Wednesday, November 25, 2009

It's Not About the Paper (It's ALL About the Service)

Recently, a new client asked me to review an Estate Plan prepared by another attorney. Why would they be bringing it to another attorney for review? They had a nice folder full of documents, but more importantly, they had many unanswered questions and concerns. They weren't comfortable with their own estate plan!

The documents were reasonably well drafted, and contained language which clearly met the "industry standard." While my documents are different, and while maybe I could try to justify that they are somehow "better," the documents are not really the issue.

So what was the problem? It is a concern that seems to arise all too often. The attorney was unavailable to the client, not returning calls and not meeting with them after the first introduction and/or seminar. They were "boilerplate" and did not reflect a close connection with the client and their wishes. And perhaps most importantly, a significant source of frustration for the client was their lack of understanding of what the documents said, how they fit their particular circumstances, and what alternative provisions they might have.

"Legalese" in estate planning documents can be daunting, even as we have tried to make them more "plain English." But I don't think it is the documents, or the wording in them that is the real cause of the client's angst.

We are professional counselors and clients do not come to us just for document preparation. They come to us for our advice, experience, and expertise in applying the principles of our profession to their particular circumstances. They want, and deserve, some professional "TLC."

This is not a concept that is peculiar to lawyers. Lawyers, accountants, financial planners, bankers, brokers, insurance advisors and trust officers are subject to this concern. It is what separates us as professionals from technocrats. Certainly we produce and sell "products." And certainly, it is critical that the "product" that we produce for clients be superior. But it is not really the product that our clients seek. It is a personal relationship in which we impart some wisdom, borne of our years of training, experience and the relationships we have forged with clients.

As another year nears its end, I am moved to re-commit myself to provide superior service to clients. To me this means to listen carefully to their concerns and needs, to be responsive to their calls, questions and concerns, and to try to create and maintain that special relationship that makes us professional advisors. I hope you'll all join me in this commitment.


Sunday, September 20, 2009

Critical Client Documents - Drafting for Precision and Flexibility

Precision and flexibility may not be immediately apparent as common goals in legal documents. As my 25th year of estate planning and business law nears a close, I find myself reflecting on just those two thoughts. When writing documents for clients, my focus is more and more, drafting and planning for flexibility, and for precision in the meaning of words. Both are elusive!

Flexibility, is necessitated by the fact of change. I am consistently impressed by how much, and how rapidly change occurs. Laws change. Technology progresses, causing change we could never have anticipated. Client circumstances change (death, divorce, children maturing, employment). Views change for all of us as we experience life. As a practical matter, if 25 years of drafting has taught me anything, it is that there will be plenty of surprises -- things we did not anticipate. Nonetheless, I believe it is an important and primary goal to try to anticipate them.

Law students are drilled on using words precisely during their first year. It is a "sense" that over time, given all the other exigencies of the business of law seems to become "dulled." In an age of ever-increasing written communication (who would ever have dreamed 15 years ago that we would be "texting" instant messages around the world as a primary means of communication?), precision in written communication is arguably ever more important. Paradoxically, it is becoming less precise, between our always evolving slang terms and the abbreviations "texting" hath wrought.

I mention this, not because it has great relevance to writing legal documents, but because it underscores the difficulty in communicating precise, consensual ideas in writing!

Surprisingly, it has taken me years to come to the awareness that you and I may say the same words and mean something altogether different.

We live in a culture where multiple marriages are common. Use of terms like "spouse," "children" and "heir" in estate planning documents may be more ambiguous at the time of application than we considered at the time of writing the document. Terms like "in writing," and "signature" have taken very different (and unanticipated) meanings in the age of electronic commerce and communication. And terms of art in an industry may well have different meanings in different contexts. Use of precision by including "definition" language will perhaps be more and more called for in the drafting of business and estate planning documents.


Wednesday, June 17, 2009

How Much Diligence Should We Do?

We all acquire new clients. A new client often comes with a specific task or request. How far do we go to collect sufficient information from them and to inform them of things that they need to do?
A client was referred by their lender, for an estate plan. The family business had been transferred down several generations. The client’s father had died years back and the business was operated as an equal partnership between mother and son.

In addition to the work I did for the client, his mom asked me to do some work on her existing plan. Looking at historical documents, it turns out that there was never a transfer from the original partnership shares to the son creating the 50/50 partnership.

In the process of review of farmland for another new client, we discovered a large parcel which had been purchased on a land contract. The land contract had been paid off long ago, but the client had never gotten a deed from the original seller and the seller was now deceased. A Probate Estate became necessary to clear up the title issues.

Another client told me all about his business entity. Checking with the Michigan Department of Labor and Economic Growth’s (DLEG) website, I discovered that his business had been automatically dissolved for failure to file Annual Reports and pay fees.

My answer to the question posed is that there can never be enough due diligence! I have learned during my 25 years of practice, to ask many questions, to insist on evidence of ownership, review transactions, and conduct independent checking (looking on the DLEG site, checking with the County Clerk and sometimes with the County Register of Deeds and/or Tax Records). Client copies of deeds and tax bills may or may not be complete and accurate information. Particularly with real estate transactions, I increasingly advise clients to obtain title searches and even property surveys.

We can never ask too many questions, or gather too much information about our new clients. The point of our representation, no matter what professional discipline we are in, is to help our clients to achieve sound business and personal goals. In that endeavor, information is king, and we often find our advice branching past the original scope of our representation and sometimes referring them to other advisors.
Learning to ask the next question, or look around the next corner is an art of diligence.


Monday, February 16, 2009

Why Should Clients Have Severance Agreements Reviewed?

A sad, but current, reality is the “downsizing,” “right-sizing” and closure of businesses due to the severe economic downturn we are facing.

I have had the unfortunate occasion to review a number of severance agreements for clients during the past several months.  In doing so, a number of relevant factors have come to my attention about these agreements.

Most severance agreements recommend that the employee have the agreement reviewed by counsel.  This is not (generally) being done by some egalitarian sense of concern for the employee’s welfare.  Under the Age Discrimination and Employment Act (ADEA), it is actually a requirement that they make that recommendation for employees over age 40.

Another reason is that it is more difficult for the employee to later argue that they did not understand the contract, if they have had it reviewed by counsel.  I still believe review by an attorney is worthwhile.

Severance Agreements are not usually required because most employees are employed “at will” in Michigan.  Nonetheless, employers are offering them in part, perhaps to assist the severed employee in a difficult time of transition.

A primary purpose of severance agreements is to induce the departing employee to waive any possible present and future claims they may have against the employer, including claims they may not even know exist.

Severance agreements typically exchange some form of extended pay or benefits, in return for the waiver.  When the employer is a very large corporation, the likelihood that the client will have any bargaining ability to negotiate the agreement is small.  So it is important to explore whether, and to what extent they may be giving up something of real value, to determine whether to sign the agreement at all.

It is also important that the agreement address benefits.  There is some “grey” area regarding if, and what benefits may be waived under the federal ERISA statute.  There may also be instances in which the waiver of claims should be mutual, i.e., the employer should waive any rights against the employee, under the same theory as the employee is waiving claims.

If you have clients, or know people going through this difficult time, who have severance agreements, encourage them to take some time to have these carefully reviewed.

This Newsletter is intended to be informational only, and does not constitute legal advice.  If you have questions, concerns or comments, please contact me at:, or by Telephone at 989-652-9923.

Andy Richards


Monday, December 1, 2008

FDIC (and other) Federal Insurance Coverage For Bank Deposit Accounts

If your experience has been like mine, you have received inquiries recently about "how safe" deposit accounts are.  The FDIC rules for banks, the NCUA rules for Credit Unions and the FSLIC rules for Federal Savings and Loans, are essentially identical. 

Generally, a depositor is covered up to $100,000 per institution for regular deposits and an additional $250,000 for IRA's, Keoghs, TSA's and self-directed 401(k) accounts.  Joint accounts are covered up to $100,000 for each joint account holder.  Co-owners must have signed the signature card, must be individuals, and must have equal rights to withdraw funds from the account.  If account-holders have more than one account at a bank, they are aggregated, not to exceed to the limits above.

Coverage for Trust accounts is not measured by the account holder.  Instead, Trust accounts are covered up to $100,000 per beneficiary, even if they do not have a current right to receive or withdraw from the account.  "Trust Accounts" include Revocable Living Trusts, "T.O.D." and "P.O.D." accounts (irrevocable trusts have different rules).   Beneficiaries must be "qualified" (spouse, child, grandchild--including step child--, siblings and parents).  They must be the beneficiary who will receive upon the death of the grantor/owner (i.e., if a trust says to 2 children and grandchildren are named as contingent beneficiaries, the grandchildren are not counted).  But if the trust says to spouse for life, then to my children, the spouse and children count.

Examples:  Joint Trust with Husband and Wife as grantors and 2 children.  The account could be covered up to $400,000 ($100,000 for each owner under the ownership rules above and $100,000 for each child).  The same would be true for a joint account with husband and wife naming 2 children as P.O.D. beneficiaries.

A/B Trust where each spouse has their own trust naming surviving spouse as life income beneficiary and 2 children as residuary beneficiaries.  The Grantor/owner is covered for $100,000 under owner rules above.  The Spouse and 2 children are covered under beneficiary rules.  Each trust gets $300,000 coverage for a total of $600,000.

These rules do not make complete sense to me, and my own advice to clients is to think about the reality of the situation.  What guarantee is there that the FDIC will have the money to pay out these amounts?  Does it make sense, in spite of these coverage limits, to "diversify" anyway?

This Newsletter is intended to be informational, only and does not constitute legal advice.  If you have questions, concerns or comments, please contact me at:, or by Telephone at 989-652-9923.

Andy Richards


Friday, August 1, 2008

“Farm Bill” Creates a Short, but Wide Open “Window”

Conservation Easements create an opportunity for a landowner to own and use their land, pass them to successive generations, and realize substantial tax benefits.

Traditionally, the Federal Tax Code has allowed deductions for the value of a “Qualified Conservation Easement”, for Income and Estate Taxes.  These provisions apply to any landowner who creates an easement for permissible conservation purposes, as defined by the code and regulations.  A “Qualified Conservation Easement” must be a permanent restriction on land, generally limiting its use to conservation (open space, wetlands, nature preserves, etc.), agriculture or historic preservation purposes.  The easement itself must be donated to either a unit of government or a qualified charitable organization (often, a Land Trust).  But the landowner continues to own and use the land.

The value of the easement, is eligible for a charitable deduction.  The deduction may be taken in the year of the donation, and any unused amounts carried forward for additional years.  Traditionally, this carry-forward has been limited to 5 years, and, because land is a capital asset, the amount of the deduction has been limited to 30% of a taxpayer's adjusted gross income.

The 2008 Farm Bill dramatically changes this, but only for a short time!  "Qualified Farmers and Ranchers" may now deduct up to 100 percent of their Adjusted Gross Income, and may carry forward the unused deduction for 15 years.  Unfortunately, this very favorable provision applies only to donations made before January 1, 2010.  A "Qualified" Farmer or Rancher is one whose gross income from Farming is more than 50% of his total gross income in the year of the contribution.

There is good news for other landowners, too (subject to the January 1, 2010 deadline).  Now other donors of  “Qualified Conservation Easements” may deduct up to 50% of their adjusted gross income and may carry unused deductions forward for 15 years.

Other tax benefits from Conservation Easements still remain.  A deduction from Federal Estate Taxes may be taken (even on easements created post mortem, by an estate or heirs).  The easement, itself, should also reduce the value of the property for real property tax purposes (A 2006 Michigan State Tax Commission letter in fact, directs assessors to take this into consideration).  And, there is currently pending Michigan Legislation which would allow a tax credit of up to $10,000 for a donated conservation easement.

This Newsletter is intended to be informational, only and does not constitute legal advice.  If you have questions, concerns or comments, please contact me at:, or by Telephone at 989-652-9923.

Andy Richards


Thursday, May 1, 2008

Michigan’s New Position on The Professional Corporation Act - "The Fix" - Part II

What does the Miller decision mean to your clients and what can be done to “fix” the problem? 

The case raises practical concerns.  Who must now incorporate under the Michigan Professional Corporation Act?  What existing corporations may be deemed to be improperly incorporated?

The Bureau’s current policy is that if the entity does not involve a traditional “learned profession,” and was incorporated prior to the court ruling in May of 2007, they will not require the entity to take any corrective action.

New entities are less clear.  Entities listed under the Professional Service Corporation Act, under the Michigan Public Health Code and those services referenced as "professional" under the Michigan Occupational Code, must now incorporate under the Professional Service Corporation Act.  Occupations which are and which are currently not included, can be found at

Occupations which may surprise, include Funeral Director, Mortician, Real Estate Appraiser, Real Estate Brokers and Salespersons.  Notably (and perplexing to me) is the list of not included occupations including Insurance Agents, Insurance Counselors, Investment Advisors and Mortgage Brokers.  It is unclear to me how these services are less professional and personal in nature than those included!

It should be noted that there is pending “corrective” legislation in the Michigan Legislature.  It appears, however, that the legislature will wait until the case, currently on appeal in the Michigan Supreme Court, is finally decided, before acting.

Some advisors are concerned that third party litigants may attempt to use the Miller decision as a basis to “pierce the corporate veil” and find personal liability.  One possible “fix” that has been suggested is for the corporate entity to form a subsidiary Limited Liability Company (LLC) and move its operations into the LLC.  At this time, there has not been a court ruling regarding the improper organization of an LLC.  Currently, an LLC is not subject to the Miller ruling (note that in “companion” litigation--Allstate v A & A Medical Transportation Services, Inc., in an unpublished opinion the court “sidestepped” the LLC issue when raised by the insurer).  Again, the bureau’s official policy is that the Miller decision does not apply to LLC formation.

Obviously, “do not try this at home” is applicable here.

This Newsletter is intended to be informational, only and does not constitute legal advice.  If you have questions, concerns or comments, please contact me at:, or by Telephone at 989-652-9923.

Andy Richards


About Issues For Advisors

About 3 years ago, I started publishing a Quarterly E-Newsletter targeted directly at professional colleagues and valued referral sources. The intent of the newsletter was to be a resource for professional advisors, including Accountants, Insurance Professionals, Financial Planners, Brokers, Bankers and Planned Giving professionals. The "Issues For Advisors," newsletters have 2 primary goals: (1) To provide timely, useful information about issues that are either of current significance, have caused a recent problem, or are of a recurring nature to our mutual clients, and (2) To keep the content brief (no more than a single page). It recently occurred to me that there is no "archive" where advisors can go to retrieve, or re-read prior Issues. Rather than "burying" them somewhere in the Smith Bovill website, I created an on-line Resource specifically dedicated to the Professional Advisors enumerated above. In addition to the "Issues For Advisors" Archive, Links to other resources (including, of course, the MICHIGAN ESTATE PLANNING BLOG and THE SMITH BOVILL LAW FIRM SITE), will be featured here.

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