Newsletter
Firm Overview At The Kaiser Law Firm, P.C. in St. Louis, Missouri, we believe that our clients deserve attorneys who spend time getting to know the clients and their objectives. Our attorneys have a deep understanding of the law in our practice areas and it shows in the results we obtain for our clients. Those practice areas include:
more... Our Address The Kaiser Law Firm,P.C.
12231 Manchester Rd.
First Floor
St. Louis, Missouri 63131
phone : 314.966.7766
fax : 314.966.7744 | |
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| Protect your Estate |
| Updated: Friday Jan 13, 2012 @ 9:30 AM |
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Living Protection Trust- |
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| Employee Buy Out |
| Updated: Friday Jan 6, 2012 @ 4:41 PM |
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| Issue 224 |
January 3, 2012 |
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The Importance Of Time In An Employee Buy Out
Many, probably most, business owners would like to sell their businesses to their employees, but for one nagging problem: Their employees have no money.
The desire to sell to employees collides with the owner’s overarching need for financial security. Owners simply cannot risk selling a business to employees who have no cash.
Take James Johnson, the fictional owner of fictional company Johnson Consultants, Inc. James’s management team was capable and interested in buying the company. The business had little debt and good cash flow.
When James met with his advisors to discuss the topic, one of their first questions was, “When do you want to leave the business?”
If James answers, “Now!” a sale to employees who lack cash is fraught with risk. If James’s answer is, “I'd like to be out—and cashed out—of the business in five to eight years,” a well-designed exit plan can make that happen—if James starts today.
Plan Goals Any buy-out plan must accomplish three goals:
- Minimize the owner’s, the company’s and the employees’ risk, by keeping the owner in control of the business and the sale process until the owner receives the entire purchase price.
- Ensure that the owner receives full value for his or her ownership interest.
- Minimize the income taxes of both the owner and the employees.
Unless a buy-out plan meets these goals, owners would be wise to reconsider selling their companies to their employees. If, on the other hand, owners plan and begin to execute a transfer plan well in advance of their departures, they can achieve these three goals. Of course, special planning is required to meet the income tax minimization goal.
Two-Stage Plan Design
A plan to execute an employee buy out has two stages.
Stage 1: Each year employees buy small amounts of stock until they have purchased and paid for approximately 35% to 40% of the ownership (usually non-voting). Ordinarily, this stage takes five to eight years. At the end of this stage, key employees are in a position to approach a bank.
Stage 2: Assuming the business continues to be profitable, paid-up owners of 40 percent of a company are usually able to secure bank financing to purchase the remaining balance of the owner’s stock.
James’s buy-out plan kept him in full control of his business until he received all of his money. Because he maintained control, he significantly reduced the risk of not receiving full value. He successfully cashed out of his business because he did not wait to begin his exit planning until he was ready to leave. By starting before he was ready to leave he was able to choose his successor, exit on his timetable, and leave with the cash he wanted.
The two-stage plan outlined above is a very brief summary of a relatively involved buy-out plan. There are many additional design issues that owners should discuss with their advisors.
Caveats:
- This plan does not work for all businesses, but can work well for companies valued between $500,000 and $5 million.
- Executing the plan takes time, usually at least five years to allow the employees to purchase a significant chunk of the company.
- This plan requires a cooperative bank aware of the owner’s intentions well in advance of the transfer.
- This plan requires a strong management team interested in owning a company financially fit enough to allow most of the available cash flow to be used to pay off the purchase debt.
If you are interested in whether this type of plan is appropriate for you and your company, please contact me.
Subsequent issues of The Exit Planning Review™ provide balanced and advertising-free information about all aspects of Exit Planning. We have newsletter articles and detailed White Papers related to this and other Exit Planning topics. If you have any questions or want additional Exit Planning information, please contact us.
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| © Copyright 2012 Business Enterprise Institute, Inc. All Rights Reserved |
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| Personal Protection Trust |
| Updated: Thursday Sep 24, 2009 @ 7:17 PM |
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The Kaiser Law Firm, P.C. "PERSONAL PROTECTION TRUST" | PDF
To Secure and Protect Your Children's "Inheritance and Financial Future. The "Traditional" Form of Estate Planning. In most Revocable Trusts, you leave assets to beneficiaries "outright" --either immediately after you are gone, or over a certain period of time, or at certain ages. In other words, your assets are distributed out of your Revocable Trust into the names of your beneficiaries following your death. Unfortunately, by "owning" their inheritance, your beneficiaries are then needlessly exposed to the claims of spouses in divorce, other creditors, lawsuits, the loss of government needs-based benefits and potentially higher estate taxes when their inheritance is passed on to the next generation of beneficiaries. A "New" and Better Alternative. Instead of receiving their inheritance directly, each of your beneficiaries may instead receive their inheritance in a uniquely designed trust, which springs out of your Revocable Trust. This continuing "Personal Protection Trust" ("PPT") can be controlled by each beneficiary in such a manner as to virtually give him or her all of the same rights of ownership, without the liability exposures outright ownership brings. How the Personal Protection Trust Works. The beneficiary may be his or her own initial Trustee and remainin control of his or her own "Personal Protection Trust". The beneficiary may control the investments of his or her inheritance, how and when income or principal is distributed andeven who may receive it when that beneficiary passes away (if you wish, this right may be limited). The level of asset protection needed may be determined by your beneficiary after you are gone with the beneficiary having the advantage of the ability to adapt to their then particular circumstances. For example, if a moderate level of protection is appropriate, an independent Co-Trustee or sole Trustee may be introduced into the PPT to authorize distributions. Or, if a greater level of asset protection is needed, an independent "Trust Protector" can provide further safeguards from from the attack of third parties. In either case, the beneficiary may continue to indirectly control his or her inheritance, while enjoying additional asset protection. Flexibility and Simplicity of a Personal Protection Trust The "Personal Protection Trust" is designed to balance the desire for potential asset protection with the desire to allow the beneficiary the most flexibility to control his or her inheritance while adapting the asset protection level as needed. While containing many traditional features of an "Asset Protection Trust", the PPT is much simpler in its design, and easier to understand and administer so your beneficiary can feelcomfortable using it.
Background of PPT –And What Makes it Different.
The "Personal Protection Trust" is based upon over a century of asset protection law. Our firm as combined the asset protection laws with certain protection features and incorporated them into our Revocable Trust. The PPT is not what other attorneys may commonly refer to as a "Discretionary Trust" or "Dynasty Trust". In fact, our "Personal Protection Trust" is unique to the estate planning world with few law firms offering the PPT. Take Advantage of This Unique Planning Tool the Kaiser Law Firm, P.C. provides the "Personal Protection Trust" as just one element of its complete foundation estate planning package. If you have not yet added this PPT feature to your existing Revocable Trust, you should seriously consider doing soright away! We at The Kaiser Law Firm, P.C. believe that it is so important, we now offer thePPT as a standard feature in the Revocable Trusts we create.
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| Trusts, Public and Private - III |
| Updated: Tuesday Sep 22, 2009 @ 2:58 AM |
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An express trust is either public or private. A public trust, also known as a charitable trust, is an express trust created for a charitable purpose. If an express trust is not a charitable trust, it is deemed to be a private trust. A private trust is an express trust created to benefit a few persons. This article discusses some aspects of public and private trusts.
Enforcement of a Trust
A trust is enforced when a trustee is compelled to do his or her duty and carry out the terms of a trust.
One of the rules about private trusts is that a private trust must have definite beneficiaries. The reason why a private trust must have definite beneficiaries is because if a private trust must be enforced, it must be enforced by a beneficiary or beneficiaries bringing a legal action against the trustee. Although the settlor may also bring a legal action against the trustee, the settlor may be deceased or otherwise unable to bring a legal action. If there were no definite beneficiaries and the settlor was unable to bring a legal action, there would be nobody to challenge the actions, or inaction, of the trustee.
Unlike a private trust, a public trust does not need to have definite beneficiaries. The reason why a public trust does not need to have definite beneficiaries is because a public trust may be enforced by the state attorney general on behalf of the public. (Note that if a public trust does not have definite beneficiaries, it must have indefinite beneficiaries within the defined class who actually receive the benefit of the trust.)
If a public trust does have defined beneficiaries, the class must be large enough to for it to make sense for the trust to be enforced by the state attorney general rather than by private individuals. A trust made in reference to a single person may have a large number of beneficiaries. For example, a trust may provide for the creation of a public swimming pool in memory of a child who drown in the local lake. The trust can be deemed public in terms of all of the potential patrons of the public swimming pool.
A public trust can be enforced by persons other than the state attorney general, where the trust has definite beneficiaries or a small indefinite class of beneficiaries. A public trust may also be enforced by the settlor.
The Period of a Trust's Existence
A public trust may last for an indefinite or unlimited period of time. A private trust terminates when its private purpose is completed. |
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| Trust Elements - Trust Property - II |
| Updated: Tuesday Sep 22, 2009 @ 2:57 AM |
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A trust has five main elements. First, a settlor transfers some or all of his or her property. Second, the property transferred by the settlor is designated trust property. Third, the trust property designated by the settlor is transferred with the settlor's intent that it be managed by another. Fourth, the trust property designated by the settlor is transferred for management by a trustee. Fifth, the trust property designated by the settlor is managed by a trustee for the benefit of a beneficiary. This article discusses some aspects of the element of trust property.
Definite Property
A trust must have definite property and the property must be in existence during the existence of the trust. An expectancy is property that one expects to own but does not yet own, such as an expected inheritance or right of survivorship. An expectancy is not enough to support a trust.
If all the property in a trust is found not to have belonged to the settlor, the trust automatically terminates. If all the property in a trust is destroyed, the trust automatically terminates.
Trust property may be a life insurance policy payable to the trustee. Such a trust is known as a life insurance trust.
Minimum Amount of Trust Property
A trust must have a minimum amount of trust property. If, by its terms, a trust has not yet taken effect, it may have a minimal amount of trust property. If, by its terms, a trust has taken effect, it must have sufficient trust property making the existence of the trust economically justified. If a trust currently has sufficient trust property to make the existence of the trust economically justified, the trust is said to be funded. If a trust does not currently have sufficient trust property to make the existence of the trust economically justified, the trust is said to be unfunded.
In some states, the minimum amount of trust property a trust must have is set by statute (e.g., $10,000). Under such a statute, if a trust does not have the minimum amount of trust property required, the trust may be terminated by a court.
A common error made by people seeking to avoid probate is to set up trusts designed leave all of their property in trust, and then forgetting, or not knowing, that they must actually transfer their property to those trusts in order for those trusts to be valid.
Sometimes, when property is left to minor children, creation of a guardianship or trust would be impractical. Most states have statutes allowing an adult to give small amounts of proper to a minor child outside a guardianship or trust and simply name an adult as custodian of the property for the minor child. |
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| Resulting Trusts |
| Updated: Tuesday Sep 22, 2009 @ 2:56 AM |
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Trusts are sometimes classified by the intent, if any, of the settlor to create a trust. This article discusses the kind of trust for which the settlor's intent is implied: the resulting trust.
Definition
If a trust is not created by a court as a remedy for injustice, a trust is created only according to the express or implied intent of the settlor. The general presumption is that a settlor what a trustee to manage property for the benefit of a beneficiary.
A resulting trust is a trust created from the implied intent of the settlor. Where a settlor has transferred property but does not intend the transferee to have equitable title, and where the equitable title is not disposed of, the result in the law is that the property is returned to the settlor. There is another presumption. It is presumed that the settlor transferred property to the trust only for the purpose or purposes expressed in the trust, and that the purpose was not merely to leave the property with the beneficiary.
When the Result is a Resulting Trust
There are two circumstances is which a resulting trust usually occurs.
First, a resulting trust occurs when a private express trust or charitable trust fails, such as were the originally intended beneficiary dies or goes out of existence before the trust property is transferred to the trust.
Second, a resulting trust occurs when an express trust does not use or dispose of all trust property.
What Happens Under a Resulting Trust
What happens under a resulting trust is that the trustee simply holds the property for the benefit of the settlor until the legal title can be returned. If the settlor is deceased, the trustee holds the property for the benefit of the settlor's heirs or residuary legatees until the legal title can be transferred to them. A resulting trust is a passive trust.
Purchase Money Resulting Trust
A resulting trust can occur when property is paid for by one person and legal title is taken by another. This is known as a purchase money resulting trust. Because a resulting trust is an implied trust, a purchase money resulting trust will not occur where the purchaser manifests a contrary intent. Moreover, some states do not permit purchase money resulting trusts.
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| How to Revoke a Power of Attorney for Finances |
| Updated: Tuesday Sep 22, 2009 @ 2:53 AM |
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To revoke a power of attorney for finances, you can either destroy all copies of the document or execute a notice of revocation. Execution has a few technical requirements that must be complied with before revocation can be regarded as legally valid and it is the preferred method because it generates proof of revocation.
The notion behind a notice of revocation is to alert your attorney-in-fact and other entities that you have revoked the durable power of attorney. A notice of revocation must be signed by you. Although witnesses are not required, having them may be a good idea if you think that your mental competence to execute the revocation might later be questioned.
If you recorded the original power of attorney document at your local registry of deeds office (because you live in North Carolina or South Carolina, or because you gave authority over your real estate to your attorney-in-fact), you have to record the revocation. Regardless of whether the original power of attorney document was recorded, you may record a revocation if you are concerned that the former attorney-in-fact might attempt to act without authorization. Recording the revocation tells people who later inspect the public records that the former attorney-in-fact is not authorized to act for you.
For a notice of revocation to take effect, you must give a copy of it to the former attorney-in-fact and to all entities that have transacted business or that might transact business with the former attorney-in-fact. This written notice is necessary because entities that do not know that the power of attorney has been revoked could, in good faith, transact business with the former attorney-in-fact. In such a case, you could be held responsible for the acts of your attorney-in-fact, despite your attempted revocation. Remember -- once you create a durable power of attorney, you have the obligation to be sure that everyone is aware you have revoked it.
The entities that have transacted business or that might transact business with the former attorney-in-fact may include:
1. landlords
2. lawyers, accountants, real estate agents
3. banks, mortgage companies
4. insurance companies
5. government benefit offices
6. Internal Revenue Service
7. post offices
8. relatives
9. doctors
10. schools
Besides revocation, there are two other ways that a durable power of attorney will end: there is no one available to serve as the attorney-in-fact or you, as the person creating the document, die. In a majority of states, the actions of an attorney-in-fact are legitimate if she did not know of your death and continued to act for you. If you want your attorney-in-fact to have any power over wrapping up your affairs after your death, that power should be granted in your will. |
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| Co-Ownership Myths - I |
| Updated: Tuesday Sep 22, 2009 @ 2:53 AM |
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One of the most confusing aspects of estate planning is the numerous myths about co-ownership of property. Many people do not understand the differences between a tenancy in common and a joint tenancy with right of survivorship. Many people do not understand what a tenancy by the entirety is or was. Many people do not understand the differences between the common law forms of co-ownership and community property. Moreover, people may define their own forms of co-ownership by contract. This article discusses some of the many myths about the co-ownership of property.
Right of Survivorship
An automatic right to share in a co-owner's share of property upon the co-owner's death is known as a right of survivorship. When a co-owner of property with a right to survivorship survives all other co-owners, he or she becomes the sole owner of the property.
There is a myth that all forms of co-ownership include a right of survivorship. The myth is not true because, among other things, there is no right of survivorship in a tenancy in common. A tenant in common may give away his or her share separate and apart from any other tenant in common. If a tenant in common dies without leaving a will, the deceased tenant in common's share of the property passes by intestate succession.
There is a myth that a form of co-ownership with a right of survivorship can be created in which one co-owner owns a greater share of the property than another co-owner. The myth is not true because were there is no equality of interest, the only form of co-ownership that can be or be created is a tenancy in common.
Probate Avoidance
There is a myth that all forms of co-ownership avoid probate. The myth is not true because only property in a joint tenancy with right of survivorship, or in a form of co-ownership with a designated right of survivorship, always avoids probate. Only in such property is the deceased co-owner's interest in the property transferred at the moment of the deceased co-owner's death.
The only way property in a tenancy in common avoids probate is by transferring it to a trust before the deceased co-owner's death.
Your lawyer
It is wise to consult your lawyer when you want to make changes to, sell, or give away co-owned property. Your lawyer can help you avoid any misunderstandings stemming from the numerous myths about the co-ownership of property. |
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