Don't get stuck in an information vacuum if your son or daughter ends up in the ER.
Early one October morning, Sheri E. Warsh, a mother of three from Highland Park, Ill., stepped out of the shower to a ringing phone. On the other end, her 18-year-old son’s college roommate delivered terrifying news: Her son—270 miles away at the University of Michigan—was being rushed by ambulance to a nearby emergency room with severe, unrelenting chest pain. “I was scared out of my mind, imagining the worst,” Warsh said.

In a panic, she called the ER for details. What she got instead was a rebuff from the nurse. “She asked me how old my son was, and when I said 18, she told me I had no right to talk to the doctor,” Warsh said.

Was the nurse acting within her scope by shutting out the anxious mom? In fact, she was. The ER chose not to disclose the son’s medical condition due to the Privacy Rule of the Health Insurance Portability and Accountability Act, or HIPAA. 

“Once a child turns 18, the child is legally a stranger to you,” said Jane F. Wolk, a trusts and estates attorney practicing in New York and New Jersey, referring to the legal age in almost all states (in a few it's older). “You, as a parent, have no more right to obtain medical information on your legal-age son or daughter than you would to obtain information about a stranger on the street.”  And that is true even if the young-adult child is covered under the parents’ health insurance, and even if the parents are paying the bill. 

A medical provider can chose to disclose protected health information to a family member, even without the patient's authorization, if, in her professional judgment, it serves the best interest of the patient. But providers often come down on the side of patient privacy, particularly if they have never met the family member.

In this case, Warsh’s son didn’t intend to keep his parents in the dark. In the midst of cardiac-care chaos, he was in too much pain to give authorization. But a simple, signed legal document (or two, in some states) would have smoothed the way.

“Nobody is talking about this, even after I went to so many college meetings and orientations,” Warsh said. The irony of her story is that Warsh is an attorney specializing in the practice of trusts and estates as a partner at a Chicago law firm. “Now in my practice I have made it my goal to educate parents on what they need to do,” she said.

Moms and dads who still think of themselves as protectors and advisers, even after their children become legal adults, often don’t consider the real-world implications of that milestone birthday. They and their young-adult children need to think about the unthinkable in advance. Three forms—HIPAA authorization, medical power of attorney, and durabe power of attorney—will help facilitate the involvement of a parent or other trusted adult in a medical emergency.

If a student attends college out of state, fill out the forms relevant to the home state and school state to avoid any challenges. If the school has its own form, sign that one too, Warsh said. “When the doctor or medical institution sees it, you want them to be familiar with it and recognize it,” she said.

Once the forms are completed, it’s a good idea to scan and save them so that they are readily available on a smart phone or home computer.

You don’t need a lawyer to do this. Many websites have downloadable forms. But a lawyer’s involvement can benefit in making sure you are using the right form, explaining it, and advocating on your behalf in case something goes wrong.

—Susan Feinstein

Thinking about the unthinkable: 3 forms that help 
HIPAA authorization
A signed HIPAA authorization is like a permission slip. It permits health-care providers to disclose your health information to anyone you specify. A stand-alone HIPAA authorization (not incorporated into a broader legal document) does not have to be notarized or witnessed. This document alone, signed in advance by her son, would have sufficed for Warsh to get information from the hospital treating her 18-year-old son. Young people who want parents to be involved in a medical emergency, but fear disclosure of sensitive information, need not worry; HIPAA authorization does not have to be all-encompassing. They can stipulate not to disclose information about sex, drugs, mental health, or other details they might want to keep private.

Medical power of attorney
In signing a medical POA you appoint an “agent” to make medical decisions on your behalf in case you are incapacitated and cannot make such decisions for yourself. Each state has different laws governing medical POA and, therefore, different legal forms. In many states, the HIPAA authorization is rolled into the standard medical POA form. Whether the medical POA requires the signature of a witness or notary varies state by state.

For the sake of clarifying often-used terms: A medical POA sometimes goes by other names, such as health-care power of attorney, designation of health-care proxy, or durable power of attorney for health care. It is one type of advance directive. The other type is a living will, which specifies your wishes with regard to interventions in life-or-death scenarios in case you are unable to do so. In many states, the language for the living will is also incorporated into a hybrid document that includes the medical POA and HIPAA release.

Durable power of attorney
As an additional step, young-adult children might consider appointing a durable power of attorney, enabling a parent or other designated agent to take care of business on the student’s behalf. If the student were to become incapacitated or if the student were studying abroad, the durable power of attorney would be able to, for example, sign tax returns, access bank accounts, and pay bills. Durable POA forms vary by state. In some states the medical POA can be included in the durable POA form. “The durable power of attorney is sweeping,” Wolk said. “You do not want to give it to someone who you do not trust.”

Copyright © 2006-2015 Consumer Reports.

Original Source: http://www.consumerreports.org/cro/news/2014/08/will-you-be-able-to-help-your-college-age-child-in-a-health-emergency/index.htm#

What is business succession planning? Business succession planning refers to the practice of using estate planning strategies to increase the chances for the survival of your family business when you retire or die unexpectedly.

1. How do I know if I need business succession planning? The following questions will help you decide if you need business succession planning?
   
2. If you die unexpectedly, can your family continue to run your business? If your family cannot run your business, who can?
   
3. If you die unexpectedly, will your family have sufficient liquid resources to hire someone to replace you? If your family cannot run your business without you, you should consider their liquidity needs. If there is no money to hire someone to run the business, perhaps life insurance is needed.
   
4. If you die unexpectedly, and have partners, will they pay your family a fair price for your business? When you are gone, you need a mechanism to ensure that your family is treated fairly by your partners.
   
5. How do you protect your family in the event of your early death? The most effective form of protection for your family, or you, if you survive to retirement, is a well prepared buy sell agreement.
   
6. How do you know if your buy sell agreement is well prepared? Does your buy sell agreement provide which events trigger the requirement that the remaining owners purchase the interest of the departing shareholder. These should include at least:
   • Death
   • Disability
   • Incapacity
   • Bankruptcy
   • Loss of a professional license
   • Failure to properly carry out the owner’s expected duties
   • Retirement
7. Does is your buy sell agreement require the remaining owners to purchase the departing owner’s interest when a “triggering” event occurs? There are two fundamental types of buy sell agreements, voluntary agreements and mandatory agreements. A voluntary agreement means that at your death or retirement, your partners will negotiate the purchase of your interest from your estate or you. A mandatory agreement mandates that the remaining owners purchase your interest. The problem with a voluntary agreement, is that it is merely an agreement to agree and does not adequately protect you or your family.
   
8. Is your buy sell agreement adequately funded? Every buy sell agreement should have provisions for the payment of the price of the departing owner’s interest by the remaining owners. The typical methods are:
• Installment sale based on the current earnings of the business
• A sinking fund whereby a certain amount of funds from the business are invested to provide for a future purchase
• Cash from borrowings at the date of purchase
• Life insurance - By far the safest method is the use of life insurance. The rest depend upon the financial solvency of the business or the other owners at the time that a purchase is mandated.
9. How is the price of the departing owner’s interest determined? Perhaps the most sensitive, and equally as important as the funding method, is the method to determine the price of the departing owner’s interest. The most frequently used methods are:
   • By appraisal
   • Book value
   • A multiple of annual earnings
   • Replacement cost of hard assets
   • As agreed upon annually
   Book value, multiple or earnings, whatever “earnings” means, and replacement cost of hard assets are susceptible to manipulation, when you may no longer be around to protect your family, and are therefore risky. Appraisal and as agreed upon annually will generally aid in reducing the potential for conflict when a purchase is mandated.
   
10. Will you have enough income when you retire? As every financial professional will tell you, it is never to early to begin accumulating wealth for retirement. In family businesses, this is especially crucial because younger family members taking over the reins will resent the senior generation if they take and unreasonable amount of money from the business because they didn’t plan ahead.
    
11. Do you have a management succession plan in place? Family business owners are notorious for neglecting to have a management succession plan in place. By management succession plan is meant a realistic determination of who in the family is capable, if anyone is, of taking over the business when the senior generatio n retires.
    
12. Does your succession plan accommodate siblings with different skill levels or interest in the business? For a succession plan to be successful, it is necessary for the senior generation to take into account the differing skill levels, or interest in the business, of siblings. If there is a daughter who is clearly the one to take over, that does not mean the son who is interested in the business is ignored. Planning must be in place to avoid family conflict that could destroy the business.
    
13. Have you considered the impact of estate taxes on your family business? As the goal of business succession planning is to transfer the family business to the junior generation in a manner that increases the probability of success, estate taxes are a prime consideration.
    
14. Do you have an estate planning team familiar with business succession planning? Business succession planning is a very complex area, it involves accounting, insurance for liquidity, professional investment advice and the aid of an estate planning attorney.
    
15. Are you willing to pay the costs of protecting your business for your family? As with all things, “you get what you pay for.” It is without a doubt that the current costs of a business succession plan are greater than the costs of not planning. However, the current savings are likely minimal when you consider the costs of not planning. What are the costs of not planning? The costs include:
    • A loss of the family business to estate taxes
    • A loss of the family business due to a lack of liquidity to tide the business through the period following an unexpected death
    • A loss of the family business because there is no formalized arrangement to transfer
      ownership of a decedent’s interest to the decedent’s heirs d. A loss of the family business because no one has been trained to replace the senior generation
    • A loss of the family business because the retiring owners demand too much from the business to allow the junior generation to earn a reasonable income for their services
    • A loss of the family business because sibling rivalry was not planned for
      
16. Have planned how transfer your family business to your heirs? Imagine, you awake at 65 years of age and decide that you would like to turn over the reins to your children. Your business is worth in excess of $1,000,000. How do you now transfer it to your children? Transferring a family business is a very time sensitive matter. The earlier one starts, the lower the estate and gift tax risks.
    
17. Are you willing to make gifts of interests in the family business to your children, or trusts for their benefit, if you can maintain management control? Unfortunately, many family business owners do not appreciate the fact that they may begin transferring interests in the business when their children are four years old and still maintain absolute control. Estate planning attorneys have devised strategies that enable a parent to give it away, but control it absolutely. This is one of the circumstances where the question of, are you willing to pay the costs of business succession planning comes into play.
    
18. Do you know how to give it away, but still maintain control? Probably not, but your estate planning attorney does. There are various estate planning strategies that allow you to reduce your ultimate taxable estate yet retain control over family business decisions.
    
19. How does your estate planning attorney allow you to give it away but maintain control? That is a part of business succession planning that involves the choice of entity in which to operate the family business.
    
20. Do you know what the entity of choice is? Actually, there are two that are very similar to one another. They are the family limited partnership and the limited liability company. They are the entities of choice because of their superior asset protection characteristics and their income tax flexibility. 
    
21. Do you know why a family limited partnership or a limited liability company has superior asset protection characteristics than a corporation? Assume you own stock in a corporation and are the general partner in a family limited partnership and you are successfully sued and the creditor obtains a judgment. If the creditor so desires, he or she can take your stock. However, all the creditor could do to your partnership interest, is to receive distributions that you would otherwise have received. The creditor may not vote, act as a general partner or even look at the partnership’s records. A somewhat hollow victory when compared to the loss of your stock. 
    
22. How would your estate planning attorney use a partnership or limited liability company to enable you to give it away but maintain control? Your estate planning attorney would prepare an agreement, assume a family partnership, and have you transfer your financial and investment real estate into the partnership in return for 2% general partner interests and 98% limited partner interests. You would then begin the process of making gifts of the limited partnership units to your children or trusts for their benefit. But because you retain the 2% general partnership interest, you are in control. You can give it away but maintain control.
    
23. Do you have an overall estate plan in place? All of your estate planning documents must be carefully designed to fit together to create a business succession plan that works. In fact, it is likely that your revocable trust will be the owner of the general and limited partnership interests that you will own. In that manner, you, or your successor trustee in the event of your incapacity, are able to manage the partnership without the necessity of a conservator or guardian. 
    
24. Do you know how your living trust will be designed to carry out your business succession plan?Assume your daughter is the one that should run the family business when you are unable to due to an early death or incapacity prior to your retirement. With the general partnership interests owned by your living trust, you daughter can be appointed by the terms of the trust as the successor trustee who is to take over as the general partner. In this method, sibling conflicts are reduced so as to protect the business.
    
25. Are you willing to give up some control over the business? It is very important that children who are to succeed to the management of the business be given increasing management authority in proportion to their skill and experience. It not only provides for trained management replacements, it gives them the knowledge that you have respect for them and confidence in their abilities. 
    
26. Are you and your spouse in agreement as to the ultimate disposition of the family business? All too often, the spouse who performs most of the management of the family business fails to take into consideration the wishes of the inactive, or less visible, spouse. This may cause the business succession planning efforts to take longer, be more costly or perhaps even fail. One example is the management spouse schedules a business succession planning meeting with the estate planning attorney and does not invite the less active spouse. 
    
27. Are you willing to face the reality that you will die or retire at some time? First generation family business owners are rare and unique breed of entrepreneur. Typically, both spouses have long and hard for the family business. They have sacrificed much to grow the family business so as to leave a legacy to their family. However, when it comes time to begin the planning, there are always too busy. It seems there is no sense of mortality and many plan “to die in the saddle.” 
    
28. Are you willing to pay the costs of business succession planning? Business succession planning may entail more professional costs than the typical business owner is used to paying, other than litigation costs. One reason is that there needs to be a team of professionals working to design and implement a plan for you and your family that will be successful. This is not the time to be “penny wise and pound foolish.” A sound business succession plan is an investment that will pay off for you and your heirs for generations to come.
    
29. Are you willing to deal with a certain amount of complexity in your business succession planning?It is without question true, that there are tremendous estate and gift tax savings to be had from a more complex business succession plan than a simple one. However, in the final analysis, you must be comfortable with the business succession strategies that you adopt to protect your family. Otherwise, the plan will fail. 
    
30. Are you willing to accept the advice of professionals? Owners of family businesses are the bedrock of the American economic system. They employ most of the employees in the country and are responsible for many innovations. Remember, Microsoft was a family owned business. However, entrepreneurs may also be difficult to counsel. They are typically confident and skilled decision makers. Unfortunately, the skills necessary for successful business successioin planning are likely somethibg the owner is unfamiliar with. It takes a leap of faith to accept the advice of others. It is also necessary to protect the family business. 
    
31. Are you concerned enough to take action? The skills of your advisors or the importance to your family of business succession planning are meaningless, unless you take action. The most important aspect of business succession planning is for the owners to become convinced that they need to take positive steps or have their family business disappear due to a lack of planning. Do not let that happen to your family business.

Original Source: http://wealthcounsel.com/articles/2015/business-success-planning-checklist?utm_content=buffer24eec&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer

By Andrew Keyt
Mon, 2015-06-15 15:20
 
A person born into a family business is a person born into a story—one that’s ongoing and generations old. Like any good story, there are heroes: parents, grandparents and great-grandparents, whose legacy, mythologized over time, casts a long shadow. This shadow weighs heavy on the next generation. Do I have what it takes? Will I be a great a leader or will I fail? The expectation to succeed, to live up to the past and honor its heroes… even the most resilient successor can be crushed by the pressure.

There are other obstacles, too. The myths of leadership. Idioms and phrases that at first, sound wise but at heart are akin to nonsense. For example, “leaders are born and not made.” How shortsighted to think that there’s only one iconic style of leadership bestowed upon a lucky few. That leadership is what? Somehow given to a person at birth, like some fairy godmother’s spell? Myths like these slowly chip away at successors and, like the weight of the family shadow, can undermine their confidence, capability and talent.

The topic of succession is one I hold near and dear. For almost 20 years, I’ve watched graduates from our Next Generation Leadership Institute go on to become confident and successful leaders within their family business. I’ve also had the fortune of interviewing 28 family business successors, all chronicled in my book, Myths and Mortals: Family Business Leadership and Succession Planning. All of these experiences have brought me to this understanding: that while it’s true we’re all born with certain leadership traits, those we lack can be developed and strengthened through hard work and education.

When on the road to becoming a successor to a family business, here are some traits to consider.

Self-Awareness

A successful successor is aware of their strengths and weaknesses and leverages their strengths for the good of the family and the business.

Belief in Oneself

The family shadow can lead them to believe that credibility and worth comes from their family name rather than individuality and identity. Successful successors aren’t afraid to make mistakes. Nor are they afraid to learn from these mistakes. This process teaches them to believe in themselves, while at the same time, building a personal record of achievement. Credibility must be built on personal and professional actions, not a family name.

Credibility with Others

Belief in oneself isn’t enough to become a successful successor; others must believe in them too. They’ll recognize a successor’s credibility in the same way a successor recognizes it within themselves: through actions, ability to lead and track record. Christie Hefner described it this way, “True power is given by the people that you lead, not by the people who gave you the job.”

Clear Sense of Values

Successful successors reflect on their parents’ values and, in turn, establish their own set of values. Some may be shared with parents, while others may be unique to them. Think of values as a map; they keep the business on a set course. When we reach a fork in the road, values help us decide which path to follow.

Decision Making

Successful successors are skilled problem solvers. They know how to make difficult decisions and act decisively for the betterment of the family and the business. Laying off parts of the workforce, for example, can be an extremely difficult decision, especially when employees feel like part of the family. But it’s a decision that sometimes must be made to keep the family business afloat.

Commitment to the Family

Survival isn’t just about money. Research shows that centuries-old family businesses have survived for so long, not because of financial success, but because of strong relationships. Families enjoy being together and have a sense of pride and commitment to each other and the business. Successful successors come to know that “we” is more important than “me.”

Commitment to People

Successors shouldn’t let their family shadow diminish contributions by employees, trusted advisors and other family members. Successful successors aren’t blinded by the shadow; instead, they shine a light on the contributions of others. (S)he should commit to the growth and development of his/her employees. Give credit where it’s due, celebrate success, admit mistakes and take responsibility when things go wrong.

Commitment to Continual Learning

Successful successors are life-long learners. They enjoy discovery and new perspectives, taking some initiative to learn and be curious.

Ability to Deal with Ambiguity

Leading in a family business is often fraught with uncertainty and ambiguity. There’s often no clear right or wrong. Successful successors are comfortable in this middle-zone; while others are paralyzed with indecision, they seek clarity.

Successors face many challenges; from the family shadow to the myths of leadership, overcoming these challenges is no easy feat. A successor will need to make a concerted effort to strengthen their leadership traits over time so they can build a legacy larger than themselves.


Source URL: http://wealthmanagement.com/family-business/key-leadership-traits-family-business-successors