Business Planning | Begin the Begin

Five New Year’s Resolutions for Your Estate Plan

January 12, 2017

Happy New Year! Very often the New Year brings all sorts of ‘changes’ for individuals, particularly after having spent any time with family members and friends over the holiday season. Here is a quick list of five resolutions to consider for your estate plan.

Is it time to update your plan? If a plan is in place, when was the last time you reviewed it? Is it simply a binder of documents you received several year ago when you finished the estate planning process and you haven’t looked at since? Have circumstances changed that are not captured in the documents? Who are the fiduciaries (i.e., executor, trustee, healthcare power of attorney, financial power of attorney, guardian, etc.) listed? Are the fiduciaries still capable of serving? Does the plan do what you want it to do? There have been a lot of changes to estate tax laws in recent years, is your plan from before 2013? In some cases, does ‘updating’ your plan, actually mean finishing the process? Or does it mean starting the process so that your theoretical plan is memorialized?
Are there beneficiary designations? When was the last time you checked beneficiary designations on life insurance, retirement accounts (i.e., 401(k), IRAs, 403(b), 457, etc.) and annuities? What about any payable on death (POD) or transfer on death (TOD) designations you have on bank accounts or brokerage accounts…do those designations reflect your wishes? For government employees, are beneficiary designations up-to-date on your Federal, state or local benefits?
Families come in all shapes and sizes -Family Fiduciaries. Are you named as a fiduciary in any family member’s or friend’s plan? Have you touched base with that person recently to see how they are doing both health-wise and financially? Do you understand what your role is as the fiduciary? Do you know the family member’s or friend’s goals and objectives? Are you able to still serve, that is, are you distracted by a health event or financial crisis and perhaps you should not take the role? Have you considered options for a care manager if you are caring for an elderly family member or friend? How about looking at assisted living or skilled nursing or home health aides, if the circumstances warrant such considerations?
Are you charitably inclined? Do you have a charitable giving plan for this year? For future years? For at your death? Have you researched your options including direct giving, donor advised funds, private foundations and/or charitable trusts? Is there a planned gift that you would like to consider? Is now the time to investigate annual giving?
Succession planning occurs at many levels. Who will be in charge of any business whether it is a limited liability company, partnership or corporation? Are shareholders’ agreements and operating agreements up-to-date? And beyond a business interest, who will be in charge of your pets? Are there monies set aside for their care? What about digital assets? Have you ensured a smooth transition of online accounts to a successor? What about your tangible personal property? Is there an inventory? Appraisals? Designated recipients?

True, there are a lot of questions and not a lot of answers here, but that is the planning process. One has to begin with the questions to reach the answers. Working with a professional advisor can both provide you with the guidance needed to navigate these questions and ensure that you complete the process. #planyourjourney #lifeplanning #legacyplanning #estateplanning @bgnthebgn

The Future of Valuation Discounting…

December 29, 2016

Earlier this month, a long awaited hearing was held on the proposed regulations that would reduce the availability of valuation discounting when transferring closely held business interests. Close to forty individuals testified at the IRS hearing and all but one individual opposed the proposed regulations. Among several of the reasons why critics opposed the regulations included the following: (a) the potential for a ‘deemed put right’; (b) the creation of a three-year look back period; (c) the forced use of the ‘investment value’ standard for determining fair market value versus the ‘willing buyer – willing seller’ standard; and (d) the use of family attribution rules that could extend the reach of the proposed regulations. An attorney-advisor from the Treasury Office of Tax Legislative Council tried to assuage some of the concerns and even commented that it would be surprising if the regulations were finalized given the new administration.

What does the hearing mean for planning? It means that planning is still very much up in the air. For some, there has been a push to complete transactions by the end of year before the regulations are finalized. For others, any potential transactions are now on hold. Either way, the issue is not dead, but may be tabled until the next election and individuals and their advisors would be wise to monitor the situation to avoid getting caught without having planned. #valuationdiscounts #2704regulations #businessvaluations #estateplanning #businessplanning @bgnthebgn

Injunction Halts Implementation of New Overtime Rules

November 24, 2016

courthouse (h/t to my colleague, Timothy M. McConville, Esq.)

Earlier this year, the Department of Labor (“DOL”) issued new regulations to the Fair Labor Standards Act that would require changes to how employers classified certain employees unless compensation levels were changed. This week a Federal Court issued an injunction blocking the implementation of these new regulations that were set to take effect on December 1st. The injunction was issued nationwide, and therefore, prohibits the DOL from enforcing those regulations anywhere until a final resolution is reached. The Court’s reasoning behind the injunction was that the DOL exceeded its authority in issuing these regulations. With this injunction, many employers who had prepared to make changes as of December 1st are now in a holding pattern until the Court finally rules. Of course, many other forces, such as a change in the administration, may also impact the implementation of these regulations. Thus, if you are an employer who is subject to the Fair Labor Standards Act, you should reach out to your professional advisor to determine the impact this ruling has on your business. #overtimerule #businessplanning #DOLenjoined #FLSA @bgnthebgn

ALERT – Valuation Discounting Impacted By New Regulations

August 4, 2016

Estate planners and valuation experts have been advising clients for the last year that the IRS and Treasury would be issuing new regulations that would make it harder to transfer business interests without incurring estate or gift tax. The proposed regulations are now here and will reduce the availability of discounting for transfers of business interests that are subject to certain restrictions (e.g., restrictions on marketability). The proposed regulations will go through a 90 day public comment period and a public hearing is scheduled for December 1, 2016. The proposed regulations will be effective as to transfers that occur on or after the date the regulations become final, and in certain circumstances, as to transfers occurring 30 or more days after the regulations become final. Thus, those who hold interests in closely held businesses should contact their professional advisors to determine whether they need to take action before the regulations are finalized. #valuationdiscounts #2704regulations #businessvaluations #estateplanning #businessplanning @bgnthebgn

New Fair Labor Standards Act Regulations May Change How You Do Business

July 28, 2016

(h/t to my colleague, Fran Dwornik, for her informative presentation on this issue.)

Enacted in 1938 in response to the Great Depression, the Fair Labor Standards Act (“FLSA” or the “Act”) regulates Federal minimum wage, overtime and child labor standards. All employees are covered unless they are deemed to be exempt (i.e., certain executives, administrative, professional, outside sales, computer specialists and highly compensated employees as defined within the Act). To be exempt, certain requirements must be met that look at the basis for the salary paid, salary level (currently $23,660 per year) and the duties of the employee.

Effective with the pay period including December 1, 2016, the new FLSA regulations will increase the salary level to $47,476 per year, which will then be updated every 3 years beginning January 1, 2020. This means that as an employer, if your employee is salaried and not earning $47,476 annually, then either the salary will have to be increased to the new minimum to continue to classify the employee as exempt or the employee will need to be switched to hourly pay and you will have to track hours and pay overtime as appropriate. There are quarterly catch-up payments that can be made to cure an issue, but you first have to recognize that an issue exists.

Also changing on December 1, 2016 is that the salary threshold to classify an employee as a ‘highly compensated employee’ will increase from $100,000 per year to $134,000 per year, provided the employee performs at least one exempt duty. This threshold will also increase every 3 years beginning on January 1, 2020.

What does this mean for business owners and employers. First, employers who are subject to FLSA need to review and analyze their employee records and salaries to determine who will be exempt and who will not be exempt under the new regulations. Next, employers will have to make some decisions regarding whether to convert currently salaried employees to hourly employees or increase the base salary to the new minimum to maintain exempt status. If the employer converts employees to hourly pay, this may mean that employees will lose some level of flexibility in their day-to-day jobs as hours will now be tracked. For example, working from home may no longer be an option for a once salaried employee who now is paid hourly as an employer may want to be able to visibly track hours and time in the office. If the employer increases base salaries to the new minimum, this may result in an overall reduction of other benefits to cover the increased salary. More part-time jobs may be developed by employers where there are middle management exempt employees who will no longer be exempt (e.g., retail and restaurant industries).

Ultimately, the impact of the new regulations is not yet fully determined. However, if your are an employer subject to FLSA, then you should review your records and sit down with your professional advisor to ensure you are or will be in compliance with the new regulations. #businessplanning #FLSA #newregulations @bgnthebgn