Whose Idea Was This, Anyway: How a VLO Benefits Clients

The following is an excerpt from a post from my Virtual Law Office blog, Cutting my Teeth on the Cutting Edge. I felt it was pertinent to this blog because it gives the reader a sense for where The Huizenga Law Firm is headed in the future and a little bit about why. If you want to follow my continued exploration of VLO in Northwest Iowa, check out http://cuttingedgevlo.blogspot.com.

In the context of a rural Midwest law practice, I'd like to kick this blog off with a brief discussion of my reasoning behind starting a virtual law office. According to VLP, a few of the client-side benefits of a virtual law office include:

• A "greener" practice: less paper means less office waste, which means less pollution
• Stronger security through off-site backups and encrypted communications
• Increased convenience for clients who can access their file/documents at any time and who can speak with their lawyer "in person" from their home computer
• Lower cost makes legal counsel available to individuals who might not otherwise be able to afford it

The first and last item in this list are linked, so let's start by looking at those after the jump.

A VLO generates less paper than a traditional law office because nearly everything is generated and transmitted digitally/electronically. The lawyer doesn't generate multiple "hard copies" of the client's papers because everything can be accessed through cyberspace as opposed to sending things via the postal service. Where multiple individuals need to receive copies of something, the digital file is made available for download to those individuals who can then view the file on their computer screen. The law office becomes eco-friendly by eliminating their use of reams of paper and envelopes.

The great part about going "paperless" is that it is eco-friendly while saving the lawyer money. If the lawyer isn't copying that 30 page contract draft 5 times, he uses less paper. Less paper = less overhead, and fewer copies = less time billed. Lower cost gets passed on to the client through reduced fees and quicker turnaround on the legal work the lawyer is doing for them. So the client gets two immediate benefits from hiring a lawyer through a VLO. First, the documents get generated and returned to the client more quickly, thereby lowering the hourly bill. Second, the client pays less for the legal work because the lawyer doesn't need to charge as much to make up his overhead.

Two cost-reductions for the win! The eco-friendly, cost-effective lawyer is now available to a broader base of clients because more people can afford his services, giving her the ability to fulfill her obligation to "seek improvement of [...] access to the legal system [and] the administration of justice" (Paragraph 6 of the Preamble to the Iowa Rules of Professional Conduct). The Iowa Rules of Professional Conduct call lawyers to "devote professional time and resources [...] to ensure equal access to our system of justice for all those who because of economic or social barriers cannot afford or secure adequate legal counsel." This duty is furthered by reducing the cost of legal services wherever possible.

All lawyers, no matter which state bar they practice under, are required to maintain the confidentiality of information provided to them by clients and prospective clients. In the digital era, compliance with this obligation has a lot of grey areas. Many lawyers carry a laptop computer on which they store sensitive client data. If that laptop were stolen, the client data would be at risk. Other lawyers make use of smartphone technology. Information stored on a smartphone is at risk any time the lawyer sets that phone down. These are both risks related to where client data is stored, but perhaps the most common way of jeopardizing client data is the use of e-mail to communicate. Any time client data is transmitted via e-mail, that data is at risk of being accessed by a third party. E-mail is, by its very nature, an unsecure method of communicating.

A VLO solves all these problems. With a VLO, client data is stored "in the cloud." What does that mean exactly? It means that you are not running around with your criminal client's personal data on your laptop hard drive. That data is stored on a remote server where you can access it through a secure portal. It means that you communicate with your clients in a setting that is secure from outside access as opposed to sending or receiving sensitive messages via e-mail or text message. When a secure connection is established, information that is transmitted over that connection is treated like a conversation held behind closed doors.

Finally, a VLO provides the client with increased convenience through the ability to access their file at any time. An estate planning client can download and print a new copy of her power of attorney at any time. A divorce client can post a message that his estranged spouse violated the temporary child custody order on a Sunday. A business client can review a draft of an at-will employment contract at midnight. You get the idea: clients don't need to wait for the attorney to be available to get information on where their file sits. They don't need to wait for the post office to deliver a letter that might have gotten lost en route, and they don't have to call the lawyer every time they want a status update.

What Good is a Will, Anyway?

When I tell people that I do estate planning, the natural follow-up question is, "Oh, is that like writing wills?" Many people have that vague idea that estate planning means wills, but very few people know exactly what a will can do. Oh, everybody knows the basics: a will tells your kids what to do with your stuff when you die. But a will does much more than that. Here's a few things you can do with your will.

1. Give to charity. If you decide to create a will, you have taken control over who will inherit your stuff. You can give money to whomever you wish in your will. Without a will, your property follows a predefined chain of family members with the potential that the state becomes the recipient of the inheritance you left behind. Since you get full control over who inherits in your will, you can choose a charity or charities to distribute assets to. You might give money to your alma mater or to your local high school or church. You might donate to the Red Cross or the Luke Society. The options are as many as the number of non-profit organizations.
2. Set up a trust. A testamentary trust is created within your will and therefore goes into effect after you die. You can place some or all of your property into a testamentary trust and can use the trust to protect assets from the creditors or estranged spouses of your children. A trust is also effective to protect the inheritance of a minor child or an heir with special needs who probably should not receive a large amount of money or property outright. You can appoint a trustee and set conditions on distributions just like in any other trust.
3. Appoint a Guardian. Along with creating a trust to protect your young kids' inheritance, you can also appoint the individual(s) who you want to care for your kids if you should pass away before they turn 18. You can decide who should take over if your first choice can't or won't act as guardian(s).
4. Appoint an Executor. In your will, it is always a good idea to choose who you want to manage the distribution of your property after your death. If you don't choose someone, the court system will have to choose one for you. In addition, you can waive the requirement that your executor be bonded (which is kind of like insurance against the executor's bad actions); this might not be waived if you don't choose to appoint someone, so it's a good idea to make sure a waiver is included if you don't want your executor to have to spend the money. Finally, you can approve or set an amount which will be paid to your executor as compensation for managing your estate during the probate process.
5. Personal Property Memorandum. A personal property memorandum clause in your will allows you to specify who will receive certain specific pieces of tangible personal property in a separate document from the will itself. The separate document can be revised or eliminated without having to change your will or create a new will. This memorandum only covers tangible property; land and cash, stocks, or other intangible personal property cannot be given away by using this document.

As you can see, a will is much more than a list of your heirs and instructions about who should get what. Along with these common terms, you can give your executor, trustee, and guardian specific powers. You can disinherit a child. You can take special steps to try to avoid estate taxes.

Without a will, you get no options. The law pre-determines how your estate passes. Isn't the alternative a better choice?

Oldest vs. Youngest - The Measuring Life

So, you've decided to delay the age at which your kids will receive their inheritance. For today, let's assume you want your children to inherit at age 25. Your estate planner puts your decision into your will and you put it out of your mind. Over the next five years, you begin to accumulate weath. You start an IRA or three and start an investment account with a financial advisor. One day your financial advisor asks if you have considered life insurance as part of you financial plan. You decide life insurance would be a strong addition and take the plunge. You make your testamentary trust the beneficiary of the policy and put that out of mind as well.

Now, assume you die before all of your children reach the age of 25. Your oldest two children are 27 and 25, so they are not beneficiaries of your testamentary trust, receiving their inheritance outright instead. Your youngest child is 21 and is therefore a beneficiary of the testamentary trust. Your life insurance pays $500,000 to that testamentary trust. Do you see the problem? The youngest child is, effectively, the only beneficiary of the life insurance policy because he is the only beneficiary of the testamentary trust. Since your older kids were above the age you set, they were never beneficiaries of the trust and have no claim to the insurance proceeds. They have been disinherited to the tune of $166,666.66 each.

How do we fix this situation? One effective way is to begin distributing your children's shares of your estate when the youngest child reaches the age of 25. This way, your older children remain beneficiaries past the age of 25. This minor inconvenience is easily justified in the situation described above; it ensures an additional $166,666.66 for the two older kids. Who could complain about that?

(Take note, though, that there are other ways around the problem. Stong drafting can allow you to make distributions to your children as they reach 25. The point is to make sure you don't end up disinheriting your kids through careless drafting.)

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Lawyer Joke of the Day:

Q: When a lawyer dies in the desert, why don't vultures eat his body?
A: Professional courtesy.

Inflation's not Just for Balloons

We're in the middle of a series discussing the options for setting an age which your minor children must reach before receiving their full inheritance. Today, I'd like to talk about special distributions and indexing them for inflation.

One way to protect your children's inheritance without making them feel like you don't trust them is to allow the custodian (usually a trustee) to make a one-time special distribution. Such a distribution could be limited to a specific purpose, like a down payment on a house or starting a business. You can restrict when such a distribution is available by setting an age or event that must be reached before the distribution is made. Typically, each child must request the distribution, but you can either give the trustee discretion whether to make the distribution or make such a distribution mandatory. But, perhaps the most common restriction is setting a maximum dollar amount on that distribution.

What many people forget to think about, though, is the passage of time between the creation of their estate plan and its implementation. You've probably heard the phrase "the time value of money." That phrase describes the way money changes value over time. An example: $10,000 will buy the same thing today as $13,756 will buy in 2021. Setting a maximum dollar amount for early distribution is a good idea, then, but inflation might make that $100,000 maximum you chose insufficient for the purchase of a house.

What's the solution? It's actually a pretty easy fix: just instruct the trustee to adjust the number for inflation over the period of time between your will's execution and your death. By adjusting for inflation, you ensure that your intentions are followed to the greatest extent possible.

Ask your estate planner about indexing special distributions for inflation. Your heirs will thank you (posthumously!).

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Lawyer Joke of the Day

"How can I ever thank you?" gushed a woman to Clarence Darrow, after he had solved her legal troubles.

"My dear woman," Darrow replied, "ever since the Phoenicians invented money there has been only one answer to that question."

Childish Behavior

Yesterday we talked about a few factors to consider when setting an age at which your young children will receive their inheritance. I'd like to talk a bit more about this subject over the next few days by looking at some of the different approaches to setting that age.

First we should talk about what circumstances lead to restricting your children from inheriting until they have lived a certain number of years. Most of the time, my clients who want to choose an age are new parents or the parents of a young family. Other reasons to set an age restriction include children who are irresponsible or children who are in a difficult or troubled relationship (such as a bad marriage). If you find yourself in one of these situations or have your own reasons for postponing the eventual distributions from your estate, you have lots of options for choosing the age at which your heirs will receive their inheritance.

The most common approach is simply choosing an age. Common choices include 18, 21, 25, and 30. What if your 19 year-old isn't responsible enough to handle $50,000 in cash? Or $500,000? Think about what you would have done at age 19 (or 21). See my point? But how do you choose an age at which your kids will be responsible with their inheritance without insulting them? You have a lot of good choices, and we'll start talking about them next time.

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Lawyer Joke of the Day

"You are a cheat!" shouted the attorney to his opponent.

"And you're a liar!" bellowed the opposition.

Banging his gavel loudly, the judge interjected, "Now that both attorneys have been identified for the record, let's get on with the case."

Think Like a Child

You thought I wasn't going to post today. Gotcha!

One thing my clients sometimes have a difficult time with is choosing the age at which their minor children will receive their inheritance. The issue typically arises when a young couple is creating their estate plan and wants to keep their young kids from receiving large sums of money before they are mature enough to handle it. Delaying the distribution until the children reach an age at which their parents believe they are responsible enough to handle the money is wise and a common approach.

The obvious question, though, is how do parents decide when their kids are responsible enough to receive their inheritance? The parents have already died, so they aren't around to make the decisions about when distributions are made.

There are myriad approaches to this, so it doesn't make much sense to try to describe them all in one blog post. Instead, below are a few factors to consider when choosing the age of distribution to your children:

1. The personalities of your kids -- Clearly, if your kids are still very young you cannot judge whether they are going to be responsible when they get older. But, if you have middle school age or high school age minor children, you may have some idea of how responsible your children are. Obviously kids of that age don't tell their parents everything, but you're probably vaguely aware of the way your kids behave when they are given responsibilities at school or at work.
2. Your kids' education -- Many parents want their children to have the option to go to college. Some parents want to take away the financial burden of paying for an undergraduate or graduate degree. Others think their kids should experience working their way through college in order to prepare them for life in the working world. Some don't care whether their children go to college at all. If your children do go to college, do you want them to have access to a large pool of money for their daily activities or would you rather they only get distributions from a trustee?
3. Inflation -- Money loses its value over time. It's a fact. Just in the last 30 years, the U.S. dollar has decreased in value compared to the global market. The Euro has even overtaken it, value-wise. A $100,000 distribution today could be worth $110,679.55 in five years. If you decide to distribute a specific dollar amount to each child at certain ages, do you want that amount adjusted for inflation between the time you set the amount and the time of the distribution?

This is not an exclusive list, but these are some of the more common factors my clients use in determining when their minor kids should receive their inheritance. Ask your advisor to help you work through the issue and check back here to find out more about a few specific approaches to this important issue.Publish Post

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Lawyer Joke of the Day:

Q: What is the difference between a catfish and a lawyer?

A: One is a slimy, scum-sucking bottom-dweller. The other is a fish.

Planning Your Healthcare Future

Right now, you're feeling pretty healthy. You woke up, went to work. You might watch some baseball this afternoon. Maybe you're one of the few Americans who exercise regularly and eat healthy. You're seldom ever sick, and you look and feel great.

Or, maybe, like the rest of us, you have trouble finding the time and or motivation to get any exercise in. Eating right takes time and effort, too, and fast food is an easy and convenient option, especially with three kids in the back seat. You're a few pounds heavier than you'd like to be, and your blood pressure is in the red. You're a tutor, chauffeur, erstwhile cook, and occasionally parent to three miniature hurricanes and don't have time to finish washing the dishes or cleaning the house.

Now would be a perfect time to get your healthcare directive put in place.

I know, I know. You feel great, and you don't have the time. Why shouldn't you be able to put it off for awhile? Besides, it's not going to do you any good today, right?

Wrong. You're currently in a time in your life when you are fully aware and able to make decisions on your own. You do it when you choose your jogging route, and you do it when you run that red light because your 14 year old is late for school. But what happens when you get hit by some jerk in a Toyota Sienna who couldn't wait for the light to turn green? Or maybe, you swerve to avoid that crazy runner who just jumped out into the road and wrap your minivan around a pole. Now you're in a persistent vegetative state and need a ventilator and feeding to keep you alive. Maybe you need some kind of experimental surgery in order to survive, but the odds of success are slim.

The medical decisions in both of these situations are difficult for anyone to contemplate. Putting a healthcare power of attorney in place is a good start, but can you imagine making life-or-death decisions for someone else? Creating a healthcare directive (living will works too) allows you to make the really hard decisions ahead of time, taking the added stress and pressure off your loved ones.

Call an advisor today to learn more about using healthcare directives in your estate plan. Your family is counting on you.

*** No second-person pronouns were harmed in the writing of this blog. ***

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Lawyer Joke of the Day

Q: How many lawyers does it take to screw in a light bulb?

A: Whereas the party of the first part, also known as "Lawyer", and the party of the second part, also known as "Light Bulb", do hereby and forthwith agree to a transaction wherein the party of the second part (Light Bulb) shall be removed from the current position as a result of failure to perform previously agreed upon duties, i.e., the lighting, elucidation, and otherwise illumination of the area ranging from ...."