Hell hath no fury like an employee scorned…
I’ve been meaning to put up a post for a while now about how badly an ex-employee can sting your business…even if you have all the standard non-solicitation and confidentiality provisions with the employee in his or her employment contract.
Prime example: Nelson Piquet, Jr., a former Formula 1 race driver. As can be seen here, here and here; Mr. Piquet and his former bosses at Renault F1 agreed last year that Nelson would crash his car deliberately in order to give an advantage during a race to his teammate. The circumstances surrounding Mr. Piquet’s (and his bosses’) acts are not that important other than for illustration…but the point is this: once Nelson was fired from the team, he got back at his former employer by telling all to the Formula 1 governing body. Chaos ensued for his bosses and his employer.
This happens all too often in small businesses…paying employees under the table…installing one licensed software program on many company computers…and other similar activities occur with the open endorsement of those in charge. Then, once a knowledgeable and disgruntled employee leaves the ranks, he or she decides to get back at his former employer by ratting it out to anyone that will listen.
The moral of the story is obvious…although most business owners play this game to some extent or another despite warnings like this.
Asset Protection if you hit your head…like Conan O’Brien
Conan O’Brien made news last week when he cracked his melon against the Tonight Show floor. Luckily, he was fine with just a minor concussion. Obviously, Conan didn’t set out to slip and fall on his head…but he did. Life happens, including undesirable events. This is why people buy insurance, and why most everyone can benefit from a comprehensive estate plan.
Whenever I talk about asset protection, most people have visions of Learjet rides to Barbados with a suitcase full of cash and exotic trust documents. But asset protection can be as simple as having a comprehensive estate plan, for instances just like Conan’s accident. How can an estate plan serve an asset protection role?
Let’s assume for a moment that after Conan hit his head, he wasn’t fine. In fact, let’s assume that he hurt himself to the extent that he became permanently impaired for the rest of his life…unable to walk, talk, eat or competently make his own decisions. This is bad enough of course, but in the days and weeks following the shock of the accident, Conan’s family and advisors would very likely need to be able to deal with his property…this could be something as complex as executing a major media business deal (perhaps the use of his likeness for a new toy doll to be marketed throughout the United States) or something as simple as selling his house.
Either way…Conan needs to sign. Problem is (at least in our example) he can’t sign…he can barely say his name. Without an estate plan in place, Conan’s wife will have to go to court and obtain a guardianship over him. This will give her the power to deal for him. In addition, she’ll need to get a “bond” in the amount of his total assets…this process can be very, very expensive, time-consuming and emotionally trying.
With a comprehensive estate plan, Conan’s wife would have the power as successor trustee of Conan’s trust and as Conan’s agent under power of attorney for property to deal with his property without the delay and cost of obtaining a guardianship. No business deals lost, no additional emotional strain. Pretty good.
Prince Harry and Estate Planning for your Kids
So here’s some recent news that, but for the legal angle I’ll describe in this post, I wouldn’t have given a second thought: Prince Harry turned 25. This is news here, here and here not only because it’s Prince Harry, but also because of (as you can read) the dough to which he now has access. And herein lies a lesson for parents who want to control their children even from the grave in case of a premature death…also known as the “dead hand.”
Harry and his bro, William, were left some money when their mom died. Presumably, all of her money. But it was left in trust. This is smart since both Harry and William were not of age at Diana’s death. If she had left the money directly to them (under a standard will) their father, Charles, would have needed to be appointed Guardian of the princes’ estates. By leaving her sons’ inheritance in trust, Diana’s estate plan avoided this unnecessary exercise.
Part of leaving money to young children in trust is the notion that children, or for that matter young adults, should not have free access to loads of cash. You wouldn’t give your 18 year old son or daughter a million dollars, right? So why should young adults get these assets outright if their parents happen to die early? They shouldn’t…which is why provisions like the one Harry apparently has now overcome by turning 25 are contained in standard trust documents.
The way this usually works is as follows, assuming parents execute trusts while they have children younger than 25 or so (which would make the parents smart):
- Assume husband dies…everything goes to wife.
- Assume wife then dies, or husband and wife die at the same time…everything goes into trust for the surviving children with aunt, uncle, grandparent or trusted friend as trustee.
- Trustee has control of trust money, with the direction and duty under the trust to take care of the children, this would include paying for basic needs, schooling, and Jonas Brothers concert tickets.
- The money stays as one big pot until the youngest child reaches some minimum age…usually 23. This is important so that there will be enough money in aggregate to get all of the children through college. If you break up the “big pot” too early into separate shares, each share on its own may not be enough to provide for the younger children.
- Once the youngest child reaches age 23, the big pot of money is split into separate shares…in the case of the royal family, one share for William and one for Harry.
- However, the separate shares are still held in trust for each child. The trustee can then use each share for the respective beneficiary’s benefit.
- Once a beneficiary reaches age 25 (or an earlier or later age), there is a choice to be made. Should the kid get access to the principal, or only the income? This is a choice for parents to make, taking into account their personal feelings and assessment of their children’s ability to handle the money. It appears that in Harry’s case, he only now has access to the income, comprised of the interest and dividends attributable to the stocks, bonds, cash and other property that make up his trust.
- Finally, there is a “kick-out” age where the child has access to all of the money. Usually this is 30. If the parent really wants the kid to do something with his/her life (or just torment the kid from the grave), the age will be 40 or 45.
So there you have it…even though she was royalty, Diana’s estate plan was pretty standard, but smart, stuff.
Think like a lawyer…but not for too long or your brain might hurt
Two axioms I hear all the time about the law and lawyers:
1. Law school doesn’t teach the law, it teaches you how to think like a lawyer.
2. Lawyers are [insert deragatory term here].
I find truth in both of these statements but for different reasons. Law school really does teach a person to think like a lawyer…but how? And sometimes lawyers do get a bad rap, primarily because we are known to give the classic post-modern lawyer answer: “it depends.” So let’s explore this.
I love the horse races. There are no better gambling pursuits than horses and craps. There just aren’t. So of course I was excited to head out to Arlington Park this past weekend to watch the ponies run. As I was taking a look at the Arlington Park website to see what is and what is not allowed in the track, I came across this statement:
Prohibited Items Include:
-Glass Containers
-Alcohol
-Commercially packaged foods
-Liquids and non-alcoholic beverages will be allowed only in their original sealed container
I brought this to the attention of my wife and as we discussed these rules…primarliy the one disallowing commercially packaged foods…it became clear that we had completely different views on what this meant. And herein lies a perfect example to show how lawyers think.
Start with a Rule
Usually, lawyers start any analysis with a rule. A client has a problem and needs to know what to do…we need a rule to guide us. So, the problem here is I want to bring some food and drink into the racetrack, but the rules are that (1) I’m not allowed to bring in anything commercially packaged; (2) I must bring in beverages in their original packaging; and (3) no glass.
Continue with additional interpretation
The rule itself doesn’t clear up the entire issue for a few reasons. First, I’m not exactly sure what “commercially packaged” means in this context. Second, the beverage rule seems to be an exception to the rule against bringing anything into the track that is commercially packaged. If these rules were laws (as in, enacted by the legislature), there would be countless other resources I could look to that would aid my interpretation of the rule.
There would no doubt be cases upon cases where judges define the term “commercially packaged” and “beverage” and then apply those definitions to cases before them. Even these cases wouldn’t say the same thing, though. They may all use the same definitions of key terms, but many would come out in opposite places in their application of the rules to the facts at hand.
There would also likely be administrative regulations providing further guidance on these rules, written by the government agency tasked with enforcing the laws. In this case, the Department of Home-Brought Food and Beverage might make some rules also defining the terms and providing some examples for everyone to peruse.
Finally, there would be treatises and other analyses written by attorneys who practice in the home-brought food and beverage area. These resources would describe the key cases at issue and how the courts apply previous case law, regulations and their own judicial preferences in ruling on similar cases.
End by testing the rule in real life
In the end, somebody has to be the guinea pig and show up to the track with questionable materials to see how far the rule extends. Three examples:
(1) I show up with a container of hummus that I bought at the store. Seemingly, this is “commercially packaged” BUT I rip all of the labels off of the container so it now resembles a tupperware container. Is this allowed? The letter of the law says no…the hummus was commercially packaged (in that, it came straight from a manufacturer) and it’s not allowed. But does that make sense? What if I had a tupperware container that was the exact same as the container that the hummus originally came from? It would be okay if I transfer the contents of the hummus to the new container, but it is not okay if I leave it in an identical container?
(2) I show up with a glass jar of salsa. The catch here is that I enjoy the salsa as a tasty beverage (it’s the thin kind). I run afoul of the “no commercially packaged” food rule AND the rule against glass containers. However, since it’s a non-alcoholic beverage I’m required to bring my salsa into the track in its original, sealed container. Is this a rule that cannot be complied with in this case? Which rule wins? Does salsa qualify as a beverage solely because I drink it?
(3) I bring into the track 50 pizzas on dollies. The pizzas are from Dominos. The pizzas are not commercially packaged since they’re cooked and packaged at a retail location…but this obviously violates the spirit of the rules allowing food and drink. Right?
Clearly, thinking like a lawyer makes the brain hurt and/or ooze from one’s ears. But these are the types of issues lawyers are faced with everyday…makes the “it depends” answer more reasonable…I hope.
Adoption Expense Tax Credit: Part II
Here is Part Deux to a four-part series on the Adoption Expense Tax Credit…a nice benefit for adoptive parents. This installment: Adopting Special Needs Children.
http://www.growninmyheart.com/special-needs-adoption-tax-credit
