PAYING LEGAL FEES: BRIDGING THE DIVIDE BETWEEN THE CLIENT AND ATTORNEY

In Maryland and nationwide, the cost of legal services is often dauntingly expensive. This is par for a financial climate where the cost of high-tech hardware, software, research resources, insurance, experienced and trained staff, taxes, and other operating expenses are on the constant rise. But the client and the attorney are entering into a relationship of trust and together they can make sure that the topic of legal fees does not interfere in securing an effective outcome.

To understand a lawyer’s fee arrangement, a short primer is necessary. There are generally four ways  a lawyer’s fees are paid. They are:

  • Hourly – This is a common method; the rates may run the gamut, depending on various factors. There may be a down payment, and hourly bills sent to the client periodically.
  • Retainer – The attorney accepts a sum up front to seal the deal. It may be fully earned and non-refundable or it may be unearned and reduced by hourly billing against it. When this fund begins to run low, the attorney may ask the client to replenish it.
  • Fixed flat fee – This applies to a standard task for a particular representation.  Advance payment is usually required.
  • Contingency — The lawyer receives nothing unless there is a recovery, at which time the lawyer receives a percentage of the recovery. This applies in personal injury cases, for example.

Regarding contracts, estate planning, probate, estate administration, and commercial and business law, the fees may not be as imposing as in complex litigation matters, but they can present an obstacle. Leaving aside the complicated financing tools sometimes used in complex litigation, this article discusses options clients have to pay their legal fees.

FINANCING LEGAL FEES

Where the small business client has sufficient operating capital or an existing substantial line of credit, the client may use its own funds to pay the requested fees. Many attorneys accept credit cards.  This is a convenient and appropriate method to pay your legal fees. Where an individual has no credit card or insufficient credit, an option is a personal loan. Success on obtaining a personal loan will depend on your credit score.  You may also consider an equity loan on your home. There is a wealth of information available on the internet regarding loans for this purpose.

Where a business client’s cash flow is challenged, the owner may ask the attorney for a payment plan if available. The same arrangements can apply to individuals. An example of a payment plan is where 50 percent is paid upfront, followed by payment in full 30 to 60 days later. Lawyers who themselves are business owners have budgetary pressures, and payment plans may not be feasible at times. Each case, however, is evaluated individually by looking at different factors and options will vary by firm. The takeaways are that: 1) clients have several funding options and 2) honest communication can bridge the divide between the client and attorney as it relates to the payment of legal fees.

Information in this article is provided for educational purposes only and not intended to constitute legal advice. Please consult with a licensed attorney in your jurisdiction for help with your specific situation.

If you or your business are in need of legal representation in Maryland, the Law Offices of Elsa W. Smith, LLC is ready to assist you. We invite you to review the firm’s practice areas  and contact us to request a consultation today.

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El Acuerdo de Compraventa: Una Poderosa Herramienta de Planificación Patrimonial para Propietarios de Negocios

 

Los dueños de negocios en Maryland pueden beneficiarse de las estrategias de planificación de sucesión, tanto a nivel personal como comercial. Esto puede incluir el uso de un acuerdo de compraventa, que puede ser una herramienta importante para un propietario de un interés en una pequeña empresa familiar estrechamente celebrada. El negocio puede organizarse como una sociedad, una LLC o una pequeña corporación. El acuerdo de compraventa puede estipular procedimientos de sucesión de negocios, restricciones a la transferencia de acciones o acciones comerciales, y la compra de la participación de un propietario o socio que se retire. Específicamente, puede aplicarse cuando un accionista, miembro o socio se jubila, muere, queda incapacitado, permanentemente incapacitado o por otras salidas inesperadas. Este artículo se centra en gran medida en el acuerdo de compraventa en el contexto de planificación patrimonial para facilitar las metas del individuo para la dirección del negocio y para la compensación de sus beneficiarios después del fallecimiento.

Los importantes beneficios del acuerdo de compraventa:

El acuerdo de compraventa ofrece varios beneficios importantes, que pueden incluir:

  • Evitar que los socios, miembros o accionistas que retiran vendan su parte a un tercero sin antes ofrecerla a la corporación o a los propietarios o socios restantes;
  • Proporcionar fondos y establecer los términos y condiciones para la compra o venta de una participación del propietario discapacitado, fallecido, incapacitado, retirado o retirado del negocio;
  • Proporcionar una fórmula que pueda ser ventajosa desde el punto de vista tributario para las partes al llegar al valor razonable y al precio de la acción que se transfiere;
  • Otorgar garantías contractuales obligatorias a cada propietario o parte interesada de que nada afectará precipitadamente la participación de uno en el negocio, excepto mediante el estricto cumplimiento de los términos claramente establecidos en el acuerdo.

 

El acuerdo de compraventa y planificación patrimonial:

Para fines de planificación patrimonial, el acuerdo de compra-venta ayuda a minimizar el estrés y la incertidumbre para los beneficiarios. Esto puede ocurrir cuando no hay un plan y / o fondos insuficientes para pasar el interés comercial del fallecido a los beneficiarios. Por ejemplo, uno de los cofundadores de una empresa familiar puede desear que el negocio se mantenga dentro de la familia y no se venda a terceros cuando muera. También quiere que los otros propietarios compren su parte para que sus beneficiarios puedan heredar el valor total de su parte.

El acuerdo de compraventa suele otorgar a los dueños de negocios que sobreviven el “derecho de tanteo” a comprar la parte del fallecido. Esto mantiene el negocio en el círculo familiar estrechamente mantenido y tiende a asegurar que los valores y tradiciones que hicieron que el negocio sea un éxito perdurarán.

El seguro de vida facilita la compra de la parte del difunto:

Los activos líquidos o en efectivo que fluyen libremente no siempre están disponibles para comprar un interés valioso en un negocio exitoso de larga data. De hecho, el acuerdo estipulará que la participación del difunto se ofrece en el mercado si la corporación o los accionistas o socios supervivientes no pueden completar la transacción. Pero la planificación previa a través del acuerdo de compraventa elimina esa incertidumbre y establece un mecanismo automático para financiar la compra del interés de propiedad del difunto.

Esto se logra a través del seguro de vida, que se puede comprar como un grupo de pólizas que cubre a cada uno de los propietarios o socios para las diversas contingencias, incluida la muerte. El precio de compra de la parte del fallecido se calcula mediante la fórmula contenida en el acuerdo, que se diseñó para proporcionar el máximo ahorro de impuestos a las partes. La cobertura del seguro está precalculada para pagar el valor de la parte del difunto y los gastos relacionados con la transferencia. La revisión periódica de la fórmula y el financiamiento del seguro es necesaria para evitar financiación insuficiente.

Uso de un testamento o fideicomiso en vida para distribuir los ingresos del negocio y otros activos:

La última voluntad y el testamento del propietario de la empresa suelen ser la pieza central del plan de sucesión. Proporciona la disposición de la parte del propietario con referencia al acuerdo de compra y venta. Alternativamente, las circunstancias y preferencias personales ocasionalmente pueden requerir el uso de un instrumento de fideicomiso activo como el mecanismo central para la distribución de activos. En ese caso, el acuerdo se coordinará con el fideicomiso para una transferencia transparente de los ingresos a los beneficiarios. Con el fideicomiso, la sucesión puede evitarse, y cualquier activo mínimo encontrado en la sucesión testamentaria puede ser eliminado mediante un “derrame” que obsequiará los activos perdidos al fideicomiso para su disposición final.

El fideicomiso también puede establecer la administración de los activos por parte del fiduciario si el propietario queda discapacitado o incapacitado. También se recomienda un poder separado para cubrir todas las bases en caso de incapacidad. Además, evitar la legalización suele facilitar una distribución más rápida de los ingresos de la compra comercial y los demás activos; los gastos administrativos también pueden reducirse significativamente. No obstante, la decisión de planificación de patrimonio para usar un fideicomiso activo o un testamento es un problema relativamente complejo en Maryland y en otros lugares. Requiere orientación y análisis profesional. La planificación patrimonial, la administración de fideicomisos y las transferencias de intereses comerciales a través de un acuerdo de compraventa no se realizan de manera segura a través de plantillas de Internet. Intentar la auto-maniobra de una red financiera y legal tan intrincada puede causar errores y gastos extraordinarios. El proceso se puede lograr mejor con la aportación combinada del abogado de planificación patrimonial, un planificador financiero calificado y un agente de seguro de vida.

La información de este artículo se ofrece solo con fines educativos y no constituye asesoramiento jurídico. Para obtener ayuda específica, consulte con un abogado autorizado en su jurisdicción.

Para obtener orientación en la elaboración de su contrato de compraventa o cualquier otro documento de planificación patrimonial, comuníquese con la abogada de Maryland Elsa W. Smith en las Oficinas Legales de Elsa W. Smith, LLC. Tenemos dos oficinas para servirle: Annapolis (410) 995-7719 y Laurel (301) 358-4340. También puede contactarnos a través de este sitio web.

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The Buy-Sell Agreement: A Powerful Estate Planning Tool for Business Owners

Business owners in Maryland can benefit from estate planning strategies, both on a personal and business level. This may include the use of a buy-sell agreement, which can be an important tool for an owner of an interest in a closely-held or small family business. The business may be organized as a partnership, an LLC or a small business corporation. The buy-sell agreement may provide for business succession procedures, for restrictions on the transfer of stock or business shares, and for the purchase of the share of a withdrawing owner or partner. Specifically, it may apply when a shareholder, member or partner retires, dies, becomes incapacitated, permanently disabled, or for other unexpected departures. This article focuses largely on the buy-sell agreement in the estate planning context to facilitate the individual’s goals for the direction of the business and for compensation of his or her beneficiaries after death.

The Important Benefits of the Buy-Sell Agreement:

The buy-sell agreement offers several important benefits, which may include:

  • Preventing withdrawing partners, members or shareholders from selling their share to an outsider without first offering it to the corporation or the remaining owners or partners;
  • Providing funding and establishing the terms and conditions for purchase or sale of a disabled, deceased, incapacitated, retiring or withdrawing owner’s share in the business;
  • Providing a formula that can be advantageous tax-wise to the parties in arriving at the fair value and price of the share being transferred;
  • Giving enforceable contractual assurances to each owner or stakeholder that nothing will precipitously impact one’s share in the business, except by strict adherence to the clearly established terms in the agreement.
The Buy-Sell Agreement and Estate Planning:

For estate planning purposes, the buy-sell agreement helps to minimize stress and uncertainty to the beneficiaries. This may occur where there is no plan and/or insufficient funding for passing the decedent’s business interest to the beneficiaries. For example, one of the co-founders of a family-owned company may desire that the business is kept within the family and not sold to outside parties when she dies. She also wants the other owners to purchase her share so that her beneficiaries can inherit the full value of her share.

The buy-sell agreement usually gives the surviving business owners a “right of first refusal” to purchase the decedent’s share. This keeps the business in the closely-held family circle and tends to assure that the values and traditions that made the business a success will endure.

Life Insurance Facilitates Purchase of the Decedent’s Share:

Free-flowing cash or liquid assets are not always available to purchase a valuable interest in a successful, longstanding business. Indeed, the agreement will provide that the decedent’s share is offered on the market if the corporation or the surviving shareholders or partners cannot complete the transaction. But pre-planning through the buy-sell agreement removes that uncertainty and establishes an automatic mechanism for funding the purchase of the decedent’s ownership interest.

That is accomplished through life insurance, which may be purchased as a group of policies that covers each of the owners or partners for the various contingencies, including death. The purchase price of the decedent’s share is calculated by the formula contained in the agreement, which was tailored to provide maximum tax savings to the parties. The insurance coverage is pre-calculated to pay the value of the decedent’s share and expenses related to the transfer. Periodic review of the formula and the insurance funding is necessary to avoid insufficient financing.

Using a Will or Living Trust To Distribute the Business Proceeds and Other Assets:

The business owner’s last will and testament is usually the centerpiece of the estate plan. It provides for the disposition of the owner’s share with reference to the buy-sell agreement. Alternatively, circumstances and personal preferences may occasionally call for using a living trust instrument as the central mechanism for asset distribution. In that event, the agreement will be coordinated with the trust for a seamless transfer of the proceeds to the beneficiaries. With the trust, probate may be avoided, and any minimal assets found in the probate estate may be disposed of by a “pour over” will that gifts the stray assets to the trust for final disposition.

The trust may also establish management of assets by the trustee if the owner becomes disabled or incapacitated. A separate power of attorney is also recommended to cover all bases in the event of incapacity. In addition, the avoiding of probate usually facilitates a quicker distribution of the business purchase proceeds and the other assets; administrative expenses may also be significantly reduced. Nonetheless, the estate planning decision to use a living trust or a will is a relatively complex issue in Maryland and elsewhere. It requires professional guidance and analysis. Estate planning, trust administration, and business interest transfers through a buy-sell agreement are not safely accomplished through internet templates. Trying to self-maneuver such an intricate legal and financial web may cause mistakes and extraordinary expenses. The process may be best accomplished with the combined input of the estate planning attorney, a qualified financial planner and a life insurance agent.

Information in this article is provided for educational purposes only and not intended to constitute legal advice. Please consult with a licensed attorney in your jurisdiction for help with your specific situation.

For guidance in crafting your buy-sell agreement or any other estate planning documents, contact Maryland attorney Elsa W. Smith at the Law Offices of Elsa W. Smith, LLC.  We have two offices to serve you – Annapolis (410) 556-0077 and Laurel (301) 358-4340.  You can also contact us through this website.