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Business life insurance

Life insurance can protect a small business by enabling it to continue operating even after the death of an owner or partner.

Janet C Tacoronte | Jan 13, 2016

What is included in your bankruptcy estate?

What is your Estate? At the time that you file your bankruptcy, your estate is all of your property and property rights that the bankruptcy court has the right to "administer." If it is exempt as we will discuss next then it is not added into the value of your estate and the bankruptcy trustee cannot touch it. Think of the date you file as a picture of your finances, everything you own on that day needs to be reviewed. If an asset qualifies for one of the exemptions you claim in Schedule C of your petition, if not, you add it to your total amount of assets. In Chapter 13 bankruptcy, all property and income you acquire during your case (which lasts from three to five years) is part of the bankruptcy estate. ASSETS Here is a list of some of the property that is considered part of your estate and that need to be listed in Schedule B of your schedules: Tip: Use Fair Market Value; what someone would pay you for these items in the condition it is at the time you file the petition. Example: you purchased a couch 5 years ago it costs you $1200, you look on craigslist and find a similar couch for $300, that's the amount you put and also print that in the event, the trustee wants to know where you got that number. Assets that are included. Property you own and possess when you file: This one is easy; if it's yours and you have it, it's part of your bankruptcy estate, even if you owe money on it. Properties you possess but belong to someone else (like your moms couch) are not part of the estate. Some examples, real estate, cars, cemetery lots, timeshares, guns, personal property, stocks, bonds etc. 2. Property you own but don't possess when you file: Even if you don't actually have the item that you own, it's still in your bankruptcy estate. For example, a security deposit held by your landlord or a utility company, or property that you've loaned to someone. 3. Property you are entitled to receive: If you have the legal right to property but have not yet received it, it's still in your bankruptcy estate. Examples include wages, commissions, tax refunds, vacation pay, an inheritance, insurance policy proceeds from an event that has occurred already, and accounts receivable. For example, February is when you are entitled to receive a tax refund for the prior year but you don't have it then it is part of your estate. Tip: Get your tax refund before you file. 4. Community property. If you live in a community property state, here are the rules: If you're married and file jointly for bankruptcy, all community property and separate property is part of the bankruptcy estate. If you file alone, then all community property and just your separate property (not your spouse's separate property) is part of the bankruptcy estate. Florida is not a community property state so if you live in a community property estate I suggest you ask local counsel about this. 5. Marital property in common law property states: If you live in a common law property state, here are the rules: If you are married and filing jointly, your bankruptcy estate includes all the property you and your spouse own together and separately. If you are filing alone, your bankruptcy estate includes: your separate property and half of the property that is jointly owned by you and your spouse, unless you own the property as tenants by the entirety. Again, seek advice from an attorney in your district. 6. Some types of property that you acquire within 180 days after filing for bankruptcy: If you acquire or become entitled to the following items within 180 days after you file for bankruptcy, the property becomes part of your bankruptcy estate: * an inheritance * property you receive or have a right to receive from a marital settlement agreement or divorce decree, and * death benefits or life insurance policy proceeds. 7. Revenue generated by other property in your bankruptcy estate: This includes earnings produced by contracts that were in effect when you filed for bankruptcy. For example, if you wrote a book before you filed for bankruptcy, any royalties you collect afterwards are part of your bankruptcy estate. 8. Property that appreciates in value after you file: The appreciation is part of your bankruptcy estate. 9. Property that you fraudulently transferred prior to your bankruptcy: If you sold property during the two-year period prior to your bankruptcy for substantially less property worth, or if you gift valuable property during this period, the transfer maybe "fraudulent" and considered part of your bankruptcy estate, and you can be sued by the trustee to get the property back. This information has to be disclosed not only in Schedule B but also in the Statement of Financial Affairs. 10. Preference payments: Bankruptcy law does not allow you to "prefer" one creditor over another. If you paid creditors more than a certain dollar amount before your bankruptcy filing. The time period differs depending on the type of creditor, the payments may become part of your bankruptcy estate. This means the trustee can sue your creditor to get the money back. For example, your mom loaned you 5k when you lost your job and you got your tax refund and paid her back a month before filing. The Trustee can go after your mom for the money or they may just let you add the 5k on top of what you are supposed to pay to your unsecured creditors. So essentially you're paying it twice. TIP: The timing of the bankruptcy is everything! If you're not in an emergency situation you need to really evaluate when the best time is. A consultation with a bankruptcy attorney would be extremely helpful to weigh out all your risks. Exempt Property What is Exempt? Well for one, it depends where you live. Exemptions play a major role in chapters 13 bankruptcy and assist you in keeping certain property. The amounts you are going to pay to unsecured creditors (like credit cards and medical bills) are dependent on the amount of property you can exempt; this is called the Chapter 7 Liquidation Test. In other words, this amount is what unsecured creditors would get had you filed a Chapter 7 and liquidated all your assets. This may be the difference between getting knocked out of the chapter 13 and having a confirmable plan. Thus, in chapter 13, exemptions assist in keeping your plan payments low through the reduction of the amount you are needed to pay to your creditors. Tip: This does not mean you do not list the exempted assets. You list all your assets and then claim them in Schedule C Bankruptcy, and I cannot stress this enough because bankruptcy is about full disclosure. Where do you find these wonderful exemptions and which ones apply to you? There are Federal Exemptions but it depends on the state you live whether you are able to use them and every state has its own exemptions. If you live in one of the following states, you can choose to use the federal bankruptcy exemptions; if not, then you are limited to your state's exemptions. These states include Alaska, Arkansas, Connecticut, District of Columbia, Hawaii, Kentucky, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Texas, Vermont, Washington, and Wisconsin. The current Federal Exemptions are: 1. Homestead Exemption: protects the equity in your principal place of residence. You can currently protect $22,975 of equity in your home under the federal exemptions. 2. Personal property includes all property you have other than real estate: The following are some of the most common federal personal property exemptions: a. $3,675 for your motor vehicle b. $1,550 for jewelry c. $12,250 aggregate value ($575 per individual item) on household goods, furnishings and appliances, clothes, books, animals, crops, or musical instruments d. $2,300 for tools of trade including implements and books. e. Health aids. f. Life insurance policies that have not matured except credit life insurance, and $12,250 in loan value of life insurance policy. 3. Exemptions Relating to Support or Benefits: a. Domestic maintenance such as alimony or child support reasonably necessary for your support. b. Life insurance payments that you need for support under policy of someone you were a dependent of. c. Social security, unemployment benefits and compensation, veteran's benefits, public assistance, and disability or illness benefits. 4. Exemptions on Recovery Received Due to Injury: a. $22,975 for personal injury except pain and suffering or pecuniary loss. b. award for loss of future earnings needed for support. c. recovery for wrongful death of person you were a dependent of needed for support, and d. Compensation received for being a crime victim. 5. Wildcard Exemption: you can apply the federal wildcard exemption to any property you own. Currently you are allowed $1,225 plus $11,500 of any unused portion of your homestead exemption to exempt any type of property. 6. Retirement accounts that are exempt from taxation, which usually include most genuine non-fraudulent retirement accounts, are fully exempt. However there is a cap of $1,245,475 on IRAs and Roth IRAs.

Elisa M Reiter | Dec 15, 2015

Trusts in Divorce

Structure The person establishing the trust is a "grantor," "settlor," or "trustmaker." The document identifies who will serve as an initial trustee, to administer the document, as well as successor trustees. The trust typically identifies "life-time" and "post-death" beneficiaries. If there are minor children, the trust will also appoint guardians and successor guardians in the event the grantor becomes disabled and is unable to care for the children. The trust is part of an overall estate plan, which often includes a pour over las will and testament, a financial durable power of attorney, a medical power of attorney, and deeds transferring real property to the trust. Who Will you Trust Post Divorce? An estate plan will likely need modification post divorce -- most often, each spouse has named the other as a fiduciary in such documents. The trust inherent in the fiduciary relationship is broken with the dissolution of the marital relationship. Funding Initial funding of the trust occurs by transferring assets to the trust. Once transferred, which is often handled through counsel, the trust, rather than the individual, owns the assets. Divorce counsel should ascertain as soon as possible which assets are owned by the individual, and which assets are owned by the trust. To Change or Not To Change First step is to figure out if the trust is revocable or irrevocable. A revocable trust can be changes. An irrevocable trust prohibits change. Were steps taken to fund the trust? Often this step is overlooked. Common oversights - failure to transfer real property, stocks and bonds, bank accounts and/or business assets, as well as life insurance (beneficiaries).

William F. Bernard | Jul 30, 2015

BUSINESS ENTITY COMPARISONS AND REASONS FOR FORMING

WHY FORM A BUSINESS ENTITY? 1. PERSONAL LIABILITY PROTECTION: The primary reasons small business owners choose to form corporations and LLC's is to protect their personal assets, such as their home, car or family savings. In the event of a lawsuit or if your business should fail, your personal assets cannot be touched, Assuming You Have Properly Formed, and maintained your corporation or LLC. This limited liability features not available in the sole proprietorship or partnership, where the participants are personally liable for all business debts. As liability insurance becomes more expensive for less coverage, asset protection is becoming more of a critical factor for entity selection. Incorporating provides another layer of complexity, giving you protection for your home and other personal assets. Forbes Magazine recently published an article stating that in the last decade, "the average jury award in court cases as a whole has tripled to 1.2 million, in malpractice it is tripled to 3.5 million and in product liability cases it has quadrupled 26.8 million according to just-released data from Jury Verdict Research." According to business statistics posted at Bizstats.com, only 22% of all small businesses in America or corporations or LLC's. Over 72% of business owners are personally exposed to liability risk. Protect yourself! 2. TAX SAVINGS: Corporations and LLC's can take advantage of tax savings options that are simply not available to sole proprietorships or partnerships. The following are some examples: *corporations can provide major self-employment tax savings. As a Corporation, only the earnings actually paid out to you as salary are subject to self-employment taxes; money left in the business is not subject to self-employment tax. All income passes through, but it's tax status depends on whether it is classified as salary or ordinary income. Here's an example. Say in 2005 you have net income of $90,000 and pay yourself $60,000 in salary, leaving $30,000 in the business area as a sole proprietor, you would pay self-employment tax on the full $90,000(90,000x15.3% equals $13,770). But as an S. corporation, you would only owe self-employment tax on the $60,000 in salary (60,000x15.3% equals $9180), resulting in a savings of $4590. *Corporations can offer deductible fringe benefits. One of the benefits of a Corporation is having a provide lucrative employee benefits that are deductible by the corporation and tax-free to the employees. Medical, life insurance, education, child care, and retirement plans are just a few of the types of benefits available. *Corporations and LLC's offer flexibility in choosing federal taxation. Corporations and LLC's have the leeway as to their method of taxation. This option is not available to sole proprietors or partnerships. *Corporations and multi-member LLC's have a lower chance of IRS audit. IRS form 1040, schedule C. (profit or loss from a business), which is used by sole proprietors to report the businesses' income and expenses, is the target of many IRS audits, however. The audit rates of similar businesses that have incorporated or formed multi-member LLC's are much lower. 3. PRIVACY: Forming a Corporation or LLC is an excellent way to keep your identity, as well as your business affairs, private and confidential. For example, a Corporation or LLC may be established in such a manner so that the shareholders/owners remain anonymous. If you want to open an independent small business of any kind and do not want your involvement to be public knowledge, your best choice may be to form a Corporation or LLC. Another manner in which a Corporation or LLC could provide privacy deals with property ownership. When it comes to owning real estate the number one rule is, don't own anything in your own name. Solid asset protection means maintaining a low profile, which is impossible if your name is splattered all over the public record. For example one can simply go to the website of the local County recorder, enter the names of several high profile individuals and print out a list of 20 or so properties owned by these individuals. That makes them sitting ducks for a lawsuit. By placing property in the name of an LLC, your name would not be associated with the property since County recorder's grantor-grantee lists only the name of the entity, not the LLC members, as the owner. 4. CAPITAL: There is a greater source of capital available to corporations and LLC's and is available to partnerships or sole proprietorships. If you plan on raising money to expand your business, a sole proprietorship or partnership may be burdensome. The sale of securities (ownership interests) in a business is a fairly complex legal matter, best facilitated by entities such as corporations and LLC's. Corporations and LLC's allow foreign investors to protect their personal assets from liabilities incurred by the business in which they invest. 5. MARKETING: the addition of the "INC." or "LLC" designator to your business name imparts credibility, reliability, size and permanence in the minds of every person with whom you do business--- customers, vendors, lenders, investors, and more. Status as a Corporation or LLC is an intelligent move, both in terms of marketing and financially. 6. CONTINUITY: Corporations and LLC's are the most enduring forms of business structure. If a Corporation or LLC owner dies, their portion of the business can be transferred quickly without interruption of the corporations operations. If a sole proprietor or partner of a partnership dies, the business may automatically and or it may become involved in various legal entanglements. Corporations and LLC's can have unlimited life, extending beyond the illness or death of the owners. The ability to survive the death or departure of any individual person gives the corporation's stability and makes it a more attractive candidate for long-term financing. Survivability also permits the corporation to raise funds by selling shares to new investors, because new owners can be added without disturbing the corporate form. 7. ADMINISTRATIVE EFFICIENCY: If a business begins with more than one owner or expects to expand beyond one owner, formation of an entity may be necessary. The formal structure of a Corporation or LLC provides not only a means for ownership interests to be divided and documented, but a set of guidelines for resolving conflicts and designating duties. In a way, the bylaws or "operating agreements" of these entities service contracts between the owners as to how the fundamental administrative matters of the business will be run. ENTITY COMPARISONS 1. Sole Proprietorship: A business owned and operated by one person for profit. The owner is the sole proprietor and there is no required formation for the business. The business terminates at the will or the death of the owner. Profits are taxed once. Profits and losses are reported on the owners' individual state and federal income tax returns. The owner may use losses to deduct other income on individual tax returns subject to active-passive investment loss rules that apply to all businesses. There is no double taxation. The sole proprietor contributes whatever capital needed to the business. Business loans may also be utilized. Generally, there is no application of state or federal securities laws. A sole proprietor may set up an Ira for investment or Keogh retirement plan and may deduct all or a portion of medical insurance premiums. The owner has full control and management of the business operations and his personal assets are always at risk. This is the easiest form of business to dissolve. The owner must pay debts, taxes and claims against the business personally. 2. General Partnership: Two or more people who jointly own or operate a business for profit. The partners own the business and the formation of a general partnership requires no formal filings and maybe express, implied, oral or written. Nevertheless, a written agreement concerning the terms and conditions of the business venture should preferably be drafted in writing. The partnership must acquire a taxpayer identification number and if necessary register a fictitious business name. The general partnership terminates by agreement or by the death or withdrawal of a partner unless there is a specific partnership agreement to the contrary. Profits are taxed once in each partner reports his or her share of the profit and loss on his or her individual state and federal income tax returns. The partnership merely files and information return. The taxation of income is on a pass-through basis in partners may use losses to deduct other income under individual tax returns if they are at risk for loss or debt. There is no double taxation. Partners typically contribute money or services to the partnership in order to raise capital and receive an interest in profits and losses. Business loans may be utilized. Generally, state and federal securities laws do not apply. General partners and other employees may set up an Ira or Keogh plan and may deduct all or a portion of medical insurance premiums. Typically, each partner has an equal management capability unless otherwise agreed and each partner's personal assets are at risk in terms of liability. The dissolution of a general partnership can be through the payment of debts, taxes and claims against the business in general or through the settlement of partnership accounts. 3. Limited Partnership: Two or more people who jointly own a business for profit consisting of at least one general partner who manages the partnership while subject to unlimited personal liability. There is also at least one limited partner who is a passive investor with no management rights but has limited liability. The partners own the business. Unlike general partnerships, limited partnerships may only be created where there is a written agreement among the partners and a certificate of limited partnership is filed with the Secretary of State. The limited partnership is terminated by agreement or upon the death or withdrawal of the partner unless there is a partnership agreement to the contrary. Profits are taxed once in each partner reports his or her share of the profit and loss on his or her individual state and federal income tax returns. The partnership merely files and information return. Accordingly, there is passed through income loss and partners may use losses to deduct other income on individual tax returns but remain at risk for any loss or debt. There is no double taxation. Partners typically contribute money or services to the limited partnership and receive an interest in the profits and losses. Business loans may also be utilized. Generally, state and federal securities laws do not apply in general partners and other employees may set up my raises or Keogh plans and also may deduct all or a portion of medical insurance premiums. General Partners have all management rights while limited partners have no management rights. Limited partners lose liability protection if they partake in management activities. General partners' personal assets are at risk while a limited partner is liable only to the extent of his or her investment. The dissolution of the limited partnership is through the payment of taxes or through debts or claims against the business. The settlement of partnership accounts may also dissolve the limited partnership or it may be dissolved by filing a cancellation of certificate with the Secretary of State. 4. C- Corporations: The corporation is a legal entity separate and distinct from its owners. It is considered a limited liability entity, as none of the owners are typically liable for the corporation's debts by virtue of being a shareholder area A C Corporation is a Corporation that has not made an election to be an S corporation. The business is owned by shareholders. The corporation is formed by filing articles of incorporation with the Secretary of State, a letting directors, appointing officers, preparing and adopting bylaws, issuing stock to the shareholders, and obtaining taxpayer identification number. Within 90 days after filing the articles, the corporation must file a statement of information with the Secretary of State. After incorporation, corporate formalities must be followed such as maintaining annual minutes. The corporation continues until the formal dissolution and is considered the most stable form of business. It is not affected by the death or disaffiliation of a shareholder. Profits are subject to double taxation once at the corporate level, and again at the individual shareholder level. There is accordingly no pass-through income loss. Corporations may deduct business losses but shareholders may not deduct losses. The corporation may sell shares of stock and may offer various classes of stock shares. The corporation may apply for business loans and go public if a substantial infusion of cash is needed. The issuance or transfer of stock is subject to state and federal securities laws. There are full tax-deductible fringe benefits for employee shareholders and the corporation may also deduct medical insurance premiums and reimburse employees medical expenses. Shareholders elect directors who manage the corporation. The directors must appoint officers and a rigid structure is required. In a Corporation liability is limited to the corporate assets except if the court pierces the corporate veil to impose personal liability on shareholders; whether his personal negligence or fault; or where there is a personal guarantee of the business debts involved. The dissolution of the corporation is obtained via shareholder approval and by filing a statement of intent to dissolve at the Secretary of State. It can also be dissolved through the payment of debts, taxes and claims against the business. The corporate assets are then distributed to the shareholders. Again or distribution of assets is then subject to double taxation. 5. S-Corporation: This corporation functions in the exact same manner as a regular C corporation except that it is taxed differently. It is considered a pass-through entity. The shareholders own the corporation and the formation requires that certain qualifying criteria are met and that there is a timely filing within 2 1/2 months of the first taxable year of an "S election" with the IRS. Otherwise, articles of incorporation must be filed with the Secretary of State selecting directors, officers and preparing bylaws and a tax identification number. The corporation continues until the formal dissolution and is considered to be the most stable form of business. It is not affected by death or does affiliation of a shareholder. Profits are taxed once. Each shareholder reports his or her share of the profit and loss on individual income tax returns. These corporations do not pay taxes in general. It is a pass-through taxable entity and shareholders may deduct their share of corporate losses on their individual tax returns. There is no double taxation. Raising capital is generally the same as a C-Corp. and you must limit the number of shareholders to 75. You cannot offer different classes of stock to investors except for shares that have different no voting rights. The issuance or transfer of stock is subject to state and federal securities laws. Employee shareholders owning 2% or more of stock are restricted from corporate fringe benefits under partnership rules. Otherwise the same fringe benefit allowances are in place as any C- Corporation. Shareholders must elect directors who manage the corporation and directors must appoint officers. Liability is limited to the corporate assets except if the court pierces the corporate veil to impose personal liability on the shareholders; where personal negligence or fault occurs; or where there is a personal guarantee of business debts. Dissolution occurs through shareholder approval and by filing a statement of intent to dissolve of the Secretary of State. This solution can take place through the payment of debts, taxes and other claims against the business. Corporate assets are distributed to the shareholders. A gain on the distribution of assets is taxed once. 6. Limited Liability Company: This is an unincorporated business entity that combines the limited liability protection offered by a Corporation and pass-through tax treatment associated with the partnerships and S corporations. The members of the company own the business and it is established by filing articles of organization with the Secretary of State. An operating agreement must be adopted in filed with the Secretary of State. A separate tax identification number must be obtained and within 90 days after filing the articles, the LLC must file a statement of information with the Secretary of State. The limited liability company may terminate by agreement or by the withdrawal of a member, depending upon the terms of the operating agreement. Each member reports his or her share of the profit and loss on his or her individual income tax returns. However, an LLC has the option of being taxed like the Corporation. Otherwise it is a pass-through income loss entity and shareholders may deduct their share of corporate losses on individual tax returns. There is no double taxation. The members typically raise capital by contributing money or services to the LLC and receive an interest in profits and losses. Business loans may also be utilized. Generally, state and federal securities laws do not apply to an LLC if all members are active in the business. An LLC can get benefits associated with a Corporation through tax-deductible fringe benefits in a manner similar to a Corporation. The manager or member who is the manager has flexibility in permitting parties to customize the management structure. Generally, liability is limited to the corporate assets except if the court pierces the corporate veil to impose personal liability; whether his personal negligence or fault; or where there is a personal guarantee of the business debts. Dissolution of the LLC can occur through the payment of debts, taxes and claims against the business. They distribution of all remaining assets to members then takes place and articles of dissolution must then be filed with the Secretary of State. WHY CALIFORNIA? Millions of companies regularly conduct business in the state of California. If you have a business nexus in California, then you are part of its tax system. The following questions can be used to determine whether or not you all are or will be a part of the California tax system and whether a California corporation or LLC is right for you: *Do you live in California? *Do you have a business location in California? *Do you or your employees work in California? *Do you own real estate in California? If you answered "yes" to any of those questions, then you are or will be part of the California tax system. If you want California-based limited liability protection without paying extra out of state fees, and forming a California Corporation or LLC may be the right choice for you.

Adam Christopher Demetri | May 6, 2015

Tips for Physicians and Business Owners for Asset Protection

State Exemptions Protect a Variety of Personal Assets From Lawsuits Each state has a set of laws and/or constitutional provisions that partially or completely exempt certain types of assets owned by residents from the claims of creditors. While these laws vary widely from state to state, in general you may be able to protect the following types of assets from a judgment entered against you under applicable state law: o Primary residence (referred to as "homestead" protection in some states) o Qualified retirement plans (401Ks, profit sharing plans, money purchase plans, IRAs) o Life insurance (cash value) o Annuities o Property co-owned with a spouse as "tenants by the entirety" (only available to married couples; and may only apply to real estate, not personal property, in some states) o Wages o Prepaid college plans o Section 529 plans o Disability insurance payments o Social Security benefits Business Entities Protect Business and Personal Assets From Lawsuits Business entities include partnerships, limited liability companies, and corporations. Business owners need to mitigate the risks and liabilities associated with owning a business, and real estate investors need to mitigate the risks and liabilities associated with owning real estate, through the use of one or more entities. The right structure for your enterprise should take into consideration asset protection, income taxes, estate planning, retirement funding, and business succession goals. Business entities can also be an effective tool for protecting your personal assets from lawsuits. In many states, assets held within a limited partnership or a limited liability company are protected from the personal creditors of an owner. In many cases, the personal creditors of an owner cannot step into the owner's shoes and take over the business. Instead, the creditor is limited to a "charging order" which only gives the creditor the rights of an assignee. In general this limits the creditor to receiving distributions from the entity if and when they are made.