In a recent article, the New York Times declared: “If a family is considering doing some tax planning and they’re putting it off to next year, they can’t go back in time and take advantage of the discounts.” The reason for this dramatic declaration is the fact that proposed IRS regulations aim to eliminate valuation discounts and severely limit the ability to shift wealth. These proposed regulations may significantly impact our ability to provide the ideal estate tax planning to you and our high net-worth clients.
The recent elections illustrate the importance of proper tax planning. President-elect Donald Trump has vowed to repeal the estate tax and replace the “death tax” with a capital gain tax on assets upon the owner’s death. Democrats vow to block any such efforts and plan to reduce the gift tax exception to $1 million. This volatility means that the perfect time for estate planning is now, before any extreme changes are made that limit planning tools that are currently available.

Estate Taxes
Estate tax is a 40% tax that is applied to the fair market value of a decedent’s estate or transfers in the form of gifts during his or her lifetime. In order to limit the double taxation effect of the estate taxes, Congress allowed for a tax credit to allow for a small estate, or an estate with assets of less than $5.45 million, to be exempt. This credit allows for a lifetime exclusion, per person, to transfer up to $5.45 million without being subject to tax.

Tax Planning
An extremely popular tax planning technique to minimize estate taxes is by transferring assets that are held in privately-owned businesses at a reduced fair market value. The fair value of a privately-held business is different from the market value of a publicly-traded stock because of the lack of marketability. Likewise, shares with significant influence or control of a business are more valuable than debt or equity with no voting rights. These concepts provide for a discount that can shrink the appraised value of a business asset by up to 40% and can be used to minimize any estate or gift taxes.

Proposed Regulations
The Treasury Department stated its desire to eliminate these valuation techniques by 2017. This will increase the value of businesses for estate or inheritance tax purposes, including capital gain taxes as proposed by the incoming administration.

Estate Planning
Estate planning involves more than just Federal taxes. Most states levy inheritance taxes and may have restrictions on any Federal tax planning. In addition, basic estate planning documents and trusts can be used to protect assets from creditors, predators or divorce. Finally, business planning and succession may be necessary to specify business continuity while providing for family members who are not involved in the business.

Small businesses are loved because of the personalized service they can provide. But what happens when a customer shows up with a list of demands longer than the mighty Mississippi? Unfortunately, it’s not uncommon for an oddball request to push the boundaries of the owner-client relationship. When demands are made, remember these tips:

1. Don’t blow a fuse.
Even if the request seems ridiculous, take a deep breath and maintain your composure. Your calm demeanor can help change the course of the conversation and get to a reasonable resolution.

2. Empathy goes a long way.

Even if the request is over the top, put yourself in your customers’ shoes. It shows that you’re listening and willing to work toward a solution.

3. Just say no.
There may be a time when you simply can’t honor a request, such as if it conflicts with company policy or legal regulations. Instead, offer a new option the customer might not have considered and work toward a compromise.

4. Rein it in.
After handling a request, gently set the expectation that this will be a one-time option due to business constraints, but that you’re happy to make an exception for a loyal customer.

Seemingly unreasonable demands can test anyone’s patience. But if handled appropriately—with tact and understanding—you can still maintain high customer satisfaction and loyalty.

1. Don’t Confuse Profits With Cash
When booking profits on paper, be sure to have the cash in the bank. This may seem obvious, but a lot of business owners don’t make the distinction—to their detriment. For example, your business may get a big order, but you have to sink money into production to fill it. If the client pays you 90 to 120 days later, your cash flow can turn negative. According to Parsons, many small businesses that fail do so not because they are unprofitable, but because they run out of money. The reasons vary, from long payment cycles to inventory management to a lack of investment capital. Understanding the levers that impact your cash flow can help you get a handle on this important metric. Parsons recommends using one of the many free cash flow calculators available to analyze and forecast your cash flow, like this one on her company’s site.

2. Revamp Your Payment Terms
Many small-business owners are at the mercy of big clients, who may take 60 or 90 days (or more!) to pay them. “We give our clients free money for 60 days,” says Parsons. “No bank would do that!” Parsons advises small-business owners to get tough and put clear payment policies in place. Know your industry averages. If other companies in your field have 15-day payment terms, you should too. And it’s not enough to stamp “Net 30” on invoices. Parsons recommends adding a late fee for tardy payments. For service-oriented companies, she suggests requiring bigger up-front deposits to cover costs and collecting the balance upon delivery. Finally, she advised, don’t underprice. Make sure you are building in a healthy profit margin and that you account for your time, including time spent traveling and planning. “It’s okay to charge for what you’re worth,” she says.

3. Plan for the Future
Don’t wait until it’s too late. Make sure you have enough cash to manage your business and cover upcoming expenses. Parson says that, according to her conversations with bank lenders, when a small business approaches a bank for a loan, 90 percent of the time they are already in trouble. The time to go to the bank, she says, is when things are going well and you foresee a need for cash in the future. That advice goes for outside capital too, says Kramlich. Building relationships with funders takes time, whether it’s a bank loan or a venture investment, so business owners should be looking out six to 18 months.

4. Understand Your Funding Options
There are many types of financing, each with their own costs and benefits. So business owners must assess what kind of capital is right for them. Loans that are secured—that is, that are backed by collateral of some sort—are often the lowest cost. That includes SBA loans and mortgages. Other asset-backed loans, such as factoring or purchase order financing, advance funds based upon your accounts receivable. These types of money lenders may take a really hefty chunk of your receivables, in some cases up to 40 percent, says Kramlich. But the trade-off might be worth it for business owners who need cash quickly. Debt can be valuable, says Kramlich, but sometimes it’s not enough to fuel a growing company. In that case, entrepreneurs may want to consider equity. Equity, or selling shares in your company, can be a great source of long-term capital, she says. That includes investments from friends and family, crowdfunding, angel investors, accelerator programs and venture capitalists. But you will give up some ownership of your company. The outside ownership, or dilution, is typically lowest with friends and family, but increases with angel and venture investors. A hybrid option is to invest in convertible debt, an interest-bearing loan that converts to stock over time. But Kramlich warns entrepreneurs to read the fine print closely and make sure they understand the terms, including how much of their company they are giving up.

5. Use Your Cash Flow to Help Attract Investors
Reiterating the importance of managing your cash flow, Kramlich stresses that a history of positive cash flow can help in obtaining outside capital. “Anyone who is going to finance you is going to look at that,” she says. In general, she advises businesses to do as much as they can to organically fund their growth and generate cash flow before turning to outside capital.

6. Leave the Excuses Behind
Finally, stop making excuses and start getting a grasp on your cash flow. “I hear all the excuses,” says Parsons, “from ‘I don’t have time,’ to ‘Why should I forecast, it never comes true?’” The fact is, an investment in understanding your cash flow may be the smartest one you can make.