Accounting & Finance

Using Single-Member LLCs to Own Real Estate

Single-member LLCs (SMLLCs) are LLCs with only one member (owner). Thanks to the taxpayer-friendly “check-the-box” entity classification regulations, SMLLCs have become a popular entity choice for various business and investment activities. Because of its unique attributes, SMLLCs are also ideal for real estate holdings. Why, Because they provide liability protection along with tax simplification, while […]

Single-member LLCs (SMLLCs) are LLCs with only one member (owner). Thanks to the taxpayer-friendly “check-the-box” entity classification regulations, SMLLCs have become a popular entity choice for various business and investment activities.

Because of its unique attributes, SMLLCs are also ideal for real estate holdings. Why, Because they provide liability protection along with tax simplification, while also setting the table for tax-deferred transactions under both the Section 1031 like-kind exchange rules.

Under the check-the-box regulations, the existence of an SMLLC is generally ignored for federal tax purposes (the exception is when the member treats the SMLLC as a corporation, which is relatively unusual). This disregarded entity status means that the business or investment activity carried on by the SMLLC is considered to be conducted directly by the SMLLC’s member for federal tax purposes. When an individual uses an SMLLC to operate a business, the tax results are reported on the individual’s Schedule C, just as if the business were a sole proprietorship. No additional federal tax forms need be filed. When an individual’s SMLLC is used to own and operate rental real estate, the tax results show up on the member’s Schedule E. When a corporation owns an SMLLC; the SMLLC is considered to be an unincorporated branch or division. When an SMLLC is owned by an entity treated as a partnership, the SMLLC’s activities are directly reflected on the member’s Form 1065 with no additional federal tax forms required.

Real estate investors are rightly concerned about exposure to all the various and sundry liabilities that property ownership can entail. These can range from environmental liabilities to personal injury claims when tenants slip and fall on the sidewalk. Setting up an SMLLC to own real estate addresses the liability exposure problem without adding tax complexity since no additional federal tax forms are required. Of course, the SMLLC’s member will often be required to guarantee any mortgages against the SMLLC’s property personally, but that’s par for the course.

Here’s where it gets interesting. As explained earlier, the SMLLC’s member is considered to directly own, for federal tax purposes, any real estate that is owned by the SMLLC. Therefore, an exchange of property owned by the SMLLC will be treated as an exchange by the member for purposes of the Section 1031 like-kind exchange rules. Meanwhile, the relinquished property given up in the exchange and the replacement property received in the exchange can at all times be held within the liability-limiting confines of the SMLLC.

If the property to be relinquished in an upcoming Section 1031 exchange is currently owned directly by an individual, he or she can set up a new SMLLC to receive the replacement property. The exchange will still qualify for Section 1031 tax-deferred treatment because both the relinquished and replacement properties will be considered owned directly by the individual for federal tax purposes. However, under applicable state law, the SMLLC will protect the individual from liabilities associated with the replacement property because he or she will never appear in the chain of title.
Single member LLCs are excellent entities to own real estate.

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financial-advisor

10 Reasons You Should Talk to a Financial Advisor

Throughout this journey we call life, so many things happen.  Think about it – you start grade school and in 13 years you’re graduating high school, regarded as an adult and making life long decisions that will impact you and your future family forever.   Most of us will spend a lifetime working on the career […]

Throughout this journey we call life, so many things happen.  Think about it – you start grade school and in 13 years you’re graduating high school, regarded as an adult and making life long decisions that will impact you and your future family forever.   Most of us will spend a lifetime working on the career we choose, buying a house, getting married, having a family, sending kids to college, retirement, weddings, funerals and all of the stuff in between.

It’s a lot.  It’s life. Some of us are prepared more than others and some sooner than most and some not at all.  All our hard work and decisions we make throughout life somehow end up typically dealing with finances, budget or money in some aspect.  Finding a trusted advisor is one of the first steps to being able to develop and create a plan to deal with all the situations that life will throw at you.  Here is a list of reasons why it’s important to communicate with your advisor and weigh their advice to help make educated decisions on your money.

#1 Graduating college – lots of debt with college loans – seek the advice of an advisor to help determine what’s the best way to pay it back, protect my parents from being responsible should something happen to you and save money for other things in life.

#2 Starting a family – if something happens to me how will my loved ones continue life without me financially; tax deduction?  That’s a good thing, right?  Saving for their college expenses. An advisor can help give you options and show you strategies that will have you protecting and saving for your new bundle(s).

#3 Buying a house – what’s a good interest rate?  How much house can I afford?  Another tax deduction, right?  An advisor can review what the expenses associated with buying versus renting can do to your budget.

#4 Saving for retirement – where are the best places to put my money for the future?  Contribute to an employer retirement plan or start my own retirement account?  An advisor can show you how investing in your retirement can solidify your future years.

#5 Insurance – should I have it, what kind and how much?  Starting a protection plan in your life is a good thing and imperative if people are depending on you for any reason.  An advisor can work with your budget and create a plan that will protect your family and change as needed with your journey.

#6 Death – a parent or other family member passes that will impact you financially in some way is a good time to connect with an advisor.  They can help you get through the estate options available to you and be a good sounding board at an emotional time.  Helping you make good decisions that can affect future life.

#7 Retirement – when to take social security?  What do I do with my employer retirement plan?  How will my budget be impacted in the transition into retirement?  This is a critical stage in life where an advisor can be a huge help to determine the best options in these questions and a hundred others you will have.

#8 Budgeting – it’s a good foundational start to all financial planning.  An advisor can help determine where your money is going and if costs are higher in some aspects of your budget than others like car insurance or interest rates.  Paying off debt can be a great time to connect with an advisor as well ensuring to pay off the higher interest rate debt first and then snowball the payments into other lower interest debt.

#9 Winning the lottery or an inheritance – if we were so fortunate to have this happen to us in our journey it can be full of endless ideas of what to do with the mullah.  An advisor can help plan the best attack on debt, savings and discretionary dollars to ensure you don’t run out of money in the first week.

#10 Starting a business – you have a great idea that you can transition into a business or it’s time to fly solo and make the jump to business ownership.  An advisor can explain the different options, discuss budgets, employees, salary and other important business decisions necessary to help you be successful in this new endeavor.

Wherever life takes you on this journey, it’s important to find that trusted advisor that you can lean on to help you move through life in the happiest parts and the saddest parts. Relying on a trusted advisor can assure you and your family, the decisions you make, will turn out better than just okay.

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security

Data Security: A Constant Threat (Part 2)

Threats of a Fraudulent Loss Creep into our Daily Business Identity theft by Social Engineering is arguably the fastest growing crime – globally, and affects all of us. Social engineering fraud is a broad term that refers to scams used to compromise data by cyber-hackers. It refers to the manipulation of people into performing actions […]

Threats of a Fraudulent Loss Creep into our Daily Business

Identity theft by Social Engineering is arguably the fastest growing crime – globally, and affects all of us. Social engineering fraud is a broad term that refers to scams used to compromise data by cyber-hackers. It refers to the manipulation of people into performing actions or divulging confidential information. Think in terms of, people being “tricked” for the purpose of information gathering, fraud, or system access.

Telecom Fraud is most common by imposters pretending to be government or some other official demanding payments for family members in financial need. Two well-known scams are IRS payment demands or family members traveling abroad and needing money for transportation home.

Others are email scams. Imposters create a scenario which seems to come from a legitimate source, and their stories are often plausible. We know these as phishing attempts. The emails often contain a link or an attachment that runs an executable file. Once opened, or clicked on, it secretly downloads malware and keystroke memory programs, for example.

Data Security Can Be A Science Project For Business

Businesses that have a well-communicated guide for handling sensitive information tend to have stronger security. They use such a guide to train their staff to recognize different types of fraud. For IT and Technology, for example, update network security and comply with the PCI DSS standards to identify vulnerabilities. Consider dual and even triple authenticity [user name, password, and image] for VPN and remote access. Require updates and changes to passwords at prescribed times and use secondary authentication for password resets. IT should require firewall settings, strength of passwords and failed attempts before granting network access. Develop a clearly defined policy on Bring Your Own Device [BYOD] and the use of personal computers. The policies should also define appropriate access points in areas with free Wi-Fi.

Safeguards for Business and Individuals

We have all received emails or phone calls with an offer that seems just too good to be true. Be sure to check the sender’s email and the URL to any links. Be vigilant and take time before opening any email and answering questions with personal information – even if it comes from someone you know! There are a lot of “don’ts” to protect your information.

If you receive an email message you weren’t expecting, or it is from an unknown source:

  • Assess domain names, subject lines, and content
  • Do not click on unrecognizable links or reply to emails from unknown people
  • Do not open any attachments
  • Do not reply or forward
  • Do not send money
  • Do not disclose personal information
  • Do not release business data
  • Do not send Identification Documents
  • Do not release details of bank accounts
  • Do not give out your credit card

What We Believe

Risks to your data and data security are real, and they are in real-time. Cyber-attacks are sophisticated and far-reaching. Breaches can and do occur and, more so, new threats occur before business are even aware of the risk [e.g., dwell time and zero-day attack.]
Yes! We have become complacent with our information. True! Businesses underestimate the scope of compliance. The three big things remain the three big things in exposed data:

  • Credit and payment card information
  • Medical and Personal Health Information
  • Employment and Personally Identifiable Information

You can reduce the risk of data loss. There is a greater need for diligence and compliance since Cyber-attacks have become so sophisticated. Strict regulations, such as HIPAA and HiTECH, and performance standards including PCI-DSS and Business Process Management, will remain complex.

While this article provides some practical advice and awareness, it is intended to explain the importance of protecting data and illustrate just some of the consequences when it is not. While we discussed safeguards, these are not all-inclusive or complete. The level of protection needed may be determined by your CIO and IT department and may include other operational safeguards such as Policies and Procedures, Training, Access Control and Enforcement, Assessing Network Hardware and Software, Securing Data Transmission and Encryption, and Auditing of events such as inappropriate and unauthorized access to information.

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home-construction

Choosing the Ideal Financing Option for Home Construction Projects

With spring arriving early in the Lehigh Valley, we’ve noticed an early uptick in inquiries on how to best finance home construction projects. Finding a knowledgeable and experienced construction mortgage lender is as important as working with a reputable builder. Consumers need a partner who is familiar with the process and can talk through the […]

With spring arriving early in the Lehigh Valley, we’ve noticed an early uptick in inquiries on how to best finance home construction projects.

Finding a knowledgeable and experienced construction mortgage lender is as important as working with a reputable builder. Consumers need a partner who is familiar with the process and can talk through the nuances of available programs, allowing homeowners to focus on choosing their dream fixtures and finishes without worrying about the financing.

As consumers shop their options, it’s helpful to understand some construction financing basics. The most common forms of construction financing are One-Close and Two-Close loans. These loan programs vary among banks, credit unions, and mortgage companies. Additionally, the size and scope of the project may limit the options.

One-Close Loans

One-Close construction loans involve one settlement prior to construction. The rate is established at closing and applies throughout the construction period and during the permanent financing period.

During the construction period, interest is paid monthly based on the total draws advanced to-date. Upon completion of the project – typically when the occupancy permit is issued – the financing converts from construction to permanent, and principal and interest payments begin based upon the amortization set at closing.
Since the permanent financing rate is established before construction begins, the worry about a rising rate environment is eliminated. The process is easier and can save money, and borrowers do not need to be reapproved, and they only pay closings costs once.

Two-Close Loans

With a Two-Close construction loan, there is one settlement before construction commences that funds for the new home and a second after completion to secure permanent financing that will pay off the construction loan.

The loan rate applicable during the construction period is typically adjustable and requires monthly interest-only payments. Construction loan terms are similar One-Close loans, although longer periods are more common. After construction is completed, the borrower must secure permanent financing and be reapproved, and the property must be reappraised. Under the Two-Close scenario, the borrower typically arranges to have the permanent financing in place and has to pay closings costs a second time.

In a potentially decreasing interest rate environment, there’s an opportunity to capture a lower rate for the permanent financing when the home is completed. Upgrades resulting in cost overruns from the initial plans may be able to be financed into the permanent mortgage.

How to Choose?

So, if you’re considering residential construction financing, which option is best? As you’ve probably guessed, the choice hinges on a number of factors. Let’s look at some complications for each loan type.

One-Close rates can typically be higher than market rates at the time of closing since the lender is establishing the rate for the construction and permanent periods. Any upgrades or cost-overruns that occur after the loan closes will need to be covered by the borrower out of pocket. Hence, it is advisable to make upgrades/changes before finalizing the construction contract with the builder so the costs can then be included in the financing.

Two-Close loans do not provide interest rate protection on permanent financing until the project is completed; there are typically additional expenses due to the permanent loan closing. Also, if a borrower’s circumstances change during construction, there could be difficulties getting reapproved. The property would likely have to be reappraised, which could play a factor in the permanent loan approval.

An important consideration when choosing between the two options is where interest rates are heading. If rates increase by the completion of the project, One-Close saves money by locking you in to the preferential, lower rate prior to the commencement of construction. If rates decrease, the Two-Close option is preferable.

Ultimately, a number of factors will come into play when considering financing for home construction projects. The best way to make an informed decision is by speaking with an experienced construction mortgage lender to explore your ideal personal options.

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CFO

CFO Services for Hire

A growing trend in the business world today – and something to consider if you have the need – is the use of temporary CFO services. If you think CFO services are a bit high-end for temp help, think again. Let’s say on some random Monday morning the CFO comes into your office and announces […]

A growing trend in the business world today – and something to consider if you have the need – is the use of temporary CFO services. If you think CFO services are a bit high-end for temp help, think again.

Let’s say on some random Monday morning the CFO comes into your office and announces he is leaving in two weeks. You, as the CEO, know that the quarterly filing is due in a few weeks, the payroll department needs to be supervised to get the payroll processed on time, and the external auditors will be knocking at the door in a matter of months. You have to replace your CFO, but you don’t want to rush a hire before you mull over your needs: what level of expertise should you look for, do you require someone full-time or part-time, what are the plans for your company going forward, what can you afford?

There is an answer, and it may be as close as your CPA firm.

When you need someone with experience and expertise that can fill the CFO’s spot almost immediately, many CPA firms have the professional staff who can serve in a CFO capacity until the company finds the right person for their organization. In fact, Mark Zinman, a member of the PICPA, wrote in an August 2016 CPA Now blog — CFO Services (and More) for Companies That Can’t Afford One — that “smaller businesses can benefit from the entire CPA knowledge base encompassed in that firm. So, a business would not only be hiring a ‘CFO, ‘ but it would also be tapping into the company’s broad collective knowledge.”

You never know why or when an executive may leave. Employees, including CFOs, depart for any number of reasons: – a spouse’s job is relocating, the CFO has decided to return to school, or this person is moving into another type of work altogether. Departures like this may not happen frequently, but they do happen. In fact, this situation transpired for one of our clients, and our firm was ready to step in and assist with the CFO duties so the business could continue its daily operations.

This particular business is a not-for-profit, and as such, it is required to file monthly, quarterly, and annual compliance reports. Because it is a small not-for-profit, the CFO wore many hats, including human resources. Our firm-provided an “interim CFO.” and in the beginning, she spent several weeks becoming familiar with the accounting system and the reports that were due. She spent time sitting with employees to understand how they contributed to the company. She also invested time reviewing checks and balances, preparing grant requests, and providing feedback to the CEO and COO.

After some time, it was determined that one or two days a week was sufficient for the week. The CEO decided that the temporary hire would continue until the organization was able to find the right person for the job. The CEO was pleased that he had a seasoned professional to fill the position and the time to make a decision based on the needs for the organization going forward.

A temporary CFO from a CPA firm is an additional benefit because the knowledge and experience of CPAs can be invaluable assets to a business. Some potential advantages include having the CPA assist with preparing financial statements for the outside auditors, preparing quarterly and annual tax filings, dealing with regulatory agencies if the need arises, conducting management presentations, interviewing full-time replacement candidates, and making recommendations for operational changes.

If you or someone you know is in the difficult position of losing your top finance officer, interim CFO services from a trusted CPA firm can be a win-win for all involved.

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irs

IRS Tax Penalty Removal: Ask and You Could Receive

With the tax filing season upon us, many small business owners take responsibility for the timely filing and payment of their business and personal tax obligations. Income tax return filings for state and local governments are not to be ignored but specifically concerning the IRS. Many of us dread receiving that official letter in the […]

With the tax filing season upon us, many small business owners take responsibility for the timely filing and payment of their business and personal tax obligations. Income tax return filings for state and local governments are not to be ignored but specifically concerning the IRS. Many of us dread receiving that official letter in the mail notifying us that something may be amiss. And as much as we plan, it is sometimes impossible to not overlook a tax filing or payment deadline, even with the best of intentions.

The IRS’s first-time abatement penalty waiver (FTA), although introduced 12 years ago, is a tool all too infrequently used by taxpayers who would otherwise qualify. An FTA, however, can only be obtained for three types of penalties: failure-to-file, failure-to-pay, or failure-to-deposit. The first two of these penalties are self-explanatory while failure-to-deposit penalties can occur when a business taxpayer fails to make their payroll tax deposit timely.

To qualify for the FTA, taxpayers must not have been assessed any other penalties of a “significant amount” on the same type of tax return within the past three years and must be in compliance with all filing and payment requirements. As previously mentioned, the FTA is not available for all types of penalties. The most commonly assessed penalties that are not eligible are known as accuracy-related penalties, also referred to as “substantial understatement” and “negligence” penalties. In most situations, taxpayers can request that these penalties be abated based on a reasonable cause standard.

For example, the IRS considers you to have understated your tax if the tax shown on your return is less than the correct tax, after adjustments. The understatement is substantial if it is more than the larger of 10 percent of the correct tax or $5,000 for individuals. For corporations, the understatement is considered substantial if the tax shown on your return exceeds the lesser of 10 percent (or if greater, $10,000) or $10,000,000.

Substantial understatement penalties are calculated as a flat 20 percent of the net understatement of tax. You will not have to pay an accuracy-related penalty if there was a reasonable cause for a position you took and you acted in good faith.
Estimated tax penalties occur in situations where taxpayers have income that is not subject to withholding and would be required to make estimated tax payments during the year. Unlike with other types of penalties, there is no reasonable cause exception for the estimated tax penalty nor is there a first-time-abatement waiver available. Therefore, it is often harder to get this penalty removed, but it is not impossible.

Consult with your CPA or tax professional to determine whether an IRS penalty you have been assessed is best suited for the FTA or a reasonable cause abatement request. Also, penalties and interest are usually assessed together. There is no first-time abatement of IRS interest nor can it be abated for reasonable cause.
Every year, people in the United States who don’t file a return, underpay their taxes and underreport their income cost the government almost $500 billion, according to IRS estimates. This difference between the amount of taxes that taxpayers owe and the amount of taxes that the IRS collects is called the tax gap. To put this number in perspective, last year’s budget deficit was $587 billion. Based on the most recent IRS study, taxpayers comply with their filing and payment responsibilities about 82% of the time. This is known as the voluntary compliance rate. Encouraging compliance is one of the IRS’s major goals as it focuses on closing the annual tax gap. The proper use of penalties helps deter noncompliance, and it is clear that the IRS has been using penalties to that end. In a recent 11-year period, the number of penalties assessed increased by 34%, from 28.3 million to 37.9 million.

Lastly, in almost no situation should a taxpayer not attempt to use the first-time abatement penalty waiver or an explanation based on reasonable cause to avoid the assessment of an IRS penalty. Think of the FTA as your “get out of jail free” card. But, only in a figurative sense, not literally.

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Data-Security

Data Security: Part 1

Today’s High-Risk Reality There is good reason to be invested in the security of credit card data and personal information. Whether inside the storefront or online, data breaches at major retailers, financial centers, and health care establishments are notable and more commonplace.  To avoid the potential fraud liability, some have upgraded to chip & pin, […]

Today’s High-Risk Reality

There is good reason to be invested in the security of credit card data and personal information. Whether inside the storefront or online, data breaches at major retailers, financial centers, and health care establishments are notable and more commonplace.  To avoid the potential fraud liability, some have upgraded to chip & pin, and chip & sign to their point of sale networks–and banks have issued credit and check cards with the latest embedded smart chip.  Retail adoption of EMV compliance, is slow – arguably due to the cost and a lengthy “certification” process for equipment.  To avoid the shift in fraud liability, merchants must upgrade to EMV technology.  Despite a move to a more secure transaction environment, it does not reduce the exposure to fraud for online and card-not-present sales.  Despite these efforts, there is still a level of complacency among small businesses and consumers alike.

Data breaches continue to increase in frequency, and cyber hackers are targeting not just the big box retailers, but now small businesses and even health care providers.  Identity theft and medical fraud by identity theft have arguably become an epidemic. As an owner or executive, there is a growing trend recognizing cyber security a strategic risk to their business.  Technology companies and manufacturers fear that proprietary processes, product specifications, and even client histories could be lost.  Others, such as retailers, banks and financial institutions and health care dread the release of identifiable information of their customers and patients.

According to the Identity Theft Resource Center [www.idtheftcenter.org 11/29/2016], there were nearly 1,000 data breaches reported in 2016.  Over 34 million individual records were potentially compromised.

Segment # of Breaches # of Records
Bank/Financial Institutions 42 71,912
Business 409 5,529,046
Education 79 1,033,863
Medical/Health Care 337 14,653,156

The losses from cyber-attacks are expected to quadruple by 2019.  Insured losses and uninsured costs to US businesses were a staggering $100 billion according to a 2013 report by the Wall Street Journal [WSJ Online 7/22/2016 Sioban Gorin.]  The British insurance company Lloyd’s estimated losses in 2015 at $400 billion.  Steve Morgan, a cyber security commentator and contributor to Forbes, believes losses will reach $2 trillion by 2019 [www.forbes.com 1/17/2016.]

Is Data a Cause for Concern or Cause for Alarm?

Merchants have not totally embraced compliance with Payment Card Industry Data Security Standards [PCI DSS.]  These are a minimum set of requirements and widely accepted policies and procedures.  These are intended to optimize the security of credit and payment cards and protect cardholders against misuse or abuse of their personal information.  PCI DSS is commonly discussed but seldom understood.  Businesses have an incentive to comply: increased risk of a data breach; higher processing charges; and penalties for non-compliance.

Retailers all seem to be collecting data on consumer buying habits.  Company loyalty programs track and record our purchases to predict what, when and how much we may buy – and stock their shelves accordingly.

Of course, this leads to BIG DATA and sales analytics for the company.  There is internal accessibility and potential inappropriate access if there are no safeguards.  More so, multi-store data collection is often done in real time so encryption and external vulnerability must be assessed.

Customer Relationship Management [CRM] and Enterprise Resource Planning [ERP] software come in all sizes and applications.  Complex software and simple, smartphone apps are standard tools that can be accessed through website portals and virtual private networks.  Information is often obtained and transferred by remote access or using personal devices [tablets, smartphones.]  Customer, vendor and third party accessibility could lead to unprotected downloads of your sensitive information.

Cybercrime and the frequency of cyber hacks will no doubt continue to rise in frequency, cost and disruption.  Cyber criminals have become so technologically advanced, that it’s hard for law enforcement to follow any electronic footprint and cyber trail.  Traditional methods may be inadequate and time-consuming. Businesses are reluctant to report cybercrimes despite the law that requires disclosure when personal information is breached.  And, of course, most companies will fear the negative publicity and loss of consumer goodwill.   In many cases, unauthorized computer access may go undetected by the business whose data network has been compromised.  More so, legal issues and legislation have challenged the development of public policy since the internet operates internationally.

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New-Years-Resolution

New Year’s Resolution

Review Your Auto Insurance Policy for UM/UIM Coverage As we prepare to turn our calendars from 2016 to 2017, many of us begin to consider the year ahead and may resolve to make some positive changes in our lives, perhaps in the form of New Year’s Resolutions. While some resolutions may be more difficult to […]

Review Your Auto Insurance Policy for UM/UIM Coverage

As we prepare to turn our calendars from 2016 to 2017, many of us begin to consider the year ahead and may resolve to make some positive changes in our lives, perhaps in the form of New Year’s Resolutions. While some resolutions may be more difficult to implement and maintain than others (think eating salads for lunch and hitting the gym every morning before work), there is one resolution that you can accomplish in just a few minutes – reviewing your current auto insurance policy to ensure that you and your family are protected with sufficient coverage.

According to recent data compiled by the Insurance Research Council, nearly one in eight drivers is uninsured. While this alone is a sobering fact, in truth, many more drivers on Pennsylvania roads carry only the minimum amount of auto insurance coverage required by law. Currently, the minimum bodily injury liability coverage required in Pennsylvania is $15,000 per person injured, with a total of $30,000 for all injuries in the entire accident. This is known as a 15/30 policy.  Thus, someone who finds themselves seriously injured in a car accident by the negligence of another driver who has either (1) no insurance or (2) only the minimum 15/30 policy may find himself without a sufficient source of recovery to pay for medical treatment or other losses from their injuries.

Certain coverages, namely uninsured/underinsured coverage, are available under your auto policy to help you protect yourself and your loved ones from such uncovered losses.  Thus, this holiday season, take a few minutes to review your auto insurance policy to check to see that you have uninsured/underinsured motorist coverage.

Uninsured motorist coverage, or UM coverage, applies to situations where a person is injured by the negligence of a motorist who does not have insurance.  Hit-and-run collisions are also covered by UM policies, so long as certain requirements are met, such as reporting the accident to authorities within 24 hours and filing a statement with your insurance carrier within 30 days. Thus, if a situation arises where the at-fault driver in a collision is uninsured or flees the scene of the accident, the UM coverage on your policy will allow you to make a claim to your automobile insurance carrier for compensation for your injuries and damages up to the amount of your policy limits.

Underinsured motorist coverage, or UIM coverage, applies to situations where the limits of available liability insurance of the at-fault driver are insufficient to pay the losses and damages suffered in the collision. Thus, if a situation arises where the at-fault driver has only minimum coverage, but your injuries exceed $15,000, the UIM coverage on your policy will allow you to make a claim to your automobile insurance carrier for compensation for your excess damages, up to the amount of your policy limits.

Pennsylvania law does not require motorists to maintain UM/UIM coverage. Many motorists attempt to cut the cost of their auto insurance by rejecting UM/UIM coverage or keeping the limits on this coverage minimal. However, by trying to save a few dollars per month, you may be exposing yourself and your family to significant risk should you be seriously injured in an automobile accident. Your decision could end up costing you more in the long term than the difference in the cost of premiums.

Finally, it should be noted that many other policy considerations must be made to ensure that you have sufficient coverage for your particular situation. These include selecting sufficient coverage limits and also electing the full tort option. However, explanation of these coverage options must wait for another edition.

If you have further questions about whether you have sufficient coverage for your particular situation, you can review your coverage with your insurance agent or a lawyer. Many personal injury law firms will review your insurance policy free of charge.

As 2016 draws to a close, please review your auto insurance policy to ensure that you have sufficient coverage for your particular situation. If you wait to check your policy until you need it, it may very well be too late.

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Ring in the New Year with College Planning Cheer

With costs of college continuing to rise, a carefully crafted college planning strategy can help your children have a memorable experience while keeping your family financially comfortable. In today’s digital age, there are a plethora of resources available on the internet to help navigate college funding. Additionally, working with a financial advisor will enable you […]

With costs of college continuing to rise, a carefully crafted college planning strategy can help your children have a memorable experience while keeping your family financially comfortable. In today’s digital age, there are a plethora of resources available on the internet to help navigate college funding. Additionally, working with a financial advisor will enable you to explore finance options you may not have considered before.  Some of the solutions are:

  1. Take the free money
  2. Analyze savings options
  3. Look at college planning as part of an overall plan, not a separate, independent decision

First, we need to understand the difference between scholarships and grants; then we must apply for them. Both of these are free money that is never paid back. The difference lies in who is giving the free money for education.

Scholarships are a form of financial aid issued by non-profit organizations, corporations, or individuals. They may ask the student applying to write some sort of essay on a creative topic or some other requirement. One great resource to help students locate scholarships is a company called Scholly (www.myscholly.com). Scholly was created by a Drexel University student who, through hard work and determination, was awarded $1.3 million in scholarships. He was featured on the hit show, Shark Tank, and since then, his business has helped students earn more than $50 million in scholarships!

Grants are another type of financial aid with disbursements usually given by the government. There are many grants available to the public to help with different needs. To determine eligibility for these grants, you must fill out the Free Application for Federal Student Aid (FAFSA). The FAFSA is a government form filed before each college school year which determines how much, if any, government aid the student is eligible for. The FAFSA accumulates all assets owned by the parents, and by the student. Money in savings accounts and money markets, retirement accounts, businesses, investments, real estate (other than the home you live in), and college savings accounts are all taken into consideration. The more assets owned, the less government aid given, all the way down to no assistance at all. So where else do you go for help?

Next, we need to analyze where we are saving all of our finances. As mentioned above, the amount of assets owned is looked at for grant eligibility. Actually, a family can reduce the amount they claim on the FAFSA by making a few small financial adjustments.

  • A common unknown fact is that the cash value within a permanent life insurance policy is not included in the FAFSA calculation. The entire cost of college could literally be wrapped up within the life insurance policy while earning tax-free interest, and use the cash value on a tax-free basis to pay for college. At the same time, the student may qualify for additional aid, reducing the overall cost of college. You could use a life insurance policy on yourself or take out a policy on your child while they are young.
  • If a college savings plan, such as a 529 plan, is being funded, you could make someone besides a parent the owner, i.e. a grandparent. If this small change is made, the assets will not be included in the family FAFSA statement.

Starting early to save for college is an excellent idea, and something a family should definitely consider. Even if you start your college planning late, there are still ways to go about this planning in a strategic manner which allots for retirement savings, ensures your assets are protected, and reduces the overall cost of college. With every family situation being unique, the approach for accomplishing goals should be customized to each individual family. Utilizing the wealth of knowledge on the internet, and working with a savvy financial planner can ensure your goals are accomplished.

Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS), 1767 Sentry Parkway West, Suite 200, Blue Bell, PA 19422. (267) 468-0822. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is an indirect, wholly-owned subsidiary of Guardian. Independence Planning Group is not an affiliate or subsidiary of PAS or Guardian. 2016-32391 Exp 12/18

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Motivating-Employees-to-Save

Motivating Employees to Save in a 401(K)

Your company already offers a pension for employees, but now you’re considering adding a company 401(k) plan. Or perhaps you have no company retirement plan at all and would like to start a 401(k) to help your employees save for the days after you give them a gold watch. How do you motivate your employees […]

Your company already offers a pension for employees, but now you’re considering adding a company 401(k) plan. Or perhaps you have no company retirement plan at all and would like to start a 401(k) to help your employees save for the days after you give them a gold watch. How do you motivate your employees to save?

Sweeten The Pot

Free money is a good start. Matching at least some of your employees’ 401(k) contributions will boost their participation rate in the plan.

“The biggest thing an employer can do to encourage employee participation is to have a decent match,” says Thomas Jordan, Senior Manager at AXA Equitable. “Many plans match dollar for dollar on the first three percent of deferred contributions. Having a match is a big inducement to contribute. For employees, if a plan offers you a match and you don’t participate at least to that level, you’re giving away money.”

A study by WorldatWork and the American Benefits Institute found that 92 percent of companies that offered 401(k) plans matched employee contributions.

Make It Automatic

Make contributing the default setting. Another way to boost employee participation is to make it automatic, Jordan says. Many companies, 56 percent according to WorldatWork, automatically enroll employees as soon as they become eligible, usually after one year on the job, Jordan says.

“For most people, inertia is a big thing,” Jordan says. “If an individual has to make a point of going to human resources just to enroll to begin deductions, a lot of times they will just keep putting it off.”

On the other hand with automatic enrollment, an employee must make a conscious effort not to participate. Among companies with automatic enrollment, 36 percent reported that 90 percent or more of their employees participated in the plan, the study found. But only 19 percent of those without automatic enrollment claimed 90 percent or greater plan participation.

Make Increases Automatic Too

To boost contributions beyond the minimum, offer an escalating feature to increase the percentage of deferred contributions, Jordan says. Twenty-six percent of the companies surveyed said their plan had both an automatic enrollment and an automatic escalation feature. Most companies surveyed, 97 percent, boosted contributions by one percentage point each year.

Educate Employees

To help employees understand the benefits of saving and the power of compounding interest, run the numbers. Show them how they can join the Millionaire’s Club.

For example, look at a 30-year-old worker who starts with $1,000 in a 401(k), earns $40,000 per year and contributes $4,000 per year with a 3 percent match from his employer. The employee gets a raise of 2 percent per year and an annual rate of return of 7 percent. After 37 years, when he or she reaches the full retirement age of 67, this employee will be a millionaire with $1,106,674 saved.

This article has been written by and obtained from an outside source and is provided for general information purposes only. This material does not constitute an offer or solicitation of any kind and is not intended, and should not be relied upon, as investment, tax, legal, or financial advice or services. Securities offered through AXA Advisors, LLC (member FINRA, SIPC) (NY, NY 212-314-4600); annuities and insurance offered through AXA Network, LLC (AXA Network Insurance Agency of California, LLC; AXA Network Insurance Agency of Utah, LLC; AXA Network of Puerto Rico, Inc.) This article is provided by Robert Dinicola. Robert Dinicola offers securities through AXA Advisors, LLC(member FINRA, SIPC) 1 TULIP COURT EASTON, PA 18045 and offers annuity and insurance products through an insurance brokerage affiliate, AXA Network, LLC and its subsidiaries. Rockland Financial Group is not a registered investment advisor and is not owned or operated by AXA Advisors or AXA Network. GE-114509(05/16)(Exp.05/18)

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