12 Wealth Threats - check out the table of contents

Click here to see a pdf of the table of contents of my new report. 12 Wealth Threats You Must Know about and How to Avoid them.

The table of contents outlines the various topics, all focused on protecting your family's wealth.

12 Wealth Threats - new free report released

This week we released the new report I drafted. This report outlines 12 threats to a family's wealth and steps you can take to avoid them. Download the free report by clicking below:

12 Wealth Threats You Must Know About and How to Avoid Them

By David Otis Edwards, Estate Planning and Asset Protection Attorney

$54 million pants: youtube video interview of owners

Here is a video related to my last post - the $54 million lawsuit against a family owned dry cleaning business, that resulted in them closing their store because of the legal expenses and stress of the 2+ years in court.

Check out the video.

Asset Protection: case of the $54 million pair of pants

"After 2 years in court, I realized we could lose everything we had worked for...I felt heartbroken and overwhelmed."

You're heard me talking about asset protection - how you should set up your estate to protect your spouse and children from threats to their inheritance from lawsuits, creditors, divorce, remarriage, etc. Maybe you've thought to yourself that your spouse or kids don't need that because they are good drivers, make wise decisions, aren't in a risky profession or business, would never marry a gold digger, etc. Well, that may protect them from some risks, but not all.

A man took his pants to a D.C. drycleaner. He came to pick them up and supposedly they misplaced them. So he sued the dry cleaner for damages of $54 million for the lost pants. How did he come up with $54 million? That's $18,000 for each day that the store allegedly committed consumer fraud by having a sign on the wall saying "Satisfaction Guaranteed".

The court found in favor of the dry cleaner. No surprise there. Then the customer appealed to get the ruling overturned. Guess what? The appellate court also agreed that the case was ridiculous and tossed it out. So everything is fine, right? Well, all that took over 2 years.

"Even though we were victorious, I knew no one had won this battle"

The owners of the dry cleaner, Korean immigrants Soo and Jin Chung, had to sell the business, citing the legal expenses (well over $100,000) as well as the stress of becoming part of a case that was a media sensation.

What is the moral of this story (from an estate planning perspective)?

• Threats include not just legitimate threats (such as a car accident that was your spouse's fault), but also bogus threats that cost money to defend.
• You can't insure against all possible threats. $54 million is beyond any small business's insurance policy.
• Outside threats to assets are outside of our control. What are the odds a dry cleaner will lose a pair of pants? Probably 100% of dry cleaners have lost something at some point. What are the odds of getting sued for $54 million? Pretty slim, but all it takes is one loony customer who decides to take you to court. And all it takes is one nut job to threaten the hard earned money you leave to your wife or child.

Come hear more about threats to your family's wealth and how you can protect against them with some effective planning. RSVP today to attend our Truth about Estate Planning Workshop. CLICK HERE FOR ONLINE INFO AND SIGN UP FOR WORKSHOP

David Otis Edwards
Counselor at Law
Helping families protect what is most important to them

Please, not another blog about Michael Jackson

There are 2 kinds of people in the world. Some can't get enough of the Michael Jackson saga. Others are complaining about how all the real news in the world is being drowned out by old Michael videos and talking heads analyzing his dysfunctional family. If you're in the 2nd group, my apologies. But below is more about Michael and his estate planning.

Also, if you want another interesting take on Michael's estate plan, check out the blog post of my colleague Victor Medina - "Michael Jackson's Estate Plan - What He Did Right!"

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MICHAEL JACKSON: Part Two

1. Don't you want to avoid confusion? With Michael, there was a time period where it wasn't clear whether he had a Will or not. In fact, his mom went to court and told the judge there was not a Will and asked that she be given power as the administrator. Now things change once the Will is presented to the court. Good planning will avoid this limbo period where people are wondering if there is a Will and where it is. Good planning will make sure that the right people know how to quickly get their hands on legal documents that you have prepared.

2. Who is a good choice as guardian of your kids? Michael's mom is 79 years old. His youngest child is 7. If I have my math right, she will be 90 years old when he gets out of high school. Is she the best option as guardian? Under Illinois law, do you know who is qualified to raise your kids? Anyone over 18 who is not a felon but is U.S. citizen. So from that pool or people, the judge has to pick someone who is in the best interest of the child. In Illinois, the court will lean strongly toward following the parent's wishes in naming a guardian, but is not absolutely required to name the guardian you list in your Will. If you properly name a guardian in writing, then your choice has "prima facie" validity. This means that the court presumes that your guardian choice is best, but the court may approve someone else if evidence shows that is better.

3. What about the other parent? The mother of 2 of Michael's kids, Debbie Rowe, is to have nothing to do with them, according to his family at a press conference. She was not named as a guardian. I am assuming that she gave up all her parental rights because (in Illinois) the other surviving parent will continue to be the child's guardian, regardless of what the Will said, unless their parental rights had already been terminated.

4. No planning = 18 year old with money. I assume that Michael's trust provides for his children and gives instructions about how their money will be managed and when and how they can spend it or take control over it. But, if he had no plan or they couldn't find the documents, then the law (at least in Illinois), is that kids get their money at age 18. Would your 18 year old high school senior be ready to receive your wealth (home, retirement plan, life insurance, etc.)?

5. Don't be distracted by the big numbers. Don't get caught in the trap that only rich people like Michael need to do estate planning. We should just call it "planning" and get rid of the term estate. Every person, regardless of their wealth or family situation, should do some kind of planning for when they are disabled or pass away. Good planning to make things easier, better, cheaper, smoother, quicker - for you now and your family later. Even doing nothing is a plan in itself.

6. End up like Elvis? Part 1. Michael was afraid he would end up dying young like Elvis. Hopefully Michael's estate won't end up like Elvis. When Elvis died, his estate was worth about $10 million, but by the time expenses, taxes, lawyers, and probate fees were all paid, there was less than $3 million left.

7. End up like Elvis? Part 2. Despite Elvis' lack of planning for his death, his family has done very well with the family business. A few years ago, the family sold most of their Elvis rights for $100 million. From being worth $3 million to over $100 million in 30 years. Not bad. I say do both - set up good planning that handles your estate properly now, but also sets up your family for greater success later. Elvis's family overcame bad initial planning to successfully grow the family wealth. Don't make your family have to overcome that obstacle.

Wealth Transfer or Wealth Reception - Part #2 - The College Years

I went to U of I in Champaign-Urbana. Both undergrad and law school. A lot has changed since I left law school in 1995. Many new buildings, and tuition has gone way up. Do you know how much it will cost now for 4 years of undergrad, including tuition, books, room and board, etc.? Somewhere around $100,000.


Suppose your kid is ready to head to college this fall. He gets all his stuff packed, buys that little fridge, picks out a shower caddy thing, and is ready to head off to college. The day comes where you pack up the mini-van and head to Champaign. You help carry all the stuff into the dorm, give him a hug, tell him to behave himself. Then you pull out your checkbook and say "Well, since we know it's going to cost you about $100,000 to get through the next 4 years, I thought I would go ahead and give it to you now." So you write out that check, hand it over, get in the car and drive back home.


Assuming you had $100,000 sitting around that was earmarked for your child's college, would you do it this way? Would you hand the entire amount over on the first day he moves in to the dorm? No? You wouldn't do that? Why on earth not?


Well, I guess there could be a few "complications".

1. He might not spend it wisely. You know, parties or a new car or who knows what? Then runs out of money before he gets the degree.

2. He might be taken advantage of. If word got out that he had a big wad of money just handed to him, do you think he would have any new "friends" that might be interested in hanging out? I'm sure there would be plenty of kids willing to help him make some financial decisions.

3. He might be less motivated to work hard. Hey, you're only young once. Doesn't it make sense to have some fun with a little of that money now? He figures he can always get a job during his last year or two of college to make up the difference.

4. What if he gets in trouble? Maybe gets in a car wreck and gets sued? Or gets in with the wrong crowd and makes a bad decision that leads to property damage or criminal charges?

5. He isn't emotionally ready to handle that kind of money. You just handed him $100,000, even though he's never had more than $500 in discretionary money to himself before now.

6. What if his plans change? Maybe he flunks out, changes his major, takes a semester off, or drops out of school to start a band? Are you expecting to get change back on your $100,000 if he doesn't finish with a degree?

7. He might fall in love. Yes, love can do strange things to someone's financial decisions.



WEALTH RECEPTION?


Well, I guess you realize that people die all the time leaving assets to their kids. And those kids may not be any more ready to receive it than your college student was to receive that $100,000 right now.

Let's say something happens to you tomorrow and you left all your assets (house, retirement plans, life insurance, bank accounts, etc.) to your kids. Would the amount of money you leave them make an impact on their daily lives? How much impact? Very little, some, or a whole bunch? Would the lifestyle they could afford be changed?

Think of the specific amount of money you would leave if you died tomorrow. How much will it increase your child's net worth? Double it, triple it, make it go up 10 times or a 100 times? or more?

All those issues that cause concern about the college student are the same issues we address with clients in estate planning. These issues are what I call "wealth reception" issues. It's not just about how quickly we can get the check to the kids. More important is what impact, good or bad, will the money have on the kids after they get it. And will the wealth better their lives one year, 5 years, or 10 years after you're gone?



David Otis Edwards
wealth reception attorney
Edwards Group LLC
Springfield, Illinois

Michael Jackson: King of Pop (and Estate Planning?)

Are you tired yet of hearing about the Michael Jackson saga? One thing for sure, the gossip media should have plenty to talk about for quite a while. It turns out Michael did have a Last Will & Testament after all. (Thanks to those who sent me links to good articles on his estate issues.) Despite the circus atmosphere, Michael's estate situation gives us some reminders about important planning issues:

1. Wills are public. Usually, there are many issues that are much more important to your family than keeping your estate matters secret. But at the same time, do you really want people to see your private info? And with increasing online access to court records, it will be easier and easier for your neighbor or nosy relative to look at your Will in court records without leaving home.

2. Living Trusts are private. A living trust is a good way to keep your info private at your death. And that's exactly what Michael did. Look at his Will. It is what we call a "pour over will", meaning his will doesn't have much in it except instructions to dump assets at his death into what they are calling his "Family Trust" (which is private and will stay private). So all the gory details about who gets what and when they get it are only in that private document, incorporated by reference into his Will. And it seems to me that Michael's Will actually included more info than necessary. For instance, I usually would not put something in the Will about disinheriting anyone (as he did with is ex-wife). That kind of info can go in your trust to keep it all private.

3. Asset titling is key. We haven't seen how this part plays out yet. Even though Michael had a living trust, if he didn't properly title his assets in that trust before his death, then the probate court will have to do it using his will. Without assets organized properly, he will lose part of the benefits of the living trust.

4. Feeding frenzy? Michael's death is a media frenzy, but also a money frenzy too. Friends, relatives, business associates, will all be scrambling to take financial advantage. Those who are controlling his assets will be approached by all kinds of people with all kinds of ideas and schemes, all designed to get some money from the estate. Marlon Brando's estate attorney said people came "out of the woodwork making all sorts of claims" after Brando died. At your death, who will be in charge of your estate and who will be at risk for being taken advantage of?

5. Personal items are important. There is a court dispute over 2,000 personal items. Michael's mom has control of them, but the real executors want them back. The judge told them to try to work it out. I have seen a lot of hurt feelings and disputes over personal items, sometimes of small dollar value. But sometimes the items of small dollar value have huge sentimental and emotional value. What have you done to make sure your personal items don't cause a dispute later? What have you done to preserve the stories behind items of emotional value?

6. We never know when. We look at Michael and figure he was living a life on the edge that could lead to an early death. But the fact is that none of us know when our time is up. One thing about estate planning - you need to do it when you don't need it, because when you need it, it's too late to do it.

I have more comments to make about MJ's estate, but I will wait until next time. And I would love to hear your comments on my comments or on Michael's situation.

David Otis Edwards, Springfield, Illinois