Women In Family Business – The Importance of Clarity

By Patricia Annino, J.D., Thomas Davidow, Ed.D. & Cynthia Adams Harrison, Ed.D., LICSW

The Importance of Clarity

family business imageThe more you and your husband agree to treat the business as a performance arena in which preparation is everything, the more productive your child will be. Similarly, the clearer you can be in terms of creating structures, the better off your child will be when he does enter the business. Being proactive about creating routines through governance structures or through accurate job descriptions is very helpful. If your child is already working in the business, you and your husband can discuss how to create sensible structures with appropriate boundaries. Everyone performs better when they know what’s expected and what the rules are.

Be Informed-Be Influential – Points to Remember

  • If your husband resists talking to you about the business or is upset about something at work and won’t share why, don’t take it personally and don’t give up.
  • Men and women really are different in how they think, behave, feel good about themselves and communicate.
  • When you set a limit for your husband, you are actually encouraging him: You are telling him that he is capable of achieving his goals as a businessman, husband and father.
  • It is possible to find the balance between creating objective criteria for your child’s performance in the business and maintaining family harmony.
  • There’s a difference between granting your child the automatic right to work in the business and giving him the opportunity to do so.
  • Things go best when there is consistent communication between you and your husband and between both of you and your child.

 

 

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Effective Risk Planning

Image of a womanOn the topic of risk I just came across the Family Office Exchange white paper, “Securing the Future: Managing Threats and Opportunities Through Effective Risk Planning” (October 2009) and was impressed with how thorough this study is.

I recommend it to anyone who is advising high net worth families and/or family owned businesses. Its intent is to develop a process for managing risk to diffuse reactive, irrational decision making and puts forth the best strategies for managing downside risks while emphasizing the importance of capitalizing on new opportunities for wealth enhancement.

It is a wonderful roadmap for a proactive approach for risk management across the critical issues that families face. To quote Arie de Geus, the former head of strategic planning for Royal/Dutch/Shell, “nobody can predict the future, therefore one should not try. The only relevant discussions about the future are those where we succeed in shifting the question from “whether something will happen” to the question “ What will we do if it does happen?”

For more information about the Family Office Exchange white paper visit: https://www.familyoffice.com/knowledge-center/securing-future-managing-threats-and-opportunities-through-effective-risk-planning

My three key areas “at risk” for family business are family cohesiveness, business ownership and wealth management. Here’s a look at what they mean:

 

Family Cohesiveness

In the area of family cohesiveness, reputation or the family brand is at risk. Traditionally this risk was triggered by a scandal that leaked out to the press. The new way this risk is triggered is through the Internet. Videos on YouTube and comments on Facebook, Twitter and other social media networks can affect your client’s family’s reputation. They can be used in divorce litigations, custody matters and employment decisions. Once viral, it is hard to remove.

The younger generation, if not educated, is not mature enough to understand the afterlife omnipresent power of the digital era. A family risk-management policy should include education about the dangers of social media and a morally binding decision among family members to understand the consequence of social media on the reputation of the entire family.

Business Ownership

Another risk to family cohesiveness is the impact to individual goals and life plans.

Traditional risks included the illness, death or incapacity of a key family figure.

In the family business, the new risk is the increased work lifespan of the older generation, which results in the delayed succession of the middle generation. With the older generation in good health and working longer, the individual goals plans of the middle generation may be passed over.

Intentional strategic planning and clear communication among all generations as to what the expectations are for the working lifespan and when the baton should/will pass can mitigate this new risk.

Traditional risks to business ownership and the economic sustainability of the family enterprise include the death or the divorce of a shareholder when proper planning is not put in place.

The new risk is the evolution of laws governing how assets are allocated in a divorce. In some states, gifted and inherited assets are divisible in a divorce. This does not just include what the about-to-be divorcing family member owns when married; it also includes the expectancy of what that divorcing family member will receive in the future.

Those expectancies are taken into account when determining the allocation of assets between the couple about to be divorced.

A significant side effect to this is how a hostile soon-to-be ex and their attorney will value the family business assets and put that valuation into the public realm of divorce court. The goal of that hostile divorcing member is to value that business high. That valuation may do serious damage to the estate plan of the older generation.

There is also an increased risk for the allocation of alimony. Many family businesses have phantom income that is earned during the course of the marriage that shows up on the tax return and is plowed back into the family business. At issue is how that phantom income should be treated for alimony purposes.

If it was earned during the marriage, is it marital income taken into account for alimony and child support purposes even though not actually received?

When thinking about these risks, it is important to remember that the law and the court in the jurisdiction of the divorcing spouse that will control these decisions. These risks can be mitigated by a well negotiated pre-nuptial agreement or post-nuptial agreement.

Wealth Management

Traditional risks related to a family’s wealth (including financial, intellectual and social assets) include the illness or death of the key family stakeholder, economic downturn and changes in the regulatory or legal environment.

The dissipation of wealth sometimes triggers new risks. With each ensuing generation, wealth is splintered. Besides that, new risks also come from the lack of creation of new wealth during turbulent economic times, the increased complexity of legal and tax matters and the increased complexity of wealth management choices.

These risks can be mitigated when the family coordinates its advisers and monitors the integration of all professional services.

The risks are further mitigated when the family embraces and encourages financial education and financial literacy across the generations. Mentoring, shadowing, exposure to the concepts and resources along the generation continuums reduces unintended consequences.

Risk taking is an essential part of getting ahead. Be sure and invest in yourself and understand and evaluate your risks before you take them.


Patricia Annino
is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Complications Cloud Possibility of a Movie Based on ‘Watchman’

By MICHAEL CIEPLY and BROOKS BARNES

Town Revisits Its ‘Mockingbird’ Past

As Harper Lee’s new novel, “Go Set a Watchman,” debuts, her hometown of Monroeville, Ala., takes stock of its Harper Leerelationship to the writer and her work.

LOS ANGELES — Typically, the outsize attention given a novel like “Go Set a Watchman” would set off an immediate scramble in Hollywood for the film rights.

But, as with seemingly everything surrounding the recently rediscovered book by Harper Lee, which was published on Tuesday by HarperCollins, the situation is not that simple.

Those who represent Ms. Lee say they are not entertaining any offers at the moment, to comply with her request that the film rights be sold only after international publication of the book is complete. Beyond that, there is a question of what role Universal Pictures, which released the film version of Ms. Lee’s “To Kill a Mockingbird” in 1962, would play in a film of “Watchman,” which has several of the same characters.

Other concerns may include an uncertain audience for ’50s-era period film, and how moviegoers would respond to a new portrayal of the lawyer Atticus Finch, who is depicted as a racist in “Watchman,” but is so identified with Gregory Peck’s Oscar-winning portrayal of him as a colorblind champion of justice in “Mockingbird.”

Ms. Lee “is quite particular about film rights in general and would want to have a say in how it is produced,” Andrew Nurnberg, the British agent who represents Ms. Lee, said in an email about any prospective movie version of “Watchman.”

Mr. Nurnberg gave no specific time table for when the rights might be sold, but said the book had generated “heaps of interest” among film companies. He added that some inquirers have also expressed interest in remaking “To Kill a Mockingbird,” which Ms. Lee opposes.

In any case, Universal’s role in any film based on “Watchman” still needs to be clarified. A spokeswoman for Universal declined to comment.

But two people briefed on the studio’s position, who spoke on the condition of anonymity, said Universal executives thought that no film could be made from “Go Set a Watchman” without their consent or participation. One of those people said the studio — which has become more focused on blockbuster fare like “50 Shades of Grey” and “Jurassic World” — had not yet decided whether it would welcome or participate in any screen version of the new book.

Deals and disputes over the control of characters have led to situations as complicated as one that found MGM, Universal and Dino De Laurentiis sharing credits on “Hannibal,” which folded the cannibal Hannibal Lecter and the F.B.I. agent Clarice Starling into a film that had to reconcile rights related to Thomas Harris novels, a De Laurentiis film called “Manhunter” and “Silence of the Lambs,” which had been released by Orion Pictures before its acquisition by MGM.

Robert Mulligan, who directed “To Kill a Mockingbird,” joined Alan J. Pakula, its producer, in making it through their Pakula-Mulligan company. They introduced the book to Mr. Peck, whose own Brentwood Productions joined in the project.

Sandy Mulligan, Mr. Mulligan’s widow, and Hannah Pakula, Mr. Pakula’s widow, declined to discuss whether the Mulligan or Pakula estates held sequel or character rights.

Shot on Universal’s back lot, “To Kill a Mockingbird” became what one former Universal executive this week referred to as a “sacred” property. It has not been mined for remakes or sequels and its principal relic on the lot — the character Boo Radley’s house — has been kept off the studio’s regular tram tour, though it is occasionally opened to V.I.P. tours.

Mr. Peck died in 2003 at 87. Until the end of his life, he answered letters and spoke to groups about Atticus, who came to stand for opposition to racial bias.

(In 1999, Mr. Peck became the second recipient, after Harry Belafonte, of the Marian Anderson Award, which recognizes artists who effect social change.)

“I never had a part that came close to being the real me until Atticus Finch,” he once said, according to Lynn Haney Trowbridge’s 2003 biography, “Gregory Peck: A Charmed Life.”

Carey Paul Peck, one of Mr. Peck’s children, said he did not know whether the Peck estate held rights that might complicate any attempt to film “Go Set a Watchman.”

Asked whether he had concerns about the characterization of Finch in “Watchman,” in which it is revealed that he once attended a Klan meeting, Mr. Peck said he did not.

“Have at it. It’s a free society,” Mr. Peck said in a phone interview.

At the same time, he said he did not expect that any film of “Watchman” would approach the achievement of “Mockingbird.”

“That’s kind of the gold, the rest is dross,” he said. “It’s not going to be the same caliber.”

Netflix, which has rights to show “To Kill a Mockingbird” on its service, has not yet considered “Go Set a Watchman” as the basis for a new film or show, a person briefed on the matter said. HBO similarly has no plans for a film project. One executive with a company that has helped to finance prominent films in the United States and Britain questioned whether any studio would invest in the period drama, unless a star of, say, Leonardo DiCaprio’s stature were to agree to play the role of Atticus. (In the book, the character is 72.)

Ms. Trowbridge said she believed that Gregory Peck would have applauded a new film, even one that presented a more complicated view of Atticus Finch.

“He was a sophisticated, educated reader,” Ms. Trowbridge said. “I think he would have said, go ahead.”

Ms. Trowbridge’s biography portrayed Mr. Peck as having viewed both Atticus Finch and Ms. Lee’s father, A. C. Lee, on whom Finch was based, as almost uniquely without flaw: “Asked if any human being could be as noble and idealistic as Atticus, Greg said, ‘I’ve met two in my lifetime — my own father and Harper Lee’s.’ ”

Mr. Peck wore A. C. Lee’s gold watch to the 1963 Oscar ceremony as a good-luck charm, and came away with the best actor award.

Mary Badham, nominated as best supporting actress that year for her portrayal of Finch’s young daughter, Scout, said she saw the makings of a fine film in “Go Set a Watchman.”

But that, she said, would require close attention to an aspect of the book and of Atticus that she thinks some have overlooked. Some early readers have focused on the unseemly opposition Atticus has to the National Association for the Advancement of Colored People, for instance, without catching the extent to which, Ms. Badham said, Finch may be engaging in dialectics meant to challenge his now-grown daughter.

“In the right hands, it could do very well,” Ms. Badham said. “But it needs very sensitive handling.”

Alexandra Alter contributed reporting from New York.

Source: www.nytimes.com A version of this article appears in print on July 17, 2015, on page B1 of the New York edition with the headline: Film Version of ‘Watchman’? First, Untangling the Rights . Order Reprints| Today’s Paper|Subscribe

 

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Financial stress is hurting worker productivity

By Beth Healy

Half said they were not certain they could come up with $1,000 in an emergency.

The recession ended nearly six years ago. The stock market has doubled in value since then. But Americans are still money roll image, financial stress, financial informationso stressed out about money and finances it’s even affecting their productivity at work.

A study by State Street Global Advisors in Boston found that large numbers of workers are experiencing emotional or physical stress that’s related to dealing with their personal finances. About 61 percent of 1,000 workers surveyed across all ages and incomes said they were moderately to severely stressed about their finances.

Half said they were not certain they could come up with $1,000 in an emergency.

“The data’s really powerful around how distracted employees are,’’ said Megan Yost, a vice president at State Street Global who works on retirement plans. “They’re not just at work and distracted; people are actually taking days off and missing work to deal with financial stress.”

Stagnant wages and competing demands on workers’ wallets — from mortgages and day care to student loans and saving for retirement — are often to blame. If the employee gym was the 1990s answer to employers fretting over rising health care costs, “financial wellness” is today’s buzzword in human resources offices.

Graph image, financial stress, financial informationIn December, State Street Global held a brainstorming session with executives from a dozen Fortune 500 companies, plus some academics, to talk about the issue. At a daylong session in Manhattan, they represented a variety of industries and employees, from the highly compensated to those in manufacturing jobs or driving trucks.

Barbara Kontje of American Express Co. was among those attending the session. She’s director of Retirement Americas & Smart Saving for 21,000 employees at the New York-based financial services company. Even in her industry, she said, concerns about finances abound.

‘There are just very few people who aren’t thinking about money.’

 

“Money is always top of mind’’ when she talks to employees, Kontje said. “They want to do better with their money. They know they should be saving for retirement. They know they should have an emergency fund. They just don’t know where to start.”

Even the federal government is on to the problem. In a report in August, the Consumer Financial Protection Bureau said many Americans lie awake at night wondering how to make ends meet. The agency cited an Aon Hewitt study that found 81 percent of workers felt financial worries hurt their work productivity.

In 2012, the government said, one in five workers admitted to skipping work to deal with a financial issue.

Financial stress is worst at lower income levels, according to State Street, but it doesn’t stop there. Among those earning less than $75,000 a year, two of every three people reported being stressed. For those earning more than $75,000, it was a bit more than half.

Beyond income, stress levels are largely determined by how much money people have available in cash or investments. Those with less than $50,000 in savings and investments suffer the most, according to the State Street study, with more three-quarters saying they experience money stress.

The situation doesn’t improve dramatically until workers accumulate more than $150,000 in investable assets, State Street found. Still, 42 percent of people in that group reported feeling stressed.

At higher levels of pay, the problem becomes more about spending habits than earning power, State Street’s Yost said. But nearly half of the people between the ages of 29 and 69 who took part in the survey said they were living paycheck to paycheck.

Rosario Cabrera, a personal care assistant from New Bedford, knows that all too well. She is 31 years old with two kids, working seven days a week caring for people who are sick and homebound, earning $13.38 an hour.

“I struggle every day,’’ Cabrera said. Having just paid the rent and her bills, she said, she’s got $89 left in her bank account. “That’s going to have to hold me until next week,’’ she said.

Even with the improved economy, workers’ financial worries are painfully common.

Another recent survey, commissioned by the Boston communications firm Brodeur Partners, found that people think about money more than about sex. While most workers think about their families and their spouses most, they worry about money 69 percent of the time — more than about religion, work, or their sex and love lives.

“There are just very few people who aren’t thinking about money,’’ said Andrea Coville, chief executive of Brodeur. “That’s a lens you have to understand when you’re talking to people.”

That’s an issue for employers trying to encourage workers to save for retirement, executives said. It’s why State Street Global, a giant investment manager that caters to corporate retirement plans, pension funds, and other large institutional investors, is spending time and money in the weeds of workers’ financial angst.

This era’s corporate gym comes in the form of company-sponsored sessions on mortgages and investing, one-on-ones with financial advisers, and webinars. Kontje said Amex has cut some of its online financial education programs to 30 minutes or even 15 minutes, to make them more convenient for workers to watch off-hours.

The most money-stressed age group is 30 to 39, according to the State Street study, the age range when many people marry, have babies, and save for other major expenses.

“It’s clearly a demographic that needs the help and wants the help,” Yost said.

Source: The Boston Globe Beth Healy

 

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Death Knell for Opera in San Diego After 49 Years

By ADAM NAGOURNEY

SAN DIEGO — Molly Whittaker is a chorus member with the San Diego Opera, where she has performed for Ian D. Campbell and ex-wife Ann Spira Campbell, San Diego Opera Executivesalmost 10 years. But the other evening she could be found outside the opera hall, wearing a bright red T-shirt reading “Fight for San Diego Opera,” and thrusting pamphlets and stickers at patrons as they arrived for a performance of Massenet’s “Don Quixote.”

“I’m trying to draw attention to myself,” she said, a note of urgency in her voice. The opera company announced last month that it would shut down after 49 years with the end of the run of “Don Quixote,” and she was on the front lines of a campaign to save it.

“I came home from babysitting, and it was on the news,” she said. “I fell on my knees and cried for two days.”

Ms. Whittaker appears to have failed. After a three-week battle that convulsed the community here and subjected its once revered opera company to widespread derision and accusations of mismanagement — Ian D. Campbell, its general and artistic director, was nearly booed off the stage when he stepped out to introduce “Don Quixote” this month on opening night — the board of directors on Friday reaffirmed its intention to close down. The final scheduled performance was on Sunday.

People here were certainly aware that their opera company, like so many others, was struggling with declining attendance and revenues. But the news still seemed to come as a shock, no matter how many urgent fund-raising appeals the troupe sent out. “You just get kind of used to that and take it with a grain of salt,” said Violet Huprich, 77, a retired teacher. “But there was no indication there was going to be a complete failure, that it was going to go down.”

The crisis comes at a time when even the Metropolitan Opera is struggling with many of the same kinds of problems and soon after the drawn-out demise of New York City Opera, which closed for different reasons. The seeming end of the line for this San Diego institution, the country’s 10th-largest opera company, gave fresh cause for alarm about the future of opera, and particularly regional opera. Unless there is a last-minute reprieve — a committee of four board members is making one final effort to find one — this metropolis of 3.1 million people, which prides itself as culturally rich, will have no place to see opera, short of chancing a drive to Los Angeles that can take anywhere from two-and-a-half hours to four hours each way.

Keturah Stickann, the New York-based director of “Don Quixote,” before a performance on Tuesday. “It’s known for bringing in the best in the world and has been for years and years and years.”

By the end, nightly attendance at the 2,500-seat Civic Theater here — the opera did not have its own hall — had fallen below 70 percent, even with seats discounted to fill the house. Ticket sales dropped to 34,674 last year from 41,355 in 2010. The Sunday performance was, not surprisingly, sold out, a bittersweet reminder of an earlier time.

Continue reading the main story

“ ‘Elixir of Love,’ which got great reviews, still sold just 68 percent,” said Karen Cohn, chairwoman of the San Diego Opera, referring to a production of the Donizetti opera in February. “Lowest in our history. It was just devastating for us.”

It was a one-two punch: Even as ticket sales were dropping, the opera was depleting a $10.5 million endowment left to it by Joan Kroc — who died in 2003 and was the widow of Ray A. Kroc, who built the McDonald’s empire — to cover operating deficits. The Kroc fund is projected to be spent by the end of this month.

“Even if we sold out, the tickets are only covering 38 percent of the cost,” Ms. Cohn said. “Our donors are passing away; I don’t know if people are not being raised with opera in the United States any longer, but we are not selling out the operas anymore. Not even close.”

In the end, she said, the choice was to close “with dignity” now or proceed with a 2015 season that has already been scheduled and posted online — Wagner’s “Tannhäuser,” John Adams’s “Nixon in China,” Mozart’s “Don Giovanni” and Puccini’s “La Bohème,” complete with contracted singers who will still have to be paid — and face the embarrassment of an inevitable bankruptcy.

The drama in San Diego was particularly pitched and sudden, all the more striking given the context of the long, slow decline of New York City Opera.

“The leadership is just throwing in the towel,” said Carlos Cota, the business agent for the International Alliance of Theatrical Stage Employees Local 122, which represents opera workers in San Diego. “It’s just going to leave a dramatic void in our city.”

There has been no shortage of second-guessing the decision to close, and questioning whether the company did everything it might have — from considering smaller stages that might reduce ticket costs to being more experimental with its programming to attract new audience members. The disclosure of high executive salaries — Mr. Campbell made $489,000 last year, while his former wife, Ann Spira Campbell, who is deputy general director, drew $274,000 — only fanned the anger.

The sudden and mysterious decision to close also fed a storm of rumors that the two were trying to protect any severance payments. The board issued a statement from an independent lawyer saying that they would be treated the same as other opera creditors.

The troupe had a $15 million budget this year and was, unlike other companies, deficit free.
“A lot of opera companies face the same challenges,” said Marc A. Scorca, president of Opera America, an advocacy organization. “But other opera companies have soldiered on through creative reinvention, cutbacks in order to stabilize. They are going forward with a more diverse public program and a more diverse audience.”

“I think this is a story about one opera company,” he said. “It describes not the state of opera but the state of the company.”

Ms. Stickann said opera companies in Houston, Chicago and San Francisco had embraced change with no harm to their reputation. “These places are bringing in world-class musical theater and world-class chamber work, and I think that these are both options that would bring in a larger audience or a different audience,” Ms. Stickann said.

The concern echoed across the country. “They are dealing with the same head winds that all nonprofits are dealing with and they chose to pull the plug,” Christopher Koelsch, president of the Los Angeles Opera, said. “The things that were cited are some of the things that all of us have to deal with and the challenge to all of us is to adapt.”

Mr. Campbell disputed the notion that the board had not acted to avoid this moment, noting that it had cut back productions to four a year from five, and trimmed the staff. There was, he said, nothing left to do.
“We knew the problem was coming,” he said. “We took rather dramatic action in cutting expenses. Nobody stepped back. We all tried to do what we could. These are the cold, hard facts rather than emotions.”
Liam Dillon contributed reporting from San Diego, and Michael Cooper from New York.

A version of this article appears in print on April 14, 2014, on page C1 of the New York edition with the headline: Death Knell for Opera in San Diego After 49 Years.

Source: New York Times

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

The Beatles vs. the Taxman: A Former Manager Recalls Yesterday

By Eric Roston Mar 22, 2013 3:38 AM ET

Fifty years ago four guys got on TV before a screaming audience and drew more U.S. viewers than any show ever had. Over the next six years, they made sublime music, girls faint and a ton of money. Below, Peter Brown, right hand to Beatles manager Brian Epstein, remembers how they did it all. Republished from March of last year:

The small, framed photograph might not strike visitors to Peter Brown’s Manhattan home as noteworthy. It features indiscernible figures lounging about a grassy estate under a high sun. But those figures — which include the four Beatles, their significant others, plus their personal assistant Neil Aspinall and Brown — are captured in repose at the peak of the band’s creativity and influence.

The picture was taken in July 1967 at Kingsley Hill, the country home of manager Brian Epstein in Sussex. The album Sgt. Pepper’s Lonely Hearts Club Band had been released six weeks earlier. The single “All You Need Is Love,” which the band had performed live three weeks earlier during the first global television broadcast via satellite, would be released in the U.S. within days.

The Beatles and their inner circle gathered for the weekend of July 15 to begin planning what to do with their wealthPeter Brown, Beatles and their future, a rare undocumented moment in the band’s biography. The photograph shows a moment of tranquility, just before the storm clouds gathered. They would soon become aware of the many shortcomings of deals that had nonetheless made them rich. The band’s management agreement with Epstein was itself due to expire toward the end of the year. That increasingly weighed on him, though there was little reason to suspect they would drop him.

After its release on June 1, 1967, ” ‘Pepper’ had kind of exploded the world, and Brian was very conscious they had to have a plan for the future,” recalled Brown, Epstein’s assistant and friend, and later an executive of the Beatles’ company, Apple Corps. Ltd. “One of the problems was this enormous amount of money” in back royalties they were to get from EMI “and what should they do with it to avoid paying taxes — prohibitive taxes — on it.”

The boys never got down to business that weekend. “I think they were proud of what they’d done, and it was a very special moment,” said Brown, 75. It was meant to be a “a quiet weekend.”

Within six weeks of snapping the photograph, Epstein, who had catapulted the Beatles from a popular, rambunctious Liverpool foursome to towering global celebrity, had died of an accidental drug overdose, at the age of 32. The act he had discovered was left rudderless; they knew virtually nothing about their own business affairs.

Brown, who is chairman and CEO of the strategic communications firm BLJ Worldwide, described his role in the Beatles empire in The Love You Make: An Insider’s Story of the Beatles, the bestselling 1983 tell-all he published with journalist Steven Gaines: “I supervised and conducted all of their business affairs, from getting their signatures on contracts to getting them out of jail. I helped marry and divorce them. On my desk was a red phone to which only they had the phone number, and locked in a desk drawer I kept their passports.”

Brown had granted an exclusive interview to mark the 50th anniversary of the start of the Beatles recording career. The album Please Please Me was released on March 22, 1963. He and I met twice, in October and January.

My main question for Brown: What was the Beatles’ business model?

Looking back, two themes prevail: Doing whatever they could to get contracts, and doing whatever they could to make the most of tiny royalty percentages and avoid the U.K.’s “super-tax” on wealthy people.

And the answer? There was no business model.

“Everything we did was unknown territory,” said Brown. His measured speech suggested an elder statesman. “What Brian did was unknown territory.”

In the Beginning

beatles, taxesRock and roll band “The Beatles” performs onstage at the Cavern Club in February 1961 in Liverpool, England. (L-R) George Harrison, Paul McCartney, Pete Best and John Lennon. Photographer: Michael Ochs Archives/Getty Images

Young merchant seamen who sailed from Liverpool, a port city of about 745,000 people in 1961, brought back firsthand encounters with popular culture abroad. “They used to come to America on the ships,” Brown said. “So they heard rock and roll. They heard rhythm and blues. They heard country music. The knowledge that Liverpool had of the contemporary music scene in America was unique.”

As manager of the record store his family owned, NEMS, Epstein catered to these relatively sophisticated tastes. Brown worked in the record department of a store across from Epstein’s. The two became friendly, grabbing morning coffee at “elevenses,” supper at night. Brown’s employer had recently put him through a two-year business degree, an investment that still didn’t move him to stay with the organization. He joined NEMS when Epstein offered him a 30 percent raise, plus commissions.

As legend and biographers have it, in October 1961, a customer dropped by the store to ask if they had a single, “My Bonnie,” by the singer Tony Sheridan (who died in February), with a local band called the Beatles backing him. There were two more requests in the next couple of days. Epstein walked over at lunchtime on Nov. 9 to see their set at the dim, crowded Cavern Club.

“They smoked as they played and they ate and talked and pretended to hit each other,” Epstein wrote in his 1964 autobiography, A Cellarful of Noise. “They turned their backs on the audience and shouted at them and laughed at private jokes.” But they also gave off a “magnetism” that held sway over the crowd and himself. Instinctively, he ordered 200 copies of “My Bonnie” for his store.

Even then, Beatlemania was under way. The Beatles’ original drummer, Pete Best, put the beginning of the craze at Dec. 17, 1960, at the Casbah Coffee Club, which his mother had opened the previous year. “This was the first time the Beatles had played in Liverpool, seeing the audiences switch on to what we were doing,” Best said in an email. “Rapturous applause and screaming girls. Every show becoming bigger than the last one was wonderful.”

Propelled back for several visits — “part sexual, part showman,” as Brown and Gaines wrote — Epstein decided he could manage them.

‘A Tough Contract’

Record executives didn’t share Epstein’s vision. Decca Records President Dick Rowe would become infamous for passing on the Beatles after they auditioned, on the assumption that guitar bands were on their way out. Later Beatles biographers have exonerated him, given the state of the band’s act in 1962. As a consolation prize, George Harrison later suggested Rowe look into a band in London he liked called the Rolling Stones, according to The Beatles by Bob Spitz.

George Martin of EMI’s Parlophone label saw how much work they needed. “I wasn’t particularly knocked out by what [Brian] played for me. I didn’t think a great deal of the songs or the singers. But I did think they produced an interesting sound,” Martin told journalist Hunter Davies.

He was willing to sign them, but not with their current lineup — namely with drummer Pete Best, who he felt wasn’t “regular enough” and didn’t “give the right kind of sound.” Epstein fired Best and hired Ringo Starr (Richard Starkey), making them, respectively, the unluckiest and luckiest drummers in the history of humans hitting things with sticks.

Martin’s offer to Epstein was standard for the time — and accordingly not a strong bet on the band’s future success. “It was a tough contract,” Martin wrote in his 1979 book, All You Need Is Ears. In the first year, with an option to renew, it required that the band deliver two double-sided singles, for which the four musicians split three-quarters of a penny among them for every sale, while Epstein got 25 percent of a penny. Despite their tiny royalty percentages — 18.75 percent of a penny per Beatle per sale — they sold enough records within a year to become wealthy, about 6 million pounds (about $16.7 million) worth.

EMI’s profits shot up 80 percent. Beatlemania spread.

Taking Stock

Since Lennon and McCartney were writing their own songs, they needed a music publisher, which owns song copyrights and pays composers their royalties. Dick James Music set up a company, called Northern Songs, after the composers’ northern English origins, to publish these compositions. DJM owned 50 percent of the company, Lennon and McCartney were given 20 percent each, and Epstein’s management company, NEMS Enterprises, took 10 percent.

Brown said there was nothing wrong with it. But all things being equal, as he and Gaines wrote, “in literal terms, Brian signed over to Dick James 50 percent of Lennon-McCartney’s publishing fees for nothing. It made him wealthy beyond imagination in eighteen months.”

These deals, and the others, and the lawsuits, that came after them, structured the Beatles’ lifetime income — and not necessarily happily. “We were desperate to get a deal,” Paul McCartney said in the official compendium The Beatles Anthology, published in 2000. “Brian did do some lousy deals and he put us into long-term slave contracts which I am still dealing with. For ‘Yesterday,’ which I wrote totally on my own, without John’s or anyone’s help, I am on 15%.”

Brown declined to discuss individual band members.

The top rate for British taxpayers in the mid-1960s reached 83 percent. The wealthiest among them paid a 15 percent super-tax on top of that, pushing taxes as high as 98 percent. The pain came out in the band’s music. George Harrison opened his 1966 song “Taxman”:

Let me tell you how it will be.
That’s one for you, 19 for me…
Should 5 percent appear too small,
Be thankful I don’t take it all.

As Lennon and McCartney racked up hits with their compositions in 1963 and 1964 — “Please Please Me,” “From Me to You,” “I Want to Hold Your Hand,” “She Loves You,” to name a few — and money started pouring in, it became clear that the songwriting profits would be siphoned away to the U.K.’s treasury if something wasn’t done.

“They were the most famous people in the world, and they were making a lot of money, but they were not seeing any of it,” Brown said. “So capital gains was the obvious route to go.”

The London financial community wasn’t quite sure what to make of a company whose only assets were the songwriting potential of two Liverpudlian twentysomethings. Still, the profits looked good, and in February 1965 the London Stock Exchange quietly hosted the initial public offering of Northern Songs Ltd.

Five million shares were offered. Lennon and McCartney each received 15 percent, which was worth $640,000 at the time, according to The Love You Make. Dick James and his partner received almost $1.7 million worth. Harrison and Starr were awarded small percentages. Fans, many of them American, bought shares to get a piece of the Beatles.

Lennon and McCartney have never owned the Beatles song catalog outright. Today, music-publishing rights rest with Sony/ATV, a joint venture between Sony Corp. and the estate of Michael Jackson. The Beatles’ recorded music is owned by Vivendi’s Universal Music Group, which purchased EMI last fall.

On the Road

The Beatles’ first movie, A Hard Day’s Night, showed the band coping with the demands of Beatlemania in their native Britain. The second picture, Help!, went on location to Austria and the Bahamas, both because it was an adventure spoof and because working abroad they could avoid taxes.

Beatles tours were exercises in chaos. There was no infrastructure or services in place to support this scale of enterprise. They needed their own chartered planes. They played stadiums with tiny speakers.

When the group traveled to Munich, Essen and Hamburg, in 1966, “the German government gave us the royal train,” Brown said, “the train which had been built for Queen Elizabeth’s tour of Germany, like, five years beforehand.” That situation set off a spat over “who was getting the queen’s bed,” Brown laughed.

“Who got it?” I asked.

“John.”

For Epstein, chaos was opportunity. “It became clear to Brian that if he and the boys were going to grab any money at all in what might be just a few fleeting moments of great prosperity, he had better grab it in cash, and cash meant touring,” Brown and Gaines wrote. Epstein felt justified collecting paper bags of cash because of the river of money the Beatles were sending into the treasury through taxes on royalties, they wrote.

Chaos also meant lost opportunities. NEMS ended up initially giving away 90 percent of merchandise-licensing income to an American middleman, resulting in a catastrophic loss of income for the Beatles. That loss would be reduced through lawsuits, but by the time the controversy settled down, Beatlemania had peaked and the drama had scared off would-be manufacturing partners.

“Brian agreed that that was the worst thing he ever did,” Brown said.

Fandom was far from universal. “The attention they were getting wasn’t always positive, because there was the Frank Sinatra generation saying, ‘Who the —- are these people?’ ” Brown said.

Beatles backlash grew serious on the 1966 tour, when the band hit a trifecta of difficulties. A perceived snub of Imelda Marcos, the Philippine president’s wife, made them personae non grata in the Philippines, requiring a hair-raising escape in which the band members needed to be protected from Philippine security who were threatening them with guns and wooden clubs at the Manila airport, Brown and Gaines wrote. A right-wing Japanese group threatened violence at a concert. In the U.S., comments made by Lennon to a British journalist that the Beatles were “more popular than Jesus now” set off record-burning protests.

“We never really said it very much” in The Love You Make, Brown said, but “there was a very great nervousness about somebody getting shot when they were onstage.”

And in the End

The Beatles performed their last scheduled concert on Aug. 29, 1966, at San Francisco’s Candlestick Park. The end of touring meant less need for constant management.

Brown frequently escaped to the country, leaving Epstein behind, often in an unsettled state. Plagued by depression and drug use, Epstein had spent part of May 1967 in a hospital breaking a cycle of insomnia and stimulant use, according to The Love You Make. The previous year Epstein had attempted suicide, according to the book.

“I had persuaded Brian to buy this house in the country because I was worried about his drug intake,” Brown said, surprised that Epstein went for it. Epstein loved the one that Brown picked out, an 18th-century house in Sussex, and bought it just months before his death on Aug. 27, 1967.

After Epstein’s death, Brown took on even greater duties as a top executive and helped the Beatles form and launch Apple Corps Ltd. He continued to oversee more than just the Beatles’ professional matters, through the band’s ultimate break-up in April 1970. He witnessed McCartney and Linda Eastman’s wedding in March 1969. Eight days later he was best man at John Lennon and Yoko Ono’s wedding, for which he is immortalized in the song “The Ballad of John and Yoko”:

Peter Brown called to say
‘You can make it okay,
You can get married
In Gibraltar, near Spain…

In the half-century since the album Please Please Me was released, the Beatles have never been far from the popular culture. Their simple lyrics, original melodies and tight harmony stand as a kind of universal musical language — hence the title of All You Need Is Ears — and have kept music scholars busy for decades. Their songs, and antics, banged up against British tax policy, cold war politics and American religion. Beyond that, the band’s “promotion of the English language around the world is one of their most substantial, and least documented, achievements,” the late music critic Ian MacDonald wrote in his 1994 book, Revolution in the Head: The Beatles and the 1960s.

On the way to the first of my two interviews with Brown, I passed a young family on the sidewalk. The smallest among them, a boy, maybe 8 years old, wore a Beatles T-shirt. I asked Brown why events in England in the early 1960s should have an impact on what American children wore in 2012. He said he asks people that himself.

“Did you show them? Did you tell them? No. They find it on their own,” Brown said. “It’s an amazing phenomenon that 50 years later, kids find them.

Correction: The original version of this article said Peter Brown is 74, based on information from an aide to Brown. He is 75.

Analyses and commentary are the views of the author and do not necessarily reflect the views of Bloomberg News.

Source:  Bloomberg News

 

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

New Risks to Business Ownership

family owned businessWhether the traditional family business ownership or assets such as real estate ventures owned jointly by family members in limited partnerships, corporate or LLC forms.

Traditional risks to business ownership and the economic sustainability of the family enterprise include the death or the divorce of a shareholder if proper planning is not in place.

The new risk to business ownership is the increasing attack by the courts on the family business when allocating assets in a divorce. In some states, known as equitable division states, gifted and inherited assets are divisible in a divorce. This does not just include what the about-to-be divorcing family member owns when married; it also includes the expectancy of what that divorcing family member will receive in the future.

Those expectancies are taken into account when determining the allocation of assets between the couple about to be divorced. As an example of the division of gifted/inherited assets in an equitable division case consider the 1981 Massachusetts court case, Vaughan v. Vaughan. In that case the parents of the son gave the couple (who were in their 30s without children) the annual exclusion gift of $10,000 a year for a period of years. The daughter-in-law sued the son for divorce and her attorney subpoenaed his parents asking that as part of the divorce the parents turn over copies of their estate planning documents, the date they were last amended and an approximation of their net worth (plus or minus $500,000).

The rationale for doing so was that the pattern of gift giving was inextricably interwoven into the lives of the son and daughter-in-law and it was “was what allowed the daughter-in-law not to work.” The expectancy of what the son will receive when his parents die is a factor that is taken into account in determining how the assets of the couple are to be divided in the divorce. The parents refused to provide these documents, but the Judge ordered them to do so. The parents then appealed that order all the way up to the Supreme Judicial Court in Massachusetts (the highest court in Massachusetts).

In a Single Justice decision, the court agreed with the daughter-in-law and ordered the parents to comply with the court order or face jail for contempt. The gifting of cash in annual exclusion amounts is easy to value – what if instead that gift had not been of cash but had been of an interest in a family owned business or an LLC, or investment in a family limited partnership? Then not only would the asset be considered an expectancy but the valuation of that asset would be part of the son’s divorce proceeding. That adversary valuation may do serious damage to the estate plan of the older generation. Placing the assets in trust does not necessarily take them off the table – it may only affect the valuation of those assets in a divorce.

In addition to the allocation of assets, there is an increased risk for the allocation of alimony. Many family businesses or co-owned assets have phantom income or Subchapter S income – income that is earned during the course of the marriage which shows up on the tax return and is plowed back into the family business. At issue is how that phantom income should be treated for alimony purposes.

If it was earned during the marriage, is it marital income taken into account for alimony and child support purposes even though not actually received?  When thinking about these risks, it is important to remember that it is not the law or the court in the jurisdiction of the parent or grandparent that will control these decisions; it is the law and the court in the jurisdiction of the divorcing spouse that will control these decisions. These risks can be mitigated by a well negotiated pre-nuptial agreement or post-nuptial agreement.

Prenuptial agreements are not new.  Court records show that a James Young and a Susan Huffman entered into a premarital agreement in Page County, Virginia in 1844.  Prenuptials are also not just for celebrity couples like Jackie Kennedy and Aristotle Onassis, Michael Douglas and Catherine Zeta-Jones, Madonna and Guy Ritchie, and Paul McCartney and Heather Mills.  Increasing numbers of women today remarrying in their 30s, 40s, 50s, 60s, 70s and 80s consider these agreements an important part of secure financial planning.

That’s because a prenuptial agreement can safeguard assets, protect family members, keep a business in the family, and in certain circumstances, even cover such specific details as how the mortgage and daily expenses are to be are to be paid if and when a marriage ends. They can be as broad or as limited as the parties decide.

Perhaps there is concern about being saddled with a fiancée’s business debts.  Or with the demands of an ex-spouse. Or concern about how much you will have to contribute to the support of a spouse’s children.   A well-drafted prenuptial agreement can handle all of these issues.  If the person is giving up a career or a lucrative job to get married, a prenuptial agreement can also set forth compensation for sacrifice if the marriage fails. A main reason to ask your children and grandchildren to enter into a pre-nuptial agreement (or a post nuptial agreement) is to protect what you chose to give them during your lifetime or at death.

A pre-nuptial agreement can address the division of assets at various stages in the marriage.  Many prenuptial agreements specify that if the marriage lasts less than two years, the division may be minimal or nonexistent, but that the payout portion will increase as the length of the marriage increases.

A prenuptial can address the issue of alimony in the case of divorce, assuring the wealthier spouse that the financial impact of a divorce will be controlled, and at the same time assuring the less wealthy spouse that she or he will be provided for adequately.

Without a prenuptial agreement in place it is up to the laws of the state in which the divorcing person is domiciled (and, in certain cases, the states in which the divorcing person owns real estate) to determine what assets or income the spouse is entitled to keep in a divorce and which assets will pass to the spouse at death. In most states, without a prenuptial agreement, a surviving spouse has the right to inherit one-third to one-half of the decedent’s probate assets. It is important to remember if you are the parent or the grandparent, it is not the law of the state in which you are domiciled that controls the division of the gifts/inheritances that the child/grandchild receives or is expects to receive – it is the law of the domicile of the child/grandchild when divorcing that controls.

A prenuptial agreement can override that and make sure that the property you owned prior to the marriage is given to your children from your prior marriage at your death. It can also specify that assets you do decide to leave to your spouse will not be left outright, but will remain in trust for the duration of the spouse’s lifetime, and then pass to the children when both of you die.

It is important to remember when having that vital conversation with the next generation that a pre-nuptial agreement is a shield – in a good marriage it can be overruled by transferring assets to the other party or into joint names or by an estate plan which leaves them to the spouse. The goal of a pre-nuptial agreement is to protect the assets if the spouse wants them and you don’t want to give them.

If you live in one of the nine community property states – Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin – without a prenuptial agreement, the law says that property accumulated during the marriage will be equally divided. In all other “equitable distribution states,” assets are divided according to what a judge determines to be fair or equitable (which does not necessarily mean equal). In making that decision the judge takes into consideration factors such as the length of the marriage, whether or not there are children, and the couple’s age, health, and job skills. Alaska is different.  It is an equitable distribution state but allows the parties to enter into a community property agreement.

Typically, a prenuptial agreement will address several categories of assets: those assets acquired and owned prior to the date of marriage, all income and appreciation on property owned and acquired prior to the marriage, all property earned and acquired by either spouse during the marriage, all appreciation in the value of assets acquired during the marriage, and all assets received by gift or inheritance during the marriage.

If each party has assets of comparable value, it may make sense to establish the what is mine is mine and what is your is yours type of agreement, specifying that the assets I bring to this marriage (and any appreciation during the course of the marriage on those assets) is mine, the assets you bring to the marriage (and any appreciation during the course of the marriage on those assets) is yours.  Any assets we acquire together during the marriage will be put in joint names and will pass to the surviving spouse at death – or split equally if we divorce.

A mine is mine and yours is yours agreement may not be fair if one party entering in the marriage has very little net worth.   In that type of case, a smart move may be to guarantee the less wealthy a specific amount of money, either when the contract is entered into or when the marriage ends. That helps make the agreement enforceable.

After re-marrying, you may decide to live in your home, or in his home. You may both sell your homes and purchase a new one together. In second marriage situations the home is an asset with strong emotions… and who has the title is an important issue to address in a prenuptial agreement. In many states, ownership of a primary residence is based on survivorship:  if one spouse dies, the ownership passes by law to the surviving spouse. In a second marriage, that could mean that the children of the first spouse to die lose inheritance rights to the house they grew up in.

An alternative is for the re-marrying couple to hold the property as tenants in common, a form of joint ownership without a survivorship right. Each person’s percentage in the home would pass through his or her will (or trust if probate had been avoided) to those persons that the spouse has selected. In such situations it’s common to have the deceased spouse’s interest in the home held in trust for the duration of the surviving spouse’s life, then at the death of both of them, the home would pass to the deceased spouse’s children.

The surviving spouse could even be the sole trustee during his or her lifetime, which gives him or her flexibility to sell the home and reinvest the proceeds in a smaller condominium or a home in another state. It also guarantees that although the surviving spouse has that flexibility, at the death of both spouses whatever the assets have been invested in – the current home, proceeds of the sale of the home or a new home –will pass under the terms of the deceased spouse’s estate plan to his or her children.

There are certain issues that cannot be legally agreed to in a prenuptial agreement. For example, parties cannot contract what child support would be if the marriage ends in divorce. Under current law, they also can’t contract for child-related issues such as custody or visitation. Many parties will, however, include language which states their intent on those issues when the agreement is entered into. Parties also cannot stipulate that they will not be responsible for their new spouse’s medical care.  That is against public policy.

Prenuptial agreements can be challenged – at the time of divorce and at death. One of the key issues the court considers in reviewing the agreement’s validity is how honest the parties were in disclosing their finances.  After all, a party to an agreement can only knowingly waive rights to an asset if she has sufficient information about what the asset’s true value is. “Assets” include tangibles like heirlooms, houses, and finances, and intangibles like intellectual properties, copyrights, royalties, medical licenses, and law degrees.

The court also considers whether both parties had competent legal counsel. Director Steven Spielberg’s wife, Amy Irving, walked away with half their net worth because their prenuptial agreement was scribbled on a napkin, and she was not represented by an attorney.

The court will also consider whether or not the party was under duress when the agreement was signed, and “duress” can be something as simple as the fact that the prenuptial agreement was signed so close to the wedding date that a signing party did not have time to consider the consequences of the agreement. When Donald Trump filed for divorce from Marla Maples in 1997, three months after they separated, Maples fought the prenuptial agreement that allotted her $2,000,000 in the event of a divorce on the grounds that she had not read the prenuptial agreement before she signed it. They settled the case without a trial and her lawyer reported in the news that Trump promised to pay her more than what was stated in the contract.

The court may also determine if there was fraud involved during the negotiation and/or signing of the agreement.

Even though it is not required in many states, the court may also consider whether or not each party had separate and independent counsel. If you choose to waive the right to counsel in signing a prenuptial, you might want to state that in the document – that the right to retain independent counsel was explained and understood but the party chose to proceed anyway.

Finally, in many states, an agreement can be challenged on the grounds of its not being “fair and reasonable.” This can be a two pronged test: 1) whether the agreement was fair and reasonable when the marriage was entered into and 2) whether the agreement is fair and reasonable when the marriage terminates. In such cases the judge is asked to determine whether one spouse took advantage of the other.

Even though prenuptial agreements can be challenged, the trend in case law is to uphold the agreement. In California, for example, the Supreme Court unanimously upheld the premarital contract between San Francisco baseball star Barry Bonds and his wife, Sun. The couple met in Montreal in 1987 when Bonds was a fledgling baseball player for the Pittsburgh Pirates and his wife was studying to be a beautician. They were both 23 years old. They courted for three months and became engaged.  The baseball player had the counsel of two attorneys and a financial advisor. His wife, a Swedish immigrant, who had been told about the agreement a week before the wedding, had a friend from Sweden advising her.  She was told the day of her wedding that the wedding would be canceled if she did not sign the agreement. On the way to the Phoenix airport, where they were catching a plane for their wedding in Las Vegas, they stopped at Bonds’ lawyer’s office and signed an agreement she had seen for the first time only hours before. This agreement dramatically limited the amount of money she would receive upon divorce.

Why did the court declare this prenuptial agreement valid?  Because, the Judges said, Sun seemed happy, healthy and confident. The week prior, Bonds’ lawyer had suggested that she retain her own attorney and she chose not to do so. What is more, the wedding was so small and impromptu that Sun could have easily postponed it if she had decided to retain counsel to review the agreement. Other cases in various states have achieved similar results.

The lesson to be learned is that voluntarily entering into a prenuptial agreement as a consenting adult is entering into a contract you cannot easily walk away from later.

Today, it is also common for the prenuptial agreement to be reviewed after you have been married for several years. Prenuptial agreements can be amended.  If, for example, you have children in the course of the marriage, or if one of you becomes seriously ill, or if a significant amount of time has passed, or if there is a change in the tax, estate, or marital laws – all of these are good reasons to amend your prenuptial agreement.

If you do choose to amend it, then all of the same formalities – separate lawyers, full financial disclosure – apply as much to the amendment as they do to the original agreement. Sometimes, the agreement has a built-in “sunset clause” that specifies that the contract expires if the parties have been married for a certain length of time, which is frequently 10 years.

It is important to remember that a prenuptial agreement is the base upon which future planning can be built. In other words, it sets the stage for what each party agrees he or she is entitled to receive.

Sometimes a prenuptial agreement does not work in the family structure. There may be emotional reasons that make the topic difficult to discuss. The parties may not wish to reveal their financial information. Another technique to consider is the use of self-settled trusts to protect the family assets. Some jurisdictions such as Delaware (even if you are not domiciled there) allow an individual to establish a self-settled trust to protect assets from creditors (which include a spouse or a future spouse). A self-settled trust allows the person transferring the assets to remain a beneficiary of the trust.  To be valid, a Delaware self-settled trust must:

1)    be irrevocable;

2)    appoint a trustee with the discretion to administer the trust;

3)    must appoint a trustee, whether corporate or individual, that is a resident of the jurisdiction in which the trust is formed (so if a Delaware trust then there must be a Delaware trustee);

4)    Contain a spendthrift clause which restricts the beneficiary’s ability to transfer the trust property (whether voluntary or involuntary).

 

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

The Prince Charles Syndrome: Family Business Succession Planning for the “Lost” Generation

No one knows better than Prince Charles about the consequences of the older generation living longer, remaining competent, and Family Business Successionperforming well far past traditional retirement age. These days, in addition to the traditional risks of illness, death or incapacity of a key family figure, the new risk to family cohesiveness is the impact of an increased lifespan on individual goals and life plans. Is there now a “lost generation” of baby boomers that have worked their entire lives for a seat at the table that may never be theirs? As advisors, how can we convince families to put that conversation on the table and what are some of the solutions to this issue?

In the family business, and in the increasingly common co-ownership of investment and commercial assets through family limited partnerships and limited liability companies, the increased work lifespan of the older generation can lead to the delayed succession of the middle generation.

In essence, with the older generation in good physical and mental health and working far longer, the middle generation may, in effect, be knocked out of position and never get its day in the sun. By the time the older generation decides to move along, the individual goals and life plans of the middle generation may have been passed by, and the baton may be passed to the next generation.

Strategies to mitigate this new risk include intentional strategic planning and clear communication among all generations as to what the expectations are for the working lifespan and when the baton should/will pass. A first step is to try to have an upfront conversation with the family about what is going on and what it means. This new risk has financial consequences to the “lost generation” family member who may have been counting on the ascension to leadership to finally attain his or her financial goals of asset ownership and increased salary;  if his or her “day in the sun” never comes then financial security may never happen.

From an overall estate planning point of view, it may make sense to “skip” the lost generation and transfer the wealth to the next generation that may have more desire to innovate and risk. However, the financial security of the “lost generation” is a real issue that must be acknowledged, addressed, and handled so that the entire plan can move forward.

If there are insufficient resources to satisfy each generation’s financial needs and expectations, hidden conflicts and agendas can surface. The “next generation,” likely chomping at the bit to take over, needs to understand that the middle generation and its financial expectations need to be addressed, and the senior generation needs to understand that they must eventually pass the family baton. Family members, however, won’t want to move aside for the next generation unless they know that they are set financially for the rest of their lives. This is fundamental to human nature.

The issue of creating financial security can be solved, however, with intentional planning that includes family business members as part of the strategic plan. By building a sustainable net worth outside of the business, the next generation is more likely to have the resources to buy, sustain, and grow the enterprise. Family members that are secure outside of the business have the additional luxury of knowing that the younger generation can take risks – and if the risks don’t pan out, their own financial security will be unaffected.

It is critical for family business owners to understand that it is not about the successor, but rather the succession process itself. This insight, summarized perfectly in KPMG and Family Business Australia’s Family Business Survey of 2011, stated, “successful succession planning can involve juggling personal financial considerations, retaining family harmony, reconciling the ambitions and expectations of particular family members and safeguarding the future of the business.”

The CPA as trusted advisor can assist in this succession planning by working closely with the family on a regular basis. Topics and strategies should include:

  1. Intentional financial planning. As part of an annual review, discuss the net worth of key family members, particularly the net worth outside of the family business, and then help develop a process for evaluating each of their personal financial wealth and income goals.
  2. Communication. This is key. Each year, ask questions that bring these issues to the forefront – how long do you expect to be involved? When do you see succession happening? Is there an exit strategy?
  3. Having a multigenerational discussion. Today, the concept of generational transfer is not really the right one – a 50-year-old woman may be re-entering the work force at the same time as her 22-year-old grandson – and they each may have similar prior work experience. It is critical to understand the fluidity of traditional generational lines and the changing roles and expectations.
  4. Urge all family members to begin financial and wealth planning early. Encourage the family and family business system to be aware that while the business is the main source of income and wealth for all generations, it is critical to view it as a “system.” Every action causes a reaction and intentional planning is as much about making sure that all other key stakeholder’s plans are in place as your own plan is in place.
  5. Understand that life is a movie not a snapshot. As life advances, business, planning, and financial requirements must also be adjusted.

 

We don’t yet know if Prince Charles will become the next King of England, or if the crown will skip to Prince William. My guess is that it’s a topic that has come up on more than one occasion, although the Queen shows no visible signs of retiring. Time will tell whether Prince Charles will get his seat on the throne, but families should take note and talk openly about who will be filling the seats at their table in the coming years.

 

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Massachusetts Appeals Court Weights In on Online Terms of Service

In a decision that could significantly affect the enforceability of online contracts, the Massachusetts Appeals Court this week ruled that an massachusetts court casesemail service cannot necessarily require its account users to litigate their claims in a distant forum.  The case will have significant ramifications for all businesses that use website “terms of service” to regulate their relationships with customers.

The three-judge panel’s ruling upends a probate court’s 2011 decision that had rubber-stamped certain provisions buried in the lengthy terms and conditions posted on a “Yahoo!” website  — provisions which, when printed out, stretched 10 single-spaced pages in length and contained no fewer than 25 numbered sections.

In a case of first impression, the Appeals Court declared that if you want a court to enforce the legal fine print on your website, you may have to prove that you “reasonably communicated” those contract terms to your users, and that the users  unambiguously gave their assent.

In other words, for businesses that want to avoid prolonged litigation, “clickwrap” contracts are in.  “Browsewrap” contracts are out.

Emailers Die.  Emails Live On.

Tuesday’s ruling in Ajemian v. Yahoo! is the latest chapter in two siblings’ long-running battle to gain  access to the contents of their deceased brother’s personal email account.  While the decision does little to resolve the cutting-edge question at the heart of that case – Who controls our social media accounts after we die? – it does provide practical guidance for how to write and present online terms and conditions in such a way that they will be enforced.

John Ajemian, struck by a motor vehicle, died tragically in 2006.  His siblings asked Yahoo! for access to his emails so they could notify his friends and invite them to a memorial service.  Yahoo! ultimately declined, citing its concern that federal law – the Stored Communications Act, which protects the privacy of online information – prohibited it from doing so.

The siblings were appointed administrators of their brother’s estate.  In that role, they again asked Yahoo! for the emails, this time to assist them in identifying and locating their deceased brother’s assets.  After prolonged negotiations, Yahoo! essentially acceded to disclosure of the names and email addresses of senders and recipients, along with dates and subject lines – but nothing more.

Finally, in 2009, the Ajemians sued, asking the Norfolk County Probate Court to declare that they were entitled to the emails themselves.  Yahoo! responded by saying the court had no power to hear the case,  because the Terms of Service on the Yahoo! website said, in Section 24, that all claims had to be brought within a year, and only to the courts of Santa Clara County, California.

Suddenly, what had started as a fight over post-mortem email privacy rights became a battle over whether Yahoo!’s website terms and conditions formed a legally enforceable contract.  The probate court, in 2011, said yes.  This week, the Appeals Court panel resoundingly disagreed.  (As for the question of post-mortem ownership of social media accounts, stay tuned: The appellate panel directed the probate court to take up that issue next.)

Are the Website Terms a “Contract”?

As any first-year law student knows, an enforceable contract requires both “offer” and “acceptance.”  The Appeals Court was unpersuaded that either had occurred in this case.

The court noted, first, that Yahoo! had not established that it had “reasonably communicated” the forum-selection and limitations provisions to its users.  All Yahoo! told the court was that when registering for its service, “[p]rospective users are given an opportunity to review the Terms of Service and Privacy Policy.” That’s not enough, the Appeals Court said, reciting a litany of unanswered questions.  Were the terms of service displayed on each user’s computer screen?  Were they displayed in full?  Or was the user merely directed to a hyperlink?  If the latter, did Yahoo! clearly explain to users that only by clicking on the link would they know the exact terms of their contract with the email provider?

The Appeals Court was equally unconvinced that Mr. Ajemian, or anyone on his behalf, had manifested assent to Yahoo!’s terms and conditions.  Citing federal court rulings from New York, Florida, Minnesota, as well as Massachusetts, the court said that forum-selection clauses were enforced “only where the record established that the terms of the agreement were displayed, at least in part, on the user’s computer screen and the user was required to signify his or her assent by clicking ‘I accept.’”

Such “clickwrap” agreements, the court said, will suffice to create a contract.  However, a mere “browsewrap” agreement – where website terms and conditions are posted as a hyperlink at the bottom of the web page – is typically not enforced as a contract, because it’s not sufficiently clear that the user actually saw and “accepted” those provisions.

 

Even if the terms of service were deemed contractual, the Appeals Court added, it’s not clear that they would bind the administrators of Mr. Ajemian’s estate.  “Yahoo! controlled the provisions” of the terms of service, the court said.  “[I]t would have been a simply matter for it to derfine the parties to the contract to include estates, administrators, executors, successors and the like had that been Yahoo!’s intent.”

Practical Tips

A close reading of the Appeals Court’s decision in Ajemian suggests a variety of options for a business seeking to ensure that its website terms will be enforceable:

  • If the terms and conditions are important, don’t hide them.  Conspicuously display them, at least in part, on the user’s computer screen at the point of registration.
  • Require that users scroll through the terms and conditions, to the end, before clicking “I accept.”
  • If instead you provide a hyperlink to the terms, explicitly tell users that they must follow the link in order to understand the terms of their relationship with your business.
  • Require an “unambiguous manifestation of assent” by the user.
  • Make sure the terms bind not simply the “user,” but also his or her administrators, executors, successors, and assigns.
  • If you include forum selection, limitations, and arbitration clauses, draft them as narrowly as possible to address your legitimate business interests.
  • If you later amend your terms and conditions, offer a splash screen telling users about the changes, and requiring them to click through.

There is an inevitable tension between a business’s marketing instincts and its legal requirements.  Too much “legalese” may get in the way of the user’s completing a transaction.  Too little may leave the business vulnerable to customer misunderstandings or legal claims.  The balance between the two is more art than science.  That’s why wise businesses work closely with their legal counsel in the drafting and presentation of their terms of service and privacy policies.

Source:  Rob Bertsche, Prince, Lobel, LC

 

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Cracking the Code: Connections Build Business

Men take the importance of connections seriously and put together a game plan on how to leverage them and make them business networks imageeffective. One of the first law firms I worked in had an annual Christmas party for its important clients. The lawyers in the office were handpicked. You were selected that year if you were a “star” and if you had the opportunity to increase the depth of the relationship between the firm and the clients.

The managing partner of that firm took building those relationships and the money expended to make it happen very seriously. Each year on the day of the Christmas party he would call into the conference room all of the selected lawyers – most of whom were older than I was and most of whom were men – and he would remind them of the rules that were to be followed at the party:

  1. No lawyer was to eat the shrimp-that was for the guests and too expensive.
  2. You had to have a glass of beer or wine in your hand so the guests felt comfortable, but you were not allowed to drink it
  3. No lawyers were to congregate and speak to each other; the point of the evening was to connect with clients.

His preplanning and “lecture” worked. Every year the firm achieved new connections, strengthened existing relationships and increased revenue from the party.

Men also understand that the entire world is connected and positive connections may prove useful later on. One of the first firms I worked in had a policy that whenever an attorney left (unless the attorney was fired) there was a lunch in his or her honor where the attorney’s contributions to the firm were applauded. That firm knew that it is a small world. That attorney could very well end up in a position to refer business back or to recommend someone in the firm for a position.

Patricia Annino is a nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  For more visit:  www.patriciaannino.com

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