tmadmin

“We make a living in life by what we get; we make a life by what we give.” – Winston Churchill

Whether a family has large wealth or has to watch each dollar they make, the education of children about money is an opportunity to teach them about values, principles, and giving back to others, whether through money, time, or both. As parents discuss money with their children-whether it is deciding to give a child an allowance, buy a new car, save for college, or donate to a local charity-it is the perfect time to begin a conversation about earning. spending, saving. and giving. Once engaged in this dialog. a family can determine their core values and principles around money and use them to create a family mission statement, or vision for the future. Crafting a vision and then a specific plan for charitable giving can ensure that every member of the family-no matter what age-is involved in the entire decision-making process.

To begin designing your family’s plan for philanthropy. work with your children to construct your family’s idea for charitable intent based upon each person’s interests, skills, and desires. You can create your family’s vision for giving by asking yourselves any (or all) of the following questions about your available resources:

1. Financial Resources

   What is your family budget? How much money from the budget is available to donate to charity? What is your family estate plan? Will there be more funds to give away when the estate plan is realized in the future?

2. Intellectual Resources

   What particular education, knowledge, or skills do your family members have? How can those traits lead to meaningful giving?

3. Human Resources

   What are your family’s values and beliefs? What particular causes are near and dear to your family? Are there traditions that you want to continue to honor as your family makes charitable gifts? What future legacies does your family want to leave?

4. Social Resources

   What interactions does your family already have in the community? On what community boards or committees are your family members serving? Are there any new relationships your family wants to establish within the community?

Having a conversation around these questions is a good way to begin honing your family’s ideals for philanthropic giving. Your family talks may reveal children’s beliefs that differ from the parents’. By working together, your family will be able to choose broad enough values and beliefs that will intertwine. These shared principles will serve as your framework for charitable giving.

After you have determined your family’s vision for charitable giving. it is time for you as parents to explore with your children the actual methods of giving you intend to pursue. Ways to give back can take many forms including social responsibility, personal fulfillment, and/or community responsibility. For example:

1. Social Responsibility

   As a family, you may feel that you have more income and savings than you need to live; therefore, you feel that it is your duty to share your wealth with others. You may be compelled to make charitable contributions to help those who are struggling or who have fewer resources than you do

2. Personal Fulfillment

   Your family may feel happy when giving. You may choose to donate to charities that are close to the family’s heart, which, in turn, brings great joy and satisfaction in knowing that a particular need is being filled.

3. Strengthening the Community

   Your family may choose to make donations to assist those in need to help strengthen their community and make it a better and safer place to life.

Laird W. Green

As you are entering your 6os, expect a volume of mail about your upcoming Medicare coverage. If you’re a business owner, taking a few thoughtful steps in your early 6os can make the transition to Medicare and required retirement distributions more tax advantageous for you. Make this transition easier by knowing when to change health insurance and how to avoid paying unnecessary income taxes by delaying required distributions.

The transition from your current insurance to Medicare

Should you consider delaying Medicare benefits? Medicare allows you to delay enrollment ii you have insurance that is eligible to be your primary coverage through your business. If you have a high deductible plan and contribute to a health savings account (HSA), you may want to continue the triple tax benefit of the HSA. If you have a higher income, you may want to delay paying the income-based Medicare Part B premiums until your income decreases.

The following four rules can help:

• RULE 1 If you have 20 or fewer employees, your primary insurance must be Medicare Part A and B, with your business insurance plan serving as secondary insurance.
• RULE 2 If you have more than 20 employees and will claim Social Security after age 65, you may find a health insurance provider that will allow you to delay Medicare coverage and to continue contributing to a health savings account.
• RULE 3 If you are on Medicare, you may not contribute to a health savings account.
• RULE 4 When you begin Social Security benefits, you are required to enroll for Medicare Part A. which will disqualify you from a health savings account contribution.

Start shopping for plans when you turn 63 to find an insurance plan that does not require Medicare to be your primary insurance. Due to the regulations around health insurance, consult with a health insurance specialist or your financial advisor.

Avoiding unnecessary income taxes by delaying required distributions

If you own more than 5% of your business in your 60s, you are likely thinking about when and how you plan to step away from the business. If you plan to work past age 70 1/2, you may not need the money from your retirement plan until after your salary ends.
The IRS requires you to take minimum distributions from retirement accounts, such as a 401(k), 403(b), or IRA starting when you are age 70 1/2. While a Roth IRA has no required minimum distributions, a Roth 401(k) or Roth account within your 401(k) does require minimum distributions. The IRS offers an exception to the required distribution rules ii you are still working and you and your family members own 5% or less of the business. By selling the majority of your business interests, you could delay the required distributions from the business’ retirement plan and avoid unwanted taxable income from required distribution.
All business owners know that a sale negotiation may take some time. Consider starting the sale process in your mid to late 6os so the sale is complete by age 69 1/2. Review this article for questions to consider as you determine a possible buyer.
Becoming aware of all financial changes that can occur when you enter your 6os can help you to make wise choices for your retirement security. Consult with a tax or financial advisor, and use the following to checklist to help:

Quick reference checklist:

• When you turn 63, ask your insurance agent to look for insurance coverage that does not require Medicare to be your primary insurance. If you want to continue contributing to an HSA, ask for the new insurance plan to be a qualified high deductible plan. Verily that the new coverage begins before you turn 65.
• You will likely automatically be enrolled in Medicare Part A and receive a Medicare card in the mail. Near your 65th birthday, un-enroll from Medicare Part A ii you want to continue health savings account contributions.
• Within 6 months of retirement, start the process to enroll in Medicare Parts A. B, and D for coverage to begin once you are no longer covered by your business’s insurance plan.
• Stop your HSA contributions when you enroll in Medicare. If you enroll in the middle of the year, verify your HSA contribution amount is the maximum amount prorated for the portion of the year that you were eligible. Example, If you enroll in Medicare with an effective date of June I, then you can make 5/12 of the maximum allowed contribution for that year.
• By your early to mid 60s, start to consider whether you will sell your business. Review this article for questions to consider as you determine a possible buyer.
• By age 68, decide whether you will complete the sale of the majority of your business interests (so you and your family own exactly 5% or less after the sale) to avoid taking required distributions from your business’s retirement plan.
• By age 69 1/2, complete the sale of your business interests if you want to delay 401(k) required distributions.

Corinne S. Hanna

Amy Florian, CEO of Corgenius, teaches service professionals how to support their clients in times of grief, loss, and transition. Amy states that 72% of Financial Advisors report providing their clients with information on aging and cognitive decline. Advisors know firsthand the emotional and financial challenges Alzheimer’s disease and other forms of Dementia can have on a family system. What can we as Advisors do? We can educate ourselves, we can educate our clients, we can observe client behavior, and we can provide resources.

What is Dementia?

With aging comes some “normal forgetfulness”. Dementia is not a normal part of the aging process. Dementia is actually caused by disease. Dementia is a general term for decline in mental ability severe enough to interfere with daily life. The Alzheimer’s Association defines Dementia as “the severe loss of thinking, memory, and reasoning skills such that the person is unable to carry out the normal activities of daily life.” The most common type of Dementia is Alzheimer’s disease; more than half of diagnosed Dementia cases are being classified as Alzheimer’s disease.

What are the symptoms and how is Dementia diagnosed?

Most types of Dementia are slow and progressive. The first signs of dementia can occur 10-12 years before an actual diagnosis. Dementia can be caused by at least 18 different diseases and is more common in women than in men.

The following ten warning signs may signal Alzheimer’s:

• memory loss that disrupts daily life
• challenges in planning and solving problems
• difficulty in completing tasks at home or at work
• confusion with time or place
• trouble understanding visual images
• new problems with words in speaking or writing
• misplacing things and losing the ability to retrace steps
• decreased or poor judgement
• withdrawal from work or social activities
• changes in mood and personality.

When someone is showing some or all of these signs, they should be encouraged to contact their doctor for an evaluation. This evaluation may include a physical exam, testing for cognitive abilities, a brain scan and blood work. The physician will ask for a detailed description of the cognitive changes that the patient and/or a family member has observed. Early diagnosis can provide the maximum benefits from available treatments and clinical trials and have been shown to improve the quality of the patient’s life.

Which documents should be in place?

It is important to have legal documents in place { preferably in advance } of any such diagnosis. Recommended documents include a Standard Will, Living Will, Five Wishes, Durable Power of Attorney, Health Care Power of Attorney and a Diminishing Capacity Letter. The Alzheimer’s Association website offers a Legal and Financial Worksheet guide that can be downloaded.

Where to go for help?

Health care professionals and your local Alzheimer’s Association { www.alz.org} are excellent resources for patients and their family members. The following list of resources may be helpful

• Online bill payment management services: aadmm.com, financialconciergeservices.com, personalbillpayingservices.com
• Local transportation: www.eldercare.gov
• Medical. Geriatric, and Aging Care Specialist: aginglifecare.org
• Services for Meal Delivery: takethemameal.com, mealtrain.com, caringmeals.com
• Local geriatric care managers, elder care attorneys, memory care facilities, respite and adult day care services.
• Alzheimer’s Navigator helps guide individuals facing dementia when planning for the future: alzheimersnavigator.org

Whether you are the patient, a family member, a friend, or a financial advisor, learning about the symptoms of Dementia, having the correct documents in place and knowing where to go for support will better prepare each of us to cope with and care for those who receive a diagnosis of dementia.

Karlyn M. Jones

For many years now, companies have seen the myriad benefits of operating in a “paperless” environment. Households, on the other hand, have been reluctant to realize the benefits of transforming your important personal information from a bulky paper filing system into a streamlined digital masterpiece. This article will give you a plan and the tools to tackle this seemingly daunting task, which, if done correctly, can be an invaluable future resource.

Counter intuitively, the primary advantage for going paperless is easy retrieval and organization of information – not to reduce paper. Other advantages include disaster proofing, reducing clutter, and the ability to access your documents from anywhere and on any device. The following points demonstrate how to create, implement, and maintain a paperless environment.

Start with a plan.

The plan should be simple to learn, easy to implement, and manageable to maintain. Initially, you may be overwhelmed by the task because you had years or decades of accumulated files. To get started, pick a firm date and everything from that point forward goes into your paperless system.

Be flexible with entering documents into the system.

There are numerous types of scanners on the market, but most households will have some sort of multifunction scanner/printer combination. These work perfectly in a paperless system, but don’t limit yourself to one entry method. An under appreciated and very convenient scanner is your smartphone. There are apps that take pictures of documents then convert them to scanned images without loss of quality or speed, and you will never have to go digging around for your receipt when you need to return an item! For large scanning volumes, I recommend a standalone scanner. They offer increased speed with single pass duplexing and larger sheet capacity than most multifunction printers.

Choose where you want your files to live.

I recommend using cloud based storage. There are many companies that, for a reasonable cost, provide online document storage and retrieval from any internet ready device. The most popular providers are Evernote, Dropbox, and Google Drive. If you are concerned about online security, password protect or encrypt your individual files to provide secondary measures in case of a security breach. For those unwilling to store information online, you can use your computer storage. However, external backup is absolutely essential in this case. Hard drives can and will fail, so make sure you are prepared. I cannot stress this enough.

Make sure you can find what you are looking for.

Again, the most important reason to go paperless is to easily find what you need when you need it. At a minimum, use a consistent strategy for naming your files. like to include the date, provider, and brief description of the contents. For example, 2016-11-28 Costco receipt, 2015 1099 Charles Schwab, or 2016-10-15 Labcorp Test Results. Create subject folders or groupings of documents such as Medical, Tax, Home, Auto, etc. Many scanners and programs will have a helpful function called Optical Character Recognition (OCR) that makes every word in the scanned document searchable. Document tags are also useful when searching through your documents.

Use technology to your advantage.

There are tools and services that make going paperless easier. Evernote Premium, for example, has built in OCR capability, tagging, and document/note encryption. Many scanners have the ability to send directly to cloud storage providers, and you can transfer documents from your smartphone or tablet. Another app that I found extremely helpful is called www.Filethis.com. It automatically downloads statements (user provides login information) from various companies with which you have relationships including brokerage statements, electric bills, cable/internet providers, and medical bills.

Keep a physical copy of important documents.

When transitioning to a paperless home, you should scan anything you might need in the future. Importantly, there are a handful of items that you should scan and also keep the physical copy in a safe location. These items include anything with a raised seal such as birth/death certificates, notarized documents (including wills, trusts, and other estate planning documents) and contracts with original signatures.

Commit and shred.

Now that you have the tools you need and a plan to implement, you have to commit to making the transition. It will take time to make it a habit but the extra effort will be worth it. To make the transition easier, I suggest you set up a pair of physical boxes initially. One for document shredding and one for keeping documents that fall into the categories in the previous step. This will help keep the scanned documents separate from those waiting to be scanned, filed, or discarded.

Stephen “Scotty” J. Scott

Whether you are an employee deciding about your annual benefits at election time or an employer deciding which benefits to offer, make your workplace benefits work for you. Your benefits can maximize your savings for retirement and lower your tax bill.  Assuming you already have an emergency fund, consider the following questions to determine in what order to fund your benefit buckets:

Does your retirement plan offer a match?

Your employer may match dollar-for-dollar contributions up to a certain percentage, which means your return on your contribution is immediately 100%.

a) If an employee will only be with the company for a short time (1-2 years), consider whether the matching contributions are subject to vesting. A shorter matching schedule allows even short-term employees to earn the match. With a longer vesting schedule, a short-term employee should consider contributing to an HSA or FSA first. (Skip to the next section.)

b) If you are an employee who will stay with the company long-term (at least 3 years), contribute enough to earn the whole match.  Example: Some companies match 100% on the first 3% of salary and 50% on the next 2% (up to 5%) of salary.  Contribute 5% of your salary to receive the whole match.

c) If you are under 45 or if you already have a sizeable 401(k) or IRA account, consider reading this article to decide whether Roth 401(k) contributions would be better than regular 401(k) contributions to maximize your after-tax savings.

What type of health insurance plan do you have

High deductible (HSA eligible plan):
Funding your HSA is the most tax-advantaged way to save for retirement and medical expenses.  You receive a tax deduction on contributions, the growth of funds in the account is tax-free or tax-deferred, and your withdrawals for qualified medical expenses (current or previous) are tax-free.  See this handout for more information.  Your high-deductible insurance plan may also give you the option to fund a limited purpose Flexible Spending Account for your vision and dental expenses.

Standard deductible plan with Flexible Spending Account option:
If you know that you will have medical expenses in the next year, are you willing to maintain complete records of the receipts for those expenses?  See below for answers:

Yes:
Fund your flexible spending account (FSA).  Remember: FSAs are subject to “use it or lose it” restrictions at the end of each year; any money above $500 remaining in the account at the end of the year is lost.  Estimate your medical expenses (within $500) before funding the FSA.  Also, because of the tax advantage (using pre-tax dollars to pay medical costs), FSAs are highly regulated.  Your FSA provider will require you to submit documentation for expenses, and you must keep that documentation for five years.

No:
Put any savings in your retirement plan.  You are not responsible for record keeping, and you will not run the risk of being audited and charged taxes and a penalty for not having sufficient records.

The following examples of selecting workplace savings buckets may help you make your decisions.

Example 1
James earns $50,000 per year and plans to stay with Gizmo Company for the long-term.  Gizmo Company offers a 3% match, and James is on a high deductible health plan.  James decides he can save 15%, which is $7,500.  He has deferred $4,150 to his 401(k) and $3,350 to his HSA.

Total savings ($9,000):

$4,150 employee contributions to 401(k)

$1,500 employer matching to 401(k) contributions

$3,350 HSA contribution.

Example 2
Lauren also earns $50,000 per year at Gizmo Company, but Lauren just started working at Gizmo and will likely move in a year.  Lauren is also on a high deductible health plan, and she has $4,500 to save through work benefits after funding her emergency fund.  Lauren has deferred $3,350 to her HSA and $1,150 to her 401(k).

Total savings ($4,500 portable, $5,650 with vesting)

$1,150 employee contribution to 401(k)

$1,150 employer matching to 401(k) contributions (subject to vesting)

$3,350 HSA contribution

Example 3
Javid earns $40,000 per year at Widget Company, and he plans to stay with Widget for at least 3 years.  Javid has a standard deductible health plan, and Widget matches contributions up to 5% with the match vesting after 2 years of employment.  Javid wants to save $4,000 through his work benefits, and he estimates that he will have $150 per month of eligible health care expenses.  Javid defers $2,200 to his 401(k) and $1,800 to his FSA.

Total savings ($6,000)

$2,200 employee contributions to 401(k)

$2,000 employer matching to 401(k) contributions

$1,800 flexible spending account contributions

The amount you’re able to save may be large or small, but let your work benefits work for you.  Always seek the advice of a professional financial planner and a CPA when considering the tax ramifications of your savings.

Corinne S. Hanna

Lending money to family and friends is a delicate subject. Given the current economy and tight credit standards, people are turning to friends and family for loans, and investors may be more willing to lend considering low interest earnings on bond investments.

Most people have some experience with lending { or being lent } money. These experiences can range from awful nightmares to wonderful memories. Ask yourself a series of questions, and document these decisions together to help ensure both parties have a pleasant and rewarding experience. Some questions to consider in your decision include whether you can afford to lend the money, how the loan may impact your relationship, why the person needs to borrow from you and not a bank. and the actual purpose of the loan. Before you decide to lend, ask yourself the following:

Do you have money to lend?

The first decision is whether you have the financial capacity to lend money. Can you easily live without the money you are lending for the term of the loan? Make sure you have a solid emergency fund of three to six months of expenses available before considering lending money to others. Consider your current investment portfolio. The loan could replace a portion of your bond portfolio, and provide cash flow to you. Intra-family loans are more attractive for investors considering the current low interest rate environment. The interest income generated from a loan could be more than you would receive on a bond investment of the same amount. Loans are usually less expensive and provide more interest income than bonds, while maintaining an attractive interest rate for borrowers. Talk to both your financial and your tax advisor about the financial implications of lending money.

Will the loan impact your relationship?

The relationship you have with the friend or family member is important. When you lend money, you may have to have tough conversations about payback. If you do not receive loan payments on time, will you feel comfortable asking for the money back, and holding the individual to the terms of the loan you agreed upon? If lending money is going to impact the relationship negatively, then you may want to consider helping the individual in other ways.

Why is the person asking you for a loan?

You are taking a risk of whether or not you will be paid back. Clarify why the borrower cannot obtain financing. Ensure that the person will be in a position to pay you back – if that person has had trouble paying back money to a bank, and you feel paying the money back could be a financial stretch for him or her, then lending may not be the best idea. Asking questions may protect you from the risk of the person’s defaulting on the loan.

What is the purpose of the loan?

For example, if you are loaning money to someone trying to start a business, ask to see a business plan and discuss projected financial statements. You want the business to succeed, and creating a business plan and thinking through the financial implications is important for success. Or, if you are loaning money to help someone purchase a home, make sure that the agreed-upon payments can be made without straining the individual financially.

If you decide you can comfortably live without the money, you want to help the person, and the borrower is in a good position to pay you back, take these few additional steps to have conversations together, agree to the terms, and document the agreement:

Think of yourself as a bank. Create safeguards that the loan and repayment plan will work for both parties. Have tough conversations on the front end and agree to the terms of the loan together. Create a loan agreement to detail the amount of the loan and how much interest will be charged and paid { annually, quarterly, daily }. Include details on how and when the loan will be repaid. Set expectations and steps for how late payments are handled. Include any fees for late payments and how those fees will be calculated and charged. Also, state what happens ii the loan is not repaid. Both parties will need to keep records of payments to avoid any discrepancies and to report any interest income to the Internal Revenue Service on tax returns. There may be additional documentation depending on the type of loan.

Many people consider co-signing a loan as a way to lend money. When you co-sign a loan you take on the obligation to pay that loan ii the borrower defaults. You should be careful when deciding to co-sign a loan because the loan will essentially be signed as if you obtained the loan on your own.

While taking these steps does not guarantee you will have a pleasant lending experience, creating a collaborative agreement and setting expectations together encourages a more favorable outcome. II disagreements do arise, both parties have the loan agreement and records to reference, which is important for maintaining the communication between both parties.

Lending money can be a good experience when you are helping people you care about achieve their goals. You can help someone who may be starting a family with the purchase of their first home, or you might help a friend or family member achieve their dream of starting a business.

J. Abigail Mason

If you have ever read any of the imancial media, you have been exposed to the
alphabet soup of the stock market; P/E, P/B, P/S, EV/EBIT, EV/EBITDA. These
abbreviations probably look familiar; each is known as a valuation multiple. They are
helpful when approximating the value of a stock, industry, or even an entire market.

What do these abbreviations mean?

Each multiple has a numerator that represents some measure of a company’s value.
In the examples above, the numerators “P” and “EV” stand for price and enterprise
value, respectively. All of the above multiples are written out fully at the end of the
article. For brevity, we will focus on the most common one: The P/E, or
Price-to-Eamings, ratio./p>

The P/E ratio tells us how many dollars investors are willing to pay for one dollar of
a company’s earnings over a specified time period. Let’s assume a share of XYZ
Company (XYZ) currently trades at $20 and has earnings per share of $2.
Investors are paying $10 for each dollar of XYZ’s earnings, or they are paying a
multiple of 10 on earnings.

The P/E ratio also varies depending on earnings reports and investors’ opinions.
However, a stock’s price doesn’t actually have to change for its P/E ratio to change. If
XYZ reports an earnings increase from $2 to $4 per share, but the stock price stays
at $20, its new P/E ratio is 5- The stock is now half as expensive in terms of earnings.
If XYZ reports new earnings of $1 per share, and the price stays at $20, its new P/E
ratio is 20. The stock is now twice as expensive based on its earnings.

I understand what multiples are, but how do I apply them?

Multiples are used in relative valuation, which means that multiples are useless
without another value to use for reference. Some common multiples used for
comparisons are market averages, industry averages, and a company’s own historical
average. We can’t make a productive decision knowing just that XYZ has a P/E of 10
because we don’t have another value to compare to 10. If XYZ’s multiple is lower
than the comparison multiple, XYZ is considered relatively undervalued. If XYZ’s
multiple is higher than the comparison multiple, XYZ is considered relatively
overvalued.

If XYZ has a P/E of 10 and the S&P 500 has a P/E of 15, we know that XYZ is
undervalued relative to the S&P 500 based on earnings. Ifwe know that XYZ has a
P/E of IO and the other companies in XYZ’s industry have a P/E of 5, we know that
XYZ is overvalued relative to its industry, according to this metric. If XYZ has a P/E
of IO and the historical P/E for XYZ is IO, we know that XYZ is fairly valued relative
to its own historical value in terms of earnings.

Are there any caveats for using multiples?

Multiples can be misleading on any number of occasions. In one scenario, the
denominator of your multiple could be temporarily over- or understated. For
example, XYZ could be trading at $20 on $2 of earnings, for a P/E of 10. XYZ
announces $4 of earnings, but continues to trade at $20 for a P/E of 5- XYZ appears
undervalued. However, when you look through XYZ’s financial statements, you find
out that for the first time in company history, XYZ sold a plant it uses in production.
The gain on the sale of this plant increased earnings by $2 this period. This
one-time event of the plant sale explains the $2 increase in earnings and the
corresponding decrease in P/E. Thus, XYZ likely isn’t undervalued.

Many industries use the P/E. For some, however, the P/E is not the preferred ratio.
Different accounting treatment for banks makes the P/B ratio the preferred ratio.
When using valuation multiples, be sure you are using the correct multiple for your
industry. Remember, valuation multiples provide an approximation of value, not an
exact value.

William R. Jeter

Most individuals would benefit from a thoughtful estate plan which
includes a power of attorney to manage your financial affairs, a will to
determine who inherits your assets, as well as other documents. Business
owners have unique concerns when crafting an estate plan. Owning a
business, or an interest in a business, adds a layer of complexity and
requires nuanced planning. Seek an attorney and financial advisor who
understands these unique issues to business ownership. Some points to
consider when creating your plan include:

What happens to my business if I am incapacitated?

A power of attorney gives someone the power to manage your assets.
When giving someone power of attorney, find someone you trust to
capably (and honestly) manage your finances. If you own a business, you
also need someone who can manage this asset. Below are some key
questions to ask yourself:

1. Does this person have the experience to run the business?

   If not, does he or she have the capacity to outsource?

2. Does this person know the key people?

   If he does not know the key people in your business, consider
   introducing everyone before you are in trouble to ensure a comfort level.

3. Does this person get along with the other owners and employees?

   A person acting on your behalf will need to be able to work with the
   necessary people as well as protect your interest, which becomes
   especially important when you are in business with your family.

What happens to my business when I die?

Be sure to consider the likely outcome for your business when creating
your estate plan. Your will determines who will receive your business after
your death and also appoints the personal representative who distributes
the assets from your estate according to the terms of the will. If you are a
business owner, your personal representative has three options: (1) wind
down the business, (2) sell the business, or (3) distribute the business so
the business can continue. Consider the following:

1. Does my personal representative have the ability to manage
   the transition ofmybusiness?

   Liquidating or selling businesses is not an easy task. Also, serving as a
   steward of the business before the business is transferred from the
   estate requires skill. Be sure the person you name as personal
   representative can manage this process.

2. Consider your existing business documents.

   These agreements may affect the ultimate disposition of your business.
   You may already have a buy-sell agreement or an operating agreement
   in place. If not, you may also want to have these documents drafted as
   part of your estate planning process.

3. Who should inherit the business?

   If only one person will inherit the business, is that a fair outcome? If you
   are concerned the outcome will not be fair, you may be able to leave
   other assets to other individuals in order to provide fairness. Also, many
   family businesses have multiple owners who are not employees. If you
   choose to have non-employee owners, your family will need to have a
   plan in order to balance the interests of the employees and the owners.

Discuss estate planning issues with your family, your business partners,
and your advisors in order to create the optimal plan. Thinking through
these challenges in advance and creating a solid plan will help protect
your loved ones and your business.

Jonathan J. Robertson

The ability to hire your children and simultaneously receive a tax deduction is a benefit unique to business owners. The work experience gained, as well as the
wages earned, can be valuable to your child as well as provide potential tax benefits to you, the employer. Employment tax responsibilities are different for minor children (or children under 18.) Because the IRS is quick to challenge children’s employment, become familiar with the current tax rules and regulations.

Impact on parents

Any wages paid to your child are fully deductible as a business expense, which lowers your gross income. While payments for the services of a child are subject to income tax withholding (regardless of age), additional taxes owed may vary according to the type of business owned.

Social Security and Medicare taxes:

• Apply towards wages paid by a corporation (even if controlled by the parent, including S-corps), a partnership that includes non-parent partners, or an estate.
• Do not apply towards wages paid by a sole proprietor who is the parent, “spousal partnership’ in which each partner is a parent, or single member limited-liability company (LLC).

Federal unemployment taxes (FUTA)

• Apply towards wages paid by a corporation { even if controlled by the parent, including S-corps }, a partnership that includes non-parent partners, or an estate.
• Do not apply towards wages paid by a sole proprietor who is the parent, “spousal partnership’ in which each partner is a parent, or single member limited-liability company (LLC).
  (state unemployment taxes may or may not apply)

Responsibility of parent

• Hire your child for a realistic job. Do not make up a position just for your child.
• Match job responsibilities to ability; Consider hiring younger children to sort and
  distribute mail. Increase their responsibilities as your children age.
• Keep accurate records of the hours worked. Use a time sheet, and add your
  children to payroll.

Impact on children

Children under 16 can take advantage of the Standard Deduction by not paying income taxes on $6,300 of earned income. Your child will owe taxes on any earned wages in excess of the Standard deduction, albeit at a lower rate than you typically pay. Another tax advantage to children is the ability to contribute up to $5,SOO tax free to a Roth IRA.

Responsibility of children

• Deposit paychecks into an account before withdrawing funds, rather than cashing them, so there is a clear record of the child’s receiving the wages.
• File a tax return if he/she earns more than the Standard Deduction. Note: filing a tax return is the only way to receive a refund if federal or state taxes were withheld from his/her paycheck.

Remember to carefully consider how to best utilize your child’s abilities and talents corresponding to age, and keep meticulous records. It is always prudent to consult your with CPA before hiring your children to work in your family business.

Cheryl R. Holland