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What age should you retire? If you’re middle aged or older, it’s likely that one of your most pressing concerns is not having enough money for retirement. And there’s good reason. According to the National Institute on Retirement Security, a full third of Americans between 55 and 65 have nothing saved for retirement.
And even if you’ve diligently saved, it’s difficult to predict if your savings will be enough. Today, many people are living into their late-80s, 90s, and even 100s. Because most Baby Boomers have lived comparatively healthier lives and had access to better healthcare than their parents, you may live even longer.
In light of these facts, a recent article in Money by renowned financial guru Suze Orman declares that the new retirement age for the majority of us is now 70.
While most plan to retire in their 60s, Orman believes this simply isn’t realistic anymore, not only because of increased lifespan, but also due to rising healthcare costs and the increased need to care for aging parents for longer periods.
Today’s eligibility age for full Social Security benefits is between 65 and 67. Of course, you can retire as early as 62 and receive partial benefits, but Orman says that claiming such partial benefits is “one of the biggest mistakes you’ll ever make.”
By waiting until 70, your annual benefit will be 76% higher, which will be hugely beneficial in the long run. Orman notes that for married couples it might be okay for the spouse earning less to retire at age 67, but the higher earner must wait until 70. The only exception is if one of you has a medical condition that prevents you from working or makes it unlikely you’ll live into your late-80s or 90s.
But delaying retirement doesn’t necessarily mean working full-time until 70. You might be able to work part-time or receive a reduction in your current job responsibilities. Orman says to start talking with employers about the possibility of part-time work or reduced duties at least two years before your planned downshift.
You also might consider switching jobs to something that requires less time and energy. Start looking now for educational and training opportunities to prepare for such a new position.
Another option (and one Orman misses) is to launch a freelance gig, or “side hustle,” which is probably your best bet for a secure retirement anyway.
Instead of thinking about retirement as a time to retire from life and work, start thinking about it as the time you can finally do what you’ve always wanted to do. Create a service offering around the passion project you didn’t think you could indulge during your working years.
Dreaming into—and even taking steps toward this side hustle—now is the place to start, no matter how close or far you are from retirement.
Your life experiences were given to you so you can give them back. Begin to consider who needs to hear what you’ve learned throughout your life, especially during the hard times, as that’s likely to be the source of your side hustle.
While this all may initially add to your retirement anxiety, rather than reducing it, you don’t have to go it alone. We’ll be in your corner the whole way, offering guidance and support, while helping with any legal, insurance, financial, and tax issues that might arise. Schedule a Family Wealth Planning Session® today to see where your retirement planning currently stands.
Hiring your minor children to work in the family business is a great way to help them develop a solid work ethic, teach them money-management skills, and fund their savings for the future. But employing your children also comes with a number of valuable tax benefits that you might not be aware of.
And following the passage of the Tax Cut and Jobs Act (TCJA) last year, those benefits just got a whole lot better. Here are a few of the ways hiring your kids can produce significant tax savings.
The tax benefits for you
By hiring your children to work for your business, you can deduct their wages from your business income as an employee wage expense. This is likely money you would have spent on them anyway that can now be used to lower your company’s taxable income.
Such a write-off can not only reduce your company’s federal income taxes, but if applicable, your self-employment and state-income taxes as well. This can be a major savings, but it can also be easily abused by those who claim the benefit without actually having their children do legitimate work in their business.
Given this, the IRS requires your children to meet a few criteria before you can write off their pay as a business expense:
- They must be doing legitimate work appropriate to their age and skill level.
- These services must exceed the normal duties and chores they’re already required to do.
- The child cannot be over-compensated and must be paid the going rate for their services.
- Good records must be kept, including W-2s.
- Their services, work conditions, and hours must be in compliance with federal and state child-labor laws (though such laws are typically far more flexible for those who employ their own children).
Tax benefits for your children
your children will pay zero federal income tax on anything they earn up to $12,000. In light of this increased deduction, hiring your kids makes more sense now than ever before.
And depending on your business structure, you may be able to save big on your child’s payroll taxes, too.
In certain cases, you may not be required to withhold or pay any Social Security and Medicare tax (FICA) or federal unemployment tax (FUTA) on your kid’s wages. This payroll tax exemption applies to sole proprietorships, single-member LLCs taxed as a sole proprietorship, husband-wife partnerships, or LLCs treated as a husband-wife partnership.
This exemption applies to both part-time and full-time work. The FICA exemption covers those under age 18, while the FUTA exemption lasts all the way until they reach 21. This allows you to shift some of the income from your own tax rate to your child’s rate, which is most likely significantly lower than yours.
Workarounds for corporations
If you run an S or C corporation, you’ll have to withhold payroll taxes on your children’s wages. That said, all of the other tax benefits still apply, and there are creative strategies that can allow even these corporate entities to reap similar payroll-tax savings.
For example, one way for corporations to qualify for the payroll tax exemption is to create a family management company. By setting up this new company as a sole proprietorship separate from your primary business and paying your children from it, you won’t have to withhold payroll taxes.
If you have an S or C corp, meet with us to learn more about such creative tax-saving strategies.
Keep your money in the family
With so many valuable benefits, hiring your children can be a highly effective tool to increase your family’s tax savings. Consult with us to discuss all of the potential benefits and learn more about other ways we can help you keep more of your hard-earned money in the family.
We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.
If you have a blended family and do not plan for what happens to your assets in the event of your incapacity or eventual death, you are almost certainly guaranteeing hurt feelings, conflict, and maybe even a long, drawn out court battle.
So let’s start with clarity around what a blended family is and whether you have one. If you have stepchildren, or children from a prior marriage, or other people you consider “kin” who are not considered legal relatives in the eyes of the law, you’ve got a blended family.
Bottom line: if you have a blended family, you need an estate plan, and not just a will you created for yourself online, or a trust that isn’t very intentionally designed to keep your family out of court and out of conflict. Period. End of story. Unless you are okay with setting your loved ones up for unnecessary heartache, confusion, and pain when something happens to you.
What Will the Law Do?
“Blended Families, once considered “non-traditional” families are swiftly becoming the norm. Currently 52% of married couples (or unmarried couples who live together) have a stepkin relationship of some kind, and 4 in 10 new marriages involve remarriage. So, clearly, this is no longer “non-traditional” but quite traditional, though our laws about what happens if you become incapacitated or die are still very much based on the traditional.
Every state has different provisions for what happens when you become incapacitated or die, and the laws of the state where you become incapacitated or die may or may not match your wishes.
For example, in Colorado, if you are survived by a spouse, your surviving spouse would only receive a part of your estate if you have living children (or parents!), and your living children or parents would receive the rest. And the amount your spouse receives is variable based on the number and ages of your children.
In contrast, in California, all community property assets would go to your surviving spouse, and separate property assets would be distributed partially to a surviving spouse and partially to children, if living, in amounts depending on the number of surviving children.
In Texas, it can get very complex, depending on whether your assets are separate or community, and whether you have children from the marriage, no children from the marriage or living parents or siblings.
These are examples to show you that where you die, and what’s true when you die, may not result in the outcome you want for your loved ones, especially if you have a blended family situation.
So, here’s what you do to make sure that things do go the way you want: call us and schedule a Family Wealth Planning Session. While the session is normally $750, if you do some homework ahead of time (homework that’s going to make sure your family can find everything you have if and when you become incapacitated or die), we’ll waive the Family Wealth Planning Session fee for you, and spend two hours getting to know you, your family dynamics, and your assets, and teach you about the law here in our county and how it would impact your family and your assets in the event of your incapacity or death, so you can ensure that things go the way you want for the people you love.
Even within “traditional” families, aka married parents with families, I want to emphasize that having a full plan is the best way to provide for your loved ones. However, with “blended” families, carefully considered estate plans are, as you can see, even more vital to avoid massive misunderstanding and conflict, and having your assets tied up in court instead of going to the people you want to receive them.
Disputes Between Spouse and Children From Previous Marriage
One of the most common problems that arises in a blended family is that the deceased’s children from a prior marriage and the surviving spouse end up in conflict. This one is sadly common. Unless a comprehensive plan has been created, it could be very easy for your surviving spouse to cut your kids out completely.
When you’re considering all of these factors for the people you love, it’s important to have a Personal Family Lawyer® who can help you look at the reality of what will happen if you become incapacitated or when you die. With the complexities of modern families, it’s better to know than to leave it to the law or a court to provide. That way, not only do the people you love get the assets that you want them to receive, but you may also be saving them from years of legal conflict. Just give us a call and we’ll help you review your options.
Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.
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With the rapid rise of the “gig economy,” which primarily relies on independent contractors instead of W2 employees, there’s been an equally steady climb in the number of Independent Contractor (IC) misclassification cases filed against businesses.
Most misclassifications are not the result of intentional violations of federal and state law, but rather, unintentional mistakes made by business owners, maybe including you, who aren’t aware of the legal landscape.
Up until the last 10 years, most regulatory agencies did little to enforce classification laws, leaving many to believe there wasn’t much risk in failing to strictly comply with the laws. But today there’s heightened scrutiny from regulatory agencies at all levels and numerous lawsuits in the courts.
You could owe back taxes on behalf of team members you’ve mischaracterized, and you may even be subject to criminal charges for misclassification. That said, with the proper legal guidance from us, it’s quite simple to stay safe and compliant. The following are three steps you should take to ensure your IC classifications are up to snuff.
1. Conduct an internal audit of your IC classifications
The first step to ensuring that your ICs are classified properly is to conduct an internal audit of your current classification policies and practices. And if you don’t have any formal policies or practices in place, now is the time to create them.
While the federal government, the states, and the courts don’t have a single common test to determine a worker’s classification, there are some overarching themes that they all consider. In general, if you have the right to control or direct how an IC’s work is done, not just what’s to be done, the worker is more likely to be an employee, not an IC. With ICs, you’re only permitted to direct and control the end result of their work, not the manner and methods of getting it done.
Since there are many complex legal issues related to this process, it’s important that you work with us as your Creative Business Lawyer® to review each worker’s on-the-job practices. Often an IC’s contract may state one thing, but their actual work performance and relationship with you may be something entirely different.
For instance, an IC’s contract might state that they’re to work independently, but in reality they work under close supervision. Or their contract may state that they’re free to work with other clients, but the audit shows that the way you’ve structured the relationship makes it impractical or impossible for them to work for anyone but you.
By auditing your policies and practices in this way, you can identify and change any problem areas internally, before a regulatory agency steps in to investigate.
2. Revisit and revise contracts when needed
Even if you’ve worked with someone for years without any problems using only a verbal agreement, it’s vital that every IC you hire has a properly drafted written contract in place, describing exactly what’s expected of them and laying out the parameters of their relationship with you.
You can see that we bolded, underlined, and italicized the fact that you need a contract in place for each of your ICs, and that’s because we cannot emphasize this point enough—it’s the foundation of your protection from misclassification.
Your IC contract should clearly define the scope of work, the time frame involved, their communication process with you, and the terms of payment. Additionally, the contract should clearly state that the worker is responsible for his or her own workplace, equipment, and expenses.
From there, be sure to have us carefully analyze and rework the contract language when and where needed—even if another lawyer prepared the contract for you. In recent court cases, attorneys for ICs have successfully used the company’s own contracts to show that the business had the right to direct and control the methods and means of the worker’s contracted services, so it’s better to be safe than sorry.
A fairly significant safe harbor for you would be if your IC is using their own contract and had their own business entity set up.
3. Implement and enforce classifications
Once you’ve identified and revised any gaps or areas needing improvement in your IC classification policies and practices, the final step is to make certain these criteria are implemented and enforced. Your policies and contracts are worthless if they’re not actually being followed.
Remember, the Department of Labor (DOL), state agencies, and the courts are only concerned with what an IC is doing, not what’s in their contract or job description.
If necessary, revise your company’s operating manual and procedures to ensure that the provisions of the contracts and policies are documented, implemented, and enforced. Try to foresee any likely barriers to implementing your policies, and then develop strategies to overcome those obstacles with an adoption process that can evolve to fit your company’s needs both now and in the future.
Whether you need help reviewing your IC classification practices and/or properly drafting IC contracts, trust us as your Creative Business Lawyer® to guide and assist you. Although there’s an uptick in IC misclassification cases right now, with the proper policies and contracts in place, you can rest assured your company is entirely compliant and up to date.
We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule. Or, schedule online.
As we head into the peak of the holiday season, you’re likely spending more time than usual surrounded by your family and friends. It’s one of the rare times of the year when loved ones from across the country gather together to enjoy each other’s company and celebrate the passing of another year.
The holidays offer an opportunity to visit with loved ones you rarely see and get caught up on what’s been happening in everyone’s life. And though it might not seem like it, the holidays can also be a good time to discuss estate planning. In fact, with everyone you love—from the youngest to the oldest—gathered together under one roof, the holidays provide the ideal opportunity to talk about planning.
That said, asking your uncle about his end-of-life wishes while he’s watching the football game probably isn’t the best way to get the conversation started. In order to make the discussion as productive as possible, you should consider the following tips.
1. Set aside a time and place to talk
Trying to discuss estate planning in an impromptu fashion over the dinner table or while opening Christmas gifts will most likely not be very productive. Your best bet is to schedule a time separate from the festivities, when you can all gather together and talk without distractions or interruptions.
It’s also a good idea to be upfront with your family about the meeting’s purpose, so no one is taken by surprise, and they are more prepared for the talk. Choose a setting that’s comfortable, quiet, and private. The more relaxed people are, the more likely they’ll be comfortable opening up about sensitive topics.
2. Create an agenda, and set a start and stop time
To ensure you can cover every topic you want to address, create a list of the most important points you want to cover—and do your best to stick to them. You should encourage open conversation, but having a basic agenda of the items you want to talk about can help ensure you don’t forget anything in the midst of emotional moments
Along those same lines, set a start and stop time for the conversation. This will help you keep the discussion on track and avoid having the conversation veer too far away from the main topics you want to discuss. If anything significant comes up that you hadn’t planned on, you can always continue the discussion later.
Keep in mind that the goal is to simply get the planning conversation started, not work out all of the specific details or dollar amounts.
3. Explain why planning is important
From the start, assure everyone that the conversation isn’t about prying into anyone’s finances, health, or personal relationships. Instead, it’s about providing for the family’s future security and wellbeing no matter what happens. It’s about ensuring that everyone’s wishes are clearly understood and honored, not about finding out how much money someone stands to inherit.
While some relatives might be reluctant to open up, being surrounded by the loved ones who will ultimately benefit from planning can make people more willing to discuss these sensitive subjects.
Talking about these issues is also a crucial way to avoid unnecessary conflict and expense down the road. When family members don’t clearly understand the rationale behind one another’s planning choices, it’s likely to breed conflict, resentment, and even costly legal battles.
4. Discuss your experience with planning
If you’ve already set up your plan, one way to get the discussion going is to explain the planning vehicles you have in place and why you chose them. If you’ve worked with us in the past you can describe how the process unfolded and how we supported you to create a plan designed for your unique needs.
Mention any specific questions or concerns you initially had about planning and how we worked with you to address them. If you have loved ones who’ve yet to do any planning and have doubts about its usefulness, discuss any concerns they have in a sympathetic and supportive manner, sharing how you dealt with similar issues whenever possible.
For the love of your family
Though death and incapacity can be awkward subjects to discuss, talking about how to properly plan for such events can actually bring your family closer together this holiday season. In fact, our clients consistently share that after going through our estate planning process they feel more connected to the people they love the most. And they also feel more clear about the lives they want to live during the short time we have here on earth.
We can help guide and support you in having these intimate discussions with your loved ones. When done right, planning can put your life and relationships into a much clearer focus and offer peace of mind knowing that the people you love most will be protected and provided for no matter what. Contact us today to learn more.
Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.
Cava and Faulkner, 
(916) 831-7565
support@cavafaulkner.com
