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Taylored Wealth Tips ~December 2007

Its almost Christmas! If you are doing last minute shopping this newsletter has some thoughts on christmans gifts.

For those of you considering starting your new business, you will want to read about the benefits of incorporation and why you MUST take the necessary steps to protect you, your loved ones and the assets you are building.

When selling a home there are steps that you can take to help shorten the time get a contract on the house. Read all about the latest techniques.

In this issues read all about

• Christmas shopping for kids
• Fringe benefits of incorporation
• Tips to follow BEFORE you list

How about an asset!   While it may not seem like a great toy, and may not win you the coveted award of best gift from Mom….the value of using a custodial account or education savings account as an alternative to buying toys ( or at least a partial alternative) has incredible long lasting value.  This is particularly appropriate for grand parents, aunts & uncles. I often questioned if I wasn’t going a little too far in explaining the details of how a company worked and how money worked when I began explaining things to my 5 & 7 years olds. When my now 10 year old requested to put most of his recent birthday money into his savings account to be ready to buy some stock, and only use $10 for a coveted toy, I knew I had made the right choice.

Register here if you are interested in the Kids Money Camp coming June 2008( adults attend too. We will get the details to you

When our sons were about 5 and 7 respectively we began a series of discussions about owning a part of a company and having money that earned more money all by itself . We talked about using only earnings from the account to buy toys rather than the money deposited.  For adults we say “letting our assets buy our toys not our earned income”.  We even created a Kids Money Camp to help other parents and their kids understand the basics.
Our sons opened their accounts (with mom and dad as custodians) and began putting some money into an account for things they wanted to buy in the current year. They put other money in an account for things they wanted to buy in a few years (the fast car in the garage that their dad owns is a great incentive… now they want one too).
Now that our oldest is 10 (this December), he has seen how his money that he put into a 5% earning account has grown. He sees the gift he was given clearly. In fact I was shocked to hear him request just last week to put some more of his earnings into the investment account and keep just a little for some toys he wanted to buy. Oh yes that is another great lesson to teach… you may buy anything you want, you just have to use your money.
We do provide toys and extras at specific times of year, but in between those times they learn the cost of their toys and create ways to earn extra cash.  They also have learned to collaborate and compromise by pooling their funds to buy one expensive toy rather than two individual ones.
How do they earn money you ask? There are a variety of methods. At our house we use a hybrid of providing an allowance for basic personal upkeep of room, clothing, and animal care. No allowance is provided if prodding is required or if the tasks are done without appropriate quality.
Then we pay extra for services we might hire out anyway like snow removal, garden bed clean up, planting, window washing, cleaning of animals, and a variety of house cleaning tasks and handy man services. These do have to be done to the appropriate level of quality or they are redone at no extra charge (another great lesson about doing it right the first time). When toys or other things are still in good condition but no longer useful, they are sold by these 2 boys and they keep the profits. If new toys can’t fit in the closet then there must be too many.
What is a real kicker is that our oldest wants to give a dividend check to his investors. When at the age of 8 he explained about the new company he was starting, he received a start up investment from an angel investor for his & his brothers company; KANDE Co. The investor was his great aunt who owns her own family run company ( lasting 4 generations now) and is celebrating her 90th birthday with her completion of the movie manuscript for 2 of her books.  She was provided with a stock certificate (yes it is on real stock paper and hand created and signed by the company owners, Devin and Kaleb, in bright crayon colors that has since formed their logo).
We can’t wait to see the surprise on their Great aunt’s face when she gets this birthday present.
The latest request from my 2 cute sons was to start buying some stock. And so the research has begun into Wendy’s, Pepsi, and the Danish owned LEGO’s.   I don’t know if LEGO’s is publicly traded but I am sure we are in for a great learning adventure.
Register here if you are interested in the Kids Money Camp coming June 2008( adults attend too. We will get the details to you

Ever heard of fringe benefits?
 Many of you may hear words of alarm during strategy sessions for those that are not incorporated but are running a small business (even if it is part time). The alarms go off because your assets (all of them) are exposed more than they need to be. Next month we address why you need to be “covered up” with a case study of what can happen when you just file articles of incorporation without understanding “piercing the corporate veil”.
In this article we give you the cash in hand reasons why you need to get incorporated and how best to maximize the status of being incorporated.
Some tips ,outlined in Tax Planning for Business Quickfinder, and provided by one of our affiliate CPA’s;  Corrin Campbell of Campbell and Assoc; gives us some explanations. When incorporated you have the advantage of making use of fringe benefit rules, taking employment tax reductions, and access to ESOP’s (employee stock ownership plans) as well as a long list of other advantages.
Let’s look at just fringe benefits for now.
Fringe Benefits: From the Handbook; “Establishing a consistent compensation policy (in writing) that includes fringe benefits and deferred compensation plans can compensate shareholder/ employees with less “visibility” than salaries and bonuses. While relevant to determining reasonableness, they may reduce likelihood of an IRS challenge.”
What does this mean to you?
 First you need to decide what your fringe benefits are going to be. Would you like to include alternative health care as part of your self –insured medical reimbursement plan or perhaps you would like to include homeopathic remedies in addition to standard prescriptions?  Done… just put it in writing and be consistent in use. Then there is tax free day care assistance (up to $5000 per year) that you can provide to your employees. You can either pay directly or reimburse the employee but the owner can’t have more than 25% of the total benefits. You can also pay relatives to provide the day care tax free (including your over 19 year old that is now independent and filing their own return).  Fringe benefits are a huge part of benefits of being incorporated.
As always you will need the help of a CPA to get the hang of putting these benefits in place and bullet proofing your return by being fully in compliance with IRS code. Having an expert in this area generally pays for itself within the first year.
If you need to find an excellent CPA skilled in this specific area,  call us for a recommendation.

Get smart-  start with pricing then spice up the deal with a cut in the monthly payment. Yes for about $4500 less to you, you can offer a payment that is the equivalent of $50,000 less in sales price. Let’s start with pricing correctly.
The amount you overprice is often equal to the amount you will end up selling under market value. For example if the real value is $200,000 and you list for $225,000, you will most likely end up selling for $175,000 (rather than $200,000).  If you haven’t been facing reality, perhaps now is a good time to begin. Housing prices have gone down by about 3-7% overall in the Denver metro area from last year at the same time and more in some areas. If you plan to sell, you will need to price your home realistically. 
Now to spice it up – provide a lower payment
Rather than drop the price by $50,000….. provide a lower payment equivalent to the drop in price at only about $4500 cost to you.
Using the example of a $250,000 purchase with 20% down and a $200,000 loan; ( more)
These strategies and variations on the theme are part of the real estate coaching that we provide.
Before you list …..Give a call … we don’t charge to chat.

List the monthly payment as $950 on your home owners flyers using your owner provided financing.
Through our affiliate lender Mosaic Lending we can provide one of our financing programs for sellers that provides a lower interest rate the 1st year and slightly higher the 2nd year and then it goes up to the original rate.
This is NOT an ARM, the interest rate remains fixed the entire time, it just starts lower and goes up across 1-3 years ( buyers choice).

The buyer would normally pay $1200 per month
but now pays $950 ($250 per month less) for the 1st year
$1100 per month the 2nd year
$1200 per month the 3rd year
To accomplish the same monthly payment you would have had to drop the price by $50,000.
To provide this, it costs you the seller only $4380
The interest rate is still a fixed rate (not an ARM) and there is no prepay penalty or other hidden costs.
For young couples that have rising incomes this is an ideal solution for everyone. For those who can afford the full payment, they will appreciate the extra monthly cash for landscaping, furniture, or other upgrades.
            These strategies and variations on the theme are part of the real estate coaching that we provide.
Before you list …..Give a call … we don’t charge to chat.