Posts in: July

Estate Planning 101: 5 Tips to Avoid Mistakes

July 25, 2017 Estate Planning, Law, Litigation Comments Off on Estate Planning 101: 5 Tips to Avoid Mistakes

As I work with small business owners and investors throughout the year, I want them to see the big picture when it comes to Estate Planning. Many misunderstand what the Estate Plan is all about and think it’s simply an ‘asset protection’ strategy…that couldn’t be further from the truth.

An Estate Plan is about passing on your hard earned wealth to your loved ones, or a project/institution you love.  What a tragedy for a small business owner or investor to spend decades toiling to build wealth, only to have it crumble at the very end of their life because they don’t have an estate plan. YOUR wealth should go to what or who you love, NOT lawyers or to ungrateful and litigious family members fighting over who gets what.

Having said that, estate planning is not just for entrepreneurs or investors – anyone who has assets and/or a family should have an estate plan.  So here are 5 tips for avoiding mistakes when setting up an estate plan:

1. Putting It Off / Procrastination. Nobody likes thinking about dying.  But here’s a motivating factor to not put off your estate plan.  Imagine how you would feel if upon your death your assets went to your worst enemy (or at least someone you don’t like).  Although that’s an extreme thought, the reality is that if you don’t have an estate plan, you lose that control, that ability to decide who gets your assets upon your death.  So before you put off doing an estate plan, imagine your ex-spouse getting everything you own, and hopefully that is all the motivation you need to get your estate plan done.  The first step is to fill out an estate planning questionnaire.  Our questionnaire has all the basic questions you should be asking yourself when setting up an estate plan.  Then I would review those answers and we would schedule a consult to make sure everything is in order.

2. Making Sure the Estate Plan Fits You / Your Situation. It doesn’t make sense to have an elaborate expensive estate plan if that’s not necessary.  It also doesn’t make for a successful business owner or investor to pay $99 for a boilerplate estate plan off the internet.  The key is making sure your estate plan is a good fit for your  You don’t want it bigger and more expensive than it needs to be, but you also want to make sure it is comprehensive and custom-fitting to your circumstances.  Our office can assist with making sure it’s a good fit for your situation.

3. Not Knowing the Difference Between Creating a Trust and Funding a Trust. One of the biggest tragedies is when someone finally gets an estate plan with a revocable living trust but they fail to FUND the trust i.e. put assets into the trust.  Certainly the trust can’t own assets until it is created, but simply creating the trust without funding it is insufficient.  Creating your revocable living trust is a matter of getting the documents drafted and properly executed/signed.  Funding your trust is a matter of actually putting your assets into the trust.  The manner in which this is accomplished depends on the asset.  Some assets require having ownership re-titled into the name of the trust.  Other assets simply require having the trust listed as the beneficiary.  But if you create the trust but don’t fund it, you’re missing arguably the most important step in the process of estate planning.  If you created a trust but are unsure if it’s been funded appropriately, our office can assist with this.

Here is a video by our senior partner here at KKOS lawyers, Mark J Kohler, explaining 4 reasons why you might need a trust. Understanding the role and purpose of a trust can help you fund it and maintain it properly.

 

4. Understanding that Estate Planning is Not Just About Death. If death isn’t reason enough to have an estate plan, what about incapacity?  Imagine the impact on your business and your life if you lost your mental capacity either because of a coma or something less dramatic.  You would no longer be able to make important decisions about your business and your life.  A good estate plan will include documents that address this.  So make sure your estate plan has the appropriate documents for death AND disability/incapacity.

5. Knowing When to Make Changes / Take Ownership of Your Estate Plan. Your estate plan is meant to be a living, breathing thing that should probably be changed as your life circumstances change.  If you plan to setup an estate plan and hope to leave it alone until you die, there’s a good chance either the applicable law will have drastically changed or your intent will be completely different than it was when you first set it up.  So if you put your best friend as a beneficiary of your trust and then you guys become worst enemies, it’s a good idea to update to your trust.  If your trust was written when your kids were little and they’re now adults, it’s probably a good idea to update your trust.  If you put your brother as the successor trustee of your trust with no backup and he died 5 years ago, you need to update your trust.  Basically, if the nature of your relationship with anyone you’ve listed in your estate plan has materially changed, it’s time to update your trust.  Now if someone’s address changes or something minor, you don’t necessarily need an overhaul of your estate plan.  The other part of this tip is making sure you take ownership of your estate plan.  Hopefully you get an attorney to draft it but even so, you should know the basics of your estate plan such as who the trustee(s) is/are and who are the beneficiaries, so that as your life changes and your relationship with these people change, you know if a change needs to be made to your estate plan.  For example, I have talked to many people who obtained an estate plan previously and they don’t know who the beneficiaries are or who the trustee(s) is/are or what the trust owns.  While you don’t need to know the legal jargon you should know these basics about your estate plan.

Hopefully these tips will get you thinking about setting up your estate plan or updating it if you already have one and your situation has changed from when you set it up originally.  Our estate plans come include a one hour consultation so you’re getting sound legal advice tailored to your situation, and not just boilerplate paperwork. Please contact our office at 888-801-0010 to book a consultation with an attorney to start the process. Any retainer will be applied to the cost of setting up the entire estate plan.

Legal Tips for Wholesaling Real Estate

July 18, 2017 Business planning, Real Estate Comments Off on Legal Tips for Wholesaling Real Estate


Many real estate investors regard wholesaling as a way to learn how to evaluate deals and develop your real estate network.  It is also a method to profit from investing in real estate without requiring significant up front capital.  Wholesaling is a strategy whereby the wholesaler enters into a purchase contract with a seller of real estate and then assigns the purchase contract to another third party who will typically rehab the property and flip it for a profit (at least that is the goal).

Although most investors regard wholesaling as involving less risk than, for example, the flipper who is rehabbing and selling the property, there are always risks in any transaction, and so the purpose of this article is to identify some of the common legal issues to look out for in your wholesale deals.  This article is not designed to teach you the strategies for being a successful wholesaler, such as how to find properties, how to approaching homeowners, etc., but instead, focuses on some of the legal aspects of wholesaling that investors should be aware.

Licensing Issues:  Be aware of potential licensing requirements for your state:  Different states define the scope of activities that require a license differently and so you should be aware of what activities are regulated by your particular state and act accordingly.  For example, California generally defines a real estate broker as someone who sells, buys or negotiates for another with the expectation of compensation.  If your activities in California meet these elements, then be advised that you may need to be licensed as real estate agent.   Any questions regarding state licensing requirements should be directed to an attorney with knowledge of the requirements of that state.

LICENSING ISSUES

Understand the Rules & Procedures Governing Real Estate Transactions in your State:  Many states have unique laws, forms or disclosure requirements for real estate purchase transactions.  For example, in California, a seller is required to provide a transfer disclosure statement and if the property is in foreclosure, there are additional required disclosure requirements.  Failure to abide by the rules that are required in your state could cause legal issues down the line in your transaction.  You don’t want to have a seller or your end buyer come back later raising an issue with the transaction that could have been avoided had you followed the proper procedures for real estate transactions in your state.

DISCLOSURE & TRANSPARENCY

Be Transparent as to your Role in the Deal:  If your intent is to wholesale the property during escrow, the homeowner should be well aware in writing that your intent is to assign the deal to a third party for profit, and the contract language should give you a unilateral right to assign without requiring the consent of the homeowner.  Most standard form purchase agreements you get from realtors do not have this language and so an amendment or specially prepared form may be necessary.   On the buyer’s side, you should be very clear in your written agreement with the end buyer as to what you will be responsible for and what will be the responsibility of the end buyer.  For example, are you going to do an analysis of after repair value (e.g. running comps and estimating repair costs)? Run title?  Do an inspection?  What happens to your earnest money deposit once you assign the contract to the end buyer?   Your agreement should clearly specify in detail what your specific obligations are in the deal, where your obligations in the deal ends, and what the end buyer is expected to do to close the deal.  It is better to have these details on who does what expressed clearly in writing rather than rely on assumption.    Most importantly, you should include language that fully releases you from any further obligations or liabilities in the deal to ALL parties once you complete the assignment to end buyer.

CONTINGENCY CLAUSES 

Make Sure Your Contingencies are Clear.  This should go without saying, but depending on the specifics of the particular deal, it is important to properly set the expectations early for all the parties involved.   I typically advise clients who wholesale properties to have a good understanding of what their potential end buyers want in a deal in terms of location, spread, contract language, due diligence items, etc.  I also encourage individuals wanting to pursue wholesaling to develop relationships with rehabbers as early as possible, preferably before getting a property under contract, so that they have a good idea of whether they will be able to successfully complete the assignment as intended.    It is highly recommended to have your team of professionals such as realtors, contractors, appraisers, etc. in place to provide accurate feedback as you analyze the merits of your deal.  Finally, have an attorney’s fees clause in your agreements so if you have to pursue legal action to enforce the agreement or your contingency clause, you preserve the right to seek your attorney’s fees.

Of course, making sure you are covering yourself legally is just one detail for successful wholesaling.  Finding the right properties, learning to negotiate with homeowners, and developing a network of professionals to assist you during the wholesaling process are all necessary aspects for successful wholesaling, but making sure that you are covering your bases legally will help ensure that your wholesale deals proceed smoothly with minimal possibility for conflict.

Ask Your Attorney if a “Covfefe” Trademark Is Right for You

July 11, 2017 Business planning, Corporations, Law, Litigation Comments Off on Ask Your Attorney if a “Covfefe” Trademark Is Right for You

On May 31st, 2017, at 12:06 a.m. Eastern Time, President Donald Trump unleashed the following tweet: “Despite the constant negative press covfefe.” No one has been able to definitively crack the code (if there is one) as to what “covfefe” actually means. The President took down the tweet six hours later and replaced it with a tweet saying: “Who can figure out the true meaning of ‘covfefe’??? Enjoy!”

Predictably, the word “covfefe” immediately went viral on social media, with several twitter users encouraging their followers to “ask your doctor if Covfefe is right for you” and others thinking it’s what you’re supposed to say when someone sneezes. In the following days and weeks, covfefe has taken on a life of its own and become a bit of a cultural phenomenon. Late night hosts have debated whether President Trump had some sort of minor stroke or simply fell asleep when he typed covfefe, and Hillary Clinton was asked about what she thought it meant in a recent public appearance.

However, it’s not only comedians and 24-hour news channels that are making hay with covfefe. A Google search of “covfefe” reveals dozens of businesses ready to sell you apparel with hundreds of variations on the covfefe theme. To date, my personal favorites are “Make America Covfefe Again” and “What Part of Covfefe Don’t You Understand?”

A check of the U.S. Patent and Trademark Office (“USPTO”) databases shows that in the forty days since the covfefe phenomenon began, 34 trademark applications have been filed using the term. The products and services being tied to covfefe run the gamut from “advice relating to investments” to fragrances, toys, coloring books, and even sandwiches. As you might expect, four different companies have filed applications to use covfefe for beer.

However, easily the most popular application (there are about twenty of them) is to get protection for using covfefe on t-shirts, hats, and other apparel. One applicant for a covfefe apparel trademark even appears to have access to the inner circle of Trump advisors and confidants who know what covfefe really means – after all, its application is for: “COVFEFE – Carry On Vigilantly Fighting Evil For Ever.”

So, the question becomes: which of these applicants will win the coveted “covfefe” trademark for t-shirts? The answer from this trademark attorney is: very possibly none of them! Why? Because the USPTO will generally refuse an application as “ornamental” if what is submitted to the USPTO shows that the use of the mark is only decorative or ornamental. That is, if the use of the mark does not clearly identify the source of the goods and distinguish them from the goods of others – which is required for proper trademark use.

The USPTO’s number one example of “ornamental” use is when a quote is prominently displayed across the front of a t-shirt, such as “The Pen is Mightier than the Sword.” The USPTO’s position is that most purchasers would perceive the quote as a decoration, and would not think that it identifies the manufacturer of the t-shirts (the source of the t-shirts could be Hanes® or Champion®, for example, as shown by the neck-tag).

Other examples of “ornamental use” put out by the USPTO are:

  1. A logo on the front of a hat. When the logo is associated with an organization, like a sports team, which did not manufacture the hat.
  2. Stitching designs on the back pocket of a pair of jeans. Purchasers are accustomed to seeing embellishments on jean pockets and would not think this embroidery design identifies the source of the jeans.
  3. A floral pattern on tableware or silverware. A purchaser would likely see this pattern as merely decorative and would not think it identifies the source of the tableware or silverware.
  4. The phrase “Have a Nice Day” or a smiley face logo. Everyday expressions and symbols that commonly adorn products are normally not perceived as identifying the source of the goods.

While there is no definitive place to affix a mark to goods to avoid an ornamental refusal, the location, size and dominance of a mark have a big impact on how the public perceives it. The USPTO has offered the following examples of proper non-ornamental trademark use:

  1. Discrete wording or design on the pocket or breast portion of a shirt. A purchaser would typically associate the small logo on a shirt pocket or breast area with the manufacturer or the source of the shirt.
  2. A tag on the inside of a hat or garment. A purchaser would associate a logo on the tag with the maker of the garment.
  3. Logo on a tag above the back pocket of a pair of jeans. A purchaser would typically associate this mark with the manufacturer of the jeans.
  4. A small logo stamped on the back of a dinner plate or bottom of a coffee mug. Purchasers are accustomed to seeing a mark used in this location to identify the source of the tableware.

Another way to get around an “ornamental use” refusal from the USPTO is to show that the mark has “acquired distinctiveness.” Long-term use in commerce, advertising and sales figures, dealer and consumer statements, and other evidence can be used to show that consumers directly associate a mark with the source of those goods. While this probably won’t work for the covfefe applicants (since the term has only existed for about six weeks), it could be an option in your situation.

The final option for the covfefe trademark applicants would be to move their applications to the “Supplemental Register.” Registration on the Supplemental Register doesn’t provide all the same legal advantages as registration on the Principal Register, but it does provide protection if and when someone applies for a conflicting mark later. Also, after five years of continual use, you can apply for (and in most cases will be awarded) registration on the Principal Register.

If you feel like you have captured “covfefe-like” lightning in a bottle, and want to talk about how to protect your name and/or logo, please give me a call at 435-596-9366 or shoot me an email at jarom@kkoslawyers.com.

Bitcoin Basics: What is Cryptocurrency?

July 3, 2017 Business planning, Law, Tax Planning Comments Off on Bitcoin Basics: What is Cryptocurrency?


Questions about Bitcoin have increased dramatically as investors have seen the price of Bitcoin rise from 30 cents per Bitcoin in 2011 to $2,550 per Bitcoin in July 2017. This article answers basic questions about Bitcoin and we’ll have two follow-up articles addressing IRA ownership of Bitcoin and about accepting Bitcoin in your business. Needless to say, there’s a “bit” of uncertainty when it comes to whether or not one should invest in Bitcoin (sorry –bad pun) but here’s a breakdown of the basics.

What Is Bitcoin And How Does it Work?

Bitcoin is one type of digital currency also known as crypto currency. Users of Bitcoin pay each other directly without traditional intermediaries such as banks or even governments using what is known as blockchain technology to effectuate transactions. First, you would install a Bitcoin wallet on your device and it will generate a Bitcoin address. When you provide your Bitcoin address, the person paying you can transfer funds to your address and into your Bitcoin wallet. This transaction and all transactions on the Bitcoin network are done using this blockchain technology, which is a ledger that tracks balances. Cryptography i.e. mathematical proofs that provide high levels of security are used to strengthen the security of the Bitcoin network. By the way, cryptography is not some untested technology – it is through cryptography that online banking is currently done. As a Bitcoin user, you would authorize a transaction using a secret piece of data called a private key. A transaction isn’t finalized until it has been mined, which is a confirmation process to ensure the integrity of the transaction. You can learn more at www.bitcoin.org. I will write another article regarding whether a small business owner should consider accepting Bitcoin as a form of payment.

Where Did It Come From And Is It Risky?

Bitcoin was created in 2008 by an anonymous creator. Many executives in the financial sector are cautious or even skeptical, but others are optimistic and confident that it is not going anywhere. Fidelity CEO Abigail Johnson believes in the future of digital currency and has been a proponent of Bitcoin.. One of the biggest complaints against digital currency is the lack of security/protection from hackers. JP Morgan Chase CEO Jamie Dimon has been a notable critic citing its use by criminals looking to transact outside of the traditional financial system. In 2015, a notorious online drug sales scheme was orchestrated using Bitcoin. There was an incident in Japan in 2013 in which digital hackers stole about $450M worth of Bitcoin. A similar incident happened in Slovenia in 2013. Other controversies surrounding Bitcoin include the disappearance of notable Bitcoin start-up companies Neo and Bee in 2014. In 2015 there were arrests when it was learned that Bitcoin company MyCoin was running a Ponzi scheme in Hong Kong. There have been quite a few money laundering cases here in the U.S. involving Bitcoin.

Should I Invest In It And How Do I Invest In It?

Most people investing in Bitcoin are using a relatively small portion of their investment portfolio i.e. I don’t know anyone who is investing most or all their “eggs” in the digital currency. A lot of people are excited about it, but like any investment, if you don’t time it right and/or you don’t know what you’re doing you can and probably will lose money. The concept, however, in simplistic terms is that you buy the digital currency at a certain price and sell it for more than you paid for it. There is the famous story of Kristoffer Koch who paid $27 in 2009 for 5,000 Bitcoins which has now been valued at almost $1M. Currently, 1 Bitcoin equals approx. $2,550 U.S. Dollars, so it would cost you over $10,000 to buy 4 Bitcoins right now. Over the last three or four years, the value of Bitcoin has continued to increase and it is the dramatic increase in value that has caused the recent stir and attention around digital currency investing. Others are attracted to Bitcoin as a protection against government currency. These investors fear a failure in the financial markets, which will dilute and may cause value declines in the dollar or other government currencies. These investors prefer to hold their Bitcoin directly, rather than through a fund.

Assuming you’ve done your research and are comfortable with the process, in terms of actually investing, one option is to invest in the Bitcoin Investment Trust (GBTC). GBTC is a publicly traded security that solely invests in Bitcoin. This allows an investor to use a traditional investment vehicle to realize gains (or losses) as the price of Bitcoin fluctuates without actually possessing and storing bitcoins. However, investing in bitcoin through the GBTC provides only a fractional value of the actual price of bitcoin and so in terms of ease and convenience, the GBTC is a good option, but at least for now, it’s not the best option to capitalize on the full value of Bitcoin. Coinbase, Inc. is another option – it is essentially a digital exchange where you can invest in Bitcoin as well as other cryptocurrencies (see below). Another option is to invest in actual Bitcoin through a self-directed IRA, which I will write about in another article.

What Are Other Types of CryptoCurrency?

Bitcoin is not the only form of digital currency – others include Litecoin, Peercoin, Primecoin, Namecoin, Ripple, Quark, Mastercoin, and Ether(Ethereum).

In sum, like any investment, it requires due diligence and a correct timing of the market(s). As you can tell, there have been some crazy tales of Ponzi schemes and fraud but also stories of incredible returns. In any case, I don’t think digital currency is going away anytime soon – I guess you could say that the stories in this article have been “tales from the crypt”-o currency (it was a stretch but I decided to go for it).