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What if No One in the Family Wants the Family Business?

As generations before us, most family business owners have invested considerable time, energy, savings, hopes, and dreams into the longevity of their business. Like many founders, family business owners often establish their business with the long-term intent of positioning the next generation to one day assume leadership. But, what if assumptions are wrong and they simply don’t want the business or they have other career aspirations in mind? Regrettably, it can—and does—happen. In fact, a recent survey indicated that fewer than half (45.5%) of those expecting to retire in five years and fewer than a third (29%) of those expecting to retire in under 11 years have selected a viable successor. (MassMutual, American Family Business Survey, 2007) The time to ask those all-important questions are sooner versus later. A large part of any solid succession plan is knowing who will assume the leadership role once the next generation assumes the reins—even if it means knowing the successor ...

Market Month: February 2019

The Markets (as of market close February 28, 2019) Each of the benchmark indexes listed here posted positive monthly gains, led by the Russell 2000, which lapped the field after gaining over 5.0% for the month. The small-cap index is almost 17.0% ahead of its 2018 closing value. Signs that a trade accord with China may be in the offing helped stimulate investors to trade throughout February. Also, word from the Federal Reserve that it may not raise the target interest rate range as aggressively as proposed last year has had a positive impact on stocks. Corporate earnings season continued on a relatively positive trend, while energy stocks rebounded as oil production was curbed, sending gas prices at the pumps higher. Overall, following the Russell 2000, the Dow posted the next highest monthly gain ahead of the Nasdaq, S&P 500, and the Global Dow. By the close of trading on February 28, the price of crude oil (WTI) was $57.26 per barrel, up from the January 31 price of $53.95 per barrel. The national ...

Brexit Update - February 2019

Summary of Brexit On June 23, 2016, the people of the United Kingdom voted by a margin of 51.9% to 48.1% to leave the European Union (EU), a customs, trade, political, and partial currency bloc comprising 28 countries in Europe. This outcome to the referendum was a surprise, effectively ousting UK Prime Minister David Cameron and briefly disrupting global markets. On March 29, 2017, the new Prime Minister Theresa May triggered Article 50 of the Lisbon Treaty, starting a two-year clock for the UK’s exit from the EU. In the months since, May and her government have been working to negotiate an exit (or “Brexit”, as a conglomeration of British and Exit) that both the UK and EU could abide that would ensure an orderly separation. An issue of particular importance in the Brexit negotiations is how to establish a custom’s border between the UK and EU. While for the most part the English Channel makes such a custom’s border between the two rather natural, the border between No ...

Market Month: January 2019

The Markets (as of market close January 31, 2019) Investors celebrated a month in which several indexes posted their best January performance in three decades. A strong labor market, low inflation, and a more "patient" Federal Reserve Board all sent encouraging messages to investors who were hungry for good news after last December's precipitous plunge. The Russell 2000 led the charge, closing the month more than 11% higher than its 2018 close, followed by a nearly 10% gain in the Nasdaq, while the S&P 500, Dow, and Global Dow all topped 7%. By the close of trading on January 31, the price of crude oil (WTI) was $53.95 per barrel, up from the December 31 price of $45.81 per barrel. The national average retail regular gasoline price was $2.256 per gallon on January 28, down slightly from the December 31 selling price of $2.266 and $0.351 lower than a year ago. The price of gold rose by the end of January, reaching $1,325.70 by close of business on the 31st, up from $1,284.70 at the end ...

How can You Lower the Costs of Owning a Vehicle?

Vehicle expenses can take a big bite out of your budget. According to a AAA report, the average annual total cost of owning and operating a new vehicle in 2018 was $8,849. Fortunately, you may be able to save money by reducing three costs. Depreciation: The loss of a vehicle's value over time was the largest expense associated with buying a vehicle, according to the AAA report. Depreciation accounts for almost 40% of the cost of owning a new vehicle — on average, $3,289. Some cars hold their value better than others, so it's important to consider resale value before you buy. Because depreciation lessens over time, buying a used vehicle or keeping a vehicle longer can help minimize the impact of depreciation. Insurance: The average annual cost of full-coverage auto insurance was $1,189. Premiums are based on many factors, including the vehicle make and model, and your location. Some vehicles may cost substantially more to insure because they are statistically more likely to be damaged i ...

Tax Scams to Watch Out For

While tax scams are especially prevalent during tax season, they can take place any time during the year. As a result, it's in your best interest to always be vigilant so you don't end up becoming the victim of a fraudulent tax scheme. Here are some of the more common scams to watch out for. Phishing Phishing scams usually involve unsolicited emails or fake websites that pose as legitimate IRS sites to convince you to provide personal or financial information. Once scam artists obtain this information, they use it to commit identity or financial theft. It is important to remember that the IRS will never initiate contact with you by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media. If you get an email claiming to be from the IRS, don't respond or click any of the links; instead forward it to phishing@irs.gov. Phone scams Beware of callers claiming that they're from the IRS. They m ...

Structures and Strategies: Family Business Succession Planning

Submitted by David Frederick, J.D., LL.M., Director of Wealth Planning at First Bank Wealth Management. A family business is more than just a business. It’s a livelihood, a life’s savings, a retirement plan, an inheritance, and a legacy. Family businesses face many challenges that require careful planning. Perhaps the greatest challenge is passing the business from one generation to the next and allowing it to successfully grow into the future. While a careful plan can help ensure the successful transfer and continued viability of the business, a lack of planning could effectively end the business during this critical juncture. Parents passing the business to the next generation generally have three areas of concern in common: economic benefit, control of the business, and tax reduction. The confluence of these concerns creates a complex environment that requires careful planning and a sound strategy. Families and individuals engage in business to earn a profit, or an economic benefit. E ...

2018 Market Review

After logging strong returns in 2017, global equity markets delivered negative returns in US dollar terms in 2018. Common news stories in 2018 included reports on global economic growth, corporate earnings, record low unemployment in the US, the implementation of Brexit, US trade wars with China and other countries, and a flattening US Treasury yield curve. Global equity markets delivered positive returns through September, followed by a decline in the fourth quarter, resulting in a –4.4% return for the S&P 500 and –9.4% for the MSCI All Country World Index for the year. The fourth quarter equity market decline has many investors wondering how equities may perform in the near term. Equity market declines of 10% have occurred numerous times in the past. The S&P 500 returned –13.5% in the fourth quarter while the MSCI All Country World Index returned –12.8%. After declines of 10% or more, equity returns over the subsequent 12 months have been positive 71% of the time in US mar ...

12 Days of Tax Tips

By David Frederick, J.D., LL.M., SVP/Director of Wealth Planning, First Bank Wealth Management The end of the year is a time for holidays, celebrations, family gatherings, and New Year’s resolutions. It is also the last opportunity to save on yearly taxes. There are a number of year-end tax strategies and maneuvers that taxpayers can use to potentially save themselves substantial tax, lower their tax bill, or raise their refund next spring. The following are a dozen tips that can help individual taxpayers save on taxes before the year ends. Maximize Retirement Savings Individual Retirement Accounts (IRAs) and Qualified Retirement Plans, like the 401(k), offer substantial present tax savings. A taxpayer may deduct current contributions to these savings plans and benefit from their investments growing tax-deferred, paying tax only when the plans distribute income in retirement. For 2018, an individual may deduct up to $18,500 in contributions to a Qualified Retirement Plan with an add ...

Market Month: November 2018

The Markets (as of market close November 30, 2018) November proved to be a very volatile month for stocks. By the third week of the month, the benchmark indexes listed here had given back just about all of the gains accumulated during the year. However, a spurt during the last week of November helped push stocks higher by the end of the month. Each of the indexes listed here outperformed their October end-of-the-month closing values, led by the large caps of the S&P 500 and the Dow, followed by the Global Dow and the small caps of the Russell 2000. The technology stocks of the Nasdaq edged higher by the close of November, and that index still maintains a sizeable lead year-to-date among the indexes listed here. Nevertheless, investors head into the last month of the year anxiously, as fears of a slowing economy and growing international trade tensions will likely temper expectations for steady stock gains moving forward. Energy stocks have been hit by falling oil prices, and the yield on 10-year Tre ...

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Disclosure

All First Bank blog information and content is strictly informational. It is not intended to be specific investment, tax, or legal advice. If you need detailed financial, investment, or tax advice, please contact a First Bank qualified professional. Please note, First Bank occasionally shares third-party content we find to be relevant and helpful to our audiences.