Keating Law Blog

Umbrella Insurance: What It Is and Why You Need It

Lawsuits are everywhere. What happens when you are found to be at fault in an accident, and a significant judgment is entered against you? A child dives head-first into the shallow end of your swimming pool, becomes paralyzed, and needs in-home medical care for the rest of his or her lifetime. Or, you accidentally rear-end a high-income executive, whose injuries prevent him or her from returning to work. Either of these situations could easily result in judgments or settlements that far exceed the limits of your primary home or auto insurance policies. Without additional coverage, your life savings could be wiped out with the stroke of a judge’s pen.

Typical liability insurance coverage is included as part of your home or auto policy to cover an injured person’s medical expenses, rehabilitation or lost wages due to negligence on your part. The liability coverage contained in your policy also cover expenses associated with your legal defense, should you find yourself on the receiving end of a lawsuit. Once all of these expenses are added together, the total may exceed the liability limits on the home or auto insurance policy. Once insurance coverage is exhausted, your personal assets could be seized to satisfy the judgment.

However, there is an affordable option that provides you with added liability protection. Umbrella insurance is a type of liability insurance policy that provides coverage above and beyond the standard limits of your primary home, auto or other liability insurance policies. The term “umbrella” refers to the manner in which these insurance policies shield your assets more broadly than the primary insurance coverage, by covering liability claims from all policies “underneath” it, such as your primary home or auto coverage.

With an umbrella insurance policy, you can add an addition $1 million to $5 million – or more – in liability coverage to defend you in negligence actions. The umbrella coverage kicks in when the liability limits on your primary policies has been exhausted. This additional liability insurance is often relatively inexpensive in comparison to the cost of the primary insurance policies and potential for loss if the unthinkable happens.

Generally, umbrella insurance is pure liability coverage over and above your regular policies. It is typically sold in million-dollar increments. These types of policies are also broader than traditional auto or home policies, affording coverage for claims typically excluded by primary insurance policies, such as claims for defamation, false arrest or invasion of privacy.
 

When planning your estate, you must consider how you hold title to your real and personal property. The title and your designated beneficiaries will control how your real estate, bank accounts, retirement accounts, vehicles and investments are distributed upon your death, regardless of whether there is a will or trust in place and potentially with a result that you never intended.

One of the most important steps in establishing your estate plan is transferring title to your assets. If you have created a living trust, it is absolutely useless if you fail to transfer the title on your accounts, real estate or other property into the trust. Unless the assets are formally transferred into your living trust, they will not be subject to the terms of the trust and will be subject to probate.

You don’t have to be retired to dip into your Social Security benefits which are available to you as early as age 62.  But is the early withdrawal worth the costs?

A quick visit to the U.S. Social Security Administration Retirement Planner website can help you figure out just how much money you’ll receive if you withdraw early. The benefits you will collect before reaching the full retirement age of 66 will be less than your full potential amount.

Top 3 Real Estate Tips for Small Businesses

The only real estate transaction most small businesses engage in is to enter into a lease for commercial space. Whether you are considering office, manufacturing or retail space, the following three tips will help you navigate the negotiation process so you can avoid costly mistakes.

“Base Rent” is Not the Only Rent You Will Pay

Most prospective tenants focus their negotiation efforts on the “base rent,” the fixed monthly amount you will pay under the lease agreement. You may have negotiated a terrific deal on the base rent, but the transaction may not be the best value once other charges are factored in. For example, many commercial lease agreements are “triple net,” meaning that the tenant must also pay for insurance, taxes and other operating expenses. When negotiating “triple net,” ensure you aren't being charged for expenses that do not benefit your space, and that you are paying an amount that is in proportion to the space you utilize in the building. Another provision to watch for is tenant's responsibility to also pay a pro rata share of increases in real estate taxes. 

There’s No Such Thing as a “Form Lease”

Most commercial property owners and managers offer prospective tenants a pre-printed lease containing your name and various terms. They present these documents often with a rider, and adamantly explain that it is the landlord’s “typical form lease.” This, however, does not mean you cannot negotiate. Review every provision in the agreement, bearing in mind that all terms are open for discussion and negotiation. Pay particular attention to the specific needs of your business that are not addressed in the “form lease.”

Note the Notice Requirements

Your lease agreement may contain many provisions that require you to send notices to the landlord under various circumstances. For example, if you wish to renew or terminate your lease at the end of the term, you will likely owe a notice to the landlord to that effect, and it may be due much earlier than you think – sometimes up to a year or more. Prepare a summary of the key notice requirements contained in your lease agreement, along with the due dates, and add key dates to your calendar to ensure you comply with all notice requirements and do not forfeit any rights under your lease agreement.

When it comes time for your business to move into a new commercial space, make sure you consider the terms of your lease agreement from both business and legal perspectives.  While there are some common terms and clauses in many commercial leases, many landlords and property managers incorporate complicated and sometimes unusual terms and conditions.   As you review your commercial lease, pay special attention to the following issues which can greatly affect your legal rights and obligations.

The primary advantages of operating as a corporation are liability protection and potential tax savings. Like any important decision, choosing whether to incorporate involves weighing the pros and cons of the various business structures and should only be done after careful research.

Once incorporated, the business becomes a separate legal entity, and assets of the corporation are separated from the owner’s personal finances. As a result, the owner’s personal assets generally can be shielded from creditors of the business.

Establishing a Life Estate is a relatively simple process in which you transfer your property to your children, while retaining your right to use and live in the property. Life Estates are used to avoid probate, maximize tax benefits and protect the real property from potential long-term care expenses you may incur in your later years. Transferring property into a Life Estate avoids some of the disadvantages of making an outright gift of property to your heirs. However, it is not right for everyone and comes with its own set of advantages and disadvantages.

Many entrepreneurs are unclear about the “par value” of a stock, and what par value they should establish for their new corporation. Generally, par value (also known as nominal or face value) is the minimum price per share that shares can be issued for, in order to be fully paid. In the old days, the par value of a common stock was equal to the amount invested and represented the initial capital of the company; but today the vast majority of stocks are issued with an extremely low par value, or none at all.

Healthcare directives can be vitally important, as recent cases, like that of Terry Schiavo, clearly brought to light. These important documents can mean the difference between your health care wishes being carried out or family members fighting over whether a loved one should be placed in a nursing home or removed from life support. Healthcare directives usually include both a healthcare power of attorney and a living will, or a form which is a combination of the two. In a healthcare power of attorney, an individual authorizes another individual to make healthcare decisions for him or her if the individual becomes unable to do so. A living will expresses an individual’s preferences about life support.