1. finance
2. personal finance
3. financial planning
4. estate planning

“I wrote this to help your
family avoid specific
pitfalls that I see families
suffer all the time. Pitfalls
that could have been
minimized…or even
avoided altogether, with
proper planning.”
-David Otis Edwards
12 Wealth Threats You Must Know
About and How to Avoid Them
By David Otis Edwards
Estate Planning & Asset Protection Attorney
www.edwardsgroupllc.com
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards Group, LLC. All Rights Reserved.
1
Introduction
So, you requested a report about threats to your wealth. Why? I’m sure you have your
reasons. Maybe you have specific concerns about your family and need answers. Maybe
you have heard about “asset protection” but aren’t exactly sure where it fits into your life.
This report is the place where you begin to focus on your specific risks and what to do about
them.
What to expect? In these next pages, I talk about 12 threats to your family’s wealth.
As you read through them, you will see examples and stories about how that threat
has impacted other families. Some of the threats you can skip past because they
don’t concern you and never will. Other threats may hit home. Feel free skip around.
Where to start? Read through the table of contents. Pick a topic that interests you
most and flip to it. This report is not designed as general information for your
edification and to talk about at dinner parties. I wrote this to help your family avoid
specific pitfalls that I see families suffer all the time. Pitfalls that could have been
minimized drastically or even avoided altogether, with proper planning.
REMINDER: The biggest threat of them all…
The biggest threat to your assets is not really these 12 areas you will read about. Instead, the
biggest threat is your own procrastination.
Which wealth threats are looming in your family?
Don’t ignore them.
Don’t rely on a “hope” that you can avoid a potential threat coming down the road.
Take steps to avoid it. Your family will thank you later and you can have peace of mind
now, knowing it is being addressed. Don’t worry that you don’t know exactly what to do in
your situation, or when to do it. That’s what asset protection attorneys like me are for, to be
a guide through the minefield of risks out there, and the options for addressing them.
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards Group, LLC. All Rights Reserved.
2
Remember what’s at stake!
Before you start reading, I want to point out a few more things.
1. What is wealth? I believe that our wealth is much more than the money we have in the
bank, the stuff we own, and the investments we made. I think it includes the way we’ve
lived our lives, the impact we have made, our faith, whether those we love are living
successful lives themselves. As we talk about threats to wealth, remember that for every
threat to your financial wealth, there are also threats to our non-financial wealth. When a
family fails to plan, dollars and cents are lost, but also the stress and frustration and
unfairness that come with it will threaten to tear family relationships apart.
2. The 100% tax. If your income tax rate was 100%, do you think that would be too high?
People worry about tax rates. Income tax rates might be 25% or 33% or 35%, but never
100%. Well, remember that other threats to your wealth can result in a total loss of wealth.
That’s equivalent to a 100% tax rate.
3. Most Wills and Trusts don’t protect against wealth threats. You may have an estate plan
already. Perhaps a Will, Trust, other documents. But remember, typical Wills don’t protect
against the threats we are talking about in this report. In fact, I would venture to say that
more than 95% of all Wills don’t cover more than 1 or 2 threats listed here, if any at all. For
most people, a Will or Trust is something to help transfer wealth, but not protect it.
Meet the Author: David Otis Edwards
I am an estate planning and asset protection attorney. For almost 15 years, I have worked to
protect clients from threats to their wealth. Prior to forming Edwards Group LLC in December
2008, I regularly represented creditors seeking to enforce liability on other individuals. Since
forming Edwards Group LLC, I focus only on protecting my client’s wealth.
My staff and I spend all day, every day working with clients like you to protect their wealth
from the 12 threats you read about in this report. We do that using Wills, Trusts, Powers of
Attorney, asset titling, tax strategies, coordination with other professionals, discussions with
family, ongoing education, formal maintenance of estate plans, corporate entities, and
other legal and financial tools. At Edwards Group LLC, we understand that effective wealth
protection is not based on any one document or strategy, but is a combination of various
legal, financial, and personal plans that are fully implemented and maintained over time.
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards Group, LLC. All Rights Reserved.
3
Table of Contents
Wealth Threat #1
Blown by the Kids: poor financial decisions
Wealth Threat #2
“I do”: marriage, remarriage
Wealth Threat #3
‘Til Divorce do us part: wealth dissolves along with the marriage
Wealth Threat #4
Jumbled Up Finances: disorganized assets put you at risk
Wealth Threat #5
Their life savings, gone: Nursing Home Expenses
Wealth Threat #6
Mismanaged by Helpers: theft and incompetence of powers of
attorney, executors, and trustees
Wealth Threat #7
Eaten up by the IRS: avoidable income tax
Wealth Threat #8
Messed up Government Benefits: special family members, special
planning
Wealth Threat #9
Lawsuits and Creditors: give the give of asset protection, along with
the inheritance
Wealth Threat #10
That greedy Uncle Sam: estate taxes, are they gone forever?
Wealth Threat #11
Don’t undo all that hard work: smoothly passing on your
business or farm
Wealth Threat #12
Business Risks: expensive business and corporate mistakes
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards Group, LLC. All Rights Reserved.
4
Wealth Threat #1
Blown by the kids: poor financial decisions
Are your kids as good with money as you are?
The hard-earned money that you saved over many years – will your family use it wisely after
you’re gone? Most inheritances are not spent wisely. That’s a fact. Maybe the heirs are too
young, not good with money. Maybe they get taken advantage of by a spouse or friends.
Maybe they make terrible business decisions.
It’s a fact that “quick money” is often gone quickly too, with unwise spending. The problem
is that quick money (as opposed to money earned and saved over a long period of time)
doesn’t give the person receiving it time to prepare. It’s just dropped on them and they
have to learn as they go. You see this problem in other quick money scenarios – lottery
winners, professional athletes, and entertainers. How many famous people do you see with
tax problems or creditors chasing them?
Back to your family. Think about how much money you would leave if you died today. And
think about who you want that money to go to. How much would that be? Would that
amount of money be a big change in their financial life? How would they handle it?
Even if you think they would make decent decisions, what kind of pressure would come on
them? What family members, friends, old classmates, salesmen would come to them for a
loan, gift, handout, bailout? Would your child’s soft heart lead them to say “yes” too many
times to those with a sad story? What about their spouse? Even if they would handle it well,
how would their spouse do?
NOW WHAT?


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



Think about your loved ones and ask yourself:
Do they need the money?
Are they ready to handle the money?
Who can help them with the money?
How can you help them prepare now, to be ready to inherit later?
Are they willing to listen to wise advice?
Who will they turn to for advice later?
Should you connect them with your trusted advisors? (legal, tax, investment,
insurance)
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards Group, LLC. All Rights Reserved.
5
Wealth Threat #2
“I do” marriage, remarriage.
One of the biggest risks to wealth is marriage.
Step-kids get it all. Grandma and grandpa dreamed of passing their wealth down to their
family. After grandpa’s death, grandma marries an old friend who was also widowed.
Grandma dies a few years later. What happens to her assets? Because of improper
planning and the use of joint ownership (advised by someone at the coffee shop to avoid
probate), all her wealth goes to her new husband. He has a stroke a few weeks later without
any plan. Where do the assets go? To the new husband’s kids, legally cutting out grandpa
and grandma’s family.
Rights of a spouse. In Illinois, a spouse can enforce a minimum amount from the spouse’s
estate, even if the spouse’s Last Will disinherited them. Under Illinois law, the surviving spouse
is entitled to 1/3 of the estate plus maybe additional amounts for support.
Joint wealth not shared. Suppose Bill and Mary were married to others at a young age, had
kids, and then divorced. In their 50’s, they meet, thankful for another chance at love. During
the marriage, they save and earn a lot more, to add to what they had prior to marriage.
They intend to split the wealth between their sets of children. However, lack of planning
leads to most assets going to only one set of children, cutting out the other side.
Unequal finances. John and Jane, both in their 70’s, meet and fall in love. John has saved
and invested well over the years and plans to pay college tuition for his grandkids and leave
each child and grandchild a nice inheritance. Jane, on the other hand, has struggled
financially since her divorce 20 years ago, living paycheck to paycheck. John’s kids are
concerned. How will John protect his financial stability after the marriage?
Free-spending spouse. They say money is the source of many fights in marriage. A frugal,
saving person can have his wealth squandered by a new spouse who is a big spender.
NOW WHAT?




To avoid these problems:
Do a premarital agreement prior to tying the knot.
Keep assets separate after marriage.
Carefully plan your estate, including asset titling.
Update your plan and pay special attention after the 1st spouse dies.
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards Group, LLC. All Rights Reserved.
6
Wealth Threat #3
‘Til divorce do us part: wealth dissolves along with marriage
Will you bet your life savings on the strength of your child’s marriage?
As we saw with Wealth Threat #2, without proper planning, even a life-long marriage can
result in assets going to the wrong people at the wrong time. If that can happen with a
successful marriage, what about a divorce?

How confident are you that your child’s marriage will survive for life?
Married child gets divorced. Suppose you die, leaving a nice inheritance to your son. He
puts it in a joint investment account with his wife. (They hold their assets jointly just like most
married couples). A few years later, your son gets divorced. Is it OK with you if the court
gives half of your inheritance to the ex-daughter-in-law in the divorce?
Single child later marries. This divorce risk is just as real even if your child isn’t married when
you die. She may marry later and then get divorced even later. Same risk is involved with
your inheritance whether your child is still a teenager or whether the child is 30 years old with
4 kids.
You get divorced. Suppose you are widowed and get married again later. You combine
your finances with the new spouse. A few years later, you get divorced. Will the judge split
your savings with your ex? Illinois law says if you mixed your assets together, then the court
presumes you intended to give half of the money to your spouse. Will you be able to
convince the judge otherwise, or will a big chunk of your savings go to your ex?
NOW WHAT?




Leave
Leave your children’s inheritance in an asset protection trust to ensure that the funds
are not mingled with a spouse’s and put at risk in a later divorce.
Require a child to sign a premarital agreement prior to taking distributions from the
asset protection trust.
For yourself, remember to do a premarital agreement and keep your assets separate.
(see Wealth Threat #2 for more discussion).
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards Group, LLC. All Rights Reserved.
7
Wealth
WealthThreat
Threat#4
#4
Jumbled
assets
put
you
at at
risk
Jumbledup
Upfinances:
Finances:disorganized
disorganized
assets
put
you
risk
If you died today, how long would it take your family to come up with a
complete list of what you own and what you owe, along with who to contact about those
assets and debts?
How long would it take you, right now, to make a list like that? Do you think it would take
your family longer than that, if you were dead or disabled by Alzheimer’s or other illness?
The risks of poor financial organization are many during your life as well as after your death.
Naming wrong beneficiaries. Do you have written confirmation of all of your beneficiaries on
life insurance, annuities, retirement plans, and other investments? How long since you
double checked them? Financial chaos may lead to the wrong people getting the wrong
assets after your death.
Undoing your plans. If you have done a thorough estate plan (will, trust, etc.), then you may
think you have things in order. Do you realize that unless your assets are coordinated with
those legal plans, your wishes may never be carried out? For instance, your listed
beneficiaries on an IRA or life insurance will have priority over anything you say in your Last
Will & Testament.
Probate Court. Disorganized assets may lead to unnecessary involvement of the probate
court leading to additional expense and delay at your death, plus making your estate public
record instead of remaining private.
Guardianship during disability. Disorganization may result in court involvement at your
disability, to name a guardian for you. With proper planning and organization, this can all be
handled privately by people you trust.
Lost funds. Loss of information about a life insurance policy, lost stock certificates, or
misplaced bonds can all result in a loss of wealth. Since the family does not know about
them, they are not pursued and perhaps that wealth is lost forever.
Frustration and stress. At a minimum, your disorganized assets, and the inability of your family
to quickly get an accurate list of what you own, owe, and earned will result in frustration and
stress to your loved ones, as well as potential conflict between loved ones.
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards Group, LLC. All Rights Reserved.
8
NOW WHAT?
How do you avoid the risks of disorganization?

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



Keep an updated list of your income, assets, and debts.
Keep an updated list of all of your beneficiaries.
Consolidate your assets as much as possible with one financial advisor and one financial
institution.
Convert paper bonds or stock certificates to online ownership, to avoid the risk of losing
the paper originals.
Work with an attorney who will help you implement your estate plan. This “funding”
assistance will involve coordinating your financial plans by helping you properly title assets
and complete beneficiary forms that are consistent with your legal documents. 99% of all
attorneys don’t offer this practical assistance so find one who does.
Take steps to avoid probate court during a disability and also at your death. To do this
successfully will require using a living trust and confirming that all assets are properly
funded to the trust.
Maintain your estate plan by participating in a formal membership program offered by
an established estate planning attorney. With such a membership, the attorney’s office
will maintain updated lists of your assets, keep copies of all asset documents, and be
available for questions about coordinating your legal and financial plan.
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards Group, LLC. All Rights Reserved.
9
Wealth Threat #5
Their life savings, gone: Nursing Home Expenses
Have you planned for future nursing care?
Many seniors fear having their life savings eaten up by nursing home or medical costs. A
high percentage of families will eventually face this issue.
DON’T MAKE THESE MISTAKES ABOUT NURSING HOME COSTS

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

Thinking that basic estate planning tools, such as a revocable living trust, will
protect assets from a nursing home.
Being too cheap to buy long term care insurance, even though you can well afford
it.
Thinking that nothing more can be done to protect assets once a person moves to
a nursing home. There are usually still options until the money is gone.
Failing to take advantage of military veteran’s benefits.
Thinking you can give it away to your kids before the time comes for a nursing
home. If you wait, it may be too late to do it effectively.
Forgetting that, even if everything goes perfectly and you qualify for the
government to pay for a nursing home (Medicaid), you lose options. Planning
ahead gives you better options to stay at home, go to assisted living, or live in a
much nicer facility.
NOW WHAT?






To prepare for nursing home costs, you need to:
Decide if you can afford to pay for care yourself without jeopardizing the
inheritance you want to leave to family.
Decide whether to buy long-term care insurance.
Consider new financial hybrid products that provide long term care benefits as part
of an annuity or life insurance policy.
Consider using long-term Medicaid planning to rearrange assets years before you
need the care.
As a last resort, use “crisis” Medicaid planning to protect a portion of a person’s
assets when they are facing immediate nursing home needs. It is never too late to
protect some of the assets.
Start as early as possible planning for the possibility of a nursing home. The earlier
you start, the greater your options, the more wealth you can protect, and the
better living arrangements you will be able to choose.
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards Group, LLC. All Rights Reserved.
10
Wealth Threat #6
Mismanaged by Helpers: theft and incompetence of
powers
of attorney, executors, and trustees
As you age, there’s a good chance you will eventually need help managing your
finances. Who will help you? And what will keep them from taking advantage of you?
There are many stories in the newspaper about seniors being taken advantage of. And
those stories usually involve someone having a power of attorney for the senior. So, at some
point, the senior trusted the person enough to give away legal authority. That authority was
later abused.
The National Center on Elder Abuse states that up to 2 million senior citizens in the U.S. have
been the subject of elder abuse and 60% of those were by family members. This is not
limited to certain wealth levels. In December 2009, the son of New York philanthropist Brooke
Astor was convicted of looting big chunks of his mom’s $198 million fortune.
It is heartbreaking to see assets stolen or mismanaged by those who never should have been
given that authority. Here are some examples of people at risk:
No close family. Who will help manage money when someone faces disability, if they have
no children, close family or trusted friends? Or what if the kids live out of state and can’t
come home often? These people are very vulnerable to those who would take advantage
of them.
Caregivers. Those helping out in the home, with no regular supervision, have great
opportunity for dishonesty if they want to use it.
Dishonest family members. You think and hope they will be honest with mom’s or grandma’s
money. But sometimes they aren’t. Does the person have a history of being a poor money
manager or of lying or misleading others? Don’t expect them to change now.
Unprepared family members. Sometimes I see honest, trustworthy helpers who are just over
their head and unable to handle the financial and legal issues asked of them. When they
are asked to be a power of attorney, executor, or trustee, they are willing but make big
mistakes or leave things undone, causing problems later. Also, unprepared helpers are easily
taken advantage of by others such as misleading salespeople.
NOW WHAT?
Give careful thought to who you ask for help. Make sure other people can provide
oversight. Do you have professionals (attorney, accountant, financial advisor) who can
provide ongoing input? To best protect from fraud, use a professional trustee, such as a
bank trust department.
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards Group, LLC. All Rights Reserved.
11
Wealth Threat #7
Eaten up by the IRS: avoidable income tax
Many estates and heirs pay unnecessary income tax, or pay it sooner than
necessary. Most families have assets with built-in income tax liability or risks, including:



Retirement accounts such as an IRA, 401(k), 403(b), or 457 plan
Tax-deferred annuities
Appreciated property such as stocks or real estate
How those assets are handled during life and after death will make a big difference. Without
proper planning, even the most modest estate may face tens of thousands in additional
income tax earlier than necessary.
GOOD PLANNING
Not only can proper planning avoid unnecessary tax, good planning at an early stage can
set up a tax-free inheritance that can be a legacy for your family for decades after you’re
gone. A conversion of a traditional IRA into a Roth IRA can allow you to leave funds to
family members that will continue to grow tax free for many decades. Using funds to
purchase life insurance is another way to leave money income-tax free to your loved ones.
What about charitable giving? If you are considering leaving money to charity at your
death, why not leave it while you are living and get an income tax deduction? With the
same level of giving, you end up leaving more for your family.
NOW WHAT? Be aware of income tax risks and opportunities at various life stages:



During healthy adulthood. Saving in a 401(k) or IRA in the early working years is the
best way to accumulate wealth for your family, particularly if you use a Roth IRA or
Roth 401(k).
During the senior years. Still time to convert to a Roth IRA. Be careful gifting
appreciated assets to family during your life. Will you combine an IRA or Roth IRA
with asset protection for your kids in an IRA Inheritance Trust? Are you coordinating
charitable giving with your income tax planning? By heirs after your death. Heirs will be faced with important tax decisions. Improperly
handling an IRA or annuity in an estate or trust could result in a much bigger tax bill.
Will your heirs know to take advantage of tax deferral by leaving money in an IRA?
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards Group, LLC. All Rights Reserved.
12
Wealth Threat #8
Messed up government benefits: special family members need special
planning
When you leave assets to those you love, will it undo other benefits?
You have dreams about how you want to benefit your kids and grandkids. Is it OK if your
wealth is used to replace benefits they were already receiving from the government? This
can easily happen without proper planning.
Do you have a loved one who is receiving government benefits?
Elderly family member in nursing home
Adult child with mental illness
Grandchild with developmental disability
If you leave assets to any of these individuals, it’s possible that they won’t really benefit.
Instead, your hard earned savings will simply be used to repay the government or else pay
for future services that the government would have provided anyway.
What about college financial aid? This is another area where families unknowingly mess up
benefits their heirs would have received. Did you ever consider that the way you leave
assets to your kids may impact your grandkids’ college financial aid?
NOW WHAT?



Talk between generations. Talk to family members about how they can or might leave
funds to a disabled member. Make sure the older generation knows the risks.
Grandparents, ask your kids about how you can best support a disabled grandchild.
Coordinate between the generations and have a united family strategy for providing
for someone at risk.
Coordinate financial and legal. Make sure your advisors are working together. Don’t
get a life insurance policy to help a disabled child without coordinating the legal
options with your attorney. Don’t set up a supplemental needs trust without
considering how to fund it and how it will impact the inheritance going to other family
members.
Update. In addition to normal legal and financial changes impacting your estate
plan, you must consider changes in your family member’s medical or mental status,
and the government benefits they receive.
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards Group, LLC. All Rights Reserved.
13
Wealth Threat #9
Lawsuits and Creditors:
give the gift of asset protection, along with the inheritance
What would you do to protect your kids, or their wealth?
Suppose you pass away, leaving savings, investments, life insurance, a paid-off home so your
family will be well taken care of. BUT, a few weeks after you’re gone, your wife is driving
along, distracted, and doesn’t see the stoplight change to red. She goes through the light
and hits a school bus coming through the intersection.
Suddenly, in a blink of an eye, her financial situation goes from secure to a disaster. How
much will a court award to the children hurt or killed in the accident? More than she has in
auto insurance and more than the money you left her at your death.
A car accident is just one of several types of liability facing your family. Others include (1)
someone injured on their property; (2) professional liability for an heir who is a doctor, lawyer,
accountant; (3) business owner faces downturn because of economy; (4) child faces
bankruptcy because of business losses or medical bills; (5) frivolous lawsuit that has no merit
but is expensive to defend.
You can protect them. If you could do something to protect your wife or children from this
type of threat, would you do it? Once the inheritance arrives to your loved one, they are
unable to take the same effective actions you can take for them now. You can best protect
them by setting up those protections prior to leaving the assets to them.
How does it work? By leaving your wealth to your loved ones in an asset protection trust
(what I sometimes call a “school bus trust”), then you can leave assets to be used when they
need it, but the assets will not be exposed to lawsuits and creditors if tragedy strikes.
NOW WHAT?




Understand that protecting an inheritance is a great benefit to your kids, not a
punishment.
Involve your kids in discussions about how to leave their inheritance. I often meet with
client’s children as we are designing their plan.
Remember that asset protection for your kids is not related to whether they are good
with money. Their money wisdom (or lack thereof) is a different threat. Here, we are
talking about outside threats that are out of their control.
Remember that this threat can be catastrophic. It may not happen often, but when it
does, it will devastate someone’s finances.
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards Group, LLC. All Rights Reserved.
14
Wealth Threat #10
That greedy Uncle Sam: estate taxes, are they gone forever?
Are estate taxes gone forever?
We’ll see. With a government that’s broke and needing money, what are the chances
that politicians may target a family like yours to pay more in tax? Unless Congress
changes the law, many people will face estate tax in 2011, even if they never thought of
themselves as “rich”.
The estate tax, or death tax, is truly one of the voluntary taxes. With proper planning,
even the richest of people can avoid paying any estate tax.
If the estate tax threshold falls back to $1 million in 2010, will you be at risk?
Do you know what types of assets are counted toward estate tax? It’s a different system
than the assets counted for probate or for nursing home/Medicaid eligibility. In general,
estate taxes are calculated based on any assets that you have control over. So this
would include your house, savings, retirement plans, vehicles, household items,
collections, and most life insurance. Simply with life insurance alone, many people may
face estate taxes without proper planning.
NOW WHAT?




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
Ask yourself:
Do you know your estate’s value if you passed away today? If not, you need to
find out.
If you’re married, do you have an estate plan that takes advantage of the special
rules spouses have regarding estate tax?
Do you know your options for avoiding additional estate tax?
Does it make sense to skip your kids and give some wealth directly to
grandchildren?
Who will advise you regarding estate tax options? You need to work with an
attorney who practices estate planning every day and understands this changing
legal field.
How will you evaluate your risk once the estate tax law comes into focus for 2011
(through Congress’s action or inaction)?
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards Group, LLC. All Rights Reserved.
15
Wealth Threat #11
Don’t undo all that hard work: smoothly passing on your business or farm
If you own a business or farm, you know how much of your blood, sweat and tears
go into it. Starting it, building it, growing it. Or, following along in a family business has its own
set of stresses as you build on what was created by those who came before you. Will you
smoothly pass along the business to the next generation, or will you be the weak link that
ends the family business with you?
Without planning, your business or family farm could end. Why?





The uncertainty and disarray at your death or disability could cause a loss of customers
or business relationships.
Unnecessary estate costs, such as probate, estate taxes, and legal fees
Family conflict that arises because of lack of clarity in your plan. Both the child in the
business and those not in the business may feel they are treated unfairly.
Insufficient liquidity if a bank loan or line of credit disappears at your death.
One child is forced to buy out others in order to continue. If he can’t raise the funds,
will there be any option but to sell it?
Which of these challenges do you face?



One child works in the business, others don’t. How do you reward the faithful worker
without being unfair or alienating the other children?
What if the child working with you isn’t yet able to handle the business without you? If
you were gone in the near future, what would happen?
You would love to retire but don’t know how, since no one else is ready to step up to
run the business.
NOW WHAT?




Make sure you have a team of professionals to help you understand options. (legal,
tax, financial, investment, business consultant)
Begin discussions with your kids, both those inside and outside the business, to see what
their expectations are. Their expectations will either make your job easier or show you
where special care is needed.
Realize you will not be around forever. If you plan well, the business will run well
without you later. If you don’t plan well, the business may not run at all.
Consider both financial and non-financial goals. What impact will the business
transition have on your family, your employees, the community?
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards Group, LLC. All Rights Reserved.
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Wealth Threat #12
Business Risks: expensive business and corporate mistakes
Don’t expose yourself and your business to unnecessary risk.
As a business owner, you face a whole new set of liability risks. What steps are you taking to
protect your wealth from business downturns, changes in your industry, personal guarantees
on bank loans, lawsuits for something your employee did, or messed up projects that went
bad despite your best efforts? You face two types of liability risks.
1. What problems in your business could result in personal liability, putting your
personal wealth at risk?
2. What personal liability could you suffer that could result in someone coming and
taking your business?
NOW WHAT? Ask yourself a few hard questions.
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Step back from the daily busyness and determine what parts of your business are
disorganized or even in chaos.
Consider not just whether your business is succeeding, but HOW is it succeeding? Can
it be sustained or is there a pothole ahead?
Ask yourself – if you were to have a liability issue, where do you think it is most likely to
arise?
Do you have any blind spots regarding the management of your business? Ask
someone else in the business to answer that.
Check out the next page for a list of common business mistakes that can lead to
unnecessary liability.
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards Group, LLC. All Rights Reserved.
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COMMON BUSINESS MISTAKES
Do you know which ones you are making?
A. Set up proper business entity
1) Are you operating as a corporation or LLC to limit personal liability?
2) Have you considered using an LLC from another, more favorable state such as
Delaware or Wyoming to provide better asset protection?
3) Are you serving as your own registered agent, risking that official notices will be
forgotten, misplaced, or intercepted without being addressed?
4) Have you considered a Series LLC to compartmentalize liability of different
properties or parts of your business?
B. Organizing assets, following through on structure
1) Are you undoing your liability protections by failing to honor the corporate
formalities, such as doing your annual corporate meeting and minutes?
2) Are you mixing your personal and business finances?
3) Are you renting personal real estate for business purposes without documenting
it with leases, payment of rent, etc.?
4) Are you mixing risky assets with safer assets in the same LLC or corporation?
Such as holding rental farmland in the same corporation as a contracting
business.
C. Planning for the future
1) Do you have an updated shareholder agreement, operating agreement, buysell agreement to govern when a co-owner wants or needs to leave the
business?
2) Is the buy-sell agreement funded with life insurance or some other means?
3) Do you have enough liquid cash to address business succession? Such as estate
taxes, buy out price, continuity operating funds, loss of bank credit line after
death of co-owner.
4) Do you have an updated estate plan that includes a full consideration of your
business ownership?
D. Nuts and bolts protections
1) Do you have adequate liability insurance, both in amount and coverage?
2) Are you following employment laws (pay, vacation, sick time, rate of pay,
termination) and paying your employment and payroll taxes?
3) Will S corp status save you income taxes?
4) Are you paying income tax or sales tax that you could avoid?
5) Are your trade secrets and intangible assets protected? (such as trademarks,
copyrights, customer lists, pricing guidelines)
6) Do you use non-competes or restrictions for key employees with inside
information, in case they leave the business?
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards Group, LLC. All Rights Reserved.
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Where to go from here?
Have you identified risks that you and your family are facing? Which ones are the biggest
concerns to you?
The most important step now is what will you do with those concerns? Simply reading about
them and saying “yes we need to do something” will not protect your family.
You need to take some action. What will that action be? Here are 2 things you can do
immediately:
Attend a Truth about Estate Planning Workshop. These are held regularly in the
Community Room at the Edwards Group LLC office. During these workshops, David
discusses the 12 threats in the context of our hypothetical family, Bill and Mary Sample.
Using a white board and interactive discussion, these wealth threats will come alive for
you even more and you will leave having more focus about the concerns you need to
address.
Check available dates and reserve your spot at a Truth about Estate Planning
Workshop by calling (217) 726-9200 or online at www.edwardsgroupllc.com
Set up an initial consultation with asset protection attorney David Edwards to evaluate
your situation. Let David help you go through the 12 threats and identify the ones that
need the most immediate attention. Call Lynn Hanson, Client Coordinator at (217)
726-9200 to schedule a consultation.
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards Group, LLC. All Rights Reserved.
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About David Otis Edwards
My name is David Otis Edwards. After spending 12 years at another
Springfield, Illinois law firm, I founded Edwards Group LLC in December
2008 to serve the planning needs of individuals, families, businesses, and
non-profit organizations through lifetime-focused strategies. My clients
include young families with minor children, families with special needs
children of all ages, farmers, business owners, established families with
dynasty goals and the elderly. I also regularly represent churches and
non-profit organizations in carrying out their missions. In matters of estate
planning, I provide tailored plans that focus on passing on more than just financial wealth, but also
spiritual, emotional and intellectual assets.
My goal is to become the trusted advisor and lifetime legal counsel for my clients. I keep ongoing
contact with my clients through newsletters as well as through our client membership program, which
helps clients keep their planning up to date, so it's ready when they need it.
I have a B.S. in Finance (1992) from the University of Illinois at Urbana-Champaign, as well as a J.D.
(1995) from the University of Illinois College of Law. During law school, I served as an Associate Editor
of the school's law review (academic law journal) and was honored as part of the Order of the Coif,
an honor society for those in the top 5% of their law school class. In recent years, I have been
honored by the Springfield Business Journal as one of the "40 under 40" for 2006 (40 top business
leaders under age 40). In 2008, 2009, and 2010, I was named as a Rising Star by Super Lawyer
Magazine, which is an award given to only the top 2.5% of attorneys in Illinois under the age of 40. I
have represented clients before the Illinois Supreme Court, as well as every other federal and state
appellate court in Illinois.
I am a member of the National Network of Estate Planning Attorneys, whose members are devoted
to pursuing the highest quality estate planning practices (both as to client experience and as to legal
expertise), even when that means bucking the legal industry by exposing weaknesses in traditional
legal planning.
I believe in making a difference in my community. I have served on the board or other leadership
roles in various local organizations, including Habitat for Humanity of Sangamon County, Rutledge
Youth Foundation, Brother James Court, Delta Church, and the Young Philanthropists of the
Sangamon County Community Foundation. The community room in my office (which seats up to 20
people) is available to any community group needing a place to meet.
I enjoy serving my clients, but my even greater joy comes spending time with my wife Michelle and
daughter, Bailey. Michelle is a nurse at Memorial Medical Center and a certified teacher. She is also
my personal historian and scrapbooker. Bailey is 3 years old, full of energy, and loves to sing.
David Otis Edwards
Attorney and Counselor at Law
4340 Acer Grove, Suite B
12 Wealth Threats You Must Know About and How to Avoid Them © 2010, Edwards
Group, LLC.Illinois
All Rights
Reserved.
Springfield,
62711
(217) 726-9200
Toll free fax (877) 866-1737
[email protected]
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