The succession plan for many owners of closely held businesses is a sale. So often, the due diligence period with a buyer will reveal issues that thwart or delay sales and result in higher transactional costs. In order to minimize the potential for such a result and have a successful sale, owners should proactively do a little spring cleaning before engaging with a buyer. These steps may include:
1. Consider tax and estate planning initiatives to minimize the tax impact of a sale and further the goals of your estate plan.
2. Conduct a self-audit of your human resources, tax and environmental (as applicable) compliance.
3. Assess the level to which you have secured the most valuable assets of your company whether that be key personnel through restrictive covenants or trademark, copyright and patent rights and whether additional efforts will increase value.
4. Evaluate the best approach to maximize value and position a sale – whether that be an asset or a stock sale.
As with preparing for any major transition, assemble a strong professional team to guide you through the process.
Trusts, Estates and Succession
- Yasmeen S. Khaleel, Esq.
- Estates, Planning, Trusts, Estates and Succession
- Yasmeen S. Khaleel, Esq.
- Estates, Planning, Trusts, Estates and Succession
Life is full of transitions and the actions taken to prepare for such transitions. Parents spend time and money preparing for the transition of a child from infant to a toddler. We winterize our cars and our homes; preparing for the changes in seasons. And as our kids grow older and leave the nest, we transition from full-time parents into “empty nesters.” There are other transitions; inevitable ones which we often do not spend nearly enough time preparing for. This and the following two blog posts will address some of these transitions and provide, if nothing else, some good conversation starters for you and your loved ones.
This blog will address the transition of relevant information to allow for the proper care of your person and assets.
The second blog will address the transition from a single family/individual residential setting to a continuing care retirement community or other form of assisted living arrangement; whether facility based or with family.
The final blog in this series will address preparation for your final transition and the preparation of your loved ones to comply with your wishes.
Insofar as the transition of your relevant information, this is particularly important if you should experience a period of illness or disability resulting in your inability to manage your own personal financial affairs. Thereafter, upon your death, the proper transition of information can facilitate the administration of your estate, minimize delays and help avoid the potential for lost assets.
The methodology can vary from person to person and practitioner to practitioner, but many utilize a document called a “letter of instruction.” These are forms you can complete to facilitate this process, the goal being the creation of a blueprint for your loved ones to direct them to the most salient information. This will assist them in the prudent management of any medical issues and implementation of appropriate treatment plans, the orderly management of your assets and the proper payment of your liabilities.
- Yasmeen S. Khaleel, Esq.
- Estates, Other, Trusts, Estates and Succession
Telephone scammers are getting better and better; using fear tactics to elicit irrational and immediate results. This happened to someone close to me just a few months ago.
It was late night for this victim, after 9 p.m., which for the typical person in their 80s is like 2 a.m. for the rest of us!
The caller claimed they had the victim’s granddaughter and demanded money for her release. The screams of a teenage girl, in hindsight no doubt a computer simulation, begged their grandparent for help. The victim responded by leaving the safety of their home to purchase gift cards as had been directed by the caller. They then provided the redemption information for the gift cards to the caller via text.
This took place despite the victim’s calls to their family to confirm the safety of their granddaughter and receipt of reassurances from the family that all was well. The scammer was so convincing that the victim succumbed to the fear and pressure of the situation.
These events are called “spoofer calls” and are specifically targeted at the elderly/grandparent population. How can this type of crime be avoided? The simple answer is don’t answer calls from unknown numbers. But for many reasons this often does not happen and is too simplistic of a solution.
So, consider these additional tools to help protect your loved ones from falling victim to these sorts of scams:
- Awareness. Talking about this scam (and similar events such as people coming to the door regarding roof repairs, etc.) and educating family members will go a long way to calm the nerves of a potential victim.
- Privacy Settings. Facebook, Instagram and other social media platforms allow for the immediate sharing of photos and connection with loved ones. But these sites also allow scammers to mine personal information. Maximize account privacy settings to minimize the potential that a scammer will know who to impersonate.
- Call Blocking. By engaging tools to block unknown callers, you can force a scammer to voicemail. A voicemail will allow the recipient the time to listen to the message and call another family member for help. Check with your cell provider to identify the security and safety tools available.
- Capehart Scatchard
- Estates, Taxes, Trusts, Estates and Succession
Tax season for the year is over – well for those individuals who filed their returns without an extension. But that does not mean that for tax preparers, they don’t have to think about income tax preparation until the change of the calendar year. Your preparer may be involved in preparation of business returns which may not have a calendar year as the tax year, so the due date may occur some time other than April. Estates may have a fiscal year end rather than a calendar year end. Individual returns placed on extension will now have a due date of October 15. So, while many people may think that tax season ends in April, for preparers it may be that they are preparing returns all year long – it is just dependent upon the type of return. April is the end of tax season primarily for individual returns.
Now that the tax filing deadline has passed, please don’t adopt the attitude that you don’t need to think about your taxes until next year. Rather, adopt a new resolution to be better organized to make next year’s tax season easier – not only for yourself but also for your preparer. Here are a couple of suggestions for you to achieve success in that resolution:
- Be organized.
- Consider a method, either electronically or manually, where you have files to accumulate information throughout the year.
- Create a file for charitable donations in which to put the acknowledgement of your donations.
- Create a file for medical deductions for receipts.
- Create a general deduction file for any miscellaneous deductions that may or may not be needed.
- Create a file for communications you may receive from taxing authorities.
- Should you close a financial account during the year, put a notation with your tax information that the account was closed and the date. Better yet, put a copy of the last statement in your tax records for the year. If you close the account early in the year, it is easy to forget having done so a year later.
- Spreadsheets are great for keeping information organized. Perhaps you would rather keep your information on paper rather than electronically, so set up a paper spreadsheet to keep track of expenses. A great example of how helpful this can be is if you are able to itemize deductions, are you aware that for medical deductions you can take mileage, parking and tolls for visits to medical providers? If you don’t make a note of it – especially for parking or tolls, you may not think about it next year. Also, did you put a $20 bill in a boot drive for emergency responders collecting at a red light? You will most likely forget making that donation next year. Sorry, but the money given to Girl Scouts for cookies is not deductible because you received the cookies in return!
- Finally, just make a simple checklist for income sources, deductions to be used at the beginning of the year to note receipt of your tax documents, e.g., financial institutions 1099 forms, mortgage interest 1098 form, real estate taxes paid, etc. Once you can check off the expected items, you can transmit your information to your preparer and be ahead of the last-minute rush in April.
- Capehart Scatchard
- Estates, Gifts, Taxes, Trusts, Estates and Succession
Many people are familiar with crowdfunding to raise money for charities, for gifts, to assist victims of tragedy, etc. Some of the sites are Go Fund Me, Facebook, Kindful and so many others. It is always nice to see people looking out for others. But did you know that money raised in this manner may be taxable for income taxes?
Let’s take a look at when the funds raised are not income taxable:
- If the organizer gives the money to the person for whom the crowdfunding campaign has been organized.
- If the people contributing have no expectation of receiving anything in return.
However, if an employer donates to a crowdfunding campaign for the benefit of an employee, those contributions are considered taxable income.
If you are an organizer of a crowdfunding campaign, you are encouraged to contact a tax professional for information and advice regarding the campaign and what to be aware of. If the amount raised is more than $600, the crowdfunding website must file Form 1099-K with the IRS. Also, if any goods and/or services are received by the contributors, this must also be reported to the IRS.
These are the same rules that apply if someone organizes an event to benefit a charity or an individual, such as a golf event. If you pay to participate in the event (you play golf, you get a meal, etc.) then the total amount of your participation fee is not considered charitable because you received something in return.
So, if you are a contributor to a crowdfunding event or an event for charity, be aware of the parameters which will be followed for how your contribution will be classified for purposes of it being considered a charitable deduction or simply a gift. They are not the same and what you may think is a deduction that can be used for income tax purposes may not be eligible.
If you are an organizer of crowdfunding for a specific cause or for a charitable event, do your homework and know what the requirements are for reporting the monies raised. Be certain to keep good records of the event so that if you are questioned, you can provide whatever information is necessary.
This is not meant to discourage crowdfunding but to make you aware that there may be more requirements than simply setting up a site to collect donations.
- Capehart Scatchard
- ALERT: IRS Services, Estates, Taxes, Trusts, Estates and Succession
Taxpayers needing to amend or correct a 1040 Form – including Forms 1040-SS, 1040-NR and others, can now do so electronically. Until recently, to do so required the filing of the amended or corrected returns on paper. Changes not only regarding income or deductions, but changes to filing status or to add a dependent not previously claimed by the taxpayer can be made.
Not only does this make the filing of such returns easier for the taxpayers, it also enables the IRS to more quickly process the returns and avoid the backlogs experienced, especially since COVID. There are approximately 3 million amended returns filed each year.
A new, electronic checkbox has been added for Forms 1040/1040-SR, 1040-NR and 1040-SS/1040-PR to indicate that a superseding return is being filed electronically. A superseded return is one that is filed after the originally filed return but submitted before the due date, including extensions.
Very similar to the “Where’s My Refund” option on irs.gov, there is an option of “Where’s My Amended Return” that can be utilized to check the status of an electronically filed Form 1040-X.
Forms 1040, 1040-NR and 1040-SR can still be amended electronically for tax years 2019, 2020 and 2021 along with corrected Forms 1040-SS and Form 1040-PR for tax year 2021.
Bottom line, file any returns electronically if the option is available. Visit irs.gov to see if the return you’re filing is available for electronic filing. Be on the alert for new electronic filing options as the IRS moves forward with expanding digital services.
- Capehart Scatchard
- Estates, Taxes, Trusts, Estates and Succession
That phrase can have so many different meanings, but as a tax preparer for many years, to me it means the end of TAX SEASON is near. For most tax preparers, at this point, they are weary, overwhelmed, and just wondering how they will get all of the returns completed, or extensions filed.
You may ask why it is so stressful for tax preparers? Yes, given that this is a once a year task for each of us which brings tax preparers additional work, what other factors create the stress?
First and foremost is the procrastination of taxpayers in providing information to the tax preparer. There are taxpayers that are diligent in monitoring the receipt of the needed information and, as soon as they have received all tax forms, they have passed it on to their preparer. But, then there are others. . . . . It is the beginning of April and some taxpayers still haven’t shared the information with their preparer. Yet, the taxpayer thinks the preparer will be able to drop everything to do their return. I ask, is that being fair to the preparer who has piles, perhaps, of returns to do for people who submitted their information earlier?
So, you may ask, why not file for an extension? Many have the misunderstanding that filing for an extension means you have an extension of time to file but also for payment of any tax owing. WRONG. Filing for an extension is only for purposes of filing. If there is any tax liability anticipated, a payment should be made before the end of tax season to toll the accruing of penalties and/or interest for underpayment or late payment. The tax preparer still needs information in order to prepare and file for an extension. An extension is not a free pass to address the taxes at a later date. A diligent preparer will want ample notice for the need to file for an extension.
There are situations where a taxpayer may not receive all of their information needed to timely prepare a return. This is most common in situations where a taxpayer has an interest in a partnership and receives a Schedule K-1. This K-1 may not be issued in January or February like most tax information. So, a taxpayer’s return must go on extension.
As a tax preparer, I would ask that whomever preparers your tax returns deserves your patience and diligence. Here are a few quick and simple suggestions to make life a little easier for your preparer:
- Don’t procrastinate in providing information to your preparer.
- Be organized and have your information in some order. If you provide information on paper, take the information out of envelopes and open it up. Group it together by income, deductions, etc. If you provide the information electronically, don’t send everything in one file in any order. Organize it.
- If your preparer has encouraged you to make estimated payments, provide information on payments made.
- If your mailing address changes, tell your preparer. Don’t make them wonder why they are seeing two different addresses on your information.
- Don’t expect your preparer to “create” charitable deductions for you if you do not have receipts and are able to itemize deductions. Have proof of your donations.
- Regardless of the method your preparer uses to obtain your signature – electronic or on paper – give your attention to this as soon as possible so that your preparer can check your return off of their TO DO list.
- Finally, remember that your tax preparer is human and doesn’t have a magic wand. They are preparing your taxes according to the tax laws and are not looking for you to have to pay taxes, so don’t get mad at them if you owe. Numbers don’t lie. And, keep in mind that a little sweetness – whether in attitude or sugar – can go a long way with your preparer.
- Andrew Bradley
- Estates, The Basics, Trusts, Estates and Succession
In 2023, most people have shifted (whether you wanted to or not) to living mostly online. Between keeping up with social media and managing your finances, the average person has more than 90 online accounts.
When dealing with estate planning, the common agenda is to ensure that you and your family are taken care of if the worst were to happen. Thinking about your online accounts isn’t something that comes to mind when planning how to make the administration of your estate easier for your executor or your power of attorney. However, your online accounts can be very important. Your fiduciary or loved ones will not be able to manage anything unless you’ve planned for that. For instance, many times people have opted to move away from receiving paper statements and have elected to get everything delivered online to their main email address.
The main question you should ask yourself “Who will have access to my accounts?” and “What accounts do I have?” Also, “Are there accounts that I do not want accessed even after death?”
Some examples are your financial accounts, utilities, taxes, photo managers, social media accounts and email accounts.
As an example, Facebook doesn’t want anyone to manage your Facebook account other than yourself. Facebook does provide an option for an account to be placed as a “legacy” account. This will allow your fiduciary to memorialize or terminate the account. This election must be done while you are alive. If you don’t choose to have your account permanently deleted, only your main profile will be memorialized if Facebook becomes aware of your passing.
Another example is Gmail. If you do not access your Gmail account for more than twenty-four months, Google will delete the account. Therefore, important information may be lost if the account isn’t accessed.
A great solution to this would be to maintain a password manager. If you provide this login information to your fiduciary, they will be able to access the accounts that you do have with the latest passwords. There are many good password managers available.
When it comes to logging into a computer, phone or other device, you will need to know the encryption code. This could be as simple as a four digit pin or something more complicated that may even need dual authentication; such as using Duo.
With cryptocurrency, if you do not have the encryption key or the private key, you will lose access to that underlying data, meaning the actual currency. If that happens, the cold wallet (an external drive) or web based account will be locked and completely inaccessible. There is no way to recover these accounts if they are lost.
Whether you want to use password managers or maintain a physical list, you should make a note for your fiduciary so that they can access this information upon your death. Otherwise, the information could be lost, inaccessible or could cause trouble in gaining access if necessary.
About the Author: Andrew Bradley is a paralegals in the firm’s Wills, Trusts & Estates Group.
- Capehart Scatchard
- Estates, Retirement Assets, Trusts, Estates and Succession, Wills
We have heard about a Will – a Last Will and Testament, which names someone to take care of wrapping up our affairs and directs the distribution of our assets. But, have you heard of an Ethical Will?
What exactly is an Ethical Will? Simply put, it is a communication to your loved ones to share some personal thoughts. It is written by you, not by an attorney, and simply provides some explanation to your loved ones. Here are some examples of issues that can be addressed in an Ethical Will:
- You can explain in your own words the reasons that you have prepared your estate plan as you have. What made you do what you did with regard to decisions you made during your lifetime. What are your views about money, charitable giving, what you hope the future will hold for them with their inheritance and your hope for how they will spend their lives.
- This could be an opportunity to share thoughts with your trustee on such ideas of the use of distributions from a trust by a beneficiary, i.e., if the beneficiary requested a distribution to start a business, return to school, buy a house – decisions of what you feel would be a reasonable use of the distribution.
- You could reflect on lessons you have learned along life’s path and how they have impacted you, people who may have influenced you, experiences you have had, relationships that have been important, how you might hope they will carry on in life without you.
- Acquiring wealth can occur in a variety of ways and explaining how you acquired your assets and your philosophy is another option.
- Last, but not least, just leave a message of love and gratitude for your feelings toward your loved ones left behind – basically this could be a real tear jerker!
Among the advantages of such an ethical will are an option for communication to express things that may be difficult to share during your lifetime, to share your thoughts at a time when your thoughts may be better received, to provide guidance that is put down on paper and enable it to be referred to as often as wanted, to share special moments about your ancestors and perhaps events shared with them and the list could go on and on.
And, don’t forget the benefits you could derive from writing your ethical will, just knowing that you have put your important thoughts on paper for your loved ones to hold on to after you have passed.
- Capehart Scatchard
- Estates, Identity Theft, Protect Your Information, Social Security, Trusts, Estates and Succession
We’ve got a lot of “Days” but have you heard of this one? National Slam the Scam Day, which was designated to be “celebrated” tomorrow, March 9, 2023.
So, what exactly is National Slam the Scam Day? Well, it is a day that we are all encouraged to take a little more time to pay attention to recognizing Social Security-related scams and to stop scammers from stealing your personal information and, perhaps, even your money!
What can you do?
- Pay close attention to emails and their attachments. While they may look to be credible, scammers pretend to be from an organization or agency that may be familiar to you.
- Usually scammers will mention a problem or a prize, telling you that your Social Security Number was involved in a crime or they ask you to confirm your SSN.
- Scammers pressure you to act IMMEDIATELY by perhaps threatening you with arrest or legal action.
- You are told that you must pay using a gift card, prepaid debit card, cryptocurrency, wire transfer of money or mail cash.
You are faced with such an encounter, so what do you do? First of all, report the contact to the Social Security Office of the Inspector General if the scammers are posing as representatives of Social Security. You can find more information at www.ssa.gov/scam.
Protect yourself and think twice about giving out your SSN or other personal information to a caller or in response to an email. Ask for a number for you to call them back when you have the information available. Chances are, the number you would be given is not a working number and will not be the same number that comes up on your caller ID. If you get an email that looks suspicious, call the proper organization on a verified number and ask if they were sending out emails such as the one you received.
Identity theft is too common and, unfortunately, we have to put forth the effort to protect our own identity and information. Be cautious when giving out your information. And, feel good about doing your part on National Slam the Scam Day.