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The Sumner Redstone Saga Continues

Interest by the media and Wall Street in the life and drama of billionaire Sumner Redstone is not unusual as once again an aging billionaire makes the news as his personal life and wealth come under study.

Sumner Redstone, the chairman of CBS and Viacom Media, resigned recently among reports of ailing health and incompetency charged by an ex-mistress. Falling stock prices soon followed.

Redstone owns 80% of National Amusements, through which he still has a controlling stake in both CBS and Viacom. His daughter owns the other 20%.

After he passes away, Redstone's shares are to be put in trust for his grandchildren. That has led to controversy as the new chairman of Viacom is also one of the trustees. Redstone's daughter claims this is a conflict of interest.

As reported by the New York Times in "When Family Fortunes Beget Vicious Power Struggles" this is not the first time a feud over a family-owned business has been made public when the founder begins to age or passes away. It is actually fairly common when the founder has done little to pave the way for a successor to operate the businesses and instead holds onto control for too long.

The saga over Redstone's media empire is just beginning and it might still work out. However, it should be considered as a lesson for anyone who owns a family business. It is extremely important to have a solid succession plan in place as part of an estate plan and that succession plan should be developed over a period of many years.

An estate planning attorney can help set up a smooth transition of power.

Reference: New York Times (Feb. 11, 2016) "When Family Fortunes Beget Vicious Power Struggles"

Please visit our website for more information on business succession.

Retirement Savings Options for Self-Employed

Unlike people who work for an employer and can set automatic deductions for their IRA accounts, self-employed people need to set up and contribute to retirement accounts. Two of the most frequently used accounts are the Simplified Employee Pension (SEP-IRA) and the Solo 401(k). Contributions to both are tax-deductible, allowing the entrepreneur to obtain tax-deferred growth and cut taxes.

Figuring out which retirement account is best for your circumstances will be easier after reviewing this article in Physician’s Money Digest, “Self-Employed Can Still Cut 2014 Taxes with a Retirement Plan.”It lists the pros and cons of each of these two accounts, along with a general description of each.

An SEP-IRAis similar to a traditional IRA in that the investment earnings grow taxed-deferred until they are withdrawn. However, a self-employed individual can save and deduct much more than the $5,500 ($6,500 if 50 and over) for contributions to a traditional IRA. SEP-IRA contribution limits are calculated as the lesser of 20% of net business income or $52,000 for 2014, $53,000 for 2015.

A Solo 401(k) is for self-employed individuals with no employees. Your spouse is not included in the employee count and is permitted to contribute to the plan if he or she is employed by the business. This 401k can be structured as a traditional 401(k) or as a Solo Roth. The maximum 2015 contribution is $53,000 or $59,000 for those 50 and older. The contribution includes (i) an annual employee deferral up to 100% of compensation or earned income for a self-employed individual (to a maximum of $18,000 and $24,000 if 50 or older), which allows some to contribute more to a Solo 401(k) than to a SEP-IRA; and (ii) an employer discretionary contribution of up to 25% of compensation as defined by the plan or 20% of earned income for a self-employed individual.

One advantage a 401(k) offers over an IRA is that you can borrow from a 401(k). If you opt for Solo Roth 401(k), there’s no deduction, but withdrawals are tax-free if you wait until you’re 59½. The plan lets you save much more than a Roth IRA. Another advantage for the Solo Roth 401(k) is that contributions aren’t subject to income limits (unlike the Roth IRA).

Which is better… a Roth or traditional IRA?It depends on many factors. If you expect to be in a higher tax bracket in the future, the Roth version may make more sense, but if your current tax rate is low, it might be better to forgo a deduction now in order to withdraw money tax-free when you’re in a higher bracket in the future. What’s nice is that it doesn’t have to be an “either-or” proposition: you can have both traditional and Roth 401(k) plans and divide contributions between them.

For most self-employed individuals, the SEP-IRA may be a better choice than a traditional IRA because the contribution limits are much higher. Also, deductions for traditional IRA contributions are limited by income for participants who are covered or whose spouse is covered by a retirement plan at work.

Talk to a qualified estate planning attorney to see how these IRA options may fit into your strategy.       

Reference: Physician’s Money Digest (August 27, 2015) “Self-Employed Can Still Cut 2014 Taxes with a Retirement Plan”

Please visit our website for more information on how to protect your retirement.

Why Your Estate Plan Needs to Be Reviewed and When

Life is about changes, both good and bad. Children grow up and marry and have children of their own. Families experience the pain of divorce. New families are created when divorced parents remarry. Many of these changes require revisiting and making changes to your estate plan. Even when your family life is stable, laws change and can impact the best of estate plans. An estate plan needs to be reviewed and changed as family situations, laws or other factors change. Here are some common points when estate plans need to be reviewed.

There are certain life events that call for your estate plan to be reviewed, detailed in“9 Life Changes That Require An Estate Plan Review.” from the Huffington Post. Some of the events are happy times, like the birth of a grandchild. But whether they are happy or sad, they all require that you take the time to review your estate plan to ensure that your loved ones are protected and that your wishes are carried out in the event of your death or if you become incapacitated.

Marriage. Did you know that your spouse may not be the sole beneficiary or heir of your estate?Depending on where you live at the time of your death, this may be unknown without a solid estate plan. To ensure your spouse, or anyone else gets certain belongings from your estate, you need to detail this in your plan. When you wed, you should review your estate plan and make any necessary adjustments.

Remarriage. A marriage license typically doesn’t set up your new spouse to receive your entire estate after your pass away. The laws of most states say that your new spouse will share in your estate assets along with your children from your first (or previous) marriage unless you change this in your will, living trust, or other estate planning document. If you get remarried, it's critical that you update your estate plan to add your new spouse and any of his or her stepchildren should you want them to inherit from you.

Divorce. Typically when a divorce decree is entered, the laws automatically disinherit a former spouse. Nonetheless, if you included provisions in your estate plan that give specific property to your former spouse by name, make sure to change this to disinherit him or her.

Birth of a Child. This big change definitely qualifies for an update of your estate plan to protect your child or children. You need to nominate guardians to care for your children in case something happens to you. If not, your children will be cared for by guardians appointed by the court. That could be anyone. The same thing applies if you adopted a child.

Death of a Beneficiary. Updating your estate plan may be the furthest thing from your mind if this should occur. However, it's important. If your beneficiary dies, you will need to ensure your estate plan still does what you want, such as if the beneficiary had children and you want his or her portion to go to them. You’ll typically need to talk to your estate planning attorney to make sure that happens.

Illness or Disability. One often overlooked aspect of estate planning is illness or disability. There are lots of things to consider regarding your care, and you need to articulate your desires before you become ill, disabled, or incapacitated. This can save your loved ones heartache. In addition, you need to think about the situation if you passed away and one of your beneficiaries became incapacitated. Money from your estate could actually harm them by causing him or her to be ineligible for needs-based government care programs. You need to look at a special needs trust. Plan for both of these scenarios by updating your estate plan before anything happens.

A Substantial Increase in Assets or Income. If you have more money or assets now than when you first created your estate plan, then that is a good thing up to a point. That point is when you and your beneficiaries are subject to federal or state estate taxes. Your estate planning attorney can structure your estate to minimize these taxes and keep more money for your estate.

Moving to Another State. Every state has its own unique set of estate laws, so you should talk to your estate planning attorney.

Changes in the Law. State and federal tax and estate laws are always changing. When this occurs, your estate plan may be at risk.

Review your plan with your attorney to make sure everything is OK.

Reference: The Huffington Post (August 17, 2015) “9 Life Changes That Require An Estate Plan Review”

Please visit our website for more information on how to keep your estate plan current.

Will Your Money Work Hard Enough When You Retire?

You are working hard in your pre-retirement years to max out your retirement funds. And while your money should always work, when you do retire your money is going to need to work even harder. It’s time for you to demand more from your money!

If you think of your money as a partner in your retirement plan, the idea that it should work hard for you makes a lot of sense. Consider these “demands” on money that appeared in “Seven demands retirees should place on their money,”from MoneyWatch:

• Growth: Make      sure you still have a growth component in your portfolio so that you aren’t      faced with attempting to live with an income that no longer covers your      costs.
• Safety: Keep      your money in a safe place and in the care of a reputable custodian who is      not part of the investment company. Two words of warning: Bernie      Madoff.
• Tax      Efficiency: Remember what Mom used to always say,      “It's not about how much money you make, but how much money you keep.”      After tax cash flow is a must.
• A      Healthy Long-Lasting Income: Ask your financial planner      to conduct a cash-flow analysis to see how your money shakes out in five,      ten, twenty and thirty years. Get help creating a plan that takes taxes      and inflation into consideration and one that increases the probability      that you’ll receive an income for the rest of your life.
• Control: Have      some control over the access to your investments. What if there's an emergency?
• Access: Set      some money aside for an emergency fund or rainy day fund, in case you have      an unforeseen expense.
• Effective      Estate Planning: Make sure that your estate plan lets      your loved ones inherit your estate in the least-taxed, most      cost-efficient wa y.

Make your money work hard! Speak with a qualified estate planning attorney.

Reference: MoneyWatch (August 3, 2015) “Seven demands retirees should place on their money”

For more information on how to protect your money, please visit our website.

Spread the Wealth with These 5 Tips

You’ve spent a lifetime building your estate. Now it’s time to decide how it will be distributed. Handing down your wealth is not as simple as writing a check or naming a beneficiary; you want to make the best decisions to preserve your financial legacy. Thomas Brockley, senior vice president and branch director at RBC Wealth Management, shares some tips on how to maximize your giving and ensure your wishes are followed.

Most people do not know where to begin making their estate plans. The more assets that you have, the more considerations you have to take into account when deciding how you want to distribute them in your estate.

The obvious starting point is to begin by hiring an experienced estate planning attorney.

It is often a good idea to go into a first meeting with an attorney with some idea about your options and what you might want the attorney to help you accomplish.

Recently, Forbes published an article titled "5 Tips For Handing Down Your Wealth."

Here is a snapshot of that advice:

1. Consider using a charitable remainder trust if you plan on leaving money to charity. These trusts allow you to receive lifetime income from current assets and get a tax break. Whatever is left in the trust after you pass away will go to charity.
2. A life insurance trust might be a good tool to keep a business in the family while providing needed cash for your family members in the form of life insurance while they are waiting for the estate to wrap up and distribute assets.
3. You might want to set limits on how your heirs can use their inheritances to make sure that your wealth is not squandered.
4. If you have a lot of assets, a professional trust manager might be a better option than naming a family member as a trustee.
5. Make sure that beneficiary designations are up to date.

In the end, the experienced assistance of an estate planning attorney who has been there and done that will make the process much easier for all concerned.

Reference: Forbes (June 5, 2015) "5 Tips For Handing Down Your Wealth"

For more information on  how to create your estate plan, please visit our website.

Media Mogul Sumner Redstone’s Estate Plan is Under Wraps

“I can tell you that careful planning has been done so that estate taxes at Sumner’s death will not require a forced sale of the stock,” Bishop said. “I cannot give you any other information about his estate plan. It’s private.”

Bloomberg Business reported the story in an article titled "Redstone Says Trustees to Oversee Estate After Death."

Recently it was reported that after 91-year-old Sumner Redstone passes away his daughter will take over as chairwoman of CBS and Viacom. The report appears to have been in error as Redstone's publicist claims that who will take over leadership of the companies has not been decided and will be determined by the directors of the companies.

Additionally, Redstone's estate will be placed into the hands of a seven member trust and plans are in place to ensure that no stock in the companies will need to be sold to pay estate taxes.

How the latter is to be accomplished is being kept private.

The normal advice is that succession plans for businesses should be clearer about exactly who will take over the business when the current person passes away.

This makes it possible for the successor to be known and to begin taking on responsibility while the current CEO is around to assist. That helps to ensure a smooth succession.

However, that advice normally applies to small and family businesses. In the case of major corporations with third party directors, it is not as necessary.

Family business owners should not structure their estate and succession plans as Redstone has done without the advice of an attorney. However, in this case, it appears Mr. Redstone has not necessarily made a mistake.

Reference: Bloomberg Business (May 7, 2015) "Redstone Says Trustees to Oversee Estate After Death."

For more information on business succession, please visit our website.

Avoid These Common Estate Planning Mistakes

Failing to take action or making the wrong moves can be costly for you and your heirs. Here are six blunders experts told us they see most often, and what to do instead.

Estate planning experts have noticed some trends over the years when it comes to making mistakes in one’s estate plan. Some mistakes are fairly minor, but others can be very costly to sort out when the estate is being administered.

Recently, Consumer Reports published a list of some of the latter mistakes in an article titled "6 costly estate-planning minefields and how to avoid them."

Their list includes:

• Thinking you are too young to need a will - Since you cannot accurately predict when you will pass away, you can never be too young to get a will.
• Putting everything into joint ownerships - When you put property into joint ownership, you give the other owner and his or her creditors equal rights to the property.
• Forgetting a will doesn't do everything - Many things such as life insurance and retirement plans are not covered by wills.
• Allowing your legacy to be squandered - Many inheritances are spent quickly if proper safeguards are not in place.
• Igniting sibling rivalry - Your estate plan should not cause your children to feud.
• Making things too complicated - You might not need a complex estate plan. You should speak to an attorney about getting the appropriate estate plan for your needs, not necessarily the latest, complex estate plan.

That last bit of advice is likely the most important. Work with an experienced attorney who has seen it all and can help you avoid estate planning pitfalls.

Reference: Consumer Reports (April 14, 2015) "6 costly estate-planning minefields and how to avoid them."

For more information on how to create a successful estate plan, please visit our website.

Congress Examines the Burden of the Estate Tax

For the first time in a decade, Congress has decided to seriously examine the burden the death tax — also known as the estate tax — places on grieving families and their small businesses and employees.

Present law states that if a business owner passes away his or her heirs possibly only have to pay one tax on the inheritance: the estate tax. After the American Taxpayer Relief Act of 2012, the estate tax exemption amount is a permanent $5 million as indexed annually for inflation. That makes the exemption $5.43 million per taxpayer in 2015.

However, under President Obama's budget proposal, those heirs might also have to pay capital gains on the amount that the inherited business has appreciated.

This has caused many family business owners and farmers to cry foul as reported by Roll Call in a recent article titled "Obama's Double Death Tax."

The biggest issue for business owners is that the double taxation makes it more likely that the business or portions of it will have to be sold to pay the taxes. Congress has acted on this problem and is now seriously considering repealing the estate tax to ease the burden on business owners.

While it is still too soon to know what will happen with these tax proposals, you should monitor their progress. Whatever the outcome, many estate plans will need to be adapted for the new laws.

Contact your estate planning attorney and make sure your estate plan is updated accordingly.

Reference: Roll Call (April 9, 2015) "Obama's Double Death Tax."

For more information on estate taxes, please visit our webpage.

Best Approach to Passing On the Family Business

Whether a family business is big or small, succession planning is important to avoid family feuding or damage to the business. Here are some tips for avoiding mistakes in succession planning.

Will your business live on after you pass away? Many family businesses begin life as the dream of a driven founder who guides the business to success. However, after that founder passes away, the businesses often flounder in the hands of the next generation.

While this is not always avoidable, it can be made less likely by avoiding common mistakes in succession planning.

Recently, the Wills, Trusts & Estates Prof Blog published a list about how to avoid those mistakes in an article titled "Succession Plan Considerations."

The list includes:

• Start succession planning sooner rather than later.
• Bring in outside advisors to help determine who is the best person to manage the company after the founder passes away.
• Consider key life insurance policy and/or a buy/sell agreement.
• Get an appraisal to have an accurate assessment of the value of the business.
• Make the plan and open dialogue with possible successors and family members.
• Do not forget to plan for the estate tax to make sure key parts of the business do not need to be sold off.

If you have questions about how to properly plan for your business after you pass away, consult with an estate planning attorney about how to make succession planning part of your estate plan.

Reference: Wills, Trusts & Estates Prof Blog (April 6, 2015) "Succession Plan Considerations."

Please visit our website for more information on succession planning.

Would You Give All of Your Wealth to Charity?

Apple Inc (AAPL.O) Chief Executive Tim Cook is joining the roster of the very rich who are giving away their wealth.

Yahoo Finance reports about this story in an article titled "Apple's Tim Cook will give away all his money." Cook plans to pay for his nephew's college education and give everything else away.

This is a trend that started with Warren Buffet, who encourages billionaires to donate at least half of their wealth to charity. The theory is that you can rear your family well enough so they will be able to take care of themselves and not need to inherit the wealth.

However, the big potential drawback to this plan is that family members may not agree that they do not need the inheritance.

In fact, the views of your family members regarding what they need or want might be very different from yours.

It is better to uncover their thinking now before you are gone.

Why?

Because estate litigation can be very expensive and unduly enrich trial attorneys.

Accordingly, if you plan to give all of your wealth to charities, then it is only prudent that you communicate this with your family members sooner rather than later.

It is important that you get your family to buy into the plan while you can.

Reference: Yahoo Finance (March 26, 2015) "Apple's Tim Cook will give away all his money."

For more information on charitable donations, please visit our website.