Pregnancy and Employment in the Veterinary Practice

Due to the vast number of female employees in the veterinary field, the issue of employee pregnancy arises frequently. Many veterinarians fail to abide by federal law in their dealings with pregnant employees because they simply aren’t familiar with the legislation protecting the pregnant employee: the Family and Medical Leave Act (FMLA) and the Pregnancy Discrimination Act (PDA). If you’re having issues pertaining to FMLA in your work, you may want to speak with a workplace fmla lawyer. However, the lack of knowledge surrounding these laws can be costly and can lead veterinary employers straight into disputes with labor boards.

The Family and Medical Leave Act was added to Title VII of the Civil Rights Act of 1964 on October 31, 1978 and applies to employers with fifty (50) or more employees. Covered employers must provide up to 12 weeks of unpaid leave to eligible employees for the following reasons: birth and care of the employee’s newborn child; care for a child after adoption or foster care placement; care for the employee’s spouse, child or parent with a serious health condition; or for a serious health condition that affects the employee’s ability to work. This federal law also addresses hiring, maternity leave, health insurance and fringe benefits for pregnant employees.

The Family and Medical Leave Act provides that women affected by pregnancy, childbirth or related medical conditions shall be treated the same for all employment-related purposes, including receipt of benefits, as other persons not so affected but similar in their ability or inability to work. Employers are prohibited from refusing to hire someone who is pregnant because of her condition. The Act also mandates that employers allow pregnant women to continue their work as long as they are able to perform their job-related tasks.

In addition, employers must hold the pregnant employer’s job open during their maternity leave for the same amount of time that jobs are held open for employees on disability leave. The federal law also provides that health insurance provided by an employer must cover expenses for pregnancy-related conditions.

Finally, the same benefits that are provided to workers on disability leave should be given to employees on maternity leave. This includes temporary disability benefits, accrual and crediting of seniority, pay increases and vacation calculation.

The Pregnancy Discrimination Act (PDA), which applies to employers with fifteen (15) or more employees, also prohibits discrimination against pregnant women. This Act guarantees that pregnant women are provided with the same opportunities and benefits as non pregnant employees who are similarly limited in their ability to perform their job responsibilities. However, if a pregnant employee is unable to fulfill their job responsibilities, employers are not required to provide accommodations.

Furthermore, most states have enacted their own pregnancy discrimination laws. Many states have also lowered the covered employer threshold to those employers with fewer than fifteen (15) employees. For example, Iowa law mandates that employers with four (4) or more employees grant pregnant employees leave for the period that the employee is disabled because of pregnancy. California law also requires employers with five (5) or more employees to grant pregnancy leave.

When federal or state pregnancy laws apply to your veterinary office, it is important to be aware of and to adhere to certain guidelines. First, if the pregnant employee refuses or is unable to perform certain tasks, such as lifting heavy equipment or taking patients’ x-rays, then the veterinary employer must determine what accommodations may be needed. For instance, a veterinary employer may shorten the employee’s work week or eliminate certain tasks such as lifting, taking x-rays, or working around hazardous materials.

However, if the accommodation would cause an undue hardship and require significant difficulty or expense for the employer (taking into consideration the number of employees at the veterinary office, the effect of the accommodation on expenses, the financial resources of the veterinary office, and the impact the accommodation would have on the entire veterinary practice), then the employer may deny any accommodation. If the employee is unable to perform job related tasks and the veterinary employer is unable to provide accommodations, then the employer must determine whether the tasks are essential to her job and if so, whether another employee may take over those tasks. If another employee is unable to perform those job related tasks, then it may be prudent to provide an unpaid maternity leave.

In addition, when federal or state laws apply to a veterinary practice, the veterinarian must remember that it is illegal to deny employment, promotions, or to fire a woman because she is pregnant. Employers should also be aware that pregnancy leave is generally without pay. However, the employee may use any paid vacation or sick time accrued as part of her pregnancy leave. Typically, pregnancy leave is four to six weeks, but it may be extended up to twelve weeks if the pregnancy involves complications. Finally, employees returning from a pregnancy leave are entitled to return to their former or a similar position at the same work schedule and pay, unless there is a legitimate business reason as to why that job is no longer available.

If federal or state pregnancy laws do not apply to your office but you wish to provide pregnancy leave either to retain a good employee or to be competitive with other veterinary offices, you must establish a leave policy and ensure that it is administered in a way that is consistent and nondiscriminatory.

To be safe, whether or not federal or state laws apply to your veterinary office, all veterinary employers should take certain actions upon discovering that an employee is pregnant. The employer should sit down with the pregnant employee and inquire into the employee’s plans for returning to work after delivery. It would be prudent to ask the employee about her estimated delivery date and whether she will have any health restrictions that will limit her ability to adequately perform her job functions. In addition, the employee should sign a release that states that the employee has been informed of the risks that her job poses to her health and that she accepts all responsibility for protecting herself and her child from exposure to all risks associated with her job.

Women are a protected class, and if an employee’s pregnancy is handled inappropriately, the employer could end up in court, incurring costly fees and time away from the practice. Therefore, it is extremely important that veterinary employers familiarize themselves with the laws that apply to their practice.

Employment Law: Employee Breaks

Employment Law: Employee Breaks

Many businesses have inquired into the legal requirements of providing their employees with lunch or rest breaks. The Fair Labor Standards Act does not require that employers provide any form of lunch or rest periods to employees. However, it does place obligations on those employers who choose to do so. It is important to ensure that employers who provide lunch or break periods to employees are in compliance with state and federal law.

 If an employer offers short breaks [five (5) to twenty (20) minutes] to its employees, the Fair Labor Standards Act considers the break as compensable work hours. These breaks of short duration should be included in the sum of hours worked during the work week and must be considered in determining whether the employee worked overtime. According to the federal law, as long as the employer has clearly communicated the length of the break to the employee and that any extension of the break is against company policy, unauthorized extensions of these work breaks do not need to be counted towards hours worked.

 Employers are not legally required to compensate employees for meal periods of thirty (30) minutes or more, provided that the employees are free to use their meal period as they wish and are not required to perform work during this time. These bone fide meal periods serve a different purpose than short work breaks and are therefore not considered work time and are not compensable. However, if an employee works during a lunch break that is intended to be unpaid, the employer may be obligated to pay additional wages to that employee, including unintended overtime. To prevent employees from working during unpaid meal or lunch periods, an employer should implement policies requiring employees to eat away from their workspace.   This will ensure that the employer will not be liable for paying employees during that time.

The Contracts Involved in the Transition of an Orthodontic Practice

Several different types of contracts are typically involved in a practice transition.  The specific number of contracts and the terms of those agreements will vary, depending on the nature and structure of the transition.  Some contracts typically utilized in a dental practice transition are as follows:

Asset Purchase Agreement/Stock Purchase Agreement

This document serves as the foundation of the transaction.  If the sale is structured as an asset purchase, an asset purchase agreement will be used, wherein the buyer purchases a portion or all of the practice owner’s tangible and intangible assets in the practice.  If the transaction is structured as a stock purchase, a stock purchase agreement will be used, wherein the buyer purchases a portion or all of the practice owner’s capital stock in the practice corporation.

Promissory Note

If the practice owner finances any portion of the purchase price for the buyer, a promissory note will be used to document the buyer’s repayment obligation.

Security Documents

These documents may take several forms, but each document provides the practice owner with security for the buyer’s promise to pay under the promissory note.  A security agreement is typically used in an asset purchase transaction, to allow the practice owner to obtain a security interest in the assets of the practice that have been purchased.  A stock pledge agreement is typically used in a stock purchase transaction, which grants the practice owner a first lien security interest on the shares of stock being acquired by the purchaser.

In addition to the security agreement or stock pledge agreement, the practice owner may require the buyer to assign a collateral interest in a life or disability insurance policy on the buyer to fund any remaining payments in the event of the buyer’s death or disability.  The practice owner may also require the buyer to assign his or her interest in any leased office space, so that the practice owner can resume possession of the premises if the buyer defaults on a loan payment.

Personal Guaranty

If the purchaser is a professional corporation, its stock owners typically would not be personally liable for corporate debts.  The personal guaranty is an agreement by which the stock-owner guarantees the company’s performance under the Promissory Note and makes his or her personal assets available to cover the debt in the event of a corporate default.

Assignment of Personal Goodwill and Covenant Not to Compete

In this contract, the practice owner conveys all of his or her personal goodwill to the buyer and agrees not to compete with the practice for an agreed upon period of time and an agreed upon distance from the practice.  This agreement is important for the security of the purchaser, as they do not want to lose their investment to future competition from the former practice owner.  Additionally, allocating a portion of the purchase price to goodwill provides both the buyer and practice owner with significant tax incentives.

Consulting Agreement or Deferred Compensation Agreement

In these contracts, a portion of the purchase price is allocated to a consulting fee arrangement or to a deferred compensation arrangement in favor of the practice owner.  This allows the buyer to expense the amounts paid to the practice owner at the time of payment.  It also allows the practice owner to spread his or her income over several tax years, as opposed to recognizing the entire purchase price as income in one year.           

Shareholders’ Agreement

If the buyer is buying only a portion of the seller’s existing practice, a shareholders’ agreement will set forth the parties’ rights, duties, and obligations with respect to one another, so that each party is protected if the other dies or withdraws from the practice during their joint ownership.

Employment Agreement

This Agreement sets forth the terms of employment, compensation, benefits and work schedules if the purchaser will enter the practice before the practice sale takes place, as well if there will be joint ownership, or if the practice owner will continue in the practice after its sale.

Bill of Sale

This contract is used in an asset purchase transaction to formally convey all of the practice owner’s assets to the buyer at the closing of the sale.

Managing Liability Exposure for Unpaid Overtime

Since the recent recession began, just before 2008, the dental employment market has changed dramatically. Dental practices have been forced to maintain or increase production levels, while lowering costs. Often, they have accomplished this task by decreasing the workforce while increasing the work load that each employee must bear. To increase productivity, many dental practices have provided employees with computers, iphones, ipads, or other mobile devices that allow them to handle practice matters while away from the office.

While employees tolerated the increased work load and working hours for some time, they have begun to fight back in the court room. Recently, many companies, and even some municipal governments, have faced lawsuits from current and former employees, alleging that they have been unpaid for overtime hours spent working from home on their employer-provided devices. Several of these cases have resulted in settlements costing companies many millions of dollars.

While it may be tempting for practice owners small and large to increase production by relying on employees to respond to email and manage other tasks from home, practice owners that allow their employees to do so should be sure to have a plan for dealing with the time that those employees spend handling practice business.

Employee overtime pay is regulated by the federal government under the Fair Labor Standards Act of 1938 (the “FLSA”). Under this Act, many employees are eligible for overtime pay. While all workers paid on an hourly basis are eligible for overtime pay, some salaried employees qualify for overtime pay as well. Distinguishing between those salaried employees who qualify for overtime pay and those who do not is a particularly challenging area for employers.

In order to be exempted from qualification for overtime pay, a salaried employee must earn at least $455 per week, and, generally, the employee must be a key decision–maker. Salaried employees such as office managers who manage, hire, and fire other employees; administrators who have decision-making authority; professionals with advanced degrees; and certain information technology workers, among others, are exempted from laws requiring the practice owner to provide overtime pay. Because distinguishing between these groups of salaried employees is a tedious, fact-based assessment, dental practice owners should consult an attorney to ensure they are in compliance with federal and state law.

After determining which employees qualify for overtime pay, practice owners should determine the appropriate amount of pay. Under the FLSA, overtime-eligible employees qualify for a pay rate of 150% of their regular pay for all time spent working in excess of forty hours per week. These employees should be compensated for all actual time spent working in excess of forty hours per week. This means that if the employee is deemed “on call” to respond to work-related matters, they likely qualify for overtime pay for the entire “on call” period. However, if the employee is generally free to respond to work-related matters at will, they should only be compensated for the actual time spent working.

Practice owners should remember that, under the FLSA, they are required to compensate employees for overtime if the practice “suffers or permits” the employee to work. This means that if an employer requires or allows the employee to work, the employee’s time must be compensated. Courts may find that a practice owner has implicitly required an employee to work by providing them with access to practice systems through a laptop, mobile device, or even computer programs linking their office computer and personally owned home computer (or cell phone, iphone, etc.).

In order to properly manage risk exposure, practice owners should implement one of several options for controlling employees’ work from home. First, a practice owner may prohibit employees from working from home altogether. This risk management method avoids the problem of unpaid overtime hours by eliminating the source.

Another method for controlling the unpaid overtime risk, which has been implemented with some success, is reclassifying salaried employees who qualify for overtime pay as hourly employees. Under this method, a practice owner may be able to attain the same overall rate of pay that the employees enjoyed while they received a salary. However, the practice owner will need to pay those employees at an hourly rate that factors in expected weekly overtime utilized to complete assigned tasks.

This risk management method is convenient because of the maintained overhead-to-production ratio. However, it may result in decreased employee morale, as many employees gain self-fulfillment from their attainment of a salary. Some previously salaried employees may feel that the owner of the practice does not value their work as highly when they begin to receive an hourly wage.

In any situation where an employee may work from home, the owner of the practice must have a system in place to accurately record the time that the employee spends on practice business. A third method of risk management is implementation of computer software requiring the employee to clock in before accessing company computer systems or email. This allows the practice owner to have accurate records when the practice owner is compensating the employee for overtime pay. This overtime management system may, however, be cost prohibitive for small practice owners.

Finally, for practice owners who have a good and honest working relationship with their staff members, the most cost-effective manner of controlling over-time pay may be to rely on employee self-reporting. Obviously, this poses the risk of employees over-reporting time worked from home; however, in a small practice environment, management staff should be in a position to adequately evaluate all reported overtime hours, and expected workload to ensure that employees are properly reporting hours worked.

By implementing a process for managing the hours that employees spend working away from the office, a practice owner can effectively manage his or her exposure to claims for unpaid employee overtime.

Minimizing Legal Risks of Employee Blogging

Although blogging has been around for some time, personal blogging has recently exploded, as well as all the companies that offer things like custom blog designs. As of 2012, there are an estimated 31 million bloggers in the United States alone. Personal blogging does not require superior technological skills or payment for the instant worldwide publication of a blogger’s personal thoughts. These blogs pose a potential risk to dental offices.

Unfortunately, employees often write about the owner of a practice on personal blogs. Since many practice owners do not monitor or consent to the publication of content posted on their employees’ blogs, office policies should be established that clearly state not only blogging guidelines, but social media guidelines.

Dental practice owners have discovered that employees are posting confidential information on their personal blogs, such as details about their work day as well as patient information. Many employers have terminated employees because of a blog post or as a reaction to an employee’s blog.

The extensive use of blogs as a personal outlet for employees has lead to an increased risk of employer involvement in litigation. A practice owner may be sued by a disgruntled former employee after his or her employment is terminated due to the content of a personal blog, or even by a patient, if the employee posts confidential information about a patient that is protected under federal law.

As a matter of risk management, practice owners must have a clearly defined and specific Internet usage, blogging and social media policy in place. A practice owner must ensure that their policy clearly states what statements may and may not be made about their patients, their work, their colleagues and their employer. In addition, the Internet, blogging, and social media policy should mandate that employees comply with all HIPAA regulations regarding the confidentiality of patient information.

By implementing an Internet usage, blogging and social media policy, practice owners may be able to limit their liability exposure and ensure compliance with federal law.

Employee Embezzlement – Employers Beware

            Statistically, approximately 40%-50% of all veterinary practices will be hit by employee embezzlement. Many incidents of embezzlement are committed by employees that work in finance and accounting positions within the practice. 

            The most common methods of employee embezzlement include  pocketing cash from patients, stealing petty cash, removing cash or checks from the daily deposits, forging endorsements, writing checks to phony vendors, writing duplicate accounts payable checks, stealing prescription medications, and returning supplies to vendors for a refund.  

Practice owners should be on the lookout for stale items in reconciliations, as deposits or checks not included in reconciliations are an indicator of employee theft.  Another red flag regarding employee embezzlement is the excessive voiding of checks. Excessive credit memos are often used by employees to cover up embezzlement. 

            It is also prudent for a practice owner to ensure that their general ledger is balanced.  Employees cover up embezzlement with excessive purchases, whereby fake payees and vendors are often used to convert funds into an employee’s personal account. In addition, a common method for employee embezzlement is altered time sheets.  Employees may falsely indicate that overtime hours were worked by altering the time sheets.

            In order to avoid employee embezzlement, practice owners should implement the following ten (10) tips:

  1. Have bank and credit card statements delivered to the practice owner’s home for personal review.
  2. Review checks and debit transactions with the statements.
  3. Either personally review business checks or require two signatures for all checks. 
  4. Run an audit trail at the end of every week.
  5. Run periodic reports for account receivable and check the report against bank deposits. 
  6. Make all deposits personally.
  7. Review the daily reports. 
  8. Ensure that a copy of the bank reconciliation is attached to each monthly bank statement and require that it be reviewed by two parties.
  9. Do not allow finance or accounting personnel to be signers on all bank accounts.
  10. Ensure that checks received in the mail are immediately endorsed by a two-person team responsible for opening and processing the mail.

            By implementing these ten (10) tips, a practice owner can effectively manage his or her exposure to the increasingly common (and costly) occurrence of employee embezzlement.

The Importance of Privacy

Privacy is something we all value.  It should not come as a surprise to anyone that dental patients want to ensure more than ever that their personal information will not be shared with anyone without a legitimate need to know.  Under the U.S. Department of Health and Human Services (HHS.gov), HIPAA Rules were created to ensure that all healthcare professionals respect and protect a patient’s privacy.   HIPAA gives patients significant rights in controlling how medical professionals maintain and communicate individual health information.  How well does your office comply with HIPAA guidelines?  Since HIPAA compliance is not optional, every dental office should take the necessary steps to ensure they are HIPAA compliant.  

About HIPAA

The Health Insurance Portability and Accountability Act (HIPAA) became law in 1996.  HIPAA provides federal protections for patients’ health care information. The HIPAA privacy rule does permit the disclosure of personal health information needed for patient care and other important purposes related to patient care.  The Security Rule under HIPAA specifies a series of administrative, physical, technical, and security measures required for covered entities (dental offices that transmit patient information in electronic form) to use in order to assure the confidentiality, integrity, and availability of electronic protected health information. 

 A main objective of the HIPAA legislation is to protect the privacy of individual health information by imposing strict security requirements on healthcare providers with access to confidential patient information. As a part of HIPAA, Congress mandated the establishment of standards for the privacy of individually identifiable patient health information.  The Privacy Rule requires that dentists [and other medical practitioners] obtain patient consent before using or disclosing a patient’s personal healthcare information which may be needed for treatment, payment, and other healthcare related purposes. 

Private Health Information, also known as PHI, is any information relating to a patient’s health, treatment, or payment for healthcare that identifies a patient.  Private health information includes, but is not limited to: names, addresses, phone numbers, fax numbers, e-mail addresses, credit card information, certificate numbers, license numbers, account numbers and birth dates. Many dental employees, including dental assistants, dental hygienists, lab technicians and front office staff, may come into direct contact with a patient’s PHI.  PHI should be carefully secured and traced throughout the dental office to ensure patient confidentiality. 

HIPPA does not require that dentists sound-proof rooms to ensure that confidential conversations are not overheard; however, dentists should make every reasonable effort to ensure that confidential conversations take place in areas away from other patients.  Also, computers, printers, faxes and file cabinets or other containers were patient records are stored should be placed in secured areas without patient access. 

Although compliance ismandatory only for “covered entities”, the American Dental Association suggests that dentists who are not covered entities adopt the same privacy practices that HIPAA mandates for “covered entities”.  It is still possible that HIPAA privacy laws may establish an industry standard among dental practices and the failure to comply with the industry standard may result in liability for the owner of a dental practice.

Understanding the value of PHI and its relationship with HIPAA, the owner of a dental practice should be able to answer some very important questions such as: how is PHI stored in our office, who is authorized to access the information, how is the information stored and how is  patient information secured, how and when is this patient information destroyed, where in the office is it appropriate to discuss personal health information, and have we implemented proper training procedures?  Answers to these questions cannot be left to interpretation. 

The owner of a dental practice must adopt and implement comprehensive privacy procedures for their office in order to ensure that patient records are kept in a secure space.  In addition, employees in a dental office must comply with HIPAA policies and procedures which have been established.  Most of the information obtained regarding patients does require the implementation of security measures.  If employees are not aware of HIPAA standards as established by the owner of a dental practice, a violation of HIPAA may be costly! 

Patient Rights

The HIPAA Privacy Rule gives patients considerable rights in controlling their identifiable healthcare information.  Covered entities must provide a Notice of Privacy Practices to each patient which details how the practice can use and disclose confidential patient healthcare information.  Under HIPAA, a healthcare provider must obtain a patient’s authorization before releasing protected patient information.  However, a health care provider may release patient information for specified health care related purposes, such as for remitting payment or for patient related treatment.   

As for patient records, patients are permitted access to their own records.  In addition, patients may also request restrictions on the disclosure of their personal healthcare information.  Patients may also request an amendment to any information in their medical file that they believe is erroneous. The Privacy Rule also prohibits employers from using a patient’s personal healthcare information as a factor in making employment decisions. 

HIPAA Violations

Failure to comply with HIPAA can result in both civil and criminal penalties, and the penalties can be stiff.  These penalties vary based on the nature of the violation and the extent of the resulting harm.  Healthcare entities and individuals who obtain or disclose individually identifiable health information face a penalty ranging from $100.00 to $50,000.00 per violation, as well as imprisonment for up to one year.  However, offenses committed with the intent to use the information for personal gain, harm, or commercial advantage face fines up to $250,000.00 and imprisonment for up to ten (10) years.  Because there is no private right of action for a patient to enforce his or her privacy rights, enforcement of the civil penalties will be processed through the Department of Health and Human Services Office of Civil Rights, and the criminal penalties will be enforced through the government. 

It is important to note that the owner of a dental practice may be held liable for HIPAA violations. Employees who knowingly violate a HIPAA rule may also be subject to civil or criminal penalties as well (including dental hygienists, dental assistants, etc.)  As a result, in order to avoid potential civil and criminal penalties, all members of a dental practice should be aware of HIPAA guidelines and procedures.

The Privacy Rule does allow dentists to use patient sign-in sheets in their offices.  However, requiring a patient to indicate the purpose of their appointment is a violation of HIPPA and should be avoided.  Reminder cards sent to a patient’s home with appointment dates on them are not considered a HIPAA violation, because of the preventative nature of dental care.  However, if the cards mention the purpose of the appointment (i.e., “This is a reminder of your appointment for a dental implants”), it will be considered as violation of the HIPAA Privacy Rule.  In addition, schedules of patient appointments should not be placed in an area in the office that is visible to other patients.  Finally, patient appointment calendars should “never” be placed on the internet [yes, this has happened]. 

Conclusion

The owner of a dental practice must determine whether their office is HIPAA compliant.  A failure to properly implement HIPAA security and patient privacy rules could result in potentially big civil and criminal penalties.  The employees of a dental practice must be trained on both HIPAA regulations and security measures.  A patient’s individually identifiable healthcare information is confidential and should be treated accordingly.

Tax Tips for Special Needs Families

April 15th is not that far away, and that means tax time. Some people with special needs may be required to file an income tax return based upon their earned and unearned income. In addition, beneficiaries and trustees of a special needs trust may also be required to file an income tax return. If you or a loved one are required to file an income tax return, there are several tax tips listed below that hopefully will save you time and money.

Not All Income Is Taxable       
Supplemental Security Income (SSI) benefits may not be considered taxable income. If a beneficiary only receives Social Security Disability Insurance (SSDI) payments, and no other income from any other source, then SSDI benefits may not be considered taxable income. In addition, funds paid through a qualified dependent care assistance program also may not be considered as taxable income. However, there may be restrictions.

Special Deductions for People with Disabilities Are Available          
In some cases, individuals who have visual impairment may qualify for a higher standard tax deduction than the average taxpayer, depending on their level of impairment. Also, individuals with disabilities who itemize their deductions on their income tax return may be able to take advantage of deductions for medical expenses, special telephones, wheelchairs, motorized scooters, the cost of schools that provide special education services, and premiums for long-term care insurance. People with disabilities who require special goods or services in order to work may also be entitled to deduct certain expenses, such as business expenses.

Tax Credits Can Help People with Disabilities and Their Relatives   
There are several types of tax credits that apply to people with special needs. If you care for a child or a dependent person with disabilities, you may qualify for a child or dependent care tax credit for up to thirty-five (35%) percent of your expenses related to their care. Also, parents of a child with disabilities may also be able to claim an Earned Income Tax Credit, depending on the family’s income.

Special Needs Trusts Have Special Rules
The trustee of a special needs trust may find it difficult and challenging to file an income tax return for the trust. As a very general rule, income generated by a first-party special needs trust is typically considered to be taxable income attributable to the trust beneficiary [regardless of whether the income is actually distributed from the trust].

However, a third-party special needs trust established by a friend or relative for a person with special needs may generate taxable income for the grantor of the trust, the beneficiary of the trust, the trust itself, or all three at once, depending on the circumstances. In some cases, trustees may be required to file income tax returns for the special needs trust itself.

Hopefully, these few tax tips have been beneficial. As with most tax matters involving the area of special needs, please make sure you consult with a qualified certified public accountant or CPA who is familiar with the areas of special needs.

According to a recent survey, many parents with special needs children have not secured their child’s financial future. Statistically, 66% of parents do not expect their child with special needs to be financially independent, and 68% of parents with special needs children do not have a will.  Estate planning is essential for parents with special needs children. Outlined below are five simple steps that will help you plan for your child’s future:

  1. Children with special needs should not be a “direct beneficiary” of a will or trust [they may be disqualified from receiving federal and state aid].
  2. A special needs trust should be established in order to make sure that certain designated money or property will be used for your child’s best interest.  
  3. In many cases, a legal guardian should be appointed for any special needs child that turns 18 years old. Once a child turns 18 years old, they are considered an adult.
  4. A special needs trust should be established in order to protect your child’s eligibility for state and federal aid. 
  5. With proper planning, a life insurance policy can ensure your child will be financially secure. A gift of money or property to a child with special needs should go directly to that child’s special needs trust. If a child with special needs is the direct beneficiary of any type of money or property, they may become ineligible for state or federal benefits.

With proper estate planning, you can secure your child’s future. For more information on special needs trusts, please contact us.

Should you choose a friend to be your business partner?

Planning to start a business partnership with a friend? Prudence demands looking at the pitfalls – as well as the potential strengths – of such relationships. Here are a few questions to consider.

  • What will my friend contribute to the business? Does he or she have strengths that will clearly enhance the business – abilities, knowledge, or resources that you don’t possess or aren’t willing to acquire by other means? Say, for example, you are good with customer relations, but not too good with numbers. If your friend loves details and is clever with records, the partnership may make sense. If, on the other hand, your friend really can not offer something that would round out the business or make it more profitable, you might want to consider partnering with someone else.
  • Are you willing to lose the friendship? This is a tough question, but one that’s critical to consider. After all, you and your friend will be working together, day in and day out, to make the business succeed. Such relationships can bring out the best – and worst – in people. If maintaining your friendship is one of your highest priorities, partnering with someone else may be a better choice.
  • What’s expected from each partner? Developing a profitable business is hard and often unrewarding work. You and any potential business partner should honestly discuss expected work hours, contributions, and responsibilities. Resentment can creep into any business relationship when partners feel that workloads and rewards aren’t fairly distributed.
  • Can you communicate effectively? Like a good marriage, a long-term business partnership takes honest communication to succeed. Ask yourself, for example, whether you can handle constructive criticism from your friend/business partner. Even the closest business partners don’t always see eye to eye, so it’s important to take an honest look at how you both handle disagreements. Will you work through difficulties for the firm’s sake, or bury your head in the sand and hope for the best? Answering this question is crucial to the success of your partnership.
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