The Consolidated Appropriations Act 2021, which was signed into law on December 27th, 2020, provides another $900 billion in funding for coronavirus relief for individuals and business owners. The new bill serves as an expansion of the 2020 CARES Act, offering additional funding and a number of key changes to both the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) program.

Although the rules for the new PPP and EIDL are similar to the original programs, there are some significant differences that you should be aware of as a business owner. The changes include new eligibility requirements, clarification of the tax implications of the legislation, and beneficial changes related to loan forgiveness.

While additional clarification and updates on the new programs are set to be released in the next few weeks, in this two-part series we’ll cover some of the most critical highlights you should know about. Last week, in the first part of the series, we discussed the new loans available under the PPP, and here in part two, we’ll look at the new funding available under the EIDL program.

If you are unfamiliar with the PPP and/or the EIDL, you should first read this post on the original stimulus funding in March 2020, which established the initial rules and funding for these programs.

New $10,000 EIDL Grants

The CARES Act passed in March 2020 included a grant (or advance) of up to $10,000 for business owners. However, the SBA later determined those grants would only cover $1,000 per employee, and many business owners who didn’t get the full $10,000 felt cheated. What’s more, the funds available for the grants ran out before all eligible businesses received them. This new legislation appears to help remedy some of those issues.

The new legislation includes new targeted EIDL grants designed to assist businesses that were hardest hit by the economic impacts of the coronavirus, and Congress has allocated $20 billion for these grants. While these new grants are an extension of the emergency EIDL grants passed under the CARES Act, the eligibility requirements are a bit different than the initial program.

Eligibility Qualifications For the New EIDL Grants

To qualify for the full targeted $10,000 EIDL grant, your business must meet the following three requirements:

  • Be located in a low-income community
  • Have suffered an economic loss greater than 30%
  • Not employ more than 300 employees

Additionally, your business must qualify as an “eligible entity” as defined in the CARES Act: 

  • A small business, cooperative, ESOP Tribal concern, with fewer than 500 employees (Note: It’s not clear yet if this requirement will be reduced to 300 employees for new EIDL grant applicants.)
  • An individual who operates as a sole proprietorship, with or without employees, or as an independent contractor
  • A private non-profit or small agricultural cooperative
  • The business must have been in operation by January 31, 2020
  • The business must be directly affected by COVID-19

For the purpose of the grants, an economic loss is defined as “the amount by which the gross receipts of the covered entity declined during an 8-week period between March 2, 2020, and December 17, 2021, relative to a comparable 8-week period immediately preceding March 2, 2020, or during 2019.” 

At this point, it’s unclear how the SBA will require those who apply for the grants to document their economic loss, but we’ll update this as more clarifications are issued.

What Qualifies as a Low-Income Community?

In the text of the stimulus act, it uses a definition from the Internal Revenue Code to clarify what would qualify as a low-income community. In Section 45D(e)(1) of the IRS Code of 1986, a low-income community is defined as follows:

“The term ‘low-income community’ means any population census tract if (A) the poverty rate for such tract is at least 20 percent, or (B)(i) in the case of a tract not located within a metropolitan area, the median family income for such tract does not exceed 80 percent of statewide median family income, or (ii) in the case of a tract located within a metropolitan area, the median family income for such tract does not exceed 80 percent of the greater of statewide median family income or the metropolitan area median family income.”

In other words, you live in a low-income community if you meet any of the following three standards:

  1. If more than 20% of families in your community are below the poverty level.
  2. If the median family income in your community is 80% of that of your metro area or lower.
  3. If the median family income in your community is 80% of that of your state or lower.

For help determining whether or not your business is located in a low-income community under the EIDL rules, these instructions may prove helpful.

This mapping tool from the Census Bureau may also help you determine if your business is located in a low-income community. However, we recommend you do not rely on these outside resources to determine if you qualify for a grant, and instead wait for additional guidance from the SBA.

Tax Implications of the New EIDL Grants
The new legislation specifies that the EIDL grants are not taxable and that businesses who receive them will not be denied a tax deduction for qualified expenses paid for with the funds.

Repeal of PPP forgiveness penalty: Moreover, the new law repeals the CARES Act provision that required PPP borrowers to deduct the amount of their EIDL advance grant from their PPP forgiveness amount. Therefore, EIDL grants will not be deducted from PPP for loan forgiveness purposes, and this applies to all EIDL grants, including those already received.

Applying For the New EIDL Grants

Under the legislation, a qualified business may submit a request to the SBA and receive the full $10,000 EIDL grant regardless of whether their application for an EIDL “is or was approved,” they accepted an EIDL loan, or they previously received a PPP loan. Any EIDL grant (not loan) previously received will be subtracted from the $10,000 EIDL grant.

The SBA is required to notify anyone who received a previous EIDL grant, or who applied but did not receive one because funding was exhausted, that they may be able to apply for the full $10,000 grant. It’s not yet clear how this contact will be initiated.

If a business requests an EIDL grant, the SBA has 21 days after receiving the request to verify whether the business is eligible. If eligible, the grant will be issued, and if not, the applicant must be notified why the SBA rejected their request. The legislation does not spell out the verification procedure other than to state that the SBA may request any documentation necessary, including tax records, even if that information has been requested before.

The legislation states the SBA will process applications in the order received, except that priority will be given to those who previously received an EIDL grant under the CARES Act, followed by those who did not receive a grant because funding was exhausted.

We do not yet know the procedure for requesting the full grant. However, the SBA has indicated that a new EIDL application portal will be available by January 17, 2021. For more information, you should monitor news from the SBA website, and stay tuned to our weekly blog for updates.

Deadline: The legislation extends the EIDL program through December 31, 2021.

EIDL Loans Are Still Available

Note that the new legislation allocates additional funding and makes eligibility changes to the EIDL emergency advance program, but not the loans themselves. While the new EIDL emergency grants won’t be available until January 17, 2021, the SBA is still accepting applications for its loans.

The EIDL program pre-dates the coronavirus pandemic, but the CARES Act relaxed its requirements, expanded eligibility, and authorized the $10,000 grants. The loans come with a 3.75% interest rate for small businesses (2.75% for non-profits), with a 30-year maturity and an automatic deferment of one year before monthly payments begin. Businesses can use the loan for working capital and operating expenses, including the continuation of healthcare benefits, rent, utilities, and fixed debt payments.

If you have not previously applied for an EIDL loan, you can do so by filling out an online application at the SBA website. When you complete the loan application, you will be given the option to check a box to be considered for the emergency EIDL grant. If you check that box, you may get a grant of $1,000 per employee. Additionally, we anticipate you may be considered for the full $10,000 targeted EIDL grant, but we do not have details on that process as of yet.

Keep in mind, if you just want an EIDL grant but not a loan, and you have not yet applied for either, you do not have to accept an EIDL loan. Some business owners choose to accept the grant, but not the loan, and that is perfectly acceptable.

Enlist Our Support

With new updates and clarifications being released all the time, it can be confusing trying to figure out your best course of action under these new programs. Contact us, as your Family Business Lawyer™, if you need help reviewing your options under either the EIDL or PPP program. Schedule your appointment today to learn more.

This article is a service of Liz Smith, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.

With people living longer than ever before, more and more seniors require long-term healthcare services in nursing homes and assisted living facilities. However, such care is extremely expensive, especially when it’s needed for extended periods of time.

Traditional healthcare insurance doesn’t cover such services, and though Medicare does pay for some long-term care, it’s quite limited, difficult to qualify for, and requires you to deplete nearly all of our assets before being eligible (or do proactive planning to shield your assets, which we can support you with). To address this gap in coverage, long-term care insurance was created.

Intensive Care

First introduced as “nursing home insurance” in the 1980s, long-term care insurance is designed to cover expenses associated with long-term skilled nursing services delivered in a nursing home, assisted living facility, or other senior care setting, though some of today’s policies cover care delivered in your own home as well.

Such intensive care is required when you are no longer able to care for yourself, often at the end of your life. These policies cover the cost of skilled nursing services that support you with basic self-care tasks, such as bathing, feeding, and using the bathroom. 

These are known as activities of daily living (ADLs) and generally include:

  • Ambulating (walking or getting around)
  • Feeding
  • Bathing
  • Dressing and grooming
  • Using the toilet
  • Continence management
  • Getting in and out of bed or a chair

Before your coverage kicks in, most policies require that you demonstrate you have lost the ability to engage in at least two or three ADLs. Most policies also have a deductible, or elimination period, which is a set number of days that must elapse between the time you become disabled (eligible for benefits) and the time your coverage kicks in.

Many policies offer a 90-day elimination period, but others can be longer, shorter, or even have no elimination period at all. Of course, the shorter the elimination period, the more expensive the premium.

Additionally, long-term care policies typically come with a predetermined benefit period, which is the number of years of care it will pay for. A benefit period of three to five years, for example, is a quite common duration for such policies. Most policies also come with a cap on the dollar amount of coverage that will be paid for care on a daily basis, known as a daily benefit amount.

Getting Covered

Obviously, the younger and healthier you are when you buy the policy, the cheaper the premiums will be, so the sooner you invest in coverage, the better. In fact, most policies exclude certain pre-existing conditions, so if you wait until you become ill, it can be impossible to find coverage.

For example, if you have any of the following conditions, it generally disqualifies you from obtaining coverage:

  • You already need help with ADLs
  • You have AIDS or AIDS-Related Complex (ARC)
  • You have Alzheimer’s Disease or any form of dementia or cognitive dysfunction
  • You have a neurological disease, such as multiple sclerosis or Parkinson’s Disease
  • You had a stroke within the past year to two years or have a history of strokes
  • You have metastatic cancer
  • You have kidney failure

Increasing Premiums, Decreasing Benefits
With the elderly population booming, there has been a surge in demand for long-term care services, which has led to a marked increase in the cost of such policies. At the same time, many insurers have been cutting back on the benefits their policies offer. 

Given this, other types of hybrid policies are springing up. One increasingly popular type of hybrid policy combines long-term care insurance with life insurance. With this type of policy, if you don’t use the long-term care benefits, the policy pays a death benefit to your family when you pass away.

If you are looking to purchase long-term care insurance, you should speak with multiple insurance providers and compare their benefits, care options, and premiums. Different companies may offer the same coverage and benefits, but they can vary dramatically in price. Always ask about the insurance company’s history of rate increases, including the amount of the most recent increase.

Choose Wisely

For the best chances of success when shopping for a policy, get help from a fee-only planner, who is not compensated based on your choice of coverage. Or, if you are working with a commissioned agent, meet with a lawyer like us with experience in elder law, who can review the policy terms to ensure it’s a good fit for you before you sign on the dotted line.

When meeting with an insurance provider, you must get answers to following three questions about your policy:

  1. How long is the elimination period before the policy begins paying benefits?
  2. What capacities, or ADLs, must you lose before coverage kicks in?
  3. How many years of care are covered?

Buying long-term care insurance should be a family affair, because you are going to need your family members to advocate for you and file a claim for the policy when you need to use it. Given this, make sure your family knows what kind of policy you have, who your agent is, and how to make a claim.

What’s more, you should pre-authorize the right person to speak to the insurance company on your behalf, and not just rely on a power of attorney. That said, you should definitely have a well-drafted, updated, and regularly reviewed power of attorney on file as well.

Keep Your Policy Updated

Once you are in your 40s, your long-term care policy should be reviewed annually to evaluate new insurance products on the market and update your policy based on your changing needs. Whatever you do, once you have a policy in place, make sure you don’t miss a premium payment, because if you stop paying, even for a short period of time, you’ll lose all of the money you invested and will have no access to the benefits when you need them.

Reach out to us, as your Personal Family Lawyer®, for support in finding the right long-term care policy for your particular situation. Long-term care insurance, along with life insurance, are key components in your estate plan. When combined with the right estate planning vehicles, you can rest assured your family will be protected and provided for no matter what happens to you. Contact us today to learn more.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for Liz to call you at a time you choose.

The Consolidated Appropriations Act 2021, which was signed into law on December 27th, 2020, provides another $900 million in funding for coronavirus relief for individuals and business owners. The new bill serves as an expansion of the 2020 CARES Act, offering additional funding and a number of key changes to both the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) program.

Although the rules for the new PPP and EIDL are similar to the original programs, there are some significant differences that you should be aware of as a business owner. Among these include new eligibility requirements, clarification of the tax implications of the legislation, and beneficial changes related to loan forgiveness.

While additional clarification and updates on the new programs are set to be released in the next few weeks, in this two-part series we’ll cover some of the most critical highlights you should know about. Here in the first part of the series, we’ll discuss the new loans available under the PPP.

A New Round of PPP Loans

The original PPP program from March 2020 included $349 billion in its initial funding. That money was gone within two weeks, which led to a second round of funding totaling $320 billion. The second round of loans ended in August 2020. This new legislation marks the third round of PPP funding, and it includes another $284 billion in loans to business owners to help cover their payroll and other basic operating costs during the pandemic.

The new PPP funding allows you to apply for a loan whether you received an initial PPP loan or not. The eligibility rules for the loans are somewhat different than before and are based on whether you are borrowing for the first time or already received money in the first two rounds. To be eligible for any of the new loans, a business must have been in operation by Feb. 15, 2020.

First Time Borrowers

If you did not receive a PPP loan in the first two rounds of funding, you can apply for this third round of funding and potentially qualify for up to $10 million as a new applicant. The program rules are essentially the same as during the first round, and the eligibility requirements include:

  • Any business categorized under “Accommodation or Food Services,” such as restaurants and hotels with 500 or fewer employees per location
  • Tribal businesses
  • Independently owned franchises
  • Self-employed workers, independent contractors, gig workers, and sole proprietors

Unlike the initial rounds, during this third round of funding, business owners in bankruptcy are now eligible for PPP loans, and the loans will be treated as administrative expenses.

Second Time Borrowers

If you previously received PPP funding in the first two rounds, you may be eligible for round three funding using what’s known as a “second draw loan,” provided you’ve used all of your previous funds or will use them.

Second-draw loans are capped at a maximum of $2 million, and to qualify your business must have 300 or fewer employees, down from the original 500 employee maximum. You must also demonstrate that you experienced a loss of at least 25% of revenue in any quarter in 2020 compared to that same quarter in 2019. This is a big difference from the original PPP guidelines that simply required you to state that economic uncertainty made the loan necessary.

This new round of loans is designed to fund 2.5 months of your payroll expenses. To determine how much you would qualify for under the second draw loans, take your average monthly payroll for 2019 and multiply it by 2.5. The bill has a special calculation for restaurants and other food service industries and provides those businesses a larger loan amount of 3.5 months of average monthly payroll.

For example, if you had an average monthly payroll in 2019 of $100,000, then your business would qualify for $250,000. If you were a restaurant or other qualifying food business, you would qualify for $350,000.

New Qualified Expenses

Like the first round of loans, the amount of funding you spend on eligible payroll costs—along with covered mortgage interest, rent, and utility payments—is eligible for forgiveness. The new bill also adds several new non-payroll expenses to the list of qualifying expenses for forgiveness, and these include:

  • Covered operations expenses: This includes money spent on software, cloud computing, and other human resources and accounting needs.
  • Covered property damage costs: This includes expenses related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance.
  • Covered supplier costs: This includes expenditures to a supplier that are related to a contract, purchase order, or order for goods in effect prior to taking out the loan that are essential to the borrower’s operations at the time at which the expenditure was made. Supplier costs of perishable goods can be made before or during the life of the loan.
  • Covered worker protection expenses: This includes money spent on PPE and other adaptive measures to help comply with health and safety guidelines at the federal, state, and local level related to COVID-19 during the period between March 1, 2020, and the end of the national emergency declaration.

60% of PPP Loan Must be Spent of Payroll

The second draw loans are eligible to be forgiven provided that 60% of the funds are spent on payroll costs. The PPP’s existing safe harbors on restoring full-time equivalent employees and salaries and wages also continue to apply to the new loans.

Tax Treatment of New PPP Loans

Under the new legislation, forgiven PPP loans will not be taxable to business owners. This applies to all existing PPP loans under the original rounds of funding as well as the new second draw PPP loans. Previously, the IRS had ruled that you could not deduct your wages and other qualifying expenses that you used your PPP funds on if your PPP loan was forgiven—which effectively created a tax on the loan.

There had been much confusion and debate on this part of the legislation, as it seemed to contradict the intent of the CARES Act, but this new legislation officially clears that up. This means you can have your PPP loan forgiven and still be able to deduct your payroll and other qualifying business expenses paid with your PPP money. Additionally, any income tax basis increase that results from your PPP loan will remain even if the PPP loan is eventually forgiven

PPP Loan Forgiveness

The SBA plans to create a simplified PPP loan forgiveness application for businesses whose PPP loans were less than $150,000.  This simplified application will fit on one page and include loan information as well as certification from you that the funds were used properly and are eligible for forgiveness, but it will not include calculations or other additional information.

The SBA already has a simplified one-page PPP forgiveness application for borrowers of $50,000 or less. It is likely that the SBA will utilize a similar application for borrowers with loans of less than $150,000.

Keep in mind that even though the loan forgiveness form will be simplified, the funds must still be spent properly to qualify for forgiveness, and the SBA may audit these applications. With this in mind, be sure to keep careful documentation of how you spent these funds in case your loan is audited.

New PPP Loans Deadline

The new bill extends the PPP loans through March 31, 2021, or until funds are depleted.

Choose Your PPP Loan Covered Period

The first two rounds of PPP loans required that the time during which you had to use your loan funds (covered period) would be the eight-week period beginning on the date you received your loan proceeds. That was later expanded to 24 weeks.

However, this new round allows you to choose any length period between 8 weeks and 24 weeks, giving you more control in handling reductions to your staff, if needed, once PPP funds are depleted.

How to Apply

Like the first rounds of funding, the new round of PPP loans will be administered by SBA-approved lenders using a new version of the existing SBA 7(a) loan program. You can apply for your PPP loan through any of the 1,800 participating SBA approved 7(a) lenders or through any participating federally insured depository institution, federally insured credit union, and Farm Credit System institution (meaning your local bank).

If you have trouble finding a lender, you can use the SBA’s PPP lender search tool.  

At the time this article was posted, the SBA had yet to provide the new applications for the latest round of PPP loans, but the organization is expected to do so at some point in the next few weeks. Until then, your best bet is to check the PPP program website on a daily basis and stay tuned to our blog for weekly updates.

Don’t Wait To Apply

Contact us, as your Family Business Lawyer™, if you need help reviewing your options under the PPP program. Since there is only a finite amount of funding available, the sooner you apply, the better. Schedule an appointment with us today to learn more.

Next week in part two, we’ll discuss the new funding and changes to the EIDL program for 2021.

This article is a service of Liz Smith, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.

Last week in part one of this series, we discussed how Hsieh became an Internet pioneer, starting two wildly successful companies, LinkExchange and Zappos, the latter of which he sold to Amazon for $1.2 billion. It was as CEO of the online shoe brand Zappos where Hsieh developed his vision for life and business: delivering happiness.

A Double Life

Hsieh outlined this mission in the 2010 book, Delivering Happiness: A Path To Profits, Passion and Purpose, which became a New York Times number-one bestseller. Yet while the young entrepreneur was busy bringing joy to his customers, employees, and friends, Hsieh was privately coping with mental health issues and substance abuse. These struggles reportedly intensified in 2020, as the pandemic-related quarantines put an end to the non-stop parties and socializing Hsieh came to crave.

Hsieh’s downward spiral also coincided with his relocation from Las Vegas to Park City, Utah. In Park City, Hsieh became further isolated from longtime friends, surrounding himself with a new group of friends, many of whom were reportedly much younger than Hsieh and encouraged his escalating use of drugs, including ketamine, ecstasy, and nitrous oxide. 

Friends With Benefits

Further complicating matters was the fact that many of Hsieh’s new friends had moved to Park City after Hsieh promised to double their highest salary if they would relocate with him and assist with his efforts to revitalize the downtown area of the ski-resort town.

The Wall Street Journal reported that the walls of Hsieh’s Park City mansion were covered in thousands of color-coded sticky notes, which Hsieh used to record financial commitments he made to employees, friends, and local businesses. What’s more, Hsieh reportedly purchased dozens of properties in Park City, including homes, condos, and businesses, all of which were owned through a number of limited liability companies (LLCs).

In August, Hsieh announced that he was retiring as CEO of Zappos, which he had run largely autonomously for more than a decade after selling the company to Amazon in 2009. Around that same time, family members and friends worried about Hsieh’s increased drinking and drug use, reportedly staged multiple interventions in an attempt to get him professional help. 

Although reluctant at first, Hsieh eventually decided he would seek treatment for his addictions. According to the Wall Street Journal, Hsieh was going to check himself into a rehab facility in Hawaii following the Thanksgiving holiday, which he planned to spend with his girlfriend in Connecticut. Sadly, Hsieh would never make it to Hawaii, as he perished from injuries he suffered after being pulled unconscious from a house fire in the early morning hours of November 18th.

A Life Cut Short

During his visit to Connecticut, Hsieh stayed in a waterfront home in New London, with his longtime girlfriend and former Zappos executive, Rachael Brown, as well as his brother, Andy Hsieh. According to property records, Hsieh purchased the $1.3 million home for Brown in August 2020, but it was a likely vacation home, as Brown reportedly lived with Hsieh in Park City, according to the Las Vegas Review Journal.

It remains unclear what started the fire. Based on reports from the Wall Street Journal, at some point in the evening, Hsieh told others in the house that he was going to a storage shed that was attached to the home, and that they should check on him regularly throughout the night. From there, Hsieh apparently locked himself—either intentionally or by accident—in the storage room and wasn’t seen or heard from again.

When firefighters arrived on the scene around 3:30 am, they found smoke billowing from the storage area at the back of the house where Hsieh was located. The others staying in the house told first responders Hsieh was locked inside the shed and was not responding to their pleas for him to come out. Firefighters were forced to break through the door into the storage area, where they found Hsieh lying unconscious.

Paramedics performed CPR on Hsieh at the scene, and then he was flown to a local hospital, before being relocated to the Bridgeport Hospital Burn Center, where he ultimately died nine days later on November 27th—just two weeks before his 47th birthday. Because the investigation into the fire is still ongoing, local authorities are not releasing any information about the suspected cause of the fire, but they maintain Hsieh’s death was accidental and caused by complications from smoke inhalation.

Cleaning Up the Mess

Hsieh is survived by two brothers and his parents. Just a week after his death in early December, a judge in Clark County, Nevada, granted a motion filed by Hsieh’s father, Richard, and his older brother, Andrew, to be named co-special administrators and legal representatives for his estate. In the ruling, the judge ruled that Hsieh’s personal and business affairs “require immediate attention to prevent loss to the estate.”

According to court reports, Hsieh’s family was unclear whether or not he had a will or any other planning documents. His father and brother sought to be named administrators of his estate, so they could access his safety deposit boxes and speak with his lawyers and other associates in order to determine if he had made any plans for how his assets should be managed upon his death.

Although Hsieh had moved to Park City earlier in the year, he was still listed as a resident of Nevada. This means that if no will is found, all $840 million of Hsieh’s assets will be distributed under Nevada’s intestate succession laws. According to those laws, Hsieh’s mother and father stand to inherit his entire estate.

However, before any of his assets can be transferred, they must first be located. Given the immense size and scope of the assets Hsieh likely accumulated over his lifetime, just identifying everything he owned will likely take his loved ones several months or even years. Depending on the type of records Hsieh kept, it’s quite likely that some of his assets will never be located, and instead of passing to his family or funding one of Hsieh’s favorite philanthropic causes, those assets will end up in the state Department of Unclaimed Property.

In addition to locating his assets, Hsieh’s family must also pay off any debts or liabilities Hsieh incurred during his lifetime. And this process will undoubtedly be extremely complicated due to his penchant for doubling his friends’ salaries in exchange for relocating to Park City with him.

Each one of the thousands of sticky notes covering the walls of Hsieh’s mansion in Park City could potentially be considered a valid contract, and if so, each of those individuals could have a claim against his estate. To complicate matters even more, it’s highly likely that there will be questions as to whether Hsieh was in a sound state of mind during his final months and if he had the mental capacity to even make binding contracts.

Hsieh’s failure to use formal legal agreements to govern his business relationships will undoubtedly lead to bitter court battles, pitting his family against some of the so-called “friends” Hsieh surrounded himself with during his final months.

Furthermore, Hsieh’s recent spending spree on real estate and businesses in Park City, much of it done through multiple LLCs, will also need to be sorted through. This will be a particularly lengthy and expensive process given that his loved ones must deal with the court process of probate not only in Hsieh’s home state of Nevada, but in every state he owned property in.

Finally, once all of Hsieh’s debts and creditors have been paid via probate, whatever remains of the estate will be subject to the federal estate tax before it can pass to his parents. The estate tax is not a factor for most people, as the tax code provides for a hefty exclusion that can be used to transfer a certain amount of wealth tax free to your heirs upon your death.

Yet given Hsieh’s massive fortune, his family will be hit with a tax bill that could potentially run in the hundreds of millions. Based on the federal estate tax exclusion for 2021, the first $11.7 million of Hsieh’s estate will pass tax-free to his family, but whatever remains of his $840 million estate after probate will be taxed at a whopping 40% rate.

A Sad Lesson

The saddest part of this whole situation is that virtually all of the time, money, and stress Hsieh’s family is now forced to endure could have been easily prevented with proper planning. And given his immense wealth, it’s virtually unthinkable that Hsieh didn’t have a team of experienced lawyers and financial advisors pushing him to create at least a minimal level of planning.

Using living trusts, for example, Hsieh could have ensured that all of his assets would pass immediately to the beneficiaries of his choosing upon his death, without the need for probate. At the same time, trusts could also have been set up to mitigate some of Hsieh potential estate tax liability, as well as ensure that some of his wealth went to the numerous charitable and philanthropic causes that were near and dear to Hsieh’s heart.

In addition to creating planning vehicles to ensure the proper distribution of his assets, Hsieh also should have created an updated inventory of all his assets. Such an inventory not only makes creating your estate plan much easier, but most importantly, it allows your loved ones to know what you have, where it is, and how to access it if something happens to you.

With us as your Personal Family Lawyer®, we will not only help you create a comprehensive asset inventory, we’ll make sure it stays regularly updated throughout your lifetime. To help you get this urgent process started, we’ve created a free tool called a Personal Resource Map, where you can start creating your inventory right now, by yourself, without the need for a lawyer.

A Wake-Up Call

Following Hsieh’s death, his family released a statement to the press that read in part, “The Hsieh family hopes to carry on Tony’s legacy by spreading the tenets he lived by—finding joy through meaningful life experience, inspiring and helping others, and most of all, delivering happiness.”

While Hsieh’s sudden death is certainly tragic, hopefully it serves as a wake-up call, reminding us all that we never truly know how much time we have left or when the end will come. To honor Hsieh’s legacy and deliver happiness to those you love most, meet with us to put your plan in place today.

Whether you already have a plan created or nothing at all, we’ll find the specific planning strategies best suited for your life situation and asset profile. With us as your Personal Family Lawyer®, you’ll have access to the same planning tools those in the Fortune 500 use, which are designed to keep your family out of court or conflict no matter what happens. Contact us today to get started.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for Liz to call you at a time you choose.

This is the first in an ongoing series covering the value legal agreements bring to your business beyond the surface. From boosting your bottom line and expanding your business to hiring the most talented team and improving every relationship you enter into; this series offers a comprehensive look at how effective legal agreements can enhance just about every aspect of your operation.  

If you are like many small business owners, you may have had one or more of the following thoughts about using legal agreements in your business:

  • I don’t need a legal agreement when I’m working with people I know and trust.
  • Legal agreements are only needed for big deals or purchases.
  • Legal agreements aren’t worth the time and money.
  • Lawyers push you to use agreements because that’s how they make money.
  • The do-it-yourself legal agreements you find online work just as well as those created by a lawyer.
  • We just need to get to work—we don’t have time to worry about legal agreements.

If you’ve ever had any of these thoughts, it’s time for you to rethink your beliefs. By rethinking the way you view legal agreements and using them effectively, you can make more money, boost your company’s growth, and improve your relationship with everyone you work with—clients, partners, team members, vendors, and service providers. 

Using great agreements and having an integrated agreement process shows you care—and not just about the deal at hand, but about the other party and your business as a whole. Having well-drafted, well-structured, and well-presented agreements demonstrates that you believe in yourself and the people you work with, and these documents can greatly strengthen your business and relationships at every level.

Legal agreements 101
In order to get the most out of your relationship with legal agreements, you must first learn how they work. Here we’ll discuss the basic facts you should know about legal agreements and how they can affect your business. Note, the terms “agreement” and “contract” mean the same thing and are thus used interchangeably.

What constitutes a valid legal agreement?
For a contract to be legally enforceable, four elements must exist: 1) an offer 2) acceptance 3) consideration (i.e., something of value was exchanged like cash, services, or goods) 4) the capacity on the part of both parties to enter into the agreement.

In some cases, a contract must be in writing to be enforceable, but most of the time, putting your agreement in writing is not actually necessary. The fact that agreements didn’t always need to be in writing was kind of shocking to me.

For example, if I make an offer, you accept the offer, something of value changes hands, and both of us have capacity (i.e., a sound mind), then a contract exists, even if it wasn’t written down.

While this all sounds pretty simple, problems can arise when what I offered to do turns out to be different from what you thought I offered to do. And even though we exchanged something of value and both have the best intentions, if you don’t accept that I’ve fulfilled what I promised I would do, but I feel like I’ve done exactly what I promised to do, we’ve got a problem.

In the above situation, a legal agreement actually does exist (all four factors are present), even though it wasn’t written down. Or let’s say the agreement was written down, but it wasn’t written clearly, a contract would still exist, although it would be a messy one that could potentially cost both of us big money to fix.

When must an agreement be in writing?

While an agreement doesn’t always have to be in writing to be considered valid, there are 5 situations in which a contract must be in writing to be enforceable. These situations include:

  1. contracts involving real property
  2. contracts that cannot be performed in under one year
  3. contracts where you assume someone’s debt or they assume your debt
  4. agreements related to the distribution of assets at the end of a marriage, such as a prenuptial agreement
  5. contracts for the sale of goods valued at $500 or more

What can go wrong with agreements that aren’t put in writing?

Even if you are involved with a situation where an agreement doesn’t need to be in writing to be enforceable, putting every contract you enter into in writing is your best course of action for a number of reasons. 

First, if you don’t write down the terms of your agreement and you have to go to court, the court will determine the terms of your agreement based on assumptions about the behavior of the parties involved, the situation, and a number of other contributing factors. Plus, who wants to go to court just to enforce an agreement?

Second, laying out the specific terms of your agreement is going to close more deals for you, and it’s going to get you more out of your relationships in regards to the positive outcomes you desire. And that’s true not just for you, but for everyone you have a relationship with.

Third, the process of writing down the agreement, if done well, will shed light on areas of the relationship that you and the other party may have thought you were in agreement about, but you actually weren’t. And the sooner you discover where potential disagreements or conflict exist in a relationship, the better.

Although it may seem counterintuitive, trust me on this one: You want to identify any potential conflicts in the relationship as early as possible before investing time, energy, attention, and money that can’t be recovered. What’s more, by uncovering any potential sticking points ahead of time, you’ll find out how easily you can work through conflicts with the other party, which is a key part of any good relationship, especially those that last over time.

An instrumental instrument

When it comes to running a business, your legal agreements are among your most vital tools. Indeed, agreements are designed to govern and protect some of your company’s most essential elements: your personal liability, intellectual property, financial investments, and tax strategies, to name just a few.

Are you really going to trust a handshake deal or a generic, fill-in-the blank form you found online to control such vital components of your business?

We, as your Family Business Lawyer™, specialize in creating contracts for small businesses like yours. With our support, your contracts will not only be legally sound, but their clear, concise presentation will wow potential clients and make you stand out from the competition. Whether you need new agreements created or want us to review ones you already have—even those drafted by another lawyer—contact us today.

This article is a service of Liz Smith, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.

On November 27th, nine days after being pulled unconscious from a house fire in a beachfront home in New London, Connecticut, Tony Hsieh, the former CEO of the online shoe retailer Zappos, died due to complications of smoke inhalation.

Hsieh, who was single and had no children, was just 46. Although the cause of the fire is still under investigation, law enforcement ruled his death accidental.

At the time of his death, Hsieh was worth an estimated $840 million, but in spite of his immense wealth, it seems he did not have a will. While it’s not uncommon for the rich and famous to die without a will, and many iconic figures—Prince, Aretha Franklin, and most recently, Chadwick Boseman—also died without creating this basic planning document, Hsieh’s case is particularly puzzling given his altruistic nature.

Hsieh was renowned for his kindness, generosity, and always putting others first, yet by dying without a will, he left his loved ones a colossal mess to clean up. Indeed, it will likely take his family many months just to account for all of his assets, and it’s likely they will overlook—and may even never find—some of those assets.

From there, Hsieh’s estate will have to go through the court process of probate, which could last years and rack up hefty lawyer fees. And after all of his debts are settled and creditors paid, Hsieh’s family will face an enormous federal tax bill that could run into the hundreds of millions.

By all accounts, Hsieh’s death at such a young age is horribly tragic. But it’s equally tragic for such a brilliant and compassionate individual to have wasted the opportunity to do real good with the assets he created and to needlessly put his loved ones through such an ordeal.

Although it may seem harsh to lay such a judgment on Hsieh, who was reportedly suffering from mental health and substance abuse issues in the last year of his life, we do so from a place of true compassion. Indeed, we cover this case and others like it in hopes that it will inspire you to remember that death comes for us all, often when we’re least expecting it. And without any planning in place, you are forcing your loved ones to endure a costly legal process and the unnecessary loss of wealth and assets you worked so hard to build.

While the loss to Hsieh’s family, and the charitable causes he would have likely supported, will be immense, his family can afford to pay the lawyers, the court costs, and the taxes. Though you likely have a much smaller estate than Tony Hsieh, the actual cost of loss to your family, if you don’t plan, could be much higher on a relative basis.

But here’s the good news: All of this suffering can be easily avoided with planning. And you don’t have to be a multi-millionaire to create a plan that’s guaranteed to protect and provide for your loved ones no matter what happens to you.

An Internet Pioneer

Hsieh grew up in San Francisco, the son of Taiwanese immigrants and the oldest of three boys. A graduate of Harvard, where he studied computer science, Hsieh started his first company, LinkExchange, in 1996 with his college buddy Alfred Lin, who would become his close business partner.

LinkExchange was one of the first major digital advertising firms, and two years later, at age 24, Hsieh sold it to Microsoft for $265 million. After selling LinkExchange, Hsieh and Lin launched the venture capital firm, Venture Frogs, which is how he met another young entrepreneur named Nick Swinmurn, who pitched Hsieh the idea of starting an online shoe company.

That company would become Zappos, which ultimately defined Hsieh’s career and set in motion his vision for life and business. As CEO, Hsieh made it clear that Zappos was far more than just a shoe retailer: Zappos was about “delivering happiness” and “a WOW experience.” Zappos focused heavily on customer service, and famously offered customers free shipping and complete refund on all shoes for a full year after purchase, with no questions asked.

Hsieh’s leadership proved highly successful, and Zappos saw its sales go from $1.6 million in 2000 to $252 million in 2005. In 2009, Hsieh sold Zappos to Amazon for $1.2 million in stock, while staying on as the company’s CEO. Jeff Bezos was reportedly so impressed with the way Hsieh ran the company, he allowed the young entrepreneur to continue running the brand with very limited oversight.

In 2005, Hsieh moved Zappos headquarters from San Francisco to Las Vegas, where he invested $350 million of his own money to transform a once seedy part of town into a hub for arts, culture, and tech. As part of the project, Hsieh created a community of 30 Airstream trailers, where he himself lived for years with his pet alpaca named Marley.

In an interview with the Las Vegas Review-Journal, Hsieh said the community was inspired by his experience at the Burning Man festival. He described the 1-acre park as an “urban camping experience with everyone sharing the world’s largest living room, which includes a community kitchen, a firepit, and a stage.”

Hsieh’s interest in fostering community and connection with the Las Vegas project, Airstream park, and other ventures reflect the young business guru’s overarching vision—which was about more than just retail.

“He was never interested in shoes,” former Zappos executive Fred Mossler told Forbes. “Tony’s journey was to improve the human condition.”

Growing Pains
Around the time Hsieh moved into the trailer park in 2014, he started to lose touch with many of his old friends. While many of his peers had gotten married and started families, Hsieh remained single and developed a reputation as a heavy partier.

According to a cover story on Hsieh’s life and business accomplishments in Forbes Magazine, the young entrepreneur was always a heavy drinker and known to use recreational drugs, but in later years, his drug use became more frequent. What’s more, close friends noted that Hsieh also suffered from mental health issues, including insomnia and depression.

Hsieh’s struggles with depression and substance abuse reportedly intensified in early 2020, as the quarantines from the COVID-19, which hit Las Vegas particularly hard, put an end to the parties and nonstop action the young entrepreneur craved. In January, right before the pandemic exploded, Hsieh attended the Sundance Film Festival in Park City, Utah, and fell in love with the upscale ski resort town.  

Vowing to recreate his Vegas utopian community in Park City, Hsieh decided to relocate to the town, purchasing some $70 million worth of property around the area, while establishing a $30 million angel fund to help local businesses and startups. In the spring, he split his time between Vegas and Park City, but by the summer, Hsieh made Utah his new full-time residence.

Hsieh’s new home and the centerpiece of his Park City properties was a $16 million, 17,350-square-foot mansion with a private lake he called “The Ranch.” During his transition from Vegas, Hsieh reportedly promised to double the salary of friends who would agree to relocate to Park City and help him in his quest to revamp the community.

The Park City Crew

According to Forbes, at least several dozen friends took Hsieh up on his offer and moved to Utah with him, where they lived for free in some nine properties he purchased in the high-end Aspen Springs neighborhood. In Park City, Tony helped many local entrepreneurs and propped up local businesses struggling to stay afloat during the pandemic with lavish spending on restaurants, bars, limos, and concierge services. 

While Hsieh initially relocated to Park City to focus on “health, wellness and rehabilitation,” by the late summer, friends and family reportedly became concerned with his increased drinking and drug use. Longtime friends found it hard to reach Hsieh, who grew increasingly isolated, surrounding himself with a new group of younger friends, most of whom were on his payroll.

According to Hsieh’s close friends and colleagues who spoke with Forbes, Tony’s new entourage of friends, he dubbed, “The Park City Crew,” were encouraging him to indulge in more frequent drug use, which his old friends felt was getting out of control. At the same time, he grew more isolated and even paranoid, and at one point, a team of security guards Hsieh hired basically barricaded sections of his main house, “blocking anyone who didn’t have Tony’s permission to enter,” according to Forbes.

In August, it was announced that Hsieh was retiring from Zappos after more than two decades at the helm. Although the timing of his retirement was suspect, Amazon denied pushing Hsieh out, and insisted that stepping down was his own decision, according to Forbes. Whatever the case may be, his friends and loved ones became so worried about his condition, they staged several interventions in order to convince him to seek help.

Apparently, the interventions worked. Hsieh was reportedly planning to check himself into a rehab facility shortly after a planned visit to see friends and family in Connecticut for the Thanksgiving holiday. But as we now know, Hsieh’s plans to turn his life around were tragically interrupted.

Next week in part two of this series, we’ll cover the last days of Tony’s life and how his lack of estate planning created a nightmare burden for his family that is only just getting started.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for Liz to call you at a time you choose.

The end of the year is tax time, and one of the most important steps in your company’s tax preparation is filing the proper tax forms for your workers. One tax form that often creates confusion for business owners is Form 1099.

Unlike traditional employees, who are issued a W-2, 1099s are used to report payments you made to independent contractors (ICs) over the course of the year. Because the rules for filing 1099s can differ depending on how much ICs were paid, how they were paid, and what business entity they use, dealing with 1099s can be tricky.

Filing 1099s for 2020 is going to be even more confusing than usual, as the IRS split 1099s into two separate forms: Form 1099-NEC to report nonemployee compensation and Form 1099-MISC to report miscellaneous service payments.

To help ensure you get your 1099s filed correctly and on time, here’s what you should know about the two new forms.

Filing Form 1099-NEC

If you paid an IC at least $600 during the year, you must report it on Form 1099-NEC. This includes commissions, fees, and other types of compensation for the work that an independent contractor performed for your company. There are four conditions for filing a 1099-NEC.

If you meet all of the following four conditions, you should file a 1099-NEC for that contractor:

  • You made a payment to someone who is not employed by your company.
  • The payment was made for services and not for merchandise or products.
  • You made the payment to an individual, partnership, or other unincorporated entity. Most payments to corporations (except attorneys or law firms) do not need to be reported on Form 1099.
  • You made payments to the IC totaling $600 or more during the year. If you paid them less than $600 total, you generally do not need to file a Form 1099-NEC.

Both the IRS and the independent contractor must receive copies of Form 1099-NEC no later than Feb. 1, 2021.

Filing Form 1099-MISC

If you made payments for miscellaneous services that were not nonemployment compensation, you must report them on Form 1099-MISC. The following types of payments are reportable on Form 1099-MISC:

1. Payments of at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest

2. Payments of at least $600 in:

  • Rents
  • Prizes and awards
  • Other income payments
  • Cash paid from a notional principal contract to an individual, partnership, or estate
  • Fishing boat proceeds
  • Certain medical and health care payments
  • Crop insurance proceeds
  • Payments to an attorney (other than fees for services)
  • Section 409A deferrals
  • Nonqualified deferred compensation

The recipient of the Form 1099-MISC must receive it no later than Feb. 1, 2021, and the IRS must receive it by March 1, 2021, if you are submitting it on paper. If you are filing it electronically, the IRS must receive it by March 31, 2021.

Take the Stress Out of Tax Time
Although dealing with all of the tax forms required by the IRS can be a hassle, you can eliminate most of the stress—and risk—involved by implementing sound business systems. We, as your Family Business Lawyer™, can support you in setting up an array of systems, not just for managing your finances and taxes, but for dealing with legal and insurance issues as well.

Additionally, when it comes to working with independent contractors, taxes aren’t your only concern. You’ll also need to pay close attention to ensure all your ICs are properly classified and have solid employment agreements in place. Meet with us today for trusted guidance on hiring, classifying, and paying your ICs.

This article is a service of Liz Smith, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.

With COVID-19 still raging, your 2020 holiday season may not feature the big family get-togethers of years past, but you’ll still likely be visiting with loved ones in some fashion, whether via video chat or in smaller groups. And though the holidays are always a good time to bring up estate planning, given the ongoing pandemic, talking about these issues is particularly urgent this time around.

That said, asking your dad about his end-of-life wishes while he’s watching football isn’t the best way to broach the subject. In order to make the talk as productive as possible, consider the following four tips.

1. Set aside a time and place to talk

Discussing planning while opening Christmas gifts most likely won’t be very productive. Your best bet is to schedule a time, when you can all gather to talk without distractions or interruptions.

Be upfront with your family about the meeting’s purpose, so no one is taken by surprise and people come prepared for the talk. Choose a setting that’s comfortable, quiet, and private. The more relaxed everyone is, the more likely they’ll be comfortable opening up.

2. Create an agenda, and set a start and stop time

Create a list of the most important points you want to cover, and do your best to stick to them. You should encourage open conversation, but having a list of items you want to cover can help ensure you don’t forget anything.

Also, set a start and stop time for the conversation. This will help keep the discussion on track and prevent people from veering too far off topic. If anything important comes up that’s not on the list, you can always continue the discussion later. Remember, the goal is to simply get the conversation started, not work out all of the details or dollar amounts.

3. Explain why planning is important

Assure everyone that the conversation isn’t about prying into anyone’s finances, health, or relationships—it’s about providing for the family’s future security and wellbeing no matter what happens. It’s about ensuring everyone’s wishes are clearly understood and honored, not about finding out how much money someone stands to inherit.

Talking about these issues is also a good way to avoid future conflict and expense. When family members don’t clearly understand the reasoning behind one another’s planning choices, it’s likely to breed conflict, resentment, and even costly legal battles.

4. Discuss your planning experience

If you’ve already created your plan, start the talk by explaining the planning documents you have in place and why you chose them. If you’ve worked with us, as your Personal Family Lawyer®, describe how the process unfolded and how we supported you to create a plan designed for your unique wishes and needs.

Mention any questions or concerns you initially had about planning and how we worked with you to address them. If you have loved ones who’ve yet to do any planning and have doubts about its usefulness, discuss their concerns in a sympathetic and supportive manner, sharing how you dealt with similar issues whenever possible.

If you have not yet worked with us on your estate plan, consider watching this brief training that discusses what you need to do, what you can do yourself, and what you need a lawyer to help you with. You may even want to watch it with your family, and outline the actions steps together. And if one of your action steps is to enlist the support of a lawyer to get your planning done, call us for a Life & Legacy Planning Session.

For the love of your family

With us as your Personal Family Lawyer®, we can guide and support you in having these intimate discussions with your loved ones. When done right, planning can put your life and relationships into a much clearer focus and offer peace of mind knowing that the people you love most will be protected and provided for no matter what. Contact us today to learn more.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for Liz to call you at a time you choose.

From websites and social media to e-newsletters and mobile apps, it’s virtually impossible to survive in today’s marketplace without having a digital footprint of one form or another. And when it comes to conducting business in the online world, protecting your clients’ personal data is paramount.

On that front, more than half of all small businesses suffered a breach of client data within the last year, according to a 2019 study by the insurance firm Hiscox. And given that the cost to resolve a single breach averages roughly $200,000, digital privacy is a major liability for businesses of all sizes.

In addition to the risk of getting hit with a lawsuit from a client whose data was stolen from your business, you must also take steps to comply with an ever-evolving set of federal and state laws governing data privacy. For example, the Fair Credit Reporting Act (FCRA) imposes stiff fines for failing to adequately protect client credit card information, while the Health Insurance Portability and Accountability Act (HIPAA) imposes similar penalties for those who fail to protect healthcare data.

At the state level, there are hundreds of different data privacy laws, though right now, California and New York have the most robust regulations. The bottom line is that failing to adequately protect your customer or client’s personal data can result in serious consequences.

To help you stay in compliance with the laws and avoid lawsuits, here are three essential strategies for managing the privacy and security of your client’s data. Although you should meet with an experienced business lawyer like us to implement a comprehensive digital protection plan, these three actions should get you off to a good start.

1. Install multiple layers of security
To protect your company’s server and computers, you should install a comprehensive array of security systems, such as anti-virus software, firewalls, intrusion-prevention systems, and anti-subversion software. The key is to add as many layers of security as possible, since hackers are likely to move on to an easier target, if your network and devices are well defended.

And don’t forget to regularly install updates to your security software, so you’ll be protected against the latest threats. Regularly check your software vendors’ websites and the U.S. Computer Emergency Readiness Team’s (UC-CERT) site to stay up-to-date on the latest viruses, vulnerabilities, and patches.

2. Select the most secure web hosting service
Web hosts house your website and data on their own off-site servers. There are numerous web hosting companies out there, and they come with varying levels of server-side protection, including security cameras, anti-virus and anti-spyware systems, and hard-wired firewalls.

Choose a web host that offers a high level of security, especially against cross-side server attacks, which involve hackers who open a fake account with the web host to access other websites on the same server. For enhanced protection, use a virtual private server (VPS), which partitions your website from other sites that share the same server.

For maximum protection, open a private server account in which your website and data are maintained on your own separate server. This option is fairly costly, but still a lot cheaper than getting fined or sued for a data breach.

3. Invest in cyber insurance
As with other forms of liability your business faces, having the proper insurance in place is a foundational aspect of your company’s data protection plan. To this end, you’ll want to purchase a cyber insurance policy.

Cyber insurance offers protection against damages resulting from data breaches, hacking, network failures, and other events. If your business’ network is breached, the cost to recover and restore this information can be extensive. And as mentioned earlier, you can also be held liable for damages to third parties, such as customers and vendors, whose data was lost or stolen from your system.

Depending on the coverage purchased, cyber insurance can pay for a wide array of services needed to repair your network and retrieve your data, including investigative analysis, business interruption, and data recovery. It can also cover the cost of notifying clients of the breach, paying regulatory fines, as well paying for lawyer fees, judgments, and settlement costs resulting from a lawsuit.

Not all businesses need cyber insurance, and the ones that do can require varying levels of coverage. Before you buy a cyber policy, consult with a trusted business lawyer like us to assess the risk your particular business faces and determine the kind of policy best suited for your situation.

4. Hire cyber security experts
If you are in an industry that’s at high risk for cybercrime, such as finance, banking, healthcare, or logistics, consider hiring outside cyber security professionals to monitor your company’s server and computer activity. These experts are specifically trained in the latest trends in hacking and other electronic infiltration methods.

However, such security firms are often quite pricey, and not all businesses will need to partner with one. We can help you better assess the risk and reward of hiring one and advise you on whether your company requires such an investment or not.

Digital defense
Regardless of the size of your digital footprint, you should stay apprised of the latest cyber threats and digital privacy laws to ensure your client’s data is secure. We, as your Family Business Lawyer™, can advise you on the safeguards you should have in place and keep you updated on the ever-changing legal landscape surrounding data privacy. And if you’re ever hacked, we can defend you in court against any lawsuits or other liabilities that might result. Contact us today to learn more.

This article is a service of Liz Smith, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.

Since you’ll be discussing topics like death, incapacity, and other frightening life events, hiring an estate planning lawyer may feel intimidating or morbid. But it definitely doesn’t have to be that way.

Instead, it can be the most empowering decision you ever make for yourself and your loved ones. The key to transforming the experience of hiring a lawyer from one that you dread into one that empowers you is to educate yourself first. This is the person who is going to be there for your family when you can’t be, so you want to really understand who the lawyer is as a human, not just an attorney. Of course, you’ll also want to find out the kind of services the lawyer offers and how they run their business.

To gather this information and get a better feel for who the individual is at the human level, we suggest you ask the prospective lawyer five key questions. Last week in part one, we listed the first two of these questions, and here, we cover the final three.

3. How will you proactively communicate with me on an ongoing basis?

The sad truth is most lawyers do a terrible job of staying in regular communication with their clients. Unfortunately, most lawyers don’t have their business systems set up for ongoing, proactive communication, and they don’t have the time to really get to know you or your family.

If you work with a lawyer who doesn’t have systems in place to keep your plan updated, ensure your assets are owned in the right way (throughout your life), and communicate with you regularly, your estate plan will be worth little more than one you could create for yourself online—and it’s likely to fail when your family needs it most.

Think of it this way: Yes, your estate plan is a set of documents. But more importantly, it’s who and what your family will turn to when something happens to you. You want to work with a lawyer who has systems in place to keep your documents up to date and to ensure your assets are owned in the right way throughout your lifetime. Ideally, the lawyer should get to know you and your family over time, so when something happens, your lawyer can be there for the people you love, and there will already be an underlying relationship and trust.

Your lawyer should proactively communicate with you and keep you and your family educated on an ongoing basis. We think sending out a weekly (at least) email is best. I prefer to hear from the professionals with whom I work on a monthly basis by regular mail and on a weekly basis by email, but depending on the relationship, it could be even more frequent than that.

If you are considering hiring a lawyer who doesn’t take the time to proactively communicate with his or her clients, this should be a red flag. That’s a sign that the lawyer may be stuck in an old, outdated mindset that won’t address your ongoing needs in the way you deserve.

4. Can I call about any legal problem I have, or just about matters within your specialty?

Given the complexity of today’s legal world, lawyers must have specialized training in one or more specific practice areas, such as divorce, bankruptcy, wills and trusts, personal injury, business, criminal matters, or employment law. You definitely do NOT want to work with a lawyer who professes to be an expert in whatever random legal issue walks through the door.

That said, you do want your personal lawyer to have broad enough expertise that you can consult with him or her about all sorts of different legal and financial issues that may come up in your life—and trust he or she will be able to offer you sound guidance. Moreover, while your lawyer may not be able to advise you on all legal matters, he or she should at least be able to refer to you to another trusted professional who can help you.

Trust me, you wouldn’t want the lawyer who designed your estate plan to also handle your personal injury claim, settle a dispute with your landlord, and advise you on your divorce. But you do want him or her to be there to hear your story, refer you to a highly qualified lawyer who specializes in that area, and overall, serve as your go-to legal consultant.

In this capacity, you can call your personal lawyer before you sign any legal documents, any time you have a legal or financial issue arise, or whenever anything that might adversely affect your family or business comes up, and know that you’ll get excellent guidance.

With this in mind, look for a lawyer who has an ongoing service program or membership program, in which you can pay a low monthly fee and be able to call with all of your legal and financial questions, without being charged hourly for the consultation. And be sure that when you call, you get to schedule time to talk with your own lawyer, who you know and trust. We love the idea of legal insurance plans, but we don’t love that you don’t get your own personal lawyer with them. You need to know your lawyer, and know that your lawyer has your back.

5. What happens if you die or retire?

This is a critically important—and often overlooked—question to ask not only your lawyer, but any service professional before beginning a relationship. Sure, it may be uncomfortable to ask, but a truly excellent, client-centered professional will have a plan in place to ensure their clients are taken care of no matter what happens to the individual lawyer managing your plan.

Look for a lawyer who has their own detailed plan in place that will ensure that someone warm and caring will take over your planning without any interruption of service. If your lawyer prepared a will, trust, and other estate planning documents for you, or if you are in the middle of a divorce or lawsuit, you want to make certain your lawyer has such a contingency plan in place, so you won’t be forced to start over from scratch should your lawyer die, retire, or become otherwise unavailable.

Finally, if your lawyer offers a membership program, you’ll want to make sure he or she has a relationship with another lawyer or a network of lawyers who can continue to service you under that program.

A Lasting Relationship

Although hiring the right estate planning lawyer may not seem like a super important decision, it’s actually one of the most critical choices you can make for both yourself and your family. After all, this is the individual you are trusting to serve on your behalf to protect and provide for your loved ones in the event of life’s most traumatic experiences.

Should you choose the wrong person for the job, your family could potentially face all manner of unnecessary conflicts, expenses, and legal entanglements during a time when they are at their most vulnerable. In the end, estate planning is about far more than having a lawyer create a set of documents for you, and then never seeing you again, or only seeing you when something goes wrong.

With us as your Personal Family Lawyer®, we develop a relationship with you and with your family that lasts not only for your lifetime, but for the lifetime of your children and their children, if that’s your wish. Our unique, family-centered legal services are specifically tailored to provide our clients with the kind of love, attention, and trust we’d want for our own loved ones. To learn more about our one-of-a-kind systems and services, schedule a Family Wealth Planning Session today.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for Liz to call you at a time you choose.