20140916 wealth management for small business owners

We Build and Preserve WealthElmwoodWealth Management

Financial Planning Portfolio Management Tax & Estate Services

Wealth Management For Small Business Owners



I. Estate and Succession Planning

II. Maximizing Your Retirement Accounts

III. Investments

Meeting Agenda



I. Various Forms of Trusts

I. Living Trusts, Revocable Trusts, Charitable Trusts, GRATs

II. Gifting

I. Annual Gift Tax Exclusion is $14,000 per Person

II. Securities, Real Estate, Low Cost Basis Assets

III. Donor Advised Funds

IV. www.tisbest.org

III. Business Continuity Plans

I. Buy/Sell Agreements

II. Key person insurance

Estate and Succession Planning

Estate attorneys typically offer package deals when creating a living trust to

include wills, health care directives and such making this undertaking more affordable.



I. Retirement Plan Options

I. Traditional IRA

I. $5,500 or $6,500 if over 50 years old

II. Roth IRA

I. $5,500 or $6,500 if over 50 years old

II. Subject to income $114,000 or $181,000 joint

III. SEP IRA

I. 25% of compensation or $52,000 maximum

IV. 401(k) plans

I. $17,500 annually and additional $5,500 if over 50

II. Individual 401(k) can match 25% of compensation up to

$52,000 maximum

Maximizing Your Retirement Accounts



I. Focus on Low Cost Providers

I. Charles Schwab & Fidelity for plan admin services

II. The Online 401(k) website (www2.theonline401k.com)

III. Individual Stocks and Exchange Traded Funds (ETFs)

II. Create a Simple and Efficient Structure

I. ‘Moneylink’ for funds transferred to checking account

II. Bundle all accounts into one user ID

III. Schwab saves 10 years of client data online

IV. Schwab Investor Checking linked to taxable/trust account

Investments

Consolidating your investment accounts to a single custodian will help to manage

your finances. Link a Charles Schwab investor checking account to your personal trust.



Quarterly Investment Reviews

I. Compare investments versus peer groups (Morningstar.com,

Yahoo or Google Finance)

II. Have a plan to rebalance your asset allocation

I. Quarterly? Annually?

Optimize account holdings

I. By ensuring that growth is a priority in retirement accounts, and

liquidity is a priority in non-retirement accounts, we can invest in

growth, at the same time providing for your own short-term needs.

I. Use retirement accounts for growth; invest primarily in

equities

II. Use brokerage/trust account for stability and liquidity; invest

primarily in bonds.

Investments –continued



I. Set an Asset Allocation (mix between

stocks, bonds, etc)

I. Know what you own, it provides

peace of mind

II. Understand how retirement date

funds work

Investments

1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055

Percent

Invested

in stocks

32% 35% 40% 42% 51% 60% 69% 76% 84% 87% 90% 90% 92%

Source: Morningstar.com May 3, 2013

Sample Target Date Retirement Fund Stock Allocation

Asset

Class

% Historical

Return

Historical

Volatility

Domestic

Equities

35% 9.74% 20.0%

Foreign

Equities

10% 8.1% 21.9%

Fixed

Income

40% 6.0% 6.9%

REITs

& Nat Re

10% 6.5% 18.5%

Cash 5% 3.0% 3.1%

Total 100% 7.4% 14.0%



Appendix

I. Retirement Plan Tax Table

II. Personal Income Tax Schedules

III. Capital Gains Tax Schedules

IV. Insurance Considerations

V. Additional Elmwood Services

VI. Elmwood Biographies

VII. Elmwood Contact Information

VIII. Disclosures



Appendix: Retirement Plan Tax Table

Go to HSAbank.com to open up a health savings account. They are

inexpensive and efficient in providing you easy access to your funds and recordkeeping.

Payroll Deduction IRA SEP SIMPLE IRA Plan Profit Sharing

Key Advantage Easy to set up/maintain Any employer with one or

more employees

Salary reduction plan with little admin

paperwork

Any employer with one or more

employees

Employer

Eligibility


employees

Any employer with one or

more employees

< 100 employees and no other

retirement plans


employees

Employer’s

Role

Arrange payroll deduction contributions.

No annual filing required

IRS form 5305-SEP to set up

plan. No annual filing required

IRS form 5304/5-SIMPLE to set up

plan. No annual filing required.

Custom plan document. Must file

IRS form 5500. Need advice

Contributors To

The Plan

Employees via payroll deduction Employer contribution only Employee salary reduction + employer

contribution

Annual employer contribution is

discretionary

Maximum

Annual

Contribution

$5,500 for 2014. Over age of 50 an

Additional $1,000

Up to 25% of comp, but no

more than $52,000 for 2014

Employee: $12,000 in 2014. Over age

of 50 an additional $2,500. Employer:

match 1-3%

Up to 100% of comp, or $52,000.

Employer can deduct amounts <

25% of total plan

Contributor’s

Options

Employee can decide how much to put in

any time

Employer decides whether to

make contributions yearly

Employee can decide how much, but

Employer must match or make 2%

Employer makes contribution as

set by plan terms

Minimum

Employee

Coverage

No requirement. Can be made available

to any employee

All employees over 21,

employed 3/5 years, and

made > $550

All employees w/ > $5,000 income in

current or last 2 years.

All employees > 21 and worked

1,000 hours last year

Withdrawals

Loans/Payment

Permitted anytime, but subject to income

and penalty taxes

Permitted anytime, but subject

to income and penalty taxes

Permitted anytime, but subject to

income and penalty taxes

Permitted for special events as per

plan terms. Subject to income

taxes

Vesting 100% immediate vesting 100% immediate vesting 100% immediate vesting Depending on plan terms



Appendix: Retirement Plan Tax Table

Safe Harbor 401 (k) Auto Enrollment 401 (k) Traditional 401 (k) Defined Benefit Plans

Permits high level of salary deferrals by

employees without annual non-

discrimination testing.

Provides high level of participation and

permits high level of salary deferrals. Safe

harbor relief for default investments

Permits high level of salary deferrals by

employees.

Provides a fixed, pre-established benefit

for employees.

Any employer with 1 or more employee Any employer with 1 or more employee Any employer with 1 or more employee Any employer with 1 or more employee

Will require help to set up. Minimum amount

of employer contributions required. Must file

form 5500

Will require help to set up. Minimum

amount of employer contributions required.

Must file form 5500



Must file form 5500



Must file form 5500. Actuary to determine

annual contributions.

Employee salary reduction contributions and

employer contributions

Employee salary reduction contributions

and maybe employer contributions

Employee salary reduction contributions

and maybe employer contributions

Primarily funded by employer

Employee: $17,500 in 2014. Over age 50

an additional $5,500.

Employer/Employee Combined: Up to

lesser of $51,000 in 2014. Employer can

deduct amounts < 25% of aggregate comp

for all participants and all salary reduction

contributions.







contributions.







contributions.

Annually determined contribution

Employee decides on contribution, and

employer must match or make 3%

contribution

Employees, unless they opt out, must

make contribution as defined by employer.

Additional contributions by employer

based on plan terms.

Employee decides on contribution.

Additional contributions by employer based

on plan terms.

Employer contributions per plan terms

Generally, must be offered to all employees

age 21 and over and who worked at > 1,000

hours previous year

Generally, must be offered to all

employees age 21 and over and who

worked at > 1,000 hours previous year









Appendix: Federal Personal Income Tax Schedules for 2014

Tax Rate Single Filers Married Filing Jointly Married Filing Separately Head of Household

10% Up to $8,925 Up to $17,850 Up to $8,925 Up to $12,750

15% $8,926 - $36,250 $17,851 - $72,500 $8,926 - $36,250 $12,751 - $48,600

25% $36,251 - $87,850 $72,501 - $146,400 $36,251 - $73,200 $48,601 - $125,450

28% $87,851 - $183,250 $146,401 - $223,050 $73,201 - $111,525 $125,451 - $203,150

33% $183,251 - $398,350 $223,051 - $398,350 $111,526 - $199,175 $203,151 - $398,250

35% $398,351 - $400,000 $398,351- $450,000 $198,176 – $225,000 $398,351- $425,000

39.6% $400,001 – or more $450,001 or more $225,001 or more $425,001 or more



Appendix: Capital Gains Income Tax Schedule for 2014

Tax

Rate

Single Filers Married Filing Jointly Married Filing Separately Head of Household

10% Not subject to capital gains tax if total

income including capital gains falls within

this bracket

Not subject to capital gains tax if total


this bracket


income including capital gains falls

within this bracket

Not subject to capital gains tax if

total income including capital

gains falls within this bracket

15% Not subject to capital gains tax if total


this bracket



this bracket


income including capital gains falls

within this bracket

Not subject to capital gains tax if

total income including capital

gains falls within this bracket

25% 15% 15% 15% 15%

28% 15% 15% 15% 15%

33% 15% 15% 15% 15%

35% 15% 15% 15% 15%

39.6% 20% 20% 20% 20%



Appendix: Miscellaneous Tax Items for 2014

Single Filers Married Filing Jointly Married Filing Separately Head of Household

Itemized

Deductions

$250,000 $300,000 $150,000 $275,000

Alternative

Minimum Tax

$51,900 $80,800 $40,400

Standard

Deduction

$6,100 $12,200

Ordinary

Dividends

Ordinary income tax rates

Qualified

Dividends

Long-term capital gains rates

Unearned Income

(Medicare Contrib)

3.8% surtax on lesser of net investment income or modified adjusted gross income above $200,000 (individuals) and $250,000 (couples)

Medicare

Payroll Tax

Additional 0.9% on earned income above $200,000 (individuals) and $250,000 (couples)



Appendix: Medicare payroll and net investment income taxes 2014

The healthcare law included two new taxes that were scheduled to take effect in 2013. These taxes were not repealed as part

of the fiscal cliff deal, and will kick in this year as expected.

The Medicare payroll tax

Here is what’s changing. In 2012, the Medicare payroll tax was 2.9%. It applied only to earned income, which includes wages

you are paid by an employer, plus tips. Your share, 1.45%, was deducted automatically from your paycheck. Your employer

kicked in the other 1.45%.

In 2013, high-wage earners will owe an additional 0.9% on earned income above $200,000 (single filers) or $250,000 (married

filing jointly). So, for example, if you are a single filer whose salary will be $225,000 in 2013, you will pay a 1.45% Medicare

tax on the first $200,000, then 2.35% (1.45% plus 0.9%) on the next $25,000. Your employer will be required to withhold the

extra 0.9% once your wages pass the $200,000 threshold for individuals.

The Medicare surtax on net investment income

A 3.8% surtax will be due on the lesser of your net investment income for the year, or the amount by which your “modified

adjusted gross income”—or MAGI—exceeds those income thresholds. Note that a taxpayer could be subject to both the

additional 0.9% tax on earned income and this 3.8% tax.

Here is a hypothetical example: Paul and Ann’s MAGI is $372,000, of which $330,000 is wages and $42,000 is net investment

income. Their MAGI is $122,000 over the $250,000 threshold for married couples filing jointly. They'll incur the 3.8% tax on

their $42,000 of net investment income, because it is less than the amount they are over the MAGI threshold ($122,000).

They’ll also owe 0.9% on the $80,000 that their wages are over the $250,000 earned income threshold for married couples

filing jointly. Their total Medicare tax surcharge will be $2,316, which includes $1,596 (3.8% of $42,000) and $720 (0.9% on

$80,000).



I. Health Care

I. High Deductible HSA’s, Group Plans, Disability

II. Long-Term Care

I. This may be a deductible expense (www.aaltci.org)

III. Business Insurance

I. Workman’s comp, liability, business income, property, comm auto

II. Umbrella policy

Insurance Considerations

Go to HSA.com to open up a health savings account. They are inexpensive

and efficient in providing you easy access to your funds and recordkeeping.



Appendix: Additional Elmwood Services for Individuals & Families

Go to our website, www.ElmwoodWealth.com to see our guide on living trusts

and college 529 plans.

I. Financial Planning

I. Retirement and education planning

II. Insurance evaluation and 410(k) allocation

II. Portfolio Management

I. Customized portfolio management to achieve financial goals

II. Open investment style and platform to avoid biases

III. Tax & Estate Services

I. Comprehensive estate planning

II. Tax efficient strategies utilized for planning and investments

http://www.elmwoodwealth.com/



Shannon Lemon, CFP

Shannon’s primary responsibilities include working directly with our clients on assessing their

financial situation and putting a plan in place to meet their financial goals. Prior to co-founding

Elmwood Wealth Management, Shannon worked for Osborne Partners Capital Management for

18 years and was their Chief Compliance Officer and a principal of the firm. Shannon holds the

CFP designation and received a B.A. from the University of Colorado at Boulder.

Our Team:

Robert C. Gillooly, CFA

Bob is a portfolio manager and member of the Elmwood Investment Committee. His primary

responsibilities include U.S. domestic stock and bond research, as well as working with our

financial planners on setting asset allocation for client portfolios. Prior to co-founding Elmwood

Wealth, Bob worked for Osborne Partners Capital Management for 18 years and was their Vice

President, Chief Operating Officer and a principal of the firm. He was a voting member of the

four person investment committee responsible for choosing individual securities and setting

asset allocations for over $1 billion of client funds. Bob also had sole responsibility for setting

strategy for their approximately $300 million bond portfolio. Bob holds the Chartered Financial

Analyst designation and received a B.A. from the University of Michigan.



Bob Gillooly Shannon Lemon

510-858-2721 510-858-2722

[email protected] [email protected]

Elmwood Wealth Management

2027 Fourth St., Suite 203

Berkeley, CA 94710

(510) 858-2723

www.ElmwoodWealth.com

mailto:[email protected]

mailto:[email protected]

http://www.elmwoodwealth.com/



Appendix: Disclosures

The information in this presentation is intended for U.S. Residents only and is not intended for distribution in any jurisdiction

where Elmwood Wealth Management Inc. (EWM) is not licensed to distribute such information or where such offer,

solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information provided in this

presentation is for information purposes only and should not be construed as investment, tax, or estate planning advice or a

determination that a particular product or service is suitable for any individual. This information should not be relied upon in

making an investment, tax, or estate planning decision and any decision based on information contained in this presentation

are the sole responsibility of the visitor or recipient.

This information is not intended to be used as a general guide to investing, or as a source of any specific investment

recommendations, and makes no implied or express recommendations concerning the manner in which any client’s account

should or would be handled, as appropriate investment strategies depend upon the client’s investment objectives. It is the

responsibility of any person or persons in possession of this material to inform themselves of and to take appropriate advice

regarding any applicable legal requirements and any applicable taxation regulations which might be relevant to the

subscription, purchase, holding, exchange, redemption or disposal of any investments.

This information neither constitutes an offer to enter into an investment agreement with the recipient of this document

nor an invitation to respond to the document by making an offer to enter into an investment agreement.

The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk. Past

performance is not indicative of future results, which may vary. The value of investments and the income derived from

investments can go down as well as up. Future returns are not guaranteed, and a loss of principal may occur.

Opinions expressed are current opinions as of the date appearing in this material only. No part of this material may, without

Elmwood Wealth Management’s prior written consent, be (i) copied, photocopied or duplicated in any form, by any means, or

(ii) distributed to any person that is not an employee, officer, director, or authorized agent of the recipient

Economy & Finance

20140916 wealth management for small business owners