LLC Planning For Your Family & Business

When it comes to understanding your estate and planning for it, the key concept is ownership. How do you own your assets? How should you own your assets? How can you easily pass along this ownership to your loved ones?

When it comes to business assets, whether in the context of ordinary day-to-day operations or as a business owner setting up your estate plan, ownership is still the name of the game. One question that arises, then, is whether your assets should be spread across separate or multiple LLCs.

I came across a recent article in CPA Magazine and, according to the author, whether you should start splintering your assets into multiple LLC depends a great deal on what you hope to accomplish. No surprise there.

However, to many it’s simply a question of liability and risk protection, but then there are other goals. Namely, splitting into multiple business entities will allow your company to move the ownership of assets around between family members or employees without necessarily dividing the business.

This can be accomplished with some careful planning, corporate due diligence, and transactions like the sale-leaseback or, more in the vein of estate planning, the gift-leaseback. In that latter play, the business owner either leases or gifts the asset away and then immediately leases it back, thereby spreading ownership but retaining the operations of the company. Of course, not all business assets are well equipped for this practice, but others are perfectly positioned, especially those that deal in large equipment or vehicles.

It’s not quite as simple in practice, and diligence is a necessity, but for many small and family owned businesses this fractured structure will allow a great deal of leeway.

Whether it truly is right for you will take some thought and competent counsel at your side. In the end, it all comes down to your own unique goals, first for your business and second for your family. At Idaho Estate Planning we have the resources and expertise you need to implement the right kind of estate plan for you, your family and your business. When it comes to your family business, good planning is no accident.

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Planning for IRA Inheritance

Parents who have substantial assets in an IRA should plan ahead for how their children may inherit those assets. The laws governing IRA assets, their transfers, taxation and inheritance, are complex. A single misstep can be unnecessarily costly. A recent article in the Wall Street Journal outlines some of the specific perils, and offers a few salient tips. Above all, this is one aspect of financial and estate planning that truly requires professional advice. A good place to start learning more is in the Journal’s article, “Pitfalls of Inherited IRAs.”

Understanding the complexities of Inheriting IRAs is just a part of successful estate planning. To ensure a successful plan, we at Idaho Estate Planning will: 1) educate you and your helpers; 2) take the time to get to know you, your family, your desires, your concerns, your goals, and your potential problems; 3) gladly and patiently answer questions until you understand the concept or issue; and, 4) based on experience with the problems and results caused by poor planning, help you design and implement the plan that fits your concerns and goals. Remember, good planning is no accident.
 

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Protecting Your Little Ones

The Wall Street Journal typically focuses their editorial slant on financial assets, but an article last week actually touches on a much more important aspect of estate planning: Who will take care of your child(ren) if you die? It’s a tough question to face, but if ignored, it leaves the fate of an orphaned child entirely up to someone who usually is a stranger – a judge.

If you are the parent – or grandparent – of a minor child, here are some tips that might get you (or your adult child) motivated to complete proper planning:

Choose a guardian for now. Remember, you can change your mind and modify your will in the future.

Think outside the box. The guardian you name does not have to be a blood relative.

Remember that nobody’s perfect. You probably are not a “perfect” (i.e., flawless) choice to parent your own children – neither is anyone else.

Consider a mixed approach. You may want to name a guardian for your children, someone who is great with the kids; and a guardian for the estate to handle the finances.

Do you know what the single most important aspect of a Will is? Getting it done of course. All the great intentions and discussions will accomplish nothing without the completed documents. Call us today and let’s get started on the documents you need to protect your loved ones now and into the future. Remember, good planning is no accident.

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The Sandwich Generation Gets Squeezed

As our population ages, more Americans find themselves in the role of caregiver for their elderly parents – often before they have completely graduated from the parenting role for their own children. A recent issue of Financial Advisor Magazine addresses the question of what trusted financial advisors can do to help their clients with caretaker challenges. Advice includes helping ensure all necessary legal documents are in order – for both the caretakers and their charges; finding financial assistance to hire help; and investigating the role of long term care insurance.

The Sandwich generation is a term used to describe people who care for their aging parents while supporting their own children. According to the Pew Research Center, just over 1 of every 8 Americans aged 40 to 60 is both raising a child and caring for a parent, in addition to between 7 to 10 million adults caring for their aging parents from a long distance.

If you are the one providing daily care for a loved one, you owe it to yourself to seek help; to take care of yourself and your needs, both physically and mentally. You owe it to those you care for to be your most efficient and effective; often that means a little help from the outside. Seek out professional help that will ease your burden. Look for community service organizations that offer respite help. If you don’t know where to start call us. Remember, good planning is no accident.

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Tax Breaks for Caregivers Worth A Look

If you have had to arrange for a caregiver for an aging loved one, then you have some appreciation of the enormity of the costs often involved. It’s important, then, not to overlook tax breaks that just might help reduce the economic pain.

A recent article from Forbes offers a helpful reminder. The costs of a caregiver, under certain circumstances, can be partially tax deductible as medical expenses. After all, they are, in fact, very important and very costly medical expenses. However, conditions for taking the deduction essentially amount to proving that fact to the IRS.

So, what are some of these key conditions?

For one, you must document a care regimen for someone who is chronically ill. This means a licensed health care practitioner has to prescribe it. Unfortunately, it can’t be up to your own discretion, but such prescriptions and suggestions are common for aging persons, especially when they suffer from dementia.

Next, there is an expense threshold. Medical expenses are deductible only to folks who itemize, and then only to the extent that the expenses exceed 7.5% of adjusted gross income. Itemizing taxes can be a little more of a burden, but with the associated medical costs involved it is generally easy to qualify. Caregiving expenses are generally rather expensive and include the wages, employment taxes, and actual medical costs along with the associated living costs from meals to even costs of rent, if live-in care is needed.

Finally, this deduction is not without caveats and the IRS watches those who try to abuse it. For example, if the cost of the caregiver is covered by insurance (e.g., long-term care or medical insurance) then you can’t double-dip and claim both costs.

This is a complicated issue. There are many moving pieces.

Fortunately, the Forbes article shares some anecdotes from some illustrative cases and tax court challenges. Nevertheless, if you’re using a caregiver now (or will in the future), don’t overlook this potentially valuable deduction.

Understanding the complexities of Tax Planning is just a part of successful estate planning. To ensure a successful plan, we at Idaho Estate Planning will: 1) educate you and your helpers; 2) take the time to get to know you, your family, your desires, your concerns, your goals, and your potential problems; 3) gladly and patiently answer questions until you understand the concept or issue; and, 4) based on experience with the problems and results caused by poor planning, help you design and implement the plan that fits your concerns and goals. Remember, good planning is no accident.

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Inheritance Planning & Your Legacy

The inheritance you leave isn’t, in itself, your legacy. This is true even if you’re passing on the business you worked your entire life to create. That said, how you leave your inheritance just might become your legacy, so take great care.

The decisions you make regarding what to leave behind and to whom, and how to divide your assets between your family members, are crucial. The Wall Street Journal recently tackled this subject.

Do you split your assets evenly? To you divide them based on merit, or based on need? Do you think about the immediate generation or the grandchildren? What if there is no balance? Many of our clients are more concerned with passing on their ideals and building character in their heirs than in passing on possessions.

These are very real questions that only you can answer. Well… that’s not quite right. In reality, there will be many people in your family with opinions and answers to offer. The challenge is to plan as you see fit, and for the reasons that you value, but in doing so you may also want to make these considerations and reasons clear to your family.

When it comes to communicating your reasons for the how of your estate plan, you may consider capturing your wishes on video. On the other hand, and this is usually more helpful, consider having an open and ongoing dialogue with your family.

The choices you make and the inheritances you leave are very important, but what is often just as important is the meaning that is understood in how you leave them.

When it is all said and done, it’s the family you’re planning for in the first place. Therefore, in order to plan properly, first you need to understand your family. Proper planning ought to include discussing these issues with your family and then making the final decisions. Communication is key. We’ve said it before, proper planning starts with a thorough understanding of your needs, goals, dreams and aspirations. It takes into account your Values not just your Valuables. It starts with a thorough understanding of your family – those who you care about and who will someday receive the benefits of your success – and your family’s dynamics. Let’s work together to implement an estate plan that works for you. Remember, good planning is no accident.

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Estate Planning for Unmarried Co-Habitants

Heads up, if you are an unmarried co-habitant (same-sex or opposite-sex)! Regardless whether you share a home, children, and assets you can be no more than well-acquainted strangers in the eyes of the legislature, the broker, and the tax-man.

It’s a very real problem to be faced by an increasing amount of the population, given the rise of same-sex marriage and the decline of marriage (or re-marriage) in heterosexual couples. Indeed, from a federal point of view, same-sex marriage isn’t marriage at all.

I happened upon an article I had missed out of the September issue of Financial Advisor Magazine and I thought it was worth sharing on this topic. It gives a general outline of the sorts of issues that unmarried cohabitants face when it comes to estate planning.

In essence, the problem is that there are very basic laws on the books, laws that have organized our family finances for generations, but unmarried persons don’t benefit from them. In fact, until it is too late, they might not realize the extent to which they won’t benefit from them.

Insurance problems abound, as well. And, when it comes to taking care of each other later in life or after death, it likely will be too late to find ways around the problem. Proper planning is always about charting a path for the future, and without certain legal designations you may end up “wandering in the wilderness”. Better to clear the path for the future today.

At Idaho Estate Planning this is not an unchartered territory. We know how to help you and your loved ones reach your goals and accomplish your dreams. Together we’ll make sure you arrive safely at your destination. Remember, good planning is no accident.

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Estate Planning New Year’s Resolutions

2012 is going to be a big year for planning. Why? Because the end of 2012 also means the end of the foreseeable future regarding a huge swath of estate planning issues.

Everything we know now about the estate tax, the gift tax, and the other wealth transfer taxes is only set in the tax code until the end of 2012… at least until Congress finishes battling it out and makes a decision about what to do going forward.

In the end, proper planning these days is about taking advantage of what we know about 2012, and hedging our bets about the future thereafter. So what do we know? Smart Money recently provided a brief run-down here:

The estate tax is still set at a $5 million exemption with a 35% rate thereafter but, barring action, it will revert back to a $1 million exemption and a 55% rate! To be precise, the estate tax is actually indexed for inflation and that means it is effectively set at $5.12 million for 2012

The exemption amount for the gift tax is the same as it is for the lifetime gift-tax exemption at the inflation indexed $5.12 million, and in like fashion will snap back in 2013 without any action. This means that it may be the last year ever to take advantage of that unprecedented gifting amount.

Finally, a new and very progressive provision will still be in place for 2012: “portability.” Portability means that a spouse may pass along their unused estate/gift tax exemption to their surviving spouse. That makes the effective total a married couple can pass on without tax a whopping $10 million, or $10.24 once indexed for inflation.

These at least are the basic facts. It may well be that we will see a situation not unlike what occurred in 2010, when the Bush-era laws expired at congressional inaction. Remember that? Taxpayers tried to hold out until 2010 and then tried to hold onto 2010 laws (or lack thereof) until the first moments of 2011.

Will we be holding onto these laws currently in play through 2012 and their generous exemptions, or is 2013 going to be even more advantageous… or treacherous for taxpayers?

No matter what happens in 2012 you can be assured that those who have planned for the future will be better prepared to meet it. Make it your New Year’s Resolution to put a plan in effect for you and your loved ones. Call us today, not tomorrow, not next month, today! We will help you put your goals and dreams into action. Remember, good planning is no accident.

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Study Shows Inherited Wealth Is Squandered

A new and unfortunate statistic confirms what we all intuitively suspected. According to research out of The Williams Group, 70% of all wealth transfers fail.

As reported by Forbes here, the failure is not that the money doesn’t get passed down; it is that the family inheritance quickly dissolves in a flash of poor planning, bickering, and waste.

How can that be?

The research found that the successful 30% had all actively engaged in transition planning, in addition to simple inheritance planning. In a very real sense, all proper estate planning is about both planning for the inheritance and planning for the inheritors. After all, the inheritors are why you want to pass on your assets in the first place. Naturally, then, transition planning is all about bringing the inheritors into the fold and allowing them to learn how to run it.

If you have a family business, then this is of the utmost importance. Why? Because for it to remain a “family business” the family has to know about the business, how to run it, and how to think about it. To be successful, hands-on training is required.

But then again, aside from a family business asset, there is still a great deal of work to be done to help inheritors properly understand wealth and investments. Likewise, hands-on training in the family wealth, perhaps beginning in philanthropy, can make all the difference.

In the end, to overcome the odds against the successful transfer of your family wealth, you need to form a plan, understand it, and to put it into action. Proper planning starts with a thorough understanding of your needs, goals, dreams and aspirations. It takes into account your Values not just your Valuables. It starts with a thorough understanding of your family – those who you care about and who will someday receive the benefits of your success – and your family’s dynamics. At Idaho Estate Planning we know how to help you implement and carry out a successful plan. Remember, good planning is no accident.

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Inheriting an IRA – Make Sure It’s Done Right

Surviving spouses have a number of pressing issues to consider after the death of a spouse. It always has been that way. Now, however, their lot is even more difficult as more is at stake, to include mistakes regarding IRA gotchas.

Unfortunately, not giving due attention to an inherited IRA can be a very costly mistake.

The problem is the IRA rollover penalty. The Wall Street Journal
rates it as one of the biggest mistakes a surviving spouse can make. The standard advice is to roll over a decedent’s IRA into your own IRA. However, especially in light of current events, this might be a rule of thumb to avoid until you’ve weighed your own options.

IRAs are tricky and getting increasingly trickier. Not to mention the reality that an ever increasing amount of personal wealth is being held and passed down in the form of IRA investments at this time of incredible market volatility. If you are at or over age 59, then an IRA rollover may not be a bad idea (since you’ll have access to the IRA funds shortly).

Nevertheless, a great many spouses will receive an IRA before that age and it’s not usable wealth to cover all sorts of new expenses, unless you pay the 10% to make early withdrawals. Instead, the IRA could simply be inherited and remain in the name of the decedent. On the downside, this approach would require taking regular and taxable withdrawals on the account right now.

In general, a great deal of thought should go into how to best “inherit” an IRA. The Wall Street Journal article goes on to mention a few other survivor mistakes, along with some interesting statistics about IRA rollovers.

Understanding Inheriting IRAs is just a part of successful estate planning. To ensure a successful plan, we at Idaho Estate Planning will: 1) educate you and your helpers; 2) take the time to get to know you, your family, your desires, your concerns, your goals, and your potential problems; 3) gladly and patiently answer questions until you understand the concept or issue; and, 4) based on experience with the problems and results caused by poor planning, help you design and implement the plan that fits your concerns and goals. Remember, good planning is no accident.

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