Longevity Insurance Can Help Those Worried About Outliving Their Money

From Brett Lee Shelton, Personal Family Lawyer™:

With longer life spans comes the necessity to be sure your money is around at least as long as you are.  Longevity insurance – where you pay a certain sum to an insurer when you’re in your 60s in exchange for monthly payments 20 or more years down the road – is a lesser known insurance product that is growing in popularity, especially considering potential cuts to Social Security benefits and the absence of pension plans in corporate America these days.

According to the Society of Actuaries, for a relatively healthy 65-year-old couple, chances are 63 percent that one of them will live until the age of 90 and 36 percent that one will make it to 95.  Some financial advisors consider longevity insurance to be a good way to manage the risk of living to a ripe old age.

Longevity insurance is an annuity with a fixed income that kicks in at a specified future age, usually 85.  For example, a “maximum income” version of MetLife’s longevity insurance with a lump sum investment of $100,000 at age 65 would pay a woman a little over $59,000 annually once she reached the age of 85.  A man would receive more – just under $74,000 a year – because men have shorter life spans than women.

Under many longevity insurance policies, if you die before payments begin, your heirs are out of luck.  However, there are alternate versions that guarantee some death benefits to heirs, but they are usually more expensive at the outset.

If you’d like to learn more about long-term care and other estate planning strategies, call our office today to schedule a time for us to sit down and talk with a Personal Family Lawyer®. We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call 303-255-3588 today and mention this article.

How to Use Estate Planning Strategies to Transfer Business Interests

From Brett Lee Shelton, Family Business Lawyer

Planning for the transfer or liquidation of your business when you are ready to retire or when you die is just as important as the planning you did in starting up your small business.  Here are some tips from a Creative Business Lawyer™ on how to use estate planning strategies to transfer your business interests:

Business Structure – How your business is set up – as a partnership, a sole proprietorship, an LLC, a C Corp or an S Corp – can have a great impact on estate taxes.  If you want to preserve your business for future generations, a family limited partnership can allow you to transfer ownership of the business to children as limited partners and enable you to maintain control over the business.  Setting a business up as a corporation allows for the issuance of stock to the owner and common stock to children utilizing the IRS’ estate freeze rule, which decreases tax liability.

Trusts – Business owners can use trusts to remove the value of the business from their estates and pass business interests on to the next generation while maintaining some control over the assets.

Buy-Sell Agreements – If you plan to transfer a business to a partner or partners upon your retirement or death, a buy-sell agreement is a necessity.  Having the agreement specify the transference of sale proceeds to a trust for your beneficiaries keeps the value of your business out of your estate, so your heirs will not be hit with a hefty estate tax bill.

Estate planning for businesses can be complicated, so small business owners should consult with a Creative Business Lawyer™ to ensure the right strategies are put in place for your individual circumstances.

If you’re a small or mid-size business owner, call us at 303-255-3588 today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.  Normally, this session is $1,250, but if you mention this article and we still have room on our calendar this year, we will waive half of that fee.

Savvy Year-End Tax Moves for Retirement Plan Owners

From Brett Lee Shelton, Family Business Lawyer

Even though the elections are over, no one knows what Congress will do by the end of the year when it comes to taxes so retirees are advised to look at strategies to cut their tax bills now rather than wait for Congress to act.  Some considerations from Kiplinger’s:

Max out on tax-deferred retirement savings plans.  The limits for contributions to a 401(k) or other employer-based retirement plan for 2012 is $17,000; if you are over the age of 50, you can contribute up to $22,500.  Contributing the maximum is also a smart move if you plan to convert a traditional IRA to a Roth IRA since it lowers your taxable income.  IRA contribution limits in 2012 are $5,000; those over 50 can stash away $6,000.

Make gifts before 2012 ends.  Most experts expect Congress to do nothing when it comes to estate and gift taxes, then catch up and make any changes retroactive to Jan. 1, 2013 when the exemption for both goes to $1 million from $5.12 million and the maximum estate tax rate jumps from 35 to 55 percent.  Review your estate plan with your Personal Family Lawyer® to see if gifting makes sense for you this year.

Postpone RMDs as long as possible.  Experts recommend you wait until mid-December to take your required minimum distributions from your IRAs.  The tax break allowing those over the age of 70 ½ to donate $100,000 tax-free to charities directly from their IRAs expired at the end of 2011, but Congress has extended this break several times and may do so again.  So postponing your RMD as long as possible (but not past mid-December) may pay off.

If you’d like to learn more about retirement planning, call our office at 303-255-3588 today to schedule a time for us to sit down and talk.  We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call today and mention this article.

Be Sure You Cover All the Legal Bases for Your Home-Based Business

From Brett Lee Shelton, Denver-Area Family Business Lawyer(tm).

Almost half of small businesses in the U.S. are operated from home, and that number is growing as the population ages and changes careers.  While the convenience of operating a home-based business is hard to beat, you need to be sure you are not running afoul of any local and tax laws while operating your business.  Some considerations:

Zoning – Municipal or county zoning laws typically draw a line between residential and commercial areas.  If you are conducting business from your home that attracts a lot of foot traffic, or you want to post a sign in your yard advertising your business, you will likely need to get permission to do so.  If you have a homeowners association in your neighborhood, you will probably need their permission as well. 

Permits and Licenses – Many cities regulate home-based businesses, requiring they limit employees to one or two people or limiting the number of customers that can come to your door.  You will need to check with your municipality to see what regulations exist for home-based businesses and if you need a permit or a license to operate your business from your home.

Tax Laws – While you are allowed to deduct the cost of having an office in your home, the IRS has strict rules about what can and cannot be deducted.  Space for your office can only be used for that purpose, and cannot do double duty as a guest bedroom or den.  Check with your accountant for IRS guidelines on deductions for home offices.

Insurance – If you have employees or clients coming to your home and they suffer an accident, you need to be sure your homeowners insurance covers any claims.  Often you will need to take out a separate policy or have a rider attached to your policy for business protection.

To be sure you understand all the rules and regulations surrounding the establishment of a home-based business, you should consult with a Creative Business Lawyer™. 

If you’re a small or mid-size business owner, call us at 303-255-3599 today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.  Normally, this session is $1,250, but if you mention this article and we still have room on our calendar this month, we will waive half of that fee.

Retirement Planning Guidelines for Every Age

From Personal Family Lawyer, Brett Lee Shelton:

You’re never too young or too old to save for retirement; here are some guidelines by age group:

Under 25:  If you graduated from college with debt, you are certainly not alone – the average debt burden is currently $26,500 for 65 percent of college graduates.  Once you are able to get a good job, you should enroll in your employer’s 401(k) or other retirement savings plan and contribute enough to qualify for your employer’s match – usually six percent of salary.

25-40:  You need to be putting away about 10 percent of your income towards retirement, and that should come before you save for a house or the kids’ college fund.

40-54:  You are in your prime earning years and should be able to contribute 15 percent or more to your retirement savings. 

55-70:  Retirement is within sight now, so you may need to start adjusting your asset allocation to risk.  The closer you are to retirement, the less risk you should be taking.  You should also look into long-term care insurance to protect retirement assets.

Over 70:  Your withdrawal rate should generally be no more than four percent of your total portfolio value, not including an emergency reserve fund, to supplement your income from Social Security or pension.  Once you are over 70 ½, you must take the Required Minimum Distribution (RMD) from your traditional IRA and 401(k) every year, which is calculated based on your life expectancy according to IRS Publication 590.

If you’d like to learn more about retirement planning, call our office at 303-255-3588 today to schedule a time for us to sit down and talk.  We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call today and mention this article.

5 Reasons Business Owners Need to Review Their Buy-Sell Agreements Immediately

From Brett Lee Shelton, Family Business Lawyer™

Savvy business owners typically execute buy-sell agreements in order to protect their family’s biggest asset.  It is, essentially, the last will and testament for your business.  But just like a will, if circumstances change, a buy-sell agreement needs to be updated to reflect those changes.  Here are five good reasons you need to meet with a Family Business Lawyer to review your company’s buy-sell agreement right away:

Changes in business value.  Many buy-sell agreements attach a specific value to the business, but that value can – and does – change with the times.  A valuation that is now too high can be as bad as one that is too low, resulting in existing shareholders having to pay an inflated sum to a partner that is leaving the company.

Under-valuation triggering higher taxes.  If the valuation is based on a standard that would conflict with the IRS’ application of highest-and-best-use valuation, you could be sitting on a tax bomb.

Marital issues.  A divorce can wreak havoc on a privately held business, and if marital issues have not been taken into account in your business’ buy-sell agreement, you are asking for trouble.

Life changes.  A good buy-sell agreement should take major life changes of its partners into consideration: death, divorce, disability, departure and dissolution.  The agreement needs to cover contingencies for all these triggers.

Lack of funding.  A buy-sell agreement is an empty shell unless it is properly funded and that funding matches up with the terms within the agreement.

If you’re a small or mid-size business owner, call us today at (303)-255-3588 to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.  Normally, this session is $1,250, but if you mention this article and we still have room on our calendar this month, we will waive half of that fee.

How to Protect Elderly Parents From Financial Abuse

From Brett Lee Shelton, Denver area Personal Family Lawyer – estate planning attorney at SSRS.

According to a recent study by the Investor Protection Trust and Investor Protection Institute, the top three ways that the elderly could be financially exploited are:

  • Theft of funds or property by family members
  • Theft of funds or property by caregivers
  • Financial scams by strangers

It is estimated that one in nine seniors has been a victim of financial abuse in the past year, so what can you do to protect elderly parents from financial fraud?  Here are some tips:

Seek out a financial abuse prevention seminar in your local area.  Many senior centers and organizations provide these programs, so choose one and go with your parent(s) as an opportunity to do something social with them.

Put your parents’ finances on auto-pilot by enrolling them in direct deposit for Social Security, pension, retirement and investment income.  Set up automatic bill pay for as many bills as possible, and help them pay their bills online.

Check in with them frequently and ask them directly if they have been solicited by anyone who visited or called.  If you live nearby, visit in person.

Some experts advise those with elderly parents who become incapable of handling investments to invest a portion of their retirement income into a low-cost, immediate-fixed or inflation-adjusted annuity from a reputable insurance company.  This will provide a guaranteed lifetime income that cannot be lost to fraud or abuse.

If a parent’s savings are still in their former employer’s 401(k) plan, consider keeping it there.  These plans are strictly regulated for the exclusive benefit of employees, and may yield the best investment deal possible.

If you’d like to learn more about estate planning, call our office today to schedule a time for us to sit down and talk.  We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call 303-255-3588 today and mention this article.

2013 to Usher in Multiple Tax Changes

A look over the fiscal cliff provided by Brett Lee Shelton, Denver-area Creative Business Lawyer(tm)…

The fiscal cliff so many of us have heard about that looms at the end of this year involves a number of likely tax changes that not only impact estate planning but your business planning as well.  Unless Congress acts by December 31, here’s what you can expect:

Increase in income tax rates – This increase will affect just about everyone, including those in the lowest tax bracket, where rates will go from 10 percent to 15 percent.  For married couples earning between $58,900 and $70,700, the tax bracket would go up from 15 to 28 percent.  Singles earning over $85,650 and married couples earning over $142,700 can expect a minimum three percent increase – the highest rate will go from 35 to 39.6 percent.

Increase in capital gains tax – The tax on capital gains is scheduled to increase by more than 50 percent, and the tax on dividends is expected to more than double.

New Medicare tax – In 2013, the top Medicare tax rate workers pay goes from 1.45 percent to 2.35 percent (the 1.45 percent that employers pay stays the same) for those whose incomes exceed a threshold amount — $200,000 for single taxpayers and $250,000 for a married couple filing jointly.  If you’re self-employed, you’ll pay 3.8 percent, up from 2.9 percent.

New Medicare taxes on investment income – A Medicare Contribution Tax on net investment income and high income trusts, estates and individuals kicks in on Jan. 1, 2013.  Taxpayers that fall into this category will have to pay 3.8 percent of whichever is less:  net investment income or modified adjusted gross income exceeding $200,000 for individuals, $250,000 for married couples filing jointly and $125,000 for married couples filing separate returns. 

End of Social Security tax cuts – On Dec. 31, 2012, the temporary two percent cut in the employee Social Security tax rate will expire.

Phasing out of itemized deductions for high income taxpayers – For those with adjusted gross incomes of more than $100,000, itemized deductions equal to three percent of AGI will be disallowed (excluding medical expenses, investment interest and losses from casualty or theft).

Increase in gift tax exclusion rate – On Jan. 1, 2013, the annual gift tax exclusion rate goes to $14,000, up from $13,000 for the previous four years.

If you’re a small or mid-size business owner, call us at 303-255-3588 today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.  Normally, this session is $1,250, but if you mention this article and we still have room on our calendar this month, we will waive that fee.

When It Comes to Inheritance, Treating Children Equally Not Always the Best Plan

Denver area- estate planning tips…

from Brett Lee Shelton, Personal Family Lawyer(tm)

While most parents have the inclination to treat all their children equally when it comes to an inheritance, Personal Family Lawyers® know that this is not always the wise choice.  Here are some scenarios when an unequal distribution may be better:

Children of unequal wealth – If you have one child that is a successful entrepreneur and another that is a social worker, you might want to leave more to the less financially advantaged child.  If that’s the case, be sure to either explain it to them beforehand or write a letter to be opened upon your death explaining your reasoning.  Most children equate money with love, so don’t leave hard feelings behind.

Poor money manager – if you have a child who is poor at managing money and always in debt, you have an alternative to leaving an inheritance outright: a spendthrift trust.  Setting up a trust to disburse certain amounts at predetermined ages, or allocating funds for medical or educational expenses, can protect the inheritance throughout your child’s lifetime.  In this case, it is best to name a trustee who is not a family member.

Bad relationships – if you have a child who has one or more divorces or a string of bad relationships, you should probably consider establishing a trust in this case as well to shield assets from divorce.

Special needs child – a child with special needs should be provided for through a special needs trust, which can be established in a way that protects his or her ability to receive necessary governmental assistance. 

Child with long-term care needs – if you have a child who has a chronic illness and needs expensive medical treatment, you might want to consider purchasing additional life insurance naming that child as beneficiary.  If the child is a minor, you will need to set up a trust as beneficiary of the policy.

Pre-existing loans – if you have made substantial loans to one child and not the others, you may wish to count those as an early inheritance and take them into account before estate assets are distributed. You can always adjust the distribution later if they pay you back. 

Estranged children – in some cases, parents want to disinherit a child.  If you do decide to take this path, you need to be clear that you are intentionally disinheriting the child and not just simply leave them out of your estate plan. 

If you’d like to learn more about creating a personal estate plan, call our office today to schedule a time for us to sit down and talk.  We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at half-price ($375). Call 303-255-3588 today and mention this article.