Simple Tips to Consider When Caring for an Aging Parent

Dealing with the financial stressors of caring for an aging loved one can affect your ability to provide them with the care and compassion they need. It can also put the security of your financial future at risk. In last week’s Where There’s A Will Wednesday post, we discussed some of the unexpected costs when caring for an elderly parent in your home. This week, we will review some additional tips when taking on the increased care for an aging parent.

Don’t Leave Your Job

Many adult children end up putting their professional lives on hold to become a primary caregiver for their elderly parents. Financial experts advise against this because of the sudden loss of income and valuable benefits. Consider caregiving options that support your ability to maintain your earning potential.

Create a Budget

Review the actual costs of being a primary caregiver before making any drastic changes like leaving your job. Also, consider whether your loved one’s assets can be utilized to cover some of the costs involved in providing care inside or outside the home. You should also take into account the loved one’s wishes for both care and how their assets should be used to provide for that care.

Look for Benefits Elsewhere

Free or low-cost benefits that can help cover some of the costs of caregiving, such as home health aides, are often available to seniors. Similarly, review the limitations of public benefit options such as Medicaid.

Consider Relocating Your Parent

It is common for seniors to prioritize remaining in their own home while they age. Although understandable, this can be a very expensive, and often an unrealistic option. If opening your home to your loved one is an option, it can be far less expensive. As always, these options should be part of a dialogue with the loved one to ensure that their voice is heard and respected.

Seek Professional Help

Geriatric care managers can help you establish a caregiving plan that meets your needs and assist you in identifying resources to save time and money.

Protect Your Parent From Scams

Financial elder abuse is on the rise, so make sure your loved one’s finances are protected. Telephone, postal mail, and internet fraud is common and can be easily avoided when a close relative or friend is helping the senior loved one keep track of their bank account. Consider talking with your parents about stepping down as Trustee of their trusts and letting you step in now to monitor their finances, and if they do not have a Trust ask them if they would consider appointing you as an agent under a Power of Attorney.

Discuss the Future

Now is an opportune time to review your loved one’s wishes for his or her estate and consider your own financial goals and how helping to care for a loved one might affect them.

Caring for a loved one can take a toll, both financially and emotionally. At Forrest Law Center, we can help you plan for changes in life at every stage. Our Estate Planning Session guides you to protect and preserve what matters most. Before the session, we’ll send you a Family Wealth Inventory and Assessment to complete that will get you thinking about what you own, what’s most important to you, and what you can do to ensure your family is taken care of.

Disclaimer: This article is for informational purposes only and not intended as legal advice or to create an attorney-client relationship. Every situation is unique and consultation with an attorney is required before any specific advice can be given.

The Unexpected Costs of Caring for Elderly Parents In Your Home

Maybe it’s the unexpected costs of retirement communities, assisted living facilities, or nursing homes. Or maybe it’s respect for the older generation’s desire to be near family in their twilight years. Whatever the cause, more families are choosing to have mom or dad or another elderly family member move in as that older family member faces greater need for assistance in daily living activities. If you are considering moving an older family member in with you, there are some important things you need to consider beforehand.

With Mom or Dad moving in, you can anticipate some extra expenses, not just financially, but possibly emotionally as well. It’s hard to know what to expect, and you might face costs you didn’t see coming. Having an elderly parent move in with you is a major life event that requires financial and emotional preparation. Here are some unexpected costs of caring for elderly parents to get you thinking about what lies ahead, if you decide to move mom or dad into your home.

Remodeling

Many people don’t think about the modifications they might need to make to their home to welcome an elderly parent. If your parent is living with you long-term, you will want to make him or her comfortable, which might entail adding a new addition to your home, creating a private living space out of a shared area, making accommodations for single-level living if your parent cannot navigate the stairs.

One of the less thought-of aspects is ensuring that your existing space is accommodating to the elderly family member’s needs. Many older people begin to lose fine motor skills. Small household items, such as kitchen utensils, remote controls, and doorknobs, may need to be replaced with larger items so that the family member can continue using them.

You may also need to consider the family member’s mobility needs. Will you need to rearrange furniture to accommodate a wheelchair or walker? Even if a family member does not ordinarily use a walker or a cane, they may still need extra space to avoid bumping into furniture around the house.

Lost Work Productivity

Moving your elderly parent in, helping him or her get acquainted with the area, and checking out activities can all eat into your work week. Expect further loss of productivity if you have to take your parent to run errands, to medical appointments, or to therapy sessions. You can look into senior transportation services if you are unable to take time off from work, but remember to budget for the extra expense.

Home Help

In-home care can be a significant expense, but unless you are able to take time away from your busy day, your elderly parent might need it. Certain kinds of insurance will cover some or all of the costs, and you might be able to get assistance from certain programs through the VA or other community organizations.

Miscellaneous Household Expenses

The costs of simply having another household member can be unexpectedly high, especially if that member spends most of his or her day at home. You should expect such extra expenses as increased heat and electricity bills, special foods, and personal care products. Remember that elderly parents have special needs, and those needs can be expensive.

Medical Expenses

Even with insurance, your parent might have steep out of pocket costs for co-pays, prescriptions, mobility aids, supplements, vitamins, and other uninsured medical expenses. For certain conditions, these costs can quickly add up.

Long-Term Expenses

As your parent ages, his or her needs will change, too. These changing needs can result in unexpected long-term costs. When your parent’s retirement funds are exhausted or when they face deteriorating health, you might have to consider the staggering costs of long-term care in an assisted living facility or nursing home.

Therapy

Moving mom or dad into your home could bring up all of the unresolved emotional issues that have not yet been addressed within your family dynamic. This isn’t something to be afraid of, so long as you have the right support. On the contrary, it can be a great opportunity to heal inter-generational wounds that would otherwise be ignored. 

Caring for an elderly parent can result in unexpected expenses and unexpected benefits, as well. Now that they are becoming more dependent on you, you might also need to consider making changes to your insurance policies or revising your estate plan. If you are ready to take the step of officially becoming caregiver for mom or dad, meet with us for guidance.

Disclaimer: This article is for informational purposes only and not intended as legal advice or to create an attorney-client relationship. Every situation is unique and consultation with an attorney is required before any specific advice can be given.

I Don’t Have Kids, So Why Do I Need Estate Planning?

Many people mistakenly believe that if they don’t have children then estate planning is not important. In fact, the complete opposite is often true – estate planning is even MORE important if you have no children.

The misconception is phrased in one of many ways, such as:

“If I die, everything will pass to my spouse anyway, so why bother?”

“I’m single with not much in the way of assets, so why bother?”

“Estate planning is an expensive hassle and it doesn’t even benefit me because I’ll be dead.”

This kind of thinking ignores several facts about both estate planning and life in general. Regardless of your marital status, if you don’t have children, you face potential complications both during your life and after your death that can be addressed during the estate planning process.

If you don’t have children, consider these three inconvenient truths before you decide to forego estate planning.

Someone will get your stuff

Whether you consider yourself rich, poor, or somewhere in between, in the event of your death everything you own will be passed on to someone. Without documenting your asset transfer wishes in an estate plan, your assets will pass to the people that state law says should get your stuff. If you have no surviving spouse and no children, then that could mean brothers and sisters or nieces and nephews (or maybe even more distant relatives). If your extended family does not know that they have a right to inherit, then they may not step forward to claim their inheritance – leaving your estate in the hands of the Division of Unclaimed Property.

Or what if your family knows that they have a right to inherit but they are not aware of what is in your estate? Your family could go through the whole court-supervised estate administration process (which often takes a year or more to complete) and in the end not claim all the assets that are due to them. Again, this means that some of your estate may be transferred to the state’s Division of Unclaimed Property.

Without a well-organized estate plan in place your surviving family could be left without a clue as to how to start transferring your assets after your death. What we mean by a well-organized estate plan is that your plan not only documents where you want your assets to go after your death, but also provides an up-to-list of where your assets can be found – such as where you do your banking; the name of your financial advisor or where your investment and retirement accounts are located; copies of any life insurance policies; etc. By keeping a well-organized estate plan, your family will be able to start the estate administration process with a better head start than most other people.

If your estate plan does contain significant wealth and assets, your lack of planning makes conflict and in-fighting among your family more likely. Without clear directions from you regarding who you want to inherit and what you want those people to inherit – and without clear direction as to who should be in charge of supervising the estate administration process – your family will be left to figure out for themselves what to do. And unfortunately, the tendency is that where there is more money and assets at stake, the more willing people are to fight each other over who gets what. An estate fight can only drag out the administration process, and it leads to expensive court and legal fees – reducing the size of your estate along the way.

Even if you have a spouse and your assets get passed to him or her, there is not guarantee that the spouse will live much longer than you. In the event of your spouse’s death without an estate plan in place, state law directs that his or her blood relatives will inherit – leaving them subject to the same estate administration nightmares described earlier AND leaving your relatives without any inheritance of their own.

Someone will have power over your health care


Estate planning isn’t just about passing on your assets when you die. Some of the most critical parts of planning have nothing to do with your money at all, but are aimed at protecting you while you’re still very much alive.

Advance planning allows you to name the person you want to make healthcare decisions for you if you’re incapacitated and unable to make decisions yourself.

For example, if you’re temporarily unconscious following a car accident and unable to give doctors permission to perform a potentially risky medical treatment, it’s not always clear who will be asked to make that decision for you.

If you have a romantic partner but aren’t married and haven’t granted them medical power of attorney, the court will may very well appoint a blood relative, not your partner, to make that decision. Depending on your family, that person may make decisions contrary to what you or your partner would want.

Indeed, if you don’t want your estranged brother to inherit your property, you probably don’t want him to have the power to make life-and-death decisions about your medical care, either. But that’s exactly what could happen if you don’t make a plan.

Even worse, your family members who have priority to make decisions for you could keep your dearest friends away from your bedside in the event of your hospitalization or incapacity.


Even if, or maybe especially if, you don’t have kids, you need to do estate planning in order to name health care decisions-makers for yourself and provide instructions on how you want decisions made.


Someone will get power over your finances

As with healthcare decisions, if you become incapacitated and haven’t legally named someone to handle your finances while you’re unable to do so, the court will pick someone for you. The way to avoid this is by naming someone you trust to hold power of attorney for you in the event of your incapacity.

Durable power of attorney is an estate planning tool that gives the person you choose immediate authority to manage your financial matters if you’re incapacitated. This agent will have a broad range of powers to handle things like paying your bills and taxes, running your business, collecting your Social Security benefits, selling your home, as well as managing your banking and investment accounts.


Because these powers are so broad, it’s critical that you only give this power to someone you absolutely trust, and ideally, with the guidance of a lawyer who can watch out for your best interests.

The fact that durable power of attorney is valid even if you are incapacitated means your agent can handle your finances without waiting for a judge’s decision to declare you incapacitated. The time saved by avoiding court can be immensely beneficial to ensure your bills get paid on time and your estate is available to pay for your care at the most critical time.


Given all of these potential risks, it would be foolhardy for those without children to ignore or put off these basic estate-planning strategies. Identifying the right planning tools is easy to do, and begins with a Family Wealth Planning Session, where we can consider everything you own and everyone you love, and guide you to make informed, educated, empowered choices for yourself and your loved ones.

It will likely take just a few hours of your time to be certain that both your assets, healthcare, and relationships will be managed in the most effective and affordable manner possible in the event of your death or incapacity.

Disclaimer: This article is for informational purposes only and not intended as legal advice or to create an attorney-client relationship. Every situation is unique and consultation with an attorney is required before any specific advice can be given.

Big Mistakes When Running a Family Business

Many new and small businesses are made up of family members. Many people find great satisfaction in working with the people they are closest to. However, working with family doesn’t mean you are excused from complying with the laws and regulations affecting your business. If you operate a family-owned business, or are considering starting a business with family members, there are four potentially lethal legal mistakes you should take care to avoid, including:

No employment agreements

Family members who work together are usually hesitant to confront one another if someone isn’t pulling their weight.  Having an employment agreement for everyone ensures that expectations for job performance are spelled out and what the grounds are for termination. In addition to having employment agreements, it is also a good idea to have regular meetings performance assessments to review whether and how expectations are being met.

Mixing family and business finances

It is tempting for family business owners to use business accounts to cover what should be personal expenses. Purchases that would not be acceptable in other companies are not acceptable in family companies. Not only can it create tax issues, it can also open up the personal assets of the owner to business liabilities.

No licenses

Even if you operate out of your home, you will likely need to obtain a local or state license to operate your family business.  While licenses are generally inexpensive, the fines for not having them can be costly.  You can find out what the requirements are in your area by contacting your city hall or county office.

No succession plan

With no succession plan in place, business bank accounts and operations could freeze in the event of an owner’s death. Often, someone will have to qualify as Executor of the owner’s estate in order to get access to business assets. A succession plan can also prevent family conflict by communicating specific roles and tasks in the event of an owner’s retirement or death.

Disclaimer: This article is for informational purposes only and not intended as legal advice or to create an attorney-client relationship. Every situation is unique and consultation with an attorney is required before any specific advice can be given.

Why Estate Planning Matters for Small Business Owners

If you’re a small business owner you undoubtedly spend countless hours juggling bills and balancing your books, not to mention all those extra hours you spend worrying about the future of the little business venture that you consider “your baby”.

In fact, you’ve been so busy that you’ve probably avoided planning your estate. Understandably, no one likes to look down the path of their life to the day they won’t be there for their families or to run their business.  And estate planning – especially when a business is involved – is seldom simple, but there are some things you can do right now to protect your family and your business. Here are some important estate planning questions every small business owner needs to ask during a consultation with an attorney:

I have created a last Will and Testament – can you go over it with me to make sure it’s correct?

If you have an existing Will, bring it with you to your meeting. While it is possible that your existing Will may not need to be changed, it is more likely that your Will needs to be updated or replaced with other planning because of changes in the law, changes to your family, or changes to your business since the last time you reviewed your estate planning documents.

Do I need to bring in my company documents?

The most valuable asset you own is likely your business, and planning for your business goes hand-in-hand with planning your estate. You should be ready to provide copies of your company’s Bylaws or Operating Agreement, as well as providing an overall picture of the financial health of your company.

Do I need a buy-sell agreement for my business?

Do you want to go into business with your business partner’s spouse or children?  If not, consider having a buy-sell agreement among the owners of your business.  A buy-sell agreement, if structured properly, will have a structure for your partner’s ownership interest to be purchased at a predetermined price upon disability and/or death.  Doing so will now will prevent a lot of potential heartache later.

Do I have a taxable estate?

The vast majority of Americans have no concern with the federal estate tax. However, the Estate Tax is a hot issue in Congress and is always subject to change. With a simple act of Congress, the estate tax exemption could be drastically reduced or eliminated altogether. That means it is important to have a picture of the full value of your estate – including the value of your business – so that proper measures can be put in place in the event you do have a taxable estate. Even if your estate is comfortably within the exemption today, proper planning can create flexibility for your trustee or executor to manage assets so that it reduces or eliminates your estate’s tax burden.

What should I set up for my kids? They’re under 18 right now and if I die unexpectedly, what can I do to make sure they’re covered?

You can set up any number of trusts to protect what you want your kids to get when you die. If your kids are grown but you have grandchildren to think about, you can also choose a generation-skipping trust to protect what you want them to receive. There are many trust options here, so make sure you provision one well – you don’t want a 19-year-old rolling around town with the bankroll you spent your whole life building. Think of options like having them receive a monthly stipend until they reach a certain age, or only giving them the remainder of their trust if they finish college.

Disclaimer: This article is for informational purposes only and not intended as legal advice or to create an attorney-client relationship. Every situation is unique and consultation with an attorney is required before any specific advice can be given.

The 4 Deadly Legal Mistakes Small Business Owners Need to Avoid

Small businesses dominate the American business landscape, but those that survive several generations are relatively rare.  If you are a small business owner, you need to be sure you are not committing any of these four deadly legal mistakes:

1.  Mixing personal and business finances. 

If your small business started as a hobby or a side line but has grown to a point where it is your main source of income, you need to consider forming a legal entity for it, like a corporation or limited liability company (LLC).  Most small business owners choose an LLC for the personal liability protection it provides without the formalities of a corporation.  An LLC also makes it easier for you to transition the business to other partners or future generations and, since it is taxed as a pass-through entity, profits are not taxed separately but instead flow through to the owner.

2.  No employment agreements. 

Employment agreements should be used to spell out expectations, especially in family-owned businesses that may have been funded by one or more family members who expect reimbursement or those who expect a job at the family firm based on nothing more than familial relationship.

3.  Failure to obtain proper licenses. 

Most businesses are required to have local, state or federal licenses to operate, with fines assessed for those that fail to get these licenses.  They are generally inexpensive, but are often overlooked.  Check with your city or county offices to see if your business requires a license to operate.

4.  No succession plan. 

If your business has no formal legal entity, it will pass when you do.  Many small businesses fail to last through the first generation due to the lack of a succession plan.  Consult with an attorney about creating a succession plan for your small business so the value you have built over the years is protected after you are gone.

Disclaimer:  This article is for informational purposes only and not intended as legal advice or to create an attorney-client relationship. Every situation is unique and consultation with an attorney is required before any specific advice can be given.

Planning for the Care of Your Pet: How to Include Your Pet in Your Estate Plan

If your pet is beloved as a family member then you likely want to ensure that he or she will be well cared for in the event of your incapacity or death. 

Without explicitly stated wishes, these furry family members could end up without a home of their own if you die or become unable to care for them.

To prevent this tragic outcome, include planning for your pet in your estate plan. Here are a few important issues to consider when planning your estate with your beloved pet in mind.

Who will get ownership of your pet?

Although we all consider them part of the family, pets are property and not people. Because of this legal distinction, an agent must be named in your estate plan to take ownership of your pet or arrange for your pet to have a loving home. In absence of a legally enforceable document stating your wishes, your pet could suffer the fate of many when their owners pass on: an animal shelter.

How will that person provide for your pet?

Pets require food and medical care. These costs can be significant if your pet has a health condition or is aging. Money can be set aside for your pet with specific directions about how those funds can be used and by whom.

How will your pet be cared for?

You may want to consider leaving instructions on how your pet should be cared for, as well as consider financial incentives for the person you’ve named to care for your pet to care for your pet pursuant to your wishes. This is especially important if your pet has any health conditions, is aging or is an exotic animal. Detailed instructions (and the money to carry them out) will ensure your pet’s new guardian can provide the same quality of care you provide now.

To ensure all your loved ones are cared for when you die, it is necessary to create a comprehensive estate plan that will ensure all your wishes are carried out, even if you don’t consider yourself financially wealthy. If you are ready to take that step toward peace of mind, begin by coming in to meet with us.  We can help you create a comprehensive estate plan that will protect your assets, your wishes and all your loved ones, furry friends included.

Disclaimer:  This article is for informational purposes only and not intended as legal advice or to create an attorney-client relationship. Every situation is unique and consultation with an attorney is required before any specific advice can be given.

How To Prepare Your Small Business For A Profitable Sale

When you started your own business, you probably didn’t give much consideration to selling it. However, with statistics showing that 80% of a small business owner’s net worth is tied up in their company, you should always keep in mind what it would take to reap a profit if you ever decided to cash in.

Whether you plan to sell your business outright or transfer to partners or family members, here are some steps you should take to protect your assets:

Know what your business is worth.

Getting a professional valuation of your business is key to a profitable sale. Be sure that whoever values your business has expertise valuing businesses in your industry.

Build your business as an investment.

The eventual buyer for your business is looking for a good investment, one that will continue to pay long after you are gone. Build your business as an investment by having a diversified management team that has some skin in the game, so they will stay on after the sale. Having a business that provides recurring revenue is also more attractive to buyers, so be sure your growth strategies are built on a solid foundation.

Have written plans and processes.

If your business plan exists only in your head, this is a big danger sign to potential buyers. Be sure your plans and processes are well documented so that new ownership can step in and run the business seamlessly.

Take taxes into consideration.

When determining the best time to sell your business, take taxes into consideration. Funding a retirement plan for employees and other tax saving strategies should be employed to shelter assets from taxation. As always, we recommend exploring your options with a tax and financial professionals.

If you’re wondering whether your business could be sold for a profit, or even if you’re worried about the legal health of your business, Forrest Law Center can help ensure your business is on the right track. We offer a LIFT (Legal, Insurance, Financial, and Tax) audit to existing businesses and LIFT planning to new businesses.

Disclaimer:  This article is for informational purposes only and not intended as legal advice or to create an attorney-client relationship. Every situation is unique and consultation with an attorney is required before any specific advice can be given.

How Legal Planning Helps Build a Strong Blended Family

Yours, mine and ours . . . in today’s modern family it’s oh so common. A blended family is the product of a marriage in which one or more of the spouses has children from a prior relationship. Often, the married couple with have kids together, in which case the children from the prior relationship are half-siblings with the children from the current marriage.

If you have or are part of a blended family, it’s important to understand how estate planning could be exactly what you need to keep your family out of conflict and in love – during life, in the event of a parent’s incapacity, and when one or more of the parents dies.

Let’s being with an understanding of where potential conflicts could arise when you are part of a blended family.

Most people assume that if they die without a will, everything they own will go to their surviving spouse. Not so fast! In Virginia, if a person dies and has one or more children from another relationship, then the surviving spouse only inherits one-third (33.3%) of the estate. All of the children (including any children from the relationship with the surviving spouse) inherit the remaining two-thirds (66.7%) of the estate. Dying without a will or documented estate plan is one of the surest ways to create chaos and conflict among your family – and just imagine if your husband or wife will have to divide up your belongings with your surviving children!

Some people I meet with think that the solution is to write a will that leaves everything to the surviving spouse. And that is a perfectly legal option. But by doing so you could leave your older children without any inheritance. By leaving everything outright to your surviving spouse, that spouse then becomes free to pass their inheritance on to whomever he or she chooses. That could leave your children feeling unloved, forgotten, or resentful.

Another popular option is to create a trust that lets your surviving spouse have access to your estate and then upon the spouse’s death leave everything to your children. This too could create unintended consequences. Your children may feel resentful toward a stepparent. They might perceive the stepparent as using up all of their inheritance, and the children may feel compelled to keep tabs on how the surviving spouse is spending money and using assets that they feel rightfully belong to them.

Without thoughtfully planning through family dynamics, your estate could turn into a source of major conflict after your death. One of the best ways to avoid conflict is to create a clear plan for estate distribution and communicate that plan to your children, spouse, and loved ones during your life so that everyone knows your wishes and understands what should be done upon your death. We help facilitate these sorts of discussions at Forrest Law Center for all families, especially blended families.

If you are the child of a someone who has remarried or entered into a long-term relationship, you may want to bring the issue of inheritance up with your parent. While death is never an easy subject to bring, and you may feel uncomfortable talking about a parent’s future death, these conversations can often bring out some of the most important and lasting lessons from an older loved one.

If you are the parent who has remarried or entered into a long-term relationship, it is vital that you think about how you want to pass on not just your estate but your most cherished values to your loved ones. Your purposeful planning and clear communication will be more valuable to them than you might realize.

Disclaimer:  This article is for informational purposes only and not intended as legal advice or to create an attorney-client relationship. Every situation is unique and consultation with an attorney is required before any specific advice can be given.

What Small Business Owners Should Know About Embezzlement

If you own a small company where you personally know and interact with everyone who works for you, it can be hard to fathom that one of those people would ever steal from you. But the fact is, embezzlement happens all the time, even at small, family-owned businesses.

According to a 2017 study on white-collar crime by the U.S. insurance company Hiscox, the majority of embezzlement (55%) occurs at companies with fewer than 100 employees. And because these companies are small, embezzlement can impact these organizations much more severely than a similar crime would a larger company with deeper pockets. The study found that the median loss for a single incident of embezzlement for small businesses is nearly $290,000—which could prove fatal for some companies.

Given the potential damage embezzlement can cause, we’ve highlighted some of the key factors associated with small-business embezzlement from the Hiscox study, along with offering suggestions for preventing such crimes and what you should do if you suspect someone is stealing from you.

The usual suspects

Like most other crimes, there aren’t any characteristics specific to all embezzlers. But the Hiscox study did find a few interesting commonalities among the most frequent perpetrators:

  • Embezzlement takes place at all levels, but executives and those in management are the most frequent culprits.
  • Women are slightly more likely to embezzle (51%) than their male counterparts.
  • Embezzlers are typically in their mid- to late-40s.
  • Embezzlement can occur in any department, but most incidents (37%) occur in finance or accounting.
  • Embezzlers are most likely to be individuals who mostly work alone.

Common schemes and scams

For those with smarts, particularly in bookkeeping and accounting, there are numerous ways to skim money. The most common method is also one of the easiest—theft of funds. Making up 34% of all cases, this typically involves the transfer of their employer’s cash or deposits into a bank account they control.

The second most popular method is check fraud, whereby an embezzler forges or alter’s checks, which accounts for 22% of cases. About 14% of incidents involve vendor invoicing and false billing. Here, the perpetrators alter or forge invoices from real vendors, or they make up fake vendor companies, invoice their employers, and route the payments to their own accounts.

Credit card fraud accounts for about 10% of cases and is most often committed by managers, who make personal purchases on company cards or issue themselves unauthorized cards. Other, less common embezzlement methods include property/merchandise theft, payroll fraud, and fraudulent loans taken out in the company’s name.

Notably, embezzlement rarely involves a single big score. Most incidents entail fairly small amounts of money being stolen over a period of several years. In fact, more than a quarter of embezzlement cases lasted for five years or longer.

Embezzlement prevention

To protect your company, Hiscox suggests implementing a system of checks and balances, such as having more than one staffer involved in every financial transaction. Since most embezzlers fly solo, this alone can significantly reduce your risk.

Additionally, business owners—or at least someone outside of the normal bookkeeper—should regularly review the company’s bank statements, credit card invoices, canceled checks, and other financial records. At the very least, you should do a monthly profit-and-loss review, looking for variances and checking into even small discrepancies. That’s something we often participate in with business owners who are part of our Creative Business Lawyer Strategy Plans®. Email us for more details.

Obviously, pre-employment background checks are also a good idea, especially for anyone involved with the business’ finances. But don’t let a clear background lull you into thinking they aren’t capable of stealing.

One of the biggest red flags to watch for are employees who seem to live well above their means, with lifestyles and purchases that aren’t commensurate with their salaries. Many times, the culprits can’t help but flaunt their riches, so keep an eye on employees who enjoy showing off wealth that doesn’t match their paychecks.


And though it won’t prevent embezzlement, company owners should always purchase adequate business insurance to mitigate the consequences of employee theft. Even if you catch the culprit red-handed, it’s rare for more than a fraction of the stolen funds to be recovered, and restitution—even when paid—will do your business little good if the missing funds cause your business to go bankrupt.

If you suspect an employee of stealing


If you suspect embezzlement, you should immediately document everything you know about the situation, and discreetly review financial, payroll, and personnel records for supporting evidence. Only share the investigation with one or two trusted individuals, and always on a strict need-to-know basis. Make a list of potential witnesses, but don’t discuss anything outside of your small investigative team until the final stages. 

However, be very careful not to jump to conclusions and accuse someone without proof—this could irreparably tarnish the employee’s reputation, cause serious staff conflict, and even expose the company to liability.

Disclaimer:  This article is for informational purposes only and not intended as legal advice or to create an attorney-client relationship. Every situation is unique and consultation with an attorney is required before any specific advice can be given.