Stop Procrastinating and Get to Work on Your Estate Plan

For many people, creating an estate plan falls into the category of important but not urgent. As a result, it can get postponed indefinitely. If you find yourself in this situation, understanding the reasons behind this procrastination can help you recognize and overcome the barriers that are preventing you from taking the first steps toward creating an estate plan.

Multiple reasons for procrastination

A primary reason people delay estate planning is emotional discomfort. Thinking about your death or a disability or becoming incapacitated is unpleasant. Simply put, it can be difficult to confront your mortality or make difficult decisions about who should inherit your assets or serve as guardian of your minor children.

Another reason for delay is that estate planning can seem daunting, especially when people assume it involves complicated legal jargon, multiple professionals and a mountain of paperwork. For those with blended families, business interests or complex financial situations, the process may feel even more overwhelming. Without clear guidance, many people don’t know where to start, so they don’t start at all.

There’s also the mistaken belief that estate planning is only necessary for the wealthy or elderly. Younger individuals or those with modest assets may think they don’t need a plan yet. Additionally, procrastination bias — the tendency to prioritize immediate concerns over future needs — often pushes estate planning to the bottom of the to-do list.

Reasons to motivate yourself

Not having an estate plan in place, especially the basics of a will and health care directives, can have dire tax consequences in the event of an unexpected death or incapacitation. Without a will, your assets will be divided according to state law, regardless of your wishes. This can cause family disputes and lead to legal actions. It can also result in tax liabilities that could have been easily avoided.

There are a few relatively simple documents that can comprise an estate plan. For example, a living will can spell out instructions for end-of-life decisions. A power of attorney can appoint someone to handle your affairs if you’re incapacitated. And a living trust can be used to transfer assets without going through probate.

The bottom line

Procrastinating on estate planning carries real risks — not just for you, but also for your loved ones. Without a proper plan, state laws will determine how your assets will be distributed, often in ways that may not align with your wishes. Contact FMD for help taking the first steps toward forming your estate plan.

Run a More Agile Company with Cross-Training

Agility is key in today’s economy, where uncertainty reigns and businesses must be ready for anything. Highly skilled employees play a huge role in your ability to run an agile company. One way to put them on optimal footing is cross-training.

Multiple advantages

Simply defined, cross-training is teaching employees to understand and perform responsibilities and tasks outside the scope of their primary job duties. It has many advantages, including:

Reducing the impact of absences. The potential reasons for any employee missing work are seemingly countless. A staff member may become sick or disabled, have a baby, take a vacation, get called to active military duty, receive a jury summons, retire, suddenly resign or be terminated. Having someone else on staff ready to jump in and handle key duties can keep your company operating relatively smoothly.

Boosting productivity. If the workload in one area of the business temporarily becomes especially heavy, you can shift staff to ease the situation. Let’s say that, pleasantly enough, your company sees a sudden upswing in sales. Cross-training could enable you to move someone in marketing to accounting to help review invoices.

Gaining fresh perspectives. Putting a new set of eyes on any business process or procedure never hurts. Employees who fill in for colleagues on a short-term basis may catch something wrong or develop an idea that improves operations.

Going back to our previous example, say that the marketing staff member temporarily working in accounting notices that your company’s invoices look outdated and contain confusing wording. As a result, you ask for that person’s input and undertake a wider initiative to redesign your invoices. Ultimately, collections improve because customers can more easily read their bills.

Strengthening internal controls. Cross-training is also an essential internal control. This is particularly true in your accounting department but may apply to information technology, production and other areas as well. Ensuring one person’s job is periodically performed by someone else can prevent fraud. In fact, when coupled with mandatory vacations, cross-training is a major deterrent because potential fraudsters know that co-workers will be doing their jobs and could catch their crimes.

Career development

When “selling” cross-training to your staff, emphasize how it’s good for them, too. Learning new things broadens employees’ skill sets and experience levels. Help them understand this by explaining whether each staff member’s cross-training is “vertical” or “horizontal.”

If the task learned is vertical, it requires more responsibility or skill than that employee’s normal duties. Thus, vertical cross-training encourages employees to feel more valuable to the business. (And you know what? They are!)

If the task calls for the same level of responsibility or skill as an employee’s routine duties, it’s considered horizontal. This type of cross-training widens employees’ understanding of their departments or the company. Plus, horizontal cross-training builds camaraderie and is often a welcome change of pace.

Risks to consider

Although generally a good business practice, cross-training has some risks you should consider. First, not everyone is a prime candidate for it. If possible, pick employees who show an interest in working outside their stated roles and are open to change.

Important: You may want to require cross-training as an internal control for some positions. This is usually a good idea for jobs involving financial management, sensitive data or high-value customers.

Second, be cognizant of employees’ workloads and stress levels. Relying too much on cross-training can lead to burnout and lower morale. Also, decide whether and how cross-training should affect compensation. Some companies use incentives or profit sharing to build buy-in.

Slowly and carefully

If your business has yet to try cross-training, starting slowly is typically best. Discuss the concept with your leadership team and identify which positions are well suited for it. Then design a formal strategy for picking the employees involved, carrying out the training and monitoring the results. FMD can help you identify all the costs associated with developing and managing staff performance.

An Employee Stock Ownership Plan can be a Versatile Business Exit and Estate Planning Tool

As a closely held business owner, a substantial amount of your wealth likely is tied to the business. Of course, you want to retain as much of that wealth as possible to pass on to your family after you exit the business. If your business is structured as a corporation, the answer may be an employee stock ownership plan (ESOP). It can enhance tax efficiency, support business succession goals and help preserve wealth for future generations.

An ESOP in action

An ESOP is a qualified retirement plan that invests primarily in your company’s stock. ESOPs must comply with the same rules and regulations as other qualified plans, and they’re subject to similar contribution limits and other requirements.

One requirement that’s unique to ESOPs is the need to have the stock valued annually by an independent appraiser. Also, by definition, ESOPs are available only to corporations. Both C corporations and S corporations are eligible.

In a typical ESOP arrangement, the company makes tax-deductible cash contributions to the plan, which uses those funds to acquire some or all of the current owners’ stock. Alternatively, with a “leveraged” ESOP, the plan borrows the money needed to buy the stock and the company makes tax-deductible contributions to cover the loan payments.

As with other qualified plans, ESOP participants enjoy tax-deferred earnings. They pay no tax until they receive benefits, in the form of cash or stock, when they retire or leave the company. Participants who receive closely held stock have a “put option” to sell it back to the company at fair market value during a limited time window.

ESOP benefits

ESOPs offer many benefits for owners, companies and employees alike. Benefits for owners include:

Liquidity and diversification. An ESOP creates a market for your stock. By selling some or all of your stock to the plan, you can achieve greater liquidity and diversification, enhancing your financial security and estate planning flexibility. Acquiring a wider variety of nonbusiness assets with the sale proceeds can make it easier to share your wealth with loved ones, especially those who aren’t interested in participating in the business.

Tax advantages. If your company is a C corporation and the ESOP acquires at least 30% of its stock, it’s possible to defer capital gains on the sale of your stock by reinvesting the proceeds in qualified replacement securities. You can even avoid capital gains tax permanently by holding the replacement securities for life.

Control. Unlike certain other exit strategies, an ESOP allows you to tap your equity in the company without immediately giving up management control. You can continue to act as a corporate officer and, if you serve as the ESOP’s trustee, you’ll retain the right to vote the trust’s shares on most corporate decisions.

The company can benefit because its contributions to the plan are tax deductible. With a leveraged ESOP, the company essentially deducts both interest and principal on the loan. And, of course, both the company and its employees gain from the creation of an attractive employee benefit, one that provides a powerful incentive for employees to stay with the company and contribute to its success.

Beware of an ESOP’s cost

An ESOP can be a powerful estate planning tool for closely held business owners, but it’s important to consider the costs. In addition to the usual costs associated with setting up and maintaining a qualified plan, there are also annual stock valuation costs. Contact FMD to learn more about pairing an ESOP with your estate plan.

Business Owners Can Rest Easier with Sound Cash Flow Management

Slow cash flow is one of the leading causes of insomnia for business owners. Even if sales are strong, a lack of liquidity to pay bills and cover payroll can cause more than a few sleepless nights. The good news is that you can rest easier by exercising sound cash flow management.

Scrutinize your cycles

Broadly speaking, nearly every business — no matter what it does — has two cycles that determine how the dollars flow. These are:

1. The selling cycle. This is how long it takes your business to:

• Develop a product or service,

• Market it, and

• Produce the product or service, close a sale, and collect the revenue.

Good accounts receivable processes — from clearly and accurately invoicing to implementing online payment methods for faster access to money — are a major aspect of cash flow management.

Less experienced business owners often underestimate the length of the selling cycle. Many a start-up has been launched with a budding entrepreneur believing the company could get its wares to market, close deals and earn revenue quickly. Grim reality usually followed.

However, even business owners who’ve been around for a while can miss changes to their selling cycles. Regular customers on whom the company depends may start taking longer to pay, or a key employee might jump ship and be hard to replace. Inefficiencies such as these are often exposed when economic conditions deteriorate.

2. The disbursements cycle. This is how your business manages regular payments to employees, vendors, creditors (including short- and long-term financing) and other parties. As payments go out, cash flow is obviously affected.

Track the timing

The selling and disbursements cycles aren’t separate functions; they overlap. But if they don’t do so evenly, delayed cash inflows can create a crisis. You want them to match as evenly as possible. Or better yet, you want to convert sales to cash more quickly than you’re paying expenses.

How can you keep tabs on it all? First, study your statement of cash flows whenever your company’s financial statements are generated. But do more than that. Regularly create cash flow statements. Despite their similar-sounding name, these reports are run more frequently — usually monthly or quarterly. You can also use financial software to set up a digital dashboard that displays weekly or even daily cash flow metrics.

Take control

If you see warning signs of an imminent cash crunch, consider these options to better control the potential crisis:

Slow down growth. Rapid growth can be both a blessing (you’re selling more) and a curse (you’re spending more on production). Cash shortages often result from a substantial mismatch between the selling and disbursement cycles, which can easily occur during high-growth periods. Out-of-control growth can also impair quality, which, in turn, sours relationships with customers and hurts your company’s reputation in the marketplace.

Review expenses. Sometimes, you can lower monthly cash outflows by converting costs from fixed to variable. Fixed expenses include mortgage or lease payments, payroll, and insurance. When an employee quits, consider using an independent contractor to fill the position. Or if a key piece of equipment breaks, explore leasing rather than purchasing. In addition, review your company’s tax planning strategies. A lower tax bill can make a big difference in cash flow.

Address asset management. How much money are you making for each dollar that’s invested in working capital, equipment and other assets? By monitoring turnover ratios, you may be able to identify and reduce weaknesses in asset management. For example, an increase in “days outstanding” in accounts receivable might improve with tighter credit policies, early-bird discounts or incentives for employees who handle collections.

Essential skills

Strong cash flow management skills are essential to running a successful business. FMD can review your sales and disbursement cycles, improve your financial reporting, and identify ways to manage your company’s cash better.

How The One, Big, Beautiful Bill Proposes to Change the Gift and Estate Tax Exemption

The Tax Cuts and Jobs Act (TCJA) effectively doubled the unified federal gift and estate tax exemption — and annual inflation adjustments have boosted it even further. For individuals who make gifts or die in 2025, the exemption amount is $13.99 million ($27.98 million for married couples).

Under the TCJA, the exemption amount is scheduled to revert to the pre-TCJA level after 2025, unless Congress extends it. This has caused uncertainty for wealthy individuals whose estates may be exposed to gift and estate taxes if the higher exemption were to expire after 2025.

The good news is that Congress has finally taken steps to address this expiring tax provision (among many others). The U.S. House of Representatives passed The One, Big, Beautiful Bill in May. Under the proposed bill, beginning in 2026, the federal gift and estate tax exemption would be permanently increased to $15 million ($30 million for married couples). That amount would continue to be annually adjusted for inflation.

Gift and estate tax exemption basics

Under the TCJA, the federal gift and estate tax exemption increased from $5 million to $10 million per individual, with annual indexing for inflation. Taxable estates that exceed the exemption amount have the excess taxed at up to a 40% rate. In addition, cumulative lifetime taxable gifts that exceed the exemption amount are taxed at up to a 40% rate.

Under the annual gift tax exclusion, you can exclude certain gifts of up to the annual exclusion amount ($19,000 per recipient for 2025) without using up any of your gift and estate tax exemption. If you make gifts in excess of what can be sheltered with the annual gift tax exclusion amount, the excess reduces your lifetime federal gift and estate tax exemption dollar-for-dollar.

Under the unlimited marital deduction, transfers between spouses are federal-estate-and-gift-tax-free. But the unlimited marital deduction is available only if the surviving spouse is a U.S. citizen.

Next steps

The proposed legislation is now being considered by the Senate. It’s likely to change (perhaps significantly) before the Senate votes on it. If there are changes, it’ll then go back to the House for a vote before being sent to President Trump for his signature.

In addition to disagreements about the bill’s tax provisions, there are Senators who don’t agree with some of the spending cuts. Regardless, changes to the estate tax rules are expected this year. Contact FMD to learn how these potential changes could affect your estate plan.

Mission and Vision Statements Help Businesses Rise Above the Din

Many of today’s businesses operate in a cacophonous marketplace. Everyone is out blasting emails, pushing notifications and proclaiming their presence on social media. Where does it all leave your customers and prospects? Quite possibly searching for a clear perception of your company.

One way — well, two ways — to rise above the din is to craft a mission statement and a vision statement. Although they may seem like superfluous marketing exercises to some, these two statements can help clarify your identity to customers and prospects. They can also matter to lenders, investors, the news media and job candidates.

Why you’re here

Let’s start with the mission statement. Its purpose is to express to the world why you’re in business, what you’re offering and whom you’re looking to serve. For example, the U.S. Department of Labor has this as its mission statement:

To foster, promote, and develop the welfare of the wage earners, job seekers, and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights.

Forget flowery language and industry jargon. Write in clear, simple, honest terms. Keep the statement brief, a paragraph at most. Answer questions that any interested party would likely ask. Why did your company go into business? What makes your products or services worth buying? Who’s your target market?

You know the answers to these questions. But distilling them into a clear, concise mission statement can do more than raise your visibility in the marketplace. It may also help renew your commitment to your original or actual mission or reveal where you’ve gotten off track.

With a mission statement in place, you can engage in more focused strategic planning. Moreover, it helps boost employee engagement, serving as a driving philosophy for everyone. And as mentioned, the right mission statement really is a marketing asset: It tells the buying public precisely who you are.

Where you’re going

So, what does a vision statement do? It tells interested parties where you’re going; that is, what you want to accomplish.

A vision statement should be even briefer than your mission statement. Think of it as a tagline for a movie or even an advertising slogan. You want to deliver a memorable quote that will get readers’ attention and let them know you’re moving into a future where you’ll provide the highest quality products and services in your industry.

Whereas a mission statement is anchored in the present, a vision statement focuses on the horizon. For instance, the mission statement of the Alzheimer’s Association is:

The Alzheimer’s Association leads the way to end Alzheimer’s and all other dementia — by accelerating global research, driving risk reduction and early detection, and maximizing quality care and support.

But its vision statement is simply: “A world without Alzheimer’s and all other dementia.”

Create a vision statement that’s a rallying cry for your company. Don’t be afraid to be aspirational, bold and appeal to people’s emotions. Remember, this isn’t where you are, it’s where you intend to go.

How to proceed

Creating mission and vision statements can be a fun, creative way to unite a company. If you already have both, well done! But don’t forget that you can still revisit and refine the language. And if you ever decide to do a major marketplace pivot or even undergo a business transformation, you’ll likely want to rewrite your mission and vision statements entirely.

The House Passes The One, Big, Beautiful Bill Act: An Overview of its Tax Provisions

The U.S. House of Representatives passed its sweeping tax and spending bill, dubbed The One, Big, Beautiful Bill Act (OBBBA), by a vote of 215 to 214. The bill includes extensions of many provisions of the Tax Cuts and Jobs Act (TCJA) that are set to expire on December 31. It also includes some new and enhanced tax breaks. For example, it contains President Trump’s pledge to exempt tips and overtime from income tax.

The bill has now moved to the U.S. Senate for debate, revisions and a vote. Several senators say they can’t support the bill as written and vow to make changes.

Here’s an overview of the major tax proposals included in the House OBBBA.

Business tax provisions

The bill includes several changes that could affect businesses’ tax bills. Among the most notable:

Bonus depreciation. Under the TCJA, first-year bonus depreciation has been phasing down 20 percentage points annually since 2023 and is set to drop to 0% in 2027. (It’s 40% for 2025.) Under the OBBBA, the depreciation deduction would reset to 100% for eligible property acquired and placed in service after January 19, 2025, and before January 1, 2030.

Section 199A qualified business income (QBI) deduction. Created by the TCJA, the QBI deduction is currently available through 2025 to owners of pass-through entities — such as S corporations, partnerships and limited liability companies (LLCs) — as well as to sole proprietors and self-employed individuals. QBI is defined as the net amount of qualified items of income, gain, deduction and loss that are effectively connected with the conduct of a U.S. business. The deduction generally equals 20% of QBI, not to exceed 20% of taxable income. But it’s subject to additional rules and limits that can reduce or eliminate the tax benefit. Under the OBBBA, the deduction would be made permanent. Additionally, the deduction amount would increase to 23% for tax years beginning after 2025.

Domestic research and experimental expenditures. The OBBBA would reinstate a deduction available to businesses that conduct research and experimentation. Specifically, the deduction would apply to research and development costs incurred after 2024 and before 2030. Providing added flexibility, the bill would allow taxpayers to elect whether to deduct or amortize the expenditures. (The requirement under current law to amortize such expenses would be suspended while the deduction is available.)

Section 179 expensing election. This tax break allows businesses to currently deduct (rather than depreciate over a number of years) the cost of purchasing eligible new or used assets, such as equipment, furniture, off-the-shelf computer software and qualified improvement property. An annual expensing limit applies, which begins to phase out dollar-for-dollar when asset acquisitions for the year exceed the Sec. 179 phaseout threshold. (Both amounts are adjusted annually for inflation.) The OBBBA would increase the expensing limit to $2.5 million and the phaseout threshold to $4 million for property placed into service after 2024. The amounts would continue to be adjusted annually for inflation. (Under current law, for 2025, the expensing limit is $1.25 million and the phaseout threshold is $3.13 million.)

Pass-through entity “excess” business losses. The Inflation Reduction Act, through 2028, limits deductions for current-year business losses incurred by noncorporate taxpayers. Such losses generally can offset a taxpayer’s income from other sources, such as salary, interest, dividends and capital gains, only up to an annual limit. “Excess” losses are carried forward to later tax years and can then be deducted under net operating loss rules. The OBBBA would make the excess business loss limitation permanent.

Individual tax provisions

The OBBBA would extend or make permanent many individual tax provisions of the TCJA. Among other things, the new bill would affect:

Individual income tax rates. The OBBBA would make permanent the TCJA income tax rates, including the 37% top individual income tax rate. If a new law isn’t enacted, the top rate would return to 39.6%.

Itemized deduction limitation. The bill would make permanent the repeal of the Pease limitation on itemized deductions. But it would impose a new limitation on itemized deductions for taxpayers in the 37% income tax bracket that would go into effect after 2025.

Standard deduction. The new bill would temporarily boost standard deduction amounts. For tax years 2025 through 2028, the amounts would increase $2,000 for married couples filing jointly, $1,500 for heads of households and $1,000 for single filers. For seniors age 65 or older who meet certain income limits, an additional standard deduction of $4,000 would be available for those years. (Currently, the inflation-adjusted standard deduction amounts for 2025 are $30,000 for joint filers, $22,500 for heads of households and $15,000 for singles.)

Child Tax Credit (CTC). Under current law, the $2,000 per child CTC is set to drop to $1,000 after 2025. The income phaseout thresholds will also be significantly lower. And the requirement to provide the child’s Social Security number (SSN) will be eliminated. The OBBBA would make the CTC permanent, raise it to $2,500 per child for tax years 2025 through 2028 and retain the higher income phaseout thresholds. It would also preserve the requirement to provide a child’s SSN and expand it to require an SSN for the taxpayer (generally the parent) claiming the credit. After 2028, the CTC would return to $2,000 and be adjusted annually for inflation.

State and local tax (SALT) deduction. The OBBBA would increase the TCJA’s SALT deduction cap (which is currently set to expire after 2025) from $10,000 to $40,000 for 2025. The limitation would phase out for taxpayers with incomes over $500,000. After 2025, the cap would increase by 1% annually through 2033.

Miscellaneous itemized deductions. Through 2025, the TCJA suspended deductions subject to the 2% of adjusted gross income (AGI) floor, such as certain professional fees and unreimbursed employee business expenses. This means, for example, that employees can’t deduct their home office expenses. The OBBBA would make the suspension permanent.

Federal gift and estate tax exemption. Beginning in 2026, the bill would increase the federal gift and estate tax exemption to $15 million. This amount would be permanent but annually adjusted for inflation. (For 2025, the exemption amount is $13.99 million.)

New tax provisions

On the campaign trail, President Trump proposed several tax-related ideas. The OBBBA would introduce a few of them into the U.S. tax code:

No tax on tips. The OBBBA would offer a deduction from income for amounts a taxpayer receives from tips. Tipped workers wouldn’t be required to itemize deductions to claim the deduction. However, they’d need a valid SSN to claim it. The deduction would expire after 2028. (Note: The Senate recently passed a separate no-income-tax-on-tips bill that has different rules. To be enacted, the bill would have to pass the House and be signed by President Trump.)

No tax on overtime. The OBBBA would allow workers to claim a deduction for overtime pay they receive. Like the deduction for tip income, taxpayers wouldn’t have to itemize deductions to claim the write-off but would be required to provide an SSN. Also, the deduction would expire after 2028.

Car loan interest deduction. The bill would allow taxpayers to deduct interest payments (up to $10,000) on car loans for 2025 through 2028. Final assembly of the vehicles must take place in the United States, and there would be income limits to claim the deduction. Both itemizers and nonitemizers would be able to benefit.

Charitable deduction for nonitemizers. Currently, taxpayers can claim a deduction for charitable contributions only if they itemize on their tax returns. The bill would create a charitable deduction of $150 for single filers and $300 for joint filers for nonitemizers.

What’s next?

These are only some of the provisions in the massive House bill. The proposed legislation is likely to change (perhaps significantly) as it moves through the Senate and possibly back to the House. In addition to disagreements about the tax provisions, there are Senators who don’t agree with some of the spending cuts. Regardless, tax changes are expected this year. Turn to FMD for the latest developments.

From the Simple to the Complex: 6 Strategies to Protect Your Wealth from Lawsuits and Creditors

Asset protection is a strategic approach to safeguarding your wealth from potential lawsuits and creditor claims. Indeed, protecting your assets is critical in today’s litigious environment. Without proper planning, a single lawsuit or debt issue could jeopardize years of financial progress. The last thing you want to happen is to lose a portion of your wealth, thus having less to pass on to your heirs, potentially jeopardizing their livelihoods.

6 asset protection techniques

Fortunately, there are legally sound strategies to shield your property, investments and other valuable assets from such risks. Here are six of them, ranging from simple to complex:

1. Give away assets. If you’re willing to part with ownership, a simple yet highly effective way to protect assets is to give them to your spouse, children or other family members. This can be achieved by making outright gifts or establishing an irrevocable trust, taking into account the current federal gift and estate tax exemption amount. After all, litigants or creditors can’t go after assets you don’t own (provided the gift doesn’t run afoul of fraudulent conveyance laws). Choose the recipients carefully, however, to be sure you don’t expose the assets to their creditors’ claims.

2. Retitle assets. Another simple but effective technique is to retitle property. For example, the law in many states allows married couples to hold a residence or certain other property as “tenants by the entirety,” which protects the property against either spouse’s individual creditors. It doesn’t, however, provide any protection from a couple’s joint creditors.

3. Buy insurance. Insurance is an important line of defense against potential claims that can threaten your assets. Depending on your circumstances, it may include personal or homeowner’s liability insurance, umbrella policies, errors and omissions insurance, or liability or malpractice insurance.

4. Set up an LLC or FLP. Transferring assets to a limited liability company (LLC) or family limited partnership (FLP) can be an effective way to share wealth with your family while retaining control over the assets. These entities are particularly valuable for holding business interests, though they can also be used for real estate and other assets.

To take advantage of this strategy, set up an LLC or FLP, transfer assets to the entity and then transfer membership or limited partnership interests to yourself and other family members. Not only does this facilitate the transfer of wealth, but it also provides significant asset protection to the members or limited partners, whose personal creditors generally can’t reach the entity’s assets.

5. Establish a DAPT. A domestic asset protection trust (DAPT) may be an attractive vehicle because, although it’s irrevocable, it provides you with creditor protection even if you’re a discretionary beneficiary. DAPTs are permitted in around one-third of the states, but you don’t necessarily have to live in one of those states to take advantage of a DAPT. However, you’ll probably have to locate some or all of the trust assets in a DAPT state and retain a bank or trust company in that state to administer the trust.

6. Establish an offshore trust. For greater certainty, consider an offshore trust. These trusts are similar to DAPTs, but they’re established in foreign countries with favorable asset protection laws. Although offshore trusts are irrevocable, some countries allow a trust to become revocable after a specified time, enabling you to retrieve the assets when the risk of loss has abated.

A word of warning

Keep in mind that asset protection isn’t intended to help you avoid your financial responsibilities or evade legitimate creditors. Federal and state fraudulent conveyance laws prohibit you from transferring assets (to a trust or another person, for example) with the intent to hinder, delay or defraud existing or foreseeable future creditors. And certain types of financial obligations — such as taxes, alimony or child support — may be difficult or impossible to avoid.

If you want to implement asset protection strategies, don’t hesitate to contact FMD. We can explain your options.

Family Business Focus: Addressing Estate and Succession Planning

The future often weighs heavier on the shoulders of family business owners. Their companies aren’t just “going concerns” with operating assets, human resources and financial statements. The business usually holds a strong sentimental value and represents years of hard work involving many family members.

If this is the case for your company, an important issue to address is how to integrate estate planning and succession planning. Whereas a nonfamily business can simply be sold to new ownership with its own management, you may want to keep the company in the family. And that creates some distinctive challenges.

Question of control

From an estate planning perspective, transferring ownership of assets to the younger generation as early as possible allows you to remove future appreciation from your estate, thereby minimizing estate taxes. Proactive planning may be especially relevant today, given the federal estate and gift tax regime under the Tax Cuts and Jobs Act.

For 2025, the unified federal estate and gift tax exemption is $13.99 million ($27.98 million for a married couple). Absent congressional action, this lifetime exemption is scheduled to drop by about half after this year. As of this writing, Congress is working on tax legislation that could potentially extend the current high exemption amount.

However, when it comes to transferring ownership of a family business, you may not be ready to hand over the reins — or you may feel that your children (or others) aren’t yet ready to take over. You may also have family members who aren’t involved in the company. Providing these heirs with equity interests that don’t confer control is feasible with proper planning.

Vehicles to consider

Various vehicles may allow you to transfer family business interests without immediately giving up control. For example, if your company is structured as a C or S corporation, you can issue nonvoting stock. Doing so allows current owners to retain control over business decisions while transferring economic benefits to other family members.

Alternatively, there are several trust types to consider. These include a revocable living trust, an irrevocable trust, a grantor retained annuity trust and a family trust. Each has its own technical requirements, so you must choose carefully.

Then again, you could form a family limited partnership. This is a legal structure under which family members pool their assets for business or investment purposes while retaining control of the company and benefiting from tax advantages.

Finally, many family businesses are drawn to employee stock ownership plans (ESOPs). Indeed, an ESOP may be an effective way to transfer stock to family members who work in the company and other employees, while allowing owners to cash out some of their equity in the business.

You and other owners can use this liquidity to fund your retirements, diversify your portfolios or provide for family members who aren’t involved in the business. If an ESOP is structured properly, you can maintain control over the business for an extended period — even if the ESOP acquires most of the company’s stock.

Not easy, but important

For family businesses, addressing estate and succession planning isn’t easy, but it’s important. One thing all the aforementioned vehicles have in common is that implementing any of them will call for professional guidance, including your attorney. Please keep us in mind as well. FMD can help you manage the tax and cash flow implications of planning a sound financial future for your company and family.

After a Person Dies, His or Her Debts Live On

One question the family of a deceased person often asks is: What happens to debt after a person dies? It’s important to realize that a person’s debt doesn’t simply vanish after his or her death.

An estate’s executor or beneficiaries generally aren’t personally liable for any debt. The estate itself is liable for the deceased’s debt. This is true regardless of whether the estate goes through probate or a revocable (or “living”) trust is used to avoid probate. Contrary to popular belief, assets held in a revocable trust aren’t shielded from creditors’ claims.

Assets and debts

Generally, an estate’s executor is responsible for managing the deceased’s assets and debts. A personal representative can also carry out this task.

With respect to debt, the executor should take inventory of the deceased’s debts, evaluate their validity and order of priority, and determine whether they should be paid in full or allowed to continue to accrue during the estate administration process. In some cases, debt that’s tied to a particular asset — a mortgage, for example — may be assumed by the beneficiary who inherits the asset.

Certain assets are exempt, however. These include most retirement plan accounts, life insurance proceeds received by a beneficiary and jointly held property with rights of survivorship that passes automatically to the joint owner.

Also, assets held in certain irrevocable trusts, such as domestic asset protection trusts, may be shielded from creditors’ claims. The extent of this protection depends on the type of trust and applicable law in the jurisdiction where the trust was created.

Assuming the deceased had a will, the estate’s assets generally are used to pay any debts in this order:

1. Assets that pass under the will’s residual clause — that is, assets remaining after all other bequests have been satisfied,

2. Assets that pass under general bequests, and

3. Assets that pass under specific bequests.

Note that some states have established homestead exemptions or family allowances that prohibit the sale of certain assets to pay debts. These provisions are designed to give a deceased’s loved ones a minimal level of financial security in the event the estate is insolvent.

When debts are greater than the estate’s value

If an estate’s debts exceed the value of its assets, certain debts have priority and the estate’s executor must pay those debts first. Although the rules vary from state to state, a typical order of priority is:

• Estate administration expenses (such as legal and accounting fees),

• Reasonable funeral expenses,

• Certain federal taxes or obligations,

• Unreimbursed medical expenses related to the deceased’s last illness,

• Certain state taxes or obligations (including Medicaid reimbursement claims), and

• Other debts.

Secured debts, such as mortgages, usually aren’t given high priority. This is because the recipient of the property often assumes responsibility for the debt and the creditor can take the collateral to satisfy its claim.

Seek professional guidance

Managing debt in an estate can be complex, especially if the estate is insolvent. If you’re the executor of an estate, consult with FMD. We can help guide you through the process.

Companies Should Take a Holistic Approach to Cybersecurity

Today’s businesses have two broad choices regarding cybersecurity: wait for something bad to happen and react to it, or proactively address the threat. Not surprisingly, we recommend the latter approach.

The grim truth is cyberattacks are no longer only an information technology (IT) issue. They pose a serious risk to every level and function of a business. That’s why your company should take a holistic approach to cybersecurity. Let’s look at a few ways to put this into practice.

Start with leadership

Fighting the many cyberthreats currently out there calls for leadership. However, it’s critical not to place sole responsibility for cybersecurity on one person, if possible. If your company has grown to include a wider executive team, delegate responsibilities pertinent to each person’s position. For example, a midsize or larger business might do something like this:

• The CEO approves and leads the business’s overall cybersecurity strategy,

• The CFO oversees cybersecurity spending and helps identify key financial data,

• The COO handles how to integrate cybersecurity measures into daily operations,

• The CTO manages IT infrastructure to maintain and strengthen cybersecurity, and

• The CIO supervises the management of data access and storage.

To be clear, this is just one example. The specifics of delegation will depend on factors such as the size, structure and strengths of your leadership team. Small business owners can turn to professional advisors for help.

Classify data assets

Another critical aspect of cybersecurity is properly identifying and classifying data assets. Typically, the more difficult data is to find and label, the greater the risk that it will be accidentally shared or discovered by a particularly invasive hacker.

For instance, assets such as Social Security, bank account and credit card numbers are pretty obvious to spot and hide behind firewalls. However, strategic financial projections and many other types of intellectual property may not be clearly labeled and, thus, left insufficiently protected.

The most straightforward way to identify all such assets is to conduct a data audit. This is a systematic evaluation of your business’s sources, flow, quality and management practices related to its data. Bigger companies may be able to perform one internally, but many small to midsize businesses turn to consultants.

Regularly performed company-wide data audits keep you current on what you must protect. And from there, you can prudently invest in the right cybersecurity solutions.

Report, train and test

Because cyberattacks can occur by tricking any employee, whether entry-level or C-suite, it’s critical to:

Ensure all incidents are reported. Set up at least one mechanism for employees to report suspected cybersecurity incidents. Many businesses simply have a dedicated email for this purpose. You could also implement a phone hotline or an online portal.

Train, retrain and upskill continuously. It’s a simple fact: The better trained the workforce, the harder it is for cybercriminals to victimize the company. This starts with thoroughly training new hires on your cybersecurity policies and procedures.

But don’t stop there — retrain employees regularly to keep them sharp and vigilant. As much as possible, upskill your staff as well. This means helping them acquire new skills and knowledge in addition to what they already have.

Test staff regularly. You may think you’ve adequately trained your employees, but you’ll never really know unless you test them. Among the most common ways to do so is to intentionally send them a phony email to see how many of them identify it as a phishing attempt.

Of course, phishing isn’t the only type of cyberattack out there. So, develop other testing methods appropriate to your company’s operations and data assets. These could include pop quizzes, role-playing exercises and incident-response drills.

Spend wisely

Unfortunately, just about every business must now allocate a percentage of its operating budget to cybersecurity. To get an optimal return on that investment, be sure you’re protecting all of your company, not just certain parts of it. Let FMD help you identify, organize and analyze all your technology costs.

Have You and Your Spouse Coordinated your Estate Plans?

When it comes to estate planning, married couples often assume that simply naming each other in their wills or designating each other as beneficiaries is sufficient. However, unintended consequences can result if you and your spouse fail to properly coordinate your estate plans.

Examples include conflicting provisions, unexpected tax consequences or assets passing in ways that don’t align with your shared wishes. Coordinated estate planning can help ensure that both your and your spouse’s documents and strategies work together harmoniously, protecting your legacies and the financial well-being of your loved ones.

Boost tax efficiency

One of the primary benefits of coordinating estate plans is tax efficiency. By working together, you and your spouse can take full advantage of the marital deduction and applicable gift and estate tax exemptions. This can help minimize the overall tax burden on both estates.

Coordination becomes especially important if you have a blended family, where children from previous relationships are involved, or in situations with complex assets like business interests or multiple properties. Clear and consistent planning that factors in tax consequences can help ensure that all beneficiaries are treated fairly and that your intentions are honored.

Streamline administration

Another benefit of coordinated planning is it helps streamline the administration of the estate. If one spouse becomes incapacitated or passes away, a well-integrated plan can reduce the administrative burden on the surviving spouse, avoid disputes and accelerate the transfer of assets.

Coordinating plans also allow you and your spouse to make joint decisions about health care directives, powers of attorney and guardianship of minor children, ensuring that both of your wishes are respected and consistently documented.

Follow your state’s law

Keep in mind that state law generally governs estate matters. Therefore, state law determines if your property is community property, separate property or tenancy by the entirety.

For instance, California is a community property state. That generally means that half of what you own is your spouse’s property and vice versa, though there are some exceptions.

Be proactive

Married spouses who coordinate their estate plans can avoid pitfalls and maximize the benefits of thoughtful planning. Taking these steps proactively can strengthen your and your spouse’s financial security and shared legacy. FMD can help ensure that all elements of your plans are aligned and up to date.

4 Ways Business Owners Can Make “The Leadership Connection”

To get the most from any team, its leader must establish a productive rapport with each member. Of course, that’s easier said than done if you own a company with scores or hundreds of workers. Still, it’s critical for business owners to make “the leadership connection” with their employees.

Simply put, the leadership connection is an authentic bond between you and your staff. When it exists, employees feel like they genuinely know you — if not literally, then at least in the sense of having a positive impression of your personality, values and vision. Here are four ways to build and strengthen the leadership connection with your workforce.

1. Listen and share

Today’s employees want more than just equitable compensation and benefits. They want a voice. To that end, set up an old-fashioned suggestion box or perhaps a more contemporary email address or website portal for staff to share concerns and ask questions.

You can directly reply to queries with broad implications. Meanwhile, other executives or managers can handle questions specific to a given department or position. Choose communication channels thoughtfully. For example, you might share answers through company-wide emails or make them a feature of an internal newsletter or blog. Video messages can also be effective.

2. Stage formal get-togethers

Although leaders at every level need to be careful about calling too many meetings, there’s still value in getting everyone together in one place in real time. At least once a year, consider holding a “town hall” meeting where:

• The entire company gathers to hear you (and perhaps others) present on the state of the business, and

• Anyone can ask a question and have it answered (or receive a promise for an answer soon).

Town hall meetings are a good venue for discussing the company’s financial performance and establishing expectations for the immediate future.

You could even take it to the next level by organizing a company retreat. One of these events may not be feasible for businesses with bigger workforces. However, many small businesses organize off-site retreats so everyone can get better acquainted and explore strategic ideas.

3. Make appearances

Meetings are useful, but they shouldn’t be the only time staff see you. Interact with them in other ways as well. Make regular visits to each unit, department or facility of your business. Give managers a chance to speak with you candidly. Sit in on meetings; ask and answer questions.

By doing so, you may gather ideas for eliminating costly redundancies and inefficiencies. Maybe you’ll even find inspiration for your next big strategic move. Best of all, employees will likely get a morale boost from seeing you take an active interest in their corners of the company.

4. Have fun and celebrate

All work and no play makes business owners look dull and distant. Remember, employees want to get to know you as a person, at least a little bit. Show positivity and a sense of humor. Share appropriate personal interests, such as sports or caring for pets, in measured amounts.

Above all, don’t neglect to celebrate your business’s successes. Be enthusiastic about hitting sales numbers or achieving growth targets. Recognize the achievements of others — not just on the executive team but throughout the company. Give shout-outs to staff members on their birthdays and work anniversaries.

It’s all about trust

At the end of the day, the leadership connection is all about building trust. The greater your employees’ trust in you, the more loyal, engaged and productive they’ll likely be. FMD can help you measure your business’s productivity and evaluate workforce development costs.

IRS Clarifies Theft and Fraud Loss Deductions

The Tax Cuts and Jobs Act (TCJA) significantly limited the types of theft losses that are deductible on federal income taxes. But a recent “advice memo” (CCA 202511015) from the IRS’s Office of Chief Counsel suggests more victims of fraudulent scams may be able to claim a theft loss deduction than previously understood.

Casualty loss deduction basics

The federal tax code generally allows individuals to deduct the following types of losses, if they weren’t compensated for them by insurance or otherwise:

• Losses incurred in a business,

• Losses incurred in a transaction entered into for profit (but not connected to a business), or

• Losses not connected to a business or a transaction entered into for profit, which arise from a casualty or theft loss (known as personal casualty or theft losses).

A variety of fraud schemes may fall under the third category.

To deduct a theft loss, the taxpayer/victim generally must establish that:

• The loss resulted from conduct that’s deemed theft under applicable state law, and

• The taxpayer has no reasonable prospect of recovery of the loss.

From 2018 through 2025, though, the TCJA allows the deduction of personal casualty or theft losses only to the extent of personal casualty gains (for example, an insurance payout for stolen property or a destroyed home) except for losses attributable to a federally declared disaster. As a result, taxpayers who are fraud victims generally qualify for the deduction only if the loss was incurred in a transaction entered into for profit. That would exclude the victims of scams where no profit motive exists. The loss of the deduction can compound the cost of scams for such victims.

The IRS analysis

The IRS Chief Counsel Advice memo considers several types of actual scams and whether the requisite profit motive was involved to entitle the victims to a deduction. In each scenario listed below, the scam was illegal theft with little or no prospect of recovery:

Compromised account scam. The scammer contacted the victim, claiming to be a fraud specialist at the victim’s financial institution. The victim was induced to authorize distributions from IRA and non-IRA accounts that were allegedly compromised and transfer all the funds to new investment accounts. The scammer immediately transferred the money to an overseas account.

The IRS Chief Counsel found that the distributions and transfers were made to safeguard and reinvest all the funds in new accounts in the same manner as before the distributions. The losses, therefore, were incurred in a transaction entered into for profit and were deductible.

“Pig butchering” investment scam. This crime is so named because it’s intended to get every last dollar by “fattening up” the victim with fake returns, thereby encouraging larger investments. The victim here was induced to invest in cryptocurrencies through a website. After some successful investments, the victim withdrew funds from IRA and non-IRA accounts and transferred them to the website. After the balance grew significantly, the victim decided to liquidate the investment but couldn’t withdraw funds from the website.

The Chief Counsel determined that the victim transferred the funds for investment purposes. So the transaction was entered into for profit and the losses were deductible.

Phishing scam. The victim received an email from the scammer claiming that his accounts had been compromised. The email, which contained an official-looking letterhead and was signed by a “fraud protection analyst,” directed the victim to call the analyst at a provided number.

When the victim called, the scammer directed the victim to click a link in the email, giving the scammer access to the victim’s computer. Then, the victim was instructed to log in to IRA and non-IRA accounts, which allowed the scammer to grab the username and password. The scammer used this information to distribute all the account funds to an overseas account.

Because the victim didn’t authorize the distributions, the IRS weighed whether the stolen property (securities held in investment accounts) was connected to the victim’s business, invested in for profit or held as general personal property. The Chief Counsel found that the theft of property while invested established that the victim’s loss was incurred in a transaction entered into for profit and was deductible.

Romance scam. The scammer developed a virtual romantic relationship with the victim. Shortly afterwards, the scammer persuaded the victim to send money to help with supposed medical bills. The victim authorized distributions from IRA and non-IRA accounts to a personal bank account and then transferred the money to the scammer’s overseas account. The scammer stopped responding to the victim’s messages.

The Chief Counsel concluded this loss wasn’t deductible. The victim didn’t intend to invest or reinvest any of the distributed funds so there was no profit motive. In this case, the losses were nondeductible.

Note: If the scammer had directed the victim to a fraudulent investment scheme, the results likely would’ve been different. The analysis, in that situation, would mirror that of the pig butchering scheme.

Kidnapping scam. The victim was convinced that his grandson had been kidnapped. He authorized distributions from IRA and non-IRA accounts and directed the funds to an overseas account provided by the scammer.

The victim’s motive wasn’t to invest the distributed funds but to transfer them to a kidnapper. Unfortunately, these losses were also nondeductible.

What’s next?

It’s uncertain whether the TCJA’s theft loss limit will be extended beyond 2025. In the meantime, though, some scam victims may qualify to amend their tax returns and claim the loss deduction. Contact FMD if you need assistance or have questions about your situation.

Why Choosing the Right Trustee Matters

It’s not uncommon for an estate plan to contain multiple trusts. They can enable you to hold assets for and transfer them to beneficiaries, avoid probate, and possibly reduce estate tax exposure. When drafting a trust, you must appoint a trustee. This can be an individual or a financial institution.

Before choosing a trustee, know that the job comes with many responsibilities — from keeping careful records and making smart investment choices to staying fair and keeping beneficiaries informed. A trustee must always put the beneficiaries’ interests first and handle everything with care, honesty and good judgment.

What are a trustee’s tasks?

Trustees have significant legal responsibilities, primarily related to administering the trust on behalf of beneficiaries according to the terms of the trust document. However, the role can require many different types of tasks. For example, even if a tax professional is engaged to prepare tax returns, the trustee is responsible for ensuring that they’re completed correctly and filed on time.

One of the more challenging trustee duties is to accurately account for investments and distributions. When funds are distributed to cover a beneficiary’s education expenses, for example, the trustee should record both the distribution and the expenses covered. Beneficiaries are allowed to request an accounting of the transactions at any time.

The trustee needs to invest assets within the trust reasonably, prudently and for the long-term sake of beneficiaries. And trustees must avoid conflicts of interest — that is, they can’t act for personal gain when managing the trust. For instance, trustees typically can’t purchase assets from the trust. The trustee probably would prefer a lower purchase price, which would run counter to the best interests of the trust’s beneficiaries.

Finally, trustees must be impartial. They may need to decide between competing interests while still acting within the terms of the trust document. An example of competing interests might be when a trust is designed to provide current income to a first beneficiary during his or her lifetime, after which the assets pass to a second beneficiary. Although the first beneficiary would probably prefer that the trust’s assets be invested in income-producing securities, the second would likely prefer growth investments.

What qualities should you look for?

Several qualities help make someone an effective trustee, including:

• A solid understanding of tax and trust law,

• Investment management experience,

• Bookkeeping skills,

• Integrity and honesty, and

• The ability to work with all beneficiaries objectively and impartially.

And because some trusts continue for generations, trustees may need to be available for an extended period. For this reason, many people name a financial institution or professional advisor, rather than a friend or family member, as trustee.

Consider all your options

Naming a trustee is an important decision, as this person or institution will be responsible for carrying out the terms outlined in the trust documents. FMD can help you weigh the options available to you.

Cost Management is Critical for Companies Today

Many business owners take an informal approach to controlling costs, tackling the issue only when it becomes an obvious problem. A better way to handle it is through proactive, systematic cost management. This means segmenting your company into its major spending areas and continuously adjusting how you allocate dollars to each. Here are a few examples.

Supply chain

Most supply chains contain opportunities to control costs better. Analyze your company’s sourcing, production and distribution methods to find them. Possibilities include:

• Renegotiating terms with current suppliers,

• Finding new suppliers, particularly local ones, and negotiating better deals, and

• Investing in better technology to reduce wasteful spending and overstocking.

If you haven’t already, openly address what’s on everyone’s mind these days: global tariffs. Work with your leadership team and professional advisors to study how current tariffs affect your company. In addition, do some scenario planning to anticipate what you should do if those tariffs rise or fall.

Product or service portfolio

You might associate the word “portfolio” with investments. However, every business has a portfolio of products and services that it sells to customers. Review yours regularly. Like an investment portfolio, a diversified product or service portfolio may better withstand market risks. But offering too many products or services exhausts resources and exposes you to high costs.

Consider simplifying your portfolio to eliminate the costs of underperforming products or services. Of course, you should do so only after carefully analyzing each offering’s profitability. Focusing on only high-margin or in-demand products or services can reduce expenses, increase revenue and strengthen your brand.

Operations

Many business owners are surprised to learn that their companies’ operations cost them money unnecessarily. This is often the case with companies that have been in business for a long time and gotten used to doing things a certain way.

The truth is, “we’ve always done it that way” is usually a red flag for inefficiency or obsolescence. Undertake periodic operational reviews to identify bottlenecks, outdated processes and old technology. You may lower costs, or at least control them better, by upgrading equipment, implementing digital workflow solutions or “rightsizing” your workforce.

Customer service

Customer service is the “secret sauce” of many small to midsize companies, so spending cuts here can be risky. But you still need to manage costs proactively. Relatively inexpensive technology — such as website-based knowledge centers, self-service portals and chatbots — may reduce labor costs.

Perform a comprehensive review of all your customer-service channels. You may be overinvesting in one or more that most customers don’t value. Determine where you’re most successful and focus on leveraging your dollars there.

Marketing and sales

These are two other areas where you want to optimize spending, not necessarily slash it. After all, they’re both critical revenue drivers. When it comes to marketing, you might be able to save dollars by:

• Refining your target audience to reduce wasted “ad spend,”

• Embracing lower-cost digital strategies, and

• Analyzing customer data to personalize outreach.

Data is indeed key. If you haven’t already, strongly consider implementing a customer relationship management (CRM) system to gather, organize and analyze customer and prospect info. In the event you’ve had the same CRM system for a long time, look into whether an upgrade is in order.

Regarding sales costs, reevaluate your compensation methods. Can you adjust commissions or incentives to your company’s advantage without disenfranchising sales staff? Also, review travel budgets. Now that most salespeople are back on the road, their expenses may rise out of proportion with their results. Virtual meetings can reduce travel expenses without sacrificing engagement with customers and prospects.

The struggle is real

Cost management isn’t easy. Earlier this year, a Boston Consulting Group study found that, on average, only 48% of cost-saving targets were achieved last year by the 570 C-suite executives surveyed. Beating that percentage will take some work. To that end, please contact FMD. We can analyze your spending and provide guidance tailored to your company’s distinctive features.

Members of the “Sandwich Generation” Face Unique Estate Planning Circumstances

Members of the sandwich generation — those who find themselves simultaneously caring for aging parents while supporting their own children — face unique financial and emotional pressures. One critical yet often overlooked task amid this juggling act is estate planning.

How can you best handle your parents’ financial affairs in the later stages of life? Consider incorporating their needs into your estate plan while tweaking, when necessary, the arrangements they’ve already made. Let’s take a closer look at four critical steps.

1. Make cash gifts to your parents and pay their medical expenses

One of the simplest ways to help your parents is to make cash gifts to them. If gift and estate taxes are a concern, you can take advantage of the annual gift tax exclusion. For 2025, you can give each parent up to $19,000 without triggering gift taxes or using your lifetime gift and estate tax exemption. The exemption amount for 2025 is $13.99 million.

Plus, payments to medical providers aren’t considered gifts, so you can make such payments on your parents’ behalf without using any of your annual exclusion or lifetime exemption amounts.

2. Set up trusts

There are many trust-based strategies you can use to assist your parents. For example, if you predecease your parents, your estate plan might establish a trust for their benefit, with any remaining assets passing to your children when your parents die.

Another option is to set up trusts during your lifetime that leverage your $13.99 million gift and estate tax exemption. Properly designed, these trusts can remove assets — together with all future appreciation in their value — from your taxable estate. They can provide income to your parents during their lives, eventually passing to your children free of gift and estate taxes.

3. Buy your parents’ home

If your parents have built up significant equity in their home, consider buying it and leasing it back to them. This arrangement allows your parents to tap their home’s equity without moving out while providing you with valuable tax deductions for mortgage interest, depreciation, maintenance and other expenses.

To avoid negative tax consequences, pay a fair price for the home (supported by a qualified appraisal) and charge your parents fair-market rent.

4. Plan for long-term care expenses

The annual cost of long-term care (LTC) can easily reach six figures. Expenses can include assisted living facilities, nursing homes and home health care.

These expenses aren’t covered by traditional health insurance policies or Social Security, and Medicare provides little, if any, assistance. To prevent LTC expenses from devouring your parents’ resources, work with them to develop a plan for funding their health care needs through LTC insurance or other investments.

Don’t forget about your needs

As part of the sandwich generation, it’s easy to lose sight of yourself. After addressing your parents’ needs, focus on your own. Are you saving enough for your children’s college education and your own retirement? Do you have a will and power of attorney in place for you and your spouse?

With proper planning, you’ll make things less complex for your children so they might avoid some of the turmoil that you could be going through. Contact FMD for additional planning techniques if you’re a member of the sandwich generation.

EBHRAs: A Flexible Health Benefits Choice for Businesses

Today’s companies have several kinds of tax-advantaged accounts or arrangements they can sponsor to help employees pay eligible medical expenses. One of them is a Health Reimbursement Arrangement (HRA).

Under an HRA, your business sets up and wholly funds a plan that reimburses participants for qualified medical expenses of your choosing. (To be clear, employees can’t contribute.) The primary advantage is that plan design is very flexible, giving you greater control of your “total benefits spend.” Plus, your company’s contributions are tax deductible.

How flexible are HRAs? They’re so flexible that businesses have multiple plan types to choose from. Let’s focus on one in particular: excepted benefit HRAs (EBHRAs).

4 key rules

Although traditional HRAs integrated with group health insurance provide significant control, they’re still subject to mandates under the Public Health Service Act (PHSA), which was amended by the Affordable Care Act (ACA). This means you must deal with prohibitions on annual and lifetime limits for essential health benefits and requirements to provide certain preventive services without cost-sharing.

Because employer contributions to EBHRAs are so limited, participants’ accounts under these plans qualify as “excepted benefits.” Therefore, these plans aren’t subject to the ACA’s PHSA mandates. Any size business may sponsor an EBHRA, but you must follow certain rules. Four of the most important are:

1. Contribution limits. In 2025, employer-sponsors may contribute up to $2,150 to each participant per plan year. You can, however, choose to contribute less. You can also decide whether to allow carryovers from year to year, which don’t count toward the annual limit.

2. Qualified reimbursements. An EBHRA may reimburse any qualified, out-of-pocket medical expense other than premiums for:

• Individual health coverage,

• Medicare, and

• Non-COBRA group coverage.

Premiums for coverage consisting solely of excepted benefits can be reimbursed, as can premiums for short-term, limited-duration insurance (STLDI). However, under certain circumstances, federal agencies may prohibit small employer EBHRAs in some states from allowing STLDI premium reimbursement. (Contact your benefits advisor for further information.)

3. Required other coverage. Employer-sponsors must make other non-excepted, non-account-based group health plan coverage available to EBHRA participants for the plan year. Thus, you can’t also offer a traditional HRA.

4. Uniform availability. An EBHRA must be made available to all similarly situated individuals under the same terms and conditions, as defined and provided by applicable regulations.

Additional compliance matters

An EBHRA’s status as an excepted benefit means it’s not subject to the ACA’s PHSA mandates (as mentioned) or the portability and nondiscrimination rules of the Health Insurance Portability and Accountability Act (HIPAA).

However, EBHRAs are subject to HIPAA’s administrative simplification requirements. This includes the law’s privacy and security rules unless an exception applies — such as for certain small self-insured, self-administered plans.

In addition, like traditional HRAs integrated with group health insurance, EBHRAs sponsored by businesses are generally subject to the Employee Retirement Income Security Act (ERISA). This means:

• Reimbursement requests must comply with ERISA’s claim and appeal procedures,

• Participants must receive a summary plan description, and

• Other ERISA requirements may apply.

Finally, EBHRAs must comply with ERISA’s nondiscrimination rules. These ensure that benefits provided under the plan don’t disproportionately favor highly compensated employees over non-highly compensated ones.

Many factors to analyze

As noted above, the EBHRA is only one type of plan your company can consider. Others include traditional HRAs integrated with group health insurance, qualified small employer HRAs and individual coverage HRAs.

Choosing among them — or whether to sponsor an HRA at all — will call for analyzing factors such as what health benefits you already offer, which employees you want to cover, how much you’re able to contribute and which medical expenses you wish to reimburse. Let FMD help you evaluate all your benefit costs and develop a strategy for health coverage that makes the most sense for your business.

Factor in GST Tax when Transferring Assets to your Grandchildren

If you’re considering making asset transfers to your grandchildren or great grandchildren, be sure your estate plan addresses the federal generation-skipping transfer (GST) tax. This tax ensures that large estates can’t bypass a round of taxation that would normally apply if assets were transferred from parent to child, and then from child to grandchild.

Because of the complexity and potential tax liability, careful estate planning is essential when considering generation-skipping transfers. Trusts are often used as a strategic vehicle to allocate the GST tax exemption amount effectively and ensure that assets pass tax-efficiently to younger generations.

ABCs of the GST tax

The GST tax applies at a flat 40% rate — in addition to otherwise applicable gift and estate taxes — to transfers that skip a generation. “Skip persons” include your grandchildren, other relatives who are more than one generation below you and unrelated people who are more than 37½ years younger than you. There’s an exception, however, for a grandchild whose parent (your child) predeceases you. In that case, the grandchild moves up a generation and is no longer considered a skip person.

Even though the GST tax enjoys an annual inflation-adjusted lifetime exemption in the same amount as the lifetime gift and estate tax exemption (currently, $13.99 million), it works a bit differently. For example, while the gift and estate tax exemption automatically protects eligible transfers of wealth, the GST tax exemption must be allocated to a transfer to shelter it from tax.

3 transfer types trigger GST tax

There are three types of transfers that may trigger the GST tax:

1. A direct skip — a transfer directly to a skip person that is subject to federal gift and estate tax,

2. A taxable distribution — a distribution from a trust to a skip person, or

3. A taxable termination — such as when you establish a trust for your children, the last child beneficiary dies and the trust assets pass to your grandchildren.

The GST tax doesn’t apply to transfers to which you allocate your GST tax exemption. In addition, the GST tax annual exclusion — which is similar to the gift tax annual exclusion — allows you to transfer up to $19,000 per year (for 2025) to any number of skip persons without triggering GST tax or using up any of your GST tax exemption.

Transfers to a trust qualify for the annual GST tax exclusion only if the trust 1) is established for a single beneficiary who’s a grandchild or other skip person, and 2) provides that no portion of its income or principal may be distributed to (or for the benefit of) anyone other than that beneficiary. Additionally, if the trust doesn’t terminate before the beneficiary dies, any remaining assets will be included in the beneficiary’s gross estate.

If you wish to make substantial gifts, either outright or in trust, to your grandchildren or other skip persons, allocate your GST tax exemption carefully. Turn to FMD for answers regarding the GST tax.

How Companies Can Spot Dangers by Examining Concentration

At first glance, the word “concentration” might seem to describe a positive quality for any business owner. You need to concentrate, right? Only through laser focus on the right strategic goals can your company reach that next level of success.

In a business context, however, concentration can refer to various aspects of your company’s operations. And examining different types of it may help you spot certain dangers.

Evaluate your customers

Let’s start with customer concentration, which is the percentage of revenue generated from each customer. Many small to midsize companies rely on only a few customers to generate most of their revenue. This is a precarious position to be in.

The dilemma is more prevalent in some industries than others. For example, a retail business will likely market itself to a relatively broad market and generally not face too much risk related to customer concentration. A commercial construction company, however, may serve only a limited number of clients that build, renovate or maintain offices or other facilities.

How do you know whether you’re at risk? One rule of thumb says that if your biggest five customers make up 25% or more of your revenue, your customer concentration is generally high. Another simple measure says that, if any one customer represents 10% or more of revenue, you’re at risk of having elevated customer concentration.

In an increasingly specialized world, many businesses focus solely on specific market segments. If yours is one of them, you may not be able to do much about customer concentration. In fact, the very strength of your company could be its knowledge and attentiveness to a limited number of buyers.

Nonetheless, know your risk and explore strategic planning concepts that may help you mitigate it. If diversifying your customer base isn’t an option, be sure to maintain the highest level of service.

Look at other areas

There are other types of concentration. For instance, vendor concentration refers to the number and types of vendors a company uses to support its operations. Relying on too few vendors is risky. If any one of them goes out of business or substantially raises prices, the company could suffer a severe rise in expenses or even find itself unable to operate.

Your business may also be affected by geographic concentration. This is how a physical location affects your operations. For instance, if your customer base is concentrated in one area, a dip in the regional economy or the arrival of a disruptive competitor could negatively impact profitability. Small local businesses are, by definition, subject to geographic concentration. However, they can still monitor the risk and explore ways to mitigate it — such as through online sales in the case of retail businesses.

You can also look at geographic concentration globally. Say your company relies solely or largely on a specific foreign supplier for iron, steel or other materials. That’s a risk. Tariffs, which have been in the news extensively this year, can significantly impact your costs. Geopolitical and environmental factors might also come into play.

Third, stay cognizant of your investment concentration. This is how you allocate funds toward capital improvements, such as better facilities, machinery, equipment, technology and talent. The term can also refer to how your company manages its investment portfolio, if it has one. Regularly reevaluate risk tolerance and balance. For instance, are you overinvesting in technology while underinvesting in hiring or training?

Study your company

As you can see, concentration takes many different forms. This may explain why business owners often get caught off guard by the sudden realization that their companies are over- or under-concentrated in a given area. FMD can help you perform a comprehensive risk assessment that includes, among other things, developing detailed financial reports highlighting areas of concentration.