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ACTIONS TO TAKE DURING THIS CRISIS

July 7, 2020

Dear Clients and Friends: With all these changes in life going on, there are aggressive actions that you can you take to protect yourself, and your family, your friends, and your employees. Here are some ideas: Review your leases for a Force Majeure clause (a provision in commercial contracts that excuses the renter from performing when certain situations arise beyond the renter’s control making performance impractical, inadvisable, unreasonably expensive, illegal or impossible). Please note that these clauses often require special notices or timing. Then, contact your landlord in writing, to notify him/her of this situation and your inability to perform. Landlords must work with their tenants in a reasonable way. Contact the lender on your business or home loan to negotiate abeyance or delayed payments. Don’t wait for the government to mandate it. Many loan contracts receive such treatment due to a doctrine called Frustration of Purpose. In such a case, the purpose of the contract was frustrated by an event (pandemic) that would excuse its performance. For example, if your business was ordered to close as a non-essential business, you can argue that the reason for entering into the loan was to operate the business – which is no longer possible. Review and determine how to handle your accounts receivable and accounts payable. Work to make your cash flow match up with revised commitments. Contact the finance company carrying your car loan. Similar to the above, you may not be able to pay your car payments or even use the car. Therefore, you should be relieved of your payment obligations – even temporarily. If you plan to reduce staff, be sure to catch up on the latest employment support plans being made available by the Federal, state, and local governments. Furlough versus termination versus reduction of work time have very different consequences. Go through all of last month’s business and personal bills and see which can be reduced or eliminated. You will be surprised at how many things can be changed without dramatically impacting your employee benefits or work and personal lifestyle. Make sure all of your assets are in the name of your family trust, both for you and for your employees. If something happens to you or your spouse/significant other, or an employee, the costs and time involved in settling the estate can be prohibitive. If all of your assets are in your trust, the transition is usually seamless. Also, make sure your health care directives are up to date with the right decision-makers named. In the meantime, make sure that you are doing the best you can to be positive and aggressively pursuing solutions for yourself, your family, your friends, and your employees.

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Summary of Government Financial Assistance to California Small Businesses and Individuals

July 7, 2020

Dear Clients and Friends: We are diligently working to keep you apprised of the new laws applicable to small businesses and individuals. Below is a summary of the new laws passed over the last week allowing for significant assistance to almost all small businesses. You will find the rules are relaxed significantly, including no personal guarantees, no requirement that you have tried to find funds elsewhere, and a quick turnaround time for funding that allows you to rehire employees. Also, some portion of these loans will be forgiven when used for the right purposes, mainly payroll. We will continue to advise you on the implementation of these laws in the weeks and months ahead. Call or email us with any questions. (1) Coronavirus Aid, Relief, and Economic Security Act (“CARES”) Financial assistance and loans to individual taxpayers, businesses, and entire industries affected by COVID19, and expansion of unemployment benefits. We focus on small businesses with this summary. Adds $349 billion in additional funds for SBA loans under Section 7(a) of the program and expands its scope. Relaxes loan eligibility criteria, increases loan limits, and expands allowable uses of the loan proceeds. Grants to entrepreneurs to help with small businesses (especially minority and women-owned). Expands access to SBA Economic Injury Development Loans (“EIDL”) through December 31, 2020 for small businesses, private nonprofits, and individuals operating as sole proprietors or independent contractors as of January 31, 2020. There are no personal guarantee requirements on all loans up to $200,000, no requirement of having to be in business for a year, and no requirement that you can obtain credit elsewhere. EIDL Applicants can receive as grants an advance up to $10,000 within three days of receipt of the application to be used for COVID-19 related paid sick leave, payroll to retain employees, pay costs related to interrupted supply chains, rent or mortgage payments, and repay obligations related to revenue losses. Grants do not have to be repaid. EIDL received $10 billion from CARES. Provides bankruptcy protection to debtors. Loans and Relief for Small Businesses Expands loan eligibility through June 30, 2020, through its “Paycheck Protection Program”: For any business under 500 employees (or the number of employees established by the SBA) Individuals operating as sole proprietorships, self-employed, or Independent Contractors, and Business in accommodation and food services industry under 500 employees in one location Businesses that borrow must certify: The current economic uncertainty makes the loan necessary to support ongoing operations; and The loan proceeds will be used to retain workers and maintain payroll or make mortgage, rent, and utility payments Businesses can use the loan for payroll, insurance premiums, continuing to pay healthcare benefits during paid sick/medical/family leave, employee salaries, commissions, utilities, rent, mortgage payments, and interest on debt obligations incurred before February 15, 2020. Business no longer have to “be able to obtain credit elsewhere.” Under the Paycheck Protection Program, Businesses can Borrow the lesser of: $10,000,000, or 2. 2.5 times the business’ average monthly payroll costs in the one-year period before closing of the loan. -The loans will have a maximum interest rate of 4% including all lender fees. -Collateral […]

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REALITY CHECK – ASSET PROTECTION PLANNING

July 7, 2020

Dear Clients and Friends: In today’s volatile economy, many clients have expressed concerns about how to protect their assets from lawsuits or other potential claims. An Asset Protection Plan may allow you to insulate some if not many, of your assets from certain liabilities that may come up both in business and personally. It is a part of your family estate planning. Asset Protection Planning is a proactive legal action that may protect your assets from current and future creditors. It is achieved by taking assets that may be subject to creditors’ claims and repositioning ownership to make the asset more difficult to attach and further out of the reach of creditors. Asset Protection Planning (APP), the planning taken to safeguard one’s assets, has three key elements to it: Timing of the plan. Level to which the risk has risen. Extent of the asset protection plan. TIMING OF THE PLAN – If you put an APP in place when there is no known risk, the probability it will hold at a later date is very high. The probability of the plan working diminishes with each subsequent risk event. It starts with you finding out that some event has created a heightened level of risk. From there it goes to an oral or written communication that notifies you of the risk. Then comes the lawsuit, the trial, the verdict, and the levy or attachment. The longer that you wait to set up protection the more likely it is that your assets will be at risk. LEVEL TO WHICH THE RISK HAS RISEN – When concerned about an event that might occur, make sure you are carrying the right type and amount of liability insurance, and that it covers the event that you are worried about. If there is risk beyond your insurance coverage, either it is not covered, or the amount involved is beyond your maximum coverage, you then need to add coverage and consider taking actions to protect assets from your personal liability. EXTENT OF THE PLAN – The plan that you establish can protect a single asset, such as your home or other real estate or even cash. In order to separate your assets from liability, they need to be owned by someone other than you. Most of our asset protection plans involve giving to your children, or to your spouse, in a way that you can utilize the assets for their benefit. With proper planning, you can separate marital assets between husband and wife, recognizing that one spouse’s separate property is NOT responsible for the separate liabilities of the other spouse. Each factual situation should be evaluated to determine if a particular asset is community or separate and how repositioning ownership could bring a level of protection for those assets. Also, recognize that if you separate assets to each spouse, that ownership will apply in the event there is a future dissolution of the marriage. TOOLS THAT WE USE. We start with a standard estate plan, including revocable trusts and pour-over wills, and then for asset protection, we branch out to separate property trusts for each spouse, and […]

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Client Update: Paycheck Protection Program Status and Expansion to Independent Contractors and Self-Employed

July 7, 2020

Dear Clients, Colleagues, and Friends: As those who have been involved in the Paycheck Protection Program (“PPP”) process know, it has been frustrating. Employers eligible for PPP have experienced limited windows to apply and conflicting directions from the SBA and their banks. When the PPP is planned to open to Independent Contractors and Self-Employed on April 10, 2020, we anticipate similar results but hope that the SBA and banks may have figured out their shortcomings by then. Therefore, we encourage our Independent Contractor and Self-Employed clients to prepare the PPP application as if it will be accepted on Friday, April 10 by a bank with which you currently have a business checking account, and keep monitoring the status of their specific bank. Applications are available here: https://www.sba.gov/document/sba-form–paycheck-protection-program-borrower-application-form We also received information that the government will add an additional $250 billion to the $349 billion originally slated for PPP in forgivable loans. Please remember that for the loans to be forgivable, they must be used for payroll. More information is available here: https://home.treasury.gov/system/files/136/PPP–Fact-Sheet.pdf In addition, the California Employment Development Department (“EDD”) will extend unemployment benefits to Independent Contractors and Self-Employed individuals who have been impacted by the pandemic. Please visit their page for updates: https://www.edd.ca.gov/about_edd/coronavirus-2019.htm Should you have any questions about your specific scenario, PPP application, or payment formula, please reach out to our office at (310) 475-0321 or email. We are all safely working from home and reachable by phone or email.  

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Preparing for Coronavirus: The #1 Legal Document Every Adult Needs to Have

July 7, 2020

Dear Clients, Colleagues, and Friends: Now is a great time to be proactive and plan ahead should you or a loved one fall ill. One of the most important and relatively easy things you can do (and should do) is to select a medical agent and set up your advance healthcare directive. What Is a Medical Agent? A medical agent (also called a healthcare agent, healthcare surrogate, a healthcare proxy, or a medical proxy) is a person you authorize in a medical power of attorney to make decisions about your medical care if you are too ill to make them yourself or are otherwise unable to communicate your wishes. Why is it important to choose a medical agent now? As of April 14, there are 602,977 total cases of coronavirus in the U.S. Of those, only 12,784 are in critical condition (about 2.12%). So even if you get sick, you’ll most likely have mild symptoms and recover quickly. However, since no one knows exactly how they will be affected by the virus, it’s best to plan for the worst and hope for the best. Part of that planning is making sure someone can make healthcare decisions for you if you fall ill and are unable to make those decisions for yourself. Factors to Consider in Choosing Your Medical Agent A medical agent is an important role, and the person you choose will have the power to make critical healthcare decisions—like consenting to a treatment plan, whether to accept or refuse medical treatment, and which healthcare providers or hospitals to use for your care. As a result, it is crucial to think carefully about who you choose to fill this role. Here are some factors to consider when selecting an agent: Emotional maturity. People handle stress differently, and not everyone is able to set aside their emotions and make level-headed decisions when someone they love is suffering. You should choose someone who is able to think rationally in emotionally difficult circumstances, even if that means you must look outside of your family to find the best person for the job. Location. The person you choose to act as your medical agent should be someone who lives close by and is able to act on your behalf very quickly in the event of a medical emergency or if you need your advocate to serve in that role for an extended time period. Consider naming several alternate agents to account for someone’s potential unavailability. Is willing/able to serve. Acting as a medical agent can be a time-consuming and emotionally draining job. Make sure that the person you choose is willing and able to set aside the time necessary to serve as your patient advocate. Don’t just assume the person you want to be your medical agent is willing: Be proactive and ask if he or she is willing to take on that role. Keep in mind that if you are elderly, you may want to avoid naming a friend or family member who also is older, as there is a greater chance that they will experience a mental or physical decline at the […]

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