Paul R. Tierney Law

Virtual Asset Protection in an Online World

Google on Wednesday became one of the first major Internet companies to put control of data after death directly into the hands of its users.

Technology has changed the way we view assets, as we now have virtual
assets to protect in addition to our tangible property. Our estates now include
digital assets like online banking and brokerage accounts. Web-based businesses
are increasing and owning property in cyberspace has become a reality. So what
happens to our virtual life when our physical life is over?

What happens to everything on the cloud when you die?

From your personal information to Facebook accounts to iTunes collections, so much of it exists online. Until recently, there have been few solutions to the meticulous record keeping to
keep everything straight, let alone remembered.

Recently, The Wall Street Journal reported in an article titled “Google Lets Users Plan ‘Digital Afterlife’ By Naming Heirs” that Google has become amongst the first and likely
the largest company to offer users a proactive digital-estate planning tool - the “Inactive Account Manager.”

The important take-a-way is the importance of the planning. What about your other accounts and bits of data snaking across the web? What plans have you made to document your virtual life
into the afterlife?

Reference: The Wall Street Journal (April 11, 2013) “Google Lets Users Plan ‘Digital Afterlife’
By Naming Heirs”

Creating a Thorough Living Will

Even if a copy of your living will ends up at the hospital with you -- that's hardly guaranteed -- doctors routinely don't know how to interpret them. They may still leave friends and family confused about what you want.

End-of-life decisions are complicated, but they can be met with proper planning today
to ensure your decisions will be carried out in the future.

So, have you executed your medical directive or living will? Was it one you created yourself or downloaded from the internet? If yes, you might want to reconsider that move while you
can.

Bloomberg recently published an article titled “The Right Way to Craft a Living Will”
that discouraged taking the self-help approach to this fundamental component of
your estate planning. It is important to know there is a “right way to craft a living will” and it does involve more than simply signing on the dotted line of a
pre-printed form.

Essentially, there may come a time when you are not “available” to make a medical decision – from
resuscitation to feeding tubes to what-have-you. What happens then will depend,
in large part, on how clear your instructions are. There are some definite
shortcomings that can arise, particularly with those free forms you pick up online.

A medical directive or living will is designed to speak for you and be some
kind of arbiter. Of course, you can only have so much forethought and the
language used in any document can only be so clear. For example, the original
article illustrates the complex issues surrounding the word “terminal.”

Given the difficultly attending the whole notion of predicting the course of your future health, consider appointing a trusted family member or friend to be your health care agent to
make the decisions when you cannot. That way you are not merely trusting a
piece of paper and the interpretation of the same.

Whatever legal arrangements prove to be the most powerful or expedient, the basic truth is that any plan can be put to paper. However, to be truly effective the contents of the plan on
that paper and your specific wishes need to be communicated to the people who
will be part of the process.

Make sure your loved ones know what your wishes are and that they will work to ensure that they are honored.

Reference: Bloomberg (April 9, 2013) “The Right Way to Craft a Living Will”

Business Succession -- It’s Never Too Early to Plan Your Exit

There are myriad ways to begin the exit process from your business without giving up management control.  [Here] are some ideas to structure for an eventual departure, without having to hand over the keys to the business right now.

Business succession planning is an inevitable process, one of which needs to be addressed well before you are ready to “clock out” for good. And since it took time to build your business
the right way, it will also take proper time and planning to leave it on your
own terms. Luckily, you can start planning your exit in such a way that allows
you to retain management control during the process.

So, how do you structure the business so that you can start succession while still sitting on the throne? A recent Forbes article titled “How To Retain Control, Even As You Exit” provides some practical advice.

At the most basic level, you may want to adjust the structure of the business itself. Is it an LLC? If yes, then retain control by making it a “manager-managed” LLC and retain the management
position. Is it a corporation? If yes, then there are more options. For
instance, you could issue various types of stock, either in different classes
(voting vs. non-voting), or even offer restricted stock that becomes vested
only upon certain conditions. The corporate structure also offers other
powerful tools like Employee Stock Ownership Purchase (ESOP) arrangements.

Your approach and the timing of your exit will depend on other factors, not the least of which hinges on your successors. When will they be ready to assume more control? Even more
important, when will you be ready to begin relinquishing control?

More often than not, you can structure an exit so both control and financial gain slowly adjust to
everyone’s benefit, but you have to start with a plan.

Reference: Forbes (April 10, 2013) “How To Retain Control, Even As You Exit”

Living Overseas Comes with a Taxing Price

So how should Americans working abroad or with a financial life in two countries manage their finances?

Traveling abroad can be exhilarating enough, but living abroad comes with a whole other level of excitement … and even some hitches if you aren’t careful. If you are one of those hopping back and forth across a U.S. border, beware of the financial hurdles and heightened attention of the IRS.

If you are no stranger to frequent border traffic, then likely you are aware of the recent adjustments in IRS practice, not to mention several large developments involving overseas
accounts and income. Essentially, the IRS is on a mission – it wants to capture
more and more overseas accounts and assets taxable under U.S. law. How? By working in sync
with international banking institutions.

Ostensibly, the targets are tax-evasion type accounts in Swiss banks. In reality, the dragnet is catching a broader group of individuals and families of all means and intentions. And many
of these individuals and families are unaware that they are targets and even
fewer are aware the rules of the (tax) road.

The problem has been growing with the surge in IRS attention to the matter and The New York Times tackled the issue not too long ago in an article titled “Overseas Finances Can Trip Up Americans
Abroad.”

Bottom line: if you’re going to be crossing borders regularly, whether for work, for family, or even as part of your retirement, then this is an important reminder about the hurdles those
little lines on the map can pose if you aren’t careful. Whether you work, live,
or retire abroad, it’s important to be aware of the new international
complications.

Reference: The New York Times (April 5, 2013) “Overseas Finances Can Trip Up Americans
Abroad”

A Million Dollars in Art, but No Money for a Burial?

Despite Mr. Simpson’s collection of museum-quality art, some of it housed in the Manhattan gallery he owned, which is now under lock and key, his family said it lacked the money for a burial.

A million dollars worth of art is quite a collection!  But this illiquid
asset isn’t exactly helping one’s heirs upon death. When it comes to burial
costs, cash is still king. The family of Merton D. Simpson knows this all too
well, as they encountered this challenge upon Mr. Simpson’s death.

In short, “illiquid assets” can present a great challenge to proper planning for you, your family, and your estate.

While there are countless examples, a very recent and public one is the case of the aforementioned Merton D. Simpson. As reported by The New York Times in an article titled “Art Worth Millions, Yet No Cash for Burial,” careful planning is required to meet “liquid” cash needs virtually every estate
encounters. Whether paying last health care expenses or other debts, you at least want to have enough cash for your funeral.

Mr. Simpson’s entire estate was worth millions in a vast collection of African and modern art, not to mention art in his own name as an artist of no little esteem. Tragically, in the end
there was no money for the funeral. In addition, what happens if and when the
taxes come due? That’s when expensive collections of illiquid assets are sold
at auction, oftentimes for pennies on the dollar.

Now there’s more to the story of Mr. Simpson and many more lessons to be gleaned regarding proper financial and estate planning, as well as a bit of family intrigue. The takeaway: if one dies
with an estate of priceless, illiquid assets – then one’s estate may find
itself deep in the desert with a purse full of gold, but not a drop of cool water to drink.

Reference: The New York Times (March 26, 2013) “Art Worth Millions, Yet No Cash for Burial”

Is the Inheritance You Plan to Leave Behind “Fair” to Your Heirs?

The ugly truth is money can’t buy love. But it can be used to try to hurt the people you say you love.

When planning your estate, you may want to assess the “fairness” of the inheritance you plan to leave behind and any potential hurt feelings along the way. You see, sometimes your plans
could convey a message of intentional disparity – which can be more obvious to
your heirs than you’d think. While it is your estate, it may be helpful to communicate your wishes and rationale now to avoid misunderstandings (or worse) later on.

The Washington Post recently explored this subject in an article titled “Dividing up money can cause divisions in families.” The article tracks the case of a certain individual who can’t help feeling resentment over the estate plan his parents have created. He believes the basis for the estate plan is his chosen “lifestyle.”

He is gay and his married sister is not. He has no children and she does. The parents of these adult children have chosen to leave an inheritance “directly” to their grandchildren, instead
of “through” their daughter. The grandchildren are set to each inherit
one-sixth of the estate, with the children splitting the remaining two-thirds.

The author of the article concludes thusly regarding the inheritance planning of these parents: “And yet, this is their prerogative. It’s their money.”

What about your own family and heirs – will they understand? What can you do to make yourself understood? Then again, if instead you are the one inheriting, have you thought it through from
everyone’s perspective?

Properly thinking through your estate planning objectives and then committing it to proper legal instruments can be an arduous task. That is why too few otherwise responsible adults
actually follow through on their intentions. One of the most common estate plans is one that lies unsigned in a desk drawer.

When all is said and done, it is your estate and you may distribute it as you wish. Period. Nevertheless, long-term family harmony often hinges on communicating your wishes while you
are alive and able to explain them. Surprise is only a good thing when it comes
to birthdays and military maneuvers.

Reference: The Washington Post (March 29, 2013) “Dividing up money can cause divisions in
families”

Life Insurance – How Much is Enough?

Rather than talk with a high-pressure insurance agent, you might be tempted to simply start plugging numbers into one of the many life insurance needs calculators out there on the Internet.
But even if one asks all the right questions, it can be tough to decide the answer to these “life and death” questions on the spot if you haven’t thought them through in advance.

Buying insurance for certain items, such as a home or car, can be pretty straight-forward and easy to
calculate cost-wise. But how do you insure your life? Life insurance is more than just number crunching; it’s about financially providing for your loves ones when you are no longer here.

It is essential to note that life insurance can be a complex subject, especially when it comes to the right “kind” and the right “amount” of insurance.

So what questions do you ask? Sometimes the important questions don’t come up when you click through those online life insurance calculators, and unfortunately, less so with some insurance
brokers. Forbes recently addressed this important issue in an article titled “What A Life Insurance Calculator Can't Tell You.”

Generally speaking, insurance exists so you can pay a “premium” now that you can afford to protect against the risk of a catastrophic event later that you cannot afford. When it comes to life insurance, of course, the risk is to your family and loved ones if you were no longer there to care for them. Life insurance is a potent tool in this regard, but it is far from the only tool to protect for your loved ones
in the event of your death.

The original article provides an excellent analysis of common “needs” that life insurance can protect. In the end, however, nothing can replace the advice and counsel of an experienced and
qualified life insurance professional.

Reference: Forbes (March 28, 2013) “What A Life Insurance Calculator Can't Tell You”

The Hoopla over HIPAA

In hospitals, nursing homes, doctors’ offices, pharmacies and insurance companies, professionals may cite Hipaa as a reason to restrict information. Some patients even have trouble accessing their
own health records, supposedly because of the privacy law.

We tend to avoid the doctor or hospitals unless we absolutely need one. Besides the germs and bad hospital food, there’s all that confusing paperwork to deal with. But eventually you or
a loved one will need to visit the doctor or hospital for your health – and you
may encounter some legal red tape that makes matters even stickier.

Sometimes the red tape is simply hospital policy gone too far. Regardless, navigating the maze requires doing your homework ahead of time. For example, what do you know about HIPAA?

HIPAA is the “Health Insurance Portability and Accountability Act of 1997.” The title of a recent article in the New Old Age Blog of The New York Times summarizes the issue well: “A Privacy Law Often Misinterpreted.”

One purpose of the law is to ensure the privacy of medical data. Nevertheless, this doesn’t mean the
hospital is intended to protect the privacy of the patient from their loved ones, especially when that loved one is present during an examination! In fact, HIPAA does not prevent health care providers
from sharing relevant information regarding a patient with their family members, unless the patient objects.

The original article is a worthy and enlightening read, whether you are a patient, a family member or even a medical professional. Apparently, there is a lot of misinformation leading to misinterpretation when it comes to HIPAA.

Bottom line: make sure you have up-to-date Advance Health Directives that specifically provide your designated agents with current and future access to all of your medical information,
verbal and written, with specific authority to execute HIPAA releases on your behalf.

Reference: The New York Times – The New Old Age Blog (March 27, 2013) “A Privacy Law Often Misinterpreted”

Asset Protection - Be Careful

It is, of course, painfully difficult to call what Reed and Cohen put together anything like valid asset protection planning. Sadly, at a certain low level this is the standard of practice, such
as it is, that goes on with mass-marketed asset protection planning.

Asset protection planning is not intended to be a game of silver bullets or invincible armor. Sadly, this
doesn’t prevent certain salesmen from marketing asset protection in that way
and certain debtors from buying into it.

A tale of gullibility, faked complexity, and predictable endings can be found in
a recent Forbes article titled “Bill 'Bulletproof A$$et Protection' Reed's
Complex Plan Pierced By Nominee And Alter Ego Theories.” The case of U.S. v. Cohen, C.D.Ill. Case No. 08-3282 (Mar. 8, 2013), chronicles an asset protection plan so frightfully poor
it could only be described as the “Bulletproof A$$et Protection.” Just the
label used to market this “asset protection” scheme should give pause to the
prudent.

Asset protection is all about understanding the legal nature of your assets and the
potential risks that may threaten your future use and enjoyment of those
assets. Certainly state and federal laws offer varying degrees of protection,
as do time-tested legal strategies. It’s as much art as science, but not magic.

This is not a do-it-yourself program. Seek qualified legal counsel for assistance.

Reference: Forbes (March 31, 2013) “Bill 'Bulletproof A$$et Protection' Reed's
Complex Plan Pierced By Nominee And Alter Ego Theories”

Four Generation Family Business Endangered by Family Dispute

The silent party to all the fighting is, of course, Luray Caverns. It is not just a U.S. Natural Landmark. It is also a business, and businesses can suffer when their owners are at war with each
other.

Family businesses have a tough time passing from generation to generation. 
Some will make the transition …and some won’t.  Even some of the most sound businesses and
families alike will face succession challenges, so you can imagine that family
business involving quarrels between family members have slim chances of
survival.

For one of those all-too-possible horror stories of succession and family business gone awry,
consider the case of the Luray Caverns and the Graves family. The Washington Post recently recounted the story in an article titled “The rift — a family dynasty fights over the
future of Luray Caverns.”

The business of the Graves family was really an empire of various tourist businesses surrounding the Luray Caverns – the largest privately held cave system and tourism hotspot since the
late 1800s. The family business apparently had been on a downward slope for
some time. To make matters worse, this four generation family business has been
in and out of litigation for the last ten years. In the end, not only has this
discord threatened the family fortune and the business that built it, but the entire
town associated with the family and the business.

More than a sad tale, this case is an object lesson for other family businesses and the original article is worth reading.

Reference: The Washington Post (March 14, 2013) “The rift — a family dynasty fights over the
future of Luray Caverns”