Probate is a process used by courts to settle the affairs of a deceased person. This legal process ensures that the estate fills its obligations and that its assets are distributed fairly according to the law.
When there is no will, then the courts will decide an equal division between all eligible beneficiaries. Once this happens, the estate will be divided into probate assets and non-probate assets.
As the terms suggest, there are assets that will be naturally immune from the probate process. These non-probate assets typically include assets like life insurance policies that already have a designated beneficiary or assets that are funded by a trust.
However, what is considered probate assets?
Probate Assets Include:
- Real estate that is owned alone without a secondary owner on the deed
- An investment account that is not qualified for probate exclusion
- Businesses owned solely by the deceased
- Any asset that is owned by the deceased individual that does not have a death designation or a beneficiary.
This often means your house (if not married), car, or even that antique vase you keep on the mantle will all go through probate because there is not a designation on where it will go after death.
If there is a will, these assets will still need to go through probate, but you will retain control over how those assets are distributed.
Often if you pass away without a will, the court will decide that as much of the estate is liquidated and the profits from it will be split.
This is often why it is so important to create a will, especially if you have a number of precious items that you do not want to be sold off.
How Long Does Probate Take
While family members and executors have four years to file after a person has died, one question that can be overlooked is how long can the process take?
When a family member or friend asks someone to handle the probate process after their death they are often not sure exactly what they are asking for.
This step takes a lot of trust and disclosure and can be an honor for the executor but it takes time and energy.
The executor must be prepared to take at least six months of their own time to settle the estate of their friend or family member for a smaller estate without disputes and up to eighteen months for larger estates.
If the family disputes the settlement of the estate this process could take even longer. It is important to realize that the death of a family member is a stressful time for anyone, and becoming an executor of the estate will add to that stress.
You will need to be accountable for every piece of property, down to the penny, that your family member owns.
How to Freeze Trust Assets for a Trust Contest
One of the benefits of creating a trust is that once the settlor, or creator of a trust, passes away, the trustee can smoothly take control of trust assets and start a probate.
However, this can also be an issue for any beneficiary that wishes to contest the trust.
The issue is that a trust contest will need to be filed, but even then the trustee can on with the probate.
By the time the trust contest is even resolved, there may be no assets left in the trust, which means the first step of a contesting beneficiary is to make an effort to freeze trust assets.
There are two primary ways to go about this.
Place a Lien on the Property
If you wish to protect real estate assets for a trust contest, you can place a lien on the property for a pendency of an action.
This means a trustee cannot sell it off or refinance until that lien is lifted because there is an action pending against it, so thus they cannot get rid of it before the trust contest is over.
A Temporary Restraining Order or Injunction
Another solid option is to pursue a TRO against the trustee and the trust. If granted, this will protect trust assets from being wasted.
The unfortunate downside is that TROs can be fairly difficult to get granted by the courts. Often you need to prove the likelihood of your trust contest claim success.
However, a TRO becomes much more likely to be granted if you believe a trustee is personally taking money from a trust for themselves. In this case, courts will be more likely to put the order in place.
By following the legal procedures, there is eventually a cut-off date for any unascertained creditors. This keeps creditors from coming back months or even years later and demanding payment.
Probate and Estate Planning
The legal process of dispersing property after one passes is known as probate. It is there that everything that the deceased owned is collected and debts are paid.
Once that is complete, the property is distributed as the deceased requested when he or she went through estate planning.
It is at that point that he or she named an executor and had a will written. Most of the time, the executor is either the surviving spouse or an adult child or the deceased.
However, all those named as beneficiaries have the right to contest the appointment, as do known creditors. Therefore, a hearing will have to be scheduled and legal notice given.
If there are no objections and your loved one left a will, it needs to be proven valid. This can be done through notarized statements from those who have seen the will, as well as through court testimony from a witness to the will.
It is not uncommon for probate cases to stay open for a few months. This gives creditors a chance to come forward so that the bills can be paid by the executor. Beneficiaries named in the will cannot collect their inheritances until all known debts and taxes are paid.
Once the claim period has passed, and the debts have been paid, the next step in the probate process is to file any necessary tax returns.
At that point, the remaining property can be given to the beneficiaries and the estate can be closed. Experienced probate lawyers can help you through the process, regardless of whether or not there is any contention involved.
Avoiding Probate Requires Planning
Probate is a completely avoidable process, even though thousands of people each year have to contend with it.
Put simply, avoiding probate is as easy as some proper planning. Taking the time that you need to plan ahead will save headaches and all future probate troubles.
With just a few simple steps, our loved ones, friends, and family members will receive the benefits of our estate plan without any probate intervention.
Here are five ways to plan your estate in preparation for probate.
1. Draft a Living Trust
A revocable living trust will enable your family members to transfer your property and possessions in a timely manner without probate interference.
2. Convert Accounts to Pay-on-Death
Choose your benefactor, and fill out a form. Then, all of your money will be transferred to your beneficiary immediately, avoiding probate completely.
3. Establish Joint Tenancy
Joint tenancy, or joint entirety, is a method of removing your name from all titles, replacing it instead with joint ownership. Thus, when you pass, all property automatically transfers to the other person on the title.
4. Gift Property
If your estate is small enough (under $5.45 million), it is sometimes possible to give enough property away to avoid taxation. This process is tricky, so work with an expert on how to formulate the details.
5. Review Small Estate Laws
With a simplified estate-planning procedure for some property types, it is sometimes possible to avoid probate. Look at these particular provisions with an expert to avoid probate on your chosen property.
Contesting a will can be a difficult process and should be done with an experienced probate attorney.
To successfully challenge a will, you must show that the will was made under undue influence, is a forgery or fraud. This would mean that the creation of the will involved manipulation and that the will’s creator was somehow vulnerable at the time.
If challenging under “undue influence”, it means the person lacked the free will to bargain due to the manipulative circumstances he was in. You can also challenge a will because another will exists that is newer than the one being submitted for probate. Usually, older wills are destroyed, but not always.
A court wishes to always fulfill the wishes of the testator, so if a newer will is located, generally the courts use the newer will as that would more accurately reflect the testators most recent wishes.
Probate is a complex process. It requires careful consideration and extensive legal consultation. For more information on estate and property management, please follow our legal blog.
Six Ways to Protect Your Company in 2019
A new business has enough to worry about without the addition of legal trouble. With how complicated the legal system is, and how many branches of it affect businesses today, it can be a real challenge to stay within the law without inadvertently breaching it.
Not only are there plenty of laws to follow, but they also change. One year you might be well within the legal system, the next you’re breaching it because they have made a change to how you’ve been running your business for the last five, ten, or even twenty years.
Adapting with the times is a sign of a successful business, and to help you improve your company’s adaptability you will want to follow this guide:
1. Have a Legal Team of Experts on Hand
Legal advice is invaluable, which, of course, is why it can be so expensive. For new businesses, small businesses, and those who have a narrow profit margin, this can mean a difficult period can be incredibly difficult to budget for.
A great way to avoid the unexpected legal fees, however, is to subscribe to them. That way you can budget appropriately and have a professional financial lawyer on your side as you need to. If your allocated hours run up, you will then benefit from an 80% discount for extra hours until the next month.
2. Create an Anti-Harassment Policy
Discrimination and harassment laws should never be taken lightly. In the States, discrimination laws usually don’t come into effect until you have more than 15 employees working for you, but this changes from state to state. Assuming is your enemy, so always check up on what you are legally entitled to do and go one step beyond.
3. Get Your Business Model Written Down
You want your company’s business model, including partner agreements, to be written down and formalized. If they aren’t this could spell trouble in the future when your partner tries to take more than his share, but you don’t have a legal document stating he can’t.
4. Get Your Company Trademarked
Another way to protect your company is to get it trademarked. Not every brand name can be, of course, but if you have a unique name it is best to get it trademarked so that there will never be any doubt as to which company a customer is trying to deal with.
5. Get the Necessary Copyright (When Applicable)
On top of trademarking your brand your will also want to apply for patents and copyright when applicable. New products that have a unique or distinctive design can be patented and trademarked and therefore protected from copycats.
6. Keep Your Books in Order
Last but not least, you will always want to keep your accounts in order. Not having this information can make it difficult to acquire tax discounts, but more importantly it can be a huge disadvantage if your company is audited or money goes missing from your account.
By keeping up to date with your finances you better protect yourself and can work on how to budget better.
What Do Trade Secrets Protect?
According to the United States Patent and Trademark Office, a trade secret is “information (that) can include a formula, pattern, compilation, program, device, method, technique or process.”
At first glance, you may think that a trade secret looks very similar to a utility patent, but as you will see, they are very different. For starters, a utility patent is something that is filed and approved through a rigorous process, whereas a trade secret is only granted limited protection in certain cases.
A trade secret aka ‘confidential information’ is non-patented information that provides a company with a competitive advantage in their industry. This could be anything from a marketing strategy to a recipe for award-winning cookies, and at their core, they enable a company to keep an edge on their competition.
As everything comes down to ‘interpretation’, and even lawyers interpret the law in a way that works for their client. Disclaimer: Don’t get caught out in a way your competitors can steal your information. A patent attorney in Orlando recommends always seeking legal advice. Startups are particularly vulnerable to the prying eyes of competitors. The options for protecting your intellectual capital or business trade secret include non-disclosure agreements (NDA), and of course if deemed the appropriate strategy, applying for a patent.
Read more below about what types of protections you are granted in the United States for a trade secret.
What is a Trade Secret?
A trade secret is anything that gives you a competitive edge in your industry, whether it is a process, recipe, or simply a method of doing something. In some cases, trade secrets are eligible for patents; in other cases, a trade secret must simply be protected by ensuring this information is not leaked.
Trade secrets are not protected like a patent – instead, they only protect against unauthorized disclosure. This means that if a contractor were to leak your trade secret to a competitor, you may be able to seek damages from the contractor, royalties from the competitor, and possibly have a court force the competitor to keep the trade secret from leaking further.
However, there is nothing that bars a competitor from independently discovering the same secret. In a patent, your invention is clearly laid out by the USPTO. Since a trade secret is not disclosed in the same nature, you can not take up legal actions against a third party who has come across the same information under their own labors.
How Does a Trade Secret Work?
Since trade secrets include such a wide variety of things, they vary slightly depending on the information in question. One good example of a trade secret is a simple customer pricing list for a sales organization.
If this list were to be leaked to the competition, there is little stopping competitors from simply offering better rates to steal these clients. One way that this list can be handled is through the use of a non-disclosure agreement, otherwise known as an NDA. In the NDA, the company can indicate all information that is not to be released or shared outside of the company, and in many cases, can not be shared within the company either.
If a trade secret is shared or discovered by misappropriation, a court may force the entity to take measures to keep the information from going any further, as well as forcing royalty payments, legal fee reimbursement, and more.
Remember though: if your competition independently discovers the same information as your trade secret, you are not granted any legal protection. If you are concerned about this and believe that your trade secret is truly unique and useful, explore your options for getting it patented in order to enjoy complete protection.
What’s in a Name: How to Choose & Legally Protect Your Business Name
When starting out on a new business, one of the most exciting parts of getting set up is choosing the perfect business name. We want something witty that sticks in people’s minds, and perfectly sums up exactly what it is that we do. Brainstorming the perfect business name can be hard, and it is made harder by the fact that just because we think we have come up with the perfect business name does not mean that we can use it.
Before we start doing anything with our amazing new business name, we need to make sure that we are actually allowed to use it. We don’t want to find ourselves with a great new website and fancy business cards only to have another business come in and stop us from using our new name, and even potentially request damages. We can save ourselves a lot of time and stress by taking the time to properly confirm whether our chosen business name is available for us to use.
Business names are regulated under Trademark Law. Regulations are in place to prevent businesses from using a business name that is likely to lead them to be confused with a competing business. If a business is found to be infringing on the trademark of another business, it can be forced to change its name, which can be a costly setback, and sometimes forced to pay damages.
It is not always prohibited to use a business name that is already in use. If the business that is already using the name is relatively small, and provides drastically different services to you, you may still be able to use the name. The same applies if the business is located a significant distance from where you are and only serves a limited community, which your business is unlikely to serve.
Research your Business Name
Once you have come up with an appropriate business name, there are a number of searches to conduct in order to ensure that it is available to use. While a federal database of registered trademarks exists, it is not sufficient to just search here. Some companies with a local focus will only register their trademark on the state level, and under United States law, a business can lay claim to a trademark by using it, without registration.
As well as searching the federal database of registered trademarks, which includes every trademark registered by the United States Patent and Trademark Office, also do a state level search for your state, and neighbouring states if you think that your business will be active there.
The next place to search is the world wide web. In fact, it is probably worth doing a basic internet search before investing time and effort in trademark searches as most companies have a web presence, so this is a fast way to eliminate names.
As well as searching for companies using your exact name, look out for companies using a similar name that are active in a similar field. If there is too much crossover in your brand and service, these companies may also be able to prevent you from using your selected name under trademark law.
This type of internet search also helps you make sure that your selected business name is available as a domain name for when it comes to establishing your own web presence. Check with different abbreviations and hyphens as well as alternative top-level domains (such as .com or .net). While you may legally be able to use a business name, you may still want to avoid it if another company is already using your preferred web domain, or a very similar domain.
Conduct Business Entity Search
Finally, you need to check if the business name is available in your state.This search has to done on a state level. Each state maintains a database of all corporations, limited liability companies (LLCs) and limited partnerships registered in the state. Each state will also have a fictitious name database, which is a list of all registered business names in the state regardless of whether they have registered a trademark or registered as a corporation with the state. This is the final search that will show up unregistered companies without a web presence.
Register your Trademark
Once you have found a business name that you can use, it is a good idea to think about registering. While it is not legally required to register a trademark to start using it, registering your trademark can be useful if you do ever find that you need to defend your trademark in court. Plus, it may help reduce the risk of others using your name, as it will be easier for them to locate your business when they do their own new business trademark search.
Brexit Unknown Makes UK Businesses Nervous
Brexit is certainly making businesses nervous right now, and there are many reasons for that. Despite almost three years having passed since the original vote, things are no clearer as to what the impact will be on business or what kind of trading relationships the UK will have with the EU going forward. Therefore, some nervousness is to be expected.
UK Businesses Rely on EU Workers
UK businesses of all kinds and in all industries employ EU workers. The question that remains unanswered is how those working relationships will function after Brexit has properly occurred.
There are guarantees in place that workers currently residing in the UK will be able to carry on living here, but it’s not at all clear whether more EU workers will be able to move here with ease after Brexit, and most indications suggest that won’t be the case. This will certainly have a big impact on businesses in many sectors. See this article on: Solicitors talk Brexit.
All Types of Workers Are Required for the UK Economy to Function
One idea that has been floated by the UK government is the idea of an income threshold, meaning only those earning more than a certain amount of money will be allowed to live and work in the UK. This would mean that highly skilled workers would find it much easier to work in the UK than low skilled workers would.
However, the UK economy relies on both skilled and low skill labour in order to function properly. If that supply of low income workers was cut off after Brexit, more businesses would struggle.
Contingency Planning Might Not be Enough for Small Businesses
For big businesses, contingency plans are already being put in place. This is expensive and time-consuming for large companies, but it will mean that they’re able to protect themselves against the upheaval brought about by Brexit. On the other hand, small businesses don’t always have that option because they don’t have the resources to put adequate contingency plans in place. It’s those small businesses, therefore, that are likely to be hit hardest.
It’s clear that small businesses are not opening at the rate they previously were because of Brexit uncertainty too. This denies the UK economy future growth prospects as well as depriving society of potentially successful ideas and businesses.
What Can Business Do to Prepare?
In terms of what businesses should be doing now, it’s best to seek professional legal advice about the situation, what you can expect and where your business and its staff stand. You should also analyse your supply chain and think about how that could change in the future under various Brexit scenarios. It might also be a good idea to look at existing contracts with EU companies and seek clarifications regarding those.
The Brexit situation is constantly in a state of flux, so things can change very quickly in one direction or the other. Therefore, it’s important for businesses to be watching and listening so that they can work out what their next move should be in order to prepare properly and minimise risk.
If You Own A Business, You Need An Estate Plan
It’s an unfortunate fact that arguments over material possessions break out between family members when somebody dies. It’s rough when one beneficiary thinks they’re entitled to that person’s possessions and financial resources more than the others. The complexity of the situation is amplified when the deceased person owned a business.
If you’ve got a family, you have every reason to care about what will happen to your business when you die. Your business has the potential to be an investment for your children or a nest egg for your spouse. If you haven’t created an estate plan that includes your business, it’s time to create one.
Start with a will
Your will is the most basic estate planning document. It allows you to declare who will be named the executor of your business. Your business executor will be responsible for continuing the business.
Dying without a will places a huge burden on your employees, business partners, and the success of your company.
Although a will is important, it’s not everything.
Your will isn’t the principle governing document of your estate
Our USA based readers may be interested in what’s in this article titled: What Might Surprise You About Your Will, CG Trust explains that many assets don’t fall under a will or probate like real estate, life insurance, and mutual funds. When you purchase these assets, you’re asked to assign a beneficiary and sometimes a contingent beneficiary.
When you specify a beneficiary for an asset, that overrides anything stated in general terms in your will. For example, say you leave everythin’ to your aunt Suzie in your will and your children are listed as beneficiaries on your life insurance policy. Your aunt Suzie can’t touch your life insurance policy – only your listed beneficiaries can.
Identify your designated beneficiaries for all business assets. If it’s not somebody you want to inherit that asset, change your beneficiary immediately. Remember, a beneficiary on a specific asset overrides what’s in your will.
Focus on minimizing your taxes
Most people don’t realize that when a business owner passes away, the estate taxes can tank the business. Estate taxes can be more than 50% of the value of your business and must be paid within nine months of your death. Most businesses need to liquidate to pay these taxes.
Thankfully, the IRS has tax breaks in Section 303 and Section 6166 that can protect your business. Section 303 deals with using stock to pay death and funeral taxes; Section 6166 deals with Federal estate taxes.
Both sections make it easier to pay necessary taxes without breaking up your business.
Avoid probate as much as possible
Although the process is mostly clerical, probate ties up assets for months (sometimes years) and can be expensive. It’s best to plan ahead to avoid probate as much as you can.
When you create a properly structured ILIT living trust, the benefits paid from the insurance policy won’t pass through probate. The funds will be available immediately to cover estate taxes and other financial obligations.
You can also establish a grantor retained annuity trust (GRAT). With this trust in place, if your assets grow over the terms of that trust, the appreciation won’t be subject to estate taxes. This allows you to pass your business assets to your kids or your spouse.
Declare power of attorney
You need to declare power of attorney to someone trustworthy to handle legal matters on behalf of the business when you pass away. This individual will be in charge of things like payroll, managing vendor payments, and financial assets.
If you don’t declare power of attorney to someone before you die, the court will appoint a guardian who may not have your company’s best interests in mind.
You also need a succession plan
A succession plan is designed to ensure your business runs as smoothly as possible; it’s a plan that chooses decision makers and creates a strategy for transferring company information to the right people. Although the details for every business will be different, Fidelity.com describes what might be included in this plan.
For example, a management succession plan might include training your successors, delegating responsibilities, and bringing in an outside advisor for their objectivity. An ownership succession plan might include defining who will own vs. manage the business, creating terms that consider your family’s best interests and timing the transfer of your business to avoid a discounted sale of your business.
Get professional guidance
Making sure your business survives and stays in good hands when you die is important. If you’re not sure where to start, contact an estate planning professional for help.
4 Things to Consider When Creating a Business Continuity Plan
One of the biggest mistakes a business owner can make is abiding by the “it will never happen to me” rule in regards to disasters. Each year, thousands of natural disasters occur all over the country.
Acts of nature like wildfires or floods can lead to a business closing for long periods of time. The only way to prevent problems when dealing with disastrous situations is by creating a business continuity plan.
Studies show that nearly 82 percent of the businesses in the United States do not have the IT infrastructure in place to deal with a disastrous act of nature or network outage. Instead of leaving the functionality of your business to chance, now is the time to take continuity planning seriously.
The following are some of the things you should consider when creating a business continuity plan.
1. Work on Identifying the Potential Threats You Face
Before you can create a comprehensive business continuity plan, you need to adequately identify the potential threats your business faces. Having a plan for a variety of possible disasters can help you rebound in a hurry following one of these events. Some business owners only make continuity plans to deal with things like natural disasters, but there are many more disastrous situations to consider.
For instance, figuring out what you would do to keep your business functional in the event of an employee strike or cyber-attack is essential. Once you have a list of possible disaster situations, you need to map out all of their outcomes.
If you are unsure about how to map out these outcomes, working with professionals who are experienced in continuity planning is a must. Often times, these professionals will be able to look at these situations objectively and help you figure out how to create adequate plans for each one.
2. Constructing a Recovery Team is a Must
One of the most vital parts of a successful business continuity plan is creating a recovery team. If you want to keep your own staff freed up during a disaster, hiring a third-party to perform this job is easy. Before hiring a company to fill this role, you need to assess the amount of experience they have.
Not only can a third-party act as your recovery team, they can also help you hone and refine your existing continuity plan. Allowing professionals to get a look at this plan can help you out greatly. They will be able to look at your continuity plan objectively and provide you with guidance on how to improve and strengthen it.
3. Know What is At Stake Without a Continuity Plan
Driving home the importance of a continuity plan is easy if you actually assess what you stand to lose without one. Often times, businesses without a comprehensive continuity plan will lose a lot of money in the event of a disaster.
While some of this money can be recouped via a class action lawsuit, a business may still lose lots of customers in the process. You can learn more about disaster-related lawsuits with a bit of online research.
4. Prioritizing is Vital When Creating One of These Plans
When disaster strikes, you will have to limit the number of resources your team uses. When creating a business continuity plan, it is important to figure out what technology or systems you need up and going first. Having this list of priorities in hand in the event of a disaster can help you limit the amount of downtime your team experiences.
Instead of trying to take on this complicated process alone, you need to reach out to disaster recovery professionals. With their help, you can get a plan in place in a hurry.
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