Choosing A Corporate Name

A big mistakes people make when setting up a new corporation is simply adding an Inc., Ltd., or Corp after their name when choosing a name for the new corporation.

Besides the very lucrative tax savings opportunities available in a corporation, it can increase your privacy and lessen the potential for frivolous lawsuits.

It is no secret that people will sue anyone for anything if they think they can get some money out of it. Ambulance chasing attorneys, when deciding whether or not to take on a case don’t care one iota whether or not the case is justified. What they are concerned with is how deep your pockets are. They will do a search to see what assets you own. If your name is the same as your corporation’s, it will be impossible to prevent the vultures from identifying everything owned by you personally and through the corp. If the names are different, there is less likelihood that a search will link ownership of assets. If there doesn’t appear to be a lot of attachable assets, the normal ambulance chaser will pass on accepting the case.

The best corporate names are those that give away no hint of who owns them. There is no requirement that the name of a corporation identify the owner or even what it does. I’m a big fan of using as generic and vague a name as possible, such as initials or a made up name. Several clients have fabricated great corporate names from parts of their kids’ or grandkids’ names.

Besides protecting against nuisance lawsuits, using a vague corporate name allows a level of privacy that would not otherwise be available. Not everyone wants all of their transactions published in the paper for the whole world to see.

KMK

SUVs Are Not Evil

I couldn’t agree more with this commentary that all the nosy busy-bodies who want to ban SUVs and condemn those who choose to own them should just shut the hell up and mind their own business. It’s the typical liberal attitude of telling everyone else how to run their lives, while exempting themselves.

KMK

Living Trusts

I don’t have time at the moment to describe all of the details of how living trusts work. Here is a good summary of the details.

From what I have seen over years, there are still a lot of misconceptions and errors with how living trusts are used in real life and death.

While most of the publicity and consternation is over the Estate (aka Death or Inheritance) tax, the truth is that most people don’t have estates large enough to be paying any of that tax. What should be more of a concern are probate fees. While estate taxes are payable on the net estate after deducting liabilities, charitable bequests and final funeral, medical, legal and tax preparation costs, probate fees are based on the gross estate values. It is possible that the probate fees are more than the net assets in the estate, requiring the heirs to pay in before the estate can be finalized. For example, an estate with assets of two million dollars and liabilities and other qualified deductions of two million would have a net estate of zero and thus no tax. The probate fees would be around $100,000 depending on the state or states in which the assets reside.

A growing number of people are using revocable living trusts in order to avoid probate. However, there is still a lot of confusion as to how they work. Many people confuse living trusts and living wills, when they are in fact two very different things. A living will is to document your wishes if you become incapacitated, such as a DNR (do not resuscitate) authorizing someone to “pull the plug” on you.

Another common misconception is that assets in a living trust are exempt from estate taxes. A living trust, because it is a revocable trust, has no effect on estate taxes or any other taxes available to individuals, such as the tax free residence sale. An irrevocable trust is a completely different entity that files tax returns and will affect estate taxes.

Another problem that often occurs is that people have set up a living trust, often with one of those cheap do it yourself kits, and then never got around to titling their assets in the name of the trust. I have seen several cases where the trust ended up doing absolutely no good for this very reason. While I still believe in setting up corporations by oneself, that is not the case for setting up a living trust. A good estate attorney will obviously take care of the asset titling at the time of the trust’s establishment, and prepare a pour-over will to cover assets obtained later on that aren’t in the trust’s name. The executor of the estate needs to be careful about titled ownership of assets as s/he is compiling the inventory and determining which assets can be transferred immediately to the heirs and which ones must go through the long and expensive probate process.

It looks like Scott Adams may be doing some estate planning.



KMK