Taxable vs Tax Deferred: Why it matters

See the potential benefits of a tax-deferred investment vs. a taxable investments. Depending on your tax bracket it can save or cost you thousands of dollars.

This chart illustrates the potential benefits of a tax-deferred investment vs. a taxable investment. For example, if an investor in the 25% federal income tax bracket purchases a tax-deferred investment with a 5% annual yield, that investor’s taxable equivalent yield is 6.67%. This means the investor would need to earn at least 6.67% on a taxable investment in order to match the 5% tax-deferred annual yield.

This chart is for illustrative purposes only and is not indicative of any particular investment or performance. In addition, it does not reflect any federal income tax that may be due when an investor receives distributions from a tax-deferred investment.

Please contactm y of ice ifyou’d like m ore inform ation on taxable vs. tax-deferred investments.

The purpose of this newsletter is to provide information of general interest to our clients, potential clients and other professionals. The information provided is general in nature and should not be considered complete information on any product or concept described. For more complete information, please contact me (916) 781-3373.


Protecting your business

There are some simple and effective strategies to protect your business and reduce your overhead expenses. Learn the keys to avoiding “business-killers” for small & medium sized companies.

Launching and growing a business takes lots of hard work and determination. Without proper insurance coverage, however, a business risks being severely damaged or even destroyed when disaster strikes.

While the specific types of insurance you should consider depend on the type of business you operate, the different types of business insurance fall into these general categories:

Property Insurance: If your business owns and uses property in the course of conducting business, that property can be lost or destroyed through, for example, fire or theft. Property insurance protects not just buildings, but also the items used in conducting business operations, such as office furnishings, machinery, supplies and computers.

Liability Insurance: A business can be sued for causing third party bodily injury or property damage. Liability insurance pays damages up to the insured limits, as well as attorney’s fees and other costs associated with a legal defense. Liability insurance is also available to protect against other risks, such as lawsuits alleging libel or slander.

Business Auto Insurance: Business auto insurance covers vehicles owned by a business and used for business purposes, such as cars, trucks and vans. The coverage also pays the costs of third party bodily injury or property damage for which your business is legally responsible. If you or any of your employees use your own vehicles for business purposes, discuss with your agent whether your personal auto insurance policy will provide coverage if the vehicle is involved in an accident.

Workers’ Compensation Insurance: Workers’ comp insurance requirements are determined by state law. Most states require that a business with more than a stated number of employees purchase workers’ compensation insurance that pays the costs of an employee’s work-related injuries, as well as replaces a portion of wages lost due to injury or death in a work-related accident.

Business Owners Policy (BOP): A business owners policy or BOP is an insurance package that generally provides coverage insuring against property damage, business interruption and comprehensive general liability. It is generally more cost effective to purchase multiple coverages bundled into a single policy than to purchase them separately.

Life Insurance: Life insurance proceeds can be used to help reimburse a business for the loss of a key employee’s services at death. Life insurance can also be an effective way to fund a buy-sell agreement between multiple business owners, or to help surviving family members continue a business at the owner’s death.

Disability Insurance: Some states require businesses to provide some level of short-term disability benefits replacing a portion of an employee’s wages if the employee is sick or hurt and cannot work. On an optional basis, a business can also provide disability benefits for a longer duration, after the short-term benefits run out.

Our Protecting Your Business Life Guide is intended to help you evaluate the types of insurance coverage your specific type of business may need and to provide tips on managing premium costs. Contact my office for your free copy.

Confessions of a mortgage broker

A must read! Chronicles the career of a conflicted mortgage broker.  This comical and tragic account explains the whole amazing subprime catastrophe through the story of one man.  Mortgage brokers dominated the lending industry for 25 years before succumbing to the lure of ever riskier products… Continue reading “Confessions of a mortgage broker”

Robert Ingram |Owner

Robert M. Ingram is the Owner and Founder of TRI Financial Group. With nearly 15 years of experience in Advanced Markets and Business Consulting.

Robert M. Ingram IMO, FMO, MGA, GA

Owner of TRI Financial Group

Robert M. Ingram is the Owner and Founder of TRI Financial Group. With nearly 15 years of experience in Advanced Markets and Business Consulting.  He founded TRI Financial Group in 1998 on the pretense of providing for our clients the best of the best when it comes to our clients Financial Plans.  He is responsible for overseeing all Agency functions while coordinating our firm’s relationships with regional and national liaisons.  He has created and implemented our training curricula in his role as General Agent.  He is also a cancer survivor and understands the need for planning.  He is actively involved with helping not only our Agents but our Customers as well.  He and his wife Janeen live in Antelope, CA. which is east of Sacramento.  Where they are involved with the community and reside with their Jack Russell dog, soon they are going to add a new family member a Rhodesian Ridgeback.

The moment of truth: our national budget

Slightly less than one-fifth of the federal budget is dedicated to other mandatory programs. These include civilian and military retirement, income support programs, veterans’ benefits, agricultural subsidies, student loans, and other

Here’s a startling summary of our national budget, deficit and expenditures from The National Commission on Fiscal Responsibility and Reform. See attached PDF [download id=”17″]. Download for your reading.

Do you have a tax summary?

Do you know what the new tax rates are for 2011 or how they effect you?

One of the valued services we provide at TRI Financial group for our clients is a tax summary. It gives you a snapshot of your current income, tax bracket, deductions and more. To see an example click this [download id=”16″]. To receive your free tax summary contact us for a free consultation.

*The tax summary is for informational purposes only and does not constitute tax advice. Please seek the advice of a tax professional.

Reducing taxes through discounting

Reducing Transfer Taxes Through Discounting

The preceding summary is intended to be a general discussion of the topic presented, and is based on our current understanding of applicable tax laws, regulations and rulings. In actual practice, the transaction discussed may be more complex and will require the attention and expertise of professional advisors. In no way should this summary be construed to constitute tax or legal advice.

Do you have clients with substantial wealth who could benefit by transferring assets at a fraction of their fair market value?

Minority interests in certain types of entities (i.e. Family Limited Partnerships, Family Limited Liability Companies, etc.) can be transferred for less than the value of the assets owned by the entity. This is because the ownership of a minority (i.e. noncontrolling) interest in a family business does not: (1) provide the ability to control the entity or its underlying assets; or (2) provide a market where the ownership interest can be freely transferred to non-family members. This lack of control and lack of marketability reduce the value of the business interest and therefore allows a reduction in transfer (gift and/or estate) taxes.

Lack of Control Discount

This discount is often applied to transfers during life or at death and reflects the inability of the minority owner to control the entity and the assets owned by the entity. Minority owners cannot dictate management decisions regarding the entity’s direction; cannot dictate investment decisions regarding the entity’s assets; and are at the mercy of those who “control” the entity. Lack of control discounts are applicable not only to “minority interests” (less than 51% ownership) but can be applied to “non-voting” and “limited” interests in the entity. Typical discounts for lack of control generally range between 20 percent and 30 percent.

Lack of Marketability Discount

This discount is often applied to transfers of minority interests because of the inability to negotiate the sale of the interest in a readily available market. Most family-owned businesses contain specific provisions ensuring that ownership of the interests will remain within the family group. Each of these provisions, by design, reduces the owner’s ability to sell his/her interest and thereby reduces its value. Several factors can influence the level of discount for lack of marketability. These factors include, but are not limited to, the entity’s asset mix (i.e. marketable securities, real property, etc.) and transfer restrictions contained in the entity’s legal documents. Typical discounts for lack of marketability also range up to 30 percent.

Bottom Line

Valuable assets such as a successful family business, real estate, etc., can be transferred to the next generation in a very tax-efficient manner. Parents can gradually give away business units which represent the bulk of the economic ownership of the entity while maintaining control of the business. Discounting for transfers of minority interests, limited interests and/or nonvoting interests can be an effective way to transfer significant amounts for a fraction of the overall value. These discounts must be determined by a qualified appraiser in conjunction with an experienced estate planning attorney.