The U.S. Senate Passes its Version of President Trump’s Tax Bill

The U.S. Senate passed its version of The One, Big, Beautiful Bill (OBBB) by a vote of 51 to 50 on July 1. (Vice President J.D. Vance provided the tiebreaking vote.) At its core, the massive bill is similar to the bill passed by the U.S. House of Representatives last May. It includes extensions of many provisions of the Tax Cuts and Jobs Act (TCJA) currently set to expire on December 31.

Both the House and Senate bills include some new and enhanced tax breaks. For example, they contain President Trump’s pledge to exempt tips and overtime from income tax for eligible taxpayers.

Trump also made a campaign promise to eliminate tax on Social Security benefits. That isn’t included in either version of the bill. However, the Senate bill temporarily provides a $6,000 deduction for those age 65 and older for 2025 through 2028 for those with modified adjusted gross income of under $75,000 ($150,000 for married joint filers). The House bill expands the standard deduction for seniors but caps it at $4,000.

In addition, the Senate’s version of the bill introduces other significant changes, including in the state and local tax (SALT) deduction cap and the Child Tax Credit (CTC).

SALT deduction cap

A major sticking point in both branches of Congress is the SALT deduction cap. It’s currently set at $10,000 by the Tax Cuts and Jobs Act. Lawmakers in high-tax states such as California and New York have long sought to increase (or even repeal) the cap.

The House’s version of the bill proposes to permanently increase the cap to $40,000 for those making under $500,000. The Senate-passed bill also calls for increasing the cap to $40,000 for 2025, with an annual 1% increase through 2029. In 2030, the cap would revert to $10,000. It also calls for phasing out the deduction for individuals who earn more than $500,000 in 2025 and then annually increasing the income amount by 1% through 2029.

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 House’s version of the OBBB 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.

The Senate’s version of the bill would also make the CTC permanent, but would increase it to $2,200, subject to annual inflation increases. It would require SSNs for both the parent claiming the credit and the child.

Next steps

These are just a few of the provisions in the massive tax and spending bill. The proposed legislation is currently back with the House of Representatives for further debate and a vote. President Trump has set a deadline to sign the bill into law by July 4, but it’s currently uncertain if the House can pass the bill in time. Stay tuned.

When Moving Out of State, Review Your Estate Plan

There are numerous factors to consider when you decide to pull up roots and relocate to another state. Your estate plan likely isn’t top of mind, but it’s wise to review and update it when you move across state lines. Let’s take a closer look at a few areas you should consider as you reexamine your estate plan.

Will’s language

Before you begin, know that you won’t have to throw out your existing plan and start from scratch. However, you may need to amend or replace certain documents to ensure they comply with your new state’s laws and continue to meet your estate planning objectives.

Begin by having your estate planning advisor review the text of your will. So long as it was properly drafted according to your previous state’s requirements, it generally will be accepted as valid in most other states.

Nevertheless, it’s important to review your will’s terms to ensure they continue to reflect your wishes. For example, if you’re married and you move from a noncommunity property state to a community property state (or vice versa), your new state’s laws may change the way certain property is owned.

Health care powers of attorney and advance directives

Many estate plans include advance medical directives or health care powers of attorney. Advance directives (often referred to as living wills) communicate your wishes regarding medical care (including life-prolonging procedures) in the event you become incapacitated. Health care powers of attorney appoint a trusted agent or proxy to act on your behalf. Often, the two are combined into a single document. Given the stakes involved, it’s critical to ensure that these documents will be accepted and followed by health care providers in your new state.

Although some states’ laws expressly authorize out-of-state advance directives and powers of attorney, others are silent on the issue, creating uncertainty over whether they’ll be accepted. Regardless of the law in your new state, it’s a good idea to prepare and execute new ones. Most states have their own forms for these documents, with state-specific provisions and terminology. Health care providers in your new state will be familiar with these forms and may be more likely to accept them than out-of-state forms.

Financial powers of attorney

Like wills, out-of-state financial powers of attorney will be accepted as valid in most states. Still, to avoid questions and delays, it’s advisable to execute powers of attorney using your new state’s forms, since banks and other financial service providers will be familiar with them.

Review your plan regardless of your location

When moving out-of-state, reviewing your estate plan can help safeguard your intentions and ensure your loved ones are protected. And even if you’re not moving to a new state, you should review your estate plan regularly to ensure it continues to meet your needs. Contact FMD with questions.

Safe Harbor 401(k)s Offer Businesses a Simpler Route to a Retirement Plan

When many small to midsize businesses are ready to sponsor a qualified retirement plan, they encounter a common obstacle: complex administrative requirements. As a business owner, you no doubt already have a lot on your plate. Do you really want to deal with, say, IRS-mandated testing that could cause considerable hassles and expense?

Well, you may not have to. If that’s the only thing holding you back, consider a safe harbor 401(k) plan. These plans are designed to simplify administration and allow highly compensated employees to contribute the maximum allowable amounts. Of course, you still must read the fine print.

Simple trade-off

Under IRS regulations, traditional 401(k) plans are subject to annual nondiscrimination testing. It includes two specific tests:

1. The actual deferral percentage (ADP) test, and

2. The actual contribution percentage (ACP) test.

Essentially, they ensure that a company’s plan doesn’t favor highly compensated employees over the rest of the staff. If a plan fails the testing, its sponsor may have to return some contributions to highly compensated employees or make additional contributions to other participants to correct the imbalance. In either case, the end result is administrative headaches, unhappy highly compensated employees and unexpected costs for the business.

Safe harbor 401(k)s offer an elegant solution to the conundrum, albeit with caveats of their own. Under one of these plans, the employer-sponsor agrees to make mandatory contributions to participants’ accounts. In exchange, the IRS agrees to waive the annual requirement to perform the ADP and ACP tests.

With nondiscrimination testing off the table, you no longer need to worry about failing either test. And highly compensated employees can max out their contributions. Under IRS rules, these generally include anyone who owns more than 5% of the company during the current or previous plan year or who makes more than $160,000 in 2025 (an amount annually indexed for inflation).

Important caveats

Regarding the caveats we mentioned, the primary one to keep in mind is that you must make compliant contributions to each participant’s account. Generally, you may choose between:

• A nonelective contribution of at least 3% of each eligible participant’s compensation, or

• A qualifying matching contribution, such as 100% of the first 3% of compensation deferred under the plan plus 50% of the next 2% deferred.

There’s also the matter of timing. Let’s say you want to set up and launch a safe harbor 401(k) plan this year. If so, you’ll need to complete all the requisite paperwork and deliver notice to employees by October 1, 2025, and contributions must begin no later than November 1, 2025.

Providing proper notice is critical. You must follow specific IRS rules to adequately inform employees of their rights and accurately describe your required employer contributions.

Potential pitfalls

Perhaps you’ve already spotted the major pitfall of safe harbor 401(k)s. That is, you must commit to making qualifying employer contributions. And once you do, you generally can’t reduce or suspend them without triggering additional IRS requirements or risking plan disqualification. There are exceptions, but qualifying for them is complex and requires careful planning.

In addition, your contributions are immediately 100% vested, and participants own their accounts. That means once you transfer the funds, they belong to participants — even if they leave their jobs.

Bottom line

The bottom line is safe harbor 401(k) plans can be risky for businesses that experience notable cash flow fluctuations throughout the year. However, if you’re able to manage the mandatory contributions, one of these plans may serve as a relatively simple vehicle for amassing retirement funds for you and your employees. FMD can help you evaluate whether a safe harbor 401(k) would suit your company.

4 Reasons Why Avoiding Probate is a Smart Estate Planning Move

When planning your estate, one of the smartest strategies you can adopt is to minimize or avoid probate. Probate is a legal procedure in which a court establishes the validity of your will, determines the value of your estate, resolves creditors’ claims, provides for the payment of taxes and other debts, and transfers assets to your heirs.

While it may sound straightforward, probate can come with several drawbacks that make it worthwhile to avoid when possible. Here are four reasons why.

1. Probate can be time-consuming

Probate proceedings often take months — and sometimes over a year — to resolve. During this period, your beneficiaries may not have access to much-needed funds or property.

The timeline can be extended even further if disputes arise among heirs or if the estate includes complex assets. Avoiding probate allows your loved ones to receive their inheritances much more quickly.

2. Probate can be expensive

Court costs, executor’s and attorneys’ fees, appraisals, and other administrative expenses can consume a portion of your estate — sometimes 5% or more of its total value. By using probate-avoidance tools, for example, a living trust, more of your assets can go directly to your heirs instead of being eaten up by fees.

Indeed, for larger, more complicated estates, a living trust (also commonly called a “revocable” trust) generally is the most effective tool for avoiding probate. A living trust involves some setup costs, but it allows you to manage the disposition of all your wealth in one document while retaining control and reserving the right to modify your plan.

To avoid probate, it’s critical to transfer title to all your assets, now and in the future, to the trust. Assets outside the trust at your death will be subject to probate — unless you’ve otherwise titled them in such a way as to avoid it (or, in the case of life insurance, annuities and retirement plans, you’ve properly designated beneficiaries).

3. Probate is a public process

Bear in mind that anything filed in probate court becomes part of the public record. This means that anyone can discover the details of your estate, including the nature and value of your assets and who has inherited them. Avoiding probate can protect your family’s privacy and shield sensitive information from public view.

4. Probate may result in family disputes

Probate can sometimes create or exacerbate conflict among heirs. Disputes over asset distribution or the validity of a will can lead to lengthy and expensive litigation. Clear estate planning can prevent misunderstandings and ensure your wishes are carried out smoothly.

Not your estate plan’s sole focus

Dealing with the death of a loved one is hard enough without the added burden of navigating the legal complexities of probate. When you structure your estate to bypass the probate process, you ease the administrative burden on your family and give them peace of mind during a difficult time.

However, avoiding probate is just one part of a complete estate plan. Your estate planning advisor can help you develop a strategy that minimizes probate while reducing taxes and achieving your other goals.

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.