Planning for Estates & Trusts

Posted on October 30, 2012 by in Blog, Strategy, Taxes

You might find this a valuable resource.  In this July 12th podcast, Bob Keebler describes strategies to plan for the 3.8% Medicare Surtax in connection with trusts and estates.  Check it out!

Change: Embodying Who Really Matters

Posted on October 26, 2012 by in Blog, Human Resources

Change: Embodying Who Really Matters (Not What Matters) to Ignite Acceptance of What Is to Come.

By Angie Martin, MBA

Is the stagnate culture you work in constricting your flow of innovation? So many organizations today are talking about change, change, change, but they seemingly only recognize change as a process or policy enhancement or improvement, leaving most of its employees still sitting idle and stale – lifeless. Is your organization constricting your flow of thought, no longer considering your point of view or what it is that ignites you? A dynamic culture that breeds success is one where engagement of all the minds is embodied. True change within an organization starts with the people who make up the environment and thus define the culture. In order to be most effective one must know the environment and understand the people within it before systematic changes involving process improvements can and will occur.

In an article titled How to Change a Culture’s DNA, written by Diana M. Smith, a Chief Executive at New Profit Inc. and contributor to the Chief Learning Officer Newsletter, a MediTec Publishing Inc. publication, the author explains that by engaging in the processes of building powerful relationships and learning these relationships, organizations can effectively change the culture or the “DNA” of the organization. Ms. Smith emphasizes that both “building” and “learning” relationships jump starts the true cycle of intervention and change. She spells out three relationship level types that one must identify and build to lead one to initiate cultural change. They are:

  • Vertical: Build relationships across hierarchical levels that can devise innovative solutions that take into account both functional realities and corporate imperatives.
  • Lateral: Build relationships across functional boundaries that invent options that address conflicting interests while meeting the interests of the whole enterprise.
  • External: Build relationships with external constituents — customers, suppliers, distributors, investors — that fully grasp their needs and create ways to meet them that are better and less expensive than competitors.

If you flush these out you can begin to build an effective change model for the culture your organization seeks to be successful in. Relationships are powerful; more powerful than some might admit. If you recognize this first off; you will be more successful than you could ever imagine. Face it; the bottom line is that people are truly what comprise the success of a flourishing organization so by examining the people to include partnerships and clients along with the structure and strategy one will be able to begin to build to change the culture; the true DNA of an organization.

*Angie Martin is an HR Consultant with ProvisHR with a background in Talent Management and Workforce Solutions.


Avoiding Estate-Tax Traps

Posted on October 23, 2012 by in Blog, Planning, Taxes

Here is some helpful information on current estate-tax laws:

Are you married? Then put a copy of this column with the “valuable documents file” you are leaving—or ought to be—for your heirs.

Here’s why: The Internal Revenue Service in June issued guidance for an estate-tax law Congress passed late in 2010. As a result, many couples will now find it easier to maximize federal estate-tax savings without costly predeath planning.

Ben Bronstein

There is an important hitch, however. An estate-tax return must be filed soon after the first partner’s death—usually within nine months—in order for a couple to get this new benefit.

If the estate’s executor misses that crucial filing, the couple will likely lose the value of one partner’s estate-tax exemption. That’s currently $5.12 million per individual, so the loss would mean sheltering only about $5 million versus $10 million of assets per couple from federal estate tax.

The recent changes are the latest effort to address a long-standing estate-tax issue for married couples. Since 1981, each spouse has been allowed to leave property to the other spouse, free of tax at death—which seems only fair.

But this fairness spawned another problem. If, as is common, one partner left all assets to the other, then this tax-free transfer in effect cost the couple one of their two estate-tax exemptions. At the second death, only one exemption was available to shelter assets.

Here is a simplified example, under both regimes: A husband and wife together have $7.5 million of assets, $6 million of it in a business owned by him and the rest owned by her. Under prior law, if they died and each partner left everything to the other (with no trusts), the estate of the second-to-die partner would owe federal tax on $2.5 million—even though the law gave each spouse a $5 million exemption.

Under the new rules, when the first partner dies—say it’s the wife—the executor files an estate-tax return preserving the value of her $5 million exemption. The result: At the husband’s death, the wife’s exemption is added to his, and the entire $7.5 million passes to heirs tax-free.

At current rates, that’s a federal estate-tax saving of $833,000, says Linda Hirschson, an attorney at Greenberg Traurig in New York.

What if a couple has total assets far below the exemption—say, $2 million? Experts advise filing an estate-tax return to preserve the dead partner’s exemption, in case the survivor receives a windfall.

The IRS has tried to simplify estate-tax filing. As long as assets go to a spouse or a charity, there is no need for expensive appraisals—the executor files a list with reasonable estimates. A house, for example, might be valued according to comparables in the neighborhood.

Why worry about these new rules when the estate tax is in flux? After all, the exemption is scheduled to drop to $1 million, with a top 55% rate, next Jan. 1. If that occurs, the new portability rules wouldn’t apply either.

The answer: Experts say these rules will be incorporated into any new regime, because they tackle a long-standing issue.”The IRS spent a lot of time preparing these generous rules,” Ms. Hirschson says. “We hope they’re here to stay.”

Key Manager or Executive Moves (Part Two)

Posted on October 18, 2012 by in Blog, Planning, Strategy

What are the areas within a transition plan? I like to start with eight basic areas, from which the plan participants can modify to fit their particular situation. The eight areas are Systems to Update, Routine Internal Meetings, Routine External Meetings, Personnel Management, Project Management, Significant Open Issues, Other Areas, and a Review section.

  1. Systems to Update. Key managers are often required to use various business systems, including time-keeping, procurement, fiscal, training, business development, project management, and so on. It’s important to provide the new manager with a detailed list of all these systems and the proper access and approval to log on to them.

  2. Routine Internal Meetings. I have split meetings into two types, internal and external. By “internal,” I am referring to all those meetings that are within your immediate business unit or company. These are all the daily, weekly, monthly or periodic meetings that the manager supports or attends.

  3. Routine External Meetings. Likewise, by “external” meetings I am referring to those regular or periodic meetings that are outside of your organization. These may be customer meetings, vendor meetings, trade organizations, benefits, and so on.

  4. Personnel Management. This is the section where you list all activities that are personnel related. I have included a longer list in the attached checklist, but typically include items such as performance appraisals, promotions, hiring, discipline actions, roles and responsibilities, and awards.

  5. Project Management. These are the activities relating to cost, schedule, and technical performance of the projects you manage.

  6. Significant Open Issues. This is a list of any significant activities that are coming within the next six months.

  7. Other Areas. This is a catch-all section for any other “gotchas” that you want to remember.

  8. Review. The final area is simply a signature line for the three participants signifying review by the outgoing manager, acceptance by the incoming manager, and review by the supervisor.

So, want a smooth transition when a key manager leaves? Take the time to pull together a comprehensive transition plan and ensure your business never misses a beat!

Acknowledgements: I’d like to thank Chuck Murgia, Director with Jacobs Engineering (Engineering and Science Contract, Johnson Space Center, Houston, TX) for his insights and discussions on this topic. I also want to thank Dan Garrison, Chief Scientist and Division Technical Manger with Barrios Technology in Houston, for his thoughts, feedback, and debate on this subject.

Key Manager or Executive Moves

Posted on October 15, 2012 by in Blog, Planning, Strategy

Transitioning, moving, or replacing key managers or executives has the potential for greatly disrupting an organization or business. Key managers set the tone for the operations, culture, and leadership atmosphere within their groups, and a change in leadership has the potential for causing quite an upheaval. So what steps can be taken to help make sure that this event goes smoothly and business operations never miss a beat? Developing a comprehensive transition plan will greatly assist in facilitating this smooth change of command.

First, let me step back and offer a suggestion that can make this entire transition process much, much easier. I’m a strong advocate of every senior manager, if at all feasible, having someone “waiting in the wings.” I like to call this a deputy, but in any case it’s an individual (or sometimes multiple folks) that the manager is actively mentoring and that is able to step in and do the management function whenever you go on vacation, travel, or the like.

When a manager does have a deputy in place, the transition plan is almost just an extension of the mentoring that is already ongoing. Either way, however, deputy or no deputy, taking the time to prepare a comprehensive transition plan will still greatly aid in a smooth change of management. A secondary, but often overlooked, added benefit of a transition plan is that it can also be used as a tool for helping the supervisor set expectations for the incoming manager.

 Once the timing for the transition has been decided, the outgoing manager, the incoming manager, and the supervisor can begin on the plan. For obvious reasons, the outgoing manager is the one who should take the lead on building the transition plan. The plan does not need to be too complex or detailed. A typical plan may be three to four pages long, and usually takes only two to three iterations among the three participants to get in final form. I highly recommend taking several days between reviews, as the mind will often pick up new ideas or missed items if given time to reflect.

What are the areas within a transition plan? I like to start with eight basic areas, from which the plan participants can modify to fit their particular situation. The eight areas are Systems to Update, Routine Internal Meetings, Routine External Meetings, Personnel Management, Project Management, Significant Open Issues, Other Areas, and a Review section.

For more specifics on each of the eight basic areas, check out Part Two.

Retirement Benefits

Posted on October 11, 2012 by in Planning, Retirement

Here is a great article outlining the advantages of waiting to take retirement benefits.  We met with a Boomer recently and advised him to stop taking Social Security.  He had taken it for just about a year and he could afford to wait.  The lifetime bonus will mean a great deal to him, and possibly his wife!  Enjoy!

People can begin collecting Social Security benefits when they turn 62, but the full retirement age is 65 for people born in 1937 or earlier, and 67 for people born after 1960. Taking benefits before reaching the full retirement age reduces the size of the payments. People who retire at 62 will on average receive a monthly payment about 25 to 30 percent less than if they waited until their full retirement age.


Most people take their benefits early. About 131,827 of the 180,645 recipients of Social Security in Butler, Champaign, Clark, Greene, Miami, Montgomery and Warren counties began claiming retirement benefits at 64 or earlier, according to a December 2011 snapshot of recipients and benefits obtained by this newspaper. More than half of recipients in the seven-county region claimed their benefits as soon as they turned 62. In Ohio, about 73 percent of recipients claimed their benefits at 64 or younger.

Additionally, more Americans are taking the benefits early. In 2011, about 73.8 percent of the 35.6 million U.S. recipients of retirement benefits received reduced monthly payments because they took their benefits before reaching their full retirement ages, according to administration data. The share of recipients who received reduced payments for taking benefits early was up from 73 percent in 2006, 71.3 percent in 2000 and 68.4 percent in 1990.

But delaying claiming benefits until the full retirement age or later is a smart financial decision for many people, because at some point — if a person lives long enough — the payments from delaying surpass the payments from taking early retirement, said Mary Beth Franklin, contributing editor to InvestmentNews and noted expert on Social Security issues.

“Deciding the right time to claim for an individual can mean the difference between tens of thousands of dollars over his or her lifetime, and for a married couple, it can be more than $100,000 over their lifetime,” Franklin said. “I think the biggest mistake is that people take Social Security as soon as they can simply because they can, without thinking it through.”

Franklin said people who are sick or in poor health or who are unemployed and need income should take benefits once they becomes available. Similarly, people who do not have a long life expectancy should also collect early, because they have a shorter window for collection. But she said people should not claim early if they are healthy, have a family history of longevity and intend to keep working. For some people, it even makes sense to delay claiming benefits past the full retirement age, because the value of the payments increase by 8 percent each year they are delayed between the ages of 66 and 70, Franklin said.

“Your benefit at 70 would be 132 percent of what it would be have been at 66, and that’s almost double the amount if you took it early at 62,” Franklin said.

She said people who continue to work definitely should delay claiming, because they will lose $1 in benefits for every $2 they earn over the annual-earnings cap, which is $14,640 this year. The earnings test does not apply once people reach their full retirement age.

Medical Loss Ratio Rebates

Posted on October 8, 2012 by in Blog, Human Resources

Medical Loss Ratio (MLR) Rebates–What You Need to Know

Many insured plans recently received rebates from insurance agencies due to Medical Loss Ratio Rebate (MLR) calculations required by the Affordable Care Act.

These rebates are generating many questions:

  • What is the MLR rebate?
  • Why am I getting a rebate?
  • How can I use the rebate?

Below are some general answers and a link to a webinar/presentation for help with additional questions.

What is the MLR Rebate?

The Affordable Care Act requires insurers to spend a minimum percentage of premium dollars on:

  • Clinical services (e.g., reimbursement of provider claims), and
  • Health care quality improvement activities

Insurers must spend:

  • 80% of premium dollars on claims and quality improvement activities for individual and small group markets in a state
  • 85% for the large group market in a state

Measured on a calendar year basis beginning August 1, 2011, MLR is calculated for each insurer, broken down into lines of business.

If needed, MRL rebates are distributed to individual and group policy holders by August 1 each year.  Letters must be mailed to enrollees and group policy holders.

Why am I getting a rebate?

If you received a rebate and letter from your insurance agency, the insurance agency did not spend the minimum amount of premiums within your state or market for the prior year.  The rebate is not based on your plan’s claim experience – it is based on a percentage of your paid premiums for the prior year.

How can I use the rebate?

The answer to this question can be complicated and varies for ERISA and non ERISA plans.  Generally speaking, the rebate can be used to:

  • Distribute amounts to enrollees;
  • Enhance benefits under the plan for current enrollees; or
  • Reduce future employee premium contributions to the plan.

The allocation method must be “fair” and “reasonable.”

Refer to the presentation, “Understanding Medical Loss Ratio (MLR) Rebates”, a presentation by Groom Law Group sponsored by Cigna, for additional details regarding rebates and how they should be distributed.  Please consult an ERISA attorney with any specific questions.

Tina Tiller