The SBA Suggests 10 Key Steps for Starting a New Business

Once you’ve decided to start a new business, it can be tempting to simply moved forward with various tasks as they come to mind. While this may work for a few entrepreneurs, it’s always best to create an organized plan of action so you won’t waste time and cause problems for yourself that could easily have been avoided.

Fortunately, the SBA (Small Business Administration) provides excellent online materials that can help you plan the most useful way to start a new company – or expand the current reach of an existing one. Here’s a brief review of the ten important tasks that should normally be addressed first as you launch a new business.

The key steps for creating a solid foundation for your new business

  1. Decide where to locate your company. Prior to starting any market research, you’ll need to look at several cities to decide upon the best location for your business. This decision must be partly based on if you’ll be selling goods and services to your customers from a brick-and-mortar storefront or office – or if you’ll just be contacting potential customers on the phone or over the Internet. Be sure to select a location where many well-qualified job applicants live – as well as a city and state with reasonable business taxes;
  1. Develop a reliable market research plan. Once you’re certain about the goods or services your new business will sell, you must conduct market research to verify that there’s a definite need for what you’ll be selling in a specific location. This activity also involves identifying your potential customers and all known competitors; 
  2. Create a viable business plan. Most people starting a new business choose between a traditional business plan or a lean one for a basic start-up company. If you need to borrow money to finance your company, you’ll almost certainly have to provide a lender with a traditional business plan.

The traditional plan is normally very comprehensive – it describes your specific goods and services, provides a mission statement about what you seek to accomplish in the long run and names the initial team of professionals who will be running the company. It also states where the business will be located and how many employees you’ll need to hire. A traditional business plan should also describe the business structure you’ll be using, who will be handling specific tasks – and it should review your market analysis. Initial financial projections or earnings for the company should also be included.

In contrast, a lean start-up business plan may simply describe your goods and services, provide a statement about who will be running the company and state who you believe will be your most likely customers. It should also contain information about how you’ll initially finance the company and where it will be located;

  1. Make sure you have enough initial funding for the company. You and your business partners or advisors must determine how much money you’ll need to start your business. If you cannot raise this money among your business partners, then may have to try and obtain funds from venture capitalists or request a small business loan from a bank or through SBA resources. Other options include raising capital through crowdfunding or other online resources;
  2. Select the best business structure for your company. While many people run sole proprietorships if they’ll be handling all of the major company tasks themselves, others choose between forming such structures as partnerships, limited liability companies (LLCs) — or some type of corporation or cooperative;
  3. Decide upon the best name for your company. It’s a good idea to brainstorm with your partners or investors since you want to try and choose a name that clearly reflects the nature or “brand” of your business – as well as its spirit. Be aware that one of your first tasks will be to make sure the name you select is original and that it’s not already being used by anyone else;
  1. Be sure to register and protect your business name. After you’ve chosen the best name for your company, you’ll need to take steps to protect that name by properly registering it. Keep in mind that you may also need to register any trademark you’ll be using. Since additional ways of protecting your company name may also be required, you should always discuss this topic with your Houston business law attorney;
  2. You must request state and federal tax IDs. You will need to obtain an EIN (employer identification number) for many reasons. For example, you must have an EIN to open a bank account for your company and to pay taxes (among other tasks). Depending on the different states where your company will be operating, you may also need to obtain one or more state tax IDs;
  3. Obtain all required licenses and permits. Your specific type of business activity and where you’ll be working will determine the types of permits and licenses you must obtain, if any;
  4. Be sure to open one or more business accounts for your company. These most often include checking and savings accounts, credit card accounts and a merchant services account. Depending on the nature of your business and its initial size, you may be able to simply start with a checking account and then open other accounts as the need arises.

Please feel free to contact one of our Murray Lobb attorneys for legal advice as you address any or all of the various steps named above while starting a new business. We’ve had the opportunity to help many clients establish a wide variety of successful businesses in the past and are prepared to provide you will all the guidance you may need.

Designating a Guardian for Your Children in a Will

If you’re a parent with children who haven’t yet reached the age of majority, you need to create a Will that designates a guardian to step in and look after them if you suddenly pass away. If you fail to provide for your kids in this manner, a court will usually appoint someone to serve in this role – especially if your former spouse is deceased or incapable of handling this responsibility.

A list of traits and abilities a responsible guardian should have are set forth below. If your children have entered their teens at the time when no parent remains alive to care for them, the courts will normally consider their preferences for a guardian at that time.

What are some key considerations when choosing a guardian for your children?

  • It’s often best to choose someone already known to your kid(s) or who has a definite gift for caregiving. This might be one of your parents, a sibling or a very close and trusted friend. Always be sure to obtain this person’s advance permission to name him (or her) in your Will before doing so. If you prefer, you can also designate a married couple as co-guardians;
  • If possible, try to choose a person who already lives in the same city as you — or who is willing to relocate there in the future. It can be very comforting to children if they’re allowed to remain in their same school district. If you can’t find someone who lives nearby, be aware that it may prove a bit expensive for an out-of-state guardian to handle legal matters for the children in a different state. Choosing a local guardian can prevent this type of problem;
  • Give serious thought to choosing a guardian who will fully support your faith beliefs and core ethical values. It’s always best to appoint a person who’s eager to help your children grow up in the faith community you prefer – and who will daily enforce the moral teachings you treasure most;
  • Think about the financial responsibilities involved. Hopefully, you’ll have provided well for your children’s future with life insurance and other funds prior to your death. However, regardless of how much money you’ve put in an account for your kids, you’ll need a guardian who can responsibly handle money. If you do not know of anyone with strong financial skills, you can still choose a person to serve as the caregiving guardian – and designate a different individual to manage the children’s financial resources;
  • What should you do if you do not want your estranged spouse to become the guardian after you pass away? Your Houston estate planning attorney may advise you to write and sign a letter documenting your reasons – and to attach relevant police reports or court documents to the letter. You can then give that letter to your named guardian so that it can be presented to the court after you’ve passed away;
  • How should you proceed if you have children living with you from different marriages? It may be necessary to name more than one guardian for the children. Your main goal should be to keep as many of the kids together as possible. However, you must be realistic about how many children your named guardian can handle;
  • Give some thought to the age of the person you’d like to name. If your parent or another desired guardian is still in good health, you may decide to go ahead and name that person now and simply revisit your decision within the next five years (or when that guardian’s health suddenly declines.) If you are naming a much older person as guardian, be sure to also name a secondary guardian who is willing to step in if the first one cannot serve in this capacity after you pass away. In fact, it’s always a good idea to have a back-up guardian named in your Will;
  • Remember to name every child you want to be cared for by your guardian. It’s never wise to think that a court will assume that all your kids are covered if you only name one or two. Also, extended family members might step in and try to contest your choice if every child isn’t named individually.

Before finalizing any Will that designates one or more guardians, be sure to discuss your choices with your older children. Also, make sure each named guardian is truly interested in helping you by taking on such a demanding assignment.

Please feel free to contact one of our Murray Lobb attorneys so we can prepare a Will that designates a guardian for your children. We’ll be happy to answer any additional questions you may have about this critical task. Most parents gain a greater sense of peace once they’ve legally provided for these important caregiving needs for their children.

Handling Your Adult Child’s Estate in Texas

Losing a child of any age remains one of life’s most difficult challenges. When that child is an adult, you may often need legal advice on how to manage any estate left behind, even if it’s rather limited. Now that so many Americans are living well into their 70s and 80s, the chances of losing an adult child are growing.

One study found that 11.5 percent of people age 50 or older have lost at least one adult child. That likelihood of loss is even higher for African Americans – 16.7 percent of them have lost an adult child. Furthermore, the older you get, the sense of loss can be even harder to cope with since adult children are often the closest caregivers of their aging parents.

Here’s a look at some of the legal questions you’ll need to address after losing an adult child.

Issues Surviving Parents May Need to Face After an Adult Child Passes Away:

  • Did your son or daughter live with and leave behind a spouse or partner? If so, calmly reach out to that person to find out if there’s a Will naming the personal representative of the estate. If your child didn’t have a Will or named someone else as the executor of their Will, you’ll need to interact very sensitively with that person. When you contact your Houston estate planning lawyer, be prepared to indicate your adult child’s marital status at the time of death;
  • Did your adult child have any children? It’s important to stay on good terms with your loved one’s surviving spouse or partner since visitation rights and overall family harmony may depend upon your relationship with that person. (Note: If the surviving spouse or partner has any major substance abuse problems, be sure to share that information with your lawyer. We can explain pertinent child custody and adoption laws, if necessary);
  • Did your son or daughter own considerable land or personal property? Your attorney can help you try to prevent anyone from giving away or disposing of such property before the estate can be probated – or passed on according to your adult child’s estate plan. If you’ve been named the personal representative, obtain a copy of the Will as soon as possible. If no one is living in your adult child’s former house or apartment, be sure someone visits soon to look for pets needing immediate care, valuables that must be secured and vehicles that must be locked and placed in a garage;
  • Contacting your adult child’s employer. If you were named as your adult child’s personal representative, you’ll soon need to contact that employer to find out what employee assets may still be held in a 401k or other account. Likewise, you’ll want to find out if any other benefits are still owing to your child – and if s/he held any type of insurance policy through the employer;
  • What should you do about burial, cremation and related issues? Always try to honor the instructions in your deceased child’s Will or other legal documents. If you can’t find a Will, then work with any surviving spouse/partner and other family members to handle this matter in keeping with your family’s faith practices or general traditions;
  • Do you know what to expect under Texas law if your adult child died intestate – without a Will or some other type of estate plan?  Your Houston estate planning attorney can explain how Texas courts address this type of situation. We can also inform you about how estates are handled by probate courts and how you should manage other tasks that are often required after losing an adult child.

Please know that since our firm has worked with many clients grieving over the loss of loved ones. We’ll provide our legal advice in the most caring manner possible. When you contact one of our Murray Lobb attorneys, we’ll be ready to provide you with simple steps to take so you can concentrate on obtaining comfort from family and friends.

Ways to Avoid Defamation When Disciplining Employees

Every employer has the right to create a pleasant and productive workplace. Yet this goal can be elusive when a worker acts unethically or behaves poorly toward others. If the behavior was grossly unethical or offensive and the person was an “at-will” employee, you can usually fire him on the spot. However, some misconduct claims must be thoroughly investigated.

General principles to bear in mind when disciplining employees

If immediate firing isn’t appropriate, you must handle all investigatory matters in a private manner. You should also only inform those with a formal “need to know” regarding specific information you are learning. Always make sure to act in a non-discriminatory manner. You can never let anyone go in a way that violates their civil rights or unjustly defames them.

Here are some suggested steps your business should take while resolving problems with difficult employees.

Responsible ways to discipline workers

  1. Create a written policy that states how your office will interact with employees who are accused of wrongful behavior. While you should be consistent in taking certain steps, you must clearly state that your office always reserves the right to immediately fire at-will employees when circumstances justify such actions. When an exempt employee is involved, try to provide warnings and always listen to their side of the story. It’s a good idea to place this policy in an employee handbook and to reference it upon first hiring all employees – and during all periodic work evaluations;
  2. Investigate all accusations, especially when immediate firing isn’t necessary. Be sure to handle all interviews in a private setting, stressing the confidential nature of the process. If there is written or documented proof of wrongdoing, obtain copies of the materials;
  3. Create a separate investigation file for the accused employee. You should also create notes in the person’s regular personnel file – making sure only a small number of employees can review either folder. In very rare circumstances, it may be necessary to hire an outside group to handle the investigation for you. Your Houston employment law attorney can fully explain when hiring outside investigators may be necessary;
  4. Create a clear plan for each employee’s disciplinary investigation. Avoid making accusations or labeling someone as a “thief.” Let the person know that you are investigating the claims. When meeting with the individual, always take notes and have at least one other staff member present as a witness. You may want to ask the employee to sign a statement, indicating awareness of the investigation.  In order to get an employee to sign a form, you may need to note in it that his/her signature does not constitute any admission regarding wrongful behavior – only that the person knows certain claims are being investigated. Be sure to listen carefully to any defense claims the employee may offer – but do not let any meeting become confrontational. If tempers flare, note that you will reschedule the appointment for a later time;
  5. Do not publicize the investigation. Only share limited information about it with those who have a “need to know” regarding it;
  6. Once a decision is reached regarding discipline, advise the employee. Make sure your decision is based on fully objective and reasonable grounds – and note them in your files. Document what you’ve decided to do in the regular personnel file – and reference the separate investigative file where all detailed notes are kept. Do not allow anyone access to the main investigative file who doesn’t have a right to see it. Be sure to keep all investigative files for a lengthy time period in case future lawsuits are brought against your company;
  7. If you decide to terminate an employee, do so in an orderly fashion. Allow the person to gather together all personal possessions before leaving the building in a private fashion. If the fired employee was fired due to dishonesty – or any violent or inappropriate behavior – you may want security to escort the person off the premises. To protect the fired employee’s privacy concerns (and to avoid defamatory actions), you may want the exit to occur when few other employees are present;
  8. Do not share details about any firing with other employees. Unless there was documented criminal activity that all personnel may need to know about, you have a duty to maintain privacy regarding the exact reasons why you chose to fire an employee.

Always remember that you cannot discipline an employee for taking lawful advantage of any state or federal right. This can include taking time off under the Family Medical Leave Act after you’ve approved the temporary departure – or taking a military or pregnancy disability leave.

Additional behaviors to avoid when disciplining employees

  • Never jump to conclusions about any claim. Don’t allow yourself to be greatly swayed by reports made by one or two individuals. Be sure to speak with all key witnesses and interview the employee concerned – to hear his/her perspective on what happened;
  • Always be/remain reasonable and flexible. Don’t ever over-penalize an employee for a minor infraction. Also, if you’re having to fire a more senior, exempt employee, make sure you have fully documented all proven reasons (or “just cause”) as to why the employee must leave;
  • Seriously consider documenting verbal warnings. While this may not be necessary, it’s usually a wise move. One way you can document them is to send yourself an email, noting in general terms (using a computer at work) why you had to verbally discipline an employee on a specific date;
  • During regular employee evaluations, be sure to note any disciplinary actions taken and how they’ve been resolved. Always have the employee sign the evaluation, noting that the person recalls all that’s happened and how all situations have been resolved;
  • Avoid telling an employee after being disciplined that you’re sure the person is likely to have a bright, long future with the company. A court might later view this type of language as reasonable proof that you were creating a new employment contract, one providing some type of guaranteed or continuing employment – as opposed to the at-will status the employee once had; and
  • Don’t punish workers for trying to improve working conditions or wages during breaks or at other times when “off the clock.” Rights like these are normally protected under the federal National Labor Relations Act.

If you’re concerned about how to handle any employee discipline or firing issue, please feel free to contact one of our Murray Lobb attorneys. We can provide legal advice based on the specific circumstances that you relate to us — and help you decide when you may need to hire outside investigators to handle a specific claim. We can also draft professional language for describing your employee discipline policy in your employment handbook.

Be Careful When Creating a Company Policy on Moonlighting

When addressing employee management issues like moonlighting, it’s often best to seek out a middle ground. If you’ll first establish clear work standards that fully protect your company’s intellectual property and ongoing research and development efforts, you should be able to accommodate those who can responsibly handle a second job outside their regular work hours.

Perhaps the best way to create a balanced moonlighting policy is to first review your main concerns about allowing employees to do any outside work. You should then try to objectively embrace your employees’ reasons for wanting to take on another job. Although you do have greater freedom to dictate when exempt workers put in their hours, that’s not always the case when interacting with at-will employees who are paid hourly.

Here’s a look at the competing interests involved when trying to design a moonlighting policy for your unique workplace. That information is followed by some general guidelines that you’ll want to review with your Houston employment law attorney. Employees do have certain privacy rights about how they conduct their lives outside of work and those must be respected.

Legitimate reasons why employers often want to limit moonlighting

  • To protect the company’s intellectual property. No employer wants to worry about employees knowingly (or accidentally) sharing confidential, proprietary information with another employer – or using such information while starting their own companies. Non-disclosure agreements are crucial to protecting these types of rights;
  • To maintain control over employee schedules for valid staffing purposes. Many companies require employee flexibility with work schedules in order to cover the ongoing, often unpredictable nature of their work volume. For example, customer “help” or call centers often experience times of peak calling. However, these fluctuations can change from week to week – or even day to day. People hired to work in these environments can be legitimately required to forfeit or greatly limit outside work – if those unique requirements were clearly stated in writing prior to their hiring;
  • A desire to have employees provide the company with their very best efforts. When employees take on “second” jobs – they’ll often be tempted to put in too many total work hours each week. It’s completely legitimate to want every worker to show up on time each day, fully rested and able to adequately focus on their assigned tasks;
  • Safety concerns. Moonlighting frequently causes many people to lose sleep. When they show up to your workplace greatly fatigued, they can pose a serious safety threat to their own health – and that of their coworkers;
  • Loyalty and commitment. While a moonlighting employee can provide you with these desirable attribues – you have every right to expect them to demonstrate respect for your company while interacting with others.

Although these aren’t the only reasons you may want to carefully limit employee moonlighting – they do touch upon common concerns. Keep in mind that it’s your right to carefully monitor the quality of work of your moonlighting employees to be sure it doesn’t start to decline.

Some of the valid reasons many workers want to do some moonlighting

  • Additional money to support themselves and other family members. Regardless of what you’re paying each worker, everyone periodically encounters unexpected medical bills and other crises that require extra income;
  • A desire to realize their own entrepreneurial dreams. Few people can afford to simply quit their “day jobs” while trying to launch new businesses. If employees pursue this type of goal while using their own resources outside of regular work hours, there may be few issues. However, if their companies will cause them to compete for clients with your business, restrictions are fully justified;
  • An interest in taking on paid union work to improve conditions for themselves and others in their industry. Employers must tread lightly when trying to restrict such activities. While company loyalty is a legitimate concern, this isn’t necessarily violated if the workers are openly addressing key safety and health issues that affect all employees.

These are just a few of the many reasons why some workers are strongly motivated to take on moonlighting jobs.

General guidelines for drafting a moonlighting policy

  • Companies should rarely try to completely forbid moonlighting. However, as your Houston employment law attorney will tell you, it’s best to inform all “new hires” if their jobs may require sudden changes in their weekly schedules or limited overtime hours on short notice. Whenever possible, try to remain flexible with workers – or your best and brightest ones may leave so they can pursue moonlighting and other privileges elsewhere;
  • Decide if you need to specifically address this topic in your employee handbook. If you don’t wish to create a “moonlighting” policy, you can ask your attorney to provide you with hiring contracts (and/or) non-disclosure agreements. These will clearly explain to all employees that they’re legally forbidden to share any company trade secrets, research and development data – or other proprietary information – with outside parties without first obtaining express, written permission from your company. It’s also wise to have all employees sign non-compete contracts with your company before they start to work;
  • Consider requiring employees to obtain your permission before taking on “second” jobs.  Should you decide that you want to expressly forbid an employee from taking on a specific “moonlighting” job, always immediately speak with your attorney – to be sure you’re within your legal rights to do so. You’ll need to carefully document all your reasons to protect yourself from any future litigation;
  • Try to be accommodating when an employee indicates that s/he will not be competing with your company in any way. After all, it’s entirely possible that you may one day become a client of your employee’s fledgling new company. Of course, you should still periodically touch base with all moonlighting employees to be sure no conflicts of interest have developed since they started their second jobs;
  • Use periodic job evaluations to your advantage. During these, be sure supervisors ask questions that can help determine if the employee’s outside job is starting to compromise his/her ability to provide you with top-quality work.

Please feel free to schedule an appointment with one of our Murray Lobb attorneys so we can help you draft the various contracts you need to protect your company’s proprietary interests. We can also help guide you as you create (or update) your current employee handbook on this and other topics.

You Might Need a Revocable or Irrevocable Trust

Depending on the nature of the property you own and how it’s titled, you may want to ask your lawyer to create a trust that will help you meet all your estate planning needs. To prepare for such an appointment, be sure to take along two lists – one noting all the properties you own and the other indicating the beneficiaries you want to help by naming them in the trust.

Your attorney will need to ask some general questions to help you decide which one of these trusts is best suited to your current financial situation.

Before describing some of the precise differences between revocable and irrevocable trusts, this article will note some of the general reasons why they’re often desirable.

What general benefits do trusts often confer on estate planning clients?

  • They can help maximize family privacy. Most property that passes to beneficiaries under trusts is never publicly disclosed — except to the extent that certain taxes may be owed on gifts given or received. Obviously, when property passes through probate, members of the public can learn about your estate by reviewing court records. Therefore, trusts offer greater privacy;
  • Trusts can help protect your assets from outside creditors. While this goal can be achieved if you’re not attempting to defraud others when you have the trust created, you must be prepared to answer questions if creditors sue you. If you want to put assets in a trust in hopes of getting around specific Medicaid rules and regulations, you must let your lawyer explain how the government prevents fraud in this legal area;
  • They can provide specific tax advantages. For example, since property or assets placed in an irrevocable trust account are considered owned by the trust and not by the grantor who had it created, those assets will not be treated as part of your estate (for tax purposes) at the time you pass away. (However, any assets in a revocable trust when you die will be taxed as part of your overall estate);
  • Trusts can provide added financial security to a dependent disabled person. In order to qualify for some Social Security benefits, recipients must meet certain financial criteria. If they own too much property or are too wealthy, they won’t be qualified to obtain key benefits. One legal way to get around this problem is to place assets in an irrevocable trust and name the disabled person as a beneficiary. Your Houston estate planning attorney can explain this process in greater detail. Aging parents and others often set up trust accounts like this to be sure seriously disabled family members will have enough to live on in the future – long after others have passed on;
  • At the time of a divorce, most trust funds should remain protected. However, you cannot place funds in a trust prior to a divorce to try and defeat your spouse’s community property rights;
  • Properly created trusts have long helped grantors provide for the basic needs of their loved ones.

It’s important to note that all trusts are categorized as either “testamentary” or “living” (inter vivos) trusts. The latter type become viable during the grantor’s lifetime – while testamentary trusts – which are directly linked to your Will — don’t go into effect until you’ve passed away.

What are some specific benefits of revocable trusts?

  • They can provide ongoing control over all trust assets. If you create a revocable trust, you can decide if you want to serve as the trustee and move certain assets in and out of the trust when you choose, depending on the terms you created for the trust;
  • You can change the terms of the trust when you choose. This might mean picking a new trustee or altering the list of beneficiaries;
  • They are relatively easy to handle at tax time. As the grantor (or creator) of this trust, you can simply declare your earnings from the trust in your personal tax return.

What are some specific benefits of irrevocable trusts?

  • The trust assets are usually considered safe from the reach of outside creditors. This will prove true if you didn’t have the trust created to defraud others. Courts will review all aspects of the trust’s initial drafting when checking to be sure it wasn’t set it up to defeat known debts;
  • As noted above, disabled people needing to receive special Social Security benefits can often receive critical added funds from properly drafted irrevocable trusts;
  • For tax purposes, the IRS and others don’t usually view these trust assets as being owned by the grantor at the time of his/her death. Therefore, any assets in the trust at the time the grantor dies will not be added to assets outside the trust when calculating any estate taxes that may be due.

Always keep in mind that the laws controlling the creation of trusts change periodically. Be sure to always confer with your Houston estate planning lawyer who keeps up with such changes before ever trying to create or modify a trust. Attorneys also stay abreast of all new state probate laws that may affect clients’ estate plans.

Should you need any help with creating or updating a trust account, please feel free to contact one of our Murray Lobb attorneys. We’re ready to provide the legal advice you’ll need to fully protect your assets in the future. Our firm can also help you revise your estate plan as your family continues to grow and new investments are added to your portfolio.

Basic Requirements for Creating a Trust in Texas

Before meeting with your lawyer to create a trust, it should prove helpful to first review the following general legal terms and requirements that govern this effort. Once you understand your duties and the different parties you’ll need to name in the trust, you’ll be better prepared to begin listing the property you wish to transfer through your trust.

Key terms such as grantor, trustee, beneficiary and trust agreement

If you’re the party seeking to create a trust, you may be referenced in the trust document as the grantor, settlor or trustor. In order to create a valid trust in Texas, you must have the present intent or goal to create this type of document that allows you to protect property in a trust during your lifetime. Depending on the exact type of trust you create, you may also retain the right to fully control the property during your lifetime – which may include moving specific bits of property it in and out of the trust according to your needs.

Among your various duties as the grantor, you’ll need to decide who you want to name as the trustee – or controlling party – of your trust. If you choose to create the type of trust that must be managed and controlled by another party, you’ll have to decide if this should be your lawyer, a family member or another party with strong financial management skills.

As the creator of the trust, it will also be up to you to carefully describe all the duties you want your trustee to handle and how you prefer that those duties be carried out. And if you’ve chosen to act as the trustee, you should also name a potential “successor trustee” who can step in and take over if (or when) you become incapacitated — or pass away.

Additional requirements that must be met when creating your trust

You’ll need to be of sound mind, fully capable of understanding all that you’re trying to do with your property and have a proper legal purpose for the trust. In other words, you’ll just need your lawyer to state the specific type of lawful trust that you’re creating – such as a revocable, irrevocable or spendthrift trust – and which parties will receive the benefit of the properties held within the trust.

Texas law also mandates that your trust fully complies with all the requirements of the Statute of Frauds. This basically means that the trust is set forth in writing and is properly executed in full keeping with that statute so that it’s legally enforceable in a court of law. Your Houston estate planning attorney can also explain to you why certain gifts must become vested within set time periods so that they’re not in violation of the Rule Against Perpetuities.

Why you may need more than one trust

In addition to creating a trust that provides all your property with certain tax advantages during your lifetime, you may also wish to create an educational trust that will benefit your grandchildren or even one to cover the needs of a beloved pet after you pass away.

A simultaneous review of your entire estate plan will also benefit you

Whether you’re married or single, it’s always wise to carefully review all your assets with your attorney when creating a trust. In some cases, you may even want to go ahead and change how certain property is currently titled and change some investment accounts so that they’ll pay out directly to specific beneficiaries at the time you pass away – thereby lessening the duties of any party you’ve named as your trustee.

Please feel free to contact one of our Murray Lobb attorneys so we can create the type of trust you currently need. We’ll also help you review your overall estate plan and provide you with legal advice about the right way to properly manage any property or business interests not currently covered by a trust.

What Kinds of Property Can Be Placed in a Revocable Living Trust?

A revocable living trust is an estate planning document that allows its trustee to actively control many properties and possessions during an entire lifetime. Both new and older possessions can be freely moved in and out of this trust and left to various beneficiaries. Once the trustee passes away, all the property still held by the trust can immediately pass to the beneficiaries and avoid incurring unnecessary probate fees.

Since real estate, business interests and personal possessions can be quite varied, it’s wise to discuss their individual characteristics with your lawyer before placing them in this type of trust. This especially holds true if you plan on buying and selling some of your possessions on a regular basis. In some cases, it may be easiest to allow a few less expensive properties to pass through probate when their value will help minimize any fees.

Here’s an overview of the type of personal possessions, real estate, business accounts and other items that you may want to place in your revocable living trust (RLT).

Types of property often placed in a revocable living trust

  • Real estate and houses. You can place these in a revocable trust, even if they’re encumbered by mortgages. Of course, any debt still owing on the property will pass to the beneficiary;
  • Legal interests you own in most small businesses. You’ll need to give this very careful thought since you’ll want to be sure your beneficiaries can capably run the business and handle other required tasks. Also, you and your Houston estate planning attorney need to carefully read all the small print in your business contracts to be sure they don’t specifically forbid the transfer of your ownership interests into a trust. Other formalities may also become pertinent. For example, if you’re a partner in a group governed by a partnership ownership certificate, that document may have to be changed to indicate your trust is the legal owner of your share in the business. Somewhat similar issues may arise if you own shares in certain types of corporations;
  • Stocks, bonds, bank and security accounts. While it can prove useful (if allowed by the terms of each account) to place all of these in your revocable living trust, it may be simpler to just a name a TOD (transfer on death) beneficiary for one or more of these accounts. Ownership can then pass directly to your beneficiaries as soon as they produce legal proof of your death;
  • Copyrights, trademarks, royalties and patents. These can all be placed in your LRT (living revocable trust). After you pass away, the rights – and limitations – that governed these interests will pass on to your beneficiaries;
  • Gold, silver and other precious metals. Before deciding whether it’s wise to place these in your trust, be sure to get them accurately appraised;
  • Prized pieces of artwork, antiques (and less expensive) furniture. Be sure that all these unique items are properly insured before placing them in your trust;
  • Your collectibles. These often include coins, stamps and other unique items you may have spent a lifetime collecting. (Be sure all these items are also properly appraised and insured).

Should you place your life insurance policy into your revocable trust?

If you’re considering this move because you’re trying to protect the policy proceeds from having to go through probate, be aware that such proceeds automatically bypass probate and go straight to your named beneficiaries. However, if the only beneficiary of your policy may still be a child should you suddenly pass away, you may want to put the life insurance policy into your trust and name the living trust as the beneficiary. Your lawyer can then make sure that the trust names an adult to manage the proceeds of the life insurance policy for the specifically named child until s/he reaches adulthood.

How should 401(k), 403(b), IRA and qualified annuity accounts be handled?

You can create various tax problems for yourself by trying to transfer these into your LRT. Ask your lawyer if it would be better to just change the beneficiaries named for these accounts.

Should you place ownership of any vehicles in your trust?

If you use them regularly, this is often not practical. However, if you own one or more antique autos, you may want to talk with your attorney about whether it’s fully beneficial to hold title to them in your trust – or if there’s a better way to keep them out of the probate process.

Can oil and gas mineral rights be placed in a revocable living trust?

What you can do with these depends on the precise nature of the rights you hold. Ask your Houston business law attorney if you should create an assignment to these rights or try to formally obtain a new deed before transferring them into your revocable living trust.

Please contact us and allow one of our Murray Lobb attorneys to help you draw up any living revocable trusts you may need to help protect your personal property and possessions.

Probating the Texas Estate of a Missing Person

At first glance, it might seem impossible to probate the estate of someone who is missing and presumed dead. However, the Texas Estates Code provides for this very process under Title 2, Subtitle J, Chapter 454 entitled, “Administration of Estate of Person Presumed Dead.”

That chapter clearly states that a probate court has the required jurisdiction to determine the likelihood of a person’s death when specific steps are followed — even if the main evidence presented is entirely circumstantial. However, the Texas Estates Code was carefully drafted to prevent fraud by requiring a lengthy delay before the assets of these types of estates can be distributed.

What are the main steps usually taken to probate the estate of a missing person?

  • Request for letters testamentary. After the probate process has begun with the filing of a request for letters testamentary, the court-appointed personal representative must serve a citation on the person presumed dead in the manner required by the court. Since the person is missing, this often means publishing a notice of the proceeding in one or more print newspapers – and in any other manner dictated by the court;
  • Contacting the proper authorities. The personal representative must then formally contact the proper authorities about the estate owner’s missing status. Among others, law

enforcement officials and state welfare agencies should be notified – along with any others suggested by the court;

  • A professional investigative agency should be hired. This must be done in keeping with the provisions of  Section 454.003 of the Texas Estates Code (requiring efforts to locate the missing owner of the estate). During this process, the investigator may encounter potential heirs who may have crucial information that can help locate the missing person – or help determine where s/he was living shortly before death.

The investigator should create a report based on all research and interviews conducted and then present it to the court – documenting that the missing person cannot be located. The cost of this investigation is normally reimbursed by the estate, after the court has had time to review the requested fees.

How quickly can the estate be distributed?

Section 454.004 of the Texas Estates Code clearly states that this can only be done after three years have passed since the date on which the letters testamentary were issued by the court to the personal representative.

What personal liabilities can arise if the person presumed dead reappears after distribution?

If the missing person returns and presents conclusive evidence that s/he was alive at the time the

letters testamentary were granted, that individual has the legal right to regain control of the estate — whatever remains of the funds or property.

However, this person who was presumed dead – yet has now reappeared – cannot get his/her property back that was sold for value to a bona fide purchaser. Instead, this person only has the right to the proceeds or funds obtained for the sale of the property to the bona fide purchaser.

In addition, Section 454.052 states that the personal representative who handled all the legal sales transactions for the estate, not knowing that the missing person was actually alive, cannot be held liable for any financial losses suffered by that individual who has now returned. And any surety who issued a bond to that personal representative cannot be held liable for anything the personal representative did while complying with approved court-ordered activities.

Should you need help probating any estate, please feel free to contact one of our Murray Lobb attorneys. We’ve had the opportunity to help many clients and can readily answer all your questions.

Should My New Texas Business Be Formed as an “S” Corp or an LLC?

While deciding which business structure will best serve your needs, always consider several key factors. For example, look at how many employees you plan on hiring and how much time you want to spend managing the company. You should also make sure you’re fully protecting your personal assets against future lawsuits and not incurring any excess taxes.

One excellent way to choose the best structure for your company is to meet with your Houston business law attorney. The two of you can discuss all that you might gain (or lose) by starting your company as either an LLC (limited liability company) or an “S” corporation.

Before noting some of the basic steps involved with forming an LLC and an “S” corporation, here’s a brief overview of the unique offerings and drawbacks of both structures.

What are some chief advantages and drawbacks of starting an LLC?

Depending on the size of your business and the types of goods or services you’re selling, you may prefer an LLC for the following reasons.

  • It offers a less formal structure. An “LLC” is also often easier to manage than an “S” corporation, especially when you have few employees. And you’ll never need to have any board meetings to tackle problems tied to issuing stock certificates;
  • You can readily change this business structure (once all proper paperwork is filed). If

you’re running an “S’ corporation, you’ll first have to arrange a formal board meeting before trying to change the business structure);

  • All members of an “LLC” do not have to be permanent residents or U. S. citizens;
  • You can more easily divide up who handles most of the daily work – while allowing others to just be investors. You can also simply divide up the profits based on each person’s initial investment and daily work contributions;
  • Disadvantages of an “LLC” compared to an “S” corporation. These can include having all the company profits subjected to self-employment taxes. Your growth may be limited since your business cannot issue any stock shares. Always ask your Houston business law attorney about any other potential disadvantages that may apply to your unique situation.

Why do some entrepreneurs prefer forming “S” corporations – despite the limitations?

  • Formality is viewed more favorably by some. Outside businesses often prefer interacting with companies that employ a more formal corporate structure;
  • You can often use this structure to avoid double taxation of income;
  • Profits are passed on to the shareholders (by way of their paid dividends). Therefore, the company does not have to pay taxes on those profits;
  • Possible drawbacks. All shareholders must be permanent residents or U.S. citizens. There can be no more than 100 shareholders. Added state filing fees may apply. Also, the IRS

tends to monitor “S” corporations very closely since some people try to improperly avoid certain taxes by wrongfully using this business structure.

What are some basic issues that must be addressed while forming an “LLC” in Texas?

  • Membership. You’ll need to decide how many owners or members you’ll have and if they’ll share all the managerial duties;
  • Naming your business. You must choose a unique name to avoid confusion with already existing companies;
  • File all required forms. You’ll need to start with a certificate of formation (Form 205) that must be filed with the Texas Secretary of State’s Office;
  • Registered agent. You must name a registered agent who can accept the service of process on behalf of your company;
  • You’ll need to create an operating agreement. It’s usually best to ask your Houston business law attorney to draft this document for you after you’ve

discussed the precise nature of your new business;

  • Fully satisfy all state and federal paperwork requirements;
  • Obtain all required state and local business licenses that may be required for your industry.

(Note: Some of these same steps may also be required while forming an “S” corporation below, regardless of whether they’re listed).

Here’s a brief review of key issues involved in starting an “S” corporation in Texas

  • The drafting of Articles of Incorporation. These must be filed with the Texas Secretary of State’s Office;
  • Stock certificates must be issued to all initial shareholders;
  • All applicable business licenses and certificates must be obtained in a timely manner;
  • You’ll need to file Form 2553 with the Internal Revenue Service. (Your lawyer can first check to be sure you meet all the qualifying terms for creating an “S” corporation).

Please feel free to contact one of our Murray Lobb lawyers so we can answer your questions about each of these business structures. We can also help you draft all the documents you’ll need to transact business throughout the year.