4 Essential Strategies For Selling Your Business

March 31, 2020

As an entrepreneur, you’ve probably put lots of thought into the best ways to start and grow your business. But you likely haven’t put nearly as much effort into thinking about how you’ll sell it or exit it, in general. And if you decide that selling is the way to go, you’ll want to start considering that now, whether you are just starting out or have been in business for years. Putting your business up for sale is not something you want to do on the fly or without careful planning. You’ll need to clearly understand your company’s competitive position in the market, determine a realistic asking price, and carefully evaluate potential buyers’ suitability in order to position your business for sale. Before you put up a “For Sale” sign in your front window, review these four strategies to maximize your chances for success. Prepare your business for sale You don’t want to get stuck trying to sell your business at the last minute due to unforeseen circumstances, such as a debilitating illness or the arrival of new technology that renders your business model obsolete. It generally takes an average of two to four years to sell a business, so you should develop your exit strategy as soon as possible.Before you can come up with a sales price, you’ll need to gather and organize a hefty amount of documentation—financials, tax returns, business records, and other materials. What’s more, proper preparation is also vital for closing a sale: Buyers will be much more likely to purchase your company if they see you’ve taken the time to thoroughly prepare your sales portfolio. We can facilitate your planning and preparation by ensuring you have all of the proper records and documentation you need to properly value your business—and wow potential buyers. Effective valuation and pricing You no doubt want to see the maximum return on all of the hard work you’ve put into building your business, but you must be realistic. Valuing your operation should be based strictly on objective data like current market prices, cash flow, and growth forecasts. You can’t let emotions cloud your judgment, so seek the opinion of a professional appraiser for an optimal valuation. You must also determine the total cost of the sale. Before setting the price, carefully factor in all of the taxes, fees, and other expenses that will be deducted for the asking price, so you don’t end up shorting yourself. We can assist with accurately assessing all financial and tax obligations that come with a sale, as well as advise you on any potential legal issues that could influence the process. Vetting potential buyers While interested buyers will be investigating you and your operation, you should carefully vet them, too. Even if it’s a friend or colleague you know well, you’ll should carefully select and pre-qualify every potential buyer. And since you’ll be sharing sensitive company data with them, you should require buyers to sign a confidentiality agreement, not just to protect your privacy, but also to weed out those who aren’t serious. And don’t just sell to the first person to walk through […]

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Can Bankruptcy Save Your Business?

March 24, 2020

If you’re struggling with debt, but don’t want to shut down your business, bankruptcy might be one way to save your company. While this may sound paradoxical, many big corporations— American Airlines, General Motors, and Kodak—have successfully used bankruptcy to restructure debt and get a fresh start. The main difference between you and a big corporation filing bankruptcy is that if you use personal bankruptcy (either Chapter 7 or Chapter 13) to discharge or restructure your debt, it will impact your personal credit. In contrast, a Chapter 11 bankruptcy used by big corporations doesn’t hurt the credit of corporate officers or shareholders. However, a few years of negative credit may be a valid option to give you another chance to rebuild your business. But deciding between Chapter 7 and Chapter 13, or whether to use bankruptcy at all (as opposed to negotiating directly with creditors), are big decisions—but ones we can help you evaluate. How does Chapter 7 work? Chapter 7 is a liquidation bankruptcy, which means all of your non-exempt assets (including your business assets) will be sold off by a court-appointed trustee to repay your creditors. This can let you wipe your personal debts clean and start over, albeit without credit available to you for some time. And though your personal assets will be included in the bankruptcy estate, you can use exemptions to protect this property. In fact, if you don’t have a high income or significant assets, you might be able to use exemptions to protect all of what you do have using what’s known as a “no-assets case.” This is designed to ensure business owners have enough assets to sustain themselves while they get back on their feet. How does Chapter 13 work? Chapter 13 lets you keep your assets and repay some or all of your debts through a court-approved payment plan lasting three or five years. By filing Chapter 13, the court grants an “automatic stay” stopping ALL creditors from pursuing you. This temporarily halts repossession of your business and personal property, allowing you to potentially lower your payments—or at least give you time to catch up on those you’re behind on. When it comes to secured debts, you can give up the collateral and convert the debt to an unsecured claim, or keep the property and continue to make payments through your repayment plan. What’s more, you typically pay only a portion of your unsecured debts, and the remainder is discharged (forgiven) at the end of the bankruptcy, provided you kept up with payments. However, Chapter 13 requires that you pay off certain “priority” debts—back taxes, child support, and alimony—in full, regardless of your income. Start with a clean slate Both types of bankruptcy can improve your financial situation and let you re-focus on your business, without closing your doors. However, bankruptcy is not a panacea, and if you fail to meet your court-ordered obligations, you can face serious consequences. Given this, consult with us as your Creative Business Lawyer® to see if either of these bankruptcy options (or negotiating directly with creditors) are right for you. This article is a service […]

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Use Estate Planning to Ensure Your Legacy Doesn’t Get Erased

March 17, 2020

When you think about those loved ones who’ve passed away, you probably don’t think very much—or even at all—about the “things” they’ve left you. And when they do leave something behind, what you likely cherish most about the object are the memories and feelings it evokes, not the thing itself. For the founder and CEO of New Law Business Model, Alexis Katz, the most treasured memento her late father left her wasn’t even something he intended to be special—it was just a random voicemail on her cellphone. And the message wasn’t meant to be anything sentimental. His message simply said, “Lex, it’s your dad. Call me back.” Following his death, Alexis loved listening to that message to hear her father’s voice. Of all the assets he left behind, that voicemail was what she cherished most. Until one day, she went to listen to the message and discovered it had been erased—and her father’s voice was lost to her forever. She still recalls that day as one of her worst ever, yet like most painful events, it taught her an important lesson. Losing that voicemail ultimately inspired Alexis to build a new feature into her family-centered model of estate planning, known as Family Wealth Legacy Passages. This feature, which is included in every plan we create, allows you to preserve and pass on something that’s inherently more valuable than any tangible asset you might leave your loved ones. Preserving your intangible assets We recognize that estate planning isn’t just about preserving and passing on your financial wealth and property when you die. When done right, planning allows you to share your family’s stories, values, and life lessons, so your legacy carries on long after you—and your money—are gone. Family Wealth Legacy Passages is a process that’s designed to not only ensure these intangible assets never get lost, but also to make the process of documenting them as easy and convenient as possible. In this process, we guide you to create a customized recording in which you share your most insightful memories and life lessons, not just for your children and grandchildren, but for generations to come. My favorite part about this process is that most of our clients tell us that going through it helps them surface things they would have never thought about regarding how they want to parent differently or things they want to share now, during life, not just leave behind a lasting legacy of love. To help inspire you, we’ve developed a series of helpful questions and prompts, which makes the process not only easy, but enjoyable. And this isn’t something you have to do on your own, which you’d probably never get around to doing, despite your best intentions. Instead, Family Wealth Legacy Passages is something we include as an integral part of our planning services—and it’s included at no extra charge with each plan we create. In the end, your family’s most precious wealth is not money, but the memories you make, the values you instill, and the lessons you hand down. And left to chance, these assets are likely to be lost forever just […]

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Use Estate Planning to Avoid Adult Guardianship—and Elder Abuse: Part 2

March 10, 2020

In the first part of this series, we discussed how some professional adult guardians have used their powers to abuse the seniors placed under their care. Here, we’ll discuss how seniors can use estate planning to avoid the potential abuse and other negative consequences of court-ordered guardianship. As our senior population continues to expand, an increasing number of elder abuse cases involving professional guardians have made headlines. The New Yorker exposed one of the most shocking accounts of elder abuse by professional guardians, which took place in Nevada and saw more than 150 seniors swindled out of their life savings by a corrupt Las Vegas guardianship agency. The Las Vegas case and others like it have shed light on a disturbing new phenomenon—individuals who seek guardianship to take control of the lives of vulnerable seniors and use their money and other assets for personal gain. Perhaps the most frightening aspect of such abuse is that many seniors who fall prey to these unscrupulous guardians have loving and caring family members who are unable to protect them. In the first part of this series, we detailed how criminally minded individuals can take advantage of an overloaded court system and seize total control of seniors’ lives and financial assets by gaining court-ordered guardianship. Here we’ll discuss how seniors and their adult children can use proactive estate planning to prevent this from happening. It’s important to note that any adult could face court-ordered guardianship if they become incapacitated by illness or injury, so it’s critical that every person over age 18—not just seniors—put these planning vehicles in place to prepare for a potential incapacity. Keep your family out of court and out of conflict Outside of the potential for abuse by professional guardians, if you become incapacitated and your family is forced into court seeking guardianship, your family is likely to endure a costly, drawn out, and emotionally taxing ordeal. Not only will the legal fees and court costs drain your estate and possibly delay your medical treatment, but if your loved ones disagree over who’s best suited to serve as your guardian, it could cause bitter conflict that could unnecessarily tear your family apart. Furthermore, if your loved ones disagree over who should be your guardian, the court could decide that naming one of your relatives would be too disruptive to your family’s relationships and appoint a professional guardian instead—and as we’ve seen, this could open the door to potential abuse. Planning for incapacity The potential turmoil and expense, or even risk of abuse, from a court-ordered guardianship can be easily avoided through proactive estate planning. Upon your incapacity, an effective plan would give the individual, or individuals, of your choice immediate authority to make your medical, financial, and legal decisions, without the need for court intervention. What’s more, the plan can provide clear guidance about your wishes, so there’s no mistake about how these crucial decisions should be made during your incapacity. There are a variety of planning tools available to grant this decision-making authority, but a will is not one of them. A will only goes into effect upon your […]

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Use Estate Planning to Avoid Adult Guardianship—and Elder Abuse

March 3, 2020

Elder abuse can take a wide variety of forms, but we think the worst of the worst is caused by unscrupulous adult guardians appointed by a court to care for seniors who are no longer able to care for themselves. And though you may not want to believe such a thing could happen, you need to know that without the right planning in place, even the seniors in your own family could be at risk. In fact, there are currently 1.5 million American adults under guardianship, with an estimated 85% of them over age 65. All total, these guardians control nearly $273 billion in assets. And a 2010 report by the Government Accountability Office (GAO) found hundreds of cases where guardians were involved in the abuse, exploitation, and neglect of seniors placed under their supervision. Exploitation disguised as protection Although most of the reported abuse was committed by family members, an increasing number of elder abuse cases involving professional guardians have recently made the headlines. The New Yorker exposed one of the most shocking accounts of elder abuse by professional guardians, and the abuse suffered by these victims is so horrendous, it’s hard to believe. The case involved the owner of a Las Vegas guardianship agency, who was indicted on more than 200 felonies for using her guardianship status to swindle more than 150 seniors out of their life savings. The craziest part of this is that many of those seniors had loving and caring family members, who were unable to protect their senior family members. That case and similar cases of criminal abuse by professional guardians across the country has shed light on a disturbing new phenomenon—individuals who seek guardianship to take control of the lives of vulnerable seniors and use their money and other assets for personal gain. These predatory guardians search for seniors with a history of health issues, and they’re often able to obtain court-sanctioned guardianship with alarming ease. From there, they can force the elderly out of their homes and into assisted-living facilities and nursing homes. They can sell off their homes and other assets, keeping the proceeds for themselves. They can prevent them from seeing or speaking with their family members, leaving them isolated and even more vulnerable to exploitation. What’s more, though it’s possible for a guardianship to be terminated by the court if it can be proven that the need for guardianship no longer exists, a study by the American Bar Association (ABA) found that such attempts typically fail. And those family members who do try to fight against court-appointed guardians frequently end up paying hefty sums of money in attorney’s fees and court costs, with some even going bankrupt in the process. An open door for potential abuse Obviously, not all professional guardians exploit the seniors (known as wards) placed under their care. But with the combination of the exploding elderly population—many of whom will require guardians—and our overloaded court system, such abuse will almost certainly become more common. Indeed, as the swelling aging population strains court resources, strict oversight of professional guardians is likely to become increasingly more difficult, enabling […]

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pink inflatable flamingo on clear water during vacation

4 Critical Estate Planning Tasks to Complete Before Going on Vacation

February 25, 2020

Going on vacation entails lots of planning: packing luggage, buying plane tickets, making hotel reservations, and confirming rental vehicles. But one thing many people forget to do is plan for the worst. Traveling, especially in foreign destinations, means you’ll likely be at greater risk than usual for illness, injury, and even death. In light of this reality, you must have a legally sound and updated estate plan in place before taking your next trip. If not, your loved ones can face a legal nightmare if something should happen to you while you’re away. The following are 5 critical estate planning tasks to take care of before departing. Make sure your beneficiary designations are up-to-date Some of your most valuable assets, like life insurance policies and retirement accounts, do not transfer via a will or trust. Instead, they have beneficiary designations that allow you to name the person (or persons) you’d like to inherit the asset upon your death. It’s vital you name a primary beneficiary and at least one alternate beneficiary in case the primary dies before you. Moreover, these designations must be regularly reviewed and updated, especially following major life events like marriage, divorce, and having children. Create power of attorney documents Outside of death, unforeseen illness and injury can leave you incapacitated and unable to make critical decisions about your own well-being. Given this, you must grant someone the legal authority to make those decisions on your behalf through power of attorney. You need two such documents: medical power of attorney and financial durable power of attorney. Medical power of attorney gives the person of your choice the authority to make your healthcare decisions for you, while durable financial power of attorney gives someone the authority to manage your finances. As with beneficiary designations, these decision makers can change over time, so before you leave for vacation, be sure both documents are up to date. Name guardians for your minor children If you’re the parent of minor children, your most important planning task is to legally document guardians to care for your kids in the event of your death or incapacity. These are the people whom you trust to care for your children—and potentially raise them to adulthood—if something should happen to you. Given the monumental importance of this decision, we’ve created a comprehensive system called the Kids Protection Plan that guides you step-by-step through the process of creating the legal documents naming these guardians. You can get started with this process right now for free by visiting our user-friendly website https://propaplaw.kidsprotectionplan.com/ Organize your digital assets If you’re like most people, you probably have dozens of digital accounts like email, social media, cloud storage, and cryptocurrency. If these assets aren’t properly inventoried and accounted for, they’ll likely be lost forever if something happens to you. At minimum, you should write down the location and passwords for each account, and ensure someone you trust knows what to do with these digital assets in the event of your death or incapacity. To make this process easier, consider using LastPass or a similar service that stores and organizes your passwords. Complete […]

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The SECURE Act’s Impact On Estate and Retirement Planning—Part 2

February 12, 2020

In the first part of this series, we discussed the potential ramifications the SECURE ACT has for your estate and retirement planning. Here, we’ll look more deeply into additional strategies you may want to consider in light of the new legislation. On January 1, 2020, the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) went into effect, and it could have big implications for both your retirement and estate planning strategies—and not all of them are positive. Last week, we discussed three of the SECURE Act’s most impactful provisions. Specifically, we looked at the SECURE Act’s new requirements for the distribution of assets from inherited retirement accounts to your beneficiaries following your death. Under the new law, your heirs could end up paying far more in income taxes than necessary when they inherit the assets in your retirement account. Moreover, the assets your heirs inherit could also end up at risk from creditors, lawsuits, or divorce. And this is true even for retirement assets held in certain protective trusts designed to shield those assets from such threats and maximize tax savings. Here, we’ll cover the SECURE Act’s impact on your financial planning for retirement, offering strategies for maximizing your retirement account’s potential for growth, while minimizing tax liabilities and other risks that could arise in light of the legislation’s legal changes. Tax-advantaged retirement planning If your retirement account assets are held in a traditional IRA, you received a tax deduction when you put funds into that account, and now the investments in that account grow tax free as long as they remain in the account. When you eventually withdraw funds from the account, you’ll pay income taxes on that money based on your tax rate at the time. If you withdraw those funds during retirement, your tax rate will likely be quite low because you typically have much less income in your retirement years. The combination of the upfront tax deduction on your initial investment with the lower tax rate on your withdrawal is what makes traditional IRAs such an attractive option for retirement planning. Thanks to the SECURE Act, these retirement vehicles now come with even more benefits. Previously, you were required to start taking distributions from retirement accounts at age 70 ½. But under the SECURE Act, you are not required to start taking distributions until you reach 72, giving you an additional year-and-a-half to grow your retirement savings tax free. The SECURE Act also eliminated the age restriction on contributions to traditional IRAs. Under prior law, those who continued working could not contribute to a traditional IRA once they reached 70 ½. Now you can continue making contributions to your IRA for as long as you and/or your spouse are still working. From a financial-planning perspective, you’ll want to consider the effect these new rules could have on the goal for your retirement account assets. For example, will you need the assets you’ve been accumulating in your retirement account for your own use during retirement, or do you plan to pass those assets to your heirs? From there, you’ll want to consider the potential income-tax […]

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The SECURE Act’s Impact On Estate and Retirement Planning—Part 1

February 11, 2020

On January 1, 2020, the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) went into effect, and it represents the most significant retirement-planning legislation in decades. Indeed, the changes ushered in by the SECURE Act have dramatic implications for both your retirement and estate planning strategies—and not all of them are positive. While the law includes a number of taxpayer-friendly measures to boost your ability to save for retirement, it also contains provisions that could have disastrous effects on planning strategies families have used for years to protect and pass on assets contained in retirement accounts. Given this, if you hold assets in a retirement account you need  to review your financial plan and estate plan as soon as possible. To help you with this process, here we’ll cover three of the SECURE Act’s biggest changes and how they stand to affect your retirement account both during your lifetime and after your death. Next week, we’ll look more deeply into a couple of additional strategies you may want to consider. 1. Increased age for Required Minimum Distributions (RMD) Prior to the SECURE Act, the law required you to start making withdrawals from your retirement account at age 70 ½. But for people who haven’t reached 70 ½ by the end of 2019, the SECURE Act pushes back the RMD start date until age 72. 2. Repeal of the maximum age for IRA contributions Under previous law, those who continued working could not contribute to a traditional IRA once they reached 70 ½. Starting in 2020, the SECURE Act removed that cap, so you can continue making contributions to your IRA for as long as you and/or your spouse are still working. These two changes are positive because with our increased life spans people are now staying in the workforce longer than ever before, and the new rules allow you to continue contributing to your retirement accounts and accumulating tax-free growth for as long as possible. However, to offset the tax revenue lost due to these beneficial changes, as you’ll see below, the SECURE Act also includes some less-favorable changes to the distribution requirements for retirement accounts after your death. Elimination of stretch provisions for inherited retirement accounts The part of the SECURE Act that’s likely to have the most significant impact on your heirs is a provision that makes significant changes to distribution requirements for inherited retirement accounts, and effectively ends the so-called “stretch IRA.”Under prior law, beneficiaries of your retirement account could choose to stretch out distributions—and, therefore, the income taxes owed on those distributions—over their own life expectancy. For example, an 18-year old beneficiary expected to live an additional 65 years could inherit an IRA and stretch out the distributions for 65 years, paying income tax on just a small amount of their inheritance every year. And in that case, the income tax law would encourage the child to not withdraw and spend the inherited assets all at once.Under the SECURE Act, however, most designated beneficiaries will now be required to withdraw all the assets from the inherited account—and pay income taxes on them—within 10 years […]

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Kobe Bryant’s Untimely Death Highlights the Vital Need for Estate Planning at All Ages

February 4, 2020

As you no doubt already know, on January 26, 2020, basketball legend Kobe Bryant was killed in a helicopter crash on a wooded hillside 30 miles north of Los Angeles. Also killed in the tragic accident was his 13-year-old daughter Gianna, and seven other passengers, who were friends and colleagues of Kobe and his family. The exact cause of the crash remains under investigation. The 41-year-old former Los Angeles Laker was flying to Mamba Sports Academy, a youth sports center Kobe founded in Thousand Oaks, where his daughter Gianna was set to play in a basketball tournament. Fortunately, none of Kobe’s other family members were on the flight, and he’s survived by his wife Vanessa and three other daughters: Natalia, 17, Bianka, 3, and Capri, 7 months. Kobe’s sudden death at such a young age has led to a huge outpouring of grief from fans across the world. Whenever someone so beloved dies so young, it highlights just how critical it is for every adult—but especially those with young children—to create an estate plan to ensure their loved ones are properly protected and provided for when they die or in the event of their incapacity. While it’s too early to know the exact details of Kobe’s estate plan (and he may have planning vehicles in place to keep the public from ever knowing the full details), we can still learn from the issues his family and estate are likely to face in the aftermath of his death. We cover these issues in hopes that it will inspire you to remember that life is not guaranteed, death can come at any moment, and your loved ones are counting on you to do the right thing for them now. Kobe’s sports and business empire Between his salary and endorsements during his 20-year career with the L.A. Lakers, Kobe earned an estimated $680 million. And that’s not counting the money he made from his numerous business ventures, licensing rights for his likeness, and extensive venture capital investments following his retirement from the NBA. That said, by all estimates, his estate has the potential to be the most valuable of any modern athlete. Given his business acumen and length of time in the spotlight, it’s highly unlikely Kobe died without at least some planning in place to protect his assets and his family. But even if Kobe did have a plan, when someone so young, wealthy, and successful passes away this unexpectedly in such a terrible accident, his family and estate will almost certainly face some potential threats and complications. For example, due to his extreme wealth, Kobe likely created trusts and other planning strategies to remove some of his assets from his estate in order to reduce his federal estate-tax liability. However, because he was so young and still actively involved in numerous business ventures, it’s quite unlikely that all—or even the majority—of his assets had been fully transferred into those protective planning vehicles. And seeing that Kobe owned the helicopter and the weather at the time was poor (many other flights had already been grounded), there’s also the real potential that the […]

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5 Updates you must make to your estate plan if you’re getting divorced - Part II

5 Estate Planning Must-Dos if You’re Getting Divorced – Part 2

January 28, 2020

In the first part of this series, we discussed a couple of the most critical updates you must make to your estate plan if you’re getting divorced. Here, we’ll cover the last three of these must-do planning tasks. Because getting divorced can be overwhelming on so many different levels, updating your estate plan often takes a back seat to other seemingly more-pressing priorities. But failing to update your plan for divorce can have potentially tragic consequences, some of which you may have never even considered before. In fact, it’s critical that you update your plan not only after the divorce is final, but as soon as you know the split is inevitable. Until your divorce is final, your marriage is legally in full effect, so if you die or become incapacitated while the divorce is still ongoing and you haven’t updated your plan, your soon-to-be ex-spouse could end up with complete control over your life and assets. For example, if you suddenly die of a heart attack while the divorce is ongoing and never got around to changing your estate plan, it’s quite likely that your future ex would inherit everything. And if that’s not bad enough, if you were to become incapacitated in a car accident during the divorce, the very person you’re paying big money to legally remove from your life could be granted complete authority over all of your legal, financial, and healthcare decisions. This is something your divorce attorney won’t think to bring up, but it’s literally one of the most critical matters you need to handle if you’re ending your marriage. Last week, we discussed the first two estate planning changes you must make—updating your power of attorney documents and beneficiary designations—and today we’ll share the remaining three. Create a new will You should create a new will as soon as you decide to get divorced, because once you file, you may not be able to change your will. Rethink how you want your assets divided upon your death. This most likely means naming new beneficiaries for any assets that you’d previously left to your future ex and his or her family. And unless it’s your wish, you’ll probably no longer want your ex—or any of his or her family—listed as your will’s executor or administrator, either. Some states have community-property statutes that entitle your surviving spouse to a certain percentage of the marital estate upon your death, regardless of what’s in your will. This means if you die before the divorce is final, you probably won’t be able to entirely disinherit your surviving spouse through the new will. However, it’s almost certain you wouldn’t want him or her to get everything. Given this, you should update your will as soon as possible once divorce is inevitable to ensure the proper individuals inherit the remaining percentage of your estate should you pass away while your divorce is still ongoing. And should you choose not to create a new will during the divorce process, don’t assume that your old will is automatically revoked once the divorce is final. State laws vary widely in regards to how […]

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