Joseph Wojcik, vice president and trust officer for FirstMerit Bank, says one of the major mistakes business owners make is not meeting with advisers to plan for the future.
“One thing I’ve discovered is that the typical business owner doesn’t talk to his advisers unless he has a transaction contemplated,” says Wojcik.
Business owners rarely spend the time or the money to just brainstorm with their lawyer or financial planner, he says, and that oversight could be costly.
“They’re thinking, ‘It might cost me $1,000 to see my accountant,’ but out of that meeting you might make $50,000 as a result of some of the changes that took place,” he says.
So if Wojcik has described you, he offers these financial planning tips in lieu of an office visit. But he does advise you to set a follow-up appointment with your financial planner.
1.) Make sure your estate plan reflects the law changes effective Jan. 1, 2002. One of the biggest changes in tax law this year for business owners is the unified credit increase that became effective this year.
Prior to Jan. 1, 2002, a business owner could transfer $675,000 worth of business interest in a lifetime to their children without paying an estate tax. As of Jan. 1, that amount rose to $1 million.
“People who had already used up their unified credit of $675,000 got a new $325,000 credit,” says Wojcik. “Every business owner needs to visit their estate planning professional to ensure that their estate plan is up to date with the new tax law change.”
In addition, the amount that can be transferred as a gift each year, separate from the unified credit, increased from $10,000 to $11,000 per person.
“The primary message is that there has been and will continue to be over the next six or seven years, changes that are already law in estate taxes,” says Wojcik, who is a CPA.
2.) Find out how to implement a Section 125 plan at your workplace.
“The 125 Plan is a way to help your employees and help yourself at the same time,” Wojcik says.
The plan is set up so that certain expenses, such as health insurance and retirement contributions, are deducted from an employee’s paycheck at the pre-tax level. The plan not only saves employees money, but the employer can avoid paying Social Security taxes and workers’ compensation premiums on those expenses, too.
“I have noticed that often these plans don’t exist. It’s a slam dunk that they should,” Wojcik says. “It’s not new, but many employers don’t have them who should.”
3.) Make sure your investment mix is consistent with your risk tolerance.
“Last year, a lot of people found out that they didn’t have quite the risk tolerance they thought they had, and it caused them to panic,” Wojcik says.
He says people should take stock of their investment mix and adjust it according to their risk tolerance. If you don’t know what your risk tolerance actually is, ask for help. How to reach: FirstMerit, (330) 384-7304
