What Does “Probate” Mean?

The term “probate” is one you’ve probably heard and might associate with negative connotations. But you may not fully understand what it is. For some people, the term conjures images of lengthy delays waiting for wealth to be transferred as well as bitter disputes among family members. Others, because the probate process is open to the public, worry about their “dirty laundry” being aired out. The good news is that there are strategies you can employ to keep much or all of your estate out of probate.

Probate primer

Probate is predicated on state law, so the exact process varies from state to state. This has led to misconceptions about the length of probate. On average, the process takes six to nine months, but it can run longer for complex situations in certain states. Also, some states exempt small estates or provide a simplified process for surviving spouses.

In basic terms, probate is the process of settling an estate and passing legal title of ownership of assets to heirs. If the deceased person has a valid will, probate begins when the executor named in the will presents the document to the county courthouse. If there’s no will — in legal parlance, the deceased has died “intestate”— the court will appoint someone to administer the estate. Thereafter, this person becomes the estate’s legal representative.

The process

With that in mind, here’s how the process generally works. First, a petition is filed with the probate court, providing notice to the beneficiaries named in the deceased’s will. Typically, such notice is published in a local newspaper for the general public’s benefit. If someone wants to object to the petition, they can do so in court.

The executor takes an inventory of the deceased’s property, including securities, real estate and business interests. In some states, an appraisal of value may be required. Then the executor must provide notice to all known creditors. Generally, a creditor must stake a claim within a limited time specified under state law. The executor also determines which creditor claims are legitimate and then meets those obligations. He or she also pays any taxes and other debts that are owed by the estate.

Ownership of assets is then transferred to beneficiaries named in the will, following the waiting period allowed for creditors to file claims. If the deceased died intestate, state law governs the disposition of those assets. However, before any transfers take place, the executor must petition the court to distribute the assets as provided by will or state intestacy law.

Ways to avoid probate

Certain assets, such as an account held jointly or an IRA or bank account for which you’ve designated a beneficiary, are exempt from probate. But you also may be able to avoid the process with additional planning. The easiest way to do this is through the initial form of ownership or the use of a living trust.

In the case of joint ownership with rights of survivorship, you acquire the property with another party, such as your spouse. The property then automatically passes to the surviving joint tenant upon the death of the deceased joint tenant. This form of ownership typically is used when a married couple buys a home or other real estate.

A revocable living trust may be used to avoid probate and protect privacy. The assets are typically transferred to the trust during your lifetime and managed by a trustee that you designate.

Protect your privacy

The reason many people dread the word probate is the fact that it’s a public process. But by using the right strategies, you can protect your privacy while saving your family time, money and hardship. We can help you implement the right techniques.

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Want to See into the Future? Delve Deeper into Forecasting

For a company to be truly successful, its ownership needs to attempt the impossible: see into the future. Forecasting key metrics — such as sales demand, receivables, payables, and working capital — can help you manage overhead, offer competitive prices and keep your business on firm financial footing.

Although financial statements are often the starting point for forecasts, you’ll need to do more than just multiply last year’s numbers by a projected growth rate in today’s uncertain marketplace. Here are some tips to consider.

Pick your time frame 

Forecasting is generally more accurate in the short term. The longer the period, the more likely it is that customer demand or market trends will change.

Quantitative methods, which rely on historical data, are typically the most accurate. However, they don’t work well for long-term predictions. If you’re planning to forecast over several years, try qualitative forecasting methods, which rely on expert opinions instead of company-specific data.

Define your demand 

Weather, sales promotions, safety concerns, and other factors can cause sales to fluctuate. For example, if you sell ski supplies and apparel, chances are good your sales tend to dip in the summer.

If demand for your products or services varies, consider forecasting with a quantitative method. One example is “time-series decomposition,” which examines historical data and allows you to adjust for market trends, seasonal trends, and business cycles.

You also might want to invest in forecasting software. These solutions allow you to plug other variables into the equation, such as the short-term buying plans of key customers.

Assess your data 

Quantitative forecasting techniques require varying amounts of historical information. For instance, you’ll need about three years of data to use “exponential smoothing,” a simple yet fairly accurate method that compares historical averages with current demand.

If you want to forecast for something you don’t have data for, such as a new product or service, you might use qualitative forecasting. Alternatively, you could base your forecast on historical data for a similar product or service in your lineup.

Get intensive for inventory

If you operate a business with extensive inventory, forecasting is particularly critical. As you’ve likely learned over time, you’ve got to establish accurate methods of counting inventory and adjust levels as appropriate to best manage cash flow.

For peak accuracy, take the average of multiple forecasting methods. To optimize inventory levels, consider forecasting demand by individual products as well as by geographic location.

Craft your crystal ball

The optimal forecasting approach for any business will depend on multiple factors, such as its industry and customer base. Contact us to discuss the forecasting practices that make the most sense for your company.

© 2022

2 Estate Planning Options for Families with Disabled Loved Ones

If you have a family member who’s disabled, financial and estate planning can be tricky. You don’t want to jeopardize his or her eligibility for means-tested government benefits such as Medicaid or Supplemental Security Income (SSI). A special needs trust (SNT) is one option to consider. Another is to open a Section 529A account, also referred to as an ABLE account, because it was created by the Achieving a Better Life Experience (ABLE) Act.

ABLE account details

The ABLE Act allows family members and others to make nondeductible cash contributions to a qualified beneficiary’s ABLE account, with total annual contributions limited to the federal gift tax annual exclusion amount ($16,000 for 2022). To qualify, a beneficiary must have become blind or disabled before age 26.

The account grows tax-free, and earnings may be withdrawn tax-free provided they’re used to pay “qualified disability expenses.” These include health care, education, housing, transportation, employment training, assistive technology, personal support services, financial management and legal expenses.

An ABLE account generally won’t affect the beneficiary’s eligibility for Medicaid and SSI — which limits a recipient’s “countable assets” to just $2,000 — with a couple of exceptions. First, distributions from an ABLE account used to pay housing expenses are countable assets. Second, if an ABLE account’s balance grows beyond $100,000, the beneficiary’s eligibility for SSI is suspended until the balance is brought below that threshold.

ABLE account vs. SNT

Here’s a quick overview of the relative advantages and disadvantages of ABLE accounts and SNTs:

Availability. Anyone can establish an SNT, but ABLE accounts are available only if your home state offers them, or contracts with another state to make them available. Also, as previously noted, ABLE account beneficiaries must have become blind or disabled before age 26. There’s no age limit for SNTs.

Qualified expenses. ABLE accounts may be used to pay only specified types of expenses. SNTs may be used for any expenses the government doesn’t pay for, including “quality-of-life” expenses, such as travel, recreation, hobbies and entertainment.

Tax treatment. An ABLE account’s earnings and qualified distributions are tax-free. An SNT’s earnings are taxable.

Contribution limits. Annual contributions to ABLE accounts currently are limited to $16,000, and total contributions are effectively limited to $100,000 to avoid suspension of SSI benefits. There are no limits on contributions to SNTs, although contributions that exceed $16,000 per year may be subject to gift tax.

Investments. Contributions to ABLE accounts are limited to cash, and the beneficiary (or his or her representative) may direct the investment of the account funds twice a year. With an SNT, you can contribute a variety of assets, including cash, stock or real estate. And the trustee — preferably an experienced professional fiduciary — has complete flexibility to direct the trust’s investments.

Medicaid reimbursement. If an ABLE account beneficiary dies before the account assets have been depleted, the balance must be used to reimburse the government for any Medicaid benefits the beneficiary received after the account was established. There’s also a reimbursement requirement for SNTs. With either an ABLE account or an SNT, any remaining assets are distributed according to the terms of the account or the SNT.

Examine the differences

When considering which option is best for your family, remember the key differences: An ABLE account may offer greater tax advantages, while an SNT may offer greater flexibility. We can help your family decide how to proceed to best provide for your loved one.

© 2022

Clean Vehicle Credit Comes With Caveats

The Inflation Reduction Act (IRA) includes a wide range of tax incentives aimed at combating the dire effects of climate change. One of the provisions receiving considerable attention from consumers is the expansion of the Qualified Plug-in Electric Drive Motor Vehicle Credit (IRC Section 30D), now known as the Clean Vehicle Credit.

While the expanded credit seems promising, questions have arisen about just how immediate its impact will be. Here’s what you need to know about the credit if you’re thinking about purchasing an electric vehicle (EV).

The credit in a nutshell

The Qualified Plug-in Electric Drive Motor Vehicle Credit has been around since 2008. For passenger vehicles and light trucks acquired after December 31, 2009, the credit starts at $2,500. Vehicles with battery capacities rated at five kilowatt hours qualify for an additional $417, plus an additional $417 for each kilowatt hour of capacity exceeding five kilowatt hours. The credit’s maximum amount is $7,500.

The credit amount begins to phase out for a manufacturer’s vehicle when at least 200,000 qualifying vehicles have been sold for use in the United States (for sales after December 31, 2009). As a result of this limitation, vehicles, including those manufactured by Tesla and General Motors, no longer qualify for the credit.

The IRA extends the newly named Clean Vehicle Credit through December 31, 2032. It also makes several significant changes to the credit, most of which will phase in over time. For example, the credit now applies to any “clean” vehicle, so a hydrogen fuel cell car or a plug-in hybrid could qualify. It also eliminates the manufacturer production cap after 2022.

The IRA leaves intact the $7,500 max credit amount but bifurcates it. You can earn a $3,750 credit if the qualifying vehicle meets a critical minerals requirement and another $3,750 credit if the vehicle meets a new battery component requirement (see “Potential hurdles” below).

The credit now includes income limitations, too. It’s not available to:

• Single filers with modified adjusted gross income (MAGI) over $150,000,

• Married couples filing jointly with MAGI over $300,000, or

• Heads of household with MAGI over $225,000.

The credit is also limited by the price of the vehicle. Vans, pickup trucks and SUVs with manufacturer’s suggested retail prices (MSRPs) of more than $80,000 don’t qualify. Other cars must have MSRPs no higher than $55,000.

One critical change took effect immediately after President Biden signed the bill into law: the so-called “final assembly” requirement. It limits the credit to vehicles for which final assembly occurred in North America. Final assembly generally refers to the production of an EV at the location from which it’s delivered to a seller with all of the necessary component parts included. The requirement is designed to encourage domestic production.

The IRS has established a two-step process to check whether a specific vehicle satisfies the final assembly requirement. First, check the Department of Energy’s Alternative Fuels Data Center’s list of 2022 and 2023 EVs that likely meet the requirement (https://bit.ly/3An4yYz). Be aware that because some models are assembled in multiple locations, some of the listed vehicles might not meet the requirement.

Then, to confirm that a specific vehicle’s final assembly occurred in North America, enter its Vehicle Identification Number (VIN) into the National Highway Traffic Safety Administration’s VIN decoder tool (https://bit.ly/3dOLUkF). By scrolling to the bottom of the result page, you’ll see the vehicle’s “Plant Information,” which includes the country where the plant is located.

For now, taxpayers who purchase qualifying EVs will continue to claim a credit on their annual tax returns. The IRA, however, provides an alternative — and much more taxpayer-friendly — option beginning in 2024. At that point, EV purchasers can transfer their credit to dealers at the point of sale, rather than waiting to claim it on their annual tax returns. The credit will directly and immediately reduce the purchase price.

Potential hurdles

The IRA imposes “applicable percentage” requirements for critical minerals and battery components. At least 40% of critical minerals must be 1) processed or extracted from the United States or a country with which the United States has a free trade agreement, or 2) recycled in North America. At least 50% of battery components must be manufactured or assembled in North America.

The initial percentages will take effect after the IRS issues proposed guidance, which the IRA mandates occur before December 31, 2022. The percentages then ramp up over time, peaking at 80% of critical minerals after 2026 and 100% of battery components after 2028.

And the credit isn’t available for vehicles with critical minerals or battery components from a “foreign entity of concern,” including China and Russia. The critical mineral exclusion takes effect for vehicles placed in service after 2024. The battery component exclusion is effective for vehicles placed in service after 2023.

These rules have raised concerns among the automotive industry, particularly as a substantial amount of the supply chain for minerals and battery components is located in China.

Transitional relief for purchasers

What if you signed a contract on an EV before August 16, 2022, when the IRA was enacted, but haven’t yet received the vehicle? The IRS has stated that the changes in the law won’t affect your tax credit. You can claim it under the rules in effect when you signed the purchase contract.

Unfortunately, that means the manufacturer cap will still apply. If you purchase a vehicle from a manufacturer that hit the 200,000 vehicle threshold more than a year prior, you don’t qualify for the EV credit. On the other hand, the final assembly requirement won’t apply.

If you purchase and take possession of a qualifying EV after the law was signed (August 16, 2022) but before January 1, 2023, the only difference to the prior rules is the applicability of the final assembly requirement. That means the manufacturer cap also would apply to your purchase. So, if you’re interested in a model that’s disqualified under the cap, it might pay off to wait until 2023 if the vehicle meets the requirements then.

New credits for used and commercial vehicles

The IRA also creates tax credits for used EVs (Sec. 25E) and commercial EVs (Sec. 45W), both starting in 2023. The IRS has indicated it will release more information on these credits in the coming months.

According to the IRA, the Sec. 25E credit is worth the lesser of $4,000 or 30% of a qualified vehicle’s sale price. The sale price can’t exceed $25,000. The credit is available only for EVs with model years at least two years earlier than the year of purchase. No credit is available if the lesser of the taxpayer’s MAGI for the year of purchase or the preceding year exceeds:

• $75,000 for single filers,

• $150,000 for married couples filing jointly, or

• $112,500 for heads of household.

The credit for commercial EVs is the lesser of 1) 15% of the vehicle’s basis (30% for vehicles not powered by a gas or diesel engine) or 2) the incremental cost of the vehicle over the cost of a comparable gas- or diesel-powered vehicle. The maximum credit per vehicle is $7,500 for vehicles with a gross vehicle weight under 14,000 pounds and $40,000 for heavier vehicles.

Only the beginning

The IRS and Treasury Department have promised to issue additional guidance about the various new and existing EV-related tax credits in the coming weeks and months. We’ll keep you up to date on new developments.

© 2022

IRS Offers Penalty Relief for 2019, 2020 Tax Years

While the recently announced student loan debt relief has captured numerous headlines, it’s estimated that another federal relief program announced on the same day will provide more than $1.2 billion in tax refunds or credits. Specifically, IRS Notice 2022-36 extends penalty relief to both individuals and businesses who missed the filing deadlines for certain 2019 and/or 2020 tax and information returns. The relief covers many of the most commonly filed forms

Broad relief for late taxpayers

The intent behind the penalty relief is two-fold: 1) to help taxpayers negatively affected by the COVID-19 pandemic, and 2) to allow the IRS to focus on processing backlogged tax returns and taxpayer correspondence. As recently as late May 2022, the IRS had a backlog of more than 21 million unprocessed paper returns. The goal is for the IRS to return to normal operations for the 2023 filing season.

To that end, the notice provides relief from the failure-to-file penalty. The penalty is typically assessed at a rate of 5% per month and up to 25% of the unpaid tax when a federal income tax return is filed late. To qualify for the relief, an income tax return must be filed on or before Sept. 30, 2022.

Banks, employers and other businesses that are required to file various information returns (for example, the Form 1099 series) also may qualify for relief. Eligible 2019 returns must have been filed by Aug. 3, 2020, and eligible 2020 returns must have been filed by Aug. 2, 2021.

Potentially eligible forms include:

• Form 1040, “U.S. Individual Income Tax Return,” and other forms in the Form 1040 series

• Form 1041, “U.S. Income Tax Return for Estates and Trusts,” and other forms in the Form 1041 series

• Form 1065, “U.S. Return of Partnership Income”

• Returns filed in the Form 1120 series including:

  • Form 1120, “U.S. Corporation Income Tax Return”

  • Form 1120-C, “U.S. Income Tax Return for Cooperative Associations”

  • Form 1120-F, “U.S. Income Tax Return of a Foreign Corporation”

  • Form 1120-FSC, “U.S. Income Tax Return of a Foreign Sales Corporation”

  • Form 1120-H, “U.S. Income Tax Return for Homeowners Associations”

  • Form 1120-L, “U.S. Life Insurance Company Income Tax Return”

  • Form 1120-ND, “Return for Nuclear Decommissioning Funds and Certain Related Persons”

  • Form 1120-PC, “U.S. Property and Casualty Insurance Company Income Tax Return”

  • Form 1120-POL, “U.S. Income Tax Return for Certain Political Organizations”

  • Form 1120-REIT, “U.S. Income Tax Return for Real Estate Investment Trusts”

  • Form 1120-RIC, “U.S. Income Tax Return for Regulated Investment Companies”

  • Form 1120-SF, “U.S. Income Tax Return for Settlement Funds (Under Section 468B)”

  • Form 1120-S, “U.S. Income Tax Return for an S Corporation”

• Form 1066, “U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return”

• Forms concerning exempt organizations

• Certain international information returns

Notably, the relief doesn’t extend to failure-to-file penalties for Form 8938, “Statement of Specified Foreign Financial Assets,” or FinCEN Report 114, “Report of Foreign Bank and Financial Accounts.”

Some other exceptions apply. Penalty relief isn’t available if:

• A fraudulent return was filed,

• The penalty was part of an accepted offer-in-compromise or a closing agreement with the IRS, or

• The penalty was finally determined by a court.

In addition, the IRS isn’t providing relief for the failure-to-pay penalty or other penalties. Such ineligible penalties may, however, qualify for previously existing penalty relief procedures, including the reasonable cause defense or the IRS’s First Time Abatement Program.

No action required

The penalty relief is automatic. If you qualify, you need not apply for it or reach out to the IRS in any way. Penalties that have already been assessed will be abated. If you’ve already paid a covered penalty, the IRS says, you should receive a refund or credit by Sept. 30, 2022.

© 2022

Does Your Trust Provide for the Removal of a Trustee?

To ensure that a trust operates as intended, it’s critical to appoint a trustee that you can count on to carry out your wishes. But to avoid protracted court battles in the event that the trustee isn’t doing a good job, consider giving your beneficiaries the right to remove and replace a trustee. Without this option, your beneficiaries’ only recourse would be to petition a court to remove the trustee for cause.

Defining “cause”

The definition of “cause” varies from state to state, but common grounds for removal include:

• Fraud, mismanagement or other misconduct,

• A conflict of interest with one or more beneficiaries,

• Legal incapacity,

• Poor health, or

• Bankruptcy or insolvency if it would affect the trustee’s ability to manage the trust.

Not only is it time-consuming and expensive to go to court, but most courts are hesitant to remove a trustee that was chosen by the trust’s creator. That’s why including a provision in the trust document that allows your beneficiaries to remove a trustee without cause if they’re dissatisfied with his or her performance can be a good idea. Alternatively, you could authorize your beneficiaries to remove a trustee under specific circumstances outlined in the trust document.

Adding successor trustees

If you’re concerned about giving your beneficiaries too much power, you can include a list of successor trustees in the trust document. That way, if the beneficiaries end up removing a trustee, the next person on the list takes over automatically, rather than the beneficiaries choosing a successor.

Alternatively, or, in addition, you could appoint a “trust protector” with the power to remove and replace trustees and to make certain other decisions regarding management of the trust. Contact us for additional information on the role of a trustee.

© 2022

The Inflation Reduction Act Includes Wide-Ranging Tax Provisions

The U.S. Senate and House of Representatives have passed the Inflation Reduction Act (IRA). President Biden signed the bill into law on August 16th. The IRA includes significant provisions related to climate change, health care, and, of course, taxes. The IRA also addresses the federal budget deficit. According to the Congressional Budget Office (CBO), the IRA is projected to reduce the deficit by around $90 billion over the next 10 years.

Although the IRA falls far short of Biden’s originally proposed $2 trillion Build Back Better Act, the $430 billion package nonetheless is a sprawling piece of legislation bound to affect most Americans over time. Here’s an overview of some of what the bill includes.

SIGNIFICANT TAX PROVISIONS

For starters, how is the federal government going to pay for all of it? Not surprisingly, new taxes are part of the equation (along with savings from, for example, lower drug prices). But the bill is designed to not raise taxes on small businesses or taxpayers earning less than $400,000 per year. Rather, wealthier targets are in the crosshairs.

The first target is U.S. corporations (other than S corporations) that have more than $1 billion in annual earnings over the previous three years. While the current corporate tax rate is 21%, it’s been well documented that many such companies pay little to no federal income tax, due in part to deductions and credits. The IRA imposes a corporate alternative minimum tax of 15% of financial statement income (also known as book income, as opposed to tax income) reduced by, among other things, depreciation and net operating losses. The new minimum tax is effective for tax years beginning after December 31, 2022.

Private equity firms and hedge funds are exempt from the minimum tax. They could have been covered by a provision that generally includes subsidiaries when determining annual earnings. The tradeoff is that the IRA now will extend the excess business loss limitation for certain businesses for two years.

Although the initial bill language also closed the so-called “carried interest” loophole that permits these interests to be taxed as long-term capital gains rather than ordinary income, the loophole ultimately survived. Democrats agreed to remove the provision closing it to secure the vote of Sen. Kyrsten Sinema (D-AZ) — but they added another tax to make up for the lost revenue. The IRA will now impose a 1% excise tax on the fair market value when corporations buy back their stock.

The IRA also provides about $80 billion (over 10 years) to fund the IRS and improve its “tax enforcement activities” and technology. Notably, the IRS budget has been dramatically slashed in recent years, dropping by 20% in 2020, compared to 2010. The CBO estimates that the infusion of funds will allow the IRS to collect $203 billion over the next decade from corporations and wealthy individuals.

CLIMATE AND ENERGY PROVISIONS

The IRA dedicates about $370 billion to combating climate change and boosting domestic energy production. It aims to reduce the country’s carbon emissions by 40% by 2030.

The legislation includes new, extended and increased tax credits intended to incentivize both businesses and individuals to boost their use of renewable energy. For example, the bill provides tax credits to private companies and public utilities to produce renewable energy or manufacture parts used in renewable projects, such as wind turbines and solar panels. Clean energy producers that pay a prevailing wage also may qualify for tax credits.

CLEAN VEHICLE CREDIT

The current tax credit for qualified plug-in electric vehicles has been significantly revised in the IRA. Currently, a taxpayer can claim a credit for each new qualified plug-in electric drive motor vehicle placed in service during the tax year. The maximum credit amount is $7,500. Certain vehicle requirements must be met.

The credit phases out beginning in the second calendar quarter after a manufacturer sells more than 200,000 plug-in electric drive motor vehicles for use in the U.S. after 2009. Under the IRA, the plug-in vehicle credit has been renamed the clean vehicle credit and the manufacturer limitation on the number of vehicles eligible for the credit has been eliminated after December 31, 2022.

The bill changes how the clean vehicle credit is calculated. Specifically, a vehicle must meet critical mineral and battery component requirements. There are also price and income limitations. The clean vehicle credit isn’t allowed for a vehicle with a manufacturer’s suggested retail price above $80,000 for vans, sport utility vehicles and pickups, and above $55,000 for other vehicles.

The clean vehicle credit isn’t allowed if a taxpayer’s modified adjusted gross income (MAGI) for the current or preceding tax year exceeds $150,000 for single filers, $300,000 for married couples filing jointly and $225,000 for heads of household.

The IRA also contains a tax credit for a used plug-in electric drive vehicle purchased after 2022. The tax credit is $4,000 or 30% of the vehicle’s sale price, whichever is less. There are also price and income limitations.

HOME ENERGY IMPROVEMENTS

Individual taxpayers can also receive tax breaks for home energy efficiency improvements, such as installing solar panels, energy-efficient water heaters, heat pumps and HVAC systems. And a “Clean Energy and Sustainability Accelerator” will use public and private funds to invest in clean energy technologies and infrastructure.

HEALTH CARE PROVISIONS

The IRA allows Medicare to negotiate the price of prescription drugs and prohibits future administrations from refusing to negotiate. It also caps Medicare enrollees’ annual out-of-pocket drug costs at $2,000 and monthly insulin costs at $35 and provides them free vaccines. Additional provisions to rein in drug costs include a requirement that pharmaceutical companies that raise the prices on drugs purchased by Medicare faster than the rate of inflation rebate the difference back to the program.

The IRA also should reduce health care costs for Americans of all ages who obtain health insurance coverage from the federal Health Insurance Marketplace. It extends the expansion of subsidies — in the form of refundable premium tax credits — under the America Rescue Plan Act through 2025. These subsidies had been scheduled to expire at the end of 2022.

MUCH MORE TO COME

The IRA is a sweeping piece of legislation that affects many sectors of U.S. business, as well as most citizens. Additional information, guidance and regulations related to its numerous, far-reaching provisions are inevitable. We’ll keep you up to date on the developments that could affect your finances and federal tax liability.

© 2022

Evaluating An ESOP From A Succession Planning Perspective

If you’ve been in business for a while, you’ve probably considered many different employee benefits. One option that might have crossed your desk is an employee stock ownership plan (ESOP).

Strictly defined, an ESOP is considered a retirement plan for employees. But it can also play a role in succession planning by facilitating the transfer of a business to the owner’s children or employees over a period of years in a tax-advantaged way.

Not a buyout

Although an ESOP is a retirement plan, it invests mainly in your own company’s stock. ESOPs are considered qualified plans and, thus, subject to the same IRS and U.S. Department of Labor (DOL) rules as 401(k)s and the like. This includes minimum coverage requirements and contribution limits.

Generally, ESOP distributions to eligible employees are made in stock or cash. For closely held companies, employees who receive stock have the right to sell it back to the company — exercising “put” options or an “option to sell” — at fair market value during certain time windows.

While an ESOP involves transferring ownership to employees, it’s different from a management or employee buyout. Unlike a buyout, an ESOP allows owners to cash out and transfer control gradually. During the transfer period, owners’ shares are held in an ESOP trust and voting rights on most issues other than mergers, dissolutions and other major transactions are exercised by the trustees, who may be officers or other company insiders.

Mandatory valuations

One big difference between ESOPs and other qualified retirement plans is mandated valuations. The Employee Retirement Income Security Act requires trustees to obtain appraisals by independent valuation professionals to support ESOP transactions. Specifically, an appraisal is needed when the ESOP initially acquires shares from the company’s owners and every year thereafter that the business contributes to the plan.

The fair market value of the sponsoring company’s stock is important, because the DOL specifically prohibits ESOPs from paying more than “adequate consideration” when investing in employer securities. In addition, because employees who receive ESOP shares typically have the right to sell them back to the company at fair market value, the ESOP essentially provides a limited market for its shares.

Costs and entity choice

Although ESOPs can be an important part of a succession plan, they have their drawbacks. You’ll incur costs and considerable responsibilities related to plan administration and compliance. Plus, there are costs associated with annual stock valuations and the need to repurchase stock from employees who exercise put options.

Another disadvantage is that ESOPs are available only to corporations of either the C or S variety. Limited liability companies, partnerships and sole proprietorships must convert to the corporate form to establish one of these plans. This raises a variety of financial and tax issues.

It’s also important to consider the potential negative impact of ESOP debt and other expenses on your financial statements and ability to qualify for loans.

A popular choice

There are about 6,500 ESOPs and equivalent plans in the United States today, with roughly 14 million participants, according to the National Center for Employee Ownership. So, if you decide to launch one, you won’t be alone. However, careful planning and expert advice is critical. We can help you evaluate whether an ESOP would be a good fit for your business and succession plan.

© 2022

Avoid These 4 Estate Planning Pitfalls

No one likes to contemplate his or her own mortality. But ignoring the need for an estate plan or procrastinating in the creation of one is asking for trouble. If you haven’t started the process, don’t delay any longer. For your estate plan to achieve your goals, avoid these four pitfalls:

Pitfall #1: Failing to update beneficiary forms. Your will spells out who gets what, where, when and how, but it’s often superseded by other documents such as beneficiary forms for retirement plans, annuities, life insurance policies and other accounts. Therefore, like your will, you must also keep these forms up to date. For example, despite your intentions, retirement plan assets could go to a sibling or parent — or even worse, an ex-spouse — instead of your children or grandchildren. Review beneficiary forms periodically and make any necessary adjustments.

Pitfall #2: Not properly funding trusts. Frequently, an estate plan will include one or more trusts, including a revocable living trust. The main benefit of a living trust is that assets transferred to the trust don’t have to be probated and exposed to public inspection. It’s generally recommended that such a trust be used only as a complement to a will, not as a replacement.

However, the trust must be funded with assets, meaning that legal ownership of the assets must be transferred to the trust. For example, if real estate is being transferred, the deed must be changed to reflect this. If you’re transferring securities or bank accounts, you should follow the directions provided by the financial institutions. Otherwise, the assets must be probated.

Pitfall #3: Mistitling assets. Both inside and outside of trusts, the manner in which you own assets can make a big difference. For instance, if you own property as joint tenants with rights of survivorship, the assets will go directly to the other named person, such as your spouse, on your death.

Not only is titling assets critical, you should review these designations periodically, just as you should your beneficiary designations. Major changes in your personal circumstances or the prevailing laws could dictate a change in the ownership method.

Pitfall #4: Not coordinating different plan aspects. Typically, there are several moving parts to an estate plan, including a will, a power of attorney, trusts, retirement plan accounts and life insurance policies. Don’t look at each one in a vacuum. Even though they have different objectives, consider them components that should be coordinated within your overall plan. For instance, you may want to arrange to take distributions from investments — including securities, qualified retirement plans, and traditional and Roth IRAs — in a way that preserves more wealth.

To help ensure that your estate plan succeeds at reaching your goals and avoids these pitfalls, turn to us. We can provide you with the peace of mind that you’ve covered all the estate planning bases.

© 2022

Complete Your Estate Plan By Adding Powers of Attorney

As you create your estate plan, your main objectives likely revolve around your family, both current and future generations. Your goals may include reducing estate tax liability so that you can pass as much wealth as possible to your loved ones.

But it’s also critical to think about yourself. What if you’re unable to make financial and medical decisions? To address this risk, powers of attorney (POA) for property and health care are crucial components to include in your estate plan.

What is a POA?

A POA is defined as a legal document authorizing another person to act on your behalf. This person is referred to as the “attorney-in-fact” or “agent” — or sometimes by the same name as the document, “power of attorney.” Generally, there are separate POAs for property and health care.

Be aware that a POA is no longer valid if you become incapacitated. For many people, this is actually when the authorization is needed the most. Therefore, to thwart dire circumstances, you can adopt a “durable” POA.

A durable POA remains in effect if you become incapacitated and terminates only on your death. Thus, it’s generally preferable to a regular POA. The document must include specific language required under state law to qualify as a durable POA.

Who should you name as POA?

Despite the name, your POA doesn’t necessarily have to be an attorney, although that’s an option. Typically, in the case of POAs for property, the designated agent is either a professional, such as an attorney, CPA or financial planner, or a family member or close friend. In any event, the person should be someone you trust implicitly and who is adept at financial matters. In the case of health care POAs, a family member or close friend is the most common choice.

Regardless of whom you choose, it’s important to name a successor agent in case your top choice is unable to fulfill the duties or predeceases you.

Usually, the POA will simply continue until death. However, you may revoke a POA — whether it’s durable or not — at any time and for any reason. If you’ve had a change of heart, notify the agent in writing about the revocation. In addition, notify other parties who may be affected.

How does a health care POA differ from a living will?

A durable POA for health care can, for instance, establish the terms for determining whether you’re incapacitated. It’s important that you discuss these matters in detail with your agent to give more direction on your wishes.

Don’t confuse a health care POA with a living will. A durable POA gives another person the power to make health care decisions in your best interests. In contrast, a living will provides specific directions concerning end-of-life decisions.

Final thoughts 

To ensure that your health care and financial wishes are carried out, consider preparing and signing POAs as soon as possible. Also, don’t forget to let your family know how to gain access to the POAs in case of emergency. Finally, health care providers and financial institutions may be reluctant to honor a POA that was executed years or decades earlier. So, it’s a good idea to sign new documents periodically. Contact us with questions.

© 2022

Leave a Lasting Legacy with a Family Education Trust

Providing for the educational needs of your children, grandchildren and even future generations is an honorable estate planning objective. What are your options for achieving this goal? A 529 plan can be a highly effective tool for funding tuition and other educational expenses on a tax-advantaged basis. But after your death, there’s no guarantee that subsequent plan owners will continue to use it to fulfill your original vision. An alternative strategy is to create a family education trust that invests in one or more 529 plans.

529 plan flexibility

529 plans are state-sponsored investment accounts that permit parents, grandparents or other family members to make substantial cash contributions. Contributions are nondeductible, but the funds grow tax-free and earnings may be withdrawn tax-free for federal income tax purposes (plus state tax breaks in some cases) provided they’re used for qualified education expenses. Qualified expenses include tuition, fees, books, supplies, equipment, and some room and board at most accredited colleges and universities and certain vocational schools.

529 plans offer owners a great deal of flexibility. For example, depending on a plan’s terms, owners have control over the timing of distributions, can change beneficiaries and can roll the funds over into another state’s plan tax-free. It’s even possible to recover funds that won’t be used for education expenses (subject to taxes and, in most cases, a 10% penalty).

In addition to the risk that a subsequent owner will use the funds for noneducational purposes, disadvantages of 529 plans include relatively limited investment choices and an inability to invest assets other than cash.

Transfer a 529 plan to a trust

Establishing a family education trust to hold one or more 529 plans provides several benefits. For example, it permits you to maintain tax-advantaged education funds indefinitely (depending on applicable state law) to benefit future generations and it keeps the funds out of the hands of those who would use them for other purposes.

In addition, the trust allows you to establish guidelines on which family members are eligible for educational assistance and direct how the funds will be used or distributed in the event they’re no longer needed for educational purposes. You can also appoint trustees and successor trustees to oversee the trust.

Finally, the trust can use funds held outside of 529 plans for purposes other than education, such as paying medical expenses or nonqualified living expenses.

Turn to the professionals

Leaving an education legacy for your loved ones and future heirs requires considerable planning, but can be incredibly fulfilling for you and beneficial for your family. We can provide guidance in creating a family education trust.

© 2022

Key aspects of a successful wellness program

Wellness programs have found a place in many companies’ health care benefits packages, but it hasn’t been easy. Because these programs take many different shapes and sizes, they can be challenging to design, implement and maintain.

There’s also the not-so-small matter of compliance: The federal government regulates wellness programs in various ways, including through the Health Insurance Portability and Accountability Act and the Americans with Disabilities Act.

Whether your business is just embarking on the process of creating one or simply looking for improvement tips, here are some key aspects of the most successful wellness programs.

Simplicity and clarity

“Welcome to our new wellness program,” began the company’s memo. “Attached is a 200-page guide, featuring a complex point system that will determine whether you qualify for incentives, and a lengthy glossary of medical terminology.”

See the problem here? The surest way to get a program off to a bad start is by frontloading it with all sorts of complexities and time-consuming instructions. Granted, there will be an inevitable learning curve to any type of wellness program. But the simpler the design, the easier it will be to explain and implement. Remember that you can update and increase a program’s complexity as it becomes more ingrained in your company’s culture.

Clarity of communication is also paramount. Materials should be well-organized and written clearly and concisely. Ideally, they should also have an element of creativity to them — to draw in participants. However, the content needs to be sensitive to the fact that these are inherently personal health issues.

If you don’t have anyone in-house who can handle these criteria, consider engaging a consultant. In addition, have your attorney review all materials related to the program for compliance purposes.

Carefully chosen providers

At most companies, outside vendors provide the bulk of wellness program services and activities. These may include:

• Seminars on healthy life and work habits,

• Smoking cessation workshops,

• Fitness coaching,

• Healthful food options in the break room and cafeteria, and

• Runs, walks or other friendly competitive or charitable events.

It’s critical to thoroughly vet providers and engage only those that are skilled and qualified. Neglecting to do so could mean that, even if you create and communicate a solid program, the initiative will likely fail once employees show up to participate and are disappointed in the experience.

Return on investment

Of course, there will be upfront and ongoing costs related to a wellness program. Contact us for help assessing these costs while designing or revising a program and tracking them over time. The ultimate sought-after return on investment of every wellness program is a healthier, more productive workforce and more affordable health care benefits.

© 2022

Provide employee parking? Here’s what the IRS wants to know.

Many offices, plants, and other business facilities are once again filled with real, live people. And those hard-working employees need somewhere to park. If your company provides parking as a fringe benefit — either on or near your premises or at a location from which employees commute — the IRS may take an interest in the arrangement.

A recently revised IRS webpage intended for charities and nonprofits highlights the tax rules applicable to employer-provided parking and what the tax agency will want to know in the event of an audit. The content is informative for businesses as well.

Parking as a benefit

Employers are allowed to provide tax-free parking to employees as a qualified transportation fringe benefit under Internal Revenue Code Section 132(f). The dollar amount of qualified parking expenses that may be excluded from an employee’s gross income cannot exceed a statutory maximum, which is subject to annual cost-of-living adjustments. For 2022, the maximum is $280 per month.

The IRS webpage explains that the value of employer-provided parking must be determined following the same general rules as those used for valuing other fringe benefits under Treasury regulations. These rules provide that an employer must include in an employee’s gross income the amount by which the fair market value of the benefit exceeds the sum of the amount, if any, paid for the benefit by or on behalf of the recipient. Any amount specifically excluded under other applicable rules must also be documented.

The fair market value, which is determined based on all the facts and circumstances, is generally the amount that an individual would have to pay for parking at the same or a comparable site in an arm’s length transaction.

Tips for auditors

The IRS webpage also provides tips for its auditors, who could encounter qualified parking benefits as part of their examinations. Auditors are advised to:

• Determine whether the employer provides parking for any employees,

• Request a list of employees entitled to receive employer-provided parking,

• Determine whether the employer includes any portion of the benefit in employees’ wages,

• Request the method used to determine the value of the parking benefit, and

• Conduct a survey, if necessary, of nearby parking facilities to determine the fair market value of the benefit.

Valuation issues generally arise with respect to qualified parking only where it’s provided “in-kind” by the employer — in other words, where the employer provides parking at its own lot.

Thorough documentation

If your company provides a qualified parking benefit, be sure to thoroughly document how you determine the value of that benefit. You’ll need to produce the documentation if you get audited. We can help you prepare for and fulfill your obligations during an IRS audit, as well as assist you in choosing fringe benefits and keeping accurate records of those you provide.

© 2022

You shouldn’t amend a will yourself

Let’s assume you have a legally valid will but you’ve decided that it should be revised because of a change in your family’s circumstances. Perhaps all you want to do is add a newborn grandchild to the list of beneficiaries or remove your adult child’s spouse after a divorce. These are both common reasons to revise your will. However, resist the temptation to revise your will yourself.

Reasons against self amendments

State laws control the validity of your will, and the laws in each state vary, so simply following an online template for revisions isn’t certain to suffice.

In addition, the amended will generally must be witnessed and notarized. A notary isn’t a replacement for an attorney who knows his or her way around applicable state laws. To ensure the validity of the will, rely on the appropriate professional.

Furthermore, in many states, a will that has provisions crossed out and changed in handwriting won’t stand up to legal scrutiny. The same is true for a will with a typed paragraph attached to the original. If someone is then “cut out” of the will or not added as promised, it could lead to challenges in court and possibly create discontent that causes a rift in the family.

Start from scratch

Minor changes to a will can be made through a codicil or an addendum. However, it may make more sense to create a brand-new will — especially if changes are substantial or state law requires the same legal formalities for codicils and addendums as it does for a will. Contact your estate planning attorney if you need to make amendments to your will.

© 2022

Weathering the storm of rising inflation

Like a slowly gathering storm, inflation has gone from dark clouds on the horizon to a noticeable downpour on both the U.S. and global economies. Is it time for business owners to panic?

Not at all. As of this writing, a full-blown recession is possible but not an absolute certainty. And the impact of inflation itself will vary depending on your industry and the financial strength of your company. Here are some important points to keep in mind during this difficult time.

Government response

For starters, don’t expect any dramatic moves by the federal government. Some smaller steps, however, have been taken.

For instance, the Federal Reserve has raised interest rates to “pump the brakes” on the U.S. economy. And the IRS recently announced an increase in the optional standard mileage rate tax deduction for the last six months of 2022 (July 1 through December 31). The rate for business travel is now 62.5 cents per mile — up from 58.5 cents per mile for the first half of 2022.

This is notable because the IRS usually adjusts mileage rates only once annually at year-end. The tax agency explained: “in recognition of recent gasoline price increases, [we’ve] made this special adjustment for the final months of 2022.”

Otherwise, major tax relief this year is highly unlikely. Some tax breaks are inflation-adjusted — for example, the Section 179 depreciation deduction. However, these amounts were calculated at the end of 2021, so they probably won’t keep up with 2022 inflation. What’s more, many other parts of the tax code aren’t indexed for inflation.

Strategic moves

So, what can you do? First, approach price increases thoughtfully. When inflation strikes, raising your prices might seem unavoidable. After all, if suppliers are charging you more, your profit margin narrows — and the risk of a cash flow crisis goes way up. Just be sure to adjust prices carefully with a close eye on the competition.

Second, take a hard look at your budget and see whether you can reduce or eliminate nonessential expenses. Inflationary times lead many business owners to try to run their companies as leanly as possible. In fact, if you can cut enough costs, you might not need to raise prices much, if at all — a competitive advantage in today’s environment.

Last, consider the bold strategy of taking a growth-oriented approach in response to inflation. That’s right; if you’re in a strong enough cash position, your business could increase its investments in marketing and production to generate more revenue and outpace price escalations. This is a “high risk, high reward” move, however.

Optimal moves

Again, the optimal moves for your company will depend on a multitude of factors related to your industry, size, mission and market. One thing’s for sure: Inflation to some degree is inevitable. Let’s hope it doesn’t get out of control. We can help you generate, organize and analyze the financial information you need to make sound business decisions.

© 2022

CHIPS Act poised to boost U.S. businesses

The Creating Helpful Incentives to Produce Semiconductors for America Act (CHIPS Act) was recently passed by Congress as part of the CHIPS and Science Act of 2022. President Biden is expected to sign it into law shortly. Among other things, the $52 billion package provides generous tax incentives to increase domestic production of semiconductors, also known as chips. While the incentives themselves are narrowly targeted, the expansion of semiconductor production should benefit a wide range of industries.

In particular, it could reduce the risks of future supply chain issues for the many goods and devices that rely on semiconductor chips, from cell phones and vehicles to children’s toys. The law also is intended to address national security concerns related to the reliance on foreign production of semiconductors.

The impetus

Although the United States developed and pioneered chip technology, many legislators have determined that the country has become too reliant on foreign producers. According to the government, American companies still account for almost half of all revenues in the global semiconductor industry, but the U.S. share of global chip production has fallen from 37% in 1990 to only 12% today. Seventy-five percent of semiconductor production occurs in East Asia. This situation poses a national and economic security threat, according to Congress.

Government subsidies are responsible for up to 70% of the cost difference in producing semiconductors overseas, giving foreign producers a 25% to 40% cost advantage over U.S. producers. The grants in the CHIPS Act, combined with a new tax credit, are intended to fully make up for this cost differential and thereby incentivize the “re-shoring” of semiconductor production.

The new tax credit

The CHIPS Act creates a temporary “advanced manufacturing investment credit” for investments in semiconductor manufacturing property, to be codified in Section 48D of the Internal Revenue Code. The Sec. 48D credit amounts to 25% of qualified investment related to an advanced manufacturing facility — that is, a facility with the primary purpose of manufacturing semiconductors or semiconductor manufacturing equipment.

Qualified property is tangible property that:

• Qualifies for depreciation or amortization,

• Is constructed, reconstructed or erected by the taxpayer or acquired by the taxpayer if the original use of the property begins with the taxpayer, and

• Is integral to the operation of the advanced manufacturing facility.

It also can include a building, a portion of a building (other than a portion used for functions unrelated to manufacturing, such as administrative services) and certain structural components of a building.

The credit is available for qualified property placed in service after December 31, 2022, if construction begins before January 1, 2027. If construction began before the CHIPS Act was enacted, though, only the portion of the basis attributable to construction begun after enactment is eligible.

Taxpayers generally are eligible for the credit if they aren’t designated as a “foreign entity of concern.” That term generally refers to certain entities that have been deemed foreign security threats under previous defense authorization legislation or those with conduct that has been ruled detrimental to U.S. national security or foreign policy.

The CHIPS Act additionally excludes taxpayers that have made an “applicable transaction” (for example, the early disposition of investment credit property under Sec. 50(a)). Applicable transactions also include any “material expansion” of the taxpayer’s semiconductor manufacturing capacity in China or other designated “foreign countries of concern.” The law provides for recapture of the credit if a taxpayer enters such a transaction within 10 years of claiming the credit.

Notably, eligible taxpayers can claim the credit as a payment against tax — what’s known as “direct pay.” In other words, taxpayers can receive a tax refund if they don’t have sufficient tax liability to use the credit. Without this option, eligible taxpayers could struggle to monetize their credits.

Additional provisions

The CHIPS Act also provides:

• $39 billion in subsidies to build, expand or modernize domestic facilities and equipment for semiconductor fabrication, assembly, testing, advanced packaging or research, and development,

• $200 million for workforce development and training, and

• $1.5 billion to spur wireless supply chain innovation.

It includes almost $170 billion for governmental research and development, as well.

Stay tuned

If your business might qualify for the new tax credit, keep an eye out for additional IRS guidance on just how it will work, including the direct pay provision. We can help you make the most of this and other tax credits.

© 2022`

Estates now have an additional three years to file for a portability election

Portability allows a surviving spouse to apply a deceased spouse’s unused federal gift and estate tax exemption amount toward his or her own transfers during life or at death. To secure these benefits, however, the deceased spouse’s executor must have made a portability election on a timely filed estate tax return (Form 706). The return is due nine months after death, with a six-month extension option.

Unfortunately, estates that aren’t otherwise required to file a return (typically because they don’t meet the filing threshold) often miss this deadline. The IRS recently revised its rules for obtaining an extension to elect portability beyond the original nine-months after death (plus six-month extension) timeframe.

What’s new?

In 2017, the IRS issued Revenue Procedure 2017-34, making it easier (and cheaper) for estates to obtain an extension of time to file a portability election. The procedure grants an automatic extension, provided:

• The deceased was a U.S. citizen or resident,

• The executor wasn’t otherwise required to file an estate tax return and didn’t file one by the deadline, and

• The executor files a complete and properly prepared estate tax return within two years of the date of death.

Since the 2017 ruling, the IRS has had to issue numerous private letter rulings granting an extension of time to elect portability in situations where the deceased’s estate wasn’t required to file an estate tax return and the time for obtaining relief under the simplified method (two years of the date of death) had expired. According to the IRS, these requests placed a significant burden on the agency’s resources.

The IRS has now issued Revenue Procedure 2022-32. Under the new procedure, an extension request must be made on or before the fifth anniversary of the deceased’s death (an increase of three years). This method, which doesn’t require a user fee, should be used in lieu of the private letter ruling process. (The fee for requesting a private letter ruling from the IRS can cost hundreds or thousands of dollars.)

Don’t miss the revised deadline

If your spouse predeceases you and you’d benefit from portability, be sure that his or her estate files a portability election by the fifth anniversary of the date of death. Contact us with any questions you have regarding portability.

© 2022

When little things mean a lot: Estate planning for personal property

Personal items — which may have modest monetary value but significant sentimental value — may be more difficult to address in an estate plan than big-ticket items. Squabbling over these items may lead to emotionally charged disputes and even litigation. In some cases, the legal fees and court costs can eclipse the monetary value of the property itself.

Create a dialogue

There’s no reason to guess which personal items mean the most to your children and other family members. Create a dialogue to find out who wants what and to express your feelings about how you’d like to share your prized possessions.

Having these conversations can help you identify potential conflicts. After learning of any ongoing issues, work out acceptable compromises during your lifetime so that your loved ones don’t end up fighting over your property after your death.

Make specific bequests when possible

Some people have their beneficiaries choose the items they want or authorize their executors to distribute personal property as they see fit. For some families, this approach may work. But more often than not, it invites conflict.

Generally, the most effective strategy for avoiding costly disputes and litigation over personal property is to make specific bequests — in your will or revocable trust — to specific beneficiaries. For example, you might leave your art collection to your son and your jewelry to your daughter.

Specific bequests are particularly important if you wish to leave personal property to a nonfamily member, such as a caregiver. The best way to avoid a challenge from family members on grounds of undue influence or lack of testamentary capacity is to express your wishes in a valid will executed when you’re “of sound mind.”

If you use a revocable trust (sometimes referred to as a “living” trust), you must transfer ownership of personal property to the trust to ensure that the property is distributed according to the trust’s terms. The trust controls only the property you put into it. It’s also a good idea to have a “pour-over” will, which provides that any property you own at your death is transferred to your trust. Keep in mind, however, that property that passes through your will and pours into your trust generally must go through probate.

Prepare a memorandum

A more convenient solution than listing every gift of personal property in a will or trust is to write a personal property memorandum. In many states, a personal property memorandum is legally binding, provided it’s specifically referred to in your will and meets certain other requirements. You can change it or add to it at any time without the need to formally amend your will. Even if it’s not legally binding in your state, however, a personal property memorandum can be an effective tool for expressing your wishes and explaining the reasons for your gifts, which can go a long way toward avoiding disputes.

© 2022

How to keep remote sales on point

The pandemic has dramatically affected the way people interact and do business. Your company likely undertook various changes to adapt to the initial lockdowns and the ongoing public health guidance over the past two years.

An interesting byproduct of the crisis is that it created a somewhat involuntary experiment in remote work. Many businesses that were previously reluctant to allow telework — and remote sales, in particular — have learned that they can be highly effective.

If your company continues todeploy a remote sales staff, don’t assume it will “run itself” or that this tech-based approach is finished evolving. Here are some tips on keeping remote sales on point.

Devise sound strategies

No matter what the method, sales efforts should be targeted. Remote sales teams can lose their focus when they’re able to literally reach out to the world via the Internet. Don’t let sound sales and marketing strategies fall by the wayside.

For example, it’s far easier to sell to thoroughly researched prospects or, best of all, existing customers — who are already familiar with your products or services and those with whom you have an established relationship.

Continuously leverage technology

This might sound like a silly point given that remote sales are wholly dependent on technology to occur, but tech solutions are constantly evolving. Stay on the lookout for video chat and virtual meeting solutions that might work better for your business.

In addition to video-based products, other types of technology can enhance or support the sales process. For instance, software platforms that enable you to create customized, interactive and visually appealing presentations can help overcome some of the challenges of remote sales. And salespeople can use brandable “microsites” to:

• Share documentation and other information with customers and prospects,

• Monitor customers’ activities on these sites, and

• Tailor follow-ups appropriately.

Also, because different customers have different preferences, it’s a good idea to offer a variety of approaches to communication — including email, texts, instant messaging, videoconferencing and live chat. Good old-fashioned phone calls should, of course, be an option as well.

Provide an outstanding experience

The ultimate goal of any remote sales team is to close deals and bring in revenue. But, rather than getting too caught up in the numbers, your salespeople should always be cognizant of the experience they’re helping provide customers.

Today’s buyers, whether consumer or business-to-business, largely prefer the convenience and comfort of self-service and digital interactions. That’s half the battle. However, your remote sales staff must still ensure that customers’ experiences with both your technology and people are overwhelmingly positive. This might entail occasionally taking off their sales hats and donning a customer service or tech support hat to solve a problem.

Stay competitive

The lasting impact of the pandemic isn’t yet completely clear, but the manner in which it has accelerated the use of remote technology is readily apparent. To stay competitive, businesses need to continue incorporating and enhancing remote sales techniques and IT solutions. Let us assist you in weighing the costs, risks and advantages of your investments in this area.

© 2022

6 steps to easing employees’ fears about innovation

Business owners often find the greatest obstacle to innovation isn’t the change itself, but employees’ resistance to it. Their hesitation or outright defiance is frequently driven by fear.

Some workers might worry about how the innovation will alter their jobs — or whether it will even eliminate their positions. Others could reject the concept and believe that the change will hurt, rather than help, the company.

To better ensure the success of your next innovative project, you’ll need to ease the fears and win the support of your employees. Here are six steps that can help:

1. Create a communications strategy.

As specifically as possible, describe the innovation’s purpose and expected impact. For example, if you’re implementing a new software platform, let employees know how the innovation will help the business. Will it streamline operations? Open new markets? Bolster the company’s reputation as an innovator?

From there, explain how the innovation will affect and improve employees’ jobs. Going back to our example, this could mean pointing out how the software platform eliminates longstanding redundancies, improves data capture and security, and “upskills” employees’ tech savvy.

Be transparent about how a change could present initial challenges. For instance, suppose a new accounts payable system will simplify invoice processing, but it will also mean employees need to substantially alter their workflows. Let workers know how you’ll revise processes, as well as the steps you’ll take to help them with the transition.

2. Solicit input.

Long before rolling out an innovation, ask employees at all levels and departments about the concept and, over time, the details. Doing so might start with issuing an employee survey and then later holding “town hall” meetings to discuss how the project is evolving.

Remember, the more often workers can provide input, the more likely they are to buy in to the change. And the discussions could yield insights that prove invaluable to the innovation’s success.

3. Assemble an implementation team.

The team should include a leader, typically a management-level employee, who understands your company culture and can navigate the bureaucratic landscape. It should also include at least one “champion” — ideally, a lower-level worker who can help win the hearts and minds of fellow rank-and-file employees.

4. Provide training.

As feasible and relevant, plan to offer training related to the innovation. Be sure to factor this into the budget. Employees often fear a major change because they’re unsure they’ll be able to master a new process or technology. Provide the education and resources they’ll need to successfully adapt.

5. Start small.

Many businesses conduct a “beta test” well before the full rollout. This essentially means asking a small group of employees to try the innovation so you can catch oversights and fix glitches. Doing so can not only prevent disappointment or even disaster, but also build excitement about the big change as word spreads about how enjoyable and effective it is.

6. Ask for help.

Many small to midsize companies lack the staff and resources to design and implement a major innovation. You might need to allocate some of the project budget to outside consultants. Contact us for help creating that budget, as well as weighing the costs vs. benefits of any innovation you’re considering.

© 2022