Get your revenge somewhere else

by Chris Erb on March 19, 2010

As lawyers, we always stress to our clients the need to keep business affairs separate from personal matters. That applies to everything from bank accounts to the stapler on one’s desk. As I’m reminded today, it also applies to the internet.

Many individuals have a single hosting account which they use for everything. It hosts their business website, their photo albums, and even that little, dark, secret blog they don’t really want anyone to know about. In fact, that blog might be the most important piece to keep separate.

You see, many people revel in the anonymity of the internet to complain about everyone from their Aunt Sally to that behemoth who has responded to their pleas for good service, bad service, or any service at all (you hear that, Sears?). The problem is that some of the complained about don’t take kindly to it, which can often lead to threats of litigation and even interruption or termination of service. That’s probably not going to make a huge difference if it’s just your blog, but if it’s also tied to your business that could spell financial disaster.

By all means, exercise your right to free speech. Just keep it separate from your paycheck.

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Store Bought Wills Part 3 - The Ugly

by Garrett Spangler on March 18, 2010

Welcome to the third and final installment of my thoughts on do-it-yourself Wills and online Will services. So far I have identified several of the positive aspects of these types of products (Part 1) as well as where they break down and are inadequate (Part 2). This post will delve into some “ugly” issues with do-it-yourself planning.

Many believe that their situations are “vanilla” and don’t require professional estate planning. In almost every case however, there are very unique elements which require careful attention and specific language to accomplish what may seem like a simple task. Here are a few examples of common problems I see in form Wills:

1) Stepchildren. Just filling in a form to indicate you want to leave your assets to your kids is easy right? Not so fast, if you have stepchildren, unless they are legally adopted by you, they are not considered your children under most intestacy statutes, including Pennsylvania, and would receive nothing under a such a form Will. To later have a share distributed to a stepchild may take considerable litigation and thousands (maybe tens of thousands) in legal fees.

2) Minor Trusts. A second issue is the timing of distributions of assets to children. Without language that creates a trust for minor beneficiaries, the money will be given outright as soon as they turn 18. An attorney can draft language to provide distributions as you so choose, even if your only asset is life insurance. This could stagger distributions to 21, 25, and 35 or provide requirements such as graduating from college before being entitled to a distribution.

3) Grandchildren. Another common problem with Will forms are leaving assets to grandchildren. While it seems easy to simply swap out “children” for “grandchildren” when completing such a form, the results are disastrous. Giving assets directly to grandchildren eliminates an opportunity for the IRS to tax the assets in the estate of the children if the assets had first passed to them. To combat this loophole, the IRS has a generation skipping tax or “GST” which will cut that grandchild’s inheritance by half. (Currently 45%, 55% in 2011)

4) Law Changes. A fourth major issue faced by do-it-yourselfers is out of date language. An example is this year’s repeal of the estate tax. Most forms provide a formula for potentially taxable estates which will leave nothing to a surviving spouse under the law as it stands today. Most people that got Wills from legalzoom.com in December ’09 probably didn’t realize they would already be outdated in January ’10. The same is true for changes in your own life and good estate planners will remind you of this. If you have gotten married, divorced, had children, bought property, altered your life goals, or simply gotten a little closer to retirement with a larger nest egg, chances are you should update your documents.

5) Miscellaneous. In addition to the issues above, there are a plethora of little things which can make or break your Will or estate plan. The absence of a simple word like “tangible” can completely alter the meaning of a phrase which in turn may require a judge to determine the proper interpretation. Signing the Will properly with proper witnesses or a notary will also make or break your document and the rules vary from state to state so you need the right instructions. Plus, a Will is not the only document you need for an estate plan. Without a healthcare proxy, living will, power of attorney, trust, or standby guardianship you may not be providing for your family as you intend.

So what should you do? My advice it to think long and hard before making a decision. Forms may seem like a deal but take legalzoom.com for example, they advertise Wills starting at just $69, but by the time you add the necessary costs to round out your estate plan (a married couple will each need a Will, powers of attorney for finances, and healthcare proxies at minimum) the total for the cheapest available options quickly climbs to nearly $400 and if you bump up to their more comprehensive premium options you are looking at $700. Plus, these fees don’t even include other charges like the cost of notarizing all of your documents which will run $5-$15 per document depending on where you live. Documents prepared by an estates attorney become appealing when you get to these levels, plus you can ask for advice and take a tax deduction for any specific tax planning you do.

Below are some situations where do-it-yourself estate plans and online form services fall short:

* You own property *

* You own a small business *

* You are married and you or your spouse have children from a previous marriage *

* You have minor children *

* You have significant assets *

* You wish to leave assets to grandchildren *

* You have a disabled or dependent adult child *

* You own a share in a small business *

* You have investments in an IRA or 401(k) *

* You think your Will may be challenged *

* You have a same-sex partner *

* You want to disinherit a spouse or child *

For just a little more, is it really worth it to take a chance on ‘as is’ downloadable form documents instead of consulting an expert? The choice is yours…..

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Store Bought Wills Part 2 - The Bad

by Garrett Spangler on March 12, 2010

Last week I introduced my thoughts on do-it-yourself Wills and online Will services. If you missed it, I encourage you to check it out here. In the article I discussed the positives associated with using these options to write your Will and this week the focus is on some of the concerns associated with preparing a Will or estate plan this way.

1) Advice. While downloads and online services provide you with a Will document, what you are paying an attorney for is the advice they provide you along with the Will. It is illegal for self-help services to offer advice to customers, whether that means answering questions or making planning suggestions for how to accomplish their goals.

2) Information. Questionnaires are used to gather information necessary to complete a Will. No matter how comprehensive they seem to be however, I’ve found questionnaires simply create a jumping off point for a thorough estate planning discussion. While do-it-yourself options seem appealing for privacy reasons, they are unable to follow-up with questions to elicit what is often the most crucial information for planning purposes.

3) Law. Estate planning happens to be an area where there is considerable upheaval at the moment. While online sites attempt to update their forms, they make no guarantees about being current. Good estate planning attorneys not only keep up with changes to federal and state law, but will often follow-up with clients to invite them to reevaluate their documents when major changes in the law occur.

4) Warranty. Online services and form kits include disclaimers stating they cannot be held responsible for problems stemming from their documents. Essentially you are buying a piece of paper “as is” without recourse if the document turns out not to do what you wanted. Even small mistakes can be very costly so spending a little more to have an attorney prepare your documents will ensure you get the right ones for your situation. Plus, should anything go wrong, attorneys stand behind their work and carry insurance to make things right.

While this list highlights some major concerns surrounding do-it-yourself Wills and estate plans it is by no means all-inclusive. I would absolutely recommend that you have an attorney review your documents if you decide to do them yourself or get them prepared by an online service. It may cost you an hour or two of legal time but it will give you some peace of mind that your documents say what you actually want them to.

Unfortunately it is often too late to make changes by the time problems are discovered in Wills and estate plans. Next week we will look at some examples of estate planning gone wrong and common needs that are a little too “ugly” for do-it-yourself kits to adequately address.

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The Good, The Bad, and The Ugly: Store Bought Wills

by Garrett Spangler on March 3, 2010

As an attorney focused on tax and estate planning I have been asked time and again what my thoughts are on store bought Wills. I have put it off in the past but I guess there is no time like the present to do my best to offer an objective look at the positives and negatives of “off the rack” documents. Over the next three weeks I will give you the low-down on the good (Part 1), the bad (Part 2), and the ugly (Part 3) associated with heading over to USA-Zoomy-Build-a-Will.com instead of down to an attorney’s office for the documents to satisfy your planning needs.

Before we go any further, I will honestly tell you that I have a horse in this race. As you will see however, I won’t shy away from the positives associated with the world of Will templates and if it makes sense for you after reading my posts, go ahead and roll with it. What I hope you will takeaway is that there are real concerns that should at least be considered before replacing a professional such as myself (who is experienced, licensed and holds a college degree, law degree, master of law degree, and financial advising background) with a cheap, fill-in-the-blank, “customizable” form.

Now, let’s get started with the positives about the Wills you can buy at a store or online. Part 1 - The Good:

1) Price. First and foremost, do-it-yourself Wills are cheap when compared to the documents drafted by an attorney. Falling somewhere in the $50 - $250 range, Will forms are less than half what you would pay to a reputable attorney to draft a similar document. This is often the number 1 reason websites and software packages are used to create estate planning documents instead of an estate planning attorney.

2) Time. Head on over to your favorite Will site and see how long they suggest it takes to create a Will. Many websites advertise that your “custom” Will can be created in 15 minutes or less. More than likely it will take you longer than 15 minutes just to drive to your attorney’s office to begin the meeting to discuss your wishes. Lives are hectic and this time savings sounds awfully good, especially when the only time many of us seem to be able to find to get personal stuff done is after the kids go to bed.

3) Privacy. People feel good about simply entering their personal information into a template instead of providing it to a stranger. Despite data security online and ethical legal standards of confidentiality, there is something about just buying or downloading some forms and filling them in all by yourself that appeals to people’s sense of privacy.

4) Accessibility. Many people either don’t believe they can afford having a Will prepared or simply don’t think they need one. States have differing rules, but in most states any properly executed document can be admitted to probate as a Will. I always encourage people to get some sort of document in place spelling out their wishes because any Will is better than no Will at all. Do-it-yourself documents at least provide the basic framework of a legal document and I applaud them for opening up the door so everyone has the opportunity to obtain one.

The permeating theme of the positives associated with store bought Wills is clearly the simplicity associated with putting together a document to help protect assets and family. Just providing people with this option has absolutely increased the number of people who now have Wills and that is something to be excited about. Nevertheless, the one-size-fits-all approach has more than its fair share of shortcomings. Next week I will explore some of the negatives associated with creating your own Will.

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Beer at work? Why not!

by Chris Erb on March 1, 2010

olde-school-barleywine.png

A recent tweet by the folks over at Dogfish Head Brewery lamented the impracticality of many employee policies for small businesses. In this particular instance, the lament was over alcohol policies, many of which are strict even for many smaller close-knit businesses but downright unrealistic for a brewery. I deal with the same problem quite often, given that many of my clients are German and are quite accustomed to keeping a case of beer (or even a small keg) in the office for after-hours or company functions.

The most important thing when considering any type of employee policy is to make sure the policy is consistent with your business practices. A strict policy against alcohol or sexual harassment policy with a rigid and complex disciplinary process is only sensible if you’re going to implement it as written. Failure to follow the company’s own procedures is, in many instances, worse than not having a policy at all.

Of course, in an environment where the risks are increased due to a more flexible policy on, say, alcohol consumption there are still steps employers can take to minimize those risks. In the case of alcohol policies, the key is to make sure the difference between alcohol consumption and abuse is clearly outlined in the policy, and to ensure that employees are not impaired while working. A desk worker who has a beer or two at a company lunch may not be working at full efficiency, but probably won’t do all that much to harm employer or employee. On the other hand, a forklift operator continuing work after two or three of the brewery’s Olde School Barleywine (with 15% alcohol) is a bad idea, and the alcohol policy should reflect that. Similarly, a policy which requires a three-step disciplinary procedure and calls for a committee to review alleged infractions is simply unworkable for a five-employee company.

So go ahead, have a beer after work, just be smart about it.

Image from Dogfish Head Brewery website

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Bad Timing for Tax Reform?

by Garrett Spangler on February 25, 2010

I’ve got mixed emotions about the new bi-partisan tax reform bill introduced by Senators Ron Wyden (D-Ore.) and Judd Gregg (R-NH) this week. On one hand I’m happy to see tax is on the minds of our Congressmen, on the other, I’m not sure the current efforts are focused on the right tax at the right time.

Its tax season and that means tax is on the minds of many Americans, not just those of us who have made careers in the field. That would suggest that debuting a new tax reform bill may be perfectly timed to get voters on board with an allegedly simplified income tax structure with fewer tax brackets, a higher standard deduction, eliminating the alternative minimum tax, and creating a flat business tax rate. It may very well be time to revisit the Tax Code and make some changes because the last time a major overhaul occurred was in 1986 under the Reagan administration.

So why do I have mixed emotions? Like the reform proposal claims to be, it’s simple; the wrong tax at the wrong time.

First, its nearly March and no attention has been given to the estate tax laws which were repealed as of the first of the year because no action was taken by Congress. As I’ve written in previous posts, estate plans of many Americans may be adversely affected without the estate tax because they were written based on the assumption that the law would remain in some form, even if the rates and exclusions were altered. If there are tax discussions in Congress right now I think the estate tax deserves to be front and center. What it constitutes; a freeze at 2009 levels, a complete repeal, some other rules? At this point I’d take any form of certainty over its current state.

Second, this is an election year for many members of Congress and that spells trouble for this type of legislation. It’s true that many Americans are fed up with partisan politics in Washington and they may be happy to see that some of their elected officials are reaching out to each other in the interest of their constituents, but it won’t get the necessary time or votes it needs to pass. That’s right, there are too many other pressing issues, such as health care reform, to get time on the floor for discussion. Plus, there will be too many Congressmen posturing to differentiate themselves in an election year to actually garner the necessary votes to pass this type of sweeping legislation.

So “attaboy” Congress, but please don’t take your eye off the ball!

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Yet Another Reason to Think Before You Lend

by Erica Intzekostas on February 22, 2010

Someone owes you money. Maybe you performed services for them. Maybe they purchased something from you. Maybe it’s your brother who still hasn’t paid you back that money he borrowed 6 months ago to get him through until his next paycheck. You’ve called, written letters, even threatened a law suit. They keep telling you they just don’t have the money, and you’re thinking that’s probably true and that you may never see the money again. Finally you work something out with them. Maybe you accept a payment plan, maybe you accept a partial payment in full satisfaction just to get something from this deadbeat, or maybe you get lucky and they actually pay you back in full. Great. Now you can go about your business, call it a lesson learned, and never have to worry about it again. Right? Well, maybe.

Under federal bankruptcy law, if a debtor files for bankruptcy, certain payments he made to creditors during the preceding 90 days can be voided by the bankruptcy trustee and brought into the bankruptcy estate.  That would most likely include any payments made to you for that past debt – meaning that you could be forced to pay that money to the bankruptcy estate so that it could be distributed among all the debtor’s creditors. In fact, if the debtor is your relative, that 90 days can be extended to a year! The purpose of this rule is to make sure that all creditors are treated equally and fairly and to avoid preferential treatment of any particular creditor by the debtor (such as a relative or valued service provider whom the debtor might be inclined to want to favor over, say, American Express).

Just another thing to keep in mind before you decide to lend your financially strapped friend a helping hand!

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Federal Estate Tax Mess: States 1, Congress 0

by Garrett Spangler on February 18, 2010

The 2010 Federal estate tax repeal is creating a mess for families whose loved ones have passed away since the first of the year. With no immediate solutions pending before Congress, states have begun to say enough is enough and put together legislation to help their residents as much as possible.

Due to the way that most good estate plans are written, specifically those which have been created, updated, or revised since changes to estate tax law took effect under the Bush administration in 2001, the complete repeal of the estate tax can have some potentially catastrophic effects. Everyone was entitled to an estate tax exemption under the previous estate tax laws and therefore married couples would seek to maximize their tax benefits by using up the exemption in the estate of the first to die and passing only the taxable assets to their spouse. Then when the second spouse passed away, they could use their own exemption to pass more of their money tax free.

The Federal estate tax exemption steadily changed over the last ten years and to prevent the need to rewrite wills and trusts every time a change occurred, estate plans used a formulaic approach. Now with the estate tax repeal, many times the entire estate of the spouse that dies first will pass to other relatives such as children, leaving the living spouse with nothing.

States are recognizing this and have begun to propose legislation to help families who could fall into this tax exemption trap. Some have proposed that anyone dying while the laws are repealed may use December 31, 2009 as their date of death, while others simply provide that any tax terms or formulas should be interpreted as though the laws of 2009 were still in effect. Either way, this can help keep families out of expensive legal battles over the intended disposition of assets and prevent them from having to pay extra, unanticipated state taxes on inheritances or estates.

While states such as Maryland, Nebraska, South Dakota, Tennessee, Florida, New York and Washington have followed Virginia’s lead with some form of legislation in this area, I have yet to see anything proposed here in Pennsylvania. For those keeping score, chalk one up for states rights advocates, your move Congress…..

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The Empire Strikes First

by Erica Intzekostas on February 17, 2010

Lucasfilm has filed suit against a Chicago billboard advertising company that calls itself Skywalker Outdoor. The lawsuit alleges trademark infringement and breach of contract. The trademark component of the compliant alleges that Lucasfilm has been using the brand name SKYWALKER since 1977 and that the term has “acquired substantial secondary meaning and goodwill” as a result of “Lucasfilm’s extensive advertising and use of the SKYWALKER mark on products and services”. The complaint alleges that a third party’s use of such brand name will likely cause consumer confusion.

Since the registered trademark for SKYWALKER is for the limited category of motion picture sound effects and the like, and its other related trademarks, like Luke Skywalker and Anakin Skywalker, are limited to things like toys and clothing (none of which have anything to do with billboards or advertising), Lucasfilm is relying on the fame of the Skywalker brand name.  In general, a mark that has achieved the elite “famous mark” status enjoys special protection under the anti-dilution provisions of the Lanham Act. However, proving fame can be difficult and is ultimately decided at the discretion of the court.

Luckily for Lucasfilm, it may have a much stronger and easier case in its breach of contract claim. According to the complaint, Lucasfilm claims that the parties entered into a contract whereby the billboard company acknowledged Lucasfilm’s prior exclusive rights in the brand names and agreed to stop using the Skywalker name after December 31, 2008. Apparently the billboard company, in its defense, is denying knowledge of the agreement and is claiming that the woman who is alleged to have signed it on behalf of the company as CEO was never actually CEO and had no authority to bind the company.

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What Happens Without a Will?

by Garrett Spangler on February 11, 2010

I spend most of my time figuring out what options may be in an individual’s or a family’s best interest for estate planning purposes. I talk to clients about the property they own, what their lifetime goals are, and what they would like to see happen to their assets when they are no longer around. It’s no secret, I discuss what an estate plan does and why one is needed all the time. What I don’t usually do is discuss what happens without a Will or other estate plan in place. Of course, like any good legal question, the only real truthful answer is, it depends.

When someone dies without a Will, the laws of the state in which you live will provide the guide for how your estate will be distributed. These laws are called intestacy laws and differ from state to state so you should find out more about the laws in your state for the most accurate answer.

That said, most states will provide the spouse of a decedent with approximately 1/3 to 1/2 of the assets, while the rest is split among the decedent’s children. If the decedent is not married or does not have children, most intestacy laws will then leave assets to the decedent’s parents, siblings, grandparents, other extended family such as uncles and cousins, and then finally to the state if no beneficiaries can be found. The order differs by state along with the shares they are poised to take but generally states seek to give your dependents and immediate family first priority.

It gets even trickier when a decedent owns property in more than one state because then you must contend with multiple sets of intestacy laws and the various sets of beneficiaries that each state sets out in their own heirarchical order. You may not care what happens to your assets when you die but most people would like to be sure that the ones they love most get whatever they leave behind. At the very least you should discuss with your family what planning they may have done because inadvertently leaving your estate to your parents or another family member may do their own estate plan more harm than good.

If you have questions about your estate or how best to provide for your family be sure to speak with an estate planning professional. They can provide you with specific answers to your situation and some guidance as to how you might wish to proceed.

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