Category Archives: Illiquid Assets

Testamentary Capacity and Family Businesses

Posted on by under Business Succession Planning, Business Transitions, Elder Law, Estate & Trust Litigation, Family Business, Family Limited Partnerships, Financial Powers of Attorney, Illiquid Assets, Kansas, Living Wills, LLCs, Medical Powers of Attorney, Missouri, Small Business, Testamentary Capacity, Trusts, Wills

Bessemer Trust provides this fascinating brief study of the testamentary capacity and other issues arising from the recent sale of the LA Clippers basketball team by the Sterling Family Trust to former Microsoft CEO Steve Ballmer for a cool $2 billion, following the publication of Mr Sterling’s racist comments and ensuing fine and lifetime ban from the NBA. As people begin to live longer (a good thing), we will see higher stakes contests in and out of court to prove someone did (or didn’t) have testamentary capacity – they could (or couldn’t) have validly signed a will, trust, living will, or power of attorney. Look for some high profile cases to emerge as highly contentious court battles – think celebrity or billionaire divorce trials. And look for creative attorneys to design provisions that hold up better in court or keep these matters out of court using improved negotiations and family dynamic consultations.

My law firm, Johnson Law KC LLC, is experienced counseling clients on all aspects of estate planning, asset protection, and helping to structure charitable giving. We can help you answer these questions with confidence and friendly expertise. If we can serve you or your family with your charitable giving questions, please call (913-707-9220) or email us (steve@johnsonlawkc.com) to schedule a free, convenient consultation.

(c) 2014, Stephen M. Johnson, Esq.

 

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Dynasty Trusts: A Great Estate Planning Tool

Posted on by under Asset Protection, BDITs, Business Succession Planning, Dynasty Trusts, Estate & Trust Administration, Estate Planning, Estate Tax, Family Business, Family Limited Partnerships, Financial Powers of Attorney, Generation Skipping Tax, Gift Tax, Gifts to Minors, Illiquid Assets, Kansas, Living Wills, LLCs, Medical Powers of Attorney, Missouri, Probate, Small Business, Special Needs Trusts, Trusts, Wills

The WSJ has this useful perspective on dynasty trusts and inheriting in trust. Dynasty trusts enable families to take care of future generations and ensure their philanthropic and business legacy while protecting hard-earned wealth from creditors, divorcing spouses, and other potential money drains. My firm counsels Kansas and Missouri clients to use Missouri dynasty trusts to help achieve their estate planning goals.

My law firm, Johnson Law KC LLC, has experience working with individuals and families to serve their business and estate planning. I enjoy working with a variety of clients – ranging from single young professionals with minimal assets to multimillionaire business owners with complex trusts. My firm has strong relationships with local and national trust companies to help administer all types and ranges of trusts. If my law firm can help you or your family with your estate planning, elder law, asset protection, business law needs, or digital estate planning, including advising on trustee removal or other fiduciary litigation, call me (913-707-9220) or email me (steve@johnsonlawkc.com) for a free, convenient appointment.

(c) 2014, Stephen M. Johnson, Esq.

 

 

Small Business Law 101

Posted on by under Business Succession Planning, Business Transitions, Digital Estate Planning, Dynasty Trusts, Estate Planning, Family Business, Family Limited Partnerships, Financial Powers of Attorney, Illiquid Assets, Income Tax, Kansas, Living Wills, LLCs, Medical Powers of Attorney, Missouri, Probate, Retirement, Small Business, Trusts, Uncategorized, Wills

There are 3 stages in the business law cycle, all of which my law firm, Johnson Law KC LLC, can help you and your business by coming alongside to provide experienced, friendly counsel leavened with an understanding of business, economic, and financial issues. The 3 business stages are: (1) formation, (2) maintenance/compliance, and (3) succession.

(1) Formation – At the formation stage, choice of entity and other considerations arise. Should the business be a corporation (C corporation or S corporation), a partnership, a limited partnership (LP), a limited liability partnership (LLP), a limited liability company (LLC), a series LLC, a professional corporation or professional association, or a family limited partnership (FLP)/family LLC? How will the business’ owners and employees, and other players relate to each other?

  • A sole proprietorship is the simplest form of business, where the owner gets all the profits, but is liable for all debts and losses, and doesn’t enjoy any limited liability.
  • C corporations and S corporations take their names from respective IRS Code chapters. Corporations have to follow corporate formalities, but get limited liability for their actions in return. Kansas corporations are formed under the Kansas General Corporation Code (K.S.A. 17-6001 et seq.), patterned after Delaware corporate law, while Missouri corporations are formed under The General and Business Corporation Law of Missouri (V.A.M.S. 351.010 et seq.).
  • A partnership (a/k/a general partnership) is a joint business venture between 2 or more equal partners. Both partners are entitled to a share of the profits, but both are also liable for the partnership’s losses and debts. Since 1998, Kansas partnerships have been governed by the Kansas Uniform Partnership Act (K.S.A. 56a-101 et seq.), while since 1949, Missouri partnerships have been formed under the Uniform Partnership Law (V.A.M.S. 458.010 et seq.).
  • A limited partnership (LP) has a general partner (who has voting rights and is liable for the partnership’s losses and debts) and one or more limited partners (who have limited liability, but don’t have voting rights). Kansas LPs can be formed under the Kansas Revised Uniform Limited Partnership Act (1983) (RULPA) (K.S.A. 56-1a101 et seq.), while Missouri LPs trace their lineage to the Uniform Limited Partnership Law (1985) (V.A.M.S. 359.011 et seq.).
  • A limited liability partnership (LLP) is a group of limited partners who enjoy voting rights and limited liability – many law firms, accounting firms, and other professional organizations are organized as LLPs. Kansas LLPs are formed under the Kansas Uniform Partnership Act (1998) (K.S.A. 56a-1001 et seq.), while Missouri LLPs are formed under the Uniform Limited Partnership Law (1985) (V.A.M.S. 359.172 et seq.).
  • A limited liability company (LLC) has members who have an interest in the firm, where a corporation has shareholders who own shares of stock or a stake in the firm. An LLC can be a single member or have multiple members. Single member LLCs are usually disregarded for IRS tax purposes (and taxed as a sole proprietorship) unless they elect S corp tax treatment. LLCs with multiple members are taxed like partnerships (flow through to individual partners) but with the limited liability of a corporation. Kansas LLCs are formed under the Kansas Revised Limited Liability Company Act (1999), part of the Kansas General Corporation Code (K.S.A. 17-7662 et seq.), while Missouri LLCs are formed under the Missouri Limited Liability Company Act (1993) (V.A.M.S. 347.010 et seq.).
  • A series LLC is a new business form in Kansas and Missouri. A series LLC has a parent LLC that acts like an umbrella to consolidate administrative and tax treatment into 1 entity, and an unlimited number of daughter series under the parent LLC’s umbrella, which can each have distinct business purposes, ownership, and functions. My law firm, Johnson Law KC LLC, is on the cutting edge of counseling local companies, small businesses, and entrepreneurs on using series LLCs. Kansas series LLCs (2012) are governed under Kansas LLC law (K.S.A. 17-76,143), while Missouri series LLCs (2013) are governed by the Missouri LLC law (V.A.M.S. 347.186)
  • A professional association (Kansas) or professional corporation (Missouri) is a special corporate form for regulated professionals – accountants, attorneys, doctors, etc – in a particular state. PAs and PCs can have one or multiple members, but each member must be licensed in the particular profession that the PA or PC practices.
  • A family limited partnership (FLP) or family LLC is an LP or LLC often used among family members for various business purposes. A family may own land, a second home, or a business property in a FLP or family LLC. A FLP has a general partner (with voting rights and unlimited liability) and limited partners (no voting rights but limited liability). Many FLPs will have a parent or grandparent as the general partner owning 1% (or so) of the FLP and children or grandchildren as the limited partners owning a majority of the FLP. FLPs and family LLCs can be advantageous for business and estate planning purposes, but must have a valid business purposes and must be carefully designed and maintained to avoid audits and heightened IRS scrutiny.

(2) Maintenance/Compliance – At the maintenance/compliance stage, the requirements for different kinds of business organizations are vastly different. Talk of maintenance or compliance often conjures up visions (or nightmares) of annual corporate minutes, annual reports, state and federal securities laws. Sole proprietorships have very little, if any, regular maintenance or compliance, but they also offer no liability protection – so no paperwork, no protection. C corporations and S corporations must file annual reports listing major shareholders and other relevant corporate data with the Secretary of State’s office in the state of incorporation (Topeka, Kansas or Jefferson City, Missouri). Likewise, C corporations and S corporations must have annual shareholder meetings, regular board of director meetings, and keep minutes from these meetings. Regular meetings and minutes ensures that the corporation is being honest and transparent with shareholders and giving them a chance to voice their approval (or concern) about the corporation’s leadership and governance direction. Many corporations must also comply with federal securities laws (primarily the Security Act of 1933 and Securities Exchange Act of 1934 and applicable SEC regulations) and state securities or Blue sky laws in the Kansas Uniform Securities Act (dating back to 1911) (K.S.A. 17-12a101 et seq.) and Missouri Uniform Securities Act (2003, dating back to 1956) (V.A.M.S. 409.107 et seq.). Corporations must also comply with applicable state and federal tax laws. Partnerships, LPs, LLPs, LLCs, series LLCs, and FLPs/family LLCs must file annual reports with the Secretary of State’s office and follow other applicable corporate, securities, and/or tax laws.

(3) Succession – at the succession stage, a business owner must decide whether to pursue a merger & acquisition (M&A), wind down, estate/tax planning for owners and/or key members, buy-sell agreements, installment sales, or other succession techniques. A business may be perpetual, but an individual’s ownership is not. Serial entrepreneurs may want to start their next business adventure. An entrepreneur who shepherded a business idea from the napkin drawing to sale to a large company may want to retire or embrace another phase of life. A business owner may want to hand the reins off to his children or her carefully chosen and groomed successors among the management or executive team. My law firm has experience counseling business owners and key executives on M&A issues, wind downs and dissolutions, estate and tax planning, asset protection, and other business succession issues.

If my law firm, Johnson Law KC LLC, can help you or your family with your Kansas or Missouri business law needs, call me (913-707-9220) or email me (steve@johnsonlawkc.com) for a free, convenient appointment.

(c) 2013, Stephen M. Johnson, Esq.

Settling Large Estates

Posted on by under Business Succession Planning, Business Transitions, Dynasty Trusts, Elder Law, Estate & Trust Administration, Estate & Trust Litigation, Estate Planning, Estate Tax, Family Business, Family Limited Partnerships, Financial Powers of Attorney, Generation Skipping Tax, Gift Tax, Illiquid Assets, Kansas, Living Wills, LLCs, Medical Powers of Attorney, Missouri, Probate, Small Business, Trusts, Wills

The NY Times has this interesting article about an estate and trust litigation settlement that has been reached in the Huguette Clark case in New York. Ms. Clark, who died in 2011 at age 104, leaving behind a roughly $300-500 million estate, elected to be a recluse for much of her adult life. Her story is told sympathetically and even-handedly by the recent book Empty Mansions (2013). (The title comes from a series of news stories about her mansions in Santa Barbara, CA, New York, and Connecticut which were left untouched and sat vacant for decades) Settling the estate was a wise decision by the various parties involved: ”Both the family and the beneficiaries had reasons to settle. Rolling the dice at a trial can mean losing everything. Both sides had already spent a great deal on pretrial research and legal fees. And a trial would be an exhausting endeavor, expensive for everyone, last weeks or months.” Empty Mansions, 345

 

The legal dispute over Clark’s estate arose because she executed 2 wills a few weeks apart in 2005: 1 Will left most of her estate to her surviving relatives (distant cousins, nieces, nephews), and another Will created a foundation in the Santa Barbara mansion and left large gifts to her healthcare providers, attorney, accountant, and mostly excluded her family. The distant relatives weren’t as concerned about inheriting part of her fortune as they were about the apparent manipulation of her by doctors, nurses, accountants, attorneys, and others, who took advantage of her generosity for private lucre. (More about those issues in future posts.) Still by all accounts, Ms. Clark ”lived a surprisingly rich life of love and loss, of creatively and quiet charity, of art and imagination. Though the platitude – money can’t buy happiness – may be comforting to those who are less than well heeled, great wealth doesn’t ensure sadness either.” Empty Mansions, 353.

Huguette was a daughter and an heir of Sen. W.A. Clark, a copper baron of the Gilded Age whose wealth was of a similar magnitude to Rockefeller, Carnegie, Mellon, and other Gilded Age business owners. Unlike his Gilded Age contemporaries, Sen. Clark did not due smart estate or business succession planning: ”The W.A. Clark business empire was not built for longevity, collapsing soon after its founder handed it to his children. While his Gilded Age contemporaries typically operated through hierarchies of executives and managers, creating vast corporate entities, W.A. ran his companies as essentially sole proprietorships, which he ruled autocratically. Having attended to every detail of his companies personally W.A. failed in succession planning.” Empty Mansions, 142.

One of her distant relatives summed up the issues she faced as the steward of a large estate: ”I think having such wealth can lead some people to have a lack of self-worth because of not having developed a lucrative career of their own or even having investigated their own potential. Having an overabundance of wealth can make people insecure around others who have far less than they do, since the former might wonder if potential partners or even friends are ‘only’ after them for their money. Well-meaning people of excessive wealth can feel anxious about the lack of perfection of charities they support, and about the fact that even as willing patrons they are powerless to obliterate suffering – all the while knowing that any small amount of money that they might spend on themselves is still enough to change or even save some lives. Wealth can lead to guilt over the unfairness of people working endlessly for them who have never been included fully into the family. In sum, having immense wealth can lead one to feel isolated and to have a false sense of being special.” Empty Mansions, 328 – 329.

Look for more posts soon on the Huguette Clark saga and lessons we can all learn from her story. In the meantime, if you need an experienced attorney to serve your estate planning needs (anything from a simple will, living will, and power of attorney, to complex business and tax planning with dynasty trusts for multiple generations), call my firm (913-707-9220) or email me (steve@johnsonlawkc.com) for a convenient, free consultation. My firm is also experienced handling probate and trust administration – ensuring your Will proceeds smoothly through probate, or that your Trust works seamlessly to avoid probate and ensure your legacy for your family, business, and favorite charities. My law firm, Johnson Law KC LLC, can serve you or your family’s estate planning, asset protection, elder law, or business needs, . My firm looks forward to serving you and your family with reliable, friendly experience and counsel at an affordable cost. One valuable lesson for us all from Huguette Clark’s life is don’t leave your legacy and your family’s inheritance at the mercy of a court settlement.

(c) 2013, Stephen M. Johnson, Esq.

It Don’t Mean a Thing if it Hasn’t Been Executed

Posted on by under Business Succession Planning, Business Transitions, Dynasty Trusts, Elder Law, Estate Planning, Estate Tax, Family Business, Family Limited Partnerships, Financial Powers of Attorney, Gifts to Minors, Illiquid Assets, IRA, Kansas, Living Wills, LLCs, Medical Powers of Attorney, Missouri, Probate, Small Business, Trusts, Wills

With apologies to the Duke Ellington Orchestra’s 1934 rendition of the great jazz standard “It Don’t Mean a Thing” (if it ain’t got that swing), here’s an interesting LA Times piece about a family where a child was promised for years (decades even) that he would inherit a house, but the parent’s Will was never signed. Kansas and Missouri both require Wills to be signed by witnesses to be valid. A Kansas Will must be signed by 2 disinterested witnesses (people who won’t inherit anything) and notarized, then filed with the county probate court within 6 months of your death to validly pass property (see K.S.A. 59-601 et seq.). A Missouri Will must be signed by 2 or more disinterested witnesses and notarized, then filed with the country probate court within 1 year of your death to validly pass property (see V.A.M.S. 474.310 et seq.). While an adult can write their own Will, consulting an experienced estate planning attorney, such as my law firm, Johnson Law KC LLC, is highly recommended to ensure your wishes are carried out according to your desires and that no federal tax or state probate issues arise after your death. Don’t be like the family in the LA Times that didn’t execute documents or did homemade documents that didn’t hold water legally and found out when it was too late – call or email my firm today for an affordable, professional solution to your estate planning needs and make an investment in your financial well being and your family’s future. My firm is experienced handling the full estate planning spectrum, from a simple will, living will, and power of attorney, to complex business and tax planning with dynasty trusts for multiple generations. My firm is also experienced handling probate and trust administration – ensuring your Will goes through the Probate Court smoothly, or that your Trust works as intended for your family, business, and favorite charities.

If my law firm, Johnson Law KC LLC, can serve you or your family’s Wills or trusts, living wills, powers of attorney, estate planning, asset protection, elder law, or business needs, call me (913-707-9220) or email me (steve@johnsonlawkc.com) for a convenient, complimentary consultation. My firm looks forward to serving you and your family with reliable, friendly experience and counsel at an affordable cost. Don’t leave your family’s inheritance up in the air this autumn season.

(c) 2013, Stephen M. Johnson, Esq.

7 Reasons Why You Need a Trust

Posted on by under Dynasty Trusts, Elder Law, Estate Planning, Estate Tax, Family Business, Financial Powers of Attorney, Gift Tax, Illiquid Assets, Income Tax, Kansas, Living Wills, LLCs, Medical Powers of Attorney, Missouri, Prenups, Probate, Small Business, Special Needs Trusts, Trusts, Wills

Fox Business has this brief, helpful article with 7 reasons why a person would want or need a trust.

They are:

1. Don’t Want Children to Inherit at Age 18

2. Asset Protection from Creditors

3. Someone Else at the Helm

4. Complicated Family Situation

5. Avoid the Probate

6. Take Care of a Disabled Child

7. Safeguard Your Privacy

All 7 of these are good reasons to consider a trust. My firm often works with clients wanting or needing asset protection, privacy, avoiding probate, or caring for a disabled child (or parent). Trusts come in a variety of options and are affordable, smart choices for many clients. If my law firm, Johnson Law KC LLC, can serve you or your family’s estate planning, asset protection, elder law, special needs trusts, or business needs, call me (913-707-9220) or email me (steve@johnsonlawkc.com) for a convenient, complimentary consultation. My firm looks forward to serving you and your family with reliable, friendly experience and counsel at an affordable cost. And there’s no better time than before the holiday rush, amid the beautiful autumn colors, to get your financial affairs settled.

(c) 2013, Stephen M. Johnson, Esq.

Digital Estate Planning

Posted on by under Digital Estate Planning, Elder Law, Estate Planning, Financial Powers of Attorney, Illiquid Assets, Kansas, Living Wills, Medical Powers of Attorney, Missouri, Retirement, Small Business, Trusts, Wills

In our digital age of laptops, smartphones, social media and digital photos and video, digital estate planning is a necessity. (You’re reading a digital asset written on a MacBook Pro.) What if a family member or business colleague needs access to your email and other digital assets when you’re alive but unavailable or incapacitated? What about after your death? This BBC article includes a good summary of the concerns and need for digital estate planning. My law firm, Johnson Law KC LLC, includes digital estate planning provisions in all powers of attorney, wills, and trusts – standard and at no extra charge – because we know how much our clients value their digital assets and want to preserve them for future generations.

If my law firm can help you or your family with your estate planning (digital and/or traditional), asset protection, elder law, or business needs, call me (913-707-9220) or email me (steve@johnsonlawkc.com) for a convenient, complimentary consultation. My firm relishes the opportunity to serve each client with reliable, friendly experience at an affordable cost.

(c) 2013, Stephen M. Johnson, Esq.

Protecting Estates

Posted on by under Digital Estate Planning, Dynasty Trusts, Elder Law, Estate Planning, Estate Tax, Family Business, Family Limited Partnerships, Financial Powers of Attorney, Illiquid Assets, Kansas, Living Wills, LLCs, Medical Powers of Attorney, Missouri, Probate, Small Business, Trusts, Wills

The LA Times has this interesting obit of Roger Richman, a California attorney who represented various celebrities’ estates and campaigned for state laws to protect (or tastefully restrict) the use of a deceased celebrity’s image or likeness. This issue involves state and federal law: state law governs estates (probate) and tort (appropriating or misappropriating someone’s name, image, or likeness), while federal trademark law may also come into play. Richman’s work led to beneficial laws for estates of celebrities or other well-known or influential people.

If my law firm, Johnson Law KC LLC, can help you or your family, or a loved one’s estate with your legal needs – estate planning, elder law, asset protection, small business law, or probate – give me a call (913-707-9220) or email me (steve@johnsonlawkc.com) for a convenient, complimentary consultation. I have extensive experience working with individuals, families, small businesses, and nonprofits on legal issues large and small – from drafting a basic estate plan for a young couple or young professional client with minimal assets to counseling affluent families with millions of dollars of complex business and real estate holdings.

(c) 2013, Stephen M. Johnson, Esq.

Tax-free Retirement?

Posted on by under Elder Law, Estate Planning, Estate Tax, Family Business, Financial Powers of Attorney, Illiquid Assets, Income Tax, IRA, Kansas, Living Wills, Medical Powers of Attorney, Missouri, Retirement, Roth IRA, Trusts, Wills

CNBC has this helpful article about how to plan for a tax-free retirement with lots of good tips and portfolio ideas. Many retirees can expect lower income tax bills than those of us still working (and earning more income), but the article wisely points out the wild card – the Congress/tax wild card.

Thoughts? What are your ideas for planning a tax-free retirement?

If my law firm, Johnson Law KC LLC, can help you or your family on your estate planning or other legal needs, give me a call (913-707-9220) or email me (steve@johnsonlawkc.com) to schedule a convenient and free consultation.

(c) 2013, Stephen M. Johnson, Esq.

Asset Protection 101

Posted on by under Business Succession Planning, Business Transitions, Dynasty Trusts, Estate Planning, Estate Tax, Family Business, Family Limited Partnerships, Financial Powers of Attorney, Illiquid Assets, Kansas, LLCs, Missouri, Small Business, Trusts, Wills

What does asset protection mean? Asset protection is about preserving and safeguarding your hard-earned money and other assets from creditors, divorcing spouses, or others. Asset protection is best done through a trust, an LLC, or a family limited partnership. The key to asset protection is (1) finding a good, protective place and (2) setting up an entity to hold the assets. Missouri was one of the 1st asset protection states in America. Kansas or Missouri residents can set up a Missouri asset protection trust to hold their assets. Kansas law doesn’t allow an asset protection trust, but does allow other trusts. An asset protection trust is irrevocable – a stand-alone entity that must file an annual income tax return. LLCs or family limited partnerships (FLPs) can be used to hold farm land, real estate, stock, the family business, or other assets. A family LLC or FLP must have a valid business purposes, but members or partners may be able to claim some discount off the value of contributed assets – e.g. if you put a minority (say 30%) interest in the family farm or business into a family LLC or FLP, you can claim a discount since your stake wouldn’t be easily marketable to outside buyers.

My law firm, Johnson Law KC LLC, is experienced counseling families and small business owners on using various asset protection tools. If I can help you or your family with your asset protection needs, call (913-707-9220) or email me (steve@johnsonlawkc.com) to schedule a convenient, free consultation.

(c) 2013, Stephen M. Johnson, Esq.