Category Archives: Uncategorized

To Inherit or Not to Inherit?

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Pop artist Sting recently made headlines by proclaiming that he didn’t intend to leave his children any sizable part of his fortune. (Leaving aside the question of how one might actually spend hundreds of millions of dollars in one’s own lifetime…) But this CNBC study suggests that many young people of the millennial generation may still have some inheritance coming their way in the future. Many people opposed to inherited wealth worry about dead hand control (the old law school classic of the rule against perpetuities) and that their children may not develop the work ethic or business savvy necessary to be successful if they receive a sizable inheritance. On the other side, many people would rather leave the money to the family than to Uncle Sam and some may wonder if children raised in a  particular setting and accustomed to a certain lifestyle are in for a rude awakening if they can’t easily replicate that lifestyle once they’re out on their own.

What do you think? To inherit or not to inherit? That is the question (with apologies to Hamlet).

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) 2014, Stephen M. Johnson, Esq.

 

Estate Planning with Multiple Homes

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Bloomberg has this article about Bill & Hillary Clinton’s estate planning techniques. Since leaving the White House, former President Clinton and his wife, the former Senator and Secretary of State, have amassed a fortune writing memoirs and giving speeches, while building their foundation’s global presence and buying multiple estates in New York and Washington, D.C. Not surprisingly, the Clintons are using several high end estate planning techniques similar to what Mitt Romney, Al Gore, and other wealthy politicians and business people use. Across the Pond, former British Prime Minister Tony Blair has developed a formidable business, philanthropic, and advisory empire. We’ve explored some of these techniques here, here, and here.

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) 2014, Stephen M. Johnson, Esq.

 

 

Real Value & Conservation Easements

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Today, the 2nd Circuit Court of Appeals (based in New York) decided Scheidelman v. Commissioner of Internal Revenue. Ms Huda Scheidelman donated a facade conservation easement (part of her townhouse in a historic district of Brooklyn) to the National Architectural Trust (a tax exempt organization). The area of Brooklyn where he townhouse is located is a “registered historic district” under federal law and New York law prohibits altering, reconstructing, or demolishing a federally registered historic building. Ms Scheidelman took a $115,000 tax deduction for donating the conservation easement to a tax exempt organization. But the IRS balked, arguing (1) she didn’t have a “qualified appraisal” and (2) her donated easement didn’t reduce the property’s fair market value because she didn’t give anything up by donating the easement. The Court found that the appraisal was seriously flawed and incomplete (see Slip at pp. 9-12), and the historic designation actually boosted, not diminished the value of her home.

While conservation easements are a useful estate planning tool, Scheidelman teaches that taxpayers need a good appraisal, to know the real value of their property, to avoid costly and embarrassing litigation and owing more money to the IRS. This year, the KC Estate Planning Society heard 2 great papers on conservation easements, which survey the landscape contours of conservation easements and how they fit into estate planning more broadly – this one by Laurie Hamilton and this one by Leah Mueller. (Excellent papers were also presented on special needs trusts and Sharia law and liberating a trust’s capital gains income from the net investment income tax under the Affordable Care Act.)

If my law firm, Johnson Law KC LLC, can help counsel you or your family on conservation easements or other estate planning issues, call (913-707-9220) or email me (steve@johnsonlawkc.com) for a complimentary and convenient consultation.

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

Time for a Vacation Home?

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It’s mid June and (almost officially) summer time. Some people think or dream about vacation homes. The WSJ has this helpful reminder of various questions to be explored if you’re in the market for sharing a vacation home (or any other property) with other people. As one person in the article puts it, “you need a real estate prenuptial.”

Some questions:

(1) Start small – go for a pre-existing, planned community with maintenance and pool included.

(2) How to use the property – time share? rent?

(3) What if one co-owner can’t afford to stay in? How do you buy them out? Rights of first refusal to the other parties?

(4) Who pays for maintenance, repairs, and upkeep?

(5) Use a shared bank account? Put the property into a LLC or trust?

If my law firm, Johnson Law KC LLC, can help counsel you or your family on these issues, call (913-707-9220) or email me (steve@johnsonlawkc.com) for a complimentary and convenient consultation.

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

Collins: Choosing Your Funeral Plan in a Medical DPOA

Posted on by under Elder Law, Estate & Trust Administration, Estate & Trust Litigation, Estate Planning, Financial Powers of Attorney, Kansas, Living Wills, Medical Powers of Attorney, Missouri, Probate, Trusts, Uncategorized, Wills

Thursday I attended a Kansas City Estate Planning Society meeting. The luncheon speaker presented fascinating and thought provoking perspectives on fiduciary litigation. She highlighted the recent Collins decision, which dealt with selecting funeral plans under a Missouri medical durable power of attorney. Look for more posts soon discussing other fiduciary litigation cases in Missouri (and Kansas).

Collins focused on the right of sepulcher, choosing your funeral plans under a medical durable power of attorney. The facts: Betty Jean Collins was diagnosed with cancer, and on June 12, 2012, executed a medical durable power of attorney (with springing powers). (Springing powers only go into effect when your doctor certifies you as disabled or incapacitated. Immediate powers, by contrast, are effective the moment you sign the document.) Importantly, Mrs. Collins did not consult an attorney – she filled out a blank medical durable power of attorney form herself. Four days later, Mrs. Collins was killed instantly in a tragic car accident. Believing Mrs. Collins wanted to be cremated after she passed away, Mrs. Collins’ grand niece, Tina Shoemaker, wanted to have Mrs. Collins’ body cremated and give the remains to Mrs. Collins’ daughters. Mrs. Collins’ medical durable power of attorney had appointed Shoemaker to make this decision. But Mrs. Collins’ daughters went to court in Benton County, Missouri and argued Shoemaker didn’t possess authority to make the decision because Mrs. Collins was never found incapacitated, so the powers hadn’t sprung into effect, but  lay dormant for all of time in the deceased’s document. Mrs. Collins died, but she wasn’t certified as disabled or incapacitated, so the Collins daughters argued her power of attorney document was a worthless scrap of paper. One month later, the Benton County Probate Court sided with Shoemaker and said she had authority to have Mrs. Collins’ body cremated and give the remains to Mrs. Collins’ daughters. But the daughters appealed to the Missouri appellate court in Kansas City. And about 1 year later, the Missouri Court of Appeals reversed the Probate Court and sent shockwaves through the Missouri probate and elder law bar. The Collins Court strictly interpreted Mrs. Collins’ document and noted that while she could have chosen immediate powers, she chose springing powers instead, so since she was never certified as disabled or incapacitated, Shoemaker never had authority to act for Mrs. Collins.

The Missouri Court of Appeals decided Collins on August 6, 2013 per Judge Ellis. In Missouri, the right of sepulcher is “the right to choose and control the burial, cremation, or other final disposition of a dead human body.” Missouri law gives the final decision to the deceased person’s next of kin. And Missouri law defines “next of kin” by degrees of consanguinity (blood relation), similar to intestacy law (dying without a Will). Collins sparked a flurry of debate among the bar. If you’re dead, are you incapacitated? “No,” the Court said. This past week, the Missouri bar released these sample durable power of attorney documents (here for the complete DPOA packet or here, the fillable DPOA), and all Missouri attorneys should ensure their clients’ documents comply with the new provisions. Because of the complexity of these legal issues, Missouri residents should consult with their estate planning attorney to ensure their medical durable powers of attorney reflect their wishes and intent about the right of sepulcher. And if you live in Missouri and do not have estate planning documents in place, do yourself and your family a favor and execute documents at your earliest convenience. Use your freedom to make your own decisions. Don’t leave your estate planning to politicians in Jefferson City.

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) for a complimentary and convenient consultation.
(c) 2014, Stephen M. Johnson, Esq.

Estate Planning in 2014

Posted on by under Asset Protection, Business Succession Planning, Digital Estate Planning, Estate & Trust Administration, Estate & Trust Litigation, Estate Planning, Estate Tax, Family Business, Family Limited Partnerships, Financial Powers of Attorney, Kansas, Living Wills, LLCs, Medical Powers of Attorney, Missouri, Small Business, Trusts, Uncategorized, Wills

Some recent online highlights from the estate planning literature. Steve Akers of Bessemer Trust offers this helpful summary of the Fall 2013 ACTEC meeting. Here’s his take on Heckerling 2014. And Wealth Counsel recently sponsored a Heckerling Nuggets 2014 webcast – slides here. The ABA’s report of Heckerling 2014 is here – part 1 and part 2.

My firm has experience working with individuals and families throughout the business and estate planning processes. I’ve enjoyed working with clients ranging from single young professionals who want to plan for the future to business owners with complex trusts and tens of millions in assets. 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, call me (913-707-9220) or email me (steve@johnsonlawkc.com) for a free, convenient appointment. I want to make business and estate planning simple and straightforward to serve your legal needs and help protect you and your business from lurking liabilities.

(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.

37% of Middle Class Americans Won’t Retire

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So finds this new Wells Fargo survey of Americans with incomes in the $25,000 – 100,000 range.

Among the Wells Fargo survey’s other findings:

  • 34% of Americans expect to work until they’re 80
  • Paying daily bills trumps retirement planning
  • Middle class Americans still feel the Great Recession’s shockwaves, even if economic data says we’re in recovery mode
  • Only 30% of Americans have a retirement plan
  • People in their 30s are most likely to have a retirement plan, but 45% say not enough assets and 25% don’t know how to create a retirement plan

The survey results make for sober reading. Every adult American needs a retirement plan, just like every adult needs health care and an estate plan. Every adult will reach a point in their life when they don’t want, or are physically unable, to keep working. And depending on Social Security, Medicare, and Medicaid for your retirement is (at best) a bad idea. The Big 3 entitlement programs were designed to keep seniors from being destitute – the equivalent Social Security retirement age when FDR signed the law would be a woman in her 80s today. But the Big 3 have big unfunded liabilities, to the tune of $70 trillion+. And we’ve all seen lately how bad Congress is at math and keeping promises. 

At my law firm, Johnson Law KC LLC, we guide clients to proactive retirement planning and regularly counsel clients on reliable, state of the art estate planning techniques to protect clients, spouses, children, grandchildren, and families. We recommend a Roth IRA, as your money grows tax free over your career and you don’t pay income tax when you withdraw money during your retirement. If you don’t have an IRA or other retirement plan, get one. They’re quick, easy, and inexpensive to start. If I can help you and your family with your estate planning needs, call me (913-707-9220) or email me (steve@johnsonlawkc.com) for a convenient, free consultation with my experienced estate planning law firm, Johnson Law KC LLC.

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

The Golden Age of Estate Planning

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The Trusts & Estates website (via Wealth Management.com) has this interesting analysis of America’s current tax laws and estate planning. The highlights:

  • “Every adult should have an estate plan” – you need (1) a will and/or trust, (2) a living will, a (3) durable financial power of attorney, and (4) a medical powers of attorney. Check out Estate Planning 101.
  1. Review your estate plan with your attorney every 3-5 years.
  2. Be alert for changes  – (a) spouse or family member’s death, (b) moving to another state, (c) divorce or remarriage or having children, or (d) becoming disabled or chronically ill – which require estate planning revisions.
  3. What about your executor/trustee, guardians and conservators for your children and/or yourself, and your attorney in fact (your agent)? Have your family dynamics changed since you’ve last done estate planning? Family members died or grown up?
  • Asset Protection – if you’re a professional (lawyer, doctor, accountant, engineer), business owner/serial entrepreneur, or someone who’s likely to be sued, consider an asset protection trust to protect your hard-earned assets from creditors, divorcing spouses, or spendthrift kids. Check out Asset Protection 101.
  • Elder Law – who will pay your bills if you’re in an assisted living or nursing home or develop dementia? Will you qualify for Medicaid, Veteran’s benefits, Social Security disability, or other benefits? Prepaid funeral arrangements? Check out Elder Law 101.
  1. Long term care insurance – how will you pay for assisted living or a nursing home? Many facilities cost up to $3,000-$5,000/month, quickly draining even the wealthiest families, and potentially leaving a spouse or other family members with nothing more than memories.
  • Insurance – do you have insurance to replace income if you become disabled or die suddenly leaving your family? What about paying taxes and debts? Starting the college funds for kids, grandkids, and great grandkids? Leaving money to your church, synagogue, or favorite charity?education funding for younger
  • Retirement income – how do you fund your lifestyle for 20-40 years of retirement?
  1. Social Security – maximizing benefits that you’re paid into
  2. Retirement plans – 401(k)s, IRAs, Roth IRAs
  3. Annuities – a “guaranteed income stream for the life of a retiree”

My law firm, Johnson Law KC LLC, has extensive experience working with families on estate planning, asset protection, and elder law issues. Whether you’ve got $5,000 or $5 million, I’d love to serve your legal needs and give you and your family peace of mind that comes from good planning. Give me a call (913-707-9220) or email me (steve@johnsonlawkc.com) for a convenient, free consultation.

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

New Law Firm Website

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Check out Johnson Law KC LLC’s new website as part of our ongoing commitment to serving you and your family’s estate planning needs, now and in the future. Check us out on your smart phone, iPad, laptop, or computer. Call us (913-707-9220), email (steve@johnsonlawkc.com), or visit our new website for a complimentary 1/2 hour consultation.

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