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Your legal expertise is apparent, but what about your business acumen? Do you have time to crunch twenty-five complex financial ratios, and then search the internet for comparison numbers to contextualize your own?
One of the foundations of working on your business rather than in it is your ability to use your firm’s financial and human resources effectively, efficiently, and fairly. Any entrepreneur, in any field, would jump at the chance to discover industry-specific financial benchmarks for the optimal relationship between overhead and revenue, or revenue and number of employees, or gross revenue and owner’s comp. Consultants may be available to run these numbers for you, for a nice fee, and they may or may not be able to give you current information about how your allocation of resources stacks up against that of other, thriving legal practices.
Members of the Academy submit these financials annually and at a close-door session at every Spring Summit, these same Members share information able their financials with each other. If you’re not a Member, you still have the opportunity to have us review your financial statistics against our benchmarks for owner’s compensation, revenue per person on the payroll, revenue per attorney in the firm, and cases per employee, among other valuable ratios. To find out how you too can adjust one or more of your financial numbers and get out of the office and onto the golf course while your revenue skyrockets, contact us about Membership today via email at info@aaepa.com or by phone at 1-800-846-1555.
Jennifer Price
Director, Member Services
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com
Estate planning attorneys often strive to obtain valuation discounts. We set up Family Limited Partnerships and carefully supervise their administration, at least in a perfect world. We advise clients to fractionalize their real estate to obtain a fractional interest discount.
But, discounts may not make sense for many clients. Remember, discounts must be taken consistently. In other words, if you are taking a discount for estate tax purposes, the same discounts will apply for income tax purposes. The problem is the client will want a low valuation for estate tax purposes and a high valuation for income tax purposes in setting the basis of the property.
Let’s look at an example:
John has assets of $4 million, consisting entirely of Blackacre. The property is currently held in his sole name and no valuation discount may be taken. If John fractionalizes the ownership to tenancy-in-common and gifts a portion to his children (or an irrevocable trust) it may qualify for a discount of 10%-20%. So, the valuation could be reduced to $3.5 million, let’s say.
Getting that reduction in valuation may make sense if we are looking at a 55% estate tax rate and a $1 million applicable exclusion. However, if the applicable exclusion is $5 million, fractionalizing the real estate could unnecessarily reduce the basis for the heirs without any estate tax benefit.
Assuming an estate tax will be due, it would be necessary to weigh the state and federal estate taxes to be saved at death against the present value (at date of death) of the future state and federal capital gains taxes which would be owed by the heirs. Of course, this is a complex calculation which requires knowledge of the heir’s state of residence and the timing of the heir’s sale of the property.
As you can see, in John’s case, if the applicable exclusion is at or above $4 million, his heirs would be better off if he does not fractionalize the real estate. If his estate is above the applicable exclusion amount, a calculation would have to be done to determine if discounting is beneficial.
Obtaining a discount may be complex (such as an FLP) or simple (such as fractionalized tenant-in-common interests), but the decision is quite complex.
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com
Every year, the co-founders of the Academy share a year-end message to the Membership. To me, it is always a breath of fresh air and I thought that our many blog subscribers might enjoy it as well.
Happy New Year!
Jennifer Price
ON YOUR MARK, GET SET… STOP!
We’ve all heard the first part of this phrase before. In fact, young children can even finish it when prompted. However, as we end 2011 and get ready for the new year, we invite you to take a moment and STOP! That’s right, STOP. Take some quiet time and reflect on the past 12 months. Sure, we’ve all heard we should review our goals, failures and triumphs, but what does that really mean? Well, we believe there are some critical elements you’ll want to look at as you get ready for 2012.
Last year we mentioned three things we think are crucial to your sustainable success: Influence, Action and Resolve. Now is a perfect time to evaluate and reflect on these values.
How did you influence others and what or who influenced you? Who did you hang out with? Did you replace any of those naysayers and pessimists who have brought you down or tried to kill your dreams? What books, magazines, TV shows, movies and radio stations did you allow into your life? Did they uplift and inspire you or were you surrounded by a bubble of negativity? As long as we’re looking at influence, what impact did you have on others? Were you an example of the virtues you look for in others? Did you keep your word, arrive at appointments on time and create a transformational experience that changed people’s lives? We encourage Members to think about how you fulfill your leadership role to those around you—family, friends, staff, clients and prospects. This can make a world of difference for everyone in your universe. Remember, peoples’ views and attitudes are contagious, and you’re in the perfect position to profoundly impact many different groups. We encourage you to take on this leadership role and use it wisely.
Next, look at your actions. In the past year, did you take deliberate action to further your goals? In the Academy Peak Performer program, we stress daily action steps in pursuit of your goals, and it is always coupled with accountability. We require Peak Members to report to us and the group daily on their progress. We’ve found that without publicly declaring your goals, finding an accountability partner and actively building structures in your life you have little chance of success. So we ask you, who is holding you accountable for your actions? In many respects the entrepreneur’s life is a lonely one with no natural checks and balances other than the indifferent marketplace.
We believe the foundation of action is integrity. No, not integrity in a moral sense, but integrity as a precursor to workability. Just like a ship has “water tight integrity” to insure the vessel stays afloat, did you demonstrate integrity by honoring your word, doing what you said you would do? We all have a funny way of distorting reality to get us off the hook. It’s often been said that we judge ourselves on our intentions, but others judge us on our actions. Look back on your actions this past year and identify those areas where you substituted your intentions for solid, real action. In many ways our lives resemble a defendant standing before the judge who pleads “guilty with an explanation.” I intended to do that, but… (fill in the excuse of your choice).
But none of it matters if your resolve is not there. Remember, if it was easy everyone would build a successful business. Expect the challenges because they are surely coming. Remain disciplined as you face the inevitable problems which confront all business owners. Be willing to go that extra lonely mile that most never walk. It can incorporate everything from taking the time to strategically plan your year to the extra effort involved in improving your skills as a counselor, manager and leader.
However, as we stressed this year everything becomes easier and is enhanced when you know your WHY. Why do you do what you do? When you strip away the money and the status, what really lights you up every day? When you identify it, we’re sure it will energize you, sustain you and provide the impetus to seize the opportunities in your marketplace. With a clear vision of your firm, you can move confidently into 2012 and you will not be alone. You will be surrounded by the care and support of the Academy and your colleagues around the country. It reminds us of the wonderful quote by Basil King, “Be bold and mighty forces will come to your aid.”
We continue to marvel at the collective success of Academy Members and remain humbled by our affiliation with such an amazing group! On behalf of the entire Academy team, we wish you a great holiday season and a prosperous New Year!
ON YOUR MARK, GET SET… GO!
To your success,
Robert and Sandy
Robert Armstrong and Sanford M. Fisch
Co-Founders of The American Academy & Co-Authors of The E-Myth Attorney
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com
If you have an email marketing program through an ESP (email service provider) you have access to powerful analytics, and you should pay attention to this data every time you send an e-news.
Why? Because it helps you develop better email programs, although you have to know what to look for and how to act on the data you receive. Email marketing analytics focus mainly on things such as open rates, click-throughs, bounces, and spam reports.
For example, the average open rate, or percentage of people who actually open your email, is 19.8% for emails delivered through professional services. If your e-news has less than a 20% open rate, you need to make some changes. One thing to review is your subject line. Many times, a general subject line works better than a specific one. It could be that “January Estate Planning News” works better than “401(k) Accounts and Estate Planning.”
Regular personal contact can also enhance open rates, especially if your rates are low because your audience hasn’t added your address to their address book. Ask all of your associates who have personal client contact to promote the benefits of your e-news and to encourage clients to add your email address to their address book.
Click rates are another indicator of how well your e-news is engaging your audience, showing you how many people click through to your website. Pay attention to these click rates and how they vary from one e-news to the next and from article to article. The average click rate for emails delivered through professional services is 3.7%. Your e-news template will have an area for your website link. You can encourage people to click on it by including a phrase such as “To learn more about us click here,” but a better tactic is to create links within each article that land people on a specific page relevant to the article.
Watch your bounce rates and spam reports. A “soft bounce” indicates that a person is away or their mailbox is full, but a “hard bounce” usually means that the address no longer exists. If a recipient has not opted in to your emails, or has forgotten that they have, they may report the mail as spam. ESPs will scold or cancel you if you have high bounce or spam rates.
So, keep your list clean. Study your subject lines, open rates, click rates, bounces and spam data. Successful email marketing is all about continuous improvement.
Jennifer Price
Director, Member Services
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com
Huguette Clark was nearly 105 years old when she died in May 2011. Heiress to a copper mining fortune, she lived an extraordinarily reclusive life. The last time she was even photographed was in 1930. Although she owned several opulent properties, she chose to spend the last two decades of her life in seclusion at Manhattan’s Beth Israel Medical Center, even when she was in good health. While she lived at the hospital, her close companions were her nurse; her attorney, Wallace Bock; and her accountant, Irving Kamsler.
Clark, who had no children, left behind an estate valued at $400 million. She also left behind two Wills, executed within six weeks of each other in 2005. The first Will, which you can read here, leaves $5 million to her nurse and the remainder of her estate to her extended family members.
The second Will, which you can read here, is longer and more complicated. It expressly disinherits her entire family, leaving $500,000 each to her attorney and her accountant, among several other bequests. It also leaves an estimated $34 million to her nurse. In addition, the Will creates a charitable organization, known as the Bellosguardo Foundation, to establish an art museum in her Santa Barbara, California mansion. Bock, Clark’s attorney, and Kamsler, her accountant, were named as directors of the foundation.
After her death, Bock and Kamsler, also her executors, filed the second Will in New York probate court and turned the first Will over to Clark’s family. The family has filed suit challenging the validity of the second Will. They allege, among other things, undue influence on the part of Clark’s attorney and accountant.
Bock and Kamsler were involved in the preparation of both Wills, and they each stand to benefit significantly under the second Will. Under New York law, their confidential relationship with Clark means that they will have the burden of disproving undue influence. In short, this will be a long, drawn-out and expensive battle for all involved.
Regardless of the eventual outcome of the litigation, Bock and Kamsler’s handling of Huguette Clark’s Will serves as a reminder of an important ethics fundamental. No matter how friendly you become with your clients, and no matter how innocent and well intentioned you and your clients may be, there are some lines that should not be blurred.
If a client expresses an interest in making you a beneficiary of his or her estate, make sure your law firm does not draft the plan.
Following this basic rule can go a long way toward saving you – not to mention your client’s family — the untold time, expense, and anguish that accompany a claim of undue influence.
Stephen C. Hartnett, J.D., LL.M. (Tax)
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com
This story is so extraordinary that if it didn’t really happen, no one would believe it. It seems life truly is stranger than fiction. The story involves two men, a hearse, a dead rock star, five gallons of gasoline, and a promise.
Remember the influential country rock musician Gram Parsons? He played with Emmylou Harris, The Byrds, The Flying Burrito Brothers, and The International Submarine Band. Parsons died in 1973 in a motel room near Joshua Tree National Monument from a morphine overdose at the age of 26.
The film Grand Theft Parsons (2003) is based on the true story of what happened to Parsons’ body after he died. The movie illustrates certain issues that can be helpful for estate planning attorneys to start conversations with their clients.
Prior to his death, Parsons stated that he wanted his body cremated at Joshua Tree and his ashes spread over Cap Rock, a prominent natural feature there. His road manager, Phil Kaufman, (who also managed Parsons’ drug and alcohol use as best he could) and Parsons had a pact. Whoever died first, the other would take the body to Joshua Tree and “set his spirit free,” that is, set the body on fire.
At the beginning of the film, Kaufman tries to obtain Parson’s body from the small, remote hospital near Joshua Tree. The nurse declines to give Kaufman the body, because he was neither a physician nor a close relative. He tries to steal the body from the hospital, unsuccessfully.
Parsons’ body goes to the Los Angeles International Airport for shipment to New Orleans for burial. Parsons’ stepfather arranged for a private ceremony, neglecting to invite any music industry friends.
In the film, Kaufman hires a hippie with a psychedelic hearse to retrieve the body from the airport and bribes the air cargo office clerk to obtain Parson’s body.
Once at Joshua Tree, Kaufman attempts to cremate Parsons by pouring five gallons of gasoline into the open coffin and throwing a lit cigarette inside – resulting in an enormous fireball. That part of the film stays pretty close to the true story.
The movie adds snarky ex-girlfriend Barbara Mansfield, who tries to cash in on Parson’s money and earthly possessions using a handwritten note on the back of a flyer advertisement. She says it’s his Will, but there is no notarization or anything that would make it official.
The note says: “To whom it may concern: I would like it to be known that it is my wish to leave Barbara Mansfield my assets and belongings in the event of my death. Signed, Gram Parsons.”
Kaufman tells her that’s not a Will. She says it’s a signed promise from Gram to leave her all of his things. Parsons was married to another woman at the time.
Using this note, she tries to obtain Parson’s guitar and music masters from Kaufman. She also tries to get money from the bank. The banker tells her they have rules, the piece of paper is invalid, and they would at least need a death certificate for her to prove that he is actually dead. She unsuccessfully tries to get a death certificate from the county registrar.
Outside of the questionable legality of setting a body on fire in a national monument, Grand Theft Parsons opens the door for attorneys to discuss the following points:
- In most states, a hand-written note does not make an acceptable Will, no matter how hard a desperate girlfriend insists it does. Do you as an estate attorney ever face this kind of situation? This is a chance to let your clients know what actually makes a legal Will valid.
- Hospitals will not release bodies to “close friends,” be they road managers or life partners without power-of-attorney proof. In fact, those who want to do their own home death care for a family member may have a difficult time getting a body released to next-of-kin.
- Bribing an air cargo clerk has got to be breaking some kind of law, but this was set in 1973, way before September 11 security enhancements at airports took effect. Only “Known Shippers” can now handle dead bodies when it comes to air cargo. You can’t just drive a psychedelic hearse up to the air cargo office anymore. Sigh.
By the way, in the true story, police chased Kaufman and his friend after setting the body on fire, but the pair got away. They were arrested several days later. Since there was no law against stealing a dead body, they were only fined $750 for stealing the coffin and were not prosecuted for leaving 35 pounds of Parsons’ charred remains in the desert.
Grand Theft Parsons is a fun film with a few life-and-death lessons sprinkled into the comedy. It can be rented on DVD through Netflix and purchased through Amazon.com. Rated PG-13 for drug references and some language.
Gail Rubin is the author of the award-winning book, A Good Goodbye: Funeral Planning for Those Who Don’t Plan to Die (http://AGoodGoodbye.com), and The Family Plot Blog, http://TheFamilyPlot.wordpress.com. She’s “knocking them dead” with her Funny Films to Start Serious Conversations talks.
Academy Guest Blogger
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com
Sanford Fisch recently blogged about finding your primary aim: creating a detailed picture of the lifestyle you want, encompassing your work and personal life as well as your involvement in the community. Once you’ve painted this vivid portrait of your ideal life, how do you bring it into being?
The next step is finding your firm’s strategic objective; in other words, creating a picture of the business you want to have that will generate the net revenue to support your ideal life. Not a daydream or a pipe dream – a detailed picture complete with milestones for accomplishing clearly defined goals. Where to begin?
Decide on your practice area. Will you focus on estate planning? What types of estate planning – basic, intermediate, or advanced? Will you include elder law, asset protection planning, pet planning, or lgbt planning? What about the myriad other areas of focus now in demand by estate planning clients?
Assign a number to the amount of revenue you want to generate. Think about what geographic area you’ll cover. Will you have one office? Will you have a satellite office? What will your offices look like, inside and out? How many employees will you have?
How will clients find out about your practice? How will they feel when they walk into your office? When they interact with you and your employees? What will your law firm’s relationship be with the people and other businesses in your community?
Take time to think in detailed terms about what your firm will look and feel like. By the time you’re finished, you should have a rich and detailed portrait of the law firm you want to bring to life. Then, you’ll be ready for the next step – mapping out an organizational strategy for your business. We’ll cover that in a future blog!
Robert Armstrong
President and Co-Founder
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com
Hardly a week goes by without news of yet another wealthy person giving away a large sum of money to a college, university, hospital, medical research facility, cultural institution, or any one of dozens of other institutions or causes.
The very wealthy are giving gifts at an astounding rate. The top five Forbes 400 members including Warren Buffet, Stephen Mandel, and Mark Zuckerberg, gifted a total of $3.7 billion in 2010 and 2011.
Clearly, many wealthy individuals view their legacy as more than the accumulation of financial assets. They want to be remembered for their charitable giving, for helping others, and to make an impact on society.
Of course, not just the super-rich practice philanthropy. Many people give meaningful gifts of all sizes or volunteer tirelessly for all sorts of causes.
So, what about you and your clients? Certainly many of your clients have an affinity to a cause or an institution and certainly some have thought about philanthropy. But perhaps they’re not aware of their options for giving, or of the tax advantages of doing so.
Here’s a handy list of ways for you or your clients to give back:
In kind. You or your clients may contribute your time or expertise to a charitable organization. While you cannot take a charitable deduction, but you get direct experience with the charity and how it uses its resources. That can be invaluable in determining whether it is a good use of your time and money later on.
Directly. This is the simplest form of giving, especially when there are no strings attached to the gift. This can be done during life, or a brief clause in a Will or Trust can suffice. This may be a good option for any client, especially for those with smaller gifts to bestow.
Retirement account gifting. A client can name a charity as a beneficiary to his or her IRA or employer-sponsored retirement plan. Of course, certain rules such as spousal approval often apply, so be sure to guide your clients accordingly. In 2011, individuals over 70 ½ can even do a “charitable rollover” of $100,000. This is a directly charitable contribution of the IRA during life. This can be advantageous because it avoids limits on income tax deductions, etc. But, hurry, the “charitable rollover” is set to expire after this year.
A charitable lead trust. This trust pays income to a charity chosen by the giver for a certain term. It may be set up during life or at death. After that term, the trust principal passes to family members or other beneficiaries.
A charitable remainder trust. This is the reverse of a lead trust because trust income is payable initially to the grantor or other non-charitable beneficiaries for the term of the trust. After that, the principal goes to the donor’s chosen charity. Again, this may be set up during life or at death.
Set up a private foundation. Individuals can make tax-deductible donations to a private foundation. Foundations can be trusts or non-profit corporations. Again, donations may be made during life or at death. For large sums, private foundations provide greater control for the donor but have significantly greater reporting requirements, etc.
Stephen C. Hartnett, J.D., LL.M. (Tax)
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com
Being a former Marine, I know all too well that the holiday season is often bittersweet for our deployed military personnel and their families. It’s hard to be joyful when you’re a world away from those dearest to you. Here are three ways you can make the holidays a little warmer for our military personnel.
- Send a Card or a Care Package to a Deployed Service Member.It used to be that civilians could send care packages addressed to “any soldier;” however, security concerns now prevent this. The Department of Defense requires that all letters, cards, and care packages be addressed to a specific service member. If you don’t personally know a deployed service member, you can go to ourmilitary.mil/care-packages/ to find a list of organizations that will help you connect with a soldier overseas. Not sure what to include in a care package? AdoptaPlatoon has compiled an excellent list of tips, ideas, and reminders to get you started.
- Write an Online Thank You Note. The USO’s Thanks From Everywhere page lets you post an online message to deployed service members, their families, and to wounded soldiers and veterans. You can also read messages from people in your area and around the country.
- Help Out a Military Family. Deployed soldiers aren’t the only ones who sacrifice to serve our country. The holidays are especially difficult for the wives, husbands, and children left at home during a service member’s absence. Here are some ways to help:
- If you already know a military family, bake a batch of holiday treats to share, or offer to babysit so that mom or dad can do some Christmas shopping without the kids in tow – the simplest gestures often mean the most.
- Volunteer with the USO, give to Operation Homefront, or support another organization that helps military families.
- Give or donate a Flat Daddy to the family of a deployed soldier. Flat Daddies are life-sized cardboard cutout photos of deployed service men and women. They’re designed to help children – especially young children – of deployed soldiers better cope with their parents’ long absences.
Whether or not you already have a connection with a service member, these are just a few of the countless ways you can show your appreciation and support this holiday season – and throughout the year.
Jennifer Price
Director, Member Services
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com
Newly released online: a short video encouraging Americans to think about their health care wishes.
Accompanied by moving music, it aims to reach the viewer emotionally as well as intellectually ― more so than I’ve seen in other video pieces on this topic. In fact, its tone reminds me a bit of the emotional ASPCA ads similarly-produced with only music, text and photos.
You might find this 3-minute piece useful to share with clients. It could be viewed in your office while clients wait for their initial consult, as homework before clients complete their healthcare directives with you, or during an educational presentation you might give in your community.
This video might also be an interesting way to reach out to existing clients at the holiday season. While your clients have obviously already completed their directives, it’s just as important that they talk about their wishes with their loved ones. And while this can be hard for them to do, it can be a tremendously important gift to their families. A short video like this to share with loved ones might give them a tool to start the conversation.
The National Healthcare Decisions Day (NHDD) initiative is hosting this video on its website (on the homepage) and adapted it for national use, as another vehicle to encourage advance care planning.
If you have any tools or ideas that you use to help clients have this conversation with their loved ones, please let me know.
Randi J. Siegel, MBA, is the President of DocuBank (docubank.com), the largest advance directive registry in the U.S., which ensures that the healthcare directives of its 190,000 enrollees are immediately available 24/7/365. Working with estate planning professionals since 1997, Randi frequently speaks at national estate planning conferences and has appeared on radio and television as an authority on registries. She is active in health policy pertaining to advance directives and serves as a Senior Fellow at the Jefferson School of Population Health in Philadelphia. Randi is an ongoing contributor to the Academy blog.
Academy Guest Blogger
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com
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