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Just Married? Financial Chores to Complete when You Tie the Knot

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Wedding season typically peaks in late summer and early fall, according to wedding website TheKnot.com. This year, that peak may be even more noticeable due to pent-up demand for wedding festivities caused by the COVID-19 pandemic.

HERE”S SOME USEFUL FINANCIAL ADVICE FOR COUPLES WHO TIE THE KNOT IN 2021

How Much Does It Cost to Tie the Knot?

The average cost of a wedding —excluding the engagement ring and honeymoon — was about $19,000 in 2020, down significantly from the average of $28,000 in 2019, according to The Real Weddings Study 2020 [COVID-19 Edition]. The pandemic has temporarily reduced the average cost, largely because the average number of guests fell dramatically last year.

The drop in average wedding cost seems to be only temporary, according to the survey. The average cost for a wedding reception in 2021 is expected to be roughly $22,500.

Costs vary significantly by geographic location, however. The most expensive state to get married is New Jersey, where couples spend an average of $53,400 for a wedding and reception. The least expensive state is Utah, where the average cost is only $19,700.

Housekeeping Chores

Whether you’re planning a wedding celebration now or later, it’s important to remember the administrative tasks to address when you say, “I do.” Many of these tasks relate to name changes. Some people choose to take on their spouse’s last name or use a hyphenated (or blended) version of both last names.

The tradition of changing names is becoming less common. Many newlyweds, including some same-sex married couples and people over 35 with established careers, are sticking with their original surnames.

If you do decide to change your name, here’s the protocol after you’re legally wed:

Visit Your Local SSA Office. Notify the Social Security Administration (SSA) after you’re married to protect Social Security benefits and credit ratings. To get a new Social Security card, you need to complete an application (available online) and provide proof of identification with your old and new names, such as a driver’s license and a marriage certificate. If you were born outside the United States, you’ll also need proof that you’re a citizen or legally in the country.

Update IRS Records. The SSA informs the IRS about name changes, and the tax agency’s records are generally updated 10 days later. If you don’t notify the SSA and file a tax return with your new married name, IRS computers won’t be able to match the new name with the Social Security number.

Spread the Word. Once your name is officially changed with the SSA, newlyweds need to share the good news with everyone else. In addition to filling out the proper forms with your employer’s human resource department, here are some other records to update to avoid confusion:

  • Driver’s license,
  • Passport,
  • State and local tax records,
  • Voter registration,
  • Vehicle registration,
  • Property titles,
  • Utility records, such as phone, cell phone, electric, gas, water and trash removal,
  • Bank, credit card and brokerage accounts,
  • Pension and retirement plans,
  • Insurance policies and beneficiaries,
  • Medical, dental and pharmacy records, and
  • Email addresses and social media accounts.

When you return to work after the honeymoon, consult your company’s human resource department to evaluate how your change in marital status affects your benefits options. You might save money by eliminating duplicate health care or life insurance coverage, for example. And don’t forget to change beneficiary designations on retirement plans and insurance policies.

Combining Your Finances

Financial matters are a leading cause of conflict for married couples, especially when you’re trying to blend two established households into one. So, it’s important to consult a R+R tax advisors to get a handle on your financial, tax and estate planning strategies as a joint household.

Newlyweds need to candidly discuss such issues as how much savings and debt each partner brings to the table. Each partner’s credit rating should be disclosed to identify potential problems early in the relationship.

You’ll also need to decide whether to combine your savings, checking and credit card accounts. Even if you decide to maintain separate accounts, it’s often helpful to have at least one joint account to pay for shared expenses, such as the costs of a mortgage or car, rent, household expenses and childcare.

A joint account can also help avoid trouble in case one spouse dies. When a spouse or common law partner dies and there are separate accounts, the survivor will be excluded from the other separate account if the estate goes into probate.

In addition, R+R often help newlyweds establish joint financial goals, including annual budgets and contingency plans in case a spouse gets laid off or becomes disabled. Once your short-term goals are set, look to the future: What age do you expect to retire? Where would you like to live when you retire? What activities — such as hobbies, travel, part-time work and volunteerism — do you envision participating in during your golden years? Are your current retirement account savings and contributions sufficient to achieve those goals?

Don’t let administrative chores prevent you from living happily ever after. R+R tax advisors are here to help address critical housekeeping chores head-on – Contact us today.

About Reynolds + Rowella

Reynolds + Rowella is a regional accounting and consulting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with our clients. As members of DFK International/USA, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve.

Our mission is to operate as a financial services firm of outstanding quality. Our efforts are directed at serving our clients in the most efficient and responsive manner possible, delivering services that exceed the expectations of those we serve. The firm has offices at 90 Grove St., Ridgefield, Conn., and 51 Locust Ave., New Canaan, Conn. For more information, please contact Elizabeth Bresnan at 203.438.0161 or email.

Is it time to update your beneficiary list?

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It’s not uncommon to lose track of your beneficiaries, including which accounts have them, and who you designated. However, it is important to keep them current.

Make your beneficiary designations a priority

When you designate a beneficiary for an account, that person inherits the assets in the account, regardless of what your will says. That’s why updating your will periodically may not be enough.

Typically, you’ll have beneficiaries for each of your IRAs, your 401(k) or other retirement plans, annuities and insurance policies. Your designations could be out of date just because of life’s changes. Since you made your initial choices, you may have married, had children or divorced. Some of the beneficiaries you chose could have died, divorced or married. Their circumstances could have changed so you no longer want them to be the beneficiary.

Tax laws change frequently as well, and they can have an impact on your choices. Choosing the wrong beneficiary, or failing to name a contingent beneficiary, can affect the long-term value of your IRA assets after you die. That’s why it’s important to review your choices with tax consequences in mind.

How to update your designations

At a minimum, you should have copies of your beneficiary designations in one place. If you don’t, call the trustees of your retirement accounts and your insurance agent and request copies.

Then review the documents and decide what changes you’d like to make. Make an appointment to review your decisions with your tax- and estate-planning advisor. Discuss matters such as naming secondary beneficiaries and whether to name your estate as a beneficiary (which is sometimes not a good idea).

Finally, send your changes to the account trustee, ask for a confirmation, and keep copies in your records.

If you have questions about tax consequences or other tax matters related to your estate, contact us at consulting@reynoldsrowella.com.

Why you should do a business year-end health check and where to start

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Business owners and managers spend most of their time monitoring operations and dealing with everyday problems. But just as an annual checkup from your doctor helps monitor and manage your personal health, an annual checkup can do the same for your business.

Here are seven checkup tasks that you should make time to do every year. These are important for your long-term business health and personal success:

1. Review your business insurance coverage.

Don’t just automatically write a check to renew your insurance policies when they come due. Instead, you should sit down with your insurance agent every year. Review your business operations, focusing on any changes. Discuss types of risk that could arise. And ask about new developments in business insurance.

2. Look at your business tax strategy.

Consider adjusting taxable earnings for the year, perhaps by accelerating expenses or delaying income at year-end. If you’re a cash-basis taxpayer, you could boost 2017 deductions by declaring and paying bonuses in December rather than in early January. Also, you may be able to defer invoices or make early purchases to reduce your 2017 tax bill.

3. Survey your customers.

An annual customer satisfaction survey is a great way to assess performance, get insight on potential new products or services and to let your customers know how much you value their business.

4. Determine your marketing effectiveness.

Are your current methods and channels working well, or are you simply doing what you’ve always done?

5. Update succession planning for your business.

Review your succession planning annually. You should have a specific plan for each key manager position, including yourself. Be prepared for a short-term absence or a permanent vacancy. Your plan may include promoting from within or recruiting externally.

6. Review your business banking relationships.

Every year you should go over your cash balances and banking relationships with your controller, CFO or accountant. Then meet with your banker. Ask about new products or services that could help your company. Address any service concerns or problems you might have had. And look for ways to boost interest earned and improve cash flow.

7. Update your personal estate planning (if needed).

If you’re a business owner, your company is likely to be a significant part of your estate. Your company, your personal circumstances and the tax laws are continually changing. You should take time each year to make sure your plans are current.

If you are serious about improving your business, consider an assessment of your operation.

Contact us at consulting@reynoldsrowella.com to learn more about how you can put your business in the best position possible for 2018.

5 last minute tax tips to consider for the new year!

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The clock is ticking down to 2018 … but you still have a few weeks left to make some last-minute tax moves. Take a look at these five tips and save a little more this year.

1. Check the amount of 2017 tax you have prepaid through withholding and quarterly estimates ASAP.

If you’ve underpaid, consider increasing your withholding before year-end. Withholding is considered to have been paid evenly throughout the year. This is to help prevent you being charged underpayment penalties for 2017.

2. Make sure you have the correct tax status.

If you got married or divorced this year, be aware that your marital status as of Dec. 31 determines your tax status for the whole year. If you are in the process of a marital status change, know that altering the dates of a year-end event to the new year may affect your taxes.

3. Plan for losses.

Check your basis in any S corporation in which you are a shareholder and where you expect a loss this year. Be sure you have sufficient basis to enable you to take the loss on your tax return.

4. Use this year’s annual gift tax exclusion.

If you make annual gifts to family members or others, make sure you complete your gifts for 2017 by Dec. 31.

5. Consider equipment purchases before Dec. 31.

Taxpayers must usually deduct the cost of business property over several years. The Section 179 election allows taxpayers to expense up to $510,000 of new and used property purchased and put into service in 2017. Property such as machinery, equipment and furnishings usually qualify. Be careful with special rules that apply to vehicles and personal computers.

Contact us at consulting@reynoldsrowella.com if you’d like more tips or have questions about year-end tax savings.

Cutting business costs is no easy tasks

but here are 4 smart ways to save money.

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Keeping costs under control is crucial in today’s challenging business environment. Without a doubt, one of the quickest ways for a business to cut costs is through staff reduction. But cutting jobs is not always the best cost-cutting strategy. Drastic job cuts can lead to a vicious cycle of reduced productivity, followed by even slower growth and decreased profitability. Replacing skilled workers when times improve may be difficult, leaving your company to struggle longer still.

Take a look at some alternative cost-control strategies:

1. Review your facility costs.

If your company owns expensive office space, consider moving to a less costly location that will not mean losing clients or business. If a move is out of the question, consider sharing office space with a compatible company. What you save in shared operating costs goes directly to the bottom line.

2. Determine if sale-leaseback arrangements are right for your company.

These enable your company to generate funds for operations and transfer the burden of ownership to the buyer, from whom you rent back the office space.

3. Recalculate the cost of supplies and inventory.

Analyze the cost of materials and supplies. Are you stocking too much material too far in advance? Can you arrange to have products shipped directly to customers by your suppliers?

Periodically conduct a competitive review of suppliers, and select those who can deliver good quality and service at the lowest cost possible. Also, you may not have to pay full price; inquire about volume discounts.

4. Consider outsourcing.

Outsource certain activities that either consume a great deal of time and resources or are prone to errors. For example, you may be able to have payroll processing done by a vendor at a fraction of your current costs.

For help in finding the best cost-control strategies for your business, contact us at consulting@reynoldsrowella.com.

EXIT DEALS HAPPEN WHEN PARTIES BECOME

‘EQUALLY UNHAPPY’

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Business owners who are considering an exit from their business should consider the negotiations that are likely to ensue through the process. This newsletter is written to help owners of privately-held businesses anticipate and prepare for what lies ahead with an exit transaction and, by understanding the other party’s concerns, to anticipate how the negotiations will go. This is why, it can accurately be said, that exit deals happen when both parties are equally unhappy. It is our hope that this newsletter provides some perspective to owners so that they are better prepared for their future exit.

Beauty May Not be in the Eye of The Beholding Buyer

When thinking about exiting your business, it is natural to believe that an outside buyer will see all of the potential and beauty that you see in the future of your business. However, your future buyer will likely not have the same perspective as you. In fact, your future buyer’s job is not to focus on the beauty that lies within the business – presumably they already see this or they would not be at the negotiation table. Rather, their job is to see what might go wrong with the business once they take over control.

The Seller’s Dream vs The Buyer’s Nightmare

A business owner selling their business will want to discuss all of the potential in the business and how the next owner will be able to reap the benefits of these opportunities. However, the buyer of a business is looking at the acquisition as something totally different – they are asking themselves ‘what is most likely to go completely wrong the day after I take over this company’.

From these divergent perspectives comes two different approaches to looking at a business. The seller wants to discuss opportunities and growth, the buyer wants to discuss operational, financial and legal issues that could crater their investment. So, while one party to the deal – the seller – is seeing and focus on the upside in the transaction, the other party is laser focused on the potential liabilities and downside / risk in the business. From these differing perspectives comes different approaches to looking at your company. There are, in effect, two different ‘languages’ being spoken within the very same transaction.

Seeking Common Ground and Meeting in the Middle

As buyers advance through their ‘diligence’ of a company, more and more reasons for being skeptical of a deal will arise. On the other hand, the business owner who is the seller is often busy running their company while also answering an endless series of questions and responding to document requests from the buyer. It is not uncommon for sellers to eventually ask whether the buyer really want to see this information or are they playing some kind of game? In reality, the buyer is looking for things that aren’t broken yet, but may break one day soon.

Articulating Your Personal and Business Goals, in Writing

Given the emotional dynamic of selling your business and dealing with a skeptical, third party buyer, perhaps some of the best advice that can be provided is put down in writing your overall personal and business goals before the selling process begins. Remember that the process of reaching relative unhappiness is one where perspective is often lost . . . sometimes it simply becomes about who will fund the next set of fees and / or who will win the little skirmish. By having your goals written down, you will have a foundation to return to when you are going through this tedious process. If you, as the seller, keep asking yourself ‘is the process that you are involved in getting you closer to your overall goals?’, then you will be able to maintain some perspective as the process continues.

Deal Negotiations

Every deal is unique – like a snowflake. But the process of negotiation is relatively certain – parties start at opposing ends and meet in the middle. Exit deals cover many areas, including valuation, terms, employment agreements, notes, earn-outs, representations and warranties, lawyers, contracts, taxation . . . just to name a few. Experienced professionals will help you anticipate and navigate these many areas of negotiation and guide you through the process.

Getting to Relative Unhappiness

Relative unhappiness is the point in time in a negotiation between a buyer and a seller when both parties look across the table and see that the other party is equally as unhappy as they are. When this magical moment arrives, it is time for a deal to close. Because in this moment, both parties have heard all of the logic, have reviewed all of the data, and have listened to the point and counter-point of each argument. So, when there is nothing left to argue and only minor items to ‘horse-trade’ to close out the negotiations, it’s time to close the deal.

Eye on the Prize

A well-developed exit plan will help you mitigate the risks of relative unhappiness in a deal. The reason is that the exit planning process should help prepare you for what lies ahead and set clear goals for the destination that you would like to reach. The investment of time and money that you make to develop your exit plan will pay off large when it is time to transact. You will make fewer mistakes, hire more qualified advisors, and be under less pressure than if you were not prepared with a plan.

Concluding Thoughts

We hope that this newsletter has achieved the goal of helping you think through your exit and to be more prepared for the circumstance where you are searching for your relative unhappiness. By understanding the other sides’ concerns you can more easily understand and navigate the process, expecting that both you and the other side will meet in the middle and be equally unhappy before your successful exit is complete.

Contact Steve Risbridger at stever@reynoldsrowella.com or 203.972.5191 for assistance navigating the complex matters related to exit planning.

 

Reynolds & Rowella | Accounting and Consulting Fairfield County CT

Reynolds & Rowella, LLP is a regional accounting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with clients. As members of Enterprise Worldwide, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve. Whether closely-held corporations or high-net-worth individuals, we believe we have earned our clients’ trust.

Thinking about selling your company?

Here is where to start.

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If you’re thinking of selling your company, a proper appraisal is a necessary starting point to ensure your business is priced properly and you will be able to attract potential buyers.

Well before you’re ready to sell your company, you’ll want to determine its fair market value as a starting point for negotiations. Of course, obtaining a reasonably precise value for your business is often a complicated and time-consuming task. Accurate appraisals must weigh a variety of factors and incorporate numerous assumptions. The more precise the underlying numbers and suppositions, the more likely the appraiser’s determination of fair market value will reflect what a willing buyer would actually pay. Here are two questions an appraisal should address.

How does your business compare?

If you’re operating a service business, your valuation will differ – often substantially – from a company involved in light manufacturing or retail. Buyers will expect a reasonable return on their investment, a return that is often represented as some form of earnings multiplier. For example, your business may be valued at three times projected earnings. Once determined, that number can be compared to businesses of similar size in your market. Of course, accurate valuations must compare apples to apples. “Earnings” must be defined. Should “earnings” include or exclude the owner’s pay, interest expense, depreciation, or taxes? A careful appraisal will also scrutinize the balance sheet. The basis for valuing tangible and intangible assets (including non-compete agreements) and liabilities (such as mortgages, installment loans, and accounts payable) should be clearly laid out – before the business is put on the block.

Will present trends continue?

The future may be difficult to predict, but a careful analysis should be based on conservative projections, assumptions, and common sense. If, for example, the business is expected to retain skilled management and employees, buyers may be willing to pay a premium. If, on the other hand, the company is overly dependent on a few products or customers, potential buyers may be scared off. Or they may require concessions to mitigate perceived risk. Again, a careful appraisal will consider many such factors and value the business accordingly.

Remember: an appraisal is merely a starting point for negotiations. The more accurate the appraisal, the more likely the business will be priced correctly and potential buyers will be attracted. Unfortunately, determining the fair market value of a business may be fraught with missteps and faulty assumptions. For that reason, hiring a trained and objective professional is often a worthwhile investment.

We have an entire team dedicated to help you with this, contact us at consulting@reynoldsrowella.com to talk about your specific situation.

 

Reynolds & Rowella | Accounting and Consulting Fairfield County CT

Reynolds & Rowella, LLP is a regional accounting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with clients. As members of Enterprise Worldwide, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve. Whether closely-held corporations or high-net-worth individuals, we believe we have earned our clients’ trust.

 

The rules for withdrawing from a 529 college savings plan

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After years of putting money in your 529 college savings plan, you’re ready to start taking withdrawals to pay tuition bills.Do you know the rules for keeping the withdrawals tax-free?

Here’s an overview of three types of 529 plan distributions.

• Qualified withdrawals. When you take money from the account to pay for college education expenses such as tuition, fees, books, supplies, and equipment, the withdrawals are generally tax- and penalty-free, no matter the age of the account beneficiary.

Caution: Part of the distribution may be taxable when the account beneficiary receives tax-free assistance such as a scholarship. In addition, you must coordinate 529 withdrawals with the American Opportunity Credit and Lifetime Learning Credit, as well as distributions from Coverdell education savings accounts. These rules prevent the use of the same expenses to obtain multiple tax benefits.

• Nonqualified withdrawals. The earnings portion of withdrawals that are used for anything other than qualified education expenses are taxable. You’ll also have to pay a 10 percent penalty on the earnings, unless an exception applies.

• Rollovers. You can deposit or rollover withdrawals into the 529 plan of a family member, or into another account of which you are the beneficiary. When the rollover is completed within 60 days after you take the initial distribution, it’s not taxable.

If you have questions or need help calculating 529 plan withdrawals, please call contact us at consulting@reynoldsrowella.com

 

Reynolds & Rowella | Accounting and Consulting Fairfield County CT

Reynolds & Rowella, LLP is a regional accounting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with clients. As members of Enterprise Worldwide, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve. Whether closely-held corporations or high-net-worth individuals, we believe we have earned our clients’ trust.

 

Single? Don’t overlook financial planning.

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Whether you are a lifelong single person or you found yourself single through divorce or the death of your spouse, you have your own financial considerations and complications.

Unfortunately, many single people overlook financial planning. Don’t make this costly mistake.

Financial and estate planning help you protect your earnings and your property. For single people who do not have someone to fall back on, planning for unexpected financial setback is especially important.

Protecting your earnings (your ability to provide basic needs for yourself and your dependents) should start with creating an emergency fund that could pay for your basic living expenses for six to twelve months. The fund should be separate from your other investments, readily accessible, and reserved solely for emergency use.

Insurance is an important factor when it comes to protecting your income. Disability insurance provides a steady income stream when you’re sidelined by illness or injury. Employers frequently offer disability policies, but they are also available through private insurers. Life insurance may not be a priority for you if you do not have dependents, but if anyone relies on you financially, a term life insurance policy would offer an income stream to your loved ones in the event of your death.

Asset protection is more complex. Through powers of attorney, you can appoint trustworthy people to make financial or medical decisions for you in the event you become incapacitated. By creating a will (and perhaps a trust) and naming beneficiaries for your IRA or 401(k) plans, you can ensure that your assets will go to the individuals or charities of your choice.

Your financial planning needs are unique. If you’d like to learn more about protecting your finances and property, contact us at consulting@reynoldsrowella.com

Disability insurance

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Disability insurance can be an important part of your financial plan – here is what you need to know.

Say “insurance” to most people and auto, health, home, and life are the variants that spring to mind. But what if an illness or accident were to deprive you of your income? Even a temporary setback could create havoc with your financial affairs. Statistics show your chances of being disabled for three months or longer between ages 35 and 65 are almost twice those of dying during the same period.

Yet people with financial savvy often overlook disability insurance. Perhaps they feel adequately covered through their job benefits. However, such coverage can be woefully inadequate. The fact is, most individuals should consider disability insurance in their financial planning. When considering disability insurance, think in terms of long term and short term. Many employers provide long-term disability coverage for all employees. Find out if your employer does. If you have long-term disability insurance, you need to consider short-term coverage to supplement during the period of disability before your long-term coverage begins. To get the right coverage for you, take the following steps:

Scrutinize key policy terms.

First, ask how “disability” is defined. Some policies use “any occupation” to determine if you are fit for work following an illness or accident. A better definition is “own occupation,” whereby you receive benefits when you cannot perform the job you held at the time you became disabled.

Check the benefit period.

Ideally, your policy should cover disabilities until you’ll be eligible for Medicare and Social Security.

Determine how much coverage you need.

Tally the after-tax income you would have from all sources during a period of disability and subtract this sum from your minimum needs.

Decide what you can afford.

Disability insurance is not inexpensive. Plan to forgo riders and options that boost premiums significantly. If your budget won’t support the ideal benefit payment, consider lengthening the elimination period (but be sure that accumulated sick leave, savings, etc., will carry you until the benefits kick in).

Need help deciding, or want a review of your current insurance? Contact us at consulting@reynoldsrowella.com we are here to help.

 

where to find us and how to call us

90 Grove Street / Ridgefield, CT 06877 / Office: 203.438.0161 / Fax: 203.431.3570
51 Locust Avenue / New Canaan, CT 06840 / Office: 203.972.5191