Born: Starkville, Miss.
Where did you attend college?
Mississippi State University. My parents went there, [so did] my grandparents. My mom suggested to all of us — there were six children in our family — to go see the world, and she was going to live vicariously through us. But when you grew up, there was such a strong tradition; it was sort of in your blood.
As a child, what did you want to be when you grew up?
By junior high, I thought I wanted to do something in the accounting world. I really don’t remember before that. I did at one point want to be a writer. Is that ironic? It was that one poetry contest that I won in about the sixth grade.
What was your first job ever?
Baby-sitting. My first real job was I helped start a refreshment stand at my brother’s T-ball games. But before that, I was baby-sitting. I worked in the nursery at church. Actually way before that, it was digging dandelions in my grandmother’s yard. She would pay us to dig the weeds — and we were really young then.
What did you learn from your childhood jobs that still helps you today?
That hard work is rewarding. The way I got into the client service business is really all the things I did focused on helping people either solve a problem — like bookkeeping or having refreshments at the ballpark when there wasn’t a refreshment stand. It’s that client service is important, if that’s what you choose to do.
What’s your favorite board game?
I love Scrabble. I love words. I love keeping score. Definitely Scrabble.
Whom do you admire most and why?
There’s so many. It’s one of those you pick and choose the attributes and not any single person. There’s so many people in my family and public figures that I admire and respect.
Atlanta Metropolitan College
Customer Service Initiative
1630 Metropolitan Parkway S.W.
Atlanta, GA 30310
Teaches customer service skills
Offers day, evening and night classes
Business Training Works
9015 Katie Court
Port Tobacco, MD 20677
Customer service training
Business etiquette training
2115 Monroe Drive, Suite 100
Atlanta, GA 30324
Provides online customer service
Creates user-friendly Web sites
Mercer1 Executive Search Inc.
4060 Peachtree Road, Suite 134
Atlanta, GA 30319
Employee matching service
Coaches on client relations
ProEdge Skills Inc.
106 13th St., Suite 204
Boston, MA 02129
Customer service training skills
Customer service articles
Service Industry Academy
Clairmont Road Training Center
Certified customer service program
Offers day and evening classes
Telephone Doctor Atlanta
1690 Spinnaker Drive
Alpharetta, GA 30005
Video-based customer service training products
The Customer Focus
711 Old Ballas Road, Suite 215
St. Louis, MO 63141
Customer service training workshops
Offers materials to conduct in-house training
720 International Parkway
Sunrise, FL 33325
Sells training products
Offers seminar customer service training
7742 Spalding Drive, Suite 356
Atlanta, GA 30092
Customer service training programs
Also offers other work-skill training
As today’s technology continues to get better and faster, it has become more important that companies make sure their IT strategies evolve efficiently at a speed that keeps up with or even surpasses the competition.
“Management can use IT as a competitive advantage in many ways,” says Eric Stoll, director of technology for Arke Systems in Atlanta. “More and more, companies are looking to IT to make their business better at execution, which requires more efficiency and better communication.”
Smart Business learned more from Stoll about how a company can ensure its IT makes a positive impact on business processes, operations and infrastructure in a competitive atmosphere.
What role should IT play in a company’s overall strategy?
By now, we all understand the magnitude of an effective IT solution and what is possible for companies who use it well. A robust IT solution provides a company with the ability to be more nimble and able to adapt to a changing market, while more efficiently executing initiatives and improving communication, both internal and external. For example, CRM (customer relations management) systems make it possible for sales to manage a high-volume pipeline, for marketing to execute high-performance campaigns, for customer support to reach the right person for any service issues that arise and for management to access reports of all this activity.
In addition to improving specific methods and tools, companies often use IT solutions in their approach to enterprise architecture as a way to leverage advantage in their marketplace. For example, companies that adopt a service-oriented architecture benefit from the agility and faster implementation of new solutions that a well-designed IT infrastructure can provide.
For a company to truly differentiate itself in the marketplace and gain an advantage through IT solutions, it’s imperative that there’s alignment and buy-in from the executive team, who needs to ask certain questions about the business itself: What does our competition do better than we do? How could we improve to be better than they are? How is the company evolving for future growth? By tying the IT initiatives back to strategic goals, companies can begin to understand how IT will make an impact on their business methods.
How can well-designed solutions work as an advantage?
A well-designed solution works to your advantage when you have a clear understanding of the solution’s purpose, its planned lifetime and how it needs to evolve. Lack of understanding of any of these will result in delays in decision-making and lost opportunity. The worst position to be in is one where you’re fishing for a solution to make an existing system better. You’ll end up spending a lot of time and resources trying to solve a problem that may not even have an answer. Good upfront design will yield savings throughout the entire solution’s lifetime.
Good design stems from understanding the purpose for each system in terms of business goals, whether that goal is to improve communication, provide better customer service or make operations more efficient. Developing performance metrics for an IT solution is dependent on what problem the company wants to solve, what business goal needs to be met or what capability needs to be created. Some of the simpler metrics might be related to software features and functionality, but remember, a solution is more than just software — it’s the whole delivery and support mechanism, too. How quickly are support requests handled? Can the software adapt to changing business needs in a timely fashion? What are the training requirements for new employees? Companies should think in a holistic way about how the solution needs to support the business as a whole.
Should IT solutions be proactive or reactive?
Solutions should always be proactive, meaning that management has a clear vision of the company’s plan, calculates risk and is forward-thinking. Each initiative must have a defined purpose, and there should be a method for measuring its success. This is where proactive management comes in to ensure that IT solutions are responsive in two ways: 1) results are delivered quickly to the users and 2) the solution can be quickly modified to meet changing business needs.
How can a company tell if its solutions are doing the job they were designed to do?
Lay out success metrics at the beginning of the project and measure the solution against them on a regular basis. The solution needs to have a mission statement or purpose for existing in the first place. Each solution needs a sponsor that will ensure it has a clear business purpose.
Create a scorecard for each solution based on predefined success metrics. The scorecard needs to reflect a passing score if the solution is working as designed, and a failing score otherwise. Reviewing these scorecards on a regular basis and being honest about the scores is the only way to identify gaps and find opportunities to improve.
ERIC STOLL is director of technology for Arke Systems. Reach him at (404) 812-3123 x130 or firstname.lastname@example.org.
Serving on a nonprofit board in the current period entails difficult choices with enhanced rewards.
Board service on a nonprofit is no longer merely a fun activity.
Smart Business spoke to Mark I. Murovitz, partner at Habif, Arogeti & Wynne, LLP, about how recent economic conditions have put board members in difficult and unfamiliar positions.
What considerations should be made before accepting a board position?
Before accepting a nonprofit board position, consider what is expected of you in terms of responsibility, legal obligations, experience and accountability. In Georgia, as in many states, the unpaid board member has protection for simple negligence. However, that protection does not cover behavior considered gross negligence or willful misconduct. If board members do not take their responsibility seriously, they could face negative public exposure and financial liability as a responsible party of a failed entity. As the nonprofit community deals with the current economic uncertainty the board member must be cognizant of all the forces impinging on the organization and its mission and weigh those with her or his legal responsibilities.
How does a board member ensure the experience is meaningful and responsive to our changed economic environment?
The fundamental concept is to make sure that the organization’s management is aware of the financial constraints that exist and the organization’s resources are used as intended to fulfill its mission. This requires an understanding of the resources available and management’s plans to meet the mission within the new economic constraints.
Frequently, the only tool utilized by the board member is the financial information produced by management. The member must ensure that management and the board has current information on revenues, expenditures and assets available for current and future needs. In addition, management must constantly update the organization’s operating budget for variations caused by the swift changes we are experiencing in our national and local economies.
How can the board member get a better understanding of the organization’s mission?
The member should be asking ‘Who is to be served and why, and what are the demands for services in the community?’ From this baseline of information, the board member must understand how those needs are converted into a priority schedule as the potential for decreasing resources must be factored into the decision making process. With current and valid information the board can work with management to reset the organization’s priorities to enable it to successfully factor in the new reality.
What are the roles of the organization’s management team and that of the board member?
The professional management team of the nonprofit is the mechanism by which the goals and objectives are transformed into the desired results. The board member, in his or her oversight role, is responsible for governing, not for managing the organization. To govern, the board member must understand the qualifications and ability of management to deal with the new economic paradigm. The board must not only approve their compensation and evaluate the efficiency and effectiveness of their performance in the changed environment but also must help management make the hard decisions with respect to staffing levels and other mission critical issues in a time of reduced resources and increased needs. In addition, the member must be personally responsive to the difficulty management is likely to encounter with the threats to the efficacy of the organization in a severely constrained financial environment.
Board members must be satisfied that information used by management and the board is current and accurate. Budgets must be constantly updated and revised based on changes that are occurring in the organization’s resources. In these times, management must have a daily dashboard of financial information, including cash available, receivables, payables and other important operating information.
It is difficult to be excited about governing in the current economic environment, but these times present the greatest opportunity for the intrinsic rewards of service to others.
MARK I. MUROVITZ, CPA, MBA, is a partner in the Forensic and Litigation Services Group at Habif, Arogeti & Wynne, LLP and an adjunct instructor of accounting at the J. Mack Robinson School of Business at Georgia State University. With more than 40 years of professional experience, he has been an adviser to business and nonprofit entities on systems and operational matters, audited public and private entities including nonprofits and performed financial investigations. He has served as a board member and officer for nonprofit organizations in the Atlanta community. Reach him at (404) 814-4940 or email@example.com.
Sustainability isn’t about saving the planet. It’s about saving your business.
Conducting business in a sustainable manner means you can spend less and increase revenue.
While sustainability does help the planet, the incentive of reducing your business costs by half is a strong reason to pay attention. The buzz is that traditional energy and other resources will be in tight supply in the future, resulting in volatile prices. By investing in sustainable efforts now, you can help ensure your business’s long-term success.
“There’s a lot of overlap with quality and sustainability,” says Christopher Johnson, co-founder and CEO of ifPeople, a technology solutions provider that incorporated sustainability as a core business value. “High quality also means low cost; less waste means less cost. Companies have to be willing to educate themselves to make sustainable choices.”
Americans compose 5 percent of the world’s population, yet contribute almost 25 percent of the greenhouse gas pollution, which scientists believe causes global warming. If everyone used and wasted energy and other resources this way, we’d need four planet earths to keep up with the demand. Consumers are finally taking notice of this egregious waste and are looking to buy from sustainable businesses, while more and more businesses are looking to obtain products from other businesses using sustainable practices. This is a time when your business can not only streamline production but also increase revenue by drawing in new customers.
“Barack Obama was so specific about forming an energy plan, we’ll be seeing things change soon,” says T. Boone Pickens, founder and chairman of BP Capital Management. “This means businesses have to get going on where they’ll be standing when this comes in to play.”
Ninety percent of readers polled by Smart Business say being green is an important part of their corporate philosophy, yet almost half report that they’re not willing to invest in greener practices. Experts say spending money on green initiatives isn’t paying for an image; it’s a direct investment in a more economic way of running your business.
Why sustainability is important
Think of sustainability like the Internet. Fifteen years ago, when the Internet was emerging, it wasn’t pervasive, but now it’s everywhere. Eventually, sustainable business will just be called business and green building will just be known as building. Experts say that is the way it’s going to be and you have to adapt now.
If you want to know the value in sustainable management, think about the Dow Jones Sustainability Index. For almost a decade, Dow Jones has been providing sustainability indexes of businesses, which shows objective benchmarks for financial products linked to economic, environmental and social criteria. Sustainability indexes offer a performance baseline and an investment value for mutual funds, certificates, separate accounts and other investment vehicles based on the concept of sustainability. To date, the assets managed amount to approximately $6 billion.
“Imagine if U.S. automakers had invested in sustainability in the ’70s,” says Andrew Keenan, founder and marketing director, Verus Carbon Neutral, a sustainability auditing company. “We’d all be saying, ‘Toyota who?’”
The need for sustainability has already created thousands of jobs stemming from business consultants to waste managers. Experts say we’ve only scratched the surface of what sustainable practices can do for businesses. While solar and wind power commonly come to mind, sustainability includes using recycled products when building, collecting rain for watering purposes and designing your business’s landscape in a way that minimizes the need for upkeep and conserving resources.
“Most graduates are environmentally oriented,” says David Rovner, managing director, Sustainable Methods Consulting LLC. “Innovative thinkers will be looking to be employed at a company that isn’t wasteful.”
While reducing waste has its obvious benefits, reduced insurance rates are another benefit to sustainable businesses. In fact, sustainability consultants predict business insurance will be more difficult to procure as nonsustainable practices are looked at as a risk.
In a 2008 report by SAB Miller, one of the world’s largest breweries, a survey of 4,000 senior executives showed 70 percent place corporate sustainability at the top of their priority list. That still leaves more than a quarter of businesses delaying action.
What you need to know
When initiating a sustainability plan, think about who your customers are and what they want. Consider how implementing sustainable practices can lead to more business. The challenge is making decisions that are financially, socially and environmentally intelligent. While there isn’t a one-size-fits-all plan, having a sustainability expert evaluate your business is a jumping-off point.
The Global Reporting Initiative is another ally for businesses seeking a sustainable route. It’s an organization that provides a framework companies can follow to measure and report their economic sustainability performance and monitor the performance of other companies. The organization sets the principles and indicators that businesses can use to measure and report their sustainability performance. GRI is growing as an international standard for corporate sustainability reporting.
“Stakeholders are looking to invest in companies that are sustainable and exhibit corporate responsibility,” Rovner says. “Too many businesses don’t know what to do outside of recycling. It’s a problem of you don’t know what you don’t know — but the resources are out there.”
Another source for information comes from the U.S. Business Council for Sustainable Development, which was established in 2002 as a member-led, nonprofit organization that presents projects to demonstrate the business value of sustainable development. Projects featured by the council create value through economic returns and environmental and social benefits.
A sustainability consultant can help you identify what sustainable methods are available. After an assessment, you, along with department managers or those hired for the assignment, can construct an operational analysis that details your plans with set goals and deadlines. This will include your estimated ROI time frame. Make sure your sustainability plan describes how sustainability topics relate to long-term organizational strategy, risks and opportunities, including supply chain topics.
Even if you don’t implement everything in your sustainability plan today, you can reevaluate and implement more sustainability methods in the future.
Make sure you are meeting all local and national protocols while setting some of your own standards. Define sustainability issues for your business based on your industry and the department. For example, if your business uses a lot of water, utilize rainwater recycling to minimize the amount of water you must purchase.
“How many more Katrinas can we survive economically?” Keenan says. “Businesses are only looking at what’s in front of them. They’re afraid to take their eye off the ball, but they should really be looking at where the ball’s going to be.”
The start of a new year means change. One big change affecting businesses is the Americans with Disabilities (ADA) Amendments Act, which keeps the three-part basic definition of disability the same, but makes other major changes to the Act.
“Congress’ original intent was for the definition of disability to be construed broadly, but in their handling of cases, courts have narrowed the definition of disability to the point where the Act no longer covers the people Congress originally intended it to cover,” says Megan Kreitner Ouzts, associate with Baker, Donelson, Bearman, Caldwell & Berkowitz PC.
Smart Business spoke with Ouzts about how to deal with the changes and what can happen if businesses are not prepared for them.
What are some of the major differences in the ADAAA?
One of the biggest differences is that the ADAAA overturns the Sutton trilogy of cases, which held that ‘mitigating measures’ that help individuals control or cope with impairments must be considered in determining whether an individual is disabled within the meaning of the ADA. The result of these decisions had been to exclude from the ADA many people, such as those with insulin-controlled diabetes, whom Congress intended to cover. Now, generally speaking, no mitigating measures will be taken into account except ordinary eyeglasses and contacts.
Another big change is that the ADAAA now provides two lists of major life activities, the first of which includes, for the first time, major bodily functions defined as functions of the immune system, normal cell growth, digestive, bowel, bladder, neurological, brain, respiratory, circulatory, endocrine and reproductive functions. The second list is different than the ADA’s original list in that it contains not only most of the major life activities previously recognized by the U.S. Equal Employment Opportunity Commission, but it also recognizes several new activities, for example, bending, reading and communicating. The Amendments Act also states specifically that an impairment can be a disability even if episodic or in remission.
How does the ADAAA affect businesses?
More people will qualify as disabled under this Act because Congress has been very clear that the definition will be construed broadly. This means that more employees are going to request accommodations from their employers, who will inevitably find themselves dedicating more resources (financial and administrative) to analyzing and, where appropriate, providing these requests.
Additionally, the ADAAA is going to change how we litigate disability cases because there are going to be fewer threshold cases. By this I mean that, in the past, employers often fought ADA claims by disputing whether a person was ‘disabled’ under the Act. Employers would win cases at the summary judgment phase by taking advantage of the narrow definition of disability. But now, because the definition of disability will be construed so broadly, lawyers will be fighting less about whether plaintiffs are disabled. This will result in a focus shift in litigation. The new battlegrounds will be, for example, whether the employer offered a reasonable accommodation or whether the person could perform the essential functions of his or her job with or without an accommodation.
How should businesses make adjustments?
- Train supervisors to engage in the interactive process and properly document
requests for accommodations. Teach them
how to handle requests, inform them of the
expanded definition of disability, discuss
available accommodations, and caution
them to expect more administrative legwork.
- Make sure your company policies conform to the new law. Consult legal counsel to
revise policies and handbooks if needed.
- Remember, employers are not required
to remove an essential function of a job when
providing an accommodation. Revise job
descriptions to be sure all essential functions
of a job are included, and determine whether
those already listed are truly essential.
- Pay attention. Changes may still occur as the EEOC promulgates new rules interpreting the ADAAA. It is also likely that the Department of Justice, which issues regulations for the ADA, will promulgate new regulations and hold a public comment period to address any proposed new language.
What else should businesses know about the ADAAA?
If a company is not engaging in the interactive process in good faith and chooses not to properly document that process, it’s going to open itself up to liability. Documentation will be critical, as will obtaining buy-in of supervisors and human resources professionals who handle requests. Document all aspects of accommodation requests, the process with the employees and, of course, which accommodation was eventually chosen and why.
Companies should not feel as if they have to offer every accommodation that is requested. Under the ADAAA, employers are under no obligation to provide employees with the exact accommodation requested or the ‘best’ accommodation. They need only provide a ‘reasonable’ accommodation, which means, at the very minimum, one that does not cause the employer undue hardship.
MEGAN KREITNER OUZTS is an associate with Baker, Donelson, Bearman, Caldwell & Berkowitz PC. Reach her at (678) 406-8736 or firstname.lastname@example.org.
Born: Syracuse, N.Y. I don’t like to tell everybody that though. It’s one of those places that it’s a good place to be from.
Education: Bachelor’s degree in accounting and pre-law from Clarkson University
As a child, what did you want to be when you grew up?
Every boy I knew on the block wanted to be the president of the United States. I asked my son this question, and his friends, last year, and I said, ‘What would be the best job in the world?’ From Bill Gates to hedge fund manager to Derek Jeter, and I said, ‘What about the president of the United States?’ and they looked at me like I had two heads.
What was your very first job?
Unloading boxcars at the farmer’s market at age 14. I had the morning and the evening newspaper before that I was a delivery boy before that, but my first real job that I got a paycheck and had to show up at a specific time was at the farmer’s market.
What did you learn from that job that still helps you today?
I worked for a gentleman who was one of the best entrepreneurs that I ever met. His name was Mr. Mento. He owned Mento Produce, and he taught me a lot. I’m forever in his debt.
What was the best thing he taught you?
Integrity. I watched the way he dealt with the people around him. He was just very candid, very firm and very caring.
What has been the best business lesson that you’ve learned in your career?
Probably getting my butt fired. It was about 20 years ago. I think I learned a lot from it. Mostly that primal fear can be overcome by believing in yourself, and I believe I coined the phrase that it was a defining moment and not a moment that defined me.
Charles Lipman admits that he has limited skill sets when it comes to technical products. And that’s not an easy admission to make, given that his company, DiversiTech Inc., manufactures air conditioning condenser pads and supplies other technical components for the heating, ventilating, air conditioning and refrigeration industry.
But Lipman has found ways to overcome this weakness and has grown DiversiTech to annual revenue of about $150 million by trusting his 350 employees and knowing when they can help him with something he’s not as knowledgeable about.
“It’s, one, confidence in your capabilities and that of your people,” the president says. “Second is being unafraid of risk, and third, it’s understanding that every decision you make can be wrong and [having] a commitment to review and adjust.”
Smart Business spoke with Lipman about how to grow your company by trusting in people and being unafraid to take risks.
Don’t fear risk. It’s confidence in your people. Of course, you have to have the people to be confident in. That’s important. You can’t have confidence and have it be misplaced.
[You know that] by the results. They have to be placed in situations where they have options, and they have to illustrate the right choices.
You can gauge that even in the simplest of actions — someone who spends enormous amounts of time in critical situations and burns the midnight oil, as they say, is a person with energy and passion, and that matters. A person that will come to you and tell you that the situation is bad. That’s the person you want on board because you don’t have to wonder about it.
If you have people who have demonstrated their abilities to get stuff done and deal with difficult areas, then you shouldn’t be afraid of going into another one.
I have confidence in people because they’re here, first. Second, the review process is proportionate to the amount of trust and the amount of risk. If the risk is great and the trust is modest, then one would have to review fairly frequently. On the other hand, if the risk is low, then the review would be a very long period in between.
It’s very important to have metrics on anything you do. Even if it’s wild speculation, it’s important to put that speculation in writing and have a measurement of where you expect to be and when you expect to be there and milestones to that objective.
Involve people in decisions. You ask them the questions leading up to the ultimate question — what are we doing well, what are we not doing so well, do we have the resources we need to achieve the objective, what will we do if the results are no better in a period of time, what are the options, what option would you choose, what’s the reason?
I prefer not asking one question, and that’s, ‘What should we do?’ Then they don’t tell me what else they’re thinking about.
Many times, one of their other options is one that they really prefer but think you will not and therefore don’t present it.
Let people make mistakes; let them lose money from time to time. You can be wrong, and they can have a success with respect to an idea that you consider worthless, and second is the fact that they know they have your confidence that could cause them to come out with other ideas, some of which might be the game-changers, and they won’t do that if you’re going to be hypercritical of their ideas and not give them the freedom to implement them.
But there are exceptions. The two exceptions are it’s ethically inappropriate, and the risk is too great. That’s not a metric decision. It’s more of taking a look at what could go wrong and how much damage that event would cause. If that event would cause a catastrophic problem for the company, it’s unlikely that we should go forward in any circumstances.
Live your values. A leader has to articulate the values, and he has to do it on a consistent basis. Those values rarely should change. They should be constants. Refer to them at a time of decision-making, and make sure you live up to them, as well. If you don’t live up to them, anything else you do won’t matter.
It’s internal — how do you make decisions, how do you do the right things, how do you want people to deal with people and deal with situations. People use words all the time, but unless you think them through, they don’t have the full meaning that they could. Words like integrity. What does that really mean? If you give it some thought, that’s helpful. It can be as simple as working out what’s the right thing to do and then go from there to decide what we should do. Always keep in mind what the high road is — always know that.
Look forward. You have to have the attitude that you’re not too interested in history — you’re more interested in going forward.
No one likes to change. The only people who like to change are people who like to change others. It’s something that we all have a problem with, and very few of us acknowledge it.
Be persistent in terms of demanding it and rewarding those who do. Rewards are almost always monetary. People are paid based upon their results and the results of the company, and we tell them that.
HOW TO REACH: DiversiTech Inc., (678) 542-3600 or www.diversitech.com
When the popular thought was permanent repeal of estate tax, Robert N. Greenberger, a tax partner in the Advisory Business Services Department at Habif, Arogeti & Wynne, LLP, predicted that estate taxes would not be repealed. With President Obama taking office, Greenberger sees more adjustments ahead.
In his fourth interview on estate taxes for Smart Business, Greenberger provides more insight on the tax’s current status and how business owners can plan for the near future.
What changes can we expect in regard to estate tax rates?
The estate tax levied a 55 percent maximum tax rate on all inherited assets above a $1 million exemption. The exemption level has risen and the tax rate has been dropping since 2001, down to 45 percent with a $3.5 million exemption. Current law calls for the tax to be repealed in 2010 with a reversion back to 55 percent tax rate and $1 million exemption in 2011. The estate tax rates also apply to gifts during life; however the gift tax exemption has remained fixed at $1 million.
Obama proposes freezing the estate tax at 2009 levels — a 45 percent tax rate on estates valued at more than $3.5 million. Married couples can combine their exemptions for a total of $7 million. Obama’s plan would completely exempt 99.7 percent of estates from taxation.
If 99.7 percent of estates are exempt, shouldn’t the estate tax just be repealed?
According to the Treasury Department, a permanent repeal would cost $522 billion in lost tax revenues over the next decade. The cry from ‘death tax’ opponents that many small businesses and farms are devastated by estate taxes is a myth. The Urban Bookings Tax Policy Center reported that when the exemption was $1.5 million, only 440 small businesses and farms were hit with this tax. An analysis by the Congressional Budget Office added that at the $3.5 million exemption level, only 159 small businesses and farms would owe any estate tax.
What about taxpayers who are still subject to the 45 percent rate?
The unfortunate taxpayers that are still subject to estate tax undoubtedly are not completely satisfied with a reduction in the estate tax rate from 55 percent to 45 percent. Almost half of their estate will fall into the hands of the IRS. But there is hope for them. First of all, among the estates that do owe taxes, the ‘effective’ tax rate — which is the percentage of the estate that is paid in taxes — averaged about 20 percent in 2005 (the latest year for which IRS data is available). As for planning for estate tax reduction, now is an opportune time. The current low valuations in the stock market and depressed real estate values provide estate-planning and gifting opportunities. In addition, low interest rates provide for certain gift-leveraging techniques, which rely on the IRS’s monthly published Applicable Federal Rates (AFRs). A combination of low valuations and low AFRs creates phenomenal gift-leveraging techniques for those that believe in the long-term strength of the U.S. economy.
Are there any other advantages to implementing gifting or estate tax reduction strategies now?
Yes. President Obama’s campaign position included attacks on valuation discounts. Minority interest, fractional interest and lack of marketability discounts have allowed taxpayers to significantly reduce the value of assets subject to gift and estate tax. These discounts may be limited or disallowed by future legislation, so implementing techniques before Congress eliminates or restricts such discounts is imperative.
What are some specific planning techniques?
Annual gifts to donees are partially exempt — the annual exclusion rose from $12,000 to $13,000 in 2009. A husband and wife with three children and seven grandchildren could transfer $260,000 per year out of their estate with no gift tax consequences.
Further gifting to utilize the gift tax exemption amount of $1 million (per donor) will pass appreciation and income from the gifted assets to recipients.
Utilizing a Grantor Retained Annuity Trust (GRAT) remains a beneficial estate-planning tool. Appreciation of assets in excess of the IRS AFR hurdle rate (3.6 percent at the time of publication) would pass gifts tax-free to the grantor’s designated beneficiaries. If the assets do not appreciate above the IRS hurdle rate during the term of the GRAT, the assets would come back to the donor with no economic downside.
Use of an installment sale to a grantor trust would allow you to lock in low AFRs for several years. This would allow for a shift in value (above the AFR hurdle rates) and also protect against possible changes in law that would restrict discounts and limitations on GRATs.
There are many other viable estate-planning tools and techniques that should be discussed with your tax adviser, but the key is to plan ahead.
ROBERT N. GREENBERGER, CPA, PFS, AEP, MAcc, is a tax partner in the Advisory Business Services Department at Habif, Arogeti & Wynne, LLP. He has more than 25 years of experience with a strong concentration in taxation, estate tax planning and closely held businesses. He has achieved the Accredited Estate Planner designation and assists with the planning and implementation of family limited partnerships, trusts, Subchapter S corporations and estate/gift tax reduction. Reach him at (404) 814-4949 or email@example.com.
Tornados, floods and other catastrophic events can have a devastating impact
on your business. In addition to possible damage to your own building or inventory,
there is the potential for loss of infrastructure services like power, water, or data
and telephone lines. Road closures or even
complete lockdown of devastated areas are
also common after a severe storm.
“The ability to repair, reopen or relocate
your business can be the key to survival,”
says Corry Novosel, director of Catastrophe
Claims Operations at Westfield Insurance.
Smart Business spoke with Novosel
about how to protect and preserve your
business when faced with catastrophes.
How can business owners mitigate risks?
A well-rounded insurance plan should
consider the possible catastrophic events in
your local geography. Tornadoes, floods
and even a terrorist event in a nearby city
can impact nearly any business at any time.
Until this year, Ohio business owners
would have laughed at the idea of being
affected by a hurricane, but the remnants of
Hurricane Ike struck large areas of Ohio on
Sept. 14, 2008. Winds as fast as 75 miles per
hour caused one of the largest storms in the
state’s history with damage estimates as
high as $1 billion.
How can you uncover commonly missed
areas of vulnerability?
First, you need to consider the ancillary
impact of a catastrophic event. What
impact would a tornado or flood have on
your supply chain or delivery? Would you
lose customer traffic or be unable to access
data, records or billing?
Next, you should discuss often-excluded
causes of loss with your agent. Flood damage, for example, is often not covered
under typical commercial policies. Loss
caused by the interruption of power to your
property or by road closures by municipal
authority may also be excluded.
Finally, think about business income coverage. In many instances, the loss of business income exceeds the cost of repairs to
the building. Even if you are a tenant, catastrophic damage to your building or your
area can result in suspending operations for
weeks or months.
What are the best ways to speed the recovery
Provide good contact information when
you turn in your claim; many times, it is difficult to locate individuals in the aftermath
of a catastrophic event. Also, don’t wait for
your claims person to contact you before
working on your own plan of action. The
sooner you have a plan in mind, the sooner
you can be advised on what is covered.
What are some important dos and don’ts following a storm?
- Do report your loss. Contact your agent
or the 800 number for direct claims reporting to your insurance carrier. The sooner
you notify your carrier of your loss, the
sooner you will be contacted and the
process of handling your loss started.
- Do take emergency measures to mitigate additional damage to your business. In
the end, you may not be covered for the cost of removing flood water from your
floor, but leaving it there for a week while
you await your carrier to call will not help
- Do document your loss. Taking photos
is always a good idea. Keep all receipts for
any emergency repairs. Your policy requires damaged property be available for
inspection. If you must throw out damaged
goods before your claims representative
arrives, be sure to document them before
they are hauled away.
- Don’t panic. Your policy is a contract
like any other. If you are covered for loss
caused by wind, you will be paid for covered damages caused by wind. The best
way for you to avoid coverage surprises is
to meet with your agent on a regular basis
and understand what is covered and what
- Don’t assume your claims person is
familiar with the details of your business.
While it is likely the person handling your
claim has an understanding of commercial
enterprises, you can help him or her by
explaining how this loss is impacting your
operations. Good communication can often
alert your claims professional to coverage
you may not realize you purchased.
What else should businesses know?
Most insurers understand that their
response to catastrophic events is an
opportunity to make a very positive
impact. Keep in mind, however, that the
intake of thousands of losses and the
movement of hundreds of claims persons
to an area that may have limited infrastructure available is, at best, difficult to coordinate. Initial focus is usually on making contact with all claimants and assessing the
most severe losses using the triage system.
Less severe losses may be handled later
with instructions to the insured to make
any necessary temporary repairs and begin
the process of finding a repairer who is
willing to come out and write an estimate
CORRY NOVOSEL is the director of Catastrophe Claims Operations at Westfield Insurance. Reach him at (724) 776-7200 or
firstname.lastname@example.org. Westfield Insurance provides commercial and personal insurance services to customers in 17 states.
Represented by leading independent insurance agencies, the product we offer is peace of mind and our promise of protection is
supported by a commitment to service excellence. For more information, visit www.westfieldinsurance.com.