Month: July 2020

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Fortify your assets against creditors with a trust

You may think of trusts as estate planning tools — vehicles for reducing taxes after your death. While trusts can certainly fill that role, they’re also useful for protecting assets, both now and later. After all, the better protected your assets are, the more you’ll have to pass on to loved ones. Creditors, former business partners, ex-spouses, “spendthrift” children and tax agencies can all pose risks. Here’s how trusts defend against asset protection challenges.

Tell creditors “hands off”

To protect assets, your trust must own them and be irrevocable. This means that you, as the grantor, generally can’t modify or terminate the trust after it has been established. (A “revocable trust,” on the other hand, allows the grantor to make modifications.) Once you transfer assets into an irrevocable trust, you’ve effectively removed your rights of ownership to the assets. Because the property is no longer yours, it’s unavailable to satisfy claims against you. It’s important to note that placing assets in a trust won’t allow you to sidestep responsibility for debts or claims that are outstanding at the time you fund the trust. There may also be a substantial “look-back” period that could eliminate the protection your trust would otherwise provide, as well as other restrictions.

Build a fence

If you’re concerned about what will happen to your assets after they pass to the next generation, you may want to consider the defensive features of a “spendthrift” trust. Despite the name, a spendthrift trust does more than protect your heirs from themselves. It can protect your family’s assets against dishonest business partners and unscrupulous creditors. It also can protect loved ones in the event of relationship changes. For example, if your son divorces, his spouse generally won’t be able to claim a share of the trust property in the divorce settlement. Several trust types can be designated a spendthrift trust — you just need to add a spendthrift clause to the trust document. Such a clause restricts a beneficiary’s ability to assign or transfer his or her interests in the trust, and it restricts the rights of creditors to reach the trust assets, as allowed by law.

Trustees play a role in keeping your trust safe

If a trustee is required to make distributions for a beneficiary’s support, a court may rule that a creditor can reach trust assets to satisfy support-related debts. So, for increased protection, consider giving your trustee full discretion over whether and when to make distributions. You’ll need to balance the potentially competing objectives of having the access you want and preventing creditors and others from having access.

Make asset protection a priority

If securing your assets is a priority — and it should be — talk to us about whether a trust can provide the protection you need. There may also be other ways to help shelter wealth — for example, maximizing your use of qualified retirement plans. For more information contact info@atacpa.net. © 2020

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6 Key IT Questions to Ask in the New Normal

The sudden shutdown of the economy in March because of the COVID-19 pandemic forced many businesses to rely more heavily on technology. Some companies fared better than others. Many businesses that had been taking an informal approach to IT strategy discovered their systems weren’t as robust and scalable as they’d hoped. Some may have lost ground competitively as fires were put out and employees got back up to speed in an altered working environment.

To keep your approach to technology relevant, you’ve got to regularly reassess processes and assets. Doing so is even more important in the new normal. Here are six key questions to ask: 

  1. What are our users saying? Every successful IT strategy is built on a foundation of plentiful user feedback. Talk with (or survey) your employees about what’s happened over the last few months from a technology perspective. Find out what’s working, what isn’t and why. 
  2. Do we have information silos? Most companies today use multiple applications. If these solutions can’t “talk” to each other, you may suffer from information silos — when different people and teams keep data to themselves. Shifting to a more remote workforce may have worsened this problem or made it more obvious. If it’s happening, determine how to integrate critical systems. 
  3. Do we have a digital file-sharing policy? Businesses used to generate tremendous amounts of paperwork. Sharing documents electronically is much more common now but, without a formal approach to file sharing, things can still get lost or various versions of files can cause confusion. Implement (or improve) a digital file-sharing policy to better manage system access, network procedures and version control. 
  4. Has our technology become outdated? Along with being an incredible tragedy and ongoing problem, the pandemic is accelerating change. Technology that may have been at least passable before the crisis may now be falling far short of optimal functionality. Look closely at whether your business may need to upgrade hardware, software or platforms sooner than you previously anticipated. 
  5. Do employees need more training? You may have implemented IT changes over the past few months that employees haven’t fully understood or have adjusted to in problematic ways. Consider mandatory training and ongoing refresher sessions to ensure users are taking full advantage of available technology and following proper procedures. 
  6. Are your security protocols being followed? Changes made to facilitate working during the pandemic may have exposed your systems and data to threats from disgruntled employees, outside hackers and ever-present viruses. Make sure you have a closely followed policy for critical actions such as regularly changing passwords, removing inactive users and installing security updates. ATA Secure can help answer any data security question. They have the ability to secure networks from the inside and outside.  Learn more about our data security partners here.

Technology has played a critical role in enabling businesses to stay connected internally, communicate with customers and remain operational during the COVID-19 crisis. Our firm can help you assess your IT strategy in today’s economy and identify cost-effective process changes and budget-conscious asset upgrades. For more information, visit ATA Tech.  © 2020

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Conduct a “paycheck checkup” to make sure your withholding is adequate

Did you recently file your federal tax return and were surprised to find you owed money? You might want to change your withholding so that this doesn’t happen next year. You might even want to do that if you got a big refund. Receiving a tax refund essentially means you’re giving the government an interest-free loan.

Withholding changes

In 2018, the IRS updated the withholding tables that indicate how much employers should hold back from their employees’ paychecks. In general, the amount withheld was reduced. This was done to reflect changes under the Tax Cuts and Jobs Act — including an increase in the standard deduction, suspension of personal exemptions and changes in tax rates. The tables may have provided the correct amount of tax withholding for some individuals, but they might have caused other taxpayers to not have enough money withheld to pay their ultimate tax liabilities.

 

Review and possibly adjust

The IRS is advising taxpayers to review their tax situations for this year and adjust withholding, if appropriate. The tax agency has a withholding calculator to assist you in conducting a paycheck checkup. The calculator reflects tax law changes in areas such as available itemized deductions, the increased child credit, the new dependent credit and the repeal of dependent exemptions. You can access the IRS calculator here: https://bit.ly/2OqnUod.

 

Changes may be needed if… There are some situations when you should check your withholding. In addition to tax law changes, the IRS recommends that you perform a checkup if you:

Adjusted your withholding in 2019, especially in the middle or later part of the year
Owed additional tax when you filed your 2019 return
Received a refund that was smaller or larger than expected
Got married or divorced, had a child or adopted one
Purchased a home
Had changes in income

 

You can modify your withholding at any time during the year, or even multiple times within a year. To do so, you simply submit a new Form W-4 to your employer. Changes typically go into effect several weeks after a new Form W-4 is submitted. (For estimated tax payments, you can make adjustments each time quarterly estimated payments are due. The next payments are due on July 15 and September 15.)

 

Good time to plan ahead

There’s still time to remedy any shortfalls to minimize taxes due for 2020, as well as any penalties and interest. Contact us if you have any questions or need assistance. We can help you determine if you need to adjust your withholding. © 2020

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Tax

People First Initiative

With the July 15 federal tax filing and payment deadline fast approaching, as part of its People First Initiative, the IRS has posted answers to FAQs on tax balances due and payment options.

One question on the top of many taxpayers’ minds is: Will the IRS forgive tax debts? The answer: No.

Any tax debts and balances will continue to accrue penalties and interest during the relief period (April 1, 2020 to July 15, 2020). However, the IRS states that the People First Initiative includes relief on a variety of issues ranging from easing payment guidelines to postponing compliance actions. Read the full list of FAQs here: https://bit.ly/2CVuJLI