As parents, we understand that while our legal responsibilities end for our children at 18, our desire to protect them doesn’t go away. In this article, I will discuss the difficult legal situations that can arise when your adult child becomes incapacitated and the proper legal documents have not been put in place prior to their incapacity.
Imagine the following scenario…Your adult child is coming home from college and is involved in a serious accident that leaves him/her incapacitated. Who is going to act on that adult child’s behalf? Who will be able to access that adult child’s accounts, personal property, vehicles, etc.? In short, who will be able to manage their day-to-day affairs?
As a practical matter, there are only two ways that we can put ourselves in a legally recognized position to address the scenario described above.
If an adult child has executed a power of attorney document that gives someone else the authority to act on their behalf, then the person they name (their “agent”) will be able to take on that responsibility. If this isn’t done, then we will need to go to the second option.
Unfortunately, the second option is not nearly as palatable. Absent a Durable Power of Attorney (DPOA), you as parent, or some other loved one, will have to file a Petition for Guardianship for your adult child in the Circuit Court. While it’s great that there is a potential judicial remedy for the situation, the reality of this process is daunting. Guardianship proceedings are expensive, invasive and you won’t always get the desired outcome. You (or someone else) will need to hire an attorney, pay for the attorneys that will be appointed to represent your adult child and potentially pay for expert witnesses to testify in support of your petition. I’ve been involved in several of these proceedings over the years. The last one that I did had attorney and expert fees that exceeded $100,000!
It’s important to understand that a DPOA is the most cost-effective and proactive defense to this scenario. Unfortunately, once an incapacity event occurs it’s too late to execute a Power of Attorney and we’re only left with the guardianship/court option.
In addition to the DPOA, it is equally important to have the power to direct health care treatment in the event an adult child becomes incapacitated. This authority is granted in a document referred to as a Health Care Power of Attorney (HCPOA). The HCPOA, in conjunction with a HIPPA release and a living will make a health care emergency much easier to manage. Without these documents in place, Virginia law will dictate who gets to make those decisions.
As always in estate planning, the “do-nothing” approach is a bad option. At JGB, we refer to this bundle of documents as our “College Plan” (although it would apply to any adult child). If this is something you would like to talk more about, please give us a call to arrange a complimentary consultation.
Friends and Clients of JGB
This post is a follow-up to previous communications from our office on the Corporate Transparency Act (CTA), which was enacted in January 2021 under the National Defense Authorization Act. It creates requirements for certain “Reporting Companies” to file a Beneficial Ownership Information Report (BOIR) with FinCEN (Financial Crimes Enforcement Network) a bureau of the U.S. Treasury under the Secretary for Terrorism and Financial Intelligence. Per FinCEN’s website (https://www.fincen.gov), the bureau exists to “safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.”
*It is critical that you read, understand and take action accordingly to ensure compliance with the CTA as a result of this information. JGB and its Attorneys ARE NOT responsible for making any filings for you or your business in order for you to be in compliance with the CTA.
Why does this exist?
This legislation is part of the U.S. government’s efforts to thwart the use of shell companies or other opaque ownership structures for money laundering, tax evasion, cyber crime, and funding terrorism, and other illicit activities and is intended to bring the United States closer to international standards in these areas.
Who needs to report?
In short, starting January 1, 2024, any entity that meets the definition of a “Reporting Company” must file a BOIR with FinCEN disclosing the Beneficial Owners of the Reporting Company. Reporting Companies include corporations, LLCs, LPs, LLPs, Business Trusts or similar entities. Basically, if the entity is created by filing a document with the secretary of state or any similar office under the law of a State or Indian Tribe, it will be considered a Reporting Company for purposes of the CT. However, there are exemptions. The biggest of these exemptions are publicly traded companies and those defined as a Large Operating Company, which is a company with more than 20 employees in the US, has US gross receipts or sales over $5,000,000 and is physically present in the US.
What about Revocable Living Trusts?
Since Revocable Living Trusts are not entities that are created by filing a document with the secretary of state or any similar office under the law of a State or Indian Tribe, they are not considered to be Reporting Companies for purposes of the CTA. However; Trusts that are the beneficial owners of a Reporting Company may be required to have information included about the trust disclosed in the BOIR to FinCEN.
What’s in a report?
The BOIR requires disclosure about the details of the Beneficial Owners of a Reporting Company. Beneficial Owners are any individual who directly or indirectly through any contract, arrangement, understanding or relationship: 1) exercises substantial control over the Reporting Company, or 2) owns at least 25% of the Reporting Company, or 3) Controls ownership of at least 25% of the Reporting Company. The BOIR will include information identifying the Beneficial Owner’s name, address, and a form of government approved identification must be uploaded into the system. Said BOIR can be made electronically at https://boiefiling.fincen.gov.
WATCH OUT FOR POTENTIAL SCAMS:
FinCEN has issued the following alert
“FinCEN has been notified of recent fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the Corporate Transparency Act. The fraudulent correspondence may be titled "Important Compliance Notice" and asks the recipient to click on a URL or to scan a QR code. Those e-mails or letters are fraudulent. FinCEN does not send unsolicited requests. Please do not respond to these fraudulent messages, or click on any links or scan any QR codes within them.”
Deadlines:
Reporting Companies that are created or registered on or after January 1, 2024, and before January 1, 2025, have 90 calendar days to make their BOIR after receiving actual or public notice of the effective date their entities creation or registration with the secretary of state or any similar office under the law of a State or Indian Tribe. For Reporting Companies that were in existence before January 1, 2024, the deadline to file the BOIR is January 1, 2025. If there is a change in beneficial ownership of a Reporting Company, then an updated BOIR must be submitted within 30 days of the change.
Penalties:
The penalties for a CTA violation should not be ignored. Under 31 USC §5336(h) and 31 CFR §1010.380(g): Willfully providing or attempting to provide false or fraudulent beneficial ownership information; or willfully failing to report, complete or update beneficial ownership information is subject to a monetary penalty of $500 per day up to a maximum of $10,000 and possible imprisonment for up to two years.
Conclusion:
The CTA is here and it is real. It imposes duties on Reporting Companies (often small businesses) that must be adhered to. The federal government is using the CTA to combat money laundering and financial support provided for terrorism. You can find more information, including FinCEN’s Small Entity Compliance Guide in the Small Business Resources section of FinCEN’s BOI website (https://www.fincen.gov/boi). Be certain to know your obligations and to make accurate BOIR filings for Reporting Companies detailing their Beneficial Owners to avoid violating the CTA and becoming subject to its penalties thereunder.
Again, it is imperative that you take action to ensure compliance with the requirements of the CTA as this filing is not completed on your behalf by JGB or its attorneys.
Please visit FinCEN’s website as identified above for more information.
Sincerely,
The Partners and Attorneys of Johnson, Gasink & Baxter, LLP (JGB)