Just Leave It Alone?

As many will recall, then candidate Trump promised to eliminate the estate tax. That was then. This is now–he’s the President. What will he actually do? Will he also eliminate the estate tax’s two siblings: the gift tax and the generation skipping tax? No one knows, though many people care, especially those who preach tax fairness.

Given that married couples currently have to be worth almost $11 million dollars before  the estate tax kicks in–it’s more complicated than that, but still–eliminating the estate tax is going to help only the very, very wealthy. And maybe that’s a bad (or a good) thing.

I’m here to argue for the advisor. Estate planning attorneys, life insurance and investment advisors, CPAs and financial planners. I’m betting that each and every one of them agree with the following:

Because the estate tax generates a meager 0.005 percent of annual tax collections, according to I.R.S. figures, it generates far more political debate than federal revenue. And among many tax planners, the calls aren’t so much for reform as for stability, or at least a period of benign neglect.

“Just leave it alone so we can plan,” Mr. Jenney said. “But every administration seems to want to put their own twist on the estate tax.”

Farm and Ranch Transition Conference–University of Wyoming College of Law

The Rural Law Center at the University of Wyoming College of Law is sponsoring the Farm and Ranch Transition Conference on March 3, 2017, a Friday, in Laramie. It’s free. The conference is open to the public. Those interested may attend either in person or via live streaming video. The  program sounds interesting.

24 Blogs to Read Beside Mine

I just stumbled upon this list of 24 [supposedly] Must-Read Blogs for Entrepreneurs I can’t vouch for them because I haven’t read them all, but many of the names behind the blogs are  recognizable: Mark Cuban, Penelope Trunk, Scott Adams, Guy Kawasaki, and others, so go take a look. If you’re thinking of or are in the middle of starting a business, you should be reading a lot about how to make things work.

Two that I’m going to be reading from now on are Duct Tape Marketing and Seth Godin’s blog (that’s Seth in the photo to the left). I need to become a better marketer of my own business, and  well, Seth Godin’s a genius.

Get Your (Valuation) Discounts Now!

Two weeks ago, the Treasury Department released proposed IRS Code Section 2704 valuation regulations that, as proposed, will dramatically change the discounts currently allowed, including so-called minority and marketability discounts. Thus, gift and estate tax planning strategies that rely on such discounts to transfer property from one individual to another via the use of limited liability companies, family limited partnerships, and other such entities may not work so well in the future.

The IRS has scheduled hearings on the proposed regulations for December 1, 2016. Sometime after that hearing the regulations will become final; thus, anyone planning on taking advantage of such discounts has little time to waste.

As I learn more about the proposed changes, I’ll follow-up on this blog. If you can’t wait that long, the AICPA has a number of helpful resources.

Trustees and Beneficiaries: More Good News than Bad?

I really like the idea behind “The Positive Story Project,” a new monthly column at Wealthmanagement.com. Here’ the first three paragraph from the opening salvo:

My goal in writing this column is to focus thinking within our community of practitioners—important players in the transfer of wealth to younger generations.   And, with so much at stake for our clients and their families—a good deal more than preservation of financial assets—let’s make this column a conversation.

Can the widespread dissatisfaction and all the talk of “problem” beneficiaries and “problem” trustees, give way to more creative and productive relationships?  I say:  “Absolutely.”  And, if your intuition is the same as mine, the harder question becomes “how do we get from here to there?”

To begin to find out, my colleague, Kathy Wiseman, and I have been going to the source—beneficiaries, trustees and their advisors—asking them for positive stories about moments in time when their relationships have worked well.  I’ll discuss what can be learned from these individuals and their stories in this column each month.

I look forward to more on this subject, both to help me as a practitioner and to inspire my clients and potential clients to use trusts to better carry out their wishes.

(You Gotta) Plan to Be a Rothschild

From Bloomberg:

“For more than a half-century, Mr. Bartley’s Burger Cottage has been a Harvard Square institution. Six days a week, college students line up around the block for creations that include the People’s Republic of Cambridge, a hamburger topped with coleslaw and Russian dressing, and the Chris Christie, which is fortified with marinara sauce and mozzarella. General Manager Bill Bartley was born in 1960, the same year his father, Joe, started the Cambridge, Mass., restaurant. Although all four of his siblings have worked there at some point in their lives, Bill is the only one still there. ‘I was groomed to take over, like a veal calf,’ he jokes. ‘They kept me in that confined area in the kitchen so I didn’t get too big.’

“Mr. Bartley’s is somewhat of a rarity: Only about a third of family-owned businesses survive into the second generation, 12 percent make it into the third, and a mere 3 percent to the fourth, according to the Family Business Institute. ‘Succession planning has become a hot item with every organization we work with,’ says Castle Wealth Advisors’ Gary Pittsford, an Indianapolis-based financial planner. ‘There are more than 27 million closely held businesses, and baby boomers are now in that 65 to 70 age bracket. There’s upwards of 5 million boomer owners trying to figure out what to do.’”

LinksI’ve read similar statistics year in and year out, and yet family business succession planning–including succession on family farms and ranches–remains an issue. I’m guessing those who haven’t done it, but should, have two reasons or excuses: 1. I’m too busy right now, and 2. it costs too much.

In response to the first, I’d remind them, none of us have time; we’re all very busy. And that will never change, so you’re going to have to change your priorities.

In response to the second reason, I’ll repeat what I’ve said before, because it obviously needs saying again: if you think succession planning costs too much, you ought to see what it costs when you  don’t do it. Remember this little fact from the quote above:

 “Only about a third of family-owned businesses survive into the second generation, 12 percent make it into the third, and a mere 3 percent to the fourth . . .”

I don’t have the facts at hand, but I’ll bet those businesses that make it to the 2nd, 3rd, and 4th generations are successively much better off than the same business in the generation before.

Business Start-Ups: Which Entity is Best

DetroitSkylineI’ve been reading Steven B. Gorin’s massive “book” (he calls the 1053 page PDF a “mere compilation of preliminary ideas”) titled Structuring Ownership of Privately Owned Businesses: Taxation and Estate Planning Implications. I’ve yet to do a deep dive–again, it’s 1053 pages of very dense, complicated reading–but I will. And I will because it’s chock full of crystal clear nuggets like this:

“I freely admit to a bias in favor of partnerships . . . Generally, a business with an uncertain future (as is the case of most start-ups) should start as an LLC taxed as a sole proprietorship or partnership . . . Start-up businesses often lose money initially, and an LLC taxed as a sole proprietorship or partnership facilitate loss deductions better than other entities.” (pp. 76, 78)

Okay, sounds good to me, but what if my plan is to take that start-up public down the road? Gorin might respond (he actually did say this, but not in response to that exact question):

“Suppose that one concludes that a C corporation would be ideal. Starting with an LLC taxed as a partnership and then converting to a C corporation the earlier of five years before a sale is anticipated or shortly before its gross assets reach $50 million might be the most tax-efficient approach.” (p. 78)

So there you have it, the advice of one of the top estate and business planning attorneys in the U.S. on where to begin with your start-up. Of course, every case is different, so don’t take his advice to the bank just yet. Consider all your options, talk with your attorney and a good CPA, but I’m thinking Gorin is probably right.



You Want to Be Successful? Try Massive Action!

Massive_2016-04-18_2108This is a little off topic, so please indulge me.

When I’m not practicing law, I teach writing at Brigham Young University. Today in my Writing & Rhetoric 150 class, my students did what I refer to as Power of Words presentations. These are essentially 7-minute oral presentations about how words have affected the student’s life for good or for bad. The presentations are accompanied by some sort of Power Point or other visual. One student used the white board for his presentation, a talk about what he had learned from his mission president about how to become successful. (For those unfamiliar with Mormon missionary service, young men and women often serve 1 1/2 to 2 years as missionaries far from home, often in foreign lands. Mission presidents and their spouses serve as leaders of those young people. I served a mission long ago in Brazil. My mission president had been a district attorney in Los Angeles before he was asked to serve as my mission president. Three years later, he returned to the DA’s office.)

Now back to my story. My student explained that his mission president wrote the following acronym on a piece of paper: ODOR – PAL.

“ODOR – PAL?” the student wondered.

The mission president continued:

O = Outcome – state what you want to achieve and do it positively.

D = Date – set a date for when you want to achieve that outcome.

O = Obstacles – what stands in your way?

R = Resources – what tools, talents, and friends do you have to help you achieve the outcome?

ODOR is all about the preliminaries, the thinking, the dreaming. Then comes PAL, where all the action takes place:

P = Planning – develop a realistic course of action, map out how you’re going to get to your desired outcome.

A = Massive Action – not just any action, action on a grand scale.

L = Leverage – use what motivates you–money, prestige, honor, whatever–to energize you to carry out your plan.

Now, a lot of this is good old Self-Help 101. I’ve read and heard advice like this a thousand times. But I have to  tell you that as my student continued talking, my mind fixated on the A, the Massive Action. More to the point, the word Massive. Actually, the word stood out even larger. MASSIVE! The white board almost yelled at me.

I consider myself a man of action, but today I realized that my problem is that often, I’m too timid, willing to take a chance but unwilling to risk too much of myself. I realized that when I have been successful, whether in business or in other aspects of my life, it’s almost always been because the adjective MASSIVE made an appearance. I leave it to you to decide what massive means to you. I know what it means to me, and I know where I need to apply it.


Don’t Put Off Till Tomorrow . . .

lightbulbYesterday I read an interview in the April 2016 issue of WealthCounsel Quarterly with Neel Shah, a business and estate planning attorney in Monroe, New Jersey. The last interview question was of particular interest to me, because occasionally I find myself wondering whether I’m simply selling something when I encourage people to do their estate and business planning, preferably with me. By simply selling I mean selling something they don’t really need. I know better, of course. I’ve seen too many cases where what should have been planned hadn’t been, and people got hurt, loved ones left in a lurch as a consequence.

And I’m not alone, I discovered–yet again. In response to the question, “Can you point to a particular experience that has changed the way you approach your practice?” Shah told the story of a client who had come to him to do some simple will planning. He was young, in the prime of his life. He had some 20 interconnected businesses. They all seemed to be doing well, and the client, Shah says, “looked like he was on top of the world.”

Less than six weeks later, the client was dead–before Shah and he had been able to do much planning. It was then that Shaw discovered that all was not well. The client’s businesses were in hock–for those unfamiliar with the term, they were in debt up to their gills. His personal life wasn’t much better. He had a child from a short-term relationship and other family members he wanted to provide for with his wealth, but in short order his “empire” came crashing down, his dreams for others unfulfilled. As Shaw reports:

“What I saw in that client was the prototypical business owner who simple couldn’t make time to get his planning in order. He had told me that he wanted to provide for his nieces and nephews and he believed–and all evidence supported–that he had many more years ahead of him. His example showed me just how quickly and dramatically things can change.

“By seeing through that client how fragile life can be, now I don’t hesitate to grab a client by the collar and shake them into reality. I also don’t feel like I’m ‘selling’ anything anymore. I feel a lot more like an emergency room physician, telling clients that their business is in dire need of help. After seeing what happens when clients drag their feet, I now have a greater sense of urgency on their behalf. It has made me more passionate in my conversations with clients, and more aggressive in advocating the importance of moving ahead to get good planning in place.”

Somewhere else on this site, I write that the cost of planning is greatly outweighed by the cost of not planning. This story vividly illustrates that point. I could tell more. Want to hear them?

When Dave Ramsey’s Wrong, He’s Really Wrong

Zander_2016-04-15_1200I’ve listened to Dave Ramsey. My wife owns a couple of his books. I get what he does, and I think he probably does a some good–in the debt area, at least. But he’s not always right. For example, I don’t care for some of his opinions about life insurance and much of his investment advice is off the mark as well. Further, his one-size-fits-all approach and his dismissive attitude towards insurance agents and other financial advisors are a real turn off for me. Seems that everybody’s out to get you but Dave and those he recommends. (I have more to say on this point, but I won’t.)

In short, I’m basically not a fan.

So you will not be surprised that I’m posting this link to a blog post by attorney Richard Chamberlain in response to a wildly uniformed excerpt about living/revocable trusts from one of Dave’s books. Make sure to read the entire post and the links in the post.

I must add my two cents on living/revocable trusts: Though they are just one part of a well-executed estate plan, they are an important part. Among many good reasons to establish a living/revocable trust, there’s this: setting one up and funding it will help you and yours get your minds around what you own, how you own it, and how you want it distributed or handled upon your death or incapacity. Mind you, I could add more than two cents to this conversation, but I’ll stop here.

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