Pointing at computer with phrase: "Make better, faster decisions during uncertain times"

How To Make Better, Faster Decisions During Uncertain Times

June 30, 2020

When there’s a blow to your business, especially an unprecedented world event like the pandemic we are living through, you might feel paralyzed and unable to make a move. But when problems crop up, you as a business owner can’t afford to freeze. Or fight, or flee, for that matter. Freeze, fight, and flee are the three most common responses to trauma, and they are reactive states that can sneak up on us before we even know what’s happening. So, step one to making it through every challenge is to start to get to know yourself, and how you respond to trauma—do you freeze, fight or flee? Make a note for yourself, so that you can see it when it happens. Often there are ways out of a bad situation that can actually put you in a better position than the one you were in before. Sometimes the best you can hope for is to keep the damage to a minimum. Either way, the first thing you need to do when you are faced with challenges and uncertainty is to get your head on straight. Here are some suggestions of how to look at your problems in a way that will keep you moving forward rather than frozen with indecision, fighting for your life, or running for the hills. Find Your Inner Calm There are a lot of outside voices who claim to be experts, and who claim to know how you should conduct your business. Some of these voices could be helpful, and others could be harmful, but if they’re coming from many directions at once, you’re not going to be able to tell the difference. With every piece of bad news or new demand placed on you, your body reacts. Every demand on your attention, and every rush of adrenaline, is taking away from the energy you could be using to solve the problem that is in front of you. Bruce Lee said, “There will be calmness, tranquility, when one is free from external objects and is not perturbed.” If you are taking in negative voices and the 24-hour flow of news, notifications, and speculation, you will never have the mental space to consider your options. First and foremost, stop watching the news. Then, get the book The Art of Contemplation by Richard Rudd, read it and breathe. Finally, carve time out for yourself daily to breathe, pause, and remind yourself what really matters. Your inner peace is paramount and must come before anything else. There will be residual emotions and thoughts that remain once you’ve switched off your television and digital devices. Acknowledge them, don’t fight them. If you fight them, they’ll just fight you back, but if you just let them be, they’ll lose their power over you. Once you’ve shut out those outer and inner voices, do something that relaxes you. When all else fails, you have the best relaxation tool built right into your body—breathing. Fill your lungs with oxygen with a nice, deep breath, and you’ll clear your mind that much faster. Get Support You Can Trust Do not sit alone with your […]

Read more

An Exit Strategy Enhances Your Business (and Legacy) Building

June 23, 2020

Exiting your business isn’t a decision to be made lightly. It may have been something you were considering before the COVID-19 pandemic hit, or it could have been something that you’ve had to reckon with because of shelter-in-place orders. Maybe your business had already been struggling, and you’ve had to come to terms with your financial struggles due to long-term closures and loss of revenue. Or perhaps you want to cash out of the investments you’ve made over the years, and reallocate your resources into something else before there are any other unexpected changes in the economy. Whatever your reason, there is a lot to take into account when considering a business exit, not just when it comes to your money, but when it comes to your personal legacy as well. Creating an intentional exit plan will help you achieve the best possible outcome for yourself and your family’s finances, your reputation as a businessperson, and the business itself. Having a plan in place, even if you aren’t planning to exit anytime soon, can also help keep the business stable in case of your sudden death or disability. This is especially important now, when COVID is posing such a major threat to health. Sell to Partners, Employees or Family Members If you are hoping that someone else will carry forward your company’s mission, you will likely want to sell to someone who understands your business already.  If you have low turnover and devoted employees who know how to drive the ship, handing over the keys to one of them may not cause too much upheaval for the business itself. The employee could pay you in one lump sum by taking out a personal loan, though this is a riskier and higher-cost option. A more manageable choice for many is an “installment sale,” which means financing the sale of business and having the employee pay you in installments over time. Making an employee or family member a part-owner of the business over time could make it easier for them to complete a buy out when the time comes. Another option is to set up something called an Employee Stock Ownership Plan (ESOP), which means that every employee owns a share in the company. Anyone who leaves the company cashes out their shares when they go—that includes you. Set Your Business Up to Be Acquired To get the best return on the sale of your business, you will need to make it as attractive as possible to an outside company or individual who you think would be interested in buying it. This option may require a lot of work on your part, or else you may end up having to sell far below market value in order to make a quick exit. You will need to conduct market research, tighten your operations, and be able to prove your business’s profitability to any prospective buyer. To implement any of the plans above, and to plan for an exit that maximizes your gains and preserves your legacy, you will want to consider hiring us to help you take the following steps. Exit Plan Steps […]

Read more

PPP Loan Forgiveness and Tax Consequences

June 16, 2020

Now that many business owners are starting to see Paycheck Protection Program (PPP) approvals and funds hit their bank accounts, you may be wondering how to ensure the loan is forgiven and what the tax consequences will be. We’ve got some of your answers. First of all, let’s talk taxes. Last week, some business owners were surprised to find out that payments for payroll, and other expenses paid using PPP money, will not be tax deductible. It actually makes sense, because the amount money that the PPP loan forgives is not included as taxable income. This way there is no double tax benefit. Let me break that down for you a bit more, so it’s totally clear. PPP is a loan, which is not taxed as income. So let’s say you received it and then had the loan forgiven. If the loan forgiveness was not taxed as income and the expenses you paid with it were deductible against your income, you’d be getting to use the PPP money tax free and not paying tax on income earned. In effect, not getting a deduction is the same as being taxed on income. Perhaps the IRS ruling reflects a frequently used quote from the now deceased Martin Ginsburg, tax professor at Georgetown University Law Center and husband of Ruth Bader Ginsburg. In his tax classes, he said, “When you’re dealing with tax laws, the pigs get fatter and the hogs get slaughtered,” meaning that, when it comes to taxes, maybe we should be grateful for what we get and not get greedy. However, Congressional Leaders have already publicly disagreed with the IRS ruling, saying that it is not within the spirit and intent of the CARES Act. According to them, the act was meant to allow for deductions by PPP recipients, so we anticipate there will be more clarification coming down the road on this topic. In the meantime, you certainly want to ensure that your PPP proceeds are forgivable. Presumably they would be, if you are using 75% or more of them on payroll and the remaining 25% or less on other allowable expenses like mortgage interest, rent, and utilities. However, there has not yet been guidance on what you will need to submit to prove loan proceeds were used as required for forgiveness. If you want to be sure that your loan proceeds are forgivable, keep clear records of how you use the proceeds and plan to file all required tax forms for payroll purposes. Remember that you cannot use these funds to pay independent contractors, only to pay employees under a payroll plan, or pay yourself as the owner of the company. We understand that these are the records you will need to submit to obtain forgiveness of your PPP proceeds: If you have employees, you will submit Forms 941 and state quarterly wage unemployment insurance tax reporting forms or equivalent payroll processor records. Evidence of business rent, business mortgage interest payments on real or personal property, or business utility payments for the covered period. If you are receiving PPP as an owner, your Schedule C will be used […]

Read more

Who Would Care For Your Children If You Got Sick With COVID-19?

June 9, 2020

The pandemic is causing us to consider a lot of things that we may not have before, even if maybe we should have. It brings to mind something a colleague of mine shared recently. One unremarkable weekend, she left her small children with a babysitter and headed out to enjoy dinner at a restaurant with her husband. But as she sat there, a thought crept into her head that she couldn’t let go. What would happen to her kids, she thought, if she and her husband got into a car accident on the way home? And even though my colleague is an estate planning lawyer herself, and she had a will at home naming guardians for her kids, she didn’t have a definite and clear answer that provided the comfort she wanted. Her will was in a vault, and her named legal guardians lived thousands of miles away.  It was that thought that spurred her to take action, not only for her own family, but to create tools and resources for others as well. If you’d like to read the book she wrote as a result of her own discoveries, it’s called “Wear Clean Underwear: A Fast, Fun, Friendly—and Essential—Guide to Legal Planning for Busy Parents” and it’s the best-selling book on legal planning for families. We’d love to send it to you as our gift. Simply email us at bob@propaplaw.com and ask for your copy, and we’ll send it your way, free. One thing you’ll discover in the book is that even naming a legal guardian in your will is often not enough to keep your kids out of the care of strangers, or someone you wouldn’t want, if something happens to you. Chances of COVID-19 Infection in the Family If you are young and healthy, it might be hard to imagine that you won’t be there to care for your kids. But if the COVID-19 pandemic is showing us anything, it’s that even a healthy person can contract a serious illness that leaves them incapacitated and unable to care for their children. If there is more than one adult in the house, that may alleviate some of your worry. While naming legal guardians for your kids may feel especially urgent for a single parent, parents with partners aren’t off the hook. You should take precautions though, especially since there are high infection rates among people who live in the same household. A professor at the University of Florida has found a more than 19% chance that someone else in the household of a person infected with COVID-19 will also contract the disease. Researchers estimate the average incubation time is about four days and could be infectious for up to two weeks. That means it’s not outside the realm of possibility that you and your partner could both contract the illness, possibly at the same time. An Easy Way to Find Guardians for Your Children Even if you never contract COVID-19, you are of course still human, and vulnerable to accidents and other dangers that could separate you from your kids—either temporarily or permanently. Last week, we referred to […]

Read more

3 Unique Ways to Handle the Guilt Inherent to Being a Parent

June 2, 2020

If you’re a parent, you may feel even more guilty than usual.  If so, you are definitely not alone. Currently, the burden is on you to both carry on with your work and manage your child’s full-time care and education. Two full-time jobs that you’re trying to do by yourself, likely without teachers or care providers to help you. If you are like most parents, you were probably struggling with guilt even before the virus. You simply can’t make it to every award ceremony or recital, and you might not have as much time to play with your kids or help them with their homework as you’d like. Those feelings of guilt may now be compounded by all the additional responsibilities you’ve had to take on in a short space of time. Take a deep breath, and let me let you off the hook here for a minute. I have no doubt you are doing the best you can, and your kids see it, and know it too, even when they are being ungrateful pains in the rear. I’ve got a few ideas about how to shift the guilt. They’re a little unconventional, but I invite you to give them a try and then message me to let me know how they went. We love hearing from you. Let’s start with one thing that is fully within your control, can help to alleviate feelings that you are not doing enough, and that you can get handled easily, for free, right now— name legal guardians for your kids, so the people you want will take care of them, if anything happens to you. Name Legal Guardians If you have not already legally documented who you would want to raise your children, if you could not finish doing it yourself for any reason, start here right now and name legal guardians using the free website I have for you to get it done protectmykidsma.com. It’s free. It’s easy. And the site guides you through who to choose and creates a legal document for you. Legally documenting your choices for who you want to take care of your kids if you can’t is a great first step to getting legal planning in place for the people you love. (Yes, I said “choices” because you want to name at least one person with two alternates.) And, doing so can provide you with a lot of relief, if you have not taken care of this yet for your kids. After you are done, contact us for a no-charge review of the documents, and we’ll guide you to the next step in ensuring the well-being and care of your kids (and your assets), if something happens to you. If the parents get sick with COVID-19, this is one of the most important things you can do for your kids right now, and we’re making it as easy as possible for you to get started with it. So that’s one way we can support you to remove some of that mom or pop guilt you may have. And, here’s another… Quality Time Doing…Nothing While you’re probably already […]

Read more

Take Control of Your Investments Now

May 26, 2020

Last week, we shared that the CARES Act makes it possible for you to access money in your retirement account now to keep your business afloat without taxes or penalties. If you missed it, you can go back and read that article here. In that article, I said that this could be a good time for you to take your money out of your retirement account and reinvest it on your own terms, rather than hold it in a place where it’s vulnerable to the ups and downs of the stock market. If you are considering that as an option, it might be time to consider a Self-Directed IRA (SDIRA), which gives you control over your finances rather than giving up that power to a broker, a robo-advisor or investments you don’t really understand. An SDIRA is an IRA that allows you to invest in different assets beyond the typical stocks, bonds, and mutual funds of a traditional plan. They’re available in both the form of a traditional IRA (which allows you to make tax-deductible contributions) or Roth IRA (where the distributions are tax free). If you move your IRA assets into an SDIRA, you will have the freedom to invest in a greater variety of assets. And depending on those investments, you may be able to get higher returns at faster rates, but most importantly you’ll be able to be deeply connected to what your IRA is invested in. It also could help you hang on to value that isn’t subject to sudden dips that you don’t understand, the way the stock market is. It is definitely a big decision. The most important thing you can do is get clarity on what your current investments are and what you want them to be. Here’s how to get started. Carefully Read Your Financial Statement First, log in to your retirement account right now, or go through your records to find your last paper statement. It’s time to figure out what exactly is going on in there. Many brokerages select investment funds for your portfolio based on rates of growth. For example, you may be typed for “slow-growth” or “conservative” or “income” or “high growth” investment plans based on what you indicated as your time frame for retirement when you opened the account. Based on whatever you indicated when you opened your account, your broker or robo-advisor will offer investment options based on a few tiers of growth and risk, and you probably don’t know exactly what stocks you are investing in. Labels like “slow-growth” or “conservative” aren’t enough to tell you exactly where your money is invested. However, your last statement should contain the names of the funds, and you can go from there to do your research. You can then look up the funds on sites like Yahoo Finance to see what your investments comprise. What do you think? Do you like what you see? What would you rather not have money invested in? What’s missing that you would like to have money invested in? Note the answers to these questions and use them to inform your next move. […]

Read more

Another Way to Fund Your Business Through the CARES Act

May 19, 2020

You may have heard the news that there have been 3 million applications for SBA loans through the recent CARES Act, to the point that the act has reached its funding limit of $349 billion. As a business owner who may have applied for the $10,000 EIDL grant only to later find it is actually $1,000 per employee, or a PPP loan that didn’t get funded before the money ran out, you may be wondering what else is possible. If you’re starting to feel overwhelmed or discouraged, listen up! I’ve got an idea for you if you have a retirement account you’ve been saving, whether for retirement or a rainy day. Well, it’s raining, and it may be the time to use that retirement money to fund your future, now. Did you know that the CARES Act has amended normal rules for withdrawing money from qualified retirement accounts?  Normally, if you were to withdraw money from your retirement account before retirement age (generally 59 1/2 years old), you’d have to pay it back within 90 days. Otherwise, you would be penalized with a 10% fee as well as have your withdrawal taxed. Now, in 2020, the CARES Act has modified those rules in order to support people whose personal and business finances have been impacted by COVID-19, which is everyone. And you may be able to use that modification to keep your business alive, even if you don’t get PPP or EIDL loan money. The act specifies that the new 2020 rules give you three years to pay back the loan from your retirement plan (without penalty or taxes) rather than the normal 90 days. The retirement accounts you can withdraw from include traditional individual retirement accounts (IRAs), 401(k)s, and 403(b) plans. The waiver applies to coronavirus-related distributions made between January 1, 2020, and December 31, 2020.  To be completely clear, the law says that the withdrawals do have to be related to COVID-19. This explicitly includes “closing or reducing hours of a business owned or operated by [an] individual due to COVID-19.” So if you have, by law, had to close down your business completely, stop in-person business and make a major (perhaps costly) switch to conducting business virtually, or reduce hours for any other reason, you’re eligible. It also applies to people who have had their work hours reduced, which can be especially relevant if you are an independent contractor. If you are eligible, you can take out up to a total of $100,000 or 100% of the qualified retirement account (whichever comes first). You can pay back the funds to that retirement plan over a three-year period, beginning the day after the date you receive your first coronavirus-related distribution. The amount of money that you pay back for the loan over that period of time will not be recognized as income to be taxed. However, income taxes will be owed on the amounts you withdraw if you don’t repay them in that three-year period and the 10% penalty will also be applied. Because this amount will ultimately have to be either repaid or taxed, it’s important to […]

Read more

Should You (or Your Parents) Be in the Stock Market Now?

May 12, 2020

If you or your parents have a retirement account, (or any investment accounts for that matter) now is the time to get connected to how those accounts are invested. While you may have outsourced all of this to a broker in the past, you can no longer afford to allow your investments to be made without your clear understanding of exactly what you are investing in, how and whether your investments align with your plans for the future. My colleague shared a story that hit home with me, and it may for you as well. After my colleague’s grandmother died, her grandmother’s retirement and investment accounts went directly to her mom, due to the estate planning they had set up. No court process. No intervention. No conflict. Great! But my colleague’s mom then never looked at the investments in those accounts. She just let them stay as they were for four years, until finally, her daughters convinced her to look. When they did look, they were mortified to find that, even though the investments should have been gaining with the bull market we’ve been in for the last many years, the accounts had actually decreased over the years from $100,000 to $60,000. If my colleague and her mom had looked at these accounts and re-allocated them when grandma died, this would not have been the case. Fast forward to now, and the daughters think to look at mom’s retirement accounts with her, only to discover that mom has a 401k with $180,000 in it, and it has lost $17,000 over the last two weeks. Mom had picked her investments with the help of a friend many, many years before, and had not looked at those investments since. My colleague’s mom is mostly invested in high-growth ETFs, which may have been the right choice when she was building her retirement fund, but definitely is not the right choice given that she retires next year and will need to start making withdrawals to replace her income. If mom does not get her money into safer investments now, her daughters could end up needing to support her for the rest of her life. So, why am I sharing this story with you? Because now is the time for you to get connected to your investments, even if they are in a retirement account and invested through a broker or advisor. This is simply not the time to set it and forget it. It’s time to know what you have, and make intentional, aware choices about how your resources (and your parent’s resources) are being used. Now is the time to truly understand what you have, and how to use it wisely. Educate Yourself If you or your parents have a retirement account, and you are not intimately connected to how your assets are being invested, it’s time to get more involved. Log in to your retirement account or pull your last statement and look. Many brokerages select investment funds for their clients’ portfolios based on rates of growth. They will offer investment options based on a few tiers of growth and risk, and […]

Read more

Protecting Your Parents From Undue Influence During Covid and Beyond

May 7, 2020

In a previous article, we shared steps to understanding your parents’ estate planning and the nature of their assets, as well as how to ensure you’re not left with a mess when something happens to them. Today, we want to focus on one of the major risks of not being “in the know” when it comes to your parents’ estate planning matters: the undue influence of bad actors. It’s an unfortunate fact that predators emerge during times of upheaval to take advantage of people. That means the COVID-19 pandemic can leave your parents vulnerable in more ways than one. But even when things go back to normal, this chronic problem of financial exploitation will still be a risk. We see it happen far too often. Maybe your elderly parents live several hours away, in another state or country, and someone in their community gets close to them. Or maybe they have a close relationship with a financial advisor who isn’t really looking out for their (or your) best interests. This person could even be another family member, friend, business partner, hired caregiver, professional advisor, or even someone they’ve just met. Sometimes, when bad actors become involved with your parents’ lives and assets, it can lead not only to a loss of money, but even a loss of personal freedom. One of the worst cases of this I’ve heard of is the case of Milo, a retired veteran living in Arizona, and his son Greg, who lived in Northern California. It all started when Milo asked Greg to help him protect his small amount of money from a family member who was “borrowing” it freely. All Milo had was a savings of $140,000 and payments of $3,700 per month from social security, a pension, and veteran’s benefits. To help his father out, Greg applied for guardianship of Milo’s money, and the court granted it to him. At the same time, without notifying Greg, the court appointed a professional financial Conservator that neither Milo nor Greg knew. The Conservator quickly set to draining Milo’s small savings, with the court barring Greg from filing any more motions. The situation escalated even further when the Conservator decided to move Milo from his assisted living facility to a cheap lock-down facility, where he wouldn’t even have access to the outdoors. This would, of course, free up more money for the Conservator to access. Before this could happen, though, Greg hurried to pick his father up and bring him back to California with him. Now, the two are essentially on-the-run from authorities, who are trying to bring Milo back to Arizona and under the control of the Conservator. Milo and Greg are out of funds and are now trying to raise the $15,000 it would take to hire a lawyer and free Milo from this terrible situation. The scariest part is that Milo and Greg had all the proper legal documents in place. Sometimes, though, that is not enough to protect your parents from being taken advantage of—even to this extreme of a level. Especially in a time of stress and confusion like the COVID-19 pandemic […]

Read more

Are You Clear About How Your Parents Estate Plan Will Impact You?

April 28, 2020

Do your parents have an estate plan? Is it up to date? No matter how rich or poor you or your parents are, especially in the wake of the COVID-19 pandemic, you need to be asking these and several other questions. When your parents become incapacitated or die, their affairs will become your responsibility, and it will be impossible to ask them to clarify anything. So, if you do not know whether or not they have estate planning in place that will help you best support them, read on. The Best-Case Scenario In a best-case scenario, your parents have an updated estate plan, and they’ve walked you through it. They have provided an inventory of their assets that’s easy for you to find listing out everything they own, how it’s titled, and who it should go to and how. Ideally, it also includes directions on how to handle their non-monetary assets, and an audio recording or written stories that pass on their values, insights and experience. On top of all that, it’s best if they’ve introduced you to the lawyer who set it all up, so you know who to turn to when the time comes. Less-Than-Ideal Scenarios If that’s not the case, you could have some holes to fill. If they’ve not done any planning at all, now is the time to encourage them to get it done, and support them in any way you can. If they already have a completed plan, it’s likely that it has been sitting on their shelf or in a drawer for years, not updated, with no inventory of their assets and no way to capture and pass on their intangible assets. Even worse, their lawyer could have been using outdated systems that are no longer recognized, which can lead to trouble down the road. It’s also possible they’ve never updated their estate plan, it no longer tracks with their current assets, and may even require complex actions that are no longer necessary upon their death. Worst of all, you may have no idea what your parents own or how to find their assets, and at their incapacity or death you’ll be left with a mess, even though your parents had good intentions and thought their planning was handled. The Worst-Case Scenario In a worst-case scenario (which we see more frequently than we’d like), your parents may have worked with someone who exerted undue influence over their decisions. This person may have led them to write something into their plan that they either didn’t really want to or wouldn’t otherwise have chosen if they understood all of their options. Either way, it’s critical for you to know who your parents have worked with to create their estate plan, and how and why they made the choices they did. If you aren’t in the know, now is the time to find out. If you and your parents are already discussing these matters, but have not yet included you, you can ask them to schedule a family meeting with their existing attorney. On your parents’ request, that attorney should look forward to walking you through […]

Read more