Will Insurance Help Business Owners Recover Lost Income?

  • Post Author:

The economic disruption from the COVID-19 pandemic has led businesses and policymakers to ask whether insurance should cover associated losses. Most businesses carry Commercial Property insurance, which frequently includes Business Income or Business Interruption coverage. In general, this additional coverage is there to replace lost income due to “covered causes.”

There’s no question that the novel Coronavirus is causing unexpected business losses. But, are the lost profits and other damages covered under these business policies?

Insurers are reluctant to cover business income losses in a pandemic, primarily because of the sheer scale of the loss. Insurance industry sources suggest that the cost of covering business income claims resulting from COVID19 could run as high as $290 billion monthly.

While insurers typically exclude coverage for losses due to viruses or bacteria … the final answer may not be as certain. Depending on the exact policy language, a policy review by an attorney may reveal an argument for coverage.

Some lawmakers also are exploring ways to shift some of the economic burden to business insurers.

For example:

  • Some insurance trade groups are considering an option where businesses submit claims as if the losses were covered, and insurers pay claims from a government-funded pool. There is precedent for this approach in the National Flood Insurance Program.
  • A state bill in New Jersey would require insurers retroactively to include virus transmission as a covered peril in BI policies. The bill also includes a provision that would allow liable insurers to petition the state for partial reimbursement collected from other insurers in New Jersey that do not offer BI coverage. This would potentially shift business losses attributable to COVID-19 to all insurers in the state.
  • Massachusetts, New York, and Ohio have also introduced bills on BI coverage.

If you are a business owner and you carry commercial property insurance, the best advice is to promptly review your policies, notify insurers of claims, document losses, and consult qualified legal counsel.

Resources: The National Law Review, Insurance Coverage in the Time of Coronavirus: Business Interruption Coverage May Require Creativity, March 18, 2020; Congressional Research Service, Business Interruption Insurance and COVID-19, March 31, 2020.

You Can Complete Your Estate Plan During the Coronavirus Quarantine

  • Post Author:

The coronavirus lockdown is happening in many states, following the lead of California, Illinois, Florida and New York. Kiplinger’s recent article entitled “How to Get Your Estate Plan Done While Under Coronavirus Quarantine” says that these isolation orders create unique issues with your ability to effectively establish or modify your estate plan.

The core documents for an estate plan are intended to oversee the management and distribution of your assets after you pass or in the event, you are incapacitated. Each document has requirements that must be met to be legally effective. Let’s look at some of these documents. Note that there is proposed federal legislation that would permit remote online notarization, and Illinois and New York have passed orders to allow notarization utilizing audiovisual technology.

Will. Every state has its own legal requirements for a will to be valid, and most require disinterested witnesses. Some states, like California, permit a will, otherwise requiring the signature of witnesses, to be valid with clear and convincing evidence of your intent for the will to be valid. An affidavit indicating that the will was signed as a result of the emergency conditions caused by the COVID-19 virus should satisfy this requirement.

Power of Attorney. This document designates an individual to make financial decisions regarding your assets and financial responsibilities if you’re unable to do so. This can include issues regarding retirement benefits, life, and medical insurance and the ability to continue payments to persons financially dependent on you. The durable general power of attorney is notarized in California.

Advance Health Care Directive. This document states whether you want your life extended by life support systems and if you want extraordinary measures to be taken. It may state that you wish to have a DNR (Do Not Resuscitate) in place.

HIPAA Authorization. Some states have their own medical privacy laws with separate requirements, and most powers of attorney provide that the designated persons can act if you’re unable to do so. Financial institutions typically require confirming letters from your doctor that you’re unable to act on your own behalf. To be certain that this agent can act on your behalf if needed, they should be given written access to see your medical information.

During quarantine, these requirements can be fluid and may change quickly. Be sure to work with an experienced estate planning attorney.

Reference: Kiplinger (March 30, 2020) “How to Get Your Estate Plan Done While Under Coronavirus Quarantine”

Keeping Ourselves and Our Elderly Loved Ones Safe

  • Post Author:

We have all been warned that our elderly loved ones are at heightened risk during the coronavirus pandemic. If you are a caregiver for someone in this high-risk population, here are some tips from Dr. Alicia Arbaje, who specializes in internal medicine and geriatrics at Johns Hopkins.

  1. Keep Yourself Well
    Be sure to follow all the guidelines and precautions about social distancing, hand washing, and cleaning to keep yourself well.
  2. Limit In-Person Visits
    It may be emotionally challenging but keeping in-person visits to a minimum is the best way to reduce the risk of infection. When you can’t be there in-person, use technology to stay in touch. Teach your older loved ones how to use video chat applications. Remember to add captions to your videos if they are hearing-impaired. Also, encourage others to telephone or send cards or notes as well.
  3. Be Creative About Home-Based Projects
    Now may be a great time to encourage your loved ones to record their personal stories, organize family photos or reconnect with old friends online.
  4. Decide on a Plan
    Discuss now your emergency response plan. Who will be the emergency contact? Do you know where the estate planning documents are and can you quickly access them, especially health care directives?

If you or your loved one do not have an updated will or trust and health care documents, please reach out to our office. We can help get planning in place quickly and easily and are even offering virtual meetings now to keep everyone safe.

What if your elder loved one starts to develop symptoms?

If you or your loved one learn that you might have been exposed to someone diagnosed with COVID-19 or if anyone in your household develops symptoms such as cough, fever, or shortness of breath, call your family doctor, nurse helpline or urgent care facility. For a medical emergency such as severe shortness of breath or high fever, call 911.

Resource: Johns Hopkins Medicine, Coronavirus and COVID-19: Caregiving for the Elderly, https://www.hopkinsmedicine.org/health/conditions-and-diseases/coronavirus/coronavirus-caregiving-for-the-elderly

What Do Farmers Need to Create an Estate Plan?

  • Post Author:

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 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.

Reference: Bangor Daily News (March 5, 2020) “How farmers can start an estate plan”

COVID-19 and Estate Planning

  • Post Author:

As Americans adjust to a changing public health landscape and historical changes to the economy, certain opportunities in wealth planning are becoming more valuable, according to the article “Impact of COVID-19 on Estate Planning” from The National Law Review. Here is a look at some strategies for estate plans:

Basic estate planning. Now is the time to review current estate planning documents to be sure they are all up to date. That includes wills, trusts, revocable trusts, powers of attorney, beneficiary designations, and health care directives. Also, be sure that you and your family members know where they are located.

Wealth Transfer Strategies. The extreme volatility of financial markets, depressed asset values, and historically low-interest rates present opportunities to transfer wealth to intended beneficiaries. Here are a few to consider:

Intra-Family Transactions. In a low-interest-rate environment, planning techniques involve intra-family transactions where the senior members of the family lend or sell assets to younger family members. The loaned or sold assets only need to appreciate at a rate greater than the interest rate charged. In these cases, the value of the assets remaining in senior family member’s estate will be frozen at the loan/purchase price. The value of the loaned or sold assets will be based on a fair market value valuation, which may include discounts for certain factors. The fair market value of many assets will be extremely depressed and discounted. When asset values rebound, all that appreciation will be outside of the taxable estate and will be held by or for the benefit of your intended beneficiaries, tax-free.

Grantor Retained Annuity Trusts (GRATS). The use of a GRAT allows the Grantor to contribute assets into a trust while retaining a right to receive, over a term of years, an annuity stream from the Trust. When the term of years expires, the balance of the Trust’s assets passes to the beneficiaries. The IRS values the ultimate transfer of assets to your intended beneficiaries, based on the value of the annuity stream you retain and an assumed rate of return. The assumed rate of return, known as the 7520 rate comes from the IRS and is currently 1.8%. So, if you retain the right to receive an annuity stream from the trust equal to the value of the assets plus a 1.8% rate of return, assets left in the trust at the end of the term pass to your beneficiaries transfer-tax-free.

Charitable Lead Annuity Trusts. Known as “CLATs,” they are similar to a GRAT, where the Grantor transfers assets to a trust and a named charity gets an annuity stream for a set term of years. At the end of that term, the assets in the trust pass to the beneficiaries. You can structure this so the balance of the assets passes to heirs transfer-tax-free.

Speak with your estate planning attorney about these and other wealth transfer strategies to learn if they are right for you and your family. And stay well!

Reference: The National Law Journal (March 13, 2020) “Impact of COVID-19 on Estate Planning”

Finalizing Estate Planning Documents while Social Distancing

  • Post Author:

After the initial shock of the pandemic, people are realizing not just that they need to update their estate planning documents, but also the people who have been named in important roles. In a recent article from The New York Times, “What to Know About Making a Will in the Age of Coronavirus,” one person said, “I think I still have my jerk brother as the trustee. I need to change that.”

However, with social distancing now being the new norm, some necessary processes for finalizing estate plans are calling for extra creativity. While lawyers can draft any necessary documents from their home offices, the documents need to be signed by clients and, depending upon the document and the state, by witnesses and notaries. These parties usually need to be in the same room for the documents to be considered legally valid.

New York’s Governor Andrew M. Cuomo issued an executive order on March 7 that declared a disaster emergency in the state and temporarily gave notaries the authority to authenticate documents by videoconference. Other governors have also issued executive orders to allow video notarizations, including Connecticut, Iowa, New Hampshire, and Washington. It’s safe to say that more states will probably permit this as time goes on. California is not on the list of remote notarizations or videoconference.

However, besides needing notarizations, wills in New York State and other documents require two unrelated witnesses in the room when the document is signed. That also goes for the health care directive, which gives a person the ability to name someone to make medical decisions on their behalf, if they become incapacitated.

One New York attorney used a video conference to watch two clients and their witnesses, located more than 100 miles away from his home office, sign new financial powers of attorney and health care documents. He used his laptop to record a video of the proceedings, while clients used their phones. The client couple sat on the enclosed porch of a friend’s house in a distant county and signed the documents, while their friends stood six feet away. When the couple finished signing, they stepped away and their friends moved in to sign the documents, all in view of the attorney and all, of course, wearing vinyl gloves.

The documents were then scanned and sent to the attorney by email and he notarized them. They will also be mailed to him at his home, and then he will authenticate the documents.

In New Jersey, notaries need to be physically present at the signing of documents. One attorney took extra steps for two ER nurses, both single mothers and on the front lines of the coronavirus outbreak. He met them in the front yard of one of their houses, where a table had been set up and rocks were used to hold down the documents from blowing away in the wind. Everyone wore gloves and brought their own pens. One nurse served as a witness for each other, and another friend was a witness for both. After each person signed, they stepped away, while another stepped up to the table.

Not every state is making changes to permit these documents to be witnessed and notarized, so there may be many outdoor signings taking place in the weeks and months to come. Speak with your estate planning attorney, who will know the laws that apply to your state.

Reference: The New York Times (March 26, 2020) “What to Know About Making a Will in the Age of Coronavirus”

An Estate Plan Is Necessary for the Unthinkable

  • Post Author:

The death of basketball legend Kobe Bryant, his daughter, and seven others reminded us that we never know what fate has in store for us. A recent article from The Press Enterprise titled Yes, you must go there: Think about the unthinkable, plan for the worst” explains the steps.

Put an appointment in your schedule. Make an appointment with a qualified estate planning attorney. If you make the call and have an actual appointment, you have a deadline and that’s a start. The attorney may have a planning worksheet or organizer that they can send to you to guide you.

Start getting organized. If this seems overwhelming, break it out into separate parts. Begin with the easy part: a list of names, addresses, phone numbers, and email addresses for family members. Include any other people who you intend to include in your estate plan.

Next, list your assets and an estimated value of each. It doesn’t have to be to the penny. Include the account numbers, name of the institution, phone number, and, if you have a personal contact, a name. Include bank accounts, real estate holdings, timeshares, stocks, bonds, personal property, vehicles, RVs, any collectibles of value (attach appraisals if you have them), life insurance, and retirement accounts.

List the professionals who you rely on—your estate planning lawyer, CPA, financial advisor, etc.

If you own a firearm, include your license and make sure that both your spouse and your estate planning attorney are aware of the information. In certain states, having possession of a firearm without being the licensed owner is against the law. Speak with your estate planning attorney about the law in your state and how to prepare for a situation if the firearm needs to be safely and properly dealt with.

Name an executor or personal representative. Estate planning is not just for death. It is also for incapacity. Who will act on your behalf, if you are not able to do so? Many people name their spouse, a long-time trusted friend, or a family member. Be certain that person is willing to act on your behalf. Have a second person also named, in case something occurs, and your first choice cannot serve.

If you have minor children, your estate plan will include a guardian, who will be responsible for raising them. Talk about that with your spouse and that person to make sure they are willing to serve. You can also name a second person to be in charge of finances for the children. Your estate planning lawyer will talk with you about the role of trusts to provide for the children.

Think about your overall goals. How do you see your legacy? Do you want to leave some funds for a charity that has meaning to you and your family? Do you want your children to receive equal shares of your entire estate? Does one child require special needs planning, or are you concerned that one of your children may not be able to manage an inheritance? These are all topics to discuss with your estate planning attorney. Their experience will help clarify your goals and create a plan so that you are prepared for the unthinkable.

Estate planning touches on topics people would prefer to avoid thinking about, but avoiding planning for the unthinkable will not protect you from it.

Reference: The Press Enterprise (Feb. 2, 2020) Yes, you must go there: Think about the unthinkable, plan for the worst”

Coronavirus Scams are Surfacing

  • Post Author:

Maryland U.S. Attorney Robert K. Hur is “encouraging all Marylanders to be aware of individuals attempting to profit from the coronavirus pandemic,” reported Marcia Murphy, a USAO spokeswoman.

The Cecil Whig’s recent article entitled “Maryland U.S. attorney warns of COVID-19 scams; Cecil County remains vigilant” cautions that coronavirus scams are being uncovered around the country.

Scammers have been sending e-mails to people claiming to be from local hospitals offering coronavirus vaccines for a fee. However, no vaccine is currently available for the coronavirus. Some of these criminals are using websites that appear to be legitimate but are actually fake websites that infect the users’ computers with harmful malware or seek personal information that can be later used to commit fraud. Many of these scams prey on the most vulnerable, especially the elderly.

Seniors need to contact the police, if they think someone has targeted them for a scam and to educate themselves on the COVID-19-related scams by checking official government websites, like the CDC.gov for information.

Seniors need to scrutinize anyone who makes contact with them about a COVID-19 vaccine—which does not exist yet—and to report any such interaction to law enforcement.

Late last week, U.S. Attorney General William P. Barr sent a memo to all U.S. Attorneys, in which he made the investigation of these scams and the individuals perpetrating them a priority. Therefore, federal, state, and local law enforcement agencies are prepared to investigate these frauds.

The Federal Trade Commission has consumer information about coronavirus scams on its website, including a complaint form to report scammers. Elderly victims can also call the newly launched Elder Fraud Hotline at 833-FRAUD-11 (833-372-8311) if they believe they are victims of a coronavirus scam—or any other type of fraud.

In addition to selling bogus cures and infecting computers by using COVID-19-related communications, other examples of coronavirus schemes include:

  • Phishing emails from entities posing as the World Health Organization or the Centers for Disease Control and Prevention
  • Those asking for donations for fraudulently, illegitimate, or non-existent charitable organizations; and
  • Scammers posing as doctors, who ask for patient information for COVID-19 testing and then use that information to fraudulently bill for other tests and procedures.

Barr asked the public to report suspected fraud schemes related to COVID-19, by calling the National Center for Disaster Fraud (NCDF) hotline (1-866-720-5721) or by e-mailing the NCDF at disaster@leo.gov.

Reference:  Cecil Whig (March 23, 2020) “Maryland U.S. attorney warns of COVID-19 scams; Cecil County remains vigilant”

IRS Postpones Gift and GST Tax Deadline to July 15

  • Post Author:

The IRS has expanded the list of deadline extensions for federal taxes and tax returns to include gift and generation-skipping transfer (GST) tax returns. An earlier notice had applied only to federal income tax returns and payments (including self-employment tax payments) due April 15, 2020, for 2019 tax years, and to estimated income tax payments due April 15, 2020, for 2020 tax years.

Notice 2020-20 updates earlier guidance to include the gift and GST deadline extensions.

What Are Gift and GST Taxes?

Gift Taxes. The Internal Revenue Code imposes a gift tax on property or cash you give to any one person, but only if the value of the gift exceeds a certain threshold called the annual gift tax exclusion, currently $15,000 per person. You can give away the amount of the exclusion each year without incurring a tax. The giver is responsible for paying this tax, not the recipient.

GST Taxes. The generation-skipping transfer (GST) tax can be incurred when grandparents directly transfer money or property to their grandchildren without first leaving it to their parents. These types of transfers share the same lifetime exemption as the federal estate and gift taxes, and are also subject to an annual exclusion limit of $15,000 per person.

Resource: Financial Planning, IRS postpones deadline for gift and GST taxes due to coronavirus, https://www.financial-planning.com/news/irs-offers-relief-on-gift-and-generation-skipping-transfer-taxes-due-to-coronavirus

What are the Restrictions on Visiting the Elderly in a Nursing Home?

  • Post Author:

The restrictions in Virginia started after the American Health Care Association, the largest national trade organization representing long-term care centers, and the Centers for Disease Control and Prevention issued guidance recommending extreme measures to prevent a scenario that has played out in a Washington state nursing home, where the virus spread rapidly and took many lives.

The Richmond Times-Dispatch’s recent article entitled “Virginia nursing homes restrict visitors over coronavirus fears, families worry about separation” says, however, that some family members and advocates worry that — without loved ones allowed to visit — residents will be even more vulnerable to neglect in nursing homes that already struggle to give them basic care.

“What we have found is that experts believe that this is the most prudent step that we can take to protect the residents,” said Keith Hare, CEO of the Virginia Health Care Association, the state chapter of the AHCA. “We have to put the health and well-being of these residents first. … It really is unprecedented action.”

However, some family members who are told that they can drop off supplies for the residents at the nursing home, cannot stay for a visit. Some are worried that parents with Alzheimer’s who need help eating, won’t be fed without their regular visitors because nursing homes are understaffed.

Nursing homes in the state say it was a hard decision to cease visitation, but it was necessary to prevent any exposure in the care facilities. They’re going to do whatever we can to keep it out, official say.

Innovative Healthcare Management, a company that runs five nursing homes in Virginia with a total of 750 residents, said that it has been educating its staff and preparing for a potential outbreak, since first learning of the coronavirus outbreak in China. IHM recently began screening visitors for possible coronavirus infection before they entered the facilities. The company decided to restrict all nonessential visitors, except when a resident is believed to be dying.

Nursing homes are trying other ways for family members to connect with residents, like phone calls and video chats.

While nursing homes around the country are doing the same thing and are restricting group gatherings within the centers, they are trying to make sure residents are being entertained with in-room activities, such as movies, card games, and puzzles. The focus at the facilities is on communication and keeping residents entertained.

Reference:  Richmond Times-Dispatch (March 15, 2020) “Virginia nursing homes restrict visitors over coronavirus fears, families worry about separation”