A Performance Management Tool For The Legal Department

Introduction

Every organization recognizes importance of measuring performance. It provides means of monitoring achievement of organization’s strategy. As such, it is a vital means of motivation.

That, at least is theory!

However, in reality, many organizations have yet to implement a performance measurement system that adequately fits bill, especially in legal department. They, instead, focus their attention on “after horse is out of barn”, like outcomes and financial performance. Thus, these organizations pay price:

•Most legal matter indicators and financial indicators are backward looking – it has been likened to “steering ship by watching wake” •Legal department performance and financial performance tends to be measured over short term and induces short term ‘fixes’ •Legal department measures and financial measures alone cannot communicate organization’s strategy and priorities to its managers and staff

Although, following approach may be applied to many departments within organization, this article focuses our attention on corporate legal department. As we have found that it is disparagingly referred to by senior management as a “necessary evil”.

With that said, corporate legal departments are now being required to do more than win cases and manage costs. They have a dual mandate, which includes adding value to corporation while providing successful, cost effective legal work to their corporate client. Adding value includes qualitative as well as quantitative measures.

Your Living Trust does not need to be changed to incorporate these changes.

However, there are other developments which might be appropriate to consider.

1) You might want to consider a Dynasty Living Trust. The advantage of using generation skipping tax exemption is greater during grantor’s lifetime. Once property is transferred to a dynasty Living Trust, all appreciation and accumulated income generated by property until grantor’s death will be exempt from estate tax as long as it remains in Living Trust. Basically, this is a grown-up Minor's Living Trust.

2) Another more recent development is worth considering. Since after one spouse dies, Survivor has full control of Surviving Spouse's Living Trust, including right to change beneficiary (through General Power of Appointment), it is important to insure that children from first marriage inherit their deserved portion.

This is what could happen. You die. Your Living Trust divides into two or three shares. Your wife, who has control of Living Trust, spends your half of estate, remarries, and leaves her half to new spouse (not your intention). You may discuss this now with your spouse and decide that assets you have acquired during your lifetime together belong to both of you. While you still want your spouse to be happy and maybe even remarry, you want your joint assets to be inherited by your children, not new spouse.

It is possible with standard A - B - C Living Trust held by most married couples, which allows Survivor's half (the A Living Trust) to be changed, to incorporate an instruction that A Living Trust (the Survivor’s half) will be locked. With this feature, surviving spouse may spend everything, but whatever is not spent must be left to your family rather than new spouse.

3) Because time has passed since your Living Trust was first written, formerly young children are not so young anymore, and successors you selected to make your decisions may no longer be appropriate because they are too old. Please review these designations listed in your Living Trust and Powers of Attorney (financial and Health Care). Furthermore, inheritance age threshold designated for minor children at time you made your Living Trust may no longer be appropriate. At time, you were guessing about what these minors would be like, say, when they became 25 years old. Maybe you now think it is necessary to adjust that age restriction.