The increasingly frenetic pace of the holiday season can only mean one thing — 2018 is coming to a close and a new year looms around the corner.
The last few days of the year are a special time for family and friends, celebrating holidays, and reflecting upon the successes and challenges faced throughout the year. But it’s also often a time to accomplish tasks left incomplete, and to make urgent calls to business and wealth advisers to implement plans made the year before or discuss last-minute changes to strategy and goals.
But you shouldn’t fret. As stressful as this can be, wealth management professionals are prepared. With the following list of year-end planning considerations for business owners, you can get a jump on your conversations and the many tasks at hand.
• Address credit concerns for your business. Conduct a full review of loan positions for rate and term and review all commercial floating rate debt. Consider refinancing or locking current rates if appropriate, as borrowing rates may continue to rise in 2019.
• Attend to employee benefits. Max out defined benefit plan contributions (or discuss benefits of creating a plan with your wealth professional) and talk to employees about taking full advantage of 401(k) plans and spending any remaining balances in flexible spending accounts. Determine if providing additional benefits or incentives to key employees are important for your future success. A stock appreciation rights plan or an employee stock ownership plan (ESOP) are great ways to ensure that key employees are committed to the future success of your company, and the ESOP can also provide income tax benefits. If you have stock options or restricted stock, talk to your wealth professional about execution strategies.
• Insurance coverages should also be reviewed at year-end. Business owners should not only review business operating coverages and property/casualty for risk gaps, but also examine life insurance coverages on key employees and owners. These policies can provide much needed liquidity and allow the company to buy back stock, continue operations or attract new talent, in the event of a key loss. If business owners have personal policies and coverage for family, make sure to review existing policies and coverages and send required Crummey notices to beneficiaries for any transfers to irrevocable life insurance trusts (ILITs).
• A variety of events can happen in investment markets each the year; 2018 was no exception. Investment accounts and strategies should be reviewed to confirm goals, risk tolerances and asset allocation strategies. Consider tactical changes to your portfolio if appropriate. Review sales of business and personal property, investments, artwork and tax-loss carry forward positions.
• Businesses and individuals, alike, often make charitable gifts at year-end. Use of appreciated assets can provide increased income tax efficiency. Consider “bunching” charitable contributions to meet new higher standard deduction limitations. Establishing a donor-advised fund can simplify charitable gifting strategies, or a family foundation can involve family in philanthropic pursuits.
• With new tax legislation adopted in 2018, business owners should consult with their tax advisers and certified public accountants to discuss maximizing eligible deductions, deferring year-end bonuses or sales of capital assets and determining eligibility for Section 199A treatment for qualifying business income. If owners were married, divorced or had a child in 2018, don’t forget to adjust your filing status.
Finally, if you’re getting ready to transition your closely held business to the next generation, you should consult with your private wealth professional regarding business succession planning strategies. As I’ve written in previous columns, Nevada business owners can take advantage of unique trust, creditor protection and legacy planning tools that are not available in other states.
So, let’s get at it — now is the time to execute on existing plans, make changes if necessary and prepare for the unknown challenges of the year ahead.
Daniel Wani is a private wealth advisor for U.S. Bank Private Wealth Management.