If you are looking to create your last will and testament, or will, online, you’ll find dozens of websites that let you prepare a variety of estate planning documents for very little money, even for free. With so many do-it-yourself online document services, you might believe you can create your will online, all on your own, without paying a lawyer to help. 

And in some cases, you can create your will online. 

But if you do, you need to understand how these services can backfire on you and your family. Online estate planning can be a catastrophe for those who need to be made aware of the risks. And as you’ll see, creating your will online without a lawyer’s guidance can even be worse for your family than if you’d done nothing. 

Know what’s possible—and what’s not 

A great way to start educating yourself is by watching this training video by family financial and legal expert Ali Katz. This free, one-hour training clarifies what you can do yourself online and when you really need a lawyer’s support. The training also gives you access to an online tool to create an inventory of all your assets, which is critically important to leave to your loved ones, no matter how much or little you have to pass on.

Meanwhile, if you want to create your own will online, ask yourself the following 3 questions. After considering these 3 questions, if you can create your own will online, you should seriously consider having us review it once you complete the document to be certain you’ve properly covered everything and everyone you care about. 

01 – Will your online will keep your family out of court?

When considering creating your own will online, the first question you need to ask yourself is: “Should I become incapacitated or when I die, do I want to keep my family out of court?” If your answer is “Yes, I 100% want to keep my family out of court,” then creating your own will online may not be the best idea.

While a will is a necessary element of most estate plans, it’s typically just one small part of an integrated plan. And a will by itself won’t keep your family out of court. For assets covered by your will to be transferred to your beneficiaries, your will must first pass through the court process known as probate.

During probate, the court oversees the administration of your estate and assets, ensuring your assets are distributed according to your wishes, while ensuring any creditors of your estate are paid, and managing any disputes that arise. Probate is lengthy, expensive, and open to the public, so you’ll want to have more than a will in place if you have any assets that would go through the court in the event of your incapacity or death.

To avoid probate and keep your assets out of court, your will must be combined with other planning documents and important conversations. These documents include a properly drafted and funded trust and up-to-date and effective beneficiary designations. You’ll also need to have conversations with your family to ensure they won’t conflict due to your lack of preparation. 

Beneficiary designations and trust planning can be complex. If you have assets that would otherwise pass through the court process, you may need help to ensure you make all the right choices for your loved ones and assets using an online document service. This is why we recommend you begin your estate planning with a Family Wealth Planning Session, during which we can help you look at your family dynamics and assets. Then we can assess what would happen to everything you have and everyone you love when something happens to you. During this planning session, we can then determine the right plan for you and the people you love to help keep them out of court when something happens to you.

02 – Is your online will’s execution legally valid?

If you do not have assets that would go through the court process, and you want to create an online will simply to name someone as your executor in the event of your death, you’ll want to make sure your online will is legally valid. 

Each state has specific laws stipulating how a will must be documented and signed to be legally binding. If you fail to execute your will under these laws, the court can deem your will legally invalid.

If the court deems your will invalid, it’s as if the document never existed. In that case, a judge would name the person it considers best to handle your estate, and your assets would be distributed according to state intestacy laws, which typically prioritize your closest living blood relatives. 

If you want to ensure your online will is legally valid, you can look up your state’s laws governing the valid execution of a will. Make certain you sign it properly, with the right number and type of witnesses.

03 – Does your online will properly name an executor?

If you are going to create your own online will, the last question to consider is whether the will properly name an executor, along with backup executors, and it ensures that the court will appoint those you name in the event of your death.

An executor also called a “personal representative,” is responsible for carrying out the instructions in your will. Your executor is typically named in your will and appointed by the court to locate and manage your assets, pay any outstanding debts and taxes you owe, and distribute your remaining assets to your beneficiaries. 

If you don’t name an executor in your will, or the person you choose is determined to be unfit, the court will appoint an executor for you. As an example of how things can go wrong here, one common situation in which a named executor can be deemed unfit is if your will does not waive the requirement for the executor to obtain a bond. Your named executor cannot qualify for a bond. This is a frequent mistake made by those who create their own will online. 

If you’re unaware of these requirements when creating your online will, your chosen executor could be deemed unfit, leaving the choice up to the court. We can make certain your choice for an executor is properly qualified, so you can rest easy knowing someone you know and trust will handle your final affairs and support your loved ones when you no longer can.

The Professional Support You Deserve

As you can see, creating your will online without a lawyer’s help is a huge gamble, and if you get it wrong, it can cost your family a lot more than money. Rather than relying on a one-size-fits-all document service, meet with Liz Smith Law to create your will and other estate planning documents. 

Our Life & Legacy Planning Process is specifically designed to put in place the right combination of planning solutions to fit with your unique asset profile, family dynamics, budget, as well as your overall goals and desires. Until then, contact us today if you need to get your plan started or need us to review your existing documents.

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.

The environmental costs of death are significant and constantly rising. With 8 billion people on the planet right now—all of whom have bodies that die and must be disposed of—we must start seriously considering alternatives to traditional options for burial and cremation. Fortunately, more and more “green” options are being developed to reduce these costs, and this article looks at some of the latest innovations. 

In most conventional burials, the body is pumped with toxic embalming fluid, placed in a steel casket, and buried within a cement-lined vault six-feet underground. According to the Green Burial Council, burials in the U.S. go through roughly 77,000 trees, 100,000 tons of steel, 1.5 million tons of concrete, and 4.3 million gallons of embalming fluid each year.

Although cremation is touted as more eco-friendly than burial, it still has serious environmental risks. According to the Natural Death Center, cremating a single body uses about the same amount of gas as a 500-mile road trip. Cremation also releases some 250 lbs. of carbon dioxide into the atmosphere, roughly the same amount an average American home produces in a week

A Return to Nature

With the death rate expected to spike as Baby Boomers age, the funeral industry is poised to cause even more damage. While green funerals are a recent trend, natural burials were the norm until the Civil War, which coincided with the rise of the industrial age, embalming, and the modern funeral director business.

Today, natural burials are making a comeback. Green funerals are designed to not only be more environmentally friendly, but also less expensive overall than conventional burial or cremation. If you want to make your last act on this planet less harmful to the ecosystem, here are six green funeral options and the best way to include your final wishes in your estate plan.

01 – Green burial

Founded in 2005, the nonprofit Green Burial Council (GBC) establishes environmental standards for green cemeteries, funeral professionals, and funeral product manufacturers. According to the GBC, a green burial must meet three general criteria: 

  1. The body cannot be embalmed.
  2.  The body must be buried without a cement or metal vault or grave liner.
  3. Only biodegradable burial containers and shrouds may be used. 

In green cemeteries, graves are typically marked by GPS or with a simple stone or tree instead of headstones, metal plaques, and other ornate markers. The grounds are often planted with native species, forgoing pesticides and mechanical landscaping. The graves are shallower than conventional plots, exposing the body to more natural organisms to speed decomposition. 

Green caskets are constructed from biodegradable materials, such as untreated wood, bamboo, wicker, or cardboard. Burial shrouds should be non-bleached, undyed, and made of natural fabrics like cotton, linen, silk, wool, or hemp. Use the GBC’s list of approved companies to find funeral providers in your area that offer green burial.

02 – Aquamation

Without embalming, caskets, or burial vaults, cremation is considered less harmful to the environment than a burial. However, a new water-based method—aquamation—promises an even greener alternative. Also called “resomation” or “flameless cremation,” the method involves a chemical process in which lye, superheated water, and pressure dissolve the body, rather than burning fossil fuels. The ashes produced by aquamation can be scattered or placed in a biodegradable urn for burial.

03 – Mushroom burial suits

One of the latest innovations in green funerals is special burial shrouds containing mushroom spores sewn into the fabric. The suit fits like long-john pajamas, and the mushrooms facilitate decomposition. In addition to absorbing and purifying toxins released by the body, the fungi deliver nutrients to the soil to encourage plant growth. When he died of a stroke at 52, TV and film star Luke Perry was reportedly buried in a mushroom burial suit.

04 – Eternal reefs

Eternal Reefs combine ashes from cremated remains with environmentally friendly concrete to create an artificial reef. Submerged on the ocean floor, these hollow “reef balls” create new habitats for coral, fish, and other marine life. Marked by GPS, your loved ones are encouraged to visit these living memorials by boat, snorkeling, or scuba diving. The company currently has locations in the waters of the following states: Florida, New York, North Carolina, Texas, South Carolina, Maryland, and New Jersey

05 – Become a tree

If you aren’t near the water but still want to leave a living memorial of yourself, a tree burial might be an attractive alternative. The startup Transcend plans to open forest-based cemeteries across the U.S., where rows of trees, rather than headstones, mark the graves. Here’s how it works: the body is wrapped in a biodegradable linen shroud and placed in a shallow grave lined with wood chips or hay. Then, a mixture of soil, wood chips, and fungi fills the grave, and a young tree is planted on top. As the body decomposes, it provides nourishment to feed the tree.

Additionally, Transcend has partnered with the nonprofit One Tree Planted, which specializes in planting trees around the world. Transcend promises to plant an additional 1,000 trees for every tree burial reserved right away. The company expects to launch its first tree burials in 2023. Visit their website to learn more, including how the company plans to ensure your tree will be well-maintained for years to come.

06 – Human composting

Another way your death can create new life is by composting your remains. Known as “human composting” or “recomposting,” the process is similar to composting used to fertilize gardens and farms. The body is first placed in a steel cylinder filled with wood chips, straw, alfalfa, and bacteria designed to break down organic matter.

After roughly a month,  your body is transformed into what amounts to the soil. The end product can either be returned to your family or used to revitalize local conservation areas. Developed in 2020 by the Seattle-based company Recompose, human composting is legal in five states: California, Washington, Oregon, Colorado, and Vermont, with legislation pending in Hawaii and Delaware.

Put Your Final Wishes In Your Estate Plan

Regardless of the method, you select, it’s critical to include your desires,  plans, and the money to pay for the disposal of your body in your estate plan. While green funerals are typically less expensive than traditional burial and cremation, they can still cost thousands of dollars. To avoid burdening your loved ones, at the very least, your plan should include enough money to pay for your funeral and legally name the person you want to fulfill your desired wishes.

Moreover, leaving money for your funeral in your will is typically not a good idea. Any money left in your Will won’t be accessible to your family until your estate goes through the court process of probate, which can last months or even years. Since many funeral providers require full payment upfront, if you leave funds in your Will, your loved ones will likely be stuck with the bill.

To avoid the necessity for probate, we often advise our clients to leave money and directions for their immediate post-death wishes in a Revocable Living Trust. A Living Trust doesn’t require probate, so the money for your funeral would be available to your loved ones immediately. In terms of your Living Trust, you can specify how you want your funeral carried out, and the person you designate as Trustee is legally bound to use the funds in the exact manner the terms stipulate. This can be especially important for green funerals, which might not be something your loved ones would choose if left to plan things on their own.

Finally, you can change the terms of your Living Trust at any point during your lifetime. With new alternatives being developed all the time, this flexibility would allow you to use the latest innovations in green funerals. If you’re interested in creating a Trust to cover your funeral expenses, meet with Liz Smith Law to discuss the options.

Help Your Loved Ones And The Planet

With proper planning, you can ensure that your death is not only significantly easier and less expensive for your family but also has the most beneficial impact on the environment. As your Alaskan estate planning attorney, I will work with you to prepare an estate plan that includes enough funding to have your funeral handled in the exact manner you desire—without forcing your family to pay for it. Contact me 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.

What Happens To Your Debt When You Die?

Maybe you’ve wondered about your own debt or perhaps your parent’s debt—what happens to that debt when you (or they) die? Well, it depends, and that’s part of the reason you want to ensure your estate plan is well prepared. How you handle your debt can greatly impact the people you love.

In some cases, you could inadvertently leave a reality in which your surviving heirs—your kids, parents, or others—are responsible for your debt. Alternatively, if you structure your affairs properly, your debt could die right along with you.

According to the Federal Trade Commission, an individual’s debt does not disappear once that person dies. Rather, the debt must either be paid out of the deceased’s estate or by a co-creditor. And that could be bad news for you or the people you love.

What exactly happens to this debt can vary. One of the purposes of the court process known as probate is to provide a time period for creditors to make a claim against the deceased’s estate, in which case debts would be paid before beneficiaries receive their inheritance. But if there is nothing in the probate estate and all assets are held outside of the probate estate, then what?

Well, that’s where we come in, and why it’s so important to get your affairs in order, even if you have a lot more debt than assets. Your “estate” isn’t just what you own, it includes what you owe, too. And with good planning, we can help you align it all in exactly the way you want.

Debt After Death

When an individual dies, someone will handle his or her affairs, and this person is known as an executor. The executor can either be someone of the individual’s choice, if he or she planned in advance, or someone appointed by the court in the absence of planning. The executor opens the probate process, during which the court recognizes any will that’s in place and formally appoints the executor to administer the deceased’s estate and distribute any outstanding assets to their loved ones.

During this process, the estate’s assets are used to pay any outstanding debt. This usually includes all of an individual’s assets, although it does not include assets with beneficiary designations, such as 401(k) plans and insurance policies.  The estate does not own these assets, and they pass directly to the named beneficiaries. Given these factors, if an individual’s assets are subject to probate and the person has outstanding debt, their beneficiaries will receive a smaller share of anything left to them in the estate plan.

How Unsecured Debts Are Handled After Death

Typically, unsecured debts, such as credit card debts, are the last form of debt the estate repays. In most cases, the estate first repays any outstanding secured debts, including car and mortgage loans. Following this, the estate repays the legal and administrative fees associated with executing the deceased’s will. From there, the estate repays any outstanding unsecured debt, including credit card balances. Usually, if the estate lacks the assets to repay these debts, creditors have no choice but to accept the loss. 

However, in some states, probate laws may dictate how the deceased’s creditors can clear these debts in other ways, such as by forcing the sale of the deceased’s property. It’s worth noting that there is a time limit for creditors to claim against an estate after the deceased dies, and this time frame varies between states.

Avoiding Probate

There are several things you can do to avoid probate. Perhaps the most common involves establishing a revocable living trust. Since the trust, not the estate, owns the assets, assets held by a properly funded and maintained trust do not have to go through the probate process.

Despite this, creating a living trust does not guarantee an individual’s assets will receive protection from creditors if that person has debt. What it does mean is that his or her heirs may have more flexibility compared to probate. In other words, by creating a living trust, your trustee may be able to negotiate with creditors more easily to reduce any outstanding debt. In theory, creditors may still sue to repay the debt in full. However, since this could involve significant costs, creditors may prefer to settle instead. 

When Do Surviving Family Members Pay The Deceased’s Debts?

Most of the time, it’s unnecessary for surviving family members to pay the deceased’s debt with their own money. Instead, as noted above, payment of the debts are either paid out of the deceased’s estate, or if there is no estate, the debts are extinguished. However, there are some exceptions to this, including the following:

  • Co-signing loans or credit cards: If someone cosigns a loan or credit card with the deceased, that individual is responsible for clearing any outstanding debt associated with that account.
  • Having jointly owned property: If an individual has jointly owned property or bank accounts with the deceased, that person is responsible for clearing any outstanding balances associated with these assets.
  • Community property: In some states, including California, Arizona, Nevada, Louisiana, Idaho, Texas, Washington, New Mexico, and Wisconsin, the surviving spouse is required to clear any outstanding debt associated with community property. Community property is any property jointly owned by a married couple.
  • State laws: Some states require surviving family members, or the estate more generally, to clear any debts associated with the deceased’s healthcare costs. Additionally, if the estate’s executor failed to follow a state’s probate laws, it might be necessary for him or her to pay fines for doing so.

What To Do When Someone Dies With Debt

When someone dies with outstanding debt, it’s important to take swift action to handle their affairs and negotiate their debts. Below are some steps to follow when faced with this scenario:

01 – Understand Your Rights

Since probate laws vary between states, it’s a good idea to thoroughly research the probate process in our state, or hire a lawyer to handle the estate for or with you. Many states require creditors to make claims within a specific period, while also requiring surviving family members to publicly declare the deceased’s death before creditors can collect any outstanding debt. It’s also against the law for creditors to use offensive or unfair tactics to collect outstanding credit debt from surviving family members. It’s generally a good idea to ask creditors for proof of any outstanding debt before paying.

02 – Collect Documents

Collecting documents can be fairly straightforward, particularly if the deceased left all their vital financial papers in a single location. If the surviving family members cannot locate these documents, they can request the deceased’s credit report, which lists any accounts in the deceased’s name. As your Personal Family Lawyer®, we can do this for you, as part of our post-death support services.

03 – Cease Additional Spending

This is essential to prevent any debts in the deceased’s name from increasing further, even if there is another person authorized to make payments. Ceasing additional spending. including canceling any recurring subscriptions, also helps prevent unnecessary complications when negotiating with creditors.

04 – Inform Creditors

Proactively contact the deceased’s creditors to look into options for negotiating the debt, and notify credit bureaus of the death. To complete this process, it’s useful to have several copies of the death certificate to share with insurance companies and creditors. Afterwards, ask to close all accounts in the deceased’s name, and request the credit bureaus freeze the deceased’s credit, preventing others from unlawfully getting credit in his or her name.

05 – Close The Estate

Once all debt has been paid off, forgiven, or extinguished, the executor can officially close the estate. The process for doing this varies based on how assets and debts were held, so do not go into this part alone. Contact us to find out how we can support you. 

We Can Help Ensure Your Family Doesn’t Get Stuck With Your Debt

Effective estate planning involves taking care of your affairs, and this includes ensuring your debts will be handled in such a way that your family isn’t left with a big mess or inadvertently forced into court. Consider scheduling a Family Wealth Planning Session with us, your Personal Family Lawyer® to determine how we can help protect your assets and prevent creditors from reducing the gifts you want to leave your loved ones after death. 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.

You are most likely monitoring several key performance indicators to determine how well your company is doing. Whether related to your finances, advertising, employee turnover, or website traffic, these metrics can be an effective way to measure, maintain, and improve your business’ success and growth.

That said, there are a number of metrics vital to a company’s long-term success that many business owners overlook or fail to track properly. But ignoring these numbers can keep your company from achieving its full potential. 

With this in mind, here are 3 critical but often-overlooked metrics all business owners should keep a close eye on. If you need support in tracking these metrics or setting up the business systems that allow you to track them, consult with us, your Personal Family Lawyer® with business planning expertise.

01 – Employee satisfaction

While most business owners understand that employee satisfaction is important, most don’t realize just how critical it is. In fact, some business experts rank employee happiness as the single-biggest driver of a company’s success.

This makes sense, seeing that happy employees are not only more productive, but they also typically deliver better customer service, which can lead to increased sales and repeat business. On the other hand, unhappy employees can result in slow or lost sales, as well as decreased levels of customer satisfaction.  

Not only that, but a satisfied team leads to less turnover, and employee turnover is among the most costly of all business expenses, especially when you factor in the costs of recruiting, hiring, and training new staff. Given these correlations, tracking both employee satisfaction and turnover costs can be an effective strategy for achieving sustainable growth. When employee satisfaction increases, your turnover costs should fall. One of our favorite resources for tracking employee happiness, and understanding employee satisfaction is a tool called 15five. Check it out, and see if it helps your business monitor team satisfaction.

The bottom line: If you start by making sure your employees are as happy as possible, many of the other factors affecting your company’s productivity and growth will usually fall into place on their own.

02 – Cash conversion cycle

One frequently overlooked financial metric is the cash conversion cycle (CCC). Your CCC tracks how quickly your customers pay you, compared to how long it takes you to pay your suppliers.

According to Harvard Business Review, Jeff Bezos at Amazon has mastered the CCC, which frees up tons of cash that he can invest however he wants. When it comes to cash flow, what matters most is not necessarily how much revenue you generate, but when the money actually changes hands. 

As the above article on Bezos points out, the basic CCC equation works like this: If your customers pay you quickly, you manage your inventory well, and you are able to take your time paying your own suppliers, your free cash flow can be consistently positive, even when your net income is not. 

CCC is easy to calculate, and it’s a good measure of your free cash flow:

  1. First, determine the average number of days you hold inventory.
  2. To that number, add the average number of days it takes for your customers to pay you.
  3. Finally, subtract the average number of days it takes for you to pay your suppliers.

The lower your CCC number, the better. Back in 2013, Amazon had a record CCC of negative 30.6 days. However, getting your company’s CCC into the single digits is an ideal target to shoot for. Generating such numbers often requires incredibly efficient inventory systems, flexible terms for your suppliers, and encouraging your clients/customers to use speedy payment options. 

If you need support with any of those areas, we’re here for you. In fact, putting these business systems in place is one of the primary services we offer our business-owner clients.

03 – Profitability per product or service

Many business owners assume that selling their most expensive product or service should be their top priority. But sometimes, the most profitable thing to sell is less expensive. In light of this, by tracking your profitability per product or service, you can figure out which ones are making you the most money.

If your business primarily sells products, first determine the true cost of each product compared to how much you are selling it for, and then check the average price your competitors are charging for similar products. Products with the highest gross profit margin (revenue produced by goods minus the cost of those goods) are the most profitable. 

Just make certain you are tracking the gross profit margin accurately to find out which products are your top sellers. In some cases, you may need to increase prices on certain products to make a profit or stop selling other products altogether.

For service-based companies, it can be a bit more challenging to track profitability, unless you charge by the hour, as opposed to charging on a per-project basis or by the month or quarter. To see how well your time is being spent, carefully track each service you offer, breaking down how many hours your team spends delivering it, along with its costs in terms of employee overhead and other related expenses. To do this, you’ll need a clear picture of exactly what goes into providing each service you offer, so you can determine which services are your top money makers—and which ones are losers. 

Keep in mind, sometimes a company will offer a service (or product) that loses money in order to attract new clients or ultimately sell something more profitable. This strategy, known as a “loss leader,” can be a great way for a new business to introduce itself to the market, build a loyal customer base, and secure future revenue.

We’ve Got Your Back

As your Personal Family Lawyer® with business planning expertise, we will advise you on the metrics that are most beneficial for achieving sustainable business growth. Moreover, you should factor your legal, financial, insurance, and tax (LIFT) expenses into the above calculations to get the most accurate measurements. 

We specialize in creating effective legal, insurance, tax, and financial (LIFT) systems for small businesses like yours, so your company has a rock-solid foundation upon which to grow. Meet with us, your Personal Family Lawyer® with business planning expertise today to streamline your business systems and operations, so your company can reach its full potential and create a lasting legacy for you and your family. Call us today to get started.

This article is a service of of Liz Smith, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule your appointment at 907-312-5436, or find a time for us to call you

Whether it’s called “The Great Wealth Transfer,” “The Silver Tsunami,” or some other catchy sounding name, it’s a fact that a tremendous amount of wealth will pass from Baby Boomers to younger generations in the next few decades. In fact, it’s said to be the largest transfer of intergenerational wealth in history.

Because no one knows exactly how long aging Boomers will live or how much money they’ll spend before they pass on, it’s impossible to accurately predict just how much wealth will be transferred. However, studies suggest it’s somewhere between $30 and $90 trillion. Yes, that’s “trillion” with a “t.”

A blessing or a curse?

While most are talking about the many benefits the wealth transfer might have for younger generations and the economy, fewer are talking about the potential negative ramifications. Yet there’s plenty of evidence suggesting that many people, especially younger generations, are woefully unprepared to handle such an inheritance.

In fact, an Ohio State University study found that one third of people who received an inheritance had a negative savings within two years of getting the money. Another study by The Williams Group found that intergenerational wealth transfers often become a source of tension and conflict among family members, and 70% of such transfers fail by the time they reach the second generation

Regardless of whether you’ll be the one passing on wealth or inheriting it, you must have a well-prepared estate plan in place to prevent the potentially disastrous losses and other negative outcomes such transfers can lead to. Without proper planning, the money and other assets that get passed on can easily become more of a curse than a blessing for you and your loved ones.

Proactive planning is the key

There are a number of proactive measures you can take to help reduce the risks posed by the coming wealth transfer. Beyond putting in place a comprehensive estate plan that’s regularly updated, openly discussing your values and legacy with your loved ones can be a key way to ensure your estate planning strategies work exactly as you intend. Here’s what we suggest:

01 – Create your own estate plan

If you haven’t created your own estate plan yet—and far too many of you haven’t—it’s essential that you put a plan in place as soon as possible. It doesn’t matter how young you are, how much wealth you have, or if you have any children yet—all adults over age 18 should have some basic estate planning vehicles in place. If you have yet to get your estate plan started, meet with us, your Personal Family Lawyer® right away to get this crucial first step handled.

From there, be sure to regularly update your plan on an annual basis and immediately after major life events like marriage, births, deaths, inheritances, and divorce. Unlike traditional estate planning professionals, when you work with us, we maintain a relationship with you long after your initial estate planning documents are signed. 

Indeed, our Life & Legacy Planning Process features proprietary systems designed to ensure your estate plan is regularly reviewed and updated over your lifetime, so you don’t need to worry about overlooking anything, as your family, the law, and your assets change over time. Be sure to ask about these systems during your visit.

02 – Talk about wealth with your family early and often

Don’t put off talking about wealth with your family until you are in retirement or nearing death. As soon as possible, clearly communicate with your children, grandchildren, and other heirs what wealth means to you and how you’d like them to use the assets they inherit. Make such discussions a regular event, so you can address different aspects of wealth with your family as the younger generations grow and mature. 

With everyone gathered under one roof for the holiday season, right now is the ideal time to have this discussion. If you feel anxious or uncomfortable talking about wealth with your family, reach out to us and ask for our help. As we covered in our previous article on how a recession can affect your family, we have processes and systems specifically designed to support you in having these delicate conversations, with far more ease than you trying to do everything on your own. We can even facilitate these discussions with your loved ones, if that’s something you are interested in. 

And when you do have the conversation with your loved ones, focus the discussion on the values you want to instill, rather than what and how much they can expect to inherit. Let them know what values are most important to you, and try to mirror those values in your family life as much as possible. Whether it’s saving money, charitable giving, or community service, having your loved ones see you live your most important values is often the best way to ensure they carry those values on once you are no longer around.

03 – Discuss your wealth’s purpose

Outside of clearly communicating your values, you should also discuss the specific purpose you want your wealth to serve in your loved ones’ lives. You worked hard to build your family wealth, so you’ve more than earned the right to stipulate how it gets used and managed when you’re gone. While you can add specific terms and conditions for your wealth’s future use in estate planning vehicles like Trusts, don’t make your loved ones wait until you’re dead to learn how you want their inheritance used.

If you want your wealth to be used to fund your children’s college education, provide the down payment on their first home, or invest for their retirement, tell them so. By discussing how you would like to see their inheritance used while you are still around, you can make certain your loved ones know why you made the estate planning decisions you did. And having these conversations now can greatly reduce future conflict and confusion among your family about what your true wishes really are when you are no longer able to explain your wishes.

A Trusted, Lifelong Guide For You And Your Family 

No matter how much, or how little, wealth you plan to pass on—or stand to inherit—it’s critical that you take action now to make sure that wealth is secure and offers the maximum benefit to your family. As your Personal Family Lawyer®, our Life & Legacy Planning Process is designed to ensure the wealth that’s transferred is not only protected, but that it’s used by your loved ones in the very best way possible.

Moreover, every estate plan we create features a built-in legacy planning process, which ensures you can communicate your most treasured values, lessons, and life stories to those you leave behind. That’s why we call our services Life & Legacy Planning, not just estate planning. These intangible assets form the foundation of your family legacy, and they are often what we value most of all when it comes to our inheritance. Unfortunately, most estate planning lawyers focus little, if any, attention on such assets.

But we are not like most estate planning lawyers.

As your Personal Family Lawyer® firm, we will serve as your trusted, lifelong guide to ensure you make a lifetime of wise, forward-thinking choices for yourself and those you love most. And we will offer your loved ones the support they need to make the most important legal and financial decisions when you are no longer there to guide them. With our expert, caring counsel, you can rest easy knowing that the coming wealth transfer will offer you and your loved ones the most benefit possible, with the least amount of risk. Schedule your visit with 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.

When starting a new business, putting the right legal agreements in place is crucial for protecting your assets and relationships. Yet far too many new business owners put off—or even entirely overlook—creating these vital documents. You might not even know which agreements you need.

The following 4 agreements are among the most essential legal documents for just about every business. If your business is missing any of these foundational documents, or you need the agreements you already have reviewed, contact us, your Personal Family Lawyer® with business planning expertise right away.

01 – Business entity agreements

One of the very first decisions you will make as a business owner is how to legally structure your business. To minimize your personal liability and maximize tax savings, we often advise our clients to set up their business as a limited liability company (LLC) or a corporation. In either case, you’ll need to draft the proper business entity agreement to stipulate how your business entity will be governed and run.

For an LLC, this is in the form of an operating agreement, while corporations require corporate bylaws. Both legal documents define the rights and responsibilities of your company’s owners: LLC owners are known as “members,” while corporation owners are “shareholders.” 

Among other functions, these agreements establish how the company will be managed not only on a daily basis, but also in the event one owner dies, becomes incapacitated, or retires, as well as stipulating what will happen if the company fails. These agreements also outline how business communications will be handled, along with how disputes will be resolved. 

Business owners often don’t take these documents seriously enough—or even bypass them entirely—because the owners are friends, and they figure they will just figure everything out as they go. But giving short shrift to these agreements is a huge mistake.

Conflicts are inevitable in any business, and even if everyone gets along, you still need to plan for events like the company’s eventual sale or dissolution, as well as incapacity, death, or retirement of an owner. For this reason, you should always consult with an experienced business lawyer like us to help you create these agreements, and never try to draft them on your own using a do-it-yourself (DIY) online document service. 

As your Personal Family Lawyer® with business planning expertise, we will not only advise you on the entity structure that’s right for your business, we will also support you to create robust operating agreements or bylaws to ensure your company’s governing documents cover all of these critical areas. 

02 – Employment and independent contractor agreements

If you anticipate hiring employees or independent contractors, you’ll need to create comprehensive employment agreements and independent contractor agreements, and require every person who works for you to sign one—no matter how long you’ve known the person. In fact, it becomes even more important when you are hiring friends or family. 

These agreements should clearly detail the terms and conditions for the working relationship, establishing metrics for success and time frames for specific goals and objectives to be achieved. Then include that information in the employment or contractor agreement, so it’s abundantly clear what the expectations for the position are for both the team member and for you.

Your employee agreements and contractor agreements should also include provisions that protect your intellectual property (IP). We often see agreements that put business owners at risk of their employees or contractors leaving and taking the company’s most valuable IP assets with them. Sometimes, they will even steal your customers, or in a worst-case scenario, you may not even own the IP you’ve paid them to create for you.

Given that your IP is one of our company’s most valuable assets, your agreements need to be prepared properly to ensure you own the full spectrum of rights related to these intangible assets. We outline how this works in the section below.

Last—but far from least, since it’s the biggest area of risk to your business—if you are hiring independent contractors, you must have an independent contractor agreement that keeps you from getting in serious hot water if a contractor you hired is actually deemed to be an employee. Before you hire anyone, be sure to work with us to get your team member contracts in place.  

03 – Intellectual property assignment agreements

You must ensure all intellectual property brought into your company by its founders before you open your doors, as well as any IP created by owners, employees, and contractors once the business is up and running, is owned by the company, not the individuals. Transfer of IP ownership is accomplished using intellectual property assignment agreements, and properly worded employment and independent contractor agreements.

Whether included as a clause in the employment agreement or created as a stand-alone document, these agreements “assign” the company ownership rights to all intellectual property assets—patents, trademarks, and copyrights—used by your business. These agreements are especially important when working with independent contractors. Although you typically have automatic ownership of IP produced by your employees working for you, contractors generally retain full ownership rights to their work, unless they’ve signed an agreement stating otherwise.

As your Personal Family Lawyer® with business planning expertise, we will help you create IP assignment agreements for everyone involved with your business, so you can retain total ownership and control of these valuable intangible assets.

04 – Sales and service agreements

Many business owners don’t understand that client service agreements and product purchase agreements are a key part of the sales process. If this process is not smooth and integrated, you’ll breach trust and reduce your chances of making the sale.

Whether you sell products, provide professional services, or a bit of both, you should have legal agreements in place clearly laying out the rights and responsibilities of both your business and its customers/clients. These agreements detail the key elements—price, payment and credit terms, tax responsibilities, warranties, and liability limitations—for all products your company manufactures or services you offer.

When you work with us to prepare your agreements, we’ll keep our eye on your company’s overall sales process. By doing so, your agreements will enhance that process, building trust and confidence in your products and services, while boosting your bottom line.

Don’t Do-It-Yourself

With so much at stake, never trust generic legal documents you find online to create your company’s agreements. Always consult with an experienced lawyer like us to ensure these vital documents are properly created and maintained.

Whether you need new agreements created or want us to review agreements you already have—even those drafted by another lawyer—meet with us,  your Personal Family Lawyer® with business planning expertise. 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 every relationship, while dealing with conflict in a way that’s both healthy and productive. Call us today to learn more.

This article is a service of 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.

Although the end of the year can be a hectic time, it’s also the deadline for your family to implement a number of key tax-savings strategies. By taking action now, you can significantly reduce your tax bill due in April, but with just a few weeks left in 2022, you better act fast.

While there are dozens of potential tax breaks you may qualify for, here are 4 of the leading moves you can make to save big on your 2022 tax return. However, there may be other opportunities for saving, so meet with us, your Personal Family Lawyer® to make certain you haven’t missed a single one.

01 – Maximize retirement account contributions

By maximizing your contributions to tax-deferred retirement accounts, such as IRAs and 401(k)s, you can not only save for retirement, but also reduce your taxable income for 2022.

In 2022, you can contribute up to $6,000 to an IRA and up to $20,500 to a 401(k) if you’re under 50, and up to $7,000 to an IRA and $27,000 to a 401(k) for those 50 and older. If you don’t have the cash available to fund the maximum amount, try to contribute at least any amount that will be matched by your employer, since that’s basically free money, and you lose it if you don’t use it.

That said, the ability to deduct your traditional IRA contributions from your taxes comes with certain limitations. These limitations are based on factors, such as whether or not you or your spouse is covered by a retirement plan at work and your adjusted gross income (AGI), so make sure you know how your family is affected by these limits when taking deductions. On the other hand, Roth IRA contributions are not tax deductible, since they are made after taxes are taken out, but withdrawals from a Roth in retirement are tax-free.

Additionally, consider maxing out contributions to your Health Savings Account (HSA). Contributions to HSAs for 2022 are capped at $3,650 for individuals and $7,300 for families, with an additional catch-up contribution of $1,000 allowed for those age 55 and older.

You have until December 31, 2022 to contribute to a 401(k) plan and until April 18, 2023 to contribute to an IRA or HSA for the 2022 tax year.

02 – Defer income if you’ll make less next year

If you’re expecting to make significantly more income this year than in 2023, try to defer as much income into next year as possible. However, this strategy only makes sense if you’ll be in the same or a lower tax bracket next year.

This might mean asking your boss to delay paying a year-end bonus until after Jan. 1, 2023, or if you’re self-employed, waiting to invoice certain clients until the new year. On the other hand, if you think you’ll be in a higher tax bracket in 2023, you may want to do the opposite and accelerate income into 2022 to take advantage of a lower tax bracket. 

Meet with us, your Personal Family Lawyer® to find out what’s best for your situation.

03 – Use “loss harvesting” to offset capital gains

With the stock and crypto markets down this year, it can be the ideal time to use a strategy called “loss harvesting,” which means selling taxable investment assets, such as stocks, mutual funds, and bonds, at a loss to offset any capital gains you may have realized earlier in the year. Capital losses offset capital gains dollar for dollar.

If your losses exceed your gains, you can write off up to $3,000 of collective losses against other income. Any losses in excess of $3,000 can be carried over into the next year. In fact, you can carry over such losses year after year over your lifetime.

Note that the loss harvesting strategy does not apply to tax-advantaged accounts, such as 401(k)s, IRAs, and 529 plans. Additionally, the IRS “wash-sale” rule prohibits using this tax write-off for buying a “substantially identical” asset within a 30-day window before or after the sale that generated the loss. 

Given the restrictions, you should always consult your CPA or financial advisor before employing loss harvesting to ensure it doesn’t backfire on you. And if you’d like us to meet with you and your CPA or financial advisor, we offer that service to the clients in our top-tier support plans, so be sure to ask about that if you’d love help getting all of your legal, insurance, financial, and tax systems organized and coordinated before the end of this year. 

04 – Watch your required minimum distributions (RMDs)—or ensure your parents are watching theirs—if you or they are over age 72

If you have an employer-sponsored retirement plan, including a 401(k), 403(b), traditional IRA, SEP IRA, or SIMPLE IRA, you must start taking required minimum distributions (RMDs) by April 1st of the year that follows the year you turn 72. After that, annual withdrawals must be made by December 31st each year to avoid a serious penalty.

If you fail to take the proper RMD, you may face a 50% excise tax on the amount you should have withdrawn based on your age, life expectancy, and your account balance at the beginning of the year. That said, if you do make a mistake, you may be able to avoid the penalty by requesting a waiver from the IRS. You can request a waiver if your failure to take the RMD is due to a reasonable error, and you take steps to make the required distribution. To request a waiver, submit Form 5329 to the IRS, with a statement explaining the error and the steps you are taking to correct it.

Note that in 2022 the IRS updated its uniform lifetime table to calculate RMDs to account for longer life expectancies. As a result, your RMDs for this year may be slightly lower compared to previous years. To determine your RMD, refer to the IRS RMD worksheet, or use an RMD calculator

Maximize Your 2022 Tax Savings

Implementing these—and other—year-end tax-saving strategies could save your family thousands of dollars on your 2022 tax bill. But if you don’t act soon, some of these opportunities may vanish for good, so meet with us, your Personal Family Lawyer® today to schedule your appointment and lock in your savings.

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 you’ve surely heard by now, we’re in the midst of great economic shifts. The collapse of the crypto market, the roller coaster that is the stock market, rising interest rates, dropping home values, and inflation through the roof—it’s enough to make you sick. And it can make you sick, unless you take the actions we are sharing here.

During every economic shift, whether it’s the Great Depression, the last Great Recession, or even during the pandemic, some people get rich, while others lose everything. Whether your family got rich, lost it all, or just hung on by their toes, you can learn from what happened and create the exact future reality you want for yourself and the people you love.

But to do that, you need to get into action now. In service to that, here are 4 steps you can take right away to change your family’s future and ensure you have the stability you need to sail through the economic shifts in the best way possible.

On that note, whether you’ll be passing on wealth or inheriting it, it’s crucial to have a plan in place to reduce the massive loss that will occur if you wait to start the estate planning conversation. Whether you have a little or a lot, not getting clear on what you do have (or will receive) can cause major upsets that can cost you far more than just money. 

01 – Get into conversation and connection  

The first step to ensure your family benefits from the current and coming economic shifts, regardless of what happens, is to get into conversation and connection with the people you depend on, the people who depend on you, or who you will depend on, if something happens to you or your assets.

With the economic realities that are upon us, we can no longer go it alone, expecting everything to just work out because the stock market is on the rise and there’s plenty of savings cushion in the bank. Instead, this is the time to bring your family together and talk about what there is, where it is, and how it’s being managed (and will be managed) in the event there is a black swan event, such as the pandemic or a major stock-market crash.

If you are afraid to have these conversations because you think your family might not do well with knowing what you have, because you think they can’t handle knowing what you have (or don’t have), or because there has been upset in the past when talking about family financial resources, that’s a sign that it’s more important than ever to get into conversation and connection as soon as possible.

If you’ve attempted to have these conversations with your loved ones in the past and it hasn’t gone well, reach out and ask for our help. We’ve got processes and systems in place to support you to have these delicate conversations with your parents, kids, or siblings, with far more ease than you trying to do everything all on your own.

And if you don’t have living parents, kids, siblings, or a spouse, it’s even more important that you start these conversations. You can begin by identifying who you need to have these conversations with. We work with many single people and unmarried couples to help them navigate and talk about what can be a confusing and uncertain future, and we can help you, too.

If talking about assets and the allocation of family resources is easy for your family, that’s great—it’s time to take it to the next level by following the rest of the steps outlined here. Once you get into conversation with the right people based on your family dynamics, the next step is to get comfortable enough to “open the kimono.” This involves creating an inventory that lists all of the assets you own, where they are located, and how the people you love can find them in the event you become unable to share those details yourself.

02 – Open the kimono: Create your “Family Wealth Inventory”

Whether you’ve created a formal set of estate planning documents already or not, it’s time to create (or update) an inventory of your assets. In our experience, most estate plans don’t do a very good job of keeping assets organized. When a loved one becomes incapacitated or dies, this is actually one of the biggest sources of expense, heartache, and pain—no one knows what there is, where it is, or how to find it.

One of the greatest gifts you can give the people you love is what we call a “Family Wealth Inventory,” and it’s something we create for all of our clients as part of their estate plan. We will not only create this inventory for you, but we have systems to keep it consistently updated year in and year out, as your life, assets, and the law change over time.

During a major economic shift, creating, updating and revising your Family Wealth Inventory is critical, and doing that with the people you love is your number-one mission. As we see it, family wealth isn’t just about your financial wealth, it’s about your whole family wealth, including your intellectual, spiritual, and human assets. In fact, these non-financial, intangible assets are usually what we all care about most, and yet they are so often overlooked in estate planning.

One of the best ways to maximize your family’s intellectual, spiritual, and human assets is for your loved ones to get into relationship around your family’s financial resources. Begin by creating (or updating) your Family Wealth Inventory, and sharing it with your loved ones, so you can discuss how to best allocate (or re-allocate) those resources. Having this conversation can help ensure your family’s intellectual, spiritual, and human wealth continues to grow, even as we move through these uncertain economic times.

If you don’t have a Family Wealth Inventory yet, contact us and ask about our Personal Resource Map. This free, online resource-mapping tool will help you start creating your asset inventory right now, without the need for a lawyer. From there, meet with us for a Family Wealth Planning Session. During this meeting, we’ll look at what you have, where it is, and who will take care of it if you can’t, so we can create a plan that’s right for you and your family, whether we have a recession, depression, inflation, or whatever else may come our way.

03 – Consider reallocating your resources

Once you’ve created your Family Wealth Inventory, which allows you to see all of your assets in one place and consider the needs of your family, regardless of the economic climate, you may decide to reallocate your resources. For example, now might be the time to invest in multigenerational housing that will allow you and your kids to live together for many years or allow you to care for aging parents, while still maintaining privacy. Or you may decide that it’s time to create that homestead you’ve been talking about building, or launch that business you’ve been wanting to start. And it could be that now is the time to do all of that with the people you love.

When we meet with you for a Family Wealth Planning Session, we’ll help you look at whether your resources are being held in ways that will support you to reach your short and long-term goals. Then, we can either help you reallocate your resources to achieve those goals, or refer you to professionals we trust to help you reallocate. The worst thing you can do right now is not look at your family resources because you are afraid to see what’s there or you want to keep your head buried in the sand.

Times are changing, and the best time to look at what you have, so you can consider the future you want to create and intentionally allocate (or re-allocate) your resources is right now. Those who do so will thrive. Those who don’t will fall behind and wish they had done something different once it’s too late.

04 – Update your plan

Once you look at what you have, where it is, and how you want it allocated, the next issue to decide on is who would take care of it all if you cannot. Leaving the management of your affairs to chance or to out-of-date estate planning documents is the worst thing you can do for yourself and those you love.

In an upcoming article, we’ll cover the Great Wealth Transfer that’s happening, detailing how between $30 and $80 trillion of wealth will be transferred between the generations over the next few decades, and how you can best prepare for that transfer.

In the meantime, start by updating the estate planning you already have in place to handle your assets in the event of your incapacity or death. If you don’t have any plan at all, the state has one for you, and it almost certainly isn’t what you would want to have happen. And if you do have an estate plan in place, it’s likely out of date, or possibly wasn’t even created properly to begin with.

No matter what you have—or don’t have—we can help. 

Secure your wealth, your legacy, and your family’s future

Regardless of how much, or how little, wealth you own, now is the time to look at what you have, talk to your parents about what they have, and talk to your kids about what they’ll need to take care of you. And if you don’t have living parents or kids, talk to your siblings or close friends. As your Personal Family Lawyer®, our Life & Legacy Planning Process is designed to guide you to look at all of these things with ease and talk to the right people based on your family dynamics and assets, as affordably and effectively as possible.

Every plan we create has built-in support for your life and legacy, which can greatly facilitate your ability to make wise legal and financial decisions throughout your lifetime and beyond. That’s why we call our services Life and Legacy Planning, not just estate planning.

By working with us, as your Personal Family Lawyer®, you can rest assured that no matter what happens with the ongoing and future economic shifts, your family wealth will offer the maximum benefit for your loved ones. Schedule a Family Wealth Planning Session today to start having these critical conversations to ensure you and your family will thrive through the recession and any other calamity that may occur.

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.

Whether you are starting your very first company or you are an established business owner looking to develop a new income stream, creating a side hustle can be the ideal way to get a new business venture started. By developing your business as a part-time side gig, you can greatly reduce the personal and financial risk that comes with starting a new business from scratch.

If you are eager to get the ball rolling with your side hustle, here are 4 strategies to enhance your chances of success.

01 – Monetize your passion

The quickest and easiest way to get a side hustle going is to start with something you truly enjoy doing, you are already good at doing, and that provides value to those around you. By turning something you are passionate about into a money-making venture, you’ll likely have the motivation to see things through when the going gets tough, because even when you are not making any money, you’ll still be having fun.

If you are working a day job, find something you enjoy doing and for which you already have the skills, experience, and industry knowledge. For example, if you work in marketing and really enjoy creating your company’s digital media, you might launch your own enewsletter or graphic design service. 

But first, be sure you aren’t violating the terms of your employment agreement with your current employer. As your Personal Family Lawyer® firm with business planning expertise, this is something we can help you with to make certain your new venture doesn’t get you into any legal trouble. 

If you already own a business, find ways to generate new income streams from your current operation. From affiliate marketing to consulting and creating new digital platforms, there are an array of different options to choose from for creating new revenue sources. Not sure where to start or which options to choose? We can help you with that.

02 – Validate your concept with income and feedback

Studies show that nearly half of all startups fail due to a lack of a profitable market. This highlights the need for you to validate your business concept with paying customers before investing too much time, energy, and money—or quitting your day job. Your side hustle idea may sound like a winning concept to you, but your potential customers might not feel the same way.

By attracting just a few paying customers, you can not only validate your concept, but you will also be able to solicit vital feedback. By getting honest customer feedback, you can make adjustments to your initial concept to ensure you’re producing the ideal version of your product or service.

Oftentimes, your initial concept will evolve through several iterations before you land on the winning one, so be flexible and willing to go with what actually works, not just what you think will work. If you’d like to have a brainstorming session to discuss the marketability of your product or service before you bring it to the market, give us a call, and ask about our LIFT Start-Up Session.

03 – Minimize your startup costs

One of the biggest advantages of launching a side gig is that you often don’t have to invest much—if any—money to get your operation off the ground. If you already own a business, you can leverage your existing legal, insurance, financial, and tax (LIFT) foundations, as long as they are already well established. 

If your business doesn’t already have its LIFT foundations in place, meet with us, your Personal Family Lawyer® firm with business planning expertise to get these systems established before you expand. And if you are starting a side hustle from scratch, you will want to consult with us before you launch to get those basic foundations in place. 

04 – Develop a schedule and stick to it

If you are already running a business or working a 9 to 5 job, you will likely have limited time to work on your side hustle. That’s why it’s called a “hustle” after all—you have to hustle to make the venture pay off. This is where time management is critical.

First, you’ll need to determine how many hours you can spend each day on your side gig, and then block out those times using Google Calendar or another time-management app. To give the venture its best chances of success, find the times of the day when you’ll have the most focus and energy. Whether it’s setting aside extra time in the morning, evenings, or weekends, tailor your side-job schedule around the times when you’ll be the most productive.

From there, make those work times as non-negotiable as your day job or primary business venture. If you simply work whenever you feel like it, you are unlikely to make progress, you’ll get discouraged, and your venture will most likely fall apart before it has a chance to take off.

We have a proven process,  called Money Mapping, we can take you through that will help you map your income needs, your available time, and then allow you to use your calendar wisely to ensure it all works together. Contact us for details.

Create a solid foundation

One way to maximize the time and productivity spent working your side hustle is to streamline the tedious—yet critical—daily tasks involved with running any business. From keeping financials and creating legal agreements to managing taxes and insurance, these things may not be very glamorous, but ignoring them can seriously stunt your budding business—and even lead to financial ruin if you are sued or audited.

As your Personal Family Lawyer® firm with business planning expertise, we can support you to ensure that you have the foundational legal, insurance, tax, and financial (LIFT) systems in place, so you can focus your time and energy on growing your side hustle. At first, you probably won’t need anything super extensive, but you’ll at least need the basics, and we offer exactly this kind of support with our LIFT Start-Up Session. 

Schedule a Start-Up Session with us before launching your side hustle—or if you’ve started but have yet to set up LIFT systems, or if you’re simply not sure if your systems have been set up properly. From there, as your side hustle grows, meet with us again to implement the full suite of systems offered in our LIFT Foundation System & Toolkit. Contact us today to learn more.

This article is a service of 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

Along with personal liability protection, record-keeping requirements, and how you plan to finance your operation, one of the main factors to consider when choosing an entity structure for your business is deciding how you want your company to pay taxes. Your choice of entity will not only determine the rate at which your business is taxed, as well as how and when you are required to file your taxes, but it can also impact a variety of other factors affecting both you and your company. 

Last week, in part one of this series, we covered the tax obligations associated with three entity structures: Sole Proprietorships, Partnerships, and Limited Liability Companies (LLCs). Here in part two, we’ll cover the tax treatment of the remaining two entity structures—C Corporations and S Corporations—along with discussing the benefits and drawbacks related to each one.

C Corporations

A C Corporation is a separate tax-paying entity that files its own tax return, Form 1120, to report its income, as well as claim deductions and credits. Corporations taxed as C Corporations currently pay taxes at the corporate tax rate of 21% on all net income. 

Post-tax profits are then distributed to the company’s shareholders as dividends. Dividends are then taxed on the shareholder’s personal income tax return at their individual tax rates. This means that the corporation itself gets taxed first, and then you get taxed again on your income from the corporation. 

To avoid this system of “double taxation,” the owner of a C Corporation may elect to have the C Corporation taxed as an S Corporation, which we will cover next.

Due to the expense and complexity of creating and maintaining a traditional corporation and dealing with double taxation, very few small businesses will choose to be taxed as a C Corporation. However, once your business begins to have annual profits over $200,000 or so annually (beyond your salary and retirement account contributions), it could be worth considering a C Corporation for your entity structure.

Once you get there, or if you are there now, talk with us, your Personal Family Lawyer® with business planning expertise to discuss whether a C Corporation entity structure might be an effective tax-saving strategy for your business.

S Corporations

An S Corporation is not a business entity in and of itself. Rather, the S Corporation is a special tax election made by the owner of a C Corporation or an LLC to notify the government that the Corporation should be taxed as a pass-through entity. As we wrote last week, unless you elect for your LLC to be taxed as an S Corporation, a single-member LLC is automatically taxed as a sole proprietorship, while multiple-member LLCs are taxed as a partnership.  

A C Corporations can also elect to be taxed as an S Corporation, thereby avoiding the double taxation issue discussed in the prior section. Instead, when your business entity elects S Corporation status, all profits of your business entity are passed through to the shareholders via a K-1, and each shareholder reports their share of the profits as income on their personal tax return.  

However, not all LLCs or C Corporations can elect S Corporation status. In order to file the S Corporation election, your business must meet the following requirements:

  • Must be filed as a U.S. corporation
  • Can maintain only one class of stock
  • Limited to 100 shareholders or less
  • Shareholders must be individuals, estates, or certain qualified trusts
  • Each shareholder must be a U.S. citizen or permanent resident alien, with a valid Social Security Number
  • All shareholders must consent in writing to the S Corporation election

As we mentioned previously, in addition to these requirements, for an S Corporation election to save taxes versus reporting all profits on a Schedule C, you’ll want to have at least $60,000 of net income per year. Furthermore, to prevent business owners from avoiding payroll taxes by taking disproportionately large profit distributions, the IRS requires S Corporation owners to pay themselves “reasonable compensation” in exchange for their services. 

What constitutes reasonable compensation is a highly subjective matter, and one that you should discuss with us, your local Personal Family Lawyer® with business planning experience, along with your CPA. This issue is particularly crucial for you to get right, because if the IRS determines that your compensation was not reasonable by its standards, your business could face serious consequences. 

For instance, the IRS could reclassify all of your S Corporation distributions as wage payments subject to employment taxes, which could leave you on the hook for a massive back tax bill. On top of that, you could face tax penalties of up to 100%, plus negligence penalties. Given such grave repercussions, consult with us to ensure your compensation satisfies the IRS requirements.

Choose the tax treatment best suited for your business

Choosing the entity structure that’s right for your business is something you shouldn’t try to handle on your own—there’s simply too much at stake should you get something wrong. As your Personal Family Lawyer® with business planning expertise, we will offer you trusted advice on selecting the entity that’s best suited for your particular company—not only for how it’s taxed, but for all of the other factors that affect your chosen entity as well. 

From personal liability protection and required administrative formalities to your ability to finance your company, we will offer you the support and guidance you need to choose the entity that’s most advantageous for every circumstance your company.

This article is a service of 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