Cornwall Wills and Estates Lawyer Asks, “Will Your Small Business Survive after Your Death?”

You’ve worked so hard for the success of your small business, but have you thought about what will happen to it after you’re gone?  By planning in advance, the small business owner can ensure that his or her wishes are followed should the unthinkable occur.  Not only does this kind of planning make for an easier transition on those left behind, but it also saves money and can literally keep the business from failing altogether.

Your small business is a part of your estate, and just like your home and other assets, planning needs to be done for how it should be handled upon your death.  You’ll want to go over your options with a qualified Cornwall and area wills and estates lawyer (as well as your accountant!) and make your decisions legal and binding with proper documentation.  Of course, you’ll also want to communicate with those individuals who will be charged with following your wishes and keeping the small business running smoothly.

Unfortunately, the death of a small business owner can also spell the death of the business.  Estate administration (also known as probate) taxes and income taxes can be so expensive that the business just can’t survive paying them. Or, the other partners in the business cannot afford to buy the decease’s share in the business, so the business gets sold to a third party and the profits divided.

Laws like this play a role in the fact that small businesses do not typically survive through the generations.  According to The Small Business Review, only about 30% of family businesses make it to the second generation, 12% to the third generation, and 3% to the fourth generation.  Obviously, there are a number of factors involved, but the need to pay taxes and take care of other transitional costs creates a significant burden in passing a business on to heirs.

By planning in advance, you can take advantage of tax reduction planning and limiting (or avoiding) probate taxes. Many of the options available to small business owners can only be utilized before death, not after, so it is important to make plans for your business succession now.

 

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Michele R.J. Allinotte is the owner of Allinotte Law Office in Cornwall, Ontario and she helps her clients make the best decisions for themselves, their families and their businesses. Her practice focuses on the areas of  business law, estate planning and real estate. Visit www.YourCornwallLawyer.com to get her FREE Peace of Mind Personal Inventory to make sure that your family has all the information they need.

 

 

 

Wait! Don’t Sign That Contract!

I hear it all the time from my clients in Cornwall and area, “Can I get out of this [insert name of contract here]?”.

People are asking about leases, guarantees, agreements to purchase a home, weight loss center memberships, you name it.

My answer is usually the same. “Well, I would have to review the agreement first.”

Some agreements do contemplate how to “get out” of the agreement, or, in legal speak, how to terminate the agreement.

If the contract says you can “get out” of an agreement before the term is up, normally you will need to have a reason (which would be set out in the agreement), or you have to give notice to the other party for a period of time, or it is going to cost you.

Most of the time there is a cost to ending the agreement early.

In other agreements, there is nothing in the document that discusses ending it early.

So what do you do then?

Well, you can try to negotiate with the other party, or you can stop honouring your obligations under the agreement and wait for the other party to sue you.

Because that is what generally happens when you don’t fulfill your side of the bargain – someone is going to pursue you for whatever money they have lost. If it is a lot of money, they are going to sue you.

Depending on the fact situation, you might be sued successfully if you break your contract.

And then you will be responsible not only for your initial obligations in the agreement, but you also might have to pay interest, and, sometimes, part of the legal costs of the other party.

Many of my clients are surprised at what their obligations are under the agreements and contracts they have signed.

Problem is, they come to me AFTER they have signed the agreements.

It doesn’t do much good for me to explain all of your obligations under a contract once it has been signed. I cannot change the contract for you (unless the other party would agree to amend the contract, which isn’t likely).

So, next time someone puts a contract in front of you to sign, don’t just sign it blindly.

First of all, READ the contract. It may not be what you agreed to, or you may not like the terms and want to renegotiate some items.

Secondly, if you aren’t sure what it means, ask to have a few days to review it before you sign. You can use that time to have your lawyer review it, or to look it over in more detail yourself so you can figure out what the heck it means.

I know not everyone can afford to hire a lawyer for every contract they sign, but think about what it might cost you if you want to get out of the contract. If you couldn’t handle the cost of fulfilling your end of the bargain if certain things do or don’t happen, you should get some legal advice on what it all means and also, if you can “get out” of it if you need to down the road.

I can almost guarantee that the cost of having me review a contract after it is signed to see if you can “get out” of it (and to help you deal with attempting to get out of it) is going to be greater than the cost of reviewing the agreement up front before you sign.

I can also tell you that almost every time I review a contract for a client, we end up asking for changes.

Some of the things we end up changing could have cost my clients a lot of money if they had signed the contract as is.

And sometimes, my clients decide that once they know their obligations and the true cost of the contract, it is not worth it, and they don’t go through with the agreement.

I recommend that you review in detail EVERY agreement you sign. A gym membership, a lease, a loan agreement, an agreement to buy a home or other large ticket item, you get the picture.

And if you aren’t sure about what is in the agreement or what your obligations are (or what the other party’s obligations are), you should get legal advice.

This is especially important for small business owners and entrepreneurs.

I have membership programs available for clients who want to have ongoing access to legal advice for contract reviews and other issues but who are concerned about managing the cost of legal services.

If you are interested in Allinotte Law Office’s membership program, give us a call at 613-933-7720 or email erin@allinottelawoffice.com.

Are You Planning On Getting Hit By A Bus?

As you know, I do estate planning, which means I talk to clients about what might happen should they die or become incapacitated.

For some reason, the phrase “So, if I get hit by a bus tomorrow …” tends to come up quite often during my conversations with clients. Realistically speaking, many of my clients will have no need for their estate planning documents until they are well into their old age, so some of the things we plan for will never actually happen.

But we do plan for them because, you never know, you just might get hit by a bus some day. And if you did, what would happen?

I’ve been thinking about this for a few days from a few different angles.

The first is that my husband was at a work meeting and one of the topics was planning for succession at his place of work. The complaint was that there was not formal training to mentor those employees who might eventually move up the ladder, so to speak.

When my husband and I talked about that, I said that yes, there needs to be a plan for when people retire, but also, you need to think about people getting hit by a bus (see, it comes up often!). What would happen if an employee/supervisor/manager didn’t show up for work one day? Would people know what he was working on? Could things be picked up where they were left off? Is there essential information about the work place that only that individual knows? These are all things that every work place needs to consider.

See, the thing is, I actually know someone who got hit by a bus. When I worked in Ottawa, it happened. One of the IT employees was walking to work and was struck. He was conscious and so he was able to make a phone call. His first phone call was not to his family, but to his supervisor at work! Thankfully he was ok, but what would have happened if he wasn’t?

Another reason I have been thinking about this is because I knew I was attending a meeting last week and the presentation topic was succession planning for business owners.

It was a great presentation on a topic so many business owners tend to ignore or delay their decision making (sometimes until it is too late). The statistics back me up on this one – according to an October 2006 study by the Canadian Federation of Independent Businesses, over 65% of small and medium sized business owners were intending to retire within 10 years. Of all business owners surveyed, only 10% had a formal plan to exit the business. Some had an informal plan, but over 50% of business owners had no plan at all!

Thinking about your death isn’t exactly fun. But we all have a 100% chance of dying. Hopefully, we won’t get hit by a bus tomorrow (or any day) but it is much easier to plan for it now than to leave our families, our work places and our businesses to pick up the pieces if we don’t have a plan.

5 Things to Know Before Hiring a Personal or Business Lawyer

Before hiring a personal or business lawyer to guide you, your family or your business, ask these 5 questions to ensure that you don’t end up paying a whole lot of money for services that are not what you need, expect or want.  Hiring an attorney does not have to be a fearful experience.  Instead, it can be the most empowered decision you ever make for yourself.

1. How do you bill for your services?

There is no need to be afraid to talk with your lawyer about how he/she bills for the work they will do on your behalf.  In fact, when you first call a lawyer’s office, this is one of the very first questions you should ask.  No one wants surprises!

If when you call the attorney’s office, they will not give you any information about how they charge for their services or any expectation of what things will cost, beware you could be in for some big surprises about what things cost down the road.

Look for a lawyer who bills all of their services on a flat-fee, project basis and never on an hourly basis, unless required to by the Court for limited purposes.  In every event, be sure the lawyer you choose promises to never send you an unexpected bill in the mail for quick phone calls or emails.

2. How are you able to be responsive to my needs on an ongoing basis?

One of the biggest complaints people have about working with a lawyer is that lawyers are notorious for not being responsive.  In fact, I’ve heard of situations in which clients have gone weeks without getting a call back from their lawyer.

This generally happens when a lawyer does not have enough administrative support in his or her office.  Far too many lawyers believe they can take care of everything in and around their office themselves, from paperwork to client meetings to calendaring to returning phone calls to connecting with their clients other advisors, the list goes on and on.  Truth is, a lawyer who is a true solo practitioner without administrative support or in a firm without adequate support will become overwhelmed and non-responsive to your needs.

You can and should ask your lawyer how he or she will respond to your ongoing needs, how quickly calls are returned in the office, if there is someone on hand to answer quick questions and if you should expect to get right through to your lawyer when you call the office.

A great way to test this is to call your prospective lawyer’s office and ask for him or her.  If you get put right through or even worse sent to a voicemail, think twice about hiring this lawyer because it means they do not have effective systems in place for managing and responding to calls or answering your quick questions.  Instead, what you want is for the person answering the phone or another team member to offer to help you and if he or she cannot then to schedule a call for you to talk with your lawyer at a future date and time when he or she will be ready to focus on your matter.

Your lawyer cannot be effective and efficient if he or she is taking every call that comes through to him or her – all calls should be pre-scheduled when you are both ready and your lawyer can focus on your specific needs.

3. How will you proactively communicate with me on an ongoing basis?

Unfortunately, most lawyers do a horrible job of proactively communicating with their clients on an ongoing basis.  The general thinking in the legal industry is that legal work is transactional in nature and clients will call when something changes.  But, this is faulty thinking and in my opinion just pure laziness on the part of lawyers.

You want to look for a lawyer who will proactively communicate with you at least quarterly by mail via an informative, easy to read newsletter and monthly by email.  I prefer to hear from the professionals I work with monthly by mail and weekly by email, but progress can only happen so fast.

If you are considering hiring a lawyer who does not proactively communicate with his or her clients, think again.  This lawyer might be stuck in an old, outdated mindset that won’t serve your needs in the best possible way.

4. Can I call about any legal problem I have or just about matters within your specialty?

In today’s complex world, lawyers must have specialized training in one or more specific practice areas, such as divorce, bankruptcy, wills & trusts, estates, personal injury, business, criminal matters or employment.  You definitely do NOT want to be working with a lawyer who professes to be an expert in whatever walks through the door.   However, you do want your personal lawyer and/or business lawyer to have a broad enough expertise that you can consult with your lawyer on all sorts of legal or financial issues that come up in your life and he or she will be able to guide you right.

Trust me, you probably don’t want the lawyer who designed your estate plan to also handle your personal injury claim, your dispute with your landlord and advise you on your divorce, but you do want him or her to be there to hear your story, find you the exact right lawyer and be available as a consultant to you. That way, you can call you personal lawyer before signing legal documents (even loan documents), any time you have a legal or financial issue, or whenever anything that could affect your family or business adversely comes up and know you’ll get great guidance.

Look for a lawyer who has an ongoing service program or membership program in place so that you can pay a low monthly fee and be able to call with all of your legal and financial questions without being charged hourly for the consultation.  And be sure that when you call, you’ll get to schedule time to talk with your own personal lawyer who you know and trust and not get passed off to one of any number of lawyers who happen to work in the office and may not know who you are or what’s important to you.

5. What happens if you die or retire?

This is a critically important question to ask any service professional when beginning a relationship and a question that is far too often overlooked.  Sure, it may feel uncomfortable to ask, but a truly excellent, client-centered service provider will have in place a plan to ensure their clients are taken care of no matter what happens to the lawyer in the future.

Answers you want to look for here are that your lawyer has a clear plan in place for someone warm and caring to take over your matter without providing any interruption of service to you. If your lawyer prepared a Will, Trust and other estate planning documents for you, or you are in the middle of a divorce or lawsuit, you want to ensure your lawyer has a plan in place so you won’t need to start everything over from scratch.  And, if you are on a membership program with your lawyer, you’ll want to make sure he or she has a relationship with a lawyer or network of lawyers who can continue to service you under that program.

When you ask these 5 questions before hiring a lawyer for any type of legal matter, you will know you are engaging a trusted advisor who will help you to make the very best decisions for you, your family and your business for the rest of your lifetime.

Get it in Writing … Real Life Reasons for Legal Agreements

Legal agreements are so boring, aren’t they? And, if you are like most people, you are making a lot of deals in life without documenting those deals. I always give people the benefit of the doubt and trust, so I do it myself. And, I’m a lawyer!

That means, if I do it, you do it too. 

But, having an agreement isn’t about not trusting someone. It’s about knowing that you’re on the same page. You might think you both agreed to something when in reality you thought one thing and they thought something else.

When you have an agreement in place, that risk is minimized.

Below are some real life examples (including one from my own life) of how putting it in writing can actually increase the likelihood of success for whatever you are doing, whether it’s personal or business related. And I’ve got some easy tips for creating your own legal agreements.

I recently hired a live-in nanny/house manager. She’s great and she’s saving my sanity. She worked with me for about 6 weeks and everything was great.

Then, things started getting not so great. Not bad, but I noticed little things starting to slip through the cracks – meals not ready on time, cats food bowls not refilled, not waking up on time a couple of times. Things like that.  Little things, really.

But, enough of these little things could add up to unhappiness and resentment.  So, I wrote up an agreement.

It’s a simple agreement that spells out my expectations. (If you want to see it, post a comment on the blog with your email address and I’ll send it to you.) You are more than welcome to use it as a basis for your own agreement.

I emailed it to her and let her know I wanted her input on it as well.  It’s an agreement, meaning we both need to agree to what’s included. We sat down together, went over each of the points, and we each signed it.  Simple. And, it fleshed out some places we were not on the same page, which could have become a problem later.

Here are some other situations in which you want to have written agreements:

• Buying property with another person
• Hiring an employee or an independent contractor (in fact, if they are an independent contractor, an agreement is even more important because otherwise you are at risk of them being reclassified as an employee, which means you owe all sorts of back taxes)
• Getting married
• Having a baby
• Starting a business
• Buying a business
• Moving in together
• Subletting your house
• Contracting for services
• Hiring a handyman or contractor

So, how do you get your legal agreement done easily?  Here’s a few simple steps:

1. Find a Template To Start From

Even lawyers don’t create legal documents from scratch. We use something we’ve created before or ask our friends to send us something they’ve used in a similar situation.

You can do the same by searching Google for the basic document you need … i.e., nanny agreement, cohabitation agreement, roommate agreement, parenting agreement, independent contractor agreement. You may be able to find something free or you may have to pay a few bucks.  It’s worth it.

For a template nanny agreement, post your email addy in the comments section of this blog post and I’ll send you my nanny agreement as a starting place for your nanny agreement.

2. Modify the Template to Fit Your Situation

The template you find is not going to be perfect for your situation.  It’s going to need modification based on the specifics of your situation. Use the template as a guide to spark your imagination of what you might want to include. There are generally very few mandatory parts of an agreement (other than the date and your signatures), so get creative. This is about your agreement and what you want.

3. Get Buy-In

Once you’ve put in everything you want, email it to the person you are creating the agreement with and ask them for their thoughts on the agreement. Make sure to mention the agreement is a starting place for discussion (if it is) and that you welcome their input.

4. Sign It, Date It and File It

Written agreements just need to be signed and dated to make them valid. Each of you should sign the agreement and date it. You generally don’t need witnesses or notarization.  Just your signatures and the date should do. Then, make sure that each of you has a copy of the agreement to refer back to in the event of uncertainty or a later disagreement.

5. Get it Reviewed … Maybe!

Sometimes, you need to get your agreements reviewed by a lawyer, sometimes you don’t.

So, when should you have a lawyer review your agreement? Generally, when it has anything to do with money or your business, it’s a good idea to get it reviewed. If you think there’s a possibility you might need to legally enforce the agreement some day, get it reviewed. One important note here on prenuptial agreements or marital agreements, in some states, like California, the agreement is not legally valid unless both parties were represented by a lawyer. That doesn’t mean it’s not helpful to have an agreement, but it won’t be legally enforceable.

If the purpose of the agreement is about setting and managing expectations, it’s not necessary to get a lawyer involved. Just having the agreement is the point.Don’t have a personal lawyer in your life who can review simple agreements for you?  You should!  Get your own Personal Family Lawyer here.

By Alexis Martin Neely. Reprinted with permission from www.familywealthmatters.com