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Archive for October, 2010

Who gets your Kids if you Die Without a Will? 10.20.2010

The answer to this question – whoever the judge decides should get your kids – is probably not comforting to most parents of young children.

According to a recent survey, as many as 75% of the parents of young children have not taken the steps necessary to decide who will care for their children if they die. With so few parents choosing guardians for their kids, designating a guardian must be extremely difficult and costly, right?

Wrong. Appointing guardians for your children is as simple as executing a Will. Once you and your spouse have decided who the primary and alternate guardians of your children should be, a document can be drafted reflecting your choices. A few signatures later, you have made certain that you, and not a disinterested judge, decide who raises your children in your absence.

Certainties in Life: Death and Taxes, or even worse, Death Taxes 10.12.2010

With federal estate tax reform about to undergo a significant return to levels not seen since 2001, many questions have arisen regarding the effect of these changes on individuals and small businesses. Here’s the scoop:

Current status: a vote on tax reform is unlikely before the November elections. The federal estate tax exemption amount is unlimited in 2010 but is set to fall to $1 million ($2 million for married couples) in 2011 with a tax rate of 55% for a majority of estates. According to the National Small Business Association, this change would increase the number of taxable estates from 5,500 to 44,000. Source: http://www.nsba.biz/content/printer.3515.shtml

Future options: over the past several years, many predictions have been made regarding the future of the estate tax. Currently there are a number of proposed bills in the U.S. Senate that would either maintain the federal exemption at the 2009 level ($3.5 million for individuals and $7.0 million for married couples) or would establish a phased approach to increasing the exemption level up to $5 million or more over an extended period of time. Unfortunately, most of these plans also incorporate other significant tax consequences such as changes to the rules regarding stepped-up basis or the drastic modification to existing planning mechanisms (such as Family Limited Partnerships) that would virtually eliminate the benefit of utilizing such planning tools.

State exemption levels: Washington and Oregon both have state estate tax exemption levels that stand-alone from the federal exemption level. At this point in time, it appears that Washington will maintain its $2 million exemption level and Oregon’s level will remain at $1 million. Other states in our region, such as Alaska and Idaho, have state exemption levels tied to the federal level, so uncertainty will remain in those states as long as Congress continues to be undecisive federally.

What does this all mean? Much of the estate planning done by many individuals and small businesses over the past five years has contemplated an exemption level higher than what we may have in 2011. Therefore, if your estate might be affected by the reduced exemption level (and higher tax rate), it is advisable to schedule a consultation with your estate planning lawyer and/or your accountant to discuss strategies that might save your estate thousands or perhaps millions of dollars in taxes.

As always, a consultation regarding your estate plan with either of our offices in Battle Ground or Snoqualmie is free. Let us know if we can help.

Superman or Batman: Two Different Views of Business Planning 10.07.2010

There are generally two ways to look at business planning:

First, you can focus on planning as a way to prevent disaster. You can identify the scenarios that might severely damage or even kill your business and then plan to avoid those potential pitfalls. Planning, therefore, is only necessary as a means to avoid disaster.

Second, you can plan in a way that will most likely help you achieve success. You can create goals for your business and figure out ways to measure those goals so that you can build upon each success (and sometimes the failures too!) in a way that always has you moving forward. Planning, therefore, is a tool to achieve goals.

If Superman were a business owner, he likely would view planning as a disaster-prevention necessity. Just as he reacts to the evils in Metropolis by waiting for a crisis to develop and then swooping in to rescue a victim from certain disaster, Superman’s business planning would be reactionary in that he would generally avoid planning until there was an identifiable threat that had to be dealt with.

On the other hand, Batman, the business owner, would likely view planning as a mechanism of control that would allow him to move in a direction that he pre-determines. Just as he deliberately identifies the criminals and thugs in Gotham and then methodically eliminates them, Batman would be proactive in his business planning and would view planning as an opportunity to establish a short-term and long-term game plan.

What about you? Do you plan to avoid disaster or do you plan to achieve goals?