Author: Onsager Law Office

Estate Planning and You in 2020; An Unlikely Pair?

Have recent events made you re-consider your estate plan or led you to conclude that you should have one? Have you thought that now might be a good time to tackle this project?  Feel overwhelmed?  Don’t know where to start?  Attorneys make you nervous?

Let me help with a no charge initial consultation.  You can get to know me better and consider whether I might be the right attorney for you.  We can begin to talk through what kind of plan might be the right fit for you.  We can even have our initial consultation over Zoom.  Sound good?  Contact me today at paul@onsagerlawoffice.com or at 608-358-9413.  I look forward to hearing from you.

-Paul

Why families with minor or young adult children should complete their estate planning: financial planning for your children

As I have said before, sometimes estate planning can be inspiring:

How do we want to give voice to our values and beliefs in how we provide for our family and causes we may be passionate about after we die?  How do we want to make a difference?

Sometimes estate planning can just be downright tough:

How would the assets of our estate be managed on behalf of our children if we died unexpectedly?  Who would be responsible for managing these assets on behalf of our children?

No one knows your children better than you.  Who better to consider when and under what circumstances your children would receive their inheritance outright to encourage their continued healthy development and to try and ensure that they do not receive their inheritance outright before they are ready to handle it.  Because each child is unique and no one knows your children better than you, there is no one more qualified than you to guide the development of the plan as to how each child should be uniquely addressed to provide for and encourage that child if both of you were to prematurely die.

The two of you are also well positioned to consider the people in your life who not only care about your children, but are qualified to manage your estate on your behalf until the children are old enough or mature enough to receive your estate unconditionally.

[Legal advice not only involves an understanding of the law, but the application of the law to a particular set of circumstances or facts.  Blog posts are also imperfect tools to address the subtlety and exceptions of the law that may apply in your situation.  As a result, the information in this blog post does not represent legal advice.  If you are in a situation where you need or desire legal advice, we would be happy to help.  Call Paul at 608-358-9413 or complete the Contact Us form to set-up your no-charge initial consultation.]

 

Why families with minors should complete their estate planning: guardianship of the children

Sometimes estate planning can be inspiring:

How do we want to give voice to our values and beliefs in how we provide for our family and causes we may be passionate about after we die?  How do we want to make a difference?

Sometimes estate planning can just be downright tough:

Who would take care of our children if we died unexpectedly?

Families with minors may wish to consider completing their estate planning, because the question of who would care for your children if you died unexpectedly is likely an emotional question, not just for the two of  you, but for both sides of your family and maybe friends as well.

Under Wisconsin law, parents are empowered in their wills to nominate a guardian for the person and a guardian for the estate for minor children, as well as for adult children who are in need of guardianship due to developmental disability or serious and persistent mental illness.  Separate people can be nominated as guardian of the person and guardian of the estate or a nominated guardian(s) may serve in both roles.  Any nomination by a parent of a guardian for his or her child(ren) in a will is subject both to the rights of a surviving parent as well as to the court’s conclusion as to what is in the best interests of the child(ren).

There are a number of potential advantages that can come from addressing the guardianship of your child(ren) in your will.  You can reduce the risk of someone (potentially a family member) serving as guardian who you are less comfortable with, by either providing explicit direction as to who you would want to serve in this role, and/or by potentially expressing your wishes that a particular party not serve as guardian.  Potential (maybe well intentioned) fighting between the family chapters as to who would serve as guardian of the child(ren) can also possibly be avoided if both families understand your wishes.  If there are concerns that a court might not respect a choice for guardian as in the best interests of the child(ren), your rationale for appointing the party can be explained to the court and an alternate choice can also be identified.  If one party might serve well as guardian of the child (person) but not of the assets, separate guardianships can be created for both the child’s person as well as assets to be managed on behalf of the child.

If both of you were to die unexpectedly, your families and the courts would want to know what you would have desired.  You can let them know with thoughtful guardianship nominations in your respective wills.

[Legal advice not only involves an understanding of the law, but the application of the law to a particular set of circumstances or facts.  Blog posts are also imperfect tools to address the subtlety and exceptions of the law that may apply in your situation.  As a result, the information in this blog post does not represent legal advice.  If you are in a situation where you need or desire legal advice, we would be happy to help.  Call Paul at 608-358-9413 or complete the Contact Us form to set-up your no-charge initial consultation.]

Net Leases and the Small Business Owner–Part II

As we discussed in the last “net lease” post, “net leases” shift costs and risks that are traditionally borne by the landlord to the tenant.  A “triple net lease” requires the tenant to pay property taxes, property-related insurance premiums, as well as maintenance and upkeep costs associated with the property.

The longer the proposed term of the net lease, the more the small business owner may wish to approach the terms and conditions of the lease as if the small business owner was purchasing the space.  If the small business owner is going to agree, for example, to pay for the maintenance and upkeep of the property (as if he or she was the property owner) for the next five years of more, you may be better served truly understanding your risk of such costs with the particular property before you sign on the dotted line.  Ask the landlord for records regarding work completed on the property.  Ask the landlord to disclose any issues with the property.  Have there been issues with water in the basement?  How old are the roof shingles, etc.?  You may also wish to consider having a trained real estate property inspector for the type of property you would be leasing, inspect the property for issues before you lease, so that you better understand the risks you are assuming when you agree to pay maintenance and upkeep costs associated with the property.

Remember that the landlord will typically be more willing to negotiate and disclose before you sign.  As a result, your legal and other advisors can often make a bigger difference for you if you retain them and seek their advice before you sign.  Your space is a critical investment for your business.  Make sure your investment is a good one.

[Legal advice not only involves an understanding of the law, but the application of the law to a particular set of circumstances or facts.  Blog posts are imperfect tools to address the subtlety and exceptions of the law that may apply in your situation.  As a result, the information in this blog post does not represent legal advice.  If you are in a situation where you need or desire legal advice, we would be happy to help.  Call Paul at 608-358-9413 or complete the Contact Us form to set-up your no-charge initial consultation.]

Net Leases and the Small Business Owner–Part I

Particularly small business owners may face the choice of whether or not to enter into a net lease.  What is a net lease and why should you care?

To varying degrees net leases shifts costs and risks that are traditionally borne by the landlord to the tenant.  Under what is termed a “single net lease” the responsibility for paying property taxes is shifted from the landlord to the tenant.  A “double net lease” shifts the responsibility for paying both property taxes and property-related insurance premiums to the tenant.  Finally, a “triple net lease” requires the tenant to pay property taxes, property-related insurance premiums, as well as maintenance and upkeep costs associated with the property.

Why should you care?  The boilerplate language in your net lease can shift important costs and risks to you, the small business owner, that you should consider, understand, and analyze before you sign the lease.  In Part II of this series we’ll discuss how you may wish to consider changing your perspective on net leases before you sign on the dotted line.

[Legal advice not only involves an understanding of the law, but the application of the law to a particular set of circumstances or facts.  Blog posts are imperfect tools to address the subtlety and exceptions of the law that may apply in your situation.  As a result, the information in this blog post does not represent legal advice.  If you are in a situation where you need or desire legal advice, we would be happy to help.  Call Paul at 608-358-9413 or complete the Contact Us form to set-up your no-charge initial consultation.]

Pass-thru business entity income of professionals under 2017 federal tax reform–Part II

So as we discussed in the first installment in this series, under the 2017 federal tax reform, many professionals are initially ineligible for the new deduction on pass-thru business entity income because they are not considered a “qualified trade or business” under the new law.  Professionals are generally ineligible for the deduction either because their profession is initially excluded (for example, attorneys and accountants) as a “qualified trade or business,” or because the principal asset of the trade or business is the reputation or skill of one or more of its employees or owners.

However, … what Congress takes away Congress partially gives back.  For a professional taxpayer whose annual taxable income is less than $157,500  for an individual filer or $315,000 for joint filers, the professional can claim the full deduction on pass-thru business entity income (20% of “qualified business income” under one approach) notwithstanding that he or she does not satisfy the definition of a “qualified trade or business.”  For individual professional taxfilers between $157,500 and $207,500 in annual taxable income the new deduction is phased out.  Likewise, for professionals filing joint tax returns, the new deduction is phased out for annual taxable income between $315,000 and $415,000.  For a professional taxpayer whose annual taxable income is more than $207,500 for an individual filer or more than $415,000 for joint filers, these professionals are generally ineligible to claim the new deduction.

However, under the 2017 federal tax reform two types of professionals, engineers and architects, qualify for the new deduction on pass-thru business entity income regardless of their annual taxable income.

To learn more about the eligibility of professionals to claim the new deduction on pass-thru business entity income, as well as to better understand what is meant by a pass-thru business entity, please read the first installment in this series.  You can’t miss!!

[Legal advice not only involves an understanding of the law, but the application of the law to a particular set of circumstances or facts.  Blog posts are imperfect tools to address the subtlety and exceptions of the law that may apply in particular situations.  As a result, the information in this blog post does not represent legal advice.  If you are in a situation where you need or desire legal advice, we would be happy to help.  Call Paul at 608-358-9413 to set-up your no-charge initial consultation.]

 

Pass-thru business entity income of professionals under 2017 federal tax reform

Under 2017 federal tax reform, the federal government not only made substantial reductions to the corporate tax rate, but made significant changes to the taxation of pass-thru business entities.  What are pass-thru business entities?  Pass-thru business entities are entities that are permitted to avoid the double taxation of income that normally applies to corporations, once at the corporate level and again when the income is distributed to shareholders.  Income earned by these entities is permitted to “pass-thru” to its owners and is taxed a single time to the owners of the business.  Pass-thru entities generally include corporations that make an S corporation election under federal law, as well as sole proprietorships, partnerships, and limited liability companies.

Many professionals have organized themselves into pass-thru business entities to carry out their professions and provide services to their clients.  Under the 2017 federal tax reform, under one approach to calculating the new deduction for pass-thru business entity owners, owners may deduct 20% of “qualified business income” thereby avoiding taxation on this income.  Imagine being able to deduct 20% of your business income when calculating your federal taxes!!

However, before you pop the cork on the bubbly, only “qualified business income” from a “qualified trade or business” is eligible for the new deduction.  The problem for professional service providers is that many professionals are initially ineligible to take the new deduction because they don’t qualify as a “qualified trade or business.”

What is a “qualified trade or business” you ask?  A “qualified trade or business” means any trade or business other than any trade or business: (a) involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, or brokerage services; (b) where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners; or (c) which involves the performance of services that consist of investing and investment management, trading, or dealing in securities, partnership interests, or commodities.

Many professionals are initially ineligible for the new deduction on pass-thru entity business income because either their profession is initially excluded or because the principal asset of their trade or business is the reputation or skill of one or more of its employees or owners.  However, as with many things in the federal tax code, what Congress takes away, it may give back in another way.  Tune in next week to learn more about how some professionals may nonetheless qualify for the new deduction on pass-thru business entity income.

[Legal advice not only involves an understanding of the law, but the application of the law to a particular set of circumstances or facts.  Blog posts are imperfect tools to address the subtlety and exceptions of the law that may apply in particular situations.  As a result, the information in this blog post does not represent legal advice.  If you are in a situation where you need or desire legal advice, we would be happy to help.  Call Paul at 608-358-9413 to set-up your no-charge initial consultation.]

Nonsolicitation of Employees under a Noncompete Agreement

In addressing the enforcement of noncompete agreements between an employer and an employee, Wisconsin law has attempted to strike a balance between: (a) ensuring that employees are not unduly restricted in their rights to compete with their former employers and to seek and obtain gainful employment; and (b) the rights of employers to not have former employees exploit either their inside knowledge or their relationships developed while employed, to unfairly compete.

In order to be enforceable under Wisconsin law, noncompete agreements must generally: (1) be necessary for the employer’s protection; (2) provide a reasonable time period; (3) cover a reasonable territory; (4) not be unreasonable as to the employee; and (5) not be unreasonable as to the general public.

The recent Wisconsin Supreme Court decision in The Manitowoc Company, Inc. v. Lanning, reinforces the danger that Wisconsin courts will strike down overly broad noncompete agreements/provisions that unduly restrict the rights of former employees to compete with the former employer or to seek and obtain gainful employment.  In Manitowoc, the Wisconsin Supreme Court found that the employer could not enforce a broad nonsolicitation provision that prohibited its former employee from soliciting any of its 13,000 employees for two years following termination of his employment.  Proceed with care when drafting such agreements to increase the likelihood that the terms of such agreements will be enforced when your company needs it the most.

Readers may also wish to review a prior blog post on the consequences of drafting a noncompete agreement/provision that is impermissibly broad.

[Legal advice not only involves an understanding of the law, but the application of the law to a particular set of circumstances or facts.  Blog posts are imperfect tools to address the subtlety and exceptions of the law that may apply in particular situations.  As a result, the information in this blog post does not represent legal advice.  If you are in a situation where you need or desire legal advice, we would be happy to help.  Call Paul at 608-358-9413 to set-up your no-charge initial consultation.]

“Defects” under the Residential Real Estate Condition Report

It is expected that potential buyers of residential real estate will rely on the disclosures provided by the seller in the Wisconsin residential real estate condition report.  Among other things, in this report the seller discloses “defects” affecting the property.  However, potential buyers should be aware of what is meant by a “defect” for purposes of this report.  In Wisconsin, under the standard residential real estate condition report, a “defect” is defined as “a condition that would have a significant adverse effect on the value of the property; that would significantly impair the health or safety of future occupants of the property; or that if not repaired, removed or replaced would significantly shorten or adversely effect the expected normal life of the premises.”  As a result, there may be many conditions affecting the property which the seller is not obligated to disclose to the buyer as these conditions do not rise to the level of “defect” as defined in the report.  If there are certain conditions of the property (for example, no basement water issues) which are deal breakers for the buyer but do not rise to the level of a “defect” under the Wisconsin residential real estate condition report, the buyer may wish to modify the offer to purchase initially submitted to the seller to require the disclosure of these conditions and to specify the remedy for buyer if such conditions are disclosed.

[Legal advice not only involves an understanding of the law, but the application of the law to a particular set of circumstances or facts.  Typically blog posts are imperfect tools to address the subtlety and exceptions of the law that may apply in particular situations.  As a result, the information in this blog post does not represent legal advice.  If you are in a situation where you need or desire legal advice, we would be happy to help.  Call 608-358-9413 to set-up a no-charge initial consultation.]

Pass-Through Entity Taxation under the Introduced 2017 Federal Tax Cuts & Jobs Act

Business owners have long sought the advantages of incorporation, including personal liability protection, while avoiding what is often a significant income tax drawback of incorporation, double taxation of income (once when the corporation is taxed for the income and once when shareholders are taxed for the distribution of this income as dividends).  Current federal law generally permits pass-through entities to avoid this double taxation of income.  Income earned by these entities is permitted to “pass-through” to its owners and is taxed a single time to the owners of the business.  Pass-through entities generally include corporations that make an S corporation election under federal law, as well as sole proprietorships, partnerships, and limited liability companies.

Under the federal Tax Cuts & Jobs Act, as introduced, the House of Representatives Ways and Means Committee majority tax staff indicates that active owners or shareholders of pass-through entities would generally be permitted to have a portion of their net income from the pass-through entity treated as “business income” subject to preferential income tax rates ranging from 9% to 25% when fully implemented, verses regular income tax rates ranging from 12% to 39.6%.  These active owners or shareholders of pass-through entities would generally be permitted to have 30% of their net business income subject to these more favorable rates as “business income.”

However, under the federal Tax Cuts & Jobs Act, as introduced, personal service businesses in such fields as engineering, law, financial services, accounting, performing arts or consulting would generally not qualify to have any net business income taxed at the more favorable rates as “business income,” except to the degree it was claimed under a formula based on the business’ actual capital investments.

In addition, unlike business owners actively participating in the business, all net income derived from a passive business activity would be eligible to be taxed as “business income” at the preferential income tax rates of 9% to 25% when fully implemented.

[Legal advice not only involves an understanding of the law, but the application of the law to a particular set of circumstances or facts.  Typically blog posts are imperfect tools to address the subtlety and exceptions of the law that may apply in particular situations.  As a result, the information in this blog post does not represent legal advice.  If you are in a situation where you need or desire legal advice, we would be happy to help.  Call 608-358-9413 to set-up a no-charge initial consultation.]