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Feature Article: I'm Not Rich - Why Do I Need A Will?
The Art of the Business Deal: The Legal Perspective
Feature Article: I'm Not Rich - Why Do I Need A Will?
One of Congress' presents to the American public in 2001 was the expansion of the "estate tax exemption" to, in 2002, $1,000,000. since this is probably money for which you would have already paid income tax, it has never seemed exactly fair that you also had to pay another tax on it just for the privilege of leaving it to your children. But that's an argument for another time. Suffice to say that we are all very grateful for this "exemption expansion"!
There is also, at least on paper, the continued expansion of the exemption, leading to the elimination of the estate tax for the year 2010. Unfortunately, no one connected with the estate planning industry to whom we have spoken, truly believes that Congress will allow the complete elimination of estate taxes. This concept looked good in an election year, but it is a "revenue losing" proposition and future congresses are extremely likely to modify it. But that, too, we'll save for a later time.
The current question is, if my estate is less than one million dollars, why bother with a Will?
There are actually a few circumstances where you might not want to bother getting a Will. If you are married, have no children by this spouse or a former marriage, have less than $1,000,000 in assets between you, and own all property and accounts jointly, then, at the death of the first spouse, the lack of a Will will not be detrimental.
If you have already created a Living Trust and transferred all your assets to that trust, and are careful to continue to do so for the rest of your life or to acquire all future assets in joint names with right of survivorship, then you might not need a Will. (Interestingly, you might already have spent more on this Living Trust than you would on a Will - and clearly, you'll have to remain more alert about what you own and how it is titled.)
For almost every other situation, the intentional avoidance of making a Will - makes no sense!
"Avoiding Probate" is meaningless in Georgia. The trouble and expense of appointing and Administrator for an intestate estate (no Will) is equal to or greater than the comparable cost to probate your Will, particularly if any of the assets are in real estate held other than as joint tenants with right of survivorship.
Keeping your nosey relatives from knowing what you had is also a non-concern. A well-drafted Will describes categories of assets, not specific dollar amounts or descriptions of personal possessions. We might leave your son your "stock account." We won't talk about your "three million shares of Coca Cola and your meager 5,000 shares of Berkshire Hathaway." And we could leave your daughter your "jewelry," without details.
It is very common for clients to tell me that they need a "simple" Will. What they mean is for me to keep the cost down. A "simple" Will takes an estate that is under the exemption amount (currently $1,000,000) and leaves everything to your spouse and then equally to grown children. If you are lucky enough to have more than $1 million, there are additional things that need to be done. If you have minor children or someone with extra medical needs, your estate plan needs personalizing. With a Will that includes a trust, you can set up a payout scheme for college or medical needs or whatever you want, without turning over large sums to young people without financial supervision. If you or your spouse have children by a former marriage; if you both have substantial assets; if one or both are due to inherit from elderly parents, then you need estate planning - not a simple Will.
Let's ask these questions: in adding up your assets, did you remember to include the face value of all life insurance? Do you have any retirement accounts (401K or IRA)? Have you checked the beneficiary designation lately? Do you understand the income tax consequences of those beneficiary designations? Do you have assets between you and your spouse that add up to something above $1,000,000, but less than $2,000,000 and therefore assume that no estate tax will catch either one of you? Remember that although the first spouse has an unlimited marital deduction, the second does not. Without some planning, the two $1 million exemptions may not be able to both be used to shelter the full $2 million.
The point of all these questions is that very few people ought to think that not having a session with a qualified estate planning attorney is really going to save you any money. And most of us are happy to give a free consultation. Not having a Will is, quite frankly, silly! Not having someone look at your situation and advise you - is short-sighted at best. Remember what they say about death and taxes? Well, we actually can do something about the tax part! If you'll just ask.
The Art of the Business Deal: The Legal Perspective
The interesting thing about the lawyer's involvement in a business transaction is that generally, by the time the lawyer is called, the "deal" is done. By this I mean that the two principals, the buyer and seller, the employer and employee, the heads of the two companies, have already said to each other, "let's do this deal!" They have decided it would be good if one sold the other his business or if one came to work for the other. They have decided it would be good if they did business together.
So, one or both call in their lawyer. What then is our role? For me, that role is to facilitate the deal - to make it happen - to help those two or more parties accomplish what they already told me they wanted to accomplish. I need to "protect" my client, but I do not need to unnecessarily complicate this process. I do not need to "over-lawyer" this deal to the point where both sides are now mad at each other or mistrustful of each other. And unless my client has completely missed some major drawback to this proposed agreement - I certainly do not need to cause it to fail.
That seems to me a very simple concept, but one that is surprisingly lost on some well-meaning business lawyers. All too often, the need to "win" on this point or that seems to drive the deal into protracted negotiations. That simple decision that the principals made while they were having coffee or playing golf and which they scribbled on the back of a paper napkin has become a war of right-meaning, tough-negotiating, high-priced lawyers, who - in the name of protecting their clients - have completely lost site of the original goal. Of course, it isn't always this way - and frankly it rarely needs to be this way.
The major points of the agreement have been decided. The client probably didn't call me until then. What I believe he wants now is for me to fill in the details and make it happen. If the "deal" involves the purchase and sale of a business, I'll point out the tax ramifications of structuring it one way or another. I'll explain the liability exposures. I'll counsel him about the long-term implications of something he may have glossed over.
For example, will the sale be of assets or corporate stock? If you purchase assets, (inventory, fixtures, equipment, receivables, work in progress) and perhaps a license to use the name of the business, you get exactly what's on the Asset List. When you buy the corporate stock, you get the assets, and you get the liabilities - those that the seller or someone has listed, but also the hidden liabilities - things that haven't been filed yet, like mechanics or materialman's liens, tax liens, potential lawsuits for which the statute of limitations has not run. But some sellers want to completely unload the business and some buyers want the corporate stock for various reasons. Where the lawyer comes in is in explaining the relevant situations that will exist in either transaction and making sure the client is getting what he expected - including promises to make him whole if he gets something he didn't expect.
If the "deal" is simply an employment agreement, there are other questions that need to be explored. The employer and employee probably agreed on the hiring and the salary. The details can make or break the agreement. As lawyers, we shouldn't let it get to that point. For example, the employer wants a lifetime restrictive covenant. The employee wants none. My place is to explain what the law in our State usually allows and to show my client that if we look at what's really important to the respective parties, and what's fair, the deal will get done.
Often the question comes up, "whose lawyer should do the first draft of the agreement?" since at this stage the two principals are probably paying their own expenses, the client probably thinks he will save money if the other guy's lawyer does the initial paperwork. My experience is that that arrangement is frequently not the best for my client. Two main reasons stand out. First, you will come closer to getting the deal on paper as you remember it, if your lawyer does the first draft. And second, you will probably spend less money with your lawyer if he is the initial "drafter" rather than the "reviewer". The first draft should be in your words and in words your lawyer understands and picks carefully with your overall intentions in mind. If I am in the role of "reviewing" rather than "drafting", I will spend more time and look more closely at each nuance in the agreement. I must try to understand the meanings and the hidden meanings of what is put before me. Because I have already explained that I don't want to over-lawyer this deal and destroy the good feelings that the principals brought to the table, I will try not to completely re-write the other lawyers' draft. My client and I will immediately be in the position of accepting little things and protecting the bigger issues. In the long run, I recommend that you start the process. I believe you will come closer to the deal you first envisioned and will be no worse off with your bill for legal services.
Sometimes, there are deals that shouldn't be done; that aren't as good for the client as he might have imagined. My role may even be to point out to my client why he should consider giving in on a small issue to save a larger concept. I have been both a business lawyer and a business owner and have some unique perspectives on these transactions. But I believe my role is to explain and to counsel - not to substitute my opinions or personalities for those of my principal. In the end, it's always the client's call. My own sense of winning or fear of losing has no place in this deal. Winning is when both sides walk away feeling good. Losing is anything else.