Running a business is a huge responsibility, so putting a lot of thought and effort into your legal agreements is likely pretty low on your list of priorities. But giving short shrift to your agreements can cost you big time—and in more ways than one.

In order to save time and money, you may be tempted to use one of the many online legal document services like Rocket Lawyer® or LegalZoom®, rather than having a lawyer prepare—or at least review—your legal agreements. But taking the do-it-yourself (DIY) route can put your company in serious jeopardy.

Before you put everything you’ve worked so hard to build in your life at risk, consider these 4 ways cutting corners with your contracts can put your business in peril.

1. Agreements Are The Heart Of Your Business
Business agreements are designed to protect your company’s most essential elements: your personal liability, personal and professional relationships, intellectual property, and trade secrets to name just a few. Moreover, legal agreements govern the rights and responsibilities of every party you do business with: clients, vendors, employees, and contractors.

Are you really going to trust generic, fill-in-the-blank forms you find online to protect such vital parts of your business? Using great agreements and having an integrated agreement process shows you care—and not just about the deal at hand, but about the other party and your business as a whole. Having well-drafted, well-structured, and well-presented agreements demonstrates that you believe in yourself and the people you work with, and these documents can greatly strengthen your business and relationships at every level.

2. Presentation Matters

Beyond putting your company in legal jeopardy, relying on cheap DIY legal documents you download off the internet can make you look amateurish—and even incompetent. In fact,  if you don’t take the time to ensure your agreements are well prepared and properly presented, you risk losing out on lucrative deals that might otherwise be a sure thing.

To demonstrate how easily this can happen, consider the following true story about how a poorly written contract cost a software developer a $25,000 deal. While the following events are entirely true, the names have been changed for privacy protection.

Ted was a successful entrepreneur, and he was planning to invest $25,000 to hire a developer to create an app. He found a software developer named Annie, who he felt confident he would hire, got his money ready, and was anxious to get started.

Then, Annie sent over her agreement. It was so confusing and poorly written that Ted decided not to hire Annie after all. It was simply going to take him too long to review the agreement she sent to make sure it was a win/win for both of them. Ted didn’t want to spend money on a lawyer—he wanted to get an app developed.

Had Annie’s contract been clearly and simply presented, and had she pointed out in the document how Ted could make payment, and how the agreement was a win/win for both of them, Ted would have moved forward—and Annie would have been $25,000 richer. Instead, likely because Annie wanted to save money on hiring a lawyer, she lost the deal entirely. 

As this story illustrates, just having a valid contract is often not enough. Annie’s agreement may (or may not) have been legally sound, but that didn’t matter. It was so poorly written and presented that Ted dismissed the deal on the spot—and for good reason.

If your contracts are shoddy and unpolished, what’s to say you won’t be just as careless and unprofessional with other aspects of your business? Indeed, the quality of your agreements is representative of the overall quality of your business.

Given how important contracts are for your business, you should work with a lawyer like us, who understands not just the legal parts of the agreement, but how to structure the agreement to build confidence in you and your services. Make sure you work with a lawyer who understands that your agreements—and their presentation—are a key part of your enrollment process. If not, you’ll most likely be leaving loads of money and clients on the table.


3. Agreements Are Vital To Your Hiring Process

When it comes to onboarding a new team member, whether they are an employee or an independent contractor, it’s fairly common to have the relationship not turn out quite the way you had hoped it would. This occurs because the individual either doesn’t provide the services you thought they promised they would provide, or they fail to live up to your expectations in some other way.

The cost of team-member turnover could be one of the highest expenses in your business, not just financially, but in terms of time and energy, too. In many cases, changing up your agreement process can ensure you are hiring the right people, who will be with you for a long time and grow alongside you and your business.

Most business owners have a standard employment agreement signed by all team members or no signed agreement at all. In either case, you may be setting yourself up for loss right from the start. Every single person you hire, whether as an independent contractor or as an employee, must sign an agreement, not because it’s necessarily required by law, but because it’s going to save you from big losses down the road.

Your agreement needs to be as specific as possible about your expectations for the relationship, establishing metrics for success and time frames for specific goals and objectives to be achieved. When you share these expectations, metrics of success, and time frames with your new hire, you are setting them up to succeed from the very start. And you are giving them an opportunity to clarify whether the expectations are clear and can be met. This is what sets the relationship up for success.

What’s more, a trusted lawyer can customize your agreements to make them more personal, catering to your specific needs, style, and way of doing business. Having well considered and customizable agreements helps you make better hires because it forces you to be proactive and think through your expectations for the relationship ahead of time. It forces you to consider what kind of things will make the relationship a thrilling success, along with what could cause the relationship to fail.


4. Focus On The Long Term

Using online legal documents may seem less expensive than hiring a lawyer, but the cost in terms of lost business can be significant. By taking the DIY approach, you not only risk missing out on lucrative business deals, but you could end up paying tens of thousands of dollars in attorney’s fees and court costs to untangle a poorly drafted agreement.

Or even worse, relying on DIY legal documents could cause you to go out of business entirely. Are you really willing to risk losing your business just to save a few hundred dollars? 

Don’t Do-It Yourself

As your Family Business Lawyer®, we specialize in creating legal agreements for small businesses like yours. With our guidance and support, your agreements will not only be legally sound, but their clear, concise presentation will wow potential clients and make you stand out from the competition. Whether you need new agreements created or want to review ones you already have—even those drafted by another lawyer—contact us, your Family Business Lawyer™ today. 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

If you have a sale of real estate or assets coming up that will result in you owing capital gains tax, you may want to give us a call to discuss whether to set up a Charitable Remainder Trust (CRT) first. Think of it this way: would you rather pay taxes and send your hard-earned money to the government, or use that same money to provide yourself with a lifetime of income and support your favorite charity at the same time?

CRTs offer a number of benefits to everyone involved. These trusts allow you to contribute to your most beloved charities, while also generating  a valuable extra source of income for the beneficiaries, which can assist with retirement, paying off taxes, or be used for additional estate planning purposes. Such trusts aren’t for everyone, so call us to see if a CRT fits in with your planning goals.

How A CRT Works
A CRT is what’s called a “split-interest” trust, meaning it provides financial benefits to both the charity and the non-charitable beneficiary. The non-charitable beneficiary can be your spouse, child, another heir, or even you.

Here’s how these unique trusts work: when you set up a CRT, you name a trustee, an income beneficiary (or beneficiaries), and a charitable beneficiary. Then, you’ll contribute your appreciated asset to the CRT, and the trustee will sell, manage, and invest the asset(s) to produce income that’s paid to the non-charitable beneficiary.

Normally, the sale of these assets would generate capital gains taxes. But instead, you get a charitable deduction for the donation when you donate the assets to the CRT, and the CRT doesn’t pay capital gains tax upon sale of the appreciated assets. Sounds like a win/win, right?

After sale of the appreciated assets, the cash generated is invested by the trustee, and the non-charitable beneficiary receives income from the trust, which is paid out either annually, semiannually, quarterly, or monthly, depending on how the trust is set up. And if income is not paid out, it can accumulate in the trust and not be subject to income tax, further growing in value. Then, at the end of the non-charitable beneficiary’s life, whatever assets “remain” (hence the name “remainder” trust), pass to the charity or charities named in the trust.

The trustee can be yourself, a charity, another person, or even a third-party entity. Since the trustee (if it’s not you) is not only responsible for seeing that your wishes are properly carried out, but also for managing the trust assets in accordance with complex state and federal laws, it’s vital that the trustee you select has experience with financial management, and ideally, with trust administration.

You can use the following types of assets to fund a charitable remainder trust:

  • Publicly traded securities
  • Some types of closely held stock (Note that CRTs cannot hold S-Corp stock)
  • Real estate
  • Certain other complex assets

If you have assets you think might be useful for funding a CRT, contact us your Personal Family Lawyer® to see if a CRT might be a good fit for your estate planning goals.

Main Types of CRTs
There are two main types of charitable remainder trusts, both of which are based on your options for how the trust income is paid out. 

Charitable Remainder Annuity Trusts (CRATS): The beneficiary can receive an annual fixed payment using a Charitable Remainder Annuity Trust. With this option, the income payments from the trust will not change, regardless of the trust’s investment performance. With this type of trust, additional contributions to the trust are not allowed.

Charitable Remainder Unitrust Trusts (CRUTS): With a Charitable Remainder Unitrust, the beneficiary is paid a fixed percentage of the trust’s assets, and the payouts fluctuate depending on the trust’s investment performance and value. Unlike with CRATS, additional contributions can be made with this type of trust.

Tax Benefits Of CRTs
Since CRTs are used primarily to reduce taxes, they come with some significant tax breaks. As mentioned earlier, you can take a partial income tax deduction within the year the trust was created for the value of your donation. The partial tax deduction you receive is based on the trust’s type and term, the projected income payments to the charitable beneficiaries, and interest rates set by the IRS, which are determined based on the growth rate of trust assets. 

That said, your deduction is limited to 30% of your adjusted gross income. And if the donation exceeds that limit, you can carry over any excess into subsequent tax returns for up to five years.

Again, profits from appreciated assets sold by the trustee aren’t subject to capital gains taxes while they’re in the trust. Plus, when the trust assets finally pass to the charity, that donation won’t be subject to estate taxes either. Such hefty tax breaks can seriously add up, so if you have the means to set such a trust up, they can be quite beneficial for all parties involved, so if you think such a trust might be right for you, definitely meet with us to discuss your options

It’s important to note that the beneficiaries will pay income tax on income from the CRT at the time it’s distributed. Whether that tax is capital gains or ordinary income depends on where the income came from—distributions of principal are tax free.

Don’t Go It Alone
CRTs come with very specific and complex requirements surrounding their creation, operation, and the responsibilities of the trustee, so if you are considering setting up a CRT, it’s vital that you consult with a lawyer experienced with such trusts. To this end, if you have highly appreciated assets you’d like to sell while minimizing tax impact, maximizing income, and benefiting charity, call us so we can determine the best way to achieve your charitable objectives, while maximizing your tax-saving and other financial benefits. 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.

If you must work in order to earn your income, you need to have disability insurance. That said, purchasing such insurance is a “buyer beware” situation. This is because when it comes to most disability insurance policies, you must be aware of the numerous pitfalls that come with acquiring coverage that will really work for you and your family, if and when you need it. This week’s article covers what you need to know to get the best coverage possible. 

What Is Disability Insurance?
A disability insurance policy pays benefits when you are unable to work because you are sick or injured. Most disability policies pay you a benefit that replaces a percentage of your income when you can’t work due to illness or injury.

Disability insurance is not the same as health insurance, as it will not cover your medical bills. Instead, disability benefits are designed to replace a percentage of the income you lose due to your inability to work, so you can cover your basic financial needs, such as paying bills, covering household expenses, and providing for your family, until you are able to return to work.

Should I Get Disability Coverage?

You might think you don’t need disability insurance, especially if you’re young and in good health. Hopefully, you’re right. Unfortunately, becoming sick or disabled can happen to anyone at any time, whether it’s from a serious accident, illness, or as with most people, as we get older. And this threat to your health isn’t specific to the most recent diseases; it has always been true.

In fact, according to the U.S. government’s statistics, one in four 20-year-olds become disabled before reaching retirement age. That makes it all the more important that you consider how to protect yourself and your family’s well-being with disability insurance.

When shopping for a policy, it’s best to work with an insurance agent who can survey many different companies to help you choose the right policy for your budget, age, health, and other risk factors. And remember, you must have the insurance policy in place before something happens. If you’re already sick, you can’t buy disability insurance to make up for lost income.

Additionally, when shopping for disability coverage, always check out the “claims paid” rating of the insurance company. This is a measure of the percentage of claims they pay compared to the ones they deny, and it’s a good indication of the company’s quality. Of course, you should also search online for reviews of the company as another measure of the company’s reputation.

In addition to these considerations, disability insurance comes with a huge array of different options and types of coverage. With so many different things to consider, it can be hard to tell what is necessary and what isn’t. While you should meet with us, your Family Business Lawyer™ to discuss the disability coverage that best fits your situation, here are some key factors to consider when choosing a disability insurance policy.

The Definition of Disability
There are many different ways to define disability. In fact, most dictionaries include more than five definitions of the word. So be sure you fully understand the definition used by your insurance provider. Most policies have a two-tiered definition of disability.

With most policies, the disability standard will be defined as the insured worker being unable to perform the duties of their “own occupation.” This refers to the job they were performing at the time they became disabled.

After a defined period of time, usually 24 months, the standard of disability will shift to a different level, known as the “any occupation” standard. This is defined as the insured worker being unable to perform any occupation. In other words, the any occupation standard means the worker has to prove they are unable to work at any job, regardless of whether it’s the one they were hired to do.

Under the any occupation standard, which is offered in many policies, the worker must still be able to earn some percentage of their former salary. Usually, the percentage is 60% to 80%. Note that many employer-provided disability policies are only available with the any occupation option, though employees may purchase a supplemental disability policy for additional protection.

Types Of Coverage
There are two main types of disability insurance: short-term disability coverage and long-term disability coverage.

Short-Term Disability Insurance

Short-term disability insurance normally lasts between 3 to 6 months, and sometimes up to a year or more. It covers about 60% to 80% of your monthly gross income. The premiums you pay ranging from 1% to 3% of your annual income.

The percentage of your income the policy pays depends on what kind of health risks the insurance company determines you have. If you smoke, for instance, the premium will probably be higher, just like with many health insurance policies. If you have a risky job, such as working with heavy machinery, premiums will likely be higher as well.

One major upside to short term policies is that payouts usually happen within two weeks, which can be a lifesaver in an emergency.

Long-Term Disability Insurance

Long-term disability insurance can pay benefits for a few years or until your disability ends, which may even be when you reach retirement age. Most policies cover 40% to 60% of your monthly gross income, but ones that pay up to 70% do exist. These policies also cost 1% to 3% of your yearly income, but based on the benefits they provide, they tend to be more cost-effective in the long run.

A major difference between the two forms of insurance is that it can take up to 6 months to see a payout from a long term policy, which may not be an realistic option, when you need money immediately to cover basic living expenses.

Despite the lengthy payout times, we recommend getting a long term policy whenever possible. This is due to the fact that such policies will last through a long recovery or treatment period, which can be invaluable if you are seriously ill or injured and cannot work. Additionally, look for a “non-cancellable insurance policy,” which will keep the insurance company from canceling your policy if you have any health changes.

Keep in mind that even the best long-term disability policies only pay a percentage of your income, so make sure to have enough savings to cover the difference. Most financial experts recommend setting aside an emergency fund that will cover your expenses for between 3 to 6 months. Indeed, such savings may be an alternative to purchasing a short-term disability policy, so consider your options to determine what makes the most sense for you.

Coverage Options
The following are a few of the most common options offered through disability insurance. However, depending on your insurance provider, such options may vary considerably or not be offered at all.

Portability
If you purchase your disability insurance through your workplace, ask if you can keep that insurance if you leave the company. If your insurance is non-portable, it will not follow you if you leave your job.

Having a portable insurance policy gives you peace of mind that you will be covered no matter where you work. Although many disability policies purchased through an employer are not portable, it is definitely something you should look into. If portability is important to you, you can consider purchasing disability insurance on your own.

Your Premium
Premiums also vary depending on the insurance provider. Some policies allow you to lock-in a premium, while others do not. Renewal options can also vary greatly, so be sure to choose the one that suits your situation best. 

A “guaranteed renewal” allows you to renew without making any changes to your coverage, but your premium can fluctuate. A “non-cancelable” policy means your coverage and your premiums cannot be changed, assuming you are paying your premiums on time. Also, be sure to find out if premiums are waived during a qualified disability.

Given the above considerations, the best disability insurance policies will be non-cancelable and guaranteed renewable, but obviously, they will cost more, so consider what’s best for you when choosing your policy options.

Cost of Living Benefits
Cost of living benefits are not included in most policies. But adding this rider is definitely something you should consider. Cost of living benefits are meant to provide financial stability by offering an increasing benefit to keep pace with inflation and other factors that increase cost of living expenses.

When choosing cost of living benefits, consider choosing one that increases on a compounding basis. Compound interest is earned on the principal and the interest. This additional rider can help your benefits keep pace through inflation even after your disability ends.

Residual Benefits
Another option to consider adding to your disability insurance are residual benefits. Residual benefits will help you make up your income if you can only work part-time, which can make these benefits extremely valuable.

Be careful, as some insurance companies commonly put restrictions on residual benefits or tweak the definition to their liking, so be sure to read the fine print to ensure you don’t encounter any surprises down the road.

Coverage Changes
Many policies can be changed by the insurance company at any time over the course of your coverage. This allows insurers to raise your coverage rates whenever they want, whether your policy is up for renewal or not.

Likewise, insurance companies could change the terms of your insurance coverage without letting you renew. This makes it imperative to understand when and how changes can be made to your insurance, so be sure to ask about such changes before getting your policy.

Future Increase
The future increase option rider is an addition to your disability coverage. However, it is worth considering if you think your income may increase over time.

With this additional rider, you are able to increase the monthly benefit of your policy, regardless of your health status. Without this rider, your policy will not protect your future income whatsoever. However, many insurance companies will limit the total of supplementary coverage that can be implemented each year.

Get Our Support Before Making Your Decision
As with most insurance coverage, disability policies can be complex and confusing. To help you consider your options and get the best possible coverage, before meeting with an insurance agent, consult with us, your Family Business Lawyer™. We can offer you trusted advice to ensure you get the best coverage for your investment. Contact us today to schedule an appointment.

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

Following the death of a loved one, close family members are sometimes surprised to learn that they didn’t receive the inheritance they were expecting, and that the deceased instead left most of their estate to an individual they only recently met, who wasn’t even a relative. While it’s not always the case, in some situations this can mean your loved one was taken advantage of by a bad actor, who manipulated him or her into cutting out close family members from their plan and leaving assets to the bad actor instead. 

This is called “undue influence,” and it’s not only unethical, it’s illegal and considered a form of elder abuse. Given the growing number of seniors, the prevalence of diminished capacity associated with aging, and the concentration of wealth among elderly Baby Boomers, we’re likely to see a serious surge in the number of cases involving undue influence in the coming years.

Undue influence can have a disastrous effect on your aging parents and other senior relatives’ estate planning. To this end, we encourage you and your family to be aware, educated, and empowered in knowing what risks are for your elderly loved ones—and for your future inheritance.

With this in mind, here we’ll discuss what constitutes undue influence, and list some common red flags to watch for that may indicate your loved one is being taken advantage of. From there, we’ll also explain how you can prevent such abuse with proactive communication and planning.

What Is Undue Influence?

Undue influence occurs when one individual uses their position of authority or advantage to coerce another individual into making decisions or performing an act that they otherwise would not. This often involves the leveraging of emotional ties or power dynamics, and it can take the form of deception, threats, harassment, isolation, or a number of other actions. The perpetrator is most often a family member, but it could also be a close friend, caregiver, professional advisor, business partner, or even someone the person just met. 

In estate planning, undue influence typically occurs during the creation or revision of wills, trusts, or other estate planning documents. For example, a son may use threats and lies to pressure his elderly father to  change his will or trust to grant him more inheritance, while reducing his siblings share of the estate. 


To illustrate what undue influence looks like in real life, consider the following court case, which was included in an article from the American Bar Association analyzing how the definition of undue influence has evolved in California’s legal system.

Undue Influence Case Example

A daughter was living with her father who was in his 80s and in poor health. She convinced him to give her $8,000 per month because, “I’m taking care of you.” She would not allow the other children to visit, saying their father was too ill and weak to receive visitors. She also told her father, “Well, the other kids won’t help. They never visit. I’m the only one who cares about you. You’d end up in a nursing home if I wasn’t here.”  

After the father died, the surviving family discovered that the daughter had induced her father to make a will leaving the family home to her as well as all his stocks and bank accounts. A will contest took place. A jury found that undue influence had taken place, but that the father would have wanted to leave something to his daughter. Eventually, it was determined that the assets should be split between the four children.

Identifying Undue Influence

Undue influence can be difficult to identify because it often takes place behind closed doors. And unless you are in frequent communication with a loved one about their estate planning, you may not even know they have changed their plan until they have passed away or become incapacitated. This can be especially challenging if you have elderly loved ones who live far away, leaving you unable to regularly visit them and with little knowledge of their daily lives and interactions with others.

To complicate matters further, not all influence is undue, and some influence is perfectly fine—the mere fact that someone was influenced by another individual to change their estate plan to increase their inheritance isn’t necessarily enough to throw their plan into question. Additionally, adults have the legal right to make their own decisions (even bad ones), and they can spend or give away their money in whatever manner they choose, provided they haven’t been deemed incapacitated. 

Undue influence isn’t just about one person influencing another or merely expressing their opinion; it’s about a person in power manipulating someone who is vulnerable to the extent that they are unable to exercise their own free will. Although undue influence can be difficult to spot, there are some common warning signs.


Red Flags For Undue Influence
Some of the most common actions that are red flags that someone may be attempting to unduly influence your parents or other elderly loved ones include the following:

  • Preventing communication between the victim and family members.
  • Isolating the victim from family and friends.
  • Withholding documents from family members.
  • Encouraging the victim to make financial gifts or offer other benefits to people he or she only recently met.
  • Naming recently-met connections as attorney-in-fact under a financial power of attorney or agent on medical power of attorney, or as a joint owner on financial accounts, real estate, and other assets.
  • Giving financial or estate planning advice that is not in the victim’s best interests, but rather in the interests of the advisor.
  • Excessive involvement of a recently-met connection with the victim’s estate planning efforts, such as help with creating or updating key estate planning documents.
  • Significant inconsistencies between previous versions of the victim’s estate plan and the latest versions. This is especially true if the estate plan suddenly includes new beneficiaries or excludes previous ones.

Should you notice any of these behaviors or other signs that a loved one may be a victim of undue influence, it’s critical that you immediately take steps to investigate the situation, whether that means getting the proper authorities involved or confronting the abuser directly. Time is of the essence in such cases, so the earlier you step in the better.

There have been far too many cases where family members waited too long to take action, and by the time they did, the damage was already done: savings were depleted, family homes were sold, and in the worst cases, senior victims were placed in substandard nursing homes and assisted living facilities against their wishes. 

Given these risks, it’s vital to get in front of the situation as early as possible, not only to prevent financial mismanagement and exploitation, but also to ensure your loved ones’ overall health and safety.

Prevent Undue Influence With Proactive Communication & Planning

One of the most effective ways to prevent the possibility of undue influence is to be proactive when it comes to communicating with your parents and other elderly relatives about their estate planning goals and desires. By talking with your loved ones early and often about how they want their affairs handled, you can help reduce the chance for surprises down the road.

Additionally, your loved ones should always work with an experienced lawyer like us to create their estate plan. As your Personal Family Lawyer®, we can support them to put in place a number of different estate planning vehicles, such as revocable living trusts and power of attorney documents, that would allow you or another trusted family member to intervene and help them in a time of crisis, without the need for court intervention.

To this end, we can support your aging parents and other senior family members develop a comprehensive incapacity plan, customized with the specific planning vehicles to match their unique needs, family dynamics, and life situation. Bring your parents or other relatives in to meet with us for a Family Wealth Planning Session to learn more about how this would work.

Of course, if you notice any red flags or other suspect behaviors, you should immediately contact us, your Personal Family Lawyer® to address the issue. While there’s no way to prevent age-related dementia and other forms of cognitive decline, make sure your parents and other senior relatives know that they can use estate planning to have control over how their lives and assets will be managed if it does 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.

Setting up the right legal structure for your business may seem like a boring detail that you don’t need to spend much time on. But, in reality, selecting the right entity for your company is one of the most critical decisions you can make as a business owner.

That said, there are all sorts of myths surrounding business entities, and this can cause confusion and lead to costly mistakes. To this end, here are 4 of the most popular myths about business entities and how you can avoid falling for them.

Myth #1: Small businesses don’t need a business entity.

Although it’s possible to run a business without a business entity, doing so puts you—and everything you own—at risk. Without the proper entity set up, there’s no separation between your business and personal assets, so your personal assets would be at risk in the event your business goes into serious debt or gets hit with a lawsuit.

For example, if your company is structured as a sole proprietorship or general partnership and you go out of business, your business creditors would come after your personal assets to pay off your business debts. The same is true if your business is ever sued.

By structuring your business as a limited liability company (LLC) or a corporation, however, you can shield your personal assets from liabilities incurred by your business. When properly set up and maintained, such structures establish your company as a separate legal entity distinct from you as an individual, preventing you from being held personally liable for the company’s debts or legal disputes.

Meet with us, your Family Business Lawyer™ for help selecting, setting up, and maintaining the entity structure that’s best suited for your particular company, no matter how big or small it may be.

Myth #2: There’s no need to set up an entity for your business until it’s profitable.

It may seem like a good idea to delay setting up your business entity until you are actually earning revenue, or even making a profit, but in reality, you should have your entity in place from the very start. This is true not only because liability can arise well before you are profitable, but also because incorporating your business is likely to lead to even more income and profit.

For example, having the proper entity in place in the early stages allows you to receive credit in your business’ name, and raise money from investors. Not to mention, the act of incorporating itself shows that you take your company seriously, which can inspire increased interest from customers, vendors, and financial backers.

Myth #3: A corporate entity offers absolute liability protection.

When properly created and maintained, entities like an LLC or corporation can shield your personal assets from creditors, lawsuits, and other liabilities incurred by your business. However, the protection afforded by these entities is not absolute.

In fact, there are a number of circumstances in which a creditor can come after your personal assets to settle a claim against your business. When this happens, it’s known as “piercing the corporate veil.”

While the corporate veil can be pierced if you commit fraud or negligence, in most cases, it happens due to innocent mistakes. These errors can include inadvertently mixing your personal and business finances, personally signing off on a business loan, or failing to abide by administrative formalities.

As your Family Business Lawyer™, we will support you with maintaining your business records and keeping up with the required corporate formalities. In fact, we offer special maintenance packages that make meeting these requirements a snap, while maintaining the maximum level of protection for your personal assets.

Finally, while a corporate entity can protect your personal assets from liability, these legal structures do not offer any protection for your business assets. To safeguard your business assets, you’ll need to invest in the proper business insurance, which is always your first line of defense.

Myth #4: Incorporating in Delaware or Nevada is always best.

You may have been told—perhaps even by another lawyer—that establishing your corporate entity in Delaware or Nevada is your best bet for tax purposes. But for most businesses, incorporating in these states is completely unnecessary—and it may even cost your company in the long run.

Although many companies do incorporate in these states, it’s for very specific reasons, such as to raise investment capital or take advantage of favorable securities laws to go public. However, unless you are actually doing business in these two states, your company isn’t going to receive any significant tax benefits or additional asset protection by incorporating there.

While Nevada and Delaware do not have state personal- or corporate-income taxes, that doesn’t mean your business will avoid state-level taxes entirely. The fact is, if you are a resident of, or doing business in, a state that has state income taxes, you must still pay those taxes, even if you are incorporated elsewhere.

Plus, if you incorporate outside of the state where you live or conduct business, you must file as a foreign registrant in your home state. Such double filings can result in extra filing fees and administrative expenses that make out-of-state incorporation financially unfeasible.

However, there are instances where it might make sense to set up your business entity in states like Delaware or Nevada, or even Wyoming or South Dakota. Contact us, your Family Business Lawyer™ for advice on the best location for establishing your entity and for support in navigating the requirements for maintaining the entity in each state you do business in.

We Can Help
Setting up the right entity for your business isn’t something you should take lightly or try to do all on your own—there’s far too much at stake. As your Family Business Lawyer™ we will offer you trusted advice on the legal entity that’s most advantageous for your business. while also ensuring that your entity is properly set up, with all of the necessary agreements and other resources in place.

Additionally, we can provide you with a variety of business systems, which will not only make your operation more efficient, but also establish a clear separation between your business and personal finances, which is a vital part of maintaining your entity’s liability protection. Finally, as your Family Business Lawyer™ we will also make sure that you are in full compliance with the various state laws and administrative formalities required to maintain your entity and safeguard your personal assets. 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

August is “National Make-A-Will Month,” and if you have already prepared your will, congratulations—too few Americans have taken this key first step in the estate planning process. In fact, only 33% of Americans have created their will, according to Caring.com’s 2022 Wills and Estate Planning Study

Yet, while having a will is important—and all adults over age 18 should have this document in place—for all but a few people, creating a will is just one small part of an effective estate plan that works to keep your loved ones out of court and out of conflict. With this in mind, this series discusses exactly what having a will in place will—and will not—do for you and your loved ones in terms of estate planning.

Last week, in part one, we looked at the different things having a will in place allows you to do. Here, in part two, we detail all of the things that your will does not do, along with identifying the specific estate planning tools and strategies that you should have in place to make up for the potential blind spots that exist in an estate plan that consists of only a will. 


If you have yet to create your will, or you haven’t reviewed your existing will recently, contact us, your Personal Family Lawyer® to get this vital first step in your estate planning handled right away.

What A Will Won’t Do

While a will is a necessary part of most estate plans, your will is typically a very small part of a comprehensive estate plan. To demonstrate, here are the things you should not expect your will to accomplish:

1. Keep your family out of court: Following your death, in order for assets in your will to be transferred to your beneficiaries, the will must pass through the court process known as probate. During probate, the court oversees the will’s administration, ensuring your assets are distributed according to your wishes, with automatic supervision to handle any disputes. 

Like most court proceedings, probate can be time-consuming, costly, and open to the public. Moreover, during probate, there’s also the chance that one of your family members might contest your will, especially if you have disinherited someone or plan to leave significantly more money to one relative than the others. Even if those contests don’t succeed, such court fights will only increase the time, expense, and strife your family has to endure. 

Bottom line: If your estate plan consists of a will alone, you are guaranteeing your family will have to go to court if you become incapacitated or when you die. Fortunately, it’s easy to ensure your loved ones can avoid probate using different types of trusts, so meet with us, your Personal Family Lawyer® to spare your family this unnecessary ordeal.

 2. Pass on certain types of assets: Since a will only covers assets solely owned in your name, there are several types of assets that your will has no effect on, including the following:

  • Assets with a right of survivorship: Property held in joint tenancy, tenancy by the entirety, and community property with the right of survivorship, bypass your will. These types of assets automatically pass to the surviving co-owner(s) when you die.
  • Assets with a designated beneficiary: When you die, assets with a designated beneficiary pass directly to the individual, organization, or institution you designated as beneficiary, without the need for any additional planning. Common assets with beneficiary designations include retirement accounts, IRAs, 401(k)s, and pensions; life insurance or annuity proceeds; payable-on-death bank accounts; and transfer-on-death property, such as bonds, stocks, vehicles, and real estate. 
  • Assets held in a trust: Assets held by a trust automatically pass to the named beneficiary upon your death or incapacity, so these assets cannot be passed in your will. This includes assets held by both revocable living trusts and irrevocable trusts.

3. Pass ownership of a pet and money for its care: Because animals are considered personal property under the law, you cannot name a pet as a beneficiary in your will. If you do, whatever money you leave it would go to your residuary beneficiary, who would have no obligation to care for your pet.

It’s also not a good idea to use your will to leave your pet and money for its care to a future caregiver. That’s because the person you name as beneficiary would have no legal obligation to use the funds to care for your pet. In fact, this person could legally keep all of the money and drop off your pet at a shelter.

The best way to ensure your pet gets the care it deserves following your death is by creating a pet trust. As your Personal Family Lawyer®, we will help you set up, fund, and maintain such a trust, so your furry family member will be properly cared for when you’re gone.

4. Leave funds for the care of a person with special needs: There are a number of unique considerations that must be taken into account when planning for the care of an individual with special needs. In fact, you can easily disqualify someone with special needs for much-needed government benefits if you don’t use the proper planning strategies. For this reason, a will should never be used to pass on money for the care of a person with special needs.

If you want to provide for the care of your child or another loved one with special needs, you must create a special needs trust. However, such trusts are complicated, and the laws governing them can vary greatly between states.

Given such complexities, you should always work with an experienced estate planning lawyer like us to create a special needs trust. As your Personal Family Lawyer®, we can make certain that upon your death, the individual would have the financial means they need to live a full life, without jeopardizing their access to government benefits.

5. Reduce estate taxes: If your family has significant wealth, you may wish to use estate planning to reduce your estate tax liability. However a will is useless for this purpose. To reduce or postpone your estate taxes, you will need to set up special types of trusts. If you are looking to reduce your estate tax liability, consult with us, your Personal Family Lawyer® to discuss your options.

6. Protect you from incapacity: Because a will only goes into effect when you die, it offers no protection if you become incapacitated and are no longer able to make decisions about your financial, legal, and healthcare needs. If you do become incapacitated, your family will have to petition the court to appoint a guardian to handle your affairs, which can be costly, time-consuming, and traumatic for your loved ones.

And there’s always the possibility that the court could appoint a relative as a guardian that you’d never want making such critical decisions on your behalf. Or the court might select a professional guardian, putting a total stranger in control of your life, which leaves you open to potential fraud and abuse by crooked guardians.

However, using a trust, you can include provisions that appoint someone of your choosing—not the court’s—to handle your assets if you are unable to do so. When combined with a well-prepared medical power of attorney and living will, a trust can keep your family out of court and out of conflict in the event of your incapacity, while ensuring your wishes regarding your medical treatment and end-of-life care are carried out exactly as you intended.

Get Professional Support With Your Estate Planning
Although creating a will may seem fairly simple, you should always consult with an experienced estate planning lawyer like us to ensure the document is properly created, executed, and maintained. And as we’ve seen here, there are many scenarios in which a will won’t be the right estate planning solution, nor would a will keep your family and assets out of court.

Meet with us your Personal Family Lawyer® for a Family Wealth Planning Session, which is the first step in our Life & Legacy Planning process. During this process, we’ll walk you through an analysis of your assets, what’s most important to you, and what will happen to your loved ones when you die or if you become incapacitated. From there, we’ll work together to put in place the right combination of estate planning solutions to fit with your asset profile, family dynamics, budget, as well as your overall goals and desires. 

As a Personal Family Lawyer® firm, we see estate planning as far more than simply planning for your death and passing on your “estate” and assets to your loved ones—it’s about planning for a life you love and a legacy worth leaving by the choices you make today—and this is why we call our services Life & Legacy Planning. Contact us today to schedule your visit to ensure that your loved ones will be protected and provided for no matter what happens to you.

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.

While you may think of your team as family and believe that they would never sue you, lawsuits filed by employees are actually one of the most common causes of litigation for small businesses. In fact, nearly one in every five small businesses will get sued by an employee at some point.

Of all types of lawsuits an employee can file against you, wrongful termination is among the most common. In basic terms, wrongful termination is when an individual is fired for an unlawful reason. This includes terminations that violate anti-discrimination and other employee-protection laws at both the state and federal level, as well as terminations that violate employment agreements.

Wrongful termination lawsuits can be a huge liability, and they’ve been on the increase in recent years, especially with so many businesses laying off workers due to the pandemic. Furthermore, these lawsuits can be extremely costly, since regardless of whether you win the case or not, you are still on the hook for attorney’s fees.

Given these risks, you should do everything you can to protect your business against wrongful termination claims, and you should consider implementing a number of proactive measures to safeguard your business. The following 5 best practices are a few of the most effective ways to protect your company from wrongful termination claims. These measures can not only reduce the chances of a wrongful termination lawsuit being filed against you, but also increase your chances of winning a lawsuit should your business ever get hit with one.

1. Understand The Law

If you don’t know what constitutes wrongful termination, you can’t take steps to prevent it. Discrimination is one of the most frequent bases for wrongful termination lawsuits. Both federal and state law protects workers from discrimination of all kinds, including on the basis of race, sex, religion, national origin, age, disability, and pregnancy.

Under these laws, you can be sued for wrongful termination if an employee claims their firing was related to one of these protected classes. For example, if you terminate a female employee, and she claims it was because she became pregnant, she could sue you.

In addition to anti-discrimination laws, there are a number of federal, state, and local laws protecting employees from terminations based on a variety of other different causes. Some of these include disparate treatment, breach of contract, retaliation, and inconsistent application of company policies.

While you should do your best to familiarize yourself with employment and labor laws, consult with us to make certain that your actions, policies, and work environment are in compliance with the latest legislation affecting your particular industry and business.

2. Ensure You Have Employment Practices Insurance In Place

Many business owners do not have the right business insurance coverage, and if that’s you, take the time to conduct an insurance review this week. Or contact us to support you with it. Business insurance, including employment practices insurance, will not only cover a judgment that may be incurred against your business, but it should also provide you with a lawyer paid for by the insurance company in the event that your company is sued by an employee.

3. Implement Effective Workplace Policies & Procedures

Knowledge of the law does little good if you don’t put it into practice. Creating clearly defined policies detailing your procedures for hiring, discipline, termination, and dispute resolution is essential. Moreover, documenting these policies and procedures in your employee handbook and in your employment agreements is another best practice.

Keep in mind, for all but the most flagrant violations of company policies, an immediate termination can often be quite risky from a potential liability standpoint. To reduce this risk, consider implementing probationary periods for new-hires, corrective-action plans for underperforming employees, and workplace mediation programs for dispute resolution.

Finally, having formal policies and procedures in place for documenting and resolving complaints of sexual harassment, discrimination, retaliation, and other unlawful behaviors can offer your company another level of protection from potential lawsuits.

4. Use Sound Employment Agreements With Every Employee

No matter whether you have one employee or one hundred, you should require every individual who works for you—without exception—to sign an employment agreement. And such agreements can be even more vital if you employ family or friends. 

Your employment agreements should clearly detail the terms and conditions for the working relationship, so everyone who works for you understands exactly what’s expected. Effective employment agreements can protect you from wrongful termination by clearly establishing the employee’s responsibilities, your rights as employer, and the circumstances under which the employment relationship may be terminated.

As your Family Business Lawyer™, we can help you create effective employment agreements for your team to ensure you have robust contractual protections for not just wrongful termination suits, but every other potential claim related to the employer-employee relationship.

5. Document Everything

If an employee you fire does sue you, the most powerful weapon in your defense is complete, thorough, and contemporaneous documentation. The last thing you want is to ask a judge or jury to simply “take your word for it,” when trying to prove an employee’s actions provided grounds for termination.

Thoroughly documenting all employee incidents, along with the corrective measures you took as a result, can not only provide strong evidence to defend against a lawsuit, but it can often be enough to get a claim thrown out before it reaches trial. Ideally, this process should be a collaborative effort with the employee, and all incidents should be documented in writing as soon as possible following the particular action.

Collaborative documentation includes having employees read and sign that they understand why disciplinary actions are being taken, and that they agree to abide by any corrective-action plan you require them to complete. As your Family Business Lawyer™, we can not only help you develop effective documentation procedures, but also advise you on the proper corrective actions to ensure you’re offering your team an appropriate opportunity to rectify their behavior, so termination is always a last resort.

A Comprehensive Approach

While these best practices can go a long way toward protecting your business from wrongful termination lawsuits, understanding all of the complexities involved with the employer/employee relationship is extremely challenging. With this in mind, you should consult regularly with us, your Family Business Lawyer™ to ensure your policies, procedures, agreements, and practices are all in compliance with the latest standards and laws.

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

August is “National Make-A-Will Month,” and if you have already prepared your will, congratulations—too few Americans have taken this key first step in the estate planning process. In fact, only 33% of Americans have created their will, according to Caring.com’s 2022 Wills and Estate Planning Study

Yet, while having a will is important—and all adults over age 18 should have this document in place—for all but a few people, creating a will is just one small part of an effective estate plan that works to keep your loved ones out of court and out of conflict. With this in mind, here we look at exactly what having a will in place will—and will not—do for you and your loved ones in terms of estate planning.

If you have yet to create your will, or you haven’t reviewed your existing will recently, contact us, your Personal Family Lawyer® to get this vital first step in your estate planning handled right away.

What A Will Does

A will is a legal document that outlines your final wishes in regards to how your assets are distributed to your surviving family members. Here are some of the things having a will in place allows you to do:

1. Choose how assets are divided upon your death: A will’s primary purpose is to allow you to designate how you want your assets divided among your surviving loved ones upon your death. If you die without a will, state law governs how your assets are distributed, which may or may not be in line with your wishes.

However, as we’ll discuss more below, a will only allows you to provide for the distribution of certain types of assets—namely, a will only covers assets owned solely in your name. Other types of assets, such as those with a beneficiary designation and assets co-owned by you with others, are not affected by your will.

2. Name an executor: In your will, you can name the person, or persons, you want to serve as your executor, sometimes called a “personal representative.” Following your death, your executor is responsible for wrapping up your final affairs. This includes numerous responsibilities, including filing your will with the local probate court, locating and managing all of your assets, paying off any debts you have outstanding, filing and paying your final income taxes, and finally, distributing your remaining assets to your named beneficiaries.

3. Name guardians for your minor children: If you are the parent of minor children, it is possible to name legal guardians for them in your will. However, naming guardians for your children in your will alone is seriously risky, and doing so may even leave your kids vulnerable to being taken into the care of strangers if something happens to you. And this is true even if you’ve worked with another lawyer to create your will, because most lawyers haven’t studied and been trained on  what’s necessary for ensuring the well-being and care of minor children.

Fortunately, whether you’ve named guardians for your kids in your will or have yet to take any action at all, you’ve come to the right place. As your Personal Family Lawyer® firm, we have been trained by the author of the best-selling book, Wear Clean Underwear!: A Fast, Fun, Friendly, and Essential Guide to Legal Planning for Busy Parents, on legal planning for the unique needs of families with minor children. 

As a result of this training, we offer a comprehensive system known as the Kids Protection Plan®, which is included with every estate plan we prepare for families with young children. While you should meet with us to put the full Kids Protection Plan® in place as soon as possible, protecting your children is such a critical and urgent issue, we’ve created a totally free website, where you can get your plan started right now.

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

After you’ve completed those initial actions, schedule a Family Wealth Planning Session with us, so we can put the full Kids Protection Plan® in place, and determine if there is anything else your family might need to ensure the well-being and care of your children.

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

4. Serve as a backup for a living trust: Because it can be difficult to transfer the legal title to every single one of your assets into a revocable living trust before your death, most trusts are combined with what’s known as a “pour-over” will. This type of will serves as a backup to a living trust, so all assets not held by the trust upon your death are transferred, or “poured,” into your trust through the probate process.

A Small—But Important—First Step
As you can see here, having a will in place only gives you a limited amount of power over the distribution of certain assets, but that doesn’t mean you should go without one. Without a will, you would have no say in who inherits your assets when you die, and everything you own could even go to the state.

But worse than that, your surviving loved ones will be the ones who have to clean up the mess you’ve left behind. And they will have to handle all of this while grieving your death. Instead, you should see your will as an important first step in the estate planning process—one that works best when integrated with a variety of other legal vehicles, such as trusts, powers of attorney, and advance healthcare directives.

Next week, in part two, we’ll detail all of the things that your will does not do, and then we’ll outline the different estate planning tools that you should have in place to make up for these potential blind spots in your estate plan. Until then, if you need to get your estate planning started or you would like us to review your existing estate plan (even one created by another lawyer) to see if you are missing anything, contact us, your Personal Family Lawyer®. 

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.

5 Events That Necessitate A Review Of Your Coverage

Putting in place the right types and amounts of business insurance is a key part of your company’s LIFT risk-mitigation and asset-protection foundation. However, like other foundational business systems, if your business insurance isn’t regularly reviewed and updated as your operation grows, your coverage can prove inadequate, putting your business at serious risk in the event you are hit with a lawsuit, judgment, or an unforeseen accident or disaster.

It’s typically a good idea to review your company’s insurance coverage on an annual basis. But as your business evolves, you should also revisit your policies whenever your company undergoes significant changes involving infrastructure, assets, and personnel. 

While there are numerous different events that could necessitate an audit of your company’s insurance, the following five are among the most common reasons to immediately review your coverage. 

1. Office Relocation Or Renovation

When your company grows, you may need to move your office to a new location or make renovations to your existing space. But unless you review and upgrade your commercial property insurance and general liability insurance, your existing insurance policies may not be sufficient to cover your new property.

If you move to a new location, you’ll definitely need to adjust your commercial property insurance coverage to account for the particulars of the new space. For example, your insurance rates can fluctuate greatly, depending on your new office’s square footage, building type, the location’s crime statistics, safety features, history, and other factors. 

2. The Addition Of A New Product Or Service

Launching a new product or service is a great way to increase revenue and grow your operation. But such new offerings also open your company up to the potential for new lawsuits.

If you’ve recently expanded your product line, you should update your product liability insurance to cover the new items in case they’re defective or otherwise harm a customer. You’ll also want to review your property insurance to cover the new products in case of theft, damage, or loss while they’re stored on your property.

If you make your living by providing professional services and/or consulting, you need professional liability insurance, and your policy will need to be updated to account for your new services. Also known as errors and omission insurance, professional liability insurance protects you against lawsuits alleging your professional services caused a client to suffer damages, arising from actions like negligence, mistakes, and breach of contract. 

Such coverage can be essential for a wide range of businesses—accountants, lawyers, real-estate agents, consultants, IT firms, and others. Check with us, your Family Business Lawyer™ to find out if you should have such coverage.

3. Hiring New Staff

As your team grows over the years, you’ll need to adjust your workers compensation insurance coverage to reflect your current staffing level. Having the proper workers comp coverage is not only a good idea, it’s the law, and failing to update your coverage could lead to fines and other penalties.

Another liability consideration when adding new team members is employment practices insurance, which provides protection for lawsuits initiated by both employees and contractors. While this is an often-overlooked coverage, it’s actually one of the most important, since employment claims are among the most serious threats to small businesses.

Indeed, studies show that nearly one in every five small businesses will get sued by a team member at some point in their lifecycle. The more people who work for you, the greater the risk of a lawsuit and the higher the resulting damages are likely to be in the event of a successful suit, so you should adjust your level of coverage accordingly as your team expands. [FBL: INSERT HYPERLINK BEHIND HIGHLIGHTED TEXT TO https://sba.thehartford.com/business-management/managing-risk/is-your-small-business-prepared-for-a-lawsuit/#:~:text=According%20to%20a%20Hiscox%20study,of%20a%20half%20million%20dollars%5D

4. Purchasing New Vehicles

If you or your team use a company-owned vehicle, each of those vehicles should be covered by comprehensive commercial auto insurance to protect against liability as well as any injury or damage that might occur to your employees, vehicles, products, and equipment.

If your team uses their own vehicles, their personal insurance may cover them. But for maximum protection, consider purchasing “non-owned auto liability coverage” in case a team member fails to renew their insurance or has inadequate coverage.

5. Changes To Executive Governance

If your company grows large enough or changes corporate structure to add board members and/or executive officers, each person serving should be covered by directors and officers insurance. Such coverage protects executives should they be sued for a decision they made on behalf of the company.

At the same time, consider taking out “key-person” insurance any time you hire a new high-level executive. Key-person insurance is basically life insurance that pays out to your company should the owner, an officer, or another top executive pass away. Such coverage can be invaluable for small companies, which would otherwise collapse in the absence of certain top-tier staff.

We Can Support Your Insurance Audit

Before you sit down with an insurance agent, meet with us, as your Family Business Lawyer™. We will evaluate the specific risks your company faces as it expands to determine exactly what kind of insurance you need and what levels of coverage will best safeguard your business assets at every stage of its evolution. Contact 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

If you have started to save for your child or grandchild’s college education, it’s worth considering whether to use a 529 plan, an education savings account, or an irrevocable trust. 

Last week, in part one of this series, we discussed 529 plans and education savings accounts, which are both popular options for saving for college education. One of the main reasons for their popularity is their tax-saving advantages. The money you contribute to a 529 account grows on a tax-deferred basis, and withdrawals are tax-free, provided they are used for qualified education expenses, such as tuition, room and board, and other education-related fees.

That said, one of the downsides of 529 plans is that they come with strict limits on how you can use the funds (for education-related expenses only), and they also have a limited range of options for how you can invest your funds, primarily in various mutual funds. For these reasons, 529 plans and ESAs aren’t always the best fit for some families looking to save for their loved ones’ education.

Education Trusts

As we noted in part one, one alternative way to save for your offspring’s higher education is by using an irrevocable trust. Although there isn’t any income tax deferral on income earned by the assets held by these trusts, it is possible to structure a trust, so your beneficiaries could qualify for financial aid that they may otherwise be ineligible for with a 529 plan. Depending on your situation, qualifying for financial aid may prove even more valuable than savings on the income taxes owed on income earned by the trust.

Here in part two, we’ll further discuss how these trusts work and why they may be an attractive alternative to 529 plans, if you are looking to save for your loved ones’ education—whether that education is college or some other form of learning.


The Benefits Of Education Trusts

In addition to the issue of qualifying for financial aid, another benefit of such trusts is that you can not only save for a single child’s or grandchild’s education, you can also structure your trust to provide a pool of funds for the education of all family members. Moreover, when creating the trust, “education” can be broadly defined to include any type of learning institution or organization, such as trade schools, educational workshops, community colleges, and private academies, to name just a few options. 

Furthermore, you can provide that the trust can pay for alternative education, such as travel, retreats, business building programs, and other nontraditional educational experiences, which may prove even more valuable than college. Bottom line: when you set aside money to educate your family with an education trust, you get to decide exactly how your beneficiaries can use the funds by what is most in alignment with your family values. And as part of creating your education trust, we will work with you to create a written set of guidelines for the trustee, who will be the person making decisions regarding distributions to the beneficiaries. 

Trust Creation Options

In terms of how the trust is set up, you can create an education trust that is built into your revocable living trust or will, and as such, it would not get registered and funded until your death. Or you can create an education trust that exists and is funded during and throughout your lifetime. In either case, the disbursements from the trust are designated for a beneficiary or a pool of beneficiaries’ education.

While you can stipulate how and when the funds are to be distributed inside the terms of the trust agreement itself, we would almost always provide the trustee with broad distribution authority and discretion (to maximize the asset protection benefits of the trust), and create a separate writing to provide guidelines on distributions, and then give a trusted person, or group of people, the right to remove and replace the trustee with someone else should your first choice not work out for any reason.

If a single trust is established for multiple beneficiaries, you can require the assets to be distributed in a number of ways. You can stipulate that the funds are divided equally among the beneficiaries, disburse the funds in a set amount, by percentage, or you can leave the decision as to how much each beneficiary receives to the trustee’s discretion.   

Tax Implications

Education trusts typically aren’t set up as tax-saving vehicles, as is the case with a traditional 529 plan, which does provide tax savings. That said, as we noted earlier, 529 plans have much more restrictive rules for how their funds can be used. Moreover, you could save on taxes with a trust if it is drafted in a way that allows the trust’s income to be taxed at your beneficiary’s tax rate, which could be significantly lower than your personal tax rate.  

If you establish an irrevocable trust for education purposes, make sure you consider all of the tax impacts on income earned by the trust. For example, the trust would be taxed on income not distributed by year’s end, but you can have the trust drafted to pay out all income to the beneficiary or include other provisions that cause the trust to be taxed to the beneficiary (even if income is retained).

That income would be taxed at trust tax rates, which could be higher than the beneficiary’s rate—and possibly even higher than your personal tax rate—so it’s important you are clear about whether income should be distributed before year’s end for each year the trust earns income. 

If the education trust is irrevocable, meaning that the gift cannot be taken back, and the amount contributed each year is less than the annual gift tax exemption ($16,000 in 2022), then no gift-tax return is required to be filed. Conversely, if the gift to the trust exceeds that amount, then you will need to file a gift-tax return, reporting the gift and using up part of your lifetime exemption of $12.06 million if single and $24.12 million if married filing jointly.

Since there are so many variables involved and different ways to set up an education trust, it’s vital to reach out to us, your Personal Family Lawyer®, so we can walk you step-by-step through all of your options—and help you determine what’s best for your unique situation.

Potential Problems To Keep In Mind

One alternative to these plans (both 529 plans and education trusts) is to use money that has been saved for other purposes, such as funds you have saved for your retirement. However, it’s important to point out that using your retirement funds can affect your child’s eligibility for various need-based financial aid programs. To this end, retirement funds withdrawn to pay college expenses are reported on the Free Application for Federal Student Aid (FAFSA) as additional income.

Consequently, when using retirement funds, the expected family contribution used from FAFSA will be higher, which will therefore reduce your child’s chances of qualifying for financial assistance. Consult with us if you choose to tap into your retirement savings to fund college expenses, so we can ensure it’s done right and will have the maximum benefit for everyone involved.

Don’t Do-It-Yourself

To ensure you get the most benefit from your savings, don’t try to make these decisions on your own. As your Personal Family Lawyer®, we will work with you to determine the best way to set aside financial resources for the people you love, whether that’s using a 529 plan, an education trust, or some other option. 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.