Author: Leon Clinton

Asset Protection Financial Planning Investments

Should You Invest in Life Insurance?

The purpose of life insurance is to provide a source of income, in case of death, for your children, dependents, or other beneficiaries. (Life insurance can also serve certain estate planning purposes, which we won’t go into here.)

Buying life insurance is contingent upon whether anyone is depending on your income after your death. If you have a spouse, child, parent, or some other individual who depends on your income, then you probably need life insurance.

Because life insurance protects your family in the event of a death, it is important to determine the correct amount. Most people do not have the right amount of insurance.

There are two basic types of life insurance: term and permanent. Term insurance is insurance that covers a specified period. If you die within this time frame, your beneficiary receives the insurance benefit. Term policy premiums usually increase with age.

Permanent insurance, such as universal life, variable life, and whole life, contains a cash value account or an investment element to the insurance.

Rules of Thumb

The younger your children, the more insurance you need. If both spouses earn income, then both spouses should be insured, with insurance amounts proportionate to salary amounts.

Tip: If the family cannot afford to insure both wage earners, the primary wage earner should be insured first, and the secondary wage earner should be insured later on. A less expensive term policy might be used to fill an insurance gap.

If one spouse does not work outside the home, insurance should be purchased to cover the absence of the services being provided by that spouse (child care, housekeeping, bookkeeping, etc.). However, if funds are limited, insurance on the non-wage earner should be secondary to insurance for the wage earner.

If there are no dependents and your spouse could live comfortably without your income, then you will still need life insurance, but you will need less than someone who has dependents.

Tip: At a minimum, you will want to provide for burial expenses and paying off your debts.

If your spouse would undergo financial hardship without your income, or if you do not have adequate savings, you may need to purchase more insurance. The amount will depend on your salary level and that of your spouse, on the amount of savings you have, and on the amount of debt you both have.

Give us a call. We’ll happy to help you determine the correct amount of life insurance you need.

Accounting Business

3 Tips for Getting an Accurate Business Valuation

If you’re conscientious about financial reporting, you may already have a sense of your company’s worth, but in some instances you might need a formal business valuation, such as:

  • For certain transactions. Selling your business? Planning an IPO? Need financing?
  • For tax purposes. Includes estate planning, stock option distribution, and S Corporation conversions.
  • For litigation. Needed in cases like bankruptcy, divorce, and damage determinations.

There isn’t a single formula for valuing a business, but there are generally-accepted measures that will give you a valid assessment of your company’s worth. Here are some tips that will help you get a more accurate business valuation.

  1. Take a close look at how your business operates. Does it incorporate the most tax-efficient structure? Have sales been lagging or are you selling most of your merchandise to only a few customers? If so, then consider jump-starting your sales effort by bringing in a seasoned consultant.Do you have several products that are not selling well? Maybe it’s time to remove them from your inventory. Redesign your catalog to give it a fresh new look and make a point of discussing any new and exciting product lines with your existing customer base.

    It might also be time to give your physical properties a spring cleaning. Even minor upgrades such as a new coat of paint will increase your business valuation.

  2. Keep in mind that business valuation is not just an exercise in numbers where you subtract your liabilities from your assets, it’s also based on the value of your intangible assets.It’s easy to figure out the numbers for the value of your real estate and fixtures, but what is your intellectual property worth? Do you hold any patents or trademarks? And what about your business relationships or the reputation you’ve established with existing clients and in the community? Don’t forget about key long-term employees whose in-depth knowledge about your business also adds value to its net worth.
  3. Choose your appraisal team carefully. Don’t try to do it yourself by turning to the Internet or reading a few books. You may eventually need to bring in experts like a business broker and an attorney, but your first step should be to contact us. We have the expertise you need to arrive a fair valuation of your business.If you need a business valuation for whatever reason, give us a call today.
Tax

5 Tips If You Changed Your Name This Year

If you changed your name this year as a result of a recent marriage or divorce, you’ll want to take the necessary steps to ensure the name on your tax return matches the name registered with the Social Security Administration. A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your tax return and may even delay your refund.

Here are 5 tips for recently married or divorced taxpayers who have made a name change.

  1. If you took your spouse’s last name or if both spouses hyphenate their last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security Number.
  2. If you were recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.
  3. It’s easy to inform the SSA of a name change. You just need to file Form SS-5, Application for a Social Security Card, at your local SSA office and provide a recently issued document as proof of your legal name change.
  4. Form SS-5 is available on SSA’s website at www.socialsecurity.gov, by calling 800-772-1213, or at local offices. Your new card will have the same number as your previous card, but it will show your new name.
  5. If you adopted your spouse’s children after getting married, you’ll want to make sure the children have an SSN. Taxpayers must provide an SSN for each dependent claimed on a tax return. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number, or ATIN, by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS website at www.irs.gov, or by calling 800-TAX-FORM (800-829-3676).
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