Category Archives: Illiquid Assets

Undue Influence?

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

This NY Times article discusses how a hospital manipulated a long term patient (net worth > $100 million) to obtain gifts, pledges, and other favors from her. Undue influence is a common probate or trust litigation issue. Wills in Kansas and Missouri are only valid if executed without undue influence. Most attorneys hear undue influence and think of a child or other prospective heir trying to persuade a family member to favor them over other relatives or heirs. But what about organizations, hospitals, and others looking for a piece of an individual’s or family’s inheritance? Food for thought.

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

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

Is New York “Offshore?”

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

The NY Times has this fascinating article about the recent corporate tax controversy of large global companies parking money in international holding companies that have domestic bank accounts or investments. But poof (now you see it; now you don’t) – by tax accounting magic, the money’s held internationally. America has the highest corporate tax rate in the developed world –  35%. Some other countries, like Ireland, have much lower tax rates, so having the money held by an Irish subsidiary in a New York bank account yields a substantially lower (say 13%) tax rate.

While offshore bank accounts (for individuals or corporations) are often discussed in political terms, they’re a bipartisan issue. While companies some might view as conservative do it (like oil and gas companies), so do seemingly more moderate or even liberal giants like Microsoft, Google, and Apple. (A few months back, Apple passed ExxonMobil as the biggest company by market cap – all those iPhones, iPads, and iPods everybody loves fueled its rise to the coolest big business on the planet.) And wealthy folks of all political stripes like Mitt Romney, Al Gore, Terry McAuliffe, and Penny Pritzer have offshore accounts or investments. Why? Lower tax bills. Whether you think offshore holdings are great or terrible, the math tells the story.

The unfortunate moral of the story is the obscene complexity of America’s tax law – call it the lawyers’ and accountants’ full employment act. Most Americans, whether conservative or liberal, favor a less complex IRS Code. Meanwhile, if my law firm, Johnson Law KC LLC, can help you or your family with your personal estate planning or small business needs, give me a call (913-707-9220) or email me (steve@johnsonlawkc.com) for a free consultation.

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

Talking to Family about Inheritances

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

CNBC has this article about a recent US Trust study about when parents should talk to their children (and grandchildren) about inheritances. As the article points out, many children of wealthy families realize they’re wealthy based on the lifestyle they enjoy. But there’s a big difference between knowing “My family’s wealthy and takes exotic vacations” and knowing “Mom & Dad have XYZ income each year, a house held in ABC trust, a controlling interest in Family Co LLC, a vacation home also held in trust, and a net worth of $_______.” When to tell family members specifics is an important question to consider in careful consultation with your family’s accountant, attorney, and other professional advisors. As the article suggests, maturity levels, financial acumen, and other factors come into play. But as the article rightly concludes, “even if parents don’t give their kids “the number” for their wealth, they should at least give them the skills and the values to manage it well.”

Beyond the tax and legal details of structuring entities that attorneys and other wealth advisors do, imparting skills and values to manage a legacy is vital. Without the skills and values, a child or grandchild may not know how a family member became wealthy, why a family member managed their lifestyle as they did, or what legacy the wealth should have. I encourage clients to be open and honest with their families when the time comes to discuss inheritance and legacy. But don’t just give your family the numbers, give them the context and share your values and passion and legacy with them.

If my law firm, Johnson Law KC LLC, can help you or your family with estate planning or asset protection needs, or give you ideas for spurring these important conversations with your family, please call (913-707-9220) or email me (steve@johnsonlawkc.com) for  a convenient free consultation.

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

Tax Like its 1972?

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

Bloomberg provides this interesting article on Summer Redstone’s appeal of the IRS arguing his 1972 transaction was a gift. Some might think that 41 years is a bit late (!) to be challenging a transaction (or collecting tax on it), and many of the lawyers quoted were surprised by the IRS’ claims. It will be fascinating to watch how this case plays out. If the IRS’ argument turns out to be merited (albeit 41 years late), this has ripple potential in the estate planning and tax communities, as attorneys, accountants, and advisors grapple with how to insulate clients (and themselves) from liability decades after the fact.

Stay tuned for updates from the recent 2013 KC Estate Planning Symposium, which I attended last week (25-26 April 2013). This year’s program featured a host of top speakers on topics ranging from grantor trust tax, FLP and other case law updates to special needs trusts, IRAs, asset protection, and Social Security planning.

If my office, Johnson Law KC LLC, can help you or your family with gift tax or other estate planning issues, give me a call (913-707-9220) or email me (steve@johnsonlawkc.com) for a convenient free consultation.

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

Inheriting personal property

Posted on by under Estate Planning, Financial Powers of Attorney, Gift Tax, Gifts to Minors, Illiquid Assets, Kansas, Missouri, Probate, Small Business, Trusts, Wills

This Daily Mail article talks about Delta Airlines’ new policy prohibiting transfer of frequent flier miles to family members or friends upon death. Frequent flier miles are a form of personal property – you accumulate them and then trade them for a ticket or two on a flight of your choice – and this is another limitation on transferring (or alienation, as lawyers like to say) of personal property. Is it legal? Sure – if you’re issuing personal property to others, you can specify the conditions (e.g. only this airline, these flights, this time of year, these destinations, etc). Like many licenses, airline tickets (or movie, theater, or sporting game tickets) have restrictions on use, re-use, and transfer. The moral of this story is don’t count on being able to pass your frequent flier miles on to your family.

If my office, Johnson Law KC LLC, can help you or your family with estate planning questions, please call me (913-707-9220) or email me (steve@johnsonlawkc.com) to schedule a free, convenient consultation.

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

Selecting a Trustee

Posted on by under Business Succession Planning, Business Transitions, Estate Planning, Family Business, Financial Powers of Attorney, Gifts to Minors, Illiquid Assets, Kansas, Living Wills, Medical Powers of Attorney, Missouri, Prenups, Probate, Retirement, Small Business, Trusts, Wills

So you’ve decided it’s time to do some estate planning and you’ve talked with you estate planning attorney. And the lawyer asks who you want to serve as trustee. A friend or family member? Your bank or a trust company? Here’s a helpful article on some non-legal issues to think about when selecting a trustee.

The lawyer walks you through some of the pros and cons of each option – a friend or family member probably won’t expect to be paid for their service, but they may not know anything about investments or administering the trust for you and your family, so they could jeopardize your financial legacy to your descendants. A bank or trust company will usually serve for a fee of 1%/year of assets under management and they have professional investment and advising services included (so you’ll be getting a good return on investment and monthly or quarterly financial statements), but they might not want real estate or closely held (and non-diversified) business interests or other assets in the trust. And banks and trust companies often change through mergers and other business deals over the years, not to mention the internal turn over of trust officers and employees that you actually work with.

Even if you don’t set up a trust, the lawyer will ask a similar question about your will (who’s your executor?), your living will and your financial and medical powers of attorney (who’s your agent/attorney in fact?). Who’s going to be making decisions on your behalf? Who do you trust to handle your last affairs and settle your estate? The law doesn’t provide many answers, but a good estate planning lawyer can walk you through your options, and help you select the person or institution best suited for your unique situation and your needs. If I can help you on your estate planning journey or answer any other questions, please give me a call (913-707-9220) or email me (steve@johnsonlawkc.com) for a convenient appointment with my firm, Johnson Law KC LLC.

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

Preparing Your Kids for an Inheritance

Posted on by under BDITs, Business Succession Planning, Business Transitions, Dynasty Trusts, Estate Planning, Estate Tax, Family Business, Financial Powers of Attorney, Generation Skipping Tax, Gift Tax, Gifts to Minors, Illiquid Assets, Kansas, LLCs, Missouri, Probate, Small Business, Trusts, Wills

The WSJ/Barron’s has this fascinating article about the new $5.25 million per person lifetime gift tax exemption that Congress passed as part of the deal to avert the fiscal cliff. But the question that arises, especially as some young, wealthy heirs and heiresses’ antics grace the tabloid and Internet headlines: can a child properly handle their inheritance? If you give your child $5 million, will they save and invest it wisely, or will they spend it frivolously and waste your hard-earned wealth and financial legacy to them? This age-old issue is nothing new – there’s a non-tax reason that custodian bank accounts exist for minors, that trusts are popular, that savings bonds, CDs, and 529 college savings accounts exist – parents and grandparents need to be able to shepherd the money their children and grandchildren will receive. Yes, a gift is giving away money without formal strings attached – not reserving some right to take it back if a financial rainy day comes along, if your child wastes the money on things you don’t approve of, or if the child turns out not to have any financial or investing sense. But legal techniques exist to help protect the gift while your child learns how to work with their inheritance.

If the economic downtown hit your portfolio like high tide hitting a beautifully crafted sand castle on the beach (as it impacted most people’s hard-earned investments, savings, and home equity), or if you’re still working to build up wealth as the economy slowly recovers, you may be looking at smaller gifts for family members. Maybe  you anticipate giving tens or hundreds of thousands to loved ones, not millions. The same principle still applies – can you child or grandchild handle getting a check for $5,000, $10,000, $100,000?

Parents and grandparents need to talk with their children and grandchildren about money, investing, saving, and inheritances. It may not be an easy or fun talk and it might be awkward at first, but it’s a lot easier to discuss now than when you’re gravely ill or when your family is trying to clean up a messy estate after you’ve died. Look for some tips on how to inherit and handling an inheritance soon on this blog. In the meantime, if I can help you or your family with your estate planning, small business, or asset protection needs, give me a call (913-707-9220) or email me (steve@johnsonlawkc.com). At Johnson Law KC LLC, we’re here to serve your needs – now and for many years to come.

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

Retirement for Small Business Owners

Posted on by under Business Succession Planning, Business Transitions, Estate Planning, Family Business, Family Limited Partnerships, Illiquid Assets, Kansas, Missouri, Small Business, Trusts, Wills

Bloomberg Businessweek has this fascinating article about some of the risks entrepreneurs and small business owners face when deciding to retire and sell their business. Unlike many of their employees, small business owners often have minimal diversification in their financial and investment portfolios (and instead have concentrated investments in their small business. If business slows down with bad economic conditions or other industry turmoil, the entrepreneur or small business owner risks losing her income and her concentrated investments in her business – a “double whammy” as the article puts it.

Don’t let your business or retirement be hit by the double whammy – plan now and plan well to be sure your future and your business’ future is secure. If we can help you or your family with your small business, estate planning, or business transition needs in Kansas or Missouri, call (913-707-9220) or email (steve@johnsonlawkc.com) the Johnson Law KC LLC for a convenient appointment.

(c) 2012, Stephen M. Johnson

To Plan or Not to Plan: Rip Van Taxes

Posted on by under Business Succession Planning, Business Transitions, Dynasty Trusts, Estate Planning, Estate Tax, Family Business, Generation Skipping Tax, Gift Tax, Illiquid Assets, Kansas, Missouri, Probate, Small Business, Trusts, Wills

Happy Thanksgiving! Yahoo Finance has this article about the coming “fiscal cliff” and some people’s race to do year-end estate and tax planning, while others are brushing off the tax planning opportunity and waiting to see what, if anything, Congress will do.  While the estate, gift, and generation-skipping tax exemptions are likely to be at the highest point in our lifetimes and the rates are probably at historic lows, the article  points out that maxing out your exemptions may only really matter if you’ve got $10 million of spare assets to give away in trusts. Anecdotally, many estate planning attorneys are seeing clients with $5 million+ estates setting up irrevocable trusts this year, but many middle class clients aren’t as concerned about looming tax increases. The article correctly notes that the estate tax “is not a tax on everyone, it’s a tax on people [with substantial assets] who aren’t paying attention.” Whatever you’re stance on the fiscal cliff and taxes, don’t be caught unprepared for the changes ahead like Rip Van Winkle.

So if you don’t have $5 million+ in assets, why bother with estate planning? Well, if you’re a high risk professional (accountant, architect, attorney, doctor, executive), asset protection is an issue. Maybe you’ve recently gotten married, divorced, or had a child. Or maybe you’re like most clients we work with who want to ensure their family’s taken care of and a surviving spouse and children don’t have to deal with a legal and financial mess after a loved one’s passing.

Whatever your estate planning motivations or needs, we can help. Our office, Johnson Law KC LLC, has years of collective experience doing estate planning, ranging from simple wills for individuals and young couples to complex dynasty trusts and advising on how best to transition the farm or family business. Give us a call (913-707-9220) or email (steve@johnsonlawkc.com) and we’ll schedule a convenient appointment to serve your estate planning needs.

(c) 2012, Stephen M. Johnson, Esq.

Final Boarding Call: Estate Planning in 2012

Posted on by under BDITs, Business Succession Planning, Business Transitions, Dynasty Trusts, 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, QPRTs, Small Business, Special Needs Trusts, Trusts, Wills

The WSJ has this helpful article reminding folks to get their estate plans in order, especially for families with $1 to 5 million+ in assets. As we ring in the new year in a few short months, if Congress hasn’t done anything on the tax front, you’ll see several changes hitting your pocketbook. The Bush tax cuts will expire – so you’ll owe tax if you (1) die with more than a $1 million estate, if you (2) give more than $1 million to family or friends, or (3) if you do more than $1 million generation skipping transfers (e.g. grandparents to grandchildren). Portability is also set to expire, so you won’t be able to use your predeceased spouse’s estate tax exemption. The Obama payroll tax cut will also expire – so you’ll have less take home pay from each paycheck. Like the historically low interest rates now in play, we may not see estate and gift tax laws that allow you to pass on your hard-earned wealth and leave a legacy for your family again in our lifetimes.

Echoing the anecdotes offered in the WSJ article, our firm has been very busy lately, and our appointment calendars are filling up with work, as are the other professionals we work with to best serve clients with a holistic approach. If you need to do any estate planning, business, or real estate work before 2013, it’s time to act. If you have a small business, real estate interests, or other potentially hard-to-value assets, you may need to have an appraisal done before structuring your business succession plan, or setting up a family limited partnership (FLP) or family LLC. Appraisers’ schedules are filling up, so if you’re thinking of passing on your business or real estate holdings, it’s time to bite the bullet and get it done. Your family will thank you and you’ll be able to enjoy the holidays with the peace of mind that everything’s taken care of according to your desires.

We offer a free 1/2 hour consultation, convenient and affordable flat fee billing, and we’re a simple phone call or email away at (913) 7o7-9220 or steve@johnsonlawkc.com. At Johnson Law KC LLC, we look forward to serving your legal needs.

(c) 2012, Stephen M. Johnson, Esq.