Marriage Is Not a \”Cell Phone\”
Reading the New York Times commentary and analysis of the Supreme Court\’s hearing on the Prop 8 case involving California\’s same-sex marriage issue, what struck deeper than anything else was the seeming reluctance of the Court to do what it is appointed to do: protect the rights of those United States persons who have been discriminated against, marginalized, or otherwise made to suffer injustice. While an \”all-or-nothing\” choice can be frustrating and using the force of law to make a large minority accept a trend that improves the civil rights of thousands instead of ruling on a decision where a large majority has issue with whether the hunting of birds flying over a particular state violates an international treaty, U.S. Supreme Court justices are appointed for just that reason. It has always been my understanding that the Court, because it is the final arbiter of American justice, is supposed to make frustrating, difficult decisions when justice calls for such decisions to be made. What was the majority\’s opinion when race was removed from the de facto \”definition\” of marriage in Loving v. Virginia? A U.S. President and 118 members of Congress decided to define \”marriage\” and the distribution of more than 1000 federal benefits that accompany this definition for millions of U.S. citizens. So, is the argument that because we don\’t have a 2:1 margin in the country supporting same-sex marriage that we are stuck with this draconian definition that is based on \”history,\” and that history\’s rationale is that the purpose of marriage is procreation? Are we not in 2013 with the Internet and assisted reproductive technology? And, speaking of technology, \”newer than cell phones\” is an insulting comparison to a relationship with all the hallmarks of a marriage except the label and, more importantly the rights that are afforded that \”label.\” The cell phone analogy could arguably be found swimming in the ocean of reductio ad absurdum, which is arguably surprising coming from a Justice of the United States Supreme Court. As Justice Kennedy pointed out, more than 40,000 children in California alone are subjected to the marginalization of their families by a law that has no place in a civil society. The Justice referred to the emotional stigmatization these children face, but what about the financial benefits that the federal government attributes to married couples? If a child is living in a home with same-sex parents who, e.g., cannot take advantage of filing jointly on federal tax returns and discounts provided in medical and other benefits via ERISA and other government agencies, then money is being taken away from that family and, therefore, that child. So while I applaud Justice Kennedy for directing the public\’s attention to the children who are adversely affected by the so-called Defense of Marriage Act (DOMA) and its proponents, in my authentically humble opinion, the argument should have and could have gone further than what appears to be a gratuitous tug at the heartstrings. Becoming a lawyer, I was told and always take to heart that those with great gifts have an equally great responsibility and must not turn away from that responsibility when it calls for making difficult choices, such as whether to provide all U.S. citizens with all of the rights of marriage or no U.S. citizen with a cohesive, civil, and just legal foundation for loving, committed relationships.
5 Reasons Why the \”Permanent\” Exemption Matters to You
Many people probably know that Congress made permanent the Federal estate tax, which is $5 million, indexed for inflation, per person and $10 million per married couple. This means that approximately 98% of Americans will not have taxable estates on their deaths with respect to the government’s estate tax. A sigh of relief for many families could be heard across the land. However, folks shouldn\’t sigh too heavily because the same matters that existed before for individuals and families were not eliminated by Congress’s act. So the following are 5 issues that have nothing to do with the federal estate tax but are still very important to protecting yourself and your family: You have children. Even families with modest-sized estates should ensure that their children are cared for according to their wishes and values if a tragedy occurs. Minor and disabled children are of primary concern. I’ve written before that without a will that nominates a guardian, minor or disabled children may be placed with someone a parent would consider less than ideal. Beyond that, consider retirement proceeds. If a minor or even young adult child is the beneficiary on a retirement account, depending on the language of that account, Uncle Sam may still take a large bite or equally troubling, a relatively young adult may come into a large sum of money in one fell swoop. You aren\’t married BUT you are in a loving committed relationship with someone. So that means your significant other or partner, while being able to benefit from your lifetime exemption, cannot benefit from portability. Also, the same issue with respect to retirement proceeds as mentioned above also apply in this scenario. If your unmarried in the eyes of the federal or state government but you and your partner have a child, just bring the issues of number one right on down. You are a professional or small business (smallbiz) owner. Unfortunately, we Americans are a litigious bunch. If we believe we have suffered an injury related to professional services, e.g., doctor, lawyer, dentist, or a small business, then many of us have no problem pursuing litigation that will cost much more than the malpractice insurance covers. Estate taxes have little or nothing to do with covering your assets from multimillion dollar litigation. You have income producing assets. The federal government and many state governments tax beneficiaries on 2 levels: estate and income. If your daughter\’s trust has income producing assets, such as the 3-flat apartment building you gave her, then there is a likelihood that the trust will have to pay income tax. How much depends on how well your team works to protect you. Still, like number 3, this has nothing to do with estate taxes. You live in a \”decoupled\” state. Some states are \”coupled\” with the Federal estate tax regime, meaning their state\’s lifetime estate tax exemption is identical to the Federal government\’s. However 28 states are decoupled, and most of those states, unlike Illinois, have a significantly lower estate tax exemption amount. So that means that while estate tax may not be due to Uncle Sam, it may be due to Uncle Quinn – Illinois\’ governor, for example. Estate taxes were a primary focus of estate planning because no one likes paying taxes. Well, estate taxes are no longer a primary focus and those other issues still need to be considered, just like they did before December 31, 2012.
2 Very Important Ps in a Smallbiz Estate Plan
Knowing why and when to start succession planning (read here) allows us to move on and address the personal and professional practical considerations of succession planning. The first personal consideration can be assessed by thinking about the following questions: What do YOU want from your succession plan? Do you want your business to continue after you retire, to stop when you have sufficient income to retire, both – which would be similar to semi-retirement, or something else? The 4 basic personal goals surrounding succession planning are: (1) creating a legacy; (2) obtaining sufficient income to retire completely; (3) both – creating a legacy and semi-retirement; or (4) something else, perhaps creating a new career entirely. Once you’ve answered these questions, next you should consider another personal matter and how it aligns with the answer above. This helps define realistic objectives. This personal consideration involves your dependents: Who depends on you now? Who is likely to depend on you in the future? And what might that dependency look like? Being an emotional and psychological support weighs heavier than we often know. So, if this type of support isn’t managed well, it will drain our energy, time, and motivation. How we sustain this loving nature without harming ourselves will be discussed in another week or so, but let’s move on to look at other dependencies. Sometimes supporting someone financially is easier than providing emotional support; sometimes it is not. Perhaps you have or someone you know has family members who phone when the electric bill is too high, when the basement has flooded, or when the church needs a new roof? Perhaps you have a relative whose spouse or partner passed away leaving a minor child to be taken care of by a single parent? Often connected to emotional and financial dependency is physical dependency, typically accompanying caring for a disabled loved one. Your succession plan must account for of these factors and possibilities or your objectives may fall short and you or loved ones may suffer. Once completing this difficult work, we can address the less difficult matters – professional considerations. Last week’s digression, covers the first professional consideration, which is deciding your business’s legal entity, i.e., a LLC or S-Corp. In very limited situations, would one actually consider a sole proprietorship, partnership, or C-Corporation, so those entity choices weren’t discussed. Having decided on a legal entity, the next professional consideration is your market. Who is your market and how can you differentiate your business from your competitors? First just think about the people who may want or need your services or product, e.g., women with bird cages that need regular cleaning. But what if you’re already in business? One idea, for those who provide personal services, is to take the average age of your oldest and youngest client; next consider the source of your highest quality referrals who fit within that average; and then of those clients, what work did you find most enjoyable: talking to the birds, letting them fly around the house, or making their cages shiny? After creating this “niche,” the issue of differentiation remains, which requires performing a lot of research – the competition, customer demand, external variables, and more. After compiling your research, you should be able to determine how you can differentiate your business from your competitors. And yes, we’re still talking about succession planning because to create a winning succession plan, you have to create a winning business. And why is succession planning important to estate planning? If you\’re a smallbiz owner, what are you going to do with the business you once owned? A good estate plan will help answer that question. The Smallbiz Success Series: Decision 3 | Succeed Today | Personal & Practical Points | Relax & Retire
#3 of 3,987: LLC or S-Corp?
So you’ve decided to start your own small business (\”smallbiz\” or \”SMB\”). Welcome! It’s one of about 3,987 decisions you will have to make. Presuming you’ve already selected a name, for Illinois citizens – at least checked the name with the Illinois Department of Business Services, and then registered your domain name, the next important step is deciding on your business’s legal entity. In most states, including Illinois, business entity choices are; Sole proprietor, Partnership and its various forms, Limited Liability Company (LLC), or Corporation and its various forms, including Subchapter S Corporations (S-Corps). Because individuals tend to believe, however erroneously, that business owners are wealthy, business owners are often litigation targets. Accordingly, it’s unreasonable to operate a business today without some type of legal liability shield in addition to your insurance, which is lacking if you\’re operating as a sole-proprietor or even a partnership. Limited Liability Partnerships (LLPs), while providing limited protection, are not as owner-friendly as LLCs and corporations. Consequently, the use of partnerships has declined substantially. A smallbiz owner is typically advised to choose a LLC or corporation. By doing so, not only can the business take advantage of the legal liability shield, the owner can “pass through” the income profits and losses to his or her individual tax returns. A LLC is treated like a partnership for tax purposes and shareholders of a corporation that selects S-Corporation (S-Corp) treatment can pass through profits or losses. So, unlike C-Corporations, no double-taxation occurs with LLCs and S-Corps. Smallbiz owners tend to prefer LLCs over S-Corps because LLCs, which can also elect S-Corp tax treatment, require fewer formalities. S-Corps require annual shareholder meetings, corporate record-keeping, and quarterly tax filings. Additionally, the Illinois LLC Act allows for either narrow or expansive provisions in a LLC’s Articles of Organization and Operating Agreement. LLCs also offer other advantages, including: an unlimited number of shareholders, no citizenship requirements, few restraints on purpose or asset class, and different stock classes. Still, LLCs that don’t select to be treated as S-Corps, must pay estimated self-employment tax on all income received whereas S-Corps are not required to pay income tax on profits held for reasons other than employee wages. Also, if one depends on profits for your wages, as a single-member LLC (SMLLC), you may lose earnings if your business is sued and no distributions can be made without settling the judgment first. As a smallbiz owner, your entity selection depends on how much flexibility you want and what your current situation dictates, i.e., how much capital you need, how much liability protection you need, and the type of business partners you have. LLCs require less administrative work than S-Corps but capitalization needed for growth is often obtained from institutions that require a record of formalities, which S-Corps also require. Still, an LLC can, through its Articles of Organization and Operating Agreement, require all the formalities of a corporation and more. So… Now, you only have 3,986 decisions to make. The Smallbiz Success Series: Decision 3 | Succeed Today | Personal & Practical Points | Relax & Retire
3 Tips on Succession Planning – Before Needing an Airbag
The previous article discussed succession planning formula for a more successful business today. This week I’ll briefly cover how succession planning helps improve retirement and more importantly, when that succession planning should begin. At its core, succession planning is about tomorrow, our “retirement.” And proper succession planning creates important retirement benefits. As an estate planner with a number of financial planning colleagues, I can attest to the fact that we may have several methods and vehicles to protect and grow your assets and with a proper succession plan, those options may increase dramatically. However, without a proper succession plan, the options could dramatically decrease. Added benefits to retirement include: Being able to withstand harsh bear markets; Having a more secure retirement because your plans are more realistic; Retiring more efficiently and with fewer adverse tax implications; and A Less stressful retirement, even if you experience 1 or 2 bumps in the road. Most importantly, a properly executed succession plan eliminates the need for a “garage sale.” So as I said previously, in addition to making more money, establishing and implementing a succession plan results in an even more successful business today and a relatively stable and peaceful retirement. Now, some of us have a good idea on when we would like to retire but there is an ideal time to start succession planning and that time is before opening your doors for business. If you incorporate succession planning when drafting your business plan, then you will ultimately use and allocate resources more efficiently and plan realistically. Moreover, you\’ll establish processes that are key to a successful business sale or shareholder transfer. You may also realize that the most important factor in executing a successful succession plan is having a well-developed successor. Sometimes, we don’t start actually planning at the beginning. Many of us just do and do and do without stopping and taking the time to think about where all this “doing” is leading. But even if you’re 10 years into your business with about 10-15 years to go, it’s not too late. You probably have some advantages, e.g., a steady clientele or a steady and established referral base; a solid understanding of the rules, regulations, and best practices applicable to your business; “brand equity” among your peers and in your community; staff, if you have them, who are loyal; and if you’re anal, like me, you have helpful processes and spreadsheets in place to get you through the day, week, month, year, and decade. Conversely, 10 years in you may have some disadvantages: too many processes, some of which are inefficient or redundant; and you could be stuck in a time warp working against yourself, treating yourself like an employee and your business like a job, instead of CEO and enterprise. New business owners even with great business plans are also disadvantaged because the business is…new. So mistakes are going to be made and newbiz owners won’t be able to plan for all of them. It is when the business shingle is rusty that folks should proceed quickly but with caution. At age 60-65, triage may be needed, but there\’s still hope. At 66 – 70, like Will Smith said in the movie, Independence Day, “I hope ya gotta an airbag!” And at 70 ½, I think land in Jamaica is reasonable. Knowing why and when to start succession planning, we can move on and discuss the personal and professional practical considerations..Next week! The Smallbiz Success Series: Decision 3 | Succeed Today | Personal & Practical Points | Relax & Retire
How to Create Value in Your Smallbiz Now
Recently, I spoke to a group of women business owners about succession planning. Some were in business for more than 15 years, others for 4-5 years, and others had just started. Because succession planning is an integral part of estate planning, over the next couple of months, I will share a few insights from that meeting for readers who are or who advise smallbiz owners. So, let’s get started… When considering succession planning, where WE are also our clients, we must ask ourselves 2 questions and answer realistically: (1) WHY are we planning and (2) WHEN is the best time to plan. We all know the obvious answer to why to make MORE MONEY for “retirement.” However, beyond making more money later, succession planning provides 2 ancillary benefits. One benefit is that it can provide a more successful business NOW; the second benefit is that “retirement” will not be chaotic. How does succession planning help your business now? As you begin succession planning, to ensure your plan’s success, you must shift your perspective from that of a “job holder” who happens to run the job to that of a CEO who runs a multi-faceted enterprise. This “multi-faceted enterprise” idea may seem a little wonky at first. But if you consider all the hats you wear during the week to accomplish all the functions needed to service your clients or customers, you’ll get the picture. With proper succession planning, even solo business owners eventually shift from doing everything to delegating non-critical components to others, freeing up time to address critical components, performing essential leadership functions, and doing some fun business activities, such as blogging, tweeting, or connecting in person. As you make this shift from job holder to CEO, finding personnel or appropriately using current personnel to perform non-critical client/customer functions, something else occurs to benefit your practice now and in the future: personnel morale increases and, consequently, personnel become more productive. By shifting our perspective, we become more conscientious when hiring, even interns or part-timers, and create more current value for our business. You will recognize – for the sake of your succession plan – the need to nurture, groom, and develop the talent. Today’s buzz word is mentoring. But these aren’t just mentees; these are individuals who work for you and who you want to continue working for you. As a solo or smallbiz, your talent development program may not be formal, but it should at least be a cognizable, supervisory, mentoring program with regular reviews and 30-60 minute “check-in” meetings. Now, you may wonder how you can afford to carve out this time in such a competitive environment like the one we’re in today. Frankly, that’s being short-sighted. Because if you’ve been mentored or supervised by an outstanding boss, then you can probably recall your morale lift and sense of pride you felt as you developed. You can also probably recall the converse, when you were treated like a minion, degraded, and dismissed. By providing personnel with meaningful tasks, constructive feedback, and respecting and giving them credit for their good ideas, we’re creating more productive personnel, thereby actually giving us more time to devote to VIP client and customer matters. This makes clients happier and happy clients are good referral sources. So this answers one of the “why\’s.” The next piece, will consider the other \”why.” Stay tuned… The Smallbiz Success Series: Decision 3 | Succeed Today | Personal & Practical Points | Relax & Retire
How Do I Love Thee? Let Me Count the 8 Articles
On Valentine’s Day it may seem off-kilter to some to read an article on death, but not here in the Shark Free Zone. The interesting truth about estate planning is that it can be a genuine measurement of how much someone loves you. If we consider the 8 basic articles that are found – or should be found – in wills, the evidence is undeniable. So, from a potential beneficiary’s perspective, hoping he or she is loved, let’s look: Article 1: Family. Love = your name is in this article. Article 2. Definitions. Love = your name is listed in the “partner” definition since you and the testator (person writing the will) are cohabiting, i.e., unmarried and un Civil Unionized, because Illinois doesn’t recognize in-state Domestic Partnerships or common law marriage. Article 3: Guardianship. Love = if you’re 14 years old (why are you reading this?), your parent or parents have named at least 2 other individuals to take care of you, just in case… Article 4: Debts, Taxes, Expenses. Love = The estate has sufficient funds to cover memorial services, credit card debt, taxes, and any other bona fide expenses that belonged to the dearly departed and not you. Article 5: Personal Property. Love = you get the Beatles White album, first edition. Article 6: Residuary Estate. Love = you get a whole lot more than the Beatles White album, first edition. Article 7: Personal Representative. Love = your name isn’t listed, so all you have to do is accept the Beatles White album, first edition and any other bequests; and you don’t have to worry about a greedy beneficiary trying to sue you for breach of fiduciary duty, such as not handing over the Beatles White album, first edition. Article 8: Disaster Awaits. Love = hoping this article isn’t triggered.
Popping the Question, Prenupts, and Powers of Attorney
Valentine’s Day is quickly approaching and thousands of individuals will be “popping the question” and getting the question popped at them. This is, at least what jewelers around the country have been spending all those advertising dollars on. It’s also what those individuals wanting to be “popped,” so to speak, are also hoping for, and my hopes are with you. In celebration of that bended knee, larger than life smile, and mother’s joyous tears, I offer a few points to ponder after the popping and before the party planning. The points are sobering but will help to provide years of “bubble and squeaky” happiness long after you’ve settled in with each other. If you’re not cohabiting, have “the money talk.” If you are living together and haven’t had the money talk, tsk..tsk… If you are cohabiting and have had it, good for you! and have the money talk again. If there is a large disparity of income or both of you are very affluent, consider a prenuptial agreement. It is commonplace in such scenarios so no one should feel offended if it is mentioned or requested. The basic rule is that both parties should retain their own attorneys to draft and review the document, which should be signed before the formal engagement celebration, if there is one. If you’re cohabiting obtain life insurance and powers of attorney. If you’re not living together but engaged, obtain these items before going on the honeymoon. If you’re on relatively equal financial footing economically and the families are smiling, when you return from the honeymoon, add a will to your estate plan. If even one close family member is frowning, turn that frown upside down by promising to leave him or her something in your will and then add an in terrorem clause. Better yet, have a trust prepared with a pour-over will attached and leave him or her whatever you like with or without the in terrorem clause. Love means planning a relationship founded on pragmatic principles as well as butterflies in the tummy.
4 Estate Planning Facts Everyone Should Know
1. You have an estate and a plan even if you’ve not done anything. The answer to how this is possible is found in the definition of “estate” and the law – at least for the state of Illinois. Your estate is everything you own – tangible and intangible. It includes retirement benefits, debts owed to you, your bicycle, your bodily tissues and organs, whatever may be in your bank accounts, and whatever remains of your coming paycheck after obligations are paid. Probate assets of those who die without a plan or a will in Illinois will be distributed according to the laws of intestacy per the Illinois Probate Act of 1975 as amended. Accordingly, debts, your bike, your bank accounts, and your paycheck will go to who the laws of intestacy and the court decides. So, regardless of what you possess and your actions, you have an estate plan. 2. Your estate plan, even the one you don\’t know about, is in effect during your lifetime. Documents you sign at medical and dental treatment facilities before being treated, and even some sporting events, typically involve you implicitly designating your “next of kin” to act on your behalf if you became incapacitated. Sometimes, this isn’t who you think it is. Since you’re going to sign these forms anyway, wouldn’t you rather make an actual decision before the dental cleaning? 3. Family and friends fight over stuff and the fight can become war. Love is love until death and then it becomes war. Folks will fight about could be grandma’s old cookie jar, gold coins, or memorial arrangements. Nevertheless, once a battle ensues, the only real winners are the litigators; they get most of the cookies. Considerations for this fact include: apathy for one\’s family; family harmony; good karma; and increasing the wealth of trial attorneys.* 4. The most important decision you can make in estate planning is not what to give away or who to give it to, but who will manage it or give it away for you. Even if you don’t interact with a certain individual regularly, they protect the cookie jar. These individuals, called “fiduciaries,” include personal bankers, financial planners and advisors, accountants, lawyers, trustees, agents under powers of attorney, guardians, and executors or personal representatives. A large part of guardianship and estate litigation involves the “breach of fiduciary duty,” where the fiduciary has dipped his or her hand into the cookie jar. Sometimes the fiduciary is a family member; sometimes a long-time, trusted friend and advisor; and sometimes not such a long-time friend but is still trusted. Thus, even if you’re not at the point of naming an executor, perhaps you should carefully consider who is going to step into your shoes and manage your finances if you become seriously ill or just go for an annual check-up; then designate someone…in writing. A thoughtful and appropriate designee may prevent abuse, breach, litigation, and possibly war. * Some of my dearest friends are trial attorneys.
The 5-Letter Word\’s Evil Twin
I often comment fervently about trusts, as any good estate planning attorney would, that is, talk a lot…about trusts. So, yes, if someone asks me how best to plan for their family and I learn that they have more than $100,000 in assets or that they’ve got other family members with bones to pick, I spell out the word T-R-U-S-T in as many ways as possible. “However folk,” in the words within a great Sinatra monologue, a trust just ain’t the answer to all of life’s woes. A few “folk” can tell you why: Tammy Lewis is being sued for $50,000. She owns a piece of property with her sister. The property value is $100,000. A revocable living trust came to Tammy’s mind when she found out about the judgment. And the thought should have made like the rabbit in the black hat and disappeared. Whether the property is held in joint tenancy or tenancy in common, Tammy’s interest in the property is attachable by a creditor. If held in a revocable living trust, the trust assets are still considered owned by the grantor (which could be Tammy), so there is no creditor or judgment protection for Tammy. Sean Davidson and his wife were happily married for 15 years. His wife worked for 9 years and then took time off to give birth, nourish and nurture the kids, volunteer with the PTA, and so forth. Initially, she worked a little from home but not much, ultimately deciding that being a full-time wife and mother at least until the youngest was in first grade was important. However, when Ms. Davidson worked, she and Sean contributed equal amounts financially to buy and help pay the mortgage on the $600,000 family residence. Now, Sean wants a divorce. He contacted an attorney to place the house held in joint tenancy with the soon to be former Ms. Davidson in a trust for Sean and Sean alone. The flow of this particular scenario would work something like this: House + Sean Davidson Revocable Living Trust + Divorce = Wife Awarded 50% of Marital Property (incl. part of the house) = Invalid Trust = Sean Sues Lawyer = Lawyer Pays and Is Possibly Disciplined Of course, other avenues exist to address some of these issues but the main point is if you owe a debt, you can’t hide from it with a trust. It’s called F-R-A-U-D. The names of individuals found within this blog are purely fictional, unless otherwise expressly stated.