Just an interesting update on Senator Kennedy's estate.
Longtime friend is executor, trustee
Boston Globe, By: Jonathan Salzman
Three years to the day before he died, Senator Edward M. Kennedy named Paul G. Kirk Jr. as executor of his estate, according to a will filed yesterday with Barnstable Probate Court.
The five-page document signed by Kennedy on Aug. 25, 2006, underscores his close relationship with Kirk, a former Democratic National Committee chairman who was named yesterday as Kennedy’s interim successor by Governor Deval Patrick.
The same day Kennedy finalized his will, he named Kirk, along with himself, as a trustee of a trust in Kennedy’s name that will handle the senator’s assets.
The will says the trust will provide for Kennedy’s widow, Victoria R. Kennedy, his three adult children, and other unnamed descendants. But it gave no indication of the value of Kennedy’s assets, which came as little surprise to seasoned probate lawyers.
“It’s perfectly in line with what I would do for a wealthy client,’’ said Nancy E. Dempze, a Boston lawyer and former cochairwoman of the trust and estate section of the Boston Bar Association who was not involved in preparation of the will but reviewed a copy. “You want to keep all of that private,’’ she said.
A 2008 federal financial disclosure report indicated that the senator’s family fortune was worth tens of millions. The report, which included Kennedy’s assets and those of Victoria Kennedy and their dependents, listed a string of publicly and nonpublicly traded trusts and assets and a range of values. The report placed the net worth of his publicly traded assets somewhere between $15 million and $72.6 million.
Under the terms of Kennedy’s will, assets from two blind trusts that Kennedy established in his name in 1978 and 1987 were to be transferred after his death to the 2006 trust. The trustee of the 1978 blind trust is John C. Culver, a former Democratic senator from Iowa and a longtime Kennedy friend who played on the Harvard football team with him and spoke at his Aug. 28 memorial service. The trustee of the 1987 blind trust is Joseph A. Kouba of Los Angeles.
Politicians and business leaders often use blind trusts, in which they have no knowledge of their holdings, to shield themselves from accusations of making political or business moves to benefit their finances.
If Kirk cannot serve as executor of Kennedy’s estate, that duty will fall to Kennedy’s son, Edward M. Kennedy Jr., according to the will, which was filed by Kevin J. Willis, a lawyer at Ropes & Gray in Boston.
Dempze said it was possible that some of Kennedy’s assets might be disclosed in the next few months if a probate inventory is filed with the court. Such an inventory excludes jointly owned assets.
Kennedy’s one-page death certificate was also filed in Probate Court yesterday. It said Kennedy died at home at 11:33 p.m. on Aug. 25, 2009, and listed the cause of death as glioma, the malignant brain tumor with which he was diagnosed 15 months earlier. No autopsy was performed.
Monday, September 28, 2009
Sunday, August 16, 2009
Is a Roth IRA Right for You?
New rules beginning in 2010 will allow higher-income holders of traditional IRAs to convert to a Roth IRA. But it pays to run the numbers first. You should consult with your financial advisor, estate planning attorney, and accountant before converting.
Business Week
By Amy Feldman
It has been one of those perverse things. The wealthier you are, the more sense it makes to convert a traditional IRA, where you pay taxes when you withdraw the money, to a Roth IRA, where you pay taxes on money when it goes in. But the rules have only allowed people with modified adjusted gross income no greater than $100,000—those less likely to have big IRAs—to convert a traditional IRA to a Roth. Come 2010, however, the option opens up to everyone. "For 2010 we're going to hire extra analysts to run the numbers," says Christopher Cordaro, a wealth manager with RegentAtlantic Capital in Morristown, N.J.
More than $3 trillion sits in IRA accounts, excluding IRAs that are already Roths. Deciding whether to convert (and how much to convert) is complex. It involves some variables—such as future tax rates—that are unknowable. That, plus the pain of paying taxes now instead of later, may be why many people have been loath to consider conversion in advance of 2010.
But if you have substantial assets—and especially if you want to leave money to the next generation—run the numbers. Online calculators like the one at rothretirement.com can help, but the myriad rules and tax ramifications make talking to an adviser worthwhile. There is an out if you convert and then wish you hadn't—perhaps because your portfolio subsequently shrank as the market fell. The Internal Revenue Service allows you to undo a conversion in a process called "recharacterization."
Here are some guidelines to help you think through the decision.
CASH FOR TAXES
When you convert a traditional IRA to a Roth, you'll face an immediate tax hit. If you own solely IRAs funded with nondeductible contributions, then you will owe taxes on the earnings only (you paid income tax on the original amount before you set up the account). If you have only IRAs with deductible contributions, then you'll owe taxes on the full amount you want to convert (since you contributed on a pre-tax basis). In that case, your tax hit could be a third of the account's value or higher.
If you contributed both ways, all those assets are considered a lump sum for conversion purposes, and you'll need to figure out the tax implications based on the pro-rata share of each. This prohibits you from cherry-picking among IRA assets to avoid paying taxes on the conversion.
Whatever amount you owe, don't convert if you need to tap tax-deferred savings to pay the taxes. "If you have to use some of that money to pay taxes, this is not a good strategy, and if you are under 591/2, it's even worse because you'd pay a penalty [for early withdrawal] just to pay taxes," says Joan Crain, senior director of wealth strategies at BNY Mellon Wealth Management in Fort Lauderdale.
For 2010 only there is an extra loophole: You can choose to postpone the taxes and pay them in two installments over the next two years.
TAX RATE GUESSWORK
If you can pay the taxes on the conversion, the next question is tax rates. One of the big benefits of a Roth is your ability to play your current tax rate off your potential future one: If you expect your rate to be higher in retirement, you can pay the taxes up front at the lower rate. While it's impossible to know what your rate will be in the future, it seems likely it will be higher (at least, in the near future). "A lot of people think they can postpone the taxes until they retire and pay them in a lower tax bracket, but that is not how it is likely to work for a lot of people now," says BNY Mellon's Crain.
There are benefits to conversion even for those whose tax rates remain the same, says T. Rowe Price (TROW) senior financial planner Christine Fahlund. She argues that since you don't know where your tax rate will be in the future, you should think about tax diversification—holding some assets in a regular IRA and some in a Roth—in the same way you'd spread wealth among different asset classes.
You'll want an accountant to calculate the impact of the conversion on your taxes in the year you make the move. For some, the additional taxable income from the conversion could push them into a higher tax bracket or into the Alternative Minimum Tax. That could cause them to lose deductions and pay more overall tax than they otherwise would. If you fall into that category, you may want to hold off or convert only a small piece of your IRA assets in 2010.
THE BIG PAYOFF
The further off retirement is, the more worthwhile the Roth conversion, thanks to the value of tax-free compounding. Similarly, the less likely you are to need the money in retirement, the more valuable the Roth. That's because Roths aren't subject to the rules that force traditional IRA holders to begin drawing down assets at 701/2. If you're nearing retirement and haven't saved enough, you're likely better off not converting. But if you can keep your Roth intact in retirement, the power of tax-free compounding is enormous.
The really big payoffs for conversion come to those who hope to leave assets to kids or grandkids. For those worried about the estate tax, the amount you pay in tax on the conversion lowers the value of your future estate (though Roth assets are still included in the estate value). The inheritors will never owe income tax. While there are required minimum distribution rules for inheritors other than a spouse, those amounts are also tax-free. T. Rowe Price ran numbers (below) showing the benefits of converting $25,000 from a traditional IRA to a Roth for a 45-year-old who won't need the money in retirement, and the even-larger benefits for the adult child who inherits that Roth 40 years later. As Fahlund says: "It's a way to leverage that money throughout a family."
Feldman is an associate editor with BusinessWeek in New York
Friday, August 14, 2009
Tax Secrets of the Wealthy: Solve your business succession problem
Just in case the last article was not enough, here is another article on business secession planning. There are lots of options, but only if you plan. If we can be of any assistances, please do not hesitate to contact us.
Tax Secrets of the Wealthy: Solve your business succession problem
Marco Eagle
By: Irv Blackman
Own a family business? Want to transfer it to your kids? Then you’ll love this article. It’s about an old IRS letter ruling that is one of my favorites. It might be labeled “the lazy man’s way to plan your business transfer.” The ruling shows you how to take advantage of some favorable tax law while avoiding pitfalls. Good stuff!
There is a bit of a problem to using the technique: You see, you must drop dead before your family can enjoy the benefits of Letter Ruling 9116031.
But wait, the ruling has one redeeming quality. Really! First, the facts.
Joe, his wife Mary and their children owned all the stock in a family business. Joe died in 1990 and Mary inherited all of his stock. (Note: Mary’s tax basis — for computing capital gains — is the fair market value (FMV) of the stock on the day Joe died. For example, if the FMV was $1 million and she sold it for $1 million, there would be no capital gains tax.) Mary immediately sold all of her stock back to the corporation.
Here’s the general rule: When you or any member of your family sells stock back to your corporation (called a redemption), the redemption is usually taxed as a dividend — a tax disaster.
But there is a special tax-saving exception for a family member who has owned the stock for 10 years or more: If he/she divests all interest in the company (including any position as an officer or director), the redemption is treated as a sale (gets favorable capital gains treatment, instead of being a dividend). Since Mary sold all (stock she owned before Joe died and stock she inherited from him) of her remaining interest in the corporation, the purchase by the corporation of her shares was considered a bone fide sale (redemption) and not a dividend — a big tax victory.
When all the smoke cleared, not only had Mary escaped a big dividend income tax bill, but she has succeeded in effectively transferring the business to her children. How? Since the kids now owned all the remaining issued and outstanding stock, they owned 100 percent of the business. To sum it up: Mary walked off with a near-tax-free capital gain, (the price paid to Mary for the stock was a bit more than the exact FMV of the stock inherited from Joe) while the kids walked off with the business. A fantastic tax result.
Here’s some more good stuff about succession planning. Over the years, we have used the above ruling dozens of times with real-life clients and have nicknamed the strategy “The little guy redemption technique.” Here’s why. We use it when the seller is (1) in a very low or zero income tax bracket; (2) the stock price is (by a sort of rule-of-thumb) $600,000 or lower and (3) the seller is not worth enough to have a potential estate tax problem.
For example, the last one we did was for $380,000 for Dad No. 1, who owned 5 percent of the stock. The corporation redeemed all the stock paying the full $380,000 with a note payable over 10 years with interest at 6 percent on the unpaid balance.
Simple! Effective. Really a nice little flow of spendable cash for Dad No. 1, whose total net worth was only $800,000.
Let’s change the facts, just a bit.
Dad No. 2 (a real client from New York) is in the highest income tax bracket and estate tax bracket. Tax heaven would be to transfer his interest in the corporation (valued at $3 million) tax-free to his kids.
Dad No. 2’s succession plan must be centered around a strategy called an intentionally defective trust (IDT). An IDT is a tax-saving machine. It’s tax-free to Dad No. 2. Best of all the “buyer” of the stock (Dad’s kids) do not pay a single penny for the stock. Instead, the kids get the stock tax-free as a beneficiary of the IDT.
The lesson to be learned. Never, but never sell your stock to your kids, unless you are a little guy (as spelled out above). If transferring the stock of your family business to one or more of your children will be a tax burden to (a) you or (b) the children or (c) (in most cases) both, it is a must to find out just how much the family will save in taxes using an IDT. The rule of thumb: The savings are over $600,000 for every $1 million of the stock’s price. In real life, Dad No. 2 and his kids saved $1,920,000 in taxes (on a stock price of $3 million).
Tax Secrets of the Wealthy: Solve your business succession problem
Marco Eagle
By: Irv Blackman
Own a family business? Want to transfer it to your kids? Then you’ll love this article. It’s about an old IRS letter ruling that is one of my favorites. It might be labeled “the lazy man’s way to plan your business transfer.” The ruling shows you how to take advantage of some favorable tax law while avoiding pitfalls. Good stuff!
There is a bit of a problem to using the technique: You see, you must drop dead before your family can enjoy the benefits of Letter Ruling 9116031.
But wait, the ruling has one redeeming quality. Really! First, the facts.
Joe, his wife Mary and their children owned all the stock in a family business. Joe died in 1990 and Mary inherited all of his stock. (Note: Mary’s tax basis — for computing capital gains — is the fair market value (FMV) of the stock on the day Joe died. For example, if the FMV was $1 million and she sold it for $1 million, there would be no capital gains tax.) Mary immediately sold all of her stock back to the corporation.
Here’s the general rule: When you or any member of your family sells stock back to your corporation (called a redemption), the redemption is usually taxed as a dividend — a tax disaster.
But there is a special tax-saving exception for a family member who has owned the stock for 10 years or more: If he/she divests all interest in the company (including any position as an officer or director), the redemption is treated as a sale (gets favorable capital gains treatment, instead of being a dividend). Since Mary sold all (stock she owned before Joe died and stock she inherited from him) of her remaining interest in the corporation, the purchase by the corporation of her shares was considered a bone fide sale (redemption) and not a dividend — a big tax victory.
When all the smoke cleared, not only had Mary escaped a big dividend income tax bill, but she has succeeded in effectively transferring the business to her children. How? Since the kids now owned all the remaining issued and outstanding stock, they owned 100 percent of the business. To sum it up: Mary walked off with a near-tax-free capital gain, (the price paid to Mary for the stock was a bit more than the exact FMV of the stock inherited from Joe) while the kids walked off with the business. A fantastic tax result.
Here’s some more good stuff about succession planning. Over the years, we have used the above ruling dozens of times with real-life clients and have nicknamed the strategy “The little guy redemption technique.” Here’s why. We use it when the seller is (1) in a very low or zero income tax bracket; (2) the stock price is (by a sort of rule-of-thumb) $600,000 or lower and (3) the seller is not worth enough to have a potential estate tax problem.
For example, the last one we did was for $380,000 for Dad No. 1, who owned 5 percent of the stock. The corporation redeemed all the stock paying the full $380,000 with a note payable over 10 years with interest at 6 percent on the unpaid balance.
Simple! Effective. Really a nice little flow of spendable cash for Dad No. 1, whose total net worth was only $800,000.
Let’s change the facts, just a bit.
Dad No. 2 (a real client from New York) is in the highest income tax bracket and estate tax bracket. Tax heaven would be to transfer his interest in the corporation (valued at $3 million) tax-free to his kids.
Dad No. 2’s succession plan must be centered around a strategy called an intentionally defective trust (IDT). An IDT is a tax-saving machine. It’s tax-free to Dad No. 2. Best of all the “buyer” of the stock (Dad’s kids) do not pay a single penny for the stock. Instead, the kids get the stock tax-free as a beneficiary of the IDT.
The lesson to be learned. Never, but never sell your stock to your kids, unless you are a little guy (as spelled out above). If transferring the stock of your family business to one or more of your children will be a tax burden to (a) you or (b) the children or (c) (in most cases) both, it is a must to find out just how much the family will save in taxes using an IDT. The rule of thumb: The savings are over $600,000 for every $1 million of the stock’s price. In real life, Dad No. 2 and his kids saved $1,920,000 in taxes (on a stock price of $3 million).
Monday, August 3, 2009
Business Secession Planning Primer
We work with many clients who start to think about business secession planning. with both experienced estate planning and business attorneys here at the firm, we are able to assist clients in managing this process. This is a good article for things to begin to think about when you want to start to create a succession plan. This article is about a presentation to contractors, but it can apply to almost any business.
In Need of a Succession Plan? Here Are the Basics
American Chronicle
Have you been at the helm of your company for longer than you can remember? Do you know who will succeed you and how? Well, the experts say these are some indicators that you need to start thinking about succession planning.
While the prospect of the loss of control probably produces anxiety for you, you undoubtedly recognize the need for planning not just for your own future, but also for your employees' future as well. Shannon Affholter, a senior managerof the construction and real estate group of the accounting firm Moss Adams (Shannon.offholter@mossadams .com) and his colleague, Glenn Wattum, CPA (also of Moss Adams) presented a session at the Construction Financial Management Association's 2009 Annual Conference on succession planning for contractors.
CBMR spoke with Affholter to focus on how to get started and what is involved in the planning process. Affholter says that succession planning is an important business issue because approximately 60 percent of family-owned businesses will be changing hands in the next 10 years.
Thoughts of succession planning in the context of a family business conjure up images in my mind of the fights between J.R. and Bobby Ewing on the television series Dallas for control of the family oil business and actual "discussions" I have had with my brother and my dad (our company's president) in our company's conference room. Although we all get along well and are fairly unlike the Ewing family, power issues frequently bubble up especially when we discuss our company's long-term plans. The issues presented by a change in the business leader in a family business are often sensitive. What should happen if the company president becomes incapacitated? Which child (or should any of them) be in charge? Should the children be treated equally? Will the employees stay on with someone else as leader?
Before heading to your lawyer or accountant for planning services, it is a good idea to get a handle on the components of the process and to start thinking of the answers to some of the tough questions you'll be confronting along the way.
Affholter points out that succession planning involves more than who is next in line to take over. It has five components that need to be integrated and are interdependent. The components are business planning, ownership transition planning, succession planning, estate and tax planning, and personal wealth planning.
Business planning. This is the strategic plan that identifies where you want your business to be. It is the time to identify your long-term goals for your business. Do you want to perpetuate your business, cash out for the best possible value, or a . combo? While these are not the only options available, you need to establish what your goal is.
Ownership transition planning. If you are considering perpetuating your business, identifying viable candidates to succeed you is elemental. You will need to establish in your own mind what skills the successor needs and what level of competency is required in each. The skills you are likely evaluating are overall business competency, commitment, personal character, and leadership ability.
Frequently, the owners of family businesses begin looking at their children or other family members as their first choice for their successor. Affholter cautions that you should objectively look at the family member's skills to see whether he or she will be able to fill the role of leader. It may be difficult for you to accurately assess the person's real strengths, weaknesses, and potential. It may be helpful to have an outsider evaluate them. Affholter suggests seeing whether additional training or outside experience will get the family member to the level needed to fulfill the company's needs. It is really going to be a hard sell to your current employees to get them to respect and follow a family member who has little experience and placed at a high level in your company.
In my company, the rule of thumb seems to be that the family employee needs to work twice as hard as nonfamily employees to garner the respect of long-term employees. Your employees are looking for the same traits and confidence in your family member as they see in you. If his or her ability is not close to yours or his or her leadership skill is not readily apparent to your employees, your employees will be hard to motivate.
If you don't think you have good candidates from within your company or your family, consider a strategic hire. At this point, a tremendous amount of high-quality talent is available for hire in the industry.
If your timeline is long enough, you might consider having an in- house development program that rotates potential leadership candidates through various departments in the company, Affholter suggests.
Ownership transition planning also includes looking at how your economic interest in the business will be handled. You will need to consult your tax counsel on the most advantageous way to address this. There are quite a few options for intrafamily business transfers Affholtersuggests investigating. Some of the options include creating a limited liability company where you can establish membership interests and transfer business assets now rather than later and having a buy-sell agreement that pre-establishes purchase price and sale terms for a transfer in the future. I have also seen other owners who decided they did not want to sell their company to a third party and had no family members who could be appropriate leaders use an employee stock ownership program (ESOP) to cash out equity in their business and transfer ownership to their employees.
Management succession planning. This is the road map for read/ ing your business for your departure or readying your successorfor his or her new leadership role. If you are going to sell your business, then the plan needs to include steps and a process for making your business an attractive purchase.
If you have a successor in mind that needs additional experience or knowledge, the plan will set out the method for supplying the experience.
Personal wealth planning. In many cases, the answer to the question "What will be your monetary needs in retirement?" will determine significant elements of your business and ownership transition plan. So be prepared with at least a general answer to the question before approaching your counsel or advisor to do your succession plan.
Estate planning. The estate planning component involves developing a strategy that minimizes your estate tax burden. The strategy will have to dovetail your business plan with your other assets and your goals for the distribution of your assets upon your death. Before pursuing an integrated strategy, you might consider consulting with a tax attorney to see what options and choices you should be exploring in fashioning your overall plan. Expect that the estate planning component will involve at least your accountant and a tax attorney.
Affholter suggests that accomplishing a comprehensive succession strategy either with one professional or multiple professionals generally takes a few years. The final succession plan, Affholter cautions, often has to be fine-tuned, or modified as circumstances change.
Copyright Institute of Management & Administration Aug 2009
In Need of a Succession Plan? Here Are the Basics
American Chronicle
Have you been at the helm of your company for longer than you can remember? Do you know who will succeed you and how? Well, the experts say these are some indicators that you need to start thinking about succession planning.
While the prospect of the loss of control probably produces anxiety for you, you undoubtedly recognize the need for planning not just for your own future, but also for your employees' future as well. Shannon Affholter, a senior managerof the construction and real estate group of the accounting firm Moss Adams (Shannon.offholter@mossadams .com) and his colleague, Glenn Wattum, CPA (also of Moss Adams) presented a session at the Construction Financial Management Association's 2009 Annual Conference on succession planning for contractors.
CBMR spoke with Affholter to focus on how to get started and what is involved in the planning process. Affholter says that succession planning is an important business issue because approximately 60 percent of family-owned businesses will be changing hands in the next 10 years.
Thoughts of succession planning in the context of a family business conjure up images in my mind of the fights between J.R. and Bobby Ewing on the television series Dallas for control of the family oil business and actual "discussions" I have had with my brother and my dad (our company's president) in our company's conference room. Although we all get along well and are fairly unlike the Ewing family, power issues frequently bubble up especially when we discuss our company's long-term plans. The issues presented by a change in the business leader in a family business are often sensitive. What should happen if the company president becomes incapacitated? Which child (or should any of them) be in charge? Should the children be treated equally? Will the employees stay on with someone else as leader?
Before heading to your lawyer or accountant for planning services, it is a good idea to get a handle on the components of the process and to start thinking of the answers to some of the tough questions you'll be confronting along the way.
Affholter points out that succession planning involves more than who is next in line to take over. It has five components that need to be integrated and are interdependent. The components are business planning, ownership transition planning, succession planning, estate and tax planning, and personal wealth planning.
Business planning. This is the strategic plan that identifies where you want your business to be. It is the time to identify your long-term goals for your business. Do you want to perpetuate your business, cash out for the best possible value, or a . combo? While these are not the only options available, you need to establish what your goal is.
Ownership transition planning. If you are considering perpetuating your business, identifying viable candidates to succeed you is elemental. You will need to establish in your own mind what skills the successor needs and what level of competency is required in each. The skills you are likely evaluating are overall business competency, commitment, personal character, and leadership ability.
Frequently, the owners of family businesses begin looking at their children or other family members as their first choice for their successor. Affholter cautions that you should objectively look at the family member's skills to see whether he or she will be able to fill the role of leader. It may be difficult for you to accurately assess the person's real strengths, weaknesses, and potential. It may be helpful to have an outsider evaluate them. Affholter suggests seeing whether additional training or outside experience will get the family member to the level needed to fulfill the company's needs. It is really going to be a hard sell to your current employees to get them to respect and follow a family member who has little experience and placed at a high level in your company.
In my company, the rule of thumb seems to be that the family employee needs to work twice as hard as nonfamily employees to garner the respect of long-term employees. Your employees are looking for the same traits and confidence in your family member as they see in you. If his or her ability is not close to yours or his or her leadership skill is not readily apparent to your employees, your employees will be hard to motivate.
If you don't think you have good candidates from within your company or your family, consider a strategic hire. At this point, a tremendous amount of high-quality talent is available for hire in the industry.
If your timeline is long enough, you might consider having an in- house development program that rotates potential leadership candidates through various departments in the company, Affholter suggests.
Ownership transition planning also includes looking at how your economic interest in the business will be handled. You will need to consult your tax counsel on the most advantageous way to address this. There are quite a few options for intrafamily business transfers Affholtersuggests investigating. Some of the options include creating a limited liability company where you can establish membership interests and transfer business assets now rather than later and having a buy-sell agreement that pre-establishes purchase price and sale terms for a transfer in the future. I have also seen other owners who decided they did not want to sell their company to a third party and had no family members who could be appropriate leaders use an employee stock ownership program (ESOP) to cash out equity in their business and transfer ownership to their employees.
Management succession planning. This is the road map for read/ ing your business for your departure or readying your successorfor his or her new leadership role. If you are going to sell your business, then the plan needs to include steps and a process for making your business an attractive purchase.
If you have a successor in mind that needs additional experience or knowledge, the plan will set out the method for supplying the experience.
Personal wealth planning. In many cases, the answer to the question "What will be your monetary needs in retirement?" will determine significant elements of your business and ownership transition plan. So be prepared with at least a general answer to the question before approaching your counsel or advisor to do your succession plan.
Estate planning. The estate planning component involves developing a strategy that minimizes your estate tax burden. The strategy will have to dovetail your business plan with your other assets and your goals for the distribution of your assets upon your death. Before pursuing an integrated strategy, you might consider consulting with a tax attorney to see what options and choices you should be exploring in fashioning your overall plan. Expect that the estate planning component will involve at least your accountant and a tax attorney.
Affholter suggests that accomplishing a comprehensive succession strategy either with one professional or multiple professionals generally takes a few years. The final succession plan, Affholter cautions, often has to be fine-tuned, or modified as circumstances change.
Copyright Institute of Management & Administration Aug 2009
Wednesday, July 22, 2009
They’re finally off to college, but we are still their parents
What a great accomplishment. After 18 wonderful (and quick years) your child is now off to start this amazing new chapter in their life. They couldn’t wait to get settled in their new digs. Perhaps off to explore a new city. And, at a school you both really like, perhaps for different reasons.
In fact, your college age child is also of legal age – although it’s hard to imagine them making all the adult decisions they will need to make without you. And, as such, your ‘parental rights’ in a legal sense, are effectively terminated. Well, they still need you to help with the finances and you have a good relationship – so –nothing to worry about – right ?
Wrong. Being legally independent gives your child a host of new rights and terminates ones you used to have. One important example of this is in the area of making medical decisions. Everyone knows that it makes sense to appoint a Health Care Agent when they do their Will. Most people prepare these documents later in life (usually after the children are born). But, what if something happened to your college age child (now legally an adult) and someone needed to make medical decisions ? Is it clear that you will be the one ? Without a properly drafted and signed Health Care Agent appointment, the answer is no.
But, what if something even worse were to happen. We all hope that another VMI incident never occurs. But, if it were to, chaos ensues. People rushing to an emergency room to find out the condition of loved ones. Surely the hospital personnel would speak to you and help you understand the condition of your loved one ? Not so. Federal law (HIPAA) has now tightened up medical providers’ ability to disclose confidential information about a patient without their prior consent. The fix is easy: A HIPAA Release. This pre-authorizes medical providers to speak with the named individuals about a patient’s condition. Also a form typically done later in life when one does one’s estate plan documents.
Why wait ? Why not begin to teach your children about keeping their affairs in order early by suggesting that they consider (as a legal adult) already appointing a health care agent to act on their behalf if they ever were to have a catastrophic accident and couldn’t speak for themselves ? And, while they’re at it – do a HIPAA Release so that not only Mom & Dad can get through easily to the nurses station to see how they’re doing – but – so too could grandparents or siblings.
These documents are easy to prepare and simple to make available in a time of need. Consider a trip to the family lawyer’s office when they’re home for holiday break and give them a gift of guidance around very important issues. And, for the college student reading this article – think about taking initiative yourself and contacting a lawyer to draw up these simple papers for you.
For more information, or to schedule an appointment for your college age child, contact info@squillace-law.com
In fact, your college age child is also of legal age – although it’s hard to imagine them making all the adult decisions they will need to make without you. And, as such, your ‘parental rights’ in a legal sense, are effectively terminated. Well, they still need you to help with the finances and you have a good relationship – so –nothing to worry about – right ?
Wrong. Being legally independent gives your child a host of new rights and terminates ones you used to have. One important example of this is in the area of making medical decisions. Everyone knows that it makes sense to appoint a Health Care Agent when they do their Will. Most people prepare these documents later in life (usually after the children are born). But, what if something happened to your college age child (now legally an adult) and someone needed to make medical decisions ? Is it clear that you will be the one ? Without a properly drafted and signed Health Care Agent appointment, the answer is no.
But, what if something even worse were to happen. We all hope that another VMI incident never occurs. But, if it were to, chaos ensues. People rushing to an emergency room to find out the condition of loved ones. Surely the hospital personnel would speak to you and help you understand the condition of your loved one ? Not so. Federal law (HIPAA) has now tightened up medical providers’ ability to disclose confidential information about a patient without their prior consent. The fix is easy: A HIPAA Release. This pre-authorizes medical providers to speak with the named individuals about a patient’s condition. Also a form typically done later in life when one does one’s estate plan documents.
Why wait ? Why not begin to teach your children about keeping their affairs in order early by suggesting that they consider (as a legal adult) already appointing a health care agent to act on their behalf if they ever were to have a catastrophic accident and couldn’t speak for themselves ? And, while they’re at it – do a HIPAA Release so that not only Mom & Dad can get through easily to the nurses station to see how they’re doing – but – so too could grandparents or siblings.
These documents are easy to prepare and simple to make available in a time of need. Consider a trip to the family lawyer’s office when they’re home for holiday break and give them a gift of guidance around very important issues. And, for the college student reading this article – think about taking initiative yourself and contacting a lawyer to draw up these simple papers for you.
For more information, or to schedule an appointment for your college age child, contact info@squillace-law.com
Monday, July 20, 2009
Charitable Remainder Trusts May Provide Benefits
We’ve attached a worthy article about Charitable Remainder Trusts “CRT”). These are important vehicles that can help client’s accomplish life planning goals (like reduced taxes and enhanced retirement income planning) while at the same time benefiting their favorite charity or group of charities. It is one piece of a bigger puzzle that could fit into your own estate plan – depending on your overall goals and objectives.
Many people don’t understand CRT’s. Hopefully, this will help bridge that gap.
CRTs may provide benefits
Times Herald Record
by Laura Medigovich
Charitable remainder trusts are gifting vehicles that provide for two sets of beneficiaries, a current income beneficiary and a remainder beneficiary.
CRTs can also provide the donor with substantial income tax savings and estate tax savings as well. In a nutshell, the donor donates an asset to a charity through a trust. The charity sells the assets and invests the proceeds. The income beneficiary receives an income stream for a term, not to exceed 20 years. At the end of the term, the remaining proceeds belong to the charity.
For illustration purposes, let's assume you are 50 years old, and you have $1 million worth of ABC stock. You purchased the stock 30 years ago for $200,000. So you have a low cost basis (the amount you paid for the stock) of $200,000. If you sold ABC stock for $1 million you would have to pay capital gains tax on $800,000 ($1 million minus $200,000 minus your cost basis equals $800,000). The federal tax bite alone would be $120,000 ($800,000 x 15 percent = $120,000).
Provides income stream
Instead, you can create an irrevocable charitable remainder trust and donate the ABC stock to "favorite" charity through the trust. The trust sells ABC stock on behalf of "favorite" charity and invests the $1 million of proceeds at a 6 percent rate of return. For the next 10 years, you receive an income stream of $50,000 a year as the income beneficiary. At the end of 10 years, "favorite" charity receives the remaining principal assets from the trust, approximately $582,065.
The above example illustrates the many benefits the donor and charity receive through a charitable remainder trust. First, our donor would receive a federal income tax deduction based on the $582,065 (the remainder amount) the charity would receive at the end of the 10-year term. Second, by gifting $1 million worth of assets, the donor has reduced his or her taxable estate, therefore creating estate tax savings. Third, the donor has also created a stream of income for himself or herself. Of course the donor has also provided the charity with a sizable donation, which is good for everyone involved.
One of the major disadvantages with a CRT is that it is irrevocable. Which means once you have donated the asset, you have lost all claims to it. So you should be confident that you have enough other assets to live comfortably, before you make the donation.
This has been a simplified discussion regarding charitable remainder trusts. When it comes to CRTs, there are several variations on the theme, such as CRATs, CRUTs and NIM-CRUTs. Each has its own nuances. As with any estate planning strategy, it is important to consult with your attorney and tax adviser to determine which is best for you and your family.
Laura Medigovich is a financial planner and assistant vice president for M&T Bank's Hudson Valley region.
Many people don’t understand CRT’s. Hopefully, this will help bridge that gap.
CRTs may provide benefits
Times Herald Record
by Laura Medigovich
Charitable remainder trusts are gifting vehicles that provide for two sets of beneficiaries, a current income beneficiary and a remainder beneficiary.
CRTs can also provide the donor with substantial income tax savings and estate tax savings as well. In a nutshell, the donor donates an asset to a charity through a trust. The charity sells the assets and invests the proceeds. The income beneficiary receives an income stream for a term, not to exceed 20 years. At the end of the term, the remaining proceeds belong to the charity.
For illustration purposes, let's assume you are 50 years old, and you have $1 million worth of ABC stock. You purchased the stock 30 years ago for $200,000. So you have a low cost basis (the amount you paid for the stock) of $200,000. If you sold ABC stock for $1 million you would have to pay capital gains tax on $800,000 ($1 million minus $200,000 minus your cost basis equals $800,000). The federal tax bite alone would be $120,000 ($800,000 x 15 percent = $120,000).
Provides income stream
Instead, you can create an irrevocable charitable remainder trust and donate the ABC stock to "favorite" charity through the trust. The trust sells ABC stock on behalf of "favorite" charity and invests the $1 million of proceeds at a 6 percent rate of return. For the next 10 years, you receive an income stream of $50,000 a year as the income beneficiary. At the end of 10 years, "favorite" charity receives the remaining principal assets from the trust, approximately $582,065.
The above example illustrates the many benefits the donor and charity receive through a charitable remainder trust. First, our donor would receive a federal income tax deduction based on the $582,065 (the remainder amount) the charity would receive at the end of the 10-year term. Second, by gifting $1 million worth of assets, the donor has reduced his or her taxable estate, therefore creating estate tax savings. Third, the donor has also created a stream of income for himself or herself. Of course the donor has also provided the charity with a sizable donation, which is good for everyone involved.
One of the major disadvantages with a CRT is that it is irrevocable. Which means once you have donated the asset, you have lost all claims to it. So you should be confident that you have enough other assets to live comfortably, before you make the donation.
This has been a simplified discussion regarding charitable remainder trusts. When it comes to CRTs, there are several variations on the theme, such as CRATs, CRUTs and NIM-CRUTs. Each has its own nuances. As with any estate planning strategy, it is important to consult with your attorney and tax adviser to determine which is best for you and your family.
Laura Medigovich is a financial planner and assistant vice president for M&T Bank's Hudson Valley region.
Wednesday, July 8, 2009
Women, Wisdom, & Wealth: Being prepared means peace of mind
Here is a great little article from a paper down in Florida that stresses the importance of proper estate planning. I really like when she comments: “Over a decade ago as new residents of Southwest Florida, we educated ourselves on proper hurricane preparedness procedures. We took the necessary actions and implemented a plan. We share the details with family members and revisit our plan each year; just in case. The peace of mind of being prepared is priceless. In the event of an emergency the last thing we need is to be searching and scrambling for important documents or contact information. Instead we’re available to help our friends and neighbors.”
By DARCIE GUERIN
Macro Eagle
Tuesday, July 7, 2009
Last week you were introduced to my friend Grace who was recently widowed. She and her husband had the difficult conversations while he was alive and discussed what the future may hold if one of them were to pass. In doing this while he was alive, she was much better prepared to handle the financial responsibilities of widowhood. The rewards were most worthwhile and helped make a very difficult time a little bit easier for her to deal with. Below are a few practical financial matters to be dealt with by widows and widowers.
PROPERTY
How are your assets owned? Is everything titled as joint tenants with rights of survivorship (JTWROS)? If the answer is yes, transfers occur immediately, but this isn’t always the best choice. If property was owned as tenants in common it will go through probate. If property was owned by a trust, the terms of that trust will determine how the property will be distributed. If there is no will, you’ll need to go through probate. You’ll also need to identify ownership of and transfer titles of bank accounts, real estate, stocks, bonds, mutual funds and retirement plans. Call your lawyer and financial advisor for assistance.
LIFE INSURANCE
Be sure to contact the Social Security Administration, current and past employers and any life insurance companies to determine and obtain all benefits you may be entitled to. Don’t forget to check on military benefits if your spouse was in the service. This may be an overwhelming task so start with just one phone call at a time.
RETIREMENT
If you’re the beneficiary of your spouse’s plans you have several options and choices to make on how to receive the benefits. Start by contacting the custodian or trustee of the plan. The selections you make on how to receive these funds are critical to your future financial well-being, so be sure to consult a trusted financial professional for guidance. And don’t forget to update your beneficiaries on retirement plans and life insurance policies.
HEALTH INSURANCE
Coverage will depend on your age and your spouse’s employment status. If covered by an employee group plan you’re probably eligible for continued coverage at a cost through COBRA or you may qualify for Medicare.
TAXES
Seek professional tax advice and request IRS Publication 559 for survivors. You may file a joint tax return and claim an exemption for your spouse in the year he or she dies. If there was a life insurance policy owned by your spouse or if proceeds of a policy were payable to the estate, the death benefit may be included in the estate for estate tax purposes.
INVESTMENTS
Grace’s husband was a savvy investor. He enjoyed keeping up with the markets and monitoring their investments each day. Grace’s primary concern was to identify income sources and evaluate her expenses. Then she determined if the investments were suitable for her needs and risk tolerance. This allowed her to ensure that her immediate and longterm financial needs would be met. Again, it’s helpful to seek professional advice as you work through these choices.
As you can see, there are many important financial matters to consider. You’ll want to coordinate efforts among the team of professionals you already have in place. It’s much easier to develop these relationships over time rather starting from scratch during a crisis.
KEY PLAYERS
Here are a few of the key players in your important decision making: Financial advisor, accountant, attorney, employer’s benefit department and insurance agents.
Over a decade ago as new residents of Southwest Florida, we educated ourselves on proper hurricane preparedness procedures. We took the necessary actions and implemented a plan. We share the details with family members and revisit our plan each year; just in case. The peace of mind of being prepared is priceless. In the event of an emergency the last thing we need is to be searching and scrambling for important documents or contact information. Instead we’re available to help our friends and neighbors.
Lack of preparation is one reason many widows and widowers face financial hardship. It doesn’t have to happen to you. Give yourself the gift of organizing and arranging ahead of time. If you do experience the unfortunate loss of a spouse, at least you’ll be as ready as you can be. There’s no better time than now to take control of the things you can. And in the meantime, after you’ve done your homework, enjoy each other’s company.
Darcie Guerin, Financial Advisor & Branch Manager, Raymond James & Associates, Inc. located at 606 Bald Eagle Drive, Suite 401, Marco Island, and FL 34145 provides this article. If you have questions please contact Darcie Guerin via e-mail at Darcie.Guerin@RaymondJames.com. Phone (239) 389-1041, toll free (866)-343-0882 or at RaymondJames.com/Darcie. Past performance may not be indicative of future results.
Information contained in these postings is for educational purposes only. No warranty, expressed or implied, is made as to their use. No one should consider this legal advice. If you have a question about your own affairs, you should seek the advice of a licensed attorney.
By DARCIE GUERIN
Macro Eagle
Tuesday, July 7, 2009
Last week you were introduced to my friend Grace who was recently widowed. She and her husband had the difficult conversations while he was alive and discussed what the future may hold if one of them were to pass. In doing this while he was alive, she was much better prepared to handle the financial responsibilities of widowhood. The rewards were most worthwhile and helped make a very difficult time a little bit easier for her to deal with. Below are a few practical financial matters to be dealt with by widows and widowers.
PROPERTY
How are your assets owned? Is everything titled as joint tenants with rights of survivorship (JTWROS)? If the answer is yes, transfers occur immediately, but this isn’t always the best choice. If property was owned as tenants in common it will go through probate. If property was owned by a trust, the terms of that trust will determine how the property will be distributed. If there is no will, you’ll need to go through probate. You’ll also need to identify ownership of and transfer titles of bank accounts, real estate, stocks, bonds, mutual funds and retirement plans. Call your lawyer and financial advisor for assistance.
LIFE INSURANCE
Be sure to contact the Social Security Administration, current and past employers and any life insurance companies to determine and obtain all benefits you may be entitled to. Don’t forget to check on military benefits if your spouse was in the service. This may be an overwhelming task so start with just one phone call at a time.
RETIREMENT
If you’re the beneficiary of your spouse’s plans you have several options and choices to make on how to receive the benefits. Start by contacting the custodian or trustee of the plan. The selections you make on how to receive these funds are critical to your future financial well-being, so be sure to consult a trusted financial professional for guidance. And don’t forget to update your beneficiaries on retirement plans and life insurance policies.
HEALTH INSURANCE
Coverage will depend on your age and your spouse’s employment status. If covered by an employee group plan you’re probably eligible for continued coverage at a cost through COBRA or you may qualify for Medicare.
TAXES
Seek professional tax advice and request IRS Publication 559 for survivors. You may file a joint tax return and claim an exemption for your spouse in the year he or she dies. If there was a life insurance policy owned by your spouse or if proceeds of a policy were payable to the estate, the death benefit may be included in the estate for estate tax purposes.
INVESTMENTS
Grace’s husband was a savvy investor. He enjoyed keeping up with the markets and monitoring their investments each day. Grace’s primary concern was to identify income sources and evaluate her expenses. Then she determined if the investments were suitable for her needs and risk tolerance. This allowed her to ensure that her immediate and longterm financial needs would be met. Again, it’s helpful to seek professional advice as you work through these choices.
As you can see, there are many important financial matters to consider. You’ll want to coordinate efforts among the team of professionals you already have in place. It’s much easier to develop these relationships over time rather starting from scratch during a crisis.
KEY PLAYERS
Here are a few of the key players in your important decision making: Financial advisor, accountant, attorney, employer’s benefit department and insurance agents.
Over a decade ago as new residents of Southwest Florida, we educated ourselves on proper hurricane preparedness procedures. We took the necessary actions and implemented a plan. We share the details with family members and revisit our plan each year; just in case. The peace of mind of being prepared is priceless. In the event of an emergency the last thing we need is to be searching and scrambling for important documents or contact information. Instead we’re available to help our friends and neighbors.
Lack of preparation is one reason many widows and widowers face financial hardship. It doesn’t have to happen to you. Give yourself the gift of organizing and arranging ahead of time. If you do experience the unfortunate loss of a spouse, at least you’ll be as ready as you can be. There’s no better time than now to take control of the things you can. And in the meantime, after you’ve done your homework, enjoy each other’s company.
Darcie Guerin, Financial Advisor & Branch Manager, Raymond James & Associates, Inc. located at 606 Bald Eagle Drive, Suite 401, Marco Island, and FL 34145 provides this article. If you have questions please contact Darcie Guerin via e-mail at Darcie.Guerin@RaymondJames.com. Phone (239) 389-1041, toll free (866)-343-0882 or at RaymondJames.com/Darcie. Past performance may not be indicative of future results.
Information contained in these postings is for educational purposes only. No warranty, expressed or implied, is made as to their use. No one should consider this legal advice. If you have a question about your own affairs, you should seek the advice of a licensed attorney.
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