Articles Posted in Business Planning

Planning Your 2016 Retirement Plan Contributions

Retirement planning and contributions have been a part of America since 1875 when they were first introduced to the workforce as a private pension plan. Twenty-four years later, there were 13 private pension plans in the country and in 1913, the federal government stepped in and began taxing pensions paid, stating they were similar to wages and therefore must be taxed.

moneyOver the years, the government has set limits and added new regulations to ensure the continuity and effectiveness of retirement plans. Most people who are financially-savvy like to view the retirement plan contributions periodically. The best time to review is towards the end of a calendar year or the beginning of a new calendar year. This way, you can contribute more to your retirement plan, if you can afford it and have not reached your limits.

In December of 2015, the IRS announced that retirement-related items and limitations for pension plans for 2016 would remain the same. Continue reading

If you are a farmer or a rancher, you are hardworking and dedicated. Your farm or your ranch is more than just a way to make a living — it is your legacy. You have spent your life building something that you can be proud of and that you want to pass down to your children so that they can preserve what you have built and they can continue to provide for themselves and their families. Unfortunately, if you do not make an estate plan, your land and your assets may be liquidated cutting your legacy short and ending your family’s unique lifestyle choice.
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Estate planning is important for everyone but especially for those who own their own business such as farmers and ranchers. If you avoid making or updating an estate plan, your assets will be subject to state intestate laws. Instead of you deciding how your estate will be settled upon your death, the courts will make that decision for you. Below are three common estate planning mistakes farmers and ranchers make and how to avoid them.
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Including a Business Succession Plan in Estate PlanningOwning and operating a small business is the dream of many Americans. Through hard work and dedication, this dream comes true for many people. Unfortunately, if the small business owner becomes incapacitated or dies without a Business Succession Plan, all of the hard work by the small business owner could be lost. Having a Business Succession Plan as part of your estate plan ensures that the business you worked so hard to build will continue to operate even though you are unable to manage the business.

 

Important Reasons Why You Need a Business Succession Plan

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Most women do not consider estate planning until they are married; however, it is important for women to have an estate plan in place regardless of whether they are married or single. Many women have children without being married; therefore, it is extremely important that they consult with an estate planning attorney to ensure that their children will be taken care of in the event of their death or incapacity. However, even for single women who have no children, estate planning is something they should consider to ensure their final wishes are carried out in the event of their death or incapacity. Below are several estate planning issues that women should discuss with an attorney.

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Avoid Estate Planning Mistakes to Protect Your Loved Ones

No one likes to think about the end of his or her life; however, it is something that we all must face. In part, we do not want to think about the loved ones that we are leaving behind when it is our time say goodbye. It is because of your loved ones that you should think about estate planning. Estate planning protects your loved ones during a time when they are emotional and may not be thinking clearly. By taking steps now to ensure that your estate planning is up-to-date and includes all of the necessary estate planning tools, you can make it easier for your loved ones in the event of your premature death. Below are the most common estate planning mistakes and how you can avoid them.

Not having an estate plan or a final Will.cat-trusts-last-will-106694546

country-farm (1).jpgAttendees at a farm show in neighboring Minnesota heard important information about the special types of estate planning available for farmers to facilitate transferring family farms to future generations in the most advantageous way possible. Family farm owners here in Wisconsin face very similar concerns and challenges. Proper estate planning can provide key benefits not only to allow you to transfer your family farm to your loved ones, but also place them in the best position to keep the farm in the family for many generations to come.

One of the primary challenges faced by family farmers is that they may own a farm worth millions of dollars in land and equipment, but still be “cash poor.” This can present a challenge when the farmer dies, as it may trigger an estate tax debt. With proper planning, you may be able to defray or eliminate that tax obligation. This can be accomplished through a variety of techniques, including qualified transfers, gifting strategies or trusts, such as irrevocable life insurance trusts (ILITs).

One of the essential benefits of planning is the protection it affords family farmers. Many family farmers run their operations as sole proprietorship businesses. That means that all the farmer’s wealth is potentially at risk. Someone injured in a car accident could attack the farm’s assets as part of collecting on a judgment awarded to that person. Similarly, but in reverse, a disgruntled farm worker could, if successful in court, pursue the farmer’s personal assets in order to collect.

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for rentA federal tax court’s ruling in favor a trust on certain deductions that the trust claimed on its federal income tax returns highlights a potential added bonus to the use of trust planning, as the court decided that a trust could engage in the sort of active participation in a business needed to claim the business’s losses on its taxes. By refusing to foreclose trusts from claiming the losses of trust-owned business assets, the court’s ruling offers one more reason why family farmers and small businesspeople should ensure they have a proper estate plan in place that includes their business holdings.

In 1979, Frank Aragona created a trust where he was the grantor and the original trustee, with his five children and one unrelated person serving as the trust’s six successor trustees. This setup might sound familiar, as many living trusts created as part of an estate plan often have the grantor serve as the initial trustee, with family, friends or a trusted professional serving as the successor trustee(s).

Aragona died two years after creating his trust, having funded some rental real estate properties, as well as some other real estate assets, into the trust. His successor trustees managed the properties, some directly owned by the trust, with others owned by LLC that was itself wholly owned by the trust. The use of LLCs within an estate plan is also a potentially helpful technique, offering important advantages in terms of establishing protection between various assets. Through this type of planning, a liability risk related to the LLC-owned real estate (such as, for example, a slip-and-fall injury on a LLC-owned property) will not expose all of the trust’s assets in the event of an unfavorable court judgment. Continue reading

closing_sale_.jpgSmall business owners are constantly brainstorming new business plans, new ways to innovate or new ways to make their business even more attractive to the public. Along the way, though, too many overlook one essential aspect of business planning, which is establishing a clear direction for their business after their death, and ensuring that the proper written documents are in place to facilitate that plan. Without a proper plan, the business you’ve spent your lifetime growing and developing may unravel when you are no longer around to guide it.

Establishing the plan for your business after your death involves making several essential determinations. First, you must decide who will become the owner of the business. Transferring ownership of your business can be accomplished through your estate planning documents. You may hand down ownership of your business, whether it is a sole proprietorship or a corporation, either through your will or your living trust. If you do not wish to hand down your business, you may also direct the personal representative of your estate (if you use a will) or your successor trustee (if you use a living trust) to sell or close the business. The proceeds of the business’s sale or closure would then distribute according to the terms of your will or trust.

In the absence of a clear plan, the business may become the subject of complex and prolonged court battles. A New York Times article recently related the story of Bari Jay, a clothing business. When owner Bruce Cohen suffered a massive stroke (and later died as a result,) he had only minimal planning in place for his business. A court battle between his daughters, to whom he intended to leave the business, and their stepmother ensured and the business fell “into the red.” In some cases, a careful and detailed succession plan might avoid such legal battles.

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Some parents dream of the day when their children will take over a family business. For those whose children have the same passion for the same line of work or business, seeing this occur can be a “dream come true.” For others, their dream becomes complicated if for some reason their child or children are not remotely interested in the family business, or the children have different levels of interest. Consequently, having a plan in place is important so that the business is handed down appropriately.

If there are no children interested in continuing to run the family business, there are a couple of alternatives. One is simply to sell the business altogether. The other would be to name someone outside the family to be the successor. In either of these situations, the children would not be burdened with the day-to-day operations but they could still benefit from the sale or the profits from it.

Where it gets sticky is when there is one child who wants to take over the family business and the other who doesn’t. Unfortunately, giving shares of the business to the children equally might create future conflict if there are disagreements about the way the company is being run, among other things.

There are advanced planning tools available that can facilitate an equal and equitable transfer. This will help to avoid unpleasant situations that can arise from simply giving the business to the kids and letting them sort it out.

Here are some estate planning tips on how inheritance equalization can be accomplished from an experienced Wisconsin probate and estate planning lawyer. These tips are particularly important because in many family-owned businesses most of the assets are tied up in sweat equity. If there is one child that has been more involved in the business than others, you have to consider whether their illiquid equity will factor into the distribution of the assets of the estate to the other children.

One solution is to equalize inheritance between children with the use of life insurance. Essentially, the children who are going to take over the business will inherit stock in it and those who are not involved will receive an equal amount from a life insurance policy naming them as beneficiary, in addition to other assets that are not business related.

Another option is to simply sell the business, or name a successor from outside the family to run it. In either of these scenarios, the children can benefit from its sale or the profits from its continued operation.

If you do not have adequate assets outside the business and are unable to insure your life for enough to even things out, your next question should be: Which goal is primary? 1. to make certain that your children are treated fairly and equally, or 2. to make sure the business has the best chance of surviving.

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