Stone Law Offices, Ltd.

Should You Cut Retirement Savings Efforts During the Pandemic?

“Take the money you’d normally save for retirement and put it into an account for emergencies.”

As the coronavirus spreads across the US, most of our lives have come to a halt. Some Americans are already out of work and millions may end up losing their jobs during a potential recession, says CNBC in the article “Financial planner: Here’s when you should temporarily stop saving for retirement during the pandemic.” What’s the best course of action for these uncertain times?

Financial advisors typically set a goal of a small portion of household income, usually 10-15%, to be set aside for retirement. Based on your situation, now might be a time to scale that back or stop contributing to retirement accounts, if you don’t have cash savings to fall back on in the short term.

If you don’t have three to six months of emergency funds available—which most Americans do not—then now is one of the only times that the financial professionals are advising putting a temporary halt on contributing to retirement accounts.

What to do with that money? Take the money you would normally be putting aside for retirement and put it in an account for emergencies, if you are able to do so. This is not an ideal time, but hopefully it is a short-term change. Make a commitment to yourself and your retirement to start contributing once you are back on normal financial footing.

Having an emergency fund right now is critical. Legislation to help is being passed, but how much help will be available for individuals, and when it will be available, is anyone’s guess. If you or the family’s main breadwinner becomes ill and can’t work, or if your job is among those lost because of the coronavirus, having a cash cushion of any kind will be important.

Every news cycle brings more things to worry about, so having an emergency fund also can provide some peace of mind. When we are worried on a chronic basis about paying for unexpected expenses, the stress can take a toll on our physical well-being.

In addition to moving retirement funds to an emergency fund, now is the time to back off of non-essentials, like subscriptions or memberships that are not being used. Make a list of everything you are paying for that is not essential—recognizing what you and your family really need, versus what you want—and send those savings to your emergency fund. The cuts may be temporary, but they will add up faster than you expect.

The charges you are not adding to credit cards now for things like dining out, going to the movies, etc., may start showing up as smaller credit card bills. However, don’t rush to spend any discretionary income. Rather than apply that money somewhere else, like increased online shopping because you are bored, also put that extra money into your emergency fund.

These are unprecedented times, when the margin for careless spending has become very slim. Be proactive about protecting your financial well-being, so you are able to weather this storm.

What Do Farmers Need to Create an Estate Plan?

“When you are a farmer, your business is not only your livelihood and your passion, but, often, it is also intermingled with your family life.”

Planning for the end of life is intimidating for everyone, but when the plan includes a family business like a farm or ranch, things can get even more challenging. That’s why estate planning, that is, planning for the distribution of assets once you die, is especially important for aging farmers. The details are in the article “How farmers can start an estate plan” from Bangor Daily News.

Death and dying are not easy to talk about, but these conversations are necessary, especially if the family wants to continue as a farming or ranching family. For aging farmers and their families, here are a few tips to demystify the planning process and help get things started.

What are your goals? Think of estate planning as succession planning. This is about making decisions about retirement and handing down a business to the next generation. If you had a regular job, you’d have far less to consider. However, succession planning for a family business owner involves more resources and more people. Having a clear set of goals, makes that transition easier. Add to that list: your fears. What don’t you want to happen? If your children don’t know how much you want them to keep the farm in the family, they may take other actions after you die. Share your goals, hopes and yes, worst case scenarios.

Build a team of professionals. The number of moving pieces in a family farm means you’re going to need a strong team. That includes an estate planning attorney who has worked with other farm families, an accountant, a financial advisor and an insurance professional. Depending on your family’s communication skills, you might even consider bringing a counselor on board.

List out your assets. Don’t assume that anyone in the family knows the value of your assets. That includes deeds to land, titles of ownership for vehicles, information about any property mortgages or loans or leases. If you are leasing land to others, you’ll need the lease agreements as well as property titles. If your lease agreements are based on a handshake, your attorney may request that you formalize them. A verbal agreement may be fine while you are living, but if you should pass and your heirs don’t have the same relationship with your tenant, there could be trouble ahead.

Consider who will be in charge when you are not there. Whether you are planning to work until you die or making a retirement plan, one of the hardest decisions will be to name a successor. Inter-generational politics can be tricky. You’ll need an unbiased evaluation of who the best candidate will be to take things on. However, going into this now is better than hoping for the best. That’s when things go south.

Talk to your estate planning attorney. Just as people should start planning for their retirement as soon as they start working, planning for the transition of the family farm is something that should start when it is years in the future, not when the transition is a few months away. It’s a process that takes a long time to do right.

C19 UPDATE: Delay Payroll Taxes OR Get Paycheck Protection?

The Coronavirus Aid, Relief, and Economic Security (CARES) Act passed on March 27, 2020, allows employers (and self-employed individuals) to delay paying their portion of that social security payroll tax. However, employers who receive Small Business Act loans that are forgiven under the CARES Act are not eligible for this payroll tax deferral.

These are tough times for everyone, but if you are a business owner you have a few more tough decisions to make right now.

The Coronavirus Aid, Relief and Economic Security (CARES) Act, which passed on March 27, authorized a number of relief and aid programs for individuals and businesses. But figuring out how to move forward with applications and quickly getting needed relief is not easy.

Case in point – the CARES Act authorizes businesses to defer paying the employer contribution of payroll taxes (approximately 7 percent of payroll) through the end of this year with what is essentially a short-term, interest-free loan. This money must eventually be paid. Half is due on December 31^st, 2021 and the other half on December 31^st, 2022. While this sounds good and allows businesses to hang on to some cash during these difficult times, there is another program that may be more helpful … and you cannot use both. In other words, these offers cannot be combined.

The Paycheck Protection Program, also authorized in the CARES Act, allows small businesses to apply for a loan that can be partially or completely forgiven. The loan can be up to 2.5 times your average monthly payroll and associated costs.  The loan amount will be based upon 2019 expenses for wages paid by your business (up to $100,000 per employee), costs for retirement plans, health insurance, self-employment earnings (again capped at $100,000/year) and state or local taxes imposed on wages.

Resource: COVID-19 Emergency Legislation Offers Substantial Relief to Employers (CARES Act), https://www.adp.com/spark/articles/2020/03/covid-19-emergency-legislation-offers-substantial-relief-to-employers.aspx and US Department of the Treasury, Assistance for Small Businesses, https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses

The CARES Act Essentials for Individual Taxpayers and Small Business Owners

Signed into law on Friday, March 27, the CARES (Coronavirus Aid, Relief, and Economic Security) Act is the biggest economic stimulus package in U.S. history.  Below are essential highlights for individuals and small businesses.

Individuals

• One-time direct deposits of up to $1,200 for individual taxpayers with incomes up to $75,000 and $2,400 for joint filers with incomes up to $150,000. An additional $500 for each eligible child can also
• Extended unemployment insurance for the self-employed, independent contractors, and gig economy workers--such as Uber drivers.
• Rules and penalties for some retirement fund distributions and loans have been adjusted or delayed.

Small Businesses

• Employers can defer the payment of their portion of 2020 payroll taxes until 2021 and 2022.
• $350 billion is dedicated to small business relief to prevent layoffs and business closures and includes:
• Paycheck protection program for up to 8 weeks of payroll coverage.
• Economic Injury Disaster Loans and Loan Advance federal disaster loans for businesses, private non-profits, homeowners.
• The 80% rule from the Tax Cuts and Jobs Act (TCJA) net operating loss is lifted, and losses can now be carried back five years.
• The excess loss limitation (ELL) rules for pass-through entities are suspended.
• The limitation on the deduction for business interest expense increased from 30% to 50% for tax years 2019 and 2020.
• $150 billion is dedicated to state and local governments that are beginning to introduce their own business grant and loan programs in states like Florida, Michigan, and New York. Find specific provisions for your state through your governor’s website; see a full list on the National Governors Association site.

Resources: Read the full text of the CARES Act: https://assets.documentcloud.org/documents/20059055/final-final-cares-act.pdf

C19 UPDATE: Guide to Resources Available for Small Business Disaster Relief

The US Chamber of Commerce compiles online guide with updates and resources to help small business survive the coronavirus pandemic.

If the coronavirus pandemic has hurt your business, visit the US Chamber of Commerce resource site for a wealth of resources to help your business survive.

Priority reading on this site includes

• Everything You Need to Know About Coronavirus Federal Small Business Stimulus Aid Programs
• Everything You Need to Know About SBA Disaster Assistance Loans
• How to Apply for an SBA Disaster Relief Loan
• Resources to Help Your Small Business Survive the Coronavirus

Other resources include expert articles on business strategy and analysis, technology, managing a remote team, and their Coronavirus Response Toolkit, with shareable graphics and helpful information suitable for posting to social media to help boost your business’s visibility online. 

Resource: Coronavirus Small Business Guide, https://www.uschamber.com/co/small-business-coronavirus

C19 UPDATE: CDC Updates Coronavirus Guidance for Businesses

As we learn more about the coronavirus the Centers for Disease Control (CDC) is updating the guidance they give to business owners and employers. They issued updates on Friday, March 21^st to include

• Updated cleaning and disinfection guidance
• Updated best practices for conducting social distancing
• Updated strategies and recommendations to be implement now to respond to COVID-19

If you are a business owner, you may want to bookmark this page and check back regularly for updates: https://www.cdc.gov/coronavirus/2019-ncov/community/guidance-business-response.html

Resource: Interim Guidance for Businesses and Employers to Plan and Respond to Coronavirus Disease 2019 (COVID-19), updated March 21, 2020, https://www.cdc.gov/coronavirus/2019-ncov/community/guidance-business-response.html

Stone Law Offices’ COVID-19 Response – We are open and here to help!!!

As many of you are aware, Nevada Governor Sisolak has implemented his “Stay Home for Nevada” initiative, which includes the closing of all “non-essential” businesses for the next 30 days in order to slow the spread of the COVID-19 virus.  During this period, Stone Law Offices will remain open as an “essential service” business to assure that our clients’ and the community’s legal needs continue to be met.

In keeping with CDC guidelines and other medically advised social-distancing guidance to minimize the community spread of COVID-19, we have implemented the following “best practices” protocols for the health and safety of both you and our staff, including but not limited to the following:

• Except for signing mission critical legal documents or when otherwise absolutely necessary, we are minimizing in-person meetings in our office and are utilizing virtual client meetings and prospective client consultations via telephone and video conference, and email.
• Hand sanitizer and disinfectant wipes are available in our lobby, every conference room, and the common areas, and additional high-touch cleaning and disinfecting is being done multiple times throughout the day.
• Hand-washing is mandated by all staff members before and after each in-person client meeting, and all staff have been instructed to stay home if they are feeling ill or suspect that they have come in contact with the virus.
• On your part, if you are experiencing any flu-like symptoms (fever, cough, shortness of breath, etc.), we ask that you stay at home and contact us for how best to address your legal needs.
• We are leveraging our technology for the receipt and delivery of your documents via our secure cloud service, and utilizing e-signature and e-notary services for remote signing. In addition, our technology allows each of our attorneys and staff to work remotely from home.     

If you have any questions, or if you need assistance with the review or update of estate planning, probate, trust administration, asset protection, and business planning legal needs, please do not hesitate to contact us at 702-998-0444, or schedule a complimentary consultation. 

C19 UPDATE: Employers Now May Help Employees with Tax-Free Direct Disaster Relief Assistance

On March 13 President Trump declared a national emergency due to extraordinary circumstances resulting from Coronavirus. This Declaration opens up new methods for employers to provide tax-favored financial assistance to employees affected by the virus.

As the coronavirus pandemic emergency unfolds, it’s clear that increasing numbers of employees will likely suffer financial impacts … from quarantines, illnesses, workplace closings, etc. President Trump’s declaration of a national emergency on March 13 now allows employers to make direct disaster-relief payments to assist employees affected by the virus.

These types of payments are not treated as income/wages to the employees and are deductible to the employer as ordinary and necessary business expenses. There is no specific cap on the amount of assistance that may be provided to an employee other than it must be “reasonable and necessary” and must not be for an expense reimbursable by the employee’s insurance.

Section 139 of the Internal Revenue Code, allows that a “qualified disaster relief payment” of any amount may be paid to reimburse or pay reasonable and necessary personal, family, living or funeral expenses (not otherwise compensated for by insurance) incurred because of a “qualified disaster.” The term “qualified disaster” includes a federally declared disaster or emergency under the Stafford Act. Accordingly, due to the Declaration, Coronavirus is now a “qualified disaster” for Section 139 purposes, so disaster relief may be provided to employees on a tax-free basis (assuming all the requirements of Section 139 are satisfied).

As always check with your CPA or attorney before implementing any tax planning strategy for your business.

Read more at The National Review, Coronavirus National Emergency Declaration Permits Employers to Offer Tax-Favored Financial Assistance to Employees, March 14, 2020

How Will Jeffrey Epstein’s Estate Be Settled?

“Generally, when settling an estate, debts and expenses are paid first, charitable and spousal transfers follow and applicable estate taxes are levied afterward.”

Jeffrey Epstein’s last will and testament is dated August 8—just two days before he was found dead in a jail cell. His will shows $577 million in assets, including fine arts and collectibles that are still to be valued. It also has a trust to hold his property.

CNBC’s recent article, “Here’s why a bitter legal battle could be ahead for Jeffrey Epstein’s estate,” reports that a lengthy fight is coming as Jeffrey Epstein’s estate addressees the legal claims over the distribution of his assets. The 66-year-old was facing federal charges of sex trafficking of minors and sex trafficking conspiracy.

The time to do your will isn’t two days before you die.

Attorneys believe there will be a long legal fight, as alleged victims file claims against the money manager’s estate. The Epstein estate will be in the middle of lawsuits for a long time, until all of the plaintiffs are paid.

Let’s look at some the issues that heirs, plaintiffs and attorneys will face.

1. Creditors get paid first. Epstein’s will tells his executor to pay from the estate several costs, including funeral and burial expenses, administration costs and “all of my debts duly proven and allowed against my estate.” The will then directs the executor to give all of his property after these payments and distributions to The 1953 Trust, which was also established on August 8. The trust distributions aren’t known, because the trust document wasn’t attached to the will.

This means creditors, including plaintiffs of the many lawsuits against Epstein who receive a judgment in their favor against the estate, will be paid before property passes through to the heirs.

2. All trusts not equal. Trusts may provide creditor protection, but not all trusts offer the same level of protection. Irrevocable trusts can’t be changed by the grantor, once they’ve been established. When you transfer the assets to this trust, they’re out of your estate and you save on taxes at death. In addition, you’ve given up control of the asset—that’s why these trusts offer creditor protection. However, revocable trusts can be revised by the grantor during his or her life. Because the terms can change, the assets are still deemed to be owned by the grantor—making them subject to estate taxes and seizure from creditors.

You don’t save on estate taxes when you create a revocable trust, and Epstein’s trust is revocable. And although moving assets to an irrevocable trust may protect them from creditors, it won’t work if you’re facing legal claims.

3. Where you live is key. Epstein was a resident of St. Thomas in the U.S. Virgin Islands, but his will mentions five properties, including a mansion in New York City. The other properties, all owned by corporations of which he owns shares, are in New Mexico, Florida, Paris and the Virgin Islands. New York is known to chase down well-to-do residents who claim to live in tax-free havens. They conduct non-residency audits and hit them with taxes. Big estates can mean a lot of revenue for New York.

There is a chance New York could seek its share of state income and estate taxes. Where you live is answered by looking at facts and circumstances, including voter’s registration, driver’s license and the location of family and belongings. Just spending 183 days in your “new” state alone, isn’t sufficient to protect it from an audit from a high-tax state.

Work for a Small Company? Your Employer May Be Offering a 401(k) Plan

A final rule from the Labor Department will allow small businesses to offer 401(k) plans, which may make fiscal sense, if they band together.

Businesses in different industries will have the option to team up to create a retirement plan, as long as they are located in the same region. Companies that are located far away from each other may be able to do the same, if they are in the same kind of business.

CNBC’s recent article, “Workers at small firms may get more access to 401(k) plans under new federal rule” reported that the Labor Department recently released a final rule that’s designed to make it simpler for smaller businesses to join together to offer 401(k) plans to their workers. The rule comes about a year after President Trump directed the agency to look into how to expand the availability of so-called multiple-employer plans.

The new rule takes effect September 30.

The rule relies on the availability of what the agency calls “association retirement plans.” These plans would be offered through employer groups, such as a local chamber of commerce, to its members. A plan also could be offered through specific companies that handle human resources tasks for their business clients.

About 38 million employees of small and midsize companies don’t have a workplace retirement plan, according to Labor Department officials. In 2018, 53% of workers at companies with fewer than 100 employees had access to one—as opposed to 85% of workers at larger companies.

Small-business owners have been concerned about the cost and administrative issues. These are the main reasons why they don’t offer a 401(k) plan to their employees. The thought is that allowing them to use this new strategy would reduce costs and cut down on the paperwork associated with plan administration.

The federal retirement legislation known as the Secure Act cleared the House last spring, but has stalled in the Senate. It includes a provision to let businesses team up regardless of their membership in a professional organization or their industry, so that their only commonality would be their participation in a shared 401(k) for their workers.

Only a small number of states have taken steps to address this lack of retirement plans among small businesses. In some cases, they require employers to participate., and employees are enrolled automatically in a Roth IRA, with contributions taken from their paycheck. They can opt out if they choose to, but the “default setting” is to include them in the plan, as a means of encouraging employees to save for retirement.