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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, July 06, 2015
Picking a business partner is not much different than choosing a spouse or life partner, and the business break-up can be as heart-wrenching and costly as divorce.
Friday, July 17, 2015
Photographer Jason Kaplan takes a look at Murray's Pharmacy in Heppner. The family owned business is run by John and Ann Murray, who were featured in our July/August cover story: 10 Innovators in Rural Health Care.
Friday, July 10, 2015
BY DAN COOK
The Affordable Care Act has triggered a rush on health care plan redesign, a process fraught with hidden costs and consequences.
Monday, July 13, 2015
BY KIM MOORE
Revenues in Oregon's private, for profit sector maintained solid growth as the economy continued to rebound.
Friday, July 10, 2015
BY AMY MILSHTEIN
When gossip crosses the line.
Wednesday, June 24, 2015
One year after he was appointed chair of the Portland Development Commission, Tom Kelly talks about PDC's longevity, Neil Kelly's comeback and his new role as Portlandia's landlord.
Monday, July 13, 2015
BY AMY MILSHTEIN | PHOTOS BY JASON E. KAPLAN
Telemedicine, new partnerships and real estate diversification make health care more accessible in rural Oregon.
|10 Innovators in Rural Health|
|The Private 150: From Strength to Strength|
|Farm in a Box|
|Flattery with Numbers|
|Preserving the Legacy|
|Downtime with Debra Ringold|
One of the many reasons why businesses fail is due to the lack of attention to analytics. Sure, you can go on running your business, but mastering the science of analytics will translate into a business advantage.
Court experience helps legal firm anticipate potential problems for clients and prevent expensive litigation.
When Garmin AT needed to consolidate operations for its 550 employees, it scanned its entire corporate map for possible sites.
Professional and Continuing Education (PACE) and the College of Business at Oregon State University is offering “Business Analytics for Competitive Advantage”, a two-day intensive workshop.
A look back at the shifting sands of Portland’s growth and development.
Robert S. Wiggins has joined Lane Powell as a Shareholder in the Corporate/M&A Practice Group. Wiggins is a well-known lawyer, entrepreneur, and investor with more than 30 years of experience leading and advising established and emerging companies in the Pacific Northwest. Wiggins will focus his practice on offering outside general counsel services, including general corporate and board representation, business transactions and capital events.