As you grow your company, you may discover that it’s time to move beyond leveraging your personal credit to fund your business, whether through business or personal credit cards, and look for outside investors or lenders.

When it comes to securing funding for your business, you must first decide what form of investment is right for your company: equity or debt. More specifically, are you looking for an investment in exchange for an equity stake in your company, or would you be better off getting a loan to fund your business?

Equity Investment: Selling Shares In Your Business

Equity investors provide capital, either in the form of cash (preferable) or in kind with services, in exchange for a percentage of your company’s profits. Generally speaking, equity investment is only feasible when you have a clear plan for exiting your business, so your equity holders will be able to earn a return on their investment when your equity becomes saleable. If you are not yet at the place where you have a clear strategy for exiting your business, you (and your investors) will likely be better off securing a loan to fund your business.

If you are at the early stages of your business and not yet clear on its value, you may want to structure that investment in the form of what’s called a SAFE investment. SAFE stands for “Simple Agreement for Future Equity.” Basically, a SAFE is an agreement between an investor and your company that provides rights to the investor for future equity in your company.

In exchange for the money invested through the SAFE, the investor receives the right to purchase stock in a future equity round (when one occurs), subject to certain conditions set in advance in the SAFE. SAFEs were created to be a simple replacement for convertible notes, and they are designed for startups seeking initial funding.

A SAFE makes sense when your company is likely to raise money in the future through an established valuation, but your company is in too early of a stage to be valued appropriately. For more information on SAFE investments, check out this video from the seed-money startup accelerator Y Combinator.

You definitely want to bring on a trusted legal advisor like us if you decide to fund your company with complex investment structures, such as a SAFE, or if you are going to raise capital by selling equity in your company. With our support and guidance, we can ensure that you have the proper legal and financial systems in place to secure your investment.

Debt Investment: Business Loans

Oftentimes, the best place to start looking for outside investment in your company is by reaching out to your friends and family for a loan. Before you take on a loan from a friend or family member, be sure to document the loan with a promissory note.

A promissory note is basically a legal agreement that you are promising to pay back the money you borrowed under certain terms. The promissory note should have clear terms regarding how you will repay the loan and the specific terms under which you will repay, such as the interest rate you are paying on the loan and over what time period the loan will be repaid.

If you don’t have any friends or family who are interested in investing in your business, you may choose to fund your company with a loan from a bank. The best way to do this is to have a relationship with a local banker, who can get to know you and your business. From there, the banker can help you tap into different small-business financing options, generally through loans from the SBA, or Small Business Administration.

It’s never too early in your business lifecycle to establish a relationship with a business banker. Ideally, contact the local business banks in your community, and go meet one or more of the bankers at each of the banks to find a relationship that feels most supportive to you and your business.

When you receive funding from a business bank, make sure the loan is provided to your business, and not to you personally, whenever possible. And it’s most ideal if you can avoid a personal guarantee of the loan, though not always possible. A personal guarantee means that if your business fails, you will be held personally liable for the balance of the loan, and the bank can come after your personal assets to satisfy the terms of the loan.

Once your business has established income, you may be able to qualify for a loan for your business without a personal guarantee. Yet, in the early stages of your business, this likely won’t be possible. However, you should always ask to get your business loan without a personal guarantee required—the worst case scenario is the banker says no.

Gain Confidence and Clarity With LIFT Systems
Building relationships with investors and lenders can be a great way to fund the future growth of your business. That said, developing such relationships will require you to confront any remaining insecurities or fears you may have about whether or not you are personally worth investing in.

On that note, having solid legal, insurance, financial and tax (LIFT) systems in place will make you far more confident going into these relationships. If you’ve yet to put LIFT systems in place, contact us, as your Family Business Lawyer™, to take our free LIFT 20-Point Assessment.

Just taking the 20-Point Assessment is a huge benefit, as it shows you the gaps in your foundation that need the most attention. From there, you can meet with us to conduct a more thorough audit of your business, so you can eventually implement the full LIFT Foundation System & Toolkit into your operations.

With a solid LIFT foundation for your company in place, you can finally gain genuine confidence about your business’ long-term success. Armed with that clarity, you can devote all of your energy and passion into growing your business into something truly meaningful for yourself, your clients, and your family.

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.

Legendary TV and radio host, Larry King, died at Cedars-Sinai Medical Center in Los Angeles on January 23rd, 2021 at age 87. Larry was hospitalized in December due to COVID-19, but he’d recently been moved from the ICU to a regular hospital room after recovering from the virus. However, the famed broadcaster suffered from a number of other health conditions over the years, including multiple heart attacks, kidney failure, and diabetes, and he passed away from sepsis that was the result of an unrelated infection.

Last week, in part one of this series, we discussed how Larry’s decision to create a handwritten will, rather than take the time to consult with legal counsel to properly update his plan for his impending divorce, is likely to result in a lengthy court battle between Larry’s seventh wife, Shawn Southwick King, and his surviving children. Moreover, we also noted that Larry would have been far better off using a Lifetime Asset Protection Trust, instead of a will, to distribute his assets to his children upon his death.

Here, in the second part of this series, we’ll first look at the different ways a Lifetime Asset Protection Trust would have benefited Larry’s children. From there, we’ll discuss the complications that are likely to arise given that two of Larry’s children died before he had the chance to update his plan—and the planning lessons we can take away from this mistake.

Lifetime Asset Protection Trusts: Airtight Protection For Your Child’s Inheritance
A Lifetime Asset Protection Trust is a unique estate planning vehicle that’s specifically designed to protect your children’s inheritance from unfortunate life events, such as divorce, debt, illness, and accidents. At the same time, the trust gives your children the ability to access and invest their inheritance, while retaining airtight asset protection for their entire lives.

For someone with as much wealth and as many heirs as Larry, a Lifetime Asset Protection Trust, built into his Living Trust, would have been an ideal vehicle to protect and pass on his assets to his heirs. To see why, let’s break down how these unique trusts work.

To avoid the court process of probate that’s inherent with a will-based plan, most lawyers will advise you to put the assets you’re leaving your kids in a revocable living trust—and this is the right move. But most living trusts are structured to distribute your assets outright to your children at certain ages or stages, such as one-third at age 25, half the balance at 30, and the rest at 35. Giving outright ownership of the trust assets in this way leaves them at serious risk of being lost or squandered.

While a living trust may protect your loved ones’ inheritance as long as the assets are held by the trust, once the assets are distributed to the beneficiary, all of the protection previously offered by your trust disappears. For example, let’s say Larry’s youngest sons Chance, 21, and Cannon, 20, both racked up serious debt while in college. If they were to receive one-third of their inheritance at age 25, creditors could take their money if it’s paid to them in an outright distribution.

The same thing would be true if Larry’s oldest son, Larry Jr., 58, got divorced soon after receiving his inheritance, only it would be his soon-to-be ex-wife who would claim a right to the funds in the divorce settlement.

In contrast, a Lifetime Asset Protection Trust gives a Trustee of your choice full discretion on whether to make distributions or not. The Trustee has full authority to determine how and when the assets should be released based on the beneficiary’s needs and the circumstances going on in his or her life at the time. And you can even choose to make your beneficiary the Trustee of their own trust (with some restrictions) for even more flexibility and control.

For example, if Larry Jr. was in the process of getting divorced or in the middle of a lawsuit, the Trustee could refuse to distribute any funds. Therefore, the Trust assets would remain shielded from his future ex-wife or a potential judgment creditor should Larry Jr. be ordered to pay damages resulting from a lawsuit.

And because the Trustee controls access to the inheritance, those assets are not only protected from outside threats like ex-spouses and creditors, but from your child’s own poor judgment, as well. For example, if Chance ever develops a substance abuse or gambling problem, the Trustee could withhold distributions until he receives the appropriate treatment.

What’s more, you can write up guidelines to the Trustee, providing him or her with clear directions about how you’d like the trust assets to be used for your beneficiaries. This ensures the Trustee is aware of your values and wishes when making distributions, rather than simply guessing what you would’ve wanted, which often leads to problems down the road.

In addition to airtight asset protection, a Lifetime Asset Protection Trust can also be set up to give your child hands-on experience managing financial matters, like investing, running a business, and charitable giving.

Although a Lifetime Asset Protection Trust would have been a great way for Larry to protect and pass on his assets to his children, such trusts aren’t for everyone. That said, contrary to what you might think, Lifetime Asset Protection Trusts are not just for the super wealthy.

Indeed, these protective trusts are even more useful if you’re leaving a relatively modest inheritance, since the smaller the inheritance, the more at risk it is of getting wiped out by a single unfortunate event like a medical emergency or lawsuit. However, if your kids are going to spend the vast majority of their inheritance on everyday expenses and consumables, such trusts probably don’t make much sense.

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

Larry Is Predeceased By Two of His Five Children

The final factor complicating Larry’s estate is the fact that two of his five adult children died just a few months before he did. His son Andy King, 65, unexpectedly passed away of a heart attack in late July 2020, while his daughter Chaia King, 51, died just three weeks later in August from lung cancer. Both children were from Larry’s marriage to his third wife, Alene Akins, who Larry wed in 1961.

While Andy and Chaia predeceased their father, Larry apparently didn’t update his estate plan to account for their deaths. Indeed, Larry’s handwritten will, which was created in October 2019, simply states that in the event of his death, “I want 100% of my funds to be divided equally among my children Andy, Chaia, Larry Jr., Chance, and Cannon.”

Had Larry worked with estate planning lawyers to keep his plan updated, rather than creating a handwritten will, his legal team would have ensured that his will and all of his other planning documents were immediately updated to account for the death of any of his beneficiaries. Along those same lines, had Larry worked with lawyers to amend his plan, his documents would have been drafted with provisions that would address the potential for one (or more) of his beneficiaries to pre-decease him, so even if his plan wasn’t updated, Larry’s assets would pass to the appropriate person or persons.

Based on California law, the share of Larry’s assets that would have passed to Andy and Chaia through his handwritten will are likely to pass to their children (Larry’s grandchildren), if they have any. However, this all depends on whether or not Shawn is able to successfully contest Larry’s handwritten will in court, which she has stated she plans to do. If she is successful, then Larry’s handwritten will would be deemed invalid, and his assets would be divided based on whatever previous estate plan Larry had in place.

Regardless of what happens to Andy and Chaia’s share of the estate, Larry’s plan should have been amended to account for their deaths. This brings us to our third and final estate planning lesson.

Lesson #3: Review your plan annually to make sure it’s up to date, and immediately modify your plan following events like births, deaths, divorce, and inheritances. 

As Larry’s case shows, your plan won’t do you any good if it’s not regularly updated. Estate planning is not a one-and-done type of deal; your plan must continuously evolve to keep pace with changes in your family structure, the legal landscape, your assets, and your life goals.

And unfortunately, this kind of thing happens all the time. In fact, outside of not creating any estate plan at all, one of the most common planning mistakes we encounter is when we get called by the loved ones of someone who has become incapacitated or died with a plan that no longer works because it hasn’t been updated. Yet, by the time they contact us, it’s too late.

We recommend you review your plan annually to keep it current, and immediately update it following major life events like births, deaths, divorce, and inheritances. We have built-in systems and processes to ensure your plan is always up to date, so you won’t need to worry about forgetting anything.

If you’ve yet to create a plan, have DIY documents you aren’t sure about, or have a plan created with another lawyer’s help that hasn’t been reviewed in more than a year, meet with us, as your Personal Family Lawyer®. We can ensure that your plan stays 100% current, so it works exactly as intended no matter what.

Don’t Do It Yourself

As Larry King’s story demonstrates, do-it-yourself planning can have terrible consequences for your loved ones—and in the worst cases, it can be even worse than if you had no estate plan at all. To ensure your plan works exactly as intended, contact us, as your Personal Family Lawyer®, to review and update your current plan, or create one if you have yet to do so.

With a Personal Family Lawyer® on your side, you’ll have access to the same planning tools and protections that A-list celebrities use, which are designed to keep your family out of court or conflict no matter what happens. 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 Liz to call you at a time you choose.

This is the third in an ongoing series covering the value legal agreements bring to your business beyond the surface. From boosting your bottom line and expanding your business to hiring the most talented team and improving every relationship you enter into; this series offers a comprehensive look at how effective legal agreements can enhance just about every aspect of your operation

Every legal agreement you sign is going to contain boilerplate terms, which are sometimes referred to as the “fine print.” It’s important that you understand these terms before you sign any agreement, because even though they may seem tedious to read, these terms will impact you and your business if and when you ever have to go to court to enforce the agreement.

Common Boilerplate Terms Found in Legal Agreements

Some common boilerplate terms that every agreement should have include the following:

1) Terms regarding the length of the agreement, how it can be terminated, by whom it can be terminated, and under what circumstances termination is possible. Make sure to look for these terms; they are the foundation of the agreement.

2) Terms regarding intellectual property, who owns it, how it gets handled, and whether it can be used by one or both parties. If you are the creator of intellectual property for a client, then you want your boilerplate to provide that you own all intellectual property you create until the contract is paid in full. If you are the employer of someone creating intellectual property of any kind—including written words, images, graphic design, or computer code—for your business, you want the agreement to stipulate that once the agreement is paid in full, you own the intellectual property created. This is called a “work-for-hire” provision, and if your agreement doesn’t include it, you are at risk of not owning what you’ve paid your team member to create.

3) Terms known as restrictive covenants, which are designed to prevent one or both of the parties from engaging in specific actions once the relationship has ended. One type of restrictive covenant is a non-solicitation agreement, which means that one or both parties cannot solicit work with contacts made as a result of the relationship. Another such term is a non-compete agreement, which provides limitations on future work that can be done after the relationship is over. Finally, a non-disclosure agreement (NDA), or confidentiality agreement, prohibits one or both of the parties from disclosing any confidential or proprietary information—also known as trade secrets—learned during the relationship to any person outside the relationship. An NDA can apply both while the relationship is ongoing as well as after the relationship ends. Whenever you sign an agreement, it’s critical that you understand all of the restrictive covenants you are agreeing to, since they can impact you and your business even after the relationship has ended.

4) Terms covering refunds and under what circumstances one of the parties can seek the return of consideration exchanged under the agreement. If you are selling products, your agreements need to cover the terms under which someone is buying your product and when they are entitled to a refund. For example, if your customers don’t like what they bought, your agreements should make it easy for them to review the terms of your refund process and clarify the circumstances under which you would provide a refund. If you are selling services, you may want to include a provision regarding chargebacks to a credit card, so it’s clear when chargebacks are allowed and when they are prohibited.

5) Finally, all agreements should have terms for conflict resolution, including how conflicts will be resolved, where they will be resolved, whether you must agree to mediation or arbitration before a lawsuit can be filed, and who covers legal fees in the event a lawsuit is necessary.

When In Doubt, Ask For Guidance

Before you sign on the dotted line and before you begin negotiation, you should look for and clearly understand all of the boilerplate terms in your agreement. If you are ever asked to sign an agreement in which you don’t clearly understand all of the terms, you should consult with us, as your Family Business Lawyer, for guidance and support.

When it comes to legal agreements, there is no such thing as a stupid question. In fact, we welcome your questions, since answering them is the best way we can support you—and we consider that smart! Always ask for guidance from trusted counsel before you sign, because once you sign, it’s too late—you’ve already entered into an agreement and are bound by the terms, regardless of whether you fully understood them or not. 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.

Legendary TV and radio host, Larry King, died at Cedars-Sinai Medical Center in Los Angeles on January 23rd, 2021 at age 87. Larry was hospitalized in December due to COVID-19, but he’d recently been moved from the ICU to a regular hospital room after recovering from the virus. However, the famed broadcaster suffered from a number of other health conditions over the years, including multiple heart attacks, kidney failure, and diabetes, and he passed away from sepsis that was the result of an unrelated infection.

With a career spanning more than half a century, Larry became the most famous interviewer of his generation as the host of CNN’s Larry King Live, a follow-up to his nationwide call-in radio show, The Larry King Show, which started in 1978. Larry retired from CNN in 2010, but up until the very end, he still hosted the streaming video cast “Larry King Now” on Hulu and RT America.

With his success in the media and the fact he continued working long after most people would have retired, Larry amassed a fortune estimated to be worth some $50 million. Starting at age 19, the media mogul got married a total of eight times to seven different women (one of them, he married twice).

With so many marriages, Larry also had multiple children. He was the father of five children: Chaia King, Larry King Jr., Cannon Edward King, Chance Armstrong King, and Andy King. Larry also had nine grandchildren and four great-grandchildren. With so much money, so many spouses, and so many children, it was practically guaranteed there would be some conflict over Larry’s estate following his death.

However, three factors are sure to make settling his estate especially troublesome.

First, Larry was in the middle of negotiating a divorce settlement with his seventh wife, Shawn Southwick King, 61, when he passed away. Second, in October 2019, Larry created a new handwritten will, which stipulated that $2 million of his estate should be equally divided among his five children upon his death, yet the document makes no mention of his seventh wife.

And finally, two of the five children—Andy, 65, and Chaia, 51, —named in Larry’s new will died within weeks of one another in August 2020, yet it seems Larry failed to amend his handwritten will to reflect their deaths.

Given Larry’s immense wealth and the fact that his seventh wife claims they worked with estate planning lawyers in the past, it’s likely that he had other estate planning vehicles, such as trusts, in place to protect and pass on some of his assets. But since trusts are private and their contents generally aren’t made available to the public, we don’t know the full details of Larry’s estate plan.

That said, in light of his impending divorce, the existence of the new handwritten will, and the recent death of two of Larry’s children, it’s almost certain that there will be a major court fight between Larry’s seventh wife and his surviving children over the $2 million in assets listed in the new will. In fact, Shawn has already announced that she plans to contest the handwritten will.

In the end, the fallout from this legal battle could make Larry famous for another reason—failed estate planning. However, with the proper planning, nearly all of the impending conflict over Larry’s estate could have been avoided. On that note, here we’ll outline several planning lessons we can learn from Larry’s death.

Till Death Do Us Part

The first factor that makes Larry’s case so contentious is his last divorce—or lack thereof. Larry filed for divorce from his seventh wife, Shawn Southwick King, in August 2019. As with most divorces, it can take some time for the two parties to reach a final settlement arrangement (especially when it’s a long marriage like the King’s, who were married for 23 years), and Shawn and Larry were apparently still negotiating their divorce settlement when he died in January 2021.

According to The Wealth Advisor,  at the time of his death, Larry was paying Shawn spousal support as part of their ongoing divorce negotiation, and she was reportedly seeking $1 million in annual spousal support as part of that deal. However, given that Larry died before the divorce was finalized, Shawn could inherit far more than that—and this is true in spite of the existence of Larry’s new will or even prior estate plans.

The reason Shawn stands to inherit so much is because California is a community-property state. Under California’s community-property laws, unless there was a prenuptial agreement or post-nuptial agreement stating otherwise, Shawn is entitled to 50% of any marital assets acquired during marriage, regardless of what Larry’s estate plan leaves her.

Given that the couple was married for more than two decades, Shawn’s ultimate inheritance will likely far exceed the $1 million per year she was seeking in the divorce settlement, which is something Larry likely would have wanted to avoid. What’s more, given that Shawn is planning to contest Larry’s new will in court, Larry’s surviving children are now facing the prospect of a costly legal battle.

This brings us to our first estate planning lesson.

Lesson #1: Update your estate plan as soon as divorce is inevitable.

Although Larry attempted to do the right thing by creating the new will, he should have taken the time to work with legal counsel to properly update his plan once he knew he was getting divorced—and ideally, before the divorce was filed. As we pointed out in a prior blog post about estate planning and divorce, it’s imperative that you create new planning documents as soon as you realize divorce is inevitable.

While California is one of the few states where you can change your will before your divorce is final, in many states, once divorce papers have been filed with the court, you are not legally allowed to change your will or trust document. To this end, once you know divorce is on the horizon, you need to act immediately to amend your estate plan.

When creating a new will or trust, rethink how you want your assets divided upon your death. This most likely means naming new beneficiaries for any assets that you’d previously left to your future ex and his or her family. And because most married couples name each other as their executor and/or trustee of their estate, it’s important to name a new person to fill these roles as well.

As we saw in Larry’s case, it’s important to keep in mind that some states have community-property laws that entitle your surviving spouse to a certain percentage of the marital estate upon your death, no matter what your plan dictates. So if you die before the divorce is final, as Larry did, you probably won’t be able to entirely disinherit your surviving spouse in your will or trust. But you can amend your plan to ensure the proper individuals inherit the remaining percentage of your estate should you pass away while your divorce is still ongoing.

Had Larry worked with his estate planning lawyer to draft his new will, rather than writing his own by hand, he could have created a much more robust will that not only would have stipulated exactly how he wanted his share of the marital assets divided among his children upon his death, but he also could have prevented a number of conflicts inherent with do-it-yourself planning. This brings us to our second planning lesson.

Lesson #2: Always work with an experienced estate planning lawyer when creating or updating your planning documents, especially if you have a blended family.

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

The risk for conflict is significantly increased if you are seeking to disinherit a family member. By creating your own will, even with the help of an online document service, you won’t be able to consider and plan ahead to avoid all the potential legal and family conflicts that could arise. For example, had Larry enlisted the help of an experienced estate planning lawyer to create his new will, he could have built in provisions that would have made it unlikely that Shawn—or anyone else—would contest his will.

It remains to be seen whether or not Shawn will be able to successfully contest the validity of Larry’s new will. However, because the new will was created in such an informal manner, her case will be a lot stronger than it would’ve been had Larry worked with lawyers to formally create a new document. Indeed, Shawn told The New York Post’s Page Six  that Larry never told her about the new will, and she believes someone pressured him to draw it up. If a trusted estate planning lawyer had been involved, the threat of such “duress” would be much less viable.

Commenting on the discovery of the new will, Shawn told Page Six, “We had a very watertight family estate plan. It still exists, and it is the legitimate will. Period. And I fully believe it will hold up, and my attorneys are going to be filing a response [to the new will], probably by the end of the day.”

While handwritten wills, also known as holographic wills, can be valid, we don’t know the full circumstances surrounding the will’s creation, but several issues stand out. First, the fact that Larry was suffering from multiple serious health conditions and was in and out of the hospital could lead the court to question whether or not Larry was of sound mind when he created the new document.

Additionally, Shawn’s claim that Larry was pressured into changing his will could raise questions as to whether or not Larry was coerced into disinheriting her by one of his children, who sought to increase his or her share of the estate. And even if Shawn isn’t successful in contesting Larry’s new will, the resulting litigation will be a lengthy, costly, and needless ordeal that will deplete Larry’s estate at the expense of all of his heirs.

Finally, had Larry consulted with an attorney when seeking to amend his plan to account for his impending divorce, he would have been advised that a will is not the ideal planning vehicle for protecting and passing on his assets to his children. Instead, Larry could have used a trust for this purpose. And while there are several types of trusts available, we would have advised Larry to create a special type of trust known as a Lifetime Asset Protection Trust.

Using a Lifetime Asset Protection Trust, Larry could have not only immediately transferred his share of the marital assets to his children upon his death or incapacity, without the need for court intervention, but he could have also ensured that those assets would transfer with airtight protection from common life events like divorce, serious illness, lawsuits, and even bankruptcy. Best of all, this asset protection would last for the lifetime of his designated beneficiaries.

Sadly, Larry chose to pass those assets to his children via a will and with no protection, which guarantees that his family will have to go to court in order to gain ownership of his share of the assets.

Next week, in part two of this series, we’ll discuss how a Lifetime Asset Protection Trust would have benefited Larry and his family, as well as the complications that are likely to arise given that two of Larry’s children died before he had the chance to update his plan.

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 Liz to call you at a time you choose.

As a business owner, your family members aren’t the only ones who could be devastated by your death. Should something happen to you, your team, partners, and clients could all face disastrous consequences.

To address this risk, you should seriously consider investing in life insurance. As we pointed out in a previous post, having the right business insurance in place is the first line of defense for a number of different liabilities facing your business. However, life insurance is designed to protect against perhaps the greatest, yet often overlooked, liability your business faces—your own death.

Life Insurance: Betting On Death

Depending on the type and purpose of your coverage, a life insurance policy pays benefits to your family or your business in the event of your death. As with most insurance coverage, the earlier in your life that you purchase your policy, the cheaper it will be. Of course, investing in life insurance early on also means that you’ll pay into the policy for a longer period of time.

Along those same lines, the healthier you are when you invest in life insurance, the less you’ll pay in premiums, since your policy is basically a bet between you and the insurance company. The insurance carrier is betting that they’ll be able to earn enough from the premiums you pay out before you die, so that they’ll have received more than enough money to pay out the death benefit to your designated beneficiaries by the time you pass away.

Life insurance comes in two main forms, which you can think of as permanent and non-permanent. With permanent coverage, as long as you pay the premiums, your insurance cannot be canceled, and your policy will pay out when you die.

With non-permanent coverage, known as “term life insurance,” you pay premiums over a certain number of years, usually 10, 20, or 30, and if you have not died during that period, the insurance ends, your premiums are gone, and no benefits are paid out when you die.

Term life insurance is much cheaper than permanent, and term policies are typically used by people who expect that they’ll only need the insurance for a certain period of time, and eventually, they won’t need the coverage anymore.

Permanent vs Term Life Insurance: Which Do You Need?

To determine which type of life insurance policy you should invest in for your business—permanent or term—you’ll need to consider a number of different factors. When it comes to life insurance for your business, you will need to die with life insurance coverage in place if any of the following three scenarios apply:

  1. You have a business that will need a cash infusion if you die to keep it running, until it can be sold or to buy out a business partner.
  2. You are likely to have dependents—senior parents, a non-working spouse, or dependent children—who rely on you for their financial needs and who will still rely on you at the time of your death, and you will not have enough saved up to provide for their needs for the rest of their life.
  3. You have an estate tax burden that you want to make sure is covered.

In each of these situations, you want to make sure you have either term life insurance that will continue long enough to address all of your needs, or you’ll want to consider purchasing permanent coverage.

Permanent Life Insurance

Permanent life insurance comes in many forms, and some of these forms include universal life, whole life, and variable universal life. Permanent life insurance can also be used as key-person insurance, which pays out benefits if you are a key team member in a company that would need cash upon your death to continue operating.

Permanent insurance can also be used to ensure there will be funds available to buy out a business partner upon your death, or it can be used to provide liquidity to your family in the event of your death, so they don’t need to continue running your company to get by.

Keep in mind: If you are considering permanent life insurance, you’ll want to have an experienced business lawyer like us join you when you meet with the insurance advisor to make certain you understand the terms of the policy you are buying and why you are buying it.

Permanent life insurance policies typically have two components: the amount that goes toward paying for the life insurance, and the amount that builds up as an investment, generally called the “cash value.” The cash value amount of your premium is invested tax-free, and you can use the cash value component in several ways: You can borrow against it throughout your lifetime, you can take it as distributions as part of your retirement, or you can use it to pay future premiums.

There are two caveats to mention here: Due to the high commissions on insurance products, you often need to pay premiums on a permanent life insurance policy for 10 to 15 years before there is enough cash value to borrow against or use to pay premiums. And you definitely want to either borrow against the cash value or withdraw it before your death, or it gets lost.

Covering Your Expenses

When it comes to purchasing life insurance, you’ll want to make sure you have enough term life insurance to cover the expenses that your dependents will require until they are no longer dependents, or until you are certain that you will have enough money in the bank to cover the lifetime needs of those dependents.

If you have children with special needs or a non-working/ homemaker spouse, they will require a longer period of care after your death, compared to a family with two incomes and children who will likely achieve their own independence in their late 20s or early 30s. To determine the right amount of term life insurance, consult with an experienced business lawyer like us or a fee-only financial planner.

If you plan on staying in your business well beyond the typical retirement age, if you are an absolutely indispensable part of your business’s success, or you will have estate taxes to cover upon your death, you should consider permanent life insurance. In that case, make sure you check the recommendations of your insurance agent with a lawyer or fee-only financial planner to ensure you are getting the right coverage for your money.

Get a Full Evaluation

Every business comes with its own unique risks, so there’s no way to know exactly what types and amounts of insurance coverage your company needs without a full evaluation. Before you sit down with an insurance agent, meet with us, as your Family Business Lawyer™, to identify the right types and amounts of insurance your business requires. Schedule your appointment today to get started.

This article is a service of Liz Smith, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.

If you use Facebook to share, track, and report on important life events, it can provide an  intimate snapshot of your life, and it can also serve as a key part of your legacy—and one you’ll likely want to protect following your death. With this in mind, as with any other digital asset you own, you should include your Facebook profile as part of your estate plan.

While you’ll want to include your Facebook profile in your plan’s inventory of digital assets, Facebook also offers a special function, known as a “legacy contact,” for managing your profile after death. Using a legacy contact, you can choose someone to look after your account and control the activities of your account once you’ve passed away.

If you are interested in preserving your digital legacy using Facebook’s legacy contact, here we’ll break down the basics of how this function works. To learn more about protecting and passing on the rest of your digital assets, meet with us, as your Personal Family Lawyer®, to discuss the different options available.

Managing Your Digital Afterlife

At the time of your death, Facebook allows your account to be “memorialized,” so friends and family can gather and share memories of you and your life. To have your account memorialized, Facebook requires proof of the account holder’s death using a special request form and evidence of death, such as an obituary. Facebook accounts can be memorialized regardless of whether or not a legacy contact has been selected.

Once your account has been memorialized, only confirmed friends can see your profile or find it in a search. Your memorialized profile will no longer appear in friend suggestions, nor will anyone receive birthday updates or other account notifications.

When your account is memorialized, the word “Remembering” will be added next to your profile name. Depending on your privacy settings, friends and family members can post content and share memories on your timeline. A memorialized account is locked, so its original content cannot be altered or deleted, even if someone has your password information.

What Your Legacy Contact Can Do

If you’ve designated a legacy contact, once your account has been memorialized, that individual will be able to manage your Facebook account based on the permissions you’ve granted him or her. As with any other person you select to manage your assets after your death, you’ll want to carefully consider who to name as your legacy contact, as this individual will have control over your memorialized Facebook account and therefore also control your legacy to some extent.

Your Facebook legacy contact can perform several functions, including:

  • Write a pinned post for your profile to share a final message on your behalf or provide information about your memorial service.
  • View posts, even if you had set your privacy to Only Me.
  • Decide who can see and who can post tributes on your memorialized profile.
  • Delete tribute posts.
  • Change who can see posts that you’re tagged in.
  • Remove tags of you that someone else has posted.
  • Respond to new friend requests.
  • Update your profile picture and cover photo.
  • Request the removal of your account.
  • Download a copy of what you’ve shared on Facebook, if you have this feature turned on.

What Your Legacy Contact Cannot Do

However, it’s important to point out that your legacy contact doesn’t have unlimited control over your account. To this end, your legacy contact cannot take the following actions:

  • Log into your account as you.
  • Read your direct messages.
  • Remove any of your friends or make new friend requests.

Alternatively, if you’re not interested in having your Facebook account continue after your death, you can choose to have your account permanently deleted upon your passing. For instructions on choosing your legacy contact and to learn more about your options for managing your Facebook account after death, check out Facebook’s Help Center FAQs.

Preserve Your Digital Assets
Since social media and other digital assets play such a big role in our lives, you should work with us, as your Personal Family Lawyer®, to ensure that all of your digital property is protected by your estate plan. With our support, we will inventory your digital assets and include instructions on how you want them handled in your planning documents, so they can pass seamlessly to your loved ones upon your death.

What’s more, we can also help you name a digital executor, who will be in charge of managing your digital assets upon your passing, so that those assets can bring the most benefit to your heirs for generations to come. 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 Liz to call you at a time you choose.

Intellectual Property (IP) is an integral part of many of today’s companies’ overall value. Indeed, studies show that up to 80% of the value of a typical business is IP, and as of 2020, more than 84%—$19 trillion—of the S&P 500’s market cap is represented by intangible assets like IP.

However, even the biggest corporations aren’t properly valuing or protecting their most valuable intangible assets.

“Very few companies recognize the value of their IP, nor have they secured an IP strategy that mirrors their long-term corporate strategy in order to maximize this value,” said Brian Hinman, Chief Innovation Officer at Aon and Head of EMEA for Aon’s Intellectual Property Solutions.

Seeing that even the biggest corporations aren’t properly protecting and leveraging their IP, we’re guessing that you probably aren’t either. This series is aimed at serving as a wake-up call for you to consider whether your business has IP that’s worth protecting and discussing the best ways to go about doing that.

Last week, in part one of this series, we discussed some of the strategies you can use to safeguard, value, and generate income from your IP assets. Namely, these strategies involved identifying, documenting, and registering these assets with the proper trademarks, copyrights, and patent protections, as well as using legal agreements to ensure that you fully own—and can financially benefit from—all of the intangible capital your company creates.

Here, in part two, we’re going to look at what can happen when you fail to secure the proper protections for your IP. In addition to addressing the disastrous results that can occur from not properly protecting your IP during your lifetime, we’re also going to discuss how you can further safeguard and leverage your IP, so that your loved ones can continue to benefit from these most valuable assets following your death or incapacity.

To demonstrate the crippling costs that can result from not properly safeguarding your company’s IP, read the following true story about how one up-and-coming blogger’s decision to go without a trademark cost her millions of dollars in potential revenue, stunted her ability to expand her business, and greatly reduced her ability to leave an inheritance for her heirs.

While the following events are entirely true, the names have been changed for privacy protection.

The Blogger Who Lost Her Own Name

Julie was a food blogger, who’d been in business for about 11 years, and she was making significant revenue from the blog—more than $300,000 in one quarter alone. She called John, an intellectual property lawyer, looking to get her name trademarked and asked him how much that would cost. John told her he charged a flat fee of $1,000 to get the trademark registered, but Julie thought that was too much money, and said, “No thanks,” even though John estimated that she probably made $1,000 from advertising just in the short time they had talked on the phone.

About six months later, Julie called John in a panic, telling him that she needed a trademark done that very day. When he asked her why, she told him that a big food company was selling frozen foods using her name. The company had changed her name just a little bit in order to get the trademark, and they now owned the trademark to her own name.

What’s more, the food company not only filed for a trademark using her name in the class of goods that included frozen foods, but they also filed for a trademark that allowed them to sell the packages online. It turns out that Julie wanted to start selling goods through her website, but now she couldn’t do that because the company had already registered a trademark using her name in the online retail class of goods.

Ultimately, Julie made two mistakes. First, she failed to trademark her name. The food company registered a trademark for the name she wanted, and even though she technically had a common-law trademark, in order for her to go after them for infringement, she’d have to take them to court. John’s firm charged $650 per hour to enter into litigation, and the case would likely take several years. In the end, not paying the $1,000 to get her name trademarked to begin with could now be a multi-six figure investment, if she decided to try to claim prior use of the mark.

Second, not only did Julie fail to protect the IP she had at the moment, she also didn’t think down the road to anticipate how she might expand her business by selling goods on her website. So now Julie is stuck with just the blog, which brings in decent income, but she’s unable to expand her business into goods. Finally, if she ever decides to sell the company, she doesn’t even own the rights to her blog’s own name, so that could make the business unsellable, leaving her without intellectual property rights to pass on to her family outside of the blog.

Don’t let something like this happen to you or your business. While registering a trademark or copyright might cost you time and money, failing to register your brand can ultimately cost you exponentially more in legal fees and the lost value of your assets, especially if you end up in court, trying to fight for what you thought you owned.

Protecting Your IP Through Estate Planning

In addition to protecting your intellectual property during your lifetime, make sure your estate plan covers your intellectual property as well, so your heirs are able to continue to use your intangible assets in the event of your potential incapacity or upon your eventual death. To prevent your family from losing out on your most valuable assets, as well as ensuring they don’t get caught up in long, costly court battles over the ownership of these assets, it’s imperative that you invest the time and money to protect these assets now.

And just like any tangible asset you’d want to protect and pass on to your loved ones, you can achieve protection for your IP through your estate plan.

When it comes to protecting your IP in your estate plan, the first step is to review the operating agreement or bylaws of your business entity. And if you don’t have an operating agreement or bylaws, now is the time to put these essential legal agreements in place.

Who Gets What: Distributing Your IP Assets
When reviewing your governing documents, you’ll want to ensure that they properly address the ownership rights to your company’s IP upon an owner’s death or incapacity, as well as upon the sale or dissolution of the business. If your business has multiple owners, you’ll ultimately want to make certain that the governing documents equitably distribute the ownership rights to the IP between the owners.

As with tangible assets owned by the business, there are numerous different ways you can divide the ownership rights to the IP among its owners. To ensure these assets are fairly distributed and this distribution is properly spelled out in your governing documents, you should consult with an experienced business attorney like us, who has experience in both intellectual property and estate planning.

Once you’ve ensured the proper distribution of your IP assets through your company’s governing documents, you should use your estate plan to protect and pass on the ownership rights to your share of the IP. And at the heart of any estate plan that includes a business is a comprehensive business succession plan.

Succession Planning

As with the failure to properly protect their IP, far too few business owners take the time to prepare for their company’s continued success following their retirement, death, or incapacity. However, creating a comprehensive succession plan as part of your overall estate plan, is just as crucial as any other planning you do for your business, if not more so.

Leveraging Your IP For the Benefit of Future Generations

After you’ve decided how you want your business to be run in your absence and formally spelled this out in your succession plan, you’ll want to consider which estate planning vehicles are best suited for protecting and transferring ownership of your IP rights to your heirs. In most cases, the best planning vehicle for this purpose is going to be a trust, either a revocable living trust, an irrevocable trust, or a combination of the two.

Using a trust, you can spell out exactly how you’d like your IP assets distributed to your beneficiaries. In addition to considering the best way to distribute your IP to your beneficiaries, you’ll also want to consider which of your loved ones is best suited for owning and managing your intangible assets, as well as how you’d like those assets to be used for the benefit of your heirs.

For example, trademarks, copyrights, and patents, can be leveraged to create revenue in a number of different ways. Your beneficiaries could simply sell any of your IP assets outright, or they could use the IP as the collateral to take out a loan. But they could also decide to license the use of your IP to others, which can generate an ongoing revenue stream that can last indefinitely.

Protect and Leverage the Value of Your IP Assets

There are countless opportunities for leveraging your IP assets, which is one of the reasons such intangible property is so valuable. To this end, it’s vital that you consult with us to not only protect your intangible capital, but to also ensure that it provides the maximum benefit for your heirs following your death. With our guidance and support, we can ensure that your loved ones can benefit from these creations for generations to come.

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.

Within the past year, a combination of new legislation and the recent change of leadership in the White House and Congress stands to dramatically increase the income taxes your loved ones will have to pay on inherited retirement accounts as well as increasing the income taxes you owe on your taxable investments. However, purchasing life insurance may offer you the opportunity to minimize the effect of these developments.

To this end, if you hold assets in a retirement account, you need to review your financial plan and estate plan as soon as possible to determine if investing in life insurance or some other strategy may offer tax-saving benefits for you and your family. To help you with this process, here we’ll discuss how these new developments might affect the taxes owed by you and your heirs, and how investing in life insurance may help offset the tax impact of these new changes.

The SECURE Act

At the start of 2020, the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) went into effect, and the new law effectively put an end to the so-called “stretch IRA.” Under prior law, beneficiaries of your retirement account could choose to stretch out distributions of an inherited retirement account over their own life expectancy to minimize the income taxes owed on those distributions.

For example, an 18-year-old beneficiary expected to live an additional 65 years could inherit an IRA and stretch out the distributions for 65 years, paying income tax on just the portion withdrawn each year. In that case, the income tax law would encourage the child not to withdraw and spend the inherited assets all at once.

Under the new law, however, most designated beneficiaries of inherited IRAs and similar tax-deferred qualified retirement accounts are now required to withdraw all of the assets from the inherited account—and pay income taxes on those withdrawals—within 10 years of the account owner’s death. Those who fail to withdraw funds within the 10-year window face a 50% tax penalty on the assets remaining in the account.

But this is just the first development that stands to affect the amount of taxes your heirs might face in the near future on inherited investments.

Democrats Take Control

As we highlighted in a previous article, the recent election of Joe Biden as President and subsequent Democratic takeover of the Senate will likely result in the passage of new tax legislation that could have a significant impact on your family’s financial and estate planning considerations.

Specifically, it’s likely that within the next two years Democrats will pass legislation aimed at eliminating many of the tax cuts enacted through the 2017 Tax Cuts and Jobs Act. As part of this legislation, we’re expected to see significantly lower federal estate tax exemptions, the elimination of the step-up in cost basis on inherited assets, as well as an increase in the top personal income and capital-gains tax rates.

One way you may be able to minimize the new taxes on both your tax-deferred retirement accounts and taxable investments is by investing in cash-value life insurance. Let’s break down exactly what this strategy might look like.

The New Role of Life Insurance In Your Estate and Financial Planning

Given the new distribution requirements for inherited IRAs, you should consider whether it makes sense to withdraw funds from your retirement account now, pay the tax, and invest the remainder in cash-value life insurance. From there, you can access the accumulated cash-surrender value of the life insurance policy income-tax free during your lifetime via tax-free withdrawals and/or loans. And upon your death, the death benefit of your life insurance policy would be income-tax free for your heirs.

By annually investing what you would otherwise put into tax-deferred retirement accounts into a cash-value life insurance contract, or by taking taxable withdrawals from your tax-deferred retirement accounts over time and reinvesting them in cash-value life insurance, you can effectively move these funds into a tax-free, rather than tax-deferred, investment vehicle.

This strategy could not only minimize the income taxes you pay over your lifetime, but it could also significantly reduce the tax bill imposed on your designated beneficiaries after your death, since life insurance proceeds are income-tax free.

Additionally, by investing a portion of your investable assets in cash-value life insurance, you can offset the effects of the proposed loss of income tax basis step-up upon your death, which we’re likely to see enacted through Democrat-backed legislation. What’s more, this strategy would also minimize your current income taxes on what otherwise would have been taxable income from your investments, as growth on investments inside a life insurance policy are not subject to income tax, including any capital gains.

Finally, if you stand to be affected by the proposed decrease of the federal estate-tax exemption, which is currently set at $11.7 million, by placing the life insurance policy inside an irrevocable life insurance trust, you can remove the death benefit paid out to your beneficiaries from your taxable estate. In doing so, you would still be able to access the cash value of the insurance policy during your lifetime, either via a so-called “spousal access trust,” if you are married, or via a traditional irrevocable life insurance trust, if you are not married.

Rethink Your Planning

Although the SECURE Act and the proposed new legislation stands to have an adverse effect on the tax consequences for your retirement and estate planning, investing in life insurance may offer you a valuable tax-saving opportunity. That said, you can only take advantage of this opportunity if you plan for it.

If you fail to revise your plan to address the SECURE Act’s new requirements and/or the proposed legislation that’s likely to be passed by the Democratic administration, you and your family could face a significantly higher tax bill. To prevent this from happening, schedule a Family Wealth Planning Session™ or an existing estate-plan review today.

With us as your Personal Family Lawyer®, we’ll work with you and your financial advisor to analyze all of the ways your retirement accounts might be impacted by the SECURE Act and the new proposed legislation and come up with the most effective planning strategies for passing your assets to your loved ones in the most tax-advantaged manner possible, while ensuring your current tax liabilities are similarly minimized. To learn more, contact us right away.

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 Liz to call you at a time you choose.

Over the past two decades, the rise of smartphones, cloud computing, social media, and other internet-based technology has transformed how today’s largest companies are valued. In 2020, tech firms like Amazon, Facebook, and Apple dominated the list of the S&P 500’s top 10 largest companies by market capitalization, whereas back in 2000, that list was topped by businesses like General Electric, ExxonMobil, and Wal-Mart.

The reason for this shift? According to Aon, a leading global professional services firm, the shift is the result of intangible assets like intellectual property replacing more tangible assets as the primary source of value for today’s biggest corporations. In fact, according to Aon’s The One Brief, an online business news website, today more than 84%—$19 trillion—of the S&P 500’s market cap is represented by intangible assets.

However, it’s not just big corporations that own an increasing amount of intellectual property (IP); even the smallest of today’s companies hold a significant amount of IP. Indeed, studies show that up to 80% of the value of a typical business is IP.

Protecting Your Company’s Most Valuable Assets

Although IP is an integral part of many of today’s companies’ overall value, even the biggest corporations aren’t properly valuing or protecting their most valuable assets—and our guess is that you aren’t either.

“Very few companies recognize the value of their IP, nor have they secured an IP strategy that mirrors their long-term corporate strategy in order to maximize this value,” said Brian Hinman, Chief Innovation Officer at Aon and Head of EMEA for Aon’s Intellectual Property Solutions.

Without legal protections like patents, trademarks, and copyrights, your IP is at serious risk of being stolen by your competitors, hackers, and even your own employees, vendors, independent contractors, or clients. Worse yet, if you don’t take your IP seriously, you are likely undervaluing your greatest assets, not capitalizing on the most valuable part of your business, and staying stuck in a model of getting paid only for the actual hours you work, rather than for the ideas and value you create.

One reason business owner’s fail to protect their IP is because unlike more tangible assets like real estate, vehicles, and office equipment, they don’t understand how to value and protect it.

Justin Johanson, a lawyer specializing in intellectual property at Luxor Law, said that for many of his business owner clients, there’s no sense of urgency surrounding their IP assets, which leads them to put off securing the necessary legal protections.

“They overlook their IP because they don’t see the value of it,” says Justin. “They don’t see the urgency to protect their business name and other intangible assets.”

Often, not recognizing your IP means you may not be paying attention to your business’ most valuable assets until something goes wrong. This might include receiving a cease-and-desist letter after another business claims your name, or a former independent contractor you used to work with begins selling services to your customers in competition with you, or you discover that you don’t actually own the source code of a website you paid to have created.

If you haven’t audited your IP recently, let this article be a wake-up call for you to consider whether you do have IP in your business that could be worth protecting.

Identifying and Registering Your IP

Protecting your IP can begin with trademarking the name of your company, registering for copyright protection for the copy on your website and in your advertisements, ensuring that all of the agreements you have with independent contractors and vendors include work-for-hire provisions, and that all agreements with clients and customers have limitations on use provisions, ensuring your business owns what it creates.

If you have not reviewed your IP and its value recently, call us and ask for an IP audit. In our IP audit, we will review your business model, the IP you have right now, the current value of that IP to your business, how your IP can increase in value, and finally, what would happen to your IP in the event of your incapacity or death.

Sadly, the lack of understanding among many small business owners regarding the value of their IP assets, coupled with their failure to take the steps to protect it through copyrights, patents, and trademarks, as well as through estate planning can be extremely costly. Let us help you not only avoid violations or surprises related to your IP, but proactively consider how you can enhance the value of your IP—and your business—today.

Next week, in part two of this series, we’ll look at how one business owner’s failure to secure a trademark for her business’ name ultimately cost her millions of dollars in potential revenue, stunted her ability to expand her business, and greatly reduced her ability to leave an inheritance for her heirs. 

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.

Although you likely won’t need to have an entirely new estate plan prepared for you, upon relocating to another state, you should definitely have your existing plan reviewed by an estate planning lawyer who is familiar with your new home state’s laws. Each state has its own laws governing estate planning, and those laws can differ significantly from one location to another.

Given this, you’ll want to make sure your planning documents all comply with the new state’s laws, and the terms of those documents still work as intended. Here, we’ll discuss how differing state laws can affect common planning documents and the steps you might want to take to ensure your documents are properly updated.

Last Will and Testament
The good news is, most states will accept a will that was executed properly under another state’s laws. However, there could be differences in the new state’s laws that make certain provisions in your will invalid. Here are a few of the things you should pay the most attention to in your will when moving:

Your executor: Consider whether or not the executor or administrator you’ve chosen will be able to serve in that role in your new location. Every state will allow an out-of-state executor to serve, but some states have special requirements that those executors must meet, such as requiring them to post a bond before serving. Other states require non-resident executors to appoint an agent who lives within the state to accept legal documents on behalf of the estate.

Marital property: If you are married, give special consideration to how your new state treats marital property. While a common-law state might treat the property you own in your name alone as yours, community-property states treat all of your property as owned jointly with your spouse. If your new state treats marital property differently, you might need to draft a new will to ensure your wishes are honored.

Interested witnesses: Another important role under your will to consider when moving to a new state is an interested witness. An interested witness is someone who was a witness to your will who also receives a gift from your will. Some states allow interested witnesses to receive the gift, while other states do not allow such gifts. And still other states allow such gifts provided the witness is a family member.

Revocable Living Trust

A valid revocable living trust from one state should continue to be valid in your new state. However, you need to make certain that you transfer any new assets or property you acquire, such as your new home, to your trust, so that those assets can avoid the need to go through probate before being distributed to your heirs upon your death.

Power of Attorney
A valid power of attorney document, such as a durable power of attorney, medical power of attorney, or financial power of attorney, created in one state may be valid in your new state. However, you shouldn’t just assume it will be accepted, and you should check with a lawyer like us to make certain your document will work 100% as intended.

What’s more, in some cases, banks, financial institutions, and healthcare facilities in your new state may not accept a power of attorney document if it’s unfamiliar to them, which is another reason to have these documents reviewed by a professional. Finally, simply as a practical matter, it may be a good idea to have your power of attorney agent live in the same state you do, so keep that in mind as well.

Advance Directive/ Living Will

When it comes to advance directives, such as a living will and medical power of attorney, you’ll find that most states will accept documents that were created in other states, but this isn’t guaranteed. Some states, for example, don’t even have any laws governing these matters, so healthcare professionals may be hesitant to accept out-of-state documents.

Furthermore, the provisions, forms, and language used in advance directives can vary widely between states. For example, some states combine a medical power of attorney with a living will, so that you get to name the person in charge of making your medical decisions in the event of your incapacity and spell out your specific wishes for care all in one document. Yet, in other states the documents are separate. For these reasons, you should enlist the help of a lawyer to make sure your advance directives will be honored in your new locale.

While you are reviewing your directives for your new state, you should also review them to ensure they are clear on your wishes regarding how you should be given nutrition and hydration if hospitalized. Many directives aren’t specific enough in this area, and this is exactly what led to the lengthy battle over Terry Schiavo’s life. In addition, check to see if you want to add or change any provisions to account for the current realities of COVID-19.

Beneficiary Designations
If you have accounts with beneficiary designations, such as 401(k)s, life insurance policies, and payable-on-death bank accounts, these should be valid no matter which state you live in. That said, you should still review these documents when you move to ensure that your address and other personal information is updated.

Keep Your Plan Current
As with other major life events, such as births, deaths, and divorce, moving to a new state is the ideal time to have your plan reviewed by a professional. With us, as your Personal Family Lawyer®, we’ll not only support you in creating the planning documents that are best suited for your situation and asset profile, but we also have systems and processes in place to ensure your documents stay totally updated throughout your lifetime.

Additionally, for parents of minor children, we can also help you create the legal documents for naming both short and long-term guardians, who would care for your kids in the event of your death or incapacity. This is so important, we’ve developed a comprehensive system called the Kids Protection Plan® that guides you step-by-step through the process of creating the legal documents naming these guardians.

You can get the process of naming guardians started right now for free by visiting our user-friendly website: https://kidsprotectionplan.com.

If we have worked with you and you are moving, we are happy to help you find an attorney to review your plan in your new state!

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 Liz to call you at a time you choose.