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The parental instinct to nurture and protect our children is hardwired into our genes.  Your ability to protect your kids does not have to stop once they are grown or when you are gone.  Estate planning offers a variety of tools that allow you to continue protecting your children from others and even from themselves.  One concern that frequently arises is how to safeguard a child’s inheritance from potential future divorce proceedings or having your hard-earned savings end up in the hands of your in-laws. With rising divorce rates, it is increasingly important to consider how to safeguard the assets to ensure your children’s inheritance remains intact and accessible only by them.   One of the most effective tools for achieving this goal is the establishment of a trust . Here's a comprehensive guide to utilizing trusts to protect your child's inheritance from the potential impacts of divorce and in-laws.   Understanding Trusts   A trust is a legal arrangement where you (the settlor) contribute property or assets that are held by another party (the trustee) for the benefit of another (the beneficiary). In the context of inheritance, a trust can be established specifically to manage and distribute assets to your child upon your death, or to provide ongoing support during their lifetime.   Unlike wills, which are executed posthumously, lifetime (sometimes called “living”) trusts are active during your lifetime and continue to operate after your passing.  For many trusts, you can be the settlor, trustee and beneficiary during your lifetime and those roles change only after you are gone.  A living trust , often revocable, allows you to retain control over the assets during your lifetime, with the flexibility to alter the trust’s terms.    Learn more about trusts by attending our weekly live webinar .    How Trusts Protect Inheritance from Divorce and In-Laws   1. Asset Protection When a married child inherits an asset outright, in many states, it becomes part of their marital property . In the event of a divorce, their spouse may attempt to claim half of that property. By placing the inheritance into a trust, those assets never become a marital asset and thus not subject to equitable distribution during your child’s divorce.   2. Control Over Distribution A trust allows you to specify when and how your child will receive their inheritance. For example, you may choose to condition access to assets on the approval of a trustee.  In addition, you could distribute assets at specific ages or milestones, or condition the distribution based on responsible behavior. This means if your child finds themselves going through a divorce, their access to the funds could be limited and protected.   3. Preventing Misuse Trusts can include provisions that allow you to dictate how the assets should be used. For example, if your child is going through personal issues (such as addiction) or a tumultuous relationship, a trust might allow a trustee to restrict access to the assets.  It could also specify that the funds be used only for certain purposes, such as education or purchasing a home, rather than being easily liquidated or distributed.   4. Keep from In-laws Some families have one child who has no children or perhaps grandchildren through only one of their children.  If your child passes away leaving no children of their own, the inheritance you left to that child will probably end up with your in-laws.  Trusts can prevent inheritance from going to a surviving spouse and redirect it to your other living children or grandchildren.  You can keep what you have saved to pass on to your family in your family.   Types of Trusts to Consider   1. Revocable Living Trust This type of trust allows you to retain control over the assets during your lifetime. You can modify or revoke it as needed. However, because assets in a revocable trust are considered part of your estate, they may not offer full protection against your child's divorce. 2. Irrevocable Asset Protection Trust Once established, these trusts cannot be modified or revoked without the consent of the beneficiaries. You can still draw an income from assets placed in this trust while your alive.  You can also defer your child’s access to the assets until after your passing.  Since the assets are no longer in your child's name, they are generally considered separate property in the event of a divorce, providing stronger protection.   3. Spendthrift Trust A spendthrift trust protects the beneficiary’s assets from creditors and divorcing spouses. It restricts the beneficiary's ability to make withdrawals or access the funds directly, thereby shielding the funds from claims during a divorce proceeding.   Steps to Protect an Inheritance from Divorce and your In-laws   1. Establish and Fund a Trust Create a trust with your child as the beneficiary.  You can control and benefit from the trust while you are alive if you so desire and defer your child’s access to the trust funds until after you pass away.  The taxable income can be taxed on your tax return as well.  Establishing a trust involves a nuanced understanding of financial and legal issues. The qualified attorneys on our team can guide you through the process, ensuring that the trust is compliant with state laws and effectively serves its intended purpose.   2. Pay-on-Death Accounts You can specify that the assets in certain accounts go directly to your child upon your death.  However, remember that assets transferred directly to a married child are typically considered marital assets subject to division during divorce.  For control purposes, you probably want to designate a Living Trust or a Testamentary Trust, the terms of which appear in your Will, as the beneficiary of the account on behalf of your child.   3. Life Insurance This works the same way as pay-on-death accounts.  Once it is paid to your child, its susceptible to divorce claims and if your child has no children of their own, whatever’s left when they die will likely go to your in-laws rather than the remaining members of your family.   4. Prenuptial or Postnuptial Agreements Prenuptial or postnuptial agreements can be effective tools to protect assets that you leave directly to your children.  They can help ensure that specific assets are earmarked as non-marital assets.  The downside is that your child can always void the agreement.  You cannot control the disposition of the assets once paid to your child.    5. Review and Update If you create a trust, it is essential to periodically review and update the trust, especially after major life events (like a divorce in the family, addiction or credit problems). Keeping the trust current ensures it remains effective in protecting your child’s inheritance.   Planning for the future of your children, especially concerning their inheritance, is a vital aspect of responsible estate planning. You work hard to create an inheritance for your children.  It can provide them with security for the inevitable storms of life.  Using trusts as a protective measure can provide peace of mind knowing that your child’s assets are secure and safeguarded from potential issues that may arise in their personal lives, like divorce, addiction, sudden health crises or credit issues.   It is crucial to consider how these strategies align with your overall estate plan and marital situation. The effectiveness of each approach can vary based on your individual circumstances, family dynamics, and the laws of your state.  If you have questions about establishing a trust or need help navigating estate planning in Pennsylvania, please reach out to us.  Our experienced estate planning and elder law attorneys can help. Protecting your family's legacy is too important to leave to chance, and the right legal guidance can make all the difference.

By Michael Fiffik, Esquire   As I write this, my youngest daughter just turned 18.  That’s a big milestone filled with pride and excitement. However, along with the celebrations, there are crucial legal implications that come with reaching adulthood. Whatever the next chapter has in store for your child, turning 18 means they gain rights and responsibilities.  At the same time, you lose certain rights as a parent to make decisions for them.  Those realities require thoughtful planning. To ensure your family is protected and to help your child navigate adulthood smoothly, here are five essential legal documents you should consider obtaining when your child turns 18.   1. Health Care Power of Attorney   Once your child turns 18, they are legally recognized as an adult, which means they have the right to make their own healthcare decisions. However, in situations where they may be incapacitated (due to illness, injury, or accident), having a Health Care Power of Attorney (HCPOA) in place becomes critical. This document allows your child to appoint someone—a parent, sibling, or trusted friend—to make medical decisions on their behalf if they are unable to do so. It allows you to have access to their healthcare information.  It ensures their healthcare preferences are honored and provides peace of mind for both you and your child.   2. College or University Medical Release Form   If your child plans to attend college or university, they should also complete a medical release form required by the institution. This document allows parents or guardians to access their child's medical records and communicate with healthcare providers in case of emergencies. The HCPOA also gives you access to your child’s medical information but it might make things easier if the school has their particular form on file.  Many schools provide a standard form, but it’s vital to clarify the specifics with the institution to ensure your access to critical health information remains intact.   3. Durable Power of Attorney   While the HCPOA is primarily focused on medical decisions, a Durable General Power of Attorney (DGPOA) covers financial matters, granting authority to a designated individual to manage your child's financial affairs if they become incapacitated. This can include managing bank accounts, paying bills, or making investment decisions. Having a DGPOA safeguards your child’s financial interests and ensures that important matters are addressed even when they cannot act on their own behalf.   4. Real ID Driver’s License   Time is of the essence for Pennsylvania residents to get a Real ID driver's license or photo identification card to fly on an airplane or enter some federal facilities, such as military bases. The deadline is May 7, 2025.  You don’t want to be trying to help your child obtain this long distance if they do not live with you.   5.  FERPA authorization   FERPA stands for the Family Educational Rights and Privacy Act, which requires that students over age 18 give written consent before any educational records can be released to another person. “Educational records” is broadly defined under FERPA to mean those records that are: (1) directly related to the student, and (2) maintained by an educational agency or institution acting for the agency or institution. Of course, this includes transcripts, disciplinary actions, scholarship information, and tuition information, but what is less apparent is that records maintained by the college campus’s health clinic are also considered an “educational record” and therefore not covered under HIPAA. For example, if your child visits his or her university’s health services center for treatment, you would not have access his or her medical records merely by presenting a signed HIPAA form. By way of contrast, however, if your child is sent to the local hospital for treatment, then the HIPAA form would permit you to access his or her medical information.   Extra Credit:  A Simple Will   If your adult child dies owning assets, their estate is subject to the probate laws of their state of domicile. If the child does not have a will or will substitute, any individually owned assets will pass according to the intestate laws of the state. Generally, the assets of an unmarried child with no descendants will pass to their parents, if they are living. That can be a tricky situation in families where the parents are divorced or separated.  The will also allows the child to choose a parent to manage their estate if they pass away.  Without a will, parents could be pitted against one another in seeking a court order to make that decision. If the parents are not living, the assets will go to their siblings. Although the appropriateness of a will or will substitute varies based on the complexity of the child’s estate, you should consider discussing this with your adult child.     As your child steps into this exciting new chapter of life, preparing these legal documents will not only help you navigate significant transitions but also empower your child to take charge of their future. Open conversations about these documents can also promote responsibility and understanding of their newfound rights. While the process may seem daunting, enlisting the help of an attorney familiar with Pennsylvania law can ensure that everything is set up correctly. Celebrate your child’s transition to adulthood with confidence, knowing you’re taking proactive steps to protect their rights and interests!

An important question in any bankruptcy is what happens to your property and possessions? In a chapter 7 case, it is possible that your property will be sold and used to pay off your debts. This is rarely the case because the law allows you to protect or “exempt” some of your property from being sold. Some of your personal property is exempt from being sold, but there are limits on the value of exemptions . These exemptions, which change periodically, cover categories of property and are limited in dollar value. In Pennsylvania, you are given a choice between using either the state or federal exemptions. For the majority of filers, the federal exemptions will provide the most protection. With the federal exemptions (in 2020) you can protect $25,150 of equity in your residence (equity is its current fair market value less the balance of all mortgages on the property); $4,000 of equity in your car; $13,400 of household goods, clothes, appliances and furniture; $2,375 for tools of your trade (perhaps you are a contractor or auto-worker); $1,700 worth of jewelry; and a variable “wildcard” exemption of $1,325 that can be applied to any type of asset. The amounts of the exemptions are doubled when a married couple files together. These exemptions apply to the value of your assets at the time of your filing. With proper planning, most filers lose little to no assets in a bankruptcy. While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind. In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In. most cases you will have to pay the mortgages or liens as you would if you didn’t file bankruptcy. We understand the stress and sleepless nights that arise from difficult financial times. Our bankruptcy attorneys are ready to get you some relief and back on the path to good credit. Contact us today for a free initial consultation.

The quickest answer is YES. According to Experian , one of the three big credit reporting agencies, bankruptcy damages your credit. Bankruptcies are considered negative information on your credit report, and can affect how future lenders view you. Seeing a bankruptcy on your credit file may prompt creditors to decline extending you credit or to offer you higher interest rates and less favorable terms if they do decide to give you credit. Depending on the type of bankruptcy you file, the negative information can appear on your credit report for up to a decade. Discharged accounts will have their status updated to reflect that they’ve been discharged, and this information will also appear on your credit report. Negative information on a credit report is a factor that can harm your credit score. If you are behind on your bills , your credit may already be bad. Bankruptcy may not make things any worse. In fact, it may start to make things better. Bad credit can make your life more expensive in ways that might not seem obvious.  Your credit score is used to determine interest rates on loans and credit cards, car insurance premiums, renting an apartment, purchasing a car or mobile phone and even applying for a job.    Because bankruptcy wipes out your old debts, you may be in a better position to pay your current bills, and you may be able to get new credit. Debts discharged in your bankruptcy should be listed on your report as having a zero balance, meaning you do not owe anything on the debt. A bankruptcy can be the beginning of a plan to improve your credit score and reduce many of your everyday expenses. We understand the stress and sleepless nights that arise from difficult financial times. Our bankruptcy attorneys are ready to get you some relief and back on the path to good credit. Contact us today for a free initial consultation.

Even when bankruptcy is the right option, many consumers are reluctant to file based on misconceptions of filing will have on their lives.  This is unfortunate because bankruptcy offers potential relief from the stress and anxiety of debt and the fresh start it can provide.  Here are five surprising facts about bankruptcy that may allay some of those fears.   Myth #1 : Filing for Bankruptcy Means You Will Lose Everything   One of the biggest fears surrounding bankruptcy is the belief that you will lose all your assets . Everyone who files for bankruptcy gets to keep some of their possessions, and most people get to keep  all of them .  While it's true that certain assets can be sold to pay off debts, bankruptcy law has specific exemptions that protect certain assets, such as your home (under certain equity limits), car, retirement accounts, furniture and personal belongings. A qualified bankruptcy attorney can help you understand these exemptions, demystify the process and alleviate your fears about losing everything you own.   Myth #2 : Filing for Bankruptcy Will Ruin Your Credit Forever   It’s a common misconception that filing for bankruptcy will ruin your credit for life. If you are delinquent on several debts, this already appears on their credit record. A bankruptcy is unlikely to make your credit rating any worse; instead, it may make it  easier  to obtain future credit.  New creditors will see that old obligations have been discharged in the bankruptcy and that you have fewer other creditors competing with them for payment. Creditors also recognize that consumers cannot receive a second chapter 7 bankruptcy discharge for another 8 years. After bankruptcy, your credit file will also list the outstanding balance as zero dollars for each of your debts discharged in bankruptcy.   Your credit file will list the fact that you filed bankruptcy and that certain debts at one time were delinquent, but creditors are most interested in what you owe now  on each debt. The fact that a credit report shows that nothing is owed on a debt improves your credit standing.   Bankruptcy will make it more difficult for a consumer to obtain a new conventional mortgage to purchase a home. Even then, most lenders will not hold the bankruptcy against the consumer if the consumer re-establishes a good credit reputation for 2 to 4 years after a bankruptcy.   After bankruptcy, some new lenders may demand collateral as security, ask for a co-signer, or want to know why bankruptcy was filed. Other creditors, such as some local retailers, may not even check the credit report.   Myth #3 : Bankruptcy Filers Must Go to Court and Face a Judge   Unless something out of the ordinary occurs, bankruptcy filers do not even go to court. They must attend one meeting with the bankruptcy trustee (not with a judge), and those meetings are usually held virtually (via video) and last only a few minutes. Creditors are invited to that meeting but rarely attend. In the rare case that a consumer does receive a notice to go to court, it is important that they go and first receive advice from an experienced bankruptcy attorney. Before a case is closed, the consumer must also take a course in personal finances, which will last for approximately two hours. The course can be taken online. In a Chapter 13 case the consumer may have to attend a court hearing on confirmation of the plan.    Myth #4 : Its Morally Wrong to Not Pay Your Debts   Most people want to pay their debts and make every effort to do so if payment is possible.  We know that because our clients come to us only after making a real effort to pay their bills.  They might find themselves in a tough situation through no fault of their own:  huge medical bills, divorce, job loss, helping a child with a crisis are many of the reasons people turn to bankruptcy.  It isn’t just gross overspending and undisciplined lifestyles.  If bankruptcy is the right solution, you should balance these feelings of obligation with the importance of protecting yourself and your family.   Bankruptcy is a legal right. The United States Constitution includes a provision concerning bankruptcy. Big corporations like Kmart, American Airlines, Chrysler, and Macy’s—and famous people such as Toni Braxton, Tammy Wynette, Larry King, Henry Ford, and Walt Disney—have all chosen to file bankruptcy. Even the Bible provides for debt forgiveness:   At the end of every seven years thou shalt make a release. And this is the manner of the release: every creditor shall release that which he has lent unto his neighbor and his brother; because the Lord’s release hath been proclaimed. (Deut. 15:1–2.)   Most important, during hard times, bankruptcy may be the only way for you to provide your family with food, clothing, and shelter. It may be that bankruptcy is the best or only realistic alternative.   Myth #5 :  Everyone Will Know I Filed for Bankruptcy   It probably seems like you’ll walk around with a red letter “B” on your forehead if you file but that’s only your fears playing tricks on you.  Most people find their reputations do not suffer from filing bankruptcy. Bankruptcies are not generally announced publicly , although they are a matter of public record. Most people that I know wouldn’t have the foggiest idea how to locate the bankruptcy docket online.  It is unlikely that friends and neighbors will know about a bankruptcy unless the you tells them.   Maybe, in a small town, where debts are owed to local people, reputational issues connected with filing bankruptcy may arise. In such a situation, weigh possible embarrassment and damage to reputation against bankruptcy’s potential advantages. One option is to voluntarily pay selected debts after bankruptcy, but a debtor cannot leave selected creditors out of the bankruptcy process entirely.   Considering bankruptcy can involve complicated emotions.  Understanding the facts versus the myths surrounding it is crucial in making informed decisions about your financial future. If you're overwhelmed by debt and contemplating bankruptcy, consulting with one of our experienced bankruptcy attorneys can provide clarity and guidance tailored to your unique situation. Remember, bankruptcy is not the end—it's a means to reclaim your financial independence and begin again.

Would a friend or relative take them? Are you sure? If your pets feel like family members, as they do for so many of us, it makes sense to include instructions for their care in your estate plan. The resources you have to make these plans may depend on how much time and money you’re willing to spend and the method through which you outline the care of your animal. When it comes to estate planning, you may include your pet in your will or be able to set up a legal pet trust. Here are three steps to ensure that your pets are covered in an appropriate estate plan. Get Your Will Started Today Step One: Choose Your Caretaker Start by determining who will care for your pet if something happens to you. This could be a spouse, a child, another relative or a friend. Do they have the space or life situation that makes them appropriate to care for your pet? For example, a sister who travels a lot for work might not be the best place for a dog. It’s a good idea to identify a successor caretaker in the event things don’t work out with your first choice. Make certain they agree to assume responsibility for your pet. If no one in your life fits the bill, consider a local or national charitable or humane organization. Some organizations will care for your pet after you pass. It helps if you give a donation to defray the cost of that care. Check their policies to learn how they place pets and how long they will house them before making a permanent placement. Step Two: Doing Your Homework In addition to a caregiver, you will want to give though to the following issues: Adequately identify your pets in order to prevent fraud, such as through photos, microchips, DNA samples, or alternatively, by describing your pet as a “class”—in other words, as “the pet(s) owned by you at the time of your illness/death; Describe in detail your pet’s standard of living and care; If the caregiver is not also the trustee of the funds that you set aside for your pet, you might consider requiring your trustee to periodically “inspect” your pet to insure it is being cared for properly; Determine the amount of funds needed to adequately cover the expenses for your pet’s care (generally, this amount cannot exceed what may reasonably be required given your pet’s standard of living) and specify how the funds should be distributed to the caregiver; If you are using a pet trust (more on that below) determine the amount of funds needed to adequately cover the expenses of administering the pet trust; Designate a remainder beneficiary in the event the funds in the pet trust are not exhausted; Provide instructions for the final disposition of your pet (for example, via burial or cremation). Step Three: Put It in Writing Once you’ve decided who will take care of your pet, put your post-mortem wishes in writing. There are three basic ways to do this: in a will, a memorandum or what’s called a Pet Trust. Each has its pros and cons, depending on your specific circumstances: 1. A Will Your will disposes of all of your property (whether tangible, such as pets, or intangible, such as bank accounts) in your sole name when you die (meaning there is no joint owner or named beneficiary). Leaving your pet to someone in your will can be as simple as including a statement such as: “I leave my pet dog, Henry, to my sister Barb.” This statement is legally binding and establishes that Barb will inherit Henry. However, what if Barb doesn’t want Henry? Or, what if, after a month, Barb decides it’s not working out with Henry? Barb will become Henry’s owner and can do whatever she likes with him. If you’ve left a sum of money to help cover costs, there’s nothing stopping Barb from taking the money and dropping Henry off at a shelter. Nonetheless, leaving a bequest in a will, with or without money, can work if you know the person well and trust them to follow your wishes. 2. Letter/Memorandum (Separate from a Will) Pennsylvania law allows individuals to create a binding letter (or memorandum) leaving their tangible property to specific individuals when they pass if the document is signed by the pet owner. A letter or memorandum may be a good option if, for instance, you are going to have surgery or are going on a trip and want to get something in writing quickly so that your pet is protected in case something unexpected happens. From a legal perspective this memorandum will be considered separate and apart from any Will that disposes of tangible personal property. 3. Pet Trust One way to plan for that contingency is to set up something called a Pet Trust. Pennsylvania enacted a law in 2006 specifically permitting the establishment of trusts for the care of pets: 20 Pa.C.S. § 7738 Summary of law: A trust may be created for the care of an animal or animals alive during the settlor’s lifetime. The trust terminates upon the death of the animal, or upon the death of the last surviving animal covered by the trust. To help you decide if this might work for you, here are some basic definitions and guidelines to keep in mind. What is a Pet Trust? A pet trust is a legally sanctioned arrangement providing for the care and maintenance of one or more companion animals in the event of a grantor’s disability or death. The “grantor” (also called a settlor or trustor in some states) is the person who creates the trust, which may take effect during a person’s lifetime or at death. Typically, a trustee will hold property (cash, for example) “in trust” for the benefit of the grantor’s pets.  Payments to a designated caregiver(s) will be made on a regular basis. The trust, depending upon the state in which it is established, will continue for the life of the pet or 21 years, whichever occurs first. Some states allow a pet trust to continue for the life of the pet without regard to a maximum duration of 21 years. This is particularly advantageous for companion animals that have longer life expectancies than cats and dogs, such as horses and parrots. Why a Pet Trust? Because most trusts are legally enforceable arrangements, pet owners can be assured that their directions regarding their companion animal(s) will be carried out. A trust can be very specific.  For example, if your cat only likes a particular brand of food or your dog looks forward to daily romps in the park, this can be specified in a trust agreement. If you want your pet to visit the veterinarian four times a year, this can also be included. A trust that takes effect during the life of the pet owner can provide instructions for the care of the animal(s) in the event the pet owner becomes incapacitated (sick, injured, comatose, etc.) Since pet owners know the particular habits of their companion animals better than anyone else, they can describe the kind of care their pets should have and list the person(s) who would be willing to provide that care. When considering your estate plan , it would be prudent provisions concerning care for your pet, whether during the owner’s lifetime or after death.  If you have any questions about this or related topics, contact one of our estate planning attorneys.

Are you a budding entrepreneur in Pennsylvania, ready to launch your dream startup? If so, you might have stumbled upon the term "bootstrapping." This method, often heralded for its practicality and creativity, can be a double-edged sword. What is Bootstrapping? In the simplest terms, bootstrapping refers to launching and growing a business using personal savings or revenue generated from the business itself, without seeking external investment (translation: no venture capital or major loans). When you choose this type of funding, you'll be keeping yourself afloat using your personal savings — perhaps with a bit of support from family or friends — and the sales you make once you launch your business.  Picture it as a journey where you’re driving the vehicle (your business) without a financial safety net provided by investors. Instead, you’re relying solely on your resources and hard work. Should You Bootstrap Your Business? Bootstrapping isn't perfect for every new business. As you compare the numerous types of funding , you'll need to weigh the pros and cons of bootstrapping to determine if this self-financed path can help you achieve your goals.  Maybe it’s the only choice that you have.  Whatever your circumstances, get smartened up before you take the leap.  The Pros of Bootstrapping 1. Complete Control: One of the most appealing aspects of bootstrapping is maintaining control over your business. Without investors breathing down your neck, you have the freedom to make decisions that align with your vision, values, and mission.  You and your co-founders will receive 100% of the profits. 2. Financial Stability: Bootstrapping can promote financial discipline. Since you’re limited to what you can afford, it encourages you to be more frugal and resourceful, ensuring that every dollar is spent wisely. 3. Rapid Decision-Making: When you don’t have to seek external approval for every financial decision, you can pivot and adapt your business model quickly based on market feedback. This agility can be a crucial advantage in today’s fast-paced business environment. The Cons of Bootstrapping 1. Financial Risk:   The most obvious risk with bootstrapping is putting your own money directly into the company. When your business takes a hit, whether due to lack of sales or an unexpected expense, it will impact you directly.  Despite having less debt to worry about, self-funded businesses are at higher risk for stagnant cash flow and running out of money altogether.   2. Limited Resources: The most significant drawback is the limitation on resources. Bootstrapped businesses often struggle to secure enough funds for marketing, hiring, and product development, which can stifle growth potential. 3. Slower Growth: Without access to external capital, bootstrapped businesses may experience slower growth compared to competitors who have secured significant investment. You won’t have the dollars to spend on Google, social media and other marketing channels to generate interest in your product or services.  Even if you’re fortunate enough to generate interest without a  marketing budget, without capital, you may not be able to keep up with demand.  Low and slow might be a safer option for business growth. 4. Risk of Burnout: Entrepreneurs who bootstrap often wear multiple hats, juggling tasks from operations to sales and marketing. This workload can lead to burnout, which stifles creativity and innovation—two essential elements for any successful startup. Is Bootstrapping Right for You? Ultimately, whether bootstrapping is the best choice for your startup depends on several factors, including your industry, personal financial situation, and business goals. Some questions to consider include: Do you have the money?   Your product needs to reach the market and generate revenue as soon as possible, using your own resources. What are your startup costs, and can you realistically cover them yourself? Are you an expert?   There’s nothing worse than pretending.  You need to know what you are doing and selling.  If you don’t, you’ll be exposed quickly. Do you know anything about marketing and sales?  Online marketing will probably be your bread and butter.  Can you do this? Are you comfortable taking on the risks associated with self-funding?   If you’re using retirement money and you fail, are you prepared to start over? Do you have any support?   Even though resources are scarce and most of the workload is on your shoulders, you should really have someone there helping you during your early stages as a bootstrapper. Wrapping it Up Bootstrapping can be a powerful method for launching and growing a startup, especially for those who cherish independence and creative autonomy. Nonetheless, it requires a careful assessment of both its advantages and challenges. If you're considering this route, ensure you have a solid plan in place to manage your resources effectively. Having a detailed business strategy and being prepared for the ups and downs of entrepreneurship are crucial. If you still have questions about starting your business journey or need legal guidance, don’t hesitate to reach out! We’re small business attorneys and we’re here to support your entrepreneurial ambitions with informed legal insights.   Now, get out there and turn your business dreams into reality—whether you choose to bootstrap or find the right funding partners!

Thinking of taking the plunge into entrepreneurship ? For many people, the hardest part is not coming up with a business idea or a potential business to buy, but finding the capital needed to start or buy the business. Too often, an entrepreneur doesn’t even know that using retirement funds could be an option for investing in a new business . Startup Capital The first place entrepreneurs typically start when looking to fund a startup is personal savings. If they do not have sufficient personal savings, then third-party loans, such as Small Business Association loans, or home-equity loans are a popular option. However, if acquiring a loan is not viable for you, then seeking third-party investors or crowdsourcing funding is often the last resort. Unfortunately, in my experience, far too many entrepreneurs are not aware that the use of a retirement account as a business funding source could end up being the most tax-efficient option. Understanding the Basics Retirement accounts , such as 401(k) plans and Individual Retirement Accounts (IRAs), are designed to provide you with financial security during your retirement years. Withdrawing funds from these accounts before retirement can lead to hefty penalties and tax implications. However, there are paths that allow you to tap into your retirement savings to fund your business without incurring these penalties. The Rollover as Business Start-Up (ROBS) One popular method to utilize your retirement funds for your business is through a structure called Rollover as Business Start-Up (ROBS) . This strategy allows you to use your existing retirement savings to invest in your new venture without triggering taxes or early withdrawal penalties. The structure does have a variety of requirements and moving pieces so keep reading before you jump in. Here’s how it works: 1. Set Up a C Corporation: ROBS requires that you establish a C Corporation. This is because the funds can only be directed into a corporate structure that allows stock ownership.  This will not work with a limited liability company. A change to another business entity could result in a taxable distribution on your rolled-over funds. 2. Roll Over Existing Retirement Funds: You can roll over funds from an eligible retirement account , such as a 401(k) or an IRA, into a new retirement plan that you set up for your C Corporation. 3. Purchase Stock: Once the new plan is funded, the corporation can purchase stock in the C Corporation, providing you with a cash infusion to fund your startup.  However, the rules require that your retirement plan pays Fair Market Value (FMV) for stock purchased by your C corporation for the plan.  Because of this requirement, ROBS are ideal for use in purchasing an existing business.  The fair market value of that business is more easily appraised or defended in the event of an audit.  ROBS are less useful for pure start-ups where you have no product, service or revenue to justify the purchase price of the stock. Pros and Cons of ROBS Pros: Access to significant capital without incurring penalties or taxes. The ability to fund your business with your own money, minimizing the need for loans or investor funding. No monthly repayments, which can alleviate financial pressure during the startup phase. Cons: Complexity: Setting up a ROBS involves adherence to strict IRS regulations and may require professional assistance. Risk: If your business fails, you may lose your retirement savings. Ongoing Compliance: The C Corporation must adhere to IRS regulations, leading to ongoing compliance requirements. Not useful for passive investment type businesses.  The rules require the business to be an operating company.  Most businesses and franchises meet these operating criteria. Business ventures that are eligible don’t include lending, investing, or single investments in real estate. Real estate does present a grey area: you can fund a property management or real estate operating company, but qualifying as “operating” depends on the scale of the venture. Other Options to Consider While ROBS is a viable method for funding your startup, it’s not the only option. Here are a few alternatives: A word on taking money from retirement accounts: You may take a taxable distribution from your individual retirement account (“IRA”) at any time. However, taxes will be due, and an early distribution penalty will apply if you are younger than 59 ½. Roth IRA distributions are tax- and penalty-free at that age. Before that, only contributions made to the Roth can be withdrawn without consequences. Unlike an IRA, a 401(k) qualified plan or other pension plan must satisfy certain “triggering rules” before the funds are accessible. Essentially, one must reach the age of 59 ½, separate from their job, or suffer a hardship before gaining access to the plan funds for distribution purposes. The downside of taking a distribution from your retirement plan is you are taking out funds that are growing in a tax-advantaged way. Moreover, if you are younger than 59 ½, you will be hit with that 10% early withdrawal penalty. 1. 401(k) Loans Some employer-sponsored 401(k) plans allow you to borrow money against your account balance. If allowable, you would be able to borrow the lesser of $50,000 or 50% of your account value. The proceeds of the loan can be used for any purpose, including starting a new business. You will generally have up to five years to repay the loan. Payments must be made at least quarterly, at an interest rate of at least  prime , which stands at 7.50% as of this writing. The advantage of using the loan option to fund a business is you can get tax- and penalty-free use of your 401(k) savings. Further, you avoid paying a higher rate with an outside lender, and all interest is paid back to the plan. 2. IRA Loans This is kind of a misnomer because you can't borrow money or take a loan from an IRA. That said, there are some ways to get money out of your traditional IRA or Roth IRA in a pinch.  If you can replace the money in 60 days or less, then a 60-day rollover might be the ticket for you. IRS rules allow you to roll money from one IRA to another one or back into the same IRA, as long as you do it within 60 days. During that time, you can do what you like with the money. It’s a somewhat complicated and risky maneuver, but as long as you follow the rules, you can get money out of your IRA without owing penalties or taxes. 3. Self-Directed IRAs Investing through a self-directed IRA allows for greater flexibility and can enable you to invest in various ventures, including startups. You cannot invest in a business in which you already have an ownership interest.  You also cannot buy a business from yourself or other disqualified individuals in your self-directed retirement plan, but all other businesses are fair game. However, there are strict guidelines that you need to follow.  An investor opens a self-directed IRA or other account with a self-directed custodian.  The investor directs the custodian to invest in the business.  The assets are held in the name of the self-directed account.  The drawback is that the  IRS rules  prohibit any direct or indirect benefit between a plan and a disqualified person.  Disqualified persons include you, your spouse, lineal family and certain financial or business relationships. Legal Considerations Before proceeding, it's crucial to consult with a legal expert or a financial advisor, especially one familiar with Pennsylvania business laws and IRS regulations. The consequences of mishandling your retirement funds can be severe, including the potential reclassification of your retirement account with significant tax penalties. Using your retirement account to fund a startup can be a double-edged sword. While options like ROBS present an innovative solution to access capital, they come with risks and obligations. Carefully consider your financial situation, seek professional advice, and weigh the pros and cons before making any decisions. Remember, your retirement is important, and protecting those savings should always be a priority.

As an entrepreneur, you wear many hats. You’re not just the visionary behind your brand; you’re also the strategist, the marketer, the accountant, and often the one who handles customer service. This multifaceted role can make it challenging to find the right balance between working on your business and working in your business. Understanding this distinction is crucial for your business’s growth and sustainability.   Working In Your Business   Working “in” your business refers to the day-to-day operations that keep your company running. This includes tasks such as:   Customer Service: Engaging with clients and addressing their needs. Product Development: Creating or improving your product or service offerings. Sales and Marketing: Promoting your products or services to generate revenue. Administrative Duties: Managing finances, payroll, paying bills and other essential paperwork.   While these tasks are vital for your business's immediate functionality, they often consume most of your time and energy, leaving little room for strategic thinking, risk mitigation and long-term planning.   The Risks of Overcommitting   Spending too much time working in your business can lead to burnout and a lack of innovation. You do not spend enough time putting processes in place to make your work easier.  There’s validity to the saying “every minute of planning saves ten minutes of execution.”  You might find yourself caught in a reactive cycle, where you’re constantly addressing immediate concerns without taking the time to consider the bigger picture. This can stifle growth and prevent you from seizing new opportunities.   Working On Your Business   On the other hand, working “on” your business involves strategic planning, priority management and long-term visioning. This includes:   Setting Goals: Establishing short-term and long-term objectives for your business. Strategic Planning: Developing a roadmap to achieve those goals. Networking: Building relationships with other professionals and potential clients. Market Research: Understanding industry trends and consumer behavior to inform your business decisions.   This aspect of your work is crucial for sustainable growth. Let us make this clear: sustained business success does not come from chance, fate, or good luck. To run a successful and profitable company it is critical that you understand, implement, and value the process of effective business planning .  By stepping back and assessing your business from a higher vantage point, you can identify opportunities for improvement, innovation, and expansion.   The Importance of Strategic Thinking   When you dedicate time to work on your business, you empower yourself to make informed decisions that will drive growth. Where can you increase our competitive advantage, gain more market share, even enter a new market altogether? Do you buy new equipment, hire additional staff, invest in new facilities, or possibly buy out a small competitor? These are tough questions and the very nature of a business plan is to help you in directing the allocation of resources with a higher degree of confidence and decreased levels of risk.   Just as critical is it is for a plan to help you focus on what you should be doing; perhaps even more valuable is that a good business plan will help you have the courage to decide on what you should NOT be doing! What projects and people should you move away from? What should you not be spending time or money on? What markets would not be right for you, even if it looks exciting and tantalizing? If you try to be all things to all people, you will become nothing to anyone. If you are always trying to keep all of your options open, you are also not fully pursuing the best options. One of the most essential skills of a successful business owner or manager – is clearly determining what not to do, and your business plan is a valuable tool in making those key decisions.   Finding the Right Balance   Achieving a balance between these two crucial areas is not just beneficial; it’s necessary for your business’s success. Here are some practical strategies to help you find that equilibrium:   1. Schedule Time for Both Just as you would schedule meetings or client calls, set aside specific blocks of time dedicated to working on your business. Two full days a year for an in-depth planning retreat, and perhaps one day each quarter for monitoring and adjustment is all that is required to build and maintain an effective business plan. If you’re screaming that you don’t have that kind of time available, the reason is that you are so insanely busy constantly reacting, you have no time.  That’s not a recipe for success.  Treat this time as non-negotiable.   2. Delegate and Outsource Identify tasks that can be delegated to employees or outsourced to freelancers – apps like Upwork or Fiverr make this more accessible than ever . We know this costs money but in the long run, the cost of delegating is far less than the cost to not setting aside time for planning and working on your business.    3. Set Clear Priorities Figure out what is absolutely most important – and do that first.  What tasks are going to return the most in the way of revenue, customers or whatever?  Use tools like the Eisenhower Matrix  to distinguish between what is urgent and important. This will help you allocate your time and scarce resources more effectively.  Figure out what is most important, put it down on paper, read it every day, and follow it. Doesn’t it seem less intimidating when we put it that way?   4. Regularly Review Your Progress Set aside time each month or quarter to review your business performance. Assess whether you’re spending enough time on both operational and strategic tasks.   5. Stay Flexible Understand that the balance may shift depending on your business’s needs at any given time. Be prepared to adjust your focus as necessary.   Balancing your time between working on your business and in your business is a dynamic process that requires intention and strategy. By recognizing the importance of both roles and implementing practical strategies to manage your time effectively, you can foster a thriving business that not only meets immediate needs but also positions itself for long-term success. Remember, your business is a living entity—it needs both daily care and visionary guidance to flourish.   If you have any questions about managing your business or need legal advice on structuring your operations, don’t hesitate to reach out. As a Pennsylvania law firm dedicated to helping small business owners achieve their dreams, we’re here to help you navigate the complexities of entrepreneurship.

Starting in 2025, ALL Pennsylvania businesses will need to comply with a new Annual Report filing requirement . Mandated by Act 122 of 2022, this replaces the previous decennial report system and introduces an annual obligation for most domestic and foreign entities registered in the state. To ensure that you stay compliant with this new business requirement, Fiffik Law Group is here to handle the filing process for you, taking the stress out of this new requirement and keeping your business in good standing. File with Fiffik Law Group What You Need to Know   Who Must File? The Annual Report applies to a wide range of businesses, including: Domestic business corporations Domestic nonprofit corporations Domestic limited liability companies (LLCs) Domestic limited partnerships (LPs), including limited liability limited partnerships (LLLPs) Domestic limited liability general partnerships (LLPs) Domestic professional associations Domestic business trusts All registered foreign associations   Are There Exemptions? No. Unlike the federal BOI filing requirement that exempts certain organizations based on the amount of annual revenue or type of business, there are no exemptions for the PA Annual Report.    What Information Is Required? When filing your Annual Report, you will need to include: Business name Jurisdiction of formation Registered office address Principal office address Name of at least one governor (e.g., director, member, or partner, depending on the entity type) Names and titles of principal officers (if applicable) Entity number issued by the Pennsylvania Department of State   Filing Deadlines and Fees The filing deadline depends on the type of entity: Corporations (business and nonprofit): January 1 – June 30 Limited liability companies (LLCs): January 1 – September 30 Limited partnerships (LPs), LLPs, business trusts, and professional associations: January 1 – December 31   Fees for filing are: $7 for business corporations, LLCs, LPs, and LLPs No fee for nonprofit corporations or LPs/LLCs with a not-for-profit purpose Public Access to Annual Report Information   The information contained in the Annual Report will be publicly available. Each association’s details—including compliance status with annual reporting requirements—will be displayed on the Department of State’s public website at file.dos.pa.gov/search/business .   Filing vs. the Corporate Transparency Act (CTA)   It is important to note that the Pennsylvania Annual Report and the Corporate Transparency Act  (CTA) Beneficial Ownership Information (BOI) report are NOT the same. The Annual Report is required by state law and filed with the Pennsylvania Department of State (DOS). The CTA BOI report is required by federal law and filed with the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN).   While both filings involve business information, they are distinct in terms of: Entities required to file Information provided within the reports   Complying with the BOI report does not satisfy the Pennsylvania annual report requirement.   The current litigation in the federal courts over the CTA BOI report do not affect Pennsylvania’s Annual Report requirements.   Learn more about the CTA BOI report.   Stay Compliant to Avoid Penalties   The penalties for non-compliance are stark.  Your business could literally be put out of business.  Failure to file your Annual Report by the deadline can result in administrative dissolution, termination, or cancellation of your entity’s registration. While reinstatement is possible for domestic entities, the process is time-consuming and costly. Foreign entities must re-register if terminated.   Let Fiffik Law Group Handle Your Annual Filing   Navigating compliance requirements can be complex, but Fiffik Law Group is here to help. Our team will handle your Annual Report filing, ensuring accuracy and timely submission so your business stays compliant and protected. To file with Fiffik Law Group, fill out and submit this form .

Joint bank accounts are very common. Frequently, a parent puts a child on an account to help with bill paying. Joint accounts do come with significant risks and consequences. These are often overlooked due to the routine nature of joint accounts. Here are three things to know about joint bank accounts: You Are Giving Someone Else Your Money There is a common misconception that by putting someone’s name on your account, that the joint account holder has limited access to your money. That is usually not the case. The joint account holder can access the account without your permission and could even remove all of the money from the account. By putting someone on your account, you are legally giving them the money in the account. Don’t expect the bank employees to explain this to you. They often do not understand the legal consequences of account titling or they may not be able to give you legal advice. If all you are seeking is to give someone the ability to pay your bills from an account, ask the bank for options to place restrictions on the person’s access to your account. We recommend giving them power of attorney rights over the account only. Your Money Is Exposed to the Joint Holder’s Creditors Certain creditors, such as judgment creditors and the IRS, can take money from bank accounts to collect money due to them. Because you are making your joint account holder an owner of your account (and the money in the account), it is also possible for the creditors of your joint account holder to take money from the joint account to pay debts that are not yours. Your joint holder may not have judgments now but they could in the future and you probably will never get notice that your account is at risk. Joint Account May Change Your Estate Plan The joint account contract with the bank controls where the money goes after you pass away. Some joint accounts have “rights of survivorship”, meaning that if you die, your joint account holder becomes sole owner of the money in the account. It does not matter if your Will has a different plan for the money. The provisions of the joint account take precedence of the contents of your Will. This can lead to some uncomfortable situations in families where relationships are less than harmonious. If only one of your children is on the account, they could retain the money to the exclusion of your other children. Convenience Accounts Pennsylvania does not recognize “ convenience accounts ”.  If Mom puts your name on a bank account as a joint owner so that it is easy for you to write checks for her to pay her bills, but she does not intend that the account pass to you on her death, that is what is often referred to as a convenience account.  The account was put in joint names only for convenience, not because it was intended to pass to the check writer by right of survivorship on Mom's death.  Mom might even have a will that she thinks governs how the money in the account will be divided at her death.  Unfortunately, after Mom is deceased; it is very hard to determine what her intention was, especially if the surviving joint owner asserts that Mom intended the ownership of the account to pass to the survivor.  The law presumes that the account passes to the surviving joint owner. It is up to the other claimants to prove that Mom had a different intention, proven by clear and convincing evidence, which is a very difficult burden and there’s often not enough money in the account to justify the high cost of litigating the issue in court. Mary’s Story Consider the story of Mary, a widow, who needed to have surgery and was expecting to be disabled for a few weeks. She had an adult disabled daughter who was financially dependent on her. Mary put her sister’s name on her bank account prior to the surgery so that someone could pay bills for Mary and her daughter. Sadly, Mary passed away shortly after her surgery. Mary’s sister became the sole owner of the money in the account as a result of Mary’s death and the fact that she was the joint owner of the account. Two big problems arose as a result: First was that the transfer of one-half of the account to Mary’s sister was taxed at 12% inheritance tax rather than 4.5% if the money had been left to Mary’s daughter outright. Secondly, Mary’s sister refused to give the money to Mary’s daughter. Mary’s Will left her entire estate to her daughter. There was no evidence that Mary intended that anyone other than her dependent daughter receive any of her assets. We believe that Mary did not fully understand that by putting her sister’s name on the account, her money might not get to her daughter at the time of her death. A lawsuit had to be filed against Mary’s sister to compel her to release the money to Mary’s daughter. That sad consequence could have been avoided had Mary fully understood what it meant to put her sister on her bank account. Don’t let the routine nature of joint bank accounts lead you to make an uninformed decision. If you think that you need to have a joint account with someone other than your spouse, call one of our attorneys to discuss the situation.

When a dispute arises between neighbors over ownership or control of a disputed area between their respective properties, one concept that frequently arises is " adverse possession ." This legal doctrine allows a person to claim ownership of a portion of land under certain conditions, even if they are not the actual owner by virtue of a deed.  It may be difficult to believe that you could lose ownership of your property to another person.  So, what exactly is adverse possession, and how does it operate in the context of Pennsylvania law?   What is Adverse Possession?   Adverse possession allows someone to acquire legal title to and ownership of land under specific circumstances, effectively “stealing” it from the rightful owner, but legally and through a defined process. To claim adverse possession, the individual must demonstrate that their use of the land meets certain legal criteria over a specified period.   The Legal Criteria for Adverse Possession in Pennsylvania   In Pennsylvania, adverse possession is guided by a set of common law principles. To successfully claim adverse possession, the possessor must prove the following elements:   1. Actual Possession The claimant must be physically present on the property, demonstrating a clear and intentional use of the land.   Actual possession of land is “dominion over the land.  This means using the land as a true owner would, which could include making improvements, maintaining the property, or otherwise exerting control.  One court found that maintaining a lawn up to a fence amounted to actual possession of the disputed area.    2. Open, Visible and Notorious Possession The possession must be obvious to anyone, including the original owner. This means the possessor’s use of the land cannot be secretive; it must be visible and evident.  Visible and notorious possession means that ownership must be evidenced by conduct sufficient to place a reasonable person on notice that their land is being held by the claimant as his own.  Placing a shed in someone’s back yard and using it would be sufficient for this type of possession.   3. Exclusive and Continuous Possession The possessor must use the property exclusively, without sharing control or use with the original owner or the public. To constitute distinct and exclusive possession for purposes of establishing title to real property by adverse possession, the claimant’s possession need not be  absolutely  exclusive.   Rather, it need only be a type of possession which would characterize an owner’s use.     4. Hostile Possession This does not necessarily mean aggressive or violent action. Instead, it signifies that the possessor does so without permission from the original owner. In legal terms, "hostile" refers to the nature of the occupancy being against or adverse to the interests of the true owner.  If all the elements of adverse possession are established, the element of hostility is implied. For example, if the owner of the land directs the adverse possessor to leave the property, then, to maintain hostility, the adverse possessor must stay.    The 21-Year Rule   One of the most critical aspects of adverse possession is the time requirement. In Pennsylvania, a possessor must maintain their claim for 21 years. During this time, the possessor must satisfy all the aforementioned criteria to establish their claim effectively.    Credit for Prior Owner’s Adverse Possession Tacking Explained   Pennsylvania law allows the claim to “tack on” the time during which prior owners also adversely possessed the property in question. The law holds that in most circumstances “tacking” requires privity of title, meaning, the land acquired by adverse possession must be stated within the granting deed to a new landowner for that new owner to ‘tack’ onto the prior years of adverse possession by the grantor.  This allows the 21 year period to be attained through the possession of multiple owners over a number of years, all adding up to 21 years.  The Pennsylvania Supreme Court explained: [T]he possession of successive occupants may be tacked, but only where there is privity between them. For our purposes, ‘privity’ refers to a succession of relationship to the same thing, whether created by deed or other acts or by operation of law. But a deed does not of itself create privity between the grantor and the grantee as to land not described in the deed but occupied by the grantor. The deed, in itself, creates no privity as to land outside its calls.   The 10-Year Rule   In some instances, an adverse possession claim may vest in ten years rather than 21 years.  This statute is limited in its applicability to only “contiguous lots.”  This means a piece of land that is abutting, or adjoining, the adverse possessor’s land.  There are more limitations as well, including that the adverse possessor’s adjoining land must be improved by a single-family dwelling that is and has been occupied by the possessor seeking title under this section for the full 10 years and identified as a separate lot.   Legal Actions and Defenses   A claimant cannot simply declare that they are owner of a property.  Proving adverse possession is required.  To accomplish this, a claimant must notify the title owner and initiate a quiet title action - a civil court action or lawsuit that is filed with the intended purpose to establish or settle the title to a property. This action should be filed with the Court of Common Pleas in the county where the property is located.   The burden of proof is on the claimant. They need to present evidence proving they satisfy all adverse possession requirements – actual, continuous, exclusive, etc. If the title owner wins the case, the quiet title action is dismissed. Tips to Avoid Adverse Possession Claims on Your Property   Properly identify your property lines .  This would include stakes, survey pins, fences, shrubbery or other markers. Monitor and regularly check for encroachments on your property such as driveways, sheds, gardens, mowed areas, etc. If any property is part of an easement , know what activities are consistent with the granted easement.   If you suspect someone is trying to take your property by adverse possession (but has not yet initiated a quiet title action), you need to assert your rights to the property by confronting the trespasser and gathering evidence that the requirements of adverse possession have not been met. If the trespasser does not respond, you should consider an action in ejectment against the trespasser.  Adverse possession is a complex area of property law that underscores the importance of continuous oversight and management of one’s land. If you believe you may have a claim or you are concerned about a potential adverse possession situation, it’s crucial to consult with a one of our experienced real estate attorneys who can provide tailored advice and assistance.