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May 2022 |
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Preserving Your Legacy: What Entrepreneurs Should Know About Estate Planning |
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Many entrepreneurs refer to their business as their “baby” and rightfully so. Like a child, entrepreneurs nurture their business from an idea through conception, to growth, and maturity. Running a business is much like raising a child. Both require a lot of time, tears, resources, and effort to be successful. People often prepare for what would happen to their children in the event they pass away unexpectedly, however, they don’t necessarily consider what would happen to their business – and how that would affect their family. While it can be scary to consider, life is uncertain. Creating an effective estate and succession plan is an ongoing process that will change in each phase of the business’s life.
Business owners pour blood, sweat, and tears into their business, often struggling and making sacrifices for the company to survive, in an attempt to create a legacy that will provide for themselves and their families. But what happens when they are no longer around to run their business? Entrepreneurs should be aware of the unique issues they face when creating an estate plan. They must take action to ensure their business continues on long after they are gone.
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Entrepreneurs often think that estate planning and succession goals happen later in life or at maturity of the business. Let’s face it, the upkeep of running a business is more than enough to worry about, much less considering one’s own mortality in their younger years. In the past, young entrepreneurs and start-up owners were less likely to plan for these things right out of the gate. As we continue to come out of the pandemic, the roles have reversed for the first time in history, allowing 18-34 year olds to take the lead when it comes to creating an estate plan.
Often business owners don’t consider what would happen to their “baby” without a leader. What happens after the owner passes away – when the court system ties up the business assets for months or even years until your estate is settled? Or even worse, they hand the business over to an unprepared family member. Without a proper estate and business succession plan in place, these scenarios are entirely likely.
Successful estate and succession planning requires a team of professionals. The team should include an estate planning attorney, accountant, financial planner, and an insurance agent. An important first step in creating the plan is consulting with an estate planning attorney and then ensuring that all of the professionals are in communication with one another in order to accomplish their succession goals.
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Filial Responsibility: Are Children Responsible for Their Parents’ Long-Term Care? |
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Filial Responsibility Laws, also known as Filial Support Laws, are relatively unknown. More than half of US states (including Puerto Rico) could hold adult children financially responsible for their parents’ long-term care. If your parents live in one of the following states, you could be held legally responsible for their healthcare: Alaska, Arkansas, California, Connecticut, Delaware, Georgia, Indiana, Kentucky, Louisiana, Massachusetts, Mississippi, Montana, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Virginia, and West Virginia. |
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At one point, 45 US states had statutes that left adult children responsible for their parents’ nursing home care. After Medicaid was established in 1965, many states repealed these laws. The filial law system was adopted from England’s “Poor Laws”, a set of social measures meant to support low income citizens that could not afford care. Medicaid and Social Security helped to reduce the need for these laws. |
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While filial laws are rarely enforced, the rising cost of healthcare and longer life expectancies increase the likelihood of elderly individuals outliving their savings, which could rekindle these laws’ implementation. If your parents live in a state with filial responsibility laws and they start to accumulate healthcare bills they cannot afford, the provider may be within their rights to sue you for payment, and win. Some states can even extend criminal penalties to children who deny covering care. For example, according to North Carolina law, refusal to support your parents could result in a Class 2 misdemeanor that could earn you up to 120 days in jail.
If a parent becomes eligible for Medicaid, then the government will pay for nursing home care in most cases, and these laws become irrelevant. The Medicaid Estate Recovery Program (MERP) will sometimes try to recover the cost through the recipient’s estate after death. However, Medicaid does not require that adult children contribute directly to their parents’ care. In cases where the child and parent share assets, such as joint bank accounts or jointly owned real estate, the state may take action against these assets when trying to recover long-term care costs.
The best way to avoid issues with these laws is to get involved with your parents’ financial planning to ensure they have a plan to pay for long-term care themselves. An estate planning and elder law attorney can help create a plan to protect your parents’ assets while alleviating you of your filial responsibility. It is also important for families to consult with an attorney when applying for Medicaid or when beginning to plan Medicaid strategies, such as changing asset ownership or spending down assets. |
Upcoming Events |
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5 Things all Kids Must Consider as their Parents AgeTuesday, June 7 5:00 PM - 6:00 PM How Do I Protect My Child’s Inheritance?Monday, June 13 12:00 PM - 1:00 PM Wills & Trusts 101Wednesday, June 15 5:00 PM - 6:00 PM How to Plan for the Second Half of LifeThursday, June 16 12:00 PM - 1:00 PM The Key Estate Planning Documents Everyone Needs and Why You May Need A TrustTuesday, June 21 12:00 PM - 1:00 PM Estate Planning for Young FamiliesWednesday, June 22 5:00 PM - 6:00 PM The Key Estate Planning Documents Everyone Needs and Why You May Need A TrustWednesday, June 22 7:00 PM - 8:00 PM
Register today to reserve your spot!
Additionally, registration for these events is critical so that we can contact you if it is prudent to cancel this session or if we need to change how we are able to offer this to you.
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A Personal Note From Tiffany |
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Some of you know that I took my first-ever sabbatical in April. It was a fantastic month. I spent the first 10 days of the month in Paris with some other business owners and our coach. It was great to have time to talk with my fellow colleagues about how they do things and to also have some time to enjoy Paris in the Spring. I came away inspired and excited about the things we can do at the firm for our clients and our team. |
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Speaking of team...The thing I was most inspired by in April was the O’Connell Law team. This was the first time I stepped away (other than for week long vacations), and the team didn’t miss a beat. My goal has always been to build a better team than I could ever be alone. It’s incredible to see the goal achieved – My team truly rocks. If you worked with my team in April, you personally know that. If you haven’t and need something, we're ready to help you. Just reach out. You’ll find our contact information on this newsletter.
As always, thank you for taking the time to read and reflect.
Sending you all a remote hug,
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Finally, an Estate Planning Guide for Everyone! |
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Many books about estate planning are long, complicated, and written in a way that’s hard to understand. Not this one!
Do You Have a Plan? How to Avoid Leaving a Mess (A Guide to Estate Planning) is written by estate planning and Certified Elder Law Attorney Tiffany A. O’Connell. The book is a quick and enjoyable read, thanks in part to wonderful illustrations by Joy Murphy. The book can also be used as a reference guide to easily review important planning concepts in the future.
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3 Eliot Street | Natick, MA 01760 |
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