COVID-19 Pandemic Update: Business-Related Estate Planning Impact

There are more than 30 million small businesses in the United States, and surveys reveal that more than 60% of the owners want their companies to continue succeeding after their passing. Despite that, only around 15% of small businesses survive the death of their owners. Estate planning lawyers assert that this low number is due to a lack of the business estate plans needed to protect those enterprises, and they warn that the COVID-19 pandemic has caused uncertainties that may drive that number down even lower.

Diminution of Asset Values

Many of the assets that are associated with businesses have been suppressed due to the pandemic. Even assets that historically hold their value during economic downturns have been affected because, on a large scale, businesses are closing temporarily or permanently, consumer activity is slowed, and investors are not buying land. In the long term, such values should normalize, but what happens if a business owner passes away while the pandemic is still ongoing? An estate planning lawyer may be able to have assets assessed at pre-pandemic values or position assets so that the courts will value them at a later date, which they have the discretion to do. This can apply to financial accounts, intellectual property, high-value equipment, and commercial real estate.

Property Taxes That Reflect Pre-Pandemic Values

The diminution of asset values also presents challenges when it comes to property taxes. Many assets that are taxed will be assessed based on the value they held on January 1, 2020. The problem with this is that asset values were drastically different just three months later. Even if you appeal, the government is not obligated to concede, and even if it does, there is no guarantee that the valuation will reflect the current value fully or at all. Nevertheless, there are opportunities within an estate plan to mitigate taxes, defer them, and manipulate them to your benefit in other ways.

Historically Low Interest Rates

While the COVID-19 pandemic has devastated many businesses, it presents opportunities as well. In May 2020, the interest rates for short-, mid-, and long-term loans were at all-time lows: 0.25, 0.58, and 1.15%, respectively. Likewise, the annuity rate was 0.80%. This provides opportunities in estate planning to position assets to take advantage of those lower rates.

Limited Access to the Courts

Another way that the pandemic is affecting estate planning is reduced access to the courts. The courts are facing the same challenges we all are and have had to execute plans for social distancing, reduced occupancy, and so forth. As of this writing, many courts are not currently accepting petitions related to estate plans simply due to the backlog of petitions caused by the pandemic.

Challenges Related to In-Person Meetings

Creating and updating an estate plan has arguably never been more challenging than it has been during the pandemic. Consider the great difficulties associated with having documents witnessed and notarized. These are activities we used to take for granted, but many states have passed laws allowing for online witnessing and notarizing to overcome the issue. There are also challenges meeting with lawyers, accountants, and other professionals, and video conferencing must often take the place of the traditional sit-down.

Protect Your Business

If you do not yet have a business estate plan, this is an excellent time to take action. Even if you do have a plan, it is important that you reevaluate it because of the current circumstances. At the Knee Law Firm, we offer more than 60 years of combined legal experience and have effective strategies in place to serve our clients despite challenges like government-mandated business closures, social distancing, and remote meetings. Our estate planning lawyer will work diligently to protect your interests. You can reach our office in Hackensack, New Jersey, by calling us at (201) 996-1200, or you can contact us online.