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March 4, 2021 by Cava Faulkner

When it comes to estate planning, most people automatically think about taking legal steps to ensure the right people inherit their stuff when they die. And these people aren’t wrong.

Indeed, putting strategies in place to protect and pass on your wealth and other assets is a fundamental part of the planning equation. However, providing for the proper distribution of your assets upon your death is just one part of the process.

And it’s not even the most critical part.

Planning that’s focused solely on who gets what when you die is ignoring the fact that death isn’t the only thing you must prepare for. You must also consider that at some point before your eventual death, you could be incapacitated by accident or illness.

Like death, each of us is at constant risk of experiencing a devastating accident or disease that renders us incapable of caring for ourselves or our loved ones. But unlike death, which is by definition a final outcome, incapacity comes with an uncertain outcome and timeframe.

Incapacity can be a temporary event from which you eventually recover, or it can be the start of a long and costly event that ultimately ends in your death. Indeed, incapacity can drag out over many years, leaving you and your family in an agonizing limbo. This uncertainty is what makes incapacity planning so incredibly important.

In fact, incapacity can be a far greater burden for your loved ones than your death. This is true not only in terms of its potentially ruinous financial costs, but also for the emotional trauma, contentious court battles, and internal conflict your family may endure if you fail to address it in your plan.

The goal of effective estate planning is to keep your family out of court and out of conflict no matter what happens to you. So if you only plan for your death, you’re leaving your family—and yourself—extremely vulnerable to potentially tragic consequences.

Where to start

Planning for incapacity requires a different mindset and different tools than planning for death. If you’re incapacitated by illness or injury, you’ll still be alive when these planning strategies take effect. What’s more, the legal authority you grant others to manage your incapacity is only viable while you remain alive and unable to make decisions about your own welfare.

If you regain the cognitive ability to make your own decisions, for instance, the legal power you granted others is revoked. The same goes if you should eventually succumb to your condition—your death renders these powers null and void.

To this end, the first thing you should ask yourself is, “If I’m ever incapacitated and unable to care for myself, who would I want making decisions on my behalf?” Specifically, you’ll be selecting the person, or persons, you want making your healthcare, financial, and legal decisions for you until you either recover or pass away.

You must name someone

The most important thing to remember is that you must choose someone. If you don’t legally name someone to make these decisions during your incapacity, the court will choose someone for you. And this is where things can get extremely difficult for your loved ones.

Although laws differ by state, in the absence of proper estate planning, the court will typically appoint a guardian or conservator to make these decisions on your behalf. This person could be a family member you’d never want managing your affairs, or a professional guardian who charges exorbitant fees. Either way, the choice is out of your hands.

Furthermore, like most court proceedings, the process of naming a guardian is often quite time consuming, costly, and emotionally draining for your family. If you’re lying unconscious in a hospital bed, the last thing you’d want is to waste time or impose additional hardship on your loved ones. And this is assuming your family members agree about what’s in your best interest.

For example, if your family members disagree about the course of your medical treatment, this could lead to ugly court battles between your loved ones. Such conflicts can tear your family apart and drain your estate’s finances. And in the end, the individual the court eventually appoints may choose treatment options, such as invasive surgeries, that are the exact opposite of what you’d actually want.

This potential turmoil and expense can be easily avoided through proper estate planning. An effective plan would give the individuals you’ve chosen immediate authority to make your medical, financial, and legal decisions, without the need for court intervention. What’s more, the plan can provide clear guidance about your wishes, so there’s no mistake or conflict about how these vital decisions should be made.

What won’t work

Determining which planning tools you should use to grant and guide this decision-making authority depends entirely on your personal circumstances. There are several options available, but choosing what’s best is something you should ultimately decide after consulting with an experienced lawyer like us.

That said, we can tell you one planning tool that’s totally worthless when it comes to your incapacity: a will. A will only goes into effect upon your death, and then it merely governs how your assets should be divided, so having a will does nothing to keep your family out of court and out of conflict in the event of your incapacity.

The proper tools for the job

There are multiple planning vehicles to choose from when creating an incapacity plan. And this shouldn’t be just a single document; instead, it should include a comprehensive variety of multiple planning tools, each serving a different purpose.

Though the planning strategies you ultimately put in place will be based on your particular circumstances, it’s likely that your incapacity plan will include some, or all, of the following:

Healthcare power of attorney: An advanced directive that grants an individual of your choice the immediate legal authority to make decisions about your medical treatment in the event of your incapacity.
Living will: An advanced directive that provides specific guidance about how your medical decisions should be made during your incapacity.
Durable financial power of attorney: A planning document that grants an individual of your choice the immediate legal authority to make decisions related to the management of your finances, real estate, and business interests.
Revocable living trust: A planning document that immediately transfers control of all assets held by the trust to a person of your choosing to be used for your benefit in the event of your incapacity. The trust can include legally binding instructions for how your care should be managed and even spell out specific conditions that must be met for you to be deemed incapacitated.

Don’t let a bad situation become much worse

You may be powerless to prevent your potential incapacity, but proper estate planning can at least give you control over how your life and assets will be managed if it does occur. Moreover, such planning can prevent your family from enduring needless trauma, conflict, and expense during this already trying time.

If you’ve yet to plan for incapacity, we can counsel you on the proper planning vehicles to put in place, and help you select the individuals best suited to make such critical decisions on your behalf. If you already have planning strategies in place, we can review your plan to make sure it’s been properly set up, maintained, and updated. Contact us today to get started.

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.

March 4, 2021 by Cava Faulkner

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February 28, 2021 by Cava Faulkner

On November 27th, nine days after being pulled unconscious from a house fire in a beachfront home in New London, Connecticut, Tony Hsieh, the former CEO of the online shoe retailer Zappos, died due to complications of smoke inhalation.

Hsieh, who was single and had no children, was just 46. Although the cause of the fire is still under investigation, law enforcement ruled his death accidental.

At the time of his death, Hsieh was worth an estimated $840 million, but in spite of his immense wealth, it seems he did not have a will. While it’s not uncommon for the rich and famous to die without a will, and many iconic figures—Prince, Aretha Franklin, and most recently, Chadwick Boseman—also died without creating this basic planning document, Hsieh’s case is particularly puzzling given his altruistic nature.

Hsieh was renowned for his kindness, generosity, and always putting others first, yet by dying without a will, he left his loved ones a colossal mess to clean up. Indeed, it will likely take his family many months just to account for all of his assets, and it’s likely they will overlook—and may even never find—some of those assets.

From there, Hsieh’s estate will have to go through the court process of probate, which could last years and rack up hefty lawyer fees. And after all of his debts are settled and creditors paid, Hsieh’s family will face an enormous federal tax bill that could run into the hundreds of millions.

By all accounts, Hsieh’s death at such a young age is horribly tragic. But it’s equally tragic for such a brilliant and compassionate individual to have wasted the opportunity to do real good with the assets he created and to needlessly put his loved ones through such an ordeal.

Although it may seem harsh to lay such a judgment on Hsieh, who was reportedly suffering from mental health and substance abuse issues in the last year of his life, we do so from a place of true compassion. Indeed, we cover this case and others like it in hopes that it will inspire you to remember that death comes for us all, often when we’re least expecting it. And without any planning in place, you are forcing your loved ones to endure a costly legal process and the unnecessary loss of wealth and assets you worked so hard to build.

While the loss to Hsieh’s family, and the charitable causes he would have likely supported, will be immense, his family can afford to pay the lawyers, the court costs, and the taxes. Though you likely have a much smaller estate than Tony Hsieh, the actual cost of loss to your family, if you don’t plan, could be much higher on a relative basis.

But here’s the good news: All of this suffering can be easily avoided with planning. And you don’t have to be a multi-millionaire to create a plan that’s guaranteed to protect and provide for your loved ones no matter what happens to you.

An Internet Pioneer

Hsieh grew up in San Francisco, the son of Taiwanese immigrants and the oldest of three boys. A graduate of Harvard, where he studied computer science, Hsieh started his first company, LinkExchange, in 1996 with his college buddy Alfred Lin, who would become his close business partner.

LinkExchange was one of the first major digital advertising firms, and two years later, at age 24, Hsieh sold it to Microsoft for $265 million. After selling LinkExchange, Hsieh and Lin launched the venture capital firm, Venture Frogs, which is how he met another young entrepreneur named Nick Swinmurn, who pitched Hsieh the idea of starting an online shoe company.

That company would become Zappos, which ultimately defined Hsieh’s career and set in motion his vision for life and business. As CEO, Hsieh made it clear that Zappos was far more than just a shoe retailer: Zappos was about “delivering happiness” and “a WOW experience.” Zappos focused heavily on customer service, and famously offered customers free shipping and complete refund on all shoes for a full year after purchase, with no questions asked.

Hsieh’s leadership proved highly successful, and Zappos saw its sales go from $1.6 million in 2000 to $252 million in 2005. In 2009, Hsieh sold Zappos to Amazon for $1.2 million in stock, while staying on as the company’s CEO. Jeff Bezos was reportedly so impressed with the way Hsieh ran the company, he allowed the young entrepreneur to continue running the brand with very limited oversight.

In 2005, Hsieh moved Zappos headquarters from San Francisco to Las Vegas, where he invested $350 million of his own money to transform a once seedy part of town into a hub for arts, culture, and tech. As part of the project, Hsieh created a community of 30 Airstream trailers, where he himself lived for years with his pet alpaca named Marley.

In an interview with the Las Vegas Review-Journal, Hsieh said the community was inspired by his experience at the Burning Man festival. He described the 1-acre park as an “urban camping experience with everyone sharing the world’s largest living room, which includes a community kitchen, a firepit, and a stage.”

Hsieh’s interest in fostering community and connection with the Las Vegas project, Airstream park, and other ventures reflect the young business guru’s overarching vision—which was about more than just retail.

“He was never interested in shoes,” former Zappos executive Fred Mossler told Forbes. “Tony’s journey was to improve the human condition.”

Growing Pains

Around the time Hsieh moved into the trailer park in 2014, he started to lose touch with many of his old friends. While many of his peers had gotten married and started families, Hsieh remained single and developed a reputation as a heavy partier.

According to a cover story on Hsieh’s life and business accomplishments in Forbes Magazine, the young entrepreneur was always a heavy drinker and known to use recreational drugs, but in later years, his drug use became more frequent. What’s more, close friends noted that Hsieh also suffered from mental health issues, including insomnia and depression.

Hsieh’s struggles with depression and substance abuse reportedly intensified in early 2020, as the quarantines from the COVID-19, which hit Las Vegas particularly hard, put an end to the parties and nonstop action the young entrepreneur craved. In January, right before the pandemic exploded, Hsieh attended the Sundance Film Festival in Park City, Utah, and fell in love with the upscale ski resort town.

Vowing to recreate his Vegas utopian community in Park City, Hsieh decided to relocate to the town, purchasing some $70 million worth of property around the area, while establishing a $30 million angel fund to help local businesses and startups. In the spring, he split his time between Vegas and Park City, but by the summer, Hsieh made Utah his new full-time residence.

Hsieh’s new home and the centerpiece of his Park City properties was a $16 million, 17,350-square-foot mansion with a private lake he called “The Ranch.” During his transition from Vegas, Hsieh reportedly promised to double the salary of friends who would agree to relocate to Park City and help him in his quest to revamp the community.

The Park City Crew

According to Forbes, at least several dozen friends took Hsieh up on his offer and moved to Utah with him, where they lived for free in some nine properties he purchased in the high-end Aspen Springs neighborhood. In Park City, Tony helped many local entrepreneurs and propped up local businesses struggling to stay afloat during the pandemic with lavish spending on restaurants, bars, limos, and concierge services.

While Hsieh initially relocated to Park City to focus on “health, wellness and rehabilitation,” by the late summer, friends and family reportedly became concerned with his increased drinking and drug use. Longtime friends found it hard to reach Hsieh, who grew increasingly isolated, surrounding himself with a new group of younger friends, most of whom were on his payroll.

According to Hsieh’s close friends and colleagues who spoke with Forbes, Tony’s new entourage of friends, he dubbed, “The Park City Crew,” were encouraging him to indulge in more frequent drug use, which his old friends felt was getting out of control. At the same time, he grew more isolated and even paranoid, and at one point, a team of security guards Hsieh hired basically barricaded sections of his main house, “blocking anyone who didn’t have Tony’s permission to enter,” according to Forbes.

In August, it was announced that Hsieh was retiring from Zappos after more than two decades at the helm. Although the timing of his retirement was suspect, Amazon denied pushing Hsieh out, and insisted that stepping down was his own decision, according to Forbes. Whatever the case may be, his friends and loved ones became so worried about his condition, they staged several interventions in order to convince him to seek help.

Apparently, the interventions worked. Hsieh was reportedly planning to check himself into a rehab facility shortly after a planned visit to see friends and family in Connecticut for the Thanksgiving holiday. But as we now know, Hsieh’s plans to turn his life around were tragically interrupted.

Next week in part two of this series we will cover the last days of Tony’s life and how his lack of estate planning created a nightmare burden for his family that is only just getting started.

February 28, 2021 by Cava Faulkner

Developing close bonds with your employees is all but inevitable. Indeed, being friendly with your team members can make the job more rewarding and enjoyable for everyone. But there’s a huge difference between being friendly with your employees and developing a genuine friendship.

When you do things like spend lots of time together outside of work, introduce them to your family, and share intimate details about your life with one another, you open up the potential for some major complications. Given the power imbalance and potential conflicts of interest, having a true friendship with an employee can test your personal/professional boundaries like practically nothing else.

Last week, we offered our first three strategies to help you successfully navigate employer-employee friendships, and here we round things out with the remaining four:

4. Business first

You should be very direct with the employee that because you’re responsible for the overall well-being of everyone on the team and all clients and customers, your role as a business owner must come first. He or she should understand that you can’t demonstrate even the slightest bit of favoritism or preferential treatment towards him or her. The mere rumor of such bias can be disastrous for team morale and respect for your leadership.

This means that even if you have critical inside knowledge, such as knowing the company is about to be sold and everyone laid off, your lips must remain sealed. You need to be totally transparent with your employee-friend, letting them know upfront that the company’s objectives must always remain your top priority.

5. Don’t take things personally

When it comes to being friends with an employee, how you navigate conflict is where the rubber really meets the road. It’s your job to keep your operation firing on all cylinders, which requires you to offer regular feedback to your team—and sometimes even take disciplinary actions.

Offering constructive criticism and leading your team is challenging enough, but add a friendship to the equation, and the potential for bruised egos and resentment skyrockets. And this is true for both sides. An employee who’s your friend could have his or her feelings more hurt by a critical remark about lagging performance. And if you ever need to take disciplinary action, he or she might even feel betrayed.

By the same token, if you’re friends with a team member, it can be easy for you to see the friend’s misbehavior or poor performance as a personal slight against yourself. Indeed, being friends with staff can cause you to second-guess what would normally be simple decisions and/or needlessly overanalyze your feedback to prevent offending your buddy.

This can all be mitigated with strong communication skills, willingness to hear and be with impact, and learning how to not get defensive. If you’re in the senior position, you’ll need to lead here.

6. Be mindful

When you’re true friends with someone, you can inject much more emotion into a relationship. This can be great if it inspires the two of you to up-level your performance and work more effectively. But it can also lead to needless tension and confusion when you have a conflict.

You have to be extraordinarily mindful of your thoughts and feelings when dealing with the other person. If you’re experiencing anger, hurt, or resentment, you’ll need to become aware of that before acting. Then, you should step back from the situation to evaluate whether or not the friendship is in any way causing or exaggerating your emotional state.

If you’re being overly emotional, you might want to cool off for a while and reconsider the situation later.

7. Seek unbiased counsel

The kind of mindful behavior we’re talking about here can require a Buddha-like level of self-awareness, and it may be difficult to maintain an even keel in all situations. If you’re having issues making truly objective decisions, you may want to turn to an outside source—a friend, spiritual mentor, life coach, or us—who can take an unbiased look at the situation and give you honest advice.

In the end, it all comes down to whether or not the friendship is negatively impacting work performance, injecting needless tension into the workplace, or impairing your ability to make decisions. If you notice any of these things happening, you should seriously reconsider whether employing your friend is worth risking your business over.

cover your legal bases

In addition to the potential emotional and performance pitfalls involved with employer-employee friendships, such relationships can also have potential legal ramifications. Consult with us to discuss the possible legal issues involved and how you can prevent them.

When it comes to befriending team members, we can provide you with objective advice about what is—and isn’t—in the best interest of your business’ success.

We offer a complete spectrum of legal services for business owners 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 you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.

February 27, 2021 by Cava Faulkner

Undoubtedly, many budding entrepreneurs have developed winning business concepts over the years, but have ultimately given up due to a perceived lack of funding.

This may have even happened to you.

Indeed, banks are primarily interested in lending to established companies. Dipping into personal savings or using home equity credit is much too high-risk for most. Some ambitious entrepreneurs are turning to venture capital financing, but this only works for businesses with extremely high-growth potential.

But there are other options. One little-known option is to use multiple business credit cards with zero-percent interest rates over an extended period as a source of investment capital. Known as credit card stacking, such financing can be a highly effective—yet underutilized—way to get the money needed to bring your business idea to market.

Aren’t credit cards usually a terribly way to finance a business?

You might be skeptical about using credit cards for business funding. Not only do they typically come with high interest rates, but even applying for credit can negatively affect your personal credit score.

However, credit card stacking uses business credit cards, not personal ones. By obtaining business cards that offer extended zero-percent interest rates, you’re basically getting an interest-free line of credit without putting up any collateral. And since these are business credit cards, they have no effect on your personal credit score. Unlike with personal credit cards, you can also use all of the available credit without being penalized by a decrease in your credit score, so long as you make at least minimum payments.

It’s not unusual for small business owners to qualify for $30,000 to $150,000 worth of business credit within 30 days (or less). And after a year or more, it’s even possible to access up to $250,000 in unsecured capital.

So, what’s the catch?

Credit card stacking is not for everyone. Most lenders only offer such credit to those with excellent personal credit scores (usually 720 or higher). The stronger your credit, the higher the credit limits and the longer the access to zero-percent financing. And to ensure your personal credit score isn’t affected, you should deal only with lenders that don’t report business credit activity on your personal credit reports. Some creditors do report your business activity to personal agencies, so you have to do your homework to find the ones that don’t.

With so many credit cards out there, finding those that offer these favorable terms can be tedious. Moreover, if you were to apply for several different business credit cards in a short amount of time, this would likely affect your personal credit.

Is there anyone who can help with this process?

While it’s possible to obtain startup financing on your own using credit card stacking, you’ll likely find more options and higher credit limits by working with a commercial provider that specializes in this type of financing. Sometimes these providers won’t use the term credit card stacking, and instead will advertise for unsecured business credit lines, but it’s the same thing.

Not only can these providers quickly find the business cards that you’re most likely to qualify for with the best interest rates, but they know how to strategically apply for multiple cards simultaneously, without affecting your personal credit. Because these companies specialize in business credit card applications, their credit analysts already have relationships with many of the leading financial institutions and can get you higher credit limits, even if the first offer back from a particular credit card company is low.

Such insider knowledge means they can directly negotiate with the banks’ underwriting departments to prove that your business concept is worth funding. When you go at it alone, business credit applications are often systematically denied, before someone can even review them.

Get started today

Because qualifying your business for such financing may require other steps, you should consult with us as your Family Business Lawyer® to get the process started. We can ensure all of your legal bases are covered and advise you on the best ways to manage this source of funding.
If you’re looking to make your startup dreams a reality, but can’t find the funding, you should seriously consider credit card stacking. To learn more about this unique financing method, sign up to view our video, or simply contact us as your Family Business Lawyer® today and we’ll walk you through the process.

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.

February 26, 2021 by Cava Faulkner

It’s common for families of those with Alzheimer’s and other forms of dementia to realize that at some point, their loved one shouldn’t be allowed to drive. But fewer people are aware they should exercise the same level of caution when it comes to restricting their loved one’s access to firearms.

This was one of the findings of a May 2018 study published in the Annals of Internal Medicine covering firearm ownership among Alzheimer’s patients. The study noted that even though 89% of Americans support restricting access to firearms for those with mental illness, there’s been little attention focused on limiting firearm access among elderly dementia patients.

Indeed, there are currently no federal gun laws prohibiting the purchase or possession of firearms by persons with dementia. And only two states—Hawaii and Texas—have laws restricting gun access for dementia patients.

A ticking time bomb

This lack of attention comes despite an increasing number of incidents involving elderly dementia patients shooting and killing family members and caregivers after confusing them for intruders. And with so many Baby Boomers now entering retirement age, this dangerous situation could get much worse.

In fact, the number of people with dementia is expected to double to around 14 million in the next 20 years, with the vast majority of those over age 65. Since nearly half of people over 65 either own a gun or live with someone who does, it’s clear that firearm safety should be a top priority for those with elderly family members—even if they don’t currently have any signs of dementia.

That said, just talking about restricting someone’s access to guns can be highly controversial and polarizing. Many people, especially veterans and those in law enforcement, consider guns—and their right to own them—an important part of their identity.

Given this, the study’s authors recommended that families should talk with their elderly loved ones early on about the fact that one day they might have to give up their guns. Physicians suggest bringing up the topic of firearms relatively soon after individual’s initial dementia diagnosis.

This discussion should be similar to those related to driving, acknowledging the emotions involved and allowing the person to maintain independence and decision control for as long as it’s safe. Even though this can be a very touchy subject, putting off this discussion can literally be life threatening.

All part of the plan

Since it relates to so many other end-of-life matters, this discussion should take place as part of the overall estate planning process. One way to handle the risk is to create a legally binding agreement laying out a “firearm retirement date” that’s similar to advance directives addressing the elderly relinquishing their driving privileges.

Such an agreement allows the gun owner to name a trusted family member or friend to take ownership of their firearms once they’re reached a certain age or stage of dementia. In this way, the process may seem more like passing on a beloved family heirloom and less like giving up their guns.

Moreover, the transfer of certain types of firearms must adhere to strict state and federal regulations. Unless the new owner is in full compliance with these requirements, they could inadvertently violate the law simply by taking possession of the guns.

In light of this risk, you should consider creating a “gun trust,”an estate planning tool specially designed to deal with the ownership of firearms. With a gun trust, the firearm is legally owned by the trust, so most of the transfer requirements are avoided, making it a lot easier for family members to manage access after the original owner’s death.

Indeed, gun trusts can be a valuable planning strategy even for gun owners without dementia. Speak with us to see if a gun trust would be a suitable option for your family.

A matter of life and death

If you have an elderly family member with access to guns, you should consult with us as soon as possible. We can not only offer guidance on the the most tactful ways to discuss the matter, but also help you set up the appropriate estate planning strategies to ensure the firearms are properly secured and transferred.

Given the grave risks involved, managing the elderly’s access to firearms should be taken every bit as seriously—if not more so—as managing their ability to operate motor vehicles. The safety of both your loved one and everyone who cares for them depends on it.

The Real Cost To Your Family: Not Planning For Incapacity