Law Offices of
624 North Front Street, Wormleysburg, PA 17043
Phone: 717 – 232 – 4701 Fax: 717 – 232 – 4774
THE LAW OFFICES OF MICHAEL CHEREWKA is proud to offer this “Starting a New Business” kit to you, as you consider or begin a new business. As a local business ourselves, we can appreciate the hard work and dedication necessary to start and maintain a successful business. This is our attempt to assist you with some of the decisions you will be facing.
This kit includes a variety of information as well as a few sample start-up forms enclosed as examples. Please contact us for further assistance. Good Luck as you begin your new business!
This kit is for informational purposes only. You should always seek the advice of an attorney and an accountant as you start and operate a new business.
1. CHOICE OF ENTITY
- C Corporation
- S Corporation
- Limited Partnership
- Limited Liability Company
3. PAYROLL TAXES
5. FINANCING ASSISTANCE
- Financing Checklist
- Sources of Financial Assistance
6. TECHNICAL ASSISTANCE
7. LOCAL GOVERNMENT RULES & REGULATIONS
- Initial Registration
- Mercantile Tax
- Business Privilege Tax
- Occupational Privilege Tax
- Sales Tax
- Licenses & Permits
8. ESTATE PLANNING
- Family Wealth Preservation
- Estate Planning Checklist
CHOICE OF ENTITY
|Tax Rate||graduated rates up to 35% apply to taxable income||no tax to the S Corp except in two limited circumstances (recognized built-in gains and excess passive net income|
|Number of Owners||no restrictions||no more than 100 shareholders|
|Type of Ownership Interests||stock; there may be different classes of stock||stock; only common stock class; may, however, be voting and nonvoting|
|Special Allocations||not permitted; dividends paid based on stock ownership||not permitted; income, gain and loss pass through to shareholders based on stock ownership|
|Liability of Owners||generally limited to assets in the corporation||generally limited to assets in the corporation.|
|Transferability of Ownership Interests||unlimited||freely transferred only to eligible S corporation shareholders|
|Management||directors / officers||directors / officers|
|Liabilities & Basis||liabilities incurred do not increase shareholder’s basis||liabilities incurred do not increase shareholder’s basis|
|Pass-through of Losses||may not be passed through to and deducted by shareholders||may be passed through to and deducted by shareholders, subject to restrictions|
|Fringe Benefits||shareholders and employees are eligible for most fringe benefits||2% shareholders are not eligible for certain fringe benefits|
|Fiscal Year||may use any fiscal year||must use the calendar year, subject to certain exceptions|
|Tax upon Sale or Distribution of Appreciated Assets.||potential double taxation – corporate level tax upon sale or distribution & dividend or capital gains tax upon distribution of sale proceeds||single tax at the shareholder level upon sale; gains tax at the corporate level is possible under certain circumstances.|
|Tax to Entity upon Liquidation||taxed on assets||none except for potential built-in gains tax|
|Tax to Owners upon Liquidation||gain recognized to the extent that Fair Market Value of property distributed exceeds the shareholder’s stock basis||gain recognized to the extent that the property distributed exceeds the shareholder’s stock basis.|
CHOICE OF ENTITY
|Tax Rate||no tax to the LLC on LLC income; all income, gain, and loss pass through and are taxed to the members||no tax to partnership on income; all income, gain, and loss pass through and are taxed to the partners|
Type of Ownership Interests membership interests general and limited partnership units; may be different classes of ownership interests
Special Allocations permitted if they have substantial economic effect permitted if they have substantial economic effect
Liability of Owners limitedgeneral partnership, unlimited; limited partnership, general partner unlimited, limited partner limited to investment in partnership
Transfer-ability of Ownership Interests restrictions may exist under state law transferable in accordance with terms of partnership agreement; ordinarily not without consent of the other partners
Duration dissolves at the time specified in agreement or upon loss of member unless other members agree to continue LLC terminates when there is more than a 50% change in partnership interests during any 12 month period
Management all members or designated managers general partners
Liabilities & Basis liabilities incurred increase a member’s basis in his membership interest liabilities incurred by the partnership increase a partner’s basis in the partnership
|Pass-through of Losses||may be passed through to and deducted by members subject to restrictions||may be passed through to and deducted by partners, subject to restrictions|
Fringe Benefits members are ineligible for certain fringe benefits partner’s are ineligible for certain fringe benefits
Fiscal Year must use the tax year of members having a majority interestmust use the tax year of partners having a majority interest
Tax upon Sale or Distribution of Appreciated Assets single tax at the member level upon sale; no tax upon distribution single tax at the partner level upon sale; generally no tax upon distribution
Tax to Entity upon Liquidation nonenone; gains on sale pass through to the partners
Tax to Owners upon Liquidation gains pass through to membersgains pass through to partners
|Document Creating the Entity|
Articles of Incorporation
Certificate of Limited Partnership
|Operating Rules for Entity|
|By-laws & Shareholders’|
Ownership of Business
General & Limited Partners
Management of Business
Members or Appointed Managers
ü Keeping Records is Important to Your Business.
ü Good records can show you what areas of your business are doing well and where there is a need for improvements.
ü Good records are necessary to prepare accurate financial statements for banks, other creditors, and tax reporting.
ü Good records can provide you with organized documentation needed when under examination by the IRS.
Record keeping systems can range from simple manual systems to computerized software packages. The decision as to which type of system to implement is influenced by the nature of the business and the volume of transactions. You should seek the professional advice of an accountant when choosing your system. At a minimum your system should include:
CHART OF ACCOUNTS
A systematic listing of all accounts used by a company.
A general ledger contains all the asset, liabilities, and owner’s equity accounts in which all types of entries can be recorded. It provides the balances in various accounts from which the financial statements can be prepared.
Record of all sales on account.
Record of all purchases on account
CASH RECEIPTS JOURNAL
Record of all entries involving receipt of cash.
CASH DISBURSEMENTS JOURNAL
Record of all entries involving the payment of cash.
ACCOUNTS RECEIVABLE LEDGER
Record of sales made on credit by the company to individual customers.
ACCOUNTS PAYABLE LEDGER
Record of the current debts of the company on an individual vendor basis.
Record of the gross earnings, deductions, and net pay for each employee for each pay period
FIXED ASSET RECORD
Permanent record of all assets purchased for use in the business. Includes a description of the assets, date of purchase, cost, estimated life, and accumulated depreciation.
Record of the type, cost, and number of items on-hand for resale by a company.
BUSINESS RECORDS RETENTION SCHEDULE
The following is a list of suggested retention periods for your business documents. Please consult your attorney and accountant for further assistance.
|Retention Period||Retention Period|
|Accident Reports & Claims Settled|
Accounts Payable Ledgers-7 yrs
Minute Books of Directors & Stockholders, including By-laws -7yrs
Perm.Accounts Receivable Ledgers 7 yrs
Notes Receivable Ledgers 7 yrs
Audit Reports of Accountants Perm.
Option Records (expired)7 yrs
Bank Reconciliations 1 yr
Payroll Records & Summaries 7 yrs
Capital Stock & Bond Records Perm.
Petty Cash Vouchers 3 yrs
Cash Books Perm.
Physical Inventory Tags 3 yrs
Charts of Accounts Perm.
Plant Cost Ledgers 7 yrs
Check (cancelled, routine)7 yrs
Property Appraisals Perm.
Check (cancelled, Important)Perm.
Property Records Perm.
Contracts & Leases (expired)7 yrs
Purchase Orders 1 yr
Contracts & Leases (in effect)
Purchase Orders (Purchasing Dept. Copy) 3 yrs
Correspondence (legal matters)Perm. 7yrs
Receiving Sheets 1 yr
Deeds, Mortgages, Bills of Sale Perm.
Requisitions 1 yr
Depreciation Schedules Perm.
Sales Records 7 yrs
Duplicate Deposit Slips 1 yr
Savings Bond Records 3 yrs
Employee Personnel Records(terminated) 3yrs
Scrap & Salvage Records
Stenographer’s Notebooks 7 yrs
1 yrEmployment Applications
Expenses Analyses and Distribution 3 yrs
Stock & Bond Certificates (cancelled) 7 yrs
Financial Statements 7 yrs
Perm.Stockroom Withdrawal Forms
Subsidiary Ledgers 1 yr
7 yrs General & Private Ledgers Perm.
Tax Returns & Worksheets Perm.
Insurance Policies (expired)3 yrs
Time Books 7 yrs
Insurance Records, Claims, Policies Perm.
Trademark Registrations Perm.
Internal Audit Reports 3 yrs
Voucher Register & Schedules 7 yrs
Invoices to Customers 7 yrs
Voucher for Payments to Vendors & Employees 7yrs
Invoices to Vendors 7 yrs
The following Payroll Tax Returns must be filed in a timely manner in order to avoid substantial penalties:
SS-4 Application for Employer Identification Number (EIN)
W-4 Employee’s Withholding Allowance Certificate
Commonwealth of Pennsylvania – Combined Registration Form (PA 100)
To inform the Commonwealth that you are starting a new company.
A publication distributed by the IRS to provide guidance on payroll taxes and determining how much federal income tax to withhold from employees.
Form 8109 – Federal Tax Deposit
For new employers, the Internal Revenue Service will send you a Federal Tax Deposit (FTD) coupon book approximately 5 to 6 weeks after you receive an Employer Identification Number (EIN).
Alternatively, the IRS is requiring many employers to file and pay Federal payroll taxes through the IRS electronic filing system.
Federal Employment Eligibility verification.
Pennsylvania New Hires Form (BUR 1575)
Form 941 – Employer’s Quarterly Payroll Tax Return
All employers who withhold income tax, social security tax and Medicare tax from wages, tips, annuities, etc., are required to file Form 941. The due date of Form 941 is the last day of the month following the quarter being reported.
1. Social Security rate is 4.2% for employee and 6.2% employer.
2. For Medicare all wages are taxed. The Medicare rate is 1.45% for employee and employer.
3. If you accumulate less than a $1,000 tax liability during a return period (e.g., during a quarter for Form 941), no deposits are required and you may pay the tax with the return for the period. However, If you are unsure that you will accumulate less than $1,000, deposit under the appropriate rules so that you will not be subject to ‘failure to deposit’ penalties.
4. An Employer should start filing a Form 941 with the first quarter in which taxes were required to be withheld. Filing Due dates are:
Jan-Feb-Mar April 30
Apr-May-June July 31
July-Aug-Sept October 31
Oct-Nov-Dec January 31
Most employees file electronically at EFTPS.gov.
5. After filing their first return, employers will receive a form from the IRS every three months. The employer should use this form. If a form is not received, the IRS local office has additional forms.
State & Local Quarterly Income Tax Withholding Payroll Tax Returns
Returns are required at both the state and local level indicating the amount of tax due based on employee wages and applicable tax rates. The current withholding rate for Commonwealth of Pennsylvania is 3.07%.
If the amount of tax withheld is less than $300, deposits are made on a quarterly basis. If more than $300 but less than $1,000, deposits are made on a monthly basis. If more than $1,000, deposit semi-monthly.
Most employers are now required to use Pennsylvania’s electronic employer system (etides).
A company is required to withhold local taxes from an employee residing within the locality of the company. The local tax rate is generally between 1% and 2%. Many local taxes are also now filed and paid electronically.
State Unemployment Tax Returns – UC-2
In the Commonwealth of Pennsylvania, Form PA UC-2 is the return used by employers to report the tax due by employers at the state level. Currently, there is no tax assessed to the employee.
The unemployment compensation tax is determined by multiplying the first $8,000 paid to each employee by a predetermined percentage rate. Once the employee’s wages reach a cumulative total of $8,000, the employer is no longer responsible for unemployment tax on that employee. This tax is commonly referred to as SUTA. The initial rate of this tax is usually 3.5%.
Currently, Pennsylvania imposes an additional surtax on employers, and a surtax to be withheld from employees.
Form 940 – Federal Unemployment Tax Return
An annual return reporting the employer’s share of tax due for unemployment compensation at the federal level is due January 31.
An employer utilizing the services of one or more employees at least one day or paying wages of at least $1,500 in a calendar quarter is responsible for FUTA tax.
The 2010 tax is based on the first $7,000 of cumulative wages paid to each employee at a rate of 6.2%. The employer may receive a partial credit of 5.4% against this tax based upon his state unemployment tax liability (SUTA).
Form W-2 – Employment Wage and Tax Statement
This is a multiple part form summarizing all wages paid and taxes withheld from each individual employee. Employers are required to distribute Form W-2 copies to their employees by January 31. Employers must also forward a copy of Form W-2 to the Social Security Administration and State Revenue office by February 28.
Form W-3 – Transmittal Form
Form used by employers to transmit all W-2 information, such as wages and taxes withheld to the Social Security Administration. Form is due February 28.
These forms are filed by payers when at least $10 in gross royalty payments or $600 in rents or services are disbursed in the course of a trade or business.
Form 1096 – Transmittal Form
Form used by employers to transmit Form 1099 information to the Internal Revenue Service, due February 28.
SUMMARY OF PAYROLL TAXES
Federal Income Tax Withholding (FIT)
The tax rate for employees depends on the pay period, number of exemptions claimed, marital status, and the amount of gross wages.
Social Security (FICA)
Tax Rate – Employee Withholding – 4.2%
Tax Rate – Employer – 6.2%
Tax Rate – Employee Withholding – 1.45%
Tax Rate – Employer – 1.45%
Taxable Base – Unlimited
Pennsylvania Income Tax Withholding
Tax Rate – Employee Withholding – 3.07%
Local Income Tax Withholding
Tax Rate – Employee Withholding – 1% to 2% (generally)
Pennsylvania Unemployment Compensation
Tax Rate – Employer – Set by the local unemployment office. For 2010 the most likely rate for a new business will be 3.5%.
Taxable Base – $8,000 per employee.
Federal Unemployment Tax (FUTA)
Employer Rate – 6.2% of wages paid during the year.
You can take credit against your FUTA tax for amounts you paid into state unemployment compensation funds. This credit cannot be more than 5.4% of taxable wages. The minimum FUTA tax that the employer is liable for is 0.8% of taxable wages.
Tax Base – $7,000
There may be ways of strengthening your insurance coverage that have not occurred to you. This checklist is provided to help you identify areas of coverage that you should review with a qualified insurance advisor.
The checklist is divided into 3 categories: (1) Essential Coverages, (2) Coverages that may be Desirable, and (3) Employee Benefits.
- Fire Insurance
- Other Perils
- All-risk Contracts
- Special protection for the loss by fire of accounts, currency, evidence of debt, securities
- Liability Insurance
- $1,000,000 minimum?
- Specific coverage for personal (libel, slander, etc.) injuries
- Automobile Insurnace
- Fleet policy versus single vehicles
- Undersured motorist coverage
- Uninsured motorist coverage
- Workmen’s Compensation
- Waive coverage for owner/employee
- Proper classification of employees
- Private disability insurance alternative for owners/key employees
- Employer Rate – Amount depends on who you have coverage with and the amount of risk associated with the job. You MUST have workmen’s compensation if you have any employees.
- Business Interruption Insurance
- Comprehensive policies
- Federal coverage
- Plate glass, signs, doors, showcases, etc.
- Full coverage for ornamentation; lettering, etc.
- Rent Insurance
- Group Life Insurance
- Coverage typically $50,000 or less
- Conversion to private plans for terminating employees
Group Health Insurance
- Key Man Insurance
- Insure company from loss of Key Employee
LOAN REQUEST CHECKLIST
Checklist For Commercial Loans
Items 1-20 summarize the types of information you may need to provide to a lender.
1. FORMAT FOR NEW BUSINESS TO BE ESTABLISHED
may be used for start-up business or a buy-out of existing business.
Provide following information:
b) Assets (already existing assets and/or those to be purchased with loan proceeds
d) Projection of income and expenses (required for upcoming twelve (12) months)
2. SUPPORTIVE STATEMENTS FOR ABOVE ITEMS
Explanation of how firm will reach the projected income figure.
3. MONTHLY CASH FLOW PROJECTION
Not usually required, but should be utilized when possible, particularly if can support your request.
4. EXISTING BUSINESS DEBT
Include the following:
a) Creditor’s name and address
b) Purpose of loan
c) Original loan amount
d) Present loan balance
e) Date loan was acquired, term of loan, interest rate, and amount of monthly installments, collateral used to secure these loans.
5. FEDERAL INCOME TAX RETURNS
Usually request past three (3) years
a) For the business
b) For the business owners
6. COLLATERAL USED TO SECURE LOAN
Include personal property
Include equipment to be bought with loan proceeds
Make an actual physical inventory
List in accordance with classification:
a) Machinery and equipment
b) Furniture and equipment
Show: manufacturer or make model and serial number, size, year; purchased new, used or rebuilt.
7. DEEDS COVERING REAL ESTATE
If loan is to be secured by any type of real estate, a copy of the deed must be provided.
8. SIGNED PERSONAL FINANCIAL STATEMENT
A separate statement will usually be required for each owner, partner or officer and any person or entity providing a guaranty on the loan.
9. FINANCIAL STATEMENTS
a) Balance Sheet
b) Profit and Loss Statements
c) Aging of Accounts Receivable and Accounts Payable
10. HISTORY OF COMPANY AND LOAN STATEMENT
Include a detailed history and specific function of firm
Include explanation of how loan will help the firm
11. DETAILED PERSONAL RESUME
Will usually be required for all owners or partners, including educational, technical, military, business and employment experience.
12. CREDIT REFERENCES
Include name, address, and account numbers
13. USE OF LOAN PROCEEDS
Give detailed explanation of use of loan proceeds; list each and their costs.
14. BANKRUPTCY OR INSOLVENCY
If applicable, provide details if the business, or any owner, partner or officer has ever filed bankruptcy.
Provide details if the business or any owner, partner or officer is involved in any previous or pending lawsuits.
16. EMPLOYMENT WITH LENDING INSTITUTIONS
Do you or your spouse or any member of your household, or anyone who owns, manages, or directs your business or their spouses or members of their households work for the lender.
17. SUBSIDIARIES OR AFFILIATES
Provide the names and relationships with your business
Provide current balance sheet and operating statement for each
18. PERSONAL FINANCIAL CONCERN
Provide details if firm buys from, sells to, or uses the services of any concern in which someone in your company has a significant financial interest.
Include copy of franchise agreement
Include copy of FTC disclosure statement provided by franchiser
20. COPIES OF IMPORTANT DOCUMENTS
Include copies of leases, fictitious name filings, corporate certificates, and other such data.
SOURCES OF FINANCIAL ASSISTANCE
Dauphin County Industrial Development Authority
2 South Second Street
Harrisburg, PA 17108 (717) 780-6250
Internal Revenue Service
228 Walnut Street
Harrisburg, PA 17101 (717)221-3490
Small Business Administration
100 Chestnut Street, Room 108
Harrisburg, PA 17101 (717)782-3840
PA Department of Revenue
Harrisburg, PA 17128 (717) 787-1064
Ben Franklin Technology Center
Central Northern Pennsylvania
Penn State Harrisburg, Crago Bldg.
777 West Harrisburg Pike, Rt. 230
Middletown, PA 17057 (717) 948-6399
227 West Market Street
Post Office Box 5046
York, PA 17405 (717) 843-5054
Entrepreneurial Assistance Office
PA Department of Community &
The Minority & Women Business Enterprise Office
502 North Office building
Harrisburg, PA 17125 (717)787-7380
Pursues contracting & subcontracting opportunities for minority & women business enterprises with state government.
Center for Entrepreneurial Assistance Department of Community & Economic Development
400 North Street, 4th Floor
Commonwealth Keystone Building
Harrisburg, PA 17120-0225
Bureau of Vocational-Technical Education
333 Market Street
Harrisburg, PA 17126 (717) 783-8506
Provides grants to train employees in specific skills to meet an individual employer’s needs, referred to as the Customized Job Training Program (CJT).
Division of Loans & Technical Assistance
490 Forum Building
Harrisburg, PA 17120 (717) 783-5046
Machinery & Equipment Loan Fund (MELF) used to provide low interest financing for machinery & equipment acquisitions, installations or upgrades of machinery & equipment directly related to the manufacturing process.
Bureau of Occupational & Industrial Safety
1529 Labor & Industry Building
Harrisburg, PA 17120 (717) 787-3323
Administrates the laws related to the safety of the public and employees.
CHAMBER OF COMMERCE CONTACTS:
Capital Region Chamber of Commerce
3211 North Front Street
Harrisburg, PA 17110
West Shore Chamber of Commerce
4211 Trindle Road
Camp Hill, PA 17011
Pennsylvania Chamber of Business & Industry
One Commerce Square
417 Walnut Street
Harrisburg, PA 17101
LOCAL GOVERNMENT RULES & REGULATIONS
During the initial registration, a new employer will receive all the necessary forms, tax returns, questionnaires, and copies of the resolutions, upon request, needed to register.
Information you will receive will include literature and forms regarding the Mercantile Tax, Business Privilege Tax, Occupational Privilege Tax and Earned Income Tax.
For example, in the City of Harrisburg, every new business is required to register with the Capital Tax Collection Bureau and the Mercantile Business License Department, located at 2301 North 3rd Street, Harrisburg, PA 17110.
Most political subdivisions in Pennsylvania levy Mercantile Taxes upon the privilege of doing business. The percentage rate of the tax depends upon the jurisdiction in which the business resides.
The Mercantile Tax focuses mainly on retail sales, wholesale sales, and restaurants. Measurement of the tax liability is based on the actual gross receipts of the person doing business, without regard to the number of establishments maintained.
Check with the City Department of Licenses or the township or borough secretary’s office.
BUSINESS PRIVILEGE TAX
The Business Privilege Tax is an excise tax on the privilege of doing business within a jurisdiction. Often referred to as a universal business tax since it reaches out to all persons engaged in doing business. To further explain, the Business Privilege Tax is levied on businesses when a taxing jurisdiction has no mercantile tax, or a business is not subject to an existing mercantile tax.
Measurement of the Business Privilege Tax is based upon the gross receipts of persons doing business. “Business” is defined as any activity carried on or exercised for gain or profit, but not limited to sale of merchandise or performance of services.
All businesses, trades, and professionals where any service is offered to the public are liable for payment of this tax. The only exclusions are manufacturing enterprises and those subject to preempting state taxes or license fees.
OCCUPATIONAL PRIVILEGE TAX
The Occupational Privilege Tax is levied upon the privilege of engaging in an occupation within the district. Each natural person who exercises such a privilege for any length of time during the tax year is liable for this tax unless he or she has previously paid the occupational privilege taxes for the calendar year to another taxing body within the Commonwealth of Pennsylvania.
As an employer, you are required to withhold Occupational Privilege Tax from the compensation paid to an employee. Only full time students employed part time and expected to earn less than $200 are excluded.
Sales tax is an excise tax levied on retail sales of tangible personal property for use or consumption. Sales tax has been commonly referred to as gross receipts tax, gross income tax, and retailer’s taxes. Although the buyer generates sales tax by the purchase of retail goods, the retailer is responsible for reporting and paying the tax to the state. The sales tax rate for Pennsylvania is 6% of the purchase price for taxable products or services.
A sales tax number is required for each business before opening. This number can be obtained from the PA Department of Revenue. A sales tax return must be filed with the Department of Revenue. The frequency of these returns is based on the average amount of sales tax generated.
LICENSES & PERMITS
Depending upon the nature of your business, a specific license or permit may be required authorizing you to transact the business of your choice. A few of the most common licenses include:
Building and Zoning Permits
Cigarette Dealer’s License
Fuel Use Tax License
Sales Use & Hotel Occupancy Tax License
Small Games of Chance Distributor License
Transient Vendor Certificate
Liquor and Beer License
These summaries are for illustration purposes only. Licenses and permits that may be necessary for your business may vary from those listed above. Be sure to seek the professional advice of your attorney and accountant for additional assistance.
FAMILY WEALTH PRESERVATION
The first step in estate planning is very personal. You must decide who inherits which assets and when they should receive them. A handful of the questions you need to consider are in the box shown below.
SIX REASONS TO PLAN YOUR ESTATE
|Estate planning is an easy thing to put off. Maybe you think it’s too early; maybe you think your estate is too small. Here are six good reasons why you should plan your estate now.|
With a Plan
Without a Plan
|1. You decide who receives a share of your assets||State laws determine who inherits your assets – they could pass to an estranged relative.|
|2. You decide how and when your beneficiaries will receive their inheritance.||The terms and timing are set by law. Your children could be left unfettered control of a sizable estate.|
|3. You decide who’ll manage your estate (executor, trustee, etc.)||The court appoints administrators – administrators whose ideas may not be compatible with your own.|
|4. You can reduce estate taxes and administrative expenses.||Costs are usually greater, due to required administrative expenses and unnecessary taxes.|
|5. You select a guardian for your child.||The court appoints a guardian for your child.|
|6. You can provide for the orderly continuance or sale of a family business.||Financial loss and family hardships may result from an untimely forced sale.|
For those of you with an existing estate plan, the checklist on the following page can assist you in evaluating your plan’s effectiveness.
ESTATE PLANNING CHECKLIST
1. Do you have a will?
2. Does your will name a guardian for your children if both you and your
spouse are deceased?
3. Are you comfortable with the executor(s) and trustee(s) you have selected?
4. Have you considered a living trust in order to avoid probate?
5. If you have a living trust, have you titled your assets in the name of the trust?
6. Are you taking full advantage of the marital deduction?
7. If you want to limit your spouse’s flexibility over his or her inheritance, have you created a QTIP trust in your will?
8. Are both your estate plan and your spouse’s designed to take advantage of the $5,000,000.00 (effective 01/01/2012) exemption?
9. Do you and your spouse each own enough assets directly in order to take advantage of the $5,000,000.00 (effective 01/01/2012) exemption?
10. Have you utilized an irrevocable life insurance trust to exclude insurance proceeds from being taxed in your estate?
11. Are you taking maximum advantage of the $13,000.00 annual gift tax exclusion?
12. Have you created trusts that qualify for the annual gift tax exclusion?
13. Have you gifted assets that have a strong probability of future appreciation?
14. Have you considered a charitable remainder trust to provide income to your beneficiaries for a period of time with the remaining principal eventually passing to charity?
15. Have you considered a charitable income trust to provide income to charity for a period of years with the remaining principal eventually passing to your beneficiaries?
16. Do you have a management succession plan for your business?
17. Do you have a buy/sell agreement for your family business interests?
18. Have you considered a gift program involving your family owned business?
19. Are you sure you have the right amount and type of life insurance?
20. Are you sure your estate plan is up-to-date and takes into account all
potential tax-savings strategies?