What is a Trust and how can it help protect your assets?

What is a Trust and Why Do I want one?

When discussing trusts with clients, it is important to draw out exactly what a trust is and how it can benefit its creator(s) [the Trustors] and the intended beneficiaries and trustees.

A trust allows a trustee to hold assets for the Trust beneficiaries. Much like a will, a trust lays out your desires in regards to the handling, use and distribution of your assets.  But unlike a will, a trust is effective during the life of the Trustor.  Further, unlike wills, trusts often times are able to bypass probate — the legal process of settling an estate during which the validity of the will is proven — and your assets can be distributed to your beneficiaries more quickly. Avoiding probate makes the affairs of the Trustor private, avoids the delays of legal probate proceedings and entails fewer legal fees.

Who can be Trustee?

When creating a trust,  any competent adult may be named trustee. Usually you would name yourself and your spouse as the trustees, in order to retain full control over your property, however you have the option of choosing any other adult. After a trust is created, if you are ever unable to manage your property as trustee, your co-trustee or successor trustee will do this for you. If there are no individuals who you feel comfortable in allowing leverage over your property, you may name a professional fiduciary as your successor trustee.

What property should I Put into my Trust?

It is not necessary to greatly fund your trust at its creation. You have the option of creating a trust with as little as a dollar or as much as all of your assets combined. You may also specify in your will that your trust is not to be funded until your passing. Every trustee has his or her own needs and concerns and thus the appropriate choice should be made according to each individual client’s needs and desires. Furthermore, once the trust is created, it is not necessary to see a lawyer if your assets change. This means less additional work on your part and less spending.

Can I find a do-it-yourself Trust program on the internet and save the cost of a lawyer?

When creating a trust it is very important to see your lawyer. Poorly drafted trusts, not specifically designed for your circumstances and needs, may lead to disputes, adverse tax consequences and red tape all resulting in grater legal fees in the future. Having your trust drafted by an attorney will save you money and grief in the long run.

The specific cost of drafting a trust varies. Attorney rates, geographical areas, size of assets, etc., all factor in to the cost of creating a trust. There are also many different types of trust, each serving a different purpose.  Trust formation may cost as little as a couple hundred dollars to several thousand dollars depending on the details of the trust and the client’s individual situation.

Looking for more information? 

Visit www.rausch.com

Advertisements

Can Your Boss Determine What You Can and Cannot Post?

With laptops, tablets and smart phones at our fingertips, the presence of social media in our lives is ever growing. In a previous post (http://goo.gl/d7eC9e), I discussed what employers could and could not access in regards to their employees’ social media posts. Keeping our clients up to date on such policies helps them to avoid costly legal issues.

Do your Employee Social Media Policies Violate the National Labor Relations Act?

Accessing employee social media posts and information is not the only issue at hand, when it comes to social media. As demonstrated by two recent court cases, UPMC, et al v. SEIU Healthcare Pennsylvania and  World Color Corp. v. Graphic Communications Conference of the Internal Brotherhood of Teamsters, there are other potential legal issues restricting what employees can and cannot do through internet communication. Furthermore, disciplining employees for social media use may also open the door to civil litigation.

The National Labor Relations Board is currently examining social media policies of many businesses. The NLRB is enforcing the right of both unionized and non-unionized employees to “engage in concerted activities for the purpose of . . . mutual aid or protection.” In doing so, the NLRB hopes to deter employers from scaring employees out of excising their rights.

Be Clear, Be precise and Give examples.

While examining such policies the NLRB looks for ambiguous or overly broad employer rules and policy language.  Such rules and policies are in violation of the National Labor Relations Act. In the first case mentioned above, an NLRB Administrative Law Judge reviewed an employer’s electronic mail and messaging policy. It was written in the policy that employees were “prohibited from using the company’s electronic technology in a way that is ‘disruptive, offensive to others, or harmful to morale’ or ‘to solicit employees to support any group or organization, unless sanctioned by management.” Such terms as “disruptive”, “offensive to others” and “harmful to morale” were deemed as ambiguous due to the lack of examples within the policy. Employees would not be able to determine what constituted disruptive, offensive, and harmful social media action. Thus, the policy was in violation of the NLRA.

In the second case, an employee who was terminated, sued his employer for having violated his NLRA rights. He alleged that he had been reassigned within the workforce because of his social media postings. Despite his testimony being the only form of evidence for the allegation, the judge declared that the employee had been punished, in this case reassigned, due to his social media posts and therefore his NLRA rights had been violated.

Employer Guidelines:

While both cases have been appealed, avoiding such situations to begin with is the ultimate employer option. Keep in mind the following tips when forming your business’ social media policies. Following these tips may be the difference between  a healthy business and a business related lawsuit.

  • When forming social media policies, avoid ambiguous terms. Provide examples of what is expected from employees in regards to social media as well as examples of what types of posts are not allowed. Leave nothing to interpretation. This will demonstrate the employer’s desire to protect his or her business rather than suggest an impermissible desire to restrict employee rights.
  • Provide proper employee training based on your social media policy. This will give employees a clear picture of what is expected of them.
  • Finally, always consider whether an employee’s social media activity is protected under the NLRA before taking disciplinary action.
LLC v. Sole Proprietroship: Which Shall Prevail?

LLC v. Sole Proprietroship: Which Shall Prevail?

In our last blog post, “Does Your Sole Proprietorship Require a Federal Tax Id?” we briefly discussed the definition of a sole proprietorship. In this follow-up post, we describe more in depth and compare the benefits and disadvantages of a sole proprietorship to those of a limited liability company (LLC). When aiding clients in business formation, it is important to address the specific needs of each client in order to determine which form of business entity is a best fit.

Ownership

In a sole proprietorship, there is one individual titled as owner and the business name is the same as the owner’s name, unless the owner files for a fictitious business name. Furthermore, only an individual may be the owner of a sole proprietorships. LLCs, corporations or any other type of business, may not be titled as owner of any sole proprietorship. With this strict individual ownership, the profits of the sole proprietorship are listed on the personal tax returns of the business owner.

LLCs on the other hand, have no limit to the number of members/owners. There may be one member or several and membership is not limited to individuals. Corporations, other LLCs, or foreign entities may be LLC owners. LLCs provide more flexibility in the selection of business names as well.  The only requirement is that the name contain the correct abbreviation for a limited liability company (depending on the state), at the end of the business name.

Business Formation

A sole proprietorship is the easiest business to form. One must only participate in a business transaction to be considered a sole proprietorship. Such business entities are not required to be chartered by any state.

When creating an LLC, articles of organization or a certificate of formation must be filed in its state of operation. The associated fees with such filing must be paid and the information listed on such articles includes the number of managers or directors in the LLC and the purpose of the business.

Liability

While the owner of a sole proprietorship has unlimited power of the decision making in his or her business, and thus actions may be taken much more quickly than in an LLC, a sole proprietorship owner also carries the weight of his or her business debts and is personally liable for any occurrence concerning the business.

Limited Liability Companies might take longer to carry out decisions due to the possibility of numerous owners having to act together.  However, business liabilities and debts belong only to the separate business entity.  When properly set up, individual owner’s assets can be protected from business related claims. Thus, generally, creditors may not pursue any personal wealth of LLC members.

The Verdict

At the end of the day, there is no absolute answer to whether a sole proprietorship or an LLC prevails as the better business choice. Every business should be formed individually and based on its and its owners personal needs. Thus, determining the facts about your potential business and comparing them to the aspects of different business entities is the best method to determine which business formation better suits you.