Even if you put a totally solid estate plan in place, it can turn out to be worthless for the people you love if it’s not regularly updated. 

Estate planning is not a one-and-done type of deal—your plan should continuously evolve along with your life circumstances and other changing conditions, such as your assets and the law. 

No matter who you are, your life will inevitably change: families change, laws change, assets change, and goals change. In the absence of any major life events, we recommend reviewing your estate plan annually to make sure its terms are up to date.

Additionally, there are several common life events that require you to immediately update your plan—that is, if you want it to actually work and keep your loved ones out of court and out of conflict. With this in mind, if any of the following events occur, contact us, your Personal Family Lawyer® right away to amend your plan.

1) You get married: Marriage not only changes your relationship status; it changes your legal status. Regardless of whether it’s your first marriage or fourth, you must take the proper steps to ensure your estate plan properly reflects your current wishes and needs.

After tying the knot, some of your most pressing concerns include naming your new spouse as a beneficiary on your insurance policies and retirement accounts, granting him or her medical power of attorney and/or durable financial power of attorney (if that’s your wish), and adding him or her to your will and/or trust.

2) You get divorced: Since divorce can be one of the most stressful life events, estate planning often gets overshadowed by the other dramatic changes happening. But failing to update your plan for divorce can have terrible consequences.

Once divorce proceedings start, you’ll need to ensure your future ex is no longer eligible to receive any of your assets or make financial and medical decisions on your behalf—unless that’s your wish. Once the divorce is finalized and your property is divided, you’ll need to adjust your planning to match your new asset profile and living situation.

3) You give birth or adopt: Welcoming a new addition to your family can be a joyous occasion, but it also demands entirely new levels of planning and responsibility. At the top of your to-do list should be legally naming both long and short-term guardians for your child. Our Kids Protection Plan offers everything you need to complete this process for free right now.

Once you’ve named guardians, consider putting estate planning vehicles, such as a revocable living trust, in place for your kids. These planning tools can make certain the assets you want your child to inherit will be passed on in the most effective and beneficial way possible for everyone involved. Consult with your Personal Family Lawyer® to determine which planning strategies are best suited for your family situation.

4) A loved one dies: The death of a family member, partner, or close friend can have serious consequences for both your life and estate plan. If the person was included in your plan, you need to update it accordingly to fill any gaps his or her absence creates. From naming new beneficiaries, executors, and guardians to identifying new heirs to receive assets allocated to the deceased, make sure you address all voids the death creates as soon as possible.

5) You get seriously ill or injured: As with death, illness and injury are an unavoidable part of life. If you’ve been diagnosed with a serious illness or are involved in a life-changing accident, you may want to review the people you’ve chosen to handle your healthcare decisions as well as how those decisions should be made. The person you want to serve as your healthcare proxy can change with time, so be sure your plan reflects your current wishes.

6) You relocate to a new state: Since estate planning laws can vary widely from state to state, if you move to a different state, you’ll need to review and/or revise your plan to comply with your new home’s legal requirements. Some of these laws can be incredibly complex, so consult with us to make certain your plan will still work exactly as you desire in your new location.

7) Your assets or liabilities change significantly: Whenever your estate’s value dramatically increases or decreases, you should revisit your estate plan to ensure it still offers the maximum protection and benefits for yourself and your loved ones. Whether you inherit a fortune, take out a new loan, close your business, or change your investment portfolio, your estate plan should be adjusted accordingly.

8) You plan to buy or sell a business: If you plan to sell a business, you can engage in estate planning strategies to avoid almost all of your capital gains taxes, if you revisit your estate plan ahead of time. And, of course, if you are buying a business, you’ll want to ensure your plan is updated to take into account your succession plans for the new business. 

For every business you own, you should consider creating a buy-sell agreement and/or a business succession plan to protect both your business and your family in case something happens to you. In your estate plan, you can not only decide who will take over your role as the company’s owner should something happen to you, but you can also provide him or her with a road map for how the business should be run in your absence by creating a comprehensive business succession plan.

At the same time, you should consult with your Personal Family Lawyer® to take advantage of the numerous tax-savings opportunities that may be available when you buy or sell your business. The tax laws are constantly changing, so you should consult with us to amend your estate plan to achieve the maximum level of tax savings possible in light of the latest changes to the tax code.

A Common Mistake

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 has not been properly updated. Unfortunately, once something happens to you, it’s too late to adjust your plan, and the loved ones you leave behind are forced to deal with the aftermath.

Keeping your estate plan updated is so important, we’ve created proprietary systems designed to ensure these changes are made for all of our clients, so you don’t need to worry about whether you’ve overlooked anything like your family, the law, and your assets change over time. Be sure to ask us about these systems during your visit.

Furthermore, because your plan is designed to protect and provide for your loved ones in the event of your death or incapacity, as your Personal Family Lawyer®, we’re not just here to serve you—we’re here to serve your entire family. We take the time to get to know your family members and include them in the planning process, so everyone affected by your plan is well-aware of what your latest planning strategies are and why you made the choices you did, along with knowing exactly what they need to do if something happens to you.

For The Love of Your Family

As your Personal Family Lawyer®, our estate planning services go far beyond simply creating documents and then never seeing you again. We develop a relationship with you and your family that lasts not only for your lifetime but for the lifetime of your children and their children if that’s your wish.

Plus, we support you in not only creating a plan that keeps your family out of court and out of conflict in the event of your death or incapacity, but we will also ensure that your plan is regularly updated to make certain that it works and is there for your family when you cannot be. Contact us today to get started.

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

It seems that everywhere you look, a new start-up is trying to make it big with a game-changing idea. But it’s only the ones that can turn that idea into reality that reach business success. Too many start-ups fail to make the transition from idea to execution or encounter major setbacks along the way. In the midst of developing your growing start-up, don’t make the common mistake of disregarding tedious, but vital tasks such as making sure all your legal, insurance, financial, and tax ducks are in a row. 

Establishing a solid legal system can help you avoid costly mistakes and save time and stress down the road. Many entrepreneurs struggle with developing such systems because they don’t foresee the most common mistakes start-ups make. Avoiding these only takes a little self-awareness and planning, so read on to learn how to sidestep the five biggest legal mistakes a start-up can make.

1.      Be strategic when creating your entity. Think about your long-term goals, and choose an entity that  matches up. Have your eye on major growth and raising capital? Consider a Delaware C-Corporation, which could set you up for venture capital. Looking for tax advantages? Look into the advantages of an S-Corporation structure that will allow you to minimize your payroll taxes by splitting your personal pay between salary and distributions. 

And, while you can always convert your entity, later on, doing it right the first time will save you time and money. When you talk with a lawyer about the best form of entity, make sure your lawyer doesn’t just suggest a one-size fits all solution, but actually understands the details of your business now and where you want to grow in the future.

2.      Be clear with co-founders. Don’t wait until your business begins to make a profit to begin discussing what each founder is worth. Confront the elephant in the room (i.e. money and position) and be clear on rights, decision-making authority, and equity from the get-go. A well-drafted operating agreement or shareholder agreement is key here. The agreement process itself can surface potential conflicts in advance, and confirm whether you and your co-founders are truly in alignment before big investments of time and money are made.

3.      Protect your intellectual property. It’s essential to establish ironclad protections for the intellectual property that impacts your business’s future value. Think beyond just patents and trademarks; consider having founders, employees and third-party developers sign intellectual property rights agreements so you retain the value they may create while working for you.

4.      Develop a robust set of contract templates. You will thank yourself later for establishing clear guidelines and minimizing your liabilities in writing. Online legal document drafting services are one size fits all; your business will be best served by developing a set of templates that meets your business’s unique needs.

5.      Don’t overlook the importance of working with a lawyer. Working with a trusted lawyer can help you avoid all the mistakes above plus countless others you will likely make as you grow your start-up. A lawyer who also works as a creative strategic advisor, as we do, will guide you to not just avoid legal mistakes, but set your business up with the right legal, insurance, financial, and tax systems for a lifetime of business success.  

Just because you’re a start-up doesn’t mean you have to be naive. If you are serious about developing a solid legal foundation for your start-up, begin by sitting down with us. As your Family Business Lawyer®, we can help you identify your liabilities, mitigate any legal risks and get you on the right track for success. This will allow you the freedom and energy to focus on growing your business.  Schedule your LIFT Strategy Session with me 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 your appointment at 907-312-5436, or find a time for us to call you

Yours, mine and ours … in today’s modern family, it’s oh so common. The blended family is the product of 2nd (or more) marriages, in which one or more of the parties comes with children from a prior marriage. And then, they may even go on to have children together.

If you have or are part of a blended family, it’s important to understand how estate planning could be exactly what you need to keep your family out of conflict and in love, both during life, in the event of incapacity, and when one or more of the senior generation (read: parents) dies. 

Let’s begin with understanding where potential conflicts could arise when you have a blended family. 

Consider the ones you love

If you have children from a prior marriage, and you become incapacitated or die, leaving everything to your new spouse or partner, there is almost certain to be some conflict (whether spoken or not) between your children and new spouse. Your children may feel unloved, forgotten or resentful. 

You may think that this can be avoided by leaving everything to your new spouse or partner, and then on their death, to your children. But this too could set up a scenario where your children feel the need to monitor your spouse/partner’s use of your assets, during their life. And that may not be what you want.

Conversely, you may have a partner or spouse that you have not legally planned for, who you would want to inherit some or all of your assets. But, as things stand right now, your entire estate may go to your children from a prior marriage. This could create a reality where your current partner even gets kicked out of the house you share if something happens to you before your plan is updated.

You can avoid all of this (and even use the estate planning process to build stronger bonds with those you love) by having clear planning in place that has been discussed with your children and your new spouse or partner. We facilitate this as part of the planning process for all blended families.


If you are the child of a parent who has remarried or re-partnered, after a divorce or death, of your other parent, you may want to bring these issues to your parent’s attention.

If you are ready to create a well-thought-out estate plan for your blended family, start by sitting down with us, your Personal Family Lawyer®. During your Life & Legacy Planning Session™, we can help you plan for the needs of your unique family and ensure everything and everyone you love is protected and provided for as you wish – including you. Our estate planning process guides you to protect and preserve what matters most. Before the session, we’ll send you a Family Wealth Inventory and Assessment to complete that will support your thinking on what you own, what’s most important to you, and what you can do to ensure your family is taken care of. You can schedule your Family Wealth Planning Session™ online with us or give us a call if you have any questions. We’re happy to help!

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 with so many things in life, some of the same qualities that help small businesses succeed can also lead to their demise. Fortunately, much of that risk can be lessened through operational excellence.

For example, the owners and managers of small businesses often know each other before they go into business together. Sometimes, they’re even related. Preexisting relationships can help propel small businesses forward, especially when there are high levels of trust and competence.

Unfortunately, however, familiarity is sometimes accompanied by a lax attitude toward operational formalities. Owners and managers may skimp in critical areas such as:

  • Governing documents such as articles of incorporation, partnership agreements, and bylaws;
  • Solid or regular auditing and accounting practices; and
  • Shareholder meetings and minutes.

In worst-case scenarios, business and personal funds are commingled or used for improper purposes.

The good news is that if you are just starting out, it is easy to avoid all of these issues and the accompanying potential for lawsuits and tax problems. As your Family Business Lawyer®, we can provide trusted advice and help position a small business in the most favorable circumstances for that unique business.

Here are some examples of the services a trusted legal advisor can provide:

  • Assistance in identifying recordkeeping products and in establishing high quality recordkeeping practices;
  • Helping owners understand the potential consequences of a lack of proper documentation;
  • Ensuring that clients know the deadlines for business and tax filings; and
  • Explaining the importance of keeping personal and business finances separate.

Perhaps most importantly, a skilled business lawyer can help you structure your operational strategies properly. This can be invaluable in helping your business avoid pitfalls and liabilities along the path toward success. We like to begin with getting to know your whole business, not just the legal side; but, also truly understanding your revenue model, how it serves your life, your team, and your clients. Then, we can advise you on the best strategies for a business that meets not just your business objectives but serves your life as well. 

Schedule your LIFT Strategy Session with us 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 your appointment at 907-312-5436, or find a time for us to call you

When you hear the words, “trust fund,” do you conjure up images of stately mansions and party yachts? A trust fund – or trust – is actually a great estate planning tool for many people with a wide range of incomes who want to accomplish a specific purpose with their money.

Simply put, a trust is just a vehicle used to transfer assets, and trusts are especially useful for parents of minor children as well as those who wish to spare their beneficiaries the hassle of going to Court in the event of their incapacity or death.

And why would you want to keep your family out of court (known as avoiding probate)?

Perhaps you’d like to keep private the details of the assets you are leaving your heirs. Leaving assets via a will that must go through probate to go into effect makes your estate a matter of public record. A trust is a private document and distributes assets upon your death without the need for probate, which can tie up assets for a long period of time in court.

The court process can take longer than is necessary and keep your family from getting access to your assets as quickly as they want or need them.

If you have minor children, you need to create a trust in order to leave your assets to them since minors cannot inherit directly. You will want to name a trustee to manage those assets for your children. Even if your children are adults, a trust can help protect assets you leave for them from creditors, legal judgments, divorce, or even their poor money management habits.

You can even establish a trust for yourself in case you become incapacitated and cannot manage your own finances at some future time. The trust assets are managed by a successor trustee, which avoids the need for a court-appointed conservator if you become incapacitated.

Trusts are also wonderful tools for those who are members of a blended family. If you are remarried and have children from a previous marriage, you can provide for your current spouse while ensuring your assets pass to your children from another marriage using a by-pass trust. 

With this kind of trust, the assets will pass to your children free of estate tax upon the death of your surviving spouse.

As you can see, there are many reasons to create a trust, and being rich isn’t necessarily one of them. You can learn more about how a trust might benefit you or your family by scheduling a Family Wealth Planning Session™, where we can identify the best strategies that are unique to you and your family.

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 we wrote last week, on September 13, 2021, Democrats in the House of Representatives released a new $3.5 trillion proposed spending plan that includes a wide array of changes to federal tax laws. Specifically, the Democrats proposed a number of significant tax increases and other changes to fund the plan, including increases to personal income tax rates and the capital gains tax rate, along with a major reduction to the federal estate and gift tax exclusion and and new restrictions on qualified business income (QBI) deductions.

While the proposed legislation is still under consideration and far from being finalized, given the broad-reaching impact these changes stand to have, we strongly encourage you to contact us now if you would be affected by the proposed legislation should it eventually pass. With the exception of capital gains rate increase, which could go into effect on transactions that occur on or after Sept. 13, 2021, most of the proposed changes would be effective after December 31, 2021, meaning that you do have time to plan now. 

Due to the time it takes to plan and execute some of the financial and estate planning actions we’d support you with, we suggest you start strategizing now. However, please note that we expect to be quite busy with those who do decide to take action before year’s end, so please contact us as soon as possible to get onto the calendar, if you intend to make changes to your business or estate planning this year. 


That way, you’ll have plenty of time to take appropriate action before the end of 2021. In addition, whether you will be impacted by any of these proposed changes or not, if you know that this is the time to get your affairs in order and have trusted guidance to do so, please contact us, your Family Business Lawyer™ as well, so we can get your planning handled before year’s end. Now is the time to get started.

Last week in part one, we discussed the new bill’s proposed changes to tax rates and estate planning vehicles, including several different types of trusts. Here, in part two, we’ll focus on what you should do now, given that the tax law is in flux and we may not have clear answers until close to the end of the year.

If you read last week’s article, or if you’ve been following the news about the coming changes, you know that none of us know what will ultimately happen—or even when we will know the final outcome. Given that the 2017 Tax Cuts and Jobs Act was not passed until December 2017, and the same thing could happen here, with some provisions potentially impacting your taxes this year, as well as provisions that could impact decisions you’d make for next year, but those decisions must be made now, what should you do?

This is exactly why we say it’s so important for you to have a relationship with a Family Business Lawyer™ who will support you on an ongoing, consistent basis and support you to get the guidance you need when you need it. As you likely well know, the one constant in life is change.

You acquire new assets. A child grows up and moves out. You change jobs, start a new business, or leave an old one. A parent needs more care than before and eventually dies.

In our book, life in motion is a life well-lived. And when you have a life in motion, you need ongoing direction, guidance, and support from a trusted advisor you can count on to be there for you through it all.

That’s us.

We are tracking the tax law changes, so you don’t need to—we know you’ve got far more important things to focus on in your life. We are consulting with financial advisors, CPAs, and our own mentors to ensure we’ve got our hearts and minds focused on the coming changes, so we can keep you informed and help you make the best decisions for yourself and the people you love.

That said, here’s what we know for sure—this last quarter of 2021 is going to be quite full, and it’s going to fly by. So if you have not already taken action to get your affairs in order, here’s what you should do now to be most prepared for whatever new changes eventually come down the pike:

  1. Engage with us as your Family Business Lawyer™ and get started by taking our LIFT 20-Point Assessment for free right now. (Email us for access, support@lizsmithlaw.com).
  1. By taking our free LIFT 20-Point Assessment, you’ll be able to identify any gaps or weak spots in your company’s legal, insurance, financial, and tax foundation that need the most attention.
  2. Additionally, by meeting with us, your Family Business Lawyer™, you’ll also get a clear view into what assets you have, where they are, and we will be on your team with clarity about what will be impacted by the new tax law changes, so we can get into action for you when the final bill is passed by the end of the year.
  3. If you have already done your planning with us, and you think you may be impacted by any of the tax law changes we wrote about last week—most notably if you have an estate valued over $5 million or you have a business that you think could grow to over $5 million before your death, you have retirement account assets valued in excess of $10 million, or you have retirement account assets that are invested in a self-directed IRA in non-registered investments—get in touch with us immediately, so we can schedule a meeting with you, your financial advisors, and your CPA to begin to plan strategic action now.
  4. NOTE: Even if the size of your estate or business is far less than this and you have not engaged in any tax planning yet, you might think you can continue to put it off. But here’s why you should not wait to plan, even if you have a fairly small business or estate.

Whether you will be impacted by the tax law changes or not, if you were to become incapacitated due to illness or injury today, or if you were to die tomorrow, your family would be left with a mess. Even if you have done your own estate planning with a DIY online service, your family would still be left with a mess. If you have yet to create a plan, no matter how the tax laws change, your family and business would be left with a mess. And it does not have to—and frankly should not—be that way. If you’ve ever experienced such events in your own family, you know the cost of such a mess.

If you haven’t already, consider what it is that is keeping you from getting your affairs in order. Then, think about the potential cost to you, your family, and your business if you don’t take the time to properly manage your affairs, and your loved ones are forced to do it for you.

This is exactly why we’ve structured our firm as we have: Our number-one goal is to make the planning process as affordable, effective, and easy for you while providing the most benefit beyond just dollars and cents.

Most of our clients leave their initial meeting with us saying, “Wow, I never expected to feel like this after talking about my estate planning.” Our process is designed to help you be a better parent, a better business owner, and a better citizen of our community—and that’s exactly how you’ll feel when you are done.

So again, we don’t know yet exactly what the government will do about the coming tax law changes. What we do know is there will be change. And with that in mind, we are reaching out directly to our clients who we already know will be impacted by that change.

If you are not yet a client, contact us to get started today. It’s going to be an incredibly busy few months until the year’s end, and that starts right now. As your Family Business Lawyer™, we would love to help you get your affairs in order, so you can be prepared for whatever happens.

Don’t Wait To Take Action

If your business or personal finances stand to be impacted by any of the new bill’s proposed changes, it’s crucial to take action as soon as possible to ensure that whatever changes to your planning that need to be made can be planned and executed before the end of the year—or in some cases, even sooner. Not only that, but given the number of proposed changes that are coming, financial advisors, CPAs, and estate planners are sure to be extremely busy in the coming months.

With such limited time, don’t wait to schedule an appointment with your Family Business Lawyer™. The sooner you meet with us, the sooner we can make certain that you can properly amend your planning strategies to minimize the impacts of this new bill on your business and personal planning.

And as we mentioned above, even if the value of your business or estate is relatively modest, and you know that you won’t be impacted by any of the new tax law changes, you still need to get your affairs in order to protect and provide for your family should something happen to you. If you’ve yet to put your estate plan in place, contact your Family Business Lawyer™ today, so you can finally take care of this vital task and do right by those you love. Don’t put it off any longer—contact us right away 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 your appointment at 907-312-5436, or find a time for us to call you

On September 13, 2021, Democrats in the House of Representatives released a new $3.5 trillion proposed spending plan that includes a wide array of changes to federal tax laws. Specifically, the Democrats proposed a number of significant tax increases and other changes to fund the plan, including increases to personal income tax rates and the capital gains tax rate, along with a major reduction to the federal estate and gift tax exclusion and new restrictions on Grantor Trusts that would basically eliminate such trust’s ability to be used as planning vehicles.

While the proposed legislation is still under consideration and far from being finalized, given the broad-reaching impact these changes stand to have, we strongly encourage you to contact us now if you would be affected by the proposed legislation should it eventually pass. With the exception of capital gains rate increase, which could go into effect on transactions that occur on or after Sept. 13, 2021, most of the proposed changes would be effective after December 31, 2021, meaning that you do have time to plan now. 

Due to the time it takes to plan and execute some of the financial and estate planning actions we’d support you with, we suggest you start strategizing now. However, please note that we expect to be quite busy with those who do decide to take action before year’s end, so please contact us as soon as possible to get onto the calendar, if you intend to make changes to your estate plan this year. 

That way, you’ll have plenty of time to take appropriate action before the end of 2021. In addition, whether you will be impacted by any of these proposed changes or not, if you know that this is the time to get your affairs in order and have trusted guidance to do so, please contact us, your Personal Family Lawyer® as well, so we can get your planning handled before year’s end. Now is the time to get started.

Last week in part one, we discussed the new bill’s proposed changes to tax rates and estate planning vehicles, including several different types of trusts. Here, in part two, we’ll focus on what you should do now, given that the tax law is in flux and we may not have clear answers until close to the end of the year.

If you read last week’s article, or if you’ve been following the news about the coming changes, you know that none of us know what will ultimately happen—or even when we will know the final outcome. Given that the 2017 Tax Cuts and Jobs Act was not passed until December 2017, and the same thing could happen here, with some provisions potentially impacting your taxes this year, as well as provisions that could impact decisions you’d make for next year, but those decisions must be made now, what should you do?

This is exactly why we say it’s so important for you to have a relationship with a Personal Family Lawyer® that is ongoing, consistent, and allows you to get the support you need when you need it. As you likely well know, the one constant in life is change.

You acquire new assets. A child grows up and moves out. You change jobs, or start a new business, or leave an old one. A parent needs more care than before, and eventually dies.

In our book, life in motion is a life well-lived. And when you have a life in motion, you need ongoing direction, guidance, and support from a trusted advisor you can count on to be there for you through it all.

That’s us.

We are tracking the tax law changes, so you don’t need to—we know you’ve got far more important things to focus on in your life. We are consulting with financial advisors, CPAs, and our own mentors to ensure we’ve got our hearts and minds focused on the coming changes, so we can keep you informed and help you make the best decisions for yourself and the people you love.

That said, here’s what we know for sure—this last quarter of 2021 is going to be quite full, and it’s going to fly by. So if you have not already taken action to get your affairs in order, here’s what you should do now to be most prepared for whatever new changes eventually come down the pike:

  1. Engage with us as your Personal Family Lawyer®, and get started with our Family Wealth Planning Session (FWPS).
  2. By engaging with the FWPS process, you’ll get a clear view into what you have, where it is, and we will be on your team with clarity about what will be impacted by the new tax law changes, so we can get into action for you when the final bill is passed by the end of the year.
  3. If you have already done your planning with us, and you think you may be impacted by any of the tax law changes we wrote about last week—most notably if you have an estate valued over $5 million or you have a business that you think could grow to over $5 million before your death, you have retirement account assets valued in excess of $10 million, or you have retirement account assets that are invested in a self-directed IRA in non-registered investments—get in touch with us immediately, so we can schedule a meeting with you, your financial advisors, and your CPA to begin to plan strategic action now.
  4. NOTE: Even if the size of your estate is far less than this and you have not engaged in any tax planning yet, you might think you can continue to put it off. But here’s why you should not wait to plan, even if you have a small estate.

Whether you will be impacted by the tax law changes or not, if you were to become incapacitated due to illness or injury today, or if you were to die tomorrow, your family would be left with a mess. Even if you have done your own estate planning with a DIY online service, your family would still be left with a mess. No matter how the tax laws change, if you have not planned, your family would be left with a mess. And it does not have to—and frankly should not—be that way. If you’ve ever experienced such events in your own family, you know the cost of such a mess.

If you haven’t already, consider what it is that is keeping you from getting your affairs in order. Then, think about the potential cost to both you and your family if you don’t take the time to properly manage your affairs, and your loved ones are forced to do it for you.

This is exactly why we’ve structured our firm as we have: Our number-one goal is to make the planning process as affordable, effective, and easy for you, while providing the most benefit beyond just dollars and cents.

Most of our clients leave the initial Family Wealth Planning Session process saying, “Wow, I never expected to feel like this after estate planning.” Our process is designed to help you be a better parent, a better business owner (if you own a business), and a better citizen of our community—and that’s exactly how you’ll feel when you are done.

So again, we don’t know yet exactly what the government will do about the coming tax law changes. What we do know is there will be change. And with that in mind, we are reaching out directly to our clients who we already know will be impacted by that change.

If you are not yet a client, contact us to get started today. It’s going to be an incredibly busy few months until the year’s end, and that starts right now. We’d love to help you get your affairs in order, so you can be prepared for whatever happens.

Don’t Wait To Take Action

If your family stands to be impacted by any of the new bill’s proposed changes, it’s vital for you to take action as soon as possible to ensure that whatever changes to your planning that need to be made can be planned and executed before the end of the year—or in some cases, even sooner. Not only that, but given the number of proposed changes that are coming, financial advisors, CPAs, and estate planners are sure to be extremely busy in the coming months.

With such limited time, don’t wait to schedule an appointment with your Personal Family Lawyer®. The sooner you meet with us, the sooner we can make certain that you can properly amend your planning strategies to minimize the impacts of this new bill on your financial, retirement, and estate planning.

And as we mentioned above, even if you have a relatively modest estate, and you know that you won’t be impacted by any of the new tax law changes, you still need to get your affairs in order to protect and provide for your family should something happen to you. If that’s you, contact us, your Personal Family Lawyer® today to schedule a Family Wealth Planning Session, so you can finally take care of your estate planning and do right by those you love. Don’t put it off any longer—contact us today to get started.

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

On September 13, 2021, Democrats in the House of Representatives released a new $3.5 trillion proposed spending plan that includes a wide array of changes to federal tax laws. Specifically, the Democrats have proposed a number of significant tax increases and other changes to fund the plan, including increases to personal income tax rates and the capital gains tax rate, along with a major reduction to the federal estate and gift tax exclusion and new restrictions on qualified business income (QBI) deductions.

While the proposed legislation is still under consideration and far from being finalized, given the broad-reaching impact these changes stand to have, we strongly encourage you to take action now if you would be affected by the proposed legislation if it does pass. With the exception of the capital gains rate increase, which could  go into effect on transactions that occur on or after Sept. 13, 2021, most of the proposed changes would be effective after December 31, 2021, meaning that you have time to plan now.

That said, due to the time it takes to plan and execute some of the financial and estate planning actions we’d need to support you with, we suggest you start strategizing now. That way, you’ll have plenty of time to take the appropriate action before the end of the year. With that in mind, here we’ll outline the ways the proposed tax law changes stand to affect your business as well as your personal financial, tax, and estate planning, so you can contact us if you would be impacted if the bill does pass.  

1. Increase in Individual Income Tax Rates 

Proposed changes: Under the proposed legislation, the top personal income tax rate would increase from 37% to 39.6% for married individuals filing jointly with taxable income over $450,000; single taxpayers with taxable income over $400,000; and married individuals filing separate returns with income over $225,000. Additionally, this increase would also apply to trusts and estates with taxable income over $12,500.

The bill would also create a new 3% surcharge on individuals with modified adjusted gross income (AGI) exceeding $5 million (or $2.5 million for married individuals filing separately) as well as on trusts with AGI greater than $100,000.

Additionally, the net investment income tax (NIIT) would be extended to cover net investment income derived in the ordinary course of a trade or business for individuals with taxable income of greater than $400,000 for individuals or $500,000 for those filing jointly, as well as for trusts and estates. The NIIT tax does not apply to earnings already subject to FICA tax.

These proposed changes are set to be effective for tax years beginning after December 31, 2021. 

Potential planning solutions: Since these increases will apply to taxable years beginning after December 31, 2021, we suggest you earn as much as you can this year and consider pushing deductions into next year, while you can still take advantage of historically low tax rates. Keep in mind that if you have a high income and decide to put off planning, you may pay much more in income taxes because of the 3% surcharge on high income and the 3.8% NIIT that will now apply to active business income for high incomes.

Moreover, the increase in personal income tax rates, along with the new 3% surcharge and changes to the NIIT have critical importance to estate planning, since the highest rate applies to estates and trusts with taxable income over $12,500, which is a drastically lower income level at which the highest tax rates apply to individuals, such as beneficiaries of a trust. Given these changes, it may be worth accelerating income for estate and trusts in 2021, while rates are lower.

For so-called “complex” or “non-grantor trusts” that pay their own income tax, distributions may carry out income to the beneficiary in order to be taxed at a lower rate. That said, the benefits of a possibly lower tax rate should be weighed against the impact of an outright distribution of funds to a beneficiary and the inclusion of those funds in the beneficiary’s estate if the distributed funds are not spent. For example, would an outright distribution negatively impact a beneficiary with poor money-management skills or issues with substance abuse?

If you will earn more than these income limits this year, meet with your Family Business Lawyer® as soon as possible to discuss a plan to adapt your financial and estate planning to offset the impact of these changes.

2. Increase In Corporate Tax Rates
Proposed changes: The new bill would revert the current flat corporate tax rate of 21% to the pre-2017 system of graduated corporate taxes as follows: The bill increases the top corporate tax rate from 21% to 26.5% for C Corporations earning in excess of $5 million, but it would reduce the lowest rate to 18% for C Corporations with income less than $400,000. For Corporations earning between $400,000 and $5 million, the rate remains unchanged at 21%.

One notable exception—under the bill, corporations that are taxed as personal service corporations are not eligible for the graduated rates and instead are subject to a flat rate of 26.5%. Additionally, the bill would increase the minimum tax rate on overseas corporate income from 10.5% to roughly 16.5%. It also reduces the percentage of foreign income that can be excluded from the minimum tax to 5% from 10%.

These tax changes are proposed to be effective for taxable years beginning after December 31, 2021.

Potential planning solutions: If you have a C Corporation, contact us now to coordinate your planning with your CPA before the end of 2021. 

3. Restrictions On Section 199A Qualified Business Income Deduction

Proposed changes: The bill would add a cap to the 20% deduction for qualified business income (QBI) under Section 199A, which would limit the maximum deduction to $400,000 for individuals, $500,000 for joint returns, $250,000 for a married individual filing separately, and to a mere $10,000 for a trust or estate.

This change will apply to tax years beginning after December 31, 2021.

Potential planning solutions: This restriction will seriously limit 199A deductions for high-income taxpayers. And the cap amount for trusts and estates is particularly severe, and it will effectively eliminate the benefit for trust-owned real estate and other trust-owned qualifying business assets. Given this, you must consider what happens when evaluating gifts to trusts of real estate, rental property, or other business assets that would qualify for 199A deduction for QBI, since those assets will now be subject to the harsh $10,000 limitation.


Reach out to us, your Family Business Lawyer to find out the best ways to offset the negative impact this change stands to have on your business and/or estate.

4. Increase in Capital Gains Tax Rates
Proposed changes: The new bill would increase the long-term capital gains tax rate from 20% to 25% on individuals with taxable income over $400,000. The increase is set to be effective for the tax year ending after September 13, 2021, and it also applies to qualified dividends. However, the bill includes a transition rule that provides that any transactions completed on or before September 13, 2021—or subject to a binding written contract entered into on or before September 13, 2021 (even if the transaction closes after September 13)—are subject to the prior 20% tax rate.

Any capital gains recognized after September 13, 2021, would be subject to the new 25% rate. So, for example, if you entered into a contract to sell your business in May 2021, and the sale closes in November 2021 and exceeds your exemption, your transaction would be subject to the 20% rate. However, if the bill passes, and you enter into a contract after September 13, your tax rate will be 25%. This applies equally to sales of appreciated stock and other investments.

Potential planning solutions: While it may seem that it’s too late to do anything about your capital gains on sales at this point, it’s not, but it will require planning. This means if you are selling any assets this year that will result in significant capital gains tax to pay, contact us now to discuss your options. Once the sale happens, it’s too late. Don’t wait.

5. Restrictions On The Use Of Business Losses

Proposed changes: The bill would permanently disallow “excess business losses” (net business deductions in excess of business income) for noncorporate taxpayers. Under current law, the IRS limits pass-through business net losses which can offset non-business income to $250,000 for individuals or $500,000 for married taxpayers filing jointly. In light of this change, you will no longer be able to offset losses from one business with losses/gains from another business.

That said, the bill would allow taxpayers whose losses are disallowed to carry those losses forward to the next tax year. This change will apply to tax years beginning after December 31, 2021.

Potential planning solutions: Contact us now to coordinate your tax planning with your CPA before the end of 2021.

6. Reduction in Estate and Gift Tax Exclusion

Proposed changes: The bill would dramatically reduce the federal estate and gift tax exclusion from its current level of $11.7 million for individuals and $23.4 million for married couples to its 2010 level of $5 million per individual, adjusted for inflation, which would bring the estate and gift tax “coupon” to roughly $6 million.

The proposed reduction would apply to estates of decedents who die or make gifts after December 31, 2021. This reduction would expose estates and gifts above the exclusion amount to a 40% federal estate tax.  

Potential planning solutions: In light of the proposed reduction, individuals with assets in excess of $6 million (including life insurance) should take a “use it or lose it” approach to gifting, and make any gifts before the end of the year to qualify for the higher exclusion rate. That said, some families should consider making such gifts before the legislation is officially passed due to the changes to Grantor Trusts and other estate planning strategies described below. If your estate is already over the $6 million exemption, or you expect it to be in the future, contact us now. Again, do not wait.

7. Tax Savings For S Corporations That Convert to Partnerships

Proposed changes: Not every change proposed by the new legislation is negative, and this is one of them. This provision would allow S-Corporations that elected S-Corp status prior to May 13, 1996 to convert tax-free to a partnership at any time in the two years following passage of the bill. Under the current law, such a move would result in a deemed taxable sale of all of the S-Corporation’s assets at the time of conversion. 

Potential planning solutions: If you own shares in an S-Corp, this could be a great opportunity. S-Corps can typically convert tax-free to a C Corporation, but C Corporations don’t offer the level of flexibility in regards to the distribution and allocation of income compared to entities taxed as a partnership. If you are looking for greater flexibility in this regard and want to take advantage of the new tax savings provided by this provision, contact your Family Business Lawyer today for support and guidance on making such a conversion.

8. New Restrictions On Grantor Trusts

Proposed changes: The new bill targets Grantor Trusts and would effectively shut them down as planning vehicles. Currently, a Grantor Trust is a trust that can be considered separate and apart from the Grantor (individual who creates the trust) and contributor to the trust for estate tax purposes, but be considered as owned by the grantor for income tax purposes.

Since the grantor is considered the owner of the trust for income tax purposes, transactions between the trust and the grantor are “disregarded,” meaning that assets can be sold or exchanged with the trust, without triggering any income tax consequences. However, that same trust can be used to move assets outside of your estate for estate tax purposes, freezing the value of those assets at their current value, such that when you die any appreciation in the value of those assets is not taxed for estate tax purposes, saving your family 40% or more. 

The new bill provides that any Grantor Trust created on or after the date of the legislation’s enactment will now be included in your estate for estate tax purposes. Distributions from Grantor Trusts (other than to the grantor or the grantor’s spouse) would be treated as gifts made by the grantor, and therefore subject to the gift tax exemption. If the bill is enacted and Grantor Trust ceases to be treated as such during the grantor’s life, the grantor would be deemed to make a gift of the trust assets, and sales of assets between a grantor and the Grantor Trust would no longer be disregarded for income tax purposes.

The good news is that under the new bill Grantor Trusts established and funded before the enactment of the new law would be “grandfathered” in, as would promissory notes that are in place at the time of the law’s enactment. 

Potential planning solutions: Contact us if your assets are above the proposed estate tax exemption amount of approximately $6 million, or you anticipate they will be, so we can move some of your assets outside of your estate this year. 


9. Impact To Discounts & Other Estate Planning Vehicles

Proposed changes: The bill would not only affect the use of Grantor Trusts, but it would also eliminate valuation discounts, unless the asset gifted or sold is an “active trade or business.” Moreover, depending upon how the legislation is applied and interpreted, the new bill may also prevent planners from being able to use irrevocable life insurance trusts (ILITs)—at least to some degree (more about ILITs below)—as well as Grantor Retained Annuity Trusts (GRATs), Qualified Personal Residence Trusts (QPRTs), and Grantor Charitable Lead Annuity Trusts (CLATs).

Irrevocable life insurance trusts (ILITs) are among the most commonly used irrevocable trusts for estate planning, and since most ILITs have traditionally been structured as Grantor Trusts, these trusts will be largely undermined by the new bill. Since the trust would be included in your estate, new ILITs will no longer be feasible. As a workaround, new ILITs may need to be structured as non-Grantor Trusts to avoid estate inclusion.

However, this structure will create an array of problems. First, it will require the trust to expressly prohibit trust income from being used to pay life insurance premiums on your life as the creator of the trust. Second, for those existing trusts that are grandfathered in, no new gifts should be made to the ILIT, or a portion of the trust assets (including life insurance proceeds) will also be included in your estate. 

Potential planning solutions: If your estate plan includes any of these trusts or planning strategies, contact us right away for guidance in amending your estate plan to offset the impact of these changes.

As we approach the end of 2021, if your business or personal finances stand to be impacted by any of these changes, it’s imperative that you take action as quickly as possible to ensure that whatever actions need to be taken can be planned and executed before the end of the year. Not only that, but given the number of proposed changes that are coming, financial advisors and estate planners are sure to be extremely busy in the coming months.

Next week in part two, we’ll discuss the rest of the changes proposed in this new bill, with a primary focus on the bill’s impact on retirement planning.

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

On September 13, 2021, Democrats in the House of Representatives released a new $3.5 trillion proposed spending plan that includes a wide array of changes to federal tax laws. Specifically, the Democrats have proposed a number of significant tax increases and other changes to fund the plan, including increases to personal income tax rates and the capital gains tax rate, along with a major reduction to the federal estate and gift tax exclusion and new restrictions on Grantor Trusts that would basically eliminate such trust’s ability to be used as planning vehicles.

While the proposed legislation is still under consideration and far from being finalized, we think it is important to be aware of what could happen in case you want to take action now if you would be affected by the proposed legislation if it does pass. With the exception of capital gains rate increase, which could go into effect on transactions that occur on or after Sept. 13, 2021, most of the proposed changes would be effective after December 31, 2021, meaning that you have time to plan now.

That said, due to the time it takes to plan and execute some of the financial and estate planning actions we’d need to support you with, we suggest you start strategizing now. That way, you’ll have plenty of time to take the appropriate action before the end of the year. With that in mind, here we’ll outline how  the proposed tax law changes stand to affect your financial, tax, and estate planning, so you can contact us if you would be impacted if the new bill does pass. 

1. Increase in Individual Income Tax Rates 

Proposed changes: Under the proposed legislation, the top personal income tax rate would increase from 37% to 39.6% for married individuals filing jointly with taxable income over $450,000; single taxpayers with taxable income over $400,000; and married individuals filing separate returns with income over $225,000. Additionally, this increase would also apply to trusts and estates with taxable income over $12,500.

The bill would also create a new 3% surcharge on individuals with modified adjusted gross income (AGI) exceeding $5 million (or $2.5 million for married individuals filing separately) as well as on trusts with AGI greater than $100,000.

Additionally, the net investment income tax (NIIT) would be extended to cover net investment income derived in the ordinary course of a trade or business for individuals with taxable income of greater than $400,000 for individuals or $500,000 for those filing jointly, as well as for trusts and estates. The NIIT tax does not apply to earnings already subject to FICA tax.

These proposed changes are set to be effective for tax years beginning after December 31, 2021. 

Potential planning solutions: Since these increases will apply to taxable years beginning after December 31, 2021, we suggest you earn as much as you can this year and consider pushing deductions into next year, while you can still take advantage of historically low tax rates. Keep in mind that if you have a high income and decide to put off planning, you may pay much more in income taxes because of the 3% surcharge on high income and the 3.8% NIIT that will now apply to active business income for high incomes.

Moreover, the increase in personal income tax rates, along with the new 3% surcharge and changes to the NIIT have critical importance to estate planning, since the highest rate applies to estates and trusts with taxable income over $12,500, which is a drastically lower income level at which the highest tax rates apply to individuals, such as beneficiaries of a trust. Given these changes, it may be worth accelerating income for estate and trusts in 2021, while rates are lower.

For so-called “complex” or “non-grantor trusts” that pay their own income tax, distributions may carry out income to the beneficiary in order to be taxed at a lower rate. That said, the benefits of a possibly lower tax rate should be weighed against the impact of an outright distribution of funds to a beneficiary and the inclusion of those funds in the beneficiary’s estate if the distributed funds are not spent. For example, would an outright distribution negatively impact a beneficiary with poor money-management skills or issues with substance abuse?

If you will earn more than these income limits this year, meet with us, your Personal Family Lawyer® as soon as possible to discuss a plan to adapt your financial and estate planning to offset the impact of these changes.

2. Increase in Capital Gains Tax Rates
Proposed changes: The new bill would increase the long-term capital gains tax rate from 20% to 25% on individuals with taxable income over $400,000. The increase is set to be effective for the tax year ending after September 13, 2021, and it also applies to qualified dividends. However, the bill includes a transition rule that provides that any transactions completed on or before September 13, 2021—or subject to a binding written contract entered into on or before September 13, 2021 (even if the transaction closes after September 13)—are subject to the prior 20% tax rate.

Any capital gains recognized after September 13, 2021, would be subject to the new 25% rate. So, for example, if you entered into a contract to sell your home in May 2021, and the sale closes in November 2021 and exceeds your exemption, your transaction would be subject to the 20% rate. However, if the bill passes, and you enter into a contract after September 13, your tax rate will be 25%. This applies equally to sales of appreciated stock and other investments.

Potential planning solutions: While it may seem that it’s too late to do anything about your capital gains on sales at this point, it’s not, but it will require planning. This means if you are selling any assets this year that will result in significant capital gains tax to pay, contact us now to discuss your options. Once the sale happens, it’s too late. Don’t wait.

3. Reduction in Estate and Gift Tax Exclusion

Proposed changes: The bill would dramatically reduce the federal estate and gift tax exclusion from its current level of $11.7 million for individuals and $23.4 million for married couples to its 2010 level of $5 million per individual, adjusted for inflation, which would bring the estate and gift tax “coupon” to roughly $6 million.

The proposed reduction would apply to estates of descendants who die or make gifts after December 31, 2021. This reduction would expose estates and gifts above the exclusion amount to a 40% federal estate tax.  

Potential planning solutions: In light of the proposed reduction, individuals with assets in excess of $6 million (including life insurance) should take a “use it or lose it” approach to gifting, and make any gifts before the end of the year to qualify for the higher exclusion rate. That said, some families should consider making such gifts before the legislation is officially passed due to the changes to Grantor Trusts and other estate planning strategies described below. If your estate is already over the $6 million exemption, or you expect it to be in the future, contact us now. Again, do not wait.

4. New Restrictions On Grantor Trusts

Proposed changes: The new bill targets Grantor Trusts and would effectively shut them down as planning vehicles. Currently, a Grantor Trust is a trust that can be considered separate and apart from the grantor (individual who creates the trust) and contributor to the trust for estate tax purposes, but be considered as owned by the grantor for income tax purposes.

Since the grantor is considered the owner of the trust for income tax purposes, transactions between the trust and the grantor are “disregarded,” meaning that assets can be sold or exchanged with the trust, without triggering any income tax consequences. However, that same trust can also be used to move assets outside of your estate for estate tax purposes, freezing the value of those assets at their current value, such that when you die, any appreciation in the value of those assets is not taxed for estate tax purposes, saving your family 40% or more. 

The new bill provides that any Grantor Trust created on or after the date of the legislation’s enactment will now be included in your estate for estate tax purposes. Distributions from Grantor Trusts (other than to the grantor or the grantor’s spouse) would be treated as gifts made by the grantor, and therefore subject to the gift tax exemption. If the bill is enacted and Grantor Trust ceases to be treated as such during the grantor’s life, the grantor would be deemed to make a gift of the trust assets, and sales of assets between a grantor and the Grantor Trust would no longer be disregarded for income tax purposes.

The good news is that under the new bill Grantor Trusts established and funded before the enactment of the new law would be “grandfathered” in, as would promissory notes that are in place at the time of the law’s enactment. 

Potential planning solutions: Contact us if your assets are above the proposed estate tax exemption amount of approximately $6 million, or you anticipate they will be, so we can move some of your assets outside of your estate this year. 


5. Impact To Discounts & Other Estate Planning Vehicles

Proposed changes: The bill would not only affect the use of Grantor Trusts, but it would also eliminate valuation discounts, unless the asset gifted or sold is an “active trade or business.” Moreover, depending upon how the legislation is applied and interpreted, the new bill may also prevent planners from being able to use irrevocable life insurance trusts (ILITs)—at least to some degree (more about ILITs below)—as well as Grantor Retained Annuity Trusts (GRATs), Qualified Personal Residence Trusts (QPRTs), and Grantor Charitable Lead Annuity Trusts (CLATs).

Irrevocable life insurance trusts (ILITs) are among the most commonly used irrevocable trusts for estate planning, and since most ILITs have traditionally been structured as Grantor Trusts, these trusts will be largely undermined by the new bill. Since the trust would be included in your estate, new ILITs will no longer be feasible. As a workaround, new ILITs may need to be structured as non-Grantor Trusts to avoid estate inclusion.

However, this structure will create an array of problems. First, it will require the trust to expressly prohibit trust income from being used to pay life insurance premiums on your life as the creator of the trust. Second, for those existing trusts that are grandfathered in, no new gifts should be made to the ILIT, or a portion of the trust assets (including life insurance proceeds) will also be included in your estate. 

Potential planning solutions: If your estate plan includes any of these trusts or planning strategies, contact us right away for guidance in amending your estate plan to offset the impact of these changes.

As we approach the end of 2021, if your family stands to be impacted by any of these changes, it’s imperative to take action as quickly as possible to ensure that whatever actions that need to be taken can be planned and executed before the end of the year. Not only that, but given the number of proposed changes that are coming, financial advisors and estate planners are sure to be extremely busy in the coming months.

Given this, don’t wait to schedule an appointment with us, your Personal Family Lawyer®. The sooner you meet with us, the sooner we can make certain that you can amend your planning strategies accordingly to minimize the impacts of this new bill on your financial and estate planning.

Next week in part two, we’ll discuss the rest of the changes proposed in this new bill, with a primary focus on the bill’s impact on retirement planning.

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

Whether it’s your very first or your fifth company, if you’re looking to start a new business venture, you have two options: 1) build your own from scratch or 2) buy an existing one. And while many entrepreneurs dream of building their own company from the ground up, the reality is, launching a brand-new business can be incredibly difficult.

Building a business from scratch can involve years of working long hours for little to no financial reward. In fact, whether your company is ever able to generate a profit or not, starting your own business can consume your life like few other activities. What’s more, no matter how much you sacrifice, there’s no guarantee the venture still won’t fail miserably.

On the other hand, buying an existing business and successfully making it your own can be somewhat less stressful. After all, you’re buying an operation that has already proven successful, with an existing customer base, brand recognition, and cash flow.

That said, buying an existing business isn’t without its own challenges. It will also require hard work and sacrifice, and no matter how successful the company was under its former owner, there’s no guarantee you will experience the same prosperity. When buying an existing business, the difference between success and failure often comes down to your first major decision: purchasing the right company.

With so much riding on your decision, here are three big mistakes to avoid when shopping for and purchasing an existing business.

1. Not Doing Proper Research Before Buying
When purchasing an existing business, you need to go into the process with your eyes wide open to ensure that what you’re investing in is everything it’s claimed to be. Just because a business appears to be successful on the surface doesn’t mean there aren’t fatal flaws just below the waterline.

One of the first things you need to learn is why the business is being sold in the first place. The owner may claim to be retiring to spend more time with the family, but he or she might know that a competing operation is opening a megastore just down the street in a few months. You’ve got to gauge not only the company’s current success, but also its potential for future success and growth. To this end, you’ll need to get straight answers to a few essential questions:

  • What assets does the business own?
  • What debts or liabilities are associated with these assets?
  • Is the company involved in any ongoing or pending lawsuits?
  • Are there any liens against the business?
  • Are there any unpaid vendors, suppliers, and/or contractors?
  • Is the company’s particular industry thriving or in decline?

Such due diligence should be done well before you begin negotiations with the seller, not a few weeks before closing. The more you know about the operation, the stronger your position will be as a buyer. When it comes to investigating the company’s legal framework and liabilities, a Family Business Lawyer™ can help you learn everything you need to know to have the strongest position possible.

2. Buying a business using the wrong entity structure
Many budding entrepreneurs get so excited to own their own company, they fail to put the proper liability protections in place. For instance, if all of the contracts you’re signing when you buy the operation are in your own name as a sole proprietor, you’re putting everything you own at risk.

In fact, without the proper business entity in place to shield you from personal liability, you could end up losing your home, car, and savings to the company’s creditors if the venture suffers a major loss or gets hit with a lawsuit. To prevent this, you need to have the appropriate legal structure in place before buying.

Business entities, such as limited liability companies (LLCs) and corporations, often provide the best protection, so even if the company totally fails, its creditors will be legally unable to come after your personal assets. To figure out what’s best for your situation, you should meet with an experienced lawyer like us to help you select, put in place, and maintain the proper entity structure for the specific operation you’re purchasing.

3. Not Properly Valuing The Business
Although improperly valuing a company is technically a lack of due diligence, business valuation is such a complex and nuanced part of the purchasing process, it deserves its own category. Indeed, every single other factor about the business can be totally perfect, but if you pay the wrong price for it, you could be setting yourself up for disaster.

Besides, even if the business you buy doesn’t actually fail because of improper valuation, it makes zero sense to waste tens of thousands of dollars that could be used for much more valuable purposes over a simple mistake that’s fairly easy to avoid.

Many times, a seller will come up with a totally unsubstantiated sales price just to test the waters. Other sellers base the price on a hidden motive: to pay off their own debts, to pay for their kids’ college education, or as part of an upcoming divorce settlement. All of these factors have no bearing on the true value of the business.

Keep in mind that the seller’s initial asking price has nothing to do with a proper valuation—that’s on you. We can help you figure out how the company’s tax and legal liabilities fit into the value equation, and then we can refer you to valuation experts we know and trust to help with the other areas.

Get Professional Support
Owning a business is a huge responsibility no matter how you look at it. And when buying an existing operation, your first—and often most critical—responsibility is to make sure the company you purchase is actually worth the money, time, and energy you’ll be investing. With so much on the line, you shouldn’t try to do everything on your own.

If you want to do things the right way, we recommend that you hire a team of experts to help with the purchase of the business. As your Family Business Lawyer, we can assist you with all of the legal issues related to purchasing the business, and we can put you in touch with other professionals we trust to help round out the rest of your support team. Schedule an appointment with us 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 your appointment at 907-312-5436, or find a time for us to call you