You’ve worked hard to create opportunities for your loved ones, and you want to make sure they enjoy the benefits as part of your legacy. So, how do you decide what amount to leave them? A Merrill Lynch survey of high-net-worth individuals says that they believe for every $100 million, $26 million is too little for one child, but $63 million is too much. Estate planning isn’t only about how to mitigate your estate tax burden or the quantity to bequeath, but in what form to leave it, in what increments, and how to prepare benefactors to make the most of their futures with it.

These are tough, emotionally charged questions every affluent family is faced with at some point, whether they have $100 million or $10 million to bequeath to one or more children, nieces and nephews, or grandchildren. Leave too much and it’s possible to create a sense of entitlement; leave too little and you could spark resentment. The right number is decidedly a personal one, both from a philosophical standpoint and in regards to each family’s tax profile.

As we noted in an earlier post, in the U.S. alone, $6.04 billion will be transferred to the next generation over the coming 30 years. These assets could be subject to as much as 40 percent of their value in inheritance taxes, with state taxes ranging between zero and 16 percent. The individuals surveyed in  Bank of America Corp.’s Merrill Lynch unit all had a minimum of $5 million in investible assets, very close to the threshold at which the estate tax is triggered.

What’s right for the next family isn’t necessarily the best course of action for yours. One might have a business to sell or to designate a successor for, another may have real estate investment property across multiple state lines. These situations require different courses of action in order to retain as much value for benefactors instead of the IRS. In some cases, beginning the distribution process during one’s lifetime via gifts and other vehicles may be the best choice after considering all parties’ interests.

Money figures aside, affluent families are tasked with ensuring heirs are properly educated on the full scope of management responsibilities for the types of assets inherited, and that they have time to recover from natural missteps that come with the territory. Structuring an inheritance in stair-step fashion based on factors such as age is one approach some families take in hopes of protecting heirs against permanent losses.

The only real way to arrive at the right number, structure and tax strategy for you and your benefactors is by discussing your options with the help of estate planning professionals. Whether your children are 5, 15, or 25, it’s not too early or too late to get started. The more time you build into the process, the longer you have to prepare everyone involved, including yourself.

The NFL just wrapped up their 2015 draft with over 250 elite players hoping to make a statement in the upcoming football season. Picks one and two, Jameis Winston for the Tampa Bay Buccaneers and Marcus Mariota for the Tennessee Titans, stand to receive $22.4 million and $21.4 million contracts, respectively. But just as salary estimates are being calculated, a new study shows nearly 16 percent of players go bankrupt within 12 years of retirement. Let’s look at a couple who fumbled and how others are scoring by pivoting their training into the business world.
The media has widely reported on two high-profile names, among others, who’ve filed for bankruptcy: defensive tackle Warren Sapp and University of Texas star Vince Young. Sapp made more than $83 million during his career but filed for bankruptcy in 2012, within five years of retirement. Young made $34 million over six years as quarterback but filed for bankruptcy in 2014.
Unrestrained spending and bad investments plagued these and other NFL athletes, contributing to the grim data based on 2,016 drafted players from 1996 to 2003. The National Bureau of Economic Research says in its study, “Having played for a long time and been well-paid does not provide much protection against the risk of going bankrupt.”
Despite these statistics, some NFL veterans have been able to parlay their athletic experience into a success mindset ideal for business. In a column written for Entrepreneur.com, Israel Idonije says adaptability is what helped him achieve success on the field and continues to do so off of it. After setting a long-term goal to play in the NFL for 10 years, he realized he had to be flexible in the short-term to make sure he got there, doing everything from modifying his training to gaining and losing as much as 55 pounds to play different positions.
Today, he reviews goals in his merchandise business, Athlitacomics Sports Heroes, in much the same way. To him, “A business plan is like a football game plan in that, sometimes, the strategy must change mid-game to adjust to what the competition is doing.”
NFL veteran Bryan Scott took a different path to business after playing for teams like the Atlanta Falcons and Buffalo Bills. He’s applying his affinity for following playbooks to his new position as the owner of multiple TITLE Boxing Club franchises in Georgia. He’s said that having a built-in game plan with a franchise doesn’t in itself guarantee success, but instead, “Each and every day you must under-promise and over-deliver on your product and customer experience and make your performance louder than your applause.”
Insights like these apply to almost every business owner working to build on his financial success. To learn specific plays that can grow your assets over time and work to protect them, consult with a member of Talley & Company’s advisory team about your position.
The tax filing deadline for 2014 was last week, but today is the day Americans celebrate Tax Freedom Day for 2015. That means that as of now, the nation has collectively earned enough money to pay the nation’s total tax bill, which stands at $4.85 trillion for 2015. This figure represents 31 percent of income and takes into account federal, state and local taxes. It took 114 days to pay off this year’s bill.
Of course, our personal tax freedom days vary depending on where we live, as well as our income, investments, and other holdings. For example, Californians will celebrate tax freedom day a couple weeks later, on May 3. And based on individual factors, the day may come even later (or earlier) in the year for each individual.
Most people are interested in reducing the number of days it takes to reach their own personal tax freedom day. For individuals with straightforward tax profiles, this might be accomplished in the weeks leading up to April 15 by looking for ways to maximize deductions and help score the biggest refund check. For high-income earners, business or property owners, estate beneficiaries or holders, and anyone with multiple tax positions that are intricately connected, this short-term, narrowly targeted approach can actually do more harm than good.
In these cases, a person’s wealth, business portfolio, and long-term investments are all complicated moving parts to take into consideration months and years before tax day. Otherwise, they may be minimizing their taxes for one year, but by doing so expose themselves to greater taxes over the long term.
There can also be a conflict of interest between personal, business, or estate tax positions. Lowering your personal tax burden could have an adverse effect on your business’ position, for example. This is why a holistic assessment helps you save over the long term. It makes it possible to uncover how an action in one area might trigger either detrimental or beneficial consequences in another. 
A tax preparation office or software might be able to help you identify write-offs, plug in the numbers, and calculate your bill/refund for any given year that may save you a few dollars now, but it’s not likely that either will give you much insight into long-term tax strategy.
Only broadly experienced tax advisory professionals such as those among the Talley & Company team can provide a truly global perspective so you can preserve, enhance and pass on to the next generation the assets and wealth that you’ve worked hard to build. We welcome the opportunity to discuss with you the current opportunities available to you and your family. For more information, contact us here.

Judging by how often 20-something tech CEOs are featured in mainstream media, you’d think the only people starting businesses were Millennials. But don’t be fooled. Boomers are twice as likely as Millennials to be planning to launch a business within the year, according to a 2015 Gallup poll. So why is there so much interest in starting up at a life stage traditionally known for winding down?

Turns out a lot of boomers aren’t ready to sail off into the sunset just yet. According to the Kauffman Index of Entrepreneurial Activity, from 1996 to 2013, 55-to-64 year-olds started new businesses at a higher rate than those in their twenties and thirties. In 1996, 18.7 percent of all new businesses were started by those in the 55 to 64 age range. That number rose to 23.4 percent by 2013. When asked to identify the primary reason for their interest in entrepreneurship, boomers most often cited independence (32 percent), followed by the chance to pursue their passions and interests (27 percent).

Many 50+ professionals have spent decades building successful careers, raising children, and growing their financial assets. For the entrepreneurially minded in the group, retirement isn’t always about extended vacations and more days out on the golf course, it’s about doing what you want, which could include transitioning into an encore career that provides added meaning and freedom.

If after a long and successful career in your field you’re thinking of going out on your own or creating another business that plays into your passions, Talley & Company has over 25 years of experience helping entrepreneurs successfully start and grow their businesses. From start-up to succession we maintain a proactive, global approach to our client’s personal, family and business planning needs.

15 years ago, 21-year old Floyd Mayweather was already being termed by many as the “best boxer in the world.” With an Olympic medal around his neck and a professional fight record of 24-0, Mayweather showed great promise to live up to that title.

Recognizing Mayweather’s potential both as a boxer and revenue generator, HBO offered him a six-fight, $12.5 million contract extension, an eye-whopping amount for the young boxer that many critics thought would be foolish to turn down. So what happened? Mayweather had bigger plans for himself and his personal brand.

Mayweather was willing to say “no” to a great opportunity. His promoter at the time, Top Rank, wanted to mold Mayweather into becoming the next De La Hoya or Sugar Ray Leonard and take the HBO deal. Mayweather saw it differently, recognizing that he was destined to rise far above boxers in his midst and that his potential value far exceeded HBO’s $12.5 million offer. He soon parted ways with Top Rank and signed on with a promoter & advisory team that shared his “bigger, better” vision of himself and executed upon his goal to build upon his dominance in the world of boxing. The results speak for themselves: 15 years later, Mayweather is undefeated (47-0) as a professional, a five-division world champion, the world’s highest-paid athlete, and is predicted to make a record-breaking $200 million on his upcoming bout with Pacquiao.

Surround yourself with the right advisory team. “There’s a lot of smart businessmen around me. You can’t do it by yourself,” Mayweather says. Having a trusted team of advisors you can turn to can make the difference between spinning your wheels and making decisions that allow you — and your business — to grow and thrive.

At Talley & Company, we understand the challenges facing both professional athletes and entrepreneurs when it comes to generating and protecting income earned in the ring, on the field or in the boardroom. Whether you’re looking to improve your tax position, build your brand through a business transaction, or wish to guarantee a legacy for your family, Talley & Company is uniquely equipped to provide the technical and managerial expertise to help you plan, negotiate, structure and execute upon your goals.

Nebulous grey areas have always made adhering to IRS’ delineations between employees and contractors a tricky task with a high cost of error. Now that companies with 50 or more full-time employees are required to offer health insurance that meets distinct affordability criteria, it’s more important than ever for small businesses to get classifications right by the IRS. Those that don’t will be slapped with additional penalties tied to the healthcare mandate.

If the IRS finds that enough workers at a company are improperly classified as contractors and not employees, pushing a small business over the 49-employee threshold, big penalties go into effect based on its entire payroll, not just the ones it got wrong. Knowing businesses may want to sidestep the healthcare benefit obligation and associated compliance paperwork by keeping their numbers under the threshold, the IRS could be scrutinizing company classifications even more closely than it already has been.

In other words, just because a business would like to identify 40 of its workers as employees and 10 others as contractors doesn’t mean it can, and the IRS will be helping to make sure of it. There are other benefits to properly classifying every employee, such as avoiding the surprise of a contractor filing an unemployment claim and, consequentially, raising your business’ unemployment tax rate.

The IRS offers businesses guidance on making the proper classification for all workers via form SS-8, but that doesn’t make it easy by any means. The case for categorizing workers in one pool over the other is weighted based on a number of factors considered in holistic combination. Typically, contractors have more control over when, how and which clients they work for, and they use their own equipment and space to perform their jobs. They have more than one client and assume certain business-related risks.

If a company has both contractors and employees, it helps to have very different treatment of the two categories to clarify the distinction. So if employees have consistent workloads, are provided office space and laptops to perform their jobs, must report to work at certain hours and perform the work given to them, it’s best if contractors aren’t treated in the same way.

What makes accurate classification doubly complex is that the distinction can vary from state to state. California, Oregon, Washington, New Jersey and New York, for instance, are more likely to classify workers as employees and have stricter criteria than the IRS. Even if a worker prefers classification as a contractor, they may still be deemed an employee, and the party usually hit with the penalty in the event of an error is the firm, not the worker. If your business is located in one state but hires a contractor from another, you’re obligated to follow the regulations in the worker’s state.

This is the time to be sure every single person working for your business is properly categorized, and that your classifications can withstand the close scrutiny of the IRS. If you have any questions in this regard, ask now so you don’t pay later.

Brace yourselves, March Madness is coming. Once again, the NCAA Division 1 men’s basketball tournament will sweep across the American landscape, distracting many co-workers as well as frustrating managers with a sudden drop in productivity. Though critics argue these figures are over-blown and should be taken with a grain of salt, a study recently conducted by outplacement  firm Challenger, Gray & Christmas showed that March Madness could potentially result in $1.2 billion “lost wages” paid to distracted and unproductive workers over the course of the tournament.

While it isn’t ground-breaking news that the annual college championship basketball tournament can be a major distraction in the workplace, new tax legislation on the horizon could have a substantial impact on future March Madness brackets and your favorite college basketball teams. 

 Just in time to compete with March Madness, the Obama Administration revealed plans to deny tax deductions for donations linked to sports tickets. If enacted into law, this would no longer allow donors to deduct four-fifths of the value of a gift made to a school, even if incentives received in return are worth more than one-fifth of the gift’s value. Many big-time college sports departments rely on money from donations to fund their program and recruit talent, and its commonplace for universities to rely on priority seating rights and tickets to entice potential donors.

Given that many of the top athletic schools in the nation receive the lion-share of donations, the proposed legislation could have a very substantial long-term impact on their ability to compete.  Ever wonder where your alma mater or favourite college sports team stands revenue wise? Check out ESPN’s page that breaks down popular sports colleges and their total athletic department revenues.

No matter what changes are on the horizon, Talley & Company’s advisory team follows all developing tax legislation affecting athletes and high-net-worth individuals. Let us know if you’d like to learn more about any upcoming legislation that may affect your tax position.

Social media has become an intimate part of our everyday lives, and it will remain so even in our deaths. Platforms like Facebook and Google are still developing their policies for what happens to your social profile and data once you head into the afterlife, who if anyone can handle your account, and what aspects of it they can manage. In the latest update, Facebook announced a policy change allowing users to designate “legacy contacts” posthumously. Here’s what you should know.

Until recently, what happened on Facebook stayed on Facebook, even after your death. Once the platform learned of a user’s passing, it would simply freeze the account, memorializing it just as it was left for all of time. Now, Facebook is still forever, but only if a user wants it to be, because members can choose to set their accounts for deletion once they’re gone.

Or, members can now select one legacy contact to manage their account. This person will be able to post a memorial note at the top of the deceased person’s page, change their profile picture, and accept friend requests. If the account user chooses, they can also give their legacy contact permission to download an archive of photos and posts.

So, what about that embarrassing snapshot from the college frat party? That’ll stick. Legacy controls are vastly different from what users themselves are able to do by logging in. Legacy users won’t be able to make, edit or delete posts in any way, and private messages will not be accessible to them for viewing. Facebook shows users how to adjust their settings here for its new options.  

Developed in response to the same posthumous challenge in the social era, Google’s policy allows users to select an “Inactive Account Manager” to determine the fate of their Gmail accounts, Google drive documents, and other data. That still leaves Twitter, LinkedIn, Pinterest and half a dozen other accounts, all of which have their own policies.

While legislation is very much in its infancy in this area, the next time you meet with your estate planner, you’ll want to add this to your checklist of discussion points. If you have active social profiles, some of which may even be tied to your business contacts or networks, adding a social media clause to your will is a good move. To start the planning process, you can explore action points from USA.gov here and bring your answers to your attorney on your next visit.

In Hollywood, even losers can be winners. This week at the Oscars, nominees from the top categories that didn’t take home the golden statuette got a consolation prize worth $168,000. You might call it part of the celebrity treatment, but to the IRS, these A-list actors are no more special than any of us. They’ll be taxed on the $20,000 horoscope reading included among the freebies in the swag bag, along with a number of other specialty items.

This year’s bag has an eclectic mix of both strange and wonderful goodies, including an $800 custom candy and dessert buffet, a $12,500 glamping vacation, a $1,200 Matrone bicycle, $25,000 worth of custom furniture, a $4,000 liposuction wearable device, a $14,000 lifestyle makeover, and an $11,500 Italian luxury hotel stay. According to Vanity Fair, “This year’s bag is the most valuable collection of swag ever assembled at an Oscars gifting suite.” Most valuable = most expensive.

At a 39.6% tax rate, the horoscope reading alone will cost the show’s host and Oscar losers in the best actor, best actress, best supporting actor, best supporting actress and best director categories $7,960 each. Even if the recipients donate the bag to an IRS-qualified charity, they’ll still need to pay taxes on it before taking a deduction, subject to limitations and requirements. Turning it down isn’t so easy, either, since they may still be required to report it as income, just as employees are if they decline a bonus.

The short of it is that the IRS doesn’t recognize the bags as gifts because they’re not really assembled as a “thank you, you’re great, sorry you didn’t win” party favor but mainly to give brands a big-time PR opportunity. Getting influential stars like Emma Stone or Reese Witherspoon to try out a certain product in hopes of taking a liking to it can translate to big sales, after all.

The Academy of Motion Picture Arts doesn’t endorse these bags, but in 2006, it worked with the IRS to reach an agreement on the bags’ tax treatment. Since then, the IRS has clearly outlined that it requires celebs to report the fair market value of the bag on their federal tax returns, including any non-transferable certificates and vouchers that are redeemed. To make it easier, the IRS says vendors involved with gift bag distribution should review form 1099 instructions to determine proper reporting responsibilities.

Sometimes, swag recipients get a chance to choose from “free” items in a shopping room. Those that do are required to pay taxes on the fair market value of whatever they select. But in the end, with a federal income tax payment for the bag this year at $66,528, being a recipient doesn’t feel quite so special anymore, does it? It’s quite possible that the after-parties more than make up for it.

After quarterback Tom Brady led the New England Patriots to win Super Bowl XLIX against the Seattle Seahawks, he was named the game’s MVP through a media panel and fan vote, earning him a shiny red 2015 Chevy Colorado. Now, he’s giving the truck away to Patriots rookie cornerback Malcolm Butler. By passing on the truck, he also gets to hand over the tax payment required to the IRS.

In an interview last Tuesday, Brady first made mention of gifting Butler the truck to recognize his undrafted teammate’s stunning last-minute interception that won the Super Bowl. ESPN quoted from Brady’s interview with Boston radio station WEEI, “I’d love to [give Malcolm the truck]. We’re going to figure out how to make that happen… [Butler’s interception] comes off as a great play, which it really was, at the biggest time of the year.”

Thanks to a swift change in the MVP rules by Chevy, which made it possible for Butler to receive the truck directly, Brady will be able to avoid income and gift taxes on the gesture. With a total of three MVP titles and a $2 million base salary, it’s safe to say Brady can buy a fully-loaded, tricked out Colorado on his own if he ever changes his mind.

But for now, the move is a touchdown for him and his tax advisor. At a 39.6 percent tax rate, federal taxes alone would have cost Brady $13,860 to keep the truck valued at about $35,000, since it would be counted as income according to section 74 of the IRS tax code.

If Brady had transferred the prize to Butler himself after receiving it, he might have had to pay gift taxes as well. While there is an annual exclusion amount for making a gift, the limit is $14,000. Any U.S. resident can gift up to $5,430,000 in their lifetime before having to pay taxes. Without access to his tax returns, none of us will know whether Brady was near that limit to determine if he saved.

Even though Butler makes just a fraction of Brady’s salary with a $420,000 minimum (not counting bonuses and endorsements), he’s also in the 39.6 percent tax bracket. What that essentially means is that now Butler, not Brady, will be responsible for the $14k to the IRS, independent of state and local taxes.

Before we feel too sorry for him, let’s remember that many teams will not only be clamoring to sign him thanks to his performance, but he’s also sure to score a substantial salary bump next year. And judging by the photo of him when he received the truck this Tuesday, Butler looks pretty satisfied with his brand-new ride.


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