How the Secure Act affects IRA, 401(k) plan holders and beneficiaries

The Secure Act, which passed and took effect Dec. 20, 2019, became applicable at the start of this year. The federal law made changes to a number of retirement vehicles, which means many people and businesses should take time to consider how the legislation affects them and their beneficiaries, and make adjustments.

“It’s been viewed by many as a patch, but it’s a significant change to the way IRAs are treated, and there are implications for 401(k) sponsors that shouldn’t be overlooked,” says Jim Altman, Middle Market Pennsylvania Regional Executive at Huntington Bank. “The Secure Act is in place, so it’s important for account holders and sponsors to plan for its more significant changes, especially those that affect beneficiaries.”

Smart Business spoke with Altman about the Secure Act, some of the key changes it brings to IRA and 401(k) plans, and what those changes mean for account holders, their beneficiaries, and employer sponsors.

What changes to IRAs and 401(k)s are important to highlight?

The Secure Act makes a few changes that will largely benefit IRA holders. For example, the minimum distribution age for IRAs has been changed from 70.5 to 72. That, for many people, can represent a meaningful difference, as it allows for the money within an IRA to enjoy additional tax-free growth.

The law raises the age of restriction on making contributions to an IRA. Previously, IRA contributions were prohibited after the account holder reached the age of 70.5. Now contributions can continue as long as the account holder is working.

However, the law changes the rules that dictate the time by which funds in an IRA must be removed by a beneficiary after the death of the account holder. Currently the named beneficiary may take funds out of an IRA over their life expectancy. Now funds must be removed within 10 years of the original account holder’s passing.

How might the law change affect employers?

The Secure Act’s passage also brings new rules regarding who can participate in 401(k)s that are favorable for account holders and mixed for plan sponsors. One notable change is that the law allows more part-time employees who qualify under testing rules to participate in a 401(k). This is where business owners should examine their plans because there now might be part-timers who either need to be covered or want to participate. Those who employ a lot of part-timers might end up contributing more to their 401(k) plans if participation increases. While that’s an additional cost, it could help employers improve retention.

What have been some of the early questions or concerns regarding the changes?

One of the issues that’s arisen from the changes is how best to deal with second marriage situations. Some of those who hold IRAs want to make sure their current spouse is taken care of, but when that spouse passes they want the money to go to the children of the first marriage. The new rules makes that more difficult.

Taking money out of a traditional IRA means paying ordinary income tax on the amount withdrawn. However, by converting to a Roth IRA, when the money eventually goes to the designated beneficiaries, they won’t pay taxes on the withdrawals because Roth dollars are tax free.

More generally, however, most people want to understand how their beneficiary designations will work under the rule changes. That’s something that’s important to take the time to look at. IRA holders should talk with their with legal, tax, banking and financial advisers to determine a structure that makes the most sense for their situation.

The IRA and 401(k) changes brought on by the Secure Act will apply to lots of people because so many in the U.S. have assets inside an IRA or 401(k), or sponsor a 401(k) plan for their employees. These are broad-reaching changes with significant impact, so it’s important not to gloss over the issue. Talk with trusted advisers and ask good questions to determine how this affects retirement outcomes not only for the current holder, but also for their beneficiaries.

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Cash management services should be a factor when selecting a bank

Businesses typically don’t jump arbitrarily from one bank to another. There’s usually a pain point, or a triggering event that causes them to look around.

In some cases, companies may outgrow their current bank, for instance after acquiring another company — the growth spurt pushing them past their current bank’s ability to support them — or a disruption in the business and the bank is no longer supportive. Sometimes, when it comes to products such as cash management, it’s a matter of a company feeling as if its voice isn’t heard by its bank.

“Businesses want service that is more personal,” says Wesley Gillespie, regional president at ERIEBANK. “For some, working with a large commercial bank can make them feel siloed — they can feel as if their bank isn’t willing to address their specific needs. That can sometimes trigger a company to look for cash management personalization elsewhere.” 

Smart Business spoke with Gillespie about what to look for in a bank’s cash management services.

How might cash management services differ from one bank to another?

Commercial banks of all sizes tend to have the same core services — wire transfers, online banking, remote deposit capture, etc. How banks charge for those services and their willingness to provide custom solutions, adapt to their changing clients, and the tone and attention of their customer service, however, all differ. 

Which bank is right for a business depends on what’s needed or wanted from a banking partner — whether that’s greater support, knowledge, customization, or products with greater functionality, better pricing or more flexibility in how they’re delivered. Some banks, especially those that emphasize customer service, will assign a relationship manager to their clients, which can offer clients a sense of being part of a team. The constant feedback can lead to customization as the relationship manager gets a better understanding of each business. The bank becomes a trusted adviser rather than a service provider. 

What should companies ask banks about their cash management services?

There are a variety of questions to ask when seeking a new banking relationship. Some of those could include: Does the bank require a specific data format to get information, or can it be customized? Who will provide the customer service for the business’s account — a bank’s dedicated team or a third party? How are cash management service fees calculated and billed — à la carte or fixed? How often are service fees reviewed? How many layers of leadership are between the business and the bank’s decision makers? 

Asking potential banking providers questions such as these can help make clear some of the complexity cash management services can have when trying to make comparisons across institutions. Ultimately, businesses should first determine what’s important to them when it comes to cash management services, then find a partner whose services are a match, or one that’s willing to cater to those needs.

Why consider cash management services when selecting a banking partner? 

When a business is selecting a bank, they’re often basing their decision on the bank’s role as a credit provider. That typically means lending rates and terms are the focus. However, that might not be the most revealing decision point for the long-term success of the banking relationship. Cash management services serve a very important role in the day-to-day operations of a business. It can often be a regular touchpoint between a business and its bank, and one that reveals the bank’s ability to customize its approach to meet a business’s needs.

Credit and access to capital are just two elements of a healthy banking relationship. Cash management is just as important because it’s a mechanism that facilitates the daily movement of cash — a vital component of a business. In this case, the size of a bank doesn’t necessarily mean it can offer the ideal cash management solution to a business. Often smaller community banks are the most competitive by offering customized solutions. A partner that’s eager to work with a company and understands its market is more likely to offer solutions designed to meet a business’s unique demands.

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How to set your company up for success on the international market

There are major sources of volatility at the macro level now that are clouding what continues to be a relatively favorable global growth environment. Issues such as Brexit and, much more recently, the increased tension with Iran, are tough for businesses to think through with respect to how they might impact their business’s performance, often indirectly.

Further, and more acute at the micro level, are the current trade tensions with China and the potential for that to manifest in supply-side issues. Companies are concerned not just with how to deal with the increased costs associated with tariffs, but how to cope with the potential sudden loss of access to vital manufacturing components.

However, in spite of these headwinds, the international markets continue to offer compelling opportunities. In fact, many forecasters have recently increased global forecasts for 2020 to levels above the 2019 actual.

“It would be easy to assume, looking just at the headlines, that overall global trade is contracting,” says Jim Altman, Middle Market Pennsylvania Regional Executive at Huntington Bank. “However, just in the U.S. between 2016 through today, year-end trade is up about 30 percent over that period, so companies are cognizant that there are still opportunities across the globe. The issue becomes how to seize on those opportunities while mitigating exposure to the obvious risks.”

Smart Business spoke with Altman about the keys to finding success on the international market.

What help for issues and opportunities in the international market are companies typically seeking from their bank?

In part, companies look to their banks for product solutions, such as trade services, foreign exchange, and credit insurance, that help de-risk foreign deals. But beyond that, many companies are looking to their banking partners for actionable insights. They want to leverage their bankers’ broad experience working across different countries and across a variety of industries to provide advice that helps them navigate risk while pursuing growth opportunities. Business owners and executives want a proactive partner that operates with their best interests in mind.

How can companies better position themselves for success and mitigate risk as they engage in international trade?

An important step is picking the right advisers, including accountants, legal counsel, and an experienced banker. Regarding the latter, it’s also important to find a bank that specializes in working with companies of similar size. Different banks have different targets — some cater their services to Fortune 500 companies, while others tend to focus more on small or middle-market companies. Companies can find that they’ve outgrown their current banking provider or that their global bank isn’t focused on businesses of their size or industry.

Finding the right partner that’s both capable and engaged is important to a company’s success. Companies that find they need to call their bank for ideas instead of their bank calling them with insights probably need to look around for another partner.

What common mistakes do companies that are interested but not yet engaged in international trade make that could be a setback?

Both small and very large companies can sometimes underestimate the risk associated with the countries that they’re dealing in. Dealing outside of the U.S. introduces new and unique risks that are easy for companies to overlook.

An example might be currency controls instituted by a foreign country that prohibit even a strong customer from remitting foreign payments, or nationalization of a foreign plant by a local government. Often cultural differences are overlooked, too, which can impact not only payment experiences but also a company’s ability to deploy a successful sales strategy in its target markets.

As a general rule, companies that perform the best tend to be those that don’t go it alone and that recruit help in assessing and mitigating risk, as well as assisting in developing sales strategies that reflect local practices and conditions. This allows companies to focus on what they do best, while leveraging the strength of their partners to be even more successful.

Insights Banking & Finance is brought to you by Huntington Bank

Steps you can take to improve, grow your business in 2020

The start of the year offers a good opportunity for business owners and executives to evaluate where their company is, where they want it to get to and then put a plan together to achieve their objectives. While 2019 was a strong year for businesses, economic and political factors could affect the landscape going forward. It’s important both to establish a plan to attack the market in the coming year and also re-evaluate and adjust that plan when circumstances change. Sometimes that process is aided by getting the input of key business partners.

“Companies and owners that put together a plan, execute that plan and find ways to work successfully with partners should be able to leverage favorable market conditions to grow their business,” says Kurt Kappa, Chief Lending Officer at First Federal Lakewood.

Smart Business spoke with Kappa about evaluation and planning strategies that can help companies unlock their potential in 2020.

What financing opportunities should business owners and executives consider and/or potentially act on in the coming year? 

When exploring financing opportunities for 2020, there are two areas business owners and executives may want to consider — their current cash position as well as utilizing debt. 

Companies should look at their cash position and how it sets them up for future growth. With capital as cheap as it is, growth can be funded via loans or lines of credit instead of cash. If a  company is cash positive at the moment, it is a good time to talk with your banker about tapping into a working line of credit.

On the flip side, debt in 2020 looks as if it will continue to be inexpensive, so it may be a good time to fund a business expansion, whether that’s through organic growth or through acquisitions. When it comes to the latter, inexpensive debt can be used to help fund an acquisition, but the high company valuations might mean it will take buyers time to find the right opportunity. 

What unique opportunities or conditions exist in the market and how could they affect a business? 

Many Northeast Ohio companies are entering succession planning and ownership transition periods. This is mostly because baby boomers who are in leadership or ownership positions have reached an age where they are looking to transition, either through succession planning or through a sale. For these owners, now is a good time to really evaluate which path is best: a sale of the business or by growing and bringing on other team members to run the business in their place. 

For those business owners who have been considering an exit, conditions in 2020 are favorable for selling. And given the high valuations, owners should be able to receive a good price for their business.

What conversations should business owners and executives have with their bankers this year as they try to make the most of 2020?

Business owners and executives should talk with their banker about all that is happening, and what they would like to happen, with their business — what their growth objectives are, what could hold back their growth and how they can navigate those obstacles to achieve their goals. 

It’s common for business owners to get so caught up in running the day-to-day operations of their business that they often struggle to step back and take a bigger-picture look at the organization and where it should be headed. Taking some time to talk with a banker can create the opportunity to have an in-depth conversation about the strategic vision, get some outside perspective on how they and their organization are currently set up to achieve it and build accountability into the plan.

Insights Banking & Finance is brought to you by First Federal Lakewood

What to consider when bringing on outside capital to fund a business

Companies typically need to look for outside funding to fuel the growth of their business. In these situations, they could turn to equity, debt or working capital facilities to expand products or services, enter new markets, repair or replace facilities, add equipment or acquire another business.

However, which type of funding to get, and when, can be a tricky question. For Wesley Gillespie, regional president, Northeast Ohio, at ERIEBANK, answering that question in a way that benefits the business is a matter of perspective.

“When businesses take a more expedient approach to solving their funding issues, it can be problematic,” says Gillespie. “What works to solve only today’s problem misses the bigger picture and can put the company in a tough situation later on.”

Smart Business spoke with Gillespie about what to consider when bringing on outside capital to fund a business. 

What issues tend to affect how businesses decide on the method of funding? 

Most often, companies are choosing between getting a loan or a working capital facility to fund some type of growth initiative. A term loan is the better choice of debt when a company is making long-term investments with a long-term payback, such as expanding a plant or adding capital equipment. Banks typically require collateral with a useful life to match the term of the debt. A plant expansion or equipment improvements should generate a return throughout their productive life, and through or beyond the term of the loan. 

Lines of credit fund short-term debts, providing working capital to cover, for instance, any gaps that might exist between payables and receivables. With a working line of credit, banks look for conversion of that asset to cash in 60 to 90 days.

Equity is typically used for riskier gambits, such as entering new markets or acquiring companies to accelerate growth or diversify. These investments might not have an immediate return, making them the higher risk, and a more expensive option.

What flaws tend to exist with how companies approach the question of funding?

Companies don’t always consider the timing of the funding — whether it’s the best time for equity or debt, which has to do with the cost of each. A good time to take on debt is when interest rates are low. A good time to take on equity is when a company’s valuation is high. A company’s life cycle stage should also be considered. Earlier-stage companies that aren’t yet revenue-positive more often use equity to grow, while revenue-stage companies tend to fund through debt.

Companies can also outgrow capital, which creates risk. Companies that don’t have enough capital might not be able to service their customers. Conversely, companies that carry too much debt too early can stifle both their ability to service debt and, in an equity situation, could have too little equity available for new investors to show interest. 

It’s best that business owners and executives step back and consider the bigger picture when making a funding decision. Get a diversity of opinions on matters of funding from a team of advisers consisting of a commercial banker, an attorney and a CPA firm. Such a team can provide an objective look at the whole picture and help make the best funding decision for the business. 

How does timing play into the funding decision? 

It’s important to consider the mix of debt and equity at the moment a funding decision is being considered. If the company is stable and profitable, it could be prudent to take on more debt, potentially buy out some investors to buy back a greater percentage of ownership and secure more profits. 

Companies that have high debt compared to earnings, and are either seeing their profitability suffer or are having trouble covering interest payments as a result might look to diversify and bring equity into the company to get their debt retired. 

There are many ways to acquire capital to fund a business, especially in this environment, which still has favorable interest rates and investors with capital that are looking to put it to work. Ultimately, making the best funding choice is about regularly assessing the funding mix on the balance sheet, asking questions about what’s best for the business and considering the bigger picture.

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Selling a business to an ESOP offers more than just financial benefits

Business owners who decide to sell their company to an employee stock ownership plan (ESOP) often say they do so not just for the significant tax advantages, but to preserve their legacy.

“They really want the business to survive them, especially if their name is on the door,” says Jim Altman, Middle Market Pennsylvania Regional Executive at Huntington Bank.

In many instances, owners sell to an ESOP to reward long-term employees who helped the owner create value in the company and generate wealth. Owners know they can’t run the business forever and want to take care of their employees. An ESOP provides an avenue to do that.

Smart Business spoke with Altman about the process and benefits and reasons to sell a company to an ESOP.

What are the direct benefits to a business owner and employees of selling to an ESOP?

In selling to an ESOP, owners will get, by definition, a full and fair price for their business. There are also tax advantages — an owner may defer all the capital gains tax on the sale of their business until they pass.

Owners are also able to realize an attractive return on their seller notes. In many ESOP transactions, about one-third is financed by a bank and two-thirds is financed by the seller. The seller notes may carry a premium rate that can generate 10 to 12 percent interest.

Employees, however, are the true winners in an ESOP. They receive a retirement benefit that is more significant than they’d get through any other program.

Who does an owner need to involve when selling to an ESOP?

There are many professionals involved in an ESOP transaction. The process is essentially as follows: The seller hires an ESOP financial adviser, which is like an investment banker, to quarterback the process for the owner and determine the company’s value. The owner also hires ESOP counsel, preferably an ESOP expert, to set the terms of the ESOP to comply with ERISA law and to negotiate with the legal representative for the buyer. Once an owner has legal counsel and a financial adviser, then it’s time to select an ESOP trustee — the entity that will oversee the Employee Stock Ownership Trust, or ESOT, to buy the stock of the business. The trustee, once selected, hires its own ESOP legal counsel and ESOP valuation firm, and comes up with its own valuation of the business. The two sides then negotiate the price until the owner feels comfortable selling.

How does selling to an ESOP differ from selling to a strategic or financial buyer?

Selling to an ESOP is not dramatically different than selling to another buyer. The difference lies with the benefits to the seller, company and employees. With an ESOP, an owner may defer the capital gains tax on the sale. When the owner’s S-corp stock is sold to a trust, the company becomes exempt from federal and most state income taxes going forward.

There is some regulation when it comes to the sale price of the business. While the buyer, an ESOP trustee, and the seller are free to negotiate, the trustee is guided by ERISA laws and the U.S. Department of Labor in order to protect the employees from overpaying for the company. Each ESOP transaction is eventually reviewed by the DOL. If the DOL determines that the purchase price was excessive, it may reduce the price.

What are some reasons an ESOP wouldn’t be in the owner’s best interests?

If an owner doesn’t have a good management team in place to run the business after he or she steps away, a trustee will see that and won’t want to buy the business. Businesses that have cash flows that fluctuate wildly are less attractive and will get less value in an ESOP structure. Also, companies that are highly leveraged should pay off their debts before attempting a transaction. Otherwise the purchase price will go toward debt and not the owner.

ESOPs are misunderstood and not widely talked about, but offer business owners a tax-efficient way to benefit their employees and preserve their legacy in the community after they have left the business. While a sale to an ESOP may not be for everyone or every business, the strategy is one every business owner should consider as part of their ownership transition plans.

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How to look for and identify the signs that it’s time for a new banker

There are signs that a company should evaluate its banking relationship in the hopes of finding a better situation. Among them are businesses that are experiencing a lack of communication with their banking officer, lack of feedback and decision-making ability, and the frequent transition of banking officers. 

“Sometimes a company might have had a good relationship with its banker, one that enables the company to get things done, then the banker leaves for another opportunity,” says Kurt Kappa, chief lending officer at First Federal Lakewood. “If the company then finds itself struggling to work with the bank’s decision makers, they may want to  consider asking to work with another banker, or switching banks entirely.”

Companies benefit from a partner that is proactive rather than reactive. It’s not ideal if the only time a company hears from its banker is when the company reaches out with an issue. They’re not asking to meet with the company to better understand the state of the business, talk through ideas and generally helping to inform the company’s strategic direction. Instead, they’re waiting for a phone call or worse, too busy to recognize they haven’t touched base with the company in awhile.  

“If you call your banker to address a particular issue and don’t get a call back for a couple days, there may not be a strong relationship there,” he says.

Smart Business spoke with Kappa about how companies can evaluate their banking relationship and the signs it’s time to move on.

What questions should a company ask when evaluating its banking relationship?

The first aspect of the relationship to consider is whether the company likes and trusts the person they’re dealing with. Does the company believe the banker has the best interests of the company in mind with each decision that’s made? Does the banker fully understand the business, its competition and the current industry landscape? And does the banker advocate for the business at the bank? It’s important for a business to have the right banking partners on their side, especially when their expertise and advocacy are needed to help the company get through difficult times. 

Once a company has evaluated its banking relationship, what are the next steps?

One of the initial considerations should be to determine if the bank can still complement the company’s strategy. Is the business working with a banker who can contribute to the company’s strategic plans, someone who has the right experience and knowledge? This isn’t to say that a company should switch banks if the relationship isn’t living up to expectations. The issues could center on the person with whom the company is dealing, and one person doesn’t represent everyone in the bank. That’s why a good first step is to look within the bank to see if there’s someone else available who better fits the bill.

However, there’s also a chance that the company might have outgrown its current banking relationship. The bank just might not be able to offer the rates and amortization structure it needs, making relationships, at that moment, a secondary consideration. If that’s the case, then it’s time to move on. 

How should a company use what it learned to find a better relationship?

Once a company has done its evaluation and identified the problems, a good next step is to start asking friends and professional advisers such as CPAs and attorneys who they recommend. It’s likely they know who in the community does what well.

Some banks are large enough and provide ample services, others can provide the hands-on relationship a company might be looking for. Which the company ultimately chooses depends on what’s important to the business owner, as well as what the company needs at that stage in its life cycle. What’s needed at one point in time might not be what’s needed later. And while some banks can grow with a company, others can’t. That’s why companies should regularly evaluate their banking relationship.

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How to efficiently manage your technology assets

In today’s environment, technology is everywhere — from tablets and smartphones to medical and manufacturing equipment. That’s created an imperative for companies to carefully track their endpoint devices to ensure they are updated with the most recent software. It necessitates working with an experienced partner that specializes in providing online asset management capabilities and facilitating a successful refresh strategy.

“Companies with many employees are managing a lot of endpoint devices that come in, go out and possibly change hands as frequently as each month,” says Jim Altman, Middle Market Pennsylvania Regional Executive at Huntington Bank. “When software licenses and device warranties end, a company must quickly and efficiently retrieve and replace or update those devices and software applications. That process is made easier through the implementation of a tracking system.”

Smart Business spoke with Altman about how companies can manage their technology assets throughout their lifespan.

What should businesses take into account from the day hardware is bought or leased?

A good first step is to estimate, as accurately as possible, when that technology will be due for an upgrade — what is the useful life of that equipment and when will it need an upgrade? If, for example, a device is on a depreciation schedule of five years, but the actual useful life of it is only two, the company won’t be ready to replace the device because it’s on the books for another three years.

Also, consider the replacement process strategy. Have a plan to swap out the assets, which are proliferating exponentially — consider that, on average, each employee may have three active devices at one time. With so many devices to update and replace, it becomes easy for chaos to be created.

Given all of this, don’t underestimate the value of leasing technology assets to manage the obsolescence factor and avoid having too much capital tied up in equipment.

What are the possibilities for streamlining and establishing efficiencies?

Companies no longer maintain devices that originate from one manufacturer and are purchased at one time. Tracking them requires a platform that enables a company to keep an active catalog of all devices, who has them and where they are in their lifecycle to more easily identify problems with certain model numbers, so users can be called in to have those issues addressed. It also allows a company to incrementally replace devices that have aged-out of their useful life, rather than all at once.

While tracking hardware lifecycles is critical, staying on top of the software maintenance schedules of those assets is equally as important. Have a mechanism to track versions throughout the network to maintain the most recent security updates, the newest user experience and compatibility as people work together and share information.

Companies of any size with any number of company-owned devices should track their assets. While a company with 20 to 30 assets doesn’t need a robust platform, as the device count rises and organizations spread out through remote working arrangements and travel, the need for an advanced solution increases.

Generally, what should companies expect in terms of device lifecycle?

Obsolescence must be carefully estimated, but for a quick reference, keep in mind that smartphones have a useful life of two years, laptops up to four, desktop computers up to five, storage devices and servers will last for four years before needing an upgrade, mainframes can go five years, and network phones and switches can last as long as seven years. Of course, this is just a generalized guide. Companies should review their hardware to determine a more accurate sense of the replacement schedule.

The importance of monitoring and tracking devices and software can’t be overstated. There are cases in which a device is still active beyond its warranty or maintenance contract, which can create costs that are hidden within an organization. Think about where the technology is going to be, not where it is. Accurately depreciating devices can be a major cost saver both in terms of replacement and maintenance costs, and productivity.

Insights Banking & Finance is brought to you by Huntington Bank

How to ensure your family’s estate-planning wishes are carried out

When it comes to estate planning, high-net-worth individuals naturally think about their assets — physical capital such as real estate, financial wealth, etc. But there are other assets to consider as well.

“There are questions, when it comes to transferring wealth, that are tough to answer,” says Jim Altman, Middle Market Pennsylvania Regional Executive at Huntington Bank. “They are questions focused on helping families get to the core issues surrounding their personal values and the legacy they wish to leave.”

Financial legacy is just one part of the equation. There are different capital structures families should consider, such as social, human and intellectual capital.

“The right wealth management team will ask questions designed to get high-net-worth individuals thinking about the role and purpose of wealth in their family and how it can be used to help them flourish.”

Smart Business spoke with Altman about legacy planning and what families should consider well ahead of a wealth transfer.

When should the conversation about legacy planning begin, and who should it include?

It’s really never too early to start the conversation around legacy planning. It’s a conversation between spouses and typically includes adult children. Those conversations are facilitated by a team of advisers — a wealth adviser, estate planning attorney, accountant — and a designated professional to quarterback the team to ensure whatever is decided gets accomplished.

The process tends to begin by talking about the financial plan, which should lead to an understanding and documentation of the family’s financial and nonfinancial goals — the latter being what the family hopes it can accomplish in later generations. That, then, leads to a discussion about transferring assets. This could include the charitable giving strategy, which requires the creation of a plan to fulfill those charitable goals.

Whatever is decided ultimately needs to be written out in a plan so that it can legally affect the family’s estate plan.

What do families tend to overlook when considering their legacy plan?

Families sometimes created a plan when their net worth was much lower than it is currently. Their situation has completely changed, but yet their plan has not. Typically that’s because the person has pushed off making changes because they’re busy and estate planning seems like a problem to deal with in the future. Working with a team can help address this because then someone can follow up — usually annually — to ensure the plan is still up to date.

It’s also important to ensure all the professional advisers on the team are on the same page. If they’re not collaborating, important aspects of the plan can be missed — tax savings, investment opportunities, transfer strategies that enable a family to avoid paying wealth transfer taxes.

Further, not coordinating the business succession plan with the estate plan can lead to significant problems down the road. It’s not enough to tell people involved with the business who will succeed the current ownership when the time comes. It has to be documented — who should take over, how the asset passes to family (if at all) — for it to be legally binding.

What should someone look for in a legacy planning team?

A good place to start when putting together the legacy planning team are trusted family members and friends, especially those who are similarly situated — a personal or professional referral is important.
All the members of the team should be technically competent and each should have the right credentials. For example, the wealth adviser should have a CFP designation, meaning the person is obligated to be objective and put the interests of the client ahead of his or her own.

It’s also important to relate to the people on the team. A warm rapport is significant because legacy planning happens over a long period of time. And over that time, private and personal discussions will be had on sensitive topics, so the interpersonal dynamics of the group are significant.

Legacy planning involves thinking beyond financial capital. It means considering the legacy the family wants to leave and all they want to be remembered for. That’s why starting early, and with the right team, is critically important to the plan’s success.

Insights Banking & Finance is brought to you by Huntington Bank

How banks can help businesses achieve their goals

Through smart planning and a little luck, there comes a time in a company’s life cycle when it has the chance to aggressively grow.

To pursue this growth, companies may look to add new and growing clients. They may add a production line to launch a new product or increase volume. Or they may acquire a business. Some companies may leverage the momentum to sell or transition the company to new owners. 

“When companies are firing on all cylinders — when market opportunities and sound, creative strategies align — it’s a great time to be more aggressive in their pursuit of growth,” says Mike Toth, president of Westfield Bank.

Smart Business spoke with Toth about how banks can help businesses achieve their growth goals. 

What supports do businesses need during periods of accelerated growth?

Companies looking to speed up their growth should spend time re-evaluating their client relationships and client makeup. It’s a good idea to look at the existing client base to ensure there is a higher percentage of growing businesses within their client portfolio. If they find they don’t have many clients that are growing, it’s highly recommended that the company seek out more clients that are in that mode. 

Many companies are leveraging their bank’s relationships with accounting firms, attorneys and other service professionals as they pursue acquisitions — something not a lot of business owners have dealt with — to perform valuations and other due diligence processes. 

Access to capital is another need, both short-term working capital and longer-term capital, to support fixed asset purchases and acquisitions that are critical to really take full advantage of a window of opportunity. 

What, generally, tends to slow down business growth?

One barrier is access to talent. Some companies can find themselves in a market in which highly qualified candidates are hard to find, which creates competition for truly talented people.

It can also be difficult for companies to grow when they are unable to get the funding needed to take critical next steps, such as servicing a large new client or upgrading equipment. Companies that can’t access capital can find themselves with missed opportunities. 

How are banks able to help businesses grow and overcome obstacles to growth? 

In order to address those impediments to growth, businesses are well-served when they network and build relationships with their bank and other service partners. Companies should leverage their banker to make introductions to potential partners and, maybe counterintuitively, their competitors. It’s not unheard of for competitors to collaborate on certain projects when it’s mutually beneficial. And banks can bridge that gap. 

Banks are also helping companies overcome obstacles in the market by providing capital and making independent insights — objective opinions that can give companies a new perspective on the market and their place in it. 

A company’s banker can work with owners or executives to help them more accurately predict and plan for future capital needs. They can also identify potential pitfalls by leveraging not only their past experience, but the wisdom of other clients who found themselves in similar situations. 

What are the best ways for businesses to create strong relationships with their banker?

Business owners can get the most out of their relationship with their banker by being transparent and communicating regularly. Business owners should be explicit about what they’re looking for from their banker. Some banks will host networking events, which are good places for business owners to make new connections. 

An accomplished banker will get to know a business, and through that knowledge provide customized solutions to overcome obstacles and support the company’s goals. Banks want to see their clients thrive, and will find ways to be supportive, whether that means help with idea generation, networking and building relationships, or finding creative ways to build value.

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