5 Years and 5+ Lessons!
It\’s true; \”time flies when you\’re having fun!\” So The Law Offices of Max Elliott is looking forward to 5 more years of \”fun\” or, more precisely, taking great satisfaction from servicing our clients as diligently as possible, protecting them, their interests, and future generations. To prepare this \”Anniversary\” piece, I reviewed our inaugural article to determine if 5 years\’ experience would cause me to change any of the positions I held at the beginning of this sojourn. One: A young married couple with a home, moderate income, and no dependents AND no wonky family dynamics could likely have a will prepared online. However, I would still recommend that an experienced attorney in their jurisdiction review it. With that exception – and the fact that I need a new photo, I agree with me on everything else. Okay, now what? What are additional takeaways from 5 years as an attorney providing wills, trusts, advanced directives, guardianship assistance, adoptions, negotiations between beneficiaries and fiduciaries, winding up estates, and wealth preservation guidance? Families need to talk more and talk sooner, reaching across the generations to gather history, empathy, and love. Today\’s world is too unpredictable and many of the squabbles are based on a lack of understanding because we haven\’t taken the time to actively listen to our loved ones. AND tolerance goes a long way. Most lawyers need to listen way more, talk way less, and be willing to educate and collaborate with our clients. Just because we\’re in the 21st century doesn\’t mean that 20th century values involving civility, integrity, and reasonableness should be not applicable in all of our professional relationships. Technology cannot send you a referral and cannot sooth the emotions of a disillusioned client. If I cannot bring my integrity into your sandbox, I can be happy playing in another sandbox, regardless of the plastic toys offered. Life is precious. Breathe, laugh, and yes, smell some flowers. The Plus: It is awesome being in on amazing, wonderful, legal change. When our office launched during Pride month in 2011, we were in the battle for marriage equality and 5 years later – it is the law of the land! \”NO MO DOMA!\” is a reality and, while the fight for rights in the LGBTQ community along other very important lines still goes on, the LGBTQ community and its allies, such as our firm, can rest a tad easier now on the marriage equality front. What an awesome 5th Anniversary Gift – Happy Pride Month! I don\’t want to name names but let it be sufficient to say that our firm has had amazing supporters from all walks of life during these last few years. It is our hope that we continue to learn and grow and provide the services that make our supporters proud and clients happy. Thank you all and here\’s to the next 5!
A Letter and Recipe for Your Family\’s Long-Term Health
Dear Family, Friends, and Folks Like Me, Last weekend I was able to release my culinary skills on a lovely group of friends and it was so delightful, I thought I\’d write a letter capturing that theme. So, I’m writing to ask that you join me in promising not to take the path of so many of our elders in creating a disastrous family meal and that you follow a healthier recipe. A friend recently heard the term, “Sandwich Generation,” for the first time. He asked me if it was because our peers grew up with Wonder Bread. Smiling, I responded, “Not quite.” I explained that the term is not because of what we ate as kids but because of what many of us are experiencing as adults. If we step back and look at the generations of family to whom we are connected, most of us will have children, whether our own or nieces, nephews, or cousins, on one side and our parents or grandparents, and sometimes both on the other side. Accordingly, we will have loved ones looking to us for care and assistance from both sides. Considering “sandwiches,” if our loved ones are the bread, then what are we? Yes. We are the stuff in the middle – peanut butter and jelly, roast beef, turkey – and because some of our elders didn’t understand or didn’t receive lessons on how to prepare a healthy, life-sustaining, family meal, many of us are starting to feel more like seamy meat-by-product instead of the tasty Portobello mushroom. So, Dear Family, Friends, and Folks Like Me, take a couple of seconds to jot down this recipe for a healthy family meal: Ingredients 1 lb of good health insurance, which may include long-term care insurance because, despite our denial, we will get old and most of us will live longer than anticipated 2 tbsps of life insurance: one for income replacement and the other for bills and larger items that must be or should be paid, such as mortgages and college educations 2-4 gallons of consistent retirement savings – about 1 cup per year 2 tbsps of powers of attorney: one for financial issues and one for healthcare issues; and 1 Will: so you can decide on who gets what and not the courts. Preparation Combine all of the above with 3-4 trusted and honorable fiduciaries, covered by a trust if you own a home, and stir occasionally with a very good financial planner and CPA. Cooking Time Then let sit for about a year, or taking it out more frequently to revisit growing family needs basis. Let’s make a conscious promise that instead of making our children feel like overdone and gamy sandwich meat, we show them that they are part of a healthy, hearty stew from which everyone can benefit and be satisfied in the long run. A votre sante! Max
3 Lessons about Grapes and Taxes
As Baby Boomers start retiring, thoughts of mortality and legacy planning begin to dance in their heads. While most boomers don’t have taxable estates…for now…the future is still a question mark for many. While enjoying retirement – golf course, cruises, mountain climbing, museum walks, wine tasting, and theatre galas – plans should be made for a time when the retirement funds must be transferred to someone else. It is critical to know how to transfer retirement proceeds properly so the distributions won\’t be literally and figuratively taxing: Claire and Cliff are in their mid 60’s. They’ve a modest estate – home valued at about $250K with most of its equity remaining, life insurance, and retirement benefits at about $2 million. Half of the retirement proceeds is in a 401(k), 25% is in an IRA, and 25% is in an annuity. They also have 2 kids: Lenny and Lisa. Lisa’s a starving artist, who is barely in the 15% tax bracket but who also has a vivacious and smart teenager. Lenny is 10 years older than Lisa and a savvy professional about to move into the highest tax bracket and has no intention of marrying or ever having children. Claire and Cliff want to distribute their estate to Lisa and Lenny equally and have been told to give the retirement proceeds to Lenny and Lisa outright. Before doing that, however, I would ask them to consider the following in a simultaneous death situation, where Claire and Cliff went down with the Titanic III: An outright gift from a 401(k) or a traditional IRA will be taxed and if the beneficiary is over 59 ½, the 10% penalty may also apply. For Lenny, who’s Mr. Money Bags, that doesn’t present too much of a problem, though no one wants to pay taxes. For Lisa, that would be a boon indeed. But an outright distribution to Lisa would yield less than what she would receive were the proceeds titled to a trust because of income tax consequences. Pick the fruit too young and the wine will be bitter; too old and you may taste too much oak. Claire and Cliff could have the proceeds placed in a trust for Lenny and Lisa. Here, part of Lisa’s benefit would be driven by Lenny’s life expectancy because he is the oldest, which would provide her with fewer years of income. Additionally, Lenny and Lisa must be sure to withdraw at least as much as the minimum required distribution annually or face a hefty penalty. Different varietals require different soils. In a qualified (retirement) annuity, the entire amount of the contract must be withdrawn over the 5-year period following Claire and Cliff’s death. Again, okay for Lenny, but not so okay for Lisa. Tax consequences also apply to this issue. Cabernets are as good as zinfandels; it\’s the consumer\’s tolerance that is key. Just like no 2 families are alike, no 2 children are alike. So make sure that your children know how to make decisions about the different types of distributions they can choose, after you enjoy your fruits. That way, the remaining fruit will, in fact, go to your children and not the community jelly jar.
The Money Talk – to Prevent Relationship Cardiac Arrest
April is National Financial Literacy Month and, thus, this week\’s column discusses something that needs to happen between committed couples before the number crunching begins: “The Money Talk.” Ideally, this talk should occur before you consider cohabiting, marriage, entering into a Civil Union, or having children. Why? Because money is one of the leading causes of relationship stress and is the bane of most family feuds in estate planning. So, if you and your honey can get this straight before you tie the knot or start playing with grandkids, then your relationship monitor will probably hum right along, at least with respect to finances. Ergo, make a “date,” collect your documents – which are alluded to below – and after a good meal and a nice walk, have a seat and start talking. The following issues and questions provide a good start: Credit score. Here’s what the agencies have to report. OK, so I’ve had a few bumps in the road. What’s your score? Net worth. This is what I earn; this is what I’ve saved; this is what I owe. What’s your net worth? Financial planning. These are my current financial obligations. What are yours? Family obligations. Once a month, quarter, or year, I give Aunt Sue a couple of hundred dollars to help her out. Do you assist any family members financially? Charitable giving and gifting in general. Annually, I give approximately $______ to these charities? What about you? For holiday and birthday gifts, I generally spend $______. What about you? But you don’t have to tell me how much you spend on me. Baby Planning. Build. Feed. Clothe. Shelter. Educate: $200,000 for 4-year college tuition is the current projection for the year 2030. \’Nuf said. Retirement planning. Presuming you’ve met with a financial advisor: This is what I’d like my retirement to look like and so this is what I’d like to have saved for retirement in 5 years, 10 years, 15… What do you want your retirement to look like and what are your plans? Of course, this is just a suggested list that should be toggled so it’s not always starting with you and could actually start off with something akin to, “I’ve been thinking about going on vacation, but I also am thinking about retiring or starting my own business…” How start The Money Talk is important because admitting one\’s financial boo-boos or bankruptcies is difficult; sometimes admitting that one is a trust fund baby who can probably feed the world three times over, build an international space station that would house China\’s population, and that you have more cars than GM built last year can also be scary. But what is most important is that you start. I know a couple who had it before marrying and still has it at least quarterly…
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
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
Lottery Lessons for Murderers
Recently, an Illinois man won a million dollars playing the Illinois Lottery. In an unfortunate turn of events, shortly after taking his smiling photo op with check in hand and stating his intentions, he died. Initially, it was thought he died of bad eating habits leading to clogged arteries and a bad heart. However, something seemed a little fishy, so the authorities were called in to request an autopsy and investigate. Ya think? One need not be a lawyer to know who was first on the list of suspects: immediate family. Not only is this is going to make an interesting whodunit but it also gave yours truly the answer to “what to write about this week?” Answer: Crime doesn’t pay even if the “payor” died without a will. Let\’s look at an example: Jennifer inherits $1 million from her father and announces to family that she is going to place the money in trust for her children. Her only living relatives are her spouse, Jeremy, and their 2 sons, Bill and Ted. Jennifer then drowns while swimming but before establishing the trust and she didn’t have a will. Later, authorities arrest a close family member and charge that person with murder. It seems that the family member didn’t agree with Jennifer’s plans. So what will happen to the cool million? It depends. Usually, in Illinois, if a spouse with a child or dependent dies intestate (with no will or trust in place), then the surviving spouse and the child will share equally in the decedent’s estate…unless one of the heirs caused the decedent’s death. If the heir intentionally and unjustifiably caused the decedent’s death, then he or she will not “receive any property, benefit, or other interest by reason of the death.” Illinois Probate Act of 1975, 755 ILCS 5/2-6. Instead the benefit will go to the heir next in line. Also, the form of that benefit or interest is irrelevant; it could be retirement proceeds, which are nontestamentary. Furthermore, the denial of the inheritance need not be made in criminal court but can be made by any competent jurisdiction. However, a few hurdles still exist: The criminal proceeding must end with a final judgment of guilty … unless the criminal trial doesn’t occur for more than a year after the death. The 401(k) administrator, for example, could have released the funds to the murdering heir without knowing the heir was the one who really retired the retiree. Accordingly, the plan administrator won’t be held liable. Still, the court would likely make the defendant give the money to the heir next in line … unless, of course, the murder is a successful fugitive and not a defendant. So what would be the results for our example: If Jeremy murdered Jennifer, then the money would go to Bill and Ted as intended. If Bill was the murderer, then the money would go to Jeremy and Ted to share equally. If Bill and Ted were co-conspirators, then Jeremy gets it all. If Jeremy, Bill and Ted were co-conspirators, that would be a little odd given that Bill and Ted were going to get it all, but hey… In that case, if there were no heirs, then Illinois won the Lottery. Lesson: If you win the lottery and you have to take a photo and someone asks about your plans, tell them to contact your attorney.
3-Cubed Lessons for Families & Lawyers who Serve Them
As the year draws to a close, reflection is a natural activity. So, below are reflections about relationships that are key to “family work,” whether you’re working on yours or working for someone else’s. Reconnecting. Most of us have various “families,” including the one into which we were borne. High school or college classmates who take the journey with us from late childhood into early adulthood is one example. Coworkers who eventually become close friends is another. Neighbors who share the block on which we raise our children and wave to the mail carrier is yet another. Therefore, staying connected or reconnecting with our several families provides us with multiple layers of protection, comfort, and enjoyment. Relationships – good and bad – take time. Even in a most loving family, a newborn crying, pooping, and sleeping takes adjusting to. We all have unique cycles that require a little getting used to. The question is, however, how soon can we identify relationships that aren’t beneficial so that the extraction is less difficult. Logically, identifying this point sooner rather than later is key or else we may end up paying attorneys a great deal of money to unravel a ball of thorns that could have been prevented. Women matter. We work just as hard as men, if not harder. But we’re paid less and that monetary standard reflects our diminished value in the eyes of our employers. That diminished value is based on the fact that we bring and nurture life – eventually more employees – and must take time off to do so. Continual and de facto ignoring women\’s value will cost employers, advisors, and society dearly. So it behooves all of us to recognize the true worth of our mothers, daughters, wives, partners, and sisters. Team estrogen is moving forward, making powerful decisions about family, community, and nation. Forced networking sucks. Understanding someone’s value system, work ethics, and motivation takes more than the 30-minute coffee klatch. I value my friends, family members, and colleagues so I don’t want to waste their time and the time of others with referrals who are a bad fit. Consequently, even if you’re just a referral source, that doesn’t change the fact that the first rule of networking is grounded in Lesson #2. Generations are unique. Matriarchs, patriarchs, other leaders, and managers should recognize that each generation has its own set of rules. Passing on the family fortune with a heavily detailed blueprint created by Great-Grandfather Algernone will probably not bode well for the fortune or the family. Algernone\’s framework may work with regular retrofitting, but the details must be fleshed out using the world as it exists in the eyes of the current generation and possibly next generation. If not, just leave the family fortune to the family pooch. Reach back. At the first glimpse of success, take the hand of a junior and bring him or her along. Make the time and take the time. Even if you didn’t see it; somebody had a hand in making your bootstraps. Thank you. Sincerely articulated, that 2-word sentence carries more gravitas than Olympic weight-lifters. Causes are everywhere – for a reason. Millions need food, shelter, clothing, books, medicine, water, and peace. Causes are everywhere – for a reason. Marriage doesn’t make the family, authentic relationships do. “She has hers; I have mine; what we build during our relationship will be ours.” This is a favorite mantra among divorce attorneys and it wreaks havoc for estate planners later when intent changes but the walls were never torn down. We must be mindful that where there are people and relationships there is overlap and trying to build one wall may undermine what could have been a solid and lasting foundation.
Be Sure to Consider the Coin\’s Third Side
I wrote this piece before “the election” after reading an article on the “what if” of an election tie. Each party’s camp, of course, believed their candidate was going to win with a considerable margin. Yet, each party’s camp also had a team of lawyers already prepared for the “what if” of a tie. The article reminded me of a lesson I learned long ago from a very wise woman. And that lesson is that every coin has 3 sides, not 2 but 3. Moreover, irrespective of how unlikely it may be that the coin will land on its third side, that likelihood should never be ignored. The lesson of the third side is one I share with not just clients but everyone I can. However, let’s talk about estate planning for a minute. Of course, there’s no “what if” about death; we’re all going to die one day whether we want to or not, but estate planning is about much more than death. Consider the phrase, “estate planning”: Legally speaking your “estate” is everything you own. “Planning” is self-explanatory. So, estate planning is about planning for what you own. If you have loved ones, this plan naturally includes determining how those assets will be distributed to your loved ones during your lifetime and upon your death. The lesson of the third side is also about the “what ifs” of estate planning: Today, you’re a young couple with an infant and nothing but life insurance and what if…you win the lottery? Your parents left you with a substantial inheritance, which could have adverse tax implications for you, what if…there was a way you could roll it over? Your health is fine, your kids are adults and financially stable, your estate is sufficient to see you through retirement and what if…you don\’t own a home? You want to start taking a lot more time away from your small business, which you’ve successfully established and maintained over the last 15 years, what if…you\’ve been the sole proprietor all those years? This year, you’re taking advantage of the homestead exemption for your residence but you’re approaching retirement , want to give the house to your children, what if…you still need a place to stay? Like millions of others, you’re now behind retirement planning because Enron, the subprime mortgage, and the boyz on Wall Street took a chunk out of your 401(k), and what if…your partner becomes seriously ill? Today the federal estate tax exemption is $5.12 million; if Congress does nothing by December 31, 2012, what if …on November 30, you had sold your business for $8 million? Gran always said the third side is the least best or worst expected outcome. Consider the coin’s third side as you plan and you’ve planned just about as well as you can.
5 Smallbiz Takeaways from Torrents and Blizzards
In the wake of Superstorm Sandy was nearly unfathomable destruction of lives and businesses. However, the American spirit is resilient and, together, we\’re recovering. It is simply taking time. During disasters of that magnitude, we often chide ourselves for not being prepared or as prepared as we could have been because much more needs to be done long before the insurance check arrives. As an attorney and smallbiz owner who assists clients with preparing legacies and for potentially unpleasant events, the need to prepare for disasters isn’t lost on me. Smallbiz owners and their families who depend on the businesses\’ earnings are particularly vulnerable, so it\’s critical that we have a continuity plan for emergencies. Like the preparations outlined in a business plan that consider key operations and resources, so should your continuity plan. Below, are a few questions smalbiz owners should consider when devising a disaster recovery plan. Caveat: This list is by no means exhaustive, comprehensive, or tailored to any particular business. It just serves to help us prepare for the next storm. What would an all out disaster look like for your business? Consider the elements – wind, fire, earth, water – and how extreme amounts of any would impact your business operations, e.g., causing network outages, inventory destruction, and so forth. What are the procedures that would put your business back on track and, specifically, who will be responsible for what and when and how will they perform the necessary tasks?a. Who will lead the team or how will tasks be divided?b. Who will contact clients and vendors, and how? What if cell towers are down?c. Is the disaster just affecting your business or is it also affecting clients?d. What if the disaster occurs “after hours”?e. How will you assess the overall impact to your go forward? Which business resources or operations are likely to suffer more, e.g., are you a restaurant owner with no electricity but with a refrigerator and a freezer full of food? Are your clients local but your employees commute from long distances? Where are your critical client or customer files stored? What if you can’t access the building or your company’s network? Where exactly is your \”cloud?\” Can you temporarily relocate your business, where and do you have sufficient resources to do that? Indeed, this is a “short list” to help small business owners think about a particularly unpleasant topic. Yet, we smallbiz owners know that asking the important “what ifs?” often saves a bundle down the line, despite the torrential downpours, tumult in the streets, blazes, or blizzards. The Law Offices of Max Elliott continues extending its thoughts and prayers to families and businesses who experience disaster as winds of change forever sweep our world.