Coronavirus Causes Increase in Estate Plan Updates

Many estate plan updates are being done by video conference.
Many estate plan updates are being done by video conference.

With the ever-increasing number of deaths from the coronavirus in Europe and the U.S., many people are now focusing on getting their estate plans in order. Phone meetings or videoconferences with estate planning attorneys have become the new way of updating estate plans, says Barron’s in the article “The Coronavirus Has Americans Scrambling to Set Their Estate Plans. Here Are Some Key Things to Know.” This is the case at Galligan & Manning where we have been meeting with our clients by phone or video conference and arranging for documents to be executed in the safety of our clients’ homes.

People are worried, and they are in a hurry too.

Here are a few tips:

Everyone should have three basic documents: a last will or revocable living trust, a financial durable power of attorney, and a medical power of attorney. These documents will allow assets to be distributed, give another person the ability to make financial decisions, if you are too sick to do so, and  allow another person to talk to medical professionals and make medical desisions on your behalf . These same documents are also a good idea for any young adults in the family, anyone older than 18 in Texas.

However, there’s more. In addition to these basic documents, everyone needs to review their beneficiary designations on assets that include bank accounts, IRAs, annuities, insurance policies and any other assets. If family situations have changed, these may be out of date.

Also, parents of minor children need to execute documents appointing guardians to care for their minor children in the event the parent is unable to do so.

While young adults may be more worried about the financial impact of the pandemic, seniors and the elderly are concerned about having documents in order. Wealthy people are concerned about the impact that the pandemic may have on estate planning law, and some are engaged in planning to make substantial gifts, in case the current estate and give tax exemptions are lowered.

Specific issues to be discussed with an estate planning attorney:

  • The advantages of certain trusts, which provide an opportunity to direct how assets will be held, invested and distributed before and after death.
  • Financial durable powers of attorney, which appoint an agent to make financial decisions.
  • Medical powers of attorney which let people designate an agent to make health decisions on their behalf
  • HIPAA Releases which allow family members receive health care and medical information from your health care providers.
  • Living wills, which allow people to designate whether to provide life-prolonging treatment, if in a terminal state

To learn more about what you need to consider when updating your estate plan see https://www.galliganmanning.com/estate-planning-life-stages/.

Reference: Barron’s (March 22, 2020) “The Coronavirus Has Americans Scrambling to Set Their Estate Plans. Here Are Some Key Things to Know”

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Qualifying for Paycheck Protection Program Loan Forgiveness

Steps to take for PPP Loan forgiveness
Steps to take for PPP Loan forgiveness

This is important news for those who received a loan through the Small Business Administration’s Paycheck Protection Program (PPP). You may recall that the PPP was part of the $2.2 trillion CARES Act stimulus package. The purpose of the loan is to help small businesses impacted by coronavirus.  One of the most valuable aspects of this program is that these small business loans can be converted to grants and be fully forgiven if used to keep employees on the payroll.

While there is still confusion around exactly what steps business owners must take to qualify for forgiveness, Forbes recently suggested loan recipients take the following three steps now.

1: Use all of the funds you receive to pay your employees. Be aware that is mathematically impossible to get the full 100% forgiveness simply by paying the same wages that your PPP application was based on. This is because the loans were calculated at 2-1/2 times your monthly payroll, and you will have only eight weeks (from the day you received funding) to disburse the loan funds.

What to do? You can use the rest of the funds on permissible expenses (business rents, mortgage interest, and utilities, with some restrictions). But it appears the safest thing to do (“safe” meaning likelihood of achieving full loan forgiveness) will be to increase your payroll, either the amount per employee or the number of employees you have on payroll, or by paying bonuses, etc.

2: But beware – any amount paid to a single employee (including yourself) over an annualized $100,000/year will not count towards forgiveness.

3: Start these payments from the very date you receive the money, or as close to that as possible, and make sure all your pay periods fall within the 8-week window. This is a tricky little point; forgiveness appears to be calculated on a cash basis, in which case, accrued payroll with a pay date after the 8-week period won’t count.

Finally, remember that managing your business through these difficult times is a balancing act. In other words, don’t put your business in danger just to be sure your loan is fully forgiven. The last thing you want to do right now is sabotage the long-term health of your business. Even if your loan is not 100 percent forgiven, the remainder will convert to a one percent loan.

The best advice? Invest your time now on business strategy, forecast different scenarios, and have a plan to grow out of these challenging times.

Learn more about other coronavirus issues that may affect you at https://www.galliganmanning.com/update-coronavirus-and-irs-deadlines-filing-extended-to-july-15/

Resources: Forbes, For Up To 100% PPP Loan Forgiveness, Take These 3 Steps The Very Moment You Get Your Loan, April 23, 2020; US Chamber of Commerce, CORONAVIRUS EMERGENCY LOANS Small Business Guide and Checklist, updated April 23, 2020

 

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Should You Save for Retirement During the Coronavirus Pandemic?

Short term savings is an important goal during the coronavirus pandemic.
Short term savings is an important goal during the coronavirus pandemic.

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 during the coronavirus pandemic 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.

As for your physical health, learn more about the Care Plan recommended by the CDC at https://www.galliganmanning.com/covid19-update-cdc-recommends-care-plans-for-both-older-adults-and-caregivers/

Reference: CNBC (March 18, 2020) “Financial planner: Here’s when you should temporarily stop saving for retirement during the pandemic”

Suggested Key Terms: Retirement Accounts Pandemic, Savings, Emergency Funds, Credit Card Bills

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