When you are devising a long-term financial strategy you may be interested in asset protection. One option that is available to that end is the creation of a limited liability company or LLC. The LLC is kind of a cross between a corporation and a partnership or sole proprietorship. The owners of an LLC are called “members,” and there is such a thing as a single member LLC.

The assets that are personally owned by the members of a limited liability company are protected from creditors and claimants seeking redress from the LLC. This is where the asset protection lies. However, the LLC itself can be litigated against so assets owned by the LLC are not protected on that level.

In addition to this, if the LLC is making cash distributions to the members, these can indeed be subject to charging liens, so the creation of a LLC is not a cure-all. There are those who try to get around this by having the LLC make payments that benefit the members without making the payments directly to them. For example, the LLC could make a mortgage payment for a member.

This is something you may want to refrain from because the onus would be on the LLC member or members to prove that this entity was in fact separate from his or her personal financial identity. Creditors often successfully argue that the limited liability company is actually just an extension of the member or members and not a legally viable entity in its own right. Having the LLC pay your bills gives the creditors ammunition when they make this argument.

Limited liability companies can be a good choice for asset protection under certain circumstances. You just have to go about things in the right way and create clear separation between your own personal finances and that of the LLC. To learn more about LLCs and asset protection, simply take a moment to arrange for a consultation with an experienced Atlanta asset protection planning attorney.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

There is a gift tax in place to dissuade people from giving away their property while they are still alive, and there is also an estate tax looming to cut into the inheritances that you leave to your heirs. At the present time both taxes are carrying a 35% top rate, but this is scheduled to go up to 55% at the beginning of 2013 if no changes to the laws are made before then.

This level of asset erosion is something to take seriously, and Atlanta estate planning attorneys understand how to do what it takes to mitigate the damage through the implementation of tax efficiency strategies.

With this in mind, let’s take a look at an interesting tax situation that a New York Yankee fan may be facing. Christian Lopez caught a home run ball in the left field bleachers of Yankee Stadium recently. But it wasn’t just any ball–it was Derek Jeter’s 3,000th hit. Rather than selling the historic baseball to the highest bidder, he gave it to the Yankees saying he felt the ball rightfully belonged to Jeter. The team rewarded him with valuable suite seats for the rest of the year as well as some autographed Yankee gear.

This exchange has tax experts wondering if what the Yankees provided to Lopez should be construed as taxable income or a gift. According to a CNN story if it is considered income, Lopez may be looking at a tax bill in the neighborhood of $14,000. If it is deemed a gift, he will emerge unscathed by the tax man. Either way, for Lopez to give some of the autographed gear to his girlfriend who purchased his July 2011 tickets for him will likely require use of a portion of his available lifetime gift tax exemption.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

Taking money out of a retirement account early should only be done in extreme circumstances. There are several major reasons you should avoid early withdraws.

Penalties

At age 59 ½ you are eligible to take money from your IRA or 401K. If you remove money before you reach this age you may be assessed a ten percent penalty. This penalty is on top of taxes you must pay.

Income Taxes

For accounts where you placed pre-tax money, you will owe income taxes on that year’s tax return. Withdrawing money provides you with extra income, which means your taxable income for that year will be higher. If you wait to take your funds until you are retired, your income may be lower, which means these funds may not be taxed as heavily.

Affect Retirement Income

Withdrawing retirement funds early will affect your later years. You may need those funds for medical bills and daily living expenses. If you take money out of your account early, you may have to delay your retirement age and continue working to rebuild your nest egg.

Exceptions

Sometimes prematurely using your retirement funds is necessary. There are times when an early withdraw will not be met with a ten percent penalty. These situations include if you become disabled, if you die, or if you have a hardship case that meets the hardship standards of your financial institution.

Alternatives

If you have an IRA you can withdraw funds any time you like, but you should wait until retirement. If you have a 401K, you may not be able to remove your money until you have left the job that offered the account. Many people withdraw their 401Ks when they change jobs. Avoid this, and consider using a rollover IRA to house your previous 401K funds.

As an alternative to withdrawing early for financial circumstances, you should consider a loan from your account if your account holder offers such an option. You will, however, have a limited amount of time, such as five years, to pay those funds back with interest.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

Saving for your retirement is an activity that should happen early and often. So, how do you know if you have enough saved to last you for the undetermined number of years you will have left after you leave your job?

How Much Do You Need

It’s hard to predict the future, but the best way to determine if you have enough for your retirement is to estimate 80% of your pre-retirement expenses. This percentage is based upon the assumption that your children will be grown and in homes of their own, that you will have your home paid off and that you will no longer need to save for retirement since you will be retired.

Another way to determine your retirement monetary needs is to create a detailed budget of your current expenses. From this, subtract what you know you will not need later and add any other expenses you foresee such as more traveling…many retired individuals love to travel!

What If You Won’t Have Enough

What if once you estimate how much you need for retirement, you realize that you will not have enough? If this is the case, you will need to reevaluate your current habits.

The best place to start is by putting more money into your retirement account. To do so you may need to cut back on your present expenses and pay off high interest debts. If your children are already in college or have started their own families, you may be able to save money by downgrading to a smaller home.

As you increase your retirement account contributions, it is also a good idea to focus on solid investments. A financial planner may be able to help you find ways to save money on your living expenses now and in retirement and provide you with great investment opportunities.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

Nearly 20% of people over the age of 65 have fallen victim to some type of fraud, whether it be an inappropriate investment, unreasonable fees for services or outright theft. Following is a rundown of just a few of the latest fraudulent schemes to watch for:

Medicare Scams

Medicare is complicated, and scammers know that fact all too well. They often send email or make phone calls to seniors purporting to be a Medicare employee and asking to “confirm” sensitive financial information, such as a bank account number, social security number or a credit card number. Medicare will NEVER ask for information in that manner, particularly financial information. Don’t be afraid to ask the caller for their name, phone number, title and the name of their department. Verify this information with Medicare before answering questions, even if the caller claims the information requested is needed to fix an error. You may also call the Health and Human Services Office of Inspector General at 800-HHS-TIPS if you suspect you’ve received a fraudulent call or contact a Medicare office to confirm a worker’s identity.

Debt Scams

Thieves can also target seniors who have recently lost their spouse. In a recent scam, a couple would scour obituaries and contact the surviving spouse claiming an outstanding bill or debt that must be paid immediately. They requested a check or credit card information to “avoid penalties and fines”. They took the money and were never heard from again. Ask any creditor for verification of a debt via a written confirmation with all details. Confirm outstanding balances and ask questions of all “collectors”.

Repair and Contractor Inflation

Beware of any contractor or repairman who would make the first point of contact offering to “fix” something or help with landscaping. These “workers” are often looking for someone to pay inflated rates for work that is either never completed or poorly done. If you are the person initiating contact for a repair or a contractor, make sure to get more than one estimate to ensure prices are reasonable. Check out contractors and servicemen through the Better Business Bureau and always confirm that they are properly licensed. If it’s something that is outside your knowledge area, ask a friend or relative for assistance in hiring a good, honest, insured contractor.

Don’t be a victim, trust your instinct and always:

• Ask questions;
• Confirm information;
• Make informed decisions;
• Ask a friend or relative for advice or assistance;
• Avoid giving sensitive information to callers or via email – including a social security number, credit card or bank account numbers or even a date of birth;
• Check out businesses with the Better Business Bureau or a local Chamber of Commerce.

Don’t be embarrassed to ask questions or ask for additional information. If a situation escalates, don’t be embarrassed to ask for advice or assistance on how to handle it. It’s always better to be safe than sorry.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.

As an owner of a small business, you’re allowed to deduct the cost of doing business from your gross income. What you get after this deduction is your net business profit. You have to pay tax on your net business profit.

If you know how to maximize your business expenses, you’ll be able to reduce your income tax, putting more money in your pocket. Guidance from a tax professional can help you understand the tax laws and how best to structure your balance sheet. You can even follow tax rules and actually get yourself a personal benefit like a holiday or retirement savings plan! It all depends on how you manage your deductions.

There’s no specific limit on the amount of operating expenses you can claim. Expenses have to be reasonable, but usually the IRS doesn’t question the amount of individual expenses you claim, because people are unlikely to pay more for something than it’s worth. However, you’ll need to be able to prove that you actually paid for each business expense that you claim. Good recordkeeping is key; you’ll need to keep your receipts and be able to track your payments for any expenses you’ve claimed.

When claiming expenses, it’s important to know the difference between personal and business expenses. For example, you cannot deduct expenses incurred you use for commuting to work. That is purely a personal expense. The same is true for meals you buy for yourself while you’re working. Although you can deduct the expense of meals you buy for clients, your tab for your own meal is considered personal.

Another type of expense that may raise a red flag with the IRS is payments you make to family members who have another business or large payments to a company in which your relative has an ownership interest. Here again, documentation and knowing the rules are key. For help with these or other small business tax issues, contact a tax professional.

Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.