Transferring The Family Business, But To Which Child?

Posted July 27, 2015 in Business Law, Estate Planning by Michael Lonich.

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July 27, 2015
Transferring The Family Business, But To Which Child?
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After years spend building up a successful family business, many want to pass on their success to their next generation of family members. Unfortunately, conflicts in family businesses are likely to occur when the owner and other family members begin to consider and examine the transfer of the ownership and control of the business. One of the largest conflicts to result often rises in situations where there are two or more children in line to take charge and sibling rivalry erupts. However, in planning the succession of a business, the transition may go smoother with the creation of a trust outlining the steps to be taken in the succession.

The advantage of a business trust is that a plan would have been put in place in the case of an unexpected death. However, there is still a problem with choosing which child to take charge of the family business. One of the greatest challenges in choosing which child to take over is their lack of experience, though this issue can be addressed with the following tips.

  • First Option: Trial Run
    • You can give each child about six months or so to be in charge.
    • Objectively list the qualities that you are looking for before the trial begins.
    • Also, make sure to let the other employees know that the child is in charge.
  • Third Option: Leave It Up to the Children
    •  If there are several children, a good option may be to allow them to set up a board and let them choose who they believe would be the best successor.
    • This can even include outside advisors.
  • Fourth Option: Have a Trustee in Place
    • Put a Trust in place with a trustee running the business until he or she believes the children are ready to take over

The options above are just a few possibilities that a family business owner can try. Nevertheless, they may be able to help family business owners who are troubled by the fear that a child cannot develop the leadership qualities necessary to run the family business. But after getting through this first hurdle and putting these details in a trust, the owner will no longer have to worry about succession of the family business as they will be in capable hands.

Estate planning is a highly complex area of law. If you are interested in creating a trust for your family business or have any questions regarding your current estate plan, please contact the experienced estate planning attorneys at Lonich & Patton for further information. The attorneys at Lonich & Patton have decades of experience handling complex estate planning matters, including family business trusts, and we are happy to offer you a free consultation. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

 

Source: Charles D. Fox, Keeping It In The Family: Business Succession Planning, SS039 ALI-ABA (2011)

 

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Special Needs Trusts: What Are They?

Posted July 20, 2015 in Estate Planning by Jennifer Mispagel.

Special Needs Trusts are imperative for beneficiaries who are disabled and receive some form of government benefits. The beneficiaries of Special Needs Trusts may be either a developmentally or physically disabled minor or adult.

A standard Family Trust may not be appropriate for a Special Needs person because they do not address the specific necessities of the disabled beneficiary, such as governmental programs and benefits. In California, a Special Needs Trust is generally an irrevocable trust that “gives the trustee discretion to supplement… whatever is provided by government programs to the trust’s beneficiary.” Most commonly, Special Needs Trusts allow for an individual with disabilities to benefit from funds in the trust without the funds counting as a financial asset and interfering with the government benefits that the beneficiary may be receiving. Even in rare cases where a beneficiary never needs Federal or State public benefits and services, Special Needs Trusts may still be a valuable tool and can be used as part of a comprehensive plan to meet the special life management needs of the beneficiary.

While the trustee of the Special Needs Trust cannot give money directly to the beneficiary (as it will interfere with eligibility for Medicaid, subsidized housing, Social Security Income and other government services), the trustee may spend the trust assets on a wide variety of goods and services for the benefit of the beneficiary. Typically, trust assets are used to pay for personal care attendants, vacations, physical rehabilitation, and recreation.

Concerned families and people with disabilities no longer need to worry about limited options regarding estate planning. In the past few years, there has been increasing public awareness of the estate planning options available for families with loved ones with disabilities. There has also been an increase in professional advisors who are able to render competent advice and provide their clients with numerous estate planning options, including Special Needs Trusts.

Estate planning is a highly complex area of law. If you are interested in creating a Special Needs Trust or have any questions regarding your current estate plan, please contact the experienced estate planning attorneys at Lonich & Patton for further information. The attorneys at Lonich & Patton have decades of experience handling complex estate planning matters, including Special Needs Trusts, and we are happy to offer you a free consultation. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

Source: http://www.nolo.com/legal-encyclopedia/special-needs-trusts-30315.html

Source:.http://www2.nami.org/Content/NavigationMenu/Find_Support/Legal_Support/Special_Needs_Estate_Planning/Special_Needs_Trust_Primer.htm

Source: Purpose of Special Needs Trust, 3 Cal. Transactions Forms- Est. Planning § 17:1 (2015)

Source:.http://www.americanbar.org/newsletter/publications/law_trends_news_practice_area_e_newsletter_home/0501_estate_financialplanning.html

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Ben Affleck and Jennifer Garner’s Divorce: Implications of the 10th Anniversary

Posted July 14, 2015 in Family Law by Jillian Green.

Ten years of marriage and three kids later, Ben Affleck and Jennifer Garner have announced their decision to split. The pair, who previously worked in two films together, made the announcement one day after their 10th wedding anniversary. While ten years is a significant milestone in its own respect, it may also give rise to legal implications in California.

There is a frequent misunderstanding that when a couple divorces after more than ten years of marriage, there is a law requiring the courts to order payments of long term support to be paid until a spouse dies, remarries, etc. However, this is not necessarily the case. This misconception may arise from California Family Code § 4336, which establishes a rebuttable presumption that a marriage of 10 years or more is a marriage of “long duration” for purposes of retaining spousal jurisdiction. This statute does not automatically force the courts to order long term support, rather it creates an indefinite reservation of spousal support jurisdiction that allows it to continue making decisions regarding the support if circumstances warrant such change. While the court may consider the duration of the marriage in making an order for spousal support, under California Family Code § 4320 there are also several other significant factors for the court to consider.

In Ben Affleck and Jennifer Garner’s upcoming divorce, Ms. Garner could potentially seek a bigger share of Mr. Affleck’s reported $75 million. Ms. Garner reported in March of this year that while Mr. Affleck was working on various motion pictures, she chose to stay at home for a year to take care their three young children. While Ms. Garner is eager to return to her career, as the lower earning spouse, the court may still award long-term spousal support[i] to Ms. Garner. While Ms. Garner may not necessarily receive spousal support forever, it is still likely that she will receive a large portion of Mr. Affleck’s assets.

If you have any questions about divorce or any other issue, the Certified Family Law Specialists at Lonich & Patton have decades of experience handling complex family law matters. Please contact the Certified Family Law Specialists at Lonich & Patton for further information.  Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may include legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.



[i] Long term spousal support is granted in order to place the supported spouse at or near the “marital standard of living” (the financial standard of living established during the marriage) after the divorce.

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The Upcoming W.N.B.A. Battle: Setting Precedent for Same-Sex Couples with Children

Posted July 1, 2015 in Family Law by Rebecca Sternbach.

W.N.B.A. players Brittney Griner, last season’s defensive player of the year, and Glory Johnson, two-time All-Star, had a controversial relationship leading up to their marriage on May 8, 2015.  Even more provocative are the actions taken by Ms. Griner a month after the couple was married and a day after Glory Johnson announced her pregnancy.

On April 22, 2015, the couple was arrested following a domestic disturbance at their home. As a result of the fight, Ms. Griner received a bite wound on her finger and scrapes on her wrist, and Ms. Johnson received a cut above her lip and a concussion. Ms. Griner pleaded guilty to misdemeanor disorderly conduct, while Ms. Johnson pleaded not guilty and her case was dismissed.

At a time of increased scrutiny of domestic violence and athletes, the league suspended both players for seven out of their thirty-four game season— the longest in league history. According to Laurel J. Richie, president of the W.N.B.A., “The W.N.B.A. takes all acts of violence extremely seriously. It is our strong belief that violence has absolutely no place in society, in sports or in this league. As president, it is my reasonability to protect the league and uphold its values. Our athletes represent the W.N.B.A., and they all must abide by the league’s standards of conduct. In this case, Brittney and Glory failed to do so, and that is unacceptable.”

Despite these troubles, the couple proceeded to marry. However, only 28 days later, Ms. Griner filed for an annulment.  Ms. Griner made the following statement, “I can confirm that today [June 5th] I filed for an annulment. In the week prior to the wedding, I attempted to postpone the wedding several times until I completed counseling, but I still went through with it. I now realize that was a mistake.” In response, Ms. Johnson’s agent, D.J. Fisher, stated that Ms. Johnson “loves Brittney and made a huge sacrifice to carry a child, put her career on hold, invest in their relationship and their future.”

It is anticipated that the couple will be heading for a battle as they have vastly conflicting opinions of Ms. Johnson’s impending motherhood. Ms. Griner claims that she does not even know when Ms. Johnson became pregnant and she has no biological connection to the baby. Ms. Johnson claims that Ms. Griner was a “willing participant, consenting and signing all the necessary documents” for the in vitro fertilization.

The law has been changing in regards to same-sex couples, most recently with the United States Supreme Court finding that the Constitution guarantees a right to same-sex marriage. Courts have been trying to navigate the waters in terms of the rights and privileges of same-sex couples. In recent years, there have also been developments relating to their child support obligations.

Courts have asserted a number of bases for “an obligation on the part of the parent’s former same-sex partner to provide financial support for the child,” including a finding of an obligation based at least in part on a contract or promise. In Karin T. v. Michael T., the parties had two children by means of artificial insemination. Before this procedure, “the partner executed an agreement stating[:] ‘a. That such child or children so produced are his own legitimate child or children and are the heirs of his body, and b. That he hereby completely waives forever any right which he might have to disclaim such child or children as his own.’” Additionally, the parties had lived together in the same household for six years and both contributed to the support of the family and the children.  The court found under these circumstances and the provisions of the agreement between the parties there was an enforceable contract. The court stressed that “the document that was signed by the partner, by which these children were brought into the world, gave rise to a situation that needed to provide these two children with remedies.” To hold otherwise, the court stated, would allow the partner to escape her responsibilities in supporting the children.

As the law continues to shift in regards to same-sex marriages, the very public Griner-Johnson separation will likely bring attention to child support obligations of same-sex partners. If Ms. Griner “fights paying child support, it could set a precedent in the state for same-sex couples.” As Arizona lawyer Claudia D. Work stated, “This is going to come down to whether the court will hold Ms. Griner to contractual promises.”

If you have any questions about same-sex marriage or any other issue, the Certified Family Law Specialists at Lonich & Patton have decades of experience handling complex family law matters. Please contact the Certified Family Law Specialists at Lonich & Patton for further information.  Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may include legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

Source: Julie A. Nice, Symposium, The Descent of Responsible Procreation: A Genealogy of an Ideology, 45 Loy. L.A. L. Rev. 781, 798 (2012).

Source: Child Support Obligations of Former Same-Sex Partners, 5 A.L.R.6th 303 (Originally published in 2005).

Source: http://www.nytimes.com/2015/05/16/sports/basketball/wnba-suspends-brittney-griner-and-glory-johnson-in-domestic-violence-case.html?_r=0

Source: http://www.huffingtonpost.com/2015/06/05/wnba-brittney-griner-annul-marriage_n_7523708.html

Source: http://www.bostonherald.com/inside_track/celebrity_news/2015/06/wnba_war_the_day_after_glory_johnson_reveals_shes_pregnant

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Celebrity Prenuptial Agreements: What Is Enforceable and What Is Not.

Posted June 26, 2015 in Family Law by Lonich and Patton.

When celebrity couples get married, celebrity news outlets and magazines are always quick to report on the details of the couples’ prenuptial agreements. More often than not, these reports feature prenuptial agreement clauses that are outlandish and extreme. To some, these celebrity prenuptial agreement clauses seem laughable and ridiculous, but for others, they are right on the money and reflect the types of items we desire in our own prenuptial agreements.  Regardless of which camp you belong to and the validity behind these reports, the clauses in celebrity prenuptial agreements do offer some points to think about. For purposes of this blog, the question is not whether the reports on these prenuptial clauses are true, the question here is whether California courts will actually enforce these types of clauses.

Before we dive into specific celebrity prenuptial clauses/provisions, let’s cover some important implications related prenuptial agreements should be covered:

1. California is a “no-fault” divorce state. Many recognize the phrase “no-fault divorce” by its legal version, “irreconcilable differences.”

2. California is a community property state, meaning that spouses share 50/50 interest in property acquired during their marriage.

3. Courts faced with a prenuptial agreement with unenforceable clauses/provisions will either invalidate the entire prenuptial agreement, or will enforce the valid portions and just sever or ignore the unenforceable parts. Couples can prevent the former from occurring by including a “severability clause” or provision in their prenuptial, which provides that the invalidity of one or more provisions shall not invalidate the remaining provisions and allows the remaining provisions to be severed and enforced according to their terms.

4. Despite California being a community property state, premarital agreements may validly preserve the separate property character of premarital assets and characterize income and property acquired after marriage.

5. In California, premarital agreements that include a waiver or limitation of post-dissolution of spousal support are not per se unenforceable, as long as it was “executed by intelligent, well-educated persons, each of whom appears to be self-sufficient in property and earning ability, and both of whom have the advice of counsel regarding their rights and obligations as marital partners at the time they execute the waiver … .”

Now that we have covered some important aspects of California law as it pertains to premarital agreements, let’s look at some of the most intriguing clauses/provisions of celebrity couples’ prenuptial agreements:

  • Justin Timberlake and Jessica Biel: The “Fidelity Clause,” which states that if Justin cheats, Jessica gets a payout of $500,000.

Enforceable?

In California, this provision is unenforceable as contrary to the public policy underlying no-fault dissolution laws to the extent it imposes a penalty on one of the parties for “fault” during marriage.

  • Facebook mogul, Mark Zuckerberg and wife, Priscilla Chan: The clause that requires Mark to totally unplug and spend quality (non-wired) time with Priscilla at least once a week.

Enforceable?

An article in the ABA Journal from June 2013, refers to this as a “Lifestyle Clause.” The article explains that while most of these types of provisions are unenforceable in court, they are still useful because they help couples discuss goals and make them more likely to stick.

  • Catherine Zeta-Jones and Michael Douglas: Provisions provide that Catherine gets $2.8 million for every year they were married. Plus, another $5 million if Michael cheats.

Enforceable?

The first part may be enforceable. The enforceability of the $2.8 million per year of marriage provision depends on how the court construes the payment amount and structure. CA courts have enforced agreements that include a payment of a specified sum to one spouse when the purpose of such payment was to ensure that, if one spouse died or the marriage was dissolved, the other would be no worse off than he/she would have been had he/she remained single (typically the woman).

The amount “per year” language is also indicative of a pre-determined spousal support amount. California does permit couples to set their own spousal support agreements so long as the amount paid is at or above the state guideline.

However, if the court construes the amount to be “promotive of dissolution” then it will not enforce it. The provision at issue is not technically one lump sum payment in the event of dissolution, but rather is a one lump sum with a total contingent on the number years married. Typically, this could be considered “promotive of dissolution” as it offers Catherine a huge sum of money for dissolution, but-for two things-

(1) Catherine is a high-paid Hollywood actress, making this total amount per year less inducing of dissolution, and

(2) Catherine only stands to gain a large sum of money per this provision because the marriage has lasted over a decade, making this provision arguably more promotive of marriage.

As for the $5 million payout if Michael cheats?

Similar to the “fidelity clause” of Justin Timberlake and Jessica Biel, this is unenforceable in California.

  • Khloe Kardashian and Lamar Odom: Provisions state that in the event of dissolution, Khloe is to receive $500,000 for every year they were married, $25,000 in general support, their house, a new luxury vehicle at the end of every lease cycle, $5,000 per month for shopping, $1,000 a month for beauty care, and Lakers tickets for Kardashian’s friends and family.

Enforceable?

While to some readers these provisions may seem exorbitant, these amounts may reflect Ms. Kardashian’s level of lifestyle during the marriage. CA law recognizes premarital agreements where couples reorder property rights to fit their needs and desires, and participate in realistic planning that takes account of the possibility of dissolution, including provisions for spousal support. Thus, Khloe and Lamar were within the law to contract these post-dissolution lifestyle maintenance amounts.

Today’s review of prenuptial agreements was just an exercise. It was by no means a full review of the law on California prenuptial agreements. Further, the celebrity prenuptial agreement clauses discussed today were only used to illustrate the point of enforceability. This blog does not purport to confirm or deny the existence of the above-mentioned clauses.

If you have any questions about premarital agreements, or any other issue, the Certified Family Law Specialists at Lonich & Patton have decades of experience handling complex family law matters. Please contact the Certified Family Law Specialists at Lonich & Patton for further information.  Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may include legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

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