Whenever you have a partner or multiple owners in a business, one of the most important—but often overlooked—aspects of the relationship is planning for how it will end. It’s crucial that you come up with a clear exit strategy, and do so at the start of your relationship when things are going well, and not wait until you encounter problems down the road.

Indeed, the more thought you put into your exit plan ahead of time, the smoother things will be when one of you finally does move on. Formally documenting your exit strategy is done with what’s called a buy-sell agreement. A buy-sell agreement outlines exactly what would happen to the business in the event an owner leaves the company for any number of reasons, or when one of the owners die or becomes incapacitated. 

Getting Clear On The What Ifs
When creating your buy-sell agreement, you need to consider all the ways you might potentially exit the business, and then outline what will happen to your ownership interests in each of those scenarios. For example, what would happen if you decide to retire and sell your stake in the company? Would you be able to sell to an outside party, or must you first give your partner the option to buy you out?

What if your partner gets divorced, and as a result, her former spouse becomes an owner of your business? What if one (or both) of you dies, or if one of you becomes incapacitated? What if you had to declare bankruptcy?

You need to get clear about all of these potential events, and address how they will impact the ownership of the business in the buy-sell agreement. Ultimately, your buy-sell agreement should proactively address any potential areas of conflict that could arise as a result of a partner’s departure, and minimize any disruption to your company’s operation or profits.

One of the most common areas of conflict is dealing with family members of a deceased or incapacitated partner. For example, should you or your partner die, the surviving partner will most likely not want to be in business with the spouse or children of the partner who died. To protect against that, you will need to put mechanisms within your buy-sell agreement that allow the surviving partner to buy out the incapacitated or deceased partner’s family. And not only do you need mechanisms in a buy-sell agreement for that buyout, but you need insurance or other sources of liquidity to fund the buyout.

Divorce is another area where conflict is likely. Should your partner’s former spouse be awarded a share of the company in a divorce settlement, you can tailor the terms of your buy-sell agreement to ensure the former spouse is compensated, so you aren’t stuck with him or her as a business partner or forced to pay an inflated price for their shares.

Valuation and Funding
An effective buy-sell agreement will not only detail how ownership of the company will be transferred should a triggering event occur, it will also spell out the methods that will be used to assess the value of the partner’s share and provide for where the funding for the purchase will come from. There are numerous ways to address valuation in your buy-sell agreement, such as using a set value that’s agreed-upon ahead of time, using a formula to determine value, or having an appraiser determine the fair market value.

As your Family Business Lawyer™, we can help you determine the optimal method for valuing your business, and then document the specific terms and conditions for executing the valuation into your buy-sell agreement. What’s more, we can put you in touch with business appraisers we trust to assist you once you are ready to get the sales process started.

Since purchasing a partner’s share of the company will require you to come up with a large sum of cash in a short period of time, it’s vital that you have a way to fund your buy-sell agreement. In most cases, the best way to fund your buy-sell is by purchasing insurance. For example, the company can purchase a life insurance policy on each of the owners, and the company would receive the death benefit to purchase the deceased owner’s share of the business and/or buy out the deceased’s heirs.

An alternate way to work the funding is to have each owner take out a life insurance policy on the other, and name themselves as the beneficiary. Upon the death of an owner, the surviving owner would receive the death benefit and use the money to buy out the deceased’s shares and/or heirs. In a business with more than two owners, rather than having each owner purchase a life insurance policy on each of the other owners, you can set up a trust to own the life insurance policies on behalf of the different owners.

Don’t Do-It-Yourself
Given all of the different variables involved and the fact that the very survival of your business is at stake, you should never rely on generic do-it-yourself (DIY) documents when you are documenting the terms of a business partnership or trying to create your buy-sell agreement. Always consult with an experienced attorney like us your Family Business Lawyer™ to ensure these essential agreements are properly created and all of the possible contingencies are accounted for.

Whether you need a new buy-sell agreement created or want us to review an existing agreement—even one drafted by another lawyer—meet with us your Family Business Lawyer™.  We will support you to not only create clear concise agreements, but also implement an agreement process that will allow you to more effectively navigate the inevitable changes that take place in the relationship while dealing with conflict in a way that’s both healthy and productive.

Finally, while creating a buy-sell agreement is an important way to protect your company in the event one of the owners decides to leave or if one of you dies or becomes incapacitated, such an agreement is merely one part of an effective estate plan. Given that your business is likely your family’s most valuable asset, you’ll want to consult with us your Family Business Lawyer™ to discuss the other legal protections you should have in place. 

Whether it’s additional insurance, succession planning, different types of trusts, or all of the above, we can ensure the company and wealth you’ve worked so hard to build will survive—and thrive—no matter what. Contact us, your Family Business Lawyer™ today to schedule an appointment.

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 third year of the pandemic, we are coming to terms with just how fragile our lives and health really are. If you haven’t gotten sick yourself, it’s almost certain you know someone who has, and many of us even know of one or more individuals who have died in the past two years. 

Although serious illness and death are something we are always at risk for—and should plan for—the pandemic has forced many of us to face our own mortality like no other event in recent memory. Some of those worst-case scenarios we thought would never happen now seem much more likely, and for some people, those unthinkable situations have even become reality.


Understanding The Risks

Yet even if you manage to avoid becoming sick right now, the fact remains that we are all vulnerable to serious illness or injury, regardless of how young or healthy you are. And if you are a parent, one of the most frightening aspects of that reality is knowing that should something happen to you, your children would be left without you to care for them, whether only for a temporary period or permanently.

With this in mind, consider the following scenario: You and your spouse are out to dinner, and your kids are at home with the babysitter. On your way home, you get into a car accident. When you fail to make it home on time, the babysitter calls you repeatedly, but when no one answers, she calls the police.


The police arrive and find your kids with the babysitter, who offers to stay with the children until a relative can be found to take them. But because the babysitter doesn’t have the legal authority to care for the children—even temporarily—the police have no choice but to call Child Protective Services. These authorities will take your children into custody until they can locate and/or appoint the proper guardian.

This is the case even if you have friends or family living nearby who are willing to care for the children. If you haven’t left proper legal documentation, the authorities have no option but to call Child Protective Services. You must give the authorities a legal basis for keeping your children with the friends or family you designate.

What’s more, your kids are still at risk of being taken by the authorities even if you’ve named legal guardians for them in your will. That’s because your will only becomes operative in the event of your death, so if you are incapacitated by an accident or illness, your will would be ineffective.

Or perhaps the guardians you named in your will live far from your home, so it would take them several days to get there. If you haven’t made legally-binding arrangements for the immediate care of your children, it’s highly likely that they will be placed with Child Protective Services until those guardians arrive. 

And does anyone even know where you will is located and how to access it? 

Most Guardianships Are Lacking
These are just a few of the many scenarios that can cause your children to be taken into custody by strangers or placed with a family member you would never want caring for them. And sadly, we see this happen even to those parents who’ve worked with lawyers to name legal guardians for their children in their will, because most lawyers simply don’t know what’s necessary for planning and ensuring the well-being and care of minor children.

However, as a Personal Family Lawyer® firm, we 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. As a result of this training, we offer a comprehensive system known as the Kids Protection Plan®, which is included with every estate plan we prepare for families with young children.

Developed by a nationally recognized attorney, who is a mom herself, the Kids Protection Plan® provides parents of minor children with a wide array of legal planning tools to make sure there is never a question about who will take care of their kids if they are in an accident or suffer some other life-threatening incident.

The full Kids Protection Plan® includes all of the following:

  • Legal documents to name short-term guardians, who can be there immediately for your children, so they will never be taken into the arms of strangers or anyone you wouldn’t want. Not even for a moment.
  • Letters to the people you name as short-term guardians, so the people you have named will know just what to do if called upon.
  • Instructions to everyone who takes care of your kids as to exactly what to do if you are in an accident, so there’s never any question about what to do or who to call.
  • Legal documents to name long-term guardians, who will raise your children just as you would, so there is no family feuding over your children.
  • Letters to your long-term guardians, letting them know exactly what to do if called upon.
  • Instructions and guidelines for your long-term guardians on how you want your kids to be raised to ensure your kids are raised with your values, insights, stories, and experience.
  • Medical powers of attorney for your minor children, so the next time they travel without you or you travel without them, you know they will get the medical care they need.
  • A custom, personalized I.D. card for your wallet stating that you have minor children at home and who should be contacted if you are in an accident.

Here’s How To Get Started

While you should meet with us to put the full Kids Protection Plan® in place as soon as possible, protecting your children is such a critical and urgent issue, we’ve created a totally free website, where you can visit to get your plan started right now.

⇒ If you’ve yet to take any action at all, visit this easy-to-use and 100% FREE website, where you can take the first steps to create legal documents naming long-term guardians for your children to ensure that should anything happen to you prior to creating your formal estate plan, your kids would be cared for by the people you would want in exactly the way you would want. Get started here now.

After you’ve completed those initial actions, schedule a Family Wealth Planning Session with us, your neighborhood Personal Family Lawyer®, where we will put the full Kids Protection Plan® in place, and determine if there is anything else your family might need to ensure the well-being and care of your children no matter what happens.

⇒ If you have already named long-term guardians in your will, either on your own or with a lawyer, we can review your existing legal documents to see whether you have made any of the six common mistakes that could leave your kids at risk, and then revise your plan to ensure your children are fully protected.

A Learning Experience
Although the pandemic is likely to go down as one of the most tragic periods of our lifetime, if it motivates more people to get serious about estate planning, it may end up having some lasting positive effects. On that note, if you are a parent of minor children and want to ensure that your kids will always be taken care of by the people you want, in the way you want, no matter what happens to you, meet with us, your Personal Family Lawyer® to put the Kids Protection Plan® in place today.

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

As a small business owner, you may not consider cybersecurity as one of your top priorities, especially if you have a limited online presence. However, that kind of thinking can leave your company seriously vulnerable to hackers and a rapidly increasing number of online threats.

And the threat against small businesses is at an all-time high. In fact, more than half of all small businesses suffered a breach of client data within the last year, according to a recent study by Hiscox insurance. The pandemic has only added to the risk. With more and more employees working remotely, where they often use unsecure public networks, shared personal computers, and mobile devices, businesses are more vulnerable than ever.

As a result, the FBI reports a 400-percent increase in cyber attacks since the pandemic began. Seeing that the cost to resolve a single data breach averages roughly $200,000, and some 60% of small businesses that suffer a cyber attack go out of business within six months, if you haven’t taken your company’s cybersecurity seriously, you most definitely need to start.

While you should consult with a cybersecurity specialist and your Family Business Lawyer™ to implement a comprehensive digital protection plan, taking the following five actions can help protect your business from cyber threats and minimize the damage should you experience a breach.  

1. Install Multiple Levels Of Security
Protect your company’s network, servers, and computers with a comprehensive array of cybersecurity systems, such as anti-virus software, firewalls, intrusion-prevention systems, and anti-subversion software. The key is to add as many layers of security as possible, since hackers are likely to move on to an easier target if your network and devices are well defended.

Remember to regularly install updates to your security software, so you’ll be protected against all of the latest threats. Regularly check your software vendors’ websites and the U.S. Computer Emergency Readiness Team’s website to stay up-to-date on the latest viruses, vulnerabilities, and patches.

If you don’t have one already, consider hiring a dedicated IT specialist, whose job it is to prioritize your company’s cybersecurity, keep your systems updated, and provide cybersecurity training to the rest of your team. If you can’t afford your own IT specialist,  you can outsource the job to an outside firm that specializes in small business cybersecurity.

2. Educate Your Team
Oftentimes, your own employees are your biggest security risk. It’s essential that you train your team how to recognize and defend against email phishing, social engineering attacks, ransomware, and other cyber threats. You should also train them in cybersecurity best practices, and ensure they are aware of the potential cost a data breach can have on your business—and their livelihoods.  

Some 63% of data breaches occur due to weak, default, or stolen passwords. Given this, implementing and enforcing team-wide password protocols, limiting who has access to sensitive data, and requiring frequent password resets is one of the easiest and most effective ways to beef up your cyber defenses.

For best results, document your password protocols and other cybersecurity policies in a standalone resource that your team can easily reference if they have any questions or issues with cybersecurity. Make cybersecurity education a part of your onboarding, and require training updates in response to new threats and/or the implementation of enhanced security measures.

3. Partner With The Most Secure Web Hosting Service
Web hosts house your website, online applications, and other data on off-site servers. There are numerous web hosting services available, and they come with varying levels of server-side protection, including security cameras, anti-virus and anti-spyware systems, and hard-wired firewalls.

Choose a web host that offers a high level of security, especially against cross-side server attacks, which involve hackers who open a fake account with the web host to access other websites on the same server. For enhanced protection, use a virtual private server (VPS), which partitions your website from other sites that share the same server.

For maximum protection, open a private server account in which your website and data are maintained on your own separate server. This option can be pricey, but it’s still a lot cheaper than getting fined or sued for a data breach.

3. Invest In Cyber Insurance

As with other forms of liability your business faces, having the proper insurance in place is a key component of your company’s cybersecurity plan. Cyber insurance offers protection against damages resulting from data breaches, hacking, network failures, and other events. If your business’ network is breached, the cost to recover and restore this information can be extensive. And you can also be held liable for damages to third parties, such as customers and vendors, whose data was lost or stolen from your system.

Depending on the coverage, cyber insurance can pay for a wide array of services needed to repair your network and retrieve your data, including investigative analysis, business interruption, and data recovery. It can also cover the cost of notifying clients of the breach, paying regulatory fines, as well paying for lawyer fees, judgments, and settlement costs resulting from a lawsuit.

Not all businesses need cyber insurance, and the ones that do can require varying levels of coverage. Before you buy a cyber policy, consult with us your Family Business Lawyer™ to assess the risk your particular business faces and determine the kind of policy best suited for your operation.


4. Hire Cybersecurity Professionals

If you are in an industry that’s at high risk for cybercrime, such as finance, banking, healthcare, or logistics, consider hiring an outside cyber security firm to monitor your company’s network and computer activity. These experts are specifically trained in the latest trends in hacking and other cyber threats, and they can add an extra layer of protection when combined with your own in-house IT specialist.

That said, such security firms are often quite expensive, and not all businesses will need to partner with one. As your Family Business Lawyer™, we can help you better assess the risk and reward of hiring these specialists and advise you on whether your company requires such an investment or not.

A Strong Digital Defense Regardless of the size of your digital footprint, you should stay apprised of the latest cyber threats to ensure your sensitive business and client data has the maximum level of protection. As your Family Business Lawyer™, we can advise you on the different safeguards you should have in place and keep you updated on the ever-changing legal landscape surrounding data privacy. And if you’re ever hacked, we can defend you in court against any lawsuits or other liabilities that might result. 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

Do a Google search for “digital wills” or “online estate planning,” and you’ll find dozens of different websites offering low-cost, do-it-yourself (DIY) and sometimes even free estate planning documents, such as wills, trusts, powers of attorney, and healthcare directives.

From LegalZoom® and Rocket Lawyer® to TrustandWill.com and FreeWill.com, these DIY legal documents may seem like a cheap and easy way to finally cross estate planning off your to-do list—and do so without having to pay a lawyer big bucks to assist you. After all, you’ve been able to prepare and file your taxes online for years, is estate planning really that much different? And aren’t lawyers using the very same forms you find on these DIY document websites? 


An Inconvenient Truth
This kind of thinking is exactly what DIY and online estate planning services would like you to believe, but it’s far from true. In fact, relying on DIY or online estate planning documents can be one of the costliest mistakes you can make for your loved ones. Keep in mind, just because you created “legal” estate planning documents that doesn’t mean they will actually work when you—or most importantly, the people you love—need them. 

Without a thorough understanding of your family dynamics, the nature of your assets, and how the legal process works upon your death or incapacity, you are likely to make serious mistakes when creating a DIY estate plan. Even worse, these mistakes won’t be discovered until it’s too late—and the loved ones you were trying to protect will be the very ones forced to clean up your mess or get stuck in a costly and traumatic court process that can drag out for months or even years. 

Last week, in part one of this series, we covered the first two ways DIY estate plans can fail, and here, we’ll cover the remaining three.

Number 3 Way Your DIY Estate Plan Can Fail: Choosing the Wrong Executors or Trustees
State laws are also very specific about who can serve in certain roles like executor, trustee, or financial power of attorney. In some states, for instance, the executor of your will must either be a family member or an in-law, and if not, the person must live in your state. If your chosen executor doesn’t meet those requirements, he or she cannot serve.

Furthermore, some states require the person you name as your executor to get a bond, which is like an insurance policy, before he or she can serve. Such bonds can be difficult to get for someone who has a less-than-stellar credit score. If your executor cannot get a bond, it would be up to the court to appoint your executor, which could end up being someone you would never want managing your assets or a third-party professional, who could drain your estate with costly fees.

Number 4 Way Your DIY Estate Plan Can Fail: Lost and Unclaimed Assets
Unless your family knows exactly what assets you own and how to locate and access those assets, that property is as good as gone when you die—and your online will won’t be of any use to your family. In fact, there’s currently more than $50 billion worth of unclaimed property sitting in the different state Departments of Unclaimed Property across the U.S. because a family member died and their loved ones lost track of their assets.

To ensure that none of your assets end up in our state’s Department of Unclaimed Property, and your family will know exactly what you have and how to find everything if something happens to you, it’s essential that you keep a regularly updated inventory of all your assets. As your Personal Family Lawyer®, we will not only help you create a comprehensive asset inventory, we’ll make sure it stays regularly updated throughout your lifetime. 

Number 5 Way Your DIY Estate Plan Can Fail: Unforeseen Conflict Between Family Members
Family dynamics are—to put it lightly—quite complex. This is particularly true for blended families, where spouses have children from previous relationships. A DIY service cannot help you consider all the potential areas where conflict might arise among your family members and help you plan ahead of time to avoid such disputes. Even the best set of documents will be unable to anticipate and navigate these complex emotional matters—but we can.

Every day we see families ripped apart due to poor estate planning. Yet, we also see families brought closer together as a result of handling these matters the right way. When done right, the estate planning process is actually a huge opportunity to build new connections within your family, and our lawyers are specifically trained to help you with that. 

In fact, preventing family conflict with proactive estate planning is our special sauce and one of the primary reasons to work with us, as your Personal Family Lawyer®, rather than relying on DIY planning documents.

The Kind Of Planning Your Family Deserves
When it comes to estate planning, the documents you use are only as good as the understanding your lawyer has about your family dynamics, the nature of your assets, and how the law will apply to your situation upon your death or incapacity. And in most cases, you will need far more than just a few fill-in-the blank documents to properly address all of those complexities.

If you truly want things to be as simple as possible for the people you love when something happens to you, you want a trusted counsel who can prepare an estate plan that will achieve your desired objectives with a minimum amount of stress and conflict for the loved ones you are leaving behind, not just someone who has the best documents. This is where a Personal Family Lawyer® comes in. 

If you’ve yet to do any planning, contact us, your Personal Family Lawyer® to schedule a Family Wealth Planning Session™, which is the first step in our Life & Legacy Planning Process. During this initial meeting, we’ll take you through an analysis of your assets, what’s most important to you, and what will happen to your loved ones when you die or if you become incapacitated.

If, as a result of this process, we determine that you really do have a very simple situation, and you want to create your own planning documents yourself online, we will support you to do that. However, if as a result of the process, you decide you would like us to draft a plan for you, we’ll support you to find the optimal level of planning for a price that’s right for you.

As part of our planning process, we will inventory all of your assets and ensure they are titled in a way that will keep your family out of court and out of conflict no matter what happens to you. Moreover, we take the time to get to know your family members and include them in the planning process, so everyone affected by your plan is well-aware of what your latest planning strategies are and why you made the choices you did, along with knowing exactly what they need to do if something happens to you. And if you are the parent of minor children, we will put safeguards in place to ensure that your kids are never placed into the care of strangers, even temporarily.

Finally, and perhaps most importantly, our Life & Legacy Planning process will ensure that it’s not just your money and tangible assets that get preserved and passed on, but also your family’s intangible legacy, which includes your family’s most treasured values, insights, stories, and mementos. We capture and record your family’s legacy using a unique process known as a Family Wealth Legacy Interview, which is included with every estate plan we create.

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

As your Personal Family Lawyer®, we are specifically trained to educate, empower, and support you to make the right decisions for the people you love, and get to know what really matters most to you. Furthermore, because your plan is designed to protect and provide for your loved ones in the event of your death or incapacity, we aren’t just here to serve you—we’re here to serve your entire family. 

In the end, as your Personal Family Lawyer®, our Life & Legacy Planning services go far beyond simply creating documents and then never seeing you again. We will develop a relationship with you and your family that lasts not only for your lifetime but for the lifetime of your children and their children if that’s your wish.

While the DIY approach might be a good idea if you’re looking to build a new deck for your backyard, when it comes to estate planning, it’s one of the worst choices you can make. Are you really willing to put your family’s well-being and wealth at risk just to save a few bucks? If you want to truly do right by those you love, contact us, to get your Life & Legacy Plan started today. 

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

Paying your children—whether they’re tweens, teens, or young adults—to work for your company is one of the greatest advantages of running a family business. By hiring your kids, you can help them develop a strong work ethic, give them experience managing money, and jumpstart their ability to save for their future, all while keeping more wealth in your family.

In return, you get employees who have a built-in sense of commitment, teamwork, loyalty, and you may even end up with a long-term succession plan. This sense of dedication is why so many business owners like to claim that their team is “just like family.” 

On top of those benefits, hiring your kids also comes with some significant tax-saving benefits as well. And with the passage of the Tax Cuts and Jobs Act (TCJA), those tax benefits are now even greater than ever before. That said, if you do hire your kids, make sure they do legitimate work and you pay them reasonable wages, or you may attract unwanted attention from the IRS. More on this below.

Their First $12,550 Worth of Earnings Are Tax Free
The TCJA nearly doubled the standard deduction, which increased from $6,300 to $12,550 starting in 2018. This means your children will pay zero federal income tax on anything they earn up to $12,550. This tax break alone can save you thousands each year, and applies to both minors and those kids over age 18.

And even if your kids do earn more than $12,550 for the year, they will pay taxes at the reduced rates established by the TCJA, so they’ll still be reducing your family’s tax bill. Plus, as with other employees, you can deduct your child’s salary as a business expense, reducing your taxable income even further.

Even if your child earns less than $12,550 for the year, you should still have them file a tax return, especially if they are over age 18. Teaching them to file a tax return not only gives them experience managing their finances, but it also allows them to start establishing a credit history.

And depending on your business structure, you may be able to save serious money on your child’s payroll taxes, too.

Payroll Tax Exemption
If your business is a sole proprietorship, a husband-wife partnership, a single-member LLC taxed as a sole proprietorship, or an LLC taxed as a husband-wife partnership, you might not be required to withhold or pay any Social Security and Medicare tax (FICA) or federal unemployment tax (FUTA) on your kid’s wages.

This payroll tax exemption applies to parents who employ their children for either part-time or full-time work. The FICA exemption covers parents who employ kids under age 18, while the FUTA exemption lasts until they reach 21. This exemption can be used to shift some of the income from your own tax rate to your child’s rate, which is most likely significantly lower than yours.

Work-Arounds For Corporations
If your business is set up as an S or C corporation, you don’t qualify for the payroll tax exemption. However, there are ways to get around this restriction by using some creative—yet 100% legal—tax strategies.

For example, instead of paying your kids directly from your corporation, you can create a family management company and pay them from that business. By setting up this new company as a sole proprietorship separate from your primary business and paying your children from it, you won’t have to withhold payroll taxes.

If you own an S or C corporation, meet with us, your Family Business Lawyer™ to learn more about the different work-arounds that allow you to pay your kids in your business and still save on your taxes.

Stay In Compliance With The IRS
With such hefty savings on the table, it’s inevitable that some people will try to abuse these provisions by claiming the tax savings without having their kids do any actual work, or by vastly inflating their wages. To prevent this, the IRS requires your children to meet a few criteria in order to qualify for these tax benefits:

  • They must perform legitimate work appropriate to their age and skill set.
  • Their work must exceed the normal household chores they already do.
  • They must be paid the going rate for their services and not be over-compensated.
  • Good records must be kept, including filing W-2s.
  • Their services, work conditions, and hours must be in compliance with federal and state child-labor laws.

There are numerous different jobs your kids can handle for you, which can not only give them valuable work experience, but also provide your business with much needed support. If you are going to pay your kids, at least make them earn it. Here are a few jobs your kids can take over for your business. 

  • Serve as models in your advertising
  • Answer incoming calls
  • Cleaning your office
  • Washing company cars
  • Updating customer lists 
  • Stuffing mailers and making trips to the post office 
  • Updating your company’s social media posts

If you employ your kids (or want to do so), meet with us, your local Family Business Lawyer™ to ensure you’re doing everything by the book, and your business isn’t in danger of attracting unwanted attention from the IRS.

Maximize Your Company’s Tax Savings
With such significant tax savings available, there’s never been a better time to put your kids to work in the family business. However, hiring your children is just one way you can reduce your yearly tax bill—there are numerous other tax-saving opportunities you might not be aware of. Consult with us your Family Business Lawyer™ to make sure you don’t miss out on a single one.

This article is a service of Liz Smith Law, 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.

Do a Google search for “digital wills” or “online estate planning,” and you’ll find dozens of different websites offering low-cost, do-it-yourself (DIY) and sometimes even free estate planning documents, such as wills, trusts, powers of attorney, and healthcare directives.

From LegalZoom® and Rocket Lawyer® to TrustandWill.com and FreeWill.com, these DIY legal documents may seem like a cheap and easy way to finally cross estate planning off your to-do list—and do so without having to pay a lawyer big bucks to assist you. After all, you’ve been able to prepare and file your taxes online for years, is estate planning really that much different? And aren’t lawyers using the very same forms you find on these DIY document websites? 


An Inconvenient Truth
This kind of thinking is exactly what DIY and online estate planning services would like you to believe, but it’s far from true. In fact, relying on DIY or online estate planning documents can be one of the costliest mistakes you can make for your loved ones.

Keep in mind, just because you created “legal” estate planning documents that doesn’t mean they will actually work when you—or most importantly, the people you love—need them. Without a thorough understanding of your family dynamics, the nature of your assets, and how the legal process works upon your death or incapacity, you are likely to make serious mistakes when creating a DIY or online estate plan.

Even worse, these mistakes won’t be discovered until it’s too late—and the loved ones you were trying to protect will be the very ones forced to clean up your mess or get stuck in a costly and traumatic court process that can drag out for months or even years.

In the end, relying on DIY or online estate planning documents can actually be worse than having no estate plan at all—and here’s why:  

A False Sense Of Security
Creating your estate plan using online document services can give you a false sense of security—you think you’ve got estate planning covered, when you most likely do not. DIY plans may even lead you to believe that you no longer need to worry about estate planning, causing you to put it off creating a proper plan off until it’s too late.

In this way, relying on DIY estate planning documents is one of the most dangerous choices you can make. In the end, such generic forms could end up costing your family even more money and heartache than if you’d never gotten around to doing any planning at all.

At least with no plan at all, estate planning would likely remain at the front of your mind, where it rightfully belongs until it’s been handled by you and trusted counsel to guide you.

Planning To Fail
The primary purpose of estate planning is to keep your family out of court and out of conflict in the event of your death or incapacity. Yet, as cheap online document services become more and more popular, millions of people are learning—or will soon learn—that taking the DIY route can not only fail to achieve this purpose, it can make things even more complex and costly for the people you love.

Most people assume that estate planning is all about filling out the right legal documents. But in reality, the true value of estate planning is not about the documents themselves—it’s the planning aspect that’s most important, not the documents. Documents are the byproducts of the plan and the outcome of counseling and decisions that require thought, consideration, and a true understanding of all the options and their potential consequences.

Without proper planning and consideration, the documents themselves—wills, trusts, health care directives, and powers of attorney—aren’t worth the paper they’re printed on. And by proper planning, we mean having a trusted advisor who can help you anticipate all of the potential problem areas and conflicts—as well as potential opportunities—that could impact your plan, and then help you adapt your plan accordingly and create documents to ensure the maximum benefit (and minimum heartache) for your loved ones. 

When done right, the value of this kind of estate planning is truly priceless because it results in the right plan for your family at the right budget for you, and it leaves your loved ones with not just a set of documents, but with a trusted advisor who will be there for them when you cannot be. And this is exactly what we as a Personal Family Lawyer® firm provide every client we serve through our Life & Legacy Planning Process. 

In a future article, we will go into detail about how our planning services work, but first let’s look at how DIY planning can go wrong by looking at five of the most common failures you are likely to encounter when using online DIY estate planning documents, instead of working with a lawyer.

One Size Does Not Fit All
“In preparing for battle, I have always found that plans are useless, but PLANNING is indispensable.” -Dwight D. Eisenhower, Former U.S. President and Commander of Allied Forces during WWII

A typical set of documents that you get from an online DIY estate planning service (and even many estate plans created by lawyers) will usually include three to five basic legal documents: a will, a financial power of attorney, a healthcare directive, possibly a trust, and a legal guardian nomination, if you have minor children. By now, it’s fairly common knowledge that these are the legal documents needed in case you become incapacitated or when you die.

But what isn’t common knowledge and what isn’t adequately covered by any online legal document service or even by many lawyers is what needs to go into those documents, and what’s needed to ensure those documents actually work for the people you love when they need them.

You see, standard documents simply cannot address the real-life complexities of your family dynamics, your assets, and the ever-changing circumstances of your life. Contrary to what the DIY services would like you to believe, estate planning is not a one-size-fits-all, once-and-done kind of deal. Even if you think your particular assets and family situation are simple, that turns out to almost never be the case, and you are likely to face one of the following issues that can leave your loved ones at risk.

5 Ways Your DIY Estate Plan Can Fail

Number 1 Way Your DIY Estate Plan Can Fail: Thinking A Will Is Enough
One of the ironic things about estate planning is that the one legal document everyone thinks they need most is the one legal document that actually accomplishes the least. Yes, you know you need a will, but a will alone doesn’t do much. 

A will can ensure the people you choose are the ones who handle your affairs and who ensure your assets go where you want them to go in the event of your death. But a will does not keep your family out of court. In fact, relying on a will alone ensures your family and friends have to go to court when you die. Plus, a will doesn’t even come into play if you are incapacitated. And if you have minor children, relying on a will alone to designate their legal guardians could leave your kids vulnerable to being taken out of your home and into the care of strangers.

Number 2 Way Your DIY Estate Plan Can Fail: Improper Execution
You could have the best documents in the world, but if you fail to sign them, or sign them improperly, they will fail. It may seem silly, but it’s true. We’ve seen family after family who brought us an estate plan after the death or incapacity of a loved one that we were not able to support them and act upon because the documents were either not signed, or were signed improperly.

To be considered legally valid, certain estate planning documents like wills must be executed (i.e. signed, witnessed, and/or notarized) following very strict legal procedures. For example, many states require that you and every witness to your will must sign it in the presence of one another. If your DIY will doesn’t mention that condition (or you don’t read the fine print) and you fail to follow this procedure, the document can end up worthless.

If you have created or started a DIY estate plan and wish to have it reviewed, contact us, your local Personal Family Lawyer® to see how you can get a Family Wealth Planning Session™ at no cost to you. During this 2-hour session, we will review what would happen to your family and your assets with your current plan and discuss the best next steps for protecting your family. 

Next week in part two of this series, we will cover the remaining three ways your DIY estate plan can fail and leave your family at risk. 

This article is a service of Liz Smith Law, Personal Family Lawyer®. We do not 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 Family Wealth 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 to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

Business growth is a dream that sparkles in the eyes of many small business owners. But bigger is only better when your business is set up to support the life you want. Bigger is not necessarily better. Best is a business that supports you to have a life you love, with an income to match, providing services or products you are proud to deliver. So, how do you get there for sustainable success in 2022 and beyond? Let’s take a look together. 

First and foremost, don’t worry about “scale” unless you are building a business that actually needs to scale. Instead, start by getting clear on what you are creating, why you are creating it, and what you need to do to get to just your own next level of income while freeing up your time, energy, and attention in the right amount so you can play your right role in your business.

Depending on your skills, talents, and desires, your right role may be to provide the service in your business, or make the products, while you hire out all of the admin, sales, marketing, and executive functions. Or, conversely, your right role may be to be the leader of your business, the strategist, visionary, and oversee sales, marketing, and executive functions while you hire out the sales or product delivery. Very rarely will it make sense for you to hold all the roles in your business, but unless you’ve got a proven product or service, and the sales, marketing, and delivery teams to support it, thinking about scale is not your next right step. However, if you do have a proven product or service and the sales, marketing, and delivery teams to support it, your next step may be scale.

As a Family Business Lawyer™, one of the things we can support you with as we move into 2022 is to get absolutely clear on where to focus your time, energy, attention, and money — which we call your TEAM resources — to align your desires for your life with your focus for the future of your business.

Factors we will focus on where to align the use of your resources toward the next level of growth of your business:

  • Getting clear on exactly how much you want to earn from your business, and how much time, energy, and attention you have to earn it, and then identifying where the gaps are between your current income and your current use of time, energy, and attention so you can focus on filling those gaps, strategically.
  • Streamlining your systems to increase productivity and efficiency. We’ll help you think  about how best to improve your tech infrastructure, company policies, and workflow.
  • Protecting your business from the potential pitfalls of growth. Rapid growth can expose you to vulnerable circumstances that can counteract the benefits of increased business. Small oversights can really add up when your business is experiencing rapid growth. We’ll help you to strengthen your legal, insurance, financial, and tax systems to support your next level of growth, so the “container” you’ve created can hold more, rather than “springing leaks” as you grow. 
  •  Hiring key players for leverage. Who and how you hire can be one of the most important determiners of your next level of success, and the right agreements negotiated clearly can make all the difference. 
  • Building strategic partnerships that will see you through your growth. We can support your development with multiple vendor relationships so that they can meet your growing needs. Don’t put all your eggs in one basket. And ensure you’ve got airtight agreements with vendors that properly share the risk. We can help with this too.

Growing your business sustainably is what we are all about. Now is the time to look at your next level of growth, and we’re here to support you. As your Family Business Lawyer™, we’re here to help you implement a legal, insurance, financial, and tax system that will ensure you can grow your business efficiently and worry-free.

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

When it comes to estate planning, most people automatically think about taking legal steps to ensure the right people inherit their stuff when they die. Although that thought is not wrong, it also leaves out a very important piece of planning for life, and perhaps the most critical part of planning.

Planning that’s focused solely on who gets what when you die is ignoring the fact that death isn’t the only thing you must prepare for. Rather,  consider that at some point before your eventual death, you could be incapacitated by accident or illness.


Like death, each of us is at constant risk of experiencing a devastating accident or disease that renders us incapable of caring for ourselves or our loved ones. But unlike death, which is by definition a final outcome, incapacity comes with an uncertain outcome and timeframe. 

Incapacity can be a temporary event from which you eventually recover, or it can be the start of a long and costly event that ultimately ends in your death. Indeed, incapacity can drag out over many years, leaving you and your family in agonizing limbo. This uncertainty is what makes incapacity planning so incredibly important.

In fact, incapacity can be a far greater burden for your loved ones than your death. This is true not only in terms of its potentially ruinous financial costs, but also for the emotional trauma, contentious court battles, and internal conflict your family may endure if you fail to address it in your plan. 

The goal of effective estate planning is to keep your family out of court and out of conflict no matter what happens to you. So if you only plan for your death, you’re leaving your family—and yourself—extremely vulnerable to potentially tragic consequences.

Where to start
Planning for incapacity requires a different mindset and different tools than planning for death. If you’re incapacitated by illness or injury, you’ll still be alive when these planning strategies take effect. What’s more, the legal authority you grant others to manage your incapacity is only viable while you remain alive and unable to make decisions about your own welfare. 


If you regain the cognitive ability to make your own decisions, for instance, the legal power you granted others is revoked. The same goes if you should eventually succumb to your condition—your death renders these powers null and void.


To this end, the first thing you should ask yourself is, “If I’m ever incapacitated and unable to care for myself, who would I want to make decisions on my behalf?” Specifically, you’ll be selecting the person, or persons, you want to make your healthcare, financial, and legal decisions for you until you either recover or pass away.

You must name someone
The most important thing to remember is that you must choose someone. If you don’t legally name someone to make these decisions during your incapacity, the court will choose someone for you. And this is where things can get extremely difficult for you and your loved ones.

Although laws differ by state, in the absence of proper estate planning, the court will typically appoint a guardian or conservator to make these decisions on your behalf. This person could be a family member you’d never want managing your affairs, or a professional guardian who charges exorbitant fees, and could even potentially decimate your estate. Either way, the choice is out of your hands.

Furthermore, like most court proceedings, the process of naming a guardian is often quite a time-consuming, costly, and emotionally draining task for your family. If you’re lying unconscious in a hospital bed, the last thing you’d want is to waste time or impose additional hardship on your loved ones. And this is assuming your family members agree about what’s in your best interest.

For example, if your family members disagree about the course of your medical treatment, this could lead to ugly court battles between your loved ones. Such conflicts can tear your family apart and drain your estate’s finances. And in the end, the individual the court eventually appoints may choose treatment options, such as invasive surgeries, that are the exact opposite of what you’d actually want.

This potential turmoil and expense can be easily avoided through proper estate planning. An effective plan would give the individuals you’ve chosen immediate authority to make your medical, financial, and legal decisions, without the need for court intervention. What’s more, the plan can provide clear guidance about your wishes, so there’s no mistake or conflict about how these vital decisions should be made.

What won’t work

Determining which planning tools you should use to grant and guide this decision-making authority depends entirely on your personal circumstances. There are several options available, but choosing what’s best is something you should ultimately decide on after consulting with an experienced lawyer like us.

That said, we can tell you one planning tool that’s totally worthless when it comes to your incapacity: a will. A will only go into effect upon your death, and then it merely governs how your assets should be divided, so having a will does nothing to keep your family out of court and out of conflict in the event of your incapacity. 


The proper tools for the job
There are multiple planning vehicles to choose from when creating an incapacity plan. And this shouldn’t be just a single document; instead, it should include a comprehensive variety of multiple planning tools, each serving a different purpose. 

Though the planning strategies you ultimately put in place will be based on your particular circumstances, it’s likely that your incapacity plan will include some, or all, of the following:

Healthcare power of attorney: An advanced directive that grants an individual of your choice the immediate legal authority to make decisions about your medical treatment in the event of your incapacity.
Living will: An advanced directive that provides specific guidance about how your medical decisions should be made during your incapacity.
Durable financial power of attorney: A planning document that grants an individual of your choice the immediate legal authority to make decisions related to the management of your finances, real estate, and business interests. 

Revocable living trust: A planning document that immediately transfers control of all assets held by the trust to a person of your choosing to be used for your benefit in the event of your incapacity. The trust can include legally binding instructions for how your care should be managed and even spell out specific conditions that must be met for you to be deemed incapacitated. 

While each of these documents is important, they are often of limited usefulness without the counsel and guidance of a personal lawyer who knows you, knows what’s important to you, knows how to locate your assets, and who can guide your family when they don’t know where to turn.

Don’t let a bad situation become much worse 

You may be powerless to prevent your potential incapacity, but estate planning — which we prefer to call Life and Legacy Planning because it’s about so much more than just your “estate” — can at least give you control over how your life and assets will be managed if it does occur. Moreover, such planning can prevent your family from enduring needless trauma, conflict, court intervention, and expense during an already trying time. 

If you’ve yet to plan for incapacity, meet with us as your Personal Family Lawyer® right away. We can counsel you on the proper planning vehicles to put in place, and help you select the individuals best suited to make such critical decisions on your behalf. If you already have planning strategies in place, we can review your plan to make sure it’s been properly set up, maintained, and updated. Contact us today to get started.

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

If you’ve been working as a true solo entrepreneur up until now, it’s time to consider hiring support to leverage to your next level. The moment when a small business owner decides to hire their first employee is one of triumph. Conversely, knowing how to start the hiring process can also be a moment of confusion that either results in more business enjoyment and income and free time, or that can create trauma and make you want to quit your business altogether.

We can help you hire your first employee the right way, and turn the experience into just one of many that helps your business grow. Follow these steps to ensure your hiring process goes smoothly and you adhere to state and federal regulations.

  • First, and most importantly, get absolutely clear on the ideal outcomes and success metrics for your first hire. The more specific the better, so you can establish a 90-day plan to onboard your new hire, help them get oriented and support them to hit the specific metrics that allow you and them to know it will be a great long-term fit.
  • Consider a 90-day probation period, during which your new hire can work as an Independent Contractor — with the right contract in place — and you make sure it will be a great fit, before you transition your hire into a Full-Time Employee.
  • Apply for your Employee Identification Number (EIN) if you don’t already have one. You will need this for tax purposes and to get the hiring process started.
  • Prepare forms and establish a recordkeeping system to ensure you have the information you’ll need for 1099 reporting or for employee tax withholdings. You need to maintain records on your employee’s federal income tax withholdings, your federal wage and tax statements, and your state taxes for four years. Get organized now, and don’t wait until tax season. Or, better yet, make your first hire a bookkeeper who can support you with all of this, and then the tracking, reporting and setup of your second hire can be handled by your bookkeeper!
  • Have your employee fill out an I-9 statement, and verify their eligibility to work in the U.S.
  • Register with your state’s New Hire Reporting Program. You must report your new hire within 20 days.
  • Once you’ve converted your new hire to an employee, get set up with workers’ compensation insurance. This is required for all companies with employees, and covers on-the-job accidents and injuries, and protects your interests.
  • If you have a physical location, post required notices at your work site, such as state and federal labor laws.
  • File your quarterly tax return (form 941). This is required if you withhold any taxes from your employee’s earnings. And, again, we don’t recommend you file this, but that you have a relationship with a CPA who can file this for you. As a Family Business Lawyer, we can help you find the right CPA for you, if you do not already have a trusted relationship with a tax advisor you love.
  • And, perhaps most importantly, get organized! Hiring an employee means mandatory reporting, more complex tax filings, numerous legal requirements, good recordkeeping and looking out for your employee’s well being. Now is the time to consider employee benefits, maintaining a safe workplace and keeping your employee informed on your company’s practices and their rights and responsibilities. You will also need an excellent record-keeping system to keep track of important information about your employee, stay abreast on labor laws and make sure you comply with state and federal regulations. But, you really don’t need to handle any of this on your own. Contact us, and we can help.

Hiring your first employee is a big step. When you are ready, start by sitting down with us as your Family Business Lawyer®. We can guide you through the hiring process, step by step.

Developing a trusted relationship with a Family Business Lawyer® ensures you are making the best legal, insurance, financial, and tax (LIFT) decisions for your life and 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

If you are like many homeowners, your home is likely your family’s most valuable and treasured asset. In light of this, you want to plan wisely to ensure your home will pass to your heirs in the most efficient and safe manner possible when you die or in the event you become incapacitated by illness or injury. 

Indeed, proper estate planning is as much a part of responsible homeownership as having homeowners insurance or keeping your home’s roof well maintained. When it comes to including your home in your estate plan, you have a variety of different planning vehicles to choose from, but for a variety of different reasons, putting your home in a trust is often the smartest choice. 

In part one, we explained how revocable living trusts and irrevocable trusts work, and we discussed the process of transferring the legal title of your home into a trust to ensure it’s properly funded. Here in part two, we will outline the key advantages of using a trust to pass your home to your loved ones compared to other estate planning strategies.

The Benefits Of Putting Your Home In A Trust
While both wills and trusts are the most commonly used estate planning vehicles to pass on wealth and other assets to your loved ones, putting your home in a trust has a number of distinct benefits compared to using a will.

Avoiding Probate

One of the primary advantages of using a trust to pass on your home to your heirs is the avoidance of the court process known as probate. Unlike a will, assets held in trust do not have to go through probate. During probate, the court oversees the will’s administration, ensuring your assets are distributed according to your wishes, with automatic supervision to handle any disputes.

However, probate can be a long and expensive process, which can be emotionally draining for your loved ones. Depending on the complexity of your estate, probate proceedings can drag out for months or even years, and your family will likely have to hire an attorney to represent them, which can result in costly legal fees that can drain your estate. Plus, probate is open to the public, which can make things risky for those you leave behind, especially if the wrong people take an interest in your family’s affairs.

Unlike a will, if your trust is properly set up and maintained, your family won’t have to go through probate to inherit your home. Instead, your home will immediately pass to your loved ones upon your death, without the need for any court intervention. Avoiding the delay of probate can be especially critical when it comes to a home to ensure the property is properly maintained, since the home may fall into disrepair while probate is being completed. 

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

Protection Against Incapacity
In addition to passing on your home to your loved ones when you die, putting your home in a trust can also protect your home in the event you become incapacitated by serious illness or injury. In contrast, a will only goes into effect upon your death, so it would be useless for protecting your home in the event you become incapacitated.

If you do become incapacitated with only a will in place, your family will have to petition the court to appoint a conservator or guardian to manage your affairs related to homeownership, including paying your mortgage and property taxes, keeping up with your home’s general maintenance, and overseeing the sale of your home. Like probate, the process of petitioning the court to appoint a conservator or guardian can be costly, time-consuming, and stressful.

And there’s always the possibility that the court could appoint a family member as a guardian that you’d never want to manage your family home. Or the court might select a professional guardian, putting a total stranger in control of your family’s most precious asset and leaving it vulnerable to crooked guardians, who could potentially sell your home for their personal financial gain.

With a trust, however, you can include provisions in the terms of the trust that appoint someone of your choosing—not the court’s—as successor trustee to manage your home’s ownership and/or sale if you’re unable to do so yourself due to incapacity. For example, your trust could authorize your successor trustee to sell your home in order to pay for the costs of long-term care should you require it.

Control Over Asset Distribution
Because you can include specific instructions in a trust’s terms for how and when the assets held by the trust are distributed to a beneficiary, a trust can offer greater control over how your assets are distributed compared to a will. For example, you could stipulate in the trust’s terms that the assets can only be distributed upon certain life events, such as the completion of college or marriage, or when the beneficiary reaches a certain age.

In this way, you can help prevent your beneficiaries from blowing through their inheritance all at once, and offer incentives for them to demonstrate responsible behavior. And as we mentioned earlier, as long as the assets are held in trust, they’re protected from the beneficiaries’ creditors, lawsuits, and divorce, which is something else wills don’t provide. 

Avoiding Family Conflict
If you leave your home to your loved ones using a will and you designate more than one person to inherit the property, there’s a potential for conflict because each individual gets an undivided interest in the home. Given this, these individuals must agree on what to do with the home—keep it or sell it—and they may not see eye-to-eye, which can create unnecessary drama that can tear your family apart.

For example, if one of your children wants to keep the home and live in it, but the other prefers to sell it in order to pay off their debts, the child who wants to sell could go to court in order to force their sibling to sell the property. However, this potential for conflict can be avoided by putting your home in a living trust.

If you name more than one beneficiary for your home in your living trust, you can name a neutral third-party as successor trustee to decide what happens to the home, and then manage the distribution after a clear determination is made. For example, the trustee could allow one child to live in the home, while the other could receive other estate assets of equal value, or the trustee could come up with some alternative solution to stave off the potential for conflict. 

Transfer On Death Deed
In some states you can use what’s known as a Transfer On Death (TOD) deed in order to transfer ownership of your home to your heirs without the need for probate. Initially created as an inexpensive alternative to living trusts, a TOD deed allows named beneficiaries to assume ownership of your home without undergoing probate or trust administration.

However, TOD deeds come with some major drawbacks, and they may end up creating unintended problems for your loved ones. To this end, before you rely on a TOD deed as a cheaper alternative to passing your house via a trust, consider the following factors:

  • If your property is held joint tenancy, your joint tenant becomes the sole owner upon your death and has full control of the property, and your TOD deed would be inapplicable.
  • Unlike with a living trust, a TOD deed cannot be used to manage, sell, or borrow against the property during your incapacity. This means that if you become incapacitated, the beneficiary of your TOD deed would be unable to access your home in order to sell or refinance the property to pay for your care, as your trustee could if you had the property in a living trust.
  • If the beneficiary of the TOD deed is a minor upon your death, a court-appointed guardian will need to be named to control your property until the child reaches legal age. With a living trust, however, the person you named as successor trustee can manage the property until your child reaches legal age.
  • Using a TOD deed in order to transfer ownership of your home to try and lower the value of your assets doesn’t count as a Medicaid spend-down, so it will not help you qualify for the program. Plus, depending on the state, the property may even be subject to the Medicaid Estate Recovery Program (MERP) after you die. As mentioned earlier, if you want to qualify for Medicaid and protect your home from MERP, meet with your Personal Family Lawyer® to discuss creating an irrevocable trust. 

Given these potential complications, using a TOD deed to transfer ownership of your home as an alternative to a living trust is almost never a good idea. Instead, your Personal Family Lawyer®, can help you find better ways to transfer ownership of your home that will keep your family out of court and out of conflict.

Find The Solution That’s Right For Your Family
Although putting your home in a living trust can be an ideal way to pass your home to your loved ones, each family’s circumstances are different. This is why your Personal Family Lawyer® will not create any documents until we know what you actually need, and what will be the most affordable solution for you and your family—both now and in the future—based on your family dynamics, assets, and desires.

The best way for you to determine whether or not your estate plan should include a will, a trust, or some combination of the two is to meet with your Personal Family Lawyer® for a Family Wealth Planning Session, which is the first step in our Life & Legacy Planning Process. During this process, we’ll take you through an analysis of your assets, what’s most important to you, and what will happen to your loved ones when you die or if you become incapacitated.

Sitting down with a Personal Family Lawyer® will empower you to feel 100% confident that you have the right combination of estate planning solutions to fit with your unique asset profile, family dynamics, and budget. In fact, we see estate planning as so much more than planning for death, which is why we call it Life & Legacy Planning—it’s about your life and the legacy you are creating by the choices you make today. Contact us today to learn more.

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