The State of Your Estate!

EstateAn “estate”, what’s that?  An estate is the sum of a particular person’s assets. This includes legal rights, interests in property, and money, minus all liabilities. The term “estate” is commonly used in reference to what a person owns when they pass away and subsequently, what happens to those things.

If a person does not have anything in place designating where their estate is to go upon death, that person is considered to have died intestate and a court will determine who your estate will go to. Estate planning allows you to designate the person(s) your estate will go to after your death. If a person dies with an estate plan, that person is said to have died testate. Regardless of whether a person dies testate or intestate, the personal representative or administrator (the person in charge of distributing the estate) will necessarily have to go through probate to ultimately distribute the estate.

Each state has intestacy laws that designate the distribution of an intestate estate when such an estate goes through probate. However, as mentioned above, it is not necessary to leave the fate of your estate up to laws that don’t take into account the intricacies of your life. There are many different ways to approach estate planning based on the size of the estate, the particular wishes of the person, and family circumstances.  However, for a small estate, a basic estate plan should include, at the minimum, three important components:

1. Will. A will allows you to ensure that your belongings will go to the desired beneficiaries. Additionally, if you have minor children or are considering having children, you are able to choose a person to act as guardian over your children in the event of your death. A note that probate is still required to validate the will, but the presence of a will often speeds up the probate process considerably.

2. Durable Power of Attorney. A durable power of attorney allows you to assign a person to act on your behalf in the event of your disability. This person, as your agent, would have the power to make legal decisions as if he/she were you.

3. Advanced Healthcare Directive. In an Advanced Healthcare Directive, you are able to designate the person that you wish to make your healthcare decisions for you when you are unable to make those decisions for yourself. Additionally, you are able to record your healthcare wishes.

A basic estate plan will not be adequate for some estates. For instance, larger estates may benefit from a trust,  of which benefits have been written about in earlier blog posts.

If you would like to discuss the benefits of planning your estate in more detail, please contact us. We can assist you in deciding how to best effectuate your wishes!

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You’re a Trustee. . . good luck with that!

Okay, it mighresponsibility-750t not be quite that bad.  But, if you have accepted or inherited the responsibility of “trustee” of a trust, you have very specific responsibilities.  By definition, trustees are people “entrusted” with the ownership of assets that they must protect and distribute based on a trust contract document.  Additionally, Utah law establishes specific duties that every trustee must fulfill. For example, a trustee must be impartial to the beneficiaries, must be loyal in complying with the trust document, and must not do anything that would improperly benefit himself. If the trustee does not diligently and competently protect the assets, distribute the assets as required, and fulfill his or her statutory duties, the trustee may have personal liability to the beneficiaries of the trust for any resulting loss. If you find yourself acting as trustee you must understand what the trust document and state law require of you. At Hastings Law we can help you understand, navigate, and successful fulfill your trusteeship responsibilities.

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Small Business . . . Not Small Potatoes

potatoesMany people dream of owning their own business . . . and it’s a good thing.  According to to the Bureau of Labor and Statistics small businesses (defined as those with 1-49 employees) typically accounts for just as much U.S. job growth as large business (those with 5o0 or more employees).

The challenge for most would-be entrepreneurs is that they have no idea where to begin when it comes to starting a new business.  If you are thinking of starting your own business, here are five basic topics you should consider:

  1. Business Idea.  Of course, you need to have an idea about what business you want to be engaged in.  The ideas doesn’t need to be earth-shattering or absolutely original, most ideas aren’t.  However, you do need to understand what product or service you want to offer and who your target market is.  Additionally, you need to develop and understanding of the cost to provide the product or service and whether your model can produce a profit.  Try putting your idea on paper.  If you struggle explaining your idea in writing, you need to develop it further.
  2. Entity.  Choosing how you want to organize your company is an important initial step.   Two common entity types are the corporation or the limited liability company.  Both provide liability protection and an organized structure for your company.
  3. Funding.  Acquiring funding is always a concern when starting a new business.  You will need to identify what the up front costs are and where the funding will come from.  Typical sources include personal savings, loans from family members, bank loans, or contributions from limited partners or preferred stockholders.
  4. Company Accounts.  When you set up an entity you will need to acquire an Taxpayer Identification Number.  Use this number to set up company bank accounts and have a strict policy that all company revenues and expenses be paid out of company accounts.  Nothing leads to business failure faster than failing to control the revenues as they start rolling in.
  5. Payroll.  If your business plan requires employees, you must bone up on the basic rules and regulations relating to employers.  In general, you must treat employees fairly, pay them on a regular basis, pay workers compensation insurance premiums, pay unemployment taxes, and remit payroll taxes and withholding to both the state and federal governments.  If you are new to payroll, it is advisable to hire a payroll processing company or other expert to assist you.  Making mistakes with payroll can create large liabilities for your new company.

Being a business owner is challenging and exhilarating.  By offering the right product, utilizing the right procedures, and hiring the right people your chances of success will greatly improve.  Good luck!

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What’s in a Name?

imagesName recognition is a value thing.  Just ask Google or Apple.  Although your business may not be quite the size of these behemoths, you still could benefit from protecting your business name, logo, or tag lines by registering them as a trademark with the United States Patent and Trademark Office (“USPTO”).

A trademark can be a word, phrase, symbol, color, or shape that distinguishes your products from those of other businesses.   A trademark can even be a sound or a smell.  The key component is that the mark must be able to identify your business as the source of origin for your products or services.

Trademarks do not need to be registered with the USPTO to be protected.  Some protection is granted merely by being the first to use the trademark in commerce, so long as the use remains continual.  Owners of unregistered marks can use the symbol ™ next to their mark to put others on notice that the item is considered a trademark.  However, federal registration provides more comprehensive protection.  For example, federal registration establishes nationwide protection from the date of the application.  Without registration, your protection may be limited to the geographical area in which you are currently using your mark.   Federal registration provides more comprehensive notice to others, thus discouraging the introduction of confusingly similar marks.  Also, federal registration allows you to use the more prestigious ® symbol next to your mark.

If you think federal registration is right for you and your company, please contact us.  We can help you determine if your application is likely to be approved and, if so, help you through the application process!

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Change is Good . . . You Go First!

change-architect-sign1If you are a member or manager of a Utah limited liability company (“LLC”) that was formed on or before December 31, 2013, changes are headed your way.  In 2013 Utah enacted the Revised Utah Limited Liability Company Act effective January 1, 2014.  However, LLC’s organized before the effective date remain subject to the old LLC Act unless they elected to be governed by new New Act.  That is, until January 1, 2016.  This coming January 1st all LLC’s in Utah will be subject to the new New Act.  Following is a brief explanation of some of the most important changes:

  1. Duty of Loyalty.  Under the Old Act it was unclear if Members and Managers of an LLC owed each other a duty of loyalty.  The duty of loyalty provides that owners or managers of a company owe a duty not to take for themselves opportunities that the company would reasonably take advantage of.  The New Act expressly provides that Members and Managers of a Utah LLC owe each other the duty of loyalty.
  2. Oral Operating Agreements.  The Old Act did not provide for oral operating agreements.  Consequently, if an LLC did not have a written operating agreement, the LLC was governed by statutory defaults that often lead to unintended ownership interests.  The New Act allows for oral and implied operating agreements with the aim of reflecting the intentions of the Members even in the absence of a written operating agreement.  Of course, recognition of oral or implied operating agreements introduces more uncertainty in the LLC’s operation.  Therefore, it is best for all LLC’s to adopt a written operating agreement.
  3. Indemnification.  The New Act provides default indemnification to Members and Managers from liability for acts or payments made on behalf of the LLC so long as they not acting outside their duty of care, loyalty, and good faith.  Under the Old Act indemnification was optional.
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Don’t be Disregarded

imagesLimited liability companies (“LLC’s”) have become a popular business entity, providing liability protection to its members, nearly identical to that of a corporation, while at the same time providing more flexibility and less formality than typically exists in the corporate form.

One thing that many LLC owners are not aware of is that, for tax purposes, the IRS default is to treat multi-member LLC’s as a partnership.  However, if the LLC has only a single member there is no partner, and therefore no partnership.  In such cases the IRS treats the LLC as a “disregarded entity” and the income from the LLC is treated as self employment income and is reported on the members personal tax return as such.  Being treated as a disregarded entity can create negative income tax implication because self employment income is subject to self employment tax in addition to income tax.

As an alternative, the LLC can elect to be taxed as a corporation.  The advantage of electing corporate tax treatment is that the LLC can pay it’s member a reasonable wage.  The wage is subject to the equivalent of self employment tax, but any remaining profits would not be considered self-employment income, and therefore not be subject to self employment tax.

An LLC can elect corporate tax treatment by filing IRS From 8832.  If you desire to be treated as an S Corporation, you will also need to timely file IRS Form 2553.  If you own a single member LLC, talk to your legal counsel to determine if electing corporate tax treatment is appropriate in your circumstances.

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To Trust or Not to Trust

TrustA Trust is an arrangement in which a Trustee is given legal title to property for the benefit of designated beneficiaries.  Trusts can be useful estate planning tools and are increasingly being used even in estates of moderate size.

While determining if a Trust will be beneficial in a person’s estate plan requires a detailed review of the person’s assets, liabilities, family situation, and estate planning goals, here are some of the typical advantages of using a Trust:

  1. Avoid Probate.  Probate is the judicial process of proving that a will is legitimate and distributing a persons assets accordingly.  Probate can be expensive and time consuming.  Assets placed in a Trust during a person’s lifetime are not considered part of a person’s estate when she dies, and therefore, are not subject to probate.
  2. Privacy.  Probate proceedings are generally a matter of public record while Trusts are private arrangements between the grantor, the trustee, and the beneficiaries.  By using a Trust a person can maintain privacy regarding their assets and who they are distributed to.
  3. Flexibility.  A Trust can be specifically tailored to a person’s wishes, so long as they are not illegal or against public policy.  As such, Trusts can accommodate unique or difficult family dynamics.  Additionally, Trusts can establish charitable foundations that can last for extended periods of time.
  4. Tax Savings.  For estates larger than $5.25M, Trusts may provide a tax savings function.
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