability to sell the property he purchased. While quitclaim deeds sound like a terrible, horrible, no good, very bad things, it is actually fairly common to see them in a number of circumstances, for example when one family member is selling property to another family member or some other type of close relationship exists between the buyer and seller or when a business is transferring property into a subsidiary. However, in a traditional real estate transaction it is much more common to deal with a warranty deed.

General Warranty Deed

Warranty deeds come in two general types- a general warranty deed and a special warranty deed. Of the two, a general warranty deed contains some important assurances for a buyer. Known as covenants of title, these assurances give the buyer confidence that he is purchasing the property he has bargained for and that if certain issues arise with it, the seller will “come to bat” for him and fit them. There are six common law covenants of title contained in a general warranty deed. They are: (1) the covenant of seisin (that the seller actually owns the property he is purporting to transfer, (2) that the seller has the right to convey the property to the buyer, (3) that the property is being conveyed without encumbrances (for example, a continuing mortgage on the property even after closing), (4) the covenant of quiet enjoyment (that the seller’s use of the property will not be disturbed or infringed by a third party)(5) the covenant of general warranty and (6) that the grantor will execute such further assurances of the land as may be requisite, meaning that he will do anything within his power to ‘fix’ any issues that may arise.

Obviously, having these assurances is much more beneficial to a buyer than simply accepting a quitclaim deed. The good news is that a general warranty deed is the generally accepted way for property to be transferred in a typical real estate transaction, so buyers are usually receiving these assurances.

Special Warranty Deed

As its name suggests, a special warranty deed is similar to a general warranty deed, however it differs in one key aspect. While a general warranty deed contains assurances from the seller that a buyer won’t face legal action or title issues because of something a previous owner did , a special warranty deed only contains assurances that the buyer won’t have an issue because of something the seller did. A special warranty deed does not give the buyer any protection if a previous owner somewhere down the line did something which created trouble for the property.

So, when it comes time to buy a home keep in mind the differences between the types of deeds with which you may be working. It can have a substantial impact on the protection you may or may not have if an issue arises down the road.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Unmarried but living together?

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 14 Dec 2017 20:14:47 GMT

There's an estate plan for that.

Unmarried couples who live together are becoming the new norm . According to a recent study by the Centers for Disease Control and Prevention, nearly three out of four women in the U.S. have lived with a partner without being married. While many of these relationships eventually transition to marriage or dissolve, for a number of couples living together, there is no objection to forgoing marriage altogether. From an estate planning perspective, that arrangement can have some important consequences which should be addressed in order to avoid problems down the line. While unmarried couples do not enjoy many of the estate planning benefits of marriage, including gifting advantages and tax breaks, they are still just as able as married couples to draft estate planning documents that will protect their interests and each other in the event something happens. So what exactly should unmarried cohabitating couples have when it comes to estate planning? Here are 10 things that should be strongly considered:

Durable power of attorney for finances . A durable power of attorney for finances is a document which grants another individual the ability to make financial decisions on your behalf. It is “durable” because that person (your agent) will be permitted to act in the event you are incapacitated. For unmarried cohabitating couples, having the ability to act on behalf of the other can be important when it comes to dealing with financial institutions or accessing money in the other’s account if, for example, rent needs to be paid.

Durable power of attorney for healthcare . A durable power of attorney for healthcare is similar to a durable power of attorney for finances, except for the obvious distinction that it specifically grants authority to your agent to make healthcare decisions on your behalf in the event you are unable to do so. Typically, medical professionals may rely on the opinion of your partner’s family instead of you when it comes to making healthcare decisions for them. Of course, this may not be what you or your partner would want if you are in a committed relationship. With a durable power of attorney for healthcare, you have the ability to instruct doctors to trust the decisions of your partner over your blood relatives when it comes to your care.

HIPAA release. The Health Insurance Portability and Accountability Act (HIPAA) protects confidential healthcare information from being disseminated in a number of ways. The most common scenario where the general public sees its impact is when it comes to sharing information about diagnosis, healthcare conditions, medications, test results, etc. with anyone who is not the patient. A HIPAA release is a document that can be used to give your partner the ability to receive that information as it pertains to your health. This can be beneficial in a number of common situations, for example, when test results need to be shared.

Living will . A living will is a document (sometimes incorporated into a power of attorney for healthcare) that explains your wishes in the event you were in a persistent vegetative state (i.e. an irreversible coma) or had a terminal condition. In the event that you are unable to communicate your healthcare wishes to your doctors if those situations arise, medical personnel will look to others to make the decisions on your behalf. For unmarried individuals, this usually means blood relatives. If you are in a committed relationship with your partner, but not married, it is important that your family and medical personnel are clear that your partner has authority to make those decisions on your behalf.

Will . A will is the cornerstone of any estate plan, and it’s no different for unmarried couples. A will is used to dispose of possessions, name a guardian for children and an executor, and lays out any other final wishes someone may have. An individual that dies without a will dies “intestate”. The estate of an individual that dies intestate is governed by statute and case law which has been developed essentially as a default scheme to dispose of a decedent’s assets. Typically parents, children and siblings are in line to receive the estate of an individual that dies intestate. For unmarried cohabitating couples, this means that the surviving partner may be left out. A properly drafted and executed will can leave assets to the surviving partner instead.

Instructions for final disposition. One of the most common causes of disagreement when someone dies is determining funeral arrangements. It’s not hard to imagine a situation where your parents would like certain things for you and your partner may want others. By leaving instructions detailing your preferences about burial or cremation, funeral arrangements, etc. you can add some clarity to the situation and diffuse any tensions amongst your family and partner before they arise.

Bank accounts. If you and your partner pay bills together it may be appropriate to open a joint bank account which will give you both access. Accounts can also be set up that will, in the event of either of your deaths, leave the funds to the other automatically. You may want to consider talking with your banker about options.

Appropriately titled real estate. If you and your partner purchase real estate it is important to discuss the implications with your attorney. There are ways to title the property so that it will automatically pass to the surviving partner in the event of one of your deaths. Of course, there can be negative consequences in the event of a breakup as well, so knowing your options can go a long way towards planning for future possibilities.

Proper beneficiary designations. Things like life insurance and retirement accounts are not affected by a will, but instead, they pass to the individuals named on the policies or accounts as beneficiaries. It’s important that you know who those beneficiaries are in order to avoid unwanted consequences like an ex receiving retirement funds upon your death.

Records of tangible property ownership. Couples that live together but don’t necessarily comingle their money may have a hard time determining who purchased what furniture, kitchen appliances and other tangible property in the event of a breakup or one person’s death. Keeping a list of who owns what will ensure that there are no disagreements later on.

Like any estate plan, there are many more devices which may be appropriate for your specific situation, so it’s a good idea to speak with your attorney and ensure that you have your bases covered. But, with the above ten items considered, you’ll be well on your way to making sure both you and your loved ones are taken care of in the event something happens to you.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

When to Review an Estate Plan

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 14 Dec 2017 20:04:44 GMT

So you’ve done some estate planning (maybe even a substantial amount), but now what? Do you just sit pat and let life happen? Well, it shouldn’t come as a surprise that filing your plan away and never re-examining it is probably not the best approach. After all, you did all that planning for a reason. Taking a look every now and then to make sure that the estate plan still reflects your goals and accomplishes your objectives will ensure that things are taken care of no matter what life throws your way.

Estate planning attorneys and financial advisors recommend reviewing your plan with your team at least annually to ensure that changes in the law, your family and financial situation are considered. However, if an annual review seems unrealistic to you, then here are a number of life events that should tip you off to the fact that a review may be in order.

Changes in the law

Gifting amounts. Paying attention to changes in the annual exclusion amount and utilizing it to make tax free gifts can be a beneficial tool in estate planning, but substantial changes in the amount may make you want to reexamine the amount of gifts you typically make. The total annual gift exclusion amount- meaning that it can be given to an unlimited number of individuals without paying any gift tax- is $14,000, but this wasn’t always the case and it certainly won’t stay this way.

Tax thresholds. Specifically the gift and estate tax limitations are important to pay attention to. Currently individuals can pass $5.12 million without estate tax consequence , but even as recently as 2003 the amount was only $1 million, meaning that anything owned at death and included in the deceased individual’s estate would be taxed a hefty amount. While 2013 brought some stability to the estate tax, it’s always possible that Congress will reduce the exclusion amount. So, if tax avoidance is a concern of yours, then it’s important to reexamine your plan anytime this amount changes.

Changes in financial situation

Investments. Changes in the value of your investments could mean that the value of your estate is changing in a relatively short period of time. It’s important to remember that the more net worth you have the more likely it is that you’ll need to consider how assets are titled and where they’ll be going when you pass away. Stay on top of it by reviewing your estate plan when your investments change substantially or the value of them changes.

Large gift or inheritance. Free money is never a bad thing… unless you don’t consider how it will affect your overall financial picture and estate plan. If you come into a large inheritance or gift it’s a good idea to review your plan to ensure that it’s clear what you’ll do with the additional money in the event something happens to you. Of course, this is one of those occasions that may also affect your tax liability, so speaking with your advising team right away will ensure that your newly acquired wealth won’t lead to any tax heartaches.

Purchase of (or cancellation of) a life insurance policy. When you purchase a new policy, it’s important to consider who you will name as the beneficiary in the event something happens to you. While that may be straight forward, it’s important to discuss the choice with your estate planning attorney to ensure that it won’t have any adverse consequences on your estate plan.

Purchase of a policy by another naming you as beneficiary. The same considerations apply if you have been named beneficiary under someone else’s policy (for example, a spouse). Your attorney can make sure that you won’t be subject to substantial liability- tax or otherwise- in the event you actually come into possession of those funds.

Making a substantial purchase. If you make the decision to purchase something like a new house, for example, it’s a good time to touch base with your estate planning attorney. Not only has your asset base changed, but real estate carries a number of special considerations from an estate planning perspective. From titling the property in the best manner to considering tax implications of the purchase, your estate planning attorney and financial team can make sure that you do things in the best way. Be sure to give them a call.

Changes to a pension or profit sharing plan. Same theme, different asset. Changes to any sort of deferred or future compensation should be considered when thinking about whether your estate plan will continue to reflect your goals.

Gifting away substantial sums that were initially to go to a beneficiary under a will or testamentary trust. An estate plan is only as good as the assets that you actually own. Fact of the matter is, life happens. Circumstances change. It’s common to see folks who have written a stone-solid estate plan , but then decide at a later time to unload some asset of chunk of money that they initially thought would go to someone else upon their death. There’s no reason not to do something like that, but it’s important to meet with your attorney and advising team if you decide to do so.

Unemployment or forced retirement. Changes in employment mean changes in income and may lead to the depletion of assets you initially planned to gift to others. If it does, it’s a good choice to speak with your attorney about how it affects your estate plan.

Litigation that may have an effect on the estate (positive or negative). This is a big one- whether potential or pending, litigation can mean hefty costs and potential large swings in net worth. If you’re involved in a lawsuit as a plaintiff or defendant, it’s a good idea to touch base with your estate planning attorney about what affect it may have on your planning.

Changes in the way property is held

Re-titling the deed to the house. Same concerns as purchasing a new property. If you elect to modify the way your deed is titled, it’s important to discuss the changes and effects with your attorney first.

Opening a payable-on-death account. Many states and financial institutions permit an account holder to add an individual to the face of the account, who, upon the death of the account holder, will automatically receive whatever funds remain in that account. Check with your estate planning attorney to make sure that the forms your bank gives you are sufficient to accomplish your goal.

Destruction, sale or loss of property.

Whether by choice or not, anytime you lose a piece of property- real estate or otherwise- it’s a good time to touch base with your advisors.

Changes in relationships.

Whether you’re getting married or divorced, this is a big one. Relationship changes can have huge implications on your rights to your assets and any your other half may own.

New family members.

Did your son just have a child? Did your brother just get married? Whatever the case- births, adoptions, marriages of family members, etc.- changes in fami8ly dynamics should be a red flag to anyone concerned about ensuring their estate planning objectives remain up to date.

Death in the family.

Never a pleasant topic, but things do happen. In the unfortunate instance that you lose a child, spouse, parent, sibling or someone else close to you, it’s important to ensure that your plan reflects the change in life circumstances. After all, while death isn’t a pleasant subject to think about, it was the reason you planned your estate in the first place. Don’t let the loss of a loved one change your goals of being organized and prepared.

Declining health

This one is tough. Not because of confusion, but because there is nothing that hits closer to home than your own well-being. What happens if you get sick? What about REALLY sick? While emotionally, you may be facing a maelstrom, individually, it’s important to realize that you still have your wits about you and being able to ensure your loved ones are taken care of is as simple as talking with your advising team.

Whether you’re just staring out in life or facing its final chapter, there are ways you can make sure those around you are taken care of. The above examples are just that- examples. If you’re interested in exploring how best to plan your estate, I suggest speaking with an estate planning attorney. Not only will he or she be able to help you plan for your family’s care now, but he or she will be able to make sure those goals remain in reach regardless of what life throws your way.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Shareholders, Directors and Officers

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 14 Dec 2017 19:59:28 GMT

What's the difference?

Q: I think I’m ready to start a corporation , but I’m a little confused on something. I know that companies have directors, officers and shareholders, but what exactly is the difference?

There are three groups with responsibility in any corporation- directors, officers and shareholders. Shareholders and directors can act only as groups. That is to say that individual shareholders or and individual directors have no power to do anything. So, whatever shareholders do, they do as a group and the same thing goes for directors. This is one of the reasons that there are statutory rules in each state that govern when a quorum is present at meetings and what vote is required.

Of course, by having those requirements, statutes assume that a corporation will have multiple shareholders and directors, which sometimes is not the case. Requirements for quorum and minimum vote requirements only make sense if there are a number of individuals involved. But in many cases a corporation may only have one individual shareholder and one director.

Officers, meanwhile, do not operate in groups. Individual officers- like president, secretary and treasurer- are agents of the corporation. As agents, they may have authority to act on behalf of the corporation in an individual capacity. For example, they may be able to bind the corporation to contracts or speak on behalf of the corporation in various ways, like determining who to delegate hiring authority.

Statutes are written with some general assumptions in mind. One of those is that the shareholders are the owners of the corporation. As such, they elect the board of directors. The directors technically “manage” the corporation, which is to say that they make the business decisions. One of those decisions is to hire and fire officers who are charged with carrying out the board of director’s directions. Directors can delegate a great deal of authority to officers to act as the agents of the corporation in its day to day operations.

Q: Are corporations required to have all three? What if I’m starting the company by myself?

All corporations have shareholders (whether a single individual, another company, or multiple different people or entities). As a general rule it’s a good idea to form a corporation with the mindset that all three roles are required. In reality, there may be times that certain roles are not required or may overlap with others. As with everything in the law, the state in which the corporation is based has a substantial effect on what roles are required and how they interact with each other. Further, there are typically methods of bypassing the statutory requirements in the articles of incorporation and bylaws. With that said, the general rules in a few states are as follows:

Illinois:

An Illinois corporation must have one or more directors, and the number may be fixed in the bylaws or articles of incorporation ( 805 ILCS 5/8.10 ). Like many states, an Illinois corporation shall have the officers which are provided in the bylaws. This means that the number could be 10 and it could be 0. Corporations have the freedom to set the number and duties however they deem appropriate ( 805 ILCS 5/8.50 ).

Minnesota:

Like Illinois, Minnesota corporations must have at least one director, but may have more if permitted by the articles of incorporation or bylaws ( Min. Stat 302A.203 ). What is different in Minnesota is the requirement that corporations have officers. Minnesota corporations must have at least one person exercising the function of a chief executive officer and chief financial officer. Additional officers may be provided for in the bylaws or by election of the board ( Min. Stat 302A.301 ).

Wisconsin:

In Wisconsin, a corporation must have at least 1 director, unless it elects to be treated as a statutory close corporation, which is beyond the scope of this post. But essentially it is a mechanism that most state statutes permit that allows a corporation, by making that election, to be governed by its shareholders and not a board of directors. The number of directors may be increased in the articles of incorporation or bylaws of the corporation. ( Wis. Stat. 180.080 3). A Wisconsin corporation shall only have those officers described in the bylaws or appointed by the board of directors. That means that a corporation may have no officers or practically any other number. ( Wis Stat. 180.0840 ).

One person can wear more than one hat at a time. In the case of a corporation being started by a single individual, there may be only one shareholder. That shareholder may also be the sole director as well as an officer (or all officers for that matter) at the same time. This is actually fairly common with small businesses just starting out, but it’s important to remember that even though the same person is serving in every role, each role has very different responsibilities. It’s important not to confuse those responsibilities and always be sure which hat the individual is wearing- whether it is that of shareholder, director or officer. Just because state corporation statutes envision three distinct groups of actors doesn’t mean that they are necessarily different people.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

General Partnership vs. Limited Partnership--What's the Difference?

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 14 Dec 2017 19:56:34 GMT

Here's what parents and students should know.

A general partnership is the simplest form of business organization involving more than one person and it is widely used today by a variety of businesses. Formation of a general partnership is easy. All that is needed is an agreement-whether written or oral, or even a handshake- that two or more individuals will carry on business for profit. Of course, a general partnership can be formed by written agreement which then governs the relationship of the partners. However, even without a written agreement, formation of a general partnership comes with a number of consequences and responsibilities. These include:

Members of the partnership sharing in the right to manage the partnership
Sharing equally in profits as well as losses
Personal responsibility for all partnership obligations
All partners are agents of the partnership and any action taken by one partner can bind the other partners.
All partners are responsible, jointly and severally, for the debts and liabilities of the partnership

Of course, as mentioned, all of these default generalizations can be (and should be) modified by a partnership agreement in order to provide some sort of governance to the company. However, without a written partnership agreement, it’s important to realize that a general partnership can many times be a risky endeavor for individuals to undertake, especially given the fact that they can be formed with little more than a handshake.

So what’s the alternative?

Well, aside from forming a corporation or limited liability company , one option for the individual that may want to invest in a new business idea but may not be willing to take on a management role or open himself up to extensive personal liability is to form a limited partnership.

A limited partnership functions much like a general partnership in that its multiple members endeavor to carry on the same goal. Simply defined, a limited partnership is a partnership in which there are one or more general partners and one or more limited partners. However, it is different in a number of important ways. First off, formation of a limited partnership requires a filing to be made with the Secretary of State (or other department in charge of business filings). Failing to make the appropriate state-specific filing will lead to a general partnership being formed along with its inherent characteristics discussed above. In many ways a limited partnership is similar to a general partnership. What is unique is the presence of limited partners who are passive investors with very limited power to participate in the management of the company. Limited partners who do participate in management of the company risk losing their limited liability. Once the appropriate filing is made with the state, a limited partnership carries the following characteristics:

Limited partners only share in the profits and losses of the company to the extent of their investment in the company.
Limited partners do not participate in management of the company.
Limited partners are only liable for the actions of the company to the extent of their investment in the company.

The theme of all of these characteristics is evident. Limited partners essentially are only as involved with the company as the money they put into it. This makes the limited partnership an intriguing entity type for investors that may see opportunity with a business venture that may not necessarily want to take on the full responsibilities and risks inherent in building that business.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Section 501(c)(3) is Just the Beginning

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 14 Dec 2017 19:44:27 GMT

Other types of tax-exempt entities explained.

Although section 501(c))(3) organizations are the best known non-profits organized under section 501 of the Internal Revenue Code , there are numerous other sections of the Internal Revenue Code that give tax exempt status to a wide array of other organizations.

So which types of organizations commonly fit into the exempt categories created by IRC 501(c)(4)-(27)? Among the most common are:

Civic Leagues, Social Welfare Nonprofit Organizations and Local Associations of Employees

Section 501(c)(3) permits an exemption for a civic league or nonprofit organization operated exclusively for the promotion of social welfare. It must engage primarily in activities to promote the common good and general welfare of people in the community, and not primarily provide benefits to its members. Political activity that is not the primary activity of the organization and not directed at particular candidates is permissible, as is lobbying if related to the organization’s exempt purpose. No part of the net earnings may inure to the benefit of any private shareholder or individual.

Trade and Professional Associations

Section 501(c)(6) provides an exemption to business leagues, chambers of commerce, real estate boards, boards of trade, and professional football leagues that are not organized for profit, and in which no part of the net earnings inure to the benefit of any private shareholder or individual. The organization must promote a common business interest of its members, who provide it with a meaningful level of support. Its activities should be directed to the improvement of business conditions of one or more lines of business, as distinguished from the performance of particular services for individual persons.

Social Clubs

Section 501(c)(7) permits an exemption for clubs organized for pleasure, recreation, and other nonprofitable purposes, if substantially all the activities are for such purposes, and no part of the net earnings inures to the benefit of any private shareholder. Membership must be limited, and use of club facilities by nonmembers must be restricted or the exemption may be lost. Additionally, the exemption will be lost if the organizations charter, bylaws, or other governing instrument or any of its written policy statements contain a provision that provides for discrimination against any person on the basis of race, color, or religion.

Labor, Agricultural and Horticultural Organizations

Section 501(c)(5) provides an exemption for labor, agricultural, and horticultural organizations. Such organizations need to have as their objectives the betterment of the conditions of persons engaged in the pursuits of labor, agriculture, or horticulture, the improvement of the grade of their products, and the development of a higher degree of efficiency in their respective occupations. The IRS has drawn narrow distinctions between furthering the interests of the organization’s members, which would support the exemption, and providing services to the members, which would not support the exemption.

Title-Holding Companies

Section 501(c)(2) provides an exemption to corporations that are organized for the exclusive purpose of holding title to property, collecting income from it, and turning over the entire amount of income, less expenses, to another tax exempt organization. Section 501(c)(25) exempts corporations and trusts organized for the exclusive purpose of acquiring and holding title to real property, collecting income from it, and turning over the entire amount of income, less expenses, to one or more other tax-exempt organizations. The organizations receiving the distributions musty have certain ownership or control over the title-holding corporation. The exemption for such title-holding corporations is dependent upon the continuation of the exemptions of the organizations receiving the distributions.

Fraternal Organizations

Section 501(c)(8) allows an exemption for fraternal beneficiary societies that operate under the lodge system or for the exclusive benefit of the members of a fraternity that operates under the lodge system, and that provide for the payment of life, sick, accident, or other benefits to the members of such society, order, association or to their dependents. Section 501(c)(10) provides an exemption to domestic fraternal societies operating under the lodge system that do not provide for the payment of life, sick, accident, or other benefits, if the fraternal organization’s net earnings are exclusively devoted to religious, charitable, scientific, literary, educational, and fraternal purposes.

Similar to a 501(c)(3) , an application for exempt status is made by filing the substantive IRC From 1024 (501(c)(3) filers use Form 1023 ). It should be noted, though, that a 1024 filing is not a requirement to claim exempt status under section 501. Organizations which meet the requirements for exemption in sections 501(c)(4)-(27) may simply file an annual Form 990 tax return indicating the section under which it is claiming exemption. Of course, organizations which choose to file a Form 990 return without pre-emptively filing a Form 1024 for IRS determination of exempt status are inviting almost sure IRS scrutiny of the organization and its filings. By initiating the process with the filing of Form 1024, an organization may preemptively satisfy questions or concerns of the IRS, and provide necessary documentation of compliance.

If you’re interested in learning more about a specific type of organization and the potential to claim tax exempt status, speak to your attorney or accountant, or feel free to contact The Virtual Attorney for more information.

How to Choose the Right Executor

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 03 Nov 2017 21:14:03 GMT

A sensitive decision made simple.

Selection of an executor, or personal representative as it is known in some states, can often times be a highly personal decision that takes a good amount of thought. The function of an executor is to collect your property when you die and distribute that property at the conclusion of the estate administration process (whether through formal or informal procedures). While it is easy to generalize the responsibilities of an executor to be purely those of a collector and liquidator of the estate property, there is a distinct management responsibility imposed on executors as well. This includes managing relationships, often times between highly emotional family members, preservation of funds and property, and detailed recordkeeping. So what factors should you consider when deciding on an executor?

Residency

As a matter of course, some jurisdictions will not appoint a nonresident as executor of an estate. For example, Wisconsin disqualifies nonresidents who do not appoint a resident agent to receive all official documents; but courts may also refuse appointment of the nonresident executor solely on that factor even if a resident agent is appointed. However, the constitutionality of such a denial based solely on the state of residency has been challenged before, and , absent other concerns about an individual’s fitness to represent your estate, the risk of choosing an out of state resident to serve is minimal.

Familiarity

It can be beneficial to name an executor that has previous experience with administering an estate . For example, older family members may have been through the process with previously deceased relatives and may be better suited to navigate the complexities of the estate administration process without an attorney. The downside, of course, is that older family members may be at a higher risk to predecease you, so there is no guarantee they will be around when the time comes to perform their duties. Naming a family attorney is another option, especially one that is well versed in the probate code of your state.

An attorney likely will have more experience dealing with common issues that may arise during the administration process such as valuing assets, communicating with stubborn financial institutions and filing the appropriate paperwork at the correct times to keep the process rolling and hassle-free for the beneficiaries and the rest of the family. However, caution should be taken prior to appointing an attorney to serve as executor, as his or her fees may be higher than that which would be acceptable to a non-attorney (fees for a mid-level estate could range anywhere from 1%-4% of the gross value of assets).

Honesty and Trustworthiness

One of the most important qualities to seek in an executor is honesty. The executor is the sole party responsible for ensuring that all of your property gets to the places and people to which you want it to go. It is not unheard of for a carelessly appointed executor to squander a substantial portion of an estate or misappropriate assets for his or her own benefit. Typically close family members are good options to serve as executor because of your familiarity and close relationship. However, if you aren’t incredibly close to siblings or children, don’t be afraid to appoint someone outside the family. You can always tell them it’s because you don’t want to burden them upon your passing.

Organization

Administering an estate is no small task, even for estates with few assets. Much like most areas of law, estate administration- or probate- is a complex web of statutes, regulations, local rules and preferences, and seemingly endless paperwork that must be filed in a very specific order. In addition, no matter how hard we try in life, chances are that all of us would like to be a little more organized. Often times it can be a challenge for an executor to track down every asset, account, and insurance policy that you may have owned during life. For those reasons, it’s important to choose an executor with tremendous organizational skills. An attorney can always help with the nitty gritty of dealing with court filings and creditor notices, but the ultimate responsibility for ensuring that everything is done appropriately and completely falls to the executor.

People Skills

Emotions can run high following the death of a loved one. Otherwise close-knit family members can quickly turn against each other, especially when an inheritance is involved. For this reason, sometimes it may not be wise to name one child or sibling to serve as executor over the others in a family; however, ultimately it is up to you to determine whether such a choice may lead to disdain in the family.

Choosing an executor is not an easy decision and not one that should be made lightly. Numerous factors should be considered and the overall effect on the family of one choice over another is important to remain mindful of. No two families are alike, so ultimately the choice is yours. But, should you want help in considering your options, an estate planning attorney can be an asset as you make these very important decisions.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Essential Legal Documents for College Students

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 03 Nov 2017 21:11:51 GMT

Don't leave home without them.

It's that time of year again- the time for 18-23-year-olds to head off to college around the country. Whether you have a child moving away for the first time as a freshman or you're a fifth year senior counting down the days of your farewell tour of a final year at your school, it's important to remember that, while it may seem like it, you or your child is not invincible. Accidents happen, and it's important to realize that, when they do, having the proper paperwork in place can greatly improve a parent or loved one's ability to help.

Upon reaching the age of 18, an individual is an adult in the eyes of the law. With this comes some important consequences which need to be considered in order to avoid a possibly messy legal situation. Upon a child reaching the age of 18 a parent’s right’s in controlling some affairs of that child become significantly diminished. Of particular note: 1) parents will no longer be able to control the healthcare decisions of their child and 2) parents will no longer be able to act on the child’s behalf in financial transactions.

In the event the child is hospitalized, medical personnel have no obligation to follow anyone’s wishes regarding treatment or consent except for the patient’s, and medical records are going to remain sealed from view absent a court order directing otherwise. In the event of a debilitating accident, illness, or mishap that leaves the child unable to determine his or her own course of treatment or who can make those decisions on his or her behalf, a doctor’s hands are going to be tied unless a court intervenes.

Similarly, financial institutions like banks, utility providers or even landlords typically will not permit an individual that is not named on an account to access its funds or information. This means that if a child is in the hospital for an extended period of time unable to act on his own behalf, the financial repercussions of failing to do things such as pay bills in a timely fashion can be long-lasting in the form of bad credit and collections.

So how do parents and student plan for the unthinkable? The answer in this case is to execute two relatively simple documents, which, if done correctly, will ensure that a parent will be able to act on behalf of his child both medically and financially should the need arise.

The two documents a new student should not leave home without are:

1) A Durable Power of Attorney for Healthcare (including HIPAA Release)

Generally speaking, a power of attorney is a document in which one individual (the “principal”) grants another individual (the “agent”) the authority to act on his behalf, many times according to a specific list of directions. The concept can be thought of in the same light as a sports agent whom an athlete grants another individual authority to act on his behalf to do things such as negotiate contracts. If done correctly and validly executed according to state law, then a power of attorney grants the agent the ability to make decisions on behalf of the principal. Traditionally a power of attorney terminated upon the principal’s death or incapacity, however laws now provide that the principal can grant the agent powers to act on the principal’s behalf event if the principal becomes incapacitated (this is the durable part of the durable power of attorney).

An agent is able to take any action which the principal would be permitted to take on his own behalf. When it comes to medical decisions, a durable power of attorney, permits the agent to make medical decisions relating to treatment on behalf of the principal and, properly drafted, it allows the agent access to the principal’s important medical records which may be necessary to consider when determining a course of treatment. Further, medical personnel are generally permitted to rely on the authority of the agent when exercising his powers.

2) A Durable Power of Attorney for Finances and Property

The durable power of attorney for finances and property functions the same as the durable power of attorney for healthcare; but it addresses powers related to non-medical actions such as those related to finances and property management and transactions. With a valid durable power of attorney for finances and property an agent should be able to access the principal’s bank accounts and financial records, pay rent, utilities and credit card bills, manage investments and loans and so on.

Important to note as well is the ability to structure the powers of attorney to limit the agent’s ability to take action until the principal is deemed incapacitated so the principal is the only party able to act on his behalf unless or until something happens.

How are powers of attorney drafted and where can I get them?

State law governs powers of attorney and their requirements for execution. Many states, like Illinois and Wisconsin, have statutes that actually contain a short form power of attorney. A power of attorney drafted in substantially similar language as that contained in the statute and executed according to the statutory directions will be presumed valid. This means that it is entirely possible to draft a valid power of attorney on your own without assistance of an attorney. However, a word of caution: while the statutory form may accomplish much of what you need it does not contain some powers such as the power to make gifts or change beneficiary designations on a trust, so depending on the individual the extent of his assets, the statutory form may tie an agents hands in some ways. Therefore, it may be wise to discuss these documents with an estate planning attorney licensed in your state and familiar with powers of attorney, disability planning and estate planning in general. Many lawyers will draft the documents for you for little charge and the benefits of doing it correctly can be great.

So parents, as your son or daughter prepares to head off to college in the coming weeks consider sending him or her away with a durable power of attorney for healthcare and durable power of attorney for finances and property. No matter how unlikely it seems that you’ll ever need to use them, find solace knowing that you’ll be able to act to protect his interests, if necessary. You have plenty of things to worry about during this transitional period in life- don’t let this be one of them. And students, believe it or not, you're not invincible. In the event something happens you need to make sure that your parents are still able to have your back.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

501(c)(3) Organizations

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 03 Nov 2017 20:55:44 GMT

An overview of the most common not for profit.

Organizations recognized as exempt under section 501(c(3) of the Internal Revenue Code are generally not required to pay income tax, which of course, is a beautiful thing if you run a business. This exemption from tax includes all sorts of things, from charitable contribution income to interest and dividends from investments. But, while the 501(c)(3) model is naturally very attractive, there are some very specific purposes for which one must exist, and even if a corporation initially qualifies, there are still very specific ways it must act in order to preserve its exemption as the business continues to operate. So, before thinking about forming a 501(c)(3) non-profit corporation, it’s important to consider what your rights and obligations are going to be going forward.

Organization

In order to qualify under IRC 501(c)(3), the organizational documents must be carefully drafted. Generally speaking, the organizational documents must follow the following guidelines:

Organizers must limit the organization’s purposes to one or more of the exempt purposes described in section 501(c)(3) . This is the basic requirement of receiving tax exempt status. While for-profit corporations may engage in a wide range of activities, non-profit corporations must specifically limit those activities in which they actively engage.
The organizers should not empower the organization to engage, other than as an insubstantial part of its activities, in activities that are not in furtherance of one or more of those specific purposes permitted by IRC section 501(c)(3). This requirement may be met if the purposes stated in the articles of incorporaiton are limited in some way by reference to section 501(c)(3). In fact, specifically setting forth the purposes of the corporation in the articles of incorporation may help streamline the application process to a certain extent as well.
The organizers should permanently dedicate assets to exempt purposes. To satisfy this requirement, include a provision stating that upon dissolution, any assets remaining in the organization be distributed to an organization that is likewise tax-exempt under section 501(c)(3), or to the federal, state or local government for a public purpose. Although it is permissible to rely on state law to establish permanent dedication of assets for exempt purposes, the IRS will process an organization’s application for recognition of exemption sooner if its articles or organization include a provision ensuring permanent dedication of assets for exempt purposes.

Operation

Careful drafting of the organizational documents alone is insufficient to guarantee exempt status. The organization must also actually be operated exclusively for one or more exempt purposes. This will be satisfied only if the organization engages primarily in activities that accomplish one or more of the exempt purposes specified in section 501(c)(3). Insubstantial participation in activities that are not in furtherance of an exempt purpose will not preclude exempt status. However, care must be taken to monitor such activity. No bright-line test is provided by the Internal Revenue Code or any accompanying regulations as to when activities reach the level of substantial.

In addition, a charitable organization organized under 501(c)(3) cannot be operated for the benefit of private parties such as the organizer, the organizer’s family, or other individuals or related entities. However, those parties may be paid reasonable compensation for their involvement of the management of the organization. Nor can a 501(c)(3) organization support political candidate or participate in any type of lobbying activity. While there may be possible organizational structures beneficial to such activities, a 501(c)(3) certainly is not one of them, and in fact, participation in any prohibited activities will likely cause the corporation to lose its tax-exempt status.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

How to Start a Non-Profit

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 03 Nov 2017 20:50:36 GMT

Getting government approval can be tough. Here's what to know.

Application

The main document that must be filed in order to apply for non-profit recognition under section 501(c)(3) is IRS Form 1023, a substantive and complex web of an application. If exemption is not requested, then contributions to the organization are not tax deductible and the organization could be subject to income tax even though it would have qualified if the appropriate Form 1023 application was filed.

Exempt Groups

A select group of organizations are exempt from filing Form 1023. These include churches, synagogues, temples and mosques, and associations of those organizations, as well as any organization other than a private foundation, that has gross receipts in each taxable year of normally less than $5,000.

Time For Filing

An organization that files Form 1023 within 27 months after the end of the month in which it was legally formed is eligible for tax exemption from the date of incorporation. If any organization that is required to file Form 1023 fails to do so within 27 months of formation, exempt status will only be effective from the postmark date of the application.

Fees

A user fee must accompany all Forms 1023 submitted to the IRS. The amount of the fee is based upon the actual or anticipated gross receipts of the organization. If gross receipts have not exceeded and will not exceed $10,000 annually over a four-year period, the user fee is $400. In all other cases, the user fee is currently $850.

Additional Forms

In addition to filing the basic Form 1023, the following additional items may need to accompany the filing:

1) Form 2848--Power of Attorney and Declaration of Representative, if there is a desire to authorize any person to communicate with the IRS as an advocate regarding the request for recognition of exemption (such as an attorney or accountant);

2) Form 8821—Tax Information Authorization, if the filers want basic information to be shared with a person other than an organization’s officers.

Filing a 501(c)(3) application is a complex process for which an attorney or experiences CPA can provide invaluable advice and assistance. In addition, there are a number of ongoing requirements that must be met in order to preserve the tax-exempt status of the corporation with which an experienced practitioner will be able to assist.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

What is Probate

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 03 Nov 2017 20:44:01 GMT

You've probably heard of it. Here's what you should know.

What is Probate?

Probate is the act or process of proving a will is valid and reflects the true wishes of a deceased individual, identifying and inventorying a decedent’s property, paying any taxes and debts and distributing the reminder to the beneficiaries named in the will or according to state law. An easy way to think of the probate process is as a script that guides the orderly transfer of an estate according to specific rules created by each state.

How does the probate process work?

Probate works a little bit differently depending on which state law is being applied; however, it usually works like this: When someone dies, if they left a will, the person named in the will as the “executor” (or in some states the “personal representative”) will need to file papers with the local probate court. When someone dies without a will, the court will appoint someone to act as the executor of the estate. Depending on the complexity of the estate an attorney may be necessary, and in any case hiring an attorney can help the executor navigate the sometimes complex web of rules that must be followed when probating an estate.

Once the court accepts the will as valid, and the executor is approved by the court, the executor must track down all assets that the decedent owned during life. Obviously, this can be quite a chore if the decedent did not leave details regarding owned stocks, bonds, financial institutions where accounts were held, insurance policies, etc- a major reason why planning during life can go a long way in helping loved ones after death. Once all assets are tracked down, the executor must take steps to appropriately secure and manage them while the probate process plays out (anywhere from a couple months to a year or more). The executor will then need to identify any debts that the decedent may still have held upon death, identify all beneficiaries, and notify any creditors that the decedent has passed away.

Creditors will then need to be paid out of the estate funds, after which the beneficiaries will receive anything that may have been left to them. Depending on the contents of the will, and on the amount of debts, the executor may have to decide whether or not to sell certain property to accommodate all creditors and beneficiaries. For example, if the will makes a number of cash bequests but your estate consists mostly of real estate, property might have to be sold to produce cash.

Once the court is satisfied that all creditors have been paid, all beneficiaries and assets have been identified, and all taxes have been paid, it will grant the executor permission to divide the remaining assets among the people named in the will (or if there is no will then to certain individuals based on state-specific laws).

Simplified Probate Procedures in Illinois

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Simplified Probate in Illinois

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 03 Nov 2017 20:42:19 GMT

As I pointed out in the last post, What the Heck is Probate? , typical probate procedures can often times be burdensome to the personal representative, costly to the estate, and time consuming for beneficiaries that may need funds distributed. Luckily, many states do have some simplified procedures that can be followed in certain situations.

Simplified Probate in Illinois

Illinois has some procedures that make it easier for survivors to transfer property left by a person who has died which can save time, money and hassle.

Illinois has a procedure that allows beneficiaries to skip probate altogether when the value of all the assets left behind is less than a certain amount ( The out-of-court affidavit procedure is available in Illinois if the gross value of all of the deceased person's property that passes under a will or by state law, excluding real estate, is $100,000 or less. 755 Ill. Comp. Stat. § 5/25-1 ). All a beneficiary has to do is prepare and appropriately execute an affidavit stating that he or she is entitled to a certain asset given the language in the will or his or her relationship to the decedent. The affidavit is then presented, along with a death certificate to the person or financial institution holding the asset and the asset is then transferred to the entitled individual.

If Transfer by Affidavit is not available for a particular estate, it may be possible for an executor to use a simplified probate procedure. To do so, an executor must file a request with the probate court requesting the procedure, but if approved, the executor will be permitted to proceed without continuous court involvement. This simplified procedure may be available if the gross value of property subject to probate in Illinois does not exceed $100,000 and all heirs and beneficiaries consent in writing. For additional detail, see 755 Ill. Comp. Stat. § 5/9-8.

For additional information in other states about simplified probate procedures check out other posts about Minnesota and Wisconsin.

Simplified Probate in Minnesota

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 03 Nov 2017 20:40:28 GMT

Yesterday, I shared a few basics about possible simplified probate procedures available in Illinois and today we’ll look at some simplified probate procedures that may be potentially available for anyone subject to the Minnesota probate system depending on the circumstances.

Simplified Probate in Minnesota

Minnesota has a few options for simplified probate, one of which is the possibility of skipping probate altogether by using an affidavit.

Minnesota has a procedure that allows inheritors to skip probate altogether when the value of all the assets left behind is less than a certain amount by preparing an affidavit attesting to the fact that he or she is entitled to certain assets. The affidavit must be signed under oath, but once done, it may be relied upon (along with a death certificate) by third parties - such as financial institutions; and assets can be transferred to the new owner. This procedure is available in Minnesota if the entire probate estate – meaning all assets minus specified types of property – does not exceed $20,000. Additionally, there is a 30-day waiting period before any inheritor can actually claim assets. For additional detail, see Minn. Stat. § 524.3-1201 .

In addition to the availability of the transfer by affidavit procedure, Minnesota has a simplified probate procedure for small estates. If an executor receives permission from the court to use the simplified procedure then he or she will be able to proceed without continuous court involvement. In order to use the simplified procedure the executor must file a written request with the probate court. The request will typically be granted if the court determines that no property is subject to creditors' claims. If granted, the estate can be closed without further proceedings and assets can be distributed to the new owners. For additional detail see Minn. Stat. Ann. § 524.3-1203 .

By Michael Brennan

Simplified Probate in Wisconsin

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 03 Nov 2017 20:38:25 GMT

Probate doesn't have to be complicated.

Last week I shared a few basics about possible simplified probate procedures available in Illinois and Minnesota and today we’ll wrap up our Midwestern exploration with a look at some simplified probate procedures that may be potentially available for anyone subject to the Wisconsin probate system depending on the circumstances.

Simplified Probate in Wisconsin

Wisconsin statutes provide for some procedures that may make it easier for survivors to transfer property left by a person who has died if the estate is below certain threshold amounts. You may be able to transfer a large amount of property using simplified probate procedures or without any probate court proceedings at all -- by using an affidavit. And that saves time, money, and hassle.

Here are the ways you may potentially skip or speed up probate.

Transfer by Affidavit

Wisconsin, like some other states, has a procedure that allows inheritors to use an affidavit to transfer estate property without more formal probate procedures or court involvement. The out-of-court affidavit procedure is available in Wisconsin if the estate property owned at death is worth $50,000. See Wis. Stat. Ann. § 867.03 for more information.

Informal Probate through Summary Settlement or Summary Assignment

If the Transfer by Affidavit procedure is unavailable to a personal representative looking for a simplified probate procedure, then it still may be possible for the personal representative to transfer the estate property through a process known as Summary Settlement . Summary Settlement in Wisconsin is available for either a) estates that are less than $50,000 in total value (less liabilities) or b) estates that are being transferred solely to a surviving spouse or surviving minor children. In order to use the procedure, the personal representative must file a request with the local probate court. Once the request is granted, the court will permit an interested individual to proceed without appointment of a personal representative and he or she may proceed with the probate process without a great deal of court involvement (though there may be a fair amount of paperwork to keep track of). Summary Assignment may be available for estates not otherwise qualifying for Summary Settlement. For more information, see Wis. Stat. Ann. § 867.01.

What to do When Someone Dies

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 03 Nov 2017 20:33:46 GMT

It goes without saying that it can be an incredibly emotional and stressful time when a loved one dies. Naturally, the grieving process takes center stage, and family members are often unfamiliar with exactly what to do from a practical standpoint. But, there are also a number of things that must be done quickly- from deciding on funeral arrangements to collecting on life insurance and distributing the decedent’s property- in order to ensure that family and friends are not left with confusion and undue burden later on.

What follows is a list of the steps that may need to be taken when a loved one dies.

- Determine whether the decedent made any arrangements to donate the body or any organs and if so, notify the organization.

- Determine whether the decedent made any funeral arrangements prior to passing away. If none were made, then search for a list of instructions that the decedent may have left. If nothing can be found, then it will be up to the family to make appropriate arrangements.

- Notify friends, relatives, and any organizations with which the decedent was involved of the funeral.

- If the decedent had any pets or livestock, make arrangements for their immediate care.

- If the decedent was responsible for the care of any other people- like children or an elderly relative, make immediate arrangements for their care.

- Locate the will . Many times a will can be found in the decedent’s safe deposit box or with other files in the decedent’s home or office. Some state courts accept wills for filing prior to death as well, so if you’re having trouble locating the will, check with the appropriate court.

- Examine the will and deliver it to the person who is named as “ personal representative ” or “executor” in the document so that he or she can file it with the circuit court in the county when it will be probated.

- If the decedent owned real estate, take immediate steps to ensure that it is protected against fire, freezing pipes, theft, etc.

- Track down any insurance policies owned by the decedent and ensure that they are adequate to protect against unforeseen events.

- Search the decedent’s home and ensure that all valuables are safe and secure.

- If the decedent had employees- whether household employees or employees of a business, make arrangements for them to be paid, as appropriate.

- Begin collecting names, addresses, social security numbers and ages of all heirs and determine whether the estate will have to be probated . Many states have simpler procedures available if certain requirements are met. An attorney can assist you in determining the appropriate course of action.

- Make a complete and detailed list of the decedent’s property and a list of any creditors, including amounts owed.

- Obtain identification numbers for the estate from the appropriate federal and (if necessary) state agencies. This may be required by some financial institutions or to transfer certain interests.

- Contact the postal service and inform them of whom the decedent’s mail should be forwarded to.

- Contact the decedent’s employer to determine the status of any benefits and/or unpaid wages.

- Contact utility and telephone companies to have service modified or terminated at the decedent’s property.

- Contact life insurance agents to obtain proof of death forms.

Of course, this list is not complete, and there are a number of other items that must be tended to in order to wrap up a person’s affairs. While some items, such as contacting utility and telephone companies are simple, others, such as probating the estate and handling any creditor claims can get very complex. It’s for those tasks that an attorney, and perhaps a good accountant, can prove invaluable.

What a Will Can (and Can't) Do

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 03 Nov 2017 20:29:39 GMT

Here's what a properly drafted and executed will can and cannot accomplish.

A will is a simple and effective tool at accomplishing a number of goals and estate planning needs, but it can’t do everything. Here are some goals that a properly drafted and executed will can and cannot accomplish.

A will CAN be used:

A will enables you to determine where your property will go, including to people who are or aren’t your heirs rather than letting it go where the intestacy laws of your state dictate it will go if there is no will.
A will enables you to keep property from going to heirs who should not receive it, either because of unfriendly feelings or the fact that they have no need. Similarly, property can be kept from going into large estates where it will serve little purpose other than increasing death taxes for that individual.
A will enables you to increase the share which a spouse may receive to an amount sufficient to provide for his or her needs, or it enables you to decrease the amount a spouse may receive in order to reduce any potential death taxes.
A will enables you to protect beneficiaries that are too young or otherwise not yet able to handle their own finances.
A will permits you to select a guardian for minor children .
A will enables you to select an executor who will be responsible for administering your estate after you’re gone.
A will enables you to waive any bond requirements of a chosen executor which can decrease the usual costs of probate.

A will CANNOT be used (or perhaps more accurately, SHOULD NOT be used):

A will cannot be used to gift jointly titled assets, such as property held in joint tenancy with right of survivorship. Certain jointly titled assets will pass by operation of law to the other individuals named in the titling document.
A will cannot be used to gift property held in a living trust ; HOWEVER, it can be used to pass property to a living trust which may have not yet been titled in the name of the trust upon your death.
A will cannot typically gift proceeds of a life insurance policy for which a beneficiary has been named.
A will cannot typically gift money in pension plans, IRAs, 401(k)s or other retirement plans for which you have named a beneficiary directly with the account administrator.
A will cannot give access to beneficiaries to directly access any bank accounts or other funds specifically left to them. Instead, it names an executor who will collect and distribute the funds with supervision from the court during the probate process.
A will is not an appropriate place to include funeral or memorial instructions . Contrary to popular culture, there is no official “reading of the will” and more times than not, a will is not found until days after death at which point funeral arrangements have already been made.
A stand alone will cannot reduce your estate taxes . While it may be possible to gift property to individuals with the goal of minimizing the size of their estate and thus reducing THEIR potential estate tax liability, it will do nothing to reduce your taxes when you die.
A will does not avoid probate. It merely guides your loved ones on how you wish for that process to unfold.

While a will is an incredibly useful tool to ensure that even the most modest and simple estates pass in ways that you desire, as you can see, they can’t be used to accomplish every goal. Other tools such as revocable and irrevocable trusts, special needs trusts, marital property agreements, modification of beneficiary designations, transfer on death account designations and retitling of assets such as real estate can be used in conjunction with a property written will to create a comprehensive estate plan uniquely tailored to your needs regardless of your situation. However, it's important to discuss your needs and estate planning goals with an attorney to ensure that they will be met.

I Need A Will. Why Not Legal Zoom?

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 03 Nov 2017 20:24:46 GMT

Be wary of online legal document generation sites.

There are a host of developments that can cause property to be distributed in ways other than that which had been intended when the will was written and signed. Many of them are changes in family situation such as births, deaths, divorces, adoptions, marriages, etc. Those changes also don’t necessarily need to directly involve the individual making the will either. Changes in the family situations of those to whom property was originally to be distributed also can have far-reaching, and often times negative effects on a hastily written estate plan.

Aside from changes in family situation, there are numerous other changes which can result in a distribution other than that intended by the individual writing the will. These take the form of actions taken by heirs and beneficiaries, death of beneficiaries, and changes in the nature of property given in the will.

While do-it-yourself wills can be enticing due to their low cost, they are low cost for a reason. Fact of the matter is that they are not tailored to individual life situations . Websites like Legalzoom are not law firms.

They are not legally permitted to review your answers for legal sufficiency, draw legal conclusions, provide legal advice or apply the law to the facts of your particular situation.

And that’s important.

Many are duped into a false sense of security by taking the half hour to prepare one of those DIY wills; however, the vast majority does not consider important “what-ifs” that may happen in their life down the road, and through no fault of their own, they don’t understand the legal principles that apply to those future events or the consequences they may have in light of what has been written (or not written) in their wills. It’s also only human to be afflicted with the “it won’t happen to me” syndrome due to the infrequency with which some events occur. Involving a lawyer in the process provides vision and understanding so that a will can be made as “farsighted” as possible no matter what life events subsequently unfold.

“Well, that’s great and all,” you say. So what exactly could happen that may lead to unintended and possibly negative results? Here are a few examples:

Lapsed bequests and devises. Naturally, when writing a will and making gifts to various people you assume that they will be alive when the time comes to distribute those gifts. But, that may not always be the case. It’s important to consider this possibility and provide accordingly in the will. A knowledgeable lawyer can explain to you what would happen if specific individuals are not living at the time of your death. Typically, any gift to a deceased individual will lapse unless the Anti-lapse Statute directs that it should go to another. Using a DIY will does not consider every possibility in this regard due to each person’s unique life situation .

The possibility that a gift may lapse also raises another point. Wills should be reviewed and updated frequently to ensure that they continually reflect the wishes of the drafter. You only get one shot at writing a DIY will; but a lawyer can work with you through the years to continually tweak the document to ensure it always reflects your wishes.

Void bequests and devises. Void bequests and devises result when a beneficiary is not in existence when the will is executed or where the gift is illegal. Many people, when drafting their wills, are often confronted with a confusing situation, for example, when there is a long list of people whom they want to benefit or in what proportion each person should benefit. All too often, when the will is finally signed, individuals who were to receive gifts have passed away. Those gifts don’t simply lapse. They are void from their inception. Instead of sitting down with an experienced attorney that can help them work through those issues, such people continually put off executing a new will leading to unintended consequences.

Renunciation. Every married person should execute his or her will with the understanding that the spouse can renounce it, which can either increase or decrease the share of the survivor. That may or may not be compatible with the wishes of the individual drafting the will. A will may be renounced by a spouse for a number of reasons such as decreasing federal estate tax or reducing the size of the taxable estate of the surviving spouse. By working with an estate planning attorney, it’s possible to give due consideration to factors that may lead to a renunciation decision and avoid the need for renouncing the will.

Disclaimers. A disclaimer is a useful mechanism by which a beneficiary may adjust the amount he or she will receive under a will after the writer of the will has died. Of course, there are limits to this that arte beyond the scope of this post, but the idea is that an individual who does not want or need the entire gift which was left to them has a means of refusing the gift. Disclaimers are particularly beneficial in estates where passing gifts to future generations can produce tax savings for the entire family. Unlike a DIY will, an attorney-drafted will can address appropriate limits which should be placed on the use of disclaimers that are appropriate for an individual’s unique life circumstances.

Ademption. A will is only useful when it gives away gifts that actually exist to people that actually exist at the time of the drafter’s death. In some cases though, plans are defeated when something that a person has been given under a will is not there when the time comes for it to be distributed and as a result, the person doesn’t receive it. This is known as ademption, and it occurs unless a will foresees possible situations where it may arise and makes contingency plans. A DIY may miss a number of these contingencies. Should another gift be used? Should the individual receive cash instead? What if there isn’t enough to account for everyone who was to receive a specific gift? An estate planning attorney is able to ensure that these issues are all addressed and can work with the drafter to modify the will as time passes, new property is acquired and older property is disposed of.

Elections. It’s important to realize that even though all beneficiaries may survive the will drafter, depending on who they are, they may have a right under the law to make certain elections even though a will may give them something different. To the extent possible, a will must be drafted so that, even though elections are exercised, the drafter’s wishes will not be defeated any more than necessary. DIY wills are limited in their ability to address these situations while an estate planning attorney can account for a number of possible future scenarios and plan contingencies accordingly.

Abatement. Abatement is the way that an estate which ends up being less than the drafter initially anticipated ends up being distributed. For various reasons, such as lifetime adversities, excessive bequests for the size of the estate, depreciation of certain assets or the necessity of paying tax liabilities, it may be necessary to distribute assets in a way that may vary from what the drafter intended. This means that, no matter how remote a potential event seems it’s important to consider what effect it may have. A DIY will is limited in the possibilities it contemplates and the possibility that the drafter’s wishes may not be carried out increased with its use. An experienced estate planning attorney is much better suited to talk through those issues with you as you draft a will that reflects your wishes no matter what life throws your way.

Will contests. There are few things that can be more damaging to a well thought out estate plan than a successful will contest. In the event a disgruntled heir or relative challenges the validity of a will and succeeds in having a court declare it invalid, there are few options that a DIY will drafter’s heirs have. The estate may end up being distributed through intestate succession- that is, the process set out by statute for who should receive a deceased individual’s property and in what amounts. By working with an estate planning attorney to draft a will, an individual can gain a number of protections. First, the attorney is going to ensure that the document is properly executed according to what is required under the law. An improperly executed will is the most common reason will contests succeed. Second, the attorney is going to work with the drafter as time goes by to continually update the will to reflect life’s changes. If a will contest succeeds in this case, for example by an individual successfully challenging the will’s validity because the drafter was too old or senile to know what they were doing when they made it, there is going to be an older will to fall back on.

I’ll repeat what I said at the beginning: Websites that permit you to create DIY wills are not law firms . They are not legally permitted to review your answers for legal sufficiency, draw legal conclusions, provide legal advice or apply the law to the facts of your particular situation. While the price may be enticing, often times these documents cause more problems than they solve. The topics above are just a few of the possible downfalls that may arise.

If you’re serious about wanting to plan for the unexpected and protect your loved ones, then it’s worth your time and money to work with an attorney .

Nine Last Minute Tax Tips

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 03 Nov 2017 20:21:46 GMT

With April 15th fast approaching, if you haven’t sat down to do your taxes yet, you certainly are not alone, but this weekend may be a good time to pound them out. If you still need to file for last year, here are 9 tips that may make things easier on you:

1. Don’t panic

So, you’re one of the roughly 4.5 million Americans who waits until the final month to file your taxes and you’re running out of time. Well, the first thing to do is relax! You’re not alone and you still have a week and a half to get everything done. While the clock certainly is ticking, taking the time to get everything in order and file your return now instead of hastily waiting until 10pm on April 14th is going to give you piece of mind and perhaps save you a few dollars as well.

2. Get organized

Instead of worrying about the number crunching and paperwork off the bat, it’s best to take some time and collect all of the financial records you’ve been keeping for the last year. If you’re like most Americans, chances are good that everything isn’t in a nice neat file in the filing cabinet. That’s ok. It’s important to at least find the big stuff- returns from last year, W2s, 1099s, and personal identification information. That’s usually the minimum you’ll need to file a clean return. If you itemize deductions, then you’ll want to make sure that you have all additional records relating to those deductions- for example, homeowners with mortgage interest to deduct should make sure they have a Form 1098.

3. File electronically

Save yourself time and hassle by filing online. There are a number of websites like TurboTax that will let you file your federal return free of charge. Otherwise, you can also file directly with the IRS with its Free File program. Filing electronically enables gives you access to software that will do some automatic calculations and ensure that you’ve filled in all required figures. Plus, you can sign up to receive your refund by direct deposit and won’t have to worry about waiting in long post office lines to send in your return.

4. Remember credits and deductions

There are tons of credits and deductions which you may qualify for . If you do, then by all means you should claim them. But a word of caution is in order: don’t claim something you can’t back up with your records. In the event of an audit, taking deductions you can’t back up could cost you significantly. Also, be specific when entering numbers. While rounding to the nearest dollar may be ok, if the IRS sees every claimed deduction rounded to the nearest $10 that may raise a red flag.

5. Double-check you numbers

It’s definitely important to double-check monetary figures, credits and deductions for accuracy to avoid raising any red flags with the IRS, but don’t forget to take a second look at everything else as well. Make sure social security numbers are accurate, including those of any dependents you’re claiming. Otherwise, you could risk not receiving a deduction for them. Also be sure to double-check bank account and routing numbers if you’re enrolling in direct deposit for your refund to make sure it gets to you as soon as possible.

6. Don’t forget all applicable schedules

The 1040 is just the beginning of your filing, and unless your return is incredibly simple, chances are that you’ll have to attach additional forms or schedules for your return to be accepted. There are dozens of forms published by the IRS, but it’s likely that you’ll only need to consider some of the more common forms. A few of the more common schedules and forms are:

Schedule A is required for itemized deductions

Schedule B is required for interest and ordinary dividend reporting

Schedule C is required for business profits

Schedule D is required for reporting capital gains and losses

Schedule EIC is required to claim the Earned Income Credit

Schedule SE is required to report any self-employment tax

Form 1040ES is required for any business owners required to make estimated tax payments

Form 2441 is required to report and claimed child and dependent care expenses

Form 5405 is required to claim the first time homebuyer credit

Form 8396 is required to claim the mortgage interest credit

Take the time after completing your return to make sure that all required schedules and forms are included in your filing. Otherwise, you may need to amend the filing and will see a delay in receiving your refund.

7. Remember to file at the state level

Unless you live in a state with no income tax, once you file your federal return, you’re only half way done. All but 7 states (Alaska, Florida, Nevada, South, Dakota, Texas, Washington and Wyoming) collect income tax at the state level. Be sure to visit your state’s Department of Revenue site for information on how to file. The good news is that most states allow e-filing and you should be able to carry over a lot of the information from your federal return.

8. Ask for an extension if you need more time

While every effort should be made to get your return filed by the deadline, if you just can’t swing it, then make sure to ask for an extension. Failing to file and not asking for an extension will lead to trouble, fines, and who knows what else. You must file for an extension by the April 15 deadline. And remember, this is just an extension to file, not an extension to pay, so you will owe interest on any tax due which isn’t paid by April 15. An extension can be requested through the IRS’s Free File system. Otherwise, Form 4868 can be mailed in (postmarked by the deadline). If you are going to owe tax, it’s smart to pay now to avoid any interest accruing. If you can’t afford the entire amount it’s still best to pay what you can in order to reduce any subsequent interest you may owe later.

9. Get professional help

Finally, if you feel like you’re in over your head get help, but make sure to do it now as tax professionals are already bogged down with last minute filings.

Michael F. Brennan is an attorney at the Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning. He has a background in tax law and a registered individual tax preparer with the IRS. If you’d like help filing your 2012 return he can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

IRS Circular 230 Disclaimer: Pursuant to regulations governing the practice of attorneys, certified public accountants, enrolled agents, enrolled actuaries and appraisers before the Internal Revenue Service, unless otherwise expressly stated, any U.S. federal or state tax advice in this communication (including attachments) is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of (i) avoiding penalties that may be imposed under federal or state law or (ii) promoting, marketing or recommending to another party any transaction or tax-related matter(s) addressed herein.

What is HIPAA

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 03 Nov 2017 20:17:03 GMT

Answers to Frequently Asked Questions

Most of us believe that our medical and other health information is private and should be protected, and we want to know who has this information. In a world that in continuously becoming more connected, the exchange of such information is simplified, and there was an increasing risk that it could end up in places we may not want. With that in mind, in 1996, Congress passed a set of statutes known as the Health Insurance Portability and Accountability Act of 1996, or in more common lingo, HIPAA.

While most have heard the term HIPAA used in some context before, many still don’t know exactly what it means to them.

Basically, HIPAA contains two major parts that are applicable to each of us as consumers of health insurance and medical services. Those are the Privacy Rule and the Security Rule.

The Privacy Rule gives consumers rights over their health information and sets rules and limits on who can look at and receive that information. For example, medical conditions, history or past treatments are protected information under HIPAA. It applies to any form of medical information- whether written, oral or electronic which a “covered entity” (i.e. health care providers; insurance companies) has on you.

The Security Rule sets standards which must be followed by those entities to ensure that your health information in electronic form remains secure.

Who is subject to HIPAA?

Entities that are subject to HIPAA are known as “covered entities”. They include:

Health Plans: including health insurance companies, health maintenance organizations (HMOs), employer health plans, Medicare and Medicaid.

Most Health Care Providers: including most doctors, clinics, hospitals, psychologists, chiropractors, nursing homes, pharmacies and dentists.

Health Care Clearinghouses: including any entities that process health information into some form.

Who is NOT subject to HIPAA?

A number of organizations which possess your individual healthcare information are not bound by the protections of HIPAA, such as: life insurers, employers, worker’s compensation carriers, most schools, a number of state agencies, many law enforcement agencies and municipalities.

What information is protected?

* Information your doctors, nurses, and other health care providers put in your medical record

* Conversations your doctor has about your care or treatment with nurses and others

* Information about you in your health insurer’s computer system

* Billing information about you at your clinic

* Most other health information about you held by those who must follow these laws

How is information protected?

* Covered entities must put in place safeguards to protect your health information.

* Covered entities must reasonably limit uses and disclosures to the minimum necessary to accomplish their intended purpose.

* Covered entities must have contracts in place with their contractors and others ensuring that they use and disclose your health information properly and safeguard it appropriately.

* Covered entities must have procedures in place to limit who can view and access your health information as well as implement training programs for employees about how to protect your health information.

What rights do I have over my protected health information?

You have the right to:

* Ask to see and get a copy of your health records

* Have corrections added to your health information

* Receive a notice that tells you how your health information may be used and shared

* Decide if you want to give your permission before your health information can be used or shared for certain purposes, such as for marketing

* Get a report on when and why your health information was shared for certain purposes

If you believe your rights are being denied or your health information isn’t being protected, you can file a complaint with your provider or health insurer, or even file a complaint with the U.S. Government

Who is permitted to look at and receive my health information?

The Privacy Rule sets rules and limits on who can look at and receive your health information. To make sure that your health information is protected in a way that does not interfere with your health care, your information can be used and shared:

* For your treatment and care coordination

* To pay doctors and hospitals for your health care and to help run their businesses

* With your family, relatives, friends, or others you identify who are involved with your health care or your health care bills, unless you object

* To make sure doctors give good care and nursing homes are clean and safe

* To protect the public's health, such as by reporting when the flu is in your area

* To make required reports to the police, such as reporting gunshot wounds

Your health information CANNOT be used or shared without your written permission unless this law allows it. For example, without your authorization, your provider generally cannot:

* Give your information to your employer

* Use or share your information for marketing or advertising purposes

* Share private notes about your health care

If I do not object, can my health care provider share or discuss my health information with my family, friends, or others involved in my care or payment for my care?

Yes. As long as you do not object, your health care provider is allowed to share or discuss your health information with your family, friends, or others involved in your care or payment for your care. Your provider may ask your permission, may tell you he or she plans to discuss the information and give you an opportunity to object, or may decide, using his or her professional judgment, that you do not object. In any of these cases, your health care provider may discuss only the information that the person involved needs to know about your care or payment for your care.

Here are some examples:

* An emergency room doctor may discuss your treatment in front of your friend when you ask that your friend come into the treatment room.

* Your hospital may discuss your bill with your daughter who is with you at the hospital and has questions about the charges.

* Your doctor may talk to your sister who is driving you home from the hospital about your keeping your foot raised during the ride home.

* Your doctor may discuss the drugs you need to take with your health aide who has come with you to your appointment.

* Your nurse may tell you that she is going to tell your brother how you are doing, and then she may discuss your health status with your brother if you did not say that she should not.

BUT:

Your nurse may not discuss your condition with your brother if you tell her not to.

If I am unconscious or not around, can my health care provider still share or discuss my health information with my family, friends, or others involved in my care or payment for my care?

Yes. If you are not around or cannot give permission, your health care provider may share or discuss your health information with family, friends, or others involved in your care or payment for your care if he or she believes, in his or her professional judgment, that it is in your best interest. When someone other than a friend or family member is asking about you, your healthcare provider must be reasonably sure that you asked the person to be involved in your care or payment for your care. Your health care provider may share your information face to face, over the phone, or in writing, but may only share the information that the family member, friend, or other person needs to know about your care or payment for your care.

Do I have to give my health care provider written permission to share or discuss my health information with my family members, friends, or others involved in my care or payment for my care?

HIPAA does not require that you give your health care provider written permission. However, your provider may prefer or require that you give written permission. Due to varying policies it is safe to have a HIPAA release and authorization handy to give to any healthcare provider.

If my family or friends call my health care provider to ask about my condition, will they have to give my provider proof of who they are?

HIPAA does not require proof of identity in these cases. However, your health care provider may have his or her own rules for verifying who is on the phone.

How can I help make sure my health care providers share my health information with my family, friends, or others involved in my care or payment for my care when I want them to?

Execute a HIPAA Release and Authorization indicating who may have access to your protected information. Working with an attorney is the best way to ensure that your form is sufficiently detailed and covers all applicable situations. However, there are forms online if you do a little searching.

Where can I find more information on HIPAA or have my specific questions answers?

For additional information, you can check out http://www.hhs.gov/ocr/privacy/ or contact an attorney to discuss any specific issues.

12 Issues to Consider With Commercial Leases

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 03 Nov 2017 18:37:47 GMT

Whether office, retail or industrial, remember these twelve things when negotiating a lease.

New business owners typically need to find a commercial space out of which to run their company. In today’s economy, there is no shortage of options, especially in Midwest cities hit particularly hard by the downturn (I’m looking at you Milwaukee). But, finding the space best suited for the new business is just the beginning. Once a space is found, it will be necessary to sign a lease for the space, and this is where any new business owner needs to pay close attention to what he is and is not agreeing to. Commercial leases are subject to much less government regulation than residential leases, so it’s important to have a clear understanding of the lease terms and negotiate modifications with the landlord as appropriate.

Here are 12 areas where a commercial lessee should pay particularly close attention to a lease:

The Space. It’s important to examine exactly what space is being included in the rental. Discuss hallway and restroom use as well as permitted entrances, elevators and other common areas. It’s also important to discuss whether the landlord has quoted your rental cost based on rental square footage or usable square footage. Usable square footage is always less than rentable square footage because it does not include common areas like bathrooms, hallways, lobbies and elevators. Having a clear understanding on the space which makes up the rental will help you determine whether the quoted rental price is fair and enable you to negotiate if appropriate. It also creates a clear understanding upfront on exactly what uses will be permitted.

The Lease Term. The “term” of a lease refers to its length. It sets forth when the lease begins, when it ends and whether there are any specific options for renewal. As a general rule, landlords will typically be more flexible in negotiating leases with longer lease terms, especially on rent. However, it’s important to remain mindful of the company’s needs- a longer lease means less flexibility to adapt to change as the business grows. Additionally, in the event that the market rate of rent declines, agreeing to a lengthy lease term up front may mean the company could be stuck paying above market rate for the leased premises. It’s sometimes preferable to negotiate a shorter term with a number of renewal options than to agree to an extended term- for example, a four-year lease with two three-year renewal options instead of a straight ten-year lease term.

Rent. Naturally a primary concern for any lessee, rent can be the driving decision-maker when it comes to making a determination whether to lease a space. Pay close attention to what the lease says about rent escalations or increases, as a fixed rent for the entire term of a commercial lease is not common. Be sure to understand how and when any escalations will be computed if a lease does not call for increases of a stated dollar amount. One common way for increases to be determined is by the Consumer Price Index (CPI), which fluctuates with market conditions. In the event the landlord insists on escalations determined by the CPI, then it may be possible to negotiate a cap on any amount, so, at minimum the maximum potential rent to be paid will be clear.

Assignments and Subleases. Assignment refers to a landlord or tenant’s ability to transfer the terms of the lease to a third party. For example, XYZ Corporation rents space for five years from Big Landlord. If, after two years, XYZ Corporation wants to allow ABC Corporation to rent its space for the remaining three years of the lease, the transfer of the space, along with all the terms of the lease, is called an assignment. Similar to an assignment, if XYZ Corporation only wants to let ABC Corporation rent the space for year three of the lease, this is called a sublease. Whether a commercial lease can be assigned or subleased to another tenant is a lease term that any potential lessee should pay particularly close attention to, as a clause that prohibits assignment or sublease can limit a lessee’s flexibility to respond to future market conditions. Landlords will usually be more open to permitting assignment or sublease if they have notice of any proposed transfer of the lease, they have the opportunity to approve it, and the original lessee remains liable for any unpaid rent or damage to the property by the third party.

Dispute Resolution. Pay attention to what a lease says regarding dispute resolution. Litigations costs can quickly get out of control, especially for a young company with limited resources. Mediation and arbitration present alternatives to traditional court proceedings and clauses requiring them are relatively common to see in commercial contracts and leases. Mediation involves a neutral third party that acts as a facilitator between the two parties to discuss disagreements, but he does not act as a decision-maker. Similarly, arbitration involves the use of a neutral third party; however, unlike a mediator, an arbitrator will actually make a decision regarding the disagreement which the parties can either agree to be binding or non-binding.

Items Included In the Rent Calculation. Much like a residential lease, a commercial lease can often include costs in addition to rent. Examine whether the rent price includes any maintenance costs, insurance, property taxes, etc. It’s important to have a clear picture about which costs you will be responsible for. If the lease terms aren’t clear, ask the landlord to include details about who will pay what costs and how they will be calculated.

Compliance with Laws. Commercial spaces must comply with a large number of federal, state and local laws and regulations. Typically, a landlord will be responsible for ensuring that the overall premises is complaint with laws; however, it’s important to understand the expectations with respect to the specific leased space. If the lease is silent on who is responsible for ensuring the space is complaint with applicable laws, ask the landlord to clarify the terms. For example, the Americans with Disabilities Act (ADA) requires all businesses that are open to the public or that employ more than 15 people to have premises that are accessible to disabled people. Make sure that you and your landlord are in agreement about who will pay for any needed modifications, such as adding a ramp or widening doorways to accommodate wheelchairs.

Improvements, Modifications and Fixtures. This is an issue that is easy to overlook but can have a potentially large impact on you when your lease term ends. It’s common for a lessee to need to make modifications or improvements to the leased space in order to serve its needs (new carpet, adding seating, cabinets, a reception area, etc.) Whether these improvements and modifications need the consent of the landlord should be set forth in the lease. Additionally, it’s important that the lease is clear about who owns the modifications when the lease ends. Typically, a landlord will own improvements made to the space upon the termination of the lease. However, a tenant may have the right to remove fixtures (those items that become part of the property but can be removed with relative ease and limited effect on the building itself.) Pay close attention to what the lease says regarding fixtures. It’s possible that an unsuspecting lessee could invest a lot of money in the property only to lose its right to remove things like expensive lighting upgrades or appliances when the lease ends.

Repairs. Watch out for lease clauses that require the premises to be returned to its original condition upon termination of the lease. Instead, consider negotiating with the landlord to carve out normal wear and tear to the premises, damage not caused by you or beyond the your control and any alterations which the landlord had previously approved. Additionally, pay close attention to who has the responsibility to maintain and repair plumbing, heating and air systems. It is common for leases to put that obligation on unsuspecting tenants who incorrectly assume the landlord will bear the costs of those repairs.

Termination. Any commercial tenant should make sure they understand the procedure for terminating the lease early and the requirements to terminate a lease prior to any automatic renewal taking effect. If the lease is silent as to a right to terminate, try negotiating a right to early termination along with the payment of a set sum of liquidated damages to the landlord in order to leave yourself an out. In the event that your business ends up not being as successful as anticipated, the business is sold, or market conditions simply require a change, you don’t want to be stuck relying on a court to determine damages to the landlord. It’s also important to pay close attention to notice requirements at the end of the lease term and follow them closely. For example, a lease may state that, sixty days prior to the end of the lease term, the tenant must give written notice to the landlord of its intent not to renew. If notice isn’t given sixty days in advance, the lease may call for the term to automatically renew. Be sure to keep a close eye on specific requirements in order to avoid getting stuck in an undesirable situation.

Security Deposit. Make sure it’s clear what can and cannot be deducted from the security deposit. Even though there are laws that specifically prohibit actions relating to security deposits, you should ensure that the lease specifically spells out the expectations and conditions for its return.

Signage. Take the time to make sure the lease is clear on any prohibitions relating to signage including size, location, lighting and the general appearance. You should also examine the exterior of the building and whether the type of desired signage works with the building’s structure. For example, a landlord may not be willing to permit a lessee to drill into a marble facade in order to attach a sign.

Negotiating lease terms with a commercial landlord can seem intimidating for a first time renter. But, if you know what to look for, you can ensure that the terms and fair and reasonable and expectations of both landlord and tenant are clear from the beginning.

Michael F. Brennan runs a virtual law office helping clients in Illinois, Wisconsin, and Minnesota launch new businesses. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

The information contained herein is intended for informational purposes only and is not legal advice, nor is it intended to create an attorney-client relationship. For specific legal advice regarding a specific legal issue please contact me or another attorney for assistance.

Estimated Taxes

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 03 Nov 2017 16:02:04 GMT

What New Business Owners Need to Know.

As a new business owner you have myriad things to worry about, but perhaps none cause more headaches than taxes. From itemized deductions to self-employment tax, to payroll taxes for those small businesses with employees, issues of taxation are commonplace and worries can be a plenty. But, there is perhaps one tax issue that has a tendency to catch even the most financially-inclined new business owner by surprise- estimated taxes. Understanding what they are, why they matter, and how and when to pay them is imperative to ensuring that you won’t be paying unnecessary penalties to Uncle Sam come April. As you look to pay your 2012 taxes , if you're a small business owner, here's what you need to know about estimated taxes as well.

What Are Estimated Taxes?

At a basic level, estimated taxes are taxes paid on income that is not already subject to withholding. Anyone who is subject to them must make four periodic payments to the IRS each year. So why haven’t you heard of them? When you work for an employer, your pay check reflects taxes that have been withheld. Your employer is actually paying those taxes to the IRS periodically- it all just happens without you knowing because, well, there wouldn’t be any reason you needed to. But, when you start your own business- whether as a sole proprietor, partnership, S corporation, LLC, or C corporation, your wages are no longer being withheld and periodically paid to the IRS by your employer. It’s now up to you to make those payments on behalf of your business.

Do You Need to Pay Estimated Taxes?

Generally, if you are self-employed in any form you must pay estimated taxes if you expect to owe more than $1,000 total in tax when you file your return in April. For business owners that report taxes on a corporate level- whether as a non-disregarded LLC or C Corporation, you typically have to pay estimated taxes if you anticipate having to pay more than $500 when you file your corporate return.

Of course, there are exceptions to the general rules. For one, if your small business is only a secondary means of income for you and you receive salary and wages as an employee with another business, you can ask your employer to withhold more tax from your earnings by filing an updated W-4 with the employer. Requesting that an additional amount equal to your tax liability from your small business be withheld will eliminate the need to file estimated taxes for the business.

You also do not have to pay estimated taxes if you meet three specific requirements: 1) you had no tax liability for the prior year; 2) you were a U.S. citizen or resident for the whole year; and 3) your prior tax year covered a 12 month period.

How Much Do You Need to Pay in Estimated Taxes?

This is where things become a bit challenging. After all, a common challenge for many small businesses is predicting cash flow with specificity. To determine your estimated tax, you first must determine your expected adjusted gross income, your taxable income and any deductions or credits for the year. After taking deductions and applying exemptions and credits, and applying the appropriate applicable rate, you’ll be left with your estimated tax liability for the year. Unlike other taxpayers, you’ll need to split this amount into four equal payments and pay them periodically throughout the year. The IRS will consider you to meet its requirements for estimated tax payments so long as that amount (or more accurately, the amount you actually pay) equals at least 90 percent of your actual eventual total tax bill. In the event that you don’t hit that magical 90 percent threshold, you may be required to pay penalties.

Due to the inability of many business owners to estimate their total income and tax liability with such certainty, there is a second option. By using the IRS “safe harbor” rules, you can figure your tax liability and estimated payments based on your liability for the previous year and stay out of trouble. You won’t be penalized if you make payments equaling 100% of your liability for the prior year (broken into four equal payments).* This “safe harbor” calculation is attractive to newer business owners that still don’t have enough of a gauge on expected annual growth, or cash method businesses in industries where high accounts receivable don’t necessarily lead to predictable payments.

When Do You Need to Pay Estimated Taxes?

Estimated tax filings must be made four times a year in order to avoid late payment or underpayment penalties:

April 15
June 15
September 15
January 15 (of the next year)

Each payment is for the period preceding it.

*The calculations under the safe harbor become a little more complex for earners with AGI over $150,000.

Michael F. Brennan is an attorney at The Virtual Attorney ™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning. He has a background in Tax law and a registered individual tax preparer with the IRS. If you’d like help filing your 2012 return he can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

Helpful Resources for Small Business Owners

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 03 Nov 2017 15:42:38 GMT

I’ve written a lot about starting a new business and the legal challenges that any new entrepreneur must consider when turning an initial idea into a buildable business concept, trends I see taking off in 2013 , how to give your new business a legal kick start , tools to operate an efficient business in the beginning stages and numerous tax issues that quickly become very real to a new business owner. And that just barely scratches the surface on the vast challenges and sudden responsibilities that any entrepreneur must consider.

Starting a business can quickly become extremely overwhelming for someone going it alone. But, be not afraid! In the internet age there are numerous places to turn in order to explore ideas, gather information and read about success stories of those that have previously flourished. You just need to know where to look. With that in mind, I’ve created this list of publications, associations, and general information sources that I hope will provide you with some useful tools to help turn any new idea into a full-fledged small business.

Publications

YFS Magazine . This is a digital magazine with advice, tips and tricks for the startups, small businesses and entrepreneurs as well as news and success stories of entrepreneurs that have taken an initial idea and turned it into a thriving business.

Entrepreneur . Another digital publication that explores successful entrepreneurs and small businesses. It provides inspiration for new ideas, and tips on marketing, technology and growth as well as interviews with successful companies from various forward-looking industries.

CNNMoney . Specifically the small business section of this online publication. Here you can learn about what makes small businesses successful and read about success stories from various industries. My favorite is a story about an 89-year-old grandmother who used Kickstarter to launch Happy Canes , which sells bright and floral decorated canes to the elderly.

Forbes for Entrepreneurs . Like Entrepreneur and CNNMoney, Forbes publishes articles specifically geared towards the entrepreneur community. Many of the articles are in numbered format (i.e. 9 Advantages of Investment Crowdfunding , which are always particularly enticing to me for some reason.

Inc. . More of the same, but this publication also includes links to finance topics, leadership, sales & marketing and technology.

General Resources

SBA.gov . The official website of the U.S. Small Business Administration. This one is loaded! Here, you can find information on a vast array of topics from starting & managing a business to how to obtain a small business loan or how to write a business plan. Keep in mind that the information is geared towards a national audience so it’s important to dig deeper at the state level as well.

IRS.gov . Taxes. As a small business owner you’ll probably visit this site more than you would like, but it’s a great resource. Find official IRS publications, filing information and forms that will be necessary to keep you from getting into hot water with Uncle Sam.

U.S. Department of Labor . A great resource to learn anything from how to get your final paycheck when leaving your job to important information regarding workplace postings that may be necessary in your new business such as job safety and health protection or equal employment opportunity notice and compliance.

State-specific Resources

Illinois, Minnesota or Wisconsin businesses . Laws Regulations and Requirements for starting and carrying on a business vary by state, so it’s important to explore those requirements in more depth. As an attorney admitted to practice in Illinois, Minnesota and Wisconsin, I obviously focus my attention of those states. So, if you have a business in one of those states or are thinking about starting one, you may find some of these links valuable.

Michael F. Brennan is an attorney at the Virtual Attorney ™ a virtual law office helping entrepreneurs in Illinois, Wisconsin, and Minnesota turn their ideas into businesses. Have a question or comment or want to discuss how he can help your small business? He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com .

3 Tips to Balance Education and Retirement Saving When You Have a Child

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 03 Nov 2017 15:39:52 GMT

A guest post by Alan Moore, CFP

Financial Planner Alan Moore offers 3 tips for new parents trying to balance retirement and education savings in this guest post. Allan is a Certified Financial Planner™ and Certified Retirement Counselor™ who specializes in providing financial planning advice and investment management services to individuals and families.

New parents often wonder how they are going to balance saving for their kids’ college education and their own retirement. There isn’t always enough money to fund all of their goals, and they are looking for a way to prioritize their savings. Here are 3 tips to help you strike a healthy balance:

#1: Fully Fund Your Emergency Fund

I know what you’re thinking… what do cash reserves have to do with retirement OR education savings? The answer is EVERYTHING! If you save into a 401(k) or 529 plan but don’t have ample cash reserves, you run the risk of having to take money out of your savings to cover the cost of an emergency. Taking money out of these accounts will cause you to pay taxes and penalties, all of which are unnecessary with proper planning. Until you have 3-6 months of living expenses in an emergency fund, don’t worry too much about retirement or education savings.

#2 Pay Yourself First

I know you’ve heard the old cliché, “Your child can take out loans for college, but there aren’t any loans for retirement.” This statement is true, but one that is hard to accept. Most parents I know have a strong desire to send their kids to college, and many are willing to forgo their own retirement goals and dreams in order to do it. Think about this though… if you pay for your kid’s college education, but haven’t saved enough for retirement, what’s going to happen when you run out of money? Chances are, the burden will fall to your kids to take care of you financially. That will be right about the time they are having kids, and will force them to balance your expenses, their kids’ education expenses, and their own retirement savings. The greatest gift you can give you children is to remain financially independent… even if it means you can’t pay for their college education.

#3: Tax Advantaged Savings – But Not Too Much!

Once you have fully funded your cash reserves and are saving enough to meet your own financial goals, you can then begin to look at saving for your kids’ college. If you live in a state with a state income tax, your first stop should be the state sponsored 529 plan. TIAA-CREF administers EdVest, the Wisconsin State 529 plan, which provides a $3,000 state income deduction per year for parents (or other donors). If you don’t have state income taxes, or your plan isn’t all that great, you can either use another states’ 529 plan, or simply start saving into a brokerage account for your child. Don’t worry about using an UTMA or putting the money in your children’s name.

How much should you save? Well, I don’t know about you, but I’m not convinced college prices can continue to rise for the next 18 years the way they have over the last 18. I believe technology is going to drive down the cost of college (while driving some universities out of business) and make it much more accessible that is currently is. For Wisconsin clients, I usually don’t recommend putting in more than $3,000, but that depends on a lot of factors such as the age of their children, their own retirement savings, and more.

Many new parents first reaction is to open a 529 plan the moment their child is born. As hard as it is, I recommend first ensuring that you can weather a financial storm by fully funding your cash reserves. Then, be sure you are saving enough to never become a financial burden on your kids. Only then should you evaluate if a 529 plan makes sense for your situation.

Five Changes to Make to Your Estate Plan After Having a Baby

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 03 Nov 2017 15:22:24 GMT

Calling life hectic after the birth of a child is one of the sure understatements of any parent. Aside from learning how to “do life” with another new face in the family, there are myriad other concerns that have all of a sudden entered into the stream of consciousness. How am I going to pay for college? Who will take care of my baby if something happens to my spouse and me? How do I know that my child will be in good hands?

Estate planning- that is, the process of ensuring that in the event of death or incapacity affairs are managed in a desirable way- is something that many people put off (some estimates have less than 40% of the population having even a simple will). But, with the addition of a new generation to the mix, many parents feel the sudden motivation and desire to plan in order to ensure their child will be taken care of if catastrophe strikes.

So what should new parents consider when tackling their estate planning? Here’s a list of the top 5 areas to take a close look at:

1) Consider guardians and trustees

In the event you are unable to care for your children, it’s important to add a clause to your will which specifies who should have responsibility for raising them. For example, suppose a young couple has a three-year-old toddler, but neither parent has a will nominating a guardian for the child. Tragically, both parents are killed in a car accident leaving their families to decide what is best for the child. Imagine all of the various grandparents, aunts and uncles that may feel like they would be best suited for caring for the child as well. The room for disagreement is obvious. Without any set of written instructions chances are that more than one family member would assume they are in the best position to raise the child which could lead to a mess in the courts and strained family relationships.

By naming a guardian for your children in your will you can avoid this undesirable, but far too common result. A will can designate a person who will care for your children in a manner that you would approve of, can avoid family conflicts over the care of the children, and can even specifically exclude someone from caring for the children.

When thinking about a guardian, it’s important to consider a number of things like;

· The physical location of the guardian- Remain mindful that a physical relocation of the child could cause unnecessary stress on him.

· Lifestyle : While an aunt or uncle may seem like an otherwise great fit to raise the child, consider his or her lifestyle, including work schedule and social habits.

· Religious, political and moral beliefs- Ultimately this person is stepping into the parent’s shoes so he or she should share the same values.

· Financial situation - In the event that you have not been fortunate enough to leave substantial financial assets for which to raise the child with, consider whether the potential guardian would be able to afford to raise the child in the lifestyle to which he is accustomed.

· Desire to serve - ASK, ASK, ASK. While an individual may seem like a perfect fit otherwise, he or she may simply not be ready or willing to be a parent. It’s important to make sure that both the person would both be ok with the potential relationship.

Similar to the appointment of a guardian for any minor children, it’s important to consider naming a trustee that will be responsible for any of your assets that pass to the minor children since the children cannot legally manage the assets for themselves. A trustee will be responsible for managing the funds on the children’s behalf until they are old enough to manage them.

2) Review any dispositive scheme- who should receive your assets?

Often times parents want their assets to pass to each other and then to their children. It’s important to review any previously executed wills, retirement accounts, insurance policies, real estate titles and TOD account designations to ensure that those wishes are reflected. Often times people plan prior to getting married or prior to having children, and their estate plans reflect that position in life. In order to consider the tiny new addition to the family, it may be necessary to change a will to remove your siblings as beneficiaries or change an insurance policy beneficiary designation to flow to a child rather than a spouse or other relative. Consider what happened to actor Heath Ledger. When he died, he had a will, but it was written three years prior to his death, prior to his relationship with Michelle Williams and prior to the birth of his daughter, Matilda Rose. As such, his will still left everything to his parents and sister instead of to Michelle and his newborn daughter. Don’t get caught in that trap.

Additionally, intestacy laws- that is, the laws that govern the disposition of property in the absence of a will- can sometimes lead to strange outcomes regardless of who may be closest to you during life. For example, famed rock guitarist Jimmy Hendrix died without a will at the age of 27. Under state law, his dad, Al, got everything, leaving his close brother Leon with nothing. When Al died years later, he cut Leon out of his will entirely in favor of his adopted daughter through a later marriage- a daughter that Jimmy never even knew.

Just like any other life-altering event, the birth of a child is a great time to review an estate plan with an attorney to ensure it still reflects your wishes.

3) Think about education

The cost of higher education in the US is at an all-time high. Add in possible costs for private pre-collegiate education, professional or doctoral education expenses and things can quickly get out of control for even the most stable parents. Further, transferring large sums almost always will trigger tax liability if done willy-nilly. By planning early, there are ways for parents to grow an education fund for their children. Setting up 529 plans or other investment accounts can offer certain tax benefits. Another option is creating educational trusts for children. This can ensure that parents retain the maximum flexibility with fund management without the necessity of locking into a specific investment scheme or company.

Individuals are permitted to make annual tax-free gifts of $14,000 (adjusted annually for inflation) to an unlimited number of people which enables parents who think ahead to transfer substantial wealth to their children free of any taxes. For example, a married couple could transfer $28,000 per year to separate trusts created for each of their children limiting the spending of trust assets to educational expenses. If the parents remain trustees of the trust, they will be able to manage the growing trust funds for their children, grow the investments and pay for the education of their children.

Discussing the possibilities available to you with your attorney and financial advisor can ensure that you’re able to provide for your children’s’ educational needs while maintaining management and control over assets and reducing tax liability.

4) Retitle assets to avoid any unnecessary transfer delay

In the event you or your spouse passes away your assets will be transferred either to those individuals that you name in your will or according to the intestacy laws of the state in which you live. This is done through what’s known as probate. Probate is the legal process by which certain assets, like personal possessions, most bank accounts, some real estate, and various other assets are legally transferred in the event that their owner passes away. The problem with probate is that it can be an expensive and slow moving process which may delay the ability of a spouse or children to access assets that may be needed immediately.

A common option to avoid the delay and costs of probate is to transfer assets to a living trust. A living trust is basically a separate entity for legal purposes that holds title to your assets while you are alive. You continue to manage them as you would if you owned them outright, however, upon your death, the assets pass according to the terms of the trust agreement instead of a will. This is beneficial because trusts are not subject to probate like wills are. Instead, the assets transfer immediately according to the terms of the trust agreement.

A couple with young children can establish a living trust which directs that, in the event one of them passes away, all assets will transfer outright to the surviving spouse. That means that they can be used immediately to pay liabilities, or otherwise be managed in a way that maximized benefit to the surviving spouse and children. The trust can then name a successor trustee and the minor children as the contingent beneficiaries so that, in the event both parents unexpectedly pass away, the successor trustee can manage the assets for the minor children.

5) Gifts and Taxes

Thanks to a last minute legislative action by congress at the beginning of this year, taxes are less of a concern to most couples in the estate planning arena than they could have been. Married couples have had the ability to pass unlimited amounts to each other free of gift tax, but starting with 2013, married couples can shelter upwards of $ 5 million each ($10 million total) from estate tax on transfers to other individuals, including their children.

For couples with assets worth more than $10 million, congress also made permanent a mechanism known as portability . Portability is the ability of a surviving spouse to claim any unused exemption amount of a deceased spouse. For example, say that a husband dies leaving $3 million to his children outright. That $3 million is not subject to estate tax because it is below the $5 million limit. The surviving wife could act to claim the remaining $2 million exemption that the husband did not use. Upon her death, she could then effectively give away $7 million free of any estate tax (her $5 million exemption plus her husband’s unused $2 million exemption).

Obviously, by raising the amount that individuals are entitled to pass free from estate tax, congress has removed it as a concern for a large segment of the population. However, for couples with assets totaling more than $10 million it’s important to discuss possible ways to reduce the value of the estate through trusts and gifting prior to death in order to minimize tax liability. Also, for couples with a net worth of a few million dollars, it’s important to remain mindful of portability so that it can be preserved in the event of one spouse passing so as to maximize the amount that can eventually be passed to children.

Whether you just became a new parent or had your fifth child, the birth of a child is a good time to review your estate plan to ensure that it reflects your wishes and new family situation. A little bit of planning now can go a long way towards lending some you some comfort in the future knowing that your family will be taken care of.

What to do After You've Drafted Your Estate Plan

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 03 Nov 2017 15:18:38 GMT

A plan isn't going to accomplish much if people don't know if exists.

I’ve written a fair amount about the importance of taking some time to sit down and knock out your estate planning , but what should you do after that? After all, a plan isn’t really going to accomplish much if loved ones don’t know it exists.

In order to ensure that your family and friends aren’t left scrambling to track down important items, people and papers, my first suggestion may be obvious: talk to them and ensure that they understand your wishes and what is important to you. Aside from those necessary conversations, I typically suggest also taking some time to pull all of that information together in one spot so that it can be easily found when it’s needed. I use this estate planning information organizer in my own practice because of its clarity and simplicity, but any type of organization that works for you is great- whether that be a letter, list or folder containing important names and documents. When gathering information, think about all of the people, places and things that would be important for your family or personal representative to know about.

Consider the following items as you pull together information:

Friends and Loved Ones to Notify: While wills and trusts name beneficiaries, there are many times where a personal representative of family member may have a hard time figuring out how to track down friends or other people who were important to the deceased in life. Keeping a list of family and friends along with addresses and phone numbers ensures that those you care about aren’t left scrambling to track down important people in your life.

Important Individuals to Contact. Professionals like doctors, attorneys, accountants, religious advisors and the like often know details about an individual which would not commonly be shared with others. They may be able to provide valuable insight into where bank accounts may have been kept or values that an individual lived by. More importantly, they can be extremely helpful in assisting with wrapping up your affairs. By making a list of these individuals you can ensure that loved ones will have access to people that can advise on your affairs as well as take a little stress out of the grieving process.

Funeral Arrangements. It’s a mistake to put funeral instructions in a will, as many times quick action is necessary and finding a will is the last thing on one’s mind. Including funeral instructions in a will creates a risk that your wishes will not be honored unless there are other indications to family members on how you would like final disposition to be made. What type of memorial service would you like? Would you like your body to be buried or cremated? Are there specific reading that you wish to have or clothes that you wish to be wearing? These are things that most of us do not discuss openly, so leaving a record or your wishes is important.

Personal Papers. Loved ones may require items like birth certificates, social security cards, marriage licenses and military records at some point after your death. Leave written instructions on where to find them; or better yet, pull them all together in one central location.

Important Papers and Financial Information. In a paperless world we often lose sight of the fact that without access to online records, much of our personal financial information is hard to come by. Chances are that few, if any, people know your passwords to financial institution websites, lending institutions, etc. (You may have a hard time remembering all of them yourself!). Tax records, deeds, bank statements and account information, retirement accounts, stock certificates and other similar items should all be kept in one central location. Track down any paper items you may already have- like deeds, and print our records or other items. Store them all in a file that can be kept safely with your will and other sensitive information. By ensuring your personal representative has access to all of this information, you can ensure that the probate process doesn’t turn into an unnecessary headache.

Valuables. Yes, you have likely listed many of these items in your will, but consider that the residue (or remainder) of your estate- any items you haven’t specifically bequeathed to anyone- needs to be disposed of as well. Do you keep some jewelry or a coin collection in a hidden place? Do you have items in storage that many may not know about? Make sure your loved ones know what you actually own by making a list of valuable items and keeping it with your will. However, it’s important to remember that this is just a list to assist people in finding all of your possessions- you’re not using it to actually give anything to anyone. While some states allow for this sort of arrangement, don’t even risk it without speaking with an attorney first.

Real Estate Information. Deeds, mortgages, homeowner’s policies, real estate tax documents, and evidence of any other liens on property should be gathered and kept in the informational file. They’ll be needed in order to ensure that property passes either according to law or how you have directed.

Business Interests. If you have any business interests, you should compile records of the interests, location of any assets, and any account information that may be necessary for your personal representative to ensure access to those interests.

Insurance Policies. All insurance policies- life insurance policies, especially, should be listed and described. Include the insuring company’s name and address, whose life the policy covers, the beneficiary, and any other important facts. Keep this information, along with copies of the policies with your other documents (any preferably with the will) so that your loved ones are able to act quickly and efficiently in finalizing any appropriate payouts with minimal pushback from the insurance companies.

By gathering all of this important information, you’ll be able to ensure that your loved one’s won’t be left scrambling to pick up the pieces when you’re gone.

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Estate Planning for Young Professionals

michael.brennan@mfblegal.com (Michael Brennan) — Wed, 01 Nov 2017 16:07:43 GMT

Estate Planning at any age is important. Accidents don't discriminate.

To follow up on my post last week, Estate Planning for the Average American , I thought it could be good to touch on estate planning for another group of people- young professionals. Considering I find myself in this classification, I realize some of the concerns, or lack thereof, which people in their 20s and 30s have. Among those, I can’t imagine that estate planning is at the forefront. However; along with typical future-looking actions like buying a house, contributing to a retirement account, and maybe buying a little life insurance, there are some relatively easy actions that can be taken to further solidify your loved ones’ well-being in the event tragedy strikes. Youth isn’t a reason to put off things like making a will or executing a power of attorney- rather it should be seen as an opportunity to do some simple planning before life gets more complicated.

With that said, here are 10 things that any young professionals can do now in order to create a safety net for themselves and their loved ones

1. Plan for the unexpected- Accidents don’t discriminate.

The fact is that we only feel invincible. Accidents happen every day, everyone is at risk including even the healthiest, youngest and most vibrant among us. Unfortunately, most people neither anticipate nor plan for an accident to happen. That means then one does happen many aren’t prepared. The fact that young people face so few health problems in the first place makes then an even less likely group to contemplate what would happen if they weren’t able to act for themselves.

For example, what would happen if you were in a car accident on the way home from work and subsequently feel into a coma for days? Who would make medical decisions on your behalf? If you are a homeowner, who would be able to access your checking account to pay your mortgage? While the chances of this sort of thing happening are small, the consequences of a catastrophic accident are very real.

Powers of Attorney for Healthcare and Finances are simple documents to execute and can name an individual that will be legally permitted to make healthcare decisions on your behalf (in your best interests, of course) and handle your financial affairs to ensure that everything is taken care of if something happens. Many attorneys will help you put these protections in place for a reasonable fee. In my opinion, it’s money well spent for some peace of mind.

2. Name a Guardian for your children (even if they aren’t born yet).

If you have children, it is incredibly important for you to name an individual who will raise them if you are no longer around. Of course, if you are married, your spouse (especially if she is the birth parent of your children) will almost certainly take on that role. However; what should happen in the event that both of you die at the same time? Who will care for your children then?

Most couples at some point or another probably have these conversations with loved ones and assume that the chosen person will just “take care of it." However; the stark reality is that many times this is not the case. Typically, in absence of a written agreement otherwise, a court will appoint a guardian. As with many things in the law, the process may not always be quick, especially if there are two sets of loving in-laws that both would like responsibility for the children.

By naming a guardian in a valid will, you can ensure that your wishes will be honored. Talking about who will care for your children is much different than doing what the law says is required to accomplish your wishes. A simple will can be drafted by an attorney for a reasonable fee.

3. Think about whom you want your stuff to go to and put it in a will.

As I’ve said many times, the term “estate planning” can be incredibly misleading. It covers a vast array of planning techniques. And, while most people assume it involves massive sums of money, the truth is, at its most basic level, estate planning is simply about making wishes known in a way recognized by the law. The term “estate” really refers to anything you own, and not just that stash of hundred-dollar bills hidden in your mattress.

Think about it for a second- bank accounts, retirement accounts, insurance, furniture, jewelry, vehicles, clothing, housing, etc.- everyone has possessions, and they need to go somewhere when you die. In the absence of a valid will, these things all pass either a) according to how they are titled (in the case of homes, some vehicles, certain benefits and insurance proceeds) or b) according to state laws of intestacy. Intestacy statutes attempt to mirror how the average person would likely wish to pass his or her belongings, however; everyone is obviously unique and individual considerations may point to a different dispositive scheme. Property passing by intestacy simply may not go where you want it to go. Drafting and executing a valid will is an easy way to set forth who you would like to receive your things in the event you die. After all, it’s your stuff. The choice should be up to you, and not the state.

4. Have a pet? Put an appropriate plan in place for its care.

This is an easy area to miss. If you’re a pet owner, you know how attached your pets can get to you, and vice versa. But, what should happen to them in the event you’re not there anymore? While those with children will probably cringe at the suggestion, pets to many people are like children (as a dog owner, I’m guilty as anyone of spoiling my pups a little too much). In the same light parents should appoint a guardian for their children, it is wise for pet owners to appoint a pet guardian.

There are a few ways this can be done. The first is in a will. The main drawback to this approach, however can be that probate procedures can be long at times, and there is a grey period where your pet may in limbo as to who will care for it. This is true especially if there are substantial bills for the pet’s care such as medication. Your chosen pet guardian may not be able to pay those expenses without funds from your estate. If the estate is stuck in probate you’ve really put that person in a tough spot. A second option is a Pet Trust . This document can name the pet guardian (just like the will) and can hold funds for the pet’s care. It is valid during your life and after your death without the need for court involvement. This approach ensures that the person that will be caring for your pets will have ample funding at their disposal to do so immediately upon your death or disability.

5. Organize important documents and write down where they can be found.

From mortgage documents to tax records to wills and social security cards, there is paper for everything. Often times for even the most organized among us at least some of these things end up in different places. After your death, chances are that your loved ones will be scrambling trying to figure out how to gather everything. But, there’s a simple way to make that task much easier on them so it doesn’t add to the immense stress they’re already facing over losing you.

Simply compiling all information and documentation in one location is an easy way to ensure that loved ones will have everything they may need in order to wrap up your affairs efficiently. I use an Estate Information Organizer in my own practice that enables an individual to list the location of important documents, accounts, titles, and key professionals that would have access to an individual’s records. While this isn’t a document with any legal consequence, it can be an important piece of any estate plan.

6. It may not be pleasant, but consider end of life treatment.

Most people remember the Terri Schiavo case , but for those that don’t, Terri was a 26 year-old woman who collapsed in her home in 1990 from heart failure that led to subsequent brain damage due to the lack of oxygen. She died in 2005 after life support was discontinued. Her death followed numerous court battles over whether or not life-support should be discontinued. Her husband insisted that she had voiced her desire never to live in such conditions, while her parents fought to keep her sustained by artificial means. Eventually, the court sided with her husband and life-support was discontinued.

Terri’s error is a sad one that tore the family apart rather than uniting them to celebrate her life. Terri had never signed any advanced directive setting forth her wishes when it came to life-sustaining treatment in the event she was ever in a persistent vegetative state. Had she executed an advanced directive, called a Living Will in many states, her family would have definitively known her wishes rather than fighting about what she may have wanted for 15 years.

By executing a Living Will, you can clearly state your desires when it comes to feeding tubes and other life-sustaining procedures in the event you are in a persistent vegetative state or have a terminal condition where death is imminent and would only be prolonged by such procedures. A valid Living Will is legally enforceable and prevents a Terri Schiavo situation from arising. Most importantly, It leaves the decision in your hands even through you won’t be able to make the decision once you find yourself in that situation.

7. Along the same note, consider funeral arrangements.

Thinking about death is an unpleasant and uncomfortable experience for all but the most morbid among us, but doing so enables you to have the most possible control over the one thing in life that is certain. Many people, especially young people, don’t discuss their wishes regarding funeral arrangements because death is far from their minds. But, however uncomfortable it may seem, there is no guarantee that you’ll live to see 80 or 90 years of age. Thinking about how you would like to be remembered and discussing that with family ensures that they are able to make choices that you would approve of. Should you be buried or cremated? Is there a special outfit you would like to be wearing? Where would you like your final resting place to be?

These aren’t easy topics to consider, but the decisions will have to be made sometime. You might as well be the one to make them.

8. Ensure that proper beneficiaries are named on retirement accounts and life insurance policies.

Retirement accounts , 401(k)s, IRAs, and life insurance almost always pass to the beneficiaries named on the account. Many employers offer some sort of retirement planning as an additional benefit, but young professionals don’t always put much thought into naming the beneficiaries on the policy. In the event you die and the policy lists you as the beneficiary, the proceeds are going to be included in your estate which may have unintended consequences. However, by changing the beneficiary designations, you can pass these assets to loved ones without them being included in your estate.

The exact procedures vary by institution and sometimes employer, but typically filling out the institution’s form will do the trick. So, if you have recently gotten married, had a child, or realized your ailing parents would be appreciative of the proceeds of a retirement account or life insurance policy; it’s wise to contact the financial institution and ensure your beneficiary designations reflect those wishes.

9. Own a home? Ensure real estate is titled to reflect your goals.

Real estate can be held in various forms. For example, in many states, if you purchase a home and subsequently get married, you and your new spouse will be treated as if you own the home as tenants-in-common- basically, you each own an equal interest in the property that can be transferred freely. Upon your death, your interest in the property will not automatically transfer to your surviving spouse. This, of course means that there is a chance the house will need to be sold.

One solution is to retitle a home as joint tenants with right of survivorship. In this type of arrangement, upon your death the property will automatically transfer outright to your surviving spouse. The transfer can be made by recording a deed with the Register of Deeds in the county in which the property is located. However, it is highly advisable to work with an attorney if you are contemplating such a change due to certain implications involved- tax and otherwise.

10. Ensure that any casual conversations with friends or family find their way to the proper paper.

Casual conversations with family and friends can be great to give them a glimpse into your wishes in the event you die, but that’s about it. The law is a cruel mistress, and without the proper writings in place and formalities followed your wishes may not be given any credence. Write everything down, and do it in a way that will be honored by the courts. Write a will, appoint a guardian in it, modify beneficiary designations, enact powers of attorney for healthcare and property, draft a living will, and most importantly, meet with an attorney to ensure it is all done properly. Tackling death now gives you the most freedom to enjoy life even when faced with your own mortality.

By Michael Brennan

Drafting Website Terms and Conditions for a New Business

michael.brennan@mfblegal.com (Michael Brennan) — Wed, 01 Nov 2017 16:03:44 GMT

Setting up a website with on online store is a relatively easy task, but ensuring that interactions between owner and customer run smoothly isn’t always as simple.

Starting a business these days is easier than ever. Web development sites provide easy-to-use do-it-yourself templates, products can easily be ordered online from manufacturers, marketing has become more of an automated process and payment processing software ensures that a new business owner gets paid. Setting up a website with on online store is a relatively easy task, but ensuring that interactions between owner and customer run smoothly isn’t always as simple. Chances are that, at one time or another, each and every one of us has been dissatisfied with a purchase. Sometimes sellers are quick to remedy any dissatisfaction a customer may have, but other times it’s a challenge to even get a seller to admit it’s wrong, yet alone convince it to give you a refund or replacement product or service. Needless to say, disagreements between a buyer and seller are not always pretty and many times it isn’t clear whether there was just a misunderstanding about what was being sold or whether the seller is actually in the wrong.

Use terms and conditions for your new business to set out expectations upfront

When starting a new business it is important to realize that the inevitable disagreement will arise and dissatisfied customers are going to make (un)reasonable demands for how it should be resolved. One essential document that any prudent new business owner can and should have in order to mitigate some of these disagreements is terms and conditions which can address the use of the business’ website and sale of its products.

Terms and Conditions ensure that the parties are clear on what the transaction is and isn’t upfront. Oral contacts are enforceable in many situations, but there is one glaring problem with any alleged oral contract. Evidence. Determining the initial agreement basically comes down to a “he said, she said” situation where each party may remember facts, conversations and circumstances a bit differently. Additionally, by the time a dispute does arise, chances are a fair amount of time has passed since the initial agreement was made and the parties don’t remember all the details of exactly what was agreed upon. When a business has clear terms and conditions, it is clear when a customer (or the business) has breached the contract. Additionally, written contracts are much easier to enforce in the event of a disagreement.

The benefits of having an experienced attorney involved in drafting terms and conditions for a new business are plenty. An attorney can ensure that bases are covered from a legal standpoint, potential risks and conflicts are considered and there is clarity in explaining rights and responsibilities to any potential customer. However, no one knows a business like the owner, so the owner’s involvement in drafting any document is also imperative.

While addressing legal concepts, like limitation of liability, dispute resolution, force majeure, warranties, applicable laws, etc., is an important part of any set of terms and conditions for a new business, the document should be more than just a regurgitation of legalese. Effective terms and conditions need to set forth the rights and responsibilities of both the business and the customers. They should explain the effect of using the website and online store, obligations relating to payment, shipment, and satisfaction as well as what the customer can expect when he or she receives any products.

Lay out exactly what the customer should expect when buying the product

When drafting terms and conditions for a new business, a business owner should put himself in the shoes of a potential customer and think about possible questions that could arise relating to the purchase.

For example:

What results does a customer expect when he or she decides to make a purchase?
Is the customer expecting the goods to adhere to a certain level of quality?
When should the client expect the goods to be shipped and delivered?
When will credit cards be charged?
What happens if the customer is dissatisfied with the order? Will they pay for the return postage?
What will the remedy be- will they receive a refund? A replacement product?
Does the customer need to understand that certain performance issues and timeframes are dependent upon the customer providing specific information in a timely manner?
What will happen if the products are no longer in stock?
Will there be different shipment options?
What happens if the carrier doesn’t get the products to the customer at the time indicated?
Will there be a procedure for cancelling an order and will a refund be issued?
If a subscription is being sold will there be a penalty for early cancellation?
Will the customer be charged taxes (sales or other)?

Define the Scope of Work

If the business is selling anything other than an individual product, it is important for the business to have terms and conditions that explain the scope of work that will be performed for the customer. Basically, what is the customer getting for their money? In the legal industry lawyers and potential clients discuss all sorts of issues that the potential client may want the attorney’s help addressing. The potential client and attorney may agree to tackle everything, or more likely, they may agree to tackle only a set of specific issues in which the attorney is experienced. This is always set out in a detailed retainer agreement which explains how much work the attorney is going to do, what he will be involved with, and what issues the client and attorney will not work on together. Like an attorney, any business selling services should endeavor to set out exactly what services will be provided and what will be excluded. Remember, an important goal of putting terms and conditions in place for a business should be full disclosure of every aspect of the relationship between buyer and seller. Doing the leg work upfront reduces the possibility that a messy disagreement will arise in the future.

Upsell Your Services and Use Terms and Conditions as a Marketing Tool

Finally, don’t overlook the opportunity that written terms and conditions present for marketing the business, either. Having terms and condition for a business shows that it’s a legitimate operation. They show that the business is sincerely concerned with how disputes should be handled and that it has given thought to the customer’s experience using its website and online store. Additionally, by writing terms and conditions in easy-to-read language a business can show potential customers that it is customer focused and doing everything it can to ensure the customer is comfortable with any transaction.

By Michael Brennan

Michael F. Brennan runs a virtual law office helping entrepreneurs in Illinois, Wisconsin, and Minnesota launch and build new businesses. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at thevirtualattorney.com .

Dying Without a Will (Infographic)

michael.brennan@mfblegal.com (Michael Brennan) — Wed, 01 Nov 2017 15:56:05 GMT

Dying without a will can have far reaching unintended consequences so it's best to know what effect it could have on you.

Dying without a will can have far reaching unintended consequences so it's best to know what effect it could have on you. Here's an illustrative view on how you could be effected depending on whether you live in Illinois, Minnesota or Wisconsin and whether you have are married or have kids. A word of caution; however. This is for illustrative purposes only and should not be relied on as any sort of legal advice. The intestacy laws are extremely details and very situation specific so it is important to discuss any implications on you or your family with an attorney knowledgeable in estate planning and intestacy laws in your state.

Estate Planning for the Average American

michael.brennan@mfblegal.com (Michael Brennan) — Wed, 01 Nov 2017 15:52:42 GMT

As an estate planning attorney it is common for me to hear from people who assume that estate planning isn’t necessary for them because they have no “estate”. However, to put it bluntly, this couldn’t be further from the truth. The mistake these folks are making is assuming that an estate must consist of millions of dollars. But, the truth is that nearly everyone has an “estate” for purposes of estate planning. This includes personal residences, insurance, retirement accounts, personal possessions and household goods. It also includes things such as who will care for children in the event both parents die, who will make financial decisions in the event an individual does not have the capacity to do so, and how should doctors handle feeding tubes and life-sustaining treatment in the event they become relevant.

Here are some common types of people who may not have millions of dollars in the bank, but still should seriously consider putting an estate plan in place.

Ordinary Middle-Class Couples

The estate tax exclusion amount for 2018 is $5.6 million per individual (married or unmarried), meaning that any amount under that limit can be passed on to friends, family, charity, or whomever upon death. Obviously, the vast majority of couples don’t come close to even having to consider planning around that amount. It's questionable under the current administration if the estate tax will even exist in the relatively near future. But, one thing is certain--unlike five years ago, very few couples need to even concern themselves with estate tax liability upon their deaths.

Of course, married couples can pass an unlimited amount of assets to one another without incurring any tax liability, but unmarried couples don’t enjoy the same right. Additionally, any wealth passed to a surviving spouse upon the death of the first spouse may be estate tax free, but without additional planning, the exemption of the dying spouse will be lost and chances are much greater that the surviving spouse will be subject to estate tax upon his or her death.

One approach for married or unmarried couples alike is to put assets into a trust that would not be considered part of the surviving individual’s estate. The terms of the trust can direct for the disposition of those assets to other beneficiaries while permitting the surviving member of the couple to receive income from the assets (and potentially principal) for health, safety and general welfare. This approach permits each member of the couple to take full advantage of the estate tax exemption and no taxes would be owed when the surviving member of the couple died.

Another option is an irrevocable life-insurance trust which can shelter insurance proceeds from estate tax; however, the price of administration may not be worth it for most ordinary middle-class couples. Instead of a straight irrevocable life insurance trust, couples may be interested in exploring the possibility of naming each other as the primary beneficiary under the policy with the previously mentioned trust named as the secondary beneficiary. Depending on the current situation when the first member of the couple dies, the surviving member may be able to elect to decline the funds having them flow directly into the trust as the secondary beneficiary of the policy. It may be possible to use this approach for retirement accounts as well.

Second Marriages and Step-children

Families with second marriages and step-children present some additional considerations due to the various relationships involved. Oftentimes couples come into a new marriage with some estate planning already in place; however, changes are usually necessary given the new priorities in their lives. Previous spouses typically need to be written out of documents, and new ones need to be written in. Another potential hurdle is figuring out how to divide up an estate when each spouse has brought children from a previous marriage into their new marriage. A natural inclination may be to favor children by blood, but doing so may provide fuel for a family dispute down the line.

Because of the inherent conflict in blended families discussing plans with all of the children is usually a good idea. The more clarity that can be given on exactly what the children should expect, the better the chances that disputes won’t arise after it’s too late to change anything.

Couples Without Children

Many couples make the decision not to have children or to postpone having children until later in life. Sometimes a question of these couples is who will take care of them in the event they are no longer able to do so. For these couples, it is important to think about that possibility and plan accordingly. A power of attorney in the name of a friend, relative or trusted advisor that becomes effective upon a finding of incapacity may help ease the concerns over financial and medical decision making down the line, but these couples should also consider setting forth their wishes regarding nursing home care, hospice, etc.

By planning early on, there becomes less of a chance that unforeseen circumstances will force lived ones to guess as to what care someone may desire or how it should be provided. Worse yet, without planning, there is always a very real possibility that the courts will be involved with appointing a guardian to act in the disabled individual’s best interests. Sometimes this may not necessarily be the person that the disabled person would have chosen to fill that role.

Unmarried Couples

As I mentioned previously, unmarried couples do not enjoy the luxury of the unlimited spousal exemption. Transfers by one member to the other are subject to gift tax during life, and will be subject to estate tax upon death to the extent they are greater than the exemption amount in place in the year of death. Given that reality, it is a dangerous assumption that each individual will leave everything to the other upon death without any sort of consequence.

The most basic solution to the potential disaster that awaits unmarried couples is leaving assets to each other in trust. One possibility is the bypass trust, which permits the surviving individual to access income and principal to an extent during the remainder of his or her life, but protects the assets from being taxed for estate tax purposes a second time upon the surviving individual’s death.

Additionally, unmarried couples need to be aware that gifts to each other will be subject to gift tax to the extent they are greater than the current exclusion limit. Presently individuals can give $14,000 to another person each year (this will increase to $15,000 in 2018). Any amount in excess of that will either a) draw down the individual’s available lifetime gift tax exclusion, or b) be subject to gift tax. Thus, adding a partner’s name to a residential deed or saving account which holds substantial assets may bring unintended tax consequences without some planning.

As can be seen, estate planning does not need to be something that involves moving around millions of dollars. It is a relevant topic to practically anyone in one form or another. By coming to that realization and exploring how it can be utilized to best protect you and your loved ones, you can keep some unnecessary future burdens at bay.

By Michael Brennan

What Happens if I Die Without a Will?

michael.brennan@mfblegal.com (Michael Brennan) — Wed, 01 Nov 2017 15:42:53 GMT

Dying without a will is called dying “intestate”. In the event that an individual dies intestate, a will is invalid or simply cannot be found after death then the deceased individual’s (“testator’s”) property passes according to laws specific to the state in which the individual lived.

An individual who dies intestate in Illinois will have his or her estate distributed as follows:

Married with no children : The entire estate goes to the surviving spouse.

Married with child or children : One half of the entire estate goes to the spouse and the other half to the decedent’s descendants.

No spouse survives but there are other relatives : The estate will be distributed in this order of priority:

1) decedent’s descendants

2) parent, brother, sister or descendant of the decedent or of brother or sister

3) grandparent or descendant of a grandparent – one half of the estate to the decedent’s maternal grandparents or their descendants and the other half to the decedent’s paternal grandparents or their descendants

4) great grandparents or their descendants – one half of the estate to the decedent’s paternal side and the other half to the decedent’s maternal side

5) the nearest kin of the decedent

Single person/ widow or widower: The estate will be distributed in the order shown below:

Order of estate distribution if decedent not married: The estate will be distributed in this order of priority:

1) decedent’s descendants

2) parent, brother, sister or descendant of the decedent or of brother or sister

4) great grandparents or their descendants – one half of the estate to the decedent’s paternal side and the other half to the decedent’s maternal side

5) the nearest kin of the decedent

No surviving relatives The real estate reverts to the county in which it is located; all other personal property becomes the property of the county in which the decedent was a resident or becomes the property of the state of Illinois and should be delivered to the State Treasurer.

An individual who dies intestate in Minnesota will have his or her estate distributed as follows:

Married with no children The spouse receives the entire estate if there are no children.

Married with child or children

1)The spouse receives the entire estate if the decedent’s surviving children are also the children of the spouse and there is no other descendant of the spouse.

2) The spouse receives the first $150,000 plus one half of the estate balance if all of the decedent’s surviving children are also descendants of the spouse and the spouse has surviving descendants who are not descendants of the decedent or if the decedent’s surviving descendants are not descendants of the spouse.

No spouse survives or the deceased was single but there are other relatives The order of distribution is as follows:

1) parents

2) descendants of the decedent’s parents

3) grandparents or descendants of the grandparents

4) next of kin

No surviving relatives The estate passes to the state of Minnesota.

Special Notes Any individual who fails to survive the decedent by at least 120 hours is deemed to have predeceased the decedent for purposes of inheritance.

An individual who dies intestate in Wisconsin will have his or her estate distributed as follows:

Married with no children: Surviving spouse or domestic partner gets entire estate.

Married with child or children:

1) If all of the decedent’s surviving children are also children of the surviving spouse or domestic partner, that surviving spouse or domestic partner is entitled to the entire estate.

2) If one of the decedent’s surviving children is not the child of the surviving spouse of domestic partner, the surviving spouse or domestic partner gets one half of the decedent’s property (other than marital property or property held equally and exclusively with the surviving spouse or surviving domestic partner as tenants in common).

Order of estate distribution if spouse or domestic partner survives: Any portion of the estate not going to the surviving spouse or domestic partner, is distributed in the following order:

1) Surviving children

2) Parents or issue of parents

3) Siblings and issue of any deceased sibling

4) Grandparents and their issue

No spouse survives but there are other relatives:

1) Surviving children

2) Parents or issue of parents

3) Siblings and issue of any deceased sibling

4) Grandparents and their issue

Order of estate distribution if decedent not married, widow or widower

1) Surviving children

2) Parents or issue of parents

3) Siblings and issue of any deceased sibling

4) Grandparents and their issue

No surviving relatives: The estate goes to the state of Wisconsin to be added to the capital of the school fund.

By Michael Brennan

Michael F. Brennan runs a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and business law issues. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com.

15 Tech Tools for any New Business

michael.brennan@mfblegal.com (Michael Brennan) — Wed, 01 Nov 2017 13:31:38 GMT

Make running your business easier by using the right technology.

To run a virtual law office or any new business you’ll need for all sorts of programs and software to be effective. From billing to research, and marketing to client communication, technology today offers some incredibly convenient tools that can be used to streamline the practice, enhance accessibility and convenience and provide security to all areas of the business. Here are 15 of the main tools the Virtual Attorney uses to operate its virtual law office. While some are geared specifically towards the practice of law, more can be used for practically any new business.

1) Total Attorneys : Without getting into the specifics of everything Total Attorneys does, it has a great practice management platform that I use to run my practice. From opening a secure line of communication with a client or potential client to tracking time, sending invoices or accepting payment, Total Attorneys covers the gamut. I use its calendar feature to stay organized and set up tasks daily to stay on top of priorities. The platform links directly to my website so it’s easy for clients to access their unique accounts or potential clients to open new ones. By far, I’d say this is the nucleus that keeps my practice organized and operating.

2) Skype : Most people probably know of Skype, but for the uninformed, Skype is a product that enables individuals to hold conferences by means of webcam. As a virtual law practitioner, I use Skype to interact with clients, conduct consultations, or even to briefly touch base on the status of something we may be working on together. The ability for a client to connect with his attorney eye to eye, read emotions and reactions, see enthusiasm and concern is paramount to establishing the trusting relationship necessary for attorneys and their clients. Skype provides a means to achieve that.

3) Google voice : Google voice is great for those who don’t see a need to rack up an unnecessary bill on a separate landline phone. After all, the virtual model is all about keeping costs low and passing those costs along to clients. For those of us that rely solely on a smartphone for communication- whether personal or business, sometimes it’s hard to separate the two. Google Voice helps you do it. It’s a free service that provides you with a separate number that you can then tie to whichever devices you choose. For example, I use my Google voice number as the Virtual Attorney’s business number, but calls are directly routed to my iPhone so I can answer immediately. It also allows you to set up a separate voicemail message and will transcribe any messages and send them directly to your email inbox. All in all, it’s an incredibly handy tool to keep business and personal calls separate without requiring the additional cost of additional phone lines.

4) Google+ Hangouts : I only started using Hangouts recently, but I immediately fell in love. Like Skype, Hangouts are a way to connect with clients or potential clients face to face but through the computer. What I really like is that it only takes a Google + profile to get started. It easily links to your Gmail inbox, so whenever you want to begin a new hangout, you can click the Google + icon, select anyone in your circle and you’re on your way. If you aren’t already connected to the people to whom you’ll be connecting, it’s easy to send out an invite to a hangout at a specific time and date (just like sending a meeting invite). While you’re speaking, you can also share your screen with the others in the meeting, or exchange documents via Google Docs.

5) Go! Animate : Go! Animate is a program that allows you to make videos for training, business or just for fun by using pre-programmed animation elements. Voices can be provided either by recorded audio file, or, through automation. I used Go! Animate to make a little intro video for my website and plan on using it more in the future to make additional explanatory videos. The videos can be easily embedded on a website, blog, or social sharing page, and they can be linked automatically to a YouTube account . Overall, a handy tool if you want to add a bit of visual zest to your business or law practice.

6) DocuSign : DocuSign is a handy tool to use when you need to get documents signed. Once you sign up for an account you’ll be able to upload any document from your computer that requires the signature of another party. You can then indicate where signatures or initials are needed with little tabs and sign for yourself (or wait until the other party signs). Docusign will send an email alert with a personalized message and link to the other party. The other party simply follows the link, e-signs where you have indicated and hits submit. The completed document is automatically uploaded to your DocuSign account where you can save and print the fully executed version. For items that need a quick signature, DocuSign provided a handy way to get a quick turnaround.

7) Dropbox : Think of Dropbox as a briefcase in the cloud. Once you upload a document to your account you’ll be able to access it from any computer or device regardless of whether it’s actually saved on that device. Unlike using a jump drive or other type of hard storage device, Dropbox helps ensure that you’ll always have the most up to date version of a document you started drafting on your PC, but modified on your laptop, smartphone, tablet and the library computer. Instead of remembering to email an updated version to yourself each time you think you may need to access it elsewhere, throw it in your Dropbox and forget the hassle. I’ve always been cautious not to use it for confidential documents I’m working on because I don’t know how susceptible it is to breach, but for less confidential items, its convenience cannot be overstated.

8) MyFax : I use MyFax for the same reason I use Google Voice- I don’t want to deal with the hassle or cost of a separate landline. While faxing may be going the way of the dinosaurs, it still pops up as necessary seemingly at the least convenient times. Instead of actually faxing anything, MyFax does it for you. You just upload scanned documents to your account and send them to your recipient’s fax number as PDFs. If you receive a fax, MyFax will convert it to a PDF and send it to your email inbox for you to print. It completely does away with the need for an actual fax line. For only $10 a month, it’s a great addition to any business’ operations.

9) VistaPrint: I use VistaPrint for my one stop shop for anything from business cards to letterhead to marketing materials. You can either upload your own design or use the site to come up with something new. It has a great range of product options as well.

10) Stamps.com : There are various options when it comes to business postage, but the one I particularly like is the model used by Stamps.com. Instead of using a postage meter or buying rolls upon rolls of stamps from the post office, the site allows you to pay postage costs through your account via credit card and print the exact amount directly onto blank stamps. I’m sure eventually I’ll move away from this, but for smaller businesses that don’t send huge amounts of mail; the ability to control the postage account practically down to the penny is great.

11) Quickbooks : I know there are tons of options out there, but when it comes to small business accounting, Quickbooks is the standard. Not only can you use it for accounting, but it can be used for credit card processing, invoicing, payroll and general bookkeeping as well.

12) Pageonce : Pageonce is one of many iPad/iPhone apps I use to run my practice. It’s basically a one-stop shop for all your bank account information, credit card balances, payment due dates, bills, etc. I don’t use it for much more than monitoring my accounts and balances (although it does have a bill pay feature), but it’s a nice tool for giving a quick overview on cash flow at any given time.

13) Buffer: Social media involvement in quickly becoming a necessity for any business, and there’s no replacement for actual interactions on Facebook or Twitter, but if you’re looking to shoot out tweets throughout the day, even if you’re tied up with something else, Buffer can do it for you. You fill your queue with the tweets you want posted and set a schedule for when they should be posted. As an extra convenience, you can download an add-on for Firefox that lets you tweet any page or add it to your queue with the click of a button. I think relying solely on automated tweets to keep a social media presence is a horrible idea, but it can enhance the tweeting you’re already doing.

14) The standards- Facebook , LinkedIn , Twitter , Instagram , and Pinterest : Not much to be said here- social media involvement is imperative. Set up a Facebook business page, and accounts on Twitter, Instagram and Pinterest. Admittedly, the latter two aren’t really geared to a service profession like law, but I use them to add a personal touch to my practice and offer a little window into who I am and what I do outside of work. Clients and potential clients don’t want to work with a machine; they want to work with a real person. These sites offer a way to let them know there’s more to you than the computer screen.

15) Google Analytics and Google Webmaster tools : The crux of online traffic monitoring is (most would say) Google Analytics. If you don’t have an account, get one and link it to your website. If you’re just starting out, make sure setting up analytics is one of the first things you do. The tool lets you monitor all sorts of valuable information from who is visiting your site to where they’re coming from and how they got there to what they’re doing once they arrive. Don’t just guess- make sure you know how your audience is engaging with your site. Webmaster tools is great for Search Engine Optimization and market research. You can use it to look into keywords relevant to your product and site and analyze how those may play into a potential marketing campaign.

Starting a business is perhaps easier today than it has ever been. Whether you’re in the practice of law or have a great idea to start your own business , incorporating some of the above tools (and surely some others) gives you the opportunity to increase productivity, profitability and the quality of service you provide to your clients.

By Michael Brennan

Entrepreneurs in the Midwest (Infographic)

michael.brennan@mfblegal.com (Michael Brennan) — Wed, 01 Nov 2017 13:23:31 GMT

While the Midwest may not necessarily be a hotbed for innovation, it does still have its share of entrepreneurs. In fact, a little over 9% of the country's entrepreneurs call the tri-state area of Minnesota, Wisconsin and Illinois home. That amounts to nearly 55,000 people!

10 Steps to Give Your Business a Legal Kickstart

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 26 Oct 2017 16:10:24 GMT

Starting a business is tough. Figuring out how to do it properly is even tougher. Here are 10 things to focus on to make sure that you get off on the right foot.

So you have a great new idea or a way to improve on an existing one, but what now? Starting a business is no easy task and the requirements to do it correctly can seem overwhelming. But, while there are a number of local, state and federal requirements to formally create the business structure and get off the ground, with some guidance and a little organization you can be up and running in no time. Here are 10 legal areas to consider when launching your business.

1) Consider how much protection from personal liability you will need. What are your business risks?

It could probably go without saying that when starting a new business it is imperative to consider the risks that it will face. Determining how likely you are to face losses will help you in making your determination on which entity is appropriate to your business. For example, a sole proprietorship provides no protection to the individual owner who remains on the hook for all potential liabilities and losses. This means that an individual doing business as a sole practitioner may be risking his savings, his credit and his home. Conversely, a C corporation will shield an individual owner from liabilities of the business. The trade-off with a C Corporation is added complexity in formation, operation and additional formalities that must be followed.

Regardless of the choice of business entity, in most cases the individuals forming the business will remain personally liable for their negligence. So an individual providing personal service, for example, may be just fine operating as a sole proprietorship with a strong insurance policy. The potential for loss shouldn’t be the only consideration when deciding the best entity for your business, but it should certainly be given some thought.

2) Research the different types of business organizations.

The types of business organizations available depend on the state in which you will be forming your business; however, for the most part, the same basic types of structures are available in most states. Sole proprietorships, partnerships, limited liability hybrid entities, S Corporations and C Corporations are all available to explore as possible structures for your business. Each has its benefits and drawbacks so it is important to take some time to explore the features that each offers and the formalities required for their continued operation.

3) Determine how your business will be taxed.

As they say, only two things in life are certain: death and taxes. Starting your own business means that you’ll now have a lot more to consider than filing a 1040 each spring. Your choice of business entity will have long lasting implications for how and when you will be required to pay taxes. You’ll want to research the various reporting requirements for each entity to determine whether you’re willing to face a complex taxation scheme if it potentially means savings down the road.

	Sole Proprietorship	Partnership	LLC	S Corporation	C Corporation
Filing Requirement	IRS 1040, Schedule C (profit and loss), Schedule SE (self-employment tax ), Quarterly estimated tax returns, Possible excise taxes and employment taxes	IRS 1040 IRS 1065 ( Partnership Income Return) Schedule SE (self-employment tax ), Quarterly estimated tax returns, Possible excise taxes and employment taxes	Not recognized entities for federal income tax purposes so it depends on election and whether LLC is single member LLC. Possible filings: IRS 8832 (entity classification election) IRS 1065 (if elected as partnership) IRS 1120 (if elected as corporation)	IRS 1120S, IRS 1120W (estimated tax) IRS 941 (employment tax) Possible excise taxes, Shareholders file Schedule E with 1040.	IRS 1020, IRS 1120-W (estimated tax) IRS 941 (employment tax), Possible excise taxes.
Benefits	Simplicity. Company is taxed at the individual level. Individual owner reports profit and loss on individual 1040 (Schedule C)	Profit and loss is passed through to the partners. No tax at the entity level. Ability to make various tax-free contributions and distributions of property to and from the partnership	Flexibility. Entity can elect to be taxed as an individual and pass through profit and loss to individual members or as a corporation	Only 1 level of tax (profits/ losses are passed through to shareholders	Flexibility. Various options exist for income shifting between corporation and shareholders. No restriction on carried losses, savings on self-employment taxes, ability to lease assets to corporation.
Disadvantages	No flexibility. Company is disregarded for income tax purposes. No ability to shift income between owner and company.	Limited flexibility. Losses only taken at partner level, so any deductions (i.e. charitable deductions) are treated first as a taxable distribution to the partner.	Depend on the classification for tax purposes (sole proprietorship, partnership or corporation.)	Shareholders taxed on profits whether or not distributed.	Double taxation (corporation is taxed on earnings at the corporate level and shareholders are taxed on any distributed dividends)

4) Determine a legal structure for your business.

Not only does each business entity have different benefits and disadvantages when it comes to taxes, but they each have various levels of formality, varying filing requirements and other considerations. Before selecting an entity for your business, you should take some time to familiarize yourself with the various characteristics of each.

	Sole Proprietorship	Partnership	LLC	S Corporation	C Corporation
Ownership	Individual	Partners	Members	Shareholders (limited amount of individuals permitted)	Shareholders
Management	Individual owners	Managed by partners (can be limited. Defined in partnership agreement)	Members or Managers (defined in operating agreement)	Board of directors (elected by shareholders). Officers run day-to-day operations (elected by directors)	Board of directors (elected by shareholders). Officers run day-to-day operations (elected by directors)
Personal Liability	Individual owners 100% liable for losses of the company	Partners personally liable for business debts (may be limited in case of limited partner)	Members typically not liable for debts of the company	Shareholders typically not liable for the debts of the company	Shareholders typically not liable for the debts of the company
Requirements for Formation	None	None. Partnerships may be formed orally	File Articles of Organization with state	File Articles of Incorporation with state	File Articles of Incorporation with state
Formalities	None (but may need to file DBA registration and periodic taxes)	None (but may need to file DBA registration and periodic taxes. Can be governed by partnership agreement but may also be formed orally.)	Daily operations governed by operating agreement. Must file annual reports with state.	Daily operations governed by bylaws. Required to have formal board and shareholder meetings, keep minutes and file annual reports with the state.	Daily operations governed by bylaws. Required to have formal board and shareholder meetings, keep minutes and file annual reports with the state.
Taxation	Taxed as individual income and loss. Report on 1040 (schedule C)	Income and losses attributable to partners. Reported on 1040 (schedule K-1)	Can elect to be taxed as individual or corporation.	Profit and loss typically passed through to shareholders and reported on 1040. Profits taxed whether or not distributed to shareholders.	Separate entity for tax purposes. Must file separate return, report distributions, salaries, income and loss.

5) Determine what your business will be called and research the name.

Once you’ve determined which type of business entity to use you should do some research on the name you would to use for your new business. In the internet age it’s easier than ever to find out if someone is already using the name, whether a domain name is available and whether protection is available if you do move forward using your chosen name.

Unfortunately, there is no one-stop shop to determine the viability of using a name, but with a few resources and a little time you should be able to develop a sense of confidence that your chosen business name is not going to conflict with another business.

County Search: Check with the county clerk’s office in the place you’ll be forming the business to see whether your desired name appears on its list of fictitious business names in the county. Most counties have a search tool on their websites that you can use, but if not you may need to call the clerk’s office and determine the procedures they require you to follow.

State Search: If you will be forming an LLC or corporation search the Secretary of State’s (in Wisconsin, the Department of Financial Institutions) records for any other company already formed under your chosen name or a similar name. Like the county websites, the state will typically have a search feature on its website that you can use. Make sure to search the entire name and various combinations of the words as most of the directories are sensitive to the exact language that you input into the field. In order to ensure that no other names are close to your chosen name, take the extra time to search a few different combinations of the words you’d like to use in your name.

Trademark search: Finally, make sure to search trademark databases, especially the federal trademark database kept with the U.S. Patent and Trademark Office (USPTO). The USPTO’s website has an easy to use search feature much like many states and counties. Again, make sure to try a few combinations of the words in your chosen name to ensure that it is not too closely related to a name that is already trademarked. Additionally, you should search all 50 state trademark databases to ensure your name does not infringe on a state registered mark (especially if you plan to do business throughout the country or on the internet). Websites like www.cscglobal.com will search all 50 state registries for a fee; however, if you have a little time and some patience you can methodically do a search yourself for free.

Domain search. A website is a necessity for any business today. Whether you will be doing business online or not, consumers are going to search for your company online. Having a website offers an easy way to provide information on your company, products and services and offers a level of legitimacy to your company. Once you think of a couple of ideas for what you would like your web address to be, you’ll need to make sure that your chosen site name is still available. Sites like GoDaddy.com, networksolutions.com and instantdomainsearch.com offer an easy search feature that will help you determine name availability. Once you find an available name you can follow the prompts to claim and register that name.

6) Register business name.

Once you’ve done your due diligence and determined that it’s safe to use your chosen name it’s time to register your name. Many times, this is done concurrently with filing any organizational paperwork. In most states, if you are forming a corporation, LLC or limited partnership, your name will be automatically registered when you file articles of incorporation, articles or organization or a limited partnership statement. However, if you have decided to form a sole proprietorship or partnership that will be doing business under a fictitious name, while there are no required filings to organize the business, you’ll want to register your fictitious business name.

In Wisconsin, a fictitious business name is filed with the Department of Financial Institutions

In Illinois, a fictitious business name is filed with the Secretary of State

In Minnesota, a fictitious business name is filed with the Secretary of State

Trademarks or service marks can also be registered at the state or federal level. While not required, registering your business name, the name of your product, a label, logo or slogan will give you certain protections and will alert the public of your claim to the mark. A word of caution: while registering a mark at the state level is a relatively simple task, federal trademark laws are many and the process for registration is complex. Federal trademark registration is one area where an intellectual property attorney will be an invaluable asset.

In Wisconsin, a mark can be registered with the Department of Financial Institutions

In Illinois, a mark can be filed with the Secretary of State

In Minnesota, a mark can be filed with the Secretary of State

7) Prepare organizational paperwork- what is required?

Various filings are required depending on the business entity you have selected. Below is a chart indicating the required filings for each entity as well as where to file and filing fees.

	Required Filings	State	Where to File	Filing Fees
Sole Proprietorship	None	Wisconsin	NA	NA
Illinois	NA	NA
Minnesota	NA	NA
Partnership	None for General Partnership. Limited Partnership requires statement of limited partnership.	Wisconsin	Department of Financial Institutions	$70.00
Illinois	Secretary of State	$150
Minnesota	Secretary of State	$100-$120
LLC	Articles of Organization	Wisconsin	Department of Financial Institutions	$130-$170
Illinois	Secretary of State	$500
Minnesota	Secretary of State	$135-$155
S Corporation	Articles of Incorporation	Wisconsin	Department of Financial Institutions	$100
Illinois	Secretary of State	$150
Minnesota	Secretary of State	$135-$155
C Corporation	Articles of Incorporation	Wisconsin	Department of Financial Institutions	$100
Illinois	Secretary of State	$150
Minnesota	Secretary of State	$135-$155

8) Obtain licenses and permits.

Federal EIN

EIN stands for Federal Employment Identification Number. Your company’s EIN will be used as an identifier on federal tax forms. If your business is going to have employees then you will need to obtain an EIN to use when reporting income to the government. While some business owners without employees have the option to file under their social security number, an EIN affords a business flexibility allowing it to set up retirement accounts and pay additional taxes, such as excise taxes. You’ll also use your EIN to do non-tax related taxes, such as set up business bank accounts, apply for credit or set up a smartphone plan.

State sellers permit

Any specialized state licenses

Local registrations and permits

Information on Illinois business licenses

Information on Minnesota business licenses

Information on Wisconsin business licenses

9) Obtain Insurance.

It should go without saying, but starting a business will bring with it inherent risks and inevitable unhappy customers. Business insurance can protect you from loss due to natural disasters or lawsuits. There are various types of insurance available to you and your business such as property and casualty insurance to protect your physical business assets (buildings, vehicles, inventory, etc.) or liability insurance which can shield you against claims for negligence. Additional types of insurance available to businesses and business owners are:

Commercial auto insurance
Product liability insurance
Business interruption insurance
Worker’s compensation insurance
Life and disability insurance

You should speak with an insurance professional about which types of insurance are appropriate for your business.

10) Learn about taxes.

If there is one thing that causes more headaches and frustration to new business owners than anything else, it’s taxes. While the complexity of your business’s tax obligations will be dictated largely by its size, your choice of business entity will also play a large roll. Corporations are likely to have a much more complex tax scheme than sole proprietorships and instead of one filing a year you may now need to keep track of multiple deadlines and learn how to estimate your business’s tax liability months in advance. For all those headaches, however, there is a nice tradeoff in the form of deductions. Expenses that are incurred while carrying on your trade or business can be deducted from total tax liability. To be deductible, the expense must be ordinary and necessary, meaning that it must be one that is common and accepted in your area of business and an appropriate expenditure to the advancement of your business. Expenses incurred in areas such as advertising, benefits, depreciation, supplies and materials, and office expenses can reduce the total amount of liability your business may have.

A word of caution though: Tax laws are incredibly complex and the penalties for abuse or misuse can be substantial. Given the risks involved, the best bet is to hire a good lawyer and accountant to walk you through the maze of code sections and regulations. This is one area where the money you spend to get some profession help will be very well spent.

By Michael Brennan

Estate Planning for Young Families

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 26 Oct 2017 16:05:55 GMT

Once kids are in the picture estate planning becomes as important as ever.

Ask anyone you know the kind of person that would need to be concerned with estate planning , and 90% would describe the well-to-do retiree who has spent the last 40 years of life building up substantial wealth. But what about the other end of the spectrum? Picture a young, newly-married couple that just had their first child. Both parents have stable jobs and a nice starter home. They put away a little money each month if they’re lucky just in case something bad happens, and they try to contribute a little bit to a retirement account on a regular basis. After all that and paying the mortgage, there isn’t much left for extras, but they’re happy, healthy and excited at the direction life will take them.

Estate planning probably couldn’t be further from this couple’s mind. After all, what estate do they have that needs planning?

Too often, young parents put off estate planning because of this misconception and probably just as likely because of the thought that with long lives ahead of them there will be time for those sorts of things in the future. After all, estate planning ultimately contemplates death which is not something that a vibrant and healthy 30 year-old wants to think about. But, no matter how morbid or uncomfortable the thought may be, the reality is that none of us can predict when death is going to knock on the door.

That’s why estate planning for the young couple is just as important as estate planning for the 90 year-old retiree. But, the question probably keeps coming up, “How am I supposed to plan for my estate when I don’t have any estate to plan?”

Well, estate planning is about much more than giving away millions of dollars. Young families without substantial assets can still find peace of mind with some relatively simple planning.

Here are 5 things that estate planning can accomplish whether you have $100 or $10,000,000:

1) Set out who will care for the children

Chances are pretty good that at some time or another most parents have a discussion about who will care for the children in the event they are no longer around. In fact, it’s probably safe to say that this is even discussed with loved ones so that it’s known what should happen in the event of an untimely death. But, chances are much worse that these wishes are ever reduced to writing. That means that no matter how clear parents think they have been about what they would like for their children there is the potential for disagreement to arise after it’s too late.

For example, suppose a young couple has a three-year-old toddler, but neither parent has a will nominating a guardian for the child . Both parents are killed in a car accident leaving their families to decide what is best for the child. Imagine the parents and siblings of both parents feeling like they would be best suited for caring for the child as well as feeling an obligation to step in and raise him. The room for disagreement is obvious. Perhaps naturally, without any set of written instructions chances are that more than one family member would assume they are in the best position to raise the child. This disagreement leads to the courts determining who will care for the child, and even after someone is finally appointed, chances are that the relationship between both families has taken a hit because of the dispute.

By naming a guardian in their wills , parents can avoid this undesirable, but far too common result. A will can designate a person who will raise the child or children in a manner that would be acceptable to the parents, can avoid family conflicts over the care of the children, and can even specifically exclude someone from caring for the children.

Factors to consider when naming a guardian are:

• The physical location of the guardian - Remain mindful that a physical relocation of the child could cause unnecessary stress on him.

• Lifestyle - While an aunt or uncle may seem like an otherwise great fit to raise the child, consider his or her lifestyle, including work schedule and social habits.

• Religious, political and moral beliefs - Ultimately this person is stepping into the parent’s shoes so he or she should share the same values.

• Financial situation - In the event that you have not been fortunate enough to leave substantial financial assets for which to raise the child with, consider whether the potential guardian would be able to afford to raise the child in the lifestyle to which he is accustomed.

• Desire to serve- ASK, ASK, ASK. While an individual may seem like a perfect fit otherwise, he or she may simply not be ready or willing to be a parent. It’s important to make sure that both the person would both be ok with the potential relationship.

2) Set out how property will be managed until the children are older

It is necessary for parents to designate someone that will manage any assets being given to minor children. If it’s not done that a court will step in and act as a conservator to manage the property on behalf of the child. If a will does not detail how assets should be managed for minor children, then the court will be forced to act. This can lead to additional burden and unnecessary expense. That burden and expense can be minimized with some simple planning .

For example, a more desirable solution may be to leave any assets to minor children in trust . The assets can then be managed by a person of the parents’ choosing (whether this is the appointed guardian or someone else). This person is under a legal obligation to manage the assets for the child’s benefit and as the parents have set forth. Typically, once the child reaches a mature age the assets can then be distributed to him from the trust to manage on his own.

3) Set out how and to whom personal possessions and any other assets will be distributed

This is probably the thing that most people think about when they hear the term ‘estate planning’. For young families without a huge amount of savings or other liquid assets it probably doesn’t feel like it’s worth the effort to actually make a plan. But, in the absence of a will, dispositions of property are made according to state laws that try to mirror the intent of the average person.

Sometimes those laws lead to strange outcomes that may seem to fall short of that goal. For example, take a married couple in Illinois with two children. In the event one spouse, say the husband, dies then his wife would only take half of property while the children would split the other half rather than the wife just taking all the property to support herself and the children. To make matters worse, if those two children are minors then the court would need to appoint a conservator to manage their half of the property.

That is just one example of why it is important to set out any desires in a will. The law may not necessarily accomplish what you’d assume they would accomplish.

4) Set out who will be responsible for managing the estate

Upon a person’s death there are numerous responsibilities that must be tended to - closing bank accounts, administering the estate, paying debts, etc. Someone needs to be appointed to take responsibility for those actions. In most states that person is called the personal representative and can be appointed in a will.

In the event a person dies and has not appointed a personal representative the court must appoint one. This may or may not be who the decedent would have chosen and can lead to additional cost and delays in administering the estate.

A will can also expand or limit the powers and abilities that the personal representative has so that it can be ensured that he or she is able to act most efficiently in wrapping up the decedent’s affairs.

5) Set out who will make financial and health related decisions if you’re unable to do so

Along with contemplating what should happen after we die, part of estate planning is about contemplating what should happen when we are still alive but perhaps unable to act on our own accord. This ‘disability planning’ aspect of estate planning includes designating individuals to make financial and healthcare decisions on our behalf in the event of incapacity.

This designation is done through advanced directives, most commonly a power of attorney for healthcare and a power of attorney for property and finances . These documents name an individual to step into your shoes in the event you cannot make decisions for yourself. They empower the individual to do anything from determine a course or medical treatment that would be in your best interests to paying your mortgage out of your checking account. Powers of attorney are governed by state law, and most states, including Wisconsin and Illinois provide statutory forms that, if followed, reduce the risk that financial or healthcare personnel may refuse to rely on them.

Without a power of attorney a determination of who should make decisions is made according to state laws that may or may not reflect your wishes.

So, while estate planning may be seen as something for the old and wealthy, there are reasons that young families, or anyone for that matter, should consider some planning now. Just because there isn’t a large financial estate does not mean that there aren’t important issues that should be considered and set forth such as who will care for children and who should make medical decisions. A little bit of planning now can go a long way towards lending some you some comfort in the future knowing that your family will be taken care of.

Simple Estate Planning for College Students

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 31 Aug 2012 00:00:00 GMT

You're never too young to need some simple estate planning. Here's what every college student should have.

As the year turns to August and summer winds down, for many families, life is about to change. It’s during August that many parents will see a child leave home and head off to college for the first time. Each year, hundreds of thousands of incoming freshman fly the coop and get their first taste of independent life as an adult. For many, the experience is nothing short of a dream come true while for others weekend trips home may be the only way to keep their sanity. Regardless of how long it takes a new college student to get comfortable in his or her new way of life, one thing is certain- and it is something that many parents do not fully grasp. The fact is that when not-so-little Jimmy or Jane moves away from home to begin this exciting chapter of life, he or she is not only leaving the comforts of home but also the protections that parents offer until the age of 18. Sure, it’s probably obvious that laundry or cooking are some essential life skills that should wisely be learned in short order, but some consequences of reaching the big 1-8 are not so obvious to most.

Once the child turns 18, he is an adult under the eyes of the law. With this come some important consequences which need to be considered in order to avoid a possibly messy legal situation. Upon a child reaching the age of 18 a parent’s right’s in controlling some affairs of that child become significantly diminished. Of particular note: 1) parents will no longer be able to control the healthcare decisions of their child and 2) parents will no longer be able to act on the child’s behalf in financial transactions.

The two documents a new student should not leave home without are:

1) A Durable Power of Attorney for Healthcare

Generally speaking, an agent can take any action which the principal would be permitted to take on his own behalf. When it comes to medical decisions, a durable power of attorney, permits the agent to make medical decisions relating to treatment on behalf of the principal and, properly drafted, it allows the agent access to the principal’s important medical records which may be necessary to consider when determining a course of treatment. Further, medical personnel are generally permitted to rely on the authority of the agent when exercising his powers.

2) A Durable Power of Attorney for Finances and Property

How are powers of attorney drafted and where can I get them?

So parents, while little Jimmy prepares to head off to college in the coming weeks consider sending him away with a durable power of attorney for healthcare and durable power of attorney for finances and property. No matter how unlikely it seems that you’ll ever need to use them, find solace knowing that you’ll be able to act to protect his interests, if necessary. You have plenty of things to worry about during this transitional period in life- don’t let this be one of them.

Michael F. Brennan runs a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning issues including drafting powers of attorney. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com.

Everything You Need to Know About Crummey Trusts

michael.brennan@mfblegal.com (Michael Brennan) — Wed, 29 Aug 2012 00:00:00 GMT

A Crummey Trust is a useful mechanism to give gifts to children during life.

While the name may not be attractive, in a lot of situations, the trust itself is just the opposite as the Crummey trust* provides a means to move substantial amounts of wealth out of an estate, thereby reducing the size of the estate subject to estate tax while also putting restrictions in place on how it can be accessed or used by the beneficiaries. However, without specific protections and special rights in place for beneficiaries, any gift to a trust will not be considered a gift of a present interest thus defeating the tax benefits of making a gift to the beneficiary of an irrevocable trust.

How it works

A Crummey trust is created with the same basic ingredients as any other form of trust . It has three main players:

1) a grantor (who creates the trust and puts property in),

2) a trustee (who manages the property put into the trust by the grantor for the beneficiaries) and

3) the beneficiary (ies) for whom the property is managed.

Why it is a useful estate planning tool

Many times in estate planning situations arise in which an individual wishes to place property in trust but does not necessarily want the beneficiary to have the ability to completely withdraw the property or accumulated income of the trust right away. At the same time, the grantor is looking for a vehicle in which to make a gift free of any gift tax (currently gifts up to $13,000 per year, per individual are permitted without the obligation to pay any gift tax under §2503(b) of the Tax Code).

Requirements

1) The trust must be irrevocable .

2) The beneficiary must have the right to receive something of value immediately at the time a gift is made to the trust.

3) The beneficiary must have notice that he or she has a right to demand to receive property.

4) The beneficiary must be given a reasonable time to exercise the demand right.

While a Crummey trust offers benefits as an estate planning tool some goals are best accomplished through other means. An estate planning attorney can discuss the Crummey trust option in much more depth along with other possible tools to accomplish your estate planning goals. There is no one-size-fits-all solution to estate planning and the advice of an attorney is imperative to ensuring that your wishes are followed. For more information on Crummey trusts and other estate planning tools feel free to explore my other posts or contact an attorney admitted in your state that is competent to give legal advice specific to your situation.

*Curious about the name? The term “Crummey trust” comes from the court case which validated the use of the technique that limits a beneficiary’s withdrawal right while permitting the grantor to make a tax free gift. Crummey v. Commissioner (1968) 397 F.2d 82.

The Dangers of Education Loans

michael.brennan@mfblegal.com (Michael Brennan) — Wed, 29 Aug 2012 00:00:00 GMT

Failure to understand the terms of your loan can be costly.

There may be nothing further from a young and healthy new graduate’s mind than premature death. However, in the event the unthinkable happens, there is a very real risk that loved ones may be responsible to repay outstanding student loans . This has been amplified by recent media coverage of the horror stories of grieving parents getting stuck with their deceased children’s student loan payments. While federal loans are typically forgiven, private loans are another story. The good news is that a new graduate can take some simple steps now to ensure their loved ones won’t be stuck footing their education bill.

Federal Loans

Death will typically discharge the borrower and his or her family from any student loan debt by way of a death discharge. According to the U.S Department of Education, if you, the borrower, die, then your federal student loans will be discharged. If you are a parent PLUS loan borrower, then the loan may be discharged if you die, or if the student on whose behalf you obtained the loan dies. The loan will be discharged if a family member or other representative provides a certified copy of the death certificate to the school or to the loan servicer.

Private Loans and the Co-signing Parent

However, there is no automatic administrative discharge of private student loans. Private lenders have their own terms and conditions when it comes to making loans and the repayment of those loans is typically governed by the specific lending agreement, not federal laws. The consequence of this is that others can be liable for any unpaid loan amount in the event the borrower dies.

If the borrower’s parents co-signed on the loan, then chances are that the parents will remain responsible for payments on the outstanding balance. According to Deanne Loonin, an attorney with the National Consumer Law Center and director of its Student Loan Borrower Assistance Project in Boston, "Some private student loan lenders will do a death discharge, but generally private student loans are treated like any other type of debt that must be repaid by the borrower's estate. While state laws on this subject vary, a co-signer is usually equally responsible for a debt."

Worse yet, some lending agreements may contain acceleration clauses, which not only require the co-signed to continue to make payments on the loan, but call the entire outstanding balance of the loan due immediately.

Spouses Also At Risk

Not only do co-signers risk being left with hefty student loan payments, but the spouse of a deceased individual may also be put in a tough spot. Depending on whether the couple lived in a community property state (like Wisconsin) and when the loans were taken. Typically in community property states both spouses are liable for debts incurred during the marriage. So, if student loans are taken out during the marriage then, in the case of death of the borrowing spouse, the surviving spouse is going to be stuck with the payments. To make matters worse, even if the loans were taken prior to marriage, the lender can still typically come after any joint accounts to satisfy the debt.

So is there anything a student can do to ensure that his co-signer parents or spouse won’t be stuck repaying enormous mounds of debt in the unthinkable happens?

Life Insurance Can Cover the Difference

Experts say that one option is life insurance. While an early death is unlikely, the risk of leaving loved ones with hefty loan payments is very real. Young and healthy college students can typically obtain life-insurance policies for relatively cheap from insurance companies that are eager to insure someone with such a low risk for an early death. For example, a 25 year-old healthy, non-smoking man may be able to purchase a 20-year policy that costs $25 to $30 per month and pays upwards of $300,000 if he dies. That is a total annual payment of only $300 to ensure that family won’t be stuck with six figures of debt. Of course, the policy wouldn’t be limited to student loan debt either- in the event of death, the policy could be used however the beneficiaries see fit.

Given the possibility that loved ones could be left with such hefty payments on your outstanding loans, the additional peace of mind that a life insurance policy can add may not be a bad thing to consider incorporating into your estate plan .

Estate Planning FAQs

michael.brennan@mfblegal.com (Michael Brennan) — Tue, 21 Aug 2012 00:00:00 GMT

These are answers to the most common questions about estate planning.

What happens if I die without a will?

Dying without a will is called dying intestate. If you die without a will, state intestacy laws determine who will receive your property. These laws vary from state to state, but typically they follow a common scheme, distributing your assets to your spouse and children. If you are not married and have no children then your assets are distributed to other family members. Generally speaking, the intestacy laws follow a scheme which imitates how the average person would wish his or her assets would be distributed; it is a sort of guess by the legislature as to what you would most likely desire.

Will a will govern the transfer of all of my assets?

A will provides for the distribution of many types of property you own upon your death from small personal items to homes or land. However, some types of property are not distributed according to a will, such as insurance policies. A will can contain provisions with direction that an individual receive a specific piece of property or it can direct that everything owed at death go to the same individuals. The important thing to remember is that, while a will can take care of many dispositions, there are some items which should be separately reviewed by an attorney to ensure they will be disposed of according to your wishes.

What do I need to do to properly execute my will?

The steps necessary to validly execute a will vary from state to state, however, generally speaking you will need to sign your will in the presence of two adult witnesses who then sign the document as well. The reason for such strict requirements is that a court wants to be very sure that a document purporting to be a will does in fact reflect the final wishes of the author. Generally, a will does not need to be notarized but attestation from a notary does add a layer of verification which in some states actually establishes a presumption of validity.

What types of property will not be governed by the terms of my will?

A will does not dispose of any property you hold with another individual with survivorship rights, such as property owned as joint tenants with right of survivorship. Upon death jointly held property automatically transfers to the other title holder. Similarly, property held in trust will note affected by the terms of your will, as it is governed by the terms or the trust agreement. Annuities and retirement accounts provide for the payment of benefits outside of a will as well to a named beneficiary. An estate planning attorney can help you decide how to structure your estate plan so that all items which pass according to terms other than those in your will can be updated to accurately reflect your wishes.

Why should I have a living will and a power of attorney for healthcare ?

A living will spells out certain types of medical treatment and life-sustaining procedures that you do and do not want (such as feeding tubes respiration machines, etc.). However, a living will cannot contemplate every single scenario that may arise. A durable power of attorney for healthcare enables someone else to act in the event a situation arises that has not been contemplated by your living will. For that reason it is wise to have both in place. A living will can dictate to loved ones how you wish to be treated while a durable power of attorney for healthcare will enable them (or one of them) to act in the event a decision which has not been contemplated needs to be made.

Who should I appoint as my agent to make financial and medical decisions on my behalf?

Choosing an agent who will make potentially make medical and financial decisions on your behalf is possibly one of the most important planning decisions that you will make. Your agent should be someone you trust and someone in whom you have confidence to act in your best interests even in the face of stressful situations or outside pressure from other family members and friends. Your agent does not need to be a family member and the same person does not need to necessarily handle financial decisions and healthcare decisions. While not necessary, it may also be wise to appoint an individual who lives near you in the event they need to act on your behalf in short order.

Who should I appoint as my personal representative?

A Personal Representative is the individual whom you appoint (or in the absence of a will, the court appoints) to administer your estate when you die. Much like your agent, the person you select should be someone you trust and someone in whom you trust to carry out your final wishes. The person should be capable of handling financial matters and maintaining detailed records. Many times the personal representative will be an adult child or sibling; however, it is important to consider whether the appointment of one child or sibling will put strain on any other family relationships.

Who should I appoint as the guardian to my children?

A guardian is the person who has legal responsibility for your children in lieu of his or her parents. There are many things to consider when picking a guardian. This is the person who will be parenting your children, so it is important to pick someone who loves your children, is responsible and capable of raising your children. It is also important to keep in mind the effect on your child. Is your child fond of this person? Does the person live nearby so that the child does not need to be uprooted. Will your children still have easy access to their other relatives? Once a guardian is selected you should discuss your selection with that individual to ensure they are willing to act. You should also consider appointing an alternate guardian in the event that the first cannot act or changes his or her mind.

What is the lawyer’s role in estate planning?

An estate planning lawyer will help you organize your estate and explain the implications, pros and cons of various estate planning tools and techniques . He is familiar with estate planning laws and procedures and can guide you through the complexities of the process. He can anticipate difficulties that may arise in the event of your disability or death and can advise on how best to plan for those contingencies. An estate planning attorney can also ensure that your estate planning documents are clear, concise and structured in a way that is easy to follow, leaving no room for interpretation and minimalizing the chances your dispositive scheme will be challenged. Ultimately, how you would like your affairs carries out is up to you, but with a lawyer’s assistance you can ensure that those wishes will be carried out according to your plan.

9 Times You Need to Review Your Estate Plan

michael.brennan@mfblegal.com (Michael Brennan) — Tue, 14 Aug 2012 00:00:00 GMT

It's important to review your estate plan periodically to ensure it reflects your goals. Here are 9 times it is recommended.

This is an excerpt from my consumer guide to estate planning: Estate Planning 101; Tools, Techniques and Frequently Asked Questions . While estate planning contemplates the future and tries to accommodate the possibility of major life events changing a plan, it is important to review your estate plan with your attorney regularly to ensure that it still reflects your wishes and is consistent with current laws.

Specifically, it is strongly recommended that you review your plan with your attorney upon the occurrence of any of the following life events: There has been a change in your marital status or that of your children, grandchildren or any other beneficiary;

► There has been an addition to your family through birth, adoption or marriage;

► A spouse or other family member has died, become severely ill or incapacitated;

► You have become responsible for the wellbeing of a family member;

► You have recently received a substantial gift or inheritance;

► You have recently made a substantial gift or charitable donation;

► Your income levels or sources of income have changed;

► You are retiring;

► You have gotten involved with a new business venture or purchased a substantial interest in an existing business;

► You have attempted to change your estate plan on your own.

Legacy Planning | Estate Planning for Values

michael.brennan@mfblegal.com (Michael Brennan) — Mon, 06 Aug 2012 00:00:00 GMT

“Carve your name on hearts, not tombstones. A legacy is etched into the minds of others and the stories they share about you.” ~ Shannon L. Alder.

I recently attended a presentation on the use of legacy tools and incorporating them into an estate planning practice , and I left thinking to myself that it was almost surprising their use isn’t more widespread.

The traditional tools of an estate planning attorney are legal documents intended to direct courts and beneficiaries how tangible property should be distributed and explain desires relating to medical care and disposition of remains. The focus is on the physical body and property, and due to that focus, the mentality that estate planning is just for the well-to-do is very much alive. But, I would bet that you would be hard-pressed to find anyone that doesn’t have a desire to leave behind a legacy beyond the physical possessions he gives away. So, whether a client has $100 or $100 million, there are some important steps that can take place to help that client create a lasting legacy.

Too often it seems that we focus on “wealth” as being purely physical- something that can be counted and monetized. That focus is misguided. Wealth as a concept is so much broader than most attorneys give it credit for. It encompasses values, knowledge, lessons and life experiences, perspective and hindsight.

Ask anyone what they remember most about a deceased parent or grandparent and the answer will likely be something other than the $500 they left behind. It is going to be about the memories, stories, and experiences that person shared during life. It’s going to be about lessons that were taught or values that were inherited.

In order to more fully serve their clients, estate planning attorneys need to realize that and use legacy planning to ensure a record of those memories, stories and experiences is left behind.

What is Legacy Planning?

Legacy planning is the use of stories in order to create a plan that reflects the client’s wishes, values, life experiences and lessons learned. It enables the attorney to be more than just a number cruncher or legal tactician. Legacy planning helps the attorney form a connection with a client and invites the client to be part of the legacy they will leave behind aside from mere physical possessions.

Typically, an ethical will or legacy letter is the end product. It can describe the client’s thoughts on an unlimited number of topics and can be as short or as long as the client desires. Some topics to consider are:

• Money

• personal treasures

• the meaning of home

• words of wisdom for children or grandchildren

• ideas on success

• values

• wishes

• thoughts on religion and spiritual belief

• thoughts on love

• thoughts on business

• regrets and disappointments

• life lessons

• special memories and cherished moments

As far as specific bequests of personal property, the client can explain why they are giving an item to a specific person, what it meant to them during life and what they hope the individual will do with it. That way a beneficiary can get a little insight on why they received the things they received. Legacy letters and ethical wills are not oral histories or memoirs, rather, they focus on what life taught the client and how they want to be remembered.

What should the role of an estate planning attorney be?

An attorney can help facilitate conversations that can disclose the client’s wishes, values, life experiences and lessons learned. He or she can help the client articulate what is truly important and what they would like to share with friends and loved ones. The conversations can be recorded for future reference when reducing the client’s thoughts to writing and they can be edited into a final visual or audio representation of the ethical will or legacy letter if the client desires.

Perhaps just as important is the role these conversations can have in determining how best to structure the traditional parts of the estate plan . They give the attorney insight into why a client would like to make specific bequests or what values are guiding the client in their decisions regarding end of life treatment .

Above all, discussing values and life lessons with an estate planning attorney enables the client to establish a connection and be an active member in the vision for their plan which may be something that is sometimes too easily forgotten.

What do Estate Planning Terms Mean?

michael.brennan@mfblegal.com (Michael Brennan) — Wed, 01 Aug 2012 00:00:00 GMT

Estate planning has a language that is unfamiliar to most people. Here's a quick guide to understanding what common estate planning terms mean.

Estate planning terminology can be a bit confusing and tough to understand so I have created a reference guide to keep everything straight. This is from my consumer packet, Estate Planning 101; Tools, Techniques and Frequently Asked Questions . To download a complete copy, click here .

Estate Planning Terminology

Agent (Attorney-in-fact)

An agent (sometimes referred to as an attorney-in-fact is an individual who is authorized to act on another’s behalf in certain matters. In estate planning it arises through the use of a power of attorney . An individual (the principal) appoints another individual (the agent) to make decisions on the principal’s behalf relating to medical, financial and property decisions, typically upon the principal becoming incapacitated and unable to act for himself.

Authorization for final disposition

An authorization for final disposition sets forth an individual’s wishes regarding how his or her physical remains should be disposed of after death, whether he or she wishes to donate organs, desired funeral arrangements and the like.

Bequest

A “bequest” is the act of giving property under one’s will. Strictly speaking, an individual will bequeath personal property, and devise real property (such as a residence).

Codicil

A codicil is a document that amends or revokes certain portions of a previously executed will. Codicils are executed in the same manner as wills requiring the testator and witnesses to sign. Depending on the state, a holographic will or codicil (one that is handwritten) may or may not be recognized as valid if all other will requirements are met (Illinois may recognize them while Wisconsin does not).

Decedent

A decedent is simply an individual who has died.

Descendant

A descendant is a relative in the direct line of an individual (i.e. children, grandchildren, great-grandchildren, etc.). The term also usually includes adopted children who are typically given the same right as naturally born children in estate planning matters.

Devise

“To devise” has similar meaning as “to bequest”. Both mean to give something to someone in a will. Traditionally, “devise” referred to giving real property (land, buildings, etc.) and “bequeath” was used for other movable items.The distinction has largely fallen out of use.

Estate

In the area of estate planning an individual’s estate specifically refers to all of the property, in whatever form, owned by the individual at any given time.

Fiduciary Duty

In the area of estate planning a fiduciary duty is imposed on trustees, personal representatives and agents appointed under a power of attorney . A fiduciary (an individual such as a trustee) is expected to exercise a heightened standard of care when he is acting in the interests of another. This includes a duty of loyalty and a duty to act in the best interests of another (whether it is beneficiaries of a trust, a decedent of an estate or a principal who has appointed him an agent through a power of attorney).

Guardian

A guardian is an individual who is legally responsible for the care and management of a minor child in the event the parents are no longer living or able to care for the child. A guardian is also appointed to take responsibility for the person and property of an individual in the event he or she is deemed incompetent. Typically one is appointed in a will.

Guardian ad litem

A guardian ad litem is a guardian who is appointed by the court to act in the same manner as a guardian appointed in a will or other document. The difference between a guardian and guardian ad litem is the amount of court involvement in making a determination of who should be appointed.

Grantor (Settlor)

A grantor, settlor and trust-creator are all one in the same. They all refer to an individual who establishes a trust.

Heirs at law

Heirs at law are those individuals who take the property of an individual dying without a will (intestate). Heirs at law are determined by the intestacy laws of the state where the person lives at the time of death.

HIPAA release

Privacy laws limit who can access medical records of an individual and information relating to healthcare. A HIPAA release form permits another individual (usually a family member) to access medical records in order to make an educated decision regarding medical treatment and it permits a healthcare provider to share information regarding the medical status of a patient with loved ones.

Intestacy

Intestacy is the act of dying without a valid will . When an individual dies intestate his or her assets are then distributed by the court through the probate process according to the intestacy laws of the state where the individual died.

Irrevocable Trust

An irrevocable trust is a trust that cannot (typically) be amended or revoked. By creating an irrevocable trust, a grantor transferring property to the irrevocable trust effectively gives up all legal rights in that property. Typically, irrevocable trusts are used for the tax benefits they present to a grantor.

Issue

Issue in estate planning typically refers to an individual’s lineal descendants of all degrees (i.e. children, grandchildren, great-grandchildren, etc.).

Living (Inter-vivos) Trust

A living trust is a trust created during the settlor’s lifetime. The settlor transfers assets to the trust to be managed by the trustee. Upon the settlor’s death the assets in the trust pass outside of probate according to the terms of the trust. Typically unless stated otherwise a living trust is amendable and revocable by the settlor at any time.

Living Will

A living will is a document that sets forth an individual’s wishes regarding lifesaving or sustaining procedures in the event he or she becomes incapacitated or otherwise unable to communicate his or her wishes. Typically it covers items such as the use of feeding tubes and other artificial life sustaining technology and when the use of such items should be discontinued.

Per Stirpes

Per stirpes distribution refers to the process of distributing a decedent’s property in a manner so that each branch of the family receives an equal share regardless of how many members of that branch are living. For example, John Smith dies leaving his property to be distributed to his descendants in equal shares per stirpes. John has three children during life, Kim, Larry and Mark. Kim died before John, but she has two children who are still living, Nicole and Olivia. If John’s estate is divided among his descendants per stirpes, then in this case Kim, Larry and Mark would each get 1/3. Since Kim is deceased, Nicole and Olivia would spit her share, each taking 1/6 of John’s estate. So, Larry would get 1/3, Mark would get 1/3, Nicole would get 1/6 and Olivia would get 1/6.

Personal Representative

A personal representative is the term used in Illinois and Wisconsin to describe the individual appointed to manage the legal affairs of a decedent. It carries the same meaning as executor in other states. Typically, a personal representative is appointed in a will. Upon the death of the decedent he or she manages the decedent’s affairs, most notably, the probate process.

Pour-over will

A pour-over will is used by an individual who have already set up a trust or trusts to pass any property remaining outside of the trust(s) upon death into the trust(s). The assets basically, “pour over” into the trust, thus the terminology. All assets would then be governed, managed and distributed according to the terms of the trust.

Power of Attorney

A power of attorney is a written authorization to represent or act on another’s behalf in certain affairs, typically of a medical or financial nature. A power of attorney is the document which gives an agent or attorney-in-fact the authority to act on a principal’s behalf. A power of attorney can be drafted in a way so that the agent does not have any authority to act until such time the principal is incapacitated and unable to act for himself. This is known as a durable power of attorney. Typically in Illinois and Wisconsin this comes in two forms: a) the durable power of attorney for healthcare , granting authority to make decisions regarding medical treatment, and b) the durable power of attorney for finances and property , granting the agent the authority to act in financial and other transactions.

Probate

Probate is the formal process by which a will is proved to be valid or invalid, assets are collected, debts are paid, claims are filed on the estate and any remaining assets are distributed, either based on the terms or a valid will or, if there is no valid will, then according to the state intestacy statute .

Revocable Trust

A revocable trust is a trust that may be amended or terminated during the life of the settlor. Since the trust may be amended or terminated at any time the assets are considered to still be owned by the settlor. Therefore, it does not reap the tax benefits that an irrevocable trust would. Some main benefits of revocable trusts are: a) flexibility, b) ability to retain control of the assets during life, c) avoidance of probate, d) management of the assets by a trustee, and e) the ability to provide continuity of management in the event of a disability.

Tangible Personal Property

Tangible personal property is any property that can generally be moved, as opposed to real property (land, homes, etc.) In a will, an individual can generally make reference to a list of tangible personal property outside of the will directing that property should be distributed according to that list. The benefit of this approach is that the list can easily be updated as items are sold, given away or acquired, and thoughts change as to who that item should pass to upon death.

Testator (or testatrix) A testator (or testatrix) is an individual who dies leaving a valid will. The adjective “testate” means having made a valid will before death.

Trust

A trust is a separately created entity which holds property to be managed and distributed according to a specific set of detailed instructions. Trusts come in a number of different forms and can be revocable or irrevocable , but each involves the same three entities. A trust is created by a settlor. It is then managed by a third party trustee per the terms of the trust agreement for the benefit of the beneficiaries.

Trust Agreement

A trust agreement is a written agreement which establishes the trust. In the trust agreement the settlor transfers legal ownership of property to the trustee to manage for the benefit of the beneficiaries.

Trustee

A trustee is an individual or organization (such as a financial institution) that holds or manages property for the benefit of another (the beneficiarie(s)). A trustee has legal obligations to make decisions regarding the trust property which are in the beneficiaries’ best interests and may be liable for damages for not doing so.

Will

A will or last will and testament is a legal declaration by which a person (the testator) names one or more persons to manage his/her estate and provides for the transfer of his/her property at death.

Revocable Living Trusts

michael.brennan@mfblegal.com (Michael Brennan) — Tue, 24 Jul 2012 00:00:00 GMT

Revocable living trusts are the most commonly used type of trust in estate plans.

As with any estate plan , there is no one-size-fits all solution that can easily be applied to every situation. However, there are a number of tools and techniques that can be used in certain situations which may provide an individual with some desirable benefits. Any discussion of trusts as estate planning tools must include an overview of revocable living ( inter vivos ) trusts. A revocable trust is one that is created during the life of the grantor, and its primary uses are to manage property during the grantor’s life and reduce the cost and time associated with probate upon the grantor’s death while permitting the grantor to retain an amount of control over the assets it holds. Along with the ability to retain control over the assets in a revocable trust, a grantor retains the power to amend or even revoke the trust entirely during his life. While this makes revocable trusts highly desirable for many individuals, without additional planning techniques there are some downsides- namely its inability to save assets from tax and inability to shield assets from creditors upon the grantor’s death.

How it works

As discussed in an earlier post , a revocable trust has three main players: 1) the settlor or grantor (who creates the trust); 2) the trustee (who administers and operates the trust); and 3) the beneficiary or beneficiaries (who receive the benefit of the trust and any distributions the trust makes). The revocable trust is established by a trust agreement, which is a writing that sets forth the above relationships and lays out how the property that the trust holds will be managed and distributed. The trust agreement, which is typically drafted by an estate planning attorney , is then formally executed in a manner that is specifically dictated by state law.

Once the trust agreement is validly created and executed property must actually be transferred to the trust. This is done by specifically titling assets- such as a residence, stocks, bond, or insurance plans- in the name of the trust. For example, with real estate, this is done by executing and recording a deed evidencing transfer of the real estate to the trust.

The type of arrangement that a revocable living trust provides offers some pros as well as some cons. Here is a high-level view of five of each:

5 benefits of using a revocable living trust:

1) Property management

2) Avoid probate upon death

Probate is the process of proving to a court that a will is valid and disposing of the items it lists in the manner in which its creator dictates, paying any due taxes, satisfying debts and generally wrapping up the affairs of a deceased person. The process can become lengthy and expensive so a goal of many estate plans is to avoid the process as much as possible. With some estate planning , the probate estate can be kept relatively small in relation to the entire estate. Certain types of assets are not subject to probate proceedings including insurance proceeds, certain jointly held property and those assets that are held in trust. Therefore, a revocable living trust that is properly funded and legally holds title to assets will avoid probate proceedings and the assets it holds will be transferred to the beneficiaries named in the trust agreement without court involvement. Thus, revocable trusts have the potential to deeply cut the time and cost sometimes associated with the probate process.

3) Privacy

This may be less of a true benefit and more of an FYI, but wills must be filed with the court upon an individual’s death while a trust does not. Therefore, a trust’s dispositive scheme, beneficiaries, etc. can remain private while a will’s provisions become public record. For most, it is not of concern who knows what assets are owned at death, however, for the ultra-private this may be a consideration.

4) Planning for mental disability or incapacity

The trust may also contain provisions dictating who should manage the property in the event the grantor becomes ill, disabled or otherwise unable to manage the property on his own behalf. In such a case the trust agreement sets out that a successor trustee can take over those duties on the grantor’s behalf. The alternative if the asset is not owned by a trust is that a guardian or conservator would need to be appointed to accomplish the same goals. This involves additional expense and court involvement which is avoided if a revocable living trust is in place. Additionally, a revocable living trust may contain provisions that name a guardian for minor children in the event of the grantor’s death.

5) Flexibility to amend or revoke the trust entirely

A revocable living trust is amendable or completely revocable during the life of the grantor ( Caution : in some states such as Wisconsin the trust must specifically state that it is revocable). So long as the grantor is mentally competent he can change the terms or the trust, how it should be administered or even who the beneficiaries should be after he dies. This feature of revocable living trusts makes it an extremely flexible estate planning tool.

For example, an elderly couple that is still competent may create a revocable living trust to hold their residence and other assets while they are living. The trust can contain provisions that provide for a successor trustee to take over management of the assets in the event they become incapacitated, permitting them to continue to live in their home without the hassle of managing it or making mortgage payments. Upon their death, the home and any other assets held by the trust pass to the beneficiaries named in the trust agreement and are not subject to probate. As such, a revocable living trust can be used as a contingency planning tool that allows a grantor or grantors to retain independence while also providing for the contingencies of incapacity or death.

Five disadvantages of using a revocable living trust:

1) Won’t avoid income taxes

Since a revocable trust is amendable and revocable, for income tax purposes the IRS considers the grantor as the owner of the assets. This means that any income produced by the trust is taxed to the grantor and any deductions that are permitted by the trust (for example the interest deduction on a mortgage) are taken by the grantor. For income tax purposes it is as if the trust does not exist. For this reason it almost always not an estate planning tool that is used to minimize tax burden.

2) Won’t reduce estate taxes more than other estate planning tools

While estate tax savings are possible with a revocable living trust, there are far better estate planning tools that can be used to minimize tax burden. Generally, a grantor must pay estate taxes on property owned at death above a certain threshold ($5.12 million in 2012). While assets in a revocable trust avoid probate they are still viewed as owned by the grantor at death, and thus, they are subject to estate tax. While it is possible to work tax savings into a revocable living trust, by itself, it is not an effective tax minimizing estate planning tool.

3) Won’t eliminate the need for probate

While the assets held by the revocable living trust are not subject to probate proceedings, the chances that an individual will die without anything that is subject to probate are minimal. Therefore, while a revocable living trust may minimize the assets that must be distributed through probate, it is still a necessary procedure in most cases. Additionally, someone will still have to prepare probate documents, file tax returns and transfer property to named individuals and incur the costs associated with these tasks. However, removing substantial assets from the probate estate can reduce cost and the time it takes for assets to be distributed to friends or loved ones so not all is lost.

4) Won’t shield assets from creditors upon death

Similar to the reasons it is inadvisable to use a revocable living trust to reduce taxes, it is not the ideal tool to shelter assets from creditors. Since a grantor for all intents and purposes is considered the owner of the assets the trust holds due to the ability to amend, revoke or otherwise direct how they should be managed and disposed of, creditors can still reach the assets as if a trust did not exists at all. Therefore, revocable living trusts should not be used if a primary purpose of an estate plan is to shield assets from creditors.

5) Won’t eliminate the need for a will or other estate planning documents

Any grantor who is thinking about adding a revocable living trust to his estate plan should also have a pour-over will which can effectively dispose of property that is not included in the trust upon death. It is also possible that property will be received after death but before the estate is wound up. A will can direct what is to be done in this situation. Additionally, it is wise to have other documents that do not directly affect property rights drawn up to round out an estate plan including powers of attorney for finances and healthcare and a living will .

While a revocable living trust offers benefits as an estate planning tool some goals are best accomplished through other means. An estate planning attorney can discuss the revocable living trust option in much more depth along with other possible tools to accomplish your estate planning goals. There is no one-size-fits-all solution to estate planning and the advice of an attorney is imperative to ensuring that your wishes are followed. For more information on revocable trusts and other estate planning tools feel free to contact me an attorney admitted in your state that is competent to give legal advice specific to your situation.

Irrevocable Trusts

michael.brennan@mfblegal.com (Michael Brennan) — Mon, 16 Jul 2012 00:00:00 GMT

Irrevocable trusts are useful estate planning tools if you want to reduce your potential estate tax liability.

An irrevocable trust is created either during the life of the grantor or upon death, and, unlike a revocable trust , its primary use is to minimize transfer tax liability- namely through avoiding estate tax on any assets which the irrevocable trust holds. Unlike a grantor’s ability to freely amend or revoke a revocable trust, a grantor’s ability to amend or revoke an irrevocable trust is severely limited, if not impossible in most situations. This is because once assets are transferred to an irrevocable trust, for all intents and purposes, they are owned by the trust- not the grantor. However, the upside is that the grantor will not pay estate taxes on the assets held in trust upon his death. For this reason, irrevocable trusts present an effective vehicle for removing large portions of wealth from an estate and maximizing the amount a beneficiary inherits.

How it works

Like any trust an irrevocable trust has three main players (the same as a revocable trust): 1) the settlor or grantor (who creates the trust); 2) the trustee (who administers and operates the trust); and 3) the beneficiary or beneficiaries (who receive the benefit of the trust and any distributions the trust makes). The irrevocable trust is established by a trust agreement, which is a writing that sets forth the above relationships and lays out how the property that the trust holds will be managed and distributed. The trust agreement, which is typically drafted by an attorney, is then formally executed in a manner that is specifically dictated by state law.

The type of arrangement that an irrevocable living trust provides offers some advantages as well as some disadvantages. Here is a high-level view of five of each:

5 benefits of using an irrevocable living trust :

1) Property management

Much like revocable trusts irrevocable trusts offer a vehicle through which property can be managed by an outside individual or financial institution thereby removing stress from a grantor’s life. Any property transferred to the trust will be managed by a named trustee according to the terms of the trust agreement. In many cases the trustee is much better equipped than the grantor to handle complex investment accounts or manage property. For assets held in trust that do not require as much financial “know how” the benefits of having someone else manage money and property for the grantor’s benefit are evident, especially in the event the grantor becomes incapacitated and is no longer to make decisions for himself.

2) Avoid probate upon death

Like a revocable trust, an irrevocable trust shields assets from the probate process. Certain types of assets are not subject to probate proceedings including insurance proceeds, certain jointly held property and those assets that are held in trust. Therefore, an irrevocable trust that is properly funded and legally holds title to assets will avoid probate. The assets it holds will be managed for the benefit of those individuals named in the trust agreement as beneficiaries and income or property will be distributed to them as directed in the trust agreement. Therefore, irrevocable trusts have the potential to deeply cut the time and cost sometimes associated with the probate process.

3) Shifting income tax burden to lower tax brackets

Given that tax planning through irrevocable trusts is typically only used for sizable estates that do not fit under certain threshold dollar amounts, it would seem obvious that the tax rate of a grantor using them for tax planning would be in a high tax bracket due to high net worth. Typical beneficiaries, such as a grantor’s children, or grandchildren, are usually in a lower bracket. Properly drafted, an irrevocable trust will shift tax liability to the trust or to those individuals in lower paying tax brackets (preferable). By transferring assets to an irrevocable trust, the income of which is distributed to the named beneficiaries, the grantor can effectively change the amount of tax paid on the income. This is so because the lower paying beneficiary is taxed on the distribution rather than the higher paying grantor. Proper use of this technique can have a tremendous effect on the actual after tax amount a grantor is able to provide to his chosen beneficiaries.

4) Reducing estate tax liability

In 2012 the estate tax exclusion amount is $5.12 million, meaning that an individual dying this year will not be subject to estate tax unless the total value of his estate is greater than that amount. However, that threshold is set to revert to $1 million in 2013 which will subject a much higher percentage of estates to tax upon death. Further, the current estate tax rate is 35% on anything over that $5.12 million; however next year it will skyrocket up to the rate of 55% without further congressional action. While very few families may be in the $5 million range the $1 million mark hits much closer to home for a sizable population. Because assets transferred to an irrevocable trust are viewed as owned by the trust and not the grantor those assets are not includable in the calculation of the estate tax exclusion limit of $5.12 million this year or $1 million for a grantor who dies next year (or possibly beyond). Therefore, transfers to effectively drafted irrevocable trusts can reduce or even eliminate the portion of an estate that would be subject to any estate tax upon death.

5) Avoid gift tax on assets likely to appreciate

Transfers to non-grantor irrevocable trusts are subject to gift tax if they are in excess of the $13,000 annual exclusion permitted per individual donee. However, once the assets are transferred to a beneficiary the grantor or donor is not subject to gift tax on any appreciation of those assets. For example, if a grantor wants to maximize a gift to an irrevocable trust set up for his son while utilizing this annual exclusion amount he could transfer stocks worth $13,000 tax free to the trust. If those stocks increase in value to $30,000 the next month, he will still be viewed as only transferring $13,000 and will not be subject to gift tax on the transfer.

Five disadvantages of using an irrevocable living trust:

1) An irrevocable trust is just that- irrevocable

Unlike the revocable trust which may be freely amended or even entirely revoked, once created, an irrevocable living trust is permanent. Assets transferred to the trust cannot be removed and given back to the grantor if he changes his mind at a later date. The trust is viewed as the owner of the assets, so while a grantor can reduce tax liability he is also losing the ability to control the assets outside of what is dictated by the trust agreement.

2) Loss of Control

As would flow from naturally from the irrevocability of a trust, by transferring assets to the trust, the grantor loses his ability to control how they are used. Once the transfer occurs, the trustee retains control over sale and use of the assets in the trust consistent with the trust agreement. The grantor simply becomes a bystander.

3) Additional tax considerations

Irrevocable non-grantor trusts are viewed as separate entities and as such they must pay their own taxes. An irrevocable trust needs a separate FEIN and must file income tax returns annually which will include the disclosure of any distributions or allocations made to the beneficiaries. In addition the trust may be required to file an annual state income tax return. Trust accounting and tax preparation can get very complex so it may be necessary to employ a competent accountant experienced in the area. This, of course, comes with additional cost.

4) Higher income tax rates

Irrevocable trusts must pay tax on their income similar to an individual or corporation and those rates can get as high as 35% very quickly due to the low thresholds for bracket cutoffs. However, trusts are also able to claim deductions for expenses and, more importantly, distributions to beneficiaries. While a trust is taxed on income it retains, distributions of the income which are made to beneficiaries are taxed to the beneficiaries and not the trust. With proper planning this may effectively lower the amount of tax owed on the trust income if the beneficiary is in a personal income tax bracket lower than the 35% rate.

5) Won’t eliminate the need for a will or other estate planning documents

As with using a revocable trust as part of an estate plan, any grantor who is thinking about adding an irrevocable trust to his estate plan should also have a pour-over will which can effectively dispose of property that is not included in the trust upon death. It is also possible that property will be received after death but before the estate is wound up. A will can direct what is to be done in this situation. Additionally, it is wise to have other documents that do not directly affect property rights drawn up to round out an estate plan including powers of attorney for finances and healthcare and a living will.

While an irrevocable living trust offers benefits as an estate planning tool some goals are best accomplished through other means. An estate planning attorney can discuss the revocable living trust option in much more depth along with other possible tools to accomplish your estate planning goals. There is no one-size-fits-all solution to estate planning and the advice of an attorney is imperative to ensuring that your wishes are followed. For more information on revocable trusts and other estate planning tools feel free to explore my other posts or contact an estate planning attorney admitted in your state that is competent to give legal advice specific to your situation.

What is a Trust?

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 08 Jun 2012 00:00:00 GMT

Trusts are incredibly useful estate planning tools. Knowing the basics can help you understand how they can work in your estate plan.

While estate planning for many individuals and couples is adequately accomplished through the use of simple wills , trusts can offer benefits which cannot be obtained solely through the use of a will. At its most basic level a trust is an entity that is created to hold property for an individual’s or multiple individuals’ benefit. The duty to manage the property is in effect separated from the right to enjoy the benefit of the property. A trust involves three main players: 1) the grantor (the guy setting up the trust and moving property to the trust), 2) the trustee (the guy in charge of managing the property the grantor puts in the trust), and 3) the beneficiary, or beneficiaries (the ones for whose benefit the trustee manages and distributes the property that the grantor puts into the trust). These relationships are set out in a legal document called the trust agreement (the thing that legally creates the trust and establishes the roles of the grantor, trustee and beneficiaries.

There are revocable trusts and irrevocable trusts . The main difference (other than the obvious) between revocable trusts and irrevocable trusts is the way they, and the property they hold, are taxed and able to protect assets. Any discussion of the tax implications of one type of trust vs. another is outside of the scope of this post, but if minimizing tax liability is your primary objective, then rest assured that years of creative thinking (and some trust-obsessed attorneys and accounting professionals) have led to a plethora of options when it comes to tax planning and asset protection through the use of trusts.

Trusts may also further be classified as testamentary trusts or living trusts . A testamentary trust is not legally created until after death, most likely in a will while a living trust, or inter vivos trust, is just that- one created during the life of the grantor. Living trusts may be revocable or irrevocable, depending on how they are set up while testamentary trusts are irrevocable (since the individual who creates them is no longer living and thus unable to revoke them). A trust is created by a trust agreement which sets forth the means by which the property it contains should be managed and distributed. It also delegates who shall serve as the trustee and designates the beneficiaries. Assets (cash, stocks and bonds, real estate, etc.) must then be specifically transferred to the trust by titling them in the trust’s name.

Once completed, the trust is the legal owner of the asset.

How to Borrow Money to a Family Member

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 17 May 2012 00:00:00 GMT

Family can be an ideal source for loans in times of need, but if done incorrectly, they can carry some expensive consequences for the lender.

CNN Money posted an article recently about exploring the possibility of receiving a loan from a family member rather than a lending institution. While most people aren't fortunate enough to have enough extra cash to finance a home purchase for a child, if you have a parent that is, there can be significant financial benefits to both you and your parents.

In order to ensure that the transaction complies with tax laws your parents need to ensure that too much of the loan is not forgiven and an appropriate rate of interest applies to the loan. Otherwise the loan could be considered a gift which would lead to uninvited tax consequences. Annually, each parent can gift $13,000 free of tax or $26,000 combined. Anything over this amount would be subject to federal gift tax. In order to prevent that on a loan, your parents will need to charge interest based on the IRS's "applicable federal rate" minimum. The good news is that, even in a down economy, these rates are still well below those being charged by lending institutions. As the borrower, you can still deduct the interest if you use the money to purchase a principal residence. Your parents will need to include any interest received on their income tax return, but the ability to receive income from helping their child is an attractive option to most loving parents with the means to do so. Also, these limitations change annually many years, so they are continually rising with the pace of inflation.

Another positive aspect of a family loan is that payments terms can be much more flexible than those of a traditional mortgage. One example the article suggests is to stipulate that the early payments on the loan be interest only while deferring the payments on principal until later on in the term. This gives you the ability to maximize your interest deduction leading to additional savings. If your parents are feeling extra generous, they have the ability to use that $26,000 combined gift tax exclusion amount towards forgiving your loan each year which can drastically reduce the principal.

You will need to ensure that proper documentation is drafted and executed so that the transaction does not look like a sham. This will typically be done through a Promissory Note or a Line of Credit Agreement. A Promissory Note sets forth the obligations, rights, and duties of both the lender and borrower during the term of the load. This would typically include the payment terms, interest rate, when payments are due, the time and manner in which the principle of the loan will be distributed to the borrower and warranties by either or both party that they are able to enter the agreement and and not making any false statements in applying for (or in the case of a family loan, asking for) the loan. A Line of Credit Agreement will set forth the same items, however, it is the structure of the borrowing that varies. With a Line of Credit, the borrower can take funds from the lender in specific amounts at specific intervals or in varying amounts in varying intervals. This allows flexability for the borrower to reassess the need for the funds throughout the period of the Line of Credit Agreement.

For example, say that the borrower would like to borrow $3,500 a month while he gets his business up and running, but he is not intirely sure when he will be able to rely solely on the income from the new venture. He could set up a Line of Credit Agreement with his father that would permit him to borrow funds at will in varying amounts depending on need for a period of two years. The agreement would also stipulate that the total amount borrowed could not exceed $50,000. This would give the son the flexability to build his business, and as it grows more successful, borrow smaller amounts against the line of credit from his father. If the business is up and running in one year and the sone has only borrowed $25,000, he would only need to pay the interest and pronciple on the $25,000 instead of the entire $50,000 originally contemplated. The key to this sort of arrangement is that the father commits to lending the entire $50,000 and the son has a right to that money any time, even if that means he takes all of it in month one (unless, of course, monthly limits are set on what may be withdrawn).

If you abide by all the necessary formalities, a family loan can provide numerous benefits that a traditional mortgage from a lending institution cannot. For more information on the benefits of a family loan and issues to be aware of in setting one up, contact me or another business attorney or financial advisor.

Michael F. Brennan runs a virtual law office helping individuals in Wisconsin, Illinois, and Minnesota with estate planning and business law issues. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com

Estate Planning Basics: What Everyone Needs to Know

michael.brennan@mfblegal.com (Michael Brennan) — Fri, 11 May 2012 00:00:00 GMT

Estate planning does not have to be a complex issue. With a little background knowledge you'll feel confident discussing your needs with your estate planning attorney.

When most people think of estate planning there is a tendency to equate the process with will drafting , however estate planning is much more than presenting a list of property and a list of individuals that should receive that property to a lawyer and receiving a will in return. Estate planning is the process by which individuals arrange their affairs in an orderly way for management during life and for disposition during life and after death. While the estate planning process may, in many instances, only require a will , it often times also includes various trusts , changes in the form of property ownership, changes in business structures, lifetime gifts, purchasing insurance and marital property agreements. Any plan would also not be complete without a durable power of attorney for property management, power of attorney for health care, and living will among other ancillary documents. While the primary motivation for creating an estate plan is to create ease of management of assets and disposition of those assets in a manner desired, you should consider additional issues with your estate planning attorney including the impact a substantial gift may have on an individual and the tax implications of a certain disposition or plan.

Various Estate Planning Documents and Considerations

Will : A will is the document most people typically associate with estate planning. It provides for a particular disposition of property upon the owner's death. A will only disposes of certain types of property called probate property. Probate property does not include items such as trust property or life insurance. These are disposed of in accordance with the terms of the documents that create them.

Wills also may perform other functions such as appointing guardians for minor of disabled children. A will also should name a personal representative that will administer the estate after the owner's death. Wills may also create trusts called testamentary trusts or contain a pour over will which would direct that property be transferred into an already existing trust.

Trust : Generally, a trust is an instrument that directs certain property to be held by an individual or corporate entity for the benefit of another person or persons. A trust must be managed according to its terms by the individual appointed to administer its terms, called the trustee. Should the trustee fail to administer the trust according to its terms, the beneficiaries have enforceable legal rights against the trustee.

Trusts may accomplish a number of objectives. They may be created during life to provide management of property for the benefit of the creator, a minor child, a spouse, or the elderly. They may be created to give use of property to certain individuals while providing that certain other individuals would receive the property upon the death of the lifetime beneficiaries. Trusts may also be used to remove property from an estate in order to minimize estate tax consequences upon the death of the creator.

Durable Powers of Attorney : A power of attorney delegates certain rights to another person. The powers can range from managing financial accounts to settling debts or making medical decisions. A durable power of attorney is unlike a regular power of attorney because it survives the principal's disability or incompetency. Thus, it is a valuable and necessary planning tool for any estate plan to ensure that an individual's affairs are properly and responsibly managed in the event that something happens to him.

Powers of Attorney for Health Care and Notice of Final Disposition: A power of attorney for health care is specifically used by an individual to delegate the power to make health care decisions to an agent in the event of incapacity. The power of attorney permits the agent to make decisions on behalf of the principal rather than issuing specific direction to a health care provider to act in a particular way should something happen to the principal. The power of attorney for health care also ensures that an agent will have access to the medical records of the principal necessary to make health care decisions in his behalf.

Form of Property Ownership

At times, the transfer of ownership of property from one person to another may have a significant effect on the estate tax due upon death. If the property was to be transferred to another upon death there may be more benefit to making the transfer immediately.

Alternatively, the form in which property is owned (whether it is marital property, individual property, joint tenancy or tenancy in common) may be changed to accomplish planning objectives. The form of ownership affects things from ultimate disposition of the property to tax liability to creditor's rights in the property.

Lifetime Gifts

An individual has virtually unlimited discretion in making gifts during life. Certain tax advantages can arise from making gifts during life, particularly if it is done pursuant to a program of planned giving. This makes gifting an ideal option for many individuals looking to direct the disposition of their property while also looking to experience the joy that comes with giving.

Marital Property Agreements

Marital property agreements may be entered by husband and wife either before or during marriage. They may be used to determine ownership of property in a wide variety of circumstances.

Changes in Business Structure

Businesses that are family owned present an additional vehicle with which to plan an estate. The form that the business is held in (sole proprietorship, partnership, LLC, corporation or the like) will have certain tax implications as well as non-tax consequences. Many times changing the form that the business is held in can be a powerful and effective planning tool.

Which Plan is Right for You?

There is no "one size fits all" estate plan. The life circumstances and family situations of individuals differ greatly, as do an individual's specific assets and desires for disposition of his estate. That is why consultation with an estate planning attorney is important when creating a plan. Your attorney will work with you to ensure that your wishes are met and your loved ones are taken care of should something happen to you.

Michael F. Brennan rund a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and business law issues.. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com

The information contained herein is intended for informational purposes only and is not legal advice, nor is it intended to create an attorney-client relationship. For specific legal advice regarding a specific legal issue please contact me or another attorney for assistance .

5 Things You Need to Know about Buy-Sell Agreements

michael.brennan@mfblegal.com (Michael Brennan) — Thu, 03 May 2012 00:00:00 GMT

All business founders start out on good terms but what happens when things go south?

When starting a business, having a partner brings some obvious benefits over going it alone, but what happens if both individuals decide to eventual go their separate ways or one faces a life-altering event or death? A buy-sell agreement can plan for any of those happenings, among a long list of others. . In general terms, a buy-sell agreement is an agreement between the owners of the business that, upon the occurrence of a triggering event, a departing owner will sell his interest in the business to the remaining owner based upon predetermined terms. The benefits of buy-sell agreements are plentiful and with proper planning and consideration, they can be a valuable piece of a business owner’s estate plan .

Before jumping in head first, here are six things to know:

1) There are two basic options to structure a buy-sell agreement

There are two basic types of buy-sell agreements: 1) a cross-purchase agreement and 2) an entity purchase agreement. In a cross-purchase agreement the remaining business owner buys the departing owner’s interest directly, and in an entity purchase agreement the business is the buyer of the departing owner’s interest. There is a possibility that a sort of hybrid approach could be used where the remaining owner or owners purchase a portion of the departing owner’s interest and the business purchases the remaining portion, though one of the direct purchase options above will be sufficient to accomplish the needs of a vast majority of small and mid-sized business owners.

2) After determining structure, it is necessary to determine a purchase price

The valuation of a business interest needs to consider the value of any assets held by the business, goodwill, depreciation and even the accounting method used to conduct business operations. This is one of those situations where it would be worthwhile to call your accountant given the intricacies of valuing each item and the substantial options with which to do so. Very generally, the idea is to determine the value of the business and then apportion that value between the owners given their relative ownership interests. Possible options to consider are a net book value or net book value with adjustments approach, a multiple-of-earnings approach, a specifically stated value approach or a hybrid of those options. Once the method is determined, the means to go about the valuation must be considered- whether it is by an outside appraiser, or the owners themselves. Your attorney will be able to draft language that will reflect your desires and ensure that the valuation method agreed upon with your accountant is followed when the time comes for the buy-sell agreement to work its magic.

3) To insure or not to insure?

Given the relatively substantial size of most business interests there is always the possibility that an unforeseen event such as the death of one owner, for example, could bring down the entire business. Without a means to pay the loved ones of the deceased owner, the remaining owner or owners must face the choice between finding a way to pay the decedent’s family an amount equal to his interest in the business, permit the decedent’s family members to take his place in managing the business or wrap up the business entirely and use the proceeds to pay the decedent’s family his portion. To avoid all of these harsh options, many times a viable and wise choice is for the business owners (or the company) to purchase life insurance policies on the life of each co-owner. The effect of this would be that if one owner dies, the remaining owner receives the life insurance proceeds on the decedent’s life which can then be used to pay the surviving family members for the decedent’s interest in the business. By following this route, the business will continue to be run by the remaining owners in its original form as their family of the deceased would have received the value of his interest upon his death.

4) A buy-sell agreement can guarantee continuity of management

Buy-sell agreements provide for the continuity of management of the business without intervention or involvement from unwanted shareholders or partners. They also ensure that profits will not have to be shared with unwanted individuals. By determining how a departing owner or a deceased owner’s family will be compensated the remaining owners can avoid any unnecessary arguments or actions to determine the value of an interest or how much management authority a decedent’s loved ones should have as the business continues to operate.

5) Marital Property Considerations

In marital property states (like Wisconsin) it is important to determine and consider the classification of the interest in the business. Generally, a business interest acquired with marital property is the marital property of both spouses. Even if the business was originally founded with separate property, any additional funds or property subsequently put towards the business must be considered on their own properties. If there has been mixing of nonmarital and marital property then the interest will be considered a marital property interest and the burden will be on the departing owner or deceased owner’s representative to trace the investments back to nonmarital property.

However, in Wisconsin a spouse holding an interest in a business with a right to manage and control the interest may enter a buy-sell agreement with the other business owners which becomes binding on the non-owning spouse even if the business interest is or becomes marital property and the non-owning spouse does not sign the agreement. A word of caution, the outcome may differ if the non-owning spouse dies first. In such an instance, a marital property agreement or option to purchase may be a useful tool, however both are outside the scope of this post and it would be wise to consult an attorney to discuss these options.

Buy-sell agreements can be a valuable estate planning tool for business owners due to their ability to settle most disposition and management issues before they arise. As with any other estate planning device, there is no one-size-fits-all solution to what works best for everyone, but if you are a small business owner or are thinking about a startup, it may be wise to consider the benefits that a buy-sell agreement can bring to the table.

Michael F. Brennan runs a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and business law issues.. He can be reached at michael.brennan@mfblegal.com with questions or comments, or check out his website at www.thevirtualattorney.com

The information contained herein is intended for informational purposes only and is not legal advice, nor is it intended to create an attorney-client relationship. For specific legal advice regarding a specific legal issue please contact me or another attorney for assistance.

Digital Assets Live On After Death

michael.brennan@mfblegal.com (Michael Brennan) — Wed, 18 Apr 2012 00:00:00 GMT

In the 21st century our lives revolve around social media and the internet. But what happens to our digital profiles after we die?

What would happen to your online persona if you died? After all, it is the digital age, and individuals are creating online personalities on a more regular basis. In addition, banking, and bill pay services are now digital. Many times, an individual does not even receive any paper record that an account exists as confirmation notices are sent to email accounts rather than physical addresses.

Digital assets are those which exist in a solely electronic and non-tangible manner such as email, online photos, and online accounts ranging from PayPal to Facebook, LinkedIn, and YouTube and the content posed on them. Most are protected by user names, passwords, and security questions which, for obvious reasons are not widely shared- not even with loved ones. When an unexpected death occurs, loved ones face a challenge obtaining access to those passwords and the content they access. Further, many people no longer receive paper bank statements, tax returns, or bills, so there is no paper trail for the family to follow to determine what accounts may exist and at which institutions.

Without knowledge of specific access credentials, family members may face substantial issues accessing the decedent’s online universe. The reason for this is that an account user typically accepts a provider’s terms and conditions when creating an account. These terms usually prohibit the user from permitting anyone to access their account except for himself. As such, many providers stand tough when confronted with a decedent’s loved one who is attempting to access or shut down an account without being able to provide the specific access credentials associated with the account. Some online searching has led to some nice summaries of what is required to gain access to some of the most popular social media tools.

For example, Facebook requires a copy of the deceased's death certificate and prevents unauthorized users from logging on, though Facebook will typically also honor requests from family or an executor to permanently close an account.

Gmail is a tough one. It makes no guarantees that it will grant access to the deceased's email account. An individual must provide a name, address, email and a copy of a driver's license or government-issued ID, and a loved one will need a copy of the deceased's email address, including the "headers" that show email tracking details. A copy of the death certificate is also required.

LinkedIn requires a "verification of death" form that includes the deceased's email address, LinkedIn profile URL and a death notice.

Twitter is probably the more reasonable requiring only a name, contact information and relationship to the deceased, as well as a link to a public obituary.

Obviously, there is a wide range of what is required to access an account, and for accounts like email and PayPal, the ability to gain access could be of utmost importance in resolving a decedent’s affairs. In order to minimize the hassle that your loved ones may face in the event of your untimely death, there are some steps that you can take now to plan for the future.

First, make a list of the digital and technological assets that you own including items from laptop and desktop computers to important electronic documents and records to purely digital items like websites you own, email and social media accounts, and online payment accounts. List out your login credentials for all of the assets you have listed. There are some online companies (naturally, based on the topic of this post) that can help you organize and store this information, but creating a hard copy on your own will be just as effective. For items such as online accounts, determine who will be responsible for this information and the assets they access. Keep a list of usernames and passwords and discuss with your chosen individuals where your list will be kept. This way, in the event of your death, that information will be easily accessible by the correct people.

Using a document such as a power of attorney , you can also legally give those individuals the authority to tend to your affairs on your accounts. While it is unclear just how broad of an authority you can give based on those various user agreements discussed above, having proper legal documentation to act should ease some burden on the loved ones who will be tasked with wrapping up your virtual affairs. As always, you should seek an attorney’s advice regarding your own situation, but with the proper planning now, you can add a good amount of organization and clarity to your loved ones in the future.

Planning for College Funding

michael.brennan@mfblegal.com (Michael Brennan) — Tue, 10 Apr 2012 00:00:00 GMT

Parents: It's never too early to start saving for your child's education. Here's how to do it without breaking the bank.

With the ever-increasing cost of education in this country , one of the most prominent thoughts of any parents is how they will pay for their children to attend college. However, there are ways to begin planning early that will lead to an income stream for education expenses when the time for college arises.

Instead of waiting until the child is 18 and ready to ship off to school, there are options available to plan for that day throughout the child’s upbringing.

One common technique to use for educational expenses planning is the creation of a 529 Plan for a benefit of a child or grandchild. 529 Plans vary by state with some making more sense than others. The way it works is by making contributions to the plan after taxes are considered. The contributions then grow free of federal income tax burden for the benefit of the child of grandchild named as beneficiary of the plan. There is no risk that the goal of education will not be met as the funds must be used for college tuition and related expenses (technically they can be used otherwise, but will be subject to a penalty on the account earnings). If the original beneficiary of the plan does not use all of the funds for his or her education, then most of the time the beneficiary can be changed to another child in order to use up all the funds. 529 Plans are limited in that they only can provide for higher education expenses.

An alternative to a 529 Plan is the creation of an irrevocable gifting trust . Many people assume that trust funds are only associated with the super wealthy, however there is no requirement that any minimum amount must be contributed. Understanding the concepts of a trust can do wonders for a family with some proper planning. If education is the goal, an irrevocable trust can be set up with children or grandchildren as the beneficiaries. A trust has an added benefit over a 529 Plan in that it can make distributions to the beneficiary (i.e. a child or grandchild) not only for college, but for other educational needs, health, maintenance, support or any other legitimate reasons, such as a down payment on a house or to start a business. There are numerous techniques that can be used by your attorney to ensure that you maintain maximum control over how the assets are disbursed. The major disadvantage to the gifting trust when compared to the 529 Plan is that the funds in the trust do not grow income tax free. Each year, to the extent income is not distributed; the trust will be required to pay income tax on its earnings.

There is also the option to combine the above two mechanisms in order to, in a sense, get the best of both worlds. An irrevocable education trust could be set up with the parents (or grandparents) putting cash into the trust (if done in appropriate amounts annually, this can be done free of gift tax). The trustee would then open 529 Plans for the beneficiaries using the cash in the trust with the trust as the account owner and the trust beneficiary as the 529 Plan beneficiary. The trustee could then authorize qualified distributions from the 529 Plan to the beneficiary for higher education expenses.

Some benefits of this hybrid approach are automatic succession planning, the limitation on the diversion of funds, the ability to fund education for a class of beneficiaries, and protection from creditors. A trust owned 529 Plan limits the need for succession planning because the successor trustee would automatically become the successor account owner. Additionally, fiduciary duties would prevent the trustee from making a distribution to himself individually so there is minimal opportunity for funds to be diverted from their intended purpose in a trust-owned 529 Plan. A trust can be set up for a class (all children or grandchildren) with the intent that if one member of the class does not use all of the funds for his or her education, the beneficiary on the account can be changed to another member of the class who is incurring greater education costs, whereas a 529 Plan with unused funds would face the possibility of paying a penalty for non-qualified distributions. The trust can contain specific instructions directing the trustee to use the trust-funds principally for higher education even if distributions among the beneficiaries are therefore unequal. Finally, the trust may contain a spendthrift clause that protects the trust assets from the beneficiary's creditors, so even if state law does not protect the 529 Plan from creditors, then trust can.

Like anything else, the hybrid approach outlined above also has some disadvantages, mostly centered on tax issues that are beyond the scope of this post. However, your attorney should be able to advise on how to appropriately handle these issues to minimize impact. With a little planning early on in your child’s life you can alleviate a lot of the stress associated with thinking about how to pay for higher education. When planning, it is important to consider 529 Plans and their tax benefits and compare them to the advantages of a gifting trust’s flexibility to make a wider range of distributions. A little planning now really does have the potential to lead to peace of mind later.