Avoiding Family Conflicts During Estate Planning / Family litigation occurs not from a lack of planning / How to avoid family battles over wealth transfers.

E. Patricia Chantler and Wonsun Willey for WealthManagement.com write: With President Obama signing the American Taxpayer Relief Act of 2012 on January 3, 2013, families can begin planning their estates knowing the updated terms. Now is the best time to assess the Act’s impact and evaluate tax-advantaged wealth transfer opportunities.  

The American Taxpayer Relief Act of 2012 permanently sets the unified gift and estate tax exemption amount to $5 million, subject to annual inflation adjustments; and permanently provides for a maximum estate tax rate to 40% for descendents dying after 2012. For high-net-worth families and those with closely-held family businesses, this means reviewing their estate plans and seeking vehicles to mitigate tax exposure.

Unfortunately, estate planning can also cause family feuds over inheritance, often leading to litigation that can become lengthy and costly with no clear winner. From our experience, family litigation occurs not from a lack of trying to solve the issue, but from a lack of planning. Below are key tactics we suggest to help take advantage of potential tax cuts, as well as to avoid family battles over wealth transfers.

• Overcome the concept of fairness. One of the most common issues is when parents try to be “fair” in order to ensure their children get along. In this situation, the parents are also typically trying to protect and keep the legacy asset, whether it is a business or a home, in the family and on a growth trajectory. If one sibling is invested and interested in the family business, while the other sibling is not interested in the family business and wants to pursue a lifestyle that is quite different from the other sibling, splitting the business “fairly” between the two siblings, i.e. giving each sibling an equal portion of the business, is likely to cause tension and unnecessary disagreements and legal battles down the road.

• Transfer assets based on a natural flow. Instead of transferring assets equally, focus on what makes sense for the individual you are transferring the asset to. For example, if only one sibling is interested in the family business, he or she should be considered to own the family business in the future. If the other sibling is not interested in the business, other mechanisms can be set into place for transferring different assets to that child.

• Protect family assets. Each sibling's desires and needs are different.  The individual might be young with other goals, might not have the same interests as the family, or might have special needs. In these situations, certain mechanisms such as trusts can be set up to protect both the individual and the family assets. For example, an individual can receive income for life and have a trustee appointed to manage the financial assets.

• Make major decisions with every family member in the room. When it comes to transferring assets or discussing the future, the family needs to be on the same page. Not doing so can lead to family tension and legal battles in the future.

For example, the parents might transfer assets to the daughter without telling the son. If the son finds out, he can begin to question how much was given and imagine the reasons for him not to be included. He can also feel resentful towards the sister or the parents. Openness and transparency prevents unnecessary misunderstandings or resentment amongst the family members.

• Do not wait for the original founder of the family business, or a parent, to pass away. A simple fact: the more you talk now, the better it will be for your family’s future.

Many problems arise after the individual who has the majority of the wealth is out of the picture. When mom or dad doesn’t address an issue, the siblings begin to feud.

• Evaluate what you can and can’t afford to transfer. The first step in beginning the estate planning process is to get an estimated current value of the asset portfolio of the estate. Determine the assets that are more likely to appreciate in value, giving considerations to those that also carry other intangible values, such as the family legacy.

Oftentimes, the parents might say, “the kids need to financially take care of themselves. We need to focus on ourselves.” However, after evaluating the estate, they might realize that they can afford to transfer wealth now and minimize what they will give in taxes to the government later. One strategy is transferring hard assets, such as a real estate property, which are likely to increase in value but may not have a good income stream.  By keeping liquid assets such as cash and stock, the parents do not have to compromise their standard of living.  This way, the asset transferred is not the asset parents depend upon for living expenses.

• Treat estate planning as an ongoing process. Every individual has life-changing events - marriage, children, divorce, sale of a business, stock options, IPO - along with changes in beneficiaries. We often refer to this as a “milestone review.” When a financial or significant life milestone occurs it is critical that the estate plan is updated.

For instance, if one of the children gets married, his or her spouse can greatly influence the individual’s opinion on how much he should be involved with the family business, etc. It is important for both the family, and the third party advising the family, to identify the goals and values of the estate and how these milestones will impact them.

• Pick the right professional advisor. Estate planning is a very personal business for both the advisor and the individual client. Look for someone you trust who will bring a personal interest to the relationship. As gifting involves giving up some control and is not something that can easily be reversed, understanding family dynamics and getting family members comfortable in all facets of the gift is important.

Communication and coordination are essential to make sure the overall tax, financial and personal outcomes are the best in the current tax regime. Keep in mind assistance from multiple advisors will be needed during this process. Trusted professional advisors can bring significant value in helping to select the best assets to transfer, for example, attorneys are essential to producing the legal documents needed to carry out the intention of the estate plan.

When planning one’s estate, don’t delay discussions about difficult inheritance and wealth transfer issues.  A family willing to have an honest and open discussion now will avoid scorched relationships and negative financial impact later. 

Get ready for the post-PC world, says accounting thoughtleader

Isaac M O'Bannon for CPA Practice Advisor writes:  More than 1,200 CPAs and financial professionals are in attendance at this year’s New Jersey Business and Accounting Show and Conference, which started today with a keynote by Rick Richardson, CPA.CITP.

In its 19^th year, the annual conference is held at the Meadowlands Exposition Center in Secaucus and is the New Jersey Society of CPAs’ largest annual technology gathering. The show offers two days of educational sessions by many of the top leaders in technology for accountants. Attendees can earn up to 12 hours of CPE during the event, including a combined four hours of CPE credits during the two free general session keynotes that open each day’s sessions.

The conference was called to order by Gerard Abbattista, CPA, the president-elect of the New Jersey Society of CPAs, who is a partner at EisnerAmper LLP, who commended the show for offering a wide opportunity for professionals to earn free and low-cost CPE.

The opening keynote was delivered by noted CPA and technologist Rick Richardson, who has been recognized as one of CPA Practice Advisor’s Thought Leaders and is a member of the Tax & Accounting Hall of Fame. This was the 11^th year that he has offered the opening keynote, which focused on “Technology Futures for 2013.”

Each year, Richardson presents his visions of technology trends shaping the profession, spotlights the key areas accountants should pay attention to, and then provides near and long-term technology predictions. He also does a quick recap of how his previous predictions have fared.

For trends this year, his key focus areas were on technology companies, platforms, hardware, communications and “Big Data.” He noted the remarkable progress Apple and tablet manufacturers have made in transitioning the market away from PCs and toward a much more mobile environment.

“We are nearing a post-PC world where fewer people care about personal computers,” Richardson noted. “Replacement cycles are lengthening as people adapt more mobile technologies, and the use of multiple devices is common. Mobile development is outpacing PC development,” and so is the revenue.

Also speaking at the show today are, Jim Bourke, CPA.CITP, CGMA, a partner at WithumSmith+Brown, who will discuss the Bring Your Own Device trend, and why it's a postitive if managed properly. Former CPA Practice Advisor Executive Editor Gregory L. LaFollette, CPA.CITP, CGMA, will offer two sessions: “How Smart Accountants are Capitalizing on the ‘Cloud Burst’,“ and “Accounting Services: Harnessing the power of the cloud."

Flagg Management has been the coordinator of the conference since it started in 2005. Located across the Hudson river from Manhattan, the show also draws several attendees from the New York area.

“I think it’s a miracle that a thousand CPAs from across the state can get up at 5am and say goodbye to their spouse, then drive for an hour or more to get to the show,” said Russell Flagg, president of the event management group. “I suspect it’s the desire on part of CPAs not only to get free and low-cost continuing education, but also to network with colleagues and get up to date on technology and other issues that they want to make sure they don’t overlook.”

The keynote scheduled for Thursday morning will be delivered by James W. Hughes, Ph.D. , of Rutgers University. He will focus on how the economy, fiscal cliff, sequester and Superstorm Sandy are continuing to affect business in the state and region.

Billbooks – New Kid On the Block of Online Invoicing App / Billbooks among the most sought after online invoicing application. Since the launch it has developed a strong user base and is growing quickly.

Today online invoicing is the simplest method of sending invoices to customers; it is an EFE (Easy, Fast and Economical) way of sending estimates or bills to clients. Using online invoicing software one can send invoices through e-mail or can print and send by post. Web based invoicing software are now been widely used by freelancers, small-medium and even large organizations.

Seeing the fast growing field of online invoicing services provided by already known sites like blinksale, invoicera, freshbooks, curdbee, zoho invoices and more, Billbooks is considered as the new kid on the block. Surprisingly after the launch of Billbooks within few months it has received warm welcome in this segment having increasing user base and the idea of pay per invoice (instead of fixed monthly rentals) has caught the nerve of today’s market.

Speaking to Founder Mr. Sagar Kogekar and Co-Founder Mr. Jayant Ingle, both had the same side of the story, “The reason for us to launch Billbooks was to give the user a new and fresh experience and EFE for creating and sending invoices and estimates. We understand the new age business and how time and cost is the major factor for the profit of an organization. Creating an invoice with a click of button among many more short keys, saves a lot of time and when it comes to save money we have come up with a pricing plan which is suitable for any kind of business from small to medium and large, where the user will have to pay as per their usage.”        

EFE of Billbooks online invoicing application.

Easy: Young generation entrepreneurs and business have adapted web based billing software, for the sole purpose of effective and simple way to send hassle free invoices. Billbooks provides a window to have a quick glance of pending and closed invoices, quick invoice preview, getting an instant profit & loss report are among the easy features.

Fast: Invoicing gets faster like never before, functions like short keys helps to create invoices and estimates at a click of a button. Billbooks introduces a whole lot of short keys like “I” for invoice, “E” for estimates, “C” to add new clients and many more.

Economical: Billbooks flaunts its unmatched economical pricing model, unlike fixed monthly or yearly rentals. It introduced pay per invoice sent model, which is the key for the success of this application.

Adding to be called Billbooks as new kid on the block, Sagar says "we have studied and understood our competitors, with a whole lot of features and many more to be added very soon, Billbooks will no longer be a kid in the competitive market of online billing application".

PayPal to Offer Free Payment Processing for 'Qualifying' Merchants

Todd Wasserman for Mashable writes:  In a bid to one-up Square, PayPal is offering free payment processing through the rest of the year for some U.S. businesses that use its PayPal Here mobile payment system.

Starting next month, PayPal will offer free credit, debit card and check processing to "qualifying" merchants. The company's announcement didn't outline how such businesses can qualify for the program. Reps from PayPal could not be reached for comment.

When PayPal Here launched in March 2012, PayPal took a 2.7% fee, though each merchant that signed up got a PayPal debit card, which earned the merchant back 1% instantly, taking the cut down to 1.7%. Square charges a 2.75% fee for every transaction, though the company also offers a program in which a participating companies can pay a $275 monthly fee in lieu of the per-transaction charges.

Other competitors in the space include VeriFone Payware, which takes a $49 yearly activation fee, though "additional merchant fees may apply" and Intuit GoPayment, which takes a 2.7% cut of every transaction unless you opt for a high-volume plan that offers a 1.7% rate with a $12.95 monthly fee. Intuit also offers a debit card, like PayPal does, but does not give merchants 1% back instantly.

General Accounting & Tax Tips for Families

BakkenCPA writes some general accounting & tax tips for families:

9 Tips on Reporting Charitable Contributions on Your Tax Return

Giving to charity may make you feel good and help you lower your tax bill.

Here are nine tips to help ensure all of your contributions are eligible for deduction on your tax return.

1. If you want a tax deduction, you must donate to a qualified charitable organization. You cannot deduct contributions you make to either an individual, a political organization or a political candidate.
2. You must file Form 1040 and itemize your deductions on Schedule A. If your total deduction for all noncash contributions for the year is more than $500, you must also file Form 8283, Noncash Charitable Contributions, with your tax return.
3. If you receive a benefit of some kind in return for your contribution, you can onlydeduct the amount that exceeds the fair market value of the benefit you received. Examples of benefits you may receive in return for your contribution include merchandise, tickets to an event or other goods and services.
4. Donations of stock or other non-cash property are usually valued at fair market value. Fair market value is generally the price at which someone can sell the property.
5. Used clothing and household items generally must be in good condition to be deductible. Special rules apply to vehicle donations.
6. You must have a written record about your donation in order to deduct any cash gift, regardless of the amount. Cash contributions include those made by check or other monetary methods. That written record can be a written statement from the organization, a bank record or a payroll deduction record that substantiates your donation. That documentation should include the name of the organization, the date and amount of the contribution. A telephone bill meets this requirement for text donations if it shows this same information.
7. To claim a deduction for gifts of cash or property worth $250 or more, you must have a written statement from the qualified organization. The statement must show the amount of the cash or a description of any property given. It must also state whether the organization provided any goods or services in exchange for the gift.
8. You may use the same document to meet the requirement for a written statement for cash gifts and the requirement for a written acknowledgement for contributions of $250 or more.
9. If you donate one item or a group of similar items that are valued at more than $5,000, you must also complete Section B of Form 8283. This section generally requires an appraisal by a qualified appraiser.

For more information on charitable contributions, talk to your tax preparer today.

May 15th, 2013

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10 Tips on Filing an Amended Tax Return

Do you need to make corrections or change information on a tax return that’s already been filed? Don’t worry; you can do this easily by filing an amended tax return. This year you can use the new IRS tool, ‘Where’s My Amended Return?’ to track the status of your amended tax return.

Here are 10 tips you should know about filing an amended tax return:

1. Use Form 1040X, Amended U.S. Individual Income Tax Return, to file an amended tax return. An amended return cannot be e-filed. You must file it on paper and mail it in.
2. You should consider filing an amended tax return if there is a change in your filing status, income, deductions or credits.
3. You normally do not need to file an amended return to correct math errors. The IRS will automatically make those changes for you.
4. Generally, you must file Form 1040X within three years from the date you filed your original tax return or within two years of the date you paid the tax, whichever is later.
5. If you are amending more than one tax return, prepare a 1040X for each return and mail them to the IRS in separate envelopes. You will find the appropriate IRS address to mail your return to in the Form 1040X instructions.
6. If your changes involve the need for another schedule or form, you must attach that schedule or form to the amended return.
7. If you are filing an amended tax return to claim an additional refund, wait until you have received your original tax refund before filing Form 1040X. You may cash your original refund check while waiting for the additional refund.
8. If you owe additional taxes with Form 1040X, file it and pay the tax as soon as possible to minimize interest and penalties.
9. You can track the status of your amended tax return three weeks after you file with the IRS’s new tool called, ‘Where’s My Amended Return?’ The automated tool is available on IRS.gov and by phone at 866-464-2050. You can track the status of your amended return for the current year and up to three prior years.
10. Always be sure to mail the amended returns as certified mail and request a return receipt! Amended returns take up to 12 weeks to process, so be patient when waiting for any refund you may be owed.

May 8th, 2013

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Should You Take the Standard or Itemized Deductions?

What’s the Difference?

When clients come to our office to file their tax return, we often get asked whether it is more beneficial for them to itemize deductions or take the standard deduction. You should compare both methods and use the one that gives you the greater tax benefit.

Here are six facts to help you choose:

1. Calculate your itemized deductions by adding up the cost of items you paid for during the year that you might be able to deduct. Expenses include:

• Home mortgage interest
• State income taxes or sales taxes (but not both)
• Real estate and personal property taxes
• Gifts to charities
• If your expenses are over the minimum threshold, you can also include:
  • Medical and dental expenses that insurance did not cover
  • Unreimbursed employee business expenses
  • Cost of preparing your tax return

2. Know your standard deduction.  If you do not itemize, your standard deduction amount depends on your filing status. For 2012, the basic amounts are:

• Single = $5,950
• Married Filing Jointly  = $11,900
• Head of Household = $8,700
• Married Filing Separately = $5,950
• Qualifying Widow(er) = $11,900

3. Apply other rules in some cases. Your standard deduction is higher if you are 65 or older or blind. Other rules apply if someone else can claim you as a dependent on his or her tax return.

4. Check for the exceptions.  Some people do not qualify for the standard deduction and should itemize. This includes married people who file a separate return and their spouse itemizes deductions.

5. Choose the best method.  Compare your itemized and standard deduction amounts. You should file using the method with the larger amount.

6. File the right forms.  To itemize your deductions, use Form 1040, and Schedule A, Itemized Deductions. You can take the standard deduction on Form 1040.

For more information about allowable deductions, contact your tax preparer today.

May 1st, 2013

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Is Your Tax Return Sending a Red Flag to the IRS?

There are certain items that if reported (or not reported) on your return will trigger the IRS to want to dig a little deeper into your finances. Take a look at these 10 tax audit red flags to be sure you aren’t drawing the attention of the IRS.

1. Foreign Assets – If you check off the box on your tax return (Schedule B) that declares you have an ownership interest in foreign accounts. You should always provide the information about that asset. If you do not, the IRS will definitely want to know how much money you have stored out of the United States.
2. A vengeful enemy – Did you recently go through a messy divorce? Fire a disgruntled employee? Some people will go to great lengths to seek revenge by ruining another person’s reputation. This can be done by contacting the IRS, phone call or letter, and reporting possible underreporting of income, or even committing a serious financial crime. These allegations do not have to be based on facts to get the IRS to check into it.
3. Rounding – When reporting expenses on your tax return, the IRS recommends rounding to the nearest dollar, not to the nearest hundred or thousand. Items such as business expenses or unreimbursed employee expenses that all happen to be, for example, $1,000 or $3,500 can cause the IRS to question the validity of the expenses. It may seem like these are made up figures or overstated figures to the IRS.
4. Questionable Deductions – Trying to take a tax deduction for an expense that is not clearly allowable on your return always runs a risk of being scrutinized. Writing off a pool as a medical deduction is one of the most common risky deductions. To qualify, you must be able to prove that you purchased the pool solely to help with the treatment of a medical condition. If you don’t have a doctor’s prescription requiring the use of a pool the deduction likely won’t be allowed.
5. High Net Worth – It is more common for taxpayers with income over $5 million to be audited than people with less income. This is simply because the tax returns tend to be more complicated and any mistake will usually lead to higher revenue for the IRS.
6. Reporting versus Saying – If you report large net losses on your business returns regularly and then in an interview state that you see huge profits, this might make the IRS want to check in on your company. Even if what is said is not factual, it does not mean the IRS won’t want to confirm the information anyways.
7. Lots of Work Related Driving – Although it may seem like a nice idea to be able to get a big deduction for all of the gas costs you had for the year, make sure you are tracking what was business versus personal use. A large vehicle expense can easily make the IRS second guess your figures, resulting in an audit.
8. Overestimated Donations – The IRS bases the reasonableness of your charitable donations on your income level and other measures. If you are reporting large donations, make sure you keep your receipts to be able to back up your calculations.
9. Unprofitable Business – If year after year your business has not seen profits, beware the IRS might reclassify it as a hobby instead. If you can authenticate the losses and explain how the business is staying open while making no money, they will accept the losses as is. If you can’t verify the reasoning behind the losses and don’t have items that prove you are a real business (such as business cards), the IRS might revise your tax return.
10. A Shady Tax Preparer – If the IRS has found by auditing taxpayers that the same tax preparer keeps coming up on the returns, they may target your return simply because of the person you have file it. Be sure you are always having your returns prepared by a qualified professional.

April 26th, 2013

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Are Your Children Being Educated About Money?

Three out of ten parents don’t talk to their children about money or have had just one major talk with their children on the subject, according to a U.S. survey conducted for the AICPA. Children tend to be over the age of ten by the time their parents first talk to them about money.

Above talking to children about finances, parents are more likely to talk to them about other important topics, such as:

• The importance of good manners
• The benefits of good eating habits
• The importance of getting good grades
• The dangers of drugs and alcohol
• The risks of smoking

It is important to teach children the right lessons about financial responsibility and help them to be prepared for a sound financial future.

Some tips for how to get these ideas across to your children:

• Start Early. Your children learn at a young age to want items, such as toys, clothes, or games, at this time, you should start teaching them about saving. Have them practice saving by putting away some of their birthday or allowance money to purchase the item they want, give them a goal to meet and once it has been met, let them buy the item. This will teach them the basics of delayed gratification and budgeting for a goal.
• Speak in Their Terms. Your child may have no interest in learning about the compounding interest on their college savings account; they are more likely to care about money to spend with friends or to buy a toy. Take this opportunity to teach about savings by relating it to something they will care enough about now to listen.
• Repeat Often. The more often you talk to your children about good financial decisions, the more likely it is to stick with them in their future. At meal times, talk about saving for big purchases, like vacations, and how it might affect budgets.
• Walk the Talk. As they say, actions speak louder than words. By giving in easily to your children if they make a fuss over a toy at store, then you will have a hard time convincing them that delayed gratification and sticking to a budget is effective.

Teaching your children now about the benefits of saving and budgeting is just as important as teaching them to be polite. These are basic skills that your children will need to know to be a well-rounded adult. For more information on what other financial knowledge you should be passing on to your children, contact your accountant today.

Tax Reform Riddle: How Big Can a 'Small' Business Be?

Patricia Clark for Bloomberg Businessweek writes: Let’s take a moment to sympathize with the philosopher kings in Congress, who might soon be grappling with one of the most gripping existential questions of our time: What, exactly, is a small business?

Lawmakers’ most recent cause for meditation on the subject is a provision in the small business tax reform billadvanced by Representative Dave Camp (R-Mich.), which aims to reduce compliance burdens on companies with $10 million or less in annual revenue by letting them use the simpler cash method of accounting. The provision is expected to receive widespread support at a meeting today of the House Ways and Means Committee (which Camp chairs), according to a story by Marc Heller in Bloomberg BNA (subscription required). One point of possible contention, according to Heller: Whether the $10 million threshold should be higher.

If you haven’t given much thought to quantifying the “small” in small business, you could start by perusing the Small Business Administration’s Table of Small Business Size Standards Matched to North American Industry Classification System Codes—a 46-page document (pdf)that sets limits, usually for revenue or number of employees, for how big a company in a given industry can be and still qualify as a small business in federal programs.

It makes for fun reading, but in the end, it doesn’t provide much clarity. The SBA considers a casino a small business if it does $7 million or less in annual revenue, unless the casino has a hotel attached, in which case the cap is $30 million. A pet food manufacturer can have 500 employees and be considered a small business, while beer wholesalers graduate out of the category after 100 workers. Power plants are generally evaluated in terms of their annual output in megawatt hours.

The various groups that track small businesses aren’t much clearer. The National Federation of Independent Business, which publishes a closely watched optimism index of its members, distributes the bulk of its surveys to companies with 20 or fewer workers. SurePayroll and CBIZ—two business service firms that tally small business hiring—define small businesses as those with up to 100 and 300 employees, respectively.

The many definitions of what constitutes a small business might seem like small beer but matter plenty for business owners who want to sell to the government, take advantage of federal loan guarantees, or know how a law will affect them. The Affordable Care Act, which will require businesses with 50 or more employees to provide health coverage beginning next year, is one good example. For another, the Senate’s Marketplace Fairness Act, which has yet to pass the House, would require businesses with more than $1 million in annual revenue to begin collecting an online sales tax on out-of-state transactions. (EBay (EBAY), which opposed the bill, proposed raising the revenue exemption to $10 million.)

Back to the cash method of accounting provision in Camp’s small business tax reform bill: It would allow some small businesses to record revenue when they receive payments, likely simplifying their tax filing process and improving cash flow (because they won’t have to pay taxes until they’ve received payment). Right now, most small businesses are supposed to book revenue when it’s earned (the accrual method), for tax purposes at least.

When BNA’s Heller went looking for naysayers to Camp’s cash accounting proposal, the closest he could get was Grafton Willey, a former chairman of the National Small Business Association, who told Heller he’d like to see the $10 million cap for the provision set “a little higher.” If you’re curious, the NSBA limits membership to businesses with 500 or fewer employees, though the average size of its 65,000 members is somewhere between eight and 11 workers.

11 Smartest Things Heard at the National Association of Personal Financial Advisors Spring Conference

 PAULA VASAN AND CHARLES PAIKERT for Financial-Planning.com write: How will you scale your practice? What's the secret to retaining Gen Y employees? What's the best way to network? For three days, advisors and industry experts descended on Las Vegas for the semi-annual National Association of Personal Financial Advisors conference to discuss these topics and many others. Check out some of the best things we heard. 

1. How to Turn $100,000 Into $1 Million

If a medium-sized RIA firm makes a $100,00 investment in technology, they can boost the net value of their business by $1 million, according to James Dario, TD Ameritrade Institutional managing director for product management and strategy.

2. New Platform Worth Watching

Dario cited inStream as an example of an “innovate new platform” advisors should be looking at. The product integrates alerts into a clients’ financial plan, letting advisors know, for instance, when a client has experienced a life event, triggering the need to roll over a 401(k) plan.

3. Network With Peers

Independent advisors should network with peers to provide support for one another in times of hardship, according to Annie McQuilken, a registered investment advisor. She’s part of an RIA group called the Money Women, in which each member formally agrees to provide coverage for each advisor of the organization should a certain member become temporarily disabled or permanently incapacitated. In other words, as "solo advisors", each running a relatively small firm, the group aims to serve as a type of succession plan and cushion for one another should a health-related disaster strike.

4. Plan for Health Care

Advisors are not doing a good enough job planning for health care costs, according to Carolyn McClanahan, a financial planner and physician. When addressing health care with clients, include the following subjects into the discussion:

• Cash flow: What is your cash flow to pay for serious illnesses? Do you want to tap into your retirement plan or access life insurance benefits?
• Tax planning: Understand all co-pays and out of pocket expenses. Track these during serious illnesses for more effective tax planning.
• Family deductibles: If you know your clients have hit greater than 10% of adjusted gross income for deductibles, make sure everyone in the family gets their health needs taken care. All of those expenses are deductible.

5. Retain Gen Y Employees

Financial advisory firms must engage and retain Gen Y employees if they want to expand their roster of Gen Y clients, says David Grant of Vantage Financial Partners (and a Financial Planning columnist). Personnel development is key to making firms successful. The risk of not putting in the effort to develop employees is having potential successors walking out the door. "Why would you not want your newest employees to be superstars?" Grant says.

Some specific tips:

• Have a good-looking, useful website
• Assess work/life balance
• Have a clear career path for employees
• Address compensation regularly
• Provide education and conference assistance

6. How to Handle Alternative Investments

Financial advisors are far from a consensus when it comes to the value of alternative investing. While some advisors embrace the sector, others view it with skepticism and distrust. "I don't recommend alternatives for any of my clients," said Joseph Hollen of Reno, Nev., based Hollen Financial Planning Ltd. "Fees are often too high. Private equity firms have a strong sales pitch," he says. In addition, the highly illiquid nature of alternatives make the asset class far from desirable. "Life events happen. Your clients need to buy a house, send their kids to college -- it's dangerous to have money locked up for so long, especially within the 30-50 age range when such events are most prevalent." 

7. Medicare Opportunity

Financial planners and advisors have a “huge opportunity” to enhance their practice by becoming knowledgeable about the latest rules and regulations impacting Medicare, according to Paula Muschler, Medicare advisor for Allsup, a St. Louis-based firm which provides Medicare services to individuals and employers. Only 28% of clients discuss Medicare issues with their financial advisors, Muschler says.

8. Don’t Worry Too Much About Older Clients Making Decisions

The vast majority of boomers do not get brain diseases like Alzheimer’s and are able to make financial decisions “thoughtfully and carefully,” says Laura Carstensen, professor of psychology and head of Stanford University’s Center on Longevity. The brain’s processing capacity declines after age 50, Carstensen explains, but older people’s expertise remains intact, as does their ability to learn.

9. An Aging Population

By 2030, an estimated 22% of the U.S. population will be over 65, according to Carstensen, a 9% increase from current levels. And according to one recent estimate, a majority of children born after 2000 will live to be 100.

10. Investors Are More Risk Averse

Risk aversion goes up as cognitive ability declines, according to a study cited by Michael Finke, professor of personal financial planning and Ph.D. coordinator at Texas Tech University.

11. Lead Generator

For $295 annually, the website www.feeonlynetwork.com is a “great resource” to connect with prospects looking for a fee-only planner, says Kristina Bolhouse, vice president and principal for The Arkansas Financial Group.