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Ashleigh Laabs 3/25/22 Ashleigh Laabs 3/25/22

360-degree feedback helps business owners see the big picture

Business owners are regularly urged to “see the big picture.” In many cases, this imperative applies to a pricing adjustment or some other strategic planning idea. However, seeing the big picture also matters when it comes to managing the performance of your staff.

Perhaps the best way to get a fully rounded perspective on how all your employees are performing is through a 360-degree feedback program. Under such an initiative, feedback is gathered from not only supervisors rating employees, but also from employees rating supervisors and employees rating each other. Sometimes even customers or vendors are asked to contribute.

Designing a survey

As you might have guessed, a critical element of a 360-degree feedback program is the written survey that you distribute to participants when gathering feedback. You can inadvertently sabotage the entire effort early on if this survey is poorly written or difficult to complete.

For starters, keep it as brief as possible. Generally, a participant should be able to fill out the survey in about 15 to 20 minutes. Ask concise questions that have a clear point. Be sure the language is unbiased; avoid words such as “excellent” or “always.” Ensure the questions and performance criteria are job-related and not personal in nature.

If using a rating scale, offer seven to 10 points that ask to what extent the person being rated exhibits a given behavior, rather than how often. It’s a good idea to use a dual-rating scale that includes both quantitative and qualitative performance questions.

Another good question is: To what extent should the person exhibit the behavior described, given his or her job role? By comparing the answers, you basically perform a gap analysis that helps interpret the results and reduces a rater’s bias to score consistently high or low.

Encouraging buy-in

To optimize the statistical validity of 360-degree feedback results, you need the largest sample size possible. Tell feedback providers how you’ll analyze their input, assuring them that their time will be well spent.

Also, emphasize the importance of being objective and avoiding invalid observations that might arise from their own prejudices. Ask providers to comment only on aspects of the subject employee’s performance that they’ve been able to observe.

Even with anonymous feedback, you should require some accountability. Incorporate a mechanism that would enable someone other than the subject of the evaluation — for instance, a senior HR manager — to address any abuse of the program. And, of course, ensure that subjects of the feedback process can work with their supervisors to act on the input they receive.

Taking it slowly

If a 360-degree feedback program sounds like something that could genuinely help your business, don’t rush into it. Discuss the idea with your leadership team and take the time to design a program with strong odds of success. Finally, bear in mind that you’ll likely have to fine-tune the program in years ahead to get the most useful data.

Ashleigh Laabs 3/25/22 Ashleigh Laabs 3/25/22

A beneficiary designation or joint title can override your will

Inattention to beneficiary designations and jointly titled assets can quickly unravel your estate plan. Suppose, for example, that your will provides for all of your property to be divided equally among your three children. But what if your IRA, which names the oldest child as beneficiary, accounts for half of the estate? In that case, the oldest child will inherit half of your estate plus a one-third share of the remaining assets — hardly equal.

The same goes for jointly owned property. When you die, the surviving owner takes title to the property regardless of the terms of your will. Unfortunately, many people don’t realize that their wills don’t control the disposition of nonprobate assets.

What are nonprobate assets?

Nonprobate assets generally are transferred automatically at death according to a beneficiary designation or contract. So they override your will. They include life insurance policies, retirement plans and IRAs, as well as joint bank or brokerage accounts. Even savings bonds come with beneficiary forms.

To ensure that your estate plan reflects your wishes, review beneficiary designations and property titles regularly, particularly after significant life events such as a marriage or divorce, the birth of a child, or the death of a loved one.

What about POD and TOD designations?

Payable-on-death (POD) and transfer-on-death (TOD) designations provide a simple and inexpensive way to transfer assets outside of probate. POD designations can be used for bank accounts and certificates of deposit. TOD designations can be used for stocks, bonds, brokerage accounts and, in many states, even real estate.

Setting one up is as easy as providing a signed POD or TOD beneficiary designation form. When you die, your beneficiaries just need to present a certified copy of the death certificate and their identification to the bank or brokerage, and the money or securities are theirs.

However, just like other beneficiary designations, POD and TOD designations can backfire if they’re not carefully coordinated with the rest of your estate plan. Too often, people designate an account as POD or TOD as an afterthought, without considering whether it may conflict with their wills, trusts or other estate planning documents.

Another potential problem with POD and TOD designations is that, if you use them for most of your assets, the assets left in your estate may be insufficient to pay debts, taxes or other expenses. Your executor would then have to initiate a proceeding to bring assets back into the estate.

Whether you have large retirement accounts or life insurance policies, hold joint accounts or use POD or TOD designations as part of your estate plan, we can review the rest of your plan to identify potential conflicts.

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FMD’s estate planning team will work with you and your legal and financial advisers to design plans that align with your goals and objectives. When it comes to estate planning and wealth preservation, every one of our clients receives the quality of service and personal attention that are the hallmarks of FMD. To learn more about how we can help address your estate planning and wealth preservation needs, contact us today.

Ashleigh Laabs 3/22/22 Ashleigh Laabs 3/22/22

Defined-value gifts: Plan carefully to avoid unpleasant tax surprises

For 2022, the federal gift and estate tax exemption has reached its highest level ever. In fact, you can transfer up to $12.06 million by gift or bequest without triggering federal transfer taxes. This is a limited time offer, however, as the exemption amount is scheduled to drop to $5 million (adjusted for inflation) in 2026. (However, Congress could pass legislation to reduce it even sooner or to extend it longer.)

Many are considering making substantial gifts to the younger generation to take advantage of the current exemption while it lasts. Often, these gifts consist of hard-to-value assets — such as interests in a closely held business or family limited partnership (FLP) — which can be risky. A defined-value gift may help you avoid unexpected tax liabilities.

Hedging your bets

Simply put, a defined-value gift is a gift of assets that are valued at a specific dollar amount rather than a certain number of stock shares or FLP units or a specified percentage of a business entity.

Structured properly, a defined-value gift ensures that the gift won’t trigger an assessment of gift taxes down the road. The key to this strategy is that the defined-value language in the transfer document is drafted as a “formula” clause rather than an invalid “savings” clause.

A formula clause transfers a fixed dollar amount, subject to adjustment in the number of shares or units necessary to equal that dollar amount (based on a final determination of the value of those shares or units for federal gift and estate tax purposes). A savings clause, in contrast, provides for a portion of the gift to be returned to the donor if that portion is ultimately determined to be taxable.

Language matters

For a defined-value gift to be effective, it’s critical to use precise language in the transfer documents. In one recent case, the U.S. Tax Court rejected an intended defined-value gift of FLP interests and upheld the IRS’s assessment of gift taxes based on percentage interests. The documents called for the transfer of FLP interests with a defined fair market value “as determined by a qualified appraiser” within a specified time after the transfer.

The court found that the transfer documents failed to achieve a defined-value gift, because fair market value was determined by a qualified appraiser. The documents didn’t provide for an adjustment in the number of FLP units if their value “is finally determined for federal gift tax purposes to exceed the amount described.”

Seek professional advice

If you plan to make substantial gifts of interests in a closely held business, FLP or other hard-to-value asset, a defined-value gift can help you avoid unwanted gift tax consequences. Turn to us before taking action because to be effective, the transfer documents must contain specific language that provides for adjustment of the number of shares or units to convey the desired value. We’d be pleased to help.

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Ashleigh Laabs 3/9/22 Ashleigh Laabs 3/9/22

Business owners, lean into sales staff retention

Although there have been some positive signs for the U.S. economy thus far in 2022, many businesses are still reeling from last year’s “Great Resignation.” This trend of a historic number of workers voluntarily leaving their jobs, combined with the difficulty of hiring new employees, didn’t spare sales teams. However, one could say that the Great Resignation only threw gasoline on an existing fire.

Historically, sales departments have always trended toward higher turnover rates. Maybe you’ve grown accustomed to salespeople coming and going, and you believe there’s not much you can do about it. Or can you? By leaning into sales staff retention a little harder, you could avoid the worst of today’s uncomfortably tight job market and hang on to your top sellers.

Improve hiring and onboarding

Retention efforts shouldn’t begin with those already on the payroll; it should start during hiring and ramp up when onboarding. A rushed, confusing or cold approach to hiring can get things off on a bad foot. In such cases, new hires tend to enter the workplace cautiously or skeptically, with their eyes on the exit sign rather than the “upper floors” of a company.

Onboarding is also immensely important. Many salespeople can tell horror stories of being shown to a cubicle with nothing but a telephone on the desk and told to “Get to it.” Today, with so many people working remotely, a new sales hire might not even get that much attention. Welcome new employees warmly, provide ample training, and perhaps give them a mentor to help them get comfortable with your business and its culture.

Reward loyalty

Even when hiring and onboarding go well, most employees will still consider a competitor’s offer if the price is right. So, to improve your chances of retaining top sales producers and their customers, consider financial incentives.

Offering retention bonuses and rewards for maintaining and increasing sales — in addition to existing compensation plans — can help. Make such incentives easy to understand and clearly achievable. Although interim bonus programs might be expensive in the near term, they can stabilize sales and prevent sharp declines. When successful, a bonus program will help you generate more long-term revenue to offset the immediate costs.

Encourage ideas

Because they work in the trenches, salespeople often have good ideas for capitalizing on your company’s strengths and shoring up its weaknesses. Look into forming a sales leadership team to evaluate the potential benefits and risks of strategic objectives. The team should include two to four top sellers who are taken off their regular responsibilities and tasked with retaining customers and maintaining sales momentum during strategic planning efforts.

The sales leadership team can also serve as a clearinghouse for customer concerns and competitor strategies. It could help with communications to clear up confusion over current or upcoming product or service offerings. And it might be able to contribute to the development of new products or services based on customer feedback and demand.

Buck the trend

Sales departments in many industries will likely continue to have relatively high turnover rates, but that doesn’t mean your business can’t buck the trend. Give your salespeople a little more attention and input, and you could retain the staff needed to maintain and improve your company’s competitive edge.

Ashleigh Laabs 3/7/22 Ashleigh Laabs 3/7/22

Clarity counts when it comes to estate planning documents

Precise language is critical in wills, trusts and other estate planning documents. A lack of clarity may be an invitation to litigation. An example of this is the dispute that arose after Tom Petty’s death, between his widow and his two daughters from a previous marriage. (The two parties have since resolved their differences and dismissed all litigation matters.)

Interpreting “equal participation”

Details of the musician’s estate plan aren’t entirely clear. But it appears that his trust appointed his widow as a “directing trustee,” while providing that she and his daughters were entitled to “participate equally” in the management of his extensive music catalog and other assets. Unfortunately, the trust failed to spell out the meaning of “equal participation,” resulting in litigation between Petty’s widow and daughters over control of his assets.

There are several plausible interpretations of “equal participation.” One interpretation is that each of the three women has an equal vote, giving the daughters the ability to rule by majority.

Another interpretation is that each has an opportunity to participate in the decision-making process, but Petty’s widow has the final say as the directing trustee. Yet another possibility is that Petty intended for the women to make decisions by unanimous consent.

Determining intent

If the two parties hadn’t settled their differences out of court, it would have been up to the court to provide an answer based on evidence of Petty’s intent. But the time, expense and emotional strain of litigation may have been avoided by including language in the trust that made that intent clear.

If you’re planning your estate, the Petty case illustrates the importance of using unambiguous language to ensure that your wishes are carried out. And if you anticipate that one or more of your beneficiaries will perceive your plan as unfair, sit down with them to explain your reasoning. This discussion can go a long way toward avoiding future disputes.

Review and revise to make your intent crystal clear

If your estate plan has already been drafted and you have concerns regarding the language used, contact your attorney. He or she can review your documents to determine if more precise wording is necessary to make your intentions crystal clear for your family after your death.

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Ashleigh Laabs 3/2/22 Ashleigh Laabs 3/2/22

The IRS again eases Schedules K-2 and K-3 filing requirements for 2021

The IRS has announced additional relief for pass-through entities required to file two new tax forms — Schedules K-2 and K-3 — for the 2021 tax year. Certain domestic partnerships and S corporations won’t be required to file the schedules, which are intended to make it easier for partners and shareholders to find information related to “items of international tax relevance” that they need to file their own returns.

In 2021, the IRS released guidance providing penalty relief for filers who made “good faith efforts” to adopt the new schedules. The IRS has indicated that its latest, more sweeping move comes in response to continued concern and feedback from the tax community and other stakeholders.

A tough tax season for the IRS

The announcement of additional relief comes as IRS Commissioner Charles Rettig has acknowledged that the agency faces “enormous challenges” this tax season. For example, millions of taxpayers are still waiting for prior years’ returns to be processed.

To address such issues, he says, the IRS has taken “extraordinary measures,” including mandatory overtime for IRS employees, the creation and assignment of “surge teams,” and the temporary suspension of the mailing of certain automated compliance notices to taxpayers. In addition, the partial suspension of the Schedules K-2 and K-3 filing requirements might ease the burden for both affected taxpayers and the IRS.

K-2 and K-3 filing requirements

Provisions of the Tax Cuts and Jobs Act, which was enacted in 2017, require taxpayers to provide significantly more information to calculate their U.S. tax liability for items of international tax relevance. The Schedule K-2 reports such items, and the Schedule K-3 reports a partner’s distributive share of those items. These schedules replace portions of Schedule K and numerous unformatted statements attached to earlier versions of Schedule K-1.

Schedules K-2 and K-3 generally must be filed with a partnership’s Form 1065, “U.S. Return of Partnership Income,” or an S corporation’s Form 1120-S, “U.S. Income Tax Return for an S Corporation.” Previously, partners and S corporation shareholders could obtain the information that’s included on the schedules through various statements or schedules the respective entity opted to provide, if any. The new schedules require more detailed and complete reporting than the entities may have provided in the past.

In January of 2022, the IRS surprised many in the tax community when it posted changes to the instructions for the schedules. Under the revised instructions, an entity may need to report information on the schedules even if it had no foreign partners, foreign source income, assets generating such income, or foreign taxes paid or accrued.

For example, if a partner claims a credit for foreign taxes paid, the partner might need certain information from the partnership to file his or her own tax return. Although some narrow exceptions apply, this change substantially expanded the pool of taxpayers required to file the schedules.

Good faith exception

IRS Notice 2021-39 exempted affected taxpayers from penalties for the 2021 tax year if they made a good faith effort to comply with the filing requirements for Schedules K-2 and K-3. When determining whether a filer has established such an effort, the IRS considers, among other things:

The extent to which the filer has made changes to its systems, processes and procedures for collecting and processing the information required to file the schedules,
The extent the filer has obtained information from partners, shareholders or a controlled foreign partnership or, if not obtained, applied reasonable assumptions, and
The steps taken by the filer to modify the partnership or S corporation agreement or governing instrument to facilitate the sharing of information with partners and shareholders that’s relevant to determining whether and how to file the schedules.

The IRS won’t impose the relevant penalties for any incorrect or incomplete reporting on the schedules if it determines the taxpayer exercised the requisite good faith efforts.

Latest exception

Under the latest guidance, announced in early February, partnerships and S corporations need not file the schedules if they satisfy all of the following requirements:

For the 2021 tax year:
- The direct partners in the domestic partnership aren’t foreign partnerships, corporations, individuals, estates or trusts, and
- The domestic partnership or S corporation has no foreign activity, including 1) foreign taxes paid or accrued, or 2) ownership of assets that generate, have generated or may reasonably be expected to generate foreign-source income.
For the 2020 tax year, the domestic partnership or S corporation didn’t provide its partners or shareholders — nor did they request — information regarding any foreign transactions.
The domestic partnership or S corporation has no knowledge that partners or shareholders are requesting such information for the 2021 tax year.

Entities that meet these criteria generally aren’t required to file Schedules K-2 and K-3. But there’s an important caveat. If such a partnership or S corporation is notified by a partner or shareholder that it needs all or part of the information included on Schedule K-3 to complete its tax return, the entity must provide that information.

Moreover, if the partner or shareholder notifies the entity of this need before the entity files its own return, the entity no longer satisfies the criteria for the exception. As a result, it must provide Schedule K-3 to the partner or shareholder and file the schedules with the IRS.

Temporary reprieves

The IRS guidance on the exceptions to the Schedules K-2 and K-3 filing requirement explicitly refers to 2021 tax year filings. In the absence of additional or updated guidance, partnerships and S corporations should expect and prepare to file the schedules for current and future tax years. We can help ensure you have the necessary information on hand.

Ashleigh Laabs 3/2/22 Ashleigh Laabs 3/2/22

5 ways to control your business insurance costs

Common sense dictates that every company, no matter how small, should carry various forms of business insurance. But that doesn’t mean you should pay unnecessarily high premiums just to retain the coverage you need. Here are five ways to better control your insurance costs without sacrificing the quality of your policies:

1. Review coverage periodically. Make sure existing policies reflect your current circumstances. For example, if you’ve sold or sunset some equipment, remove it from your schedule of current assets. If you’ve reduced the number of workers on your payroll, adjust workers’ compensation estimates accordingly. (We’ll address this further below.) On the other hand, if you’ve added equipment, vehicles or staff, see that they’re appropriately covered.

2. Shop around. Spend some time and effort to compare coverage and costs of various insurers. Investigate whether you qualify for any discounts that you’re not getting. To facilitate the process, you might want to engage an insurance specialist in your industry. The right expert can help you weigh the total, true costs of various policies and advise you without a vested interest in selling you a particular product.

3. Actively manage workers’ compensation coverage. In some industries, such as construction and manufacturing, workers’ comp is a major focus. In others, business owners might pay little attention to it if accidents rarely occur. Be sure that you keep up with the costs of this coverage and make regular adjustments as the nature of work changes.

Workers’ compensation insurers assign risk classification codes to employees based on their duties, responsibilities, and level of exposure to the risk of injury or illness. Higher risk means higher premiums so, at least annually, check that you’re classifying employees accurately. For example, if an employee who now works from home is still classified as someone who travels regularly or works in a higher risk location, your premiums may be needlessly inflated.

4. Consider higher deductibles. If you’re comfortable assuming some additional risk, and your cash flow is strong enough, calculate whether you can save on premiums by raising the deductibles on certain policies. It could be worth paying a higher deductible so long as the premium savings is enough to cover a claim or two if they do occur.

5. Prioritize safety. Keeping employees safe is a worthy goal in and of itself, of course. But emphasizing the importance of safety to managers, supervisors, employees and any independent contractors you might have on-site can also positively affect your company’s insurance costs. After all, the premiums you pay are based in part on your claims history. There are various steps that every business should take to avoid injuries and illness:

Provide safety training to new hires,
Conduct drills and refresher training for current employees,
Issue personal protective equipment, as appropriate, and
Strictly enforce safe work practices with no exceptions.

By keeping your employees safe, and promoting wellness in every respect, you’ll not only decrease the likelihood of costly insurance claims, but you’ll also likely contribute to higher morale and more robust productivity. We can help you measure and assess your insurance costs so you can make the right adjustments without incurring unnecessary risk.

Ashleigh Laabs 2/25/22 Ashleigh Laabs 2/25/22

Owning real estate in more than one state may multiply probate costs

One goal of estate planning is to avoid or minimize probate. This is particularly important if you own real estate in more than one state. Why? Because each piece of real estate titled in your name must go through probate in the state where the property is located.

Cost and time can become issues

Probate is a court-supervised administration of your estate. If probate proceedings are required in several states, the process can become expensive.

For example, your representative will need to engage a probate lawyer in each state, file certain documents in each state and comply with other redundant administrative requirements. In addition to the added expense, the process may also delay the settlement of your estate.

Place all real estate into a revocable trust

If you have a revocable trust (sometimes called a “living trust”), the simplest way to avoid multiple probate proceedings is to ensure that the trust holds the title to all of your real estate. Generally, this involves preparing a deed transferring each property to the trust and recording the deed in the county where the property is located. Property held in a revocable trust generally doesn’t have to go through probate.

Before you transfer real estate to a revocable trust, we can help determine if doing so will have negative tax or estate planning implications. For example, will transferring a residence to a trust affect your eligibility for homestead exemptions from property taxes or other tax breaks? Will the transfer affect any mortgages on the property? Will it be subject to any real property transfer taxes?

It’s also important to consider whether transferring title to property will affect the extent to which it’s shielded from the claims of creditors. Please contact us with any questions.

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Ashleigh Laabs 2/25/22 Ashleigh Laabs 2/25/22

Should your business address retirement plan leakage?

Under just about any circumstances, the word “leakage” has negative connotations. And so it follows that this indeed holds true for retirement planning as well.

In this context, leakage refers to early, pre-retirement withdrawals from an account. Now, as a business owner who sponsors a qualified retirement plan, you might say, “Well, that’s my participants’ business, not mine.”

However, there are valid reasons to care about the issue and perhaps address it with employees who participate in your plan.

Why it matters

For starters, leakage can lead to higher plan expenses. Fees are often determined on a per-account or per-participant basis. When a plan loses funds to leakage, total assets and individual account sizes shrink, which tends to hurt administrative efficiency and raise costs.

More broadly, if your employees are taking pre-retirement withdrawals, it could indicate they’re facing unusual financial challenges. These usually have a negative impact on productivity and work quality. What’s more, workers who raid their accounts may be unable to retire when they reach retirement age.

Of course, the COVID-19 pandemic has put many people in difficult financial positions that have led them to consider withdrawing some funds from their retirement accounts. More recently, “the Great Resignation” might have some account holders pondering whether they should quit their jobs and pull out some retirement funds to live on temporarily or use to start a gig or business of their own.

What you might do

Perhaps the most important thing business owners can do to limit leakage is educate and remind employees about how pre-retirement withdrawals can diminish their accounts and delay their anticipated retirement dates. While you’re at it, provide broader financial education to help workers better manage their money, amass savings, and minimize or avoid the need for an early withdrawal.

Some companies offer emergency loans that are repayable through payroll deductions, thus providing an avenue around the use of retirement funds. Others have revised their plan designs to reduce the number of situations under which plan participants can take out hardship withdrawals or loans.

Minimize the impact

“Roughly 22% of net contributions made by those 50 or younger leaks out of the retirement savings system in a given year,” according to a 2021 report released by the Joint Committee on Taxation.

Some percentage of retirement plan leakage will probably always occur to some extent. Nonetheless, being aware of the problem and taking steps to minimize it are worthy measures for any business that sponsors a qualified plan. We can answer any questions you might have about leakage or other aspects of plan administration and compliance.

Ashleigh Laabs 2/21/22 Ashleigh Laabs 2/21/22

Use the net gift technique to reduce your gift tax rate

If you’re concerned about the impact of transfer taxes on your gifts, consider making “net gifts” to your loved ones. A net gift is simply a gift for which the recipient agrees to pay the gift tax, thereby reducing the value of the gift for tax purposes. It may also be possible to reduce its value further through the “net, net gift” technique.

The technique in action

The easiest way to demonstrate the benefits of a net gift is through an example. Suppose you’d like to make a $1 million gift to your adult son. For purposes of this example, also assume that you’ve already exhausted your federal gift and estate tax exemption amount, so the gift is fully taxable. At the current 40% marginal rate, the tax on your $1 million gift would be $400,000. However, if your son agrees to pay the gift tax as a condition of receiving the gift, then the value of the gift would be reduced by the amount of tax, which in turn would reduce the amount of gift tax owed.

Rather than get caught up in an endless loop of calculating the tax, reducing the gift’s value, recalculating the tax, and so on, there’s a simple formula for determining your son’s tax liability: Gift tax = tentative tax/(1 + tax rate). In our example, the tentative tax is $400,000 (the tax that would’ve been owed on an outright gift), so the gift tax on the net gift would be $400,000/1.4 = $285,714.

You can confirm that the math works out by assuming that you give your son $1 million and that he agrees to pay $285,714 in gift taxes. That tax liability reduces the gift to $1 million - $285,714 = $714,287, resulting in a tax liability of .40 x $714,287 = $285,714.

By using a net gift technique, you reduce the effective tax rate on the $1 million transfer from 40% to only 28.57%. Note that if the gift is in the form of appreciated assets rather than cash, the recipient’s payment of the tax liability can result in capital gains taxes for the donor.

Taking it up a notch

It may be possible to further reduce the effective gift tax rate by using a net, net gift. Under this technique, in addition to assuming liability for gift taxes, the recipient also agrees to pay any estate tax liability that might arise by virtue of the so-called “three-year rule.”

Under that rule, gifts made within three years of death are pulled back into the donor’s estate and subject to estate taxes. The U.S. Tax Court has effectively given its blessing to the net, net gift technique, allowing the value of a gift to be reduced by the actuarial value of the recipient’s contingent obligation to pay estate taxes that would be owed if the donor were to die within three years of making the gift.

If you’re considering the net gift technique, consult with us before taking any action.

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Ashleigh Laabs 2/17/22 Ashleigh Laabs 2/17/22

Prudent technology upgrades call for some soul searching

By now, most business owners view technology upgrades as inevitable. Whether hardware or software, the tech your company relies on to operate will need to change slightly or even drastically for you to stay competitive.

Strange as it may sound, technology upgrades demand a bit of soul searching. That is, before spending the money, you need to dig deep for insights about what your business really needs and whether your employees or customers will appreciate your efforts.

Ask the right questions

Begin the decision process with a series of inquiries. That is, sit down with your leadership team and ask questions such as:

What are the specific functionalities that we need?
Do we need hardware, software or both?
If software, are we looking at an entirely new platform or a smaller upgrade within our existing systems?

Assuming you already have a technology infrastructure in place, compatibility is an issue, too. If you’re using an older operating system, new software could be buggy or flat-out incompatible. In either case, you could incur substantial additional costs to update or replace your operating system, which might involve new hardware and impact other software.

When deciding whether to upgrade internal systems, get input from your staff. For example, your accounting personnel should be able to tell you what types of reports they would want from upgraded financial management software. From there, you can establish criteria for comparing different packages.

If you’re considering changes to a “front-facing” system, you might want to first survey customers to determine whether the upgrade would improve their experience. Ask them questions about what works and what doesn’t to assess whether major or minor changes are needed.

Create a “hot list”

As you’re no doubt aware, there’s no shortage of hardware and software vendors out there. So, just as you’d do your homework on a major asset purchase or the lease of a large office space, do it for a technology upgrade as well.

Generally, longevity is a plus. Look for companies that have been in business for at least five to 10 years, have a track record of successful implementations and can provide references from satisfied customers. Also find out what kind of technical support is included with your purchase.

For example, if you’re doing a software upgrade, is training part of the package? If not, you’ll likely need to send one or more IT staffers out for training or engage a third-party trainer, both of which will cost you additional dollars. And keep in mind that, if you buy a top-of-the-line system but the vendor’s customer service is nonexistent, you and your employees probably won’t be happy.

Your goal is to create a “hot list” of top vendors. With this list in hand, you can get down to the serious business of comparing the various bids. To aid you in this critical decision, ask for free trial periods or online demos to help you choose the best product for your company.

Ensure a happy ending

You’ve likely heard horror stories of businesses that haphazardly attempted to upgrade their technology only to lose time, money and morale fixing the resulting problems. Approach this task cautiously to ensure your upgrade story has a happy ending. For help estimating the costs and projecting the financial impact of a tech upgrade, please contact us.

Ashleigh Laabs 2/11/22 Ashleigh Laabs 2/11/22

The donor-advised fund: A powerful vehicle for charitable giving

If charitable giving is important to you, consider a donor-advised fund (DAF). A DAF — typically sponsored and managed by a community foundation or commercial investment company — offers many of the benefits of a private foundation at a fraction of the cost.

Upsides of a DAF

A DAF allows you to make tax-deductible contributions to an investment account and to advise the fund regarding which charities your contributions and earnings should be used to support. Tax regulations require the sponsor to have the final say on how your charitable dollars are spent, but in most cases the fund will follow your recommendations.

The advantages of a DAF include:

Immediate charitable deductions. The ability to set up a DAF quickly and secure an immediate charitable income tax deduction, without the need to identify a specific charitable beneficiary, is attractive to many donors. Why does this matter? Perhaps this is an ideal year for you — from a tax perspective — to make significant charitable donations, but you haven’t determined which charities you want to support.

Simplicity and low cost. Setting up a DAF is nearly as cheap and easy as opening a mutual fund account. Minimum contributions average around $25,000, although some DAFs allow you to open an account with as little as $5,000.

Private foundations, on the other hand, usually involve six- or seven-figure contributions, take several months to set up, and come with significant legal fees and other expenses. And while a DAF’s sponsor handles investment management and administration, a private foundation requires you to establish a board, hold periodic board meetings, keep meeting minutes and file tax returns.

Higher deduction limits. Cash contributions to DAFs, like donations to other public charities, are deductible up to 60% of your adjusted gross income (AGI). Noncash contributions are deductible up to 30% of AGI. Deduction limits for private foundations are 30% and 20%, respectively.

Privacy. Unlike private foundations and other charitable giving vehicles, a DAF allows you to remain anonymous if you so desire. Technically, when a DAF sponsor donates to a charity, it’s distributing its own assets, so you can elect to keep your name out of it. Alternatively, you can name your DAF after your mission — for example, the Fund for Alzheimer’s Research.

Downsides of a DAF

Once you contribute assets to a DAF, they become the sponsor’s property. Your role in directing distributions is, as the name indicates, strictly advisory, and you have little or no control over investment management.

Evaluate the costs and benefits

Whether a DAF is right for you depends on how much you plan to give to charity, the amount of time and resources you wish to commit to philanthropic activities, your need to retain control over your charitable assets, and other estate planning objectives. We can help you evaluate the relative costs and benefits to determine if a DAF is right for you.

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Ashleigh Laabs 2/10/22 Ashleigh Laabs 2/10/22

Approach turnaround acquisitions with due care

Economic changes wrought by the COVID-19 pandemic, along with other factors, drove historic global mergers and acquisitions (M&A) activity in 2021. Experts expect 2022 to be another busy year for dealmaking.

In many cases, M&A opportunities arise when a business adversely affected by economic circumstances decides that getting acquired by another company is the optimal — or only — way to remain viable. If you get the chance to acquire a distressed business, you might indeed be able to expand your company’s operational scope and grow its bottom line. But you’ll need to take due care before closing the deal.

Looking at the long term

Although so-called “turnaround acquisitions” can yield substantial long-term rewards, acquiring a troubled target can also pose greater risks than buying a financially sound business. The keys are choosing a company with fixable problems and having a detailed plan to address them.

Look for a business with hidden value, such as untapped market opportunities, poor leadership or excessive costs. Also consider cost-saving or revenue-building synergies with other companies that you already own. Assess whether the return on investment will likely exceed the acquisition’s immediate costs and ongoing risks.

Doing your homework

Successful turnaround acquisitions start by understanding the target company’s core business — specifically, its profit drivers and roadblocks.

If you rush into the acquisition, or let emotions cloud your judgment, you could misread the company’s financial statements, misjudge its financial condition and, ultimately, devise an ineffective course of rehabilitative action. This is why so many successful turnarounds are conducted by buyers in the same industry as the sellers or by investors, such as private equity funds, that specialize in a particular sector.

During the due diligence phase, pinpoint the source(s) of your target’s distress. Common examples include:

Excessive fixed costs,
Lack of skilled labor,
Decreased demand for its products or services, and
Overwhelming debt.

Then determine what, if any, corrective measures can be taken. Don’t be surprised to find hidden liabilities — such as pending legal actions or deferred tax liabilities — beyond those you already know about.

You also might find potential sources of value, such as tax breaks or proprietary technologies. Benchmarking the company’s performance against that of its industry peers can help reveal where the potential for profit lies.

Identifying cash flows

Another critical step in due diligence is identifying cash flows, both in and out. Determine what products or services drive revenue and which costs hinder profitability. Does it make sense to divest the business of unprofitable products, services, subsidiaries, divisions or real estate?

Implementing a long-term cash-management plan and developing a forecast based on receipts and disbursements is also critical. Revenue-generating and cost-cutting measures — such as eliminating excessive overtime pay, lowering utility bills, and collecting unbilled or overdue accounts receivable — can often be achieved following a thorough evaluation of accounting controls and procedures.

Reliable due diligence hinges on whether the target company’s accounting and financial reporting systems can produce the appropriate data. If these systems don’t accurately capture transactions, and fully list assets and liabilities, you’ll likely encounter some unpleasant surprises and struggle to turn around the business.

Structuring the deal

Parties to a business acquisition generally structure the deal as a sale of either assets or stock. Buyers generally prefer asset deals, which allow them to select the most desirable items from the target company’s balance sheet. In addition, the buyer receives a step-up in basis on the acquired assets, which lowers future tax obligations. And the buyer gets to negotiate new contracts, licenses, titles and permits.

On the other hand, sellers typically prefer to sell stock, not assets. Selling stock simplifies the deal, and tax obligations are usually lower for the seller. However, stock sales may be riskier for buyers because the business continues to operate uninterrupted, and the buyer takes on all debts and legal obligations. The buyer also inherits the seller’s existing depreciation schedules and tax basis in the company’s assets.

Developing a plan

Current market conditions will likely continue to generate turnaround acquisition opportunities in many industries. We can help you conduct data-driven due diligence and develop a strategic M&A plan that minimizes potential risks and maximizes long-term value.

Ashleigh Laabs 2/3/22 Ashleigh Laabs 2/3/22

New tax reporting requirements for payment apps could affect you

If you run a business and accept payments through third-party networks such as Zelle, Venmo, Square or PayPal, you could be affected by new tax reporting requirements that take effect for 2022. They don’t alter your tax liability, but they could add to your recordkeeping burden, as well as the number of tax-related documents you receive every January in anticipation of tax-filing season.

Form 1099-K primer

Form 1099-K, “Payment Card and Third-Party Network Transactions,” is an information return that reports certain payment transactions to the IRS and the taxpayer who receives the payments. Since it was first introduced in 2012, the form has been used to report payments:

From payment card transactions (for example, debit, credit or stored-value cards), and
In settlement of third-party network transactions, when above a certain minimum threshold amount.

For 2021 and prior years, the threshold was defined as gross payments that exceeded $20,000 and more than 200 such transactions. Note that no minimum threshold applies to payment card transactions — all such payments must be reported.

Taxpayers should receive a Form 1099-K from each “payment settlement entity” (PSE) from which they received payments in settlement of reportable payment transactions (that is, a payment card or third-party network transaction) during the tax year. Form 1099-K reports the gross amount of all reportable transactions for the year and by month. The dollar amount of each transaction is determined on the transaction date.

In the case of third-party network payments, the gross amount of a reportable payment doesn’t include any adjustments for credits, cash equivalents, discounts, fees, refunds or other amounts. In other words, the full amount reported might not represent the taxable amount.

Businesses (including independent contractors) should consider the amounts reported when calculating their gross receipts for income tax purposes. Depending on filing status, the amounts generally should be reported on Schedule C (Form 1040), “Profit or Loss From Business, Sole Proprietorship;” Schedule E (Form 1040), “Supplemental Income and Loss;” Schedule F (Form 1040), “Profit or Loss From Farming;” or the appropriate return for partnerships or corporations.

Understanding the new rules

The American Rescue Plan Act (ARPA), which was signed into law in March of 2021, brought significant changes to the requirements regarding Form 1099-K. The changes are intended to improve voluntary tax compliance.

Beginning in 2022, the number of transactions component of the threshold for reporting third-party network transactions is eliminated, and the gross payments threshold drops to only $600. The change is expected to boost the number of Forms 1099-K many businesses receive in January 2023 for the 2022 tax year and going forward.

The ARPA also includes an important clarification. Since Form 1099-K was introduced, stakeholders have been uncertain about which types of third-party network transactions should be included. The ARPA makes clear that these transactions are reportable only if they’re for goods and services. Payments for royalties, rent and other transactions settled through a third-party network are reported on Form 1099-MISC, “Miscellaneous Information.”

The ARPA changes heighten only the reporting obligations of third-party payment networks; they don’t affect individual taxpayer requirements. They might, however, reduce your odds of inadvertently underreporting income and paying the price down the road.

Taking steps toward accurate reporting

While the increased reporting doesn’t require any specific changes of affected taxpayers, you’d be wise to institute some measures to ensure the reporting is accurate. For example, consider monitoring your payments and the amounts so you know whether you should receive a Form 1099-K from a particular PSE. Notably, you’re required to report the associated income regardless of whether you receive the form.

You’ll also want to step up your recordkeeping to allow you to reconcile any Forms 1099-K with the actual amounts received. If you have multiple sources of income, track and report each separately even if you receive a single Form 1099-K with gross payments for all of the businesses. For example, if you process both retail sales and rent payments on the same card terminal, your tax preparer would report the retail sales on Schedule C and the rent on Schedule E.

If you permit customers to get cash back when using debit cards for purchases, the cash back amounts will be included on Form 1099-K. Those amounts generally aren’t included in your gross receipts or businesses expenses, though, making it critical that you track cash-back activity to prevent inclusion.

Amounts reported could be inaccurate if you share a credit card terminal with another person or business. Where required, consider filing and furnishing the appropriate information return (for example, Form 1099-K or Form 1099-MISC) for each party with whom you shared a card terminal. In addition, keep records of payments issued to every party sharing your terminal, including shared terminal written agreements and cancelled checks.

Other potential landmines include:

Incorrect amounts due to mid-tax year changes in entity type (for example, from a sole proprietorship to a partnership),
Forms issued to you as an individual, with your Social Security number, rather than to your C corporation, S corporation or partnership, with its taxpayer identification number,
Incorrect amounts due to a mid-tax year sale or purchase of a business, and
Duplicate payments that appear on both a Form 1099-K and either a Form 1099-MISC or a Form 1099-NEC, “Nonemployee Compensation.”

If you receive a form with errors in your taxpayer identification number or payment amount, request a corrected form from the PSE and maintain records of all related correspondence.

Don’t dawdle

It may seem tempting to put off the steps necessary to establish solid recordkeeping procedures for payments from third-party networks, but that would be a mistake. We can help you set up the necessary processes and procedures now so you’re in compliance and not scrambling at tax time.

Ashleigh Laabs 2/3/22 Ashleigh Laabs 2/3/22

The 2021 gift tax return deadline is almost here, too

April 18, 2022, is the deadline for filing your federal income tax return. Keep in mind that the gift tax return deadline is on the very same date. So, if you made large gifts to family members or heirs last year, it’s important to determine whether you’re required to file Form 709.

Filing requirements

Generally, you must file a gift tax return for 2021 if, during the tax year, you made gifts that exceeded the $15,000-per-recipient annual gift tax exclusion (other than to your U.S. citizen spouse). (For 2022, the exclusion amount has increased to $16,000 per recipient or $32,000 if you split gifts with your spouse.)

You also need to file if you made gifts to a Section 529 college savings plan and wish to accelerate up to five years’ worth of annual exclusions ($75,000) into 2021. Other reasons to file include making gifts:

That exceeded the $159,000 (for 2021) annual exclusion for gifts to a noncitizen spouse,
Of future interests (such as remainder interests in a trust) regardless of the amount, or
Of jointly held or community property.

Keep in mind that you’ll owe gift tax only to the extent an exclusion doesn’t apply and you’ve used up your federal gift and estate tax exemption ($11.7 million for 2021). As you can see, some transfers require a return even if you don’t owe tax.

No return required

No gift tax return is required if your gifts for the year consist solely of gifts that are tax-free because they qualify as annual exclusion gifts, present interest gifts to a U.S. citizen spouse, educational or medical expenses paid directly to a school or health care provider, or political or charitable contributions.

But if you transferred hard-to-value property, such as artwork or interests in a family-owned business, consider filing a gift tax return even if you’re not required to. Adequate disclosure of the transfer in a return triggers the statute of limitations, generally preventing the IRS from challenging your valuation more than three years after you file.

Be ready

If you’re unsure whether you need to file a gift tax return or if you owe gift tax to the IRS, we can help. Act quickly, though, because the filing deadline is fast approaching.

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Ashleigh Laabs 2/3/22 Ashleigh Laabs 2/3/22

2022 deadlines for reporting health care coverage information

Ever since the Affordable Care Act was signed into law, business owners have had to keep a close eye on how many employees they’ve had on the payroll. This is because a company with 50 or more full-time employees or full-time equivalents on average during the previous year is considered an applicable large employer (ALE) for the current calendar year. And being an ALE carries added responsibilities under the law.

What must be done

First and foremost, ALEs are subject to Internal Revenue Code Section 4980H — more commonly known as “employer shared responsibility.” That is, if an ALE doesn’t offer minimum essential health care coverage that’s affordable and provides at least “minimum value” to its full-time employees and their dependents, the employer may be subject to a penalty.

However, the penalty is triggered only when at least one of its full-time employees receives a premium tax credit for buying individual coverage through a Health Insurance Marketplace (commonly referred to as an “exchange”).

ALEs must do something else as well. They need to report:

Whether they offered full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan,
Whether the offered coverage was affordable and provided at least minimum value, and
Certain other information the IRS uses to administer employer shared responsibility.

The IRS has designated Forms 1094-C and 1095-C to satisfy these reporting requirements. Each full-time employee, and each enrolled part-time employee, must receive a Form 1095-C. These forms also need to be filed with the IRS. Form 1094-C is used as a transmittal for the purpose of filing Forms 1095-C with the IRS.

3 key deadlines

If your business was indeed an ALE for calendar year 2021, put the following three key deadlines on your calendar:

February 28, 2022. This is the deadline for filing the Form 1094-C transmittal, as well as copies of related Forms 1095-C, with the IRS if the filing is made on paper.

March 2, 2022. This is the deadline for furnishing the written statement, Form 1095-C, to full-time employees and to enrolled part-time employees. Although the statutory deadline is January 31, the IRS has issued proposed regulations with a blanket 30-day extension. ALEs can rely on the proposed regulations for the 2021 tax year (in other words, forms due in 2022).

In previous years, the IRS adopted a similar extension year-by-year. The extension in the proposed regulations will be permanent if the regulations are finalized. No other extensions are available for this deadline.

March 31, 2022. This is the deadline for filing the Form 1094-C transmittal and copies of related Forms 1095-C with the IRS if the filing is made electronically. Electronic filing is mandatory for ALEs filing 250 or more Forms 1095-C for the 2021 calendar year. Otherwise, electronic filing is encouraged but not required.

Whether you’re a paper or electronic filer, you can apply for an automatic 30-day extension of the deadlines to file with the IRS. However, the extension is available only if you file Form 8809, “Application for Extension of Time to File Information Returns,” before the applicable due date.

Alternative method

If your company offers a self-insured health care plan, you may be interested in an alternative method of furnishing Form 1095-C to enrolled employees who weren’t full-time for any month in 2021.

Rather than automatically furnishing the written statement to those employees, you can make the statement available to them by posting a conspicuous plain-English notice on your website that’s reasonably accessible to everyone. The notice must state that they may receive a copy of their statement upon request. It needs to also include:

An email address for requests,
A physical address to which a request for a statement may be sent, and
A contact telephone number for questions.

In addition, the notice must be written in a font size large enough, including any visual clues or graphical figures, to highlight that the information pertains to tax statements reporting that individuals had health care coverage. You need to retain the notice in the same location on your website through October 17, 2022. If someone requests a statement, you must fulfill the request within 30 days of receiving it.

Identify your obligations

Although the term “applicable large employer” might seem to apply only to big companies, even a relatively small business with far fewer than 100 employees could be subject to the employer shared responsibility and information reporting rules. We can help you identify your obligations under the Affordable Care Act and assess the costs associated with the health care coverage that you offer.

Ashleigh Laabs 1/31/22 Ashleigh Laabs 1/31/22

Does your trust need protection?

Designing an estate plan can be a delicate balancing act. On the one hand, you want to preserve as much wealth as possible for your family by protecting it from estate taxes and creditors’ claims. On the other hand, you want to have some control over your assets during your life.

Unfortunately, these two goals often conflict with each other. Generally, the most effective way to remove wealth from your taxable estate and shield it from creditors is to place it in one or more irrevocable trusts. But, as the name suggests, an irrevocable trust requires you to relinquish control over the trust assets. One potential solution to this problem is to appoint a trust protector.

Trust protector’s duties

A trust protector is often compared to a member of a corporation’s board of directors. A trustee manages the trust’s day-to-day affairs while the trust protector serves in an oversight capacity to prevent trustee mismanagement and to participate in certain major decisions.

A trust protector’s specific powers are set forth in the trust document. Among other things, powers may include adding, changing or eliminating beneficiaries’ interests; replacing a trustee; and amending the trust or redirecting distributions to comply with new laws or to reflect beneficiaries’ changing circumstances.

One advantage of using a trust protector is that you can confer powers on the protector that you wouldn’t be able to hold yourself without exposing your assets to creditors or triggering gift or estate taxes.

Bear in mind that a trust protector should be distinguished from a trust advisor, who’s available to advise the trustee but has no power to make binding decisions on trust matters.

2 primary benefits

Trust protectors offer two primary benefits:

1. They provide a check against mismanagement, fraud or abuse by the trustee. A trust protector might have the power to remove or replace the trustee, or veto certain decisions, if the trustee isn’t acting in the beneficiaries’ best interests.

2. They allow you to build some flexibility into an otherwise rigid estate planning tool. Many people are reluctant to transfer assets to an irrevocable trust for fear that changing tax laws or changing circumstances years or even decades later may affect the trust’s ability to achieve their original goals. At the same time, they may be hesitant to provide the trustee with too much discretionary authority over the trust. A trust protector can step in if circumstances change and modify the trust or take other actions to ensure that the trust continues to accomplish your estate planning objectives.

Scope of a trust protector’s powers

What powers should you grant your trust protector? The answer depends on the nature of your estate plan, your family’s situation, the capabilities of the trustee and your specific estate planning objectives. But in most cases, it’s advisable to limit the trust protector’s authority to relatively narrow circumstances. Contact us if you have questions regarding the role a trust protector should play in your estate plan.

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Ashleigh Laabs 1/31/22 Ashleigh Laabs 1/31/22

Let your financial statements guide you to optimal business decisions

Now that 2022 is up and running, business owners can expect to face a few challenges and tough choices as the year rolls along. No matter how busy things get, don’t forget about an easily accessible and highly informative resource that’s probably just a few clicks away: your financial statements.

Assuming you follow U.S. Generally Accepted Accounting Principles (GAAP) or similar reporting standards, your financial statements will comprise three major components: an income statement, a balance sheet and a statement of cash flows. Each one contains different, but equally important, information about your company’s financial performance. Together, they can help you and your leadership team make optimal business decisions.

Revenue and expenses

The first component of your financial statements is the income statement. It shows revenue and expenses over a given accounting period. A commonly used term when discussing income statements is “net income.” This is the income remaining after you’ve paid all expenses, including taxes.

It’s also important to check out “gross profit.” This is the income earned after subtracting the cost of goods sold from revenue. Cost of goods sold includes the cost of direct labor and materials, as well as any manufacturing overhead costs required to make a product.

The income statement also lists sales, general and administrative (SG&A) expenses. They reflect functions, such as marketing and payroll, that support a company’s production of products or services. Often, SG&A costs are relatively fixed, no matter how well your business is doing. Calculate the ratio of SG&A costs to revenue: If the percentage increases over time, business may be slowing down.

Assets, liabilities and net worth

The second component is the balance sheet. It tallies your assets, liabilities and net worth to create a snapshot of the company’s financial health on the financial statement date. Assets are customarily listed in order of liquidity. Current assets (such as accounts receivable) are expected to be converted into cash within a year. Long-term assets (such as plant and equipment) will be used to generate revenue beyond the next 12 months.

Similarly, liabilities are listed in order of maturity. Current liabilities (such as accounts payable) come due within a year. Long-term liabilities are payment obligations that extend beyond the current year.

True to its name, the balance sheet must balance — that is, assets must equal liabilities plus net worth. So, net worth is the extent to which assets exceed liabilities. It may signal financial distress if your net worth is negative.

Other red flags include current assets that grow faster than sales and a deteriorating ratio of current assets to current liabilities. These trends could indicate that management is managing working capital less efficiently than in previous periods.

Inflows and outflows of cash

The statement of cash flows shows all the cash flowing in and out of your business during the accounting period.

Cash inflows typically come from selling products or services, borrowing and selling stock. Outflows generally result from paying expenses, investing in capital equipment and repaying debt. The statement of cash flows is organized into three sections, cash flows from activities related to:

Operating,
Financing, and
Investing.

Ideally, a company will generate enough cash from operations to cover its expenses. If not, it might need to borrow money or sell stock to survive.

The good and the bad

Sometimes business owners get into the habit of thinking of their financial statements as a regularly occurring formality performed to satisfy outside parties such as investors and lenders. On the contrary, your financial statements contain a wealth of data that can allow you to calculate ratios and identify trends — both good and bad — affecting the business. For help generating accurate financial statements, as well as analyzing the information therein, please contact us.

Ashleigh Laabs 1/24/22 Ashleigh Laabs 1/24/22

Educate Your Children On Wealth Management

If you’ve worked a lifetime to build a large estate, you undoubtedly would like to leave a lasting legacy to your children and future generations. Educating your children about saving, investing and other money management skills can help keep your legacy alive.

Teaching techniques

There’s no one right way to teach your children about money. The best way depends on your circumstances, their personalities and your comfort level.

If your kids are old enough, consider sending them to a money management class. For younger children, you might start by simply giving them an allowance in exchange for doing household chores. This helps teach them the value of work. And, after they spend the money all in one place a few times and don’t have anything left for something they really want, they (hopefully) will learn the value of saving. Opening a savings account or a CD, or buying bonds, can help teach kids about investing and the power of compounding.

For families that are charitably inclined, a private foundation can be a vehicle for teaching children about the joys of giving and the impact wealth can make beyond one’s family. For this strategy to be effective, children should have some input into the foundation’s activities.

Timing and amounts of distributions

Many parents take an all-or-nothing approach when it comes to the timing and amounts of distributions to their children — either transferring substantial amounts of wealth all at once or making gifts that are too small to provide meaningful lessons.

Consider making distributions large enough so that your kids have something significant to lose, but not so large that their entire inheritance is at risk. For example, if your child’s trust is worth $2 million, consider having the trust distribute $200,000 when your son or daughter reaches age 21. This amount is large enough to provide a meaningful test run of your child’s financial responsibility while safeguarding the bulk of the nest egg.

Introduce incentives, but remain flexible

An incentive trust is one that rewards children for doing things that they might not otherwise do. Such a trust can be an effective estate planning tool, but there’s a fine line between encouraging positive behavior and controlling your children’s life choices. A trust that’s too restrictive may incite rebellion or invite lawsuits.

Incentives can be valuable, however, if the trust is flexible enough to allow a child to chart his or her own course. A so-called principle trust, for example, gives the trustee discretion to make distributions based on certain guiding principles or values without limiting beneficiaries to narrowly defined goals. But no matter how carefully designed, an incentive trust won’t teach your children critical money skills.

Communication is key

To maintain family harmony when leaving a large portion of your estate to your children, clearly communicate the reasons for your decisions. Contact your estate planning advisor for more information.

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Ashleigh Laabs 1/24/22 Ashleigh Laabs 1/24/22

Using B2B Media To Lengthen Your Marketing Reach

Companies that sell products or services primarily to other businesses face a tough challenge when it comes to marketing. Your customers are likely well-versed and experienced in what they do, so you must not only persuade them to buy from you, but also communicate that you’re an expert in your industry or field.

If you can demonstrate that expertise, half the marketing battle is won because your name recognition and reputation alone will likely generate positive interest in your products or services. So, how do you elevate yourself to this vaunted position? One way is to use business-to-business (B2B) media to get your name and know-how out there.

3 common approaches

B2B media, what we used to call “trade publications,” now encompasses a wide variety of content. Print publications still exist, but much of the activity has moved online to websites, blogs, social media platforms and podcasts.

You might be able to name the top B2B media outlets in your industry off the top of your head, or maybe you need to do a little digging. After getting a good sense of your options, consider one or more of the following three approaches:

1. Send out press releases. Launching a new product? Hiring a new executive? Opening a new location? When your company has big news, getting the word out to the B2B media in a press release can raise your profile with customers and prospects.

There are various best practices for sending out a press release. Include the who, what, where, when and why of the topic. Add at least two sentences from you or a company executive that can be used as comments in an article. If appropriate and available, incorporate customer testimonials.

Traditionally, press releases are submitted with a news kit that includes a fact sheet on your business, profiles of key team members, complete contact information, and, in some cases, professional photos.

2. Write bylined articles. If you know of one or more industry publications that would be a good fit for your knowledge and experience, and you’re comfortable with the written word, submit an article idea. Getting published in the right places can position you (or a suitable staff member) as a technical expert in your field.

For example, write an article explaining why the types of products or services that you provide are more important than ever to businesses in today’s difficult environment of pandemic-related changes. But be careful: Publications generally won’t accept content that comes off as free advertising. Write your article as objectively as possible with only subtle mentions of your company’s offerings.

There are other options, too. You could pen an opinion piece on how a legislative proposal is likely to affect your industry. Or you might write a tips-oriented article that lends itself to a publication or website looking for short, easy-to-read content. Insist on attribution for your company if the article is used, of course.

3. Do it yourself. A third approach is to create your own B2B media presence. For years, business owners have been urged to start their own blogs, send out their own tweets and, in general, create a social media identity that will make friends and win over customers.

This has largely become the way of the business world. In fact, there are so many social-media avenues you could travel down to get your message out, you may find the concept overwhelming. There’s also a high risk of burnout. Many people start blogs or open a social media account, post a few things and then disappear into the ether. This is not a good look for business owners trying to establish themselves as industry experts.

To be successful at blogging and social media marketing, set an editorial calendar and stick to it. Get your marketing department involved. Devise a strategy that will push out quality, consistent content regularly on the appropriate channels, whether authored by you or someone else at your company.

Not a replacement, but a booster

Using B2B media won’t completely replace the need for advertising or other marketing initiatives. However, it can boost your profile and credibility as a business owner and, thereby, create opportunities to increase sales and attract strong job candidates.

What’s more, the cost in dollars and cents is typically low — though you’ll need to set aside a certain amount of time in your schedule and you might have to expand the job duties of one or more employees. We can help you assess B2B media initiatives from a cost-benefit perspective.

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