Month: April 2010

What’s So Bad About Probate?

The short answer – maybe nothing, maybe something. Whether probate is “bad” is a case-by-case scenario specifically based on what is most important to the individual or family who has no estate plan or who has a will-based estate plan.(or worse, a trust-based plan that was never “funded!”).  But Mike, I thought a will bypassed probate.  That is a common misconception.  A will does not bypass probate . . . a will guarantees a probate.  The will must be probated for it to have any effect.

Ok, that was an aside – back to the topic at hand: probate.  Like I was “saying,” your most important goals and objectives will determine whether or not probate is a “bad” thing for your situation.  Here are the most common complaints I hear and which I am routinely asked to help avoid:

Time consuming: probate can be a very lengthy process.  In my experience, the average probate in Michigan lasts a minimum of 6-9 months (except for very small estates).  I rarely, if ever, see the process take less time than that.  I do routinely see it take longer than that.  And the number one thing I’ve seen cause it to drag on longer (sometimes years!) is conflict.  Conflict among any one of several people, whether it be a case of multiple personal representatives (e.g., executors), between a personal representative and a beneficiary or beneficiaries, or someone who “didn’t get what they thought they had coming,” and they want to challenge it.

Costly: probate can be costly.  In my experience, the average cost is somewhere around 3-5% of the probate estate.  That estimate includes everything that could be a cost associated with the probate: probate fee, attorney fees, appraisal costs, bond premiums, CPA fees, filing fees, etc.  For example, let’s say you have a probate estate of $500,000 (not hard to get to if you include real estate, retirement, and other assets).  5% of $500,000 is $25,000.  That’s a decent “chunk of change,” that many people would rather have going to their family.

Public: probate is public.  I’ve had several people request that I “look into” an estate for whatever reason.  Simple enough.  I go to the county courthouse, go to the probate clerk, give them the name of the person who passed away, and they provide me the file (if a probate has been started).  I can look through everything: who the personal representative is, an inventory of the assets, the will (if there is one), what the final distribution (e.g., accounting) was, and more.  Anyone can look at the file.  So, imagine that you have a young child.  You (mom and dad) both pass away and your estate goes through probate.  The estate is put into a conservatorship estate for the benefit of your child and it will be paid outright to your child when he/she turns 18.  The entire thing is public record.  Not only is your child getting the entire amount left of the estate, but there could be less-than-trustworthy people who also know what amount he/she is getting because they’ve been monitoring the probate file.  Whose to say they won’t take advantage of that opportunity.

The good news is that you can plan around all of this by meeting with an attorney who focuses on estate planning – specifically one who does so on a relationship model, not a transactional one.  Someone who will really learn about who you are, not just what you have, so they can work with you to determine what YOUR most important goals and objectives are and create a plan that meets them.

The Game Is On: Billionaire Dies – Stakes Raised On The Estate Tax Issue

As mentioned in this article over at The Trust Advisor Blog, the stakes are now raised on what Congress will do about the estate tax as a billionaire recently died.  With no estate tax in 2010 (as it stands now), it seems he may have passed his $9 billion (with a “b”) estate to his heirs completely free of estate tax.  If last year’s estate tax rules were still in effect now, the IRS could have collected roughly $4 billion (with a “b”) in estate tax on the estate.

As the article points out, it must be awfully tempting for Congress to reinstate the estate tax in 2010 at its 2009 level and, they say, make it retroactive to the first of the year.  I have to imagine that, given the amount of money at stake now, any attempt at retroactively enacting the estate tax would be challenged tooth and nail by an army of lawyers on Mr. Duncan’s behalf.  It will be very interesting to watch, that’s for sure.  I’ll make sure to keep you updated as I learn more.

A BIG Oops! How Do-It-Yourself Estate Planning Can Disinherit Your Children

Wondering how that could be possible?  Rania Combs, a Texas Wills and Trusts lawyer, has a great blog post entitled “Do-It-Yourself Estate Planning Mistake Disinherits Child.”  Take the time to read the article – it is a quick read and very well done.  The article is especially poignant, as I have had more cases recently involving children from previous marriages.  Rania’s post is just one of several ways that Do-It-Yourself planning can harm a family and just one of several ways that no planning (or inadequate planning) can hurt a mixed family.

There are only two things I will add to Rania’s excellent post:

  1. Not only does Jack’s new wife have complete control of Jack’s assets and no obligation to use them for Rose’s benefit, but what if the new wife gets remarried?  If she remarries and doesn’t do any planning herself (or does typical planning), there is a very real likelihood that Rose won’t get anything.  I’m not just conjecturing . . . that is based on circumstances I’ve seen.
  2. Not only could Jack have set aside all or a portion of his estate in trust for Rose’s benefit, he could have set the trust up to protect those assets from Rose’s creditors, judgments, estate taxes in her estate, and even her own divorce.

Have you had this happen to you or know someone who has?  I am interested in the story, if so.  Please share via comment on this post or emailing me via our Contact Us page.

Who Moved My Office? Things I Learned In My Office Move

As I’m sure all my regular readers know, I recently moved to a new office.  I believe that all things happen for a reason – the timing and the office are perfect.  What I realized during the moving process is that I did some things right and I did some things wrong.  So, I thought I would pass along the key things I learned.  I’m sure I will think of more as I get fully settled in.  I hope this proves useful to many of you.

  • Plan, plan, plan . . . I can’t emphasize that enough.  I’m a chronic planner/organizer and I fell short on this one.  I thought I had everything planned out in the perfect way . . . turns out, not so much.  Planning includes not just finding the location and setting a general time frame for the move.  It also includes planning your moving announcement card, coordinating change of address, notifying all the vendors, customers, memberships, insurance companies, service professionals, referral sources, etc., of your move, and that is just the tip of the iceberg.  It even includes planning on how best to pack up your old office to make the unpacking in the new office as efficient as possible.
  • Start earlier than you think is necessary.  I started my office search and planning process almost 4 months ahead of the scheduled move.  Guess what?  That was too late.  I still found myself rushing at the end.  Give yourself the time.  Particularly in the current commercial real estate market you have the benefit of being able to view many different locations and negotiate with many different property owners/landlords to make sure you are getting the best office.
  • Pick the office that is the best “fit” for your business and your personality.  It seems to go without saying, but at lot of people don’t think about the second one.  By checking out several different locations I was able to find a great location, great office layout, AND a building owner/landlord that is kind and great to work with.
  • Utilize a tenant representative if there is one in your area.  I had the benefit of working with Chris Atwater from Waters Tenant Representation LLC.  If you are moving your business in the West Michigan area, you owe it to yourself to talk with  Chris.  He is a man of integrity and truly represents the tenant throughout the process.  And he is fair to the building owner/landlord as well, which only helps the tenant in the negotiation process.  On a grander scale, I recommend a tenant representative as a way to know that the person you’re dealing with is truly working on your behalf and not conflicted between dual roles.
  • Make a realistic budget and add 20% to it.  This is what I did and it served me VERY well.  I actually came in under budget – partly by getting some great deals and partly by deferring some purchases.  There’s no sense in making an unrealistic budget.  In today’s environment you can get a good feel for pricing on every item you’ll need by searching the internet.  I’m a big fan of supporting local businesses, so I researched the items online to help build my budget and then I purchased locally.
  • Talk to other business owners who have gone through office moves.  Been there, done that is a big help.  You may not use every suggestion they give, but I assure you that listening will be beneficial.

Please feel free to share your suggestions via comment on this post.  I’m curious to hear what others have learned.

And They Say Stuff Like This Never Happens! Why You Should Include Asset Protection in Your Planning

A recent conversation with a banker friend of mine confirmed the value of advanced estate planning techniques and how they apply in a practical, “real life” sense.

Her story was all to familiar – I hear about these situations on a regular basis.  During life, Husband and Wife had an estate plan drawn up.  At least one part of it was a joint trust with no asset protection  components.  They trusted each other, so they were not worried about the surviving spouse doing anything with the trust assets other than what they initially agreed between them.  When the first of them passes away, the surviving spouse will continue to have the power to revoke or amend the trust in any way.  Fast forward many years – wife has passed away and Husband has a new wife.  That’s where the bankers story gets interesting.  Husband revokes the trust, comes into the bank with new wife, and proceeds to put all the bank assets from the trust into a joint account with his new wife.

Now, do you think that is what his first wife would have wanted?  If they had a typical distribution plan, it would have been set up to continue for the surviving spouse (which it did) and then had it split equally among their children.  Well guess what?  It’s quite possible that the children will get nothing.  What is Husband passes away before his new wife?  His trust is revoked and the bank assets (which are substantial) are in joint accounts with his new wife.  If he dies first without anything changing, his new wife stands to get the vast majority of his assets.  Who knows what else he changed to benefit her . . . beneficiary on life insurance, retirement accounts, annuities, etc.

What could Husband and Wife had done to protect against this?  They could have set their estate plan up in a way that guaranteed that not only a large portion of the assets would have gone to their children (no matter what!), but those assets could have been protected from Husband’s creditors, lawsuits against him, and yes, from a future spouse and even divorce.

Don’t misunderstand me, I am a HUGE proponent of marriage and think Husband and Wife should have trusted each other like they did.  I don’t see this advanced planning as saying you don’t trust your spouse, I see it as making sure that you protect as much as possible of what Husband and Wife worked so hard to create together and ensuring that it continues to benefit their family and not the government or creditors.  And this protection becomes even more important the higher your exposure to creditors is . . . for example, high-risk businesses, doctors, lawyers, and other professionals.

This is something I cover with ALL of my clients.  And no matter who you work with, make sure they understand how this protection can be beneficial and – more importantly – how to do it right!

What do you think?  Please share your thoughts.  I always enjoy comments from my blog readers.

How a Layoff Can Be the Start of a Dream Come True

There was a great article in the Grand Rapids Press this past Sunday talking about how layoffs are a driving force behind many recent business start-ups (read it here: http://www.mlive.com/business/west-michigan/index.ssf/2010/04/bad_economy_driving_more_worke.html).  The drive, determination, and creativity of the folks in the article is why I limit my business services to only entrepreneurs.  I believe entrepreneurs can benefit most from my approach and that I can bring the most to the table for these drivers of our economy.

This article provides encouragement to thousands who may consider starting their own business, as it shares the stories of folks who have.  Fear is the common barrier between idea and action . . . at least in my experience.  And knowing that others are in the same situation as you and have taken the same “leap” you’re considering, helps alleviate some of that fear.  The layoffs and overall job loss over the past couple of years has allowed the creative spark that lied dormant in so many individuals, to come out and be put into action.

So I ask . . . do you have a great idea for a business?  A new product?  A new service?  A new way of providing a product or service?  What’s holding you back from acting on that great idea and making it the catalyst to take your future into your own hands?  I look forward to comments on this post or via email.  Let’s work together to keep the entrepreneurial spirit strong!

As a side note, if you are curious about entrepreneurship, you should consider the Michigan Small Business Technology and Development Center’s many resources.  The hub just happens to be right here in West Michigan at Grand Valley State University’s downtown campus.  You can find out more here (http://www.gvsu.edu/misbtdc/).

I would be remiss if I didn’t remind everyone how important it is to have the proper legal, insurance, financial, and tax foundation when you start your business and as you continue to operate it.  I have a very unique approach to providing business formation and ongoing representation services that enables a start-up to spread out the associated fees and receive the guidance and services they need not only upon start-up, but throughout the critical first years.  Comment on this post, call me, or use our contact us page if you would like more information.

Why Every Business Needs a Lawyer (and What Type of Lawyer They Need!)

This will be a short one.  I just read a great blog post by my colleague Gina Madsen in Nevada on this very topic.  I recommend you read it here (http://www.madsenlawoffice.com/Blog/tabid/59/ID/25/Why-Every-Business-Needs-a-Lawyer.aspx).  Gina is very good at being short and to the point.  I won’t add much to her article other than a personal example.  I recently had a new client join one of my business membership programs, and boy is he glad he did.  The first matter I worked on for him was a negotiation that resulted in him saving $3,000!  And beyond that – and more importantly – he had the peace of mind of knowing I was taking care of the issue for him.  He expressed many times how he “just didn’t have to worry about it, or think about it . . . I have a business to run,” and “I just want it taken care of. ” And take care of it I did.

Gina also had a followup post on How to Choose the Right Lawyer for Your Business.  You can read it here (http://www.madsenlawoffice.com/Blog/tabid/59/ID/26/How-to-Choose-the-Right-Lawyer-for-Your-Business.aspx).  Gina and I have the same approach to serving our clients – a relationship model built on service.  A trusted adviser that you can turn to without having to worry about getting a bill in the mail every time you do.  Being proactive rather than reactive (and saving serious $$ by doing so).  And she brings up some very important additional considerations.  I particularly agree with her suggestion to work with a business lawyer who has practical business experience.  I think many business owners overlook the beneficial insight such a lawyer can bring to the table.  I know that my business degree and practical experience helping operate a commercial equipment leasing company help me be a legal adviser AND business adviser to my clients.  And their feedback let’s me know they appreciate that added benefit.

After reading those posts (and my comments) you likely find yourself looking for “that type” of lawyer.  Well, if you are in West Michigan, look no further and call our office for a Small Business Review to see if you qualify to work with our firm.  And if you are in Nevada, I recommend that you call Gina.