Double Duty Giving With Charitable Gift Annuities

If you’re charitably inclined, you may wish to consider a charitable gift annuity. It can combine the benefits of an immediate income tax deduction and a lifetime income stream. Furthermore, it allows you to support a favorite charity and reduce the size of your future taxable estate.

What is It?

A charitable gift annuity is an arrangement in which you make a gift of cash or other property to a charity in exchange for a guaranteed income annuity for life. This is similar to buying an annuity in the commercial marketplace, except that you potentially can claim an immediate charitable deduction for the excess of the value of the property over the value of the annuity.

The payouts will generally be lower than those of a commercial annuity because a portion of your charitable gift annuity investment benefits charity. For you to claim a charitable deduction, the charity must receive at least 10% of the initial net value of the property transferred.

The annuity may be payable to you over your life, or over the joint lives of you and someone you’ve designated (a joint and survivor annuity). The rate of return is typically set at the time of the gift based in part on your age (and, if it’s a joint and survivor annuity, the age of the other person you’ve designated). A portion of each annuity payment is tax-free, because you’re entitled to recover your original investment over your life expectancy.

What’s my Deduction Amount?

Your charitable deduction will be less than the total value of your annuity purchase price because the deduction can be claimed for only the present value of the property that the charity will keep after your death. The present value is based on life expectancy and an IRS-prescribed interest rate at the time of purchase of the annuity.

Additional rules and limits apply to charitable gift annuities. Talk with us if you’re charitably inclined and would like to know if a charitable gift annuity is right for your estate plan.

Theus Law Offices specializes in a complete range of estate planning and elder law services, including wills, trusts, probate, successions, estate administration and probate litigation. If you need a Louisiana wills and trusts lawyer or succession attorney in Alexandria, Lafayette, Lake Charles, Baton Rouge, New Orleans, Shreveport, Monroe, or elsewhere in Central Louisiana, let our certified estate planning specialist and probate lawyers help you.

Get SMART When it Comes to Setting Strategic Goals

Strategic planning is key to ensuring every company’s long-term viability, and goal setting is an indispensable step toward fulfilling those plans. Unfortunately, businesses often don’t accomplish their overall strategic plans because they’re unable to fully reach the various goals necessary to get there.

If this scenario sounds all too familiar, trace your goals back to their origin. Those that are poorly conceived typically set up a company for failure. One solution is to follow the SMART approach.

Definitions to Work By

The SMART system was first introduced to the business world in the early 1980s. Although the acronym’s letters have been associated with different meanings over the years, they’re commonly defined as:

Specific. Goals must be precise. So, if your strategic plan includes growing the business, your goals must then explicitly state how you’ll do so. For each goal, define the “5 Ws” — who, what, where, when and why.

Measurable. Setting goals is of little value if you can’t easily assess your progress toward them. Pair each goal with one or more metrics to measure progress and success. This may mean increasing revenue by a certain percentage, expanding your customer base by winning a certain number of new accounts, or something else.

Achievable. Unrealistically aggressive goals can crush motivation. No one wants to put time and effort into something that’s likely to fail. Ensure your goals can be accomplished, but don’t make them too easy. The best ones are usually somewhat of a stretch but still doable. Rely on your own business experience and the feedback of your trusted managers to find the right balance.

Relevant. Let’s say you identify a goal that you know you can achieve. Before locking it in, ask whether and how it will move your business forward. Again, goals should directly and clearly support your long-term strategic plan. Sometimes companies can be tempted by “low-hanging fruit” — goals that are easy to accomplish but lead nowhere.

Timely. Assign each goal a deadline. Doing so will motivate those involved by creating a sense of urgency. Also, once you’ve established a deadline, work backwards and set periodic milestones to help everyone pace themselves toward the goal.

Eye on the Future

Strategic planning, and the goal setting that goes along with it, might seem like a waste of time. But even if your business is thriving now, it’s important to keep an eye on the future. And that means long-term strategic planning that includes SMART goals. Our firm would be happy to explain further and offer other ideas.

Theus Law Offices provides a complete range of business planning services. If you or your business need a Louisiana business lawyer or a tax attorney in Alexandria, Lafayette, Lake Charles, Baton Rouge, New Orleans, Shreveport, Monroe or elsewhere in Central Louisiana, let our business attorneys, including a certified tax law specialist, help you.

Have You Ever Made Your Burial Wishes Clear?

It may be difficult to consider, but funeral arrangements are a critical component of your estate plan. Failure to clearly communicate your wishes regarding the disposition of your remains can lead to tension, disputes and even litigation among your family members during what is already a difficult time.

Address These Issues

The methods for expressing these wishes vary from state to state, and may include a provision in your will, language in a health care proxy or power of attorney, or a separate form specifically designed for this purpose.

Whichever method you use, it should, at a minimum, state:

  • Whether you prefer burial or cremation,
  • Where you wish to be buried or have your ashes interred or scattered (and any other special instructions), and
  • The person you’d like to be responsible for making these arrangements. Some people also request a specific funeral home.

Beware of Prepaid Funeral Plans

To relieve their families of the burden of the costs of a funeral, some people pay for them in advance. Unfortunately, prepaid funeral plans can be fraught with potential traps. Some plans end up costing more than the benefits they pay out. And there may be a risk that you’ll lose your investment if the funeral provider goes out of business or you want to change your plans.

Some states offer protection — such as requiring a funeral home or cemetery to place funds in a trust or to purchase a life insurance policy to fund funeral costs — but many do not. If you’re considering a prepaid plan, find out exactly what you’re paying for. Does the plan cover merchandise only (casket, vault, etc.) or are services included? Is the price locked in or is there a possibility that your family will have to pay additional amounts?

How the State Can Intercede

If you fail to make your burial wishes clear, and your family members disagree about how you would want your remains disposed of, the outcome will depend on applicable state law. Absent express instructions from the deceased, some states give priority to the wishes of certain family members, such as spouses or children, over other family members, such as siblings.

To avoid this situation, talk to us about your wishes. We can help ensure that they’re properly documented.

Theus Law Offices specializes in a complete range of estate planning and elder law services, including wills, trusts, probate, successions, estate administration and probate litigation. If you need a Louisiana wills and trusts lawyer or succession attorney in Alexandria, Lafayette, Lake Charles, Baton Rouge, New Orleans, Shreveport, Monroe, or elsewhere in Central Louisiana, let our certified estate planning specialist and probate lawyers help you.

Is There a Weak Link in Your Supply Chain?

In an increasingly global economy, keeping a close eye on your supply chain is imperative. Even if your company operates only locally or nationally, your suppliers could be affected by wider economic conditions and developments. So, make sure you’re regularly assessing where weak links in your supply chain may lie.

3 Common Risks

Every business faces a variety of risks. Three of the most common are:

  1. Legal risks. Are any of your suppliers involved in legal conflicts that could adversely affect their ability to earn revenue or continue serving you?
  2. Political risks. Are any suppliers located in a politically unstable region — even nationally? Could the outcome of a municipal, state or federal election adversely affect your industry’s supply chain?
  3. Transportation risks. How reliant are your suppliers on a particular type of transportation? For example, what’s their backup plan if winter weather shuts down air routes for a few days? Or could wildfires or mudslides block trucking routes?

Potential Fallout

The potential fallout from an unstable supply chain can be devastating. Obviously, first and foremost, you may be unable to timely procure the supplies you need to operate profitably.

Beyond that, high-risk supply chains can also affect your ability to obtain financing. Lenders may view risks as too high to justify your current debt or a new loan request. You could face higher interest rates or more stringent penalties to compensate for it.

Strategies to Consider

Just as businesses face many supply chain risks, they can also avail themselves of a variety of coping strategies. For example, you might divide purchases equally among three suppliers — instead of just one — to diversify your supplier base. You might spread out suppliers geographically to mitigate the threat of a regional disaster.

Also consider strengthening protections against unforeseen events by adding to inventory buffers to hedge against short-term shortages. Take a hard look at your supplier contracts as well. You may be able to negotiate long-term deals to include upfront payment terms, exclusivity clauses and access to computerized just-in-time inventory systems to more accurately forecast demand and more closely integrate your operations with supply-chain partners.

Lasting Success

You can have a very successful business, but if you can’t keep delivering your products and services to customers consistently, you’ll likely find success fleeting. A solid supply chain fortified against risk is a must. We can provide further information and other ideas.

Theus Law Offices provides a complete range of business planning services. If you or your business need a Louisiana business lawyer or a tax attorney in Alexandria, Lafayette, Lake Charles, Baton Rouge, New Orleans, Shreveport, Monroe or elsewhere in Central Louisiana, let our business attorneys, including a certified tax law specialist, help you.

Provide for Family Members With Special Needs Using an SNT

If you have a child or other family member with a disabling condition that requires long-term care or prevents (or will prevent) him or her from being able to support him- or herself, consider establishing a special needs trust (SNT). Also known as a supplemental needs trust, an SNT allows you to enhance a family member’s quality of life without jeopardizing his or her eligibility for government benefits, such as Medicaid or Supplemental Security Income (SSI).

SNT Primer

An SNT is an irrevocable trust designed to supplement, rather than replace, government assistance. Generally, the trust is funded by someone other than the beneficiary, though in certain instances a beneficiary’s assets may be used to fund the trust.

To preserve eligibility for government benefits, the beneficiary can’t have access to the funds, and the trust must be prohibited from providing for the beneficiary’s “support.” That means it can’t be used to pay for medical care, food, clothing, shelter or anything else covered by Medicaid or SSI, such as the basic medical care provided by those programs.

But an SNT can be used to pay for virtually anything government benefits don’t cover, such as unreimbursed medical expenses, education and training, transportation (including wheelchair-accessible vehicles), insurance, computers, and modifications to the beneficiary’s home. It can also pay for “quality-of-life” needs, such as travel, entertainment, recreation and hobbies.

Careful Drafting Required

To ensure that an SNT doesn’t disqualify the beneficiary from government benefits, it should prohibit distributions directly to the beneficiary and prohibit the trustee from paying for any support items covered by Medicaid or SSI. Some SNTs specify the types of supplemental expenses the trust should pay; others give the trustee sole discretion over nonsupport items.

Like many trusts, most SNTs contain spendthrift language to protect the trust assets against creditors’ claims. Also, in some states, it may be necessary to include specific language providing that the trust is an SNT, that the funds are intended for only nonsupport purposes and that your intention is to preserve the beneficiary’s eligibility for government benefits. In other states, simply designing the trust as a discretionary trust may be sufficient, but it can’t hurt to include SNT spendthrift language just to be safe.

Communication is Key

If you establish an SNT, communicate your plans to everyone concerned. Otherwise, well-meaning relatives or friends might inadvertently undermine your strategy by making gifts or bequests directly to the special needs person. Contact us with questions regarding an SNT.

Theus Law Offices specializes in a complete range of estate planning and elder law services, including wills, trusts, probate, successions, estate administration and probate litigation. If you need a Louisiana wills and trusts lawyer or succession attorney in Alexandria, Lafayette, Lake Charles, Baton Rouge, New Orleans, Shreveport, Monroe, or elsewhere in Central Louisiana, let our certified estate planning specialist and probate lawyers help you.

Contemplating Compensation Increases and Pay for Performance

As a business grows, one of many challenges it faces is identifying a competitive yet manageable compensation structure. After all, offer too little and you likely won’t have much success in hiring. Offer too much and you may compromise cash flow and profitability.

But the challenge doesn’t end there. Once you have a feasible compensation structure in place, your organization must then set its course for determining the best way for employees to progress through it. And this is when you must contemplate the nature and efficacy of linking pay to performance.

Issues in Play

Some observers believe that companies shouldn’t use compensation to motivate employees because workers might stop focusing on quality of work and start focusing on money. Additionally, employees may feel that the merit — or “pay-for-performance” — model pits staff members against each other for the highest raises.

Thus, some businesses give uniform pay adjustments to everyone. In doing so, these companies hope to eliminate competition and ensure that all employees are working toward the same goal. But, if everyone gets the same raise, is there any motivation for employees to continually improve?

2 Critical Factors

Many businesses don’t think so and do use additional money to motivate employees, whether by bonuses, commissions or bigger raises. In its most basic form, a merit increase is the amount of additional compensation added to current base pay following an employee’s performance review. Two critical factors typically determine the increase:

  1. The amount of money a company sets aside in its “merit” budget for performance-based increases — usually based on competitive market practice, and
  2. Employee performance as determined through a performance review process conducted by management.

Although pay-for-performance can achieve its original intent — recognizing employee performance and outstanding contributions to the company’s success — beware that your employees may perceive merit increases as an entitlement or even nothing more than an inflation adjustment. If they do, pay-for-performance may not be effective as a motivational tool.

Communication is the Key

The ideal solution to both compensation structure and pay raises will vary based on factors such as the size of the business and typical compensation levels of its industry. Nonetheless, to avoid unintended ill effects of the pay-for-performance model, be sure to communicate clearly with employees. Be as specific as possible about what contributes to merit increases and ensure that your performance review process is transparent, interactive and understandable. Contact us to discuss this or other compensation-related issues further.

Theus Law Offices provides a complete range of business planning services. If you or your business need a Louisiana business lawyer or a tax attorney in Alexandria, Lafayette, Lake Charles, Baton Rouge, New Orleans, Shreveport, Monroe or elsewhere in Central Louisiana, let our business attorneys, including a certified tax law specialist, help you.

Protect Your Peace of Mind With a Trust Protector

Irrevocable trusts can allow for the smooth, tax-advantaged transfer of wealth to family members. But there’s a drawback: When you set up an irrevocable trust, you must relinquish control of the assets placed in it. What you can control is who will eventually oversee distribution of the assets after your death. That is, you can appoint the trustee. But if you aren’t completely confident that the trustee will carry out your wishes, you might want to appoint a trust protector, too.

Trust Protector Duties

A trust protector is to a trustee what a corporate board of directors is to a CEO. A trustee manages the trust on a day-to-day basis. The protector oversees the trustee and weighs in on critical decisions, such as the sale of closely held business interests or investment transactions involving large dollar amounts.

There’s virtually no limit to the powers you can confer on a trust protector. For example, you can enable a trust protector to replace a trustee, to appoint a successor trustee or a successor trust protector, and to approve or veto investment or beneficiary distribution decisions. He or she can also resolve disputes between trustees and beneficiaries.

A word of warning: Although it may be tempting to provide a protector with a broad range of powers, this can hamper the original trustee’s ability to manage the trust efficiently. Keep in mind that the idea is to protect the integrity of the trust, not to appoint a co-trustee.

Exercise of Discretion

Trust protectors offer many benefits:

  • A protector with the power to remove and replace the trustee can do so if the trustee develops a conflict of interest or fails to manage the trust assets in the beneficiaries’ best interests.
  • A protector with the power to modify the trust’s terms can correct mistakes in the trust document or clarify ambiguous language.
  • A protector with the power to change the way trust assets are distributed if necessary to achieve your original objectives can help ensure your loved ones are provided for in the way you would have desired.

These are just a few examples of how appointing a trust protector can help ensure your estate planning goals are achieved.

Wise Choice

Choosing the right trust protector is critical. Given the power he or she has over your family’s wealth, you’ll want to choose someone whom you trust and who’s qualified to make investment and other financial decisions.

Many people appoint a trusted advisor — such as an accountant, attorney or investment advisor — who may not be able or willing to serve as trustee but who can provide an extra layer of protection by monitoring the trustee’s performance. Contact us if you’d like to learn more about incorporating a trust protector into your estate plan.

Theus Law Offices specializes in a complete range of estate planning and elder law services, including wills, trusts, probate, successions, estate administration and probate litigation. If you need a Louisiana wills and trusts lawyer or succession attorney in Alexandria, Lafayette, Lake Charles, Baton Rouge, New Orleans, Shreveport, Monroe, or elsewhere in Central Louisiana, let our certified estate planning specialist and probate lawyers help you.

6 Ways to Get More Value From an IT Consultant

IT consultants are many things — experts in their field, champions of the workaround and, generally, the “people persons” of the tech field. But they’re not magicians who, with the wave of a smartphone, can solve any dilemma you throw at them. Here are six ways to get more value from your company’s next IT consulting relationship:

  1. Spell out your needs. Define your desired outcome in as much detail as possible up front, so that both you and the consultant know what’s expected of each party. To do so, create a project scope document that clearly delineates the job’s purpose, timeframe, resources, personnel, reporting requirements, critical success factors and conflict resolution methods.
  2. Appoint an internal contact. Assign someone within your organization as the internal project manager as early in the process as possible. He or she will be the go-to person for the consultant and, therefore, needs to have a thorough knowledge of the job’s requirements and be able to fairly assess the consultant’s performance.
  3. Put in some prep time. Before the consultant arrives, prepare his or her workstation, ensuring that any equipment you’re providing works and allows appropriate access to the required systems — including email. Don’t forget to set up the phone, too, and add the consultant to your company phone list. Also, alert your staff that you have engaged a consultant and, to alleviate potential concerns, explain why.
  4. Roll out the welcome wagon. Try to arrange an orientation on the Friday before the start date (assuming it’s a Monday). That way, you can give the consultant the project scope document as well as a written company overview (perhaps your employee procedures manual) that includes policies, safety protocols, office hours and tips on company culture to review over the weekend.
  5. Keep in touch. Conduct regular project status meetings with the consultant to assess progress and provide feedback. Notify the consultant or the internal project manager immediately if you suspect the job is off track.
  6. Conclude courteously. If you need to end the consulting engagement earlier than expected (for reasons other than poor performance) or extend it beyond the agreed-on time frame, give as much notice as possible.

Act toward a good consultant as you would any valued vendor with whom you’d like to work again. After all, establishing a positive relationship with someone who knows your business could provide even greater return on investment in the future. Our firm would be happy to explain further or explore other ideas.

Theus Law Offices provides a complete range of business planning services. If you or your business need a Louisiana business lawyer or a tax attorney in Alexandria, Lafayette, Lake Charles, Baton Rouge, New Orleans, Shreveport, Monroe or elsewhere in Central Louisiana, let our business attorneys, including a certified tax law specialist, help you.

Addressing Long-Term Care Costs With a Tax-Qualified LTC Insurance Policy

No matter how diligently you prepare, your estate plan can quickly be derailed if you or a loved one requires long-term home health care or an extended stay at a nursing home or assisted living facility.

The annual cost of long-term care (LTC) can reach as high as six figures, and this expense isn’t covered by traditional health insurance policies, Social Security or Medicare. So it’s important to have a plan to finance these costs, either by setting aside some of your savings or purchasing insurance.

LTC Insurance

An LTC insurance policy supplements your traditional health insurance by covering services that assist you or a loved one with one or more activities of daily living (ADLs). Generally, ADLs include eating, bathing and dressing.

LTC coverage is relatively expensive, but it may be possible to reduce the cost by purchasing a tax-qualified policy. Generally, benefits paid in accordance with an LTC policy are tax-free. In addition, if a policy is tax-qualified, your premiums are deductible (as medical expenses) up to a specified limit.

To qualify, a policy must:

  • Be guaranteed renewable and noncancelable regardless of health,
  • Not delay coverage of pre-existing conditions more than six months,
  • Not condition eligibility on prior hospitalization,
  • Not exclude coverage based on a diagnosis of Alzheimer’s disease, dementia, or similar conditions or illnesses, and
  • Require a physician’s certification that you’re either unable to perform at least two of six ADLs or you have a severe cognitive impairment and that this condition has lasted or is expected to last at least 90 days.

It’s important to weigh the pros and cons of tax-qualified policies. The primary advantage is the premium deduction. But keep in mind that medical expenses, including LTC insurance premiums, are deductible only if you itemize and only to the extent they exceed 7.5% of your adjusted gross income (AGI) in 2018 or 10% of AGI in future years (unless Congress extends the lower threshold). So some people may not have enough medical expenses to benefit from this advantage. It’s also important to weigh any potential tax benefits against the advantages of nonqualified policies, which may have less stringent eligibility requirements.

Think Long Term

Given the potential magnitude of long-term care expenses, the earlier you begin planning, the better. We can help you review your options and analyze the relative benefits and risks.

Theus Law Offices specializes in a complete range of estate planning and elder law services, including wills, trusts, probate, successions, estate administration and probate litigation. If you need a Louisiana wills and trusts lawyer or succession attorney in Alexandria, Lafayette, Lake Charles, Baton Rouge, New Orleans, Shreveport, Monroe, or elsewhere in Central Louisiana, let our certified estate planning specialist and probate lawyers help you.

Business Tips for Back-to-School Time

Late summer and early fall, when so many families have members returning to educational facilities of all shapes and sizes, is also a good time for businesses to creatively step up their business development efforts, whether it’s launching new marketing initiatives, developing future employees or simply generating goodwill in the community. Here are a few examples that might inspire you.

Becoming a Sponsor

A real estate agency sponsors a local middle school’s parent-teacher organization (PTO). The sponsorship includes ads in the school’s weekly e-newsletter and in welcome packets for new PTO members. Individual agents in the group also conduct monthly gift card drawings for parents and teachers who follow them on Facebook.

The agency hopes parents and teachers will remember its agents’ names and faces when they’re ready to buy or sell their homes.

Planting the Seeds of STEM

An engineering firm donates old computers and printers to an elementary school that serves economically disadvantaged students. The equipment will be used in the school district’s K-12 program to get kids interested in careers in science, technology, engineering and math (STEM) disciplines.

At back-to-school time, a firm rep gives presentations at the schools and hands out literature. Then, in the spring, the company will mentor a select group of high school seniors who are planning to pursue engineering degrees in college.

Participating in STEM programs fosters corporate charity and goodwill. It can also pay back over the long run: When the firm’s HR department is looking for skilled talent, kids who benefited from the firm’s STEM efforts may return as loyal, full-time employees.

Launching an Apprenticeship Program

The back-to-school season motivates a high-tech manufacturer to partner with a vocational program at the local community college to offer registered apprenticeships through a state apprenticeship agency. In exchange for working for the manufacturer, students will receive college credits, on-the-job training and weekly paychecks. Their hourly wages will increase as they demonstrate proficiency.

The company hopes to hire at least some of these apprentices to fill full-time positions in the coming year or two.

Finding the Right Fit

Whether schools near you are already in session or will open soon, it’s not too late to think about how your business can benefit. Sit down with your management team and brainstorm ways to leverage relationships with local schools to boost revenues, give back to your community and add long-term value. We can provide other ideas and help you assess return on investment.

Theus Law Offices provides a complete range of business planning services. If you or your business need a Louisiana business lawyer or a tax attorney in Alexandria, Lafayette, Lake Charles, Baton Rouge, New Orleans, Shreveport, Monroe or elsewhere in Central Louisiana, let our business attorneys, including a certified tax law specialist, help you.