Monday, June 10, 2019

The Family Limited Partnership


Helena S. Mock, Esq.
Estate Planning is a complex area of the law because it deals with so many different issues, from asset protection to taxation and almost everything in between. There are a variety of different legal strategies and tools that have been developed and are regularly used to assist in reducing the value of an estate for estate tax purposes while maintaining control and keeping the assets in the family. 

One of these strategies is the use of the Family Limited Partnership (“FLP”) or Family Limited Liability Company (“FLLC”).  With this strategy, a property owner can give away the underlying equity interest in an asset while still retaining managerial control over that asset.  FLPs are most commonly used as vehicles for making gifts of interests in real estate and family-owned business interests.  With an FLP, you title assets in the name of the FLP and then gift partnership interests in the FLP to others. It is like giving away pieces of a pie. However, because each piece is valued individually, the sum of the parts does not necessarily equal the whole. The fractional ownership of property by multiple individuals allows for the artificial “discounting” of the value of each individual’s share upon their deaths, thereby reducing estate taxes. 

But why are discounts for these interests available? Very simply, it’s because no buyer would pay full price for a fractional interest in a closely-held FLP since profits are shared with the other partners, and the buyer may not have control over how the FLP is managed or when it will be dissolved or the assets sold.  The overall value of the property is only artificially diluted by this process, however, because at any time, the partners can agree to dissolve the FLP, and upon termination of the partnership, the assets almost magically return to their full underlying value.

This can also be a way of giving interests in property to beneficiaries who may not yet have the ability to manage assets wisely.  Since the FLP allows for centralized management, the individual owners of the separate interests have little to no say in management, development, or sale of partnership property. It is also more difficult for creditors to get at the assets when they are in the FLP than if they were held outright by the beneficiaries. In fact, many experts believe this one document has more important lawsuit and asset protection features than any other estate planning strategy. It can be the fortress protecting your hard-earned wealth.

The result of this strategy is that the family’s assets have greater protection from a personal judgment against any family member. If the limited partnership had not been used, all the family’s assets, including the business or property in the FLP, would have been lost. The laws protecting partnership assets from the reach of creditors of individual partners have been around for many years. In fact, these provisions date back to the English Partnership Act of 1890 and were later adopted by the Uniform Partnership Act which has been the law in America since the 1940s.

There is always the possibility that a judge may not like the fact that a legitimate creditor can’t get paid because of the partnership rules and may take it upon himself to find a way to satisfy the judgment. Perhaps in close cases, a judge may rule that the partnership was set up to defraud creditors and thereby ignore the protection. Or the legislature may decide to change the law.  Several years ago, the IRS cracked down on this strategy; however, more recent cases have upheld FLPs as a viable estate planning strategy when they are properly structured and administered.

While FLPs and other advanced planning strategies may not be for everyone, they can be a good tool to minimize estate taxation and maximize asset protection. However, you should seek the advice of an experienced estate planning attorney in determining whether an FLP is appropriate for you and for assistance in setting up and administering the FLP.

Wednesday, April 17, 2019

The Ethical Attorney

Meredith H. Maust
Associate Attorney
If I were to say “ethical attorneys” in front of a group of people, I am likely to hear a joke or two that will, inevitably, conclude with the idea that this phrase is an oxymoron. Oh, the discomfort that comes when I casually remind the jokester that, not only am I an attorney, but not all attorneys are corrupt.

So, you have suspended reality to consider that not all attorneys are corrupt, but the jokes about attorneys exist because there are unethical attorneys out there. You know the type: lawyers who perform unnecessary tasks to create more billable hours from their clients; those who are dishonest and misrepresent the reality of a case to their clients; those who fail to communicate once they have your retainer; and those who seem more focused on representing their personal interests and financial gain rather than those of the clients’. I am not unfamiliar with attorneys who fall into these categories.

Well, if I can admit lawyer jokes have merit, why is it that I am so unwilling and unable to graciously accept the humorous denigration of my chosen profession?

It is as simple as this: a lot of attorneys dedicate their practice to upholding a tradition of integrity, client loyalty, honesty and a commitment to ethical standards. We work hard to fight for our clients, for an outcome that we believe in and we do so without exploiting the system and those whom we represent. 

We work hard to stay true to ourselves, to maintain our ideals and ethical practice of the law. As such, the generalization hurts. Not all lawyers are created equally. Not all doctors deserve a license to practice medicine, not all mechanics are trustworthy and, well, perhaps I should altogether stay away from commenting on politicians at any level. There are bad apples in every lot, in every profession, but that should not affect those of us who take genuine pride in their commitment to providing the best service to those in need.

Ask an attorney why they decided to become a lawyer. The attorneys with whom I associate will provide a genuine response that has nothing to do with making money. Many of us chose this profession to make a difference and to help others. Many of us have personal reasons for choosing our specific practice area.  These are the lawyers that put time and effort into providing individualized service and attention to clients, who maintain ethical standards of practice despite going up against opposition that pays no heed to the regulated codes of conduct to which all lawyers are required to adhere. It takes true commitment to provide zealous representation of our clients without devolving into the lawyer who condones the unprincipled tactics of unethical opposition by choosing to retaliate with similar practices.

I can admit most attorneys are competitive know-it-alls. We are constantly engaging in some sort of challenge or debate. Whether it is over the interpretation of the law or a simple dispute over the facts, attorneys want to be the one with the answers, want to be right, and want to win. The difference is, there are lawyers who will resort to any means necessary to win and those of us who want the win for our client; those of us who believe we can achieve a positive outcome without sacrificing our integrity.

I advise people looking for legal representation to meet with a few different attorneys before retaining counsel. You will be able to tell who is a good fit for you and, by reserving judgment, you will find those of us who are here to help.

Wednesday, March 27, 2019

Losing a Loved One

Helena S. Mock, Esq.
Change is always difficult, but a death in the family can be especially traumatic. It may feel as though the world should stop to mourn your loss, but it doesn’t. The world keeps turning, the day still follows night, people around you continue to go about their normal routines as if nothing has happened.  For those suffering, this can seem callus until you realize that your loss is not theirs.
When the loss of a family member occurs, whether sudden or expected, your world can feel as if it has been turned upside down. This loss is combined with the additional burdens of settling the decedent’s estate.  Thus, it is helpful to have a “to do” list handy so that you do not overlook anything in the panic and grief of the moment. The following is a list of “action items” that will help guide you following the loved one’s passing:
  • In the hours immediately following the death, make sure family members have friends or loved ones with them. Arrange care for any children or adults needing assistance.
  • Call the funeral home and clergy to set up appointments to discuss final arrangements. Before the meeting, be sure to check and see if the decedent left behind any memorial or burial instructions.
  • Obtain several copies of the death certificate, at least 5; you can always get more later.
  • Let people know what has happened. Notify immediate family members and close friends. If the decedent was employed, notify his employer and any important business colleagues.
  • In the days immediately following the death, gather the decedent’s important papers, including the Will or Trust, deeds, bank and brokerage statements, tax returns for 3 years prior to death, all life insurance and/or annuity contracts and retirement plan documents.
  • Schedule an appointment with an experienced estate planning attorney – one who focuses her practice in estate planning. Working with someone who is knowledgeable about estate and tax issues will avoid potential problems. The person named as the executor (“Personal Representative”) or trustee should attend this conference.  The employment of legal counsel is an expense of administration. Failing to retain competent counsel can result in the fiduciary being personally liable to the decedent’s estate.
  • The Trustee and/or Personal Representative will then take over the decedent’s assets and finances and manage them throughout the administration period. Be mindful of the Prudent Investor Rule. Just because the decedent held a certain asset does not mean it is appropriate to maintain that asset in the estate; it might be time to restructure the investments.
  • If the decedent was still working, contact his employee benefits department to begin processing any benefits that are due. They will likely need an original death certificate.
  • Contact the local Social Security office. If the decedent was married, his spouse may be eligible for benefits. A disabled child of the decedent may also be eligible for benefits.
  • If there was any life insurance, determine the beneficiaries.  Only the beneficiaries can claim any death benefits (the insurance company will usually refuse to speak with anyone other than the beneficiary.)  Each insurance company will require an original death certificate in order to process the claim.
  • If the decedent was ever in the military, contact the Veterans Administration to see if surviving family members are eligible for any benefits due to the death.
  • Keep a record of any expenses you or anyone else pays on behalf of the estate (funeral expenses, qualification fees, etc.) for purposes of reimbursement and possible deductions on the estate or trust tax returns.  Do not pay any debts until you are sure the estate is solvent enough to be able to pay all debts.
  • Inventory the decedent’s assets and note how each asset is titled (individually, joint with someone else, in trust, etc.).
  • File the decedent’s final personal income tax return (IRS form 1040) and corresponding state income tax return, if any, by April 15th of the year following the year of death.  A tax return for the estate and/or trust will also be due but may be filed on either a calendar or fiscal year. Consult with your attorney to determine which is best.
  • Do not change the title to assets, claim any benefits, or roll-over any retirement accounts without consulting with your estate attorney. Changing a title can have unexpected income, estate, and property tax consequences.
The process of administration of a loved one’s trust or estate is complicated considerably by emotion. In addition, there can be difficult and complex family and financial issues that arise during this time. However, there are resources available to help you navigate through the rough waters.  Most important, don’t delay. Although normally there is nothing that needs to be done immediately, delaying too long can cause problems which may be difficult or impossible to fix later.

Wednesday, February 6, 2019

Lacie

Barbara K. Armstrong
Senior Paralegal
My husband and I adopted our sweet beagle, Lacie, over 12 years ago.  We fell in love with her picture first and when she met us, she put her little head in my husband’s lap and that was all it took.   She was coming home with us.

As the years have gone by, Lacie has seen it all.  She’s seen our children grow up and move out of the home.  She has witnessed a couple of marriages in our backyard, not to mention plenty of cookouts with friends and family.  She has seen new little faces added to the family.  She’s been so much a part of our family that it goes without saying that everyone loves her and looks for her when they come over if she hasn’t already come to greet them.

Recently, I noticed Lacie was behaving strangely.  She was having trouble walking, which at first, I thought was due to her nails needing a fresh cut. But as the morning wore on, she was walking in and out of the house and she was very restless.  I realized something was truly wrong when she had her nose poked out the door, not moving and her eyes were moving side to side at an alarming rate.   I had to take her to the vet.

The vet came in and with the initial exam said it was most likely vertigo or vestibular disease due to an inner ear infection.  She was given a couple of shots, ear medicine and put on motion sickness medication and sent home.  

The next few days were rough as we had to carry her everywhere.  After about a week she became more confident in her walking and we have been able to take her for short walks in the neighborhood.  We thought that she would come through this with little to no complication.  

Well, we discovered that she is now completely deaf.  Poor thing!  This was a realization that Lacie will not be around forever.   We obviously knew she wouldn’t but the years go by so fast and before you know it, you have a senior in the family.

As our Lacie gets older, we know that one day she won’t be with us anymore and that there will be a big empty place in our hearts.   Anyone that loves a pet knows that they are a part of the family and their loss is great.  For now, we will enjoy our girl for as long as we can until we know we cannot anymore

Friday, January 4, 2019

The Rise of The Green Burial

Elizabeth D. Johnson
Paralegal
Imagine taking a walk through a garden or forest, admiring the wildlife, flora, and fauna. Maybe there is a lake or stream that you can sit by and collect your thoughts while absorbing the natural beauty around you. Now imagine that this place you’re in is a cemetery. Hybrid, natural, and conservation burial grounds are popping up all over the country, focusing on green alternatives to the burial and funeral process. The Green Burial Council describes green or natural burial as a way of caring for the dead with minimal environmental impact that aids in the conservation of natural resources, reduction of carbon emissions, and the restoration or preservation of habitat. It is also a way of reconnecting with and having our final purpose be giving life back to the earth.

Funerals in the United States are the most resource intensive in the world, with 53 million gallons of toxic embalming fluid being buried every year. Most people believe the way to combat this is to be cremated, however, the cremation process consumes fossil fuels and releases more than 23 million pounds of CO2 into the atmosphere annually. While just having yourself or a loved one cremated seems small in the grand scheme of things, about 40% of Americans receive cremation. Among the most significant noxious emissions produced by cremation are carbon dioxide, hydrogen chloride, carbon monoxide, mercury, and of course, formaldehyde.

For those who would still rather have a more common funeral service including an open casket and the works, there are now formaldehyde-free embalming fluids and some are made entirely of nontoxic and biodegradable essential oils. Aside from formaldehyde being bad for the earth, the National Cancer Institute released in 2009 that funeral directors and embalmers have a much higher incidence of myeloid leukemia and cancers of the brain and colon.

Green burials may seem like a radical idea but they actually share many similarities with Muslim and Jewish traditions – no embalming, the body is usually laid to rest within a 24-hour period, and the body is touching the earth. They also involve the use of a shroud or a nontoxic, biodegradable casket.  During the 18th and 19th Centuries, burials in the U.S. involved, at most, a pine casket and a plot of land. The “green death movement” essentially takes us back to those practices, when we were more connected to death and the land - a true “ashes to ashes, dust to dust, earth to earth” burial.

If none of the reasons above are resounding enough to think about a green burial for yourself, there’s always the cost difference. Typical funerals cost between $7,500 and $10,000 and cremations cost around $2,000 – not including the service and any other bells and whistles.  The price of a burial plot at a green cemetery, including a marker, ranges from $800 to $3,500, with some of that cost going toward conservation and restoration. Some people also opt for a home funeral (being buried on your land), which is allowed by almost all counties, but most require a minimum number of acres and the filing of a plat map with the local planning department.

In this day and age, there are tons of things to consider about your life and your death. It seems like there are a thousand decisions to make and add-ons for everything that you want to do, whether buying a car or planning your own funeral.  Perhaps a green burial will allow you to take solace in knowing that your final act is providing nourishment for the earth and conserving what we have left for the people you leave behind.

For more information on green burials, go to:



Organizing your Digital Footprint in the New Year

Valerie M. Hollar, Paralegal
Happy New Year! I don’t know about you, but I always look to the start of a new year as a way to get organized in some area of my life. Just like you organize your closet or your cabinets, your digital assets also need to be organized. It seems like there are online accounts for just about anything these days. From banking, social media, networking, etc., there literally are online accounts for everything. Do you have a list of all of your online accounts and passwords? More times than not, the online account host has rules pertaining to a decedent’s account, and the powers granted in your estate planning documents do not always allow your agents to manage or close these accounts upon your death. The following article will give you a little more insight.

Digital assets are any type of personal property which are stored in digital form, such as photographs, word or pdf documents, financial information, email accounts, business accounts, banking accounts, domain names, blogs, web pages, social media accounts, loyalty program benefits, online storage accounts, online purchasing accounts, online sales accounts, etc.  Such information can only be accessed through computers, smartphones, tablets, etc., and is normally password protected. 

So, what happens to this information if you become disabled or when you die?  Some accounts are eventually closed for inactivity, but others stay open until directed to be closed by someone having the appropriate authority.  It is this question of authority that causes problems for family members and fiduciaries. Many online organizations have put rules into place for accessing the digital information of a decedent.  This article explains some of the established processes and suggests that every estate plan contain a strategy for dealing with digital assets, including the appointment of a digital executor to handle these assets.

Virginia defines a digital asset as an electronic record in which an individual has a right or interest. Article 3.1 of the Virginia Code is the Uniform Fiduciary Access to Digital Assets Act which describes how to protect your digital accounts after you pass away. This Article was established in July 2017 and provides your trustee, personal representative, or agent under a power of attorney is allowed to manage your digital assets and can restrict said fiduciary from accessing your electronic communications, including emails and texts, unless otherwise specified in your estate planning documents.  The prior governing act, The Privacy Expectation Afterlife and Choices Act, brought the issue of different state’s laws into play since every company is tied to a particular state. The new act now applies to the owner of a digital asset if they reside in the Commonwealth of Virginia or did when they died.

The paragraphs that follow detail several popular digital account holding websites that you may have accounts with. As you will see, each of these organizations has certain criteria for accessing a decedent’s account. This list does not list every online digital asset holding account that currently exists, but it does serve as a good starting point for you to think about in terms of your digital footprint.

Google (Gmail, YouTube, Google+)

Google has what is called an Inactive Account Manager, which is a way to either share or delete your account after a set period of inactivity.  You set a timeout period, after which time of inactivity on your account, any trusted contacts will be notified, given an option to share data, and your account will be permanently deleted.  If you fail to set up your Inactive Account Manager before your passing, members of your family can request the contents of your account, but there is no guarantee that they will actually get them. By providing proof of kinship, a death certificate, and possibly a court order (i.e. certificate of qualification on the decedent’s estate), Google will review whether or not to release the contents of your account. 

Yahoo

Similar to Google, Yahoo will not give anyone access to the account.  It does provide an option for closing a decedent’s account. A letter containing the request and the account name (email address), a death certificate, and a copy of a document appointing the requesting party as the personal representative or executor of the estate of the deceased are required to close the account.

Microsoft (Hotmail.com, Live.com, Windowslive.com, MSN.com)

Microsoft will release contents of emails, attachments, address book and messenger contact list to the next of kin of a deceased or incapacitated account holder following a short authentication process, but it will not provide any passwords or access to the account.  A death certificate or certified document stating the user is incapacitated, a certified document proving kinship, and a photocopy of a government issued photo ID of a family member are required. Microsoft will not provide this support for SkyDrive, MSN Dial-up or Xbox Live.

America Online

 AOL will not release the contents of any account to anyone, but it is possible to transfer ownership to another AOL Username already listed on the account.  The next of kin can change the payment information online through My Account Settings, using the deceased person’s Username and Password.  AOL Customer Service will provide this information if needed. 

Apple iCloud (Mac.com, Me.com)

Apple has no right of survivorship, which means that rights to Apple ID or content within an account are non-transferable.  Next of kin may provide a death certificate, in which case the account will be terminated and all content will be deleted.

Facebook

 Your Facebook account can be handled one of two ways, either the account can be memorialized or it can be deleted.  Either option can be chosen by the user before death.  For either option, after death, a family member needs to fill out an online form with a link to either an obituary or news report confirming the death.  When an account is memorialized, all sensitive information including contact information and addresses are removed, as well as status updates.  The profile settings are changed so that only friends can find the profile and post information to the user’s wall.  Login information will be deactivated, preventing anyone from accessing the account.

Twitter

Twitter will not release any passwords or information about an account, but the account can be deactivated with proper documentation.  The Username of the deceased user’s Twitter account, a copy of the death certificate, a copy of a government-issued ID, and a signed statement including contact information and relationship to the deceased user is required to request deactivation.

Instagram

Like Facebook, an Instagram account can either be memorialized or deleted.  A family member must provide a death certificate and proof of authority as a representative of the estate.  Memorialized accounts cannot be changed in any way, but posts the deceased person shared stay on Instagram and are visible to the audience they were shared with.  Instagram does not allow anyone to log into a memorialized account.

Cell-Phone Carriers

Cell phone providers make the process of closing accounts of their deceased account holders a bit easier. Most, including AT&T, Verizon, T-Mobile, and Sprint, require account holders’ names, in some cases social security numbers, phone number and death certificates to terminate the decedent’s account. Most will also waive the account termination fees for deceased account holders. Check with your individual carrier for specific guidelines.

Take a moment to think about all of your online accounts. You probably have numerous usernames and passwords for different accounts that probably change with some regularity. You may be apprehensive about keeping a list of all of these accounts and passwords in one place for fear of a security threat. Beginning in May 2012, the U.S. Government started encouraging people to create social media wills in which a person would name an Online Executor to close online accounts, social media profiles, email accounts, etc. after death. 

This information should not be contained in your actual will because when your will undergoes probate after your death, the information contained within it becomes public record. It is recommended that you make a list of all of your personal accounts, usernames, and passwords and state how you would like each handled upon your passing.  This list should be kept with your original will or trust so it can be found upon your incapacity or death.  For your security, this list should not be given to anyone prior to your incapacity or death, but it is important to advise the person you have named as your Online Executor as to where this list can be found. When you’re thinking about who to give this title to, keep in mind it may be easier for the trustee of your trust, or personal representative, etc., to take on this role. Finally, this list should be reviewed and updated at least every six months because, as we all know, accounts and passwords change regularly.  The list is only beneficial if it contains the most relevant and up to date information.

In lieu of making the list discussed previously, there are a few websites which can store account information and passwords for you securely.  Some of these include passwordbox.com, everplans.com, and planneddeparture.com. These sites are set up to store all passwords to any of your online accounts.  You then select a Digital Estate Executor, who should be a trusted person, to receive access to your accounts upon passing.  Once your Digital Estate Executor has contacted the site and provided proof of your passing, all of your passwords will be released to that person, with details on how you want each account handled. Some digital companies, such as PSN, Snapchat, and Tinder, do not have options for account management after passing so it would be a good idea to leave instructions on how you want those accounts managed.  Keep in mind that it could be a violation of the Terms of Service Agreement for someone else to access your account, even with written consent.  So, read the various Terms of Service Agreements for each company and stay up to date on their policies.

What happens to your social media accounts after you die is something that is usually overlooked.  Like with anything else, having a plan in place is the key to making things easier on your agent, personal representative, trustee, and/or family members by providing the information that person will need to access and/or close your digital accounts upon incapacity or death.  If we can provide any additional information on this issue or assist you in appointing your Online Executor, please contact us. I wish you a new year full of prosperity, happiness, and organization!