IN THIS ISSUE– Estate Planning for

College Students

– Business Owner Alert: Department of Labor Issues New Rule Impacting Overtime Pay

– Window May Be Closing for Discount-Based Estate and Gift Tax Planning Techniques

– Firm News

A Report on Legal Issues Affecting Privately Held Businesses and Personal Wealth

This is an exciting time for Larry Freiman’s daughter, Madeline, pictured left. She is just starting her freshman year at American University in Washington, D.C. Planning has been a whirlwind, but she has taken the time to have a real conversation with her parents about what it means to be 18 years old and away from home for the first time. Like Madeline, many other young adults are preparing for college and may not be aware of how their changing legal status will impact them in a variety of ways.

For that reason, we encourage parents who have college-bound children to think about estate planning for their young adults. While estate planning for this age group is often overlooked, having certain medical and financial documentation in place is critical. Once children reach the age of majority (which is 18 in most states), privacy laws generally protect their medical and financial information. The following basic estate planning documents can be used to give parents, or another named individual, the authority to receive important information and to act on the student’s behalf in the event that he or she cannot do so.

Estate Planning for College Students

The MendenFreiman SUMMER 2016

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THE MENDENFREIMAN ADVISORPAGE 2

DURABLE POWER OF ATTORNEYThis document allows a student to name an attorney in fact to act on his or her behalf regarding financial and legal matters. For example, as attorney in fact, a parent could pay bills, maintain bank accounts and take care of other financial matters for their child if the need arose. The power may become effective immediately or it may be “spring-ing,” which means it only becomes effective upon the occurrence of a later event (e.g., a student’s incapacity). If the document becomes effective immediately, a parent could seamlessly act for their child, if necessary, without having to go through a determination of incapacity – which may include the added burden of obtaining a medical opinion.

ADVANCE DIRECTIVE FOR HEALTHCAREThis document allows a student to name an agent to make health-care decisions for him or her in the

Please note that a student may name someone other than his or her parents to serve in the above described roles (e.g., other relatives or a close friend). In addition, it may be prudent to name backup decision makers in case the primary designated individuals are unable to act in such a role.

LAST WILL AND TESTAMENTIn addition to the above-described documents, we also recommend that students have a simple Last Will and Testament. Even at a young age, a simple will ensures that a student can direct the ultimate disposition of his or her assets. Also, upon an individual’s death, assets must be adminis-tered and distributed, creditors must be paid and memorial arrangements must be made. A simple will can help to make the probate process more manageable.

While parents feel that their college-age children are still very much under their care and are their responsibility, there are real-world implications associated with children getting older. Advance preparation can greatly reduce legal hurdles parents may face when trying to assist their children with medical and/or financial mat-ters in the future. Therefore, as parents are getting their children ready to head off to college, we encourage them to think about adding basic estate planning docu-ments to their to-do list.

Please contact MendenFreiman if you have any questions.

event he or she is unable to do so and permits a student to specify certain treatment preferences regarding such care. This document only becomes effective when a student cannot make health decisions for himself or herself.

AUTHORIZATION TO DISCLOSE PROTECTED HEALTH INFORMATIONThe Health Insurance Portability and Accountability Act (HIPAA) establishes rules and limits on who can look at and receive an individual’s medical information. This document authorizes healthcare providers to disclose a student’s medical information to certain named individuals. In the unfortunate scenario where a student experiences a medical emergency, this document would give parents, or another named individual, the authority to receive information from healthcare providers regarding the student’s healthcare status and related information.

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Earlier this year, the Department of Labor (DOL) issued a highly anticipated new rule modifying the exemptions to the Fair Labor Standards Act (FLSA). The Obama administration has long sought to change federal regulations so more workers will qualify for overtime, and this new rule is designed to achieve that objective. The DOL estimates the change will extend the right to overtime pay to approximately 4.2 million currently exempt workers.

Business Owner Alert: Department of Labor Issues New Rule Impacting Overtime Pay

WHAT CHANGED?Executive or manager positions, so-called “white-collar” positions, currently cannot qualify for overtime if they have a minimum salary of $455 per week ($23,660 annually). The new rule, which goes into effect on December 1, 2016, significantly increases the exemption threshold by more than 100 percent to $913 per week ($47,476 annually) for executive, administrative and professional employees. However, under the new rule, employers will be permitted to count non-discretionary bonuses and incentive compensation, including commis-sions, toward up to 10 percent of this threshold, as long as the pay-ments are made at least quarterly.

For “highly compensated employees,” the salary threshold will increase from $100,000 annually to $134,004 annually. The new rule did not change the “duties test” related to the kinds or amounts of work necessary to qualify for either the white-collar or highly compensated exemptions, but the DOL has asked for comments on whether those rules should be changed. So this new rule might not be the only change planned for these exemptions.

The new rule also establishes, for the first time, a mechanism for updating the threshold on a regular basis. Beginning January 1, 2020, and every three years after that date, the DOL will “update”

(likely meaning “increase”) the threshold amounts. These updates will be announced 150 days in advance. The DOL has stated that the new “white-collar employee” threshold is set at the fortieth percentile of data representing the “earnings of full-time, salaried workers” in the lowest-wage census region (currently the South), and that the “highly compensated employee” threshold is set at the ninetieth percentile of data representing “earnings of full-time salaried workers” nationally. Presumably, these data sets would be used as the basis for future updates.

WHAT TO DO?First, employers should determine which of their employees may be affected by these changes. Not meeting the duties test and exemp-tions that are in place for certain industries may cause the employee to be exempt from FLSA standards.

Second, for employees who are affected and will now be under the FLSA exemption threshold, the employer has two basic choices: (1) raise the employee’s salary to be greater than the threshold amount or (2) convert the

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At MendenFreiman, we understand business and life can be complicated. For nearly 20 years, we have made it our mission to identify and simplify complex business, wealth and life-planning issues for our clients. In addition to law degrees, most of our attorneys have earned advanced degrees in business, accounting or tax; and several are certified public accountants. This diverse combination of legal, management, tax and financial expertise sets our firm apart. Our clients trust us to help them solve complicated business planning, transactional, wealth transfer and estate planning matters.

5565 GLENRIDGE CONNECTOR, N.E. SUITE 850 ATLANTA, GA 30342 PHONE 770.379.1450 FAX 770.379.1455 MENDENFREIMAN.COM

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Window May Be Closing for Discount-Based Estate and Gift Tax Planning Techniques

employee’s pay to an hourly basis and pay time and one-half for time worked over 40 hours per week. Obviously, both of these options can be expensive so the determination should be made on a case-by-case basis, with a mind to the impact on the overall wage scale for the company and the impact of giving “unearned” raises on both the com-pany budget and employee morale.

Third, for nonexempt employees, employers will need to make sure they track and maintain an accurate record of all hours worked, regardless of whether their employees are paid hourly or are on salary.

THE BOTTOM LINEAll employers need to be aware of the impact of this new rule and make sure that they have taken the appropriate steps to be in compliance once the rule goes into effect on December 1, 2016. If you are unsure if your employees will be impacted, or if you want help making sure you are in compliance, give us a call. We will help you prepare your business for continued success under these new regulations.

For several years, the IRS and the Obama Administration have let it be known that they were seeking ways to limit the use of valuation discounts for closely held business interests, including interests in family invest-ment partnerships and limited liability companies, to reduce exposure to federal gift and estate taxes for transfers of such interests. Last year, they specifically targeted the regulations related to Section 2704 of the Internal Revenue Code as a way to further this goal. Recently, the Treasury Depart-ment released proposed regulations that would expand the scope of the statute to cover different types of business entities, redefine certain terms to enhance the impact of the statute and impose certain standards that will make planning around the statute more difficult.

While the impact of these proposed regulations will be better understood over time, what is clear right now is that they will not go into effect until final regulations are published. The first hearing on the proposed regulations is currently scheduled for December 1, 2016, so the final regulations will not be published until at least 30 days after that date. Accordingly, there is a valuable window for the next few months to put in place planning structures that take advantage of the current state of the law.

We will continue to monitor and update planning strategies in light of these proposed regulations, and remain available and ready to assist clients and advisors in understanding these new proposed rules and in implementing discount-based strategies before the end of the year.

MendenFreiman NewsNathan T. Johns We are pleased to announce that Nathan T. Johns has been named a partner. Nathan joined the firm in 2013 and focuses on business law and all aspects of business and commercial real estate transactions. He represents private entities on business and transaction structuring, mergers and acquisitions, capital investment and financing.

Laura B. TraylorMendenFreiman extends a warm welcome to Laura B. Traylor who joins the firm as an of counsel attorney in the estate planning and trust and estate administration practice areas. She focuses on drafting complex wills and has significant experience advising and assisting with the administration of estates.