Blazier, Christensen, Browder & Virr, P.C.Blazier, Christensen, Browder & Virr, P.C. | Austin Business and Estate Planning Attorneys2024-03-13T05:20:07Zhttps://www.blazierlaw.com/feed/atom/WordPressOn Behalf of Blazier, Christensen, Browder & Virr, P.C.https://www.blazierlaw.com/?p=489502024-03-13T05:20:07Z2024-03-13T05:20:07ZWhy would anyone override a power of attorney?
Powers of attorney are legally binding, but sometimes it becomes necessary to override the authorization. For example, your family and friends might discover the agent is unfit for the role due to abusing their position.
What are the options for overriding a power of attorney?
If you’re the principal and of sound mind, the concerned parties can approach you. If you agree that the agent is unfit, you can override the power of attorney and choose a new agent. It’s not mandatory to complete a Texas Revocation of Power of Attorney Form, but the form does make the revocation official and provide written proof.
The concerned parties can also bypass you and go directly to the agent. However, this is only recommended if the concerned parties have professional assistance. Taking this step without professional assistance could result in crucial mistakes or a misinterpretation of the situation.
Is going to court necessary?
If all else fails, the concerned parties can take the situation to court. A judge will determine if the agent should be removed from their duties. This requires proof that you (the principal) aren’t of sound mind and that the agent is abusing or neglecting their duties.
No one can predict how an agent will behave when fulfilling their role as power of attorney. You might choose someone you trust, only to have them abuse that trust. You can consider having an alternative agent in case your main choice doesn’t work out.]]>On Behalf of Blazier, Christensen, Browder & Virr, P.C.https://www.blazierlaw.com/?p=489482024-03-08T19:00:20Z2024-03-08T19:00:20ZSimplified tax reporting
Businesses that elect S Corp status can simplify their tax reporting obligations by avoiding the double taxation typically associated with regular corporations. Only wages paid to employees are taxed at the individual level, while the remaining profits can be distributed to shareholders as dividends which are taxed at the individual shareholder's tax rate. This means that S Corps do not pay federal income tax at the corporate level, unlike C Corporations where profits are taxed both at the corporate level and again when distributed to shareholders as dividends.
Loss deductions
When classified as an S Corp, shareholders can deduct their share of the company's losses on their personal tax returns. This can be particularly advantageous for small businesses in their early stages or those facing temporary setbacks. These losses can offset other income the shareholders may have, reducing their overall tax liability.
Self-employment tax relief
Since S Corp owners must pay themselves a salary, they can avoid paying the FICA taxes on the portion of their income designated as distributions. By splitting their income between salary and distributions, S Corp owners can potentially save on self-employment taxes as only the salary portion is subject to FICA taxes like Social Security and Medicare. This can result in significant savings for business owners, especially those with higher incomes.
When registering a business, seeking legal guidance can help determine the most suitable tax classification based on the specific circumstances and goals of the business owners. As such, if you haven’t received personalized feedback yet, consider reaching out in ways that will allow you to make truly informed decisions about your options.]]>On Behalf of Blazier, Christensen, Browder & Virr, P.C.https://www.blazierlaw.com/?p=489322024-02-22T22:32:13Z2024-02-22T22:32:13ZWhen a business is set up as a C Corp, this refers to the IRS code. This business would be registered under subchapter C of that code, which is the default position for many businesses. It can grow at an unlimited rate, and it is an independent legal entity.
However, one important thing to note about C Corps is how taxes are handled. It can lead to a phenomenon known as double taxation, wherein the money that travels through the business is taxed twice by the government. People are often looking for ways to get around this issue so that more of the money stays with the company, the owner and/or the shareholders.
The corporate tax rate
First of all, the federal corporate tax rate is going to apply to the money that the business earns. For instance, this could be set at 21%. The business pays 21% taxes on all of the revenue. Profits and dividends are then handed out to the shareholders, based on the company’s earnings and their investments. However, these count as personal income for those shareholders. As such, the distributions are taxed once again. This is how double taxation takes place. The government takes a cut at the beginning and after the distribution.
Are there any solutions?
Yes, there are legal solutions to this issue. For instance, an S Corp could be set up with pass-through taxation. This is a major advantage because the corporation doesn’t have to pay the federal taxes first.This is just one example of how corporate structures can impact a business’s earnings. The financial side of establishing a company can be very complicated and those involved need to understand their legal options.
]]>On Behalf of Blazier, Christensen, Browder & Virr, P.C.https://www.blazierlaw.com/?p=489252024-02-07T18:14:24Z2024-02-07T18:14:24Zdurable power of attorney that aims to ensure that the principal's financial affairs can be managed efficiently if they can’t do so themselves due to physical or mental incapacity. An agent is expected to manage the principal's finances with the utmost care and loyalty, avoiding conflicts of interest and ensuring that all decisions benefit the principal.
Responsibilities and decision-making
The scope of an agent's authority can vary widely, depending on the terms of the POA document. Typical duties include paying bills, managing bank accounts, investing money and handling tax matters. The agent may also be authorized to buy or sell real estate, manage retirement accounts and engage in estate planning activities on behalf of the principal.
Potential challenges
Agents acting under a financial POA in Texas may encounter several challenges. One significant issue is the potential for disputes with family members or other interested parties who may question the agent's decisions or allege misuse of the POA.
Another challenge is the potential for third party refusal, such as banks or financial institutions, to recognize the authority of the POA. Although Texas law requires these entities to accept a valid POA, some may be hesitant or require additional documentation, which can delay or complicate financial transactions.
The duties of a POA must be executed in accordance with applicable laws. Working with someone who can assist with these matters to ensure legal compliance is critical.]]>On Behalf of Blazier, Christensen, Browder & Virr, P.C.https://www.blazierlaw.com/?p=489222024-01-26T12:53:52Z2024-01-26T12:53:52ZWhen managing a trust, various complexities can lead to disputes among those involved. Trust disputes commonly stem from specific issues related to the trustee's actions, the validity of the trust, or the interpretation of its terms.
Understanding these common reasons for trust disputes is essential for navigating trust management's often intricate and sensitive nature. Each type of dispute requires careful consideration and potential legal intervention to resolve.
Questions about the trustee's actions
A breach of fiduciary duty, where the trustee fails to act in the best interests of the beneficiaries, is a common issue. This breach may manifest as mismanagement of assets or neglect to distribute assets according to the trust terms. Another concern is the trustee's lack of transparency or communication. This may lead to beneficiaries feeling uninformed about the trust’s administration. Misappropriation of funds, where there are suspicions of the trustee misusing the trust’s assets for personal gain, is also a serious concern.
Validity of the trust
The validity of the trust itself is another ground for disputes. Challenges to validity may arise from allegations of undue influence or coercion exerted on the trustor. Questions regarding the mental capacity of the trustor at the time of the trust's creation can also lead to disputes. Improperly executing a trust, such as a lack of proper witnessing or notarization, can raise questions about its legality.
Interpretation of trust terms
Disputes can also stem from how the trust’s terms are interpreted. Ambiguous language in the trust can lead to multiple interpretations and disagreements among beneficiaries. Conflicting terms within the trust can create confusion regarding its administration. Changes to the trust, especially if made under questionable circumstances, can result in disputes among those involved.Legal representation is critical for anyone involved in these situations. Trust disputes can quickly become contentious, so proper preparation is key. ]]>On Behalf of Blazier, Christensen, Browder & Virr, P.C.https://www.blazierlaw.com/?p=489212024-01-11T16:26:51Z2024-01-11T16:26:51ZA power of attorney (POA) is a legal document that grants someone the authority to make decisions on your behalf.
Typically, people will designate one or more people as their POAs for their financial and medical affairs with the idea that these trusted people can step in and take over for them should they ever be temporarily or permanently incapacitated. Unfortunately, it’s easy to make mistakes that can put you in a less-than-ideal situation with your POA in the future. Consider these:
1. Naming more than one POA at a time.
Sometimes people will name two people, such as two adult children or a spouse and an adult child, as their co-POAs. This can create a lot of problems. At best, it may delay a lot of necessary actions because both POAs have to give their consent or signatures for everything. At worst, it can cause legal disputes if the co-POAs don’t agree on some action.
2. Naming a single POA with no alternative.
A POA is a type of contingency plan – but your contingency plan needs to consider other contingencies. There is always the possibility that your POA could be in a common accident with you, especially if you picked your spouse or another close relative, and be unable to serve when the time comes. Or, your POA could be ill, out of the area on vacation or just suddenly unable or unwilling to take on the role when they’re needed. You need an alternative designation.
3. Failing to notify prior POAs (and others) of changes.
Your preferences for your POAs may change over time, and that’s perfectly normal. However, make sure that you inform prior POAs that you’ve changed your designations – and update any institution, such as your bank, doctor’s office or hospital, of the change, as well. That way, there’s no confusion or mistake about who has the authority to act.When you’re thinking ahead to the future, it’s smart to seek legal guidance about these issues and more.]]>On Behalf of Blazier, Christensen, Browder & Virr, P.C.https://www.blazierlaw.com/?p=489232024-01-31T00:07:33Z2024-01-10T00:06:58ZState requirements vary
Most states follow the same tax rules for S-corporations based on federal requirements. However, states like New Hampshire, Tennessee and Texas do not follow these rules and instead tax S-corporations the same as if they were C-corporations. Business owners must ensure they follow the appropriate tax law and relevant requirements for their state or risk being subject to a tax audit.
Salary requirement
A business owner who is also a shareholder and company employee, as most business owners are, in an S-corporation receives their share of the company’s profits through distribution, and they are not required to pay taxes on this amount. However, the IRS does not allow business owners to work for zero salary and receive all their compensation in a distribution.
Tax laws require owners to receive a salary from the company that equates to someone doing similar work in a comparable company. The salary is recorded on the company’s profit and loss statement, which reduces its net income. This requirement may create an additional financial burden if the company struggles financially.
Tax regulations and company ownership
S-corporations must contend with specific U.S. tax regulations that restrict business ownership. If they want to provide equity ownership to raise additional capital, the business is limited to a maximum of 100 owners. Tax regulations for S-Corporations also require all owners to reside in the U.S. or be American citizens, which could create challenges for businesses whose important business relationships are mainly outside of the country. C-Corporations have no such limitations.
Poor record-keeping and underpaying taxes
Sometimes, S-corporations are small businesses that lack the resources to have a department dedicated to keeping detailed tax records to ensure they pay the proper amount. This need is relevant for companies in states like California, which imposes a 1.5% franchise tax on S-corporations' income.
Small companies also collect sales tax from customers and may neglect to file and pay their state’s tax returns. At tax time, these companies may have financial penalties and interest due in addition to their tax liabilities if they do not calculate correctly and pay on time.
S-corporation tax issues deserve attention and planning. Staying informed of state and federal requirements, recording transactions properly, and filing taxes promptly can help business owners avoid audits and other tax issues.]]>On Behalf of Blazier, Christensen, Browder & Virr, P.C.https://www.blazierlaw.com/?p=489162024-01-04T05:18:45Z2024-01-04T05:18:45ZS-corps vs C-corps
The S corporation is not required to pay corporate-level income taxes. The profits and losses pass through to shareholders and are reported on individual tax returns. This is how S corps avoid the double taxation that occurs on C-corp profits and then again on the dividends distributed to shareholders. Unlike C corps, which may have unlimited, non-US shareholders, S corporations are limited to 100 shareholders who are U.S. residents or citizens.
Establishing S corps in Texas
The business name must comply with the naming regulations in Texas. Next, file the certification of formation with the Texas Secretary of State. Draft an S corp operating agreement detailing how ownership percentages, federal tax provisions, profit and loss division and how the organization is ruined. This involves understanding various tax issues and the differences between S-Corporation/C-Corporations and ensuring the business is compliant with S corp regulations. Complete and file IRS Form 2553 to elect to become an S corp.
The S corporation is a domestic entity limited to having one class of stock. Financial institutions, domestic sales companies operating globally and insurance brokerages are prohibited from operating as S corporations. The 100 shareholders may identify as individuals, exempt organizations or estates. Maintaining S corp status requires adhering to state and federal regulations, including limiting owners to collecting reasonable salaries.]]>On Behalf of Blazier, Christensen, Browder & Virr, P.C.https://www.blazierlaw.com/?p=489132023-12-19T03:32:22Z2023-12-19T03:32:22ZToo much power in the hands of another
A power of attorney, by definition, is a legal document designed to allow the person you choose, known as your agent, to act on your behalf. However, one of the many power of attorney issues and pitfalls is allowing your agent too much power without vital directives.
Drafting clear guidelines about what you want to occur if you can’t take care of yourself is crucial. This process helps prioritize your needs. It can also help alleviate your agent’s stress about carrying out their duties.
Unintended agents
Selecting someone as your agent is a substantial task. A primary requirement for the agent is to be willing and able to act in your best interests. However, the information contained within them is sometimes outdated because they are often written years, sometimes decades in advance. Named agents may pass away or be unable or unwilling to take on the responsibility when you need them most.
Naming an alternate agent prevents a court from deciding for you. Having a list of a few people in your life who will be ready and willing to take on the role is key. Once you have gathered these names, you must list them in order of preference.
Designating a power of attorney is necessary in your estate and health planning process if you want to ensure your wishes are respected. Just make sure whoever you choose to be your agent is someone you can trust with your life since they will be making decisions when you are most vulnerable.]]>On Behalf of Blazier, Christensen, Browder & Virr, P.C.https://www.blazierlaw.com/?p=489112023-12-11T18:56:12Z2023-12-06T22:53:06ZDeciphering estate planning
Estate planning encompasses a broad spectrum of legal arrangements and decisions to manage an individual's assets in the event of incapacitation or death. It goes beyond simply drafting a will and includes various instruments like powers of attorney, health care directives and guardianship designations.
At its core, estate planning aims to ensure that your assets are distributed according to your wishes while minimizing taxes and legal complications. A well-crafted estate plan allows for control over who inherits your property and can outline directives for healthcare and financial decisions if you cannot make them yourself.
Unveiling the role of trusts
Contrary to popular belief, a trust isn't synonymous with estate planning; rather, it's a critical component within the estate planning framework. A trust is a legal entity that holds assets on behalf of a beneficiary, managed by a trustee following specific instructions outlined in a trust agreement.
Trusts offer several advantages, primarily facilitating asset distribution outside of probate court, ensuring privacy and allowing for greater control over how and when assets are distributed. They can also provide protection against challenges to the estate and offer tax benefits, depending on the type of trust established.
Differentiating the two
While estate planning and trusts share the overarching goal of asset management and distribution, the key distinction lies in their scope and functionality. Estate planning encompasses a holistic approach to managing one's affairs, including various legal documents and directives, whereas trusts specifically focus on holding and distributing assets.
A crucial aspect to note is that trusts are but one tool within the larger estate planning toolkit. A comprehensive estate plan might involve trusts alongside wills, powers of attorney and other legal documents tailored to an individual's unique circumstances and objectives.
Estate planning and trusts are integral components of securing one's financial future, yet they serve distinct purposes within the broader spectrum of financial planning. Understanding the nuances between the two empowers individuals to make informed decisions when structuring their estate plans. Consulting with a qualified legal professional is crucial to crafting a personalized strategy that aligns with your goals and safeguards your legacy.]]>