CARES Act Authorizes $349 Billion in Forgivable Small Business Loans

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On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), authorizing the United States Small Business Administration (the “SBA”) to issue up to $349 billion in forgivable loans to eligible small businesses through June 30, 2020. SBA §7(a)-approved lenders will be begin processing loan applications as soon as April 3, 2020.

Under Section 1102 of the CARES Act, the “Paycheck Protection Program,” employers with five hundred (500) or fewer employees can borrow up to an amount equal to 2.5 times the employer’s average monthly payroll expense or $10 million, whichever is less. The Paycheck Protection Program waives a number of the requirements that are typically applicable to SBA loans, caps interest rates at four percent (4%), and provides for complete payment deferment (including payment of principal, interest and fees) for not less than six (6) months and not more than one (1) year.

Section 1106 of the CARES Act provides that the principal balance of a loan obtained under the Paycheck Protection Program is forgivable in full, provided that the loan is used to pay for business continuity expenses, including: payroll (wages, health insurance, sick leave, retirement, and other benefits), mortgage interest expenses, rent expenses, and utility expenses. However, the total amount of the principal balance that is forgiven will be reduced if an employer lays off employees who are not subsequently rehired or reduces compensation to employees by more than twenty-five percent (25%) during the covered period (March 1, 2020, through June 30, 2020).

The SBA recently updated its website to include information regarding Paycheck Protection Program loans, including a sample application form.

If you have any questions regarding this topic, please contact Lin Law LLC at (920) 393-1190.

The Business News publishes guest legal column by Lin Law LLC

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The following article by Lin Law LLC’s Attorney Emily E. Ames was published in the March 30, 2020 issue of The Business News as Now is good time to review succession plan.

 

Preparing During a Pandemic: Does Your Business Have a Succession Plan?

In the midst of a global pandemic and the corresponding uncertainty regarding the future, now is a good time to review your business’ succession plan (if you have one) or to start putting one in place (if you do not). Unsure whether you have a business succession plan? Two basic but important questions for business owners to consider are: “what will happen to my business when I’m ready to retire?” and “what will happen to my business if I die unexpectedly?” If you do not have a good answer to one or both of these questions, it’s time to do some work.

At a minimum, it is important to ensure that your business has all the necessary documentation in place. For a limited liability company, this will primarily consist of a comprehensive Operating Agreement, and should also include consent resolutions executed by the members, which document important transactions and business decisions. For a corporation, this means up-to-date Bylaws, accurate and regularly-maintained corporate minutes, and a Shareholders’ Agreement or other similar Buy-Sell Agreement. The business should, ideally, have an Employment Agreement in place for all key employees.

There are also practical considerations to keep in mind. Does someone other than you have the log-in information for all hardware and important software? Does someone other than you have access to the information necessary to maintain essential business operations? If the answer to either of these questions is “no,” begin documenting these items as soon as possible.

Another issue to consider is whether you intend to pass the business on to an employee or business partner, or whether you would prefer to sell it to a third party. If the former, it is important to begin identifying potential successors and training them as soon as practicable. The sooner you start, the better. If the latter, consider how you will go about identifying an appropriate buyer and what you can do to make the business more marketable. In both cases, it’s important to understand what your business is realistically worth.

Keep in mind the interplay between your business succession plan and your estate plan, and ensure that the two are coordinated. Ideally, your Operating Agreement or Shareholders’/Buy-Sell Agreement will specify what happens to your ownership interest upon your death. These documents will frequently grant a right of first refusal for the corporate entity or other owners to purchase your ownership interest. If this is the goal, it’s important to have life insurance in place that will prevent any liquidity issues in the event the corporate entity wishes to exercise that option. However, if none of the other owners or the company are willing or able to exercise such option, your ownership interest will generally be distributed in accordance with the terms of your Will or Revocable Trust, if you have one, or the default laws of inheritance, if you don’t.

These issues are just a starting point, but they illustrate the importance of having an official business succession plan in place. While having no official succession plan for your business is still a plan, it’s not a very good one.

If you have any questions regarding this topic, please contact Lin Law LLC at (920) 393-1190.

Lin Law LLC Is Here for You

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Pursuant to Governor Evers’ Safer at Home Order, dated March 24, 2020, law firms are deemed an essential business and, as such, may continue to operate during the ongoing COVID-19 pandemic. Lin Law LLC will remain open and continue to serve our clients during this difficult and unprecedented time.

We will, however, conduct client meetings and other business via teleconference or videoconference to the extent reasonably possible, in order to protect our clients and staff. If you need to visit Lin Law LLC in person, we ask that you call ahead and maintain social distancing while visiting our office. We will update you, our valued clients, on any changes to these practices.

Wishing you and your family continued safety and health,

Lin Law LLC

Expanded Leave Under the Families First Coronavirus Response Act

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On March 18, 2020, President Trump signed into law House Resolution 6201, the Families First Coronavirus Response Act (the “Act”). The Act, which is applicable to employers with five hundred (500) or fewer employees, provides expanded paid and unpaid leave to employees in response to the ongoing COVID-19 pandemic.

Emergency Family and Medical Leave Expansion Act

Division C of the Act, subtitled the “Emergency Family and Medical Leave Expansion Act”, uses the existing Family and Medical Leave Act (FMLA) as a framework to provide eligible employees with the right to take up to twelve (12) weeks of job-protected leave. Eligible employees are those who have worked for the employer for at least thirty (30) calendar days and who are unable to work because they must care for their minor child due to the child’s school or care provider being closed or unavailable.

While the first ten (10) days of required leave may be unpaid, employers must provide up to ten (10) weeks of paid leave once the unpaid leave has been utilized by an employee. The required rate of pay is two-thirds (2/3) of the employee’s regular rate of pay, multiplied by the number of hours the employee would otherwise be scheduled to work, up to $200 per day or $10,000 in the aggregate.

Emergency Paid Sick Leave Act

Division E of the Act, subtitled the “Emergency Paid Sick Leave Act,” requires employers to provide up to eighty (80) hours of paid sick leave to eligible employees, regardless of how long the employee has been employed by the employer. Employees are eligible for paid sick leave under Division E if they are unable to work for any of the following reasons:

  • The employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19;
  • The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  • The employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis;
  • The employee is caring for an individual who is subject to an order to quarantine or isolate by a public order or self-quarantine as advised by a health care provider;
  • The employee is caring for the employee’s child if the school or place of care for such child has been closed, or if the child care provider of such child is unavailable due to COVID-19 precautions; or
  • The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

Employees exercising sick leave must be paid at their regular pay rate or at the federal, state or local minimum wage, whichever is greater, not to exceed $511 per day or $5,110 in the aggregate. Employees who take paid sick leave to care for another individual or child are entitled pay of two-thirds (2/3) their regular rate. In these circumstances, the paid sick leave rate may not exceed $200 per day or $2,000 in the aggregate.

Available Tax Credits for Employers 

To help offset the burden to employers, the Act provides a refundable payroll tax credit for one hundred percent (100%) of qualified emergency leave wages (as provided by Division C) and qualified paid sick leave wages (as provided by Division E) paid by an employer through the end of 2020. The allowable credit amount for any calendar quarter cannot exceed the total employer payroll tax obligations on all wages for all employees.  However, if the amount of the credit that would otherwise be allowed is so limited, the amount of the limitation is refundable to the employer.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

Happy International Women’s Day!

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Sunday, March 8, 2020 is International Women’s Day! This day, celebrated annually since 1911, honors working women worldwide. Most working women have a lot on their plate, and between their careers, their families, and all the other day-to-day goings-on, their estate plan is probably not at the top of their priority list. So, let’s take some time, in honor of International Women’s Day, to consider the unique challenges women face with regard to their estate plans.

Women in the United States live an average of 5 years longer than men. As a result, they are statistically likely to outlive their male spouses. Depending on each spouse’s level of involvement in the estate planning process, a new widow may or may not have a good understanding of how her estate plan works, and should consider having it reviewed to determine whether any updates are necessary.

Women are often caregivers not only for their children, but also for ageing parents (this has become so common that there’s a term for it: the “sandwich generation”). Women in this position should take the time to consider who will take over their responsibilities if they themselves become incapacitated. This may require ensuring that successor trustees, attorneys-in-fact for finances, health care agents, and/or guardians are named to take over those responsibilities.

Finally, women are often the peacekeepers in their families, and may wish to plan for and, hopefully, help soften the impact their passing will have on their spouse, children, and other family members. This could include leaving specific instructions regarding the disposition of tangible personal property (particularly items like family heirlooms), putting written procedures in place for managing the family cottage, and/or pre-planning their funeral and burial arrangements.

Planning for the future isn’t always easy, but doing so will help to ensure that your loved ones are provided for after you’re gone.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

The Estate of Kobe Bryant

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On January 26, 2020, beloved basketball star Kobe Bryant died in a helicopter crash at the age of 41. Given Kobe’s estimated net worth (he earned an estimated $680 million over his 20-year career with the Lakers alone), his estate plan (or potential lack thereof) has been a hot news topic ever since. However, Kobe’s lifetime earnings are only a small part of his financial and estate planning picture. In 2013, Kobe co-founded the venture-capital firm Bryant Stibel, and in 2016 began investing in sports drink brand BodyArmor. As the result of a recent investment in BodyArmor by Coca-Cola, Kobe’s initial $6 million investment in the company is now worth an estimated $200 million.

Kobe was, of course, survived by his wife, Vanessa, and rumor has it they married without a prenuptial agreement. Depending on how Kobe’s estate plan, if any, was structured, Vanessa is likely to inherit a large portion, if not all, of Kobe’s estate. Due to the unlimited marital estate tax deduction, she will inherit those assets free of estate tax. However, Vanessa will now have the task of managing her late husband’s estate, including his various business endeavors, and planning the eventual disposition of that estate. The work and difficulty involved in doing so will depend, in large part, upon the planning, or lack thereof, that Kobe completed during his lifetime.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

IRS Confirms: No “Claw-Back”

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Ever since the 2017 Tax Cuts and Jobs Act (“TCJA”) doubled the federal estate tax exemption amounts (adjusted for inflation to $11.58 million for 2020), estate taxes have been a thing of the past for most individuals. Some high net-worth individuals, however, have kept in mind that the TCJA is set to “sunset” on December 31, 2025, at which point the estate tax exemption amount will revert back to amount in effect in 2017 ($5 million, as adjusted for inflation). Those individuals have therefore questioned whether it is possible to utilize a portion of the presently available exemption amount by making taxable lifetime gifts, or whether the IRS would later “claw back” the temporarily increased exemption amount by reducing a taxpayer’s available estate tax exemption by the cumulative total of the gifts made by the taxpayer while the TCJA was in effect.

On November 22, 2019, the Internal Revenue Service issued final “anti-claw-back” regulations in the form of Treasury Decision 9884. This decision provides that an estate may compute the applicable estate tax credit using either the exemption amount applicable during the decedent’s lifetime or the exemption amount applicable on the date of the decedent’s death, whichever is greater.

26 CFR § 20.2010-1 provides the following example (edited for simplicity):

Individual A (never married) made cumulative taxable gifts of $9 million, all of which were sheltered from gift tax by the cumulative total of $11.4 million in basic exclusion amount allowable on the dates of the gifts. The basic exclusion amount on A’s date of death is $6.8 million. Because the total of the amounts allowable as a credit in computing the gift tax payable on A’s gifts (based on the $9 million of basic exclusion amount used to determine those credits) exceeds the credit based on the $6.8 million basic exclusion amount allowable on A’s date of death, the credit for purposes of computing A’s estate tax is based on a basic exclusion amount of $9 million, the amount used to determine the credits allowable in computing the gift tax payable on A’s gifts.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

The SECURE Act of 2019: The End of “Stretch” IRA Distributions

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On January 1, 2020, the Setting Every Community Up for Retirement Enhancement (SECURE) Act, making widespread changes to the rules and regulations regarding retirement assets, became effective.

From an estate planning perspective, the most significant change is the requirement that most non-spouse beneficiaries of an inherited IRA or other inherited retirement asset, such as a 401(k), must withdraw the entire balance of the inherited asset within 10 years of the decedent’s death. Prior to the SECURE Act, beneficiaries of inherited retirement assets were able to “stretch” the required minimum distributions (RMDs) out over their projected lifetimes, thereby reducing the total income tax burden.

The following classes of beneficiaries are exempt from the 10-year distribution requirement, and may continue to “stretch” distributions out over their lifetimes:

–     Surviving spouses;

–     Minor children (but only until age 18);

–     Chronically ill and disabled beneficiaries; and

–     Beneficiaries who are not more than 10 years younger than the decedent.

Ultimately, this change will result in a greater tax burden for most beneficiaries, and individuals whose estates include IRAs and other retirement assets should review their beneficiary designations and overall estate plan with the new rules and regulations in mind.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

How Not to Amend your Revocable Trust

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A California state court recently held, in Pena v. Dey, that interlineations made by a grantor to the text of his trust agreement were not sufficient to amend the terms of the trust. The grantor, James Robert Anderson, sent the marked-up copy to his estate planning attorney, with a post-it note instructing the attorney to prepare a written amendment. The trust agreement itself provided that any amendment must be made by way of a written instrument, signed by the grantor and delivered to the trustee.  Unfortunately, Anderson subsequently passed away before the amendment was finalized, and his successor trustee petitioned the court for instructions regarding the validity of Anderson’s “amendments.” In its written decision, the court stated: “While the law considers the interlineations a separate written instrument, and while there can be no doubt Anderson delivered them to himself as trustee, he did not sign them.” The amendments were, therefore, not effective.

Pursuant to Wis. Stat. § 701.0602(3), if a trust agreement does not set forth a specific method for amending the terms of the trust, the grantor may amend the trust agreement by means of:

1.    A subsequent will or codicil which expressly refers to the trust or specifically devises property that would otherwise have passed according to the terms of the trust; or

2.   Any other method manifesting clear and convincing evidence of the grantor’s intent.

While this statute may sometimes permit a grantor to amend his or trust agreement by simply penciling in the desired changes, most trust agreements will provide for a specific method of amendment. If the grantor does not comply with the proscribed method, his or her attempted amendment will most likely be ineffective. In other words, it’s always better to be safe than sorry.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

Wisconsin Legislature Considers Online Notarization

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The next time you need to execute a document in the presence of a notary public, you may be able to find one online!

Assembly Bill 293 and Senate Bill 317 (introduced June 13 and July 10, 2019, respectively), if passed by the Wisconsin Legislature, would allow a Wisconsin notary public to become commissioned as an “online notary” who is authorized to notarize legal documents online.  Pursuant to the Bills, online notarial acts must be accomplished via communication technology, such as videoconferencing, which allows the notary to communicate in real time with the affiant.  Both Bills would permit online notaries in the State of Wisconsin to notarize the signatures of individuals present anywhere in the United States, not just within the State.

One concern regarding these Bills is whether or not they should authorize the online notarization of estate planning documents such as wills, trusts, marital property agreements, durable powers of attorney, and health care powers of attorney, given that many of these documents must be signed by one or more witnesses, in addition to being notarized.  The Bills, as written, do not presently exclude estate planning documents from online notarization.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.