Supported Decisionmaking

Supported Decisionmaking

Supported Decisionmaking – a new alternative to guardianship

Effective July 1, 2019, Indiana now has the option for supported decisionmaking agreements to be used in lieu of guardianship proceedings for individuals who may need assistance in making certain types of decisions, but do not necessarily require a full guardianship to be established. It allows people with disabilities to maintain some level of a self-directed, independent life.

While, on its face, this seems like a huge step forward in disability rights, there are some lingering issues that will need to be hammered out before these agreements can really begin to make a difference in people’s lives.

Indiana is one of only a handful of states to have legislation authorizing these types of agreements. However, unlike in a number of other states, Indiana has no statutory form. Just as with the power of attorney documents, each supported decisionmaking agreement can be unique. Although this allows customization to make the document suit the situation, it can lead to difficulties in getting the document recognized and accepted. Schools, medical providers, and financial organizations may not see the agreement as a legally binding document.

In addition, these agreements are not a substitute for powers of attorney in the event of an individual’s complete incapacity. Rather, supported decisionmaking agreements are a tool in our toolbox that we can use to help facilitate a more independent lifestyle. Just as with any adult, power of attorney documents for health care and finances should also be executed to provide a decisionmaking chain of command in the event the individual is incapable of making a decision for him or herself.

The framework found at the link below can help start the conversation about supported decisionmaking and guide the creation of the document.

Charting the LifeCourse – Tool for Exploring Decision Making Supports

In addition, other states, such as Maine, Texas, and Delaware have statutory forms that can be used for reference in discussing the agreement. We recommend consulting with an attorney who has experience in special needs planning prior to signing one of these agreements to ensure that it meets all of your needs. If you would like us to review the special needs situation for your loved ones, please call 574.232.3538 to schedule an appointment.

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Author: Jennifer L. VanderVeen is a certified elder law attorney (CELA) at Tuesley Hall Konopa, LLP where she counsels clients on long term care planning, Medicare, Medicaid, veterans benefits applications, guardianships, special needs trusts, and complex estate planning issues. Jennifer frequently speaks to community groups on caregiver responsibilities and caregiver burnout.

You can contact Jennifer by calling 574.232.3538 or by email jvanderveen@thklaw.com.

Disclaimer: The THK Legal Blog is for informational purposes only and should not be relied upon as legal advice. In no case does the published material constitute an exhaustive legal study, and applicability to a particular situation depends upon an investigation of specific facts. You should consult an attorney for advice regarding your individual situation.
Corporate Opportunities Doctrine: Potential Trap for the Serial Entrepreneur

Corporate Opportunities Doctrine: Potential Trap for the Serial Entrepreneur

South Bend business transaction attorney, Peter J. Gillin, Partner, Tuesley Hall Konopa, LLPYou are the majority owner of a sales and distribution business. You’ve been working diligently to land new customers and grow sales. You’re growing increasingly frustrated that the minority owners are not putting in the same effort. A contact from your network reaches out to let you know about a producer looking to bring on a new distributor to cover your area. You know this opportunity will be lucrative for whoever lands the work but that it’s going to take real effort to make it pay off. You’re up for the extra work. But you have doubts about whether your partners share the same hunger to succeed. What do you do?

Corporate governance issues do not tend to be front of mind for most owners of closely-held businesses. Corporate formalities are viewed as irritants and, as such, tend to be limited to cursory annual consents electing board members and appointing officers. Decisions (big and small) about the business are most often discussed and then made informally by the group. When the owners, directors, and officers are focused on making the business as profitable as possible, if corporate governance issues crop up, they tend to be hashed out amicably over a cup of coffee. Interests are aligned. The system works smoothly.

Whether and how to pursue a new business opportunity may take more than a cup of coffee. Interests may no longer be aligned. That misalignment tends to cause friction. In the hypothetical above, you want to pursue this new opportunity because you believe it will be profitable. However, you can’t help but feel frustrated that your partners are not matching your effort; effectively freeloading off of your labors. As a result, you harbor concerns that if you share the opportunity with your partners, the same dynamic will take hold. You will perform the lion’s share of the work but not earn a fair return off of that effort. You would prefer to exploit this opportunity without your partners to prevent this source of frustration from getting worse.

The law governing closely-held businesses imposes ethical obligations on business owners, board members and officers requiring them to treat the business and the other business owners fairly. These obligations, commonly referred to as fiduciary duties, flow in part from statutes and in part from case law. These duties are commonly referred to as duties of loyalty, care, and good faith. The hypothetical above touches upon the duty of loyalty which obligates fiduciaries of a business to act in the best interest of the business and their fellow business owners when addressing matters that relate to the business. Depending on how closely related a new opportunity is to the scope of the existing business, decisions regarding whether to pursue an opportunity and how to pursue the opportunity may raise a question as to whether you have fulfilled your duty of loyalty to your partners.

The ‘Corporate Opportunities Doctrine’ evolved as a framework for assessing whether principals have an ethical obligation to share a new business opportunity with the other principals in the business before seeking to capitalize on it. The analysis begins with an assessment of how closely a new opportunity relates to the existing business. The more closely related, the more likely a corporate opportunity would be found to exist. The more removed from the existing business, the less likely a corporate opportunity would be found to exist. If no corporate opportunity exists, a principal has no duty to present the opportunity to the other principals. If a corporate opportunity exists, the options are more limited. A partner has an obligation either to present the opportunity to the other partners for consideration or to decline the opportunity. Failing to disclose the opportunity to your partners but pursuing the opportunity separately from the existing business would open you up to a breach of fiduciary duty claim under the Corporate Opportunities Doctrine. Frustration with a lack of effort by your partners will not justify an attempt to exploit the opportunity on your own.

Planning opportunities exist which may help entrepreneurs avoid or dampen the impact of the Corporate Opportunities Doctrine which may present themselves in the future. As the name implies, the doctrine evolved from cases exploring the nature and scope of fiduciary duties owed by officers, directors, and stockholders to the corporations they serve. Until recently, the statutes and laws governing the formation and operation of corporations did not allow principals forming corporations the flexibility to modify the scope of the fiduciary duties owed to others. With the increasing popularity of the limited liability company form, which allows greater flexibility to waive or modify these duties, forward-looking states like Delaware have begun to allow corporations to address issues like the scope of corporate opportunities in their charter documents. If the prospect of future conflicts is an issue of concern to you as an organizer, the jurisdiction in which you form your business entity is an important consideration.

As the title ‘Indiana Business Flexibility Act’ implies, the limited liability company form offers organizers greater latitude to address issues like how to handle future business opportunities should they arise. Limited liability companies are very much creatures defined by contract. A limited liability company’s operating agreement can be tailored to address when (if ever) an owner, manager or officer would be required to present a new opportunity to the company or other owners. Serial entrepreneurs are wise to consider these issues and possible solutions in advance of the next opportunity presenting itself.

 

Disclaimer: The THK Legal Blog is for informational purposes only and should not be relied upon as legal advice. In no case does the published material constitute an exhaustive legal study, and applicability to a particular situation depends upon an investigation of specific facts. You should consult an attorney for advice regarding your individual situation.

Trending in Philanthropy – Donor-advised Funds

Trending in Philanthropy – Donor-advised Funds

Estate Planning Attorney, Adam S. Russell, Tuesley Hall Konopa,In the wake of the 2018 tax law changes that, among other things, increased the standard deduction to a baseline of $12,000 for an individual and $24,000 for a married couple filing jointly, much attention has been given to the effects such changes might have on conventional charitable giving (as opposed to, for instance, planned giving like gift annuities). In fact, we had a blog post around the time the law passed that predicted some changes in the patterns of charitable giving, including an expected decrease in annual giving. Just this month, news reports have indicated that the impact on giving was even greater than economists expected.

Among the charitable giving and tax planning tips that received significant circulation last year was the concept of gift “bunching,” where a donor would bunch up several years’ worth of annual gifts into one taxable year, to create a larger one-time deduction (as compared to normal pattern of year over year deductions for the same total gift amount), and otherwise relying on the increased standard deduction. The idea behind this was, if you are planning to make the charitable gifts (and we are assuming the gifts would be made even absent a tax benefit), you might as well structure it in a fashion to maximize the tax efficiency.

When the idea was new and being circulated regularly in estate and wealth planning circles, we did not hear many charities complaining. Donations made now are better than donations made later, of course. We did hear rumblings of concern that the bunching approach would lead to more fundraising variability – a greater amplitude in the hills and valleys – which would, in turn, create other budgetary pressures that might offset the advantage of any windfalls from bunching. But, institutions that offer donor-advised funds (DAFs), such as community foundations, were quick to jump in and inform everyone that they could, in fact, despite the adage, have their cake and eat it, too.

Combining bunched giving with a DAF allows donors to maximize their tax efficiency by concentrating the gift deduction into one taxable year (by making a bunched gift into a DAF) while allowing them to preserve the patterns of annual giving with which they (and the donees) had grown accustomed. Utilizing DAFs in this fashion allows the donor to retain all the flexibility of annual giving among their favorite charitable organizations while smoothing the hills and valleys for the charities, and no income tax deduction downside. This strategy may also, for some donors, increase disposable income during the intervening years between bunched gifts, which may present opportunities to employ additional gifting strategies, such as qualified charitable distributions from an IRA.

Want to learn if you can use a DAF as a philanthropic flexible spending account to support your favorite charities? Call 574.232.3538 for an appointment to discuss your goals.

Disclaimer: The THK Legal Blog is for informational purposes only and should not be relied upon as legal advice. In no case does the published material constitute an exhaustive legal study, and applicability to a particular situation depends upon an investigation of specific facts. You should consult an attorney for advice regarding your individual situation.

Meet Adam S. Russell

Adam is an estate planning attorney at Tuesley Hall Konopa, LLP. Practice areas include trust and estate planning, estate administration, tax planning, charitable planning, and charitable trusts, trust funding, special needs trusts and supplemental needs trusts, prenuptial agreements, and probate. Additionally, Adam is licensed to practice in both Indiana and Michigan and regularly meets with clients in our South Bend, Elkhart and Cassopolis offices.

Succession Planning 101 – Implement But Be Flexible

Succession Planning 101 – Implement But Be Flexible

Eric W. Seigel, Partner & Business Counsel at Tuesley Hall Konopa, LLP

Succession Planning 101 – Steps 8 through 10 – Implement But Be Flexible (Print PDF – All 4 Parts)

In my previous three posts, I discussed why business owners need to engage in succession planning (aka exit planning), listed ten steps as an overview of the planning process, and covered the first seven steps in detail.

After completing steps 1 through 7, you will have assembled your professional team, defined your personal financial objectives and timeline, determined at least an approximate value for your business, identified your desired successor, and developed and evaluated possible succession plan structures.

After all that, it is finally time for you to begin to implement your succession plan.

Step 8: If You Have a Good Fit, Further Develop the Plan, Including the Timeline and Methods for Building and Protecting the Value of the Business and for Transferring the Business to the Successor

If your personal financial objectives and desired exit timeline, approximate value of your business, and your desired successor all match up well, then it is time for you to further develop your plan. This should include a targeted timeline for beginning to implement your plan and for completion of your plan. It should also include the development of methods for building and protecting the value of your business and for transferring the business to a successor.

Examples of further plan development here might include (1) determining whether/when to begin to transfer minority ownership interests to designated family member successors or key employee successors; (2) ensuring that critical business functions can be handled by one or more key employees and that the business’ success and survival are not overly dependent on your involvement; (3) protecting the value of the business through confidentiality, non-competition, or stay bonus agreements with key employees; or (4) developing a timeline for a sale to an outside third party and possibly identifying a business broker or investment banking firm to engage for assistance with marketing the business for sale.

Step 9: If You Do Not Have a Good Fit, Go Back to Step 2 (or Step 4) and Start Over

Sometimes one or more of your personal financial objectives, desired timeline, approximate value of your business, and desired successor do not match up well.

Maybe your plan has always been to have one or more of your kids take over the business, but after going through Steps 1 through 7 you now realize that none of your kids really want to take over the family business. Or maybe they do want to but you now realize they don’t really have what it takes to manage the business successfully.

Or perhaps you were hoping to sell the business to a third party for $5 million but your professional valuation report is telling you the business is only worth $2.5 million, and that amount will not meet your personal financial objectives.

Whatever the reason, if the path you thought you were headed down is clearly not going to work, it is important that you not waste valuable time pursuing that path any further. Instead, it is time to go back to Step 2 (or Step 4) and start over because you will need to change one or more aspects of your plan. You may need to do one or more of the following: adjust your personal financial objectives; adjust your timeline; change your desired successor; or find a way to increase the value of your business.

Step 10: Once Your Plan is Developed, Implement It (But Be Prepared to Be Flexible and to Revisit the Plan Over Time As Necessary)

But, life and business often do not go according to plan. It may be a downturn in the economy, or a change in your industry, or a health issue for you or your successor, but the odds are good that your succession plan will encounter unexpected obstacles.

So, as your plan unfolds you must continue to review and revisit the plan to be sure it continues to meet your objectives and you must be prepared to be flexible and adapt the plan to changing circumstances.

Click on Succession Planning 101 – If You Plan to Succeed, You Need a Succession Plan for a downloadable PDF summary of the succession planning blogs.

Disclaimer: The THK Legal Blog is for informational purposes only and should not be relied upon as legal advice. In no case does the published material constitute an exhaustive legal study, and applicability to a particular situation depends upon an investigation of specific facts. You should consult an attorney for advice regarding your individual situation.[/vc_column_text][/vc_column][/vc_row]

New Sick Leave Rules Coming to Michigan

New Sick Leave Rules Coming to Michigan

Michael J. Hays, Partner & Civil Litigation Attorney at Tuesley Hall Konopa, LLPAre you ready for the new Michigan Paid Medical Leave Act? Did you know there was such a thing? After much political wrangling, the current version of this law is scheduled to take effect on April 1. Under it, many Michigan employers will be required to provide paid sick time for their workers. Keep reading for an overview of the new law and what it requires.

The law began with a ballot initiative. Michigan voters were posed to give themselves a generous helping of paid sick time, so the Michigan Legislature intervened and passed the law themselves, thus taking it off the ballot and allowing time to delay the effective date. This gave us the Michigan Earned Sick Time Act—which never became effective. In the final weeks of 2018, the Republican-controlled legislature passed a series of amendments, including re-naming the law the Michigan Paid Medical Leave Act. Lame duck governor Rick Snyder signed the amended version into law shortly before his Democratic successor Gretchen Whitmer came into office.

The politics of sick leave

The first thing to understand about this law is that the political battle rages.  Some activists feel the legislature “stole” their ballot initiative and watered it down. Movements are afoot to bring a new ballot initiative. There is also talk of court challenges, and with divided government in Michigan, it’s hard to predict where this issue will ultimately land. But for now, employers have to prepare themselves and be ready to honor the new requirements that come into play April 1.

Eligibility

The next thing to understand is that it currently only applies to employers with 50 or more employees. This was one of the biggest amendments in December, as the original version applied in some form to almost all employers. If you don’t employ at least 50 workers in Michigan, you are spared from this law—at least for now.

Benefits

For those employers covered by the Act, you must provide your workers with one hour of paid sick time for every 35 hours worked, up to a maximum of one hour per week and a maximum of 40 hours per year.

The benefit does carry over from year-to-year, but you are not required to allow employees to use any more than 40 hours in a given year. The law also includes some detailed definitions surrounding what types of health issues, family health needs, and domestic violence concerns qualify for paid time off under the Act. Be on the lookout for a poster published by the State of Michigan (not yet available) that employers will be required to post.

Strategies for Compliance

The law expressly allows you to “front load” the 40-hour benefit at the beginning of a year and permits reliance on a standard paid time off policy to satisfy the requirements of the Michigan Paid Medical Leave Act, so long as the benefit and eligibility rules are at least as generous.

For many employers, it may be possible to make modest tweaks to your current policy and bring it into compliance with this new law.  For others, providing this benefit will represent a major change.  You should consult with your legal and HR advisors to determine what works for your organization. Even for Indiana employers or small businesses in Michigan that do not fall under this law, it is important to stay tuned to changes in sick leave rules so that you are offering competitive benefits for your workers.

Whether your business is domiciled in Michigan or Indiana, your employee benefits manual should be reviewed annually, and updated as needed. If you have questions about being in compliance in either state, please call Employment Law Attorney, Michael Hays at 574.232.3538.

Disclaimer: The THK Legal Blog is for informational purposes only and should not be relied upon as legal advice. In no case does the published material constitute an exhaustive legal study, and applicability to a particular situation depends upon an investigation of specific facts. You should consult an attorney for advice regarding your individual situation.

Contract Manufacturing Agreements

Contract Manufacturing Agreements

Contract Manufacturing Agreements:  The Importance of Allocating Outsourcing Risk Fairly

Businesses increasingly look to contract manufacturers (CMs) as a way to improve efficiency in their production processes. The allure of outsourcing all or part of a manufacturing process is the chance to lower the cost of bringing a product to market. For CMs, contract manufacturing engagements represent an opportunity to utilize their capital and workforce more productively. Competition among CMs to land lucrative contract manufacturing engagements can be fierce. And the drive to land an engagement can influence how aggressively a CM pushes back on contract terms and conditions proposed by potential customers. Understanding key contract terms and how they allocate risks between parties to contract manufacturing relationship can help a CM’s management make better decisions regarding its contract manufacturing commitments.

When a business explores outsourcing the production of a product or component of a product, the analysis tends to focus on how the decision will affect quality. Because the quality of a business’ products is integral to a business’ brand, it should be no surprise that contract provisions addressing the quality of deliverables are reflected throughout the terms and conditions. Terms and conditions address the risk that a CM relationship will affect the quality of products delivered in two primary ways: risk mitigation; and risk transfer.

Risk mitigation provisions are designed to limit proactively the chances of problems occurring in the future. In a contract manufacturing agreement, risk mitigation provisions tend to describe reporting requirements, product inspections processes and auditing of production methods and environments. The goal being to identify possible problems in manufacturing processes or the output from those processes prior to product hitting the market. While these sorts of provisions tend to be located in the ‘boilerplate’ of contract manufacturing agreement forms, giving thought to the balance between the costs associated with these sorts of quality assurance protocols and the benefits gained from increased initial product quality can be an opportunity to achieve greater efficiency. Even with thoughtful quality control measures reducing the risk of future problems, the potential for product defects remains a concern.

Risk transfer provisions allocate responsibility between the parties if a problem arises. In a contract manufacturing agreement, key risk allocation terms include the warranty and indemnity provisions. At their simplest, a warranty is an assurance regarding the quality of a deliverable and an indemnity is a mechanism to ensure that an injured party is made whole if a warranty proves to be untrue. Warranties may be implied at law and or given expressly through written contracts.  Where warranties regarding the quality of products are implied at law, the Uniform Commercial Code (state statute) allows written contracts between businesses to expressly disclaim enforcement of any implied warranties. For CMs, the warranties in their agreements with their customers plus any implied warranties created by state law form a measuring stick against which the quality of the products they deliver are measured.

Translating an understanding of how warranty and indemnity provisions allocate risk between parties into better contract terms for a CM is more art than science. Ideally, warranty and indemnity terms would only hold a CM responsible for failures that are within the CM’s reasonable control. For example, if a customer provides a CM with a set of specifications for a batch of deliverables and the CM’s deliverables meet those specifications in all respects, does it make sense to hold the CM responsible for product liability or product warranty issues which may arise when the deliverables are ultimately introduced to the market? Unless the warranty provision distinguishes between compliance with specifications and deviations from those specifications and the indemnification provision allows for the indemnification of the CM where the proximate cause for defects is in the specifications themselves, the CM has exposure for aspects of the relationship it does not control.

The more thoughtfully terms and conditions spell out (1) who bears responsibility for which elements of the manufacturing process and (2) who makes who whole in the event something goes wrong, the more smoothly the relationship should run when problems arise. Tailoring contracts for each relationship takes time and money. And managing a supply chain with a set of highly tailored contract manufacturing agreements can increase administrative costs for the business customer. So, many times CMs are faced with the choice of accepting broader risk under a customer’s standard form contract terms and potentially missing out on a key piece of business. Pricing the additional risk into the CM’s cost of manufacturing the contract deliverables being sold is critical to ensuring a successful contract manufacturing engagement. Not fully appreciating how the risks are allocated between the CM and its customer can sour an otherwise profitable contract manufacturing engagement very quickly.

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Author: Pete Gillin is a seasoned transactions attorney whose experience includes advising middle-market and closely-held businesses. Practice areas include business counsel, business formation, business transactions, business acquisitions, succession planning, partnership agreements, financing agreements, contract review, and intellectual property matters.

You can contact Pete by calling 574.232.3538 or email pgillin@thklaw.com.

Disclaimer: The THK Legal Blog is for informational purposes only and should not be relied upon as legal advice. In no case does the published material constitute an exhaustive legal study, and applicability to a particular situation depends upon an investigation of specific facts. You should consult an attorney for advice regarding your individual situation.