Aging Clients Need Considerate Advisors

Deidra Thomas, CPA, Tax Supervisor 

Our client base is aging.  People are living longer and continue to need planning and financial services into advanced age.  This is good news for CPAs. However, there are health issues that can affect the way we should best communicate with our aging clients. 

If you have noticed an older client having trouble paying attention, becoming paranoid, or undergoing personality changes, they may be suffering from dementia.  Alzheimer’s disease is the most common type of dementia, accounting for 70% of all cases.  The 2009 Alzheimer’s Disease Facts and Figures estimates that over 5.1 million Americans aged 65 or older have Alzheimer’s.  By 2030, that number is estimated to grow to over 7.7 million. With those numbers, it is easy to see that understanding and helping aging clients will continue to become increasingly important not only for CPAs, but for all types of advisors.    

As difficult as it may be to bring up this topic, advisors need to have a discussion with the client, if they demonstrate the above mentioned symptoms.  Legal documents and engagement letters should contain the names of contact persons in case the client should lack the mental capacity to make sound decisions.  Most importantly, we should accommodate clients by taking the following steps:

• Conduct shorter meetings
• Limit the focus to one or two topics
• Be clear of deadlines and courses of action
• Hold meetings in familiar surroundings like the client’s home
• Use simple sentences and limit questions to one at a time
• Do not argue or correct
• Above all, be patient 

As our clients age, there is a strong likelihood that some, or perhaps even many, will develop a type of dementia.  Service should remain our top priority. By communicating in a way that addresses their needs, we ensure that our clients continue to see us as trusted advisors.

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Has Estate Planning Gone to the Dogs?

Erin E. Prest, CPA/PFS 

At first I thought I had misread the subject line of the email I received.  It was from the AICPA, an organization that I respect as a CPA.  The email was touting the “New Guide to Legal Planning for Pet Care.”  Recent changes in estate law have changed the legal status of a pet to property, affording them better legal rights and protection.  Drafting legal documents to protect the welfare of pets is apparently becoming the new trend.  Those that treat their pets like family (or better) will now be able to legally set up trusts to ensure Fido maintains his current standard of living.  I’m sure this could also lead to some surprised heirs who find out they’re getting less than the pets. 

The emphasis on pets is echoed in recent articles about PurinaCare, a pet health insurance provider.  PurinaCare’s pet insurance is now available as a group benefit that employers can offer to employees.  The insurance group has also just expanded their insurance coverage to two more states so it must be catching on. 

As a member of our Wealth Management group, I’m always looking for more ways to help our clients plan for the future.  All jokes aside about the current lack of estate planning reform, it seems that traditional insurance and estate planning have now really gone to the dogs (and cats).  

While we’re on the subject, don’t forget to update your wills and account beneficiaries for the non-animals in your life.  Many times, wills and other important documents aren’t frequently updated which can lead to unintended results when your estate is distributed.  Check up on your wills, trust documents, durable powers of attorney, and beneficiaries of life insurance policies, retirement plans and other accounts.  This review is especially important if you’ve had any significant changes in the family through births, deaths, marriages or divorces.  Make sure your assets are going to those you intend to inherit your wealth….otherwise, you could be in the doghouse!

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Tips for Avoiding Negative Tax Consequences from Your Inherited 401(k)

Katie M. King, CPA, Tax Associate 

Historically when the beneficiary of a Qualified Retirement Plan, such as a 401(k), was not a spouse, the account balance had to be distributed in either a lump sum or within a five-year period.  Under these rules, the benefit of the tax deferral was lost.

With the passing of the Pension Protection Act of 2006, nonspouse beneficiaries of Qualified Retirement Plans now have the chance to avoid these negative tax consequences and receive the balance through distributions over their lifetime.

Here are some tips that must be followed in order to take advantage of these new rules:

• Arrange for a trustee-to-trustee transfer from the 401(k) into a new IRA identified as an IRA with respect to the deceased individual (John Smith as beneficiary of Jane Doe’s IRA). This must be a trustee-to-trustee transfer, you cannot receive the money in cash and then roll it into an IRA.
• Complete the transfer in the year of death if possible, no later than the following year. This way, no matter how the plan was set up, the beneficiary will be able to receive the benefits over their lifetime using the life expectancy rules.
• If the transfer is completed in the year following the death, be sure to take the required minimum distribution in the year of death.
• Do not make new contributions to the IRA or roll it over into an IRA solely in the name of the beneficiary.

Be sure to consult with your tax advisor to make sure you have maximized the benefits available to you.

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The Perfect Storm: There May Never be a Better Time to Transfer Assets to Younger Generations

By Douglas D. Mueller, CPA/PFS

A perfect storm usually conjures up bad thoughts.  But right now there is a rare combination of economic events that could be a perfect storm for doing estate planning and transferring assets to younger generations.

We know all too well that market values are still down from a historical perspective. This is a great time to get these assets in the hands of the younger generation so the appreciation belongs to them and is out of your estate.

The other economic anomaly right now is historically low interest rates.  The good news about these interest rates is that the IRS uses these rates as well when they determine what a fair rate of interest should be for family transactions.
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Enjoy Retirement: Succession Plans Are Critical for Family Businesses

By: John C. Scott, CPA, CVA

Who’s going to manage your business when you retire? Will your business continue?  Will you sell it?  And if you sell it, how will you transfer ownership?

These are tough questions and many times just thinking about the answers is reason enough for family businesses to simply put off succession planning.  While business succession planning should be a priority for every business, it is particularly crucial if you own a family business.

Unlike other businesses, relationships and emotions can drive decisions and pose complications.  The family dynamic can take a difficult process like succession planning and make it even harder. 

For many family businesses, family is the primary focus of succession planning.  As a family business owner, you worry not only about the business but also about how decisions will affect you and future generations. More than 70 percent of family-owned businesses do not survive the transition from founder to second generation. In many instances, poor tax planning or discord among family members can be the cause.  Both of these issues can be readily addressed in a good family business succession plan.

So where do you start?  Here are some tips:

• Start Planning Early
• Involve Your Family in Discussions
• Be Realistic and Plan Accordingly
• Train Your Successor
• Seek Professional Assistance

Enjoy Retirement:  You’ve worked for hard for retirement and you deserve to enjoy it.  A good succession plan can ensure you have the funds you need to retire and that the business you have built continues to thrive in the hands of the next generation.

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IRA or Roth IRA?

By: Chad R. Gall, CPA

To convert or not convert, that is the question.  In fact, that is one of the big questions for traditional IRA owners in 2010.  Should you convert your traditional IRA to a Roth IRA?  In many cases, the answer is yes.  

The capability to take tax-free withdrawals from a Roth IRA makes a conversion compelling.  However, as with most financial decisions, there are many variables and factors to look at before converting.  Be sure to analyze this option based on your own circumstances. 

The conversion decision depends on a number of factors, including:

• Your tax rates today versus those at retirement
• How will the taxes due on the conversion be paid
• The amount in your estate, and
• Your overall estate plan
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