Month: July 2013

A Last Resort: Alternatives to Disinheritance

Parents have many reasons for disinheriting a child. But disinheriting can lead to unintended consequences, including family tension or even a court battle. The decision to disinherit a child is entirely up to you, but before you do, there may be alternatives to consider.

One reason parents choose not to leave anything to a child is because the child is financially irresponsible. It’s certainly an understandable concern. Fortunately, there’s also a solution: a trust with a responsible trustee. A trust allows you to leave your child with a means of support and protect them from themselves.

Some parents leave nothing to a child because they’ve been told that an inheritance would mean the child no longer qualifies for particular government benefits. The problem with this approach is that those benefits may not be enough. Again, the solution is a trust. Done right, a trust will add to the child’s resources rather than replacing government benefits.

A more complicated issue is when one child doesn’t seem to need an inheritance. Disinheriting is permanent and the child’s situation might change. It can also make the child feel unloved or resentful. If you still think disinheritance is necessary, explain your reasons to your child. You should also consider leaving them items of personal, rather than financial, value. That way they still feel included in the family and can understand where you’re coming from.

Ultimately you can leave your estate—or not leave it—to anyone you wish. But before you make a permanent decision to disinherit a child, consider all your options. That way you can avoid unnecessary tension and truly meet your estate planning goals.

Expanding Your Business With Business Certifications

Both government and private organizations offer businesses multiple ways to “certify” their business as a particular type. Common certifications include small business, woman-owned, minority-owned, and disabled veteran-owned. But what do those certifications mean and is it worth looking into certifying your business?

There are two main reasons businesses choose to get certified. The first is that government agencies and even some private companies offer business opportunities to particular types of businesses. A good example is that many state agencies set aside a certain number of contracts for small businesses certified with the U.S. Small Business Administration.

Another reason to get certified is marketing. A business targeting women might attract more customers if they can advertise as a certified woman-owned business. Similarly, many customers will appreciate knowing that they’re supporting small or veteran-owned businesses.

Before deciding to certify your business, it’s a good idea to do your homework. First, make sure you qualify. Second, specific business opportunities may require you to be certified by a particular organization (like a national organization rather than a state government). Finally, research the certification process. Some certifications may be fairly simple and ask for limited information. Others require you to follow a lot of steps, including an on-site visit, and can take a while to complete.

Certifying your business can be a great way to market your business or access new opportunities. Our attorneys can help you decide if it’s the right choice for your business and walk you through the process.

Piercing the Corporate Veil: How to Avoid Losing Your Corporate Protection

Ask any business owner why they incorporated their business and one of the reasons they’ll give is “to protect myself from business liabilities.” But incorporating doesn’t mean you can never be held personally liable. Although it’s rare, courts sometimes ignore the legal protection of a corporation to hold an owner personally liable (a process called “piercing the corporate veil”).

The good news is there are steps you can take to avoid having a court pierce the corporate veil. Piercing happens when the court decides that you, as a business owner, haven’t really treated the corporation as a separate entity. In Wisconsin, the same theory applies to LLCs and their members as well. Essentially, the courts are saying that if you want the protection of incorporating, you have to follow corporation rules.

To avoid piercing:

  • Always follow corporate formalities, like holding annual meetings, keeping minutes and filing with the state on time
  • Never mix corporate assets with your personal ones (or those of another corporation or LLC)
  • When setting up your business, make sure it’s adequately funded. Courts are more willing to pierce an “undercapitalized” business
  • Always identify your business as a corporation or LLC so customers and creditors are on notice that your business has limited liability. Also identify your title so they know you’re acting on the business’ behalf
  • Never use your business to engage in illegal, fraudulent or reckless activities (and get the advice of an experienced business attorney if you aren’t sure)

Having a court pierce your business’s veil can be devastating for you as an owner. But by following the rules, you won’t give the courts a reason to pierce. That way you and your business can take advantage of the protections offered by corporations and LLCs.

The Pitfalls of P.O.D. Accounts

We all hope to have someone help us in our old age. Many of us might also plan to thank that caregiver by leaving them a larger gift than originally intended. Rather than redo an entire estate plan, however, some people turn to the easy and inexpensive option of making a caregiver the beneficiary of a particular account (such as savings) using a payable on death (P.O.D.) designation.

Unfortunately, a P.O.D. account is especially vulnerable to attack by the people who otherwise would’ve received the account. They often claim “undue influence”—that the caregiver wrongly influenced the account owner’s decision. Even worse, Wisconsin law doesn’t allow the caregiver to testify about the owner’s actual reasons for the designation.

If you’re going to use a P.O.D. designation to thank a caregiver, the most important thing to remember is to document your reasons. That means making your intent clear to third parties, because you won’t be around to testify and your caregiver can’t.

The easiest way to do this is to discuss your decision and your reasons with your attorney. That addresses two issues: 1) Your attorney can testify (if necessary) about what you intended and 2) Your attorney can make sure the P.O.D. designation doesn’t conflict with or undo the rest of your estate plan. It’s also a good idea to discuss your reasons with other third parties who could testify, like a financial planner or friend.

After discussing your reasons, make sure to carefully document them and identify who you discussed them with. Put the document somewhere it can be easily found (like an estate plan folder). The more evidence you have the more likely the P.O.D. designation will stand and the less likely your other beneficiaries will challenge it.