Home Posts tagged Plan
Accounting and Tax Planning

Review, Refocus, and Reset

By Julie Quink, CPA, CFE

Julie Quink

Julie Quink

This year has been riddled with a series of unexpected and unanticipated events for business owners and organizations, the height of which continues to be the pandemic and its continued significant impact.

With the uptick in positive cases continuing, business owners and management continue to face difficult business decisions and worries surrounding the financial and safety impacts of the COVID-19 coronavirus. With much on their minds running a business day to day, it becomes difficult for business owners, management, and even accounting professionals to ‘see the forest for the trees,’ as they say, and, as a result, they often set aside the opportunity to plan.

Using the lessons learned in 2020, there is no better time to review, refocus, and reset.

Review

Countless impacts, some quantifiable and some undocumented or unknown, exist within organizations resulting from the events thus far in 2020. Among them:

• An unprecedented amount of fraud has occurred, impacting unemployment claims, accounting systems, and data breaches, to name a few areas of concern;

• Key accounting standards that were intended to be implemented in 2019 and 2020, including the lease-accounting and revenue-recognition standards, were deferred by the standard setters to ease the strain on companies in this high-pressure economic atmosphere;

• Significant stimulus funds have been made available to the business community through the Coronavirus Aid, Relief and Economic Security (CARES) Act, including the Paycheck Protection Program, the Provider Relief Fund for hospitals and healthcare providers, and the Economic Injury Disaster Loan Program;

• Businesses that have been severely impacted by the pandemic may qualify for the Credit for Sick and Family Leave and the Employee Retention Credits;

• Remote working has become the norm out of necessity rather than convenience as businesses try to keep employees safe, while maintaining the desired level of production;

• Not-for-profit organizations are feeling the pinch of decreased donation levels at a time when their services are needed the most; and

• Interruption of business globally due to the closure of various countries, limited travel, and availability of resources has contributed to the economic challenges for businesses.

Typically, reviewing the results and events of a previous year or period is instrumental in planning for an upcoming year. For many organizations, pivoting and reframing have partially replaced planning in 2020, sometimes just to survive.

Refocus

If there is any bright spot in the current environment, it is the ability to step back and refocus. Bringing the lessons learned from 2020 thus far into clear view, organizations can’t necessarily do what they have always done and survive. Some key areas that may need a refocus include:

• Technology and security of accounting systems and sensitive data;

• The review and planning for changing accounting standards. We know there is potential for new standards or revisions of existing standards to assist in evaluating the impacts of the pandemic on financial reporting. In addition, the timeline for implementation of standards that have already been deferred may be moved even further down the road.

• The use of PPP and other stimulus funds, including employer credits, requires additional consideration from a financial-reporting and a tax-compliance perspective. Will additional stimulus funds be made available in 2021?

• Long-term remote working may encourage the movement from traditional brick-and-mortar locations going forward.

• Fundraising efforts of not-for-profit organizations may need to continue to shift and adapt to our current virtual environment, with gathering restrictions for physical events still in place. The balance of budgeting between mission and funding will seemingly continue for the next few years. Will this spur mergers of not-for-profits to allow for continued mission?

• A shift of international business perspective, including supply chain, will need to continue to occur, perhaps to source more products and services locally.

A common thread weaved in among the suggested areas of refocus is the impact they have on the financial health and well-being of an organization. Taking the time to strategize and refocus in key areas opens new opportunities to shift and reset. With many demands on business owners and management to manage day-to-day operations, this process can be easily lost but remains critical.

Reset

The resetting process is the opportunity to remove the 2020 eyeglasses and pick up a prescription with new, improved lenses for 2021. This ‘new normal’ that organizations are facing encourages outside-the-box thinking, as the original box may not exist anymore or may look entirely different than before. Resetting may continue to be critical to an organization’s success and survival. Resetting in some key areas will help the organization be agile and adaptable to change.

It is clear that business owners and management may not be able to embark on the resetting process all on their own. The reliance on IT, accounting, legal counsel, investment advisors, and business consultants, included in an organization’s team of professionals, will become increasingly important. These spokes in your professional team’s wheel are critical to maneuver through the upcoming year.

Traditionally, strategic planning has encompassed perhaps a three, five-, and 10-year plan. Internal planning — and planning externally with your accounting professionals — have moved to a shorter-term focus, including many transactional and situational planning opportunities, as a result of the continuously changing environment, additional stimulus-fund opportunities, and compliance requirements.

Business owners and management do not need to hold all the information necessary to reset and reframe, but they do need to know the appropriate people to whom they can reach out.

Takeaways

As business owners and management think about the year ahead using the 2020 rearview mirror, one thing is for sure: they should have their team of professionals on speed dial.

If they do not have the right professionals in place, now is the time to make changes. The guidance provided by the spokes on the professional wheel should not be underestimated because one thing is clear: no one of us has all the answers to navigate the new normal, but collectively the team can help provide the input needed to move the organization to the next levels.

Remember: review, refocus, and reset.

Julie Quink, CPA, CFE is the managing principal of West Springfield-based Burkhart, Pizzanelli, P.C., certified public accountants; (413) 781-5609.

Features Special Coverage

A Season on Ice

Nate Costa, president of the Thunderbirds

Nate Costa, president of the Thunderbirds

The wall opposite Nate Costa’s desk is covered in a wrap depicting action from the American Hockey League (AHL) All-Star Classic, played at the MassMutual Center in January 2019 — probably the high point of the five-year re-emergence, and renaissance, of professional hockey in Springfield.

Costa pointed toward that wall several times as he tried to explain just how the Springfield Thunderbirds, which he serves as president, might place spectators so they are at least six feet apart — if, and it’s mighty big if, the governor, the city, and whoever else might need to sign off on such a plan gives the proverbial green light. And he also pointed while talking about the many subtleties and challenges that go into such an exercise.

“It’s almost like a puzzle,” he explained. “We have 6,700 seats, and our season-ticket holders are typically jammed into the best seats. All our center-ice seats are completely taken … so what do you do in a six-foot distancing model? — everyone can’t get the seat they would normally want to have, and that’s just one of the challenges.”

As he talked with BusinessWest on Oct. 15, five days after the 2020-21 season was supposed to start, Costa acknowledged that trying to put together this puzzle is just one of the myriad questions and challenges he and a now considerably smaller staff are working to address.

“The ownership has given a commitment to Springfield — we’re not going anywhere. It’s going to be a challenging year for us, like it is for everyone else, but the commitment is there to get through this year and plan for the long term. We’ll get through this … it’s just going to be tough.”

Indeed, Costa admitted he has no real idea if or when he might be able to put such a plan into action. In reality, he has no idea when or under what circumstances hockey might again be played on Main Street. He was told in July by the National Hockey League, parent to the AHL, that games might be able to commence by early December, but he’s very doubtful about that date.

He believes January or even February is a far more likely start time. But beyond that, he cannot say with any degree of certainty how — and how many — games might be played, and how late into 2021 the season might go. Instead, there are only question marks — many of them, involving everything from if and how many fans can sit in the stands to if and how this team can travel to away games in other states, let alone Canada.

All these questions, most of them difficult if not impossible to answer at this juncture, make this a difficult, very frustrating time for Costa and all those involved with a franchise that had become one of the feel-good stories in Springfield over the past several years.

games might be played in early December

While the AHL is expressing hope that games might be played in early December, Nate Costa, president of the Thunderbirds, believes January or early February is a more likely target for a return to action at the MassMutual Center.

Under Costa’s stewardship and the backing of a large, committed ownership group, Springfield had gone from a city without hockey after the Falcons departed for Arizona more than five years ago, to one with a franchise that was not only filling the MassMutual Center with increasing regularity, but also becoming part of the fabric of the region.

Turning the clock back just seven months or so, although it seems like an eternity, to be sure, Costa said the team was clicking on all or most cylinders, meaning everything from ticket and merchandise sales to creating strong partnerships with a number of area businesses.


Listen to BusinessTalk with Nate Costa Podcast HERE


“We were, fortunately, in a really good position when the season ended last year,” he noted. “We were ahead of budget, we were on track to make a profit, which was three years in the making. We were in great shape — we had nine sellouts through March last year, which was our previous record, and we had three weekends left and were expecting three more sellouts. The business was in great shape.”

In the proverbial blink of an eye, though, everything changed. The season, and the MassMutual Center, were shut down. Initially, the Thunderbirds, like most businesses closed down by the pandemic, thought it might be a matter of several weeks before things went back to something approaching normal. As it became clear this wouldn’t be the case, the team — again, like many other businesses — had to make some hard decisions and eventually furlough several employees; once a staff of 19, it is now down to seven.

“The thing that has been frustrating and challenging — to everyone, but me in particular — is that we don’t have a lot of control over much of anything at this point. You’re beholden to the state and other states and also to the league … you can have all the best plans in the world, but if we don’t have the ability to do it and do it safely, then it’s going to be a challenge.”

Those who remain are trying to carry on as they did seven and half months ago — selling season tickets, planning events, working within the community, and building the team’s foundation. But it’s all different. For the most part, the staff is trying to prepare for contingencies, plan what can be planned, and, perhaps above all, work tirelessly to remain relevant while waiting for games to commence and the pandemic to run its course.

“The ownership has given a commitment to Springfield — we’re not going anywhere,” Costa said. “It’s going to be a challenging year for us, like it is for everyone else, but the commitment is there to get through this year and plan for the long term. We’ll get through this … it’s just going to be tough.”

 

Setting Goals

When asked about how he’s apportioning his time these days, Costa said he spends much of it on the phone.

Many of those calls are to and from other team executives in the AHL — he knows most of them going back to the days when he worked for the league — who are looking to compare notes and share thoughts on how to deal with a situation unlike anything they’ve encountered.

“I’m seeing what other teams are doing, what they’re hearing from their states, and what the temperature is for us to play in the upcoming year,” he explained. “There’s a lot of conversation going on about how we can pull this off and how we can do it the right way. It’s a challenge that none of us have faced in our careers, and there’s no way to really plan for it.”

In addition to other AHL officials, Costa and others within the league are also talking with leaders from other sports, including the National Football League. From these conversations, they’re learning it’s been difficult to sell even those comparatively few tickets that states like Florida, Texas, and Missouri are allowing teams to sell.

Indeed, while the popular notion might be that there is considerable demand for those few seats, and that teams would struggle to figure out who might be awarded them, that is certainly not the case.

“They’re having a hard time selling the limited inventory that they have because people are just not mentally ready for it yet,” Costa said. “Even the Cowboys are facing challenges; they’ve had to comp a lot of tickets. The Dolphins, the same thing. That’s what we’re seeing.”

2019-20 Thunderbirds’ schedule

Signage outside the MassMutual Center still displays the 2019-20 Thunderbirds’ schedule because the slate for this year remains clouded by question marks.

This harsh reality brings yet another layer of intrigue, and questions, to the discussion concerning just when, if, and under what circumstances the AHL might be permitted to carry out its 2020-21 season. Indeed, while the league wants to commence action and get fans back in the arenas, if they start too early, fans will not be eager to come back.

And the harshest reality of all is that this league — and the NHL as well — simply cannot operate for any length of time without fans in the stands.

The AHL is a league with no national television contracts and only some smaller, regional deals. The vast majority of revenues come from sponsorships and sales of tickets, concessions, and merchandise. And without fans in the stands … well, it’s easy to do the math.

Meanwhile, the inability to play in front of fans is also presenting a major challenge to the parent league, the NHL, whose franchises own the bulk of the teams in the AHL, with a dozen or so, including the Thunderbirds, being independently owned.

“Even though the perception is that the NHL is this huge entity that can just sustain losses, with them not having the ability to put fans in the stands, that impacts everything,” he explained. “That’s the trunk to the revenue tree. If you don’t have fans, it’s hard to sell sponsorships, and you can’t sell merchandise and concessions. And at our level, that’s what really drives our business — it’s butts in seats.

“In this league, it’s crucially important to have fans in the arena,” he went on. “And that’s what we spent four years doing — rebuilding the fan base and packing this arena so that our business would be much more financially solvent.”

But playing games without fans in the stands remains one of the options moving forward, said Costa, calling it a last resort, but still a possibility, especially if he can negotiate with one of the local TV stations to televise some of the games. And talks along those lines are ongoing, he told BusinessWest.

The hope, though, is that, by January or February, the state will allow fans in the arenas with a six-foot-distancing model, he said, referring again to that image on his wall.

“It’s not going to be a ton of people, maybe 1,200 to 1,500 people from what we’re doing with our modeling,” Costa continued. “But at least it would get us started, and then the hope would be that, as the spring would move along, we’d be able to bring more bodies into the building.”

That’s the hope. But Costa and his team, as noted, are preparing, as best they can, for a number of contingencies.

“The thing that has been frustrating and challenging — to everyone, but me in particular — is that we don’t have a lot of control over much of anything at this point,” he said. “You’re beholden to the state and other states and also to the league … you can have all the best plans in the world, but if we don’t have the ability to do it and do it safely, then it’s going to be a challenge.”

 

Knowing the Score

Next spring will mark the 50th anniversary of the Calder Cup championship run authored by the team known then as the Springfield Kings, the minor-league affiliate of the then-fledgling Los Angeles Kings.

Costa said the team has been making plans to honor that squad and its accomplishment with a throwback game featuring the Kings’ colors and logos, an on-ice ceremony featuring surviving members of that team, and other events.

Now, most of those plans, as well as those to mark the fifth anniversary of the Thunderbirds themselves, are in limbo, like just about everything else concerning the 2020-21 season.

Indeed, even as Costa and his team try to prepare for the new season, there are still so many things beyond their control, especially the virus itself. By most accounts, a second wave has commenced, with cases on the rise in a number of states. Some of those states, and individual communities, have already put a number of restrictions in place as part of efforts to control the spread of the virus, and there may be even more in the weeks and months to come.

The ones already in place create a number of logistical concerns.

“Rhode Island has a 14-day mandatory quarantine, so if we play Providence, how does that work?” he asked rhetorically. “Meanwhile, the Canadian border is closed; we have Canadian teams, including one in our conference, Toronto. And then, there’s the challenge of air travel — Charlotte is in our division, and we would normally go there once or twice a year. How do you do that, and how do you do it safely?

“There’s a lot of things that we as a league have to work through,” he went on, and while coping with these day-to-day questions and challenges, he stressed the need to think and plan for the long term. He said the pandemic will eventually be something to talk about with the past tense, and he wants to properly position the franchise for that day, even while coping with the present challenges.

This mindset has dominated the team’s actions with regard to everything from refunding tickets sold but not used last season to managing the partnerships that have been developed over the years with corporate sponsors.

“We reached out to every season-ticket holder and gave them a number of options,” he said in reference to the seven games they missed at the end of last season. “They could roll the credit over to the following year, they could donate to our foundation, or, if they didn’t want to do any of those, we would be happy to give them a refund because, at the end of the day, it’s the right thing to do.

“None of us planned for this, so from a business perspective, we thought that any sort of pushback or anything like that is not the way to be,” he went on. “We want to make sure we’re doing the right thing for the people who have supported us from the start, and we’ve been proactive and honest because, at the end of the day, it’s so important for us to be authentic through this process because we’re not the only ones dealing with this — everyone has their own challenges.”

This approach, coupled with the team’s strong track record over the past several years, has helped the organization maintain its strong base of support, said Costa, adding that the Thunderbirds have been able to retain roughly 85% of their season-ticket sales from last year, despite the question marks hovering over the upcoming season.

“It’s been incredible to see the level of support we’ve been given,” he said. “I think people were really seeing what we are able to do in the community and how much of an impact we were having. We’ve been given commitments by people that they’re going to be here when we’re back.”

Looking ahead to the day when the pandemic is over and he can once again focus on selling out the MassMutual Center, Costa is optimistic about his prospects for doing just that.

“I think it’s going to take some time — it might take until the summer for those people who aren’t diehards to come back to our arena, but I think that, by next fall, we’ll be able to pack this place again,” he told BusinessWest. “I think there’s going to be a lot of pent-up demand, and I think we’re positioned well. I think that, when people are ready to get back in the arena again, they’re going to think twice about driving to Boston and paying $300 to $400 for a ticket when they can get the same experience and see really good hockey right here in our area for a fraction of that price.”

 

Taking Their Best Shot

As he walked and talked with BusinessWest while showing off some of the many other wraps adorning the team’s offices on Bruce Landon Way, Costa stopped and reflected on the fact that last year’s schedule is still posted on the wall outside those facilities.

That schedule has become symbolic of how the NHL and the Thunderbirds have become frozen in time in some respects. No one can say when there will be new games on the slate, how the games will be played, or where.

What Costa does know is that, sometime soon — just when, he doesn’t know — there will be a new schedule in that space. Things will be different for some time to come, and the team is certainly not going to pick right up where it left off when the music stopped last March.

But he firmly believes that the solid foundation laid before the pandemic entered everyone’s lives has the team in a good place for when we’re all on the other side of this crisis.

 

George O’Brien can be reached at [email protected]

Opinion

Editorial

If you watched Gov. Charlie Baker at his highly anticipated press conference to announce the state’s reopening plan last week, you may have been very disappointed.

The governor said he is trying to create a balance between keeping people safe and attempting to resurrect an economy that was seen by many as being one of the strongest in the country — although not anymore, thanks in part to the governor.

If balance is the goal, this plan — if we can really call it a plan — falls way short. It doesn’t move quickly or profoundly enough, and it leaves far too many of the small businesses that form the backbone of the state’s economy without any real chance to weather this storm.

In short, Gov. Baker’s plan creates winners and losers, haves and have-nots —  a situation where Walmart or Home Depot can open their doors to the public, but small, locally owned retailers are forced to keep theirs closed or operate curbside (if they can); a situation where a yoga school with eight students is put in the same category as a Planet Fitness with thousands of members.

As most everyone knows by now, the Baker administration’s reopening plan has four phases — named ‘start,’ ‘cautious,’ ‘vigilant,’ and ‘new normal.’ On May 18, a day every business owner had circled on his or her calendar, the governor gave some details on phase 1. Manufacturing and construction could restart immediately, with restrictions, as could places of worship, while hospitals and community health centers can now provide high-priority preventive care, pediatric care, and treatment for high-risk patients and conditions. On May 25, laboratory and life-sciences facilities can open; offices can reopen, except in Boston; and recreational-marijuana shops can reopen, as can salons, barber shops, and pet groomers. Retail facilities can open for remote fulfillment and curbside pickup.

Gov. Baker’s plan creates winners and losers, haves and have-nots —  a situation where Walmart or Home Depot can open their doors to the public, but small, locally owned retailers are forced to keep theirs closed or operate curbside.

But there are no details on phase 2, which includes restaurants and lodging, some healthcare facilities, and playgrounds and pools, or phase 3, which includes bars, casinos, gyms, and museums. All that’s known is that each phase will last at least three weeks and could be extended before moving on to the next stage, depending on factors like COVID rates, testing, and healthcare-system readiness.

For small businesses, this slow, plodding pace and lack of details makes it difficult, if not impossible, to plan and — more importantly — stay alive. The governor’s plan is anything but a plan, and it will spell the demise of many small businesses.

Rick Sullivan, president of the Economic Development Council of Western Massachusetts, put things in perspective when he told BusinessWest, “I think there needs to be an appreciation for restaurants and small Main Street businesses that are not going to be able to just comply with those protocols. They’ll need to plan, order equipment, and spend some time reorganizing their business, because it’s going to be different than it was pre-COVID. And it’s not something they can do overnight.”

The reopening panel could have recognized the needs of small businesses and implemented common-sense protocols to allow them to open. Instead, it chose not to. Clearly, there doesn’t seem to be an appreciation for just how endangered our state’s small businesses are, or what will become of our cities and towns if they are allowed to die on the vine.

These businesses need more than a belated plan with cleverly (or not-so-cleverly) named stages. They need a common-sense blueprint for effectively reopening an economy that’s been shut down for two tortuously long months.

The governor’s ‘plan’ is anything but that.

Community Spotlight

Community Spotlight

Mayor Thomas Bernard says North Adams has been investing in economic development, public safety, education, and a host of other areas.

Seven priorities, 43 goals, 95 policies, and 355 actions.

This tall list makes up the master plan for the city of North Adams. The Vision 2030 Plan was launched in 2011, and just this year, Mayor Thomas Bernard and cohorts revisited the plan to check up on the progress made to date.

“We had a really good session in October where we got some interesting suggestions for setting priority areas around marketing and promotion to move the needle on some of the economic developments,” he said.

In addition to the information session in October, Bernard says another will be held in early 2020 in which the town will tackle three things: review what has been accomplished so far, identify things that five years ago may have seemed urgent but are not as pressing now, and identify issues that have changed in the last five years.

The plan’s seven priorities — economic renewal, investment in aging infrastructure, creation of a thriving and connected community, intergenerational thinking, fiscal efficiency, historic preservation, and food access — are all currently being reviewed, and Bernard says these undertakings make for an exciting time in the city.

“There are some really great developments happening in a lot of different areas,” he told BusinessWest. “There’s a good chance to work in collaboration with a lot of people.”

Some of the more prominent developments include a project to build a much-needed new elementary school, updating zoning for the town, investing in public safety, and several projects that cater to younger children.

Bernard knows that, in order to be successful with new projects, the city must still take care of the older, foundational matters, and says North Adams has done a great job keeping track of both.

“We want to double down on the things we’ve already done, both this cultural development that’s happening, but also doing the foundational work to ensure that we can be successful so that we’re championing the big developments, we’re celebrating the jobs that are coming in, but we’re also making sure that the quality of life in neighborhoods is strong and solid,” he said.

“There are some really great developments happening in a lot of different areas. There’s a good chance to work in collaboration with a lot of people.”

Indeed, he says the overall feedback from the community has been extraordinarily positive, and mentioned one feeling in the city in particular: optimism.

Youthful Approach

That optimism, said Bernard, now going into his second term as mayor of North Adams, comes amid an increasing number of investments in economic development, public safety, and other key areas.

But you can’t move forward without looking back, so one big goal is investing in the youth and education sector, which includes the renovation of a very old elementary-school building.

Just a few weeks ago, Bernard and Superintendent of Schools Barbara Malkas visited the Massachusetts School Building Authority and were invited into eligibility for consideration of the reconstruction of Greylock Elementary School — a building that is 70 years old.

North Adams at a glance

Year Incorporated: 1878
Population: 13,708
Area: 20.6 square miles
County: Berkshire
Residential Tax Rate: $18.62
Commercial Tax Rate: $40.67
Median Household Income: $35,020
Family Household Income: $57,522
Type of government: Mayor; City Council
Largest Employers: Crane & Co.; North Adams Regional Hospital; BFAIR Inc.
* Latest information available

“If we’re able to be successful in the feasibility phase, then we’re invited to proceed forward, and we can put the funding plan together,” said Bernard. “It really will set the course for elementary education in the city for the next 50 years.”

Other investments for the youth population in the city include a splash park and a skate park. While Bernard acknowledged North Adams is an aging community and its leaders are always thinking about what it means to be age-friendly, he sees a lot of energy and — here’s that word again — optimism when it comes to investing in the younger population.

“What this splash park and the other main investment, which was a skate park, has done is create community engagement, excitement, energy, vibrancy, and a sense of optimism that comes from things that are youth-focused,” he said.

On the economic-development side, Dave Moresi, a local developer, recently embarked on a mill project that celebrated its grand opening this past June. Bernard said Moresi bought the mill in mid-2017, and it already has more than 50 businesses inside, including a financial-services office, a mental-health clinician, a coffee roaster, a gym, a hair salon, and much more.

“I think this speaks to a couple things,” said Bernard. “It speaks to the quality of work that Dave and his team do, but it also speaks to this moment that we’re in, bringing it back full circle to this energy, excitement, and potential.”

Moresi also purchased a school building the city no longer uses and is turning it into residential apartments.

Adding to that excitement are two enabling projects that have occurred over the past year. Bernard said bringing life into the downtown area continues to be a challenge, so a parking study was done to look at what assets and needs are necessary if the city were to attract additional housing and development. North Adams also updated its zoning map to reflect current conditions — a process that hadn’t been tackled since the late ’50s to early ’60s.

With all this activity going on, the city has also been investing in public safety. Just this year, Lt. Jason Wood was appointed as the new police chief for North Adams. In addition, the city added its first hybrid vehicle to the city fleet and is working on adding a hybrid cruise, which would make it the first city in Western Mass. to do so.

Forward Momentum

While North Adams still faces economic and socioeconomic challenges, like all cities do, the mayor feels optimistic that the community is on the path for success.

“We continue to be in an exciting time for North Adams, and I think more and more people are picking up on it, whether that’s visitors who are coming here or whether it’s longtime residents who are seeing some of these developments and being really excited about it,” Bernard said. “We have a lot of work to do to make sure we stay on an even keel.”

Kayla Ebner can be reached at [email protected]

Estate Planning

Now Is the Time to Plan

By Gina Barry

In recent times, many committed couples are choosing not to get married, especially if they have been previously divorced or widowed.

Gina Barry

By Gina M. Barry, Esq.

Although these couples are not married, many present themselves as a married couple. They live together, while sharing their assets and debts. While this arrangement may allow the happy couple to live in bliss while each partner is alive and well, trouble begins when one of the partners loses their competency or passes away.

Your partner does not have the same legal rights as would your spouse. In fact, their legal rights are usually no more than a stranger would have. Fortunately, with proper planning, an unmarried partner can be provided with some legal rights.

The first potential issue to be addressed is incapacity. If you lose your capacity, your partner will have no power to handle your financial affairs unless you have executed a valid durable power of attorney. This is a document in which you designate someone to make financial decisions for you. At a minimum, naming your partner in this document will allow your partner to pay bills, manage real property and other assets, and deal with government agencies, such as MassHealth.

Similarly, if you lose your capacity, your partner will have no power to make medical decisions for you unless you have executed a valid healthcare proxy, a document in which you designate someone to make healthcare decisions for you in the event that you are incapacitated and unable to make your own healthcare decisions. Language addressing your end-of-life decisions, which is known as a living will, is normally included within the healthcare proxy.

This language usually states that you do not want extraordinary medical procedures used to keep you alive when there is no likelihood that you will recover. Having a living will in place lets loved ones know your wishes and should reduce conflict should such a situation arise.

“Although these couples are not married, many present themselves as a married couple. They live together, while sharing their assets and debts. While this arrangement may allow the happy couple to live in bliss while each partner is alive and well, trouble begins when one of the partners loses their competency or passes away.”

Further, if you have not properly planned your estate and you pass away, you may unintentionally disinherit your partner. Your probate estate consists of any assets held in your name alone at the time of your passing that do not have a designated beneficiary. When you die without a will, the heirs at law of your probate estate are your spouse and your blood relatives. As your partner is neither your spouse nor a blood relative, your partner would not receive any assets from your probate estate if you die without a will.

While your partner may receive assets held jointly with you or the assets on which you have named your partner as beneficiary, your partner will not receive anything from your probate estate unless you have a last will and testament naming your partner as your beneficiary. Another reason to establish a will is so that you may name your partner as the personal representative of your estate, which will give your partner the authority to handle your estate for you.

If you have a taxable estate, which at the present time in Massachusetts means an estate greater than $1 million, you will not be able to take advantage of estate-tax laws that favor married couples. The unlimited marital deduction allows a deceased spouse to leave assets of any amount to the surviving spouse without having to pay any estate tax. Since this deduction may be taken only with respect to assets left to a surviving spouse, it is not available to your estate if you leave assets to a partner.

As such, it may be necessary for you to address your tax issues in other ways, such as by gifting, using the annual gift-tax exclusion of $15,000 per person in 2019, or by establishing an irrevocable trust that owns life insurance meant to replace the wealth that will be lost on estate tax.

Even though you may have committed to your partner, if you have not taken the legal steps necessary to protect your partner’s interests should you lose your capacity or pass away, you have overlooked a very important aspect of your relationship.

Once you have lost your capacity or passed away, it is too late to protect your partner. For the love of your partner, plan now, and ensure their legal rights.

Gina M. Barry is a partner with the law firm Bacon Wilson, P.C.. She is a member of the National Assoc. of Elder Law Attorneys, the Estate Planning Council, and the Western Mass. Elder Care Professionals Assoc. She concentrates her practice in the areas of estate and asset-protection planning, probate administration and litigation, guardianships, conservatorships and residential real estate; (413) 781-0560; [email protected]

Retirement Planning

Separating Hype from Reality

By Ann I Weber, Esq.

Ann I Weber, Esq.

Ann I Weber, Esq.

Recent headlines read: “Estate Taxes Repealed for All But Mega Estates!” “Get Your Hot Dogs Here with a Complimentary Will and Trust!” and “Never Need Legal Work Again!”

Is all this true, hype, or misinformation?

All three, as it turns out. Yes, only ginormous estates, i.e., those in excess of $11,200,000 for an individual, will be subject to federal estate taxes. Yes, wills and trusts may become less expensive without technical drafting to minimize federal estate taxes. Hype because many people have estates that are subject to state estate taxes. In Massachusetts, any estate over $1 million is taxed from dollar one — and you can’t dodge that bullet by making deathbed gifts.

Hype also because many non-tax situations make an estate plan desirable or even crucial. Misinformation because, as noted below, changes and complications in families, businesses, and relationships are inevitable, and sometimes an estate plan can help your family to navigate through what might otherwise be turbulent times.

A estate plan is important because you still need to say where you want your property to go at your death. Without a will, absent a named beneficiary, your property will go where the Commonwealth says it will go. In many cases, that’s not what you may want. For example:

• You may want your surviving spouse to receive all of your assets. But unless you say so in a will, your estate will be divided among your spouse and your children based on formulas tied to whether some or all children are from your prior marriages, if any, and from the prior marriages, if any, of your current spouse.

• You may have individuals you wish to include who are not your ‘heirs at law.’ Under Massachusetts intestacy statutes, a parent, cousin, nephew, friend, or charity, among others, might not benefit from your estate unless specifically named.

• You may have minor children and want to delay their direct access to your estate. Many people want to defer the benefits that their minor children receive from their estate until the children reach specified ages. The Commonwealth provides only for outright distribution to estate beneficiaries age 18 or older. If such beneficiaries are under the age of 18, the court will appoint a guardian to manage these funds for the child. A will or a revocable living trust can create a trust providing for delayed distributions to the child while still allowing the trustee to use trust assets for the child’s benefit until that time.

• You may have children from a previous marriage. The Commonwealth provides formula benefits to current spouse and children whether from the current or prior marriages, and may not meet the particular needs of your family. A will or trust can tailor distributions to your children and spouse or provide that property allocated to your spouse pass to your children at such spouse’s death.

• You may have a parent you want to benefit. The intestate laws in Massachusetts do not provide benefits for a parent if a spouse or children survive you. A will or trust could include such provisions. If there is a possibility that a parent might require nursing-home care, a specially drafted trust can shelter trust assets from MassHealth claims. At the parent’s death, trust assets will pass according to your directions.

• You may have a special-needs beneficiary. If assets from your estate are distributed outright to a person who otherwise qualifies for state or federal benefits such as MassHealth, Supplemental Security Income, or VA benefits, for example, the receipt of these assets may cause an interruption in or cessation of benefits. Instead, you may want to consider directing these benefits to a special-needs trust which can hold such benefits without adversely impacting needs-based benefits.

• You may want to make gifts to charity. Massachusetts laws of intestacy do not provide for gifts to charities. Such gifts can be made via a will or trust or by naming a charity as a beneficiary of your bank, investment, or retirement account. If a charity is named as a beneficiary of your retirement fund, the gift will pass free of income taxes that would be payable by individual beneficiaries and will also pass free of estate taxes.

• You may want to consider a durable power of attorney to appoint someone to handle your financial affairs in the event of your disability. Durable powers of attorney can take effect immediately or upon your disability and, in the event of your disability, can avoid the need for a court-appointed guardian with all the attendant expense, publicity, and delays — and the choice of who handles your affairs is made by you rather than a judge.

• You may want to specify the type of medical treatment you do or do not want. The Commonwealth provides a standard-form healthcare proxy, available online, that can address these concerns about treatment and end-of-life care. If you have strong opinions regarding the administration (or lack thereof) of particular forms of treatment should you be terminally ill or injured, you may want to consider executing a living will.

Attorney Ann I. Weber is a partner with the Springfield-based law firm Shatz, Schwartz and Fentin, P.C., and concentrates her practice in the areas of estate-tax planning, estate administration, probate, and elder law. She has a particular interest in creative estate planning for authors, artists, farmers, and landowners, and she is a frequent author and speaker on issues regarding estate planning; (413) 737-1131; www.ssfpc.com