Help Chart the Future of Your Family Business

A recent survey found that 27% of business owners expect to hand off their businesses in the next five years. And even though more than half of the business leaders who plan to retire believe their companies will stay in the family, it has been estimated that only about 36% of American family firms actually are passed on to a second generation.¹

The transition from one generation to the next is considered to be one of the biggest risks to the survival of a family-owned business, so it’s somewhat surprising that 47% of family firms have no formal succession plan.²

A thoughtful succession strategy not only outlines when and how ownership should be transferred but also takes tax implications, family relationships, and other sensitive issues into account.

Management Succession

Think realistically about who is most capable, motivated, and/or prepared to run the business. Because it may take several years to groom a successor, it’s important to identify potential candidates early. If no family members are interested in leading, you may want to consider tapping someone competent from outside the family.

Ownership Succession

Family members who are not willing to take on significant operating roles may still want to retain a stake in the company. How you decide to divide your ownership shares among your heirs and business partners could have a major influence on the future of the company. Involving family members in the process may help promote a smooth transition.

Keep Taxes in Mind

Because tax laws tend to change frequently, it can be critical to stay on top of potential estate tax issues. Trusts, buy-sell agreements, and/or insurance policies may be used to help reduce taxes or provide the funds to help pay them.

It’s a shame that some businesses must be sold either to pay estate taxes or because family members can’t agree on how to move forward. Forming a plan well before you intend to retire could help ease the transition to the next generation.

1–2) PricewaterhouseCoopers, 2010

 

Plan Deliberately, Spend Wisely, Live Abundantly! Disclaimer/Limit of Liability: The information in this blog is not intended as tax or legal advice. You are encouraged to seek tax or legal advice from an independent professional advisor. MLGA will work in conjunction with qualified legal and tax professionals. For general information on Melissa L. George, author interviews, reprint permission, consulting, seminars, live events for your organization or other publicity information, please contact us via email at info@melissalgeorge.com or call (678) 325-0100.

Deciding When To Begin...Social Security: A MUST Read

A presidential commission has recommended increasing the early retirement age for Social Security to 64 and the full retirement age to 69. Fortunately, the plan, if adopted, would be phased in slowly and wouldn’t be fully implemented until 2075.¹

Currently, most Americans can choose to start collecting benefits at full retirement age, which ranges from 65 to 67 depending on the year they were born, or to receive a reduced benefit as early as age 62. This is an important decision, so it’s a good idea to consider all the factors involved.

It’s About Monthly Income

If you claim benefits at age 62, the amount you receive each month would be about 70% of your full retirement benefit. Each month you wait to claim benefits after age 62, your monthly benefit increases slightly, so that at full retirement age you would be entitled to 100% of your full retirement benefit. For each month you wait to claim Social Security after full retirement age, your monthly benefit will continue to increase until you reach age 70, when you could be entitled to about 132% of your full benefit.

If you live an average life expectancy, you will collect the same amount in lifetime benefits regardless of whether you begin benefits at age 62, full retirement age, or 70. Benefits are reduced at younger ages because, in theory, you will be collecting them for a longer period of time.

It’s important to consider your current financial situation and health as you decide when to begin collecting benefits. If you expect to keep working while collecting early benefits, a portion of your benefit will be withheld if your annual earnings exceed the earnings limit. No earnings limit applies after you reach full retirement age.

If you are healthy and don’t need the money, it might be a good idea to wait to claim your benefits so you can lock in a higher monthly income. Calculating your breakeven age may help you decide. This is the age at which the total amount you collect by claiming early benefits would equal the amount collected if you waited until full retirement age. If your breakeven age is later than your probable lifespan, you might be better off taking early benefits.

There may be other factors to consider depending on your circumstances. Deciding when to collect benefits is a big decision that should be considered carefully.

1) The New York Times, November 10, 2010

Plan Deliberately, Spend Wisely, Live Abundantly! Disclaimer/Limit of Liability: The information in this blog is not intended as tax or legal advice. You are encouraged to seek tax or legal advice from an independent professional advisor. MLGA will work in conjunction with qualified legal and tax professionals. For general information on Melissa L. George, author interviews, reprint permission, consulting, seminars, live events for your organization or other publicity information, please contact us via email at info@melissalgeorge.com or call (678) 325-0100.

Season’s Greetings on a Shoestring Budget?

...Just in time for the holiday shopping kick-off!
The economy continues to struggle, you do the best you can to hold on to your job, your home and your sanity when here comes the biggest spending season of the year. The last thing you need to feel obligated in any way to join the spending frenzy, but if you start now and plan realistically, you can participate in the joy of giving without the sorrow of a light wallet. Here are 10 Tips Stretch your holiday spending dollars:

1. What’s your ceiling: Establish your maximum budget for all shopping and be realistic. If you haven’t saved all year, don’t start flossing now. You know what you need to keep the lights on and what’s left over for discretionary spending.

2. Make a spending plan: A written list for holiday spending and gift giving is essential for you to understand with whom your gift priorities are and what you have to work. Start a list with everyone you would ‘like’ to buy for. Next include possible gifts, alternate voices and spending limits for each person. Now prioritize each one with a number value. Begin adding the dollar amounts from priority one and so on until you reach your maximum budget. For everyone who didn’t make the cut, summon your inner Oprah and say it with me, “Everybody else is getting a CARD!”

3. Subscribe: Begin subscribing to the email list of your favorite vendors and start watching the advertising and sale flyers for items you intend to purchase. You’ll often receive exclusive coupons and notice of special sales events. Prepare for the increased influx of email by creating a digital folder to capture them and you can look through them before shopping or at your leisure and when the holiday is over, you can always unsubscribe.

4. Re-gift, I mean RECYCLE! Whatever you decide to call it, if you’re going to do it, do it right. The top 3 rules for re-gifting items you don’t want are 1) Know who gave you what and when. It only takes seconds to do and could save you and your reputation a lifetime of embarrassment. 2) ONLY re-gift brand new (duplicate or unwanted items) that you would have bought anyway in its original packaging. Anything else is a dead giveaway and should be given to charity or sold on eBay. 3) Don’t re-gift in the same circles…did I REALLY need to tell you that? 3) Know your peeps. Nothing says RE-GIFT like a totally inappropriate pass along. A well matched re-gift is always better than a paid gift no one wants that will end up in their re-gift stash. Hopefully, you’ll be able to cross a few people off your gift list leaving more available dollars for people who didn’t make the cut!

5. Avoid crowds: Shop online and only buy 'on-sale' items from sites offering free shipping. Check out sites like www.retailmenot.com and www.couponmountain.com for discount codes for additional savings. You'll avoid the parking lot and cash register frenzy and reduce your carbon footprint at the same time.

6. Reward Yourself: Take advantage of debit card reward programs like VISA Rewards or Swag bucks. You can get cool merchandise or certificates for yourself or others and pay with the points you've accumulated during the year. If you belong to any frequent shopper loyalty programs, now's the time to cash in.

7. Consider layaway: It’s making a comeback at top retailers like Wal-Mart, Sears, Kmart, Toys R Us, Babies R Us, Burlington, TJ Maxx*, Marshalls and more. It’s a great way to reserve an item before it’s no longer available, make comfortable installments all without incurring interest or affecting your credit score.

8. Cash is king: Leave your credit card at home. Charging purchases tend to promote indiscriminate spending and most people will spend multiples of the purchase price in interest. Spend cash and avoid using credit cards.

9. Shop on December 26: It’s Christmas all over again and at a deep, deep discount. Enjoy guilt free shopping with proceeds from returns, exchanges, gift cards and Holiday Cash!

10. Start a loose change fund: Start throwing your spare change [and even your extra $1.00 bills] each day into a gallon jug, metal pail or whatever and don’t touch until the day after Thanksgiving. This is a great activity for one or the whole family and you‘ll pleasantly surprised at how much you’ll accumulate during the year.

BONUS: Gifts that NEVER offend: Bottles of champagne & Starbuck's gift cards…I mean, who can’t appreciate a $4 cup of java?

Top Year End Personal Finance & Tax Planning Tips

Tax season is one of the most frustrating times for most Americans. Here are some tips to help you get organized, increase your deductions, reduce taxes and save you a headache.

1.      Spend Less than you Earn: It sounds logical and simplistic, but how can you know where your money is going if you don't budget? No matter how much or how little you're paid, you'll never get ahead if you spend more than you earn. Often it's easier to spend less than it is to earn more, and a little cost-cutting effort in a number of areas can result in big savings. It doesn't always have to involve making big sacrifices.

2.      Maximize Your Employment Benefits: Employment benefits like a 401(k) plan, flexible spending accounts, medical and dental insurance, etc., are worth big bucks. Make sure you're maximizing yours and taking advantage of the ones that can save you money by reducing taxes or out-of-pocket expenses. And if your employer sponsored 401(k) plan has matching and you don't contribute to it, you’re leaving free money on the table. If your employer doesn't offer a retirement plan, consider an IRA.

3.      Donate and Deduct: Both cash and property donations can be deducted for the current year, but be circumspect about getting receipts for items exceeding $250 or more in value. If you plan to make a charitable donation, bear in mind that you must itemize your deductions in order to receive related tax benefits. Individuals who take a standard deduction are not eligible for those benefits.

4.      Capture Stock Market Losses: Many investors saw their investment accounts fall 40% when the stock market tanked. The sticker shock was overwhelming, but from a tax perspective, it might be wise to take the losses now on stocks that haven't bounced back. Investors can sell assets that have generated large losses in after-tax accounts and use those losses to offset taxable income or even future gains. The losses can be used to offset capital gains as well as a portion of regular income each year. Any amount exceeding the annual threshold can be carried forward to offset gains in the following year.

5.      Timing is Everything: Be careful when investing new money in mutual funds at the end of the year. You may want to purchase after the distribution date to avoid owing taxes on fund shares that you owned only for a short period of time and had little to no gain. Call the mutual fund and find out when the distribution date is.

6.      Tax Relief for Foreclosures: It’s common knowledge that the economic downturn was also affected by foreclosures. Until recent legislation was passed, you had to pay taxes on the amount of the mortgage reduction or restructuring, , but you may not have to pay taxes on the amount forgiven.

7.      Deductions for Job Hunters: Millions of Americans have been job hunting since the economic downturn. If you searched for a new job this year, don’t forget that you can deduct certain expenses. This includes travel expenses, resume preparation, phone calls to prospective employers, career counseling and much more.

8.      Accelerate Deductible Expenses: If you have deductible expenses such as mortgage payments, medical bills, property taxes, and other expenses that are not due until next year, they are deductible on this year’s tax return if you make the payment before December 31st.

9.      Defer Income: If you’re close to a lower tax bracket, you can decrease this year’s taxable income by deferring payments and income until next year. Here are a few options: 1) deferring taxation on income from savings bonds, 2) asking to receive your year-end bonus when the new year begins, and 3) if you’re self-employed, delaying billings until near the end of the year.

10.   Keep Good Records: If you don't keep good records, you're probably not claiming all your allowable income tax deductions and credits. Before year end, make sure that your tax documentation is in good shape; receipts, a list of expenses and what they're for, etc. Once your system is in place, it's much easier than scrambling to find everything at tax time, only to miss items that might have saved you money.

11.   Check Your Address With The IRS: Every year, the IRS reports tens of thousands of refund checks that can't be delivered because of bad addresses. Incorrect addresses will not only result in failure to deliver any refund by mail, but could also result in you missing important communications from the IRS. If you due a tax refund, consider direct deposit. You can even split your refund into three accounts, including an IRA.

Preparation is the key to having a tax season that is free of frustration and mistakes and making sure you receive all the tax benefits for which you are eligible. It also reduces the risk of having to file an amended return or of receiving a notice of amendment from the IRS for a reduced refund or increased taxes. Avoid the surprises by working with a competent tax professional.

Layaway is making a comeback for Christmas!

It’s already begun…Halloween hasn’t even arrived, but the Christmas trees are already out. Soon there will be the holiday traffic as well. Maybe you haven’t already begun to shop or figure out where the shopping money is going to come from, but unlike many consumers whose habits are to BUY NOW/ PAY LATER, consider paying on the front end and save yourself unnecessary emotional stress and debt!

With more and more consumers with little to no available credit to those who can’t get credit, the popular layaway plans of the past are being revamped and making a comeback. "People are going through hard times during this recession and some no longer have the option to use credit," Sears spokeswoman Salima Yala said. "There are no finance charges, and customers have the ability to pace themselves and teach themselves financial responsibility without major penalties… People feel more in control when they can budget their payments"

This year, Sears, Kmart, Toys R Us, Babies R Us, Burlington,TJ Maxx*, Marshalls*, Hallmark* and most recently, Wal-Mart are participating. Wal-Mart’s new program will offer layaway from Oct. 17 through Dec. 16 and allow customers to make payments at any time and for any amount on Christmas gifts with a retail price of $15 or more in the electronics or toy departments. As an alternative form of payment, layaway allows shoppers to reserve an item in the store and pay in installments or at the end of a contract, without incurring interest or affecting a credit score.

This season, don’t run from store to store through the shopping frenzy trying to find popular, hard-to-find items. Give your ‘reduce debt’ New Year’s resolution a fighting chance. Consider layaway for your holiday shopping this year and get the items you want with a comfortable payment schedule and pick-up just in time for the holidays!

*At selected stores only.