Unless you’ve created an estate plan that works to keep your family out of court, when you die (or become incapacitated) many of your assets must go through probate before those assets can be distributed to your heirs. Like most court proceedings, probate can be time-consuming, costly, and open to the public, and because of this, avoiding probate—and keeping your family out of court—is often a central goal of estate planning. 

To spare your loved one’s the time, cost, and stress inherent to probate, last week in part one of this series, we explained how the probate process works and what it would entail for your loved ones. Here in part two, we’ll discuss the major drawbacks of probate for your family, and outline the different ways you can help them avoid probate with wise planning.

What’s At Stake For Your Family
Probate court proceedings can take months, and sometimes even years, to complete. In the immediate aftermath of your death, that’s the last thing you likely want your loved ones to have to endure. And the cost of their time and emotional strain are just the start of the potentially devastating consequences your family could face if you don’t plan ahead.

Without easy and immediate access to your assets, your family could face serious financial hardship at a time when they need the most support. Not only that, but to help them navigate the legal proceedings, your loved ones will almost certainly need to hire a lawyer, which can result in hefty attorney’s fees and the real risk of them hiring a lawyer who is uncommunicative, which only creates more stress for them. All of that is on top of the court costs, executor’s compensation, and all of the various other administrative expenses related to probate. By the time all of those costs have been paid, your estate could be totally wiped out, or at the very least, seriously depleted. 

Another drawback of probate is the fact that it’s a public process. Whether you have a will or not, all of the proceedings that take place during probate become part of the public record. This means that anyone who’s interested can learn about the contents of your estate, who your beneficiaries are, and what they will inherit, which can set them up as potential targets for scammers and frauds.

Probate also has the potential to create conflict among your loved ones. This is particularly true if you have disinherited someone or plan to leave significantly more money to one relative than the others, in which case, a family member may contest your will. And even if those contests don’t succeed, such court fights will only increase the time, expense, and strife your family has to endure. 

How To Avoid Probate

Before we discuss the more advanced ways you can use estate planning to allow your loved ones to avoid probate, it’s important to point out that not all of your assets will have to go through the probate process—and that’s true even if you don’t have any estate plan at all.

Assets That Do Not Require Probate: Certain assets, such as those with beneficiary designations like 401(k)s, IRAs, and the proceeds from life insurance policies, will pass directly to the individuals or organizations you designated as your beneficiary, without the need for any additional planning. 

The following are some of the most common assets that use beneficiary designations and therefore, bypass probate:

• Retirement accounts, IRAs, 401(k)s, and pensions
• Life insurance or annuity proceeds
• Payable-on-death (POD) bank accounts
• Transfer-on-death (TOD) property, such as bonds, stocks, vehicles, and real estate

Outside of assets with beneficiary designations, other assets that do not go through probate include assets with a right of survivorship, such as property held in joint tenancy, tenancy by the entirety, and community property with the right of survivorship. These assets automatically pass to the surviving co-owner(s) when you die, without the need for probate. 

However, it’s critical to note here that if you name your “estate” as the beneficiary of any of these assets, those assets will go through probate before being distributed. The same goes if you overlook a beneficiary designation, or if you die at the same time as a joint property owner—each of those assets will also go through probate, even though they have beneficiary designations.

In addition, we generally recommend that you do not rely on beneficiary designations to handle the distribution of your assets. These designations give you little to no control over how your assets are distributed, and they can result in negative outcomes you did not intend, especially if you have a blended family with children from a prior marriage or if you have no children at all.

Although there are several different types of assets that automatically bypass probate, the majority of your assets will require slightly more advanced levels of planning to ensure your loved ones can immediately access them, without the need for any court proceedings in the event something happens to you. The primary estate planning tool for this purpose are trusts.

Avoiding Probate With A Revocable Living Trust
Trusts are a popular estate planning tool for avoiding probate. Although there are a variety of different types of trust, the most commonly used trust for probate avoidance is a revocable living trust, also called a “living trust.”

A trust is basically a legal agreement between the “grantor” (the person who puts assets into the trust) and the “trustee” (the person who agrees to manage those assets) to hold title to assets for the benefit of the “beneficiary.” With a revocable living trust, this agreement is typically made between you as the grantor and you as the trustee for the benefit of you as the beneficiary. You act as your own trustee during your lifetime, and then you name someone as a “successor trustee” to take over management of the trust when you die or in the event of your incapacity.

It might seem odd to make an agreement with yourself to hold title to assets for yourself in order to benefit yourself. Yet by doing so, you remove those assets from the court’s jurisdiction in the event of your incapacity or when you die. Instead, those assets transfer to your successor trustee, without any court intervention required.

At that point, your successor trustee is responsible for managing the trust assets and eventually distributing them to your beneficiaries, according to the terms you spell out in the trust agreement. This is how a trust avoids probate, saving your family significant time, money, and headache.

The Key Benefits Of A Living Trust

Unlike a will, if your trust is properly set up and maintained, your loved ones won’t have to go to court to inherit your assets. Instead, your successor trustee can immediately transfer the assets held by the trust to your loved ones upon your death or in the event of your incapacity. And since you can include specific instructions in a trust’s terms for how and when the assets held by the trust are distributed to a beneficiary, a trust can offer greater control over how your assets are distributed compared to a will. 

For example, you could stipulate that the assets can only be distributed upon certain life events, such as the completion of college or marriage, or when the beneficiary reaches a certain age. In this way, you can help prevent your beneficiaries from blowing through their inheritance and offer incentives for them to demonstrate responsible behavior. And as long as the assets are held in trust, they’re protected from the beneficiaries’ creditors, lawsuits, and divorce—which is something else wills don’t provide. 

Finally, trusts remain private and are not part of the public record. So, with a properly funded trust, the entire process of transferring ownership of your assets can happen in the privacy of us, your Personal Family Lawyer®’s office, not a courtroom, and on your family’s time.

Transferring Assets Into A Living Trust

For a trust to function properly, it’s not enough to simply list the assets you want the trust to cover. When you create your trust, you must also transfer the legal title of any assets you want to be held by the trust from your name into the name of the trust. Retitling assets in this way is known as “funding” a trust.

Funding your trust properly is extremely important, because if any assets are not properly funded to the trust, the trust won’t work, and your family will have to go to court in order to take ownership of that property, even if you have a trust. In light of this, it’s critical to work with us, your Personal Family Lawyer® to ensure your trust works as intended.

While many lawyers will create a trust for you, few will ensure your assets are properly inventoried and funded into your trust, and then ensure the inventory of your assets is kept up-to-date as your life and assets change over time. As your Personal Family Lawyer®, we will not only make sure all of your assets are properly titled when you initially create your trust, but we will also ensure that any new assets you acquire over the course of your life are inventoried and properly funded to your trust. This will keep your assets from being lost, as well as prevent your family from being inadvertently forced into court because your plan was never fully completed. 

Living Trusts, Taxes, Creditors, & Lawsuits

When you create a revocable living trust, you are free to change the trust’s terms or even completely terminate the trust at any point during your lifetime. Because you retain control over the assets held by a living trust during your lifetime, those assets are still considered part of your estate for estate tax purposes. Similarly, assets held in a living trust are not protected from your creditors or lawsuits during your lifetime. This is an important and often misunderstood point.

Again, a revocable living trust does not protect your assets from creditors or lawsuits, and it has no impact on your income taxes. However, as mentioned earlier, as long as the assets are held by a living trust or a Lifetime Asset Protection Trust, those assets can be protected from your beneficiaries’ creditors, lawsuits, and even divorce settlements. Be sure to ask us about the different trust-based estate planning options we offer to find one that’s best suited for your particular situation.

The primary benefit of a living trust is to pass your assets to your loved ones without any need for court or government intervention, and to ensure your assets pass in the way you want to the people you want.

Life & Legacy Planning: Do Right By Those You Love Most
Although a living trust can be an ideal way to pass your wealth and assets to your loved ones, each family’s circumstances are different. This is why us, your local Personal Family Lawyer® will not create any documents until we know what you actually need and what will be the most affordable solution for you and your family—both now and in the future—based on your family dynamics, assets, and desires.

The best way for you to determine which estate planning strategies are best suited for your situation is to meet with us, your local Personal Family Lawyer® for a Family Wealth Planning Session, which is the first step in our Life & Legacy Planning Process. During this process, we’ll take you through an analysis of your assets, what’s most important to you, and what will happen to your loved ones when you die or if you become incapacitated.

Sitting down with us will empower you to feel 100% confident that you have the right combination of estate planning solutions to fit with your unique asset profile, family dynamics, and budget. As your Personal Family Lawyer® firm, we see estate planning as far more than simply planning for your death and passing on your “estate” and assets to your loved ones—it’s about planning for a life you love and a legacy worth leaving by the choices you make today—and this is why we call our services Life & Legacy Planning. Contact us today to get started.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for our team to call you at a time you choose.

Although cash is the lifeblood that sustains every business, far too many business owners fail to properly manage their cash flow. And this is despite the fact that statistics consistently show that running out of money is one of the main reasons new businesses go under.

Trying to run a business without carefully managing your cash flow is like fighting a rising tide: Sooner or later you’re going to find yourself underwater. And even if your business generates healthy revenue, you can still experience the occasional cash crunch—which is especially true during your first few years of operation.

To avoid joining the ranks of bankrupt startups, get smart about boosting your cash flow by implementing these 5 strategies.

1. Get Professional Support

To save money, lots of new business owners try to manage their books on their own, but this is a major mistake. Managing cash flow is too time consuming, complex, and critical to your company’s survival for you to fit it in with all of your other responsibilities. In fact, the very first team member you hire should be a professional bookkeeper/financial manager.

Effective cash-flow management is the foundation upon which all of your company’s financial and tax strategies are built, and it needs to be done properly from the very beginning. With this in mind, even if you’ve yet to earn any revenue, you should consider paying for a bookkeeper out of your own pocket. 

Hiring a highly experienced bookkeeper with whom you can build a tight relationship might require an investment of time and money upfront, but the ultimate payoff in terms of your financial strategy and tax savings will more than make up for the initial effort and expense. 

If you need support in finding the right bookkeeper, work with us, your Family Business Lawyer™ for guidance. We can refer you to bookkeeping professionals in our area we trust most to ensure your company has the proper financial oversight from the start.

 2. Implement Financial Systems

Above all, effective cash-flow management requires sound systems. If your company’s financial systems and processes aren’t set up the right way from the start, even a skilled bookkeeper isn’t going to magically fix them.

As your Family Business Lawyer™, we  specialize in supporting startups to set up effective financial systems. We will help you put the proper systems in place to manage your cash flow and ensure your company has a rock-solid financial foundation that won’t suddenly collapse when the going gets rough. 

3. Closely Monitor Accounts Receivable

Many startups experience negative cash flow simply because they don’t stay on top of accounts receivable. You must ensure that your customers pay you on time and in full. Accounts receivable that go unpaid for too long are more likely to get overlooked and go uncollected.

Your bookkeeper should keep track of all accounts receivable and include them in the monthly financial reports that he or she submits to you. Having these details included in your reports will not only keep you apprised of your company’s financial health, but it can also allow us to better assist you if and when you ever need support with collections.

4. Get Paid Upfront

One easy way to boost your cash flow and eliminate headaches associated with accounts receivable is to have your customers pay their bills upfront whenever possible. This is especially true if you have clients who are consistently late with payment.

If full payment upfront isn’t feasible, even requiring partial payment as a deposit will improve cash flow. To encourage quick payment, consider offering discounts for upfront or early payment. At the same time, have a firm policy in place that penalizes late payments, and make sure your sale agreements clearly spell this policy out—and you consistently enforce it with all late paying clients.

5. Maintain A Cash Reserve

Just about every startup experiences revenue shortfalls. And your company’s survival will likely depend on how you handle these lean times. To shield your company from the inevitable slow periods and unforeseen emergencies, try to maintain a cash reserve—even if it’s just access to a line of credit.

Having a reserve to fall back on will not only protect your company’s financial health, it can also save you from the stress and desperation that comes from unexpectedly running out of money. Nothing will kill your team’s morale—and your company’s growth—more than finding yourself unable to cover payroll.

Keep The Cash Flowing
All the vision and passion in the world won’t keep your startup afloat if you fail to properly manage your cash flow. That said, you don’t have to be a financial genius to keep your revenue flowing freely—you just need the proper systems and support. As your Family Business Lawyer, we can support you with both. 

We will assess your current financial systems and advise you about additional ways you can shore up any weak spots in your company’s foundation. Getting a handle on your cash flow will prevent your startup from running out of money, and it will also free up your time and energy to focus on the big-picture responsibilities needed to ensure your business not only survives, but truly thrives. Contact us today to get started.

This article is a service of Liz Smith, Family Business Lawyer™. 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 your appointment at 907-312-5436, or find a time for us to call you. 

Unless you’ve created a proper estate plan, when you die many of your assets must first pass through the court process known as probate before those assets can be distributed to your heirs. Like most court proceedings, probate can be time-consuming, costly, and open to the public, and because of this, avoiding probate—and keeping your family out of court—is a central goal of most estate plans. 

During probate, the court supervises a number of different legal actions, all of which are aimed at finalizing your affairs and settling your estate. Although we’ll discuss them more in-depth below, probate typically consists of the following processes:

• Determining the validity of your will (if you have one).
• Appointing an executor or administrator to manage the probate process and settle your estate.
• Locating and valuing all of your assets.
• Notifying & paying your creditors.
• Filing & paying your taxes.
• Distributing your assets to the appropriate beneficiaries.

In most cases, going through all of these steps is a real pain for the people you love. It’s expensive, can take a long time, and be highly inconvenient, and sometimes, even downright messy.

By implementing the right estate planning strategies, however, you can help your loved ones avoid probate all together—or at least make the process extremely simple for them. To spare your family from the time, cost, and stress inherent to probate, here in this two-part series, we’ll first explain how the probate process works and what it would entail for your loved ones, and then we’ll outline the different ways you can avoid probate with wise planning.

When Probate Is Required

As mentioned previously, if you fail to put in place a proper estate plan, your assets must go through probate before they can be distributed to your heirs. In general, this includes those individuals who have no estate plan at all, those whose estate plan consists of a will alone, and those who have a will that’s deemed invalid by the court. 

It’s important to point out that even if you have a will in place, your loved ones will still be required to go through probate upon your death. Therefore, if you want to keep your family out of court and out of conflict when you die, you cannot rely solely on a will, and you’ll need to put in place additional estate planning vehicles, which we will cover in further detail later. 

If you die without a will, it’s known as dying intestate, and in such cases, probate is still required to pay your debts and distribute your assets. However, since you haven’t expressed how you wish your estate to be divided among your heirs, your assets will be distributed to your closest living relatives based on our state’s intestate succession laws. These laws typically give priority to spouses, children, and parents, followed by siblings and grandparents, and then more distant relatives. If no living heirs can be found, then your assets go to the state.

Some states allow estates with a relatively low value to bypass probate and use an abbreviated process to settle the estate. For example, Texas law allows estates with a total value of less than $75,000 to skip probate. In those cases, beneficiaries can claim the estate’s assets using simpler legal actions, such as by filing an affidavit or other form.

Additionally, when an individual’s debts exceed the value of their assets, or a person has no assets at all, probate is often not initiated, and the estate is settled using alternative legal processes.

How Probate Works

How probate plays out is largely determined by whether or not you had a valid will in place at the time of death. However, even in cases where no will exists, or the will is deemed invalid, the probate process is quite similar. Indeed, once the court appoints someone to oversee the probate process on your behalf, the process unfolds in a nearly identical manner, regardless if you had a will or not.

1. Authenticating The Validity Of Your Will: Following your death, your executor is responsible for filing your will and death certificate with the court, and this initiates the probate process. From there, the court must authenticate your will to ensure it was properly created and executed in accordance with state law, and this may involve a court hearing. 

Notice of the hearing must be given to all of the beneficiaries named in your will, along with all potential heirs who would stand to inherit under state law in the absence of a will. This hearing gives these individuals the opportunity to contest the validity of your will in order to prevent the document from being admitted to probate.

For example, someone might contest your will on the grounds that it was improperly executed (signed, witnessed, and/or notarized) as required by state law, or someone might claim that you were unduly influenced or coerced to change your will. If such a contest is successful, the court declares your will invalid, which effectively means the document never existed in the first place.

2. Appointing The Executor Or Administrator: If you created a will, the court must formally appoint the person you named in your will as your executor before they can legally act on your behalf. If you died without a will, the court will appoint someone—typically your closest living relative—to serve in this role, known as your personal representative or administrator.

In some cases, the court might require your executor to post a bond before they can serve. The bond functions as an insurance policy to reimburse the estate in the event the executor makes a serious error during probate that financially damages the estate.

3. Locating & Valuing Your Assets: Once probate begins, the executor must identify, locate, and take possession of all of your assets, so they can be appraised to determine the total value of your estate. This includes not only those assets listed in your will and other estate planning documents, but also those you may have not included in your estate plan. This is why keeping a regularly updated inventory of your assets is so important.

Any assets the executor is unable to locate will end up in our state’s Department of Unclaimed Property. Across the U.S., there is more than $58 billion (yes, that’s billion with a ‘b’) of assets stuck in state Departments of Unclaimed Property.  Fortunately, this is easy to prevent when you work with us. As your Personal Family Lawyer®, we will not only help you create a comprehensive asset inventory, we will make sure this inventory stays updated throughout your lifetime.

In the case of real estate, although the executor is not expected to actually move into your home or other residence, he or she is required to ensure that your mortgage, homeowners insurance, and property taxes are paid while probate is ongoing. These and all other debts can be paid from your estate. 

Once all of your assets have been located, the executor must determine their value, which is typically done using financial statements and/or appraisals. From there, the combined value of all of your assets is used to estimate the total value of your estate.

4. Notifying & Paying Your Creditors: To ensure all of your outstanding debts are paid before your assets are distributed, the executor must notify all of your creditors of your death. In most states, any unknown creditors can be notified by publishing a death notice with your local newspaper.

Creditors typically have a limited period of time—usually one year—after being notified to make claims against your estate. The executor can challenge any creditor claims he or she considers invalid, and in turn, the creditor can petition the court to rule on whether the claim must be paid.

From there, valid creditor claims are then paid. The executor will use your estate funds to pay all of your final bills, including any outstanding medical and funeral expenses.

5. Filing & Paying Your Taxes: In addition to paying all of your outstanding private debts, the executor is also responsible for filing and paying any outstanding taxes you owe to the government at the time of death. This includes personal income and capital-gains taxes, as well as state and federal estate taxes, if your estate is valuable enough to qualify. 

That said, the federal estate tax exemption is currently set at $11.7 million for individuals and $23.4 million for married couples, so most families won’t have to worry about estate taxes. And for those who do exceed that threshold, there are several strategies you can use to reduce the size of your estate to avoid these taxes.

Any taxes due are paid from estate funds. In some cases, this may require liquidating assets to raise the needed cash. As your Personal Family Lawyer®, we will not only support you during your lifetime to implement tax-saving strategies to minimize your tax bill, but we will also work with your loved ones following your death in the same capacity to ensure the wealth and legacy you’ve built provides the maximum benefit to those you leave behind.

6. Distribution Of Your Remaining Assets: Once the court confirms all of your debts and taxes have been paid—which typically requires the executor to file an accounting of all transactions he or she engaged in during the probate process—the executor can petition the court for authorization to distribute the remaining assets in your estate to the beneficiaries named in your will, or according to state intestate succession laws, if you didn’t have a will.

Once all assets have been distributed, the executor must file a petition with the court to close probate. If all creditors and taxes have been paid, your assets have been distributed, and there are no other outstanding issues to be addressed, the court will issue an order formally closing the estate and terminating the executor’s appointment.

Keep Your Family Out Of Court & Out Of Conflict

As your Personal Family Lawyer® firm, one of our primary goals when creating your estate plan is to keep your family out of court and out of conflict no matter what happens to you. Yet, as you can see, if your family has to go through probate, your estate plan falls woefully short of that goal, leaving those you love most stuck in an unnecessary, expensive, time-consuming, and public court process.

Fortunately, it’s easy for you to spare your family the burden of probate with proactive planning. Next week, we’ll look at the ways you can do just that in the second part of this series. Until then, if you haven’t put an estate plan in place or have one that would force your family to go through probate, work with us, your Personal Family Lawyer® for a Family Wealth Planning Session. 
Next week, in part two, we’ll discuss the estate planning strategies that you can use to avoid the need for your loved ones to go through probate.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for our team to call you at a time you choose.

If you’ve ever had clients who were more trouble than they were worth, you know how stressful such toxic relationships can be. Yet, it can be difficult to drop a client, especially if your business is just getting off the ground or cash is tight. That said, when dealing with certain problem clients, sometimes the best thing you can do is end the relationship.

Keep in mind, not every client is actually worth working with. In the worst cases, you’d be better off having never done business with some clients at all. With this in mind, if you’ve experienced one or more of the following issues with your clients, that’s a serious red flag that you should seriously consider letting them go.

1. Consistently Late Payments

In most instances, having a client make one or two late payments is a simple oversight, rather than a blatant attempt to avoid paying you. In such situations, a quick email or phone call should be enough to resolve the issue.

But if failing to pay on time becomes more than the occasional slip-up, you should consider ending the relationship. Just think about what would happen if you paid your team a few weeks, or months, late. They’d probably quit—and with good reason.

One way to avoid late-payment issues is to include specific terms in your sales agreements outlining your payment schedule and detailing penalties and/or other methods of recourse for delayed payments. Or you might want to require clients to pay upfront or put down a deposit before starting work. No matter what you choose, you must require ALL clients to sign a sales agreement, including specific terms for payment, before you do any work.

As your Family Business Lawyer™, we can assist you in creating solid agreements to help ensure that late payments never become anything more than a minor oversight.

2. Getting Paid Too Little

It’s absolutely crucial to get the appropriate compensation for your work. Yet far too many business owners have an unhealthy relationship with money. This can lead you to undervalue your own time, energy, and attention when it comes to making money. As a result, you may feel uncomfortable, or even guilty, for charging clients the rates you actually deserve.

Much of this “money dysmorphia” can be traced back to ingrained fears and beliefs that have negatively conditioned your views about the role that money plays in your life. If you don’t face these false beliefs, it can wreck your health, business, and relationships—and this is particularly true with your client relationships.

By appropriately valuing your work, you project confidence in both your business and yourself, which clients will respect. Not only that, but keeping even a few low-paying clients can not only impact your bottom line, it can also wreak havoc on your self-esteem. This can cause your passion to dwindle, your quality of work to suffer, and eventually manifest in professional and personal burnout.

As your Family Business Lawyer® firm, we have been specially trained to help you develop a healthy relationship with money. Using the highly successful Money Map to Freedom program, we’ll show you how you can take back your non-renewable resources of time, energy, and attention and create all the money you need to live a life of true freedom—a life in which you’ll never feel uncomfortable asking clients to pay you what you’re truly worth.  

3. Scope Creep

You’ve undoubtedly had clients who want you to go above and beyond the amount of work outlined in your agreement. At first, they might ask for small changes every now and then. But before you know it, you’re doing all kinds of extra work on every one of their projects, which is not only unfair to you, but to all of your other clients.

You should seriously reconsider your relationship with such clients—but don’t break things off right away. Clients who ask you to do extra work aren’t always bad actors. For one, if you set a precedent that you’re willing to do more work than you’re getting paid for and never say anything, what reason do they have to stop? They’re getting an incredible bargain!

Recognize your clients’ need for additional work, and ask them to pay for it. If you’ve ever done any remodeling to your house and decided to add anything on to your build, you know all about “change orders,” and if you aren’t using them yourself when scope creeps in your own business, you should start now. In the end, if you end the relationship without ever asking for more money, you could needlessly lose a loyal client, who would be more than happy to pay you whatever you request. Of course, if they’re not willing to pay for the extra work—or at least stick to what’s in the agreement—it’s time to end things.    

Establish Healthy Relationships With Your Clients

While it can be stressful to sever ties with problem clients, as with ending any dysfunctional relationship, you’ll be better off in the long run by ending things—and the sooner the better. You can always find new clients, but you can never recover the time, energy, and attention wasted by staying with a lousy client longer than you should have.

As your Family Business Lawyer™, we will support you when dealing with dysfunctional business relationships. Whether it’s creating airtight sales agreements, assisting you in overcoming your subconscious hang-ups over money, or helping convince late-paying clients to pay you what they’ve agreed upon, you can count on us to have your back. Schedule a visit with us, your local Family Business Lawyer™ today to get started.

This article is a service of Liz Smith, Family Business Lawyer™. 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 your appointment at 907-312-5436, or find a time for us to call you. 

Over just the last two years, we’ve seen historic levels of damage caused by natural disasters in the U.S. From blizzards in Texas and wildfires in California to hurricanes in Louisiana and tornados in the Midwest, few regions of the country are immune to such catastrophes. And based on the latest data from the United Nations World Meteorological Organization (WMO), things are only going to get worse.

The WMO found that climate change has helped drive a five-fold increase in the number of weather-related disasters in the last 50 years, and these calamities are getting more severe each year. As a result of climate change, weather records are being broken all the time, turning previously impossible events into deadly realities.

Despite this threat, a majority of homeowners lack the insurance coverage needed to protect their property and possessions from such calamities. Roughly 64% of homeowners don’t have enough insurance, according to a 2020 report from CoreLogic, the nation’s largest source of property and housing data. One major factor contributing to this lack of coverage is the mistaken belief that homeowners insurance offers adequate protection from natural disasters.

In truth, however, much of the damage caused by natural disasters is not covered by a standard homeowners policy. To fully protect your home and other property, you often need to purchase a separate policy or endorsement that covers specific types of natural disasters. To help you get the proper coverage, here we’ve highlighted the various types of insurance available and explained what these policies typically will—and won’t—cover.

Wildfires

Although homeowners insurance typically doesn’t pay for damage caused by natural disasters, most policies do cover fire damage, including wildfires like the recent ones that have devastated the West. Generally, the only instances of fire damage a homeowners policy won’t cover are fires caused by arson or when fire destroys a home that’s been vacant for at least 30 days when the fire occurred.

That said, not all homeowners policies are created equal, so you should review your policy to make certain that it includes enough coverage to do three things: replace your home’s structure, replace your belongings, and cover your living expenses while your home is being repaired, known as “loss-of-use” coverage. 

What’s more, in certain areas that are extremely high-risk for wildfires, it can be quite difficult to find a private company to insure your home. In such cases, you should look into state-sponsored fire insurance, such as California’s FAIR Plan.

Earthquakes

Unlike fires, earthquakes are typically not covered by homeowners policies. To protect your home against earthquakes, you will need a freestanding earthquake insurance policy. And contrary to popular belief, Californians aren’t the only ones who should have such coverage.

Most parts of the U.S. are at some risk for earthquakes. In fact, the U.S. Geological Survey found that between 1975 to 1995, earthquakes occurred in every state except Florida, Iowa, North Dakota, and Wisconsin. To gauge the risk in your region, consult with the Federal Emergency Management Agency’s (FEMA) earthquake hazard maps.

While earthquake insurance is available just about everywhere, policies in high-risk areas typically come with high deductibles, ranging from 10% to 15% of a home’s total value. Additionally, though earthquake insurance covers damage directly caused by the quake, some related damage, such as that caused by flooding, will likely not be covered. Carefully review your policy to see what’s included—and what’s not.

Floods

Though homeowners insurance generally covers flood damage caused by faulty infrastructure like leaky or broken pipes, nearly all policies exclude flood damage caused by natural events like heavy rain, overflowing rivers, and hurricanes. To protect your property and possessions from these events, you’ll need stand-alone flood insurance.

The threat from flooding is so widespread, Congress created the National Flood Insurance Program (NFIP) in 1968, which allows homeowners in flood-prone areas to purchase flood insurance backed by the federal government. In some coastal regions, especially where hurricanes are prevalent, you might even be required by law to have flood insurance for your home. To determine the risk for your property, consult FEMA’s Flood Maps.

Even if you live in a location where flood insurance isn’t required, you may want to consider buying it anyway. That’s because 90% of all natural disasters include some form of flooding, and more than 20% of flood-damage claims come from properties outside high-risk flood zones. Given how commonplace flood damage can be, you should carefully consider whether or not such coverage is warranted in your area.

Hurricanes & Tornadoes

Most homeowners policies do provide coverage for wind-related damage. However, whether or not a policy covers such claims often depends on the type of storm that caused the damage. For example, wind damage from tornadoes and even some tropical storms is typically covered, while wind damage from hurricanes generally requires a separate windstorm policy, or in some cases, a hurricane rider.

Because damage from hurricanes is often measured in the billions, windstorm policies usually have high deductibles, and they are frequently based on a percentage of your home’s value, instead of a fixed dollar amount. Some policies also come with a cap on coverage, so be sure to review exactly what type and amount of coverage your policy offers.

Of course, high winds aren’t the only threat posed by hurricanes. These tropical systems often cause severe flooding, which is typically the storm’s most damaging element. But as mentioned earlier, whether it’s caused by a hurricane or a tornado, flooding is generally not covered by homeowners insurance. For flood protection, you’ll need to purchase a separate flood insurance policy through the NFIP.

Be Ready To Go: Pack A Go-Bag

Beyond having the right insurance, if your family is forced to evacuate your home in the event of a natural disaster, you’ll need important documents and supplies on-hand to recover in the wake of the catastrophe. We recommend you take a cue from the U.S. military, which requires its members to always have a “go-bag” ready and packed with the essential items needed to survive for at least three days following a disaster or other emergency.

In addition to clothes, toiletries, medications, and food, your go-bag should include copies of your passport, birth certificate, driver’s license, state ID card, and/or other essential identification. Other documents to pack include the deed to your home if you have one on-hand, copies of your insurance policies, the original copy of your will (if your lawyer isn’t already storing it for you in a fireproof safe), vehicle titles/registration, and a recent family photo with faces clearly visible for easy identification.

While all of your estate planning documents should be included in your go-bag, having your medical power of attorney and living will readily accessible is especially critical for medical emergencies. Without these documents, doctors and other medical professionals won’t know your wishes for treatment or which of your loved ones should help them make decisions in the event of your incapacity from illness or injury, which is all the more likely during a disaster scenario.

To make everything as portable as possible, download your estate plan and other important documents to a flash drive you can carry in your go-bag, and upload additional copies to the cloud.

Finally, make sure your family knows about your go-bag and estate planning documents—as well as how to find them. Even if you have all of the necessary legal documents in place, they won’t do you any good if your loved ones don’t know about them or can’t quickly locate them during an emergency. You might even want to keep your go-bag near your home’s primary exit, so you or someone else can grab it on the way out the door.

Preserving Your Family’s Most Precious Mementos

Obviously, not all of your family’s belongings can be replaced, so you should take additional precautions to safeguard your most precious sentimental items: photo albums, home videos, old letters, family histories, and treasured cards from the past. Since you won’t have the time or space to pack these items in your go-bag, we recommend you make digital copies of these keepsakes and store them in the cloud.

As your Personal Family Lawyer®, we are keenly aware of the priceless value these items represent, and we believe safely storing your sentimentals online is so important we offer this as a service to all of our clients. Be sure to ask us how we can help you preserve your family’s most precious mementos.

Protect Your Home & Family Today

To make certain that you have the proper insurance and other estate planning documents in place to protect your home, family, and belongings from the ever-increasing threat posed by natural disasters, consult with us, your Personal Family Lawyer®. We’ll help you evaluate the specific risks for your area, assess the value of your home and other assets, and support you to obtain the proper insurance and estate planning vehicles to fully safeguard you and your loved ones from every possible emergency. Call us today to get started.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for our team to call you at a time you choose.

One of the main reasons for setting up your business as a corporation or limited liability company (LLC) is to shield your personal assets from debts and other liabilities incurred by your business. Corporations and LLCs exist as separate legal entities from their owners, which allows the business itself to acquire assets, enter into contracts, and take on debt. 

In turn, if your business is unable to pay its debts, creditors are typically allowed to only go after your company’s assets, not your personal assets. However, there are several circumstances in which business owners can be held personally liable, and you should understand how these potential pitfalls can leave you vulnerable.

In some cases, business owners simply make innocent mistakes when running their business, and these errors leave them personally liable. Other times, when business owners take certain improper actions, such as using the corporation to promote fraud, failing to observe corporate formalities, or even just inadvertently commingling business and personal assets, a court can hold the owners personally liable for the debts and liabilities of the business. When this happens, it’s known as “piercing the corporate veil.”

If you’re thinking of incorporating your business, or if you already own a corporation or LLC, you should become familiar with the following scenarios that can leave you personally on the hook for your business debts.

Commingling Business & Personal Finances
The biggest risk to your business (and your personal assets) when running a small business is commingling your personal finances with those of your business. It can be something as benign as using a company bank account to pay your mortgage or depositing a check made out to your business into your personal account. If this is happening to you now—and we bet it is, because it happens to almost every business owner we serve—there’s no shame in it, but there could be major risk to you.

Commingling your business and personal finances means that if you are ever in a lawsuit related to your business and a judgment is obtained against your business, a court can decide that you’re using your company as an extension of yourself, and therefore you should be held personally liable for its debts. In that case, everything you’ve read or believed about your business entity protecting your personal assets just goes right out the window, and you lose all the protections of having that entity. On top of that, commingling business and personal finances means you will not be able to make wise strategic decisions based on the financials of your business, and that’s actually your biggest risk, bar none.

To prevent this kind of thing, when you work with us, as your Family Business Lawyer™, we regularly review your company’s financials with you and your accountant to ensure you’re keeping all of your finances separate in the exact way required to protect your personal assets.

Making Personal Guarantees

If you cosign a business loan or personally guarantee a financial obligation for your corporation or LLC, you share responsibility with the company for paying it back. And if your business defaults on a loan you’ve personally guaranteed, your company’s creditors can come after your personal assets, even if you have a business entity in place.

Using Personal Assets As Collateral
Since many small business owners don’t have a lot of startup capital, you may be asked to use your personal property, such as your home or other assets, as collateral on a business loan. If so, the personal assets you pledged as collateral can be seized and sold off to pay your company’s creditors in the event your company fails to pay back the loan.

Committing Fraudulent Actions
Of course, if you make fraudulent representations or omissions to secure a business loan, you can be held personally liable for those debts. Similarly, if your corporation or LLC was created to further a fraudulent purpose or you made business deals knowing the company wasn’t able to pay for them, you can be convicted of fraud, thereby voiding your personal liability protection.

Failing To Follow Corporate Formalities
Corporations and LLCs are legally required to follow certain administrative formalities and observe certain rules. If you fail to treat your business like a corporate entity by not abiding by these formalities—such as keeping detailed records (minutes) of meetings where important business decisions are made or adopting corporate bylaws—the court can rule your company is nothing but a shell and remove the veil of protection shielding your personal assets.

In fact, maintaining corporate formalities is among the most important actions needed to keep you safe from business creditors, and most small business owners simply don’t do this because it’s the last thing on their priority list. As your Family Business Lawyer™, we will put you top of our priority list, with our corporate  maintenance packages and systems that are specifically designed to help you abide by these formalities and keep your personal assets secure.Keep Your Veil Intact
In light of all of the complexities surrounding corporations and LLCs, you should meet with us, your Family Business Lawyer™ to make sure you’re not opening yourself up to be personally liable for your business debts. We will not only help you decide which business entity structure is best suited for your operation, we’ll also assist you in properly setting up and maintaining the entity, so your personal assets are always well protected. Call us today to get started.

This article is a service of Liz Smith, Family Business Lawyer™. 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 your appointment at 907-312-5436, or find a time for us to call you. 

Whether you’ve met with an estate planning lawyer before or it’s your first time, it’s important to understand how working with us, your Personal Family Lawyer® is different from meeting with a traditional lawyer. 

Here we will explain what’s involved with our process, in hopes that it will inspire you to meet with us, your Personal Family Lawyer® and get clear on what your family needs you to have in place, so you don’t leave behind a mess if you become incapacitated or when you die. We promise to help you make the wisest, most affordable, most effective, time-saving plan for yourself and the people you love. 

Meeting With A Traditional Lawyer

Given the unique approach of Personal Family Lawyer® firms, an initial consultation with our firm is quite different from an initial consultation with a typical estate planning attorney. A typical “initial consultation” would be a meet-and-greet-type of meeting, in which the lawyer describes the various legal documents you need to put in place and quotes you a fee to provide those documents.

In those types of meetings, it will likely be quite difficult for you to know exactly what you need for your unique family situation, assets, and how to make the right decision, outside of simply considering whether the cost of these documents fits within your budget. Deciding what you need based solely on the cost of documents will likely lead to you receiving a set of documents that won’t serve and protect your family or your assets when they need the most support.

Unfortunately, we’ve seen it all too often: You have the best of intentions to do the right thing and get a will or trust in place, but you either don’t do it, don’t complete it, or work with a lawyer who puts in place a documents-only plan that is little more than what you could do yourself online through an online document service. And then you become incapacitated or die, and your family is left with a mess: They don’t know where your assets are, they don’t know who to turn to, your documents are out-of-date, and your loved ones are lost, confused, and grieving all at once. 

We’ve designed our entire process, which we call Life & Legacy Planning, to support an entirely different reality—one in which you use the estate planning process to not only leave behind a plan for the people you love, but to make your life even better right now. Let me explain how we do that.

Family Wealth Planning Session™

As your Personal Family Lawyer® firm, our entire process is designed to support you to make the right decisions for yourself and the people you love during your life and to leave a legacy of support and love to the people you care about most. 

In service to that, our initial meeting with you is a two-hour working session, called a Family Wealth Planning Session. During this session, you’ll educate us on everything you own and all of your family dynamics, and we’ll educate you on how the law would apply to you, your assets, and your family in the event of your incapacity or death. Then, together we will create a plan for how to structure your affairs, how you’d like to have your family supported, and how to keep track of your assets, so your family never feels lost, confused, or alone during a time of grief. And by the time you leave the Session, you’ll feel relieved, cared for, and more clear than you’ve ever been about how to make life choices in alignment with the legacy you desire to leave, as a parent, as a business owner or professional, and as the CEO of your life.

This Planning Session is $750. But if you’d like us to waive this fee, we will do so if you are willing to do a bit of homework ahead of time. This homework is a critical part of the planning process, and it will benefit your loved ones whether you engage in a full plan with us or not. The homework will guide you to find everything you own, and document it, using our Personal Resource Map: Family Wealth Inventory and Assessment.

Just completing this initial assessment will likely get you more financially organized than you’ve ever been before.

We are consistently surprised to see that many of our clients do not have a clear awareness of what they own or how to locate all of their assets. And if you don’t know what you have and where it is and you haven’t documented it, how will your family know? This is exactly why there is more than $58 billion (yes, that’s billion with a “b”) of lost and unclaimed assets held by state and federal agencies in the U.S. This happens when you become incapacitated or die, and your family is unable to find or simply overlooks assets you’ve worked so hard to create because most people fail to properly inventory their assets and/ or keep that inventory regularly updated. So we support you to start there.

We know you haven’t devoted years of your precious time and energy to build your family wealth only for your heirs to lose track of it when something happens to you. That’s one reason the Family Wealth Planning Session is so beneficial. Whether you decide to create a full estate plan or just rework the one you have, after working with us, at the very least your family will know what you have and how to locate it should anything happen to you. 

And if you do decide to create an estate plan or redesign an existing plan with us, the Family Wealth Planning Session will guide you to choose the type of plan you want based on your budget, what’s most important to you, what’s not important to you, and with a clear understanding of the impact of your choices. We will guide you to choose the most affordable and effective planning solution for your life and the people you love, so you can get your affairs in order and keep them that way throughout your lifetime and through all of life’s changes

This investment of your time now will save your family countless hours of heartache and work down the road, while also keeping your loved ones out of conflict and out of court. If you choose to work with us, you’ll get the peace of mind that comes with knowing you never have to make another financial or legal decision without our guidance again. And if and when something happens to you, your loved ones will get the same type of trusted advisor, who will be there for them when you can’t be.

Death is unavoidable. But you can make it far easier on the people you love by the choices you make now. And facing the reality of this fact allows you to make choices that will let you enjoy your current life even more. In fact, our clients often report a huge sense of relief after meeting with us, and they frequently say they wished they’d created a life and legacy plan sooner.

Life & Legacy Planning

You see, we’ve discovered that estate planning is about far more than planning for your death and passing on your “estate” and assets to your loved ones—it’s about planning for a life you love and a legacy worth leaving by the choices you make today—and this is why we call our services Life & Legacy Planning.

As your Personal Family Lawyer®, we are specially trained to educate, empower, and support you to make the right decisions for your life and for the people you love. Furthermore, because your plan will be designed to provide for your loved ones in the event of your death or incapacity, we aren’t just here to serve you—we’re here to serve your entire family. 

In the end, your Life & Legacy Plan goes far beyond simply creating documents and then never seeing us again. We will develop a relationship with you and your family that lasts not only for your lifetime but for the lifetime of your children and their children if that’s your wish. And this all starts with our Family Wealth Planning Session. If you’d like to learn more about this process or schedule your appointment, contact us, your Personal Family Lawyer® today.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for our team to call you at a time you choose.

Even if the process is amicable, divorce can be one of life’s most stressful events. With so many major changes taking place, it’s easy to forget to update your estate plan—or simply put it off until it’s too late. After all, dealing with yet another lawyer is probably the last thing you want to do.

However, neglecting to update your estate plan for divorce can have potentially tragic consequences. And you shouldn’t wait until the divorce is final to rework your plan—you should update it as soon as you realize the split is inevitable.

Here’s why: Your marriage is legally still in full effect until your divorce is final, so if you die or become incapacitated while your divorce is ongoing and haven’t changed your estate plan, your soon-to-be ex spouse could wind up with complete control over you life and assets. Unless you want your ex to have that kind of power, you need to take action as soon as possible.

However, keep in mind that some states have laws that limit your ability to change your estate plan once your divorce is filed, so you may want to  consider making some or all of the following changes to your estate plan as soon as divorce is on the horizon and before you’ve filed. As your Personal Family Lawyer®, we can support you to ensure your estate plan is properly updated to reflect the latest changes in your life situation, family dynamics, and asset profile. Contact us as soon as you know divorce is coming, or right away if you’ve already begun the divorce process.

1. Change Your Power Of Attorney Documents

Unless you want the person you are removing from your life to make all of your legal, financial, and medical decisions in the event of your incapacity, you need to update your power of attorney documents as soon as divorce is inevitable. All adults over age 18 should have both a durable financial power of attorney and a medical power of attorney in place.

A durable financial power of attorney allows you to grant an individual of your choice the legal authority to make financial and legal decisions on your behalf should you become unable to make such decisions yourself. Similarly, a medical power of attorney grants someone the legal authority to make your healthcare decisions in the event of your incapacity.

Without these documents in place, your spouse has priority to make financial and legal decisions for you. And since most people typically name their spouse as their decision maker in these documents, you need to take action even before you begin the divorce process and grant this authority to someone else, especially if things are anything less than amicable between the two of you.

Once divorce is a sure thing, don’t wait—immediately contact us, your Personal Family Lawyer® to get these documents created or changed. And unless your attorney is an expert in estate planning, we recommend you don’t rely on your divorce lawyer to update these documents for you. There are just far too many important details in these documents that can be overlooked by a lawyer using a standard form, rather than the custom documents we will prepare for you.

2. Change Your Beneficiary Designations

As soon as you know you are getting divorced, you should update the beneficiary designations for assets that do not pass through a will or trust, such as life insurance policies and retirement plans. Failing to update your beneficiaries can lead to serious trouble down the road, and unfortunately, we see this happen all the time.

If you get remarried following your divorce, for example, but you haven’t changed the beneficiary of your 401(k) to name your new spouse, the ex you divorced 10 years ago could end up with your retirement account upon your death. And since there are often restrictions on changing beneficiary designations once a divorce is filed, the timing of your beneficiary change is particularly critical.

In most states, once either spouse files divorce papers with the court, neither party can legally change their beneficiaries without the other’s permission until the divorce is final. With this in mind, you may want to consider changing your beneficiaries prior to filing divorce papers, and then post-divorce you can always change them again to reflect whatever is determined in the divorce settlement.

If your divorce is already filed, meet with us your Personal Family Lawyer® to see if changing beneficiaries is legal in our state—and whether it’s in your best interest. And if naming new beneficiaries is not an option for you now, once the divorce is finalized it should be your number-one priority. In fact, put it on your to-do list right now!

3. Create a New Will

You should create a new will as soon as you decide to get divorced, since once divorce papers are filed, you may not be able to change your will. And because most married couples name each other as their executor and the primary beneficiary of their estate, it’s important to name a new person to fill these roles as well.

When creating a new will, rethink how you want your assets divided upon your death. This most likely means naming new beneficiaries for any assets that you’d previously left to your future ex and his or her family. Keep in mind, some states have community-property laws that entitle your surviving spouse to a certain percentage of the marital estate upon your death, regardless of what your will says. So if you die before the divorce is final, you probably won’t be able to entirely disinherit your surviving spouse through the new will.

That said, it’s almost certain you wouldn’t want him or her to get everything. In light of this, you should create your new will as soon as you realize divorce is inevitable to ensure the proper individuals inherit the remaining percentage of your estate should you pass away while your divorce is still ongoing.

And should you choose not to create a new will during the divorce process, don’t assume that your old will is automatically revoked once the divorce is final. State laws vary widely in regards to how divorce affects a will. In some states, your will is revoked by default upon divorce. In others, unless it’s officially revoked, your entire will—including all provisions benefiting your ex—remain valid even after the divorce is final.

Given the uncertain legal landscape, meet with us your Personal Family Lawyer®  as soon as you know divorce is coming. We can advise you on our state’s laws and how to best navigate them when creating your new will—whether you do so before or after your divorce is final.

4. Amend Your Existing Trust Or Create A New One

If you have a revocable living trust, you’ll want to update it too. Like wills, the laws governing if, when, and how you can change a trust during a divorce can vary, so you should consult us as soon as possible if you are considering divorce. In addition to reconsidering what assets your soon-to-be-ex spouse should receive through the trust, you’ll probably want to replace him or her as successor trustee, if they are so designated.

And if you don’t have a trust in place, you should seriously consider creating one, especially if you have minor children. Trusts provide an array of benefits that are unavailable with a will, and they’re particularly well-suited for blended families. Given the likelihood that both you and your spouse will eventually get remarried—and perhaps have more children—trusts are an invaluable way to protect and manage the assets you want your children to inherit.

By using a trust, for example, should you die or become incapacitated while your kids are minors, you can name someone of your choosing to serve as successor trustee to manage their money until they reach adulthood, making it impossible for your ex to meddle with their inheritance.

Given the enhanced protection and control that a trust can provide compared with a will, you should at least discuss creating a trust with us, your Personal Family Lawyer®  before ruling out the option entirely.

5. Revisit Your Estate Plan Once Your Divorce is Final
During the divorce process, your primary objective is limiting your soon-to-be ex’s control over your life and assets should you die or become incapacited before divorce is final. For this reason, the individuals to whom you grant power of attorney, name as trustee, designate to receive your 401(k), or add to your estate plan in any other way while the divorce is ongoing are often just temporary.

Once the divorce is final and your marital property has been divided up, you should revisit all of your estate planning documents and update them accordingly based on your new asset profile and living situation. From there, your plan should continuously evolve along with your life circumstances, particularly following major life events, such as getting remarried, having additional children, or when family members pass away.

Get Started Right Away

Although it may be tempting to put off changing your estate plan when you are going through a divorce, especially if the process has been contentious, you can’t afford to wait. Meet with us to review your estate plan immediately upon realizing that divorce is unavoidable, and then schedule a follow-up visit once your divorce is final.

If you delay updating your estate plan, even just for a few days during your divorce, it can make it legally impossible to change certain parts of your plan, so act now. And if you’ve yet to create any estate plan at all, an impending divorce is the perfect time to finally take care of this crucial responsibility. Contact us today to learn more.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for our team to call you at a time you choose.

In the last decade, the rise of the gig economy has fueled an unprecedented increase in the number of independent contractors (ICs) in the U.S. workforce. And that growth has only accelerated in the wake of the pandemic, with more companies relying on remote work arrangements, and many workers laid off during the shutdowns and forced to go solopreneur choosing to remain independent.

In fact, the number of independent contractors in the U.S. workforce rose by 34% in 2021, according to MBO Partners’ 11th Annual State of Independence in America report. As a business owner, using independent contractors in lieu of full-time employees has a number of distinct advantages, including big savings on labor costs, taxes, and training—but using contractors is not without risks.

Employers Facing Increased Scrutiny
Along with the rise in ICs, there’s been an equally steady increase in the number of companies being targeted by state and federal agencies for misclassifying workers. And with the election of President Biden, employers are facing even more scrutiny. 

Last May, the Department of Labor (DOL) rescinded a Trump-era rule that would have made it easier for employers to designate workers as independent contractors, rather than employees under the Fair Labor Standards Act (FLSA). And as part of his $6 trillion budget proposal unveiled this summer, Biden pledged to end “the abusive practice of misclassifying employees as independent contractors.” To fund this effort, Biden proposed a 12% increase in funding for the DOL’s Wage and Hour Division, which deals with worker classification. 

Most recently, in January the DOL and the National Labor Relations Board struck an agreement to collaborate on investigations and share information on potential violations, specifically targeting independent contractor misclassification. The deal will create a new referral process for violations of federal labor and employment laws, making it easier for the government to pursue employers who have breached laws enforced by both agencies.

The Cost Of Misclassification
If you misclassify an employee, you can face hefty fines from the DOL, IRS, and state agencies. Moreover, you can be held responsible for paying back taxes and interest on employee wages, along with FICA taxes that weren’t originally withheld.

You can also be held liable for failing to pay overtime and minimum wage under the FLSA as well as under state laws. Such claims can go back as far as three years if it’s found you knowingly made the misclassification. And if the IRS believes your misclassification was intentional, there’s also the possibility of criminal penalties.

Outside of the fines paid to state and federal agencies, if an employee is misclassified, they’re eligible to claim employee benefits he or she missed out on. These can include healthcare coverage, stock options, 401(k) matches, PTO, and even unpaid break time.

Best Practices To Avoid Misclassification
Fortunately, with the support and guidance from us, your Family Business Lawyer™, you can easily avoid these risks and stay totally compliant. While you should meet with us for an in-depth review of your employment agreements and worker classification procedures, implementing the following best practices can go a long way toward ensuring your team members are correctly classified.

1) Conduct An Internal Audit Of Your Classification Process

The first step to ensuring that your ICs are classified properly is to conduct an internal audit of your current classification policies and practices. And if you don’t have any formal policies or practices in place, now is the time to create them.

While the federal government, the states, and the courts don’t have a single common test to determine a worker’s classification, there are some overarching themes that they all consider. In general, if you have the right to control or direct how an IC’s work is done, not just what’s to be done, the worker is more likely to be an employee, not an IC. With ICs, you’re only permitted to direct and control the end result of their work, not the manner and methods of getting it done.

Since there are many complex legal issues related to this process, it’s important that you work with us, your Family Business Lawyer™ to review each worker’s on-the-job practices. Many times an IC’s employment agreement may state one thing, but their actual work performance and relationship with you may be something entirely different.

For example, an IC’s contract might state that they’re to work independently, but in reality they work under close supervision. Or their contract may state that they’re free to work with other clients, but the audit shows that the way you’ve structured the relationship makes it impractical or impossible for them to work for anyone but you.

By auditing your policies and practices in this way, you can identify and change any problem areas internally, before a regulatory agency steps in to investigate.

2) Review And Revise Your Employment Agreements

Even if you’ve worked with someone for years without any problems using a verbal agreement, it’s crucial that every contractor you hire has a properly drafted contractor agreement in place, describing exactly what services the contractor is providing and laying out the parameters of their relationship with you.

We cannot emphasize this point enough: Well-drafted agreements are the foundation of your protection from misclassification. Your IC agreements should clearly define the scope of work, the time frame involved, their communication process with you, and the terms of payment. Additionally, the agreement should clearly state that the worker is responsible for his or her own workplace, equipment, and expenses.

Finally, don’t forget to include terms in your IC agreements protecting your intellectual property. This can be done fairly easily using work-for-hire and copyright assignment clauses. To ensure your agreements offer you the maximum protection, be sure to have us review the terms of your agreements, even those prepared by another lawyer.

3) Implement And Enforce Classification
Once you’ve identified and fixed any gaps or areas needing improvement in your IC classification policies and practices, the final step is to make certain these criteria are implemented and enforced. Your policies and agreements are worthless if they’re not actually being followed.Keep in mind, the DOL, state agencies, and courts are only concerned with what an IC is doing, not what’s in their contract or job description. If necessary, revise your company’s operating manual and procedures to ensure that the provisions of the agreements and policies are thoroughly documented, implemented, and enforced.

This article is a service of Liz Smith, Family Business Lawyer™. 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 your appointment at 907-312-5436, or find a time for us to call you. 

No matter what line of business you are in, the reality of being a successful business owner is that you open yourself up to a number of different risks—and the more successful you get, the more risks you face.

Asset-protection planning is intended to reduce or eliminate the risks of being in business by shielding your business and personal assets from litigants, creditors, and other potential threats to the fullest extent legally possible. And it’s crucial to have these strategies in place from the moment you open your doors, because once a claim or lawsuit is filed, it’s too late.

In fact, once a claim or lawsuit is filed, if you take certain actions to protect your assets, you could be at risk of being charged with fraud. So take action now, while there is nothing to worry about, and you still have access to a full array of options to protect your business and its assets.

While the specific protections you need will depend on the particulars of your business and personal assets, the following four strategies form the foundation of any comprehensive asset-protection plan.

1. Limit Personal Liability With Business Entities

One of the most fundamental asset-protection strategies is setting up the proper entity structure for your business. Without the correct entity in place, your personal assets would be at risk if your business ever falls into debt or is hit with a lawsuit. For example, if your company is structured as a sole proprietorship or general partnership and you go out of business, creditors would come after your personal assets to pay off your business debts.

By structuring your business as a limited liability company (LLC) or corporation, you can shield your personal assets from liabilities incurred by your business. Such structures establish your company as a separate legal entity that’s distinct from you as an individual, which prevents you from being personally liable for the company’s debts or legal liabilities.

As long as you properly maintain the separation of your business and personal assets, both LLCs and corporations effectively create a barrier between you and the activities of your business. In that case, creditors, clients, and other potentially litigious entities can go after your business assets, but not your personal assets. That said, you can still be held personally liable in certain situations, such as if your entity isn’t maintained properly or you mistakenly commingle your personal and business finances.

However, with our legal and financial systems and trusted guidance, keeping up with your entity’s administrative and compliance formalities is a snap. Contact us your Family Business Lawyer™ to find out what entity structure is best suited for your business and how we can ensure you have the maximum protection possible for your personal assets.

2. Invest In Business Insurance

While setting up a separate legal entity can safeguard your personal assets from your company’s liabilities, an entity will not protect your business assets—that’s where business insurance comes in. And since a single catastrophic event or lawsuit can wipe out your company, it’s vital that you have the proper insurance coverage in place from the moment you launch your business.

The type and amount of insurance coverage your company needs will largely depend on your particular company and its assets. That said, most businesses can benefit from the following forms of insurance: general liability insurance, professional liability insurance, property insurance, and employment practices insurance. Additionally, you should also consider investing in umbrella insurance, which would cover you for any damages that exceed the coverage limits of your other individual policies.

Before you sit down with an insurance agent, meet with us, your Family Business Lawyer™. We will evaluate your business assets and underlying risks to identify the optimal levels of coverage you should have in place.

3. Put Sound Legal Agreements In Place

Although using proper contracts and business agreements might not seem like a major priority for asset protection, the value of these documents should never be underestimated. In fact, these agreements are designed to protect your company’s most essential elements: your personal liability, your personal and professional relationships, your intellectual property, and your trade secrets, to name just a few.

In addition, legal agreements govern the rights and responsibilities of every party you do business with, from clients and vendors to employees and contractors. Given the importance of such documents, you should never rely on do-it-yourself (DIY) legal documents you find online when creating your business agreements. Instead, reach out to us, your Family Business Lawyer™ to support you in creating, reviewing, and updating your company’s legal documents—even those created by another lawyer—to ensure you have the most robust legal protection in place at all times.

In all cases, you must enter into legal agreements in the name of your business entity, not in your personal name. And whenever possible, be sure that your legal agreements include provisions requiring conflict resolution through mediation and arbitration, before litigation.

What’s more, in certain cases, the terms of your business agreements can be drafted to limit the level of liability and potential damages your business would face should a contractual dispute arise. That said, when it comes to limiting liability through contracts, state laws vary widely, so your agreements should be drafted and reviewed by a business attorney licensed in our state like us, your Family Business Lawyer™.

4. Protect Your Business With Trusts

If you’re looking for the maximum level of protection, you may want to consider using specially designed trusts to safeguard your business. Such trusts are set up so that your business is owned by the trust, not you, and since you can’t lose what you don’t own, your company and its assets can’t be reached by creditors or lawsuits.

These asset-protection trusts are not the same as the living trusts designed to protect the inheritance you want to leave for your family from the court process of probate in the event of your death or incapacity. Living trusts are revocable, meaning you still own the assets held by the trust while you’re alive, and as such, you can dissolve the trust or change its terms during your lifetime.

Because you still retain ownership of assets held by revocable living trusts, a revocable living trust does not provide you with any asset protection from creditors. Asset protection trusts, however, are irrevocable.

The most airtight protection is provided when you never own your business to begin with, and when the business is started by you as the trustee of an irrevocable trust set up for you by a parent or grandparent. And if you anticipate growing the value of the business significantly, this kind of trust setup can also provide extremely valuable estate tax protection. The one hitch here is that you have to have parents or grandparents who thought ahead and left you an inheritance inside an irrevocable trust at their death, or who are willing to set up an asset protection trust for you during their lifetime, so you can start your business with this airtight protection.

If you already have an ongoing business that you want to protect using asset protection trusts, you can transfer your business into a creditor-shielded asset protection trust, but there are many restrictions, and your protections will only begin after several years, depending on the state in which the trust is established. If this is something you’d like to consider to protect your assets from creditors that may arise in the future, or from significant estate taxes in the future, contact us now to discuss your  options.

This article is a service of Liz Smith, Family Business Lawyer™. 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 your appointment at 907-312-5436, or find a time for us to call you.