If an LLC protects me, why get business insurance?

Business clients often ask me why, if they form their business as a limited liability company (LLC), would they need business insurance?  Doesn’t the LLC structure protect me from liability?

You can launch a business tomorrow simply by starting to do whatever your business does, without filing with the state, choosing a business entity.  If you want to sell widgets, you would get widgets and sell them.  You would be a sole proprietor, you would have a sole proprietorship structure to your business.  You would be your own boss, totally responsible for business decisions.  That sounds perfect to many people.  However, you would also be totally responsible for liabilities, and your personal assets would be vulnerable if your business was sued for whatever reason.  Your business’s money and property and your personal money and property are all at risk as a sole proprietor.  You might not only lose your business’s widgets in a lawsuit, you might lose your house.

To create a divide between “business” and “personal,” sole proprietors and people starting a business choose to incorporate.  The limited liability company (LLC) is a common choice of business entity in Ohio.  If your LLC is sued, only the business’s assets are at risk and your personal assets should be safe.  (“Piercing the corporate veil” in a lawsuit against an LLC could put personal assets at risk, but that is a topic for a different blog post.)  So, why would you need business insurance since your personal assets are protected?

The question becomes what happens if your business faces a large lawsuit.  For example, one of the widgets you sold was defective and caused a horrible personal injury to the customer who bought it.  Even if your company is found not liable, it could face financial ruin defending itself.  Business liability insurance protects the assets of your business.  Errors and omissions (E&O) insurance would cover the cost of defending your business in a lawsuit, while general liability insurance would cover your business in situations arising from negligence.

If you are a sole proprietor, or plan to start a business, incorporate your business to protect your personal assets.  Then, purchase business insurance to protect your business’s assets.

If you want to start a business in Ohio, or have any questions about LLCs, email me at julie@juliemillslaw.com.

 

 

Have you been named Executor? Trustee? Possibly both?

When clients have estate plans prepared, they must choose people they trust to fill certain roles in estate plan documents.  The biggest shoes to fill are the executor of a will, and the trustee of a trust (if the client is getting a trust).  The duties for both roles are different because the documents do different things.  Sometimes the same person fills both roles, if that’s what the client wants and if the person they choose agrees.

Executor

An “executor” is the person named in your Last Will and Testament to wrap up your affairs after you die.  You might be expected to:

  • Pay financial obligations including taxes of the decedent from estate assets
  • Manage the estate by possibly submitting a will for probate, gathering the decedent’s assets and holding them until they are sold or distributed
  • Contacting government institutions and agencies to stop benefit payments
  • Represent the estate in legal matters

The role of an executor typically lasts for 13 months or under in Ohio.   You are wrapping up someone’s affairs and distributing their assets as their will dictates.  Once bills are paid and assets are sold or distributed, your role ends.

Trustee

A “trustee” is the person named in your trust (often, a “revocable living trust”) to perform the duties stated in your trust.  You might be expected to:

  • Manage the assets in the trust, which might be monetary assets, a home, etc.
  • Distribute trust assets according to the terms of the trust.  Common terms include the trustee paying for a beneficiary’s college expenses, distributing portions of the assets of the trust at certain ages
  • Communicating with the beneficiaries

The role of a trustee lasts for the lifetime of the trust.  A trust ends once final distributions are made or assets are exhausted.  A trust can also be terminated, which mostly happens when the value of the assets of the trust make administering the trust impossible–the trust’s assets diminish in value to the point of the trust not being able to pay trustee fees or other expenses.

Both roles carry some amount of personal liability, impose fiduciary responsibility, and can be time consuming.  If you were named in either role, then the person creating the documents trusts you, your abilities and judgment.

If you have been named the executor or trustee in someone’s will or trust, and you have questions or need guidance, please email me at julie@juliemillslaw.com.

For Nonprofits: Classify your donations correctly

When someone donates money or something else of value to a charity (typically tax-exempt nonprofit, or 501c3), that donation is restricted or unrestricted–a charity’s assets are classified as either with donor restrictions or without donor restrictions.  Charities must know the difference between these terms and what problems might arise with any restrictions, and keep track of donations appropriately.

If I donate $500 to my favorite charity with a statement somewhere (could be written in my donation letter or email, or even on the memo line of a check) that my donation is to be used for a specific purpose of the charity–my gift is to the Humane Society of the United States to fight puppy mills, then my donation must, by law, be used for that purpose, to fight puppy mills.  This is a restricted gift.

If I donate $500 to the United Way with no statement anywhere about what purpose it is to be used, or I state that my donation can be used however the United Way sees fit, then the United Way can use my donation however it determines–operating expenses, any of its programs, etc.  This is an unrestricted gift.

What if a nonprofit that provides assistance with medical bills, raises money through GoFundMe or something similar, for a specific event–a person facing a specific surgery, then that surgery is no longer needed?  Or all of the funds raised aren’t needed–$50,000 was raised but only $30,000 is needed to pay medical bills?  The nonprofit has $20,000 remaining of a restricted gift.  Just because the bills only total $30,000 does not mean that the nonprofit has $20,000 to use as it wishes, since the donors who gave that money did so to pay for that specific surgery.  Your state’s Attorney General would become very interested in what happens to those donations.

If the purpose for the gift no longer exists, it is possible for the charity to remove donor restrictions from a gift/donation.  It can:

  1. Talk to donors.  You can go back to donors, tell them that the purpose for their donation no longer exists and ask them what they would like you to do with their donation, or for permission to put it towards another use.  If you use due diligence in this effort, then the Attorney General might not intervene since their purpose is to protect the public.  Perhaps you would put a notice on your website or Facebook page to reach the specific donors, try to contact them directly, or publish something in the newspaper asking for donors to the campaign to come forward.
  2. Talk to the Court.  It is possible to go to court requesting a modification of the gift’s restriction if the purpose for the gift no longer exists, has become unlawful, impossible to achieve, or wasteful.
  3. Talk to the Attorney General.  If the donations total less than $250,000 and are more than 10 years old, you could provide 60 days’ notice to the Ohio Attorney General of your intention to modify or release the restriction. If the Attorney General does not object, then you can release or modify the restriction–the $20,000 from the GoFundMe surgery campaign could be used for another medical bill, another program, overhead, or whatever the charity determines.

The best advice for nonprofits is to keep detailed financial records of donations and any restrictions that are attached.

If you have any questions regarding donations, charities or anything in this post, email me at julie@juliemillslaw.com.

No will? The state has one for you and it might not accomplish what you want.

“Everyone has a will.  Either you prepared it, or your state did.”  It’s true–if you have not prepared your own last will and testament, then a state’s statute of descent and distribution (here is Ohio’s) kicks in when you die.  These state statutes prescribe who inherits your assets at your death.  So yes, everyone is covered by either their own will, or your state’s laws, for distributing your assets when you die.  The question becomes whether you want to decide who inherits your belongings, or whether you want the state to decide.

For example, in Ohio if you die intestate (with no will), here is how your assets are distributed.  My summary below doesn’t cover every situation possible–see the link above to the statute if your situation in Ohio is not included in scenarios below.  Note that children who are adopted are treated legally the same as biological children:

  • Spouse is alive:
    • all kids are yours and spouse’s: all to spouse
    • no kids with spouse or anyone: all to spouse
    • kids survive but none are with spouse: some to kids, some to spouse
    • kids survive but some with spouse, some not: some to kids, some to spouse
  • Spouse died before you:
    • kids survive: to kids or their lineal descendants (your grandkids, great grandkids, and on)
    • no kids or their lineal descendants survive: all to your parents or surviving parent
    • no kids/lineal descendants, no parents survive: to whole or half blood brothers and sisters, or to any of their lineal descendants
    • no kids/lineal descendants, no parents, no whole/half blood brothers and sisters or their lineal descendants survive: one-half to surviving maternal grandparents or survivor of them; one-half to paternal grandparents, or survivor of them
    • none of above are surviving: to lineal descendants of grandparents (e.g., your grandparents’ children and their descendants)
    • none of the above are surviving: to stepchildren, or to their lineal descendants.
  • If none of the above are surviving when you die, then your assets escheat (go to) the state.

If absolutely no one survives you, do you want the state to get your assets when they could have been donated to a charity, or to benefit a school program, or sold to provide funds for a food pantry?  Perhaps you have pets and would want your assets sold to provide for their care?  Perhaps you have a dear friend who you would want to receive your assets?  Designating something in a will accomplishes what you want to happen.  Assets escheating to the state is not as uncommon as people think.

Contact me at julie@juliemillslaw.com to discuss what you wish to happen to your assets at your death.

 

Service dogs in schools–a decision for the parent

My law practice consists of estate planning, probate, business, nonprofit, real estate and other transactional-type of areas.  However, an unadvertised part of my practice involves service dogs in schools.  This area of practice came about by experience (my knowledge of the Americans with Disabilities Act [ADA]) and happenstance (jumping into the service-dog fray due to representing someone pro bono after their egregious situation made its way into the news).

Children with disabilities have service dogs (SD) for a variety of reasons.  Service dogs aren’t just comforting pets that accompany a child to make him or her feel better.  In situations where I’ve been involved, the SD has been trained to detect seizures before they happen and alert adults, detect low blood sugar in children with diabetes, prevent elopement (wandering) of children typically with autism, calm “meltdowns” that are uncontrollable, and trained in search and rescue when children do wander away without being noticed.  This training usually costs five figures or more and is time-intensive.  Some of these situations, especially “wandering,” might seem strange to parents who don’t have children on the autism spectrum, or other special needs.  Elopement-wandering, for example, is when children–again, typically who are autistic–escape notice and wander off (elopement happens often in nursing home residents as well).  This can happen in a split second and, in fact, elopement is a leading cause of death in children with autism.  Death from elopement is caused mostly by drowning, then by being struck by a vehicle.

Parents obtain service dogs for a variety of reasons also, but for most, having a service dog with their child is a matter of life and death.  One mom had an elementary-age daughter, nonverbal, autistic, who kept escaping her classroom, then escaped the school building.  The Special Education Director assured Mom that the school could keep her child safe.  The very next week, this nonverbal 6 year-old escaped the school building, wandered a mile down the road, crossed four lanes of traffic and entered a 7-11 store to the shock of the employees inside, and the school didn’t notice her missing for over an hour.  This was life and death for this child, and Mom got a service dog.  In a class of 20 students, a teacher already has his or her hands full, which is why the parents got a service dog for their child with Type 1 diabetes, so that blood sugar issues didn’t go unnoticed and possibly become fatal.

For years, schools would bring the SD issue under determination of special education procedures, i.e., an IEP, under special education federal law, the Individuals with Disabilities Education Act (IDEA).  Typically, the school would deny the SD as not necessary to the child’s education.  Fortunately the U.S. Supreme Court weighed in, and recognized what some courts held, that a service dog is a civil right to the child and not a matter under purview of anyone, including schools.  Governing federal law–the Americans with Disabilities Act and the Rehabilitation Act of 1973–permit service dogs to accompany their person anywhere, with very rare exceptions.  Service dogs are working animals, not pets, and are actually considered durable medical equipment, no different than a wheelchair.  They are protected in public places by federal law, as opposed to emotional assistance animals (most remember the peacock on the plane).

Children with disabilities can be accompanied by their service dogs to school.  Period.  This is not a decision left to the school.  A service dog is a right of the child independent of their receipt of a Free and Appropriate Public Education (FAPE).  Whether the SD is medically necessary is not up to the school.  Obtaining a prescription from the parent for the SD, requiring insurance coverage, or requiring vaccinations beyond what is required of any dog are not permitted.  Rejecting the SD’s presence due to another’s allergies, or because of the dog’s breed, are also prohibited.  These are all reasons that were given to my clients by schools in service dog cases.  Parents ask permission from the school to permit the dog to accompany their child, but frankly this is not required.  It is certainly good practice to alert the school and work with the school to accommodate your child with the service dog.  My favorite court ruling mentioned the defendant-school stating that “we[staff] can help Johnny when he needs it, he doesn’t need the service dog” (Johnny isn’t his real name), to which the court responded that this was akin to saying about a student in a wheelchair, “we’ll carry him where he needs to go–he doesn’t need his wheelchair.”

The school has to provide reasonable accommodations and reasonable modifications to policies when a request for a reasonable accommodation is made by a student with a disability.  The Department of Justice (enforces the ADA) makes it clear that public schools are to make reasonable accommodations for service dog requests.  Schools perhaps justifiably analyzed service dog requests under the law that governs their daily work lives, the IDEA.  Fortunately, the Supreme Court realized that other federal laws govern students as well.

If you have any questions regarding service dogs, whether it’s school-related, or service dogs in public places or elsewhere, please contact me at julie@juliemilslaw.com, or (614) 519-8661.

 

Misconceptions you might have with estate planning

I have heard all of these misconceptions mentioned, including just today.

  1.  The attorney who prepared my will must handle my probate.  No.  Many estate planning attorneys prepare wills with an eye toward being called upon to handle a probate if the client dies, but there is absolutely no requirement that the drafting attorney who prepared your will must handle your probate.  This includes if the attorney who prepared your will holds your original will for safekeeping.
  2. My will dispenses with all of my property. Some documents override a will.  If you have a will, and you leave all real (house, land) and personal property to John, yet you have a deed that is held somehow with Jane, Jane will get the house because she is on the deed, not John, even though your will gives it to John.  Generally, titled and deeded assets go to the person listed on the title, or beneficiary designation, or deed.  “I leave everything I own to Bob.”  At my death, I have a life insurance policy that lists Joanne on the beneficiary designation.  Who gets my life insurance?  Joanne.
  3. I had a trust prepared so I don’t have to worry about probate.  It is so frustrating to see clients come to me with trusts they had prepared (and paid a lot to have prepared), only to learn that the trusts are unfunded.  What the client has, then, is a stack of papers that likely will not do what was intended.  Funding your trust involves titling or deeding assets to your trust.  You can accomplish this by naming your trust on beneficiary designations so that asset goes into your trust at your death, or having a “transfer on death affidavit” prepared that puts your home into your trust at your death.  For example, you would have a deed prepared granting your home from Jenny Jones to “The Jenny Jones Revocable Living Trust.”   However you accomplish it, a discussion of “funding your trust” should be a critical part of planning from your attorney.  If you have a trust prepared and then never prepare a new deed putting your home into your trust, and you die, your home will likely require a probate to be opened, defeating one of the important reasons for having a trust prepared (avoiding probate, privacy).
  4. A will (last will and testament) is different than a “living will.”  A last will and testament is what we think of as a “will”–we state who is to inherit what, we name a guardian for our kids if they’re young, we name an executor.  On the other very different hand, a “living will” is a healthcare document stating whether we want artificial life support if (1) we are terminally ill and death is imminent, or (2) if we are in a permanently unconscious state (i.e., brain dead).  This is popularly known as “pulling the plug.”

Contact me at julie@juliemillslaw.com to discuss estate planning.