Articles

Business owners are often so busy with the day-to-day issues of running and growing their companies that the issue of business succession is often overlooked or left on the "back burner" until it's too late. What would happen to your business if you were to disappear from the scene tomorrow due to disability or death? Would your co-owners, managers, employees, and family members know what to do and would they have the guidelines and tools they would need to keep the business moving forward?

Alex and Brad, both in their mid-forties, had just celebrated the tenth anniversary of Consulting, Inc., their market consulting business. The next morning, before going to work, Brad suffered a heart attack while jogging and died later that day. Alex suddenly lost his long-time business associate. What's more, after the estate was settled, he found himself with a new co-owner -- Brad's wife.

Most all closely held businesses, especially multi-owner corporations and partnerships need to have a buy-sell agreement in place. Individually owned businesses can also profit from the use of a buy-sell agreement. This is essential for smooth transition of ownership upon the occurrence of several events, namely the "Eight D's." We'll discuss each one individually in the corporate context, however, most would also apply to partnerships. In a single-owner business, the buyer could be key employee(s), a competitor, a supplier, or even a customer.

Whatever your motivation for selling your business, you'll only get one chance to maximize the return on your years of hard work. Do it the right way and you could get the price you want and reduce the impact of capital gains and estate taxes. Do it the wrong way and you might end up with a hefty capital gains tax bill and estate planning headaches.

One of the reasons so few family businesses survive into the second generation¹ is because the owners fail to adequately plan for their succession. Many owners simply wait too long to do business succession planning, so the business must be liquidated to pay estate taxes which are generally due nine months after death.

Competition is the backbone of the American economy. But business owners need to consider the consequences of a consultant or key employee opening a rival company - stealing trade secrets, hiring valued staff, and luring away customers. This could pose a serious threat to your business. You wouldn't have merely another competitor, but one with an inside edge - thanks to your proprietary information and diligent efforts.

Many affluent individuals view the family foundation as a means for meeting specific philanthropic goals. For some, it also creates visible evidence of a donor's charitable intent. In addition, a family foundation may serve two unique purposes within the confines of familial walls. A foundation can assist a donor in maintaining the integrity of his or her charitable intent for many years into the future, as well as help to inspire the character, sense of community, and love of knowledge of future generations.

Land "rich" and cash "poor." That describes Jim and Angela in a nutshell. While they actually live quite comfortably on their professional incomes, they are getting closer to retirement age and are looking for ways to supplement the income they expect from their employers' retirement plans.

As higher education costs continue to soar, many parents find themselves faced with a nagging question: "Will I have enough money to pay for my child's college education?" Although most people today are likely to agree that an investment in higher education usually reaps its rewards in higher long-term earnings - and, hopefully, greater job satisfaction - one key concern is how to choose a smart savings alternative. 529 plans are flexible investment options with tax benefits.

Life insurance may be a "diamond in the rough" for your business if its ongoing success depends on one or more key individuals. The death or disability of such a person - for example, an owner or manager who brings in customers - can mean tough times. The realities of business do not include a grace period following a loss: Cash flow must continue, and customers will need reassurance that your goods or services will continue to be available.

From time to time, circumstances may warrant taking money out of your 401(k) account. If you're older than age 59½, become disabled, get divorced (in specific situations), or die, money can be removed from your 401(k) without paying the 10% federal income tax penalty for early withdrawals. (Of course, income taxes will still be due.)

As larger corporations downsize to meet the competitive challenges of the 21st century, many middle managers are taking the opportunity to strike out on their own as consultants. They often seek the independence and satisfaction of working for themselves. Wouldn't everyone?

If you are an inventor, author, artist, or owner of a closely held business, you may have already taken steps to ensure the protection of your intellectual property rights. Business ideas, visual art, published or unpublished literary and musical works, inventions, computer programs, and designs of clothing and architecture can be protected by law through copyrights, patents, and trademarks. These valuable assets also need to be carefully considered when planning your estate, so that they are transferred to your heirs according to your wishes upon your death.

Parents and guardians of children with special medical needs face many challenges. One of the most significant can be how to provide financial support for expensive, on-going medical or custodial care, particularly after the parents' or guardians' deaths.

Life insurance can help provide for your heirs, and it should be considered an important estate planning tool. It can offer protection to loved ones when they need it most and help ensure financial obligations will be fulfilled. One thing that many people do not realize, however, is that life insurance can add a significant amount of wealth to their overall estates, possibly causing assets to surpass the applicable exclusion amount of $2,000,000 (in 2008), the amount that can be sheltered from estate taxes. Fortunately, with proper guidance, it is possible to keep your life insurance policy proceeds out of your estate, as well as provide immediate funding for short-term financial needs.

Increased mobility in today's society has changed the ways in which we live, work, and play. Compared to previous generations, it is now quite common for work and recreation arrangements to cross state lines, resulting in ownership of property and formal social relationships in more than one state. However, the expanded opportunities created by mobility may come at a price: the increased likelihood that several states may be able to tax your estate when you die. If you were to die today, do you know if more than one state would try to levy death taxes on your estate?

You have undoubtedly heard that it's important to have a will in order to control the disposition of your property after your death.

The possibility of sustaining a long-term disability from an accident or illness is something most of us would rather not contemplate. However, there is a way to protect you and your family should you lose your ability to earn income.

According to the U.S. Department of Health and Human Services, approximately 9 million Americans over the age of 65 will have used long-term care services in 2008 and this number is likely to increase to 12 million by 2020. This means that at least 70 percent of people over the age of 65 will need long-term care services at some point in their lives and greater than 2 in 5 (40%) will need nursing home care for some length of time. The average length of long-term care for a person over the age of 65 is three years.1 Such stays can be very expensive and quickly deplete your family's financial resources.

Many individuals generally view bonds as a conservative investment that provides steady income and a higher degree of protection of principal. With the oversize gains in the stock market over the past two decades, it is understandable how bonds can easily be overlooked as market euphoria sweeps up individuals.

Mortgage-backed securities have made it possible to link Wall Street together with "the person on the street." By making capital available to the mortgage market, homeownership is easier and mortgage rates are more uniform across the country

With the average American's life expectancy on the increase, people who spend more years in retirement need a longer income stream to support themselves during those extra years.

As you near your 62nd birthday, the dream of early retirement may draw ever closer to reality. From that day on - assuming you have paid into the Social Security system for a minimum number of years and were born before 1942 - you may have the right to draw Social Security retirement benefits.

Although your retirement date may still be many years off, it is never too early to start your preparation. Yet, many people spend more time planning their annual vacations than they do planning for their retirement future.

Until recently, the primary decision for retiring workers regarding their company pension plans centered on which form of payout option best suited their needs.

Simply stated, a rollover means "rolling over" your assets/funds from one qualified retirement plan directly into another. This transaction must be accomplished within 60 days of your receiving the funds from the original plan or you will face a penalty. The transfer is done tax free.

When the subject of taxation comes up in conversation, many Americans may find it challenging to say something positive. However, some long-awaited tax law changes may help those conversations take a more positive turn.

Year-end tax planning can provide important tax-saving opportunities. Now is the time to consider how you should handle income and expenses for the rest of 2002 and during 2003.

In recent years, revocable living trusts have been touted as a simple, cheap supplement to wills. But are they? It's called a living trust because you set it up and put some or all of your assets into it during your lifetime. Typically, you serve as trustee which gives you control of the assets until death. After your death, they are distributed according to the terms of the trust document and don't go through probate, which can be costly and time-consuming.

Trusts can be used to accomplish any number of estate planning goals. But the success of a trust strategy often depends on how well the trust is managed - and that depends on the abilities of the person (or institution) named as trustee.

Today, life in America commonly finds families scattered across the country. With family members often separated by hundreds or thousands of miles, it may be extremely difficult to manage the care of an older parent or relative living far away. To help facilitate the best care possible for your loved one, and to help alleviate the stress long-distance caretaking could cause, you may want to take steps now to be prepared, should the need arise.

One of the most important estate tax planning tools available to married couples is the unlimited marital deduction. The deduction allows one spouse to pass an unlimited amount of property to the other spouse without incurring any federal estate or gift taxes.

Most everyone has, at some point in their lives, accumulated personal debt - some more than others. Whether debt is a cause for concern depends upon a number of factors, including how the economy is faring, your particular earning and economic prospects for the near and long term, and the type of debt you incur. By being conscious of your spending habits, including credit card use and large purchase habits, you can better understand ways to control debt - before it starts to control you.

Who should benefit from your retirement assets - you and your family or the federal tax coffers? The answer is easy: you and your family, of course. Achieving that goal is more difficult. These days, very few people stay at one job for their entire careers. So, by retirement, you and your spouse may have assets in four or five - or even more - employer-sponsored retirement plans and individual retirement accounts (IRAs). How you utilize those accounts at retirement can make a big difference in the amount of assets available to pass on to children or other heirs.

Planning and saving for retirement, like cleaning out the attic, may be something you figure you'll get to later. But when "later" arrives at retirement age, you may not have the financial resources to enjoy your golden years.