We Want To Be Your Resource

We at The Gierach Law Firm want to be your resource for information that is useful to you.  In order to bring you such information, we will occasionally bring to you an article which you may find of interest by someone outside of the firm or we may offer you a free or reduced fee service which we think you may find beneficial.

In the process of doing estate planning, wills and trusts for our clients, we noted that many clients have life insurance, but really don’t know what they have or why.  Many times the clients have small policies that were sold to them by various family members, many of whom did not even stay in the insurance business after the policy was sold to them.  As a result, many clients have questions such as:  Do I need life insurance?  How much life insurance do I need?  What are the policies that I have?  Do they provide me with any benefit?  Does the benefit run out at particular ages?  Are the policies good for investment?  Should I keep the policies or cash them in?

As you may know from having dealt with our firm, we do not push the purchase of life insurance.  There are certain circumstances that require insurance such as to provide liquidity for your family to maintain their lifestyle after you die, to provide money to pay estate taxes when you die, or to fund a buy-sell agreement, to name a few.  In those situations, we do recommend life insurance to our clients and we work actively with either your insurance professional or we give you names of several insurance brokers to facilitate the purchase of insurance.  We do feel that it is a wise move for our clients to have their insurance policies reviewed periodically to determine the answers to the above questions and to determine if the existing policies should be maintained.

To facilitate the review of your policies, we have asked Stephen Collins of Lake Michigan Benefit Associates, who we have worked with for many years in the past, to review our clients’ existing life insurance policies at no charge to you, which he is willing to do.  Stephen is a financial planner with an emphasis in life insurance and regularly evaluates existing life insurance products for many of our clients.

If you are interested in the free review of your existing life insurance, please send me an email at deniceg@gierachlawfirm.com to schedule an appointment at our offices.  

Denice A. Gierach is a lawyer and owner of The Gierach Law Firm in Naperville. She is a certified public accountant and has a master’s degree in management. Contact her at 630-756-1160 or visit her website at www.GierachLawFirm.com.

The Importance of a Team to the Growth of Your Business

As published in the Business Ledger — April 19, 2010

In this economy, it seems like the stars have to all align for your business to prosper. Besides the normal issues that a business owner has to deal with – employment issues, union issues, tax planning, how to acquire more business, cash flow, and the like – now that same business owner has to be mindful of impending higher taxes, health care reforms recently enacted into the law, as well as an increasing labyrinth of regulations sure to follow.

One of the best ways to survive these tough times is to build a great team both inside your business and outside your business. Obviously, most business owners strive to find the right employees to work for them and help the business to prosper. Often, it is counterintuitive sometimes for a business owner to create a team that is outside the business looking in, especially at a time when money is tight. However, it is a good investment in your business.

Who should be part of your team? One of the great members of the team should always be a good banker. The business owner needs a banker who knows their business and its capital needs. This became even more obvious in the last year and a half with many banks failing, leaving many businesses without the capital needed to pay their normal expenses.

Many businesses having to shutter their doors. Even if their bank did not fail, many lenders refused to make further loans, or worse still, to call the existing loans.

A good bank should be working with the business owner to increase the financial strength of the company. The banker should be proactive in determining what your company’s needs have been, particularly in the last two years, to assist you in preparing for any economic downturns in the future.

This may be working with you on various cash flow projections, with various assumptions from a 20% contraction to a breakeven prediction. If your banker is not proactive in preparing for the future, you may want to shop for a banker who will look beyond the written loan agreements to assist you in the growth and financial stability of the business.

Another important member of the team is a good accountant. The accountant is not just important for the numbers and charts – some of which you may do in house. The most important trait of a good accountant is that he or she is a good business advisor.

The accountant should be able to review both the past results and future projections of your business to give the business owner good, solid business advice, from a more independent viewpoint. His or her advice may range from the proper use of internal controls in the business, what is the proper amount to pay for a business that you are buying, structuring business relationships from a tax perspective, to name just a few.

Every business transaction has a tax consequence and it is important for the business owner to know what the tax impact is from a transaction before the deal is signed – and preferably when the deal is being negotiated. There is nothing worse to giving your books to your accountant to do your tax returns only to find out that the deal just cost you 35 percent more because of a tax consequence that you were not aware of.

Another potential member of the team is also a good insurance broker. It is important for the business to be properly insured for all the risks that are present in the business tempered by the amount of insurance that the business can afford. A business owner needs to be aware of the potential risks his or her company is subject to, and how much potential risk is self-insured.

Being we’re in the midst of a major overhaul of the health care, it will be necessary to have an insurance broker to help tailor a health care plan for your employees that will comply with the law, and to make a determination of the cost of complying with the new law.

Last, but certainly not least, is a good attorney. The business owner needs to have a good relationship with an attorney who understands your business and will be someone that the business owner can go to, seeking advice about either the direction of the business or a particular business matter. Your business attorney can be helpful in many ways, as he or she has seen many other transactions similar to what you are proposing.

Many business owners look at the team as a cost. Really, the amount that the business pays to members of the team is really an investment in the future of the business to keep the business healthy and growing.

Denice A. Gierach is a lawyer and owner of The Gierach Law Firm in Naperville. She is a certified public accountant and has a master’s degree in management. Contact her at 630-756-1160 or visit her Web site at www.GierachLawFirm.com.

Waiting for the other shoe to drop in commercial real estate

As published in the Business Ledger – March 4, 2010

Anyone who owns commercial real estate knows that there are cycles in commercial real estate. There are times when the commercial real estate market is “hot” and times when the real estate market is oversaturated and is considered “soft.” As the economy has been in a deeper than normal recession, the commercial real estate market is also experiencing deeper issues than normal in a soft market. In fact, a congressional watchdog panel raised new warnings about the condition of the commercial real estate market.

In its monthly report, the Congressional Oversight Panel for Troubled Asset Relief program predicted that the failure of these loans could further endanger the banking system and preclude a true economic recovery. The report noted that about $1.4 trillion in commercial real estate loans will come due at the end of their terms and about half of those are considered “under water”, where the fair market value of the property is less than the mortgage debt outstanding. The report further stated that the potential losses from these loans could amount to $300 billion, which would severely impact small to mid size banks, who have a high concentration of commercial real estate in their portfolios. The concern is that if these banks do not have adequate reserves to cover these losses, that there could be more bank failures, which will adversely impact any real recovery in the economy.

There were several potential solutions that were listed in the report, including doing a “stress test” of individual banks whose portfolios contain a concentration in commercial real estate loans. Due to the sheer volume in number of these small to midsize banks, it may not be feasible to review these banks’ records at such a detailed level. Another suggestion is that the federal government could inject additional capital into the small banks, buying their toxic assets or guaranteeing loans. Based upon the fact that the federal government is considered by many taxpayers as spending too much of the taxpayers’ money already, this may not be a feasible approach. There are also concerns if the federal government “reuses” paid back TARP funds as to whether that is constitutional to do so without additional legislation.

A more practical approach might be to allow the banks to extend the due date for the underwater loans, rather than to force a bank to recognize losses at this time. This would allow the economy to recover and over time, the commercial market place would recover, allowing the fair market values to recover as well. It would also allow the owners of the property to find additional tenants for the property or sell the property and pay off more of the outstanding balances of loans for the property. This may allow the banks to recover 80% or more of their loans outstanding, as against taking a loss for the entire loan, reselling the property, and being able to recover maybe twenty cents on the dollar. In addition, if the bank forecloses and cannot sell the property, as there are few buyers out in the marketplace at this time, the bank will have to pay the maintenance and upkeep for the property, the insurance cost and the real estate taxes, as well as a management fee. These costs, along with the legal expense, may force the bank to take a lower offer than that they would have normally accepted in a decent market.

Hopefully, the federal government will enact the necessary regulations that will allow the banks to extend the due dates of the loans on terms that will allow the borrowers to pay, which may include the accrual of a small interest amount, e.g. 1-2%, until three to five years have passed which would allow the cycle to Anyone who owns commercial real estate knows that there are cycles in commercial real estate. There are times when the commercial real estate market is “hot” and times when the real estate market is oversaturated and is considered “soft.” As the economy has been in a deeper than normal recession, the commercial real estate market is also experiencing deeper issues than normal in a soft market. In fact, a congressional watchdog panel raised new warnings about the condition of the commercial real estate market. In its monthly report, the Congressional Oversight Panel for Troubled Asset Relief program predicted that the failure of these loans could further endanger the banking system and preclude a true economic recovery. The report noted that about $1.4 trillion in commercial real estate loans will come due at the end of their terms and about half of those are considered “under water”, where the fair market value of the property is less than the mortgage debt outstanding. The report further stated that the potential losses from these loans could amount to $300 billion, which would severely impact small to mid size banks, who have a high concentration of commercial real estate in their portfolios. The concern is that if these banks do not have adequate reserves to cover these losses, that there could be more bank failures, which will adversely impact any real recovery in the economy. Denice A. Gierach, owner and founder, The Gierach Law Firm pass. After all, most of the commercial real estate loans were good loans hit by a really bad economy. In other words, the borrowers did not cause the loans to go bad—it was the economy. Enacting regulations of this nature would make the best of a bad situation for both the borrower and the banker, as well as for the overall economy. Absent these type of regulations that would allow a “lend-extend” type of loan adjustment, the federal government may cause the other shoe to drop, which will cause additional bank failures and additional economic problems.