Foresight and Planning are Essential in Managing Wealth

September 1, 2016

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Special Section Advertising – Wealth & Money Q&A

Whether you’re running a business or overseeing your personal finances, knowledge and planning are invaluable. It’s always best to consider how you’ll handle events well in advance of their occurrence and be prepared as much as you can for the future. Particularly when it comes to wealth, proper planning can help you reduce your taxes, take care of your loved ones, and retire in style.

If you’re a business owner, you have additional considerations regarding wealth management. Your business may represent a sizeable portion of your net worth, so of course there may be questions about how you can best protect your assets and your ownership in the company. As a company owner, you need to think about not only providing for your own retirement, but also for the retirement of your employees. Therefore, it’s wise to review all your options. It’s also important to consult with knowledgeable experts, whether they specialize in the areas of business management, finance, or law. What you do today can definitely make a difference in the years to come. Make sure you have the information you need to make sound decisions so you can minimize surprises.

Q: As the owner of a company, how can I save more for my personal retirement, as well as any key employees, without the restrictions of a 401(k) plan?

A: A qualified plan, such as a profit-sharing plan or a 401(k) plan, can be a valuable employee benefit. A qualified plan provides you with an immediate income tax deduction for the amount of money you contribute to the plan for a particular year. Your employees aren’t required to pay income tax on your contributions until those amounts are actually distributed from the plan. However, in order to receive this beneficial tax treatment, a qualified plan must comply with strict and complex ERISA and IRS rules, and the plan must generally cover a large percentage of your employees. In addition, qualified plans are subject to a number of limitations on contributions and benefits. These limitations have a particularly harsh effect on your highly paid executives.

In contrast, NQDC plans can be structured to provide the benefit of tax deferral while avoiding almost all of ERISA’s burdensome requirements. No dollar limits apply to NQDC plan benefits (although compensation must generally be reasonable in order to be deductible), and you can provide benefits to your highly compensated employees without having to offer similar benefits to your rank and file employees.

Midwest Financial Advisors
Robert Zvonek
Director, NQDC Plans
12900 Hall Rd., Ste. 415
Sterling Heights, MI 48313
586-997-1110
Robert@midwestfa.com
www.midwestfa.com
Securities and investment advisory services offered through SagePoint Financial Inc., member FINRA/SIPC. This information was developed by Broadridge, an independent third party. It is not a recommendation or a solicitation. Investments and strategies mentioned may not be suitable for all investors. SagePoint Financial does not provide tax or legal advice.

Q: I own my own business, and would like to sell some equity, but don’t want to give up control. What are my options?

A: Your financial adviser has likely spoken about the wisdom of diversification. And if you’re a business owner, a large portion of your personal net worth may be tied up in your business.

Bringing in a minority (i.e., nonchange-of-control) equity investor can help you accomplish two objectives. First, you can partially diversify your holdings by turning some of your paper equity (perhaps 30 or 40 percent) into cash. Second, you can benefit from the experience and connections of an established equity investor like Huron Capital and its Strategy & Operations Group, with a network of over 40 seasoned executives from a variety of industries.

While most equity groups will look to own a majority of your equity, groups like Huron Capital have a flexible approach that may be tailored to fit your needs.

Huron Capital Partners
Christopher Sheeren, Partner
500 Griswold, Ste. 2700
Detroit, MI 48226
313-962-5805
www.huroncapital.com

Q: Should I have a revocable trust?

A: For most people, the answer is yes. Assets held only in your name will require probate court administration following your death, and for a variety of reasons it’s generally advisable to avoid probate. A “funded” revocable trust is considered the best approach for doing just that, and it gives you great flexibility in designing a distribution plan for your beneficiaries. The plan can maintain privacy, minimize tax, protect assets from creditors, delay distributions to younger beneficiaries, create a multigenerational “dynasty” trust, supplement (rather than terminate) a beneficiary’s receipt of Medicaid and other assistance, and leave a charitable legacy.

Clark Hill PLC
J. Thomas MacFarlane
248-988-5846
www.clarkhill.com

Q: What are the basic keys to developing a lifelong growth strategy for income, money, and wealth?

A: Individuals and families should begin to develop a strategy to grow income, cash flow, and wealth as early in life as possible. The following are essential:

1. Early discovery of one’s passions maximizes the opportunity to build a fruitful career driven by a strong work ethic and a focus on customer satisfaction, lifelong learning, and income maximization.

2. From the first paycheck one earns to the last, long-term wealth accumulation must be a primary focus. From your first paycheck to age 35, a minimum of 5 percent of your income should be invested in long-term options such as IRAs or 401(k)s. From 35-45 years of age, this figure should increase to 10 percent and at least 15 percent from age 45 to retirement, with 50 percent of yearly bonuses invested for the long term, also.

3. Deferred consumption and the power of “compounding” provide money in the short term to accumulate wealth over the long run. The S&P 500 has averaged a 9 percent annual return since its inception in 1923. Wealth can only be accumulated if you are patient, invest on a regular basis, and allow the uninterrupted forces of the market to compound and grow your money over time.

Northwood University
Dr. Timothy Nash
Senior Vice President for Strategic and Corporate Alliances and Director of The McNair Center
4000 Whiting Drive
Midland, MI 48640
989-837-4323
Northwood.edu

Q: What are the most common mistakes people make with mortgages and how can I avoid them?

A: The most common mistake people make is NOT having a plan in place before shopping for a new home. You definitely need a thorough plan in place for your goals and objectives.

At Capital Mortgage Funding, having a plan in place entails sitting down with you to go over your income, credit, down payment, job history, and all mortgage options tailored to your specific needs.

Once we have the plan in place, you can go out and shop with confidence and a clear understanding of what you can afford, with your mortgage approval in hand.

Also, during the mortgage process, we advise that you do not change jobs, do not open up new credit cards, do not buy or lease a new car, and, last but not least, do not deposit or transfer large sums of money without proper documentation. These are all common mistakes made by borrowers.

The mortgage process does not have to be tricky, and with a solid plan in place, it won’t be!