Get Your Estate Planning House in Order

Thanks to Randy Coleman of The Coleman Law Firm in Jacksonville, FL, for reminding us that National Estate Planning Awareness Week starts today. The following post is courtesy of the National Association of Estate Planners & Councils (NAEPC) Education Foundation. Get more info at its Estate Planning Answers website.

Estate planning is a very important component of everyone's financial plans, regardless of the size of the estate. It's the only way to control what happens to your assets when you become disabled or pass away.

Estate planning is one of the most overlooked areas of personal financial management. It is estimated that over 120,000,000 Americans do not have up-to-date estate plans to protect themselves and their families in the event of sickness, accidents, or untimely death. This costs the affluent and middle classes wasted dollars and hours of emotional hardship each year that that can be minimized with proper advanced planning and action.

The NAEPC Education Foundation, the American Institute of CPAs, the Planned Giving Design Center, and many other professional organizations representing over 800,000 attorneys, accountants, trust officers, life insurance, financial planning professionals and nonprofits, have made an ongoing commitment to promote National Estate Planning Awareness Week, the third week in October (This year October 17-23). 

You can't just talk about estate planning because verbal agreements aren't legal. You and or your attorney need to put your wishes in writing and follow the proper formalities or your documents may not be accepted.

Here's how to save time and money on legal fees to get your estate planning house in order now and keep it there over your lifetime.

1. GATHER YOUR PERSONAL & FINANCIAL INFORMATION

List full names, addresses and Social Security numbers for you and your family members.

List your current financial advisers.

List your assets & liabilities at current values.

Gather retirement plans beneficiaries' statements.

Identify how you hold title to each asset.

Summarize your cash flow.

Gather employment benefits statements, life insurance policies, deeds to real property, partnership and business agreements and the last two years of income tax returns.

Include divorce papers, premarital agreements, existing estate plan documents & any other such documents.

List any questions, concerns and ideas.

2. WRITE OUT YOUR PERSONAL GOALS

Identify beneficiaries who you want to inherit something from you when you die. Specify how much, what percentage or which specific assets go to each person or charity. Take note of the special needs of any beneficiary, such as a disability preventing work or an inability to manage money, and identify backup beneficiaries in case your first choices do not survive you.

If you don't have strong feelings about individuals, consider selecting a favorite charity or "cause" to be your primary or secondary beneficiary.

Also consider the timing for distributions to designated recipients. Some beneficiaries can handle a large, lump-sum distribution. Others, such as children, benefit from distributions that are spread out over time.

Identify guardians of the person to raise your minor children should both you and your spouse die or become incapacitated. Also, select guardians of the property to handle your children's inherited assets. Identify backups, too.

Identify executor(s) and trustee(s) to carry out your wishes after death. You'll need an executor to administer your will, and if you have trusts, you need to name trustees to manage them.

For each position, come up with several choices because you don't know who will be willing and able to serve when the time comes. Consider selecting two or, in larger estates, three trustees as a check-and-balance system.

Identify other decision makers to carry out your health & money choices for you if you're incapacitated.

For special needs and concerns, list any sensitive family circumstances or concerns you have that may affect your planning, such as prior marriages, ill parents, troubled kids.

If you are not sure about your plans, talk them over with a professional financial advisor who specializes in estate planning. This could be an AEP^®, CPA, CFP^®, ChFC^®, CLU^®, or trust officer.

3. SEEK OUT THE RIGHT ATTORNEY

An attorney or you are the only ones who can draft the legal documents necessary to put your estate plan in effect. Due to the complexity and importance of these documents it is highly advised that you retain a qualified attorney to draft them for you. Identify several attorneys who specialize in estate planning by getting referrals from your AEP, CPA, CFP, ChFC, CLU, trust officer, banker, financial adviser and/or friends. Call the attorneys and ask how many wills and trusts they have prepared this year and in the last 10 years. Ask whether they also handle estate administration after someone dies to see if they're familiar with issues following a death.

Ask how they charge. Estate-planning attorneys are specialists. They can charge hourly rates of $100 to $500 or more, or charge a flat fee for document preparation. Ask if they will provide an introductory meeting with you at no charge. Make sure you are comfortable with your attorney as he or she will be asking you thought-provoking questions and you will be discussing your personal affairs together.

4. MAKE THE MOST OF YOUR MEETING

Bring your notes and the information from above when you meet with an attorney. This could save one to five hours (or more) of billable time. Discuss your overall goals and see how they can be met.

Ask the attorney about the main documents that need to be prepared:

Will

Living Trust

Durable Power of Attorney for Asset Management

Advanced Health Care Directive or a Durable Power of Attorney for Health Care

Before leaving the attorney's office, if you are satisfied, request an engagement letter quoting the fee for services and a brief summary of your estate plan – written in terms you can understand – to serve as a record of the decisions made. Confirm that you're taking advantage of all tax-saving possibilities and, when desirable, avoiding probate.

5. REVIEW & SIGN DOCUMENTS

Have copies of draft documents sent to you for review and approval. Note questions and changes in red ink in the margins. Be specific. If you have an estate worth more than $1 million or a complex family situation, have a copy of your documents sent to your AEP, CPA, CFP, ChFC, CLU, trust officer or financial adviser for a second opinion. Discuss questions and possible changes with your attorney.

After you sign the documents, ask your attorney where they should be kept and what should be provided to family members, executors and trustees.

6. TAKE CARE OF TITLE AND BENEFICIARY DESIGNATIONS

Have your attorney make sure that titles on all your assets and your beneficiary designations, such as life insurance and retirement plans are coordinated with your will and/or living trust.

7. UNFORTUNATELY, ESTATE PLANNING IS FOREVER...

Call your attorney about updating your plan at least every three years or any time you have major changes in your personal situation due to births, deaths, marriage or divorce, as well as significant increases or decreases in the size of your estate.

Estate plan documents are technical and very dry; they do not communicate personal feelings. Consider drafting a personal letter to your spouse and family expressing your final thoughts and feelings to them.

It’s also important to keep your key financial paperwork readily accessible, for those who will be dealing with your affairs when something happens to you. For a complimentary copy of the YOUR financial PARTNER Location worksheet in Excel format, visit www.estateplanninganswers.org/is-it-time-to-get-your-estate-planning-house-in-order/.

© Copyright 2011 - The NAEPC Education Foundation & Valentino Sabuco, CFP^®, AEP^®

All rights reserved.

5 Tax Free Ways to Grow Your Business

Increase your profits in 2011 by using tax credits and incentives for small businesses to expand your company.

Pay less in taxes as you buy equipment, raise capital or invest in research, by using the following tax breaks meant to stimulate the economy.

1. Invest more into your new business. The maximum deduction for start-up expenses doubled to $10,000 in 2010. Deduct the remaining balance of start-up expenditures over 180 months.
2. Deduct up to $500,000 of the first $2 million in expenses for qualified property in the year in which you begin to use it, rather than depreciating it over several years as previously required. The IRS offers guidance on Section 179 property, including qualifications, under its Instructions for Form 4562. The maximum deduction drops to $125,000 in tax year 2012.
3. Use bonus depreciation to recover a percentage of the cost of new property and equipment.  You can depreciate 100 percent of the cost of qualified property acquired and placed into service after Sept. 8, 2010, and before Jan. 1, 2012 (Jan. 14, 2013, in the case of certain longer-lived and transportation property). You may take the depreciation after any Section 179 deduction and before regular depreciation. Learn the types of qualified property that can be depreciated in the IRS publication “How to Depreciate Property.”
4. Sell stock to long-term investors. Investors who acquire small business stock after Sept. 27, 2010, and before Jan. 1, 2012, may exclude 100 percent of the gains from any future sale or exchange, provided they hold the shares for at least five years.
5. Invest in research. Congress has renewed the research credit that was set to expire in 2010. This expense-based credit allows you to deduct a percentage of the cost of qualifying investments, according to variables such as total expenditures. Consult the IRS’ website for guidance on “Qualified Research Activities.”

Ask your tax professional how you can benefit from these tax credits and incentives now --  for they may be fleeting. Tax breaks meant to stimulate economic growth may not be renewed when they expire in 2012, if the economy is stronger. President Obama and Congressional leaders have already identified tax reform as a priority over the next two years, so expect more changes.

Learn more about these tax free ways to grow your business and how to pay less in taxes by downloading our free whitepaper “Tax Tips for Businesses in 2011.”

5 Ways the Senate’s Tax Plan Helps Business Owners

Business owners will benefit personally and professionally from the tax bill approved by the U.S. Senate.

From lower rates for individuals to incentives to invest in their companies, business owners could reduce their tax liabilities in 2010 and beyond.

The following tax breaks would be most helpful.

Extension of Bush tax cuts

The reduced personal income tax rates that were implemented under former President George W. Bush will remain in place for all taxpayers in 2011 and 2012. Rates were set to rise on Jan. 1 and Democrats had tried to restrict an extension of the lower rates to households with incomes of less than $250,000.

Capital gains and dividends

Increases in the tax rates for capital gains and dividends that were to take effect on Jan. 1 have been postponed as well. This alleviates the need for investors to sell shares of companies now rather than pay a higher bill next year. It also reduces pressure to sell businesses to lessen tax liabilities, perhaps allowing sellers to negotiate better terms.

Estate tax

Fewer business owners have to worry about leaving behind a large tax bill if they live into 2011. After lapsing in 2010, the estate tax had been set to return in 2011 with an exemption of $1 million and a maximum rate of 55 percent.  Instead, there will be a $5 million exemption and a top rate of 35 percent for the next two years.
The National Federation of Independent Business, a small-business advocacy group welcomed the more favorable terms, in a statement by Senior Vice President Susan Eckerly.

“Not only does this framework provide certainty for the 75 percent of business owners who file their taxes as individuals, but it also includes a workable estate tax compromise. The estate tax disproportionately harms family businesses, levying a tax on the business not just at death but in the years planning and preparing in advance.”

Relief for individuals

The $858 billion tax bill extends several key measures for individuals while implementing others. Among them, according to The New York Times:

“It continues a college tuition credit for some families, an expanded child tax credit and the earned income tax credit. It also includes a two-year adjustment to the Alternative Minimum Tax to prevent as many as 21 million more households from being hit by it. …”

As employees of their companies, business owners also will benefit from a temporary reduction in taxes paid by workers.  According to The New York Times:

"The one-year payroll tax cut would reduce to 4.2 percent the 6.2 percent Social Security tax levied on income up to $106,800. For a family with $50,000 in annual income, the cut would yield tax savings of about $1,000. For a worker paying the maximum tax, it would provide savings of $2,136."
 

Business provisions

Tax breaks for businesses could help owners increase profits at their companies. The Wall Street Journal noted:

“The bill also allows businesses to write off 100% of equipment purchases made after Sept. 8, 2010, but before Jan. 1, 2012. ... And it renews a host of expired tax breaks for businesses, including a tax break on banks' overseas income, quicker depreciation for restaurant improvements and the 45-cent tax credit for ethanol blenders.”

Companies in sectors such technology, agriculture and energy, will benefit from $55 billion in industry-specific credits or reductions, according to The Washington Post.

Unfinished business

Though the tax plan cleared the Senate by a large margin, 81-19, its final structure is still far from determined, as it now goes to the House of Representatives.

House Democrats have expressed frustration with many of the bill’s provisions, particularly regarding the estate tax. A prolonged debate or significant changes that prevent the same legislation from being passed in both chambers could leave the nation’s tax code in limbo until next year, when a new Congress convenes, under Republican leadership.

If the debate lingers into 2011, the benefits for business owners will be uncertain.

Follow our blog for ongoing coverage of taxes for business owners.

Finish Year Strong with Savvy Financial Management

If cash is king, his royal highness has left the palace.

Cash is hard to find at the end of the year, with annual budgets depleted, new revenue scarce, credit scarcer and accounts payable mounting.

Always important, cash flow is especially critical to small business development right now. In “5 Year-End Survival Tips for Entrepreneurs,”guest columnist Rosalind Resnick of Axxess Business Consulting advises Wall Street Journal readers how to finish 2010 strong by stretching their dollars over the coming months.

Resnick urges business owners to revise plans, market proactively and spend wisely. Her most practical advice for small businesses may be to use credit-card rewards points to cover travel and entertainment expenses, including company holiday parties.

Cash forecasting and preservation also are key. Preserve cash by deferring payment on invoices or paying with credit lines instead.

Identify potential income tax savings through year-end tax planning as well. Review possible deductions and strategy with your accountant, Resnick writes.

Manage cash flow properly and you will end the year strong, setting yourself up for success in 2011.

Then, the king will return. All hail the king. 

Download a complimentary copy of “Five Ways to Build Cash When Credit is Tight” for more cash flow management advice and small-business financing tips.

 

 

Tax Implications of the Small-Business Aid Bill

The U.S. Senate approved $12 billion in tax breaks as part of the Small Business Jobs and Credit Act of 2010, but additional relief was rejected to speed the passage of the overall bill.

Attempts to make permanent a research and development tax credit and to extend by one year a credit for biofuels failed, according to The Wall Street Journal. Sen. Charles Grassley, R-Iowa, also had sought a 20 percent tax deduction from businesses’ earnings, according to an Associated Press story in The New York Times.

According to the Associated Press, the following tax measures passed.

• The ability for small-business owners to deduct health insurance costs from self-employment taxes for the 2010 tax year.
• Exemptions from paying capital gains taxes for long-term investors in qualifying businesses.
• Breaks for restaurant owners and retailers who remodel or build new stores.

The Wall Street Journal reported that the bill also included a 50% write-off of new equipment purchases in 2010 and doubled, to $500,000, the new investment that small businesses can expense in 2010 and 201.

Senators also approved $30 billion in loan funds, which would be leveraged by community banks, as part of the bill. The measure will go to the House of Representatives and then, pending approval there, to President Barack Obama for his signature.

The legislation will be funded largely by allowing taxpayers to convert of 401(k) and government retirement accounts into Roth IRAs, in which account holders pay taxes up front so that they can withdraw funds tax-free after retirement, according to the Associated Press.

Hunter & Associates honored for helping Jacksonville businesses

Jacksonville Business Journal has given Hunter & Associates P.A. a 2010 Diversity Award for its work as a Professional Service Provider  for minority-owned businesses in Northeast Florida.

Hunter & Associates was one of eight award winners and the only its category. Hunter & Associates provides accounting, business development and consulting services to small- and medium-sized businesses.

Hunter & Associates was honored for helping clients get certified as Disadvantaged Business Enterprises, thereby generating business opportunities. The firm has extensive experience in auditing firms that work with government agencies, which often seek DBEs as contractors and consultants.

In a profile of the firm in the Aug. 6-12 issue of The Business Journal, client Nina Sickler, president of Landmark Engineering Inc., stated that the financial audit that Hunter & Associates conducted of her transportation-engineering company helped it earn a DBE certification with the Florida Department of Transportation. Sickler also stated that the firm helped her evaluate tax issues and manage expenses.

Because it works with numerous small businesses and DBEs, Hunter & Associates conducts many audits for the FDOT and often provides financial management training for the department’s contractors. Hunter & Associates also has contracted with the U.S. General Services Administration to provide accounting and development services to agencies and companies that work with them across the country.

“Government agencies and the contractors that work with them are focused on ways to maximize their time and minimize their expenses,” said Lewis Hunter, president of Hunter & Associates. “We help them find ways to do both.”

 

About Hunter & Associates P.A.

Based in Jacksonville, Fla., Hunter & Associates provides accounting, business development and consulting services to small- and medium-sized businesses. The firm also assists government agencies and contractors. Hunter & Associates provides accounting and development services to government agencies through a contract with the U.S. General Services Administration.

As a member of the international RAN ONE network of Certified Public Accountants, Hunter & Associates has invested heavily in specialized training and tools.

Additionally, Hunter & Associates Principal Lewis Hunter is a partner in international consulting firm ROCG, which specializes in assisting entrepreneurs with business transitions.

 

Contact:

Lewis Hunter

Hunter & Associates P.A.

Phone: (904) 731-9222

E-mail: lhunter@huntercpa.com

###

2010 is the year to hire new employees

For small business owners considering expanding their staff, 2010 is the year to do it.  The Hiring Incentives to Restore Employment (HIRE) Act signed into law on March 18, 2010 offers significant tax incentives for businesses who hire the unemployed.

In order to qualify, business owners must hire a candidate between Feb. 3, 2010 and Jan. 1, 2011.  The candidate must also have been unemployed or working less than 40 hours per week (for a different employer) for at least 60 days before being hired full time.

If the business owner hires a candidate who fits the above criteria, they will receive the following tax breaks:

• Exemption from the 6.2 percent Social Security payroll tax on employee paychecks after March 18, 2010.
• If the employee stays on the job for at least 52 weeks, the business owner can file for an additional $1,000 credit per qualifying employee.

The HIRE Act allows business owners to write off up to $250,000 invested in company equipment this year.  The provision is intended to give business owners the money they need now in order to grow in this struggling economy.

If you're planning on hiring a new employee, do some research to see if your business can also qualify for some of these tax incentives.  With such a high national unemployment, chances are good that you may qualify.  For more information and details on the HIRE Act, check out HIREAct.org and the IRS Q&A Web site.

Financial breakdown for buying vs. leasing a vehicle

In times when everyone is trying to cut costs and save money, surprise expenses can become a major setback.  One expense many Americans can't live without is an automotible.  If you've found yourself in need of a new vehicle but can't decide whether to buy or lease, there are some financial factors you should be aware of before you make your decision.

Buying - advantages:

• You will own the vehicle and continue to build equity as you make payments
• Vehicle owners have the option to sell the vehicle at its depreciated resale value
• You can set a time limit to pay off your loan, and after, you will be debt free for vehicle payments
• No commitment for a certain period of ownership, meaning you can sell the vehicle at any time
• No mileage restrictions or penalties

Buying - disadvantages:

• Monthly payments are generally higher than leasing
• After the manufacturer's warranty is up, you are responsible for all maintenance costs
• The buyer usually must give a down payment
• Most financing loans come with a substantial interest rate depending on the buyer's credit history

Leasing - advantages:

• Lower monthly payments
• Cost-free maintenance during the lease period
• Some companies give lease-to-buy offers, allowing you to purchase the vehicle at its depreciated resale value at the end of your lease
• You can trade in a lease every few years for a newer model
• If the vehicle you desire costs more than you can afford, you might be able to afford to lease the vehicle 
• Leased vehicles used for business purposes can easily be deducted on your taxes

Leasing - disadvantages:

• At the end of your lease, you don't own anything and have not built any equity
• You must pay high cost-per-mile penalties if you go over your mileage limit
• You can expect to have a monthly payment as long as you are leasing the vehicle
• Insurance companies often charge more for coverage on leased vehicles
• Security deposits are typically required at the beginning of a lease

There is no definitive answer to which is better - buying or leasing.  It is a matter of personal preference and individual financial situations.  Below are links to several resources for those looking to buy, sell or lease a vehicle.

Use Kelley Blue Book to calculate your vehicle's depreciated resale value.
Learn more about leasing a vehicle using Lease Guide's lease kit.
Get the CarFax before you purchase a used vehicle.
Know your FICO score and credit history before purchasing a new vehicle.

Green Tax Credits

Besides the benefits of reducing your environmental footprint, using "green" energy products can also get you some tax breaks.

The government has incentivized using energy    efficient products and renewable energy systems by offering tax credits.  Here are some green tax credits you should consider when filing for taxes this year, as well as preparing for next year.

Home Improvement
By making your home more energy efficient with ENERGY STAR certified products, you will not only save on your utility bills, but can also get 30 percent of the cost of improvements up to $1,500 back.  These improvements include insulating your house, using HVAC heating and air conditioning, and using metal or asphalt roofing  materials to reflect heat.  Keep in mind that this credit expires on Dec. 31, 2010.

Alternative Fuel
Using wind mill energy, solar energy and geothermal heat will qualify you for a tax credit that doesn't expire until December of 2016.  By using alternative energy sources in your primary or secondary residences (if you own the properties), you can get back 30 percent of the total cost of improvements.

You can learn how to apply to the above tax redits by visiting EnergyStar.com. 

Hybrid Vehicles
Buying a hybrid or electric vehicle can qualify you for a tax credit of up to $7,500 depending on the vehicle.  Although these vehicles are often more expensive off the lot, they will save you money on expensive gasoline in the long term.  For a full list of qualifying vehicles, visit FuelEconomy.gov.   

These tax breaks are available to individuals, but businesses can also qualify by making energy-efficient improvements to office buildings and company vehicles.  For more information on how to start or transition to a green business, see the Green Business Guide.

Remember that going green isn't done overnight.  If you haven't made energy-efficient changes in time for the 2009 tax season, start preparing now for 2010.

Don't forget to deduct charitable contributions

This year, thousands of Americans contributed to the Haiti disaster relief through a variety of nonprofit foundations.  But how many of these individuals will remember to claim these financial contributions when doing their taxes? 

Charitable contributions are among the most commonly forgotten tax deductions, and they can save you a lot. 

The following are some helpful tips to consider when claiming charitable contributions:

• A new law allows those who gave money to the Haiti earthquake relief to deduct contributions when filing for their 2009 tax returns.  According to Notice 1396, these contributions must have been made after Jan. 11, 2010 and before March 1, 2010.  They must also have been made to qualifying organizations.  This type of deduction is rare as the contribution was made to a foreign country, so those who gave should take advantage of it.  Visit IRS.gov for an overview of all charitable contribution legislation and updates.   
• Keep all receipts.  Whether you've texted contributions, gave cash or used your credit card, be sure to collect and record all charitable transactions throughout the year.  You can't deduct your time or services given to charities, but anything financial can be included in your taxes.  Don't forget that if your total contribution exceeds $5,000, you will need to break contributions down into categories.  Click here for 10 more tips for deducting charitable contributions.
  
• Contribute to a qualifying charity.  However good they may be, contributions to just any charitable organization may not be tax deductible.  The IRS has an official list of charities that qualify for tax-deductible contributions.  You can view this list on the IRS Web site.

Do yourself and the community a favor this year by giving charitable contributions and claiming them on your tax forms.   

Charitable contributions are just one of the many tax deductions that people often forget to claim.  Click here for 10  more deductions you may qualify for so you can get the most out of your tax return.