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If you’ve dreamed of leaving your company to your family but haven’t sufficiently included your business in your estate plan, that dream could become a nightmare for your heirs—and for your business’ team members and clients, too. To ensure your company is passed to your family in exactly the way you desire, you want to create a comprehensive estate plan for business owners. The plan will likely include some of these key elements:

Although you might think a will would sufficiently protect your business assets, a living trust will keep your business out of court, whereas a will won’t. While a will coordinates the division of your assets following your death, a living trust is a separate legal entity that effectively owns your share of the business, though without any tax consequences or change of control until after your incapacity or death.

Unlike a will, assets put into a living trust are not subject to probate. Beyond avoiding the hassles of probate, this also means your business affairs will remain private. A living trust has several other advantages over wills: It transfers your assets immediately upon your death in the privacy of your attorney’s office; it lets you designate a successor to take control of the business; and it saves on estate taxes, court costs, and legal fees.

Unless your business generates significant cash flow—and will continue to do so upon your death—that income might not be enough to financially provide for your family. To offer a safety net for your heirs, team, and customers, invest in life insurance to provide liquidity while your family handles your affairs.

If your business has multiple owners, you’ll likely need a buy-sell agreement. A buy-sell agreement ensures that upon certain conditions—like the death or disability of a partner—the remaining owners are able to purchase your shares of the business, or your shares will pass directly to your heirs.

This will prevent your beneficiaries from getting stuck owning a business they don’t want and can’t sell, and it also protects your remaining partners from being forced to deal with new owners they didn’t count on.

Nearly every week, the news is filled with headlines announcing that some big company lost or was forced to settle a lawsuit for mega millions. While big-name corporations may be able to survive such litigation relatively unscathed, for small and medium-sized businesses, just a single lawsuit could sink your entire operation.

Even if your company has done nothing wrong, your legal defense fees (the cost of proving you did nothing wrong) can still be massive. Of course, these fees are nothing compared to what you’ll have to shell out if you’re actually found liable and must pay damages.

If your company is sued, your general liability insurance will offer you some protection, but if that policy maxes out, you could be facing a potentially disastrous gap in coverage. To this end, many businesses add additional protection by purchasing commercial liability umbrella insurance.

As the name implies, umbrella insurance is simply an extra layer of coverage that sits on top of your existing policies. Think of your general liability policy as your raincoat and this extra insurance as—you guessed it—an umbrella. If your underlying policy is unable to keep you completely covered, umbrella insurance can allow you to weather even the nastiest storms.

For example, if someone is injured at your place of business, they might sue you for their medical bills, lost wages, and even pain and suffering. Your general liability will cover you up to a certain dollar amount, but you’ll be on the hook for anything beyond that limit.

Once your underlying insurance maxes out, the umbrella policy will help pay for the resulting damages and legal expenses if you lose the case. If you win, it can help cover your lawyer’s fees.

Not all businesses need umbrella insurance. For example, if you work from home as a consultant, it’s unlikely you’d need it, unless you have clients who visit your house.

That said, in today’s litigious culture, it can be difficult to know if you face enough risk to justify such coverage. While we cannot offer definitive advice on your company’s need for coverage, you can get some idea of your risk level by considering a few questions:

• Is your business property open to the public? If you have people regularly visiting your place of business, you’re at a greater risk for accidents and premises liability lawsuits.
• Do your employees use vehicles for business? Whether it’s a company car or their own, if an employee gets into an accident while driving for work, your company could be sued.
• Is your workplace at high risk for employee injuries? While Workers’ Compensation Insurance should cover most on-the-job accidents, if your particular business operation leaves employees prone to injury, you could be sued by an employee alleging their injury was due to your negligence.

Commercial umbrella insurance is only applicable for certain types of business insurance, so it’s not something that will cover your company on its own—or even in all cases. Umbrella coverage typically applies to three primary types of underlying commercial policies: general liability, employer’s liability, as well as hired and non-owned auto liability.

In order for umbrella coverage to apply, you must first have an appropriate underlying policy in place, and that policy’s limits must be maxed out. In fact, you may not even be able to purchase umbrella insurance if your underlying policy doesn’t offer high-enough limits.

Note that for certain professional-service businesses, such as law firms or healthcare practices, umbrella coverage will not apply in cases involving malpractice or other professional liability policies.

Because each business has its own unique risks and assets, there’s no way to say exactly how much coverage your company might need without a full evaluation. But before you speak with an insurance agent, consult with us as your Creative Business Lawyer,® so we can support you in finding the right agent and evaluating your options.

We’ll evaluate your business assets, risks, and underlying coverage and then work with you and your insurance advisor to identify  the optimal levels of insurance you should have in place.

We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule. Or, schedule online.

With the holiday season here, you’re probably spending lots of time with your family and friends. During these moments, you’re likely reminded of just how important these relationships can be. And as we grow older, you begin to realize how precious little time we have to spend with one another.

Given life’s fleeting nature, using this time to talk about estate planning is vital for ensuring you and your loved ones will be provided and cared for no matter what happens. Though death and incapacity can be uncomfortable subjects to discuss, with a comprehensive plan in place, you’ll almost certainly experience a huge sense of relief and peace, knowing this critical task has been discussed and documented.

And though you might not realize it, estate planning also has the potential to enhance your relationship with loved ones in some major ways. Planning requires you to closely consider your relationships with family and friends—past, present, and future—like never before. Indeed, the process can be the ultimate forum for heartfelt communication and prioritizing what matters most in life.

Indeed, communicating clearly about what you want to happen in the event of your incapacity or death (and asking your loved ones what they want to happen) can foster a deeper bond and sense of intimacy than just about anything else you can do.

Here are just a few of the valuable ways estate planning can improve the relationships you cherish most:

Taking the time and effort to carefully plan for what will happen to you in the event of your incapacity or when you die is a genuine demonstration of your love. It would be far easier to do nothing and simply let you family and friends figure it out for themselves. After all, you won’t be around to deal with any of the fallout.

Planning in advance, though, shows that you truly care about the welfare of your loved ones, even when you’re no longer around to benefit from their love and companionship. Such selfless concern and forethought equates to nothing less than a final expression of your unconditional love.

Sitting down and having an honest discussion about life’s most taboo subjects—incapacity and death—is almost certain to bring you and your loved ones closer. By forcing you to face immortality together, planning has a way of highlighting what’s really important in life—and what’s not.

In fact, our clients consistently share that after going through our estate planning process they feel more connected to the people they love the most. And they also feel more clear about the lives they want to live during the short time we have here on earth.

Planning offers the opportunity to talk openly about matters you may not have even considered. When it comes to choices about distributing assets and naming executors and trustees, you’ll have a chance to engage in frank discussions about why you made the choices you did.

While this can be uncomfortable, clearly communicating your feelings and intentions is crucial for maintaining healthy relationships. In the end, it might just be the first step in actively addressing and healing any problems that may be lurking under the surface of your relationships.

Whether it’s the individuals you name as your children’s legal guardians or those you nominate to handle your own end-of-life care, estate planning shows your loved ones just how much you trust and admire them. What greater honor can you bestow upon another than putting your own life and those of your children in their hands?

Though it’s often challenging to verbally express how much you love your family and friends, estate planning demonstrates your affection in a truly tangible way. And once these people see exactly how much you value them, it can foster a deepening of your relationship with one another.

While estate planning is primarily viewed as a way to pass on your financial wealth and property, it can offer your loved ones much more than just financial security. When done right, it lets you hand down the most precious assets of all—your life stories, lessons, and values.

In fact, the wisdom and experience you’ve gained during your lifetime are among the most treasured gifts you can give. Left to chance, these gifts are likely to be lost forever. In light of this, we’ve built in a process, known as Family Wealth Legacy Passages, for preserving and passing on these intangible assets.

With this service, which is included in every estate plan we create, we guide you to create a customized recording in which you share your most insightful memories and experiences with those you’re leaving behind. Family Wealth Legacy Passages can not only ensure you’re able to say everything that needs to be said, but that your legacy carries on long after you—and your money—are gone.

We can help guide and support you in having these intimate discussions with your loved ones. And as our Family Wealth Legacy Passages service shows, we offer a wide-array of customized planning options designed to enrich your family and friends with far more than just material wealth.

With our help, estate planning planning doesn’t have to be a dreary affair. When done right, it can put your life and relationships into a much clearer focus and ultimately be a tremendously uplifting experience for everyone involved.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.

If you’ve come up with a great business idea, but don’t have the money to bring it to market, it may feel like you’re left with few funding options. Banks aren’t interested in loaning to startups that have yet to make any money, and most people don’t have family or friends who are wealthy enough to provide the kind of cash needed to make a real go of it.

To this end, you may find yourself considering the venture capital market. While TV shows like Shark Tank have romanticized the world of venture capital, many entrepreneurs have little idea of how such financing actually works. Here we’ll walk you through the basics, so you’ll have a better understanding of whether or not this type of funding is right for your awesome new idea.

Venture capital (VC) is a form of business financing that comes from outside, private investors, who agree to fund a startup or small business in exchange for a high rate of return and some temporary control of how the company is run. The businesses that receive VC are generally considered to have exponentially high-growth potential, but are also often high risk.

VC is not about long-term investing. The investors are interested in providing the company with enough infrastructure and guidance for it to obtain significant size, profitability, and credibility, and then they want you to sell the business, so they can recoup their investment.

And VC also isn’t about investing just money—it can be offered in the form of management and/or technical expertise as well.

Once the business reaches a certain level of maturity—typically after 4 to 6 years—it’s usually sold to a corporation or made available for sale on the public equity market through an IPO. At this point, VC investors will liquidate their shares.

Simply put, VC investors buy a stake in your business idea, help nurture its growth for a short period, and then cash out their equity in your company when it reaches a certain point in its life cycle.

Venture capital firms typically get the majority of their investment funds from major institutions—large corporations, financial firms, pension funds, university endowment funds, along with very wealthy private individuals, or “angel investors.” These institutions and individuals generally put only a small percentage of their overall funds into these high-risk investments, and they expect a high rate of return (between 20% and 35%) per year for the duration of their investment.

Usually, it won’t be just one VC firm financing a company. Instead, you’ll frequently find a group of two or three firms involved, with one serving as the “lead” investor and the others as “followers.” Outside of the small percentage of funds they invest, such co-investing offers further diversification, ensuring that even if one startup fails, they’ll be able to offset the loss with others that succeed.

Because they’re often hoping to take a chosen startup public, VC investors are looking for businesses with a potential for rapid growth, as opposed to small mom and pop shops. Given this, VC firms usually focus solely on high-growth market sectors.

Timing is also critical in VC. Investors tend to focus on industries that are in their adolescent stage of evolution. They avoid an industry’s earliest stages, when the technology and market are still unstable, as well as the later stages, when the market is saturated with competitors and its potential for growth has passed its peak. Today, for example, more than 25% of VC is focused on the Internet and its seemingly limitless technological applications.

Moreover, VC firms often specialize in certain areas: particular industry segments, stages of a company’s development, or specific geographical regions.

While VC firms look at numerous factors (which we’ll cover in a future article) when deciding whether or not to finance a specific company, you generally need to show investors that your business idea, company’s stage of development, and industry match their particular needs, values, and focus.

And most importantly, you’ll need to show them they can believe in you! You must prove that your experience, management acumen, and skills make you a relatively safe bet. Since they’re investing other people’s money, they want to feel confident you’re worth the risk. By understanding how venture capital financing works and adjusting your expectations properly, you’ll have a jumpstart on the competition before you even give your first pitch.

Beyond these basics, there are a huge array of other legal and financial issues to consider when seeking venture capital. With us as your Family Business Lawyer®, we can not only help you locate suitable VC investors, we can also walk you step-by-step through the complex process of preparing your business to qualify for funding.

And if VC funding is not an option, you may want to consider using a unique funding technique known as credit card stacking, where you use multiple business credit cards to get zero-percent business financing. We’ll cover this method in next week’s article, explaining how it works and when you should use it—or if you need the money immediately, contact us today to learn more!

We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule. Or, schedule online.

If you follow the mainstream or social media news, you likely know the new Republican tax bill, which recently passed both the House and Senate, is a potential game changer for tax planning. Known as the “Tax Cuts and Jobs Act,” both houses of Congress passed different versions of the bill, so it’s unclear what the final legislation will include, or if it will even pass. If passed, the new bill is a potential game changer for your family’s tax strategy.

That said, both versions include some common elements, and since we’re close to year end, it’s important to understand what these potential changes might mean for your family’s tax planning. For example, if you are a W-2 employee, you may want to start a side-line business in 2018 to offset some of the potential negative impact of the tax law changes, and we may be able to help you with that.  If you have specific questions on personal impact to you, contact us prior to year-end so we can discuss.

You can use this knowledge to implement tax-saving strategies—by potentially deferring income to 2018 or accelerating deductions into 2017—if you take action before year end.

But keep in mind: None of this is set in stone, yet. By the time this article is published, we’ll certainly have more information. And one thing is for sure, knowledgeable, proactive planning is always wise, especially when supported by a trusted advisor who can guide you.

Both the House and Senate versions of the bill increase the standard deductions to nearly identical levels: $12,200 for singles and $24,400 for joint filers in the House and $12,000 and $24,000 in the Senate. Both plans eliminate personal exemptions, though, so those with dependents won’t see quite as much savings. And if you’ve deducted medical expenses and/or charitable donations in the past, that would be eliminated. So if you donate to charity and are able to write off your donations because you itemize your expenses rather than take the standard deduction, consider increasing your charitable donations this year, as they may not be deductible next year.

The bill keeps the mortgage interest deduction, but adds some new limits. Current homeowners can continue deducting mortgage interest up to $1 million. For new home buyers, however, the deduction will be capped at $500,000. And the bill only allows homeowners to take the deduction for their primary residence, not vacation and/or second homes. What’s more, the bill no longer permits taxpayers to deduct the interest on home equity loans or lines of credit.

Those with young children will see an increase in the child tax credit, too. The House raises the credit to $1,600 per child, with a phase-out for joint filers with an income of $230,000. The Senate plan boosts the child credit to $2,000 per child and sets the phase-out at $500,000.

The House bill sets in motion a full repeal of the estate tax  by 2024, but it boosts the exemption from its current $5.49 million to $10 million starting in 2018. The Senate doesn’t repeal the estate tax, but it does significantly raise the exemption to $11.2 million. Chances are you aren’t impacted by the current estate tax, but if you are, contact us so we can take advantage of potential opportunities to save going into 2018, as it’s likely that the estate tax exemption amount will be rolled back after future elections.

Both bills repeal deductions for state and local income taxes. However, they do still allow for up to a $10,000 deduction for state and local property taxes.

If you’ve created an estate plan, it likely includes traditional wealth and assets like finances, real estate, personal property, and family heirlooms. But unless your plan also includes your digital assets, there’s a good chance this online property will be lost forever following your death or incapacity.

What’s more, even if these assets are included in your plan, unless your executor and/or trustee knows the accounts exist and how to access them, you risk burdening your family and friends with the often lengthy and expensive process of locating and accessing them. And depending on the terms of service governing your online accounts, your heirs may not be able to inherit some types of digital assets at all.

With our lives increasingly being lived online, our digital assets can be quite extensive and extremely valuable. Given this, it’s more important than ever that your estate plan includes detailed provisions to protect and pass on such property in the event of your incapacity or death.

Digital assets generally fall into two categories: those with financial value and those with sentimental value.

Those with financial value typically include cryptocurrency like Bitcoin, online payment accounts like PayPal, domain names, websites and blogs generating revenue, as well as other works like photos, videos, music, and writing that generate royalties. Such assets have real financial worth for your heirs, not only in the immediate aftermath of your death or incapacity, but potentially for years to come.

Digital assets with sentimental value include email accounts, photos, video, music, publications, social media accounts, apps, and websites or blogs with no revenue potential. While this type of property typically won’t be of any monetary value, it can offer incredible sentimental value and comfort for your family when you’re no longer around.

Though you might not know it, you don’t actually own many of your digital assets at all. For example, you do own certain assets like cryptocurrency and PayPal accounts, so you can transfer ownership of these in a will or trust. But when you purchase some digital property, such as Kindle e-books and iTunes music files, all you really own is a license to use it. And in many cases, that license is for your personal use only and is non-transferable.

Whether or not you can transfer such licensed property depends almost entirely on

the account’s Terms of Service Agreements (TOSA) to which you agreed (or more likely, simply clicked a box without reading) upon opening the account. While many TOSA restrict access to accounts only to the original user, some allow access by heirs or executors in certain situations, while others say nothing about transferability.

Carefully review the TOSA of your online accounts to see whether you own the asset itself or just a license to use it. If the TOSA states the asset is licensed, not owned, and offers no method for transferring your license, you’ll likely have no way to pass the asset to anyone else, even if it’s included in your estate plan.

To make matters more complicated, though you heirs may be able to access your digital assets if you’ve provided them with your account login and passwords, doing so may actually violate the TOSA and/or privacy laws. In order to legally access such accounts, your heirs will have to prove they have the right to access it, a process which up until recently was a major legal grey area.

Fortunately, a growing number of states are adopting a law that helps clarify how your digital assets can be accessed in the event if your death or incapacity.

The Revised Uniform Fiduciary Access to Digital Assets Act, which has been adopted in 37 states so far, lays out guidelines under which fiduciaries, such as executors and trustees, can access these digital accounts. The Act allows you to grant a fiduciary access to your digital accounts upon your death or incapacity, either by opting them in with an online tool furnished by the service provider or through your estate plan.

The Act offers three-tiers for prioritizing access. The first tier gives priority to the online provider’s access-authorization tool for handling accounts of a decedent. For example, Google’s “inactive account manager” tool lets you choose who can access and manage your account after you pass away. Facebook has a similar tool that allows you to designate someone as a “legacy contact” to manage your personal profile.

If an online tool is not available or if the decedent did not use it, the law’s second tier gives priority to directions given by the decedent in a will, trust, power of attorney, or other means. If no such instructions are provided, then the third tier stipulates the provider’s TOSA will govern access.

As long as you use the provider’s online tool—if one is available—and/or include instructions  in your estate plan, your digital assets should be accessible per your wishes in states that have adopted the law. However, all 50 states are expected to adopt the Act soon, so even if the law isn’t on the books in your state, you should take it into serious consideration when planning.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.