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Trustee Certificate - iStockAs everyone mourns the death of Robin Williams and reflects on his tremendous talents, we estate planning attorneys can’t help but wonder, did Robin Williams do any estate planning?

It is apparent that Robin Williams had a very successful career. What is unclear is the true value of his estate. Some reports indicate that Robin Williams was close to filing bankruptcy, while others report that he had equity in real estate upwards of $25 million. If the latter is true, one can only hope that Robin Williams took the time to do some estate planning.

Robin Williams’ family would surely benefit from any preplanning he may have done. He was married to his third wife at the time of his death, and he left behind three children between the ages of 22 and 31. Some of Robin Williams’ past estate planning documents have been leaked to the press, documents in which Robin Williams’ agents claim are void. The documents were akin to Irrevocable Life Insurance Trusts, allowing for staggered trust distributions to his children: 1/3 at 21; 1/3 at 25; and a 1/3 at 30.

What has yet to be confirmed is whether Robin Williams had any type of Revocable Trust in his estate plan. For the real estate alone, this could be significant. If the real estate was held in a Revocable Trust, no probate matter would need to be commenced to transfer the assets to his heirs. Similar to the laws in Minnesota, under California law, if Robin Williams did not have a trust and owned real estate when he passed away, a probate matter would need to be commenced to pass the real estate on to his heirs. However, if the allegations that he held his real estate in trust are true, under the name of The Domus Dulcis Domus Holding Trust, his real estate could escape the probate courts all together.

While probate does not need to be costly for all matters in Minnesota, a probate matter dealing with multi-million dollar real estate in California certainly would be. In California, the filing fees are much higher and occur both at the inception of the probate proceeding and at the close of the proceeding. What becomes most concerning with Robin Williams’ estate is the amount of attorney’s fees that his heirs would incur in this type of probate proceeding.

In most states, probate attorneys charge by the hour or collect a flat fee for attorney’s fees. The fee arrangement is usually based on the concept of “reasonableness.” However, that is not the case in California. California is one of only a few states (Florida is another example) that allow attorneys to be paid based on a statutory fee. The attorney’s fees are based on the value of the assets that pass through probate. The fees are set forth in the state statutes (Cal. Probate Code §§ 10810, 10811).

Current Rates:

  • 4% of the first $100,000 of the gross value of the probate estate
  • 3% of the next $100,000
  • 2% of the next $800,000
  • 1% of the next $9 million
  • .5% of the next $15 million

If Robin Williams’ estate passes through probate, the attorney involved stands to benefit quite substantially under the current estimates of the value of his estate. For if Robin Williams utilized a Revocable Trust, his assets could pass directly to his family, saving them thousands of dollars in court costs and attorney’s fees.

Rest in Peace Robin Williams.

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Power of Attorney - iStockI know, I know… you have read it over and over again here on Epilawg that it is important to have documents in place for times of incapacity. Yet, as Jayne Sykora and I just attended a conference together, I was reminded of the importance to do so particularly if you own a business. As business partners, Jayne and I are able to backup one another. If something happens to one of us, the other is able to step in and tend to necessary tasks. However, if something happened to both of us, we do have a plan in place to ensure someone else can make various decisions on our behalf, complete certain transactions and do whatever is needed to either keep our business going or wind things up to shut it down.

If there are multiple owners of your business, you should ensure the appropriate people are designated to act on various accounts and proceed with different transactions. Some companies may limit who has the authority to withdraw funds or enter into agreements on behalf of the company, but it is important to have a line of succession in case the primary person is unable to act.

You can designate the line of succession in the company’s governing documents or even through a power of attorney. Under the Minnesota Statutory Short Form Power of Attorney, a principal can authorize the attorney-in-fact to handle a wide range of tasks on behalf of the principal and/or business. Minn. Stat. §523.24 Subd. 5.If the principal would like to limit the authority they can do so by drafting a common law power of attorney.

It is also important to recognize any limitations on who can be named as an authorized party or attorney-in-fact on behalf of the business based on the type of business or services provided. For example, a business that is designated as a “professional firm,” meaning a company that furnishes professional services such as medical, legal or tax services, might be required to only name someone else who is licensed to perform such services to carry on those business operations.

If you have more questions about establishing a business succession plan, be sure to contact an attorney to explore the different options best suited for you and your company.

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Non-Compete Agreements

by Jayne Sykora on August 1, 2014

Calculator - iStockOne item that many employers have begun to use extensively with employees is a non-compete agreement. The main goal of a non-compete agreement (“non-compete”) is for an employer to protect its goodwill, trade secrets and confidential information upon an employee leaving that employer and, presumably, working for a competitor of the employer. A non-compete could restrict the former employer from working for competitors within a geographic area for a given amount of time, or, it could simply restrict the employee from sharing any information regarding the former employer, and/or it could restrict the employee from contacting any customers of the former employer. Most often, a non-compete is part of a brand new employee’s offer package. However, a non-compete could be included long after an employee-employer relationship has begun as part of a promotion and/or other incentive compensation plans. This post will discuss how and why non-competes are valid and enforceable.

Necessary and Reasonable

In general, courts disfavor non-competes because they are a restriction on an individual obtaining work. Therefore, courts construe non-competes very narrowly and the terms of the agreement must be considered both necessary to safeguard an employer’s unique interests and reasonable between the parties. Overall, the agreement must not impose any greater restriction than necessary on an employee to protect an employer’s business. To show that a non-compete is necessary, the employer should specify in detail what it is looking to protect, why it is unique to the business, and how the employee directly impacts or is affected by what is to be protected.

Reasonableness: Time

Non-compete agreements must be reasonable in the scope of time the agreement would be enforced, should the employer-employee relationship end. A court would consider the following factors to determine if the temporal scope is reasonable:

  • Nature of the employee’s work (i.e., how unique is the work?)
  • Time necessary for an employer to train a new employee’s to do the job (i.e., how special is the training?)
  • Time necessary to allow customers to become familiar with new employees (i.e., how strong is the relationship between customers and the employee?)
  • Time necessary to obliterate the association between the employer and employee in the minds of the employer’s customers

In general, it would be very unusual to see a non-compete last more than one year post-termination. If an employer is looking to have a non-compete that lasts more than two years, then it is because a high-level executive is the employee, it is part of a post-termination severance package or a pay-out package that lasts longer than a year.

Reasonableness: Geography

As with time, the geographic scope of the non-compete must be considered reasonable. Some of the things that a court would take into account would be:

  • Employer’s trade area
  • Area where employee performed his or her duties
  • Employer’s actual business area
  • Location of employer’s customers

Keep in mind that, again, the restriction should be specific and consider where the employee’s new employer is located and whether because of emails and the web, if a specific geographic restriction is necessary.

Sufficient Consideration

Gift Box - iStockSince courts are concerned about ensuring that an employee received a valuable present benefit in exchange for the potential sacrifice of future freedom to seek employment, sufficient consideration must be provided when an employee signs a non-compete. Sufficient consideration exists at the time of hire of the employee (i.e., the benefit is new employment). After the employee-employer relationship has begun, then sufficient consideration is found only when an employer provides a benefit beyond those to which the employee is already entitled. Therefore, independent consideration like stock options, bonuses, severance packages, promotions, cash payments. etc. should be provided and it should be clear that those employees that are signing a non-compete get the additional benefits, while those that do not sign a non-compete, do not receive the benefit.

If you have specific questions about non-compete agreements, be sure to contact a local business law attorney in your area.

 

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MN Public Benefit Corporation Act

by Jennifer Santini July 23, 2014 Business

More and more business owners are incorporating a charitable intent or purpose into their companies. However, many still wish to remain a for-profit business and therefore do not apply for non-profit or tax-exempt status. Recently, […]

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Supreme Court Rules on Inherited IRAs

by Jamie Held July 17, 2014 Estate Planning 101

On June 12, 2014, the U.S. Supreme Court ruled on a divisive bankruptcy and estate planning case.  At issue was whether an individual retirement account (“IRA”) that a debtor inherited was exempt from the debtor’s […]

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Independent Contractors

by Jayne Sykora July 15, 2014 Business

Some of the small business clients I work with often want to hire an independent contractor versus bringing on a permanent employee. The use of independent contractors is very attractive to businesses because it can […]

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Review, Review, Review!

by Jennifer Santini July 3, 2014 Estate Planning 101

When we assist clients with drafting their estate plans, we try to draft a plan that will grow and evolve with them overtime. However, this does not mean that clients should stick their plans into […]

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A New Development in Euthanasia

by Jamie Held July 1, 2014 Estate Planning 101

Earlier this year, the law making body in Belgium passed a law removing the age restriction on the country’s euthanasia law.  Belgium has allowed euthanasia since 2002.

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The Constant Fear of “Rejection” When Drafting Real Estate Deeds

by Kim Prchal June 25, 2014 Estate Planning 101

When drafting real estate deeds (even though the Minnesota Uniform Conveyancing Blanks forms look relatively simple) there are several statutory-specific rules that inevitably lead to the return of your deed with a “rejection letter” from […]

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Recent MN Tax Changes – Why You Received a Refund from MN

by Erik Doerr June 16, 2014 Taxes

If you are like me, you recently received a second tax refund from the State of Minnesota. Right before that, you also received a letter explaining that you were about to receive the refund and […]

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Basics of Business Formation

by Kate Wells June 11, 2014 Business

Many Minnesota entrepreneurs are well aware that they need to take steps to limit their potential for liability but are unclear about which type of entity is right for them. This post will outline some […]

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