TOM’S 8 TIPS FOR SUCCESSION PLANNING(1) ©
Estate planning for entrepreneurs is not complete until it includes a succession plan. Individuals who create successful businesses often find it hard to consider handing over the reins.
Entrepreneurs would not succeed without their ability to focus all of their energies on their business. It is not easy for this type of person to imagine that one day they may want to retire or that the possibility exists that they might become ill, injured or even die. Without an effective estate plan that includes a succession plan, their work, staff and families may be placed in jeopardy.
A recent business.com post, “5 Estate Planning Tips for Entrepreneurs,” lists these important estate planning essentials:
TOM’S 9 TAX TIPS AND FACTS RELATED TO SUCCESSION PLANNING(1)©
1. Estate tax, the cruelest tax. You are taxed once on the income you earn. You save some of what you earn and are successful. If you die with “too much”, you are taxed again on your hard earned savings.
2. Only Federal; Texas does not have an estate or an inheritance tax.
Regardless of which candidate becomes president and what changes are made in coming years, there will still be a need for estate planning in Texas, and that includes regular folks as well as the ultra-wealthy.
If the U.S. federal estate tax were to be eliminated, there will still be plenty for single family offices and estate planning attorneys to do, according to a Forbes article, “If the U.S. Federal Estate Tax Goes Away, What Will Single-Family Offices Likely Do?” Wills are still going to be needed to provide direction as to how assets are to be distributed, and all estate plans will likely need to be reviewed and revised in light of changes to the law. For the single family office, there will still be much to do.
Life insurance purchased to pay estate taxes will also need to be reviewed. One way to do this is to convert permanent policies with meaningful cash values into private placement life insurance policies (PPLI).
Most Houstonians like to stash away our tax forms as soon as we file our taxes, but that’s a mistake.
When it comes to making financial decisions, you want to arm yourself with as much information as possible. One often overlooked source is your Form 1040, advises CNBC in “Use your tax return for more than paying taxes.” Sharing this document with your Houston estate planning attorney will allow them to get a clearer picture of your situation as well.
Lines 1-5 (Filing status). If you need to check a different box for your filing status, you should review your estate plan. If you get married or divorced, you'll need to update your will and the beneficiaries for life insurance and retirement plans.
We’ve been so inundated with the idea of tax-free investment accounts that the taxable investment account’s role in retirement planning is underutilized and overlooked.
If you’re like most Americans, you’ve got at least one and maybe a few retirement accounts. You like the tax benefits that come from having IRA's, 401k's, 403b's, 457b's and defined benefit plans. You know you’ll have to pay income taxes when you start taking distributions from them, except for the Roth accounts, but seeing those accounts grow makes you feel good. And if you have a Roth, you like knowing that even if you aren’t getting a deduction now, distributions will be tax free. But there are other kinds of investment accounts for retirement planning.
As Physician’s Money Digest says in “10 Reasons You Need a Taxable Investment Account,” taxable retirement accounts are ignored because we’re so focused on IRS-approved retirement accounts. But you might think about supplementing your savings with a taxable retirement account. This can be a regular, old-school investment portfolio that’s not linked to any government regulations and that you’re building for retirement.
If you are working after 70 ½, there are still ways to save money tax-free.
Wage earners are not permitted to put money into a traditional IRA in the year they turn 70 ½ according to the Kiplinger article, “Tax-Smart Ways to Save When You're Too Old for a Traditional IRA.” But you would still be able to contribute to a Roth IRA, as long as your income in 2016 is less than $132,000 if single or $194,000 if married and file taxes jointly. In addition to the money growing tax-free in the Roth IRA with no time limit, you don’t have to take any RMDs (required minimum distributions).
You can contribute up to the amount you earned for the year (your net income from self-employment), with a maximum of $6,500—that’s $5,500 for everyone under age 50, plus $1,000 for people age 50 and older. If your earnings are well over the $6,500 maximum, you can just contribute that amount. However, if your earnings are near or under the maximum, you’ll need to know what is considered compensation and how to calculate your allowed contribution.
While the number of people making New Year’s financial resolutions are on the rise, we would do well to make a midyear financial check a regular part of the summer season.
The good news is more than 30% of Americans did give some thought to making financial resolutions this past New Year, according to a survey from Fidelity Investments. The goals were nothing out of the ordinary. They were simply the things we should all be doing with our money: saving more, spending less and getting rid of debt.
If you were one of these go-getter and goal-setters, this summer is a perfect time to look at your progress, says US News in “Keep Your Money Goals on Track with a Midyear Financial Checkup.”
Whether on the evening news or a serial drama, we love to watch the inner workings of family businesses—in large part because of the drama and the high likelihood of failure.
The narrative of family dynasties is intriguing. According to the Yakima Herald in "Passing the baton: 6 challenges for family business succession," that is because successfully transitioning from one generation to the next is extraordinarily challenging and statistically unlikely. The low levels of success are matched by high expectations of business owners who believe that somehow, someway, their family will continue to control the businesses. Their viewpoint is highly optimistic and—most often—wrong.
Whether it's a national chain of supermarkets or a mom and pop corner grocery, owners will face several obstacles when seeking to ensure that their business legacy continues with and through their children. Here are some common challenges to consider.
Let's continue addressing a series of money decisions from Forbes' "10 Financial Choices You'll Regret in 10 Years," regarding financial choices we make in the earlier part of our lives that are surprisingly important—but we don't always see how important they are until it is too late.
Here are the next five decisions:
Houston Estate Planning and Elder Law Attorney Blog