Author: Kevin Eismann

Exit Planning: It Takes a Team

Exit Planning is very comprehensive.  Accordingly, several key players must be involved including your financial advisor, CPA, banker, insurance professional, business broker, or investment banker and attorney.  When selecting your team of advisors it is important to identify players that will work well together and will be able to help with any of the issues in a comprehensive plan.  No one person or advisor has the expertise to design a comprehensive plan.

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Exit Planning vs. Succession Planning?

Often times the terms Succession Planning and Exit Planning are used interchangeably but they should not be.  Both Succession Planning and Exit Planning should be addressed as separate plans.

Succession Planning is planning for leadership continuity.  It identifies and fosters the next generation of leaders within a business. It’s a process because it requires a company to develop internal people with the potential to fill key positions within an organization. With a proper Succession Plan, a business will seamlessly transition leadership.

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Employee Policies and Procedures: Costly if Not Monitored

There’s been a lot in the news lately about huge settlements that big companies have made for employment law issues. Whether it be for misclassification of workers or violation of wage and overtime laws, businesses continue to pay large fines for not following employment laws. For example, Uber drivers recently filed a class action lawsuit claiming they have been misclassified as independent contractors and are entitled to be reimbursed by Uber for expenses such as gas and vehicle maintenance. This lawsuit was costly. Uber agreed to pay $100 million to settle independent contractor misclassification claims.

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Wisconsin Worker’s Compensation for Business Owners

Wisconsin Worker’s Compensation for Business Owners

For most Wisconsin employers, the thought of a Worker’s Compensation claim is scary. Trying to keep your business afloat while navigating the countless rules seems impossible. At first glance, the rules appear to be stacked against the business. With the right guidance, however, a Wisconsin worker’s compensation claim should not mean the end of your business. In fact, a claim shouldn’t even be all that scary.

The Wisconsin Department of Workforce Development defines worker’s compensation as a system of no-fault insurance that pays benefits to employees for accidental injuries or diseases related to an employee’s work. Payment to employees is typically prompt, and much more certain then other states. In exchange, employers have limited liability. The question for every business owner then, is why do claims appear to threaten the success of my business? That answer is two part.

First, and the most likely answer, is perception. Because every bad story is told a thousand times more than every good story, the perception is that every worker’s compensation claim shuts down a business. But, perception is not reality in this situation. The second reason is a failure to obtain insurance. Like anything, not having insurance places 100% of the risk on the business. As if that risk weren’t enough, the business can also face penalties and fines. But, once insurance is in place the insurance company assumes nearly all of the risk. So, the first step to not allowing a worker’s compensation claim to shut down your business is obtaining the right insurance.

But, even after obtaining insurance, a business may still be liable to an injured worker. Worker’s compensation insurance does not cover every risk associated with a workplace injury. The two most common uninsured scenarios are (i) safety violations and (ii) an employer’s failure to timely report a fatality or injury.

A safety violation may result in an employer being liable for a 15% increase in compensation, up to a maximum of $15,000.00. Or, in other words, a penalty equal to 15% of the compensation awarded to the injured employee. Safety violations can include a violation of a safety order/statute, failure to use a safety device or failure to obey an established safety rule. Thankfully, by following safety rules, installing safety devices and providing employees with training and guidelines, employers can limit their risk.

An employer’s failure to timely report a work place incident is susceptible for two different penalties. First, an intentional failure to report a work place injury may result in an employer being assessed a penalty of up to $15,000.00 or 200% of the compensation paid to the injured employee. On the other hand, an employer who negligently fails to timely report an injury may be assessed a penalty of 10% of the injured employee’s compensation if the delay in reporting causes an untimely payment. Thankfully an employer’s reporting period is pretty generous. In the event of a work-related fatality, an employer must report said fatality to the Wisconsin Department of Workforce Development and the Worker’s Compensation Division, Madison Office, within 24 hours of the fatality. This doesn’t seem to extreme considering the severity of the triggering event. On the other hand, employers must report a work place injury to their insurance carrier within 7 days of the incident. This time frame also seems very reasonable.

Although this article is not an exhaustive list of the different ways an employer can be susceptible to liability, it does include two of the biggest risks under Wisconsin’s worker’s compensation laws. Even though a business has limited liability, it is still very important to make sure you properly navigate each worker’s compensation claim. The attorneys of Epiphany Law are always happy to help reduce that risk and ensure your future success.

IRAs and Estate Planning

IRAs can be incredible wealth accumulation devices. However, when it comes to dealing with IRAs in your estate plan, the rules are a bit complicated and a number of misconceptions abound.

Myth #1: My well thought out Will and Last Testament will take care of my IRAs.

Truth: While a Will is a very good thing, a Will, does not control the disposition of your IRAs. Rather, the transfer of your IRAs will be controlled by the beneficiary designation you probably filled out many years ago when you originally opened the account. The odds are it’s outdated and probably incorrect. If you didn’t complete the form? Your IRA will transfer pursuant to the rules of the investment company; which likely will be different than your wishes expressed in your Will.

Myth #2: I can simply name my kids as beneficiaries and there shouldn’t be any issues.

Truth: If you only have one child, he or she is in perfect health (and always will be), could never get divorced, always makes wise financial decisions, and will never experience creditor problems, then simply designating your child as beneficiary might work. For the rest of us, we hope for the absolute best for our children, but plan for things to possibly go wrong at some point; we’ll want an IRA Trust just in case.

Myth #3: IRAs are protected assets and creditors can’t get them.

Truth: In general, IRAs are protected from the claims of creditors with regard to the IRA owner during his or her lifetime. However, once the IRA assets are transferred upon death of the owner, the assets are no longer exempt from creditors – so declared the United States Supreme Court in the recent Clark v. Rameker decision.

Myth #4: I can simply use my existing Living/Revocable Trust for my IRAs.

Truth: The draconian rules that the government has in place for the transfer of IRAs are complex and often nonsensical. Obviously, it’s not in the best interest of the government for tax-free and tax-deferred investments to remain not taxed. Consequently, best practices are to always have a separate IRA Trust if IRAs make up any sizeable portion of your estate.

Summing it Up: With proper planning, you can pass along to your children the tax-deferred or tax-free advantages of IRAs, often allowing them to “stretch” the tax benefits over their lifetime. In addition, through the use of an IRA Trust, you can protect your children from creditors and predators, (whether that is an ex-spouse or Uncle Sam). Contact Epiphany Law to learn more.

Now or Later? Leaving Wealth to Family

Many people who intend to leave their wealth to children and grandchildren assume they can only do so when they pass away. The problem with a traditional inheritance is that you won’t be around to see your family enjoy it. Sometimes, you may want to help out a family member facing a difficult time now instead of down the road.

The good news is that there are ways to distribute your wealth during your lifetime. These “nontraditional” inheritances allow you to help out family when you want to (or when they need it) and see the benefits. In addition, lifetime distributions can reduce the size of your estate, which can help avoid hefty estate taxes. The most common option is through gifting: you can gift up to $14,000 each year to each individual family member (and your spouse can gift the same) without incurring gift taxes.

 

However, there can also be drawbacks to making distributions during your lifetime. The biggest concern is that you give so much you’re unable to support your own needs and those of your spouse. Before you begin making distributions, you should seriously consider if you can afford to. Unfortunately, many people make lifetime distributions only to find they can’t afford their own long term care or other expenses.

If you decide you want to distribute part of your wealth during your lifetime, it’s important to plan those distributions just as you would plan traditional inheritances. Discuss your decisions with family members so they understand your choice (especially if you aren’t making gifts to everyone) and know what to expect. With a little planning, you can easily accomplish your goal of sharing your wealth with family now, while making sure you can meet your needs later.

A Creditor’s Guide to Bankruptcy

Bankruptcy is difficult for a debtor, but did you know it can also be complicated for creditors? While big creditors have sophisticated processes for dealing with bankrupt customers, small businesses are often the ones left out.

As soon as a customer files bankruptcy, there are several key steps you should take to protect your interests:

  1. 1.Contact your attorney. Bankruptcy laws are complicated and if you don’t follow the bankruptcy court’s rules, you can end up with nothing or even having to pay back what you’ve collected.
  2. 2.Collect and preserve your business records for that customer. Those records are important to prove your claim.
  3. 3.If you’ve sold goods to the customer on credit, you might be able to reclaim those goods if you quickly send a reclamation demand to the customer. You should also stop goods that are in transit or hold goods not yet shipped to the customer.
  4. 4.File a proof of claim. This proof of claim is necessary in order for you to have any right to potential distributions.
  5. 5.Stop the collections process. Filing for bankruptcy automatically stops creditors for pursuing other collections options, like filing a lawsuit.

Unfortunately, you can’t accept payment from the customer once they’ve declared bankruptcy or even in the period immediately before declaring bankruptcy (with some exceptions). It seems unfair, but the goal is to prevent customers from paying favored creditors while others are shut out. You may end up being sued to repay the amount. If a customer suddenly offers to pay an old bill, check with your attorney first before accepting.

Understanding your rights and limits when a customer declares bankruptcy can give you the best chance to come out of the process on top. And remember: a good process for handling bankruptcies is no substitute for having a solid, consistent collections process up front.

Government Benefit Programs and Your Estate Plan

There’s been a lot of talk in the news over whether or not the government should give out benefits, how much, and to whom. But what you don’t hear about is the effect changes to government programs will have on estate planning.

There are many different types of government benefits, from Medicare and Social Security, to veterans’ benefits, to disability and so on. Nearly everyone receives some type of benefit or knows someone who does. They can be important tools for estate planning and come with their own sets of advantages and challenges.

In the past, many estate planning attorneys focused on maximizing the government benefits a person can receive and relying on those benefits to estate plan. The downside is that many benefits require a person to have limited personal assets to qualify (leading some critics to call this form of estate planning “poverty planning.”)

No matter how you feel about benefit programs, the fact is that many have been reduced or cut. Others now have stricter requirements. And while your attorney might have a guess, they can’t tell you what will happen to these programs in the future. Your current estate plan maximizing these benefits may not fully address your needs.

The better choice is to reexamine your plan now. You may find that maximizing government benefits isn’t your best option. Or you may find better ways to maximize those benefits. At the same time you can make sure your estate plan lines up with the rest of your goals.

An effective estate plan is updated with personal developments but also, as in the case with government benefits, with political and legal developments that change how your plan will work. It’s far easier to address these issues now, instead of ending up with an ineffective plan.

Putting Wage Garnishments in Perspective

Garnishing a debtor’s wages is called an “earnings garnishment” in Wisconsin. It’s one way a creditor has to collect what they’re owed on a judgment. But like many ways to collect, there are limits to what and how you can garnish.

The biggest limitation is on what you can garnish: at best, only 20% of an employee’s earnings can be garnished. If garnishment would bring the earnings below the poverty level, you’ll get even less. And if an employee is already earning below the poverty level, you can’t garnish at all.

Another limitation is time: Wisconsin limits garnishing to 13 week periods. Usually, only one creditor can garnish at a time. When the 13 weeks are up, you have to re-file (and pay the appropriate fees).

A final issue with earnings garnishments is that they involve a debtor’s employer (called the “garnishee”), which can complicate things. For example, you must send certain forms to both the debtor and the garnishee. Both of them can object to the garnishment, meaning you may end up back in court to decide who’s right.

It might seem like, with all of those limits, an earnings garnishment is never a good idea. Not true! The key to a successful earnings garnishment is to keep your expectations reasonable. Working with someone who understands the collections process, the likely costs you’ll incur and the likely amount you’ll receive from the garnishment.

Also, consider alternatives ways to collect: a garnishment may be your best option, especially if you’re having difficulty finding other property that the debtor owns. And if the debtor makes enough money, you may be able to get the judgment paid relatively quickly.

The collections process can be daunting. Understanding the pros and cons of your options can help you make the best decision on approaching it.

Property Exemptions

If you have a judgment against a debtor, there are several options you have to try and collect it. One of those options is execution, or seeking to collect assets of the debtor to satisfy the debt. Unfortunately, Wisconsin has a long list of exemptions—certain assets that you can’t reach as a creditor.

Some of the more common exemptions are:
•The value of the debtor’s home up to $75,000;
•Child support or alimony payments;
•Social security or disability benefits;
•Some business and farm property, some household goods and some savings accounts;
•Retirement benefits; and
•75%, 80% or even 100% of the debtors’ wages (depending on the circumstances).

For some debtors, all of these exemptions might make them “judgment proof”—in other words, there’s nothing left to go after. But for others, it might just take some investigation. For example, the home exemption might mean a debtor’s Appleton house is off-limits but their cottage up near Green Bay is still fair game.

Because execution is complicated and full of these exemptions, it’s never a good idea to tackle it on your own. Always consult an attorney who can help you identify if execution is the best approach for you. This is especially true if the debtor is married—their spouse can claim all of those exemptions as well, making execution even trickier. Your attorney can help you identify what property you can actually reach and how to navigate the process.