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In March of this year, all non-essential businesses in New York State were closed in an effort to slow the spread of coronavirus disease 2019 (“COVID-19”). New York State has now begun to reopen in phases under the New York Forward Plan (“NY Forward”), and the State has placed requirements and obligations on businesses that are resuming in-person operations. All regions in New York have now begun reopening. Five regions (North Country, Finger Lakes, Central NY, Mohawk Valley, and Southern Tier) entered Phase Three on or about June 12, 2020.
In order for a business to resume (or for essential businesses, continue) in-person services, the State has placed specific obligations on employers. Under NY Forward employers must: 1) read and affirm the guidelines specific to their industry, and 2) prepare a written Business Safety Plan. Failure to comply with the State’s requirements may expose business owners to liability, fines, or investigations. Business owners should familiarize themselves with the NY Forward guidelines specific to their industry, and understand the obligations imposed on them, in order to avoid adverse effects and keep employees and visitors safe.
The State has released guidelines for industries in Phases 1 through 3, and “State Wide Guidelines” for miscellaneous industries. Guidelines for Phase 4 industries, which will include Arts/Entertainment/Recreation and Education, have not yet been released. Thus far, the State has released guidelines for the following industries:
Phase 1 – Construction; Agriculture, Forestry, Fishing, and Hunting; Retail Trade; Manufacturing; Wholesale Trade; and Higher Education Research
Phase 2 – Offices; Real Estate; Essential and Phase 2 In-Store Retail; Vehicle Sales, Leases, and Rentals; Retail Rental, Repair, and Cleaning; Commercial Building Management; Hair Salons and Barbershops; Outdoor and Take-Out/Delivery Food Services
Phase 3 – Food Services (In-Person); Personal Care
State Wide Guidelines – Child Care and Day Camps; Lake and Ocean Beaches; Religious and Funeral Services; Racing Activities; Dentistry; Auto Racing; Professional Sports Training Facilities; and Public Transportation
Business owners should read the State guidelines for their industry, and are required to affirm that they have read them. The affirmation can be found at https://forms.ny.gov/s3/ny-forward-affirmation. The guidelines vary by industry, and include requirements, guidance, and suggestions for business owners. A common requirement across industries is the requirement to screen employees and, in some instances visitors/clients, for symptoms of COVID-19. The “Office” industry guidance specifically requires that business owners screen employees daily to determine if they are or have experienced symptoms, have been tested and/or diagnosed, and/or have been in close contact with someone who has experienced symptoms or been diagnosed. Business owners may also elect to conduct temperature checks on employees and/or visitors/clients/customers, but may not keep health data (i.e., the result of temperature screenings). Employers should also encourage employees to notify the employer right away if the employee begins experiencing symptoms. Further, employers should be prepared to isolate employees who begin experiencing symptoms and cannot be immediately removed from the work place.
The NY Forward guidelines for all industries require that employers notify the local health department if any employee tests positive for COVID-19, and work with the health department in contact tracing efforts. To that end, the State further recommends that employers track employee contacts with other employees, customers, visitors, etc., in order to better assist in contact tracing efforts. The NY Forward guidelines also require, among other things, that employers to maintain a social distance of at least 6 ft. between all people, require masks at all times when social distancing is not possible, decrease in person interactions wherever possible, minimize or eliminate shared equipment and items, and clean high touch surfaces frequently.
Ensuring a proper supply of personal protective equipment (PPE), is imperative to employer operations. Employers must provide employees (and customers or clients if necessary) with masks and proper hand sanitizing materials. In certain industries and for certain tasks the employer may also be required to provide gloves and other PPE such as a face shield. Under current State Orders businesses have a right to refuse service to customers who refuse to wear a mask.
Two federal agencies, the US Centers for Disease Control (CDC) and Occupational Safety and Health Administration (OSHA), have also released recommendations for reopening and operating businesses. Employers may mitigate potential liability by following the guidance of these federal agencies. Further, the NY Forward guidelines largely incorporate, and in some instances adopt, the CDC and OSHA guidelines. Unlike CDC and OSHA recommendations however, many of the State guidelines under NY Forward are required. Businesses who fail to comply with the NY Forward guidelines may be subject to fines, investigations, and potential civil liability. Local municipalities will reportedly be responsible for enforcing the guidelines, and the State has encouraged employees to report violations to the Department of Labor.
Additionally, businesses are required to prepare a Business Safety Plan. The State’s Business Safety Plan template can be found at: https://ocfs.ny.gov/main/news/2020/COVID-2020Jun08-Guidance-Reopening-Plan-Template.pdf. Alternatively, business owners may elect to prepare their own Business Safety Plan, using the State template for guidance. The Safety Plan need not be submitted to a State agency directly, but should be conspicuously posted in the workplace, and made available upon request (i.e., during an investigation). The Business Safety Plan template includes, but is not limited to, the following provisions:
People – ensure appropriate social distancing and minimize in-person capacity to the extent possible;
Places – ensure adequate supplies of and proper use of PPE and hygiene materials (i.e., hand washing or hand sanitizer stations), and make plans for communication (i.e., maintain a log of persons who have had close contact in the workplace for contact tracing purposes); and
Processes – ensure proper screening of employees, and a plan for contact tracing assistance and cleaning/disinfecting in the event someone who has access to the workplace tests positive.
As with much of the guidance regarding COVID-19, this is a rapidly evolving area of law and policy. This article is intended to be for informational and discussion purposes only and is not to be construed as legal advice or as a legal opinion on which certain actions should or should not be taken. If you have specific questions regarding reopening, compliance with State guidelines, or preparing a Business Safety Plan, we would be happy to assist you. For further information regarding your particular circumstances, or if you need legal assistance, reach out to your normal contact at the firm, or contact Melissa Green (email@example.com).
On Friday, June 5, 2020, the President signed into law H.R. 7010 – The Paycheck Protection Program Flexibility Act (PPPFA). The PPPFA eases some of the requirements of the Paycheck Protection Program (PPA), which was included in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) passed earlier this year. The PPPFA lowers the threshold for spending required on payroll expenses, increases the covered loan period, provides exceptions for businesses who are unable to rehire employees to qualify for full loan forgiveness, and sets a minimum term of 5 years for new borrowers. The changes to the PPP are summarized below.
|· Covered Period – February 15, 2020 through June 30, 2020||· Covered Period – February 15, 2020 through December 31, 2020|
|· Qualified expenses – must spend 75% on payroll, 25% on other qualified expenses, or be subject to a decrease in loan forgiveness||· Qualified expenses – must spend at least 60% on payroll, 40% on other expenses, or no loan forgiveness|
|· Term – maximum of 10 years||· Term – (for new borrowers) minimum of 5 years|
|· Payroll Tax Delay – deferment of social security taxes available only until loan is forgiven||· Payroll Tax Delay – deferment of social security taxes through December 31, 2020 (even if loan is forgiven before that date)|
|· Maintenance of Employment Levels – must maintain full-time employment and salary levels, or risk proportionate reduction of forgiveness||· Maintenance of Employment Level – creates hardship exceptions if there is an inability to rehire, hire, or return to pre-COVID-19 employment levels|
|· Payment Deferral Period – payments of principal/interest delayed for 6 months||· Payment Deferral Period – payments deferred until lender receives forgiveness funds from the government, or, if no forgiveness application is submitted, deferred for 10 months following the end of the Covered Period|
Under the CARES Act the Covered Period for a PPP loan begins on the date of origination, and ends 8 weeks later. This meant businesses had just 8 weeks to spend all of the loan funds and qualify for forgiveness. Under the PPPFA the Covered Period spans 24 weeks after the origination date, or through December 31, 2020 (whichever is earlier). There is nothing in the PPPFA which prevents a borrower from applying for forgiveness if they meet the requirements (i.e., spend the loan funds) sooner than 24 weeks.
The CARES Act required borrowers to spend 75% of loan funds on payroll expenses, and 25% on other qualified expenses in order to qualify for loan forgiveness. Borrowers who did not meet these requirements were subject to a reduction of the loan forgiveness amount. Under the PPPFA borrowers must spend 60% on payroll expenses and 40% on other qualified expenses, or the loan will not be forgiven. It has been pointed out that this new “cliff” scenario may cause hardship to borrowers, and Congress has indicated that the U.S. Small Business Association (SBA) will release additional guidelines that specify the proportional reduction of loan forgiveness still applies. However, the law as written does not allow for a proportional reduction.
The PPPFA establishes a minimum maturity time period of 5 years for new borrowers. Under the CARES Act the maximum maturity time period is 10 years. While the new 5 year minimum does not automatically apply to those who have already received PPP funds, the PPPFA specifies that borrowers and lenders may renegotiate the maturity date in light of the PPPFA.
PPP borrowers are eligible to defer payment of social security taxes for 2020, and repay such taxes at the end of 2021 and 2022 (paying 50% each year). Under the CARES Act the deferment period ends when the borrower’s loan is forgiven. The PPPFA extends the deferral period through December 31, 2020, for all borrowers, even if the loan is forgiven before that date.
Borrowers were required to maintain pre-COVID-19 employment and salary levels in order to qualify for forgiveness under the CARES Act. Specifically, the CARES Act required that any employees who were terminated after February 15, 2020, be rehired such that the borrower retained employment levels through the Covered Period. Later guidance on the CARES Act allowed employers to instead hire similarly situated individuals for the same position if they were unable to rehire certain employees. Similar rules are in place for the maintenance of employee pay rates. The PPPFA creates exceptions to the employment maintenance and salary requirement if the borrower can provide evidence that: 1) the borrower is unable to rehire individuals who were employees, and the borrower is unable to hire similarly qualified individuals; or 2) the borrower is unable to return to the same level of business activity due to compliance with requirements by various government agencies (i.e., Health and Human Services, Centers for Disease Control, and Occupational Safety and Health Administration) from March 1, 2020, through December 31, 2020, regarding standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19. This is great news for businesses such as restaurants and retailers who are unable to rehire at previous staff levels due to regulations that resulted in a decrease to the business’s customer base.
Finally, the PPPFA extends the payment deferral period. Under the CARES Act borrowers’ payments were deferred for 6 months. The PPPFA requires that payments be deferred until the lender receives forgiveness funds from the government. In the event that the borrower does not apply for loan forgiveness, then the deferral period is 10 months following the end of the Covered Period. As the government is unlikely to quickly process forgiveness applications and disburse funds to lenders, experts agree that most deferral periods will likely extend well beyond 6 months.
As discussed, the SBA is expected to release additional guidance regarding the PPP that is intended to provide clarity on the PPPFA. Businesses should continue to monitor the situation as legislation and agency guidance are rapidly evolving. This article is intended to be for informational and discussion purposes only and is not to be construed as legal advice or as a legal opinion on which certain actions should or should not be taken. If you have specific questions regarding a PPP loan, application, or forgiveness, we would be happy to assist you. For further information regarding your particular circumstances, or if you need legal assistance, reach out to your normal contact at the firm, or contact Melissa Green (firstname.lastname@example.org).
On April 3, 2020, Governor Cuomo signed New York’s Fiscal Year 2021 Budget into law. The budget contains provisions that will impact businesses, including mandated paid sick leave. The law also provides the Governor and State Budget Director with the authority to revise the state’s fiscal plan throughout the coming fiscal year, as much remains uncertain in this volatile economic time. Notable tax provisions contained in the budget include: a new category for the Excelsior Tax Credit Program, prolonging the Hire-A-Vet Tax Credit Program, and a departure from recently enacted federal tax benefits. The budget also includes provisions which impact individual tax payers.
Paid Sick Leave
New York employers will soon be required to provide sick leave to employees. The temporary sick leave policies enacted in response to the COVID-19 pandemic were modified and made permanent. Employees begin accruing sick leave (at a rate of one hour per thirty hours worked) on September 30, 2020, but employers are not required to begin paying leave until January 1, 2021. Employer requirements are based on size and net income as follows:
|Less than 4 employees with net income less than $1 million||40 hours of unpaid sick leave|
|Less than 4 employees with net income greater than $1 million;|
or greater than 4 but less than 100 Employees
|40 hours of paid sick leave|
|100 or more employees||56 hours of paid sick leave|
Employers should refresh their policies and procedures to determine how they will comply with the law. Where an employer is already providing paid sick leave that meets the requirements, such policies may and should continue. Under the new law, employers are not required to pay unused sick leave upon termination of employment. However, employers should remember that New York State common law requires payment of sick leave upon termination, if it is the company’s existing policy to do so. Employers should notify employees of changes to sick leave policies, including how and when employees will accrue leave (annually or an on hourly basis) and pay upon termination. Employee policies regarding notice of sick leave and the minimum hours used should also be reviewed to ensure compliance with the new law.
Business Tax Credits
The Excelsior Tax Credit and Hire-A-Vet Programs were extended in the budget. Under the new category provided for in the Excelsior Tax Credit Program, employers with qualified “Green Projects” may be entitled to: a refundable Jobs Credit of 7.5% for new jobs, 5% for new capital investments, and 8% for qualifying research and development expenses. The Hire-A-Vet Tax Credit, which provides credit to employers equal to 10% of wages paid to a qualified veteran (up to $5,000) and 15% of wages paid to a disabled veteran (up to $15,000), was extended to include both the 2020 and 2021 hiring periods.
Recent federal legislation contained in the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, included provisions for business interest deductions (increase to 50%) and net operating loss (allowing net operating losses to be carried back from 2018, 2019, and 2020 for a period of five years, and eliminating the 80% utilization limit prior to 2021). The New York State Budget decouples from the CARES Act relief, preventing full realization of these benefits for New York State taxpayers.
Individual Income Taxes
In 2016, New York State began a phased rollout of decreasing middle class income taxes, which the Governor’s office projects will result in a “$4.2 billion in annual savings for six million filers by 2025.” Under the 2020 provisions individual income tax rates will be 6.09% for taxpayers in the $43,000-$161,550 income bracket, and 6.41% percent in the $161,550-$323,200 income bracket.
Several other provisions impact individual tax payers. First, the Long-Term Care Insurance credit was decreased to $1,500 (available for those with an adjusted gross income of less than $250,000). New York State also automated the process of electing the higher deduction allowing for the use of the standard deduction automatically where it is greater than allowable itemized deductions. Similarly, where the State has the information to calculate eligibility, entitled taxpayers will automatically receive the Earned Income Tax Credit.
New York State’s Fiscal Year 2021 Budget reflects the uncertainty of economic impact as New Yorkers continue to deal with the effects of COVID-19. The budget provides room to pivot as economic impacts continue to be realized and areas of continuing need are assessed. The mandated sick leave policies will benefit employees, but should be reviewed closely by employers to ensure compliance.
Unfortunately, proposed benefits for small businesses were not included in the final budget. Likewise decision to decouple from the CARES Act tax benefits will negatively impact New York taxpayers. However, some tax benefits continued or expanded including the availability of state tax credits for qualified “Green Projects” and certain jobs, and the multi-year rollout for middle income tax cuts. The new law also continued the phased rollout of decreasing income taxes for middle class New Yorkers.
Estate planning . . . It is one of those “to-dos” in life that is so easy to put off, even when the world isn’t turned upside down. We all want “a plan,” but it never seems like the right time to tackle estate planning. And, let’s be honest, no one wants to think about their own death and what/who we will leave behind. As trying as these times are with this current pandemic, the mortality rate from COVID-19 is low. That being said, between the scare of COVID-19 and how the world has slowed down, it may be a good time to address your estate planning. In fact, despite the stay-at-home order, it is easier than ever to facilitate the signing of important estate planning documents. Governor Cuomo has issued an Executive Order permitting video execution of Wills, remote witnesses, as well as remote/video execution of powers of attorney, health care proxies, and other legal documents. The Governor’s prior Executive Order 202.7 permitted notarization by video at this time in our state. This means that clients can create, sign and update important estate planning documents without leaving the safety of their home. In addition, the remote witnessing makes it so you do not have to let other people, who could be potential risks, into your home. There are, of course, specific guidelines to follow in accordance with these executive orders. While it’s not ideal, it does make safe and effective estate planning possible for those clients that would like to proceed at this time, rather than wait any longer. In reviewing your “estate plan,” remember that it’s more than just a will. You should be reviewing and updating your health care powers of attorney, your legal or financial powers of attorney, as well a living will. If you have these documents already, ensure that your appointed agents are up to date. If you do not have these documents in place, please consider doing so. If you have questions on any of these documents please let us know. Finally, remember that many of your assets may not pass under your will and despite what your will may say, these “non-probate” assets would be distributed pursuant to beneficiary designations or by nature of how you own the asset. These include your life insurance policies, retirement accounts as well as annuities – all of these pass by beneficiary designations which should be reviewed and updated as well.
If we can be of assistance to you in starting an estate plan or updating your present estate plan, please contact us. We would be happy to meet with you ~ even if it is “remotely”.
Many people are wondering how to resolve the shelter-in-place and social distancing directive from New York State with the back and forth travel and contact with others that is inherent in any custody order. Parents are rightfully worried about the health and safety of their children as well as themselves. But the COVID-19 virus should not be used as a means to deny access unnecessarily. So what to do?
A child’s relationship with both parents in a divided family is of the upmost importance to the child’s overall well-being and emotional health. In these stressful and uncertain times, the need for emotional stability and consistency is critical for children to feel safe and secure, but must be weighed with protecting the child’s health. If a parent is not infected, not exhibiting symptoms and does not have any known exposure to someone with COVID-19, then parenting time should take place as usual. If a parent or someone in that household is infected, showing symptoms or has known exposure to an infected person then the other parent may keep the child at home for the 14-day recommended period. A parent working outside the home should not be a basis for denial of access. However, there have been issues related to parents working in the medical field where it may not be appropriate for visitation to occur.
While access to courts is limited at this time, many judges have made it clear that a parent’s behavior during this time will not be ignored and will be used as a basis for future determination of parental fitness, once there is court access. In addition, emergency applications may be considered in custody violations during this pandemic. Common sense must prevail with respect for each parent’s right to be with their child. Each child needs both parents, especially in these uncertain times. As always, the best interest of the children must be the foremost consideration.
No doubt the COVID-19 pandemic will be causing problems on construction projects for many months to come.
Below is a quick primer of items to be aware of while your project is in limbo and starts up again:
Many contracts have time limits for contractors and subcontractors to submit claims for increased costs because of the delay caused by unforeseen events, and in this case the COVID-19 shutdown. Check your contract for these dates and know when you have to notify the owner or contractor in order to make a timely claim. Once you are aware of a claim, submit it immediately so that your rights are not lost.
Questions to ask yourself:
No doubt, payment for work and materials you supplied to a project will also be impacted by the pandemic. These are the general rules if you want or need to file a mechanic’s lien to protect your rights to be paid.
If you are a contractor, subcontractor or supplier and the project is a private improvement in New York, you have 8 months from the date you last provided labor or materials to the project to file a mechanic’s lien for commercial jobs, and 4 months if it is a residential project. Do not delay in contacting an attorney to assist you with preparing and filing a mechanic’s lien if you are worried about payment, especially because your recovery can be limited to the balance due on the contract if you are a subcontractor or supplier.
If your contract is related to a public improvement in New York, a subcontractor and supplier can file a public improvement mechanic’s lien within 30 days of completion and acceptance of the project, but you really do not want to wait that long because your recovery can be limited to the balance due on the contract if you are a subcontractor or supplier.
Labor and Material Payment Bonds for Public Improvement and Federal Projects: Public improvements and Federal projects may also have a labor and material payment bond component. Some private projects have payment bonds, but it is unusual these days. If your job has a payment bond, find out the time limits to make a claim under the bond if you need to. These are strict time limits sometime as short as 30 days, but if you meet the requirements of the bond and file timely, it is another very important source for payment. Be diligent and do not delay in investigating this and making your claim for payment if you are worried.
If you find yourself in a position where you want to learn more about what rights and options you may have in a particular situation, contact Douglas J. Mahr, Esq. at Scolaro Fetter Grizanti & McGough, P.C. at 315-477-6264.
As we navigate the COVID-19 pandemic, the New York State Court system is working extremely hard to open up the Court system. Effective March 16, 2020, New York State Chief Administrative Judge Lawrence Marks postponed all “non-essential” functions of the court system until notice.
On March 22, 2020, Judge Marks issued administrative order AO/78/20, which significantly limited the receipt of filed papers by courts and county clerks in litigation matters. AO/78/20 applies to both paper and electronic filings, and extends to all trial courts. Consistent with Governor Cuomo’s Executive Order suspending statutes of limitations in legal matters until further notice, AO/78/20 limited court filings to matters deemed to be “essential.” A list of essential matters is attached to AO/78/20 which is subject to amendment in the future. In addition to the case types specified on the list, judges may deem any individual matter to be “essential” as circumstances require.
It is important to note that AO/78/20 does not address the following:
As of April 6, 2020 and in an effort to restore some “normalcy” to the judicial system, the Unified Court System implemented a “virtual court” model in all trial courts in each of New York State’s 62 counties to address essential court matters (as defined in AO/78/20). In this virtual court system, legal matters are handled by remote appearances of judges, attorneys, and most non-judicial staff, through audiovisual appearances, telephone communications, and digitized exchanges of papers. The “virtual court” allows court operations to continue while at the same minimizing courthouse traffic and safeguarding everyone’s the health and safety.
We encourage you to contact us if you have questions about pending actions you may have or about whether an action you may want to commence is deemed “essential.”
For now, stay safe.
Retirement plan sponsors should be aware of the costs associated with missing participants: (1) time and expenses involved in searching for them, (2) additional administrative costs when billed on a per participant basis, and (3) additional costs based on surpassing participant limits for, among other things, annual plan audits. However, there may also be associated legal perils.
An October 2, 2017 letter, from the American Benefits Counsel (“ABC”) to Tim Hauser at the Department of Labor (“DOL”), outlines the aggressive legal positions recently taken by DOL investigators with respect to missing participants:
The second position – that forfeiture of unclaimed retirement benefits may be a prohibited transaction has been pursued even when the plan document provides for the forfeiture and restoration and received a favorable determination letter from the Internal Revenue Service. Because prohibited transaction issues are within the purview of the DOL, plan sponsors are insulated from potential DOL liability. In addition, the DOL has indicated that relying on a third party administrator or record-keeper’s routine process for locating missing participants may not be sufficient if the plan administrator fails to appropriately monitor the service provider.
The ABC letter requests that the DOL engage in a rule-making process to issue comprehensive guidance on plan fiduciary responsibilities with respect to unresponsive and missing participants and cease taking ad hoc enforcement positions until the DOL provides actual guidance.
Plan administrators should review their administrative procedures for locating missing participants to determine if additional procedural safeguards are necessary. As noted above, even if this responsibility has been delegated to a third-party service provider, it may be necessary to review the provider’s processes and determine whether they are adequate. Plan administrators should also examine their plan documents and participant communications, such as summary plan descriptions, to determine how the plan treats the benefits of missing or unresponsive participants and assess whether modifications are warranted.
To view this article in PDF format, please click here [Missing Participants].
With the cost of college continuing to rise at a rapid pace, many grandparents want to help their grandchildren with the cost of higher education. The use of a 529 plan not only allows grandparents the satisfaction of helping their grandchildren through college, but there are also estate and gift tax advantages.
In New York, contributions to a 529 plan grow deferred from federal and state income taxes. In addition, the account owner does not pay federal or state income taxes on the money used to pay qualified higher-education expenses.
529 plans can support a long-term gifting strategy to reduce one’s taxable estate. For example, $14,000 ($28,000 if married filing jointly) can be contributed annually to each grandchild’s 529 plan without triggering federal gift tax. These annual gifts can be made to remove assets from your taxable estate and to pass them into the plan free of federal gift tax. New York permits a special election, which allows you to accelerate your gifting schedule and make five years’ worth of gifts in one year. A lump sum contribution of $70,000 ($140,000 for married couple), is spread out over five years, provided you do not make any other gifts to the same beneficiary over that five-year period.
Although the assets are no longer in your taxable estate, a unique advantage of the 529 plans is that they permit the account owner to maintain control over the assets. You can decide how the assets are invested, when the assets are withdrawn and for what purpose. Furthermore, if necessary, you can change the beneficiary.
When deciding on a plan, it’s important to review any costs and fees associated with the plan. In addition, you should consult with your estate planning attorney or other professional advisor before any decisions are made that could impact your tax liability.
To view this article in PDF format, please click here [Grandparent-Funded 529 Plans].
It is not simply having a will that leaves assets to family members and it is not simply a buy-sell agreement that provides that if Dad dies, Uncle Bob buys him out and vice versa. Succession planning involves many components of a well-coordinated plan that are based on the particular circumstances that exist within the business or farm and most importantly it must be in writing and kept up-to-date. These components include:
Estate Planning – Family business-based wills and trusts that do not simply divide assets among heirs. What entities are involved and who is to own and manage them needs to be carefully thought out and set forth.
Asset Protection Planning – Utilization of limited liability entities and trusts to protect assets for not only the current generation, but future generations, is critical to succession planning to protect assets not only from third parties but from “non-business” heirs.
Management and Knowledge Transfer – Establish a plan today that allows the junior generation to benefit from the years of experience of the senior generation and the many relationships that have been established by the senior generation over the years. For example, the time for the next generation of owners/managers to meet the banker for the first time should not be at Dad’s funeral.
Succession Planning Agreements – Planning for expected and unexpected events that will arise in the future such as death, disability, divorce, departure etc. with proper agreements such as buy-sell agreements among the owners of the operation and employment and long-term incentive arrangements with key employees who may not be owners, but are critical to the continued success of the business operations.
Lifetime Planning – Implementing the appropriate lifetime strategies to protect assets from plaintiffs in lawsuits, minimize or eliminate estate taxes including spouses in matrimonial matters and possibly to protect assets from being improperly managed by owners who should no longer be in controlling positions.
Opportunities for succession planning today are greater than ever. Federal estate and gift exemptions are nine times what they were twenty years ago. In 2017, there is a federal estate and gift exemption of $5,490,000.00 for each individual. With a properly structured plan a married couple can benefit from almost an $11,000,000.00 exemption. Proposed legislation in Congress nearly doubles the present exemptions. This affords opportunities not only for transfers at death, but utilizing long-standing and accepted planning strategies to remove significant assets from a taxable estate during life – and this can be done in a manner that benefits both the senior and junior generations. State laws such as New York must be taken into consideration as well, but many states have followed the federal lead in lessening the impact of estate taxes on closely-held business owners. In New York, our present exemption is at $5,250,000 and the present laws provide that New York’s exemption will match the federal exemption in 2019. So, does that mean that if the federal exemption increases to almost $11,000,000 New York’s will as well? – – – We’ll see.
Your Succession Plan Audit
Questions to Ask
Regardless of when a plan was put into place, it needs to be periodically reviewed and maintained just like any equipment utilized in a business. If changes are needed, they should be made while everyone is alive, well and in agreement on issues rather than after a death or another difficult situation has arisen. It is also critical to review your plan with your advisory team – your attorney, accountant, financial consultant and other advisors.
If we can be of any assistance in working with you on the creation of your own family business succession plan or to review your present plan with you, please do not hesitate to contact us.
To view this article in PDF format, please click here [Family Business Succession Plan].
Since 1979, the Syracuse-based law firm of SCOLARO FETTER GRIZANTI & McGOUGH, P.C. has provided sophisticated tax, business, litigation, employee benefits, estate and trust planning and administration services to its individual, business, entrepreneurial and professional clients throughout New York, Pennsylvania, Florida and other states in which its attorneys are admitted to practice.