20140916 wealth management for small business owners
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We Build and Preserve WealthElmwoodWealth Management
Financial Planning Portfolio Management Tax & Estate Services
Wealth Management For Small Business Owners
We Build and Preserve WealthElmwoodWealth Management
Financial Planning Portfolio Management Tax & Estate Services
I. Estate and Succession Planning
II. Maximizing Your Retirement Accounts
III. Investments
Meeting Agenda
We Build and Preserve WealthElmwoodWealth Management
Financial Planning Portfolio Management Tax & Estate Services
I. Various Forms of Trusts
I. Living Trusts, Revocable Trusts, Charitable Trusts, GRATs
II. Gifting
I. Annual Gift Tax Exclusion is $14,000 per Person
II. Securities, Real Estate, Low Cost Basis Assets
III. Donor Advised Funds
IV. www.tisbest.org
III. Business Continuity Plans
I. Buy/Sell Agreements
II. Key person insurance
Estate and Succession Planning
Estate attorneys typically offer package deals when creating a living trust to
include wills, health care directives and such making this undertaking more affordable.
We Build and Preserve WealthElmwoodWealth Management
Financial Planning Portfolio Management Tax & Estate Services
I. Retirement Plan Options
I. Traditional IRA
I. $5,500 or $6,500 if over 50 years old
II. Roth IRA
I. $5,500 or $6,500 if over 50 years old
II. Subject to income $114,000 or $181,000 joint
III. SEP IRA
I. 25% of compensation or $52,000 maximum
IV. 401(k) plans
I. $17,500 annually and additional $5,500 if over 50
II. Individual 401(k) can match 25% of compensation up to
$52,000 maximum
Maximizing Your Retirement Accounts
We Build and Preserve WealthElmwoodWealth Management
Financial Planning Portfolio Management Tax & Estate Services
I. Focus on Low Cost Providers
I. Charles Schwab & Fidelity for plan admin services
II. The Online 401(k) website (www2.theonline401k.com)
III. Individual Stocks and Exchange Traded Funds (ETFs)
II. Create a Simple and Efficient Structure
I. ‘Moneylink’ for funds transferred to checking account
II. Bundle all accounts into one user ID
III. Schwab saves 10 years of client data online
IV. Schwab Investor Checking linked to taxable/trust account
Investments
Consolidating your investment accounts to a single custodian will help to manage
your finances. Link a Charles Schwab investor checking account to your personal trust.
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Financial Planning Portfolio Management Tax & Estate Services
Quarterly Investment Reviews
I. Compare investments versus peer groups (Morningstar.com,
Yahoo or Google Finance)
II. Have a plan to rebalance your asset allocation
I. Quarterly? Annually?
Optimize account holdings
I. By ensuring that growth is a priority in retirement accounts, and
liquidity is a priority in non-retirement accounts, we can invest in
growth, at the same time providing for your own short-term needs.
I. Use retirement accounts for growth; invest primarily in
equities
II. Use brokerage/trust account for stability and liquidity; invest
primarily in bonds.
Investments –continued
We Build and Preserve WealthElmwoodWealth Management
Financial Planning Portfolio Management Tax & Estate Services
I. Set an Asset Allocation (mix between
stocks, bonds, etc)
I. Know what you own, it provides
peace of mind
II. Understand how retirement date
funds work
Investments
1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055
Percent
Invested
in stocks
32% 35% 40% 42% 51% 60% 69% 76% 84% 87% 90% 90% 92%
Source: Morningstar.com May 3, 2013
Sample Target Date Retirement Fund Stock Allocation
Asset
Class
% Historical
Return
Historical
Volatility
Domestic
Equities
35% 9.74% 20.0%
Foreign
Equities
10% 8.1% 21.9%
Fixed
Income
40% 6.0% 6.9%
REITs
& Nat Re
10% 6.5% 18.5%
Cash 5% 3.0% 3.1%
Total 100% 7.4% 14.0%
We Build and Preserve WealthElmwoodWealth Management
Financial Planning Portfolio Management Tax & Estate Services
Appendix
I. Retirement Plan Tax Table
II. Personal Income Tax Schedules
III. Capital Gains Tax Schedules
IV. Insurance Considerations
V. Additional Elmwood Services
VI. Elmwood Biographies
VII. Elmwood Contact Information
VIII. Disclosures
We Build and Preserve WealthElmwoodWealth Management
Financial Planning Portfolio Management Tax & Estate Services
Appendix: Retirement Plan Tax Table
Go to HSAbank.com to open up a health savings account. They are
inexpensive and efficient in providing you easy access to your funds and recordkeeping.
Payroll Deduction IRA SEP SIMPLE IRA Plan Profit Sharing
Key Advantage Easy to set up/maintain Any employer with one or
more employees
Salary reduction plan with little admin
paperwork
Any employer with one or more
employees
Employer
Eligibility
Any employer with one or more
employees
Any employer with one or
more employees
< 100 employees and no other
retirement plans
Any employer with one or more
employees
Employer’s
Role
Arrange payroll deduction contributions.
No annual filing required
IRS form 5305-SEP to set up
plan. No annual filing required
IRS form 5304/5-SIMPLE to set up
plan. No annual filing required.
Custom plan document. Must file
IRS form 5500. Need advice
Contributors To
The Plan
Employees via payroll deduction Employer contribution only Employee salary reduction + employer
contribution
Annual employer contribution is
discretionary
Maximum
Annual
Contribution
$5,500 for 2014. Over age of 50 an
Additional $1,000
Up to 25% of comp, but no
more than $52,000 for 2014
Employee: $12,000 in 2014. Over age
of 50 an additional $2,500. Employer:
match 1-3%
Up to 100% of comp, or $52,000.
Employer can deduct amounts <
25% of total plan
Contributor’s
Options
Employee can decide how much to put in
any time
Employer decides whether to
make contributions yearly
Employee can decide how much, but
Employer must match or make 2%
Employer makes contribution as
set by plan terms
Minimum
Employee
Coverage
No requirement. Can be made available
to any employee
All employees over 21,
employed 3/5 years, and
made > $550
All employees w/ > $5,000 income in
current or last 2 years.
All employees > 21 and worked
1,000 hours last year
Withdrawals
Loans/Payment
Permitted anytime, but subject to income
and penalty taxes
Permitted anytime, but subject
to income and penalty taxes
Permitted anytime, but subject to
income and penalty taxes
Permitted for special events as per
plan terms. Subject to income
taxes
Vesting 100% immediate vesting 100% immediate vesting 100% immediate vesting Depending on plan terms
We Build and Preserve WealthElmwoodWealth Management
Financial Planning Portfolio Management Tax & Estate Services
Appendix: Retirement Plan Tax Table
Safe Harbor 401 (k) Auto Enrollment 401 (k) Traditional 401 (k) Defined Benefit Plans
Permits high level of salary deferrals by
employees without annual non-
discrimination testing.
Provides high level of participation and
permits high level of salary deferrals. Safe
harbor relief for default investments
Permits high level of salary deferrals by
employees.
Provides a fixed, pre-established benefit
for employees.
Any employer with 1 or more employee Any employer with 1 or more employee Any employer with 1 or more employee Any employer with 1 or more employee
Will require help to set up. Minimum amount
of employer contributions required. Must file
form 5500
Will require help to set up. Minimum
amount of employer contributions required.
Must file form 5500
Will require help to set up. Minimum
amount of employer contributions required.
Must file form 5500
Will require help to set up. Minimum
amount of employer contributions required.
Must file form 5500. Actuary to determine
annual contributions.
Employee salary reduction contributions and
employer contributions
Employee salary reduction contributions
and maybe employer contributions
Employee salary reduction contributions
and maybe employer contributions
Primarily funded by employer
Employee: $17,500 in 2014. Over age 50
an additional $5,500.
Employer/Employee Combined: Up to
lesser of $51,000 in 2014. Employer can
deduct amounts < 25% of aggregate comp
for all participants and all salary reduction
contributions.
Employee: $17,500 in 2014. Over age 50
an additional $5,500.
Employer/Employee Combined: Up to
lesser of $51,000 in 2014. Employer can
deduct amounts < 25% of aggregate comp
for all participants and all salary reduction
contributions.
Employee: $17,500 in 2014. Over age 50
an additional $5,500.
Employer/Employee Combined: Up to
lesser of $51,000 in 2014. Employer can
deduct amounts < 25% of aggregate comp
for all participants and all salary reduction
contributions.
Annually determined contribution
Employee decides on contribution, and
employer must match or make 3%
contribution
Employees, unless they opt out, must
make contribution as defined by employer.
Additional contributions by employer
based on plan terms.
Employee decides on contribution.
Additional contributions by employer based
on plan terms.
Employer contributions per plan terms
Generally, must be offered to all employees
age 21 and over and who worked at > 1,000
hours previous year
Generally, must be offered to all
employees age 21 and over and who
worked at > 1,000 hours previous year
Generally, must be offered to all
employees age 21 and over and who
worked at > 1,000 hours previous year
Generally, must be offered to all
employees age 21 and over and who
worked at > 1,000 hours previous year
We Build and Preserve WealthElmwoodWealth Management
Financial Planning Portfolio Management Tax & Estate Services
Appendix: Federal Personal Income Tax Schedules for 2014
Tax Rate Single Filers Married Filing Jointly Married Filing Separately Head of Household
10% Up to $8,925 Up to $17,850 Up to $8,925 Up to $12,750
15% $8,926 - $36,250 $17,851 - $72,500 $8,926 - $36,250 $12,751 - $48,600
25% $36,251 - $87,850 $72,501 - $146,400 $36,251 - $73,200 $48,601 - $125,450
28% $87,851 - $183,250 $146,401 - $223,050 $73,201 - $111,525 $125,451 - $203,150
33% $183,251 - $398,350 $223,051 - $398,350 $111,526 - $199,175 $203,151 - $398,250
35% $398,351 - $400,000 $398,351- $450,000 $198,176 – $225,000 $398,351- $425,000
39.6% $400,001 – or more $450,001 or more $225,001 or more $425,001 or more
We Build and Preserve WealthElmwoodWealth Management
Financial Planning Portfolio Management Tax & Estate Services
Appendix: Capital Gains Income Tax Schedule for 2014
Tax
Rate
Single Filers Married Filing Jointly Married Filing Separately Head of Household
10% Not subject to capital gains tax if total
income including capital gains falls within
this bracket
Not subject to capital gains tax if total
income including capital gains falls within
this bracket
Not subject to capital gains tax if total
income including capital gains falls
within this bracket
Not subject to capital gains tax if
total income including capital
gains falls within this bracket
15% Not subject to capital gains tax if total
income including capital gains falls within
this bracket
Not subject to capital gains tax if total
income including capital gains falls within
this bracket
Not subject to capital gains tax if total
income including capital gains falls
within this bracket
Not subject to capital gains tax if
total income including capital
gains falls within this bracket
25% 15% 15% 15% 15%
28% 15% 15% 15% 15%
33% 15% 15% 15% 15%
35% 15% 15% 15% 15%
39.6% 20% 20% 20% 20%
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Appendix: Miscellaneous Tax Items for 2014
Single Filers Married Filing Jointly Married Filing Separately Head of Household
Itemized
Deductions
$250,000 $300,000 $150,000 $275,000
Alternative
Minimum Tax
$51,900 $80,800 $40,400
Standard
Deduction
$6,100 $12,200
Ordinary
Dividends
Ordinary income tax rates
Qualified
Dividends
Long-term capital gains rates
Unearned Income
(Medicare Contrib)
3.8% surtax on lesser of net investment income or modified adjusted gross income above $200,000 (individuals) and $250,000 (couples)
Medicare
Payroll Tax
Additional 0.9% on earned income above $200,000 (individuals) and $250,000 (couples)
We Build and Preserve WealthElmwoodWealth Management
Financial Planning Portfolio Management Tax & Estate Services
Appendix: Medicare payroll and net investment income taxes 2014
The healthcare law included two new taxes that were scheduled to take effect in 2013. These taxes were not repealed as part
of the fiscal cliff deal, and will kick in this year as expected.
The Medicare payroll tax
Here is what’s changing. In 2012, the Medicare payroll tax was 2.9%. It applied only to earned income, which includes wages
you are paid by an employer, plus tips. Your share, 1.45%, was deducted automatically from your paycheck. Your employer
kicked in the other 1.45%.
In 2013, high-wage earners will owe an additional 0.9% on earned income above $200,000 (single filers) or $250,000 (married
filing jointly). So, for example, if you are a single filer whose salary will be $225,000 in 2013, you will pay a 1.45% Medicare
tax on the first $200,000, then 2.35% (1.45% plus 0.9%) on the next $25,000. Your employer will be required to withhold the
extra 0.9% once your wages pass the $200,000 threshold for individuals.
The Medicare surtax on net investment income
A 3.8% surtax will be due on the lesser of your net investment income for the year, or the amount by which your “modified
adjusted gross income”—or MAGI—exceeds those income thresholds. Note that a taxpayer could be subject to both the
additional 0.9% tax on earned income and this 3.8% tax.
Here is a hypothetical example: Paul and Ann’s MAGI is $372,000, of which $330,000 is wages and $42,000 is net investment
income. Their MAGI is $122,000 over the $250,000 threshold for married couples filing jointly. They'll incur the 3.8% tax on
their $42,000 of net investment income, because it is less than the amount they are over the MAGI threshold ($122,000).
They’ll also owe 0.9% on the $80,000 that their wages are over the $250,000 earned income threshold for married couples
filing jointly. Their total Medicare tax surcharge will be $2,316, which includes $1,596 (3.8% of $42,000) and $720 (0.9% on
$80,000).
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Financial Planning Portfolio Management Tax & Estate Services
I. Health Care
I. High Deductible HSA’s, Group Plans, Disability
II. Long-Term Care
I. This may be a deductible expense (www.aaltci.org)
III. Business Insurance
I. Workman’s comp, liability, business income, property, comm auto
II. Umbrella policy
Insurance Considerations
Go to HSA.com to open up a health savings account. They are inexpensive
and efficient in providing you easy access to your funds and recordkeeping.
We Build and Preserve WealthElmwoodWealth Management
Financial Planning Portfolio Management Tax & Estate Services
Appendix: Additional Elmwood Services for Individuals & Families
Go to our website, www.ElmwoodWealth.com to see our guide on living trusts
and college 529 plans.
I. Financial Planning
I. Retirement and education planning
II. Insurance evaluation and 410(k) allocation
II. Portfolio Management
I. Customized portfolio management to achieve financial goals
II. Open investment style and platform to avoid biases
III. Tax & Estate Services
I. Comprehensive estate planning
II. Tax efficient strategies utilized for planning and investments
We Build and Preserve WealthElmwoodWealth Management
Financial Planning Portfolio Management Tax & Estate Services
Shannon Lemon, CFP
Shannon’s primary responsibilities include working directly with our clients on assessing their
financial situation and putting a plan in place to meet their financial goals. Prior to co-founding
Elmwood Wealth Management, Shannon worked for Osborne Partners Capital Management for
18 years and was their Chief Compliance Officer and a principal of the firm. Shannon holds the
CFP designation and received a B.A. from the University of Colorado at Boulder.
Our Team:
Robert C. Gillooly, CFA
Bob is a portfolio manager and member of the Elmwood Investment Committee. His primary
responsibilities include U.S. domestic stock and bond research, as well as working with our
financial planners on setting asset allocation for client portfolios. Prior to co-founding Elmwood
Wealth, Bob worked for Osborne Partners Capital Management for 18 years and was their Vice
President, Chief Operating Officer and a principal of the firm. He was a voting member of the
four person investment committee responsible for choosing individual securities and setting
asset allocations for over $1 billion of client funds. Bob also had sole responsibility for setting
strategy for their approximately $300 million bond portfolio. Bob holds the Chartered Financial
Analyst designation and received a B.A. from the University of Michigan.
We Build and Preserve WealthElmwoodWealth Management
Financial Planning Portfolio Management Tax & Estate Services
Bob Gillooly Shannon Lemon
510-858-2721 510-858-2722
[email protected] [email protected]
Elmwood Wealth Management
2027 Fourth St., Suite 203
Berkeley, CA 94710
(510) 858-2723
www.ElmwoodWealth.com
We Build and Preserve WealthElmwoodWealth Management
Financial Planning Portfolio Management Tax & Estate Services
Appendix: Disclosures
The information in this presentation is intended for U.S. Residents only and is not intended for distribution in any jurisdiction
where Elmwood Wealth Management Inc. (EWM) is not licensed to distribute such information or where such offer,
solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information provided in this
presentation is for information purposes only and should not be construed as investment, tax, or estate planning advice or a
determination that a particular product or service is suitable for any individual. This information should not be relied upon in
making an investment, tax, or estate planning decision and any decision based on information contained in this presentation
are the sole responsibility of the visitor or recipient.
This information is not intended to be used as a general guide to investing, or as a source of any specific investment
recommendations, and makes no implied or express recommendations concerning the manner in which any client’s account
should or would be handled, as appropriate investment strategies depend upon the client’s investment objectives. It is the
responsibility of any person or persons in possession of this material to inform themselves of and to take appropriate advice
regarding any applicable legal requirements and any applicable taxation regulations which might be relevant to the
subscription, purchase, holding, exchange, redemption or disposal of any investments.
This information neither constitutes an offer to enter into an investment agreement with the recipient of this document
nor an invitation to respond to the document by making an offer to enter into an investment agreement.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk. Past
performance is not indicative of future results, which may vary. The value of investments and the income derived from
investments can go down as well as up. Future returns are not guaranteed, and a loss of principal may occur.
Opinions expressed are current opinions as of the date appearing in this material only. No part of this material may, without
Elmwood Wealth Management’s prior written consent, be (i) copied, photocopied or duplicated in any form, by any means, or
(ii) distributed to any person that is not an employee, officer, director, or authorized agent of the recipient