Thinking Of Selling Your Family Business? Here Are Six Key Steps You Need To Take Now

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Some businesses are family-owned for generations, but keeping a business in the family is not always the right choice. Family business owners who anticipate a sale should start planning as early as possible. For many business owners, most of their wealth is tied up in a business they spent years growing and there is tremendous pressure not to botch the sale. Ideally, a business owner will begin planning a sale at least three to five years before the transaction. Below are six steps that family business owners can take now to help prepare for a successful sale in the future.

  • Evaluate Personal Goals

    The decision to sell a family-owned business is a business decision but also a family decision. A family business owner must evaluate the next generation’s desire to own and ability to operate the business. If the next generation lacks the desire to maintain the family business, then a sale may be the best choice. The owner should also consider their personal involvement in the business. Some owners want to remain involved in the business after the sale while others want (and sometimes need) to be able to walk away. The owner’s need to remain involved after the sale will often depend on the type of buyer.

    • Put a Team in Place

    Most family business owners have a financial advisor, CPA, and business lawyer, but few have worked with a mergers and acquisitions (M&A) advisor unless they participated in a previous business sale. An M&A advisor helps broker the sale of a business and they also typically provide business valuation and exit planning services. Depending on the size of the business and the anticipated sale date, a business owner can decide whether and to what extent to engage an M&A advisor, but it can be helpful to go ahead and get one lined up. Your financial advisor, CPA, or business lawyer should be able to refer a qualified M&A advisor.

    • Get a Business Valuation

    It is often difficult for business owners to be objective about the value of their business. An independent valuation provides business owners with an unbiased perspective of what someone else would pay, which can help set expectations and negotiate the deal. A valuation may also identify opportunities for an owner to increase the value of their business. An M&A advisor can assist with providing a business valuation.

    • Ascertain Potential Buyers

    Business owners sometimes overestimate the level of interest in their business. A valuation can help assess the pool of potential buyers or lack thereof. The number of potential buyers has a significant impact on the marketability of a business which typically has a similar impact on the sales price. The team you put in place to assist with the sale will also be driven in part by the number of potential buyers. An M&A advisor will be much more involved in brokering a highly marketable business whereas if there is only one realistic buyer then they may have less involvement.

    • Consider the Impact on Personal Finances

    A business valuation is key to understanding what someone may be willing to pay for a business, but a seller is more interested in understanding what they will get. Business sales can be structured as asset or stock (equity) sales. Buyers typically prefer asset sales because they do not assume any liability, and they can immediately deduct more of the purchase price. However, asset sales often result in a substantial portion of the purchase price being taxed as ordinary income. Your CPA and M&A advisor should be able to work together to prepare a net proceeds analysis which takes into account the potential tax liability to provide an estimated amount a business owner would actually receive from a sale.

    Your financial advisor can run cash flow projections based on the net sales proceeds to provide cash flow and net worth projections following the sale of the business. These projections should also take into account any “personal” business expenses such as a company car or phone service. Having to pay these expenses out of pocket can come as a shock after years of running them through the business. The cash flow and net worth projections help to avoid any unwanted financial surprises following the sale of the business.

    In addition to the other members of your sales team, it is also important to bring your estate planning attorney into the discussion early on. The sale of a business is often the biggest liquidity event of the business owner’s life and there may be significant tax benefits to doing wealth transfer or charitable planning in advance of the sale. Transferring part of a business to the next generation before the sale may result in a considerable reduction in the business owner’s estate tax liability. Similarly, for business owners who are charitably inclined, structuring charitable gifts in connection with the sale is an effective way to reduce the business owner’s income tax liability from the sale.

    Selling a business can be a full-time job on top of what is already a full-time job running the business. With a family business, there is often also a significant emotional component to the sale. For these reasons, many family business owners delay starting the sales process until they are forced to do so by their need to retire or some other event that can negatively impact the family financially and emotionally. Family business owners who anticipate a sale should start planning as soon as possible. Doing so can help to maximize the sales proceeds, minimize the taxes, ensure financial stability, and maintain family harmony.

    If you have any questions or would like to discuss further, please reach out to your client service team, or call 404.264.1400. You can also visit us on the web at HomrichBerg.com.

    Download this article.

    Important Disclosures

    This article may not be copied, reproduced, or distributed without Homrich Berg’s prior written consent.

    All information is as of date above unless otherwise disclosed.  The information is provided for informational purposes only and should not be considered a recommendation to purchase or sell any financial instrument, product or service sponsored by Homrich Berg or its affiliates or agents. The information does not represent legal, tax, accounting, or investment advice; recipients should consult their respective advisors regarding such matters. This material may not be suitable for all investors. Neither Homrich Berg, nor any affiliates, make any representation or warranty as to the accuracy or merit of this analysis for individual use. Information contained herein has been obtained from sources believed to be reliable but are not guaranteed. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decision.

    ©2024 Homrich Berg.

    Life’s Third Certainty: Change, And How Powers Of Appointment May Help An Estate Plan To Accommodate For It

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    They say that the two certainties in life are death and taxes, but change must be the third. People grow, or regress. Couples marry, and some divorce. Babies come into this world, while others leave it. Laws fluctuate depending on who is in power. The economy may thrive…or not. When establishing a trust as part of an estate plan, a material question is how to ensure that the trust is administered according to its creator’s wishes while accounting for life’s potential changes.

    If you have ever met with an estate planning attorney, you have likely discussed trusts. A trust is a legal agreement allowing the creator (the “Settlor”) to direct how assets are to be used by a third party (the “Trustee”) for the benefit of certain individuals (the “Beneficiaries”).

    Some trusts may be amended or revoked during the Settlor’s lifetime; these are called revocable trusts. Upon the Settlor’s death, though, these trusts become irrevocable. Many times, irrevocable trusts are created during a Settlor’s lifetime. In most cases, older generations create irrevocable trusts to benefit younger generations in a manner that protects the trust assets from certain creditors and minimizes certain taxes.

    The attribute of these trusts that helps to protect their assets and provide tax savings is the very attribute that many people view as their biggest drawback: they are irrevocable; their terms may not be amended or revoked. This irrevocable nature may cause a Settlor to hesitate to establish a trust for fear of chiseling the wrong set of directions in the proverbial stone. For this reason, drafting irrevocable trusts with the flexibility to change with the times is important. This may be done by appointing Trustees whom a Settlor trusts to use discretion in carrying out the Settlor’s wishes, ensuring – when appropriate – that documents are drafted in a manner to make them modifiable in the future, and/or including certain flexible provisions that allow for certain decisions to be made by select individuals in the future. One such example of flexible trust provisions is the power of appointment.

    A power of appointment is a provision within a Trust granting an individual (often, a Beneficiary) the authority to designate who will receive trust property, how it will be distributed, and under what conditions. This authority can be broad or narrow, depending on the Settlor’s wishes and the language of the trust document. By granting this discretion to direct trust property, the power of appointments allow for adaptability of the trust in response to changing circumstances, unforeseen events, or changes in family dynamics.

    For example, John and Jane create a trust for their son, Jim. The trust provides that income and principal may be distributed to Jim or for Jim’s benefit during his lifetime and that, upon Jim’s death, the remaining trust estate passes to or among John’s and Jane’s descendants and/or charity, as designated in Jim’s last will and testament. Jim’s power to direct the disposition of the trust in his will is his power of appointment.

    Powers of appointment do not all resemble Jim’s power; they come in different forms, for different purposes, with different provisions, with different consequences for the beneficiaries relating to estate taxation, income taxation, asset protection, and ownership, all of which should be discussed with and carefully designed by a qualified estate planning attorney. Here, we will focus on various family circumstances that may arise that powers of appointment may help to address. Please remember that the following examples require more planning than the simple inclusion of a power of appointment.

    Base Facts: Assume John and Jane are married with three children, Peter, Paul, and Mary. John dies, leaving a trust for the benefit of Jane, requiring quarterly distributions of income to Jane and permissible distributions of principal for her support. The trust grants Jane a limited power of appointment to direct the trust property to be distributed outright or in further trust for any of John’s descendants and/or charity. If Jane doesn’t exercise her power of appointment, then upon her death, the trust will be distributed among John’s descendants, per stirpes.  

    Successful Child Scenario

    For this scenario, in addition to the Base Facts, let’s assume Peter and Paul both earn middle-class salaries, but Mary invents the latest Silicon Valley success and has more money than she could spend in 1,000 lifetimes. If Mary inherits one-third of her parents’ estates after they die, she will needlessly inherit funds that would be of more use to her brothers and will have an augmented estate, destined to be subject to more tax. Jane could fix the situation by exercising her power of appointment to direct the trust estate remaining at her death for the benefit of Peter and Paul, excluding Mary.

    Substance Abuse Scenario

    In addition to the Base Facts, assume that John’s death sends Paul into a downward spiral, and his alcoholism surfaces in a major way. Paul loses his job, alienates his spouse, and depletes his personal funds. As difficult as it is to effectively disinherit Paul, Jane decides to use her power of appointment to provide that Paul’s share of the trust will not be distributed to him upon her death; instead, it will be held in a trust for the benefit of Paul and his children, with the proviso that the only permissible distributions for Paul will be for healthcare and rehabilitation, unless a named, trusted individual determines that Paul has stopped drinking. Jane could use her power of appointment to affect the necessary planning to ensure that Paul doesn’t deplete his part of the estate she and John worked so hard to amass at the liquor store, further damaging his health and well-being.

    Special Needs Scenario

    Here, along with the Base Facts, assume John and Jane have six wonderful grandchildren. One of Peter’s children, Paxton, has severe multiple sclerosis and cannot see, write, speak, walk, or handle his own activities of daily living. After John’s death, Jane becomes worried about a scenario in which Peter’s share of the estate passes to Paxton (thereby disqualifying him from certain necessary public assistance) and decides that she would like to direct Peter’s share of John’s trust to provide for Paxton’s benefit. Jane may exercise her power of appointment to direct what would have been Peter’s share of the trust to a special needs trust for Paxton to supplement the goods and services provided by public assistance. Further, Jane could use her power of appointment to direct that any trust funds remaining upon Paxton’s death will be distributed among her and John’s then-living descendants, per stirpes.

    Spendthrift Scenario

    In addition to the Base Facts, assume here that Peter falls on difficult times, his loans and credit card bills are mounting, and his marriage is strained. Seeing this, Jane decides that it is a bad idea for Peter to receive one-third of the trust when she dies because the creditors (potentially including Peter’s wife, in a divorce) would all take their part of Peter’s inheritance. Therefore, Jane exercises her power of appointment to direct Peter’s inheritance into a trust that allows a trustee to make distributions for Peter’s benefit. Not only could the creation of the trust protect Peter’s inheritance from susceptibility to his poor decisions, but it could also help to shield Peter’s inheritance from certain creditors.

    Changes in Wealth Goals

    In addition to the Base Facts here, assume that Jane has significant personal funds apart from the trust John left for her and she makes large gifts to the children after John’s death. With time, she decides that the children have already received plenty of money and she does not want to ruin the children by allowing them to receive additional funds from John’s trust when she dies; so, Jane exercises her power of appointment to direct that, upon her death, the remaining trust estate will be distributed to charities she and John supported during their lives together.

    These are just a few examples of the usefulness of powers of appointment, but powers of appointment may prove to be even more useful in scenarios we cannot contemplate now. Certainly, when meeting with a qualified estate planning attorney, a discussion relating to powers of appointment, if they are appropriate, for what purposes, and for whose benefit is worthwhile for any thorough estate plan.

    If you have any questions or would like to discuss further, please email info@homrichberg.com, call 404.264.1400, or complete our “Contact Us” form.

    Download this article.

    Important Disclosures

    This article may not be copied, reproduced, or distributed without Homrich Berg’s prior written consent.

    All information is as of date above unless otherwise disclosed.  The information is provided for informational purposes only and should not be considered a recommendation to purchase or sell any financial instrument, product or service sponsored by Homrich Berg or its affiliates or agents. The information does not represent legal, tax, accounting, or investment advice; recipients should consult their respective advisors regarding such matters. This material may not be suitable for all investors. Neither Homrich Berg, nor any affiliates, make any representation or warranty as to the accuracy or merit of this analysis for individual use. Information contained herein has been obtained from sources believed to be reliable but are not guaranteed. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decision.

    ©2024 Homrich Berg.

    Homrich Berg Brings in Andrew Page as Head of Corporate Development

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    $16B Atlanta-based RIA adds leader focused on strategic acquisitions and advisor additions

    ATLANTA — April 22, 2024 —Homrich Berg (HB), a leading Atlanta-based RIA serving families and investors across the country from its offices in the Southeast, welcomes Andrew Page as Head of Corporate Development. HB created this new position to add a leader with Page’s dealmaking experience, signaling the $16 billion enterprise firm’s continuing focus on growth by acquisition.

    With a foundation in deal execution, business development, and strategic advisement in the wealth management industry, Page comes to HB to focus on fostering relationships with RIA firms and advisor teams which lead to partnerships aligning with the firm’s values. Prior to joining Homrich Berg, Page was a Director and Partner at Ancora Holdings Group where he led their M&A efforts and other strategic initiatives. He previously was a member of the investment team at Focus Financial Partners focused on the financial services industry leading all phases of the deal process from sourcing to execution and relationship management.

    “Homrich Berg planted its flag 35 years ago in fee-only, fiduciary service and has built a reputation as one of the industry’s leading firms. Its commitment to holistic client service is a powerful starting point for any acquisition or partnership,” Page said. “The management team here is excellent, and HB’s thoughtful approach to growth creates a strong foundation for future strategic acquisitions.”

    Page’s appointment as Head of Corporate Development comes as strong M&A activity in the RIA industry continues to defy headwinds. In the current deal climate, advisors seek strategic partners that see eye-to-eye on client service, long-term sustainability, and cultural alignment.

    “We knew we needed a seasoned leader like Andrew, who understands both the M&A marketplace and the type of professionals who will align closely with HB,” said Thomas Carroll, President and CEO of Homrich Berg. “He joins us at an important point in our history as we continue to seek firms and advisors who are aligned with our values and value the benefits of joining our firm.”

    This hire comes on the heels of Michael A. Woocher joining HB’s executive team as Chief Advisory Officer with a dedicated focus on leading advisors and client experience.

    Read more here: https://citywire.com/ria/news/exclusive-16bn-homrich-berg-hires-first-head-of-manda-from-focus-shop/a2440971?re=119572&ea=1905439&utm_source=BulkEmail_USA+RIA+Morning&utm_medium=BulkEmail_USA+RIA+Morning&utm_campaign=BulkEmail_USA+RIA+Morning

    About Homrich Berg

    Founded in 1989, Atlanta-based Homrich Berg is a national independent wealth management firm that provides fiduciary, fee-only investment management and financial planning services, serving as the leader of the financial team for our clients, including high-net-worth individuals, families, and not-for-profits. Homrich Berg manages over $16 billion for more than 3,500 family relationships nationwide. This document is not a recommendation.

    Contact:

    Haley Rosa

    Gregory FCA for Homrich Berg

    610-228-2805

    haley@gregoryfca.com

    Overview Of The New Corporate Transparency Act Reporting Rule

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    The Corporate Transparency Act (CTA) was passed in 2021 and created a new ownership information reporting requirement making it harder for business owners to conceal their identity for illicit purposes. The CTA reporting rule went into effect on January 1, 2024, and requires certain entities referred to as “reporting companies” to file beneficial ownership information (BOI) reports with the United States Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

    UPDATE: As of February 19, 2025, beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (CTA) are once again back in effect. For the majority of reporting companies, the new deadline to file an initial, updated, and/or corrected BOI report is now March 21, 2025. Please see https://fincen.gov/boi for more information on the status of the reporting requirement.

    BOI reports must be submitted via FinCEN’s BOI E-Filing System and FinCEN expects that most companies will be able to submit this information on their own using FinCEN’s Small Business Resources. Below is an overview of the new CTA reporting rule including (1) who is subject to the reporting rule, (2) what information must be reported, and (3) when reports must be filed. Companies that need additional assistance should contact their attorney or CPA.

    Fraud Alert: There have been recent fraudulent attempts to solicit information from individuals and entities who may be subject to the CTA reporting requirements. FinCEN does not send unsolicited requests and any information requests purporting to be from FinCEN are fraudulent. 

    1. Who is subject to the reporting rule?

    Nearly all small business entities are “reporting companies” subject to the CTA reporting rules. The CTA and corresponding Treasury Regulations generally define a reporting company as any entity that must file a document with a secretary of state or similar office to be created or registered to do business. State laws vary, but this essentially includes all Corporations, Limited Liability Companies (LLCs), Limited Partnerships (LPs), and any other types of business entities that limit owner liability. Note that it makes no difference whether an entity is an operating company or merely holds assets.

    The CTA lists several entities that are exempt from being treated as reporting companies, including companies already subject to regulatory oversight such as banks, tax-exempt entities, large operating companies having 20+ full-time employees and $5M+ gross receipts, and certain inactive entities in existence before 2020. Sole proprietorships, general partnerships, and most trusts are also excluded from the reporting company definition if they did not have to file with a secretary of state or similar office to be created or registered to do business.

    Takeaway: If you have a corporation, LLC, LP, or any other entity that was created or registered to do business by filing with a secretary of state and it does not fall under an exemption then it is a reporting company subject to the CTA reporting rule.

    2. What information must be reported?

    Reporting companies are required to provide information about their beneficial owners and company applicants (for reporting companies created or registered to do business on or after January 1, 2024). Note that beneficial owners and company applicants must be individuals and the required information includes their legal name, date of birth, current address, and an image of a document with a unique identifying number (i.e., passport or driver’s license). The BOI report is straightforward and has fields for all the required information. However, it can be a challenge to determine who the beneficial owners and company applicants are.

    The CTA and corresponding Treasury Regulations generally define a beneficial owner as an individual who directly or indirectly either exercises substantial control over the reporting company or owns or controls 25% or more of the reporting company. An individual is deemed to have substantial control of a reporting company if he or she: (1) is a senior officer, (2) has authority to appoint or remove officers, (3) is an important decision-maker, or (4) has any other form of substantial control. For reporting companies owned entirely by individuals the beneficial owners are likely apparent, but this may not be the case for reporting companies that are owned or controlled by other entities.

    If a reporting company is owned or controlled by another entity, the beneficial owners are generally those individuals who own 25% or more of the reporting company indirectly through the intermediary entity. If a trust owns 25% or more of the reporting company, the beneficial owners are those individuals with the authority to dispose of or withdraw the trust assets. This would typically include the trustee and any beneficiary that has the right to demand a distribution as well as the grantor if he or she retains the right to revoke the trust. Keep in mind that no matter the ownership structure, any individual who directly or indirectly exercises substantial control over a reporting company is a beneficial owner.

    Takeaway: A reporting company must include information on all beneficial owners in its BOI report. A beneficial owner is an individual who directly or indirectly either exercises substantial control over the reporting company or owns or controls 25% or more of the reporting company.

    A reporting company created or registered to do business on or after January 1, 2024, is also required to provide information about the company applicants. The CTA and corresponding Treasury Regulations define a company applicant as the individual who directly files the document that creates or registers the reporting company. If another individual is primarily responsible for directing or controlling the filing then that individual would be listed as a second company applicant, but a second company applicant should be reported only if more than one individual is involved in the filing. If you are filing your company’s creation or registration documents yourself then you would be the company applicant. If you are using a lawyer, CPA, or other service provider to file then you should confirm that they will either handle preparing the BOI report or provide the required company applicant information.

    Takeaway: A reporting company created or registered to do business on or after January 1, 2024, must also include information on its company applicant in its BOI report. A company applicant is an individual who directly files the document that creates or registers the reporting company.

    3. When must BOI reports be filed?

    Reporting companies created or registered to do business before 2024 must file their initial BOI report by January 1, 2025. Reporting companies created or registered to do business during 2024 must file their initial BOI report within 90 calendar days after receiving actual or public notice that their creation or registration is effective. Reporting companies created or registered to do business after 2024 must file their initial BOI report within 30 calendar days after receiving actual or public notice that their creation or registration is effective. BOI reports must be submitted via FinCEN’s BOI E-Filing System.

    There is no annual BOI reporting requirement, but reporting companies must file updated or corrected BOI reports if any of the information changes. If the information in a BOI report is inaccurate or changes, the reporting company must file an updated or corrected BOI report within 30 days after the change occurs or the inaccuracy is identified. Updated or corrected BOI reports must also be submitted via FinCEN’s BOI E-Filing System.

    An individual who willfully violates the BOI reporting requirements may be subject to penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file, correct, or update a BOI report. Individuals can be held liable if they either cause the failure or are a senior officer at the company at the time of the failure. FinCEN expects reporting companies to verify the information they receive, but beneficial owners and company applicants should be aware that they may face penalties if they willfully cause a reporting company to fail to report complete or updated beneficial ownership information or willfully provide the reporting company with false information to report.

    Takeaway: Reporting companies created or registered to do business before 2024 have until January 1, 2025 to file their initial BOI report, but reporting companies created or registered on or after January 1, 2024, must file their initial BOI report within 90 days (30 days beginning in 2025). All reporting companies must update or correct their BOI reports within 30 days after a change occurs or an inaccuracy is identified (this is required if ANY information in the BOI report changes).

    Because of the potential liability associated with these filings, Homrich Berg cannot provide specific guidance, and companies that need additional assistance should contact their attorney or CPA.    

    Download this article.

    Important Disclosures

    This article may not be copied, reproduced, or distributed without Homrich Berg’s prior written consent.

    All information is as of date above unless otherwise disclosed.  The information is provided for informational purposes only and should not be considered a recommendation to purchase or sell any financial instrument, product, or service sponsored by Homrich Berg or its affiliates or agents. The information does not represent legal, tax, accounting, or investment advice; recipients should consult their respective advisors regarding such matters. This material may not be suitable for all investors. Neither Homrich Berg, nor any affiliates, make any representation or warranty as to the accuracy or merit of this analysis for individual use. Information contained herein has been obtained from sources believed to be reliable but are not guaranteed.

    ©2024 Homrich Berg

    After A Loss, Take Control Of Your Finances

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    After a spouse passes away or a couple divorces, the “suddenly single” spouse may find the prospect of handling finances complicated and daunting.

    The financial industry is full of phrases and terminology that can be confusing. In many cases, someone else was in charge of making the financial decisions for the family. Now is the time to change your mindset around money. It is time to realize that this is your money and your opportunity to design the future of your finances.

    Realizing that you are now the decision-maker can be very powerful. As with many things in life, with this honor comes responsibility.

    It is critical that you take control of your finances and understand the investments within your portfolio. Do you have bonds? Stocks? Are the stocks domestic or international? What percentage of your portfolio is liquid and readily available versus tied up in longer-term partnerships? Do you have a long-term financial plan? If so, what are your financial goals and objectives? What assumptions have been made regarding future income, expenses, and rates of return? Does your portfolio reflect the needed “mix” to meet the rate of return assumptions and ultimately your goals and objectives?

    If you are answering “no” or “l don’t know” to those questions, one option is to take control by building a team of unbiased advisers. This entails adding financial experts, including a wealth manager and CPA, to your current team (likely an estate or family law attorney). When choosing your advisor, it is important to ask how they are compensated.

    There are three models:

    • Commission-based advisors, like traditional stockbrokers, receive a commission with each trade.
    • Fee-based advisors can get paid in other ways beyond the fee paid by clients.
    • Fee-only advisors are paid exclusively by their clients, have a fiduciary duty to act in your best interest, and do not receive commissions when investing your portfolio.

    As the decision maker, it’s important to ask as many questions as needed until you understand the general asset mix of your portfolio and can articulate your long-term financial plan. Be wary of the professional who does not encourage you to ask questions. Like discussing a sick child with a pediatrician, no questions should remain unanswered.

    Whatever your decision on hiring professionals, you will need to take time to build your financial plan. This is the time to consider your goals: short-term, mid-term, and long-term. Short-term goals (O-3 years) might include building an emergency fund or saving for a home improvement project. Mid-term goals (3-10 years) include saving for a vehicle, a major trip, or the purchase of a home. Finally, long-term goals (10 years or more), would include things like saving for retirement or college.

    Once you have your plan in place and finances in order, you can take additional steps to protect your assets. One that gives you greater control as well as protection is to freeze your credit with all three credit agencies (Equifax, Experian, and Transunion). This prevents someone else from pretending to be you and opening credit accounts (e.g., store credit cards, car, home loans, etc.) in your name without your knowledge.

    All three agencies should be contacted separately and will ask a series of identification questions. Once frozen, you can temporarily “thaw” your credit files as needed to apply for a new line of credit, such as an apartment or mortgage application, a car loan, or a cell phone application.

    Developed after years of working with suddenly single spouses, these simple steps will give you the confidence to take control of your financial future and allow you to maintain your financial independence.

    To learn more or get help with your finances, please visit us at homrichberg.com, send an email to info@homrichberg.com, or call 404.264.1400.

    Download this article.

    Important Disclosures

    This article may not be copied, reproduced, or distributed without Homrich Berg’s prior written consent.

    All information is as of date above unless otherwise disclosed.  The information is provided for informational purposes only and should not be considered a recommendation to purchase or sell any financial instrument, product or service sponsored by Homrich Berg or its affiliates or agents. The information does not represent legal, tax, accounting, or investment advice; recipients should consult their respective advisors regarding such matters. This material may not be suitable for all investors. Neither Homrich Berg, nor any affiliates, make any representation or warranty as to the accuracy or merit of this analysis for individual use. Information contained herein has been obtained from sources believed to be reliable but are not guaranteed. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decision.

    ©2024 Homrich Berg.

    The Fed’s Path To A Soft Landing

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    In early November, the Federal Reserve pivoted in its messaging indicating that after a historic rate hiking cycle, the Fed’s next move is likely a rate cut. This fueled a stock market rally into the year-end, as investors priced in higher odds of a soft landing. In this video, Ross Bramwell discusses what it may take for the Fed to be successful in cutting rates without pushing the economy into a recession.

    Watch here: https://youtu.be/Ae-D2rLm-Mw

    Estate Planning; A New Year’s Reminder Of Where We Are, Where We Are Going, And What To Consider

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    It seems like it was just yesterday that the 2017 Tax Cuts and Jobs Act was passed, aiming to usher in relief for middle-income Americans. Some of the act’s changes are here to stay; however, from tax brackets to personal exemptions and deductions to estate tax exemptions, the act instituted many individual and estate tax changes that will sunset on December 31, 2025. As a result, prudent taxpayers will engage in certain planning now, to take advantage of existing laws before we revert to pre-2017 rules; one such notable planning opportunity exists in the world of gift and estate planning.

    Spouses may give an unlimited amount to each other completely gift and estate tax-free. There is a limit on how much may be given to non-spouse recipients before such gifts incur gift tax (if given during life) or estate tax (if given at death). In 2024, this limit (the “exemption”) is $13,610,000. Collectively, spouses may give ~$27,000,000 to their descendants, friends, and family without incurring any gift or estate tax. Amounts given in excess of this exemption are currently taxed at a forty percent rate. Under current law, the exemption is scheduled to increase with inflation in 2025, and then subsequently decrease to an estimated $7 Million per donor on December 31, 2025.

    Will this sunset actually happen? Educated guesses suggest yes. What to do with this knowledge? Consider gifts.

    If you use your exemption today and the exemption decreases as scheduled, you will not be penalized later for the gift you make now; you can take advantage of today’s more favorable tax laws. Consequently, many individuals are making gifts – either directly to individual recipients or in trust – now.

    If you are reading this thinking, “There’s no chance I will ever give more than $7 Million, so I do not need to rush to make gifts before 2025,” you are correct – you should be able to make such gifts after 2025; however, consider two ideas:

    1. There is an advantage to using any amount of exemption – above or under $7 Million – now. Removing value from your estate today also means removing growth from your future estate; if you give away $1 today and that $1 grows into $5 tomorrow, $4 of growth occurred outside of your estate. By making gifts today, you minimize or eliminate the potential estate tax to be assessed upon your death.
    2. You might consider making a larger gift than contemplated understanding that you may make a gift to a trust that your spouse is a permissible beneficiary of; in other words, you give the assets away but have indirect access to the assets through your spouse (assuming you aren’t sleeping on the couch!)

    Your financial advisor should be able to run a gift “stress test” for you. Considering your current assets, cash flow, anticipated financial events, and more, your advisor should be able to show you if you have enough to comfortably make a contemplated gift.

    If you’re thinking “Maybe I’ll wait until 2025 to see if we have more certainty about the tax laws and potentially make a gift then,” don’t wait! Gifts often aren’t made in one day; they may require planning, valuations, trusts, corporate structures, and the movement of accounts. If you call your attorney in July 2025 to talk about your thoughts on a gifting plan, you may be met with the answer that your attorney is on oxygen, completing gifts for clients who called sooner, and she/he has no capacity to do your work then. What’s more, there’s nothing to prevent Congress from passing a law to take effect and change exemptions sooner than scheduled; perhaps this is not probable, but it is possible. Talk now! Establish the necessary legal entities and structures now, and you will be ready to easily make a gift later.

    If you are not ready to make a “big” gift, you may consider annual exclusion gifts. Each individual is allowed to give the “annual exclusion” (currently $18,000 per donor, per year) to as many recipients as s/he would like each year, and such gifts do not consume any of one’s gift or estate tax exemptions. If gifts are intended to be made to trusts, the trusts must incorporate special provisions to allow them to serve as valid receptacles for these gifts. $18,000 may not seem like much in the grand scheme of tax-oriented gifting, but if a married couple has three children and nine grandchildren, they may give $432,000 away in 2024 without using any gift exemption, potentially saving their family a minimum of $172,000 in gift or estate tax.

    Regardless of whether you make gifts, a new year should serve as a reminder that, if a few years have passed or there have been any major life events (e.g., a birth, divorce, death, marriage, or liquidity event in the family) since you reviewed your estate plan, now is the time to call your attorney for a review. Your plan may accomplish your personal goals but lack some advanced tax planning. It may perfectly accomplish your tax goals but fall short of honoring your wishes. It might accomplish your tax and personal goals, but documents may contain old, stale, boilerplate language in need of replacement. Let your estate planning check-in be a 2024 resolution you keep!

    If you have any questions or would like to discuss further, please reach out to your client service team, or call 404.264.1400.

    Download this article.

    Important Disclosures

    This article may not be copied, reproduced, or distributed without Homrich Berg’s prior written consent.

    All information is as of date above unless otherwise disclosed.  The information is provided for informational purposes only and should not be considered a recommendation to purchase or sell any financial instrument, product or service sponsored by Homrich Berg or its affiliates or agents. The information does not represent legal, tax, accounting, or investment advice; recipients should consult their respective advisors regarding such matters. This material may not be suitable for all investors. Neither Homrich Berg, nor any affiliates, make any representation or warranty as to the accuracy or merit of this analysis for individual use. Information contained herein has been obtained from sources believed to be reliable but are not guaranteed. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decision.

    ©2024 Homrich Berg.

    Your Kids, Saving, And Roth IRAs

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    As parents, we want our kids to become self-sufficient, thriving adults, and part of that “want” is for them to be financially independent, responsible, and on the path to creating financial security. In a society where spending is so visible, so celebrated, and so dang easy, it is tough to model a savings mentality. Saving strategies are largely invisible to our kids – our 401k contribution comes out of our paycheck, and most aren’t sitting around sharing that pay stub with the family. Transfers to savings and investment accounts are electronic and done behind the computer screen. Again, most of us aren’t talking to our kids about how much we save or how much we have accumulated via those savings plans.

    Unless we take intentional action with our kids to promote saving and to share the how and the why with them, they will pick up on what they see – a lot of spending. Here are some ideas for parents to start at whatever age their kids happen to be.

    For younger kids, the tried-and-true piggy bank is a helpful way to get them used to taking some part of their “income” and stashing it away for the future. You can have them save up for “the future” which is what adults must do and have them save for some bigger item that they want. Both help with delaying gratification, something that is not encouraged by the marketing industry, and help them see the need to have funds set aside because it is important to be able to get money if it is needed. We may not know why we’ll need it or exactly when we’ll need it but having it creates some security.

    As kids get to the teen years and have a paycheck, it is time to communicate the important lessons about using funds for some “needs” and not just for “wants.” This is the downside of adulting, but the day is fast approaching when they must pay their way so getting used to saving and perhaps assuming responsibility for things like gas for the car, buying some of their clothes, etc. can help them understand that every dollar earned should not be a dollar spent.

    An obvious first step is to open accounts like savings and checking accounts. You can walk into your bank with your teen and open accounts like we did when we were kids (Does anybody remember having a “passbook?” Yes, I am that old.). Some banks allow teens to have their own account in their name before age 18; others may require a parent to be a joint account holder. Regardless, I recommend setting up balance alerts or some other method of monitoring because there are likely to be a few “oops” moments as your teen is learning the mechanics of banking, and overdraft fees are not cheap (Although offer a good teaching moment!).

    There are now many online options for teens to open an account from the convenience of a phone. Do your research and check ratings and user comments. Sites like NerdWallet and The Balance have ratings for such accounts and a quick online search will lead you to articles and resources to help analyze the options. The important part is to make sure that you help your child understand how these accounts work and what tools the online app has for monitoring and tracking.

    There are also companies offering debit cards for kids which have a lot of parental oversight, reporting, and monitoring capabilities. In a time when cash is giving way to electronic commerce, learning how to manage money when it is invisible is more important than ever. These can be used by much younger kids and can be set up to help them divide up their allowance with rules for saving, giving, and spending based on what you and your child agree upon.

    I remember my kids struggled with the difference between an ATM card and a gift card. They had plenty of experience with the mechanics of gift cards with a set balance “on the card” which was used and then tossed. They had a harder time understanding that the ATM was not a “card with a balance” but rather a “key” to access an account at a bank. A lost card doesn’t mean the loss of the funds “on the card” but rather a temporary inconvenience to the access of the account. These abstract concepts take some detailed explanations.

    The more interesting part comes in working through the mechanics of depositing paychecks and setting up automatic transfers to savings and investment accounts. What a gift it is to teens to get them primed to have a formula for receiving money:

    • X% to charity (if that’s important to your family),
    • Y% to the emergency savings account, and
    • Z% to long-term investing.
    • Maybe you add a C% for saving for college or a G% for paying for gas each week.

    Teaching teens how to allocate their earnings to important goals and priorities sets them up for financial success throughout their lives. They don’t need a job to be introduced to this structure. It is great to set priorities for any money they receive.

    This is also an opportunity to teach them about the differences between interest on a savings account and opportunities for dividends and investment growth in an investment account. Savings accounts have low-interest rates because the safety of the principal is guaranteed – lower risk, lower reward (interest). Investing carries a risk of loss so must provide a greater reward (higher interest rate, dividends, or the opportunity for increases in the value of the investment).

    When your teen does have earned income1 (wages from a job), we recommend they open a Roth IRA account. The beauty of a Roth IRA is that the owner can invest those funds, and as long as they follow the Roth rules, they will never be taxed on the returns from those investments (called “unearned” income in tax lingo). Wow – that is a great deal! Interest, dividends, and capital gains over their lifetime build up and are never taxed (under the current tax rules anyway). Unearned “ordinary” income in a non-retirement investment account is subject to tax at “ordinary income” rates which go from 10% to 37%. Gains on investment sales and “qualified dividends” are subject to capital gains rates which are currently 0%, 15%, and 20%.

    It is important to note that the contribution amount is limited to the lessor of earned income or the limit set in the Tax Code which is $6,500 for 2023 and $7,000 for 2024. Other important points:

    • The contribution can be made from any source so a parent could incentivize savings by matching the teen’s contribution. So, if the teen is going to contribute 20% of their income to the Roth, a parent could match that and gift the teen the money to contribute an additional 20%, thus, doubling the contribution to 40% of income. The limit would be that total contributions and cannot exceed the $6,500 (2023) and $7,000 (2024) limits.
    • Everyone has until April 15th to make the contribution for the PRIOR tax year so you can fund 2023’s contribution until April 15, 2024. (They must have earned income for 2023, though, so if they just got a job this year, they would be funding their 2024 contribution.)
    • Your teen should report the contribution on his or her tax return for the year of contribution but is not required to. If no return was required to be filed or they have already filed for 2023, they can still contribute. They should track their contributions, and the custodian of the account will send a Form 5498 each year, usually in May, which they should keep for record-keeping purposes.
    • There are income limits for making a direct contribution to a Roth so consult with your advisor if you (or your brilliant teen) have a substantial income.

    How should they invest those funds? That is a topic for a different day (April 17th!), but this is a great way to get teens interested in and explore the differences between stocks, bonds, ETFs, and mutual funds. All online investing platforms like Schwab and Fidelity have tools and resources to help people learn about investing and are reputable sources of information. Many commission-free ETFs provide broad exposure to U.S. and international markets.

    Time is your best friend in terms of investing so starting early and investing consistently will make their march toward financial security that much easier.

    As part of our Financial Foundations series, we have a free webinar coming up which may be helpful. On February 15th at noon ET, we are presenting Let’s Tax Taxes for those who want a primer on the basics of our tax system. Please click here to register. This is a great resource for anyone to learn more about the basics of personal finance. Please email info@homrichberg.com to be added to the invitation list for future webinars.

    To learn more or get help talking to your kids about money basics, please email me at gildea@homrichberg.com.

    1Earned income is a tax-related term and indicates that wages and other such income is available for contributions to retirement accounts like IRAs and Roth IRAs while unearned income, like interest and dividends, is not available for such contributions.  

    Download this article.

    Important Disclosures

    This article may not be copied, reproduced, or distributed without Homrich Berg’s prior written consent.

    All information is as of date above unless otherwise disclosed.  The information is provided for informational purposes only and should not be considered a recommendation to purchase or sell any financial instrument, product or service sponsored by Homrich Berg or its affiliates or agents. The information does not represent legal, tax, accounting, or investment advice; recipients should consult their respective advisors regarding such matters. This material may not be suitable for all investors. Neither Homrich Berg, nor any affiliates, make any representation or warranty as to the accuracy or merit of this analysis for individual use. Information contained herein has been obtained from sources believed to be reliable but are not guaranteed. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decision.

    ©2024 Homrich Berg.

    Financial Planning recently released its 20 largest fee-only RIAs

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    Financial Planning recently released its 20 largest fee-only RIAs, ranked by AUM list for 2023. We are excited to rank #11 out of #20! Click here to read more, see the entire list, and the methodology for the rankings: https://www.financial-planning.com/list/ria-leaders-2023-top-20-firms-by-aum?utm_campaign=editorial-content&utm_medium=organic&utm_source=linkedin

    Financial Planning’s data partner for the RIA Leaders feature, COMPLY, produced the rankings by applying six criteria to firms’ required SEC Form ADV filings in July 2023. COMPLY is completely independent and objective and does not receive compensation in exchange for placement on its rankings.

    Named #35 of Barron’s Top 100 RIA Firms of 2023

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    We’re proud to share that we have been named #35 of Barron’s Top 100 RIA Firms of 2023! We’re honored to be included on this list and look forward to continuing to provide top-tier service to our clients.

    You can view the full list here: https://www.barrons.com/advisor/report/top-financial-advisors/ria?page=1&

    Barron’s 8th annual ranking of independent advisory companies is based on assets managed by the firms, technology spending, staff diversity, succession planning, and other metrics.