Taking your clients out to dinner or to a sporting event can be a great way to get to know the people with whom you are doing business and help you develop a closer relationship. Plus, business-related meals and entertainment can be a legitimate business expense (with some exceptions) that you can deduct from your company’s income taxes. 

That said, the rules for deducting meal and entertainment expenses from your taxes have changed quite a bit over the last few years. And these changes have made understanding exactly what you can (and cannot) write off on your tax return pretty confusing. 

In some circumstances, for example, a business-related meal is 100% deductible, while in others, the same meal is only 50% deductible. Yet other times, a business meal is totally nondeductible. It all boils down to a few factors: the meal’s purpose, who provides the meal, and who benefits from the meal. 

Legislation Brings New Rules
To boost business spending at restaurants following the pandemic, Congress added a provision to the Consolidated Appropriations Act (CAA) passed in December 2020 that makes the cost of business-related meals served in a restaurant 100% deductible—but only for 2021 and 2022. Previously, deductions for business meals at restaurants were limited to 50%.

While lawmakers may have temporarily increased the deduction for business-related meals, they made another change that eliminates your ability to write off most entertainment expenses—and that change is permanent. Starting in 2018, the Tax Cuts and Jobs Act (TCJA) permanently eliminated deductions for most business-related entertainment expenses.     

Before the TCJA, you could deduct 50% of the cost of entertaining your clients, such as taking them to a ballgame or treating them to a round of golf. But after the TCJA, you can no longer deduct such expenses. Moreover, while you can deduct the cost of food and beverages consumed in conjunction with an entertainment event, the food and beverages must be purchased separately from the entertainment or stated separately on the bill in order to qualify for a deduction.

Confused yet? We don’t blame you. For clarification on the finer details of these changes to the tax code, consult with us, your Family Business Lawyer™ or Certified Public Accountant (CPA). Meanwhile, here we will highlight a few of the most significant new rules for deducting meal and entertainment expenses for 2021 and beyond.

Deducting Business Meals

You are allowed to deduct the cost of business meals (food and beverages) as a business expense, and in most cases, the meal will be 50% deductible. The cost of the meal equates to the total cost of the food and beverages, including sales tax, tips, and delivery fees.

To qualify for the deduction, you (the business owner) or an employee must be present during the meal, and the meal cannot be “lavish or extravagant.” The IRS does not define “lavish or extravagant;” instead, the agency states that the cost must be “reasonably based on the facts and circumstances.” The IRS also points out that meal expenses will not be disallowed simply because they exceed a certain price or because they take place at a fancy restaurant.

However, as mentioned earlier, the CAA allows you to write off 100% of the cost of business-related meals provided by restaurants and bars from January 1, 2021, through December 31, 2022. This temporary 100% deduction applies to facilities that provide sit-down dining or take-out. 

The following are a few examples of situations where you would be able to claim the 50% deduction (or 100% for 2021 and 2022 if the meal is provided by a restaurant) for business meals:

• Dinner with a client where work is discussed
• Employee meals while traveling for business
• Drinks, snacks, and other food items supplied for the office
• Catered food for a board meeting
• Meals you purchase while traveling for business
• Food provided for employees who are working late
• Eating lunch out with a few employees 

Fully Deductible Meals

In certain circumstances, some meal expenses are fully (100%) deductible. Examples of fully deductible meal expenses include the following: 

• A holiday party for the entire company
• A community event where you provide free food to the general public 
• A fundraising event where the proceeds go to a charitable organization
• Food provided as part of employee’s taxable compensation (must be included on W-2)
• A dinner out where at least half of all your employees are present

Meal Expenses You Cannot Deduct

Basically, most business-related meals you can think of are either 50% or 100% deductible, but there are some exceptions. For example, if you take a client out to dinner and invite your spouse and kids to come with you, neither your spouse nor your kids’ meal expenses can be deducted. The clients’ spouse’s meal expense would not be deductible, either.

The same restriction would apply for meal expenses incurred by spouses, dependents, or other individuals who accompany you on business trips. The only instance where you could deduct such expenses would be if the spouse, dependent, or other person worked for your company.

Deducting Business Entertainment

As mentioned earlier, following the implementation of the TCJA in 2018, you can no longer deduct most entertainment expenses. Entertainment is defined as “any activity generally considered to provide entertainment, amusement, or recreation,” according to the IRS.  

This means you can no longer write off the expenses for taking clients to a basketball game, football game, or other sporting events; bringing employees to a Broadway musical or on a fishing trip, or taking a prospective vendor to a Vegas show. Additionally, you cannot deduct the costs of renting out an “entertainment facility,” which includes things like a yacht, swimming pool, bowling alley, limo, airplane, hotel suite, or villa in a vacation resort. 

The same restriction applies to deducting membership and club dues, such as dues for membership to a country club or golf course—these expenses cannot be deducted from your taxes.

As we touched on earlier, while you can no longer deduct most entertainment expenses, you can still deduct the cost of food and beverages consumed in conjunction with an entertainment event, such as hot dogs and beers purchased at a baseball game. However, to qualify for the deduction, you must meet one of two conditions: 1) the food and beverages must be purchased separately from the entertainment, or 2) the cost of the food and beverages must be stated separately on the bill or receipt.

Given this requirement, you should always insist on detailed receipts whenever you visit any entertainment venue for business purposes.

Entertainment Deductions Still Available

In spite of these new restrictions, there are still a few entertainment expenses that you can fully deduct from your taxes. According to the IRS, you can deduct 100% of the cost of the following entertainment-related business expenses:  

• Entertainment expenses that are reported on your tax return as taxable compensation to your employees.
• Entertainment expenses for recreational or social activities for your employees, such as a holiday party or a company picnic.
• Expenses related to attending business meetings or conventions of certain exempt organizations, such as business leagues, chambers of commerce, or professional associations.
• Entertainment sold to your customers. For example, if you run a nightclub, and you hold a rock concert, those expenses are not subject to the nondeductible rules.

Keep Track of Your Expenses With Sound Systems

The key to taking full advantage of business-expense deductions, such as for meals and entertainment, is to keep meticulous track of your expenses, and the best way to do that is to implement sound business systems. As your Family Business Lawyer™, we can support you in setting up an array of business systems, not just for managing your finances and taxes, but for dealing with legal and insurance issues as well. 

You also need to stay on top of the latest changes to federal and state laws governing business expenses and other tax matters, and we, in tandem with your certified public accountant, can help you with that, too. Contact us today to get started with a LIFT Business Breakthrough Session, where we will examine all of your legal, insurance, financial, and tax needs, and help you put in place the proper systems to make managing these areas of your business a breeze.

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. 

As we head into the peak of wedding season, if you are a newlywed or are about to tie the knot, add “estate planning” to your do list. And yes, we imagine that at this happiest time of your life, planning for your potential incapacity and eventual death is probably the farthest thing from your mind, but getting it handled as part of your wedding planning is the greatest gift you can give your soon-to-be spouse.

First, be aware of the impact of doing nothing. If you were to become hospitalized for any reason prior to your wedding day, the person you love most in the world would not have the legal authority to make your medical decisions and may not even have the authority to see you in the hospital. Your beloved would have no access to your bank accounts and could even be put into a position of having to move out of your shared home abruptly in the event of your death.

Indeed, once your marriage is official, your relationship becomes entirely different from both a legal and financial perspective. With this in mind, last week in part one, we discussed the first three of six essential items you need to address in your plan, and here we cover the final three.

4. Durable Financial Power of Attorney

As we touched on last week in part one, estate planning is not just about planning for what happens when you die. It is equally important—if not even more so—to plan for your potential incapacity due to a serious accident or illness.

If you become incapacitated and have not legally named someone to handle your financial and legal interests, your spouse would have to petition the court to be appointed as your guardian or conservator to handle your affairs. Though your spouse would typically be given priority, this is not always the case, and the court could choose someone else.

And the person the court appoints could be a family member you would never want having control over your life, or it could even be a crooked professional guardian, who would charge exorbitant fees, keep you isolated from your family, and sell off your assets for their own benefit. In any case, if you have not chosen someone to make your financial and legal decisions in the event of your incapacity, the court will choose for you.

To ensure your spouse has the ability to make these decisions, you should create a power of attorney documents to give him or her this legal authority. You actually need two of these documents, and the first one is a durable financial power of attorney. A durable financial power of attorney would grant your spouse the immediate authority to manage your financial, legal, and business affairs in the event of your incapacity.

With a durable financial power of attorney, your spouse would have a broad range of powers to handle things like paying your bills and taxes, running your business, collecting government benefits, and selling your home, as well as managing your banking and investment accounts. Granting durable financial power of attorney is especially important if you live together before you get married because, without it, the person named by the court could legally force your soon-to-be spouse out with little to no notice, leaving your beloved homeless.

The second document you will need is a medical power of attorney, which we will discuss next.

5. Medical Power of Attorney and Living Will

In addition to the durable financial power of attorney, you will also need to create a medical power of attorney. A medical power of attorney is an advance healthcare directive that would give your spouse (or someone else) the immediate legal authority to make decisions about your healthcare and medical treatment should you become incapacitated and unable to make those decisions for yourself.

For example, a medical power of attorney would allow your spouse to make decisions about your medical treatment if you are in a serious car accident or hospitalized with a debilitating illness. Without a medical power of attorney in place, your spouse would have to petition the court to become your legal guardian.

As we discussed last week, even though your spouse is generally the court’s first choice for guardian, you should spare your spouse the time, money, and trauma involved with the guardianship process by creating a medical power of attorney and naming him or her as your agent.  

While a medical power of attorney allows your spouse to make healthcare decisions on your behalf during your incapacity, a living will is an advance directive that explains how you would want your medical care handled, particularly at the end of life. A medical power of attorney and a living will work closely together, and for this reason, they are sometimes combined into a single document.

Within the terms of your living will, you can spell out things, such as if and when you would want life support removed should you ever require it, whether you would want hydration and nutrition supplied, and even what kind of food you want and who can visit you in the hospital. 

One tragic example of just how nightmarish things can become in the event you are incapacitated without advance directives in place is the case of Florida’s Terry Schiavo, who spent 15 years in a vegetative state after suffering a heart attack at age 26. Because she had neither a medical power of attorney nor a living will Schiavo’s young husband fought her parents in court for years for permission to remove her from life support, and the resulting litigation made news headlines around the world and exposed a deep divide among Americans over the right-to-die movement.

6. Name Legal Guardians For Your Minor Children
If either you or your spouse has minor children from a prior relationship, or if you are planning to have kids of your own soon, it is imperative that you select and legally document long-term guardians for your children. Guardians are people legally named to care for your children in the event something should happen to you and your spouse.

And do not assume that just because you have named godparents or have grandparents living nearby that is enough. You must name guardians in a legal document, or you risk creating needless conflict and a long, expensive court process for your loved ones.

When working with us as your Personal Family Lawyer®, naming legal guardians for your kids could not be any easier or more convenient. Indeed, creating the legal documents that will ensure your children will be raised to adulthood by the people you trust most and are never placed in the care of strangers (even temporarily) is one of our specialties. And we accomplish this using our comprehensive system called the Kids Protection Plan®.

The Kids Protection Plan® provides you with all of the legal planning tools needed to make sure there is never a question about who will take care of your kids if you and your spouse are in an accident or suffer some other life-threatening emergency. Even if you have already named guardians for your kids in your will, either on your own or with the help of a lawyer, we often find that these plans contain at least one of six common mistakes that can leave your kids at risk.

This happens because most lawyers are not trained to understand exactly what is necessary for planning and ensuring the well-being and care of minor children. However, all Personal Family Lawyers® have been trained by the author of the best-selling book, Wear Clean Underwear!: A Fast, Fun, Friendly, and Essential Guide to Legal Planning for Busy Parents, on legal planning for the unique needs of families with minor children at home.

Best of all, we have created an easy-to-use (and 100% free) website you can visit right now to take the first steps to create legal documents naming the long-term guardians you would want to care for your children if you could not. Do it here now: https://lizsmithlaw.kidsprotectionplan.com/.

From there, you can schedule a Life & Legacy Planning Session with us where we will put the full Kids Protection Plan® in place, and determine if there is anything else you might need to ensure the well-being and care of your children no matter what happens. 

Do not wait to take care of this urgent matter. In fact, if you have minor children, your number-one planning priority should be naming legal guardians to care for your children should anything happen to you. And if you need any help with this process, reach out to us, your Personal Family Lawyer®, and we will be glad to walk you through it. 

A Trusted Advisor For Your New Family

Getting married is an exciting first step for your new family, and you should start things off right by getting your estate plan properly prepared. But here is the thing about estate planning—it is not just about creating a set of documents and then filing them away in a drawer and never looking at them again until something happens.

Like your family, your planning needs are constantly evolving, so you must ensure your plan is regularly updated as your assets, family situation, and the laws change. If you do not keep your plan updated, it will be totally worthless when your family needs it. In fact, failing to regularly update your plan can create problems that leave your family worse off than if you had never created a plan at all.

As your Personal Family Lawyer®, we have built-in systems and processes to ensure your plan is regularly reviewed and updated, so you do not need to worry about whether you have overlooked. What’s more, our planning services go far beyond simply creating documents and then never seeing you again. 

Indeed, we will develop a relationship with you and your family. This is so we can get to know you, your wishes, and be there for you throughout the many stages of life—and above all, be there for your loved ones if and when you cannot be. Contact us, your Personal Family Lawyer® today to get things started with a Life & Legacy Planning Session™.

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.

When it comes to your company’s identity, nothing is more vital to your company than your name and logo. By developing a catchy name and snazzy logo for your business, you can quickly get your company recognized, remembered, and respected.

Once you have come up with a winning name and logo, you will want to safeguard your investment with the proper legal protections. For the maximum level of protection and to protect the investment you are making in your business, you should register your business name and logo with the U.S. Patent and Trademark Office (USPTO).

That said, registering a trademark with the USPTO can be a lengthy and complex process, especially if you aren’t familiar with intellectual property law. While you should always work with an experienced business lawyer like us to register your trademark, you can use these answers to some commonly asked questions about trademarks and the trademark registration process as a quick-and-easy reference.

Q: What does a trademark protect?
A: While patents protect inventions, and copyrights protect an original work of authorship, trademarks protect a word, phrase, symbol, design, or other distinguishing feature that identifies your product or service. Trademarks allow you to exclude others from using the same—or highly similar—branding as yours.

The word “trademark” can refer to both trademarks and service marks. A trademark is used for goods, while a service mark is used for services.

Q: How is a trademark established?

A: You actually become a trademark owner simply by being the first person to use your particular name or design in commerce. That is, your trademark—and the rights that go with it—are established by using it, not by registering it.

However, such “common-law” trademark rights are quite limited and will typically be inadequate for most companies. Officially registering the mark provides a number of advantages, such as being able to sue for monetary damages against other companies for trademark infringement. For this reason, it is always a smart move to officially register your trademark.

Q: Can I register a trademark on my own?

A: Yes, you can register a trademark totally on your own or with the help of a cheap, do-it-yourself trademark registration service. But the registration process is highly technical, consisting of a number of detailed steps, and from start to finish, the entire process can take up to a year or more to complete. Plus, if you make even a minor mistake, your application can be rejected at any stage during this process, and then it could end up more difficult or even more expensive to get your trademark registered.

And while you are in the process, you may be investing in your name and logo with no assurance that it is protected. The cost of that could be far more than just hiring an experienced lawyer to handle it for you. In fact, as many as 66% of all trademark filings are initially rejected, according to USPTO trademark statistics. In the end, whether you do it all on your own or with the help of a DIY registration service, the cost of having your application rejected and having to start all over will nearly always exceed the flat fee you would pay us, as your Family Business Lawyer™, to help you file your application.

Q: How does the registration process work?

A: To federally register your trademark, you must file an application through the 

the USPTO’s Trademark Electronic Application System (TEAS). Once your application is submitted, it undergoes a thorough examination to determine if your trademark meets all the legal requirements for registration and to ensure there are no issues or problems that would cause your application to be denied.  

If the USPTO determines your trademark isn’t registrable, it will send you what’s known as an office action. This letter will explain why registration is being refused, and it may include suggestions for fixing your application. You must respond to the office action by its stated deadline, and if your response successfully corrects the problem, your trademark may be approved.

However, before submitting your application, the first step in the process is to make sure the trademark you want is eligible for registration and not already in use by a competitor.

Q: How do I check to see if a name is already trademarked?
A: To find out whether any business similar to yours has already trademarked the name you want, you should use the USPTO’s Trademark Electronic Search System (TESS). This database contains all active and inactive trademark registrations and applications, and it can help you decide whether to file an application for your particular trademark. 

Keep in mind, however, that such a search can be complicated. While searching for the exact same trademark is fairly simple, searching for marks that might be regarded as confusingly similar requires some skill. Your Family Business Lawyer™ can ensure your search is done properly, so your registration has the highest chances of getting approved. 

Q: Do I need to trademark my logo if I’ve already trademarked my company name, and they’re used together?

A: Registering your business’ name for a trademark provides protection for the name itself, but that protection doesn’t extend to your logo, even if it is used together with your company name. If you want the same protection to extend to your logo—and you most definitely should—then you need to register the logo, also known as a “design mark,” separately from your business name.

Q: How much does trademark registration cost?

A: It generally costs between $250 to $350 per class to register a trademark in one class of goods and services with the USPTO. And the total cost of registration varies depending on the number of classes of goods and services in which you register. We often recommend registering your name and/or logo in more than one class.

The USPTO has 45 different classes of goods and services. Depending on your product or service and your business, you may need to register in multiple classes. Deciding on which classes to register in is something we can help you with as well.

Q: What is the difference between the ™ symbol and the ® symbol?

A: The ™ symbol stands for trademark, and it is used with trademarks that are not yet officially registered. Once your registration is approved and your trademark is registered with the USPTO, you have the right to use the ® symbol with your branding.

Although you are not legally required to use either the ™ symbol or the ® symbol to protect your trademark, you most definitely should, especially once you have your mark registered. Indeed, the ® symbol gives your company more credibility and prestige, while letting competitors know you are serious about protecting your IP.

Enlist Our Help With Trademark Registration

Rather than rolling the dice by trying to register your trademark on your own or with a DIY registration service, we recommend you save yourself the time, money, and hassle, and hire us to support and guide you through the process. When you work with us as your Family Business Lawyer™ to get your trademark application handled (whether you DIY with our guidance or hire us to get it handled), you will pay a flat fee that covers the entire process, from the initial search all the way to final registration, with no billable hours, hidden fees, or nasty surprises. 

And once you have your trademark registered, you will need to take steps to ensure your intellectual property rights aren’t infringed upon and your investments in your intellectual property are protected and even maximized—and that’s something we can help with, too. As your Family Business Lawyer™, we will not only support and advise you step-by-step through the process of trademarking your name and logo, but also help you enforce your ownership rights should your IP ever be infringed upon, and we will support you to maximize the value of your investments in your intellectual property assets.

Contact us today to get started with a LIFT Business Breakthrough Session, so we can look at all of the legal, insurance, financial, and tax needs of your most important investment—your business.

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. 

As we head into the peak of wedding season, if you are a newlywed or are about to tie the knot, add “estate planning” to your do list. And yes, we imagine that at this happiest time of your life, planning for your potential incapacity and eventual death is probably the farthest thing from your mind right now, but getting it handled as part of your wedding planning is the greatest gift you can give your soon-to-be spouse.

First, be aware of the impact of doing nothing. If you were to become hospitalized for any reason prior to your marriage day, the person you love most in the world would not have the legal authority to make your medical decisions and may not even have the authority to see you in the hospital. Your beloved would have no access to your bank accounts and could even be put into a position of having to move out of your shared home abruptly in the event of your death.

If the idea of these potential realities is terrifying to you, call us today to get a “pre-marriage” plan in place, and then, after your marriage, we can update it.

Indeed, once your marriage is official, your relationship becomes entirely different from both a legal and financial perspective. With this in mind, if you’ve recently said “I do” or have plans to do so in the near future, here are six essential items you need to address in your plan. 

1. Beneficiary Designations
One of the easiest—and often overlooked—estate planning tasks for newlyweds is updating your beneficiary designations. Some of your most valuable assets, such as life insurance policies, 401(k)s, and IRAs, do not transfer via a will or trust. Instead, they have beneficiary designations that allow you to name the person (or persons) you’d like to inherit the asset upon your death.

You should name your spouse as your primary beneficiary (if that’s your wish), and then name at least one contingent, or alternate, beneficiary in case your spouse dies before you. And if you have kids, remember to never name a minor child as a beneficiary of your life insurance or retirement accounts, even as a contingent beneficiary.

If a minor is listed as the beneficiary, the assets would be distributed to a court-appointed custodian, who will be in charge of managing the funds until the child reaches the age of majority, at which point all benefits are distributed to the beneficiary outright. 

If you want your child to inherit your life insurance or retirement account, you should set up a trust to receive those assets instead. And if you have significant retirement account assets, you may not even want those assets to go outright to your spouse (or future spouse), but instead, you may want to use a trust to distribute your retirement account assets. If you don’t want your retirement assets to go outright to your named beneficiaries and want them to have the maximum tax advantages, contact us for a Life & Legacy Planning Session™.

2. A Will

A last will and testament allows you to designate who should receive your assets upon your death. If you are newly married, you likely want your spouse to receive most, if not all, of your assets, and if so, you should name him or her as the primary beneficiary in your will.

Although your spouse would likely inherit all of your assets should you die without a will, known as dying intestate, depending on state law and whether or not you have children, your assets may not get divided according to your wishes, so it’s always a good idea to create a will (or update your old one) when you get married. And to ensure that your will is created and executed properly, you should always work with trusted legal counsel like us, and never rely on generic, fill-in-the-blank documents you find online.

Trust us—you don’t know what you don’t know here. Online legal document services may be better than nothing for some people, but they may actually be worse than nothing for those who truly want to ensure they’ve considered all of the options. For instance, an online document service cannot help you anticipate and plan for all the potential issues related to your family dynamics and assets that can arise and lead to conflicts and disputes between your loved ones. Yet that’s exactly what you would get when you work with a trusted legal advisor like us and use our comprehensive inquiry process.

Additionally, if you intend to leave assets to someone other than your spouse in your will, or for some reason plan to leave your spouse out of your will, be sure to check our state’s laws governing marital property. In some states, a surviving spouse is entitled to a certain percentage of your assets regardless of what’s in your will. Consult with us, your Personal Family Lawyer®, for clarification on our state’s marital property laws.

Finally, although a will is an essential part of nearly every estate plan, as you’ll see below, having a will alone is rarely enough to ensure your spouse and other loved ones stay out of court and out of conflict when something happens to you.

3. A Trust
Upon your death, assets included in a will must first pass through the court process known as probate before they can be transferred to your spouse or any other beneficiary. Probate can take months or even years to complete, and it can even sometimes lead to ugly conflicts between your spouse and other family members. Not to mention, your spouse will likely have to hire an attorney to represent him or her during probate, which can result in significant legal fees that can deplete your estate.

Furthermore, a will only governs the distribution of your assets upon your death. It offers you zero protection if you become incapacitated and are unable to make decisions about your own medical, financial, and legal needs. If you become incapacitated with only a will in place, your spouse would have to petition the court to be appointed as your guardian to manage your affairs.

Here’s the bottom line: If your estate plan consists of a will alone, you are guaranteeing your spouse and family will have to go to court if you become incapacitated or when you die.

To avoid the time, cost, and conflict inherent to an estate plan consisting solely of a will, you should consider creating a revocable living trust, along with your will. If your assets are properly titled in the name of your living trust, they would pass directly to your spouse upon your incapacity or death, without the need for any court intervention. 

What’s more, in the terms of your trust, you can even outline the specific conditions that must be met for you to be deemed incapacitated, which would allow you to have some control over your life in the event you become incapacitated by illness or injury. This is in contrast to a will, which only goes into effect upon your death and then merely governs the distribution of your assets. 

Finally, if you are getting married and have minor children from a previous marriage, there is an inherent risk of conflict between your soon-to-be new spouse and your children because your children and new spouse have conflicting interests about what happens to your assets in the event of your death or incapacity. If you want to ensure a lifelong relationship of harmony and ease between your children and your soon-to-be spouse, or new spouse, contact us—we have very specific strategies we can use to support that outcome. 

If you are soon-to-be-married or recently married and anything in this article makes you realize that estate planning isn’t something to put off, but a huge gift to the people you love, contact us to schedule a Family Wealth Planning Session™. This is the first step in considering all of your assets, all of your family dynamics, and getting clear on the right plan, at the right price, for the people you love.

Next week, we’ll continue with part two in this series on six estate planning essentials for newlyweds. As your Personal Family Lawyer®, we can guide you to make informed, educated, and empowered choices to protect yourself and the ones you love most. Contact us today to get started with a Family Wealth Planning Session™.

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.

Each year, between 35% to 53% of small businesses in the U.S. are hit with a lawsuit, according to the Small Business Administration (SBA). With statistics like these, it may not be a matter of if your company will get sued, but when you will find yourself in a conflict that could result in a lawsuit.

To make matters worse, if you get sued, even if you win the case, you may still be on the hook for lawyer’s fees and court costs, not to mention the time you spend defending yourself and the potential damage to your reputation. This is exactly why we support our business clients to stay out of court and out of conflict, with proactive business planning.

In service to keeping your business out of court and conflict, here we will cover three of the most common sources of court and conflict for businesses we work with. By understanding the causes of potential legal trouble, you can take the necessary steps to prevent disputes before they occur.

1. Lawsuits By Employees

Although you may not like to think that one of your team would ever sue you, your employees (or independent contractors) are one of the most likely sources for litigation. In fact, nearly one in every five small businesses will get sued by a team member.

The most common lawsuits arise when a team member needs to be let go, and he or she feels mistreated (rightly or wrongly) in the process. If you operate like many business owners, without clear agreements with your team members and without formal processes for handling hiring and firing, you may only find out when it is too late that you weren’t the great boss you thought you were.

By working with an experienced business lawyer like us, you can dramatically reduce your chances of getting sued for employment-based claims—or reduce your out-of-pocket costs if you do get sued due to no fault of your own. From creating sound employment agreements, advising you on the appropriate insurance coverage, and helping you establish workplace policies and procedures in compliance with federal and state laws, we can support you in every aspect of employment law matters for your business.

2. Lawsuits by Clients or Customers

Every business owner must deal with the reality of unhappy clients or customers. You cannot please all the people all the time, but you can establish your process for selling your products and services to minimize the risk of court and conflict when you do have an unhappy client or customer. 

The way you present your client or customer agreement, what it says, and how it says what it says, plus how you get paid and handle customer complaints, can mean the difference between an unhappy customer, who you can turn into a future raving fan, and an unhappy customer, who ends up suing you. We help our clients turn client or customer complaints into learning and growth opportunities and head off future problems by creating template agreements and offering training on how to present those agreements for the best possible outcome of a happy, paying client. 

You are much better off paying a little more upfront to create a thoroughly protective agreement and learning how to present it, so it sets up your client and customer relationships for success, rather than trying to save a few dollars by downloading a do-it-yourself agreement online that will not keep you out of court and conflict. 

3. Lawsuits for Third-Party Injuries

If you or one of your team members is injured on the job, that is typically covered by worker’s compensation insurance. But if a client, vendor, or another third-party is involved in an accident in your place of business, you can be sued for negligence, often known as a “slip-and-fall” lawsuit. 

If you allow members of the public onto your property, you have a duty to provide for their safety. If a visitor to your business can prove that you did not take the proper precautions and he or she is injured as a result, that individual can sue your company to pay for their medical bills, lost wages, and even their pain and suffering. Depending on the severity of the injury, personal injury claims can be among the most expensive of all types of litigation.

Your primary defense against personal injury suits is to have adequate liability insurance coverage in place. As your Family Business Lawyer™, we will recommend the best types and amounts of liability insurance for your business operation. Meet with us to discuss your specific coverage needs.

Your Very Own In-House Legal Counsel

The risk of lawsuits is simply an unfortunate fact of life for today’s business owner. In fact, most large corporations have in-house teams of lawyers on retainer to defend them against this ever-present liability. And with us, as your Family Business Lawyer™, you will have your very own trusted legal counsel in your corner.

Meet with us, your Family Business Lawyer™ to discuss the specific legal safeguards you should have in place. Whether it is investing in the right insurance coverage, reviewing and updating your agreements, or helping you navigate the complexities of employment law, we always have your back. Contact us today to learn more.

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. 

Nearly three years have passed since Aretha Franklin, known as the “Queen of Soul,” died from pancreatic cancer at age 76. When she first passed away in August 2018, her family thought that Aretha died without any estate plan at all.

But since then, four different wills attributed to the late singer have been discovered. And ever since those documents came to light, her four adult sons—Clarence, Edward, Ted White Jr., and Kecalf—have been in court fighting one another over her assets, as well as who among them should be designated as the estate’s representative.

While a trial is set for August 2021 to establish whether any of the four documents, some of which are handwritten and barely legible, can formally stand as her will, Aretha’s story demonstrates just how destructive shoddy estate planning can be for the loved ones we leave behind.

Indeed, in part one of this series, we discussed how the ongoing court battle between Aretha’s four sons has created an ugly rift between the siblings and exposed dark family secrets to the tabloids, both of which the notoriously private singer undoubtedly would have wanted to avoid. We also noted that following Aretha’s death, the IRS claimed that she owed nearly $8 million in unpaid income taxes. And because Aretha’s sons only recently reached a tentative deal to pay off the IRS, so far, Aretha’s family has yet to receive a single penny from her estate—which is estimated to be worth up to $80 million—even though the legendary musician died nearly three years ago.

Here in part two, we will discuss how Aretha could have planned to spare her loved ones from their current conflict, expense, and embarrassing public exposure. From there, we will discuss how you can take steps to ensure that your family can avoid suffering a similar fate as Aretha’s, even if you have far less wealth and assets than Aretha.

The IRS Comes Calling

Given that none of Aretha’s four alleged wills were properly completed or filed with the court, her estate and all its assets remain stuck in court, awaiting a judge to rule on the validity of those documents. However, even if one of those wills was proven valid, her assets would still be inaccessible to her loved ones due to her massive tax debt.

When Aretha died in 2018, the IRS claimed the late singer owed more than $7.8 million in unpaid income taxes, interest, and penalties, which accrued from 2010 to 2017, according to the Detroit Free Press. While her sons have appealed the total amount owed, the estate has been steadily paying on the tax debt and interest since Aretha’s death, and as of December 2020, the remaining unpaid balance with the IRS was estimated to be $4.75 million. 

In March 2021, a tentative deal was reached with the IRS to pay off the debt, as well as finally distribute some cash to her four sons. Under the agreement, which was reached with attorneys for Aretha’s sons, the IRS will receive an immediate payment of $800,000. Additionally, 45% of quarterly revenue from the estate, which comes largely from royalties and licensing, will be paid toward the balance due to the IRS. Another 40% is to be held in an escrow account to pay future taxes on income generated by the estate.

The deal also stipulates that Aretha’s four sons will receive an immediate payment of just $50,000 each. From there, they are set to get quarterly payouts in equally distributed shares of whatever is left after the remaining 15% of revenue is used to cover the estate’s administration costs, which could eat up a substantial part of the remaining funds.

Although the deal must still be approved by a judge, and Aretha’s sons continue to dispute the total amount of taxes owed, the agreement stipulates that any overpayments to the IRS will be returned to the estate for equal distribution to the sons should they be successful in proving a lower amount is due, whether in trial or through a settlement outside of court.

The Dangers of DIY Planning

Aretha made an obvious mistake by attempting to create her first three wills on her own by hand, with apparently no help from legal counsel, and the fact that those wills were lost for years attests to just how risky do-it-yourself (DIY) planning can be. Indeed, when you rely on DIY estate planning instead of the services of a trusted advisor guiding you and your family, your planning documents can easily disappear or even be stolen and changed by someone else. 

When we create or update your plan, it is standard practice for us to not only keep current copies of your documents in a file at our office, but we also ensure that everyone named in your plan knows what their role is and what to do when something happens to you. This way, the people you choose can immediately put the necessary legal actions in motion to effectively manage your estate.

While it is always a good idea to have a lawyer help you create your planning documents, this is particularly true when you have a blended family like Aretha’s. If you are in a second (or more) marriage, with children from a prior marriage, there is an inherent risk of dispute because your children and spouse often have conflicting interests, particularly if there is significant wealth at stake.

And the risk of conflict is vastly increased if you are looking to disinherit a beneficiary, like Aretha may have attempted to do in one of her wills. By creating your own plan, even with the help of an online document service, like LegalZoom, Rocket Lawyer, or TrustandWill.com, you will not be able to consider and plan ahead to avoid all the potential legal and family conflicts that could arise.

As your Personal Family Lawyer®, our processes and systems are designed to identify and prevent conflicts before they ever happen, and our unique planning process can help create connections among your loved ones and bring your family closer together. In fact, this is part of our special sauce!

Relying on a Will Alone is Not Enough

Next up in the list of Aretha’s planning failures is her fourth will, which was reportedly created with help of the Detroit law firm Dickinson Wright, according to the Detroit Free Press. Although the fact that Aretha hired a law firm to help her draft the will shows that the singer was apparently getting more serious about planning, her efforts there still failed.

First off, because her estate plan includes only a will and not a trust to hold title to her assets privately, Aretha’s family had a guarantee of getting stuck in the court process known as probate. And as we have already seen in Aretha’s case, probate can not only be a long, drawn-out process that takes years to complete, but it can also create ugly conflicts between family members and waste significant money on lawyer’s fees.

Worst of all, relying on a will alone has the potential to have disastrous repercussions for one of Aretha’s family members in particular—her oldest son, Clarence, who has special needs. While Aretha’s fourth will reportedly contained instructions to create a trust for Clarence, it is unclear exactly what kind of a trust this would be, and regardless of the type, it appears that no trust was ever set up. 

Planning For Those With Special Needs

When planning for a loved one with special needs, you must be extremely careful and always work with an experienced lawyer like us, because if handled improperly, you can easily disqualify your loved one with special needs from much-needed government benefits. Because individuals with special needs often require a lifetime of healthcare and other forms of support, most of these individuals rely on government programs to offset the exorbitant costs of such care.

However, these programs have strict income limits, so if you leave money directly to a person with special needs, such as through a will as Aretha seemed to do, you risk disqualifying him or her for those benefits. Aretha could have set up a planning vehicle known as a Special Needs Trust for her son Clarence. By creating a Special Needs Trust, Aretha would be able to provide supplemental financial resources for Clarence for the rest of his life, without affecting his eligibility for public healthcare and income assistance benefits like Medicaid and Social Security. 

That said, the rules for Special Needs Trusts are complicated and can vary greatly between different states, so if you have a loved one with special needs like Clarence, be sure to work with us as your Personal Family Lawyer®. We can make certain that upon your death, your loved one with special needs would have the financial means they need to live a full life, without jeopardizing their access to government benefits.

One final benefit a Special Needs Trust would have had for Clarence is the fact that such a trust—like all trusts—would not be required to go through probate, so Clarence would have had immediate access to his inheritance. And though Clarence’s three brothers do not require a Special Needs Trust, they too would have been far better off had Aretha used a trust instead of just a will to leave them their inheritance. 

Lifetime Asset Protection Trusts: Airtight Protection for Your Children’s Inheritance

While there are several types of trusts available, given the size of Aretha’s fortune and the complexity of her assets—which include the rights to her vast catalog of music, as well as royalties from her recordings and licensing rights to her name and image—we would have advised the Queen of Soul to create a Lifetime Asset Protection Trust to pass her assets to her three youngest sons, Edward, Ted White Jr., and Kecalf.

Using a Lifetime Asset Protection Trust, Aretha could have not only immediately transferred her assets to her sons upon her death or incapacity, without the need for court intervention, but she could have also ensured that those assets would transfer with protection from common life events like divorce, serious illness, lawsuits, and even bankruptcy. At the same time, the trust would give her sons the ability to access, manage, and invest those assets, while retaining airtight asset protection for their entire lives. 

Guidance and Direction For Your Children’s Inheritance—And Your Legacy

Had Aretha used a trust, she could have provided guidelines to the Trustee, providing him or her with clear directions about how her assets could be used for her beneficiaries’ benefit, or even built-in provisions to let her heirs control their own inheritance while maintaining their asset protection benefits. By providing a Trustee with guidelines for distributions, you can be sure that the person you name to handle your affairs is aware of your wishes and values when making distributions, rather than simply guessing about what you would have wanted, which often leads to problems.

Given that Aretha’s estate includes the rights to her music, name, and likeness, all of which can provide a potentially indefinite source of income for her loved ones, it is almost certain that Aretha would have wanted a say in how this priceless intellectual property should be managed in the future. A Lifetime Asset Protection Trust would give Aretha the ability to govern how these treasured assets should—and should not be—used by her heirs, ensuring that her artistic legacy is always honored, and her family can benefit from her incredible talent for generations to come. 

Although a Lifetime Asset Protection Trust would have been an ideal way for the Queen of Soul to protect and pass on her assets, such trusts are not for everyone. But contrary to what you might think, Lifetime Asset Protection Trusts are not just for the rich and famous.

These protective trusts can be even more useful if you are leaving a relatively modest inheritance, since the smaller the inheritance, the more at risk it is of getting wiped out by a single unfortunate event like a medical emergency or lawsuit. That said, if your kids are going to spend most of their inheritance on everyday expenses and consumables, such trusts probably do not make much sense.

Meet with us, as your Personal Family Lawyer®, to see if a Lifetime Asset Protection Trust is the right choice for your family.

Learn from Aretha’s Mistakes

Regardless of your financial status, planning for your potential incapacity and eventual death is something that you should take care of immediately, especially if you have children. While Aretha lived a relatively long life, you never know when tragedy may strike, and through diligent estate planning, you can save your family from the needless disputes, expense, and embarrassing public exposure the late singer’s loved ones are currently enduring.

As Aretha Franklin’s story demonstrates, do-it-yourself planning can have terrible consequences for your family—and in the worst cases, it can be even worse than if you had no estate plan at all. We urge you to use the Queen of Soul’s story as a learning experience—when done properly, estate planning can keep your family out of court, out of conflict, and out of the public eye. Even more, truly effective planning can ensure your wealth, assets, and legacy are protected and used to benefit your children, grandchildren, and great-grandchildren in strict accordance with your values.

To ensure your estate plan works exactly as intended, meet with your Personal Family Lawyer® to review and update your current plan or create one if you have yet to do so. Contact us today to schedule your appointment.

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.

Hiring independent contractors (ICs) can be an essential way to boost productivity and streamline your resources, especially during the startup phase, when you have limited access to capital and can’t afford to hire a full roster of employees. 

And even after your operation grows beyond its fledgling period, contractors are often vital for completing one-off projects or rounding out your team during particularly busy periods. That said, working with ICs also creates a number of unique legal and financial risks for your company.

Outside of the risk of getting sued or hit with hefty fines for misclassifying an employee as a contractor, you must also be careful to properly secure ownership of anything an IC creates for you. This is particularly true when it comes to intellectual property (IP).

Make Sure You Actually Own The Work You Pay For

Unlike employees, with whom you generally own automatic copyrights to everything they produce while working for you, ICs typically retain full copyrights to their work—unless they’ve signed a written agreement stating otherwise.

Indeed, if you don’t have properly drafted agreements in place, you may not even own the work you pay ICs to produce for you. My mentor and the founder of New Law Business Model, Ali Katz, learned this the hard way during her early days as a lawyer when she hired a friend to create a website that helped parents name legal guardians for their kids online.

When Ali went to move the website to a different developer, her friend claimed the source code was his, and he said she’d have to pay him $25,000 on top of the $25,000 she’d already paid him because they didn’t have an agreement containing a “work-for-hire” clause.

Because Ali trusted her friend, she figured she didn’t need a formal written agreement to govern their relationship, and in doing so, she didn’t own the website she had paid her friend, the developer, to create as an independent contractor. And this is true of all creative works of authorship you might hire an IC to produce, including graphic design, written content, software, computer code, photos, videos, and other content.

Fortunately, it’s fairly easy to secure full ownership of such works by using the proper legal agreements. However, this is only possible if you actually put such agreements in place with every IC you work with—and yes, this means every single person, even those you may have worked with for years without a single problem.

Work-For-Hire Agreements

When it comes to using legal agreements to secure ownership of the work you hire an IC to produce, you have a couple of options. One option is to include a work-for-hire clause in their independent contractor agreement.

A work-for-hire clause states that you, not the IC, own all copyrights to the deliverables he or she produces for you under the agreement. Such a clause effectively makes it as if you created the work yourself, and as such, it allows you to use the work in any way you wish.

Just be sure to have the IC sign the agreement before he or she starts working. If not, it may be too late to acquire full ownership. Additionally, work-for-hire clauses only cover certain types of materials. According to the U.S Copyright Office, in order for a work-for-hire to apply, the work being created must fall into one of the following nine categories:

• a contribution to a collective work, such as a magazine or anthology
• a part of an audiovisual work or movie
• a translation
• a supplementary work, such as a forward, editorial notes, appendix, bibliography, or chart
• a compilation created by selecting and/or arranging preexisting works
• an instructional text
• a test
• answer materials for a test 
• an atlas

It is important to point out that if the work you hired an IC to create does not fall into one of these nine categories, a work-for-hire clause would not give you full ownership. This catches many business owners by surprise, who falsely assume having such a clause is all they need. If the work you are paying for doesn’t fit into these categories, you will need a different type of agreement.

Copyright Assignment
For works that fall outside of the work-for-hire domain, you will need to include an assignment clause in the contractor’s agreement, in which the IC transfers some or all of their copyrights to your business. Without this clause, the IC would retain all rights to the work, even if the agreement contained a work-for-hire clause.

Adding an assignment clause to the IC’s agreement is fairly simple, and for maximum protection, you can even include such a clause alongside a work-for-hire provision. Simply add a brief clause stipulating that if the work is not deemed a work for hire, the IC assigns all copyrights to your company. Contact us today to ensure you have proper agreements in place.

Don’t Do-It-Yourself

Although both work-for-hire and copyright-assignment clauses are not difficult to create, because each work is unique, there is not a specific template or generic form that would cover every job. What’s more, the wording of each agreement is important, and some states require specific language for work-for-hire agreements.  

Given this, you should steer clear of generic legal agreements you find online, and always have us, your Family Business Lawyer™ review your IC agreements, even if they were drafted by another lawyer. Whether you need your existing agreements reviewed or need help creating new contracts, we can support you in developing sound employment agreements that will give you the most comprehensive ownership rights possible with every contractor you hire.

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. 

A last will and testament is the most commonly thought-of document when it comes to an estate plan. But really it is only a very small part of an integrated plan that ensures your family stays out of court and out of conflict if and when something happens to you.

Do not think you can just write your own will and that will help your family.

You have probably seen ads from services that tout the idea that you can write your own will quickly – maybe even while you are in the security line at the airport (seriously, we have seen those ads in our own Facebook feeds).

Instead, consider the reality that trying to do so could actually create far more trouble for your loved ones down the road if you try to write your own will. Your family and loved ones need you to get professional support from someone who can help you look at what you own, who you love, and what would happen to you and everyone you love if and when something happens to you.

Death is unavoidable – and incapacity may happen before that. These are non-negotiables.

Facing these matters head-on leads you – and your loved ones – to having the best life possible. Otherwise, it is the people you love who get stuck with everything you were not willing to take care of now.

Unfortunately, if you go it alone, you may miss important facets of what happens in the event of your incapacity or death. For example, you may think that a will is sufficient when what you really need is a probate avoidance trust to keep your family out of court. A five-minute will won’t help you stay out of court.

Or you may think your kids are adequately protected because you have a will, but you may really need a full Kids Protection Plan® and without it your kids could end up in the care of strangers, even if just temporarily. Before you do anything, get educated and empowered to do what is right.

The right plan for you begins with knowing what you have, and then being clear on what is necessary to keep your family out of court and conflict and keep your assets out of your state’s unclaimed property fund. If you are ready to write your will, that is great – come see us first.

The biggest mistake you can make is not facing the reality of death, the second biggest mistake is facing it alone.

If you need help getting started, consult with us your Personal Family Lawyer®. We will help you through the process so you can make sure your loved ones are protected and your wishes are honored.

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 you can invest in many different types of insurance to protect your business from lawsuits and other liabilities, one of the greatest liabilities you simply can’t avoid, especially if you are the sole owner of your business, is your incapacity or death.

To make certain that your business—and the income it generates for your family—would continue to run smoothly when something happens to you, you need to create a comprehensive estate plan, and it really needs to include a trust. Without such a plan in place, your business will be stuck in an unnecessary court process, and it could easily cause the loss of everything you’ve worked so hard to build.

A Will Alone Is Not Enough
When it comes to creating an estate plan, most people typically think of a will. While it’s possible to leave your company to someone in your will, it’s far from the ideal option. That’s because, upon your death, all assets passed through a will must first go through the court process known as probate. The cost of probate, the time of probate, and the complexity of a court making decisions about your business assets is wholly unnecessary. 

During probate, the court oversees your will’s administration to ensure your assets (including your business) are distributed according to your wishes. But probate can take months, or even years, to complete, and it can also be quite expensive, which can seriously disrupt your operation and its cash flow. What’s more, probate is a public process, potentially leaving your business affairs open to your competitors.

Furthermore, a will only goes into effect upon your death, so it would do nothing to protect your business should you become incapacitated by illness or injury. Indeed, if you only have a will in place (or have no estate plan at all), in the event of your incapacity, your family would have to petition the court for guardianship in order to manage your business and other personal and financial affairs.

Like probate, the court process associated with guardianship can be long and costly. And in the end, whether it’s a family member or professional guardianship agency, there’s no guarantee the individual the court ultimately names as guardian of your assets would be the best person to run your company.

Maximum Protection For Your Business and Family

Given the drawbacks associated with a will, a much better way to ensure your business’s continued success is by placing your company in a revocable living trust. A living trust is not required to go through probate, and all assets placed within the trust are immediately transferred to the person, or persons, of your choice in the event of your death or incapacity.

Upon your death or incapacity, having your business held in trust would allow for the smooth transition of control of your company, without the time and expense associated with probate or guardianship. Using a trust, you can choose the individual(s) you think is best suited to run your company in your absence, whether that absence is permanent (your death) or temporary (your incapacity). What’s more, within the trust, you can also create a succession plan, which would provide the new owner with detailed—and legally binding—instructions for how you want the business run when you are gone. 

Finally, trusts are not open to the public, so your company’s internal affairs would remain private, and the transfer of ownership would take place in your lawyer’s office, not a courtroom.

Although the majority of business owners will get suitable protection for their business using a revocable living trust, for the most airtight form of asset protection, you may want to consider creating a specialized irrevocable trust. Such irrevocable trusts are quite complex, so they are not for everyone, ask your Family Business Lawyer™ to find out if such a trust would be suitable for your particular company.

A Comprehensive Plan

While placing your business in a trust is an effective way to protect your company upon your death or incapacity, it’s merely one part of a comprehensive asset protection plan. To get the maximum level of protection for your business, meet with us, as your Family Business Lawyer™. We can analyze your business and its assets, and discuss all of the different tools available to ensure the company and wealth you’ve worked so hard to build will survive—and thrive—no matter what.

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. 

Nearly three years have passed since Aretha Franklin, known as the “Queen of Soul,” died from pancreatic cancer at age 76. At the time, her total fortune was estimated to be worth up to $80 million. Yet due to poor estate planning, the late singer’s children have yet to see a dime of their inheritance, and what they ultimately do receive will be significantly depleted by back taxes. Moreover, it’s still not clear whether or not Aretha ever had a valid will.

When she passed away in August 2018, her family thought that Aretha died without any estate plan at all. But since then, four different wills attributed to the late singer have been discovered. And ever since those documents came to light, her four adult sons—Clarence, Edward, Ted White Jr., and Kecalf—have been in court fighting one another over her assets, as well as who among them should be designated as the estate’s representative.

While a trial is set for August to establish whether any of the four documents, some of which are handwritten and barely legible, can formally stand as her will, Aretha’s story demonstrates just how destructive shoddy estate planning can be for the loved ones we leave behind.

Indeed, although her alleged wills clearly show Aretha was concerned for the well-being of her family and wanted them to share her fortune, the legendary singer’s haphazard planning has pitted brother against brother, exposed dark family secrets, and lost millions of dollars to the IRS. And perhaps worst of all, while the legendary singer was notoriously private, all of this has played out in the news headlines for the whole world to see.

Aretha’s situation is definitely tragic, and sadly, far too common among famous musicians—Prince, Jimi Hendrix, and Bob Marley all died without a will. Yet we cover her story and others like it in hopes that it will inspire you to do right by your loved ones by creating a proper estate plan.

And such planning is vital even if you have far less wealth than Aretha. In fact, planning can be even more critical for those with fewer assets. After all, given Aretha’s massive fortune, it’s likely that her heirs will still receive an inheritance, while similar mistakes would likely totally wipe out a smaller estate.

With this in mind, here we’ll discuss Aretha’s planning mistakes and how those errors have impacted both her family and fortune. From there, we’ll explain how proper planning could have prevented the entire mess from ever happening, and then we’ll outline the steps you can take to make certain that, unlike Aretha, your loved ones never have to endure such a nightmare.

Three Wills, a Sofa, and a Spiral Notebook
As we first reported in 2018, Aretha passed away due to pancreatic cancer in her Detroit home on August 16, 2018. At the time, it was widely believed she didn’t have a will. As a result, Michigan law stipulated her assets would be divided equally among her four adult sons, and they agreed to designate their cousin—Franklin’s niece, Sabrina Owens—as the estate’s executor. 

But in May 2019, nine months after Aretha’s death, Sabrina discovered three different handwritten wills while cleaning out the late singer’s home. According to Hour Detroit magazine, the three documents—two of which were dated from 2010 and found in a locked cabinet and one dated from 2014 was scribbled in a spiral notebook found under her sofa cushions—contain conflicting instructions for how the singer wanted her assets divided and whom she wanted as her executor.  

The 2010 copies of Aretha’s handwritten will provide for regular allowances for all four sons and leave specific assets to each of them. Those documents also name Sabrina and her son Ted as executors. The 2014 version, however, provides for a simpler division of her assets in equal shares between her three youngest sons, and it leaves the decision as to how much money their older brother, Clarence, should receive up to his three brothers.

Clarence, Aretha’s first child, has unspecified special needs, and he is currently 66 years old and has lived in a group home near Detroit for decades. Clarence is represented by his own court-appointed attorney. 

Furthermore, in her 2014 will, Aretha reportedly wrote the names of Sabrina, Ted, and Kecalf as executors, but then apparently crossed out the first two names, according to Hour Detroit. Given this, when the three wills were discovered, Kecalf filed in court to be appointed as the estate’s executor.

However, Ted and the attorney for Clarence, fought against this move. In a court filing, Clarence’s attorney noted that Kecalf isn’t fit to be the executor, as he has not “displayed any ability or inclination to support himself and lacks the financial knowledge or ability to act as a fiduciary.”

Family Secrets Come to Light
In addition to causing infighting between the brothers, Aretha’s handwritten wills also disclosed a previously unknown fact about Clarence’s father, according to a report by NBC News. Aretha gave birth to Clarence Franklin in 1955, when she was just 12 years old. The late singer rarely discussed her personal life in public, and up until recently, Clarence’s father was reported to be a friend of Aretha’s from school, named Donald Burk.

However, one of the handwritten wills from 2010 names Clarence’s father as Edward Jordan Sr., who’s also the father of Aretha’s second son, Edward, who was born when she was 14. Little is known about Jordan, but in the will, Aretha makes it clear that he was a terrible father and should get nothing from her estate.   

On page six of the purported document, Aretha wrote, “His father, Edward Jordan Sr., should never receive or handle any money or property belonging to Clarence or that Clarence receives, as he has never made any contribution to his welfare, future, or past.” In both instances, the word “never” was underlined.

The resulting court battle between the brothers also led Sabrina to quit as executor. In January 2020, Sabrina filed her resignation with the court, noting that the family feud “is not what [Aretha] would have wanted for us.” With Sabrina gone, in March 2020, Oakland County Probate Court Judge Jennifer Callaghan appointed Reginald Turner, a Detroit attorney and longtime friend of Aretha’s, as temporary personal representative for the estate.

The judge also scheduled a hearing for June 2020 to determine whether any of the three handwritten wills can be deemed valid. Under Michigan law, a handwritten, or holographic, will can be valid as long as it meets three primary requirements: it must be dated, signed, and written by the decedent.

A Fourth Will Appears

Although the judge set a trial to determine the validity of the three wills for the summer of 2020, the ensuing pandemic caused that trial to be delayed—and in the interim, yet another will was uncovered.

According to the New York Times, the latest version of her will, which was filed in probate court in March 2021 by lawyers for Clarence and Ted, including a typed, eight-page document, titled “The Will of Aretha Franklin,” along with another 23 pages that reportedly lay out the terms of a trust for Clarence. The documents are stamped as “draft” and unsigned.

The latest will was reportedly created by Aretha with the law firm Dickinson Wright in 2018, which would make it the most recent. According to the court filing, Aretha hired Detroit lawyer Henry Grix to assist her with estate planning, and the filing includes correspondence between Grix and Aretha discussing her estate plan that’s dated back to 2017. 

As for the division of her assets, the draft of the fourth will would create a trust to benefit Clarence, and it would split her remaining assets equally between her three other sons and leave specific assets to her other relatives. The will also stipulates that the three youngest sons should serve as the estate’s representatives, and as such, they would have the authority to make determinations about the late singer’s music rights, name, and likeness.

According to the lawyers for Clarence and Ted, the documents show that Aretha hired Grix and had been in discussions with him for more than two years about her estate plan, and the documents contained her initials. However, the late singer became too ill “to finish discussions on a few items” and was unable to sign the papers.

It remains unclear exactly how the documents were obtained and why it took so long for them to come to light. While the court filing noted that the documents were discovered “late in 2019,” the lawyer for Clarence told the New York Times that the date was a mistake and that he actually received the document in December 2020 in a response to a subpoena.

Although the fourth will was not signed by Aretha, in his petition, Ted asks the court to recognize the draft of the will and its accompanying notes as Aretha’s final wishes. His petition cites a Michigan law that allows a deceased person’s “intent to be recognized even if the documents are defective in execution.” 

In light of the new will, the judge scheduled a trial for August 2021 to determine whether any of the documents that have been found can be deemed a valid will and therefore govern the Queen of Soul’s estate.

An Incomplete and Inadequate Plan

Based on all of the different versions of her will, it’s clear that Aretha cared deeply about her four sons and other family members, and she wanted her loved ones to benefit from her wealth and other assets. However, given that her first few attempts at planning were done on her own, by hand, and then seemingly lost or forgotten about, she didn’t take the job as seriously as she should have—at least in the beginning. 

Additionally, while the discovery of the fourth will suggests that Aretha did get serious about creating a more formal plan in her final years, it’s puzzling why that version of her will and its corresponding instructions to create a trust for her oldest son, Clarence, didn’t surface earlier. Indeed, if the New York Times report is accurate, those documents were only uncovered in response to a subpoena, and even then, they were incomplete, unsigned, and in our opinion, far from adequate for an estate that large and complex.

What’s more, as we’ll discuss further in the second part of this series, even if Aretha’s fourth will is ruled valid, her estate is still on the hook for millions in back taxes. According to the Detroit Free Press, when she died in 2018, the IRS claimed the singer’s estate owed more than $7.8 million in unpaid income taxes, interest, and penalties. While the sons have reportedly worked out a tentative deal with the IRS that will finally give them access to small cash payments from their mother’s estate, the terms of the deal must still be approved by Judge Callaghan.

Adding that huge tax liability on top of all the other troubles that have plagued her loved ones since the day she died, it becomes all too clear that Aretha could have done a much better job at estate planning. As we’ll see next week, with the proper planning, the legendary singer’s loved ones would have had immediate access to her assets upon her death, avoiding the need for court involvement altogether and kept the contents and terms of her estate totally private.

What’s more, a truly effective plan also would have provided a lifetime’s worth of support for her eldest son Clarence, who has special needs and will likely need financial support for the rest of his life. Most importantly, it would have done so without disqualifying Clarence for vital governmental support, which is essential for those with special needs. If you have a loved one with special needs, contact us, as your Personal Family Lawyer® to learn more about the unique strategies involved with estate planning for those with special needs.

Next week, in part two of this series, we’ll discuss how Aretha’s poor planning created an enormous tax bill for her loved ones, and how the late singer could have avoided that liability, along with all of the other problems her heirs are currently facing, using proactive estate planning.

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.