If you’re self-employed or own a small business and you haven’t established a retirement savings plan, what are you waiting for? A retirement plan can help you and your employees save for the future. And you’ll be in good company–over 1 million small businesses with 100 or fewer employees currently offer workplace retirement savings plans.

Tax advantages

A retirement plan can have significant tax advantages:

• Your contributions are deductible when made

• Your contributions aren’t taxed to an employee until distributed from the plan

• Money in the retirement program grows tax deferred (or, in the case of Roth accounts,

potentially tax free)

Types of plans

Retirement plans are usually either IRA-based (like SEPs and SIMPLE IRAs) or “qualified” (like 401(k)s,

profit-sharing plans, and defined benefit plans). Qualified plans are generally more complicated and

expensive to maintain than IRA-based plans because they have to comply with specific Internal Revenue

Code and ERISA (the Employee Retirement Income Security Act of 1974) requirements in order to qualify

for their tax benefits. Also, qualified plan assets must be held either in trust or by an insurance company.

With IRA-based plans, your employees own (i.e., “vest” in) your contributions immediately. With

qualified plans, you can generally require that your employees work a certain numbers of years before

they vest.

Which plan is right for you?

With a dizzying array of retirement plans to choose from, each with unique advantages and

disadvantages, you’ll need to clearly define your goals before attempting to choose a plan. For example, do you want:

• To maximize the amount you can save for your own retirement?

• A plan funded by employer contributions? By employee contributions? Both?

• A plan that allows you and your employees to make pretax and/or Roth contributions?

• The flexibility to skip employer contributions in some years?

• A plan with lowest costs? Easiest administration? The answers to these questions can help guide you

and your retirement professional to the plan (or combination of plans) most appropriate for you.

SEPs

A SEP allows you to set up an IRA (a “SEP-IRA”) for yourself and each of your eligible employees. You

contribute a uniform percentage of pay for each employee, although you don’t have to make

contributions every year, offering you some flexibility when business conditions vary. For 2012, your

contributions for each employee are limited to the lesser of 25% of pay or $50,000. Most employers,

including those who are self-employed, can establish a SEP. SEPs have low start-up and operating costs and can be established using an easy two-page form. The plan must cover any employee aged 21 or older who has worked for you for three of the last five years and who earns $550 or more.

SIMPLE IRA plan

The SIMPLE IRA plan is available if you have 100 or fewer employees. Employees can elect to make

pretax contributions in 2012 of up to $11,500 ($14,000 if age 50 or older). You must either match

your employees’ contributions dollar for dollar–up to 3% of each employee’s compensation–or make a

fixed contribution of 2% of compensation for each eligible employee. (The 3% match can be reduced to

1% in any two of five years.) Each employee who earned $5,000 or more in any two prior years, andwho is expected to earn at least $5,000 in the current year, must be allowed to participate in the plan.

SIMPLE IRA plans are easy to set up. You fill out a short form to establish a plan and ensure that

SIMPLE IRAs are set up for each employee. A financial institution can do much of the paperwork.

Additionally, administrative costs are low.

Profit-sharing plan

Typically, only you, not your employees, contribute to a qualified profit-sharing plan. Your contributions are discretionary–there’s usually no set amount you need to contribute each year, and you have the flexibility to contribute nothing at all in a given year if you so choose (although your contributions must be

nondiscriminatory, and “substantial and recurring,” for your plan to remain qualified). The plan must contain a formula for determining how your contributions are allocated among plan participants. A separate account is established for each participant that holds your contributions and any investment gains or losses. Generally, each employee with a year of service is eligible to participate (although you can require two years of service if your contributions are immediately vested). Contributions for any employee in 2012 can’t exceed the lesser of $50,000 or 100% of the employee’s compensation.

401(k) plan

The 401(k) plan (technically, a qualified profit-sharing plan with a cash or deferred feature) has become a

hugely popular retirement savings vehicle for small businesses. According to the Department of Labor, an

estimated 60 million American workers are enrolled in 401(k) plans with total assets of about 3 trillion

dollars. With a 401(k) plan, employees can make pretax and/or Roth contributions in 2012 of up to

$17,000 of pay ($22,500 if age 50 or older). These deferrals go into a separate account for each

employee and aren’t taxed until distributed. Generally, each employee with a year of service must be

allowed to contribute to the plan. You can also make employer contributions to your 401(k) plan–either matching contributions or discretionary profit-sharing contributions. Combined employer and employee contributions for any employee in 2012 can’t exceed the lesser of $50,000 (plus catch-up contributions of up to $5,500 if your employee is age 50 or older) or 100% of the employee’s compensation. In general, each employee with a year of service is eligible to receive employer contributions, but you can require two years of service if your contributions are immediately vested. 401(k) plans are required to perform somewhat complicated testing each year to make sure benefits aren’t disproportionately weighted toward higher paid employees. However, you don’t have to perform discrimination testing if you adopt a “safe harbor” 401(k) plan. With a safe harbor 401(k) plan, you generally have to either match your employees’ contributions (100% of employee deferrals up to 3% of compensation, and 50% of deferrals between 3 and 5% of compensation), or make a fixed contribution of 3% of compensation for all eligible employees, regardless of whether they contribute to the plan. Your contributions must be fully vested. Another way to avoid discrimination testing is by adopting a SIMPLE 401(k) plan. These plans are similar to SIMPLE IRAs, but can also allow loans and Roth contributions. Because they’re still qualified plans (and therefore more complicated than SIMPLE IRAs), and allow less deferrals than traditional 401(k)s, SIMPLE 401(k)s haven’t become popular.

Defined benefit plan

A defined benefit plan is a qualified retirement plan that guarantees your employees a specified level of

benefits at retirement (for example, an annual benefit equal to 30% of final average pay). As the name

suggests, it’s the retirement benefit that’s defined, not the level of contributions to the plan. In 2012, a

defined benefit plan can provide an annual benefit of up to $200,000 (or 100% of pay if less). The services of an actuary are generally needed to determine the annual contributions that you must make to the plan to fund the promised benefit. Your contributions may vary from year to year, depending on the performance of plan investments and other factors. In general, defined benefit plans are too costly and too complex for most small businesses. However, because they can provide the largest benefit of any retirement plan, and therefore allow the largest deductible employer contribution, defined benefit plans can be attractive to businesses that have a small group of highly compensated owners who are seeking to contribute as much money as possible on a tax-deferred basis. As an employer, you have an important role to play in helping America’s workers save. Now is the time to look into retirement plan programs for you and your employees.

Kenneth Himmler, Sr. is a Wealth Management Coach that focuses his efforts on working with individuals that value a higher quality of life above anything else.  This allows him to work primarily with people that have similar values and goals, which makes for a very mutually satisfying and long-lasting relationship.

Ken offers a wide range of programs and services – from financial planning to ongoing wealth management.  Ken specializes in coaching individuals, from retirees to entrepreneurs, and helping them to strive to obtain financial freedom and security.  He acts as the quarterback giving his clients access to work with top attorneys, CPA’s, and money managers, putting together a plan that enables people to go from their accumulation stage to the distribution phase, better known as retirement.  This allows many of his clients to strive to live an even higher quality of life into retirement than they had prior to retirement.

Along with being the CEO of IAM Wealth Management, Ken was the radio host of a live, syndicated program called, Live Rich & Stay Wealthy for ten years. He has also authored the financial column in four newspapers. In addition he also teaches financial courses at several colleges.  He has been a professional public speaker now for over seventeen years, traveling nationally for very select organizations and institutions.

for more info, please visit: www.iamllc.biz

###

By David Gribin – Gribin, Kapadia & Associates

Click below to explore Gribin’s insightful look into the current market perspective.

Attractive Real Estate Investments

by Dave Stolte, Vice President, Senior Housing

I discovered the senior living niche in commercial real estate after 18 years as a “Butterfly Broker” (doing whatever it took to put three kids through 20 years of college and 3 weddings).  I had a personal experience with the senior care industry when my own mother, who was in what was considered an “upscale” facility in well-to-do Clayton, Missouri, was in a less than desirable situation.  When I visited her at the facility, I was struck by the odor permeating the entire place and I returned to California, thinking there MUST be a better way to treat seniors in their declining years.  My mother later passed away at the age of 86 and I spent the next several years at the Andrus School of Gerontology at USC researching the aging population on the then-growing Internet.  The coming crush of seniors and shortage of space to care for them convinced me to spend the rest of my days working with Developers and Operators to provide decent care for seniors.

Looking back in recent history, almost every city in California defined senior care as “your Grandma’s nursing home”.  It took years and countless visits to a plethora of California cities to notice any measurable updates in definitions for Continuing Care Retirement (CCRCs), Assisted Living, Memory Care, Skilled Healthcare and Hospice / Rehab uses (contact me for a copy of “The Aging of America” presented to more than 75 cities in the state).   Procedures that had been in place on the East coast and Midwest have been replicated on the West coast, so that, today, the above uses are common knowledge to the majority of planners and council members throughout the West.   The American Seniors Housing Association (ASHA), the Assisted Living Federation of America (ALFA) and local councils like our “55+ Housing Council” of the Building Industry Association (BIA) are available to provide insight regarding the myriad facets of today’s senior living challenges.   According to recent statistics, the baby boomers, whom are becoming seniors, will make up about 1/3 of the TOTAL U.S. population in the next 15-20 years.  Imagine a “Grey Panther” movement in politics at that time!   As our economy has waxed and waned, providers large and small have had to adjust their plans.  The large (300-500 unit) golf-course CCRCs of the 80’s and 90’s are being replaced by smaller, more intimate settings… Institutional-looking Memory Care and Skilled Healthcare facilities are becoming more “homey” and user-friendly.

Now, because of the protracted recession of 2008 – 2012, and failure of housing prices to bounce back, more assisted living providers are transitioning into “Home Health Care Services” or versions thereof.  It is clear that we are currently living longer, healthier and more active lives but when I started in this business, the average age range for residents in Independent (55+ Apartments) living was 55-65 years of age…now, it’s up to 68-75 years of age.  Additionally, the age of those living in Assisted Living facilities rose from 72-75 years of age to 83-84 years of age, just in the last 10 years!

Memory Care, with more than 100 forms of dementia (includes but not limited to Alzheimer’s) and other long term nursing homes facilities used to be places where elderly would remain indefinitely, but now things have changed.  Now these facilities have become a vigorous rehab, short-stay use whose main purpose is to return the elderly to an assisted living apartment or at home with in-home nursing care visits.

In the years ahead, the cry of “The Baby Boomers are Coming” will make all of us rethink our paths to the “Care and Raising” of seniors.   Will the humongous CCRC’s of yesteryear still be built or will seniors opt for familiar single family homes, or assisted in-home care? These are just some of the questions that we all shall begin to explore.

Stay tuned for film at Eleven!

David Stolte is Vice President, Senior Living with NAI Capital’s Orange County office.   He can be reached at davestolte@naicapital.com.

Disclaimer:

The opinions expressed by the Senior Living Guest Blog and those providing comments are theirs alone, and do not reflect the opinions of the NAI Capital or any employee thereof. NAI Capital is not responsible for the accuracy of any of the information supplied by the Senior Living Guest Blog.

This is the fourth post in a series of articles from NAI Capital guest blogger, Ken Himmler, CEO with Integrated Asset Management, LLC.  In his series of articles, Ken discusses topics relating to real estate investments and estate taxes.   NAI Capital brokers will have an opportunity to meet Ken at our company’s next Capital College meeting on Feb. 2nd, 2011.

Minimizing Estate Taxes

What is minimizing estate taxes?
The act of giving away your property, either during life or at death, will probably be subject to one or more of several types of taxes (collectively referred to here as estate taxes), either on the federal level, state level, or both. These tax liabilities may be the largest potential expenses you or your estate may have to pay; federal estate tax alone may reach as high as 35 percent of your estate if you die in 2011 or 2012. This also means that property you intend to go to your loved ones or others when you die may go instead to the IRS or to your state. Therefore, understanding how these taxes can be minimized is vital if you want to preserve your estate for others.
What are estate taxes?
Estate taxes are actually transfer taxes. Transfer taxes are imposed when you give your property to someone else. This can be done during life (this kind of transfer is called a gift) or at death (this kind of transfer is called a bequest or legacy if you leave a will, and intestate succession if you don’t leave a will). There are five transfer taxes that may affect your estate: (1) state gift tax, (2) state death taxes, (3) state generation-skipping transfer tax (GSTT), (4) the federal gift and estate tax, and (5) the federal GSTT.
State gift tax
Currently, Connecticut, Tennessee, and Puerto Rico impose a gift tax. A gift is a transfer of property you (the donor) make during your lifetime. The person or organization you give to is called the donee. When you make a gift, it is in exchange for nothing or in exchange for property of lesser value (in other words, it is not a bona fide sale). Generally, gifts must be reported, and gift tax paid in the year following the year in which the gift is made (e.g., gift tax on a gift made in 2011 would be due in 2012). If your state imposes a gift tax and you intend to make lifetime gifts, you should contact your state’s department of revenue to find out what gifts need to be reported, how to compute the gift tax, and when and how to file a gift tax return.
State death taxes
State death taxes are imposed on property distributed after your death. You should be especially aware of state death taxes because they may affect even the smallest estates. There are three types of state death taxes: inheritance tax, estate tax, and credit estate tax (commonly referred to as a sponge tax or pickup tax). Most states impose at least one type.
State generation-skipping transfer tax (GSTT)
Currently, some states impose a GSTT. The GSTT is imposed on property transferred to a family member who is two or more generations below you (e.g., a grandchild or great-nephew). You can contact your state’s department of revenue to find out what transfers may be subject to state GSTT, and when and how to file a return.
Federal gift and estate tax
Generally speaking, the federal gift and estate tax is imposed on property transferred to others either while you are living or at the time of your death. Unlike the individual states which impose at least one type of death tax, and some of which impose a separate gift tax, the federal tax system is unified. In other words, the IRS adds lifetime and transfers made at death and treats them the same. This is how the unified tax system works:

Before 1976, the federal tax system worked much like that of the states. Gifts made during life (taxable gifts) were reported, and any gift tax owed was paid on an annual basis. After death, estate tax was imposed only on property owned at death (gross taxable estate). Since 1976, generally, taxable gifts are still reported, and any gift tax owed is paid annually (generally, you must file a gift tax return and pay gift tax due, if any, by April 15 of the year following the year in which you make a taxable gift). But upon death, all taxable gifts are added to your gross taxable estate for estate tax calculation purposes, even though a gift tax return may already be filed and gift tax paid (gift tax paid is deducted from the estate tax owed). The IRS unified the gift tax and estate tax systems so that: (1) you can’t avoid estate tax by giving your wealth away before you die, and (2) you pay tax on the cumulative amount of wealth you give away (this pushes your estate into a higher tax bracket).
The federal generation-skipping transfer tax (GSTT)
Like the state-imposed GSTT, the federal GSTT is a tax imposed on property you transfer to a family member who is two or more generations below you (e.g., a grandchild or great-nephew). The IRS wants to levy a tax on property as it is passed from generation to generation at each and every level. The purpose of the GSTT is to keep families from avoiding estate tax by skipping an intermediate generation. A flat tax rate equal to the highest estate tax rate is imposed on every generation-skipping transfer you make over a certain lifetime amount.

Tip: The GSTT rate is the same as the maximum estate tax rate, and the GSTT exemption is the same amount as the estate tax applicable exclusion amount.

How do you minimize estate taxes?
You can minimize estate taxes by: (1) taking advantage of certain allowable tax exclusions, deductions, and credits, (2) using an estate freeze technique, or (3) employing post-mortem planning.
Exclusions, deductions, and credits
Under the federal tax system, individuals are generally allowed to make gifts of up to $13,000 (current figure; this figure is indexed for inflation so it may change in future years) per donee each year gift tax free under the annual gift tax exclusion.

In addition, individuals are allowed to exempt a certain amount of property from the gift and estate tax.

Further, transfers of property between U.S. citizen spouses are fully deductible, as are transfers of property to qualified charitable organizations.

There are many exclusions, deductions, and credits that if effectively used can minimize estate taxes. You need to understand what these exclusions, deductions, and credits are, and how they work in order to take full advantage of them.

Tip: States also have their own exclusions, deductions, and credits, although they may not be the same as the federal system.

Estate freeze
An estate freeze is any planning device that allows you to freeze the present value of your estate and shift any future growth (or potential growth) to your successors.

Example(s): You give land valued at $100,000 to your children. Twenty-five years later, you die. The land is valued at $500,000 on the date of your death, but only $100,000 is included in your taxable estate because the value of the land froze on the date you gave it to your children.
There are many ways you can freeze the value of property. Estate freezing techniques range from relatively simple (e.g., installment sale or private annuity) to the more complex (e.g., gift- or sale-leaseback). You need to know what these techniques are and how they are used in order to know which, if any, is best for you.

Tip: This generally works for state taxes also.

Post-mortem planning
There are many post-mortem (i.e., “after death”) techniques that can help keep the value of your property as low as possible in order to minimize federal estate taxes. There are 10 post-mortem techniques in particular that you should know about. Even though these techniques are implemented after your death, you should understand each of them now because if you believe your estate might benefit from them, there may be things you need to do now to ensure that your estate will qualify for these elections after your death.

Kenneth Himmler, Sr. is a Wealth Management Coach that focuses his efforts on working with individuals that value a higher quality of life above anything else.  This allows him to work primarily with people that have similar values and goals, which makes for a very mutually satisfying and long-lasting relationship.

Ken offers a wide range of programs and services – from financial planning to ongoing wealth management.  Ken specializes in coaching individuals, from retirees to entrepreneurs, and helping them to strive to obtain financial freedom and security.  He acts as the quarterback giving his clients access to work with top attorneys, CPA’s, and money managers, putting together a plan that enables people to go from their accumulation stage to the distribution phase, better known as retirement.  This allows many of his clients to strive to live an even higher quality of life into retirement than they had prior to retirement.

Along with being the CEO of IAM Wealth Management, Ken was the radio host of a live, syndicated program called, Live Rich & Stay Wealthy for ten years. He has also authored the financial column in four newspapers. In addition he also teaches financial courses at several colleges.  He has been a professional public speaker now for over seventeen years, traveling nationally for very select organizations and institutions.

for more info, please visit: www.iamllc.biz

Federal gift and estate tax is generally referred to simply as estate taxes, although your estate may be subject to other kinds of estate taxes (i.e., state death tax and generation-skipping transfer taxes).

When you die, you will leave behind all your possessions, property, and debts. What you leave behind is called your estate. Not surprisingly, estate tax is imposed on your estate, but it is also imposed on gifts you make while you are living (hence the name federal gift and estate tax). The IRS treats all the wealth you give away in the same way, whether you give it away during life or at death.

The estate tax rates could reach as high as 35 percent for the estates of persons dying in 2011 and 2012 (this rate is currently scheduled to increase to 55 percent in 2013). This means that estate taxes could be one of the largest expenses your estate may pay. It also means that a significant part of your estate may be going to Uncle Sam and not to your loved ones.

If your estate planning goals include minimizing estate taxes and preserving your estate for your heirs or beneficiaries, you need to understand how the estate tax system works, how to estimate your potential estate tax liability, and what techniques are available that may minimize your estate tax liability.

How does the federal gift and estate tax system work?

The estate tax system is a unified system; that is, the gift tax system and the estate tax system are combined. Before 1976, the tax systems were separate. Gifts (i.e., taxable gifts) made during life were reported–and any gift tax owed was paid–on an annual basis. After death, estate tax was imposed only on at-death property transfers.

Since 1976, generally, taxable gifts are still reported–and any gift tax owed is paid–annually. (Generally, you must file a gift tax return and pay gift tax due, if any, by April 15 of the year following the year in which you make a taxable gift.) But, upon death, all gifts are added to your gross taxable estate for estate tax calculation purposes, even though a gift tax return may already be filed and gift tax paid (gift tax paid is deducted from the estate tax owed).

The effect produced by unifying the gift tax system and the estate tax system is (1) lifetime gifts and at-death property transfers are taxed using the same tax rates (under the Unified Tax Rate Schedule), (2) a basic (applicable) exclusion amount can be applied to lifetime gifts and at-death property transfers, and (3) the estate tax imposed at death is computed by adding lifetime gifts to at-death property transfers (this pushes your estate into a higher tax bracket).

Why estimate estate taxes?

Understanding how your estate tax liability is calculated may help you achieve your estate planning goals, such as:

Saving your property for your heirs or beneficiaries

As mentioned, estate tax rates currently reach as high as 35 percent for estates of persons who die in 2011 and 2012. This means that an large chunk of your estate may go to the federal government instead of your loved ones. If you want to preserve your estate for your heirs or beneficiaries, you need to know how to keep your property transfers from being subject to the estate taxes. This means that you should know what lifetime gifts are taxable gifts and what at-death gifts will be included in your gross estate.

Example(s): Fred’s son Tim goes to a state college. Tim takes out loans to pay for his tuition and works a part-time job to make money for books and other expenses. Fred wants to help his son, so he gives Tim a monthly allowance. Fred is making a taxable gift to Tim that is subject to gift tax (assume no other variables). However, gifts for educational purposes made directly to an educational institution are exempt from gift tax. If Fred paid part of Tim’s tuition directly to the college instead of giving the money to Tim, Fred’s gift would be tax free. Tim could then use the money he saves on tuition for his other expenses.

Reducing estate tax liability

Under the unified tax system, every individual is allowed an basic (applicable) exclusion amount that will reduce estate tax liability. In addition, there are exclusions, deductions, and other credits available that allow you to pass a certain amount of your estate tax free. You need to understand what these exclusions, deductions, and credits are and how they work in order to take full advantage of them.

Example(s): In 2011, Mary wins $100,000 in the lottery, which she wants to share with her daughters, Denise, Dolores, and Debbie. Assume Mary does not want to use her basic exclusion amount. Mary gives $20,000 to each of her three daughters ($60,000 total). The annual gift tax exclusion allows Mary to give the first $13,000 to each daughter free from tax. Mary incurs tax on $21,000 ($60,000 – [$13,000 x 3]). If Mary gives $13,000 to each daughter in 2011 and then $7,000 to each daughter in 2012, she would be able to give the entire $60,000 tax free because the annual gift tax exclusion can be applied each year.

Tip: The annual gift tax exclusion is indexed for inflation. Currently, it’s $13,000, but this may increase in future years.

Providing for payment of estate taxes

Generally, your personal representative must pay estate taxes within nine months after your death using assets from your estate. To avoid depriving your beneficiaries of what you intend for them to receive, your estate plan should provide that specific and sufficient assets be set aside and used for this purpose. In addition, these assets should be sufficiently liquid to pay this expense when it is due.

Example(s): Alison dies, leaving a will. Alison’s gross estate includes two homes, one of which she leaves to her son Sam and the other of which she leaves to her daughter Ella. Besides the two homes, Alison’s gross estate includes only a small amount of cash, which is used to pay her final expenses. Alison makes no provision in her will for the payment of estate taxes. Her personal representative calculates the taxes owed on her estate, and informs Sam and Ella that the only assets available to pay the taxes are the two homes. After a dispute with Ella, Sam decides to sell the home he received in order to pay for the estate taxes that are owed. Because the taxes are due within nine months after Alison’s death, Sam reduces the selling price of the home in order to get the cash in time.

Tip: Purchasing a life insurance policy payable to your estate, the proceeds of which would be used to pay estate taxes, may be one solution to this situation.

Planning for estate tax expense

Although calculating estate taxes can be complex, you should estimate what the amount of the estate taxes may be so that you can arrange to have sufficient funds to pay the tax bill.

Example(s): Sally had built a substantial estate over her long life. Extremely devout, Sally promised her church that upon her death she would leave enough money to replace the steeple and make other much needed repairs. Sally executed her will and specifically provided for her family and friends. She also felt very satisfied that by leaving whatever remained in her estate (the residuary) to the church, as she had promised, the church would have all the money it needed to make the required repairs. Without calculating what her estate tax liability might be, Sally took a guess and put aside an amount she thought would be sufficient. Sally died. Sally’s personal representative calculated the estate taxes owed on her estate. The actual amount owed far surpassed the amount Sally had put aside, so Sally’s personal representative had to take an additional amount out of the residuary to make up the difference. The amount left over for the church was only enough to make a few small repairs. The steeple was not replaced, and several larger repairs were left undone.

Although estimating estate taxes can be complex, don’t be overwhelmed. If you proceed step by step, you can do it. The peace of mind that comes with implementing a successful master estate plan should be worth your time and trouble.

What is minimizing estate taxes?

Understanding how the unified tax system works and using the system to your benefit can help you save your property for your beneficiaries and reduce your potential estate tax liability. There is another method you can use to accomplish those goals: the estate freeze. As the name implies, an estate freeze fixes the value of your estate at its present value. This may save estate taxes because no future growth of your assets will be included in your estate when you die.

Estate freezing techniques range from relatively simple (e.g., installment sale) to the more complex (e.g., gift- or sale-leaseback). You need to know what these techniques are and how they are used in order to know which, if any, are best for you. For more information, see Minimizing Estate Taxes.

Kenneth Himmler, Sr. is a Wealth Management Coach that focuses his efforts on working with individuals that value a higher quality of life above anything else.  This allows him to work primarily with people that have similar values and goals, which makes for a very mutually satisfying and long-lasting relationship.

Ken offers a wide range of programs and services – from financial planning to ongoing wealth management.  Ken specializes in coaching individuals, from retirees to entrepreneurs, and helping them to strive to obtain financial freedom and security.  He acts as the quarterback giving his clients access to work with top attorneys, CPA’s, and money managers, putting together a plan that enables people to go from their accumulation stage to the distribution phase, better known as retirement.  This allows many of his clients to strive to live an even higher quality of life into retirement than they had prior to retirement.

Along with being the CEO of IAM Wealth Management, Ken was the radio host of a live, syndicated program called, Live Rich & Stay Wealthy for ten years. He has also authored the financial column in four newspapers. In addition he also teaches financial courses at several colleges.  He has been a professional public speaker now for over seventeen years, traveling nationally for very select organizations and institutions.

for more info, please visit: www.iamllc.biz

by Guest Blogger – Ken Himmler, CEO, Integrated Asset Management, LLC

Think about why you’re investing in real estate
When thinking about whether to invest in real estate, the factors you should consider depend on what kind of purchase you’re considering and the reason you’re buying it. Real estate can help diversify an investment portfolio and serve as a hedge against inflation, but there are many ways to do that. Your reasons for buying will affect how you choose to invest in real estate. In turn, the form that your real estate investment takes will affect the factors you should consider in your purchase.

Here are some of the questions you’ll need to ask yourself:
Do you want to be an active or passive investor?
Investing in real estate can be as active or passive as you choose. Buying rental property and managing it yourself will involve time and effort unless you hire someone to manage it for you. If you’ve never been a landlord, be sure to talk with other landlords to get a sense of the potential rewards and pitfalls. Other real estate investments, such as REITs, exchange-traded funds, mutual funds, real estate limited partnerships, or raw land, demand less day-to-day involvement. If you’re investing simply to diversify an investment portfolio, those may satisfy your needs without the challenges of owning property.

However, bear in mind that the same factors that can influence the value of a direct real estate investment–the negative impact of a drop in real estate values generally, economic downturns, rising interest rates that affect the cost of obtaining a mortgage, changes in property taxes or zoning laws, demographic changes, natural disasters, and many other factors–can also have a significant negative effect on REITs, mutual funds and ETFs.
Are you investing for income, capital appreciation, personal use, or a combination?
Real estate investments can offer potential for all three, but there is often a tradeoff among them. For example, raw land may have development potential, but it likely will not provide any return until that potential is realized. You may be able to earn income from rental property that has the potential to increase in value over time, but your ability to use it yourself will be limited if you want to enjoy a rental’s tax benefits. Ranking your priorities can be useful.
Are you looking for a quick return or a long-term investment?
Real estate speculators have been known to earn high profits from buying distressed property, fixing it up, and reselling it at a profit, especially in a buyer’s market. However, the real estate market is notoriously cyclical. If you’re speculating, hoping for a quick return on your capital, the liquidity of a real estate investment will be important to you; so will making sure you don’t overpay to begin with. If you have a longer time frame, you may have a wider range of investing options.
Is real estate going to be a full-time business for you or a sideline?
Some real estate investors find that what they intended as a hobby or retirement diversion quickly becomes more than they can handle. Think about just how much time and capital you’re prepared to devote to your real estate investments, and how much of a cushion you have in case things don’t work out as you expected.
Are you investing for tax considerations?
Operating expenses for rental property can be tax-deductible if you don’t use the property yourself or use it only minimally, and you may also benefit from deductions for depreciation. Also, any profit from the sale of real estate generally is taxed not as ordinary income but at the lower rates for capital gains, and you may be able to use capital losses to offset capital gains. Other forms of real estate investment, such as REITs and ETFs, may have only limited value as tax shelters. Also, remember that tax laws can change. If tax considerations are your primary focus, be sure to consult your financial professional to see whether real estate is the most effective means of addressing your tax concerns and which type or types might be most appropriate.

Kenneth Himmler, Sr. is a Wealth Management Coach that focuses his efforts on working with individuals that value a higher quality of life above anything else.  This allows him to work primarily with people that have similar values and goals, which makes for a very mutually satisfying and long-lasting relationship.

Ken offers a wide range of programs and services – from financial planning to ongoing wealth management.  Ken specializes in coaching individuals, from retirees to entrepreneurs, and helping them to strive to obtain financial freedom and security.  He acts as the quarterback giving his clients access to work with top attorneys, CPA’s, and money managers, putting together a plan that enables people to go from their accumulation stage to the distribution phase, better known as retirement.  This allows many of his clients to strive to live an even higher quality of life into retirement than they had prior to retirement.

Along with being the CEO of IAM Wealth Management, Ken was the radio host of a live, syndicated program called, Live Rich & Stay Wealthy for ten years. He has also authored the financial column in four newspapers. In addition he also teaches financial courses at several colleges.  He has been a professional public speaker now for over seventeen years, traveling nationally for very select organizations and institutions.

for more info, please visit: www.iamllc.biz

General Categories of Real Estate Investments

by Guest Blogger – Ken Himmler, CEO, Integrated Asset Management, LLC

Residential Real Estate/Vacation Property
If you are considering investing in a single-family dwelling, multi-unit property, or vacation property for rental or as a second home, you should analyze market value, as well as potential income and operating costs.

To determine a property’s market value, it is important to understand the local economy and real estate market conditions. A period of low interest rates and high supply may indicate a good time to invest. The location of the particular property you are considering is also important, as is the condition of the property. Be sure to have the property inspected and appraised by professionals. To make sure the asking price is reasonable, compare it to several similar properties in the area. Research whether there are current building plans that will change the neighborhood (e.g., a large department store or strip mall). And finally, talk to neighbors about any problems that might exist in the neighborhood (e.g., noise, crime).

Caution: The assessed value of the property for property tax purposes may not be an indication of the property’s real value.

To analyze potential income and operating costs, you should review the property’s operating figures for the past three years, if they are available. Compare the percentage of occupancy to similar properties in the area. If occupancy is relatively high, rental rates may be too low (or vice versa). Obtain the rental rates charged in comparable properties in the area. To evaluate the property’s potential for future increases in rental rates, estimate the local population’s median income. Once realistic potential income is determined and costs are estimated (don’t forget to include tax liabilities and financing costs), prepare a cash flow statement. If the property offers a positive cash flow–in other words, if the potential rental would more than cover the mortgage payments and expenses–the property may make sense as an investment.

Tip: If you decide to invest in the property, be sure to review the property’s finances on a regular basis (i.e., weekly or monthly) to make sure that holding the investment is sound.

Tip: There are services and software products available to help you analyze residential real estate investment opportunities.

Timeshare Ownership
Timeshares represent ownership of a share of a piece of property, such as a condo in a resort area, that gives you access to the property for a specific amount of time. They are popular as a way to avoid the responsibilities of owning a second or vacation home, and they are sometimes marketed for their investment value. However, as an investment, they can be problematic, and there are several considerations you need to be aware of. Perhaps the most important is the potential resale value of your investment; timeshares can be extremely difficult to resell. It’s worthwhile to check prices on units that are being resold; not only will your research give you an idea of what you might be able to get for yours, but prices for resold units typically are much cheaper than those for new ones. Also, there are usually ongoing maintenance and management fees; make sure you factor them into your calculations. Finally, if your timeshare is part of a network that allows you to trade your time for time in another location, be sure to check on availability; many of the most popular locations are difficult to book.
Commercial Real Estate
Commercial real estate (e.g., retail and office buildings) is more difficult to analyze than residential real estate because there are many more details to be concerned about, including the stability of rental income (commercial property is more vulnerable to downturns in the economy) and competition. These details are analyzed in a process known as due diligence.

In addition to the common sense items listed above under residential real estate (e.g., economic and market conditions, site, value), an investor in commercial real estate should carefully examine all documents concerning the building and its operations. Such documents may include:

• Existing leases (including extensions, addendums, and riders)
• Existing notes, loans, and mortgages
• Insurance policies and past claims
• Certificates of occupancy
• Maintenance and other service contracts
• Licenses and permits
• Deed
• Rental payment histories and credit files of existing tenants
• Financial records for the past three years, including income and expense statements
• Tax returns for the past three years
• Utility bills for the past three years
• Bank statements
• Litigation histories
• Past appraisals, engineering reports, surveys, etc.
• Inventory–furniture, fixtures, and supplies

Further, investors in commercial real estate should also:

Have the property surveyed, appraised, and inspected (engineering and environmental) by professionals
Have an outside firm audit the financial statements
Verify payment of past taxes
Tip: Any purchase of commercial real estate should be contingent on the purchaser’s satisfaction with the completeness and outcome of due diligence, and ample time for due diligence should be allowed.

Unimproved Land
Buying unimproved land for its development potential is highly speculative. If you’re interested in a specific piece of property, be sure to factor the property taxes you’ll pay into your calculations of the potential return on your investment. If you’re counting on nearby development to increase your land’s value, remember that a change in the economic climate can affect not only commercial development but government priorities and funding for infrastructure projects such as roads, sewer and water lines. Zoning issues may also be a factor.
Real Estate Investment Trusts (REITs)
A real estate investment trust (REIT) is a real estate investment company that is publicly traded on one of the stock exchanges. Many investors find REITs attractive because they must distribute 90 percent of their net income as dividends to shareholders. Thus, when analyzing a REIT, an investor should ascertain the company’s dividend rate and dividend-paying ability. Also, keep in mind that the income potential depends upon income derived from the underlying property, and low occupancy rates will affect a REIT’s return.

The primary performance and valuation gauge for a REIT is funds from operations (FFO). FFO is net income plus depreciation and amortization plus extraordinary losses (or minus extraordinary gains). To determine the company’s dividend rate, divide FFO per share by dividend per share. To ascertain safety, determine the company’s dividend coverage ratio (DCR), which is calculated by dividing FFO per share by its current dividend. The higher the DCR, the more sustainable the current dividend.

Think about whether you want an REIT that concentrates in one sector of real estate, such as office buildings, shopping malls or apartment buildings, or one that is more diversified or that has multiple sources of income.
Real Estate Mutual Funds and Exchange-Traded Funds
There are multiple ways to use mutual funds and exchange-traded funds to invest in real estate. A mutual fund may be actively managed, selecting specific real-estate developers’ stocks or REITs in which to invest. Or it may simply invest according to an index of various REITS, as exchange-traded funds do. Popular real estate indexes include the Dow Jones Wilshire Real Estate Securities Index, the Dow Jones Wilshire Real Estate Investment Trust Index, the FTSE EPRA/NAREIT Global Real Estate Index, and the S&P/Citigroup Global REIT Index. In addition to these broad-based indexes, which can be used as a basis for comparing the performance of individual REITS or REIT funds, there also are regional indexes for various parts of the world.

You should read the fund’s prospectus (available from the fund) and carefully evaluate a real estate fund’s expenses and fees, investment objective, holdings and performance before investing, just as you would any other fund. In addition, think about whether you want a closed-end mutual fund, which issues a fixed number of shares and may use leverage as part of its investing strategy, or a more traditional open-ended mutual fund, which issues shares continuously.
Real Estate Limited Partnerships
Limited partnerships offer investors who do not have the expertise or time to select and manage investments on their own the ability to seek opportunities in real estate. Investors should carefully review the financial information contained in the offering documents, including fee structures. Additionally, because limited partners have no say in management, investors should research the credentials of the general partner, including his or her knowledge and experience, and willingness to keep the limited partners informed on the status of the partnership’s holdings. The general partner should have a good track record. Review past deals to determine whether projections were met. Talk with current limited partners about the profits they have earned.

Kenneth Himmler, Sr. is a Wealth Management Coach that focuses his efforts on working with individuals that value a higher quality of life above anything else.  This allows him to work primarily with people that have similar values and goals, which makes for a very mutually satisfying and long-lasting relationship.

Ken offers a wide range of programs and services – from financial planning to ongoing wealth management.  Ken specializes in coaching individuals, from retirees to entrepreneurs, and helping them to strive to obtain financial freedom and security.  He acts as the quarterback giving his clients access to work with top attorneys, CPA’s, and money managers, putting together a plan that enables people to go from their accumulation stage to the distribution phase, better known as retirement.  This allows many of his clients to strive to live an even higher quality of life into retirement than they had prior to retirement.

Along with being the CEO of IAM Wealth Management, Ken was the radio host of a live, syndicated program called, Live Rich & Stay Wealthy for ten years. He has also authored the financial column in four newspapers. In addition he also teaches financial courses at several colleges.  He has been a professional public speaker now for over seventeen years, traveling nationally for very select organizations and institutions.

for more info, please visit: www.iamllc.biz

Understanding the Process

The Transition broker used to be one of the hordes of Haystack brokers crammed into a territory in competition with one another, vying for the attention of decision makers. They will always be there, constantly coming and going. What separates the Transition broker from this horde will be his ongoing commitment to the contacts within the four corners of his community.

Haystack brokers wandering around the Transition broker’s community are flitting from one area to another, not focusing on establishing relationships with contacts. They are blindly hoping to find that needle in the haystack, the deal that has eluded them and which they think could be behind the next door.

Many times the Haystack broker will, in fact, stumble through a door and by dumb luck or good fortune discover a real requirement or a potential deal. I called this broker the Last-Broker-In. Suffice it to say that the Last-Broker-In is making old-fashioned Haystack brokerage cold calls.

But the Transition broker is different because he does not make cold calls. He makes only warming calls on contacts he knows personally and who know him. Each time he meets with his community contacts he gets to know them a little better and establishes greater rapport and confidence. Loyalty and commitment are the eventual by-products of warming calls, which makes warm calls more effective than cold calls.

Contacts Become Clients

As decision makers get to know the Transition broker better, they come to understand that he is the go-to broker in his territory. The broker begins to create lasting value for himself. He differentiates himself from Haystack brokers who are just knocking on doors, cold calling a territory.

The Transition broker becomes a reliable fixture in his territory and a source of valuable information for his contacts. As decision makers come to appreciate the broker’s commitment to their area, they come to rely on him as a source of market insight, which only a truly dedicated and competent professional can credibly provide.

Over time, this reliance generates confidence in the Transition broker as a knowledgeable professional and establishes his dominance over cold-calling Haystack brokers. His personal contacts will believe that he has their best interests at heart and has strategic insight to provide.

Once decision makers come to understand the value the Transition broker represents, they will turn to him for help because he has separated himself from the brokers who are merely commodities in the local marketplace. This is the point at which the Transition broker separates himself from the Last-Broker-In. This is the point at which contacts become clients. This is the point where hard work and diligence start to pay off.

Relationship brokerage is a long-term commitment. There is a constant process of conversion within the Transition broker’s community. There is churning and turnover, with new companies constantly relocating to the area. The decision makers in those companies need to become contacts, and eventually clients and personal promoters.

Clients Become Promoters

The ultimate conversion is the conversion of contacts into clients and promoters. Once the Transition broker has done a deal with a client, the value of that client does not disappear, lying dormant for years until a new requirement for the client’s company arises. The reward for a job well done is recognition of the broker’s value to the client who appreciates good work and the quality of service provided.

It is a normal human reaction to want to reward a job well done. After finishing an especially enjoyable meal at a fine dining establishment it is customary to leave a gratuity. Everybody goes through the same calculation in determining how large a gratuity the waiter has earned. Based upon the value of the waiter’s contribution to the enjoyment of the evening, the gratuity can range from mere acknowledgment to great appreciation.

The same dynamic happens every time a broker works on a potential transaction, whether the deal actually closes or not. The very fact that the broker worked on it, and did his best for his client, earns him credit in the mind of his client. His client will want to reward him. There is a normal human inclination to express great appreciation and additional acknowledgment for a job well done.

Promoters Give Referrals

When a client appreciates the service that a broker has rendered over time, he will look to provide some acknowledgment of faithfulness and hard work. Since the client may not have a commissionable transaction in the immediate future, he will be open to do something else for the broker. In a subtle way the broker is in a position to suggest to his clients that there is something that he would appreciate by way of acknowledgment. He can ask for referrals.

Referrals are a gigantic acknowledgment of faithful service, and they can many times represent even greater opportunity for a commissionable event than the original deal. When a client refers his friends or colleagues to a broker with strong commendation of the broker’s professionalism and competence, then that client has been converted into a personal promoter.

A promoter is a reliable source of referral business for the Relationship broker. Personal promoters provide referrals on an ongoing basis because they are players in the real estate market, especially in the community where the broker claims special expertise.

The confidence that a competent broker inspires in his promoters escalates the volume of business potential over time, and this potential grows exponentially over the course of the broker’s career. Eventually it becomes possible to base a career on the referral business generated from one’s promoters. Just look at the most successful brokers in any real estate brokerage office. How do you think they become the most successful brokers in the office?

There needs to be a constant element of conversion involved in managing the Relationship broker’s community. It is a never-ending task to convert impersonal company names into contacts, contacts into clients, and then eventually clients into personal promoters.

Even within each category there is an ongoing conversion of good clients into great clients, and good personal promoters into great personal promoters. It is for this reason that every day in the brokerage business is challenging and rewarding … even if the broker does not make money on any given day.

The Transition broker must spend a tremendous amount of time getting to know the names of the 400 companies within his territory, identifying the 400 decision makers within those companies, and establishing personal relationships with those 400 decision makers over time. This represents a significant investment of time … and that is exactly what the broker is doing: he is investing time in his future.

No Better Time

There is no better time to implement Relationship brokerage than now. Most brokers are feeling the cumulative effect of slow market conditions which have been persistently dispiriting many in our profession.

As a consequence, competitors are less quick on the draw than they once were, and have increased the length and number of vacations that they are taking. They are working on their golf handicaps and learning how to fly-fish, waiting until the market turns around. But they have not gotten the word: the market has turned around (or for the pessimistic among us: is turning around). The number and velocity of transactions has started to brighten the horizon.

Assuming that the early bird will get the deal, each broker is faced with a choice. Be the early bird–or join your competitors on vacation. Time spend developing client relationships now will assure that you are not the one that hears about deals after they happen, rather than making the deals yourself and depositing the commission into your own checking account.

Half of a broker’s business should come from within the four corners of his community and the other half should come from referrals. These are two sides of the same coin. In other words, all of your business should come from implementation of Relationship brokerage.

It is a broker’s presence among his contacts within the four corners of his community that provides the basis for the development of personal promoters on a consistent basis. Referrals come from personal promoters who are in the broker’s corner and willing to refer him to their friends and colleagues in the knowledge that he will provide a quality service.

Relationship brokerage leverages a broker’s activity into increased referral activity. Without a network of personal promoters who can be a reliable source of referrals, then there are no referrals. The only way to cultivate promoters is to establish personal relationships with them over time.

The only way to establish personal relationships over time is by being present among potential promoters and providing ongoing, consistent and reliable services that justify referrals from these promoters. If you have no community, then how can you possibly generate referrals from personal promoters?

Reach for the Stars

Many times a broker is betting the farm, swinging for the fences, putting all his eggs in one basket, reaching for the stars. Whatever cliché you want to call it, all brokers dream of the big deal that will make the difference between having a boat and owning a yacht; between vacationing in the backyard or in retiring in Tahiti. Admit it! Even you have put all your chips on the table, betting that one monstrous deal would close and make you a wealthy person.

Even when that does happen, you will still need all the help you can get. You need personal promoters working to support your interest. You need inside salesmen. The trick is how creatively to identify potential personal promoters and to create the network necessary to escalate those contacts to personal promoters as inside salesmen.

So, in the end, it all still comes down to relationships and Relationship Brokerage. A broker needs to be persistent to become a Relationship broker.

Before concluding our discussion I would like to share the story of “The Persistent Bastard” (we will call him Tim). I want to tell you about Tim’s brief career as a commercial real estate broker because he was the ideal case study of what faithful implementation of the concept of Transition brokerage can do for a broker’s income.

You have probably already figured out that Tim is no longer in the business because I referred to his “brief career.” But I had great hopes for Tim when I hired him as an industrial broker many years ago. Tim had worked in his family’s business selling janitorial supplies door to door. He was a very personable young man. He loved cold calling and came into the business with a lot of enthusiasm. I was confident that I would be able to channel Tim’s cold calling skills into warm calling proficiency. I was a bit too optimistic.

Tim started as a Transition broker from his first days in the business. He was off to an aggressive start and everything looked great. Tim warm called three hours per day, three days per week, and three days of follow-up for three months before returning to his reset point at the beginning of each quarter.

He followed the program of Transition brokerage with great discipline and never wavered in his commitment to become a successful Relationship broker. However, it turned out that Tim was undermined by a faltering economy and was never able to translate his enthusiasm into transactions. Nonetheless, he did well everything just as he was taught to do.

Since he was following the principles of Transition brokerage without wavering, Tim had soon contacted all of the decision-makers within his market. Being a very personable young man, he was well on his way to creating relationships with contacts in his area. At the end of his first year he had become an expert in his community.

All the contacts in his community knew him, and he knew most of them; he knew about every transaction before it happened and he did his best to have his finger in every transaction. But he had made little money. That did not dissuade Tim from his daily commitment because he was convinced that he would make money eventually if he committed to achieving his five prioritized objectives in the proper order.

Tim made it his goal to meet the decision-maker of one large company in his area with whom he had never been able to connect. He had stopped into the decision-maker’s office once a quarter, left his business card and followed up for three days after each visit over a full year. That meant that the decision-maker has heard Tim’s name at least 16 times during the year. Adding the e-mails sent in Tim’s Touch-12 program, the decision-maker had heard his name 28 times without ever having met him.

One day at the start of Tim’s fifth quarter in the business he again stopped into the office of the elusive decision-maker. As he walked into the lobby, a gentleman in an expensive suit exited from the inner sanctum. The gentleman asked Tim who he was. Tim responded confidently that he was Tim from NAI Capital and that he was there to see if he could help the company with its real estate requirements.

The gentleman took a step back. He looked Tim over from head to foot, and finally said, “You’re Tim from NAI Capital? You are one persistent bastard! What can I do for you?”

Tim again asked if there was anything he could do to help with the company’s real estate requirements. The gentleman said that there was nothing that Tim could do to help because he had a close personal friend who was a broker. And besides, there was no building that would meet his company’s requirement.

He told Tim that he needed a 200,000 square foot warehouse and that it had to be in the immediate area of his current facility. He knew that there was no such building available on the market in the area, so he was resigned to wait until the right building came on the market. He did not have long to wait.

As luck would have it, two of Tim’s teammates the day before had just listed a 205,000 square foot warehouse down the street. The property was not yet on the market. Tim started to hyperventilate. He scrambled back to the office and excitedly told his mentor broker what had happened.

Pretending that he was calm (though in fact very excited at the prospect of out-maneuvering the decision maker’s Relationship broker as the Last-Broker-In), the mentor broker returned to the facility. He asked if the decision maker would sign a short-term agreement recognizing NAI Capital as his exclusive agent if Tim were able to show him a warehouse building which seemed to meet the company’s requirement.

Confident that there was nothing available to see, but willing to hedge his bet, the decision maker signed the 24-hour exclusive right to represent the company. Calm as could be, Tim opened the front door, pointed down the street, and asked, “Is that building close enough?” It was.

Tim left brokerage a month later to return to his family business when his uncle needed help with their janitorial supply business. But on the way out the door, Tim was handed a check for $200,000.00 as his share of the commission for being such a dogged Transition broker.

He really was a Persistent Bastard.