If you’re already or soon to be a trustee of a family trust you might want to read my new piece on Medium: Trustee Much? 5 Ways to Avoid Sibling on Sibling Mayhem.
What Do You Do When You Can’t Find the Decedent’s Will?
March 9, 2017 by Leave a Comment
If the title of this post describes you, you might want to read my post at Medium.com.
Kanban Boards, Focus, and Productivity
March 7, 2017 by Leave a Comment
One of my many weaknesses is maintaining focus. Often it seems squirrels are everywhere. And that’s frustrating because when I am focused, my head down, I move forward quickly and accomplish a lot.
So it was that I got excited when I heard John Grant describe so-called Kanban Boards on a Legal Talk Network podcast. (Warning, the podcast starts out slowly and Grant can be a bit jargony–so much so that I almost turned the podcast off–but it gets better and when he began talking about Kanban Boards, I was hooked.)
I rushed home, watched his video on the the subject and created my own board. I’d show you my board, but I have client names on some of the Post-it Notes–did I mention that a Kanban Board is essentially a white board divided into columns and covered with Post-It Notes? Since I began using my board three weeks ago, I’ve been multiple times more focused and productive. Can’t recommend the tool highly enough.
By the way, Kanban Boards are not just for attorneys. They’ll improve anybody’s life.
Here’s the video:
To C or LLC? That’s Today’s Question
February 22, 2017 by Leave a Comment
I just read an interesting post over at The Startup Law Blog, a post written six years ago. The writer lists “12 Reasons For A Startup Not To Be An LLC.” The key word in that post is “startup,” and key thing to understand is the author’s audience, largely captured in the following paragraph from the post:
For tech or growth companies planning to follow the traditional path of regular and ongoing equity grants to employees, multiple rounds of financing, and reinvestment of as much capital into the business as possible, with the goal of an ultimate sale to a big, maybe public, company in exchange for cash and/or stock, LLCs are typically not the way to go.
If that paragraph describes you, then maybe the C corporation should be the entity of choice for you.
As for the C corp, the author makes another important point. We’ve all heard that one reason–if not the major reason–to avoid the C corp is the possibility of double taxation. Well, maybe:
The bogeyman that you will hear about most frequently is the “double tax” bogeyman. You will be told—don’t form a C Corporation because you will be subject to a double tax.
What is meant by this is that if the C Corporation makes money, it will pay tax on that money. And if it pays dividends to its shareholders, they will pay tax on the dividends. This is true. And so if you anticipate your business being a cash cow, and immediately generating so much money that you will earn more than you can reasonably pay out in salary to the owner executives, then maybe an LLC is a good choice for you. But for most growth businesses, whose goal is to raise capital, reinvest capital, grow fast, grant equity incentives, and ultimately be acquired or go public, a C Corporation is the way to go. For these businesses, the double tax bogeyman rarely appears, and most exits are structured as one layer of tax stock sales. (Emphasis supplied)
In the end, the real lesson, make that two lessons, from the blog post is that one size doesn’t fit all and that there are lots of questions to answer on the road to choosing an entity for your new business venture.
Will you know the answers? Better yet, do you know the questions?
Just Leave It Alone?
February 21, 2017 by Leave a Comment
As many will recall, then candidate Trump promised to eliminate the estate tax. That was then. This is now–he’s the President. What will he actually do? Will he also eliminate the estate tax’s two siblings: the gift tax and the generation skipping tax? No one knows, though many people care, especially those who preach tax fairness.
Given that married couples currently have to be worth almost $11 million dollars before the estate tax kicks in–it’s more complicated than that, but still–eliminating the estate tax is going to help only the very, very wealthy. And maybe that’s a bad (or a good) thing.
I’m here to argue for the advisor. Estate planning attorneys, life insurance and investment advisors, CPAs and financial planners. I’m betting that each and every one of them agree with the following:
Because the estate tax generates a meager 0.005 percent of annual tax collections, according to I.R.S. figures, it generates far more political debate than federal revenue. And among many tax planners, the calls aren’t so much for reform as for stability, or at least a period of benign neglect.
“Just leave it alone so we can plan,” Mr. Jenney said. “But every administration seems to want to put their own twist on the estate tax.”
When We Last Looked in on Prince
February 15, 2017 by Leave a Comment
As readers of this blog will remember, I posted a short piece about the news that Prince died without a will. To quote from that very brief article:
Something tells me this will neither go smoothly nor end well.
Well, look who’s a genius: Lawyers battle for control of late pop star Prince’s estate.
Veteran entertainment attorney L. Londell McMillan and CNN political commentator Van Jones were close advisers to Prince at different times in his life. Following the reclusive artist’s drug-overdose death in April, the two have ignited a family feud among his six known heirs—a sister and five half-siblings—over issues including the singer’s legacy, a memorial concert and the lawyers’ own conflicts of interest.
. . .
The development comes nearly a year after Prince’s death and offers a window into McMillan’s vision for how best to manage the estate—a view that differs in some respects from that of Jones. (emphasis supplied)
Actually, it doesn’t take much of a genius to see problems in the future when money is at issue–lots of it, in this case. I learned that years ago when I worked as a bank teller for a short time in a management training program I was in. I made a small mistake–25 cents if I recall correctly–when I entered the current balance in the customer’s passbook savings book. You would have thought that I’d just robbed Fort Knox.
Lesson? Be a real prince and have an attorney draft you a will–at least a will. And if you don’t want people peering into your estate through a “window,” have your attorney draft a revocable living trust as well. Unlike with a will (or an estate like Prince’s with no will), what goes on inside a trust is private.
Where’s There’s a Will, There’s a Will.
February 9, 2017 by Leave a Comment
At the link is an interesting piece at WealthManagement.com that compares the reasons people gave in 1927 for not making a will with the reasons people give now. It’s worth a read if for no other reason than the photographs from those bygone days are great.
That said, here are the reasons people gave in 1927:
- A superstitious fear that making a will inevitably ushers in death faster.
- Mental laziness—putting off the process of working out the details of distribution and apportionment with a fair regard to what’s equitable and just.
- A sense of inadequacy to plan for the future.
- The expectation that a little later, the mind will be “better made up.”
- The dread of expense in paying for competent legal advice.
- Sheer hesitation and procrastination.
And here’s what people say today:
- I am too young.
- I don’t want to think about dying.
- The belief that assets will automatically pass to the proper individuals.
- Drafting a will is expensive.
- The belief that only wealthy people need wills.
- Not ready to make important decisions.
- Avoid dealing with family issues.
- Reluctant to discuss personal details with an attorney.
- Unaware of the consequences of not having a will.
There is no real good reason to not make a will–a very basic estate planning document that anyone who owns anything or who has minor children should have. And the two reasons I’ve bolded above have no merit. You can buy a do-it-yourself will online for as low as $30.00. A good attorney can draft a simple will for as little as $250.00. (Other estate planning documents–trusts, powers of attorney, and the like–are an additional cost.)
So go get that will. Tell the world who gets what when you die and who you want to be the guardian of your minor children. Just do it.
Or let your state’s law of intestacy do it all for you.
I’m a Fan, of Both Nino and Kagan
October 7, 2016 by Leave a Comment
Scalia was possibly the best writer on the Supreme Court–ever. Kagan, almost his political polar opposite, will likewise rank as one of its best writers. These are generous, kind thoughts and a worthy example to emulate when we speak of someone we may otherwise disagree with.
Business Start-Ups: Which Entity is Best
April 22, 2016 by Leave a Comment
I’ve been reading Steven B. Gorin’s massive “book” (he calls the 1053 page PDF a “mere compilation of preliminary ideas”) titled Structuring Ownership of Privately Owned Businesses: Taxation and Estate Planning Implications. I’ve yet to do a deep dive–again, it’s 1053 pages of very dense, complicated reading–but I will. And I will because it’s chock full of crystal clear nuggets like this:
“I freely admit to a bias in favor of partnerships . . . Generally, a business with an uncertain future (as is the case of most start-ups) should start as an LLC taxed as a sole proprietorship or partnership . . . Start-up businesses often lose money initially, and an LLC taxed as a sole proprietorship or partnership facilitate loss deductions better than other entities.” (pp. 76, 78)
Okay, sounds good to me, but what if my plan is to take that start-up public down the road? Gorin might respond (he actually did say this, but not in response to that exact question):
“Suppose that one concludes that a C corporation would be ideal. Starting with an LLC taxed as a partnership and then converting to a C corporation the earlier of five years before a sale is anticipated or shortly before its gross assets reach $50 million might be the most tax-efficient approach.” (p. 78)
So there you have it, the advice of one of the top estate and business planning attorneys in the U.S. on where to begin with your start-up. Of course, every case is different, so don’t take his advice to the bank just yet. Consider all your options, talk with your attorney and a good CPA, but I’m thinking Gorin is probably right.