Question
Why do I need a Will anyway? I am not rich, besides my sister said that I can go on the net and download the forms I need.
Response
Everyone currently has an estate plan. It is either one that you prepare, or one that the State of Alabama has prepared for you. If you prepare your own estate plan, you can set out things that way you want them. If you do not, the State of Alabama will determine your affairs, and it does not know your wishes. Thus, while you do not have to do so, you should strongly consider preparing an estate plan. An estate plan is far more than a Will or a bunch of documents. An estate plan is a process to bring you peace of mind, and a good one addresses both issues of the head and the heart.
An estate plan does not depend upon whether you are “rich”. A person or couple of modest means has legitimate and important planning issues. However, a person or couple with an anticipated estate above a certain dollar amount will need advanced planning with techniques such as irrevocable trusts to address tax issues. Your anticipated estate is likely larger than you think. A lawyer practicing in estate planning can assist you in determining the best plan for you at this stage of your life.
Do not believe for a minute the revocable trust (“Living Trust”) and other Will preparation packages and forms that are advertised on the internet, in the newspaper and in “free” local seminars are a cure-all for proper estate planning and estate taxes. Usually, these are products being pushed and promoted by persons trying to make a fast buck at your expense. Revocable trusts can play a valuable role in your overall estate plan if they are carefully considered along with other alternatives that may be more appropriate.
Question
My friend and I started a catering company together, we agreed to split profits 50/50 and become an LLC like my Dad’s business. Why do I need a lawyer when I already know what type of company I want to be?
Response
There are many important questions to consider and pitfalls to avoid in forming and operating a business. Your company is not the same as your Dad’s company, and most importantly, you are not alone as you are sharing the business with your friend. The nature of the business enterprise, ownership structure and profit allocation are just a few examples of the differences. What will be the amount of involvement in the business for both of you? What will each of you do? Is the contribution between you going to be equal in terms of equipment, money and other assets? Will you have employees? How will business decisions be made and who will make them? What is the resolution process if you both cannot agree? Do you plan to borrow money, and if so, how do you want to structure the debt? What will happen if one of you wants or has to withdraw from the company? What events will trigger such a withdrawal? These are just a sample of the issues and pitfalls to discuss. A business-tax lawyer can assist you in navigating the process and identifying the issues.
Question
My Dad passed away last year and my Mom two years before that. Their tax returns were not filed the last three years, and I keep getting IRS notices because I inherited their home. How can an attorney help in this situation?
Response
First and foremost, you should never attempt to discuss or resolve any issue with the IRS or the Alabama Department of Revenue without the representation of a competent and experienced tax lawyer. Any such issue is very much dependent on facts which cannot be covered in your question. People run scared of the tax authorities for many reasons. When contacted, the process is embarrassing and intimidating by design. Seek help immediately. The longer you wait; the more difficult and expensive it will be to resolve the issue.
We are required by law to pay tax but we are not required to pay one penny more than the law requires. If you do not file a tax return, the IRS will file one for you and claim tax owed on all income it estimates you received. The tax is calculated without any credit or deduction you may have been entitled to claim. A deduction and credit may only be claimed by affirmative election; so if you do not file a return, you cannot elect to claim a deduction or credit. The resulting tax liability can be enormous and will be increased by penalties and interest.
Question
I have a successful business that provides for my wife and children. I do not need a business succession and estate plan. When I die, my wife can run the business until my children are old enough to take it over. Why do I need a lawyer to prepare an estate plan and business succession plan?
Response
Business succession and estate planning for a business owner reconciles matters of the heart and the mind. Your wife and children likely will be more concerned about losing you than running the business. In fact, they likely have little desire or ability to continue it. Many owners assume the family will run the business and its profitability will continue. The issue is never discussed. Tragically and all too often, the family business falls apart quickly and is sold for pennies on the dollar. The Will becomes the starting point to examine other critical issues, including continuity and successorship of the business and conflicts over business policy and leadership; for example, who takes over and whether they will be good business leaders. In addition, there are serious tax and liquidity implications to consider in the event the owner, or another partner with significant ownership interest, was to die.
A good plan for a business owner must go beyond who will inherit what and should consider many issues that include:
- Assuring that there will be liquidity sufficient to pay taxes and debts without having to sell the business or dispose of assets hurriedly on unfavorable terms;
- Restructuring your assets through the use of trusts and other devices so as to maximize wealth retention for heirs or, if you have charitable intentions, to reduce the cost of making charitable gifts to qualified nonprofit organizations;
- Reallocating control over specific business assets by limiting voting power for equity interest holders, separating control from financial interest holders and assuring continuity of the business enterprise through the use of buy-sell agreements that will be triggered in the event of your death or the death of another principal in the business; and
- Ensuring that your wife will be taken care of financially and importantly, that she will not be placed in an awkward predicament of balancing the needs of the business versus accommodating the different needs of, or manipulation by, the children.
Your plan should consider all of the items above in a manner that achieves fairness and good feelings among your heirs, relatives and friends important to you while helping to ensure continuing competent leadership of the business.
Question
Lawyers are expensive. I know how to make contracts and agreements for my business. Besides, I have an old contract I can use as a form on a new deal that just developed. Why do I need a lawyer to advise me or prepare the contract?
Response
In a down economy, it’s very understandable to be cost-conscious. You want that business – you need that business. But if the deal, arrangement or contract is not properly documented with legal assurances and protections, the business you think you landed is no good. You run the significant risk of problems, delays and not receiving the full compensation you are due. Worse yet, you may end up in litigation which will cost you time, money and loss of productivity.
Question
A deed is simple. My title company said it would prepare a deed for my closing at a price cheaper than a lawyer would charge. Why do I need a lawyer to prepare the deed?
Response
If you are preparing to close on a real estate deal with a title company, you are not obligated or required to use the title company or its lawyer if it selects one. You can change title companies. Most importantly, you can choose the lawyer you want to prepare the legal documents. It will require a properly licensed, insured and experienced lawyer to prepare any legal document necessary to the real estate transaction. A reputable title company fully understands this law and risk liability. It will not break the law and accept such liability.