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|Thursday, July 03, 2014|
BY TED AUSTIN & MIKE BAELE | GUEST CONTRIBUTORS
Like the rest of the country, Oregon has enjoyed a revival of economic activity and growth over the past several years. Fortunately, the state was spared from the harsh winter conditions that affected much of the U.S. this past year. The Office of Economic Analysis announced that Oregon is currently enjoying the strongest job growth since 2006. Recently, economic indicators have approached the levels seen in 2008, according to the Oregon Index of Leading Indicators. While this resurgence has been welcome, the lingering effects of the 2008 “Great Recession” continues to affect Oregon businesses especially with regard to estate planning and business succession.
During the past 20 years the nature of businesses in Oregon has transformed. The state now relies less heavily on a resource-based economy (timber, fishing, agriculture), and more on a combination of mixed manufacturing, marketing and technology. These changes, along with the recent recession, led to an environment where some once-thriving businesses have declined, closed their doors or have seen only modest revenue growth during the past five years. This has affected company balance sheets and altered company valuations along with the financial stability of the owners and their families. Estate planning issues were compounded with the financial crisis and long-term nature of the recovery. With one-third of small business owners over the age of 55, the financial crisis may have also had a substantial impact on their personal long term planning processes. There are two trends that rise to the top for business owners post-recession.
The potential benefit of life insurance
When company valuations are low, paying taxes on a business can be stressful, thus making an estate plan vital. In Oregon, federal estate taxes are at 40 percent on estates greater than $5.34 million and Oregon estate taxes are as much as 16 percent on assets over $1 million. Many Oregon business owners find that the majority of their net worth is tied up in the company with little personal liquidity.
In the event of the death of the business owner, cash needed for the estate tax bill and other estate expenses may cause other owners, families and beneficiaries think that the only option is to liquidate the company or its assets. Liquidating can be a suitable option, and it is important to work with a wealth management professional, attorney, and a tax professional to help ensure you are creating a purchase agreement that allows the business to sell in a manner that minimizes the tax liability and avoids the liquidity trap.
With short-term interest rates at historic lows, the use of life insurance can provide much needed liquidity for estate tax liabilities, as well as other business succession plans. Paying the premiums on insurance policies of this size may be challenging for those who have most of their capital in their business. There is an increased interest in premium-finance loans, where business owners can borrow the funds to pay life insurance premiums. Rather than outlay capital for the premiums, business owners can pay the interest on the funds borrowed to pay the premiums.
Varying your approach to investing capital
While growing their business, many continue to invest capital back into their company. Another option may be to invest available capital into mutual funds for simplicity and diversification. Mutual funds are generally the appropriate tool for these reasons, however, some larger investors, with assets of $5 million or more are seeking alternatives to mutual funds.
Larger investors who seek capital-gains control or who don’t want to be subjected to the possibility for frenetic inflows and outflows or the potential for high tax liabilities or market timing may find that mutual funds generally won’t give them the desired outcome.
A wealth management professional can guide business owners through the process of creating a business succession plan and a unique investment plan with a variety of investment types while providing more control over tax consequences. It is important for business owners to seek specialized guidance to help ensure they are thoroughly planning for their business, personal life and their family’s future after surviving the financial crisis.
Ted Austin is the Oregon market leader and Mike Baele is managing director, senior portfolio manager for The Private Client Reserve of U.S. Bank in Portland.
Monday, April 13, 2015
BY GRANT KIRBY | OP-ED CONTRIBUTOR
The mega-shift from technology-driven to data-driven organizations raises questions about Oregon’s workforce preparedness.
Monday, April 27, 2015
BY AMY MILSHTEIN
Companies can benefit when they use software to meet staffing requirements and address employees' family and life commitments.
Friday, May 08, 2015
BY CHRIS NOBLE | PHOTOS BY JASON E. KAPLAN
Hagfish may not have evolved much over the last 300 million years, but their protein-heavy slime promises advances in super-materials.
Friday, May 15, 2015
BY KIM MOORE | RESEARCH EDITOR
The Portland Bureau of Transportation is seeking input from businesses on a $5.5 million initiative to create a network of biking, transit and pedestrian trails within Portland’s central city.
Friday, May 22, 2015
BY JACOB PALMER | DIGITAL NEWS EDITOR
The recent tragedy in Philadelphia has called attention to Amtrak and the nation's woefully underfunded rail service. Here are six facts about the Amtrak Cascades corridor between Eugene and Vancouver B.C.
Wednesday, May 27, 2015
PHOTOS BY JASON E. KAPLAN
Like all good journalists, OB editorial staff typically eschew freebies. But health care costs being what they are, digital news editor Jacob Palmer couldn't resist ZoomCare's offer of a three-in-one (cleaning, exam, whitening) dental office visit, guaranteed to take no more than 57 minutes.
Friday, May 22, 2015
BY ANNIE ELLISON
Portland tech veteran Ben Berry is leaving his post as Portland’s chief technology officer for a full-time role producing unmanned aerial vehicles (UAVs) aimed at first responders and the military. Berry’s AirShip Technologies Group is poised to be on the ground floor of an industry that will supply drones to as many as 100,000 police, fire and emergency agencies nationwide. He reveals the plan for takeoff.
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Tonkon Torp helps seed sustainability at Gunderson.
Oregon-based Environments helps companies create inspired workspaces. “Simply put, we help companies future-proof their workspaces,” says Chris Corrado, president. Since 1988,Environments has witnessed firsthand the changing landscape of business. Native Portlander and Environments founder Corrado says, “We help our clients navigate the complex realities of the workplace today and plan for their future in a very mindful, strategic way. We think of ourselves as their partners in the process.”
One hundred years ago, the Willamette River might easily have been mistaken for a sewer. Unchecked industrial activity and decades of pollution made it unrecognizable compared to the clean river that now flows north for 187 miles from Eugene through the center of Portland.
The Oregon Entrepreneurs Network (OEN) will be presenting its third annual Entrepreneurial Summit on Friday, June 5 at Castaway in Portland, Oregon.
On June 13th Mayor Charlie Hales will attend nonprofit organization Dream Change’s inaugural Love Summit and will introduce one of its keynote speakers, Dan Wieden of Wieden+Kennedy advertising agency.
34 spots for food, 17 places to sip, and 7 sites to choose a brew beckon visitors.