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5 Small Business Tax Tips for 2012: Start Planning Now for a Prosperous New Year

December 6th, 2011

Posted by our partner RocketLawyer, by Jenny Greenhough

The shiny ball is going to drop…whether you’re ready or not. And with the holiday season in full swing, it’s easy to procrastinate thinking about your business. Rookie mistake! Year-end is the ideal time to make sure you’re doing everything you can to maximize your tax savings before 2012 comes to a close, and to start developing your tax strategy for the new year. We know you’re busy, so we put together 5 tax tips to help you wind down 2011 and get the most tax-benefits in 2012.

1. Incorporate your small business on January 1.

It’s always a good time to incorporate because of potential tax savings and liability protection, but the New Year may be the best time. With a filing date of January 1, you’ll save time when filing a tax return for that year, because the business doesn’t need to file two separate tax returns for the unincorporated entity and one for the new C-Corp, S-Corp, or LLC. You can incorporate your business for free at Rocket Lawyer.

2. Consider both tax savings and liability protection when choosing your business structure.

If you want to incorporate on January 1, start thinking about your business structure now. There are multiple factors to consider when choosing between a C-Corp, S-Corp, or an LLC, and while many business owners decide to incorporate based on potential tax savings alone, it’s also important to consider liability protection. Make sure you speak to an attorney, and not just a CPA - you may find that opinions differ depending on who you talk to. With all the facts you’ll be better equipped to make the right decision for your business and reap the benefits all year long. With a Rocket Lawyer legal plan, you can get a free consultation with a Rocket Lawyer On Call attorney in your area.

3. Be aware of the personal liabilities incurred by individuals you choose to place in positions of authority.

The issue of tax fund recovery penalties is a little-known danger to your business and employees. If your business has failed to pay what it owes to the IRS, this money is held by you, in trust, for the government. In fact, the government will hold any and all parties in positions of authority within the business personally liable and accountable for the repayment of the funds.

Individuals in positions of responsibility, whether it is the business owner, or the signatory, are personally liable for both the unpaid taxes, and the penalties associated with non-payment. So, before you decide to put your children, spouse, or other employees in these positions in your company, make sure you understand the unintended consequences that may arise as a result of this action.

“Choosing signatories wisely can save your business and your family from any unnecessary interaction with the IRS,” emphasized tax attorney James Pratt.

“Most people would like their children to take over the family business, but they should balance their education in the business with protecting them from some of the liabilities,” added Pratt.

4. Before you hire a new worker, choose carefully between classifying the individual as an employee or an independent contractor to avoid an audit.

Worker classification (employee vs independent contractor) will be a hot topic for the IRS this coming year. Companies sometimes try to have it both ways - sending a big red flag to the IRS. A common situation is when a company treats employees as independent contractors in practice (not paying payroll taxes on the workers), but then also claims tax deductions as if the workers were employees.

To prevent this situation, think about the role you want the new worker to fulfill and then put the appropriate relationship in writing with an Independent Contractor Agreement or an Employment Agreement. Then, stick with it, from paying payroll taxes (if applicable) through to the tax credits you claim. Also, it’s best to look at the long term tax consequences of worker classification from the outset, and an attorney’s advice can be extremely helpful for getting the tax savings you deserve while staying in the good grace of the IRS.

5. Keep track of your expenditures over the next year and prepare for rising costs as itemized tax deductions are reduced.

The Joint Taxation Committee has recommended cuts to charitable deductions, mortgage interest deductions and state and local tax deductions. The likely effect of this is higher costs for business and a significant fall-out for the mortgage real-estate and non-profit sector. This, of all years, is one where planning ahead will be crucial.

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Business Agreements from LegalOut

August 17th, 2011

legaldocWhether you freelance or own your own consulting firm its important to protect your business interests. Preparing legal documents is one important step to protecting yourself.

Contract agreements will help you define the terms and conditions of professional services you wish to contract as well as protecting valuable business information.

Check out some important legal documents in this issue or for more information or other legal documents visit LegalOut.

Protect Your Interests

Consulting Agreement

If you’re an independent consultant asking your clients to sign a legal contract can help clarify goals and avoid sticky issues down the line. In the consulting agreement, a consultant or independent contractor agrees to provide professional, consulting or other services for a fee. You want to define the terms and conditions of professional services you are providing to a person or company.

Start your agreement now>>

Protect Confidential Information

Non Disclosure Agreement

Are you in the process of hiring a consultant for your business? Make sure you protect your business information with a Non Disclosure Agreement. In this agreement, a person or organization agrees not to disclose proprietary and confidential information that it receives from another party.

Create your Non Disclosure Agreement in minutes with our easy online interview. Save, share or print your legal document immediately - no waiting!

Start your non disclosure agreement>>

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When to Update Your Living Will

June 8th, 2011

Be sure to review your Living Will periodically. Living Wills are easily modified to reflect changes in your health, finances, or perspective on end-of-life care. Even if your wishes don’t change, a Living Will should be regularly updated to take into account changes in medical technology. Consider updating your Living Will when you need to:

  • Change or set limits on medical care to meet your ability to pay
  • Respond to changes in medical technology
  • Respond to a change in health care laws
  • Respond to a changes in your health, including: decline, terminal diagnosis, possibility of surgery and hospitalization, or pregnancy
  • Designate a different person to make health care decisions for you
  • Move to a new state
  • Respond to changes in your beliefs and wishes concerning end-of-life care
  • Respond to the death of a loved one or significant other

Remember that new documents will generally supersede old ones - in other words, executing a new Living Will has the effect of revoking a prior Living Will.

Update your Living Will with LegalOut.

Article by RocketLawyer.

Living Will

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Protect Your Wishes and Family

March 31st, 2011

Happy Spring. LegalOut wishes you a bountiful & joyous spring!

A new spring brings the traditional spring cleaning, a good time to organize, decide on priorities, and get your home in order. Spring is also an excellent time to review your legal situation and make sure that you have essential legal documents to ensure your wishes and family are protected. Check out some important legal documents below or for more information or other legal documents visit Create Legal Docs>>

Prepare Legal Documents

Last Will and Testament
Protect Your Loved Ones: A Will is a document under which a Will writer states his or her intentions regarding the persons or organizations (”Beneficiaries”) who will receive the Will writer’s property, and the person or organization (”Executor”) who will carry out the Will writer’s wishes. Click here to prepare a Last Will and Testament>>

Living Will/Advance Directive for Healthcare
Protect Your Wishes: A Living Will authorizes an agent of your choosing to communicate your life-support decisions to medical personnel in the event that you are unable to do so. A Living Will spares your family the anguish of making life-support decisions without your input. A Living Will also ensures that your doctor understands your end-of-life wishes and treats you accordingly.Click here to prepare a Living Will/Advance Directive for Healthcare>>

Domestic Partnership Agreement
Protect Your Partnership: A Domestic Partnership Agreement is a document that a couple can enter into to dictate their contractual rights as a couple. It is also used to outline the responsibilities of each partner when a couple decides to form a long-term committed relationship, such as how to share income and pay bills and whether property is meant to be jointly or individually owned. Click here to prepare a Domestic Partnership Agreement>>

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Why a Living Will is Important

February 4th, 2011

Recently, The South Florida Gay News.com posted a significant article, “Beyond Living Well is a Living Will” by Jarret Terrill about the importance of preparing a living will. This article highlights the challenges people may face without a living will, a form of an Advance Care Directive.

Advance medical directives pertain to treatment preferences and allow you to appoint someone you trust (a family member, close friend, or partner) - to make health care decisions for you if you lose the ability to make decisions yourself.

A living will is a written document that specifies what types of medical treatment are desired. A health care proxy names a specific person to make health care decisions for you when you can’t make them for yourself.

Here is an excerpt from the article:

“Many gay men and women are faced with anti-gay family members that they would not entrust an “end of life” decision to. Without a living will issuing advance directives, Florida hospitals would be bound by law to follow the directives of distant family members over a lover’s wishes.

A living will, also known as an Advance Care Directive, is a document that tells doctors, attorneys and law enforcement which person in your life is responsible for executing decisions you’ve made about your healthcare if you are unable to speak for yourself.

Says Daniel W. Humbert, a Fort Lauderdale Attorney who has developed a specialty in estate planning,  “a General Power of Attorney is very broad in scope and tends to give the Attorney-In-Fact (the person you designate) the power to do virtually anything. A living will is quite different.”

Humbert says that a living will is “where you can express your wishes for what they call extraordinary life-saving measures. This would be particularly important for a person who becomes incompetent or goes into a coma or something like that.”

“A living will is essential for everybody, but it’s particularly important to the gay community,” says Humbert.  Laws and regulations concerning those extraordinary circumstances and the decision-making process favor family members. Since the legal definition of a family member varies from state to state, this can pose a problem if you don’t have a living will.”

Click here to read the entire article>>

Without legal documents you are at risk of not having your wishes carried out in the event that something unexpected occurs. If you are in a committed relationship, you may want your significant other to be able to make medical and legal decisions for you, should you unable to make them yourself.  You would like to plan for the future of your family to ensure they are taken care of when you are gone. Even if you are not in a committed relationship, you want to make decisions about your own life and future without unwanted intrusions from others.

Prepare Legal DocumentsLegalOut’s online resource center provides the LGBT community with affordable legal document solutions.  We provide easy-to-use tools for customizing your documents online, in the privacy of your own home, at your own pace and provides hundreds of do-it-yourself legal documents including living wills, domestic partnership agreements, power of attorney documents, last will and testament, and many others.

By planning now you can feel comfortable that you, your family and your future are taken care of exactly the way you envision.

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New Federal Hospital Visitation Regulations for LGBT go into Effect on Jan. 18, 2011

January 15th, 2011

medicalOn January 18, 2011, new hospital visitation regulations go into effect that require all hospitals participating in Medicaid and Medicare programs to permit patients to designate visitors of their choosing and prohibit discrimination in visitation based on a number of factors, including sexual orientation and gender identity.

The new regulations are a result from President Obama’s presidential memorandum in April 2010 directing the Department of Health and Human Services to develop regulations protecting hospital visitation rights.

Regulations require hospitals (from HRC’s Hospital Visitation Guide):

  • to inform each patient of his or her right to receive visitors whom he or she designates, including a domestic partner
  • to not restrict or limit visitation rights based on sexual orientation and gender identity, among other factors
  • must ensure that all visitors have full and equal visitation rights, consistent with a patient’s wishes.

To learn more visit the Human Rights Campaign Hospital Visitation Guide for LGBT Families>>

While these new federal regulations are a great step forward for LGBT hospital visitation equality it’s important to note there are other medical decision making areas that are not protected unless an individual has prepared the necessary legal documents.

Many state laws governing medical decision making defaults to biological family members or marital laws. Since there is marriage inequality in most of the U.S. LGBT individuals are not protected. Even if you are not in a committed relationship, you want to make decisions about your own life and future without unwanted intrusions from others. By planning now you can feel comfortable that you, your family and your future are taken care of exactly the way you envision.

If you want to designate a person to make health care decisions for you if you are unable to do so or state your wishes regarding the withholding or withdrawal of life-sustaining procedures under certain circumstances you will need to prepare an Advance Directive for Healthcare or Living Will.

Not planning, means letting someone else plan for you. LGBT individuals need to be proactive to ensure that their plans for the future reflect their own wishes and are not dictated by laws that do not fit your life and relationships or individuals who are not involved in your life and relationships.

Do not put off preparing legal documents as we never know what can happen. LegalOut can help you avoid putting off creating legal documents. LegalOut’s online resource center provides the LGBT community with affordable legal document solutions.  We provide easy-to-use tools for customizing your documents online, in the privacy of your own home, at your own pace and provides hundreds of do-it-yourself legal documents including living wills, domestic partnership agreements, power of attorney documents, last will and testament, and many others.

By planning now you can feel comfortable that you, your family and your future are taken care of exactly the way you envision.

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How Do I Change a Will After it Has Been Signed?

January 12th, 2011

If you have a Will and need to make some changes, learn how to make a change by watching a Free legal help video form our partner RocketLawyer. You cannot simply cross out a sentence or add a new sentence to change your Will. You must either create a ‘codicil’ which is an amendment to your Will, or create a new Will.

Click here to view the Free Legal Help video to learn more.

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Give the Gift of Estate Planning!

December 17th, 2010

Christmas GiftsThe 2010 holiday season is upon us which means holiday dinners, holiday travel and shopping for gifts. A gift to consider this holiday season is the gift of estate planning. Legal documents provide you and your loved ones with a peace of mind.

LGBT individuals especially need to be proactive to ensure that their plans for the future reflect their own wishes and are not dictated by laws that do not fit their life and relationships. Did you know that unless otherwise specified in many states, probate laws generally provide if a person dies without a Will, their property goes to family, rather than a partner they had a relationship with for years and the state determines who gets your assets, not you. Without an estate plan, your loved ones would have the burden to decide what your wishes are in times of crisis. Preparing legal documents will secure your wishes and help loved ones know what your intentions are during times of crisis.

Give the gift of estate planning for yourself or loved ones and you’ll have peace of mind for many holidays to come.

Let LegalOut help you give the gift of estate planning, visit our legal documents center.

Top Reasons Individuals Put Off Preparing Legal Documents

Often times, people put off creating legal documents. We know we need to do something, but we wait. Why do we wait? Here are some common reasons why we defer making a decision:

  • We do not want to think about dying or being incapacitated.
  • We do not know where to begin.
  • We think we do not have any assets. People assume they have to be rich or married with children to create a Will.
  • We procrastinate- people know they need to create an estate plan but put it off.
  • Legal costs are high.

Can you identify with one of these reasons of putting off estate planning? Without legal documents you are at risk of not having your wishes carried out in the event that something unexpected occurs. If you are in a committed relationship, you may want your significant other to be able to make medical and legal decisions for you, should you unable to make them yourself.  You would like to plan for the future of your family to ensure they are taken care of when you are gone. Even if you are not in a committed relationship, you want to make decisions about your own life and future without unwanted intrusions from others.

LegalOut can help you avoid putting off creating legal documents. LegalOut’s online resource center provides the LGBT community with affordable legal document solutions.  We provide easy-to-use tools for customizing your documents online, in the privacy of your own home, at your own pace and provides hundreds of do-it-yourself legal documents including living wills, domestic partnership agreements, power of attorney documents, last will and testament, and many others.

By planning now you can feel comfortable that you, your family and your future are taken care of exactly the way you envision.

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Chicago Tribune: Business Securing the future as life partners

August 20th, 2010

From the Chicago Tribune: Securing the future as life partners
If you don’t want to - or can’t - marry, it’s critical to stitch together some legal protections

By Jane Bennett Clark, Tribune Media Services
1:20 PM CDT, August 19, 2010

Julie Kurland and Marcia Diehl live in a Victorian home in Takoma Park, a leafy Maryland suburb of Washington, D.C. The couple take turns walking their dog, Cody, past the 1920s bungalows and gabled Victorians that line the streets of their neighborhood. On Sundays they wander over to the farmers market and spend the rest of the day gardening or reading on their wide front porch.

It’s a routine that befits any contented couple. But Kurland, 46, and Diehl, 56, are not married, nor would their union be recognized federally or in all but five states. And while a California court case regarding the legality of same-sex marriage winds its way through the appeals process (likely to end up before the U.S. Supreme Court), there still remains this present-day reality:

Gay couples, and straight couples who’d prefer not to marry, lack the legal structure that protects married couples’ rights on everything from property division to end-of-life decisions. Instead, they must create their own framework.

“It’s much more important for gay couples to have their documents lined up,” said Kurland. “We have to be sure we have our t’s crossed and our i’s dotted.”

Regardless of who you’re partnered to, if you commit to each other without tying the knot, these steps will help you avoid being caught in legal limbo:

Powers of attorney: Diehl’s parents, who are deceased, never acknowledged her relationship with Kurland. Had Diehl suffered a health crisis that rendered her unable to make her own decisions, “they would have thought it was their privilege, not Kurland’s, to make the decisions for me,” said Diehl. In most states, spouses and blood relatives take priority over nonrelatives in the absence of a document that specifies otherwise.

Diehl and Kurland assigned each other a health-care power of attorney, a state-specific document (available free at doctors’ offices, hospitals and on the Internet) that lets each make medical decisions on the other’s behalf. They also gave each other a durable power of attorney, which conveys the right for each to make financial and legal decisions for each other. A durable power of attorney goes into effect as soon as you sign it or upon a triggering event. Consult a lawyer about the choices.

Put it in writing: As singles, “you only have rights to something in the other’s name if there is a written agreement,” said Frederick Hertz, co-author of “A Legal Guide for Lesbian & Gay Couples” (Nolo, $34.99). A cohabitation contract, like a prenuptial, lets you formalize financial and living arrangements while you are together and spell out who gets what if you break up. Drawing up a contract can run a few thousand dollars for a simple agreement, to $25,000 for a complex one. Consult a lawyer.

Wills: Without a legal will, your estate will be divvied up according to state intestacy law, which generally favors spouses, children and other relatives, not significant others. To avoid leaving your partner in the lurch, spend the $300 or so necessary to have a lawyer draw up a will or do it yourself online.

If you are the biological parent and want your partner to raise your child after you die, be sure that you nominate him or her as the personal guardian. As with any guardianship, the court has to sign off on the nomination, but it generally respects the legal parent’s wishes, with one significant exception: The other legal parent — say, a former spouse — is willing and suited for the job.

Establish joint ownership: In some states, married couples or those with marital rights can title jointly owned property as tenancy by the entirety. Each spouse owns the entire property, and neither can sell without the other’s OK. When one spouse dies, the survivor inherits the property, avoiding probate.

Unmarried couples may own property two ways: tenancy with the right of survivorship and tenancy in common. With the first, you own the property 50-50. When one of you dies, ownership passes to the survivor automatically. You can sell or give away your half, but you can’t bequeath it to someone else. Some unmarried couples choose this setup to avoid the public process of probate or as backup to a will. Tenancy in common is more flexible: It lets you own unequal shares of the property, and, if you sell, you walk away with whatever percentage you contributed.

Keep track of gifts: Married couples in the eyes of Uncle Sam can give each other unlimited assets without tax consequences. But unmarried heterosexual couples and all same-sex couples are considered “legal strangers” for federal tax purposes, said Dana Levit, a financial planner in Boston and president of PridePlanners, a nonprofit financial-education group. That awkward status requires you to report gifts to each other of more than $13,000 a year (as of 2010). The excess counts against each individual’s $1 million lifetime federal gift-tax exemption.

Even if you’re not in the habit of writing each other fat checks, you could exceed the $13,000 limit by, say, putting your partner on the title to a house you own. Although most people never reach the $1 million limit, you lessen your risk by transferring assets incrementally, said Hertz. “Give early, often and in small amounts.”

Also be careful to document your contributions to any joint property owned as tenancy with the right of survivorship. Lacking evidence to the contrary, the IRS assumes that the entire property belonged to the first person to die and calculates the estate-tax obligation accordingly. Keeping separate bank accounts helps clarify who paid for what, said Carrie Aburto, a financial adviser at Aspen Wealth Management in Denver.

Minimize your taxes: As single filers (same-sex married couples, in states that legally permit same-sex unions, generally have to file as marrieds on their state taxes and as singles on their federal taxes), you can allocate your deductions to maximize the tax benefit. For instance, the partner who earns more income can pay the mortgage and deduct the interest, while the other partner takes the standard deduction.

“Taxes are one area in which it’s often good to be gay,” said Levit.

Likewise, if you have a child, one of you can claim the child as a dependent on your federal tax return. Assuming that the same parent provides more than 50percent of the child’s support, he or she also can file as head of household, which usually results in a lower tax bill. Couples with two kids may be able to split the difference, each claiming one child as a dependent and filing as head of household.

As singles, you have a good chance that at least one of you will fall below the income limits for tax benefits or tax-preferred accounts. Say one of you has an income that exceeds the limit for contributing to a Roth IRA, (which in 2010 is $120,000 for singles; $177,000 for married couples filing jointly) and the other has earned income that falls below the limit, the one who earns less can still establish a Roth IRA.

Provide for your survivor: You won’t have access to spousal Social Security benefits, but each of you can still name the other as beneficiary of your retirement accounts. Nonspousal beneficiaries of IRAs and 401(k) plans can take distributions from an inherited retirement account over their lifetime.

As for life insurance, leave enough so that each of you will be able to live comfortably if the other dies first. These days, term-life policies come cheap. A 50-year-old woman in good health can pick up a 20-year term policy with $500,000 of coverage for about $700 to $850 a year. A healthy 50-year-old man can buy the same for about $950 to $1,200.

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Check out LegalOut’s affordable online solutions to start your estate plan - get started now for a piece of mind! Through our simple, easy-to-follow online tools powered by RocketLawyer.com, you’ll quickly and easily create affordable legal documents — all in the privacy of your own home.

Knowledge is the first step to protection. For more information visit LegalOut - Protection 101 or click on the legal documents below for more details:

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Are you one of the 70%?

August 11th, 2010

Did you know that national statistics indicate that over seventy percent (70%) of Americans die without creating a Last Will and Testament or other estate plan? This is a staggering statistic; it means that 70% of adults are letting others make decisions for them.

Are you one of the seventy percent? Do you really want someone else to make tough decisions on your behalf in times of crisis?

Here are some reasons why people do not create a Will:

  • Do not want to think about dying or being incapacitated.
  • Do not know where to begin.
  • Think they do not have any assets. People assume they have to be rich or married with children to create a Will.
  • Procrastination - people know they need to create an estate plan but put it off.
  • Legal costs are high.

What happens if you do not have a Will or Estate Plan:

  • State determines who gets your assets, not you.
  • Probate laws generally provide if a person dies without a Will, their property goes to family, rather than a partner they had a relationship with for years or decades.
  • Not having a Will may cause disagreements or lawsuits between your partner and your family.
  • Your loved ones would have the burden to decide what your wishes are in times of crisis.

Legal DocTypes of Estate Planning Documents

No one wants to think about his or her own death, but taking the time now to complete some basic documents can save you and your family much heartache later. You’ll get more peace of mind knowing that your wishes will be followed and your family and friends will be taken care of. Listed below are some basic estate planning documents:

Last Will and Testament
A Last Will and Testament allows you to set out your specific wishes for how you want your property and assets to be divided upon your death. It also designates who will assume guardianship responsibility of any minor children if neither parent can serve as guardian. You can use a will to make bequests to charities. Wills are easy to prepare, but are subjected to probate process, which, depending on the size of your estate, could take some time.

Living Will
A Living Will is a legal document used to specify your wishes for end-of-term health care decisions. It states that you do not want life-prolonging treatment if there is no hope of recovery, for example in the event of terminal illness or irreversible coma. Having a Living Will lets others know what your wishes are when you are unable to communicate them yourself.

Durable Power of Attorney
You can grant a Power of Attorney to another person (called your agent) for any case where you cannot represent your own interests. For example, you can send an agent to an important meeting you are unable to attend, and they may act on your behalf for the duration of that meeting. A Durable Power of Attorney, on the other hand, remains in effect if you become incompetent. In cases of terminal illness or permanent unconsciousness, you can set out health care directives for your agent, much like in a Living Will.

Hospital Visitation
This authorization is used to give visitation rights to a person who is not a legally recognized family member, should you become unconscious or unable to communicate yourself. You should have this document if you want your partner or someone who is not considered a family member by the state to be able to visit you in the hospital, should you become unable to communicate for your wishes.

Domestic Partnership Agreement
The Domestic Partnership Agreement is a document that a couple can enter into to dictate their contractual rights as a couple.

You can find all these legal documents and other estate planning forms on Legalout.com. Our online interview makes it easy to create these important documents - get started now for a piece of mind!

Online Legal Wills Provide an Affordable Solution
Everyone should have a Last Will and Testament, and the document should be reviewed and updated on a regular basis. Preparing and maintaining your Will doesn’t have to be time consuming, difficult, or costly. Knowing that an hour of an attorney’s time can cost $200 or more, many people put off preparing their Wills. However, you don’t have to use the services of an attorney to create an effective Will. You and the other members of your family can create your own Online Legal Will easily and inexpensively.

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