I also want to take a moment and thank all of you who have referred your family, friends, and associates to us – your confidence in MEA is greatly appreciated.  A referral to MEA is the sincerest form of compliment and we want to thank you for those referrals through our Thank You Referral Program.

When one of your referrals calls us, we will ask them how they heard of us.  When your name is mentioned, we will send you a $5.00 Starbucks gift card. In addition, you will be eligible for that month’s drawing of a $25.00 gift card AND be eligible for the quarterly drawing of a $50.00 gift card.  Every referral gives you another opportunity to win in the monthly and quarterly drawings!  It’s just our way of saying “thanks” for sharing your confidence in MEA with others.

We genuinely appreciate your business and look forward to working together for many years to come.

The winner of the $25.00 gift card for February was Steven M. of Portland.

Thank you for your help and support!

A step-by-step look at adding your next staff member

Looking to hire a janitor or a secretary? Maybe a senior minister? While some hires might involve a few more steps than others, it’s all pretty basic, right? You’ve got the résumé, two or three references, and you know what the job requires. You work with people all of the time, so you have a good, intuitive sense of who will fit in and who won’t. It ought to be a no-brainer.

Not quite. Many things can go wrong. There are specific steps you should take, and pitfalls you should avoid. We asked two experts in this area to give us some advice. Bob Podgorski is manager of extension services at Harper Community College in Palatine, Illinois. He is also coordinator of the St. Hubert Job and Networking Ministry, and he runs his own consulting practice in human resources, RPP Enterprises, both based in Hoffman Estates, Illinois. Christian Poland, a partner at Bryan Cave LLP in Chicago, is a lawyer who specializes in employment and non-profit organizations.

Before You Start Looking

The first step is to develop a well-organized employment handbook. A handbook will save a lot of time and avoid many hiring problems. The handbook should contain a statement of the church’s faith, policies, and standards of conduct. “For instance, a conservative church would not want a minister who will promote gay marriage and abortion, while a liberal church will not want a minister who condemns gay marriage and abortion,” Poland says.

“You should also convey clearly the standards of conduct you expect,” he says. “I was recently involved in a case in which a candidate for a senior-level ministry position was living with his fiancée. They were soon to be married, but, after the offer was made and announced publicly, the situation was discovered and the church had to withdraw its offer on the basis that the person was violating the Biblical prohibition regarding sex outside of marriage and so was not fit to assume moral leadership within that church. The situation was difficult and embarrassing for both the church and the applicant.”

The interview process itself should be fairly short and pleasant since the essential information is already out in the open.

While much of this information can be made available through a church’s website, the applicant should receive an actual handbook at the start of the process. The handbook should contain basic policies, such as vacation time, as well as the statement of faith and expected conduct. “You can’t cover every possible sin, but you should list the main conduct parameters, especially those that might not be readily understood by an outsider,” Poland says. Topics like drug testing and harassment should also be discussed.

The second step is to prepare a detailed, accurate job description. “One of the pitfalls I’ve seen many times is that job descriptions are vague,” says Podgorski. Vagueness confuses both the interviewer and the applicant about job responsibilities. The job description should be very specific about job duties and the requirements in education, skills, and experience.

The third step is to get the word out about the job opening. Because many churches have limited budgets for advertising, Podgorski says administrators should think about sources that are free and easily accessible to candidates. These can include placement firms where job descriptions can be posted, as well as job and networking groups within the community. Notices on bulletin boards in coffee shops and grocery stores, especially near the church, also can help. Be sure to advertise the openings in the church bulletin and on the church’s bulletin boards.

Dealing With Applicants

A résumé is necessary, but also ask for a cover letter stating why the person wants the job, the salary requirements, and the aptitudes he thinks he can bring. The application process should include permission to do background checks appropriate for the position. For example, a credit check may be in order if the position involves financial responsibilities. A criminal record check is especially important if the person will supervise youth activities.

Before you start reviewing applicants, Podgorski advises to have a preliminary meeting with everyone who will be involved in the process. “Discuss the criteria for screening, and determine what each screener’s focus will be,” he says.

Churches may also be surprised to learn that the ADA covers not just physical disabilities, but psychological impairments as well.

“Background checks are virtually a necessity in this day and age,” Poland says. “There are a series of requirements under the Fair Credit and Reporting Act that mandate certain notices and forms be filled out.” This statute provides rights and strictures for both employers and employees. States often have their own laws. “It’s very difficult for a church to do this level of research on its own,” Poland says. Hiring an agency to do these checks, however, is an efficient way to get this task accomplished, he adds.

Background checks are important, says Poland, but “they are no substitute for reference checks.” The applicant must sign release forms allowing their former employers to talk. Former employers might not want to say bad things about the applicant for fear of liability. On the other hand, an applicant who had a bad experience with a former employer, perhaps one involving a firing, might be able to offer mitigating circumstances or show how he was unfairly treated.

Be very cautious in asking applicants to participate in any kind of psychological or personality tests. Tests that are innocuous enough to avoid legal snags might not tell you things that you couldn’t find out otherwise. For instance, says Poland, a question that indicates a relatively neutral personality trait, such as introvert or extrovert (most people are a bit of both, depending upon the circumstances), reveals very little. On the other hand, having the applicant complete a “sentence completion” questionnaire, as is sometimes used in psychological testing, might be illegal or at least legally dangerous under the disability discrimination laws.

Because the hiring process is fairly complex and involves quite a bit of paperwork, Podgorski recommends keeping records of each applicant for at least one year.

The Interview and Offer

“The interview process should be determined in advance: know who will conduct the interviews and what questions are pertinent in terms of the job description and culture within the office or other church environment,” Podgorski says. And if all of the foregoing considerations have been put into place, the interview process itself should be fairly short and pleasant. A lot of uncomfortable digging will be avoided, since the essential information is already out in the open.

An important dynamic of the offer letter, which can easily be overlooked, is what is called “at will employment,” Poland says. This means that the employee can either be fired or quit at any time. Under some circumstances, though, a new employee might be guaranteed a long tenure. For instance, a pastor with name power might not make the move unless he has that assurance, and the church thinks it’s worthwhile to meet his wishes.

But generally, confirming the “at will” status of the employment is important, Poland says. If the letter says, “We’re so pleased you’re joining us as senior pastor and we hope you’re with us until you retire,” it could create a huge liability for the church. If the pastor is involved in a scandal six months later and fired, he could try to claim breach of contract. The letter should include the provisions covered earlier, such as the understanding that the applicant has read and agrees to the basic criteria in the handbook, job description, and so on.

It’s also important to have an expiration date on the offer, Poland says, to avoid any misunderstanding. For instance, if an applicant resigns his current position, sells his house, and so on, then finds he doesn’t have the job he’s accepted, then the church that made the offer may be liable for all those costs, even if a contract has not been signed.

Welcoming the New Employee

“The pastor should welcome the new employee,” Podgorski says. “He should review the payroll agreements (including overtime, vacation, and benefits), general policies, any dismissal or disciplinary parameters, references to the parish’s values, attendance at services if required, quality of work expected, and problem-solving in a team atmosphere.”

Podgorski points out a common shortcoming—not clearly indicating who will be the new employee’s supervisor. “The new employee is often frustrated by having too many bosses and inconsistent direction,” he says. The new employee should also clearly understand how he will be evaluated in terms of his performance.

In addition to reviewing job requirements, the orientation should include a tour of the church, pointing out where things are stored, and introducing him to the people he’ll work with. A meeting with the church directors and leaders may be in order, along with a history of the church and its mission. The new employee might shadow another employee for a short period of time.

Employee Classification

The Fair Labor Standards Act sets minimum wage and overtime requirements. The determination of an employee’s exempt (salaried) or non-exempt (hourly) status, as defined in the Act, often is incorrect. “This represents a lot of risks for the church,” explains Poland. For example, an administrative assistant might be generous with her time, doing extra work on Saturday and Sunday. She may do this voluntarily, but if the employment relationship sours, then the employee can claim she’s been working 50 hours a week, and the church could be liable for back pay and other damages.

Sometimes pastors use people from their congregation to do various jobs and regard them as outside contractors. The church does not need to withhold taxes or offer benefits. The worker might not pay certain taxes, and might choose to establish her own health plan.

The problem with this arrangement is that it’s sometimes illegal. “Generally, if a person does all his work for you, such as a janitor who works 40 hours per week, then he must be regarded as an employee,” Poland says. “But if he is a landscaper not directly supervised by the church, is in control of his schedule and manner of work, and has other businesses he serves, then he is properly treated as an independent contractor.”

Leaders also need to be aware of potential problems when volunteer work is closely aligned to the church’s general administrative work, says Poland. For example, a volunteer who does accounting work 10 hours every week could one day say he wants compensation for all that time he put into the work.

Discrimination

While churches may have an exception to the laws prohibiting religious discrimination when hiring, they can get into trouble when they are inconsistent. An example of inconsistency is a Baptist church turning down a janitorial applicant because he is not of the same Baptist denomination of the church, but then hiring a Catholic receptionist.

Employers are generally prohibited from discriminating based on gender. But Poland says churches can be exempt in this regard by claiming religious freedom under the Constitution. Some churches contend, for example, that their religious criteria allow only males to be ministers.

Race discrimination is also prohibited, but Poland has not seen any recent cases in which a church has tried to justify the non-hiring of a minority applicant based on a religious belief that a minority applicant did not meet the church’s religious qualifications. Instead, Poland sees the issue arising in well-intentioned, but likely illegal, sensitivity to parishioners.

For example, a board of elders might find that a minority applicant satisfies fully the requirements of the job, but decide that its congregation is not ready for someone with a different ethnic background than what they are used to. Because the elders are not basing their rejection of the applicant on a failure to meet religious criteria, but rather the perceived ethnic preferences of their congregants, the elders’ discrimination based on ethnicity is likely illegal.

If the position at issue is that of a senior minister, the courts might not interfere (a “ministerial exception” has developed based on the courts’ recognition that they are ill-equipped to adjudicate ecclesiastical disputes and may violate the Constitution in doing so). But refusing to hire a receptionist because of her ethnicity is almost surely illegal.

Regarding the Americans With Disabilities Act, Poland says some churches fail to understand that the obligation is not just one of non-discrimination. Affirmative “reasonable accommodations” need to be made for employees with disabilities if those accommodations permit the employee to perform the job. Churches on tight budgets may initially reject a request for accommodation based on its cost, and in so doing violate the ADA.

Churches may also be surprised to learn that the ADA covers not just physical disabilities, but psychological impairments as well. ADA cases are frequently brought by employees claiming that their employers failed to accommodate their depression or anxiety disorders, with the typical accommodations sought being requests for time off for therapy or recovery or additional understanding in the workplace with respect to productivity. And, of course, if a mental illness merely makes the employee’s behavior a little odd but does not interfere with his ability to work productively and with others to get his job done, the church would likely violate the ADA in firing him.

Another challenging area of discrimination law is the application of state and local laws prohibiting discrimination on the basis of marital status and sexual orientation to employment decisions based on conduct the church deems to be immoral or religiously unacceptable. Homosexual conduct (as well as heterosexual conduct outside of marriage) is often deemed contrary to religiously based standards of conduct and some churches view divorce as unacceptable for its ministers and elders.

If the employment decision is in fact based on sincerely held religious beliefs about the impropriety of the conduct, the church will generally be within its rights to act on such a basis (although its defense may have to be based on constitutional religious freedom protections, which makes defense more complicated and expensive). But because public opinion often runs counter to such decisions, for public relations and legal reasons, the church must be careful to identify in advance the prohibited conduct, act consistently in enforcing its expectations regarding proper conduct, and then clearly articulate the religiously motivated reason for the decision.

Wheaton College recently received significant negative press, including Chicago Sun-Times front-page coverage, for its policy regarding divorced individuals, even though the professor at issue had voluntarily resigned in recognition of the College’s policy. The advice of a qualified lawyer early in the process can significantly reduce the risk of legal liability and negative publicity.

Hiring is Just the Start

Most parishes miss ongoing employee development, says Podgorski. “You want a good employee to stay with you, and there’s no better way to do this than to have a program which will allow for advancement. This falls into the area of investing in your employees, making sure they have the opportunity to learn skills, to work with their peers by attending seminars and conferences. Then they’ll be able to bring back to the church fresh ideas and renewed enthusiasm.”

Thomas Dolan writes on a variety of freelance topics.

This article first appeared in Your Church. Used by permission of Christianity Today, Carol Stream, IL 60188

Copyright © 2008 by the author or Christianity Today, Inc. /Your Church magazine.

Portland Monthly teamed up with Five Star Professional to conduct a very extensive research study looking to find Wealth Professionals that are proven to provide their clients with exceptional service. They reach out by phone and mail to all FINRA reps, all brokers dealers, and IAR’s (over 2,600 service industry professionals and 420 firms) in Clackamas, Columbia, Hood River, Multnomah, Tillamook County, Washington & Yamhill counties in the state of Oregon and asked each professional/firm to nominate a Wealth Manager they feel provides exceptional service to clients.

Once all the nominations are complied Five Star Professional contacts the nominees to start an extensive review process –There are 10 objective criteria that each nominee is scored against. Those 10 objective criteria are:

• Credentialed as an IAR.
• FINRA rep, CPA, or a licensed attorney.
• Minimum of 5 years in the financial service industry.
• Favorable regulatory and complaint history.
• Fulfilled their firm review based on internal standards.
• Accepting new clients.
• One year client retention, five year client retention.
• Assets administered.
• Number of client households served.
• Education/professional designations.

As a final step, Five Star Professional survey 1 in 12 high net worth households in Oregon (15,400 consumers) to uncover positive and negative experiences with their wealth manager.

There were 1,454 candidates nominated and only 268 award winners were chosen for 2012. This represents less than 5% of all Wealth Managers in the Oregon.  (Over 6,000 registered financial advisors in the geographic coverage area).

We at Majestic Eagle Agency are excited to announce that in the May issue of Portland Monthly,  Damon Winter LUTCF, CFS, VP Financial Planner will be featured as a 2012 Five Star Wealth Manager as named for providing exceptional service to his clients!

We at MEA, want to take a minute to thank you for your loyalty and confidence with working with us throughout the years! The Five Star award is so important to Damon Winter because it shows him that he is meeting the needs of his clients!

Please join us in Congratulating Damon Winter!

Best Regards,
Bill Wilson

Most people know Habitat for Humanity as a non-profit organization that builds affordable housing worldwide for people in need. But for construction companies, it can also be a source of surplus and used building materials. In addition, in some areas, Habitat offers services to disassemble buildings and salvage the contents.
Across the U.S., about 50 Habitat affiliates operate ReStores, and their success is inspiring more affiliates to follow the example. The stores receive contributions from contractors with excess supplies, lumberyards, demolition crews salvaging reusable materials, home improvement centers and individuals who are remodeling their homes.

Bargain surplus goods might include paving bricks, drywall, roofing materials, wallpaper, carpeting and power tools. Used items might consist of doors, kitchen sinks and cabinets. Some companies find ReStores also a smart way to cut costs on architectural details such as doorknobs or crown molding for restorations.

ReStores sell the donated goods at discounts as deep as 90 percent of retail costs and use the proceeds to pay administrative costs and help finance Habitat’s home construction. Because the stores’ stock is donated, inventories change daily, so some shoppers drop by periodically to see what’s available.

ReStores offer another source of savings: Some of the outlets offer deconstruction services, an alternative to demolition. ReStore staff dismantles buildings by hand to salvage fixtures and materials for resale and provides a detailed inventory for the owners. The businesses and individuals that make these contributions may qualify for charitable tax deductions.

A few ReStores are equipped to handle both deconstruction and demolition. And their not-for-profit status means low overhead, so they are likely to be able to place job bids far below those of commercial demolition contractors.

To find a Habitat ReStore near you please click this link Habitat ReStore Directory – Oregon

The IRS sometimes audits corporations over the salaries they pay shareholder-employees. In fact, this has been one of the IRS’ favorite audit targets in recent years.

Compensation is fully deductible by a C corporation if it’s considered “reasonable.” But if a salary is considered too large, Uncle Sam can label part of the payments as “disguised dividends” and your business can be subject to double taxation.

How? When your corporation distributes profits as salaries, the firm gets a deduction for the amount. You have to pay personal income tax on the money, of course, but it’s only taxed once.

However, if the corporation pays you a dividend, the money is taxed twice – once at the corporate level and again at the personal level on your Form 1040.

Here are two examples of corporations challenged by the IRS over compensation and the different results they received.

In a Tax Court case, a husband and wife were the sole shareholders of a construction corporation in Colorado. The firm poured the concrete foundations of residential and commercial buildings, as well as driveways, sidewalks and other “flat work.”

During the year in question, the husband and wife were paid compensation (including salary and bonuses) of more than $1 million. The company had annual sales of $4.5 million and poured more than 600 foundations. The wife handled the books and the husband’s duties included supervising the firm’s employees, soliciting bids, arranging deliveries and ordering equipment.

The Court looked at nine factors to determine if the compensation was reasonable or excessive:

•  The couple’s compensation.
• The nature, extent and scope of the work.
• The size and complexity of the business.
• A comparison of the salaries paid with the gross income and net income.
• The prevailing economic conditions.
• A comparison of salaries with distributions to shareholders.
• The prevailing rates of compensation for comparable positions and businesses.
• The salary policy of the taxpayer as to all employees.
• The amount of compensation paid in previous years.

Key points: The company never paid any dividends and the combined compensation for all other employees was only $650,000. The couple didn’t show that an independent investor would be satisfied enough with the return on equity to pay their salaries. Therefore, the Court ruled that the couple’s compensation was unreasonable. (B&D Foundations, Inc., TC Memo 2001-262).

In another case, a mobile home retailer paid its General Sales Manager and major shareholder a salary of $1.1 million over a two-year period. The IRS and the Tax Court rejected part of the amount as excessive.  They pointed to the fact that there was no defined salary plan for the General Sales Manager. The General Manager (GM) responded that the compensation he took was a percentage of gross sales, and when sales were down, he took minimum compensation. According to his testimony, if the company had a good year, he had a good year, and vice versa.

The GM’s expert witness testified that the amount of compensation paid was deemed to be the amount required to satisfy an independent investor. The Court also examined the duties performed by GM and found them to be extensive.

The Court found that all the amounts paid to GM compensation did not exceed reasonability. (Brewer Quality Homes Inc., TC Memo, 2003-200).

Best advice: If you suspect that you might have a reasonable compensation issue, ask your accountant to perform a reasonability analysis. This can involve using national salary surveys, comparing your compensation with that of similar positions in similar companies in your geographic location, and evaluating your background, performance, and the duties, time, and energy required by the job. Whatever the result of the analysis, have your accountant document the basis for the salary decision.

Hoffman Stewart & Schmidt, P.C. provides the information for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

Don’t let the changing estate tax laws prevent you from getting your estate in order.  Even if you don’t think your estate will be subject to estate taxes, there are other reasons to plan your estate, such as to make sure your assets are distributed according to your wishes and to name guardians for minor children.   While most people will need the help of professionals to develop a formal estate plan, you can aid the process by organizing information and making some basic decisions.  Consider these steps:

Calculate your estate’s value.  In addition to assets you currently own, include assets your estate will acquire after your death, such as life insurance proceeds and pension benefits.  For each asset, list the estimated current market value, how the asset is titled, and any beneficiaries.  Also list any debts that will have to be paid from the assets.  Subtracting the debts from the assets will give you an estimate of your estate’s current value.

Determine your estate planning objectives.  Decide who should inherit your assets and how and when those assets should be distributed.  You can bequeath assets outright giving heirs immediate control, or you can place assets in trust so you control how and when they should be distributed.  Business owners should also consider succession planning for the business.

Decide who will assist in carrying out your estate plan.  Several individuals will be key:

An executor (or personal representative) administers your estate through probate court, locates and values all assets, pays your estate’s obligations, and distributes assets to your heirs.

A trustee manages your trust and distributes the income and principal to heirs.

A guardian cares for your minor children.  You may decide to elect one guardian to physically care for your children, while another guardian manages their assets.

Consider a durable power of attorney, which gives an individual you select the power to take over your finances if you become incapacitated.

Consider a health care proxy to delegate health care decisions to a third person in the event you are unable to make those decisions.  In all cases, name your first choice and at least one successor.

Review options to minimize estate taxes.  With the estate tax exclusion amount and the maximum estate tax rate changing almost annually, the amount of tax your estate will owe depends on the year you die.  Since that can’t be predicted, your estate plan will need to provide flexibility.  Consider the following strategies:

Trusts are versatile estate planning tools that can be used for a variety of purposes, including to reduce estate taxes, control asset distribution, make gifts to charities, provide for the possible incapacity of the creator, protect heirs, avoid probate, provide professional management of assets, or make provisions for minors.  There are a wide variety of trusts, so you should review which ones may be appropriate for your circumstances.

The unlimited marital deduction allows you to leave any part of your estate to your spouse without paying estate taxes.  That doesn’t mean that leaving all your assets to your spouse is the best strategy for your estate.  Your estate may reduce taxes owed if you distribute some assets to other heirs, either outright or through a trust, to utilize some or all of your estate tax exclusion.

You can make annual estate-tax free gifts (up to $13,000 in 2012 or $26,000 if the gift is split with your spouse) to each of any number of individuals.  These annual gifts are not counted as part of your life time gift tax exclusion.  Over a number of years, an annual gifting program can remove substantial assets from your estate.

If you can’t totally avoid estate taxes, make provisions for the payment of those taxes.  Many large estates are cash poor, making it difficult for heirs to pay estate taxes.  You may want to obtain a life insurance policy to help fund those taxes.  If properly structured, your beneficiaries may receive the proceeds free of income and estate taxes.

Please call if you’d like to discuss your estate planning situation in more detail.

Copyright © Integrated Concepts 2012. Some articles in this newsletter were prepared by Integrated Concepts, a separate, nonaffiliated business entity. This newsletter intends to offer factual and up-to-date information on the subjects discussed, but should not be regarded as a complete analysis of these subjects. The appropriate professional advisers should be consulted before implementing any options presented. No party assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.

When you’re asked to serve as executor of someone’s estate, it’s generally meant as a compliment that the person trusts you to serve in this important role.  But don’t simply accept without giving the matter serious thought.  Not only does the job come with significant responsibilities, you may find yourself in the middle of family squabbles.  Before agreeing to take on this important role, consider the following:

Understand the duties involved.  Those duties include:

Locating and valuing all assets.  This includes dealing with the probate court and filing all required documents; preparing a complete inventory of assets; notifying life insurance companies of the death ; collecting m money owned from employers, pensions, Social Security, and other sources; and arranging for property appraisals.  While the will is in probate, the executor is responsible for maintaining and investing the assets.  If a family business is involved, the executor may need to manage or liquidate the business.

Paying the estate’s obligations.  This includes paying creditors; arranging for the family’s immediate living expenses; and preparing and filing all income, estate, and inheritance tax returns.  If assets must be sold to pay debts, the executor must decide which assets and when to sell them.

Distributing the estate. 

The executor must decide when and how to distribute the estate’s assets to the heirs.  The executor may have to resolve conflicts among family members.   After the assets are distributed, a final accounting must be prepared for the court.

Look for possible problems.  In most situations, executors perform their duties with no issues.  However, think carefully before accepting in the following situations:

The person is unwilling to show you his/her estate documents.  Without knowing all the details about the person’s estate, you can’t determine whether heirs may disagree or whether the estate is more complex than you are comfortable handling.

An heir is disinherited or heirs receive substantially unequal distributions.  While it is certainly within the person’s rights to disinherit an heir or make unequal distributions, those situations are more likely to lead to court battles or fights among heirs.  Decide whether you want to get involved in that type of situation.

The person isn’t well organized.  One of your primary duties is to track down, manage, and distribute assets.  If the individual doesn’t have his/her affairs well organized, you could spend excessive time hunting for documents and assets.

Protect yourself.  If you decide to serve as executor, try to protect yourself by:

Asking the person to limit your liability.  Executors can be sued by heirs.  Make sure your liability is restricted unless you commit “gross negligence”.

Making sure you can hire an attorney and/or accountant.  Be sure to use those professionals to help you with your duties.  The use of professionals will also help limit your liability, since they will be more familiar with the process and can help you perform your duties appropriately.

Please call if you’d like to discuss this in more detail.

Copyright © Integrated Concepts 2012. Some articles in this newsletter were prepared by Integrated Concepts, a separate, nonaffiliated business entity. This newsletter intends to offer factual and up-to-date information on the subjects discussed, but should not be regarded as a complete analysis of these subjects. The appropriate professional advisers should be consulted before implementing any options presented. No party assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.

News and Announcements

Your Parent’s Estate Plans.  Estate planning can be a difficult subject to discuss with your parents.  But to help ensure their estate is settled quickly according to their wishes, family members should have some basic information.  You don’t need to know the specifics, but you should find out:

Where important estate planning documents are located.  Don’t ask for specifics, just make sure documents are in place so their wishes will be carried out.  Find out if they have a durable power of attorney and a health care proxy.  With a durable power of attorney, they designate someone to control their financial affairs if they become incapacitated.  If your parents are concerned that this person may assume control prematurely, suggest leaving the document with their attorney, who can deliver it to the appropriate person when necessary.  A health care proxy delegates health care decisions to a third person when your parent is unable to make those decisions.  Usually, this document also outlines procedures to be used to prolong life.

How to contact their advisors.  Ask for a list of names, addresses, and phone numbers of lawyers, accountants, and financial advisors.

Their rationale for distributing their estate.  Often, when heirs understand why an estate is being distributed in a particular manner, it can prevent problems among those heirs.  If your parents are reluctant to discuss these things now, suggest they leave a personal letter with their estate planning documents explaining their rationale for distributions.

Preferences for the future.  Find out where your parents would like to live if they’re not physically able to live in their current home.  Discuss in detail what procedures they want performed to prolong life in the event of a terminal illness.  Determine their preferences for funeral arrangements.

Copyright © Integrated Concepts 2012. Some articles in this newsletter were prepared by Integrated Concepts, a separate, nonaffiliated business entity. This newsletter intends to offer factual and up-to-date information on the subjects discussed, but should not be regarded as a complete analysis of these subjects. The appropriate professional advisers should be consulted before implementing any options presented. No party assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.

On December 31, 2012, the provisions of the law that took much of the sting out of estate taxation are due to expire.  It was the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2012, or TRA 2010, signed into law on December 17, 2010, that ushered in the lightest levies against inherited assets in more than 75 years.  Among other things, it raised the estate tax threshold to $5 million per person ($5.12 million in 2012), and lowered the estate tax rate to 35%.

The rate hadn’t been that low since 1931 when the top rate was 20%.  It rose to 45% in 1932 and soared to 77% from 1941 through 1976 before decreasing to 55% in 1984 where it remained through 2001.  Changes in the 2000s gradually brought that rate down to 35%.

The Changes Explained.  With the expiration of TRA 2010 set for the end of 2012, estate taxation will revert to what it was in 2001: taxes begin on estates of just $1 million (still twice that for married couples), and the tax rate moves back up to 55%.  To illustrate the impact: the taxes due on a joint estate of $5 million will rise from nothing this year to $2.75 million in 2013.

What’s more, when TRA 2010 expires, it will also become more difficult to reduce your estate by gifting.  In sync with the lowering of the threshold for estate taxation, the lifetime gift tax exemption will be cut from $5.12 million per person ($10.24 million for couples) to just $1 million ($2 million for couples).

Take Advantage of More Favorable Terms before They Disappear If you’re among the Americans who would be affected by the reset of estate tax laws in 2013 (if you have an estate worth more than $1 million and /or would consider gifts or more than $1 million), then there are steps you can take today to take advantage of the current favorable estate tax laws.  Those steps include:

Accelerate your gifting.  Even if you had previously used your full lifetime gift exemption (which was $1 million), through 2012, you can make additional gifts up to the limited-time-only lifetime limit of $5.12 million.  Work with a professional advisor to ensure that you balance minimizing estate tax consequences with leaving enough liquidity in your estate to provide for your own needs.

Move more assets into trusts.  Sheltered trusts can be an effective way to protect your assets from estate taxes.  It always makes sense to ensure that you have maximized your use of trusts to minimize your estate tax burden, but with stiffer tax laws likely in the future, now is a critical time to do so.

While it’s possible that Congress could pass new laws before the end of 2012 that make the estate tax code more benign, with federal spending cuts in the neighborhood of $1 trillion on the table along with the proposals to increase taxes on the wealthy, it appears that an extension of estate tax relief is a long shot in the near term.

Smart changes in your gifting strategy and your estate plan depend on knowing, in part, how the market has changed the value of your assets and how those changes affect your entire financial picture.  Please call if you’d like to discuss your estate plan in more detail.

Copyright © Integrated Concepts 2012. Some articles in this newsletter were prepared by Integrated Concepts, a separate, nonaffiliated business entity. This newsletter intends to offer factual and up-to-date information on the subjects discussed, but should not be regarded as a complete analysis of these subjects. The appropriate professional advisers should be consulted before implementing any options presented. No party assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.

Usually, a great deal of thought and effort goes into estate planning documents.  You need to consider all your assets, decide who should receive those assets, and find the best strategies to accomplish your goals.  However, your work isn’t over once you’ve signed those documents.  You need to make sure your assets are properly positioned to go to your intended heirs.  Some problems to look out for include:

Your assets aren’t titled properly to fund trusts.  A common estate planning strategy used to preserve your estate tax exclusion is to set up a credit shelter or bypass trust.  Assets up to the estate tax exclusion amount ($5,120,000 in 2012, scheduled to decrease to $1,000,000 in 2013) are placed in trust.  Your spouse can then use the income and even some of the principal, with the remaining assets distributed to your heirs after your spouse’s death.  To fund the trust, however, you need sufficient assets titled only in your name.  Assets jointly owned with your spouse will typically pass directly to your spouse and cannot be placed in the trust.  However, you may want to split assets so each of you individually owns assets designated to go into the trust.  Residents of community property states should review their state laws carefully, since they typically have more flexibility when using assets to fund trusts.

Beneficiary designations contradict your estate planning documents.  Assets like life insurance, annuities, 401 (k) plans, and individual retirement accounts pass directly to named beneficiaries.  Provisions in your will and other estate planning documents cannot change those designations.   Thus, review all your beneficiaries ensuring those designations are compatible with your estate plan.  Also review contingent beneficiaries in case a beneficiary dies before you.  After significant changes in your life, such as a divorce, remarriage, spouse’s death or child’s or grandchild’s birth, review your designations to see if changes are warranted.

Owning assets jointly with just one child.  Often, a widow or widower will add one child to bank accounts, brokerage accounts, deeds and titles so that child can help manage the assets if the widow or widower becomes incapacitated.  He/she expects the child to share the assets with his/her siblings.  However, the asset is considered a gift to the one child.  For that child to split the asset with his/her siblings, he/she will have to make gifts to those siblings, possibly raising gift tax implications.  Instead, consider using a power of attorney, so one child can help with your financial affairs.  Or, make a provision in your estate planning documents that adjusts distributions for any assets that pass to one heir through  joint ownership.

Please call if you’d like to discuss coordinating your assets with your estate plan.

Copyright © Integrated Concepts 2012. Some articles in this newsletter were prepared by Integrated Concepts, a separate, nonaffiliated business entity. This newsletter intends to offer factual and up-to-date information on the subjects discussed, but should not be regarded as a complete analysis of these subjects. The appropriate professional advisers should be consulted before implementing any options presented. No party assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.