Life insurance policies have long been used as a way to provide liquidity to one’s estate and beneficiaries. They are especially common in situations where individuals hold non-traditional assets (i.e. family owned business stock, real estate, etc.) causing the estate to be high in value, but fairly illiquid.  One thing to remember when life insurance is used in this capacity is that although proceeds are not subject to federal income tax, they are considered part of your taxable estate and are subject to federal estate tax if you are the owner of the policy.

One solution to this problem is to create an ILIT that will own the policy and receive the policy proceeds on your death. A properly drafted life insurance trust will keep the insurance proceeds from being taxed in your estate as well as in the estate of your surviving spouse. It can also protect the trust assets from the reach of the beneficiaries’ creditors and former spouses in the event of a divorce. The trust also provides centralized and reliable management for the trust assets. This is an especially important factor if your beneficiaries are minor children or you otherwise want to restrict their access to the proceeds.

Here’s a quick rundown on how the ILIT works:

You create an ILIT to be the owner and beneficiary of one or more life insurance policies on your life. You contribute cash to the trust to be used by the trustee to make premium payments on the life insurance policies. Or if you have an existing policy, you contribute that to the trust. If the trust is properly drafted, the contributions you make to the trust for premium payments will qualify for the annual gift tax exclusion, so you won’t have to pay gift tax on the contributions (the annual gift tax exclusion in 2013 is $14,000).

The life insurance trust typically provides that, during your lifetime, principal and income, in the trustee’s discretion, may be paid or applied to or for the benefit of your spouse and descendants. This allows indirect access to the cash surrender value of the life insurance policies owned by the trust, and permits the trust to be terminated if desired despite its being irrevocable. On your death, the trust continues for the benefit of your spouse during his or her lifetime. Your spouse is given certain beneficial interests in the trust, such as the right to income, limited invasion rights, and eligibility to receive principal. On the death of your spouse, the trust assets are paid outright to, or held in further trust for the benefit of, your descendants.

ILITs are simple, common, and effective. However, as it holds true in all wealth planning topics, we all have unique wrinkles to our situation which deserve consideration when choosing what strategy is best for our families.

McKonly & Asbury’s Private Client Services group specializes in helping families protect, enhance, and transfer their wealth and values. If you have any questions about the contents of this article or would like to speak to someone about other advanced wealth topics, please email Dan Matarrese at dmatarrese@macpas.com.

We discussed Pennsylvania’s Educational Improvement Tax Credit Program and learned what this program is all about, what type of businesses can participate, and what the eligible taxes are for which the credit can be applied. We then reviewed several examples for increased understanding of the tax credit and wrapped up with instructions for how an organization can apply.

Check out our Upcoming Events page for news and updates on our future seminars and webinars.

For more information on this topic or to submit a question for Greg or Michael, use our contact page at www.macpas.com/contact or email them directly at glowe@macpas.com and meby@macpas.com.

Below you can watch a recording of the presentation, view the slides, or download the audio file.

Download the audio file as an MP3 (37 MB)
Click here to download

CFMA Confindex – Increase of 15 points to 129 – A number of macroeconomic indicators suggest that despite US Economic growth, construction growth is firming.

Architectural Billing index – Increase of 12 point to 64.8 – With increasing demand for design services the ABI continues to strengthen.

FMI Construction Outlook Report – Holding steady at 8% growth for 2013 – Although the strength of individual markets is shifting, the forecast for total construction put-in-place for 2013 continues to show an increase of 8% over 2012 levels.

McGraw-Hill Construction Industry Confidence index – 64% in Fourth Quarter of 2012 – For the first time since 2008, signs suggest the the market is gradually recovering.

ABC Backlog indicator – Increase of 3.5% since November 2012 – ABC continues to report strengthening in its backlog indicator report.

To learn more about these reports, please visit www.cfma.org and search under Industry News and Advocacy or contact the construction professionals of McKonly & Asbury, LLP.

There are several key concepts that form the basis of the methodology, and that can be applied to other improvement approaches as well. The following post will explore each here.

The first concept is what is called ’7-ways’.  Instead of identifying one possible solution to a product or process design challenge, identify seven possibilities.  ’7-ways’ stretches the creative problem solving process that is at the core of any product or process design.

Once seven possible ways have been identified, the process moves to an assessment of each in terms of how they meet the objectives identified before the start of the exercise.  Target cost, performance, quality, and manufacturability objectives are identified prior.  The key is to not select one ‘solution’ over the others, but to develop a ‘collaboration’ of ideas.  Narrowing too quickly to one is avoided by setting three possibilities as the goal at this point of the process.

Another concept that is part of the methodology is referred to as ‘biomimicry’.  As part of the 7-ways technique team members are first asked to identify examples from nature of the function that they are expecting the product or process to perform.  This technique helps people look ‘outside their box’ of predisposed solutions.

Rapid learning cycles is another key concept of 3P.  Learn fast and cheap through prototyping, creating mock-ups, and simulation.  The objective is to ‘make the fuzzy tangible’, or at least as tangible as possible.  People will learn more through experience that utilizes all of their senses.

Early involvement of ‘internal customers’ and even suppliers to the development process is another key concept.  No more “throw it over the wall’ from engineering to production, or from engineering to purchasing and then to the supplier. An effective 3P team has strong cross-functional representation.  All the better to get the best ideas out as early as possible in the process.  The collaboration between functions and departments is a wonder to see in practice.

These are several of the key concepts that form the foundation of the 3P methodology.  All of them can be put into practice in some form in other Continuous Improvement (CI) methodologies.  Its principles have broad application.

Readers are probably thinking that a development process that makes use of 3P will take longer. It is true that the upfront ‘study’ phase will take longer. However, the overall development time decreases because of the signficant and positive impact on the ‘execution’ phase.

If you want to learn more about 3P, please check out the new book, “Unleashing the Power of 3P: The Key to Breakthrough Improvement” available from Productivity Press. Click here for more information.

The following post was written by Drew Locher, Managing Director of Change Management Associates. To learn more about the concepts of 3P, please vist the Change Management Associates website at www.cma4results.com or contact the LEAN Accountants of McKonly & Asbury, LLP.

The star of the show is residential buildings with a 23% rise in single-family buildings. While much of business sector is still in wait-and-see mode, some industries are breaking the mold and planning for growth. Commercial, lodging and office construction are starting to pick up.

The rich shale regions of the country are seeing a lot of construction activity. With oil and gas exploration booming, these regions are in need of housing, as well as the construction of roads, rail and pipelines to move the product from the fields to refining and distribution sites.

In addition, the potential for greater energy independence and lower energy prices is helping to make the U.S. more competitive in the global market and enticing more manufacturing to relocate in the U.S.

Residential Construction — Single-family housing put in place grew 19% in 2012, and FMI expects another 23% growth to reach $161 billion by the end of 2013. Multifamily construction improved a whopping 47% in 2012, with FMI looking for another 31% in 2013.

Nonresidential Construction Trends and Forecasts by Sector:

Lodging — After three years of steep declines, the market for lodging construction came back a strong 25% in 2012 and FMI expects another 10% growth in con­struction put in place for 2013.

Office — Office construction is finally showing a solid but slow turnaround with 5% growth in 2012 and another 5% increase expected in 2013.

Commercial — Commercial construction is the third largest nonresidential construction market behind education construction and manufacturing construction. That is why it is good to see that it continues into its third year of good growth, moving up 8% in 2012 and looking for another 7% to reach $50.3 billion in 2013.

Health care — Health care construction was moderate in 2012, growing only 3%, but FMI expects it to pick up in 2013 to 8% to $44.2 billion construction put in place for the year.

Manufacturing — Manufacturing construction increased 17% in 2012. It will continue with another 6% increase for 2013 through 2014.

Power-related — Construction for the power market grew 9% in 2012 and will continue to grow between 8% and 9% through 2017.

An important factor to consider when looking at asset protection statute states, not considered in Oshin’s chart, is privacy. States have different privacy provisions protecting information contained in a trust from becoming public. Nevada has no privacy provision and, after three (3) years, trust information can become public in Delaware. South Dakota is the only asset protection state that has a total seal on trust information forever. Clearly, this is also an important factor to consider when determining where to place an asset protection trust.

Download chart in PDF

This article was originally posted on Bridgeford Trust Company’s website. Bridgeford Trust Company is an affiliate of McKonly & Asbury and provides holistic multi-family office wealth management and third party fiduciary services to affluent families. Bridgeford Trust Company offers an independent, collaborative, and world-class approach to wealth management with a strong focus on wealth education and preparing the next generation for the responsibilities of wealth and business ownership. To view the original article on Bridgeford Trust Company’s website, please click here.

The ASU requires an entity to prepare financial statements using the liquidation basis of accounting when liquidation is imminent.  The standard defines this as the point in time when it is considered remote that the entity will return from liquidation, and either

(a)    a plan for liquidation is approved by those with the authority to make the plan effective and there is a remote likelihood that the execution of that plan will be blocked by other parties, or

(b)   a plan for liquidation is being imposed by other forces, such as an involuntary bankruptcy

When liquidation is considered imminent based on the definitions above, the financial statements of the organization should be prepared such that they will present all assets using the value of the expected cash proceeds from liquidation.  This will likely differ from the historical or fair values presented using the assumption that the organization will continue as a going concern.  Financial statements prepared under the liquidation basis will also include any assets that were not previously recognized under US GAAP, but that the organization expects to either sell in liquidation or use in settling liabilities.  A common example of such assets would be trademarks or other intangibles.  All liabilities should continue to be recognized and measured using US GAAP guidance that would have previously applied.

The ASU also provides additional clarity on the required disclosures about the liquidation plan, including the methods and assumptions used to measure assets and liabilities presented in the financial statements.  The full text of the ASU can be found on the FASB’s website.

The guidance in ASU 2013-07 is effective for annual periods beginning after December 15, 2013 and all interim reporting periods within those years.  Early adoption is permitted.  The ASU applies to all entities, including public companies, private entities, and not-for-profit entities.  The only excluded entities are investment companies regulated under the Investment Company Act of 1940.

For additional information or questions regarding this article, please feel free to contact Michael Hoffner, Partner with McKonly & Asbury, LLP, via our contact page.

Summary of Findings

• Sixty-four percent of executives feel more optimistic about financial prospects for their own companies, down slightly from 69 percent a year ago.
• Seventy-two percent of respondents rated their optimism about financial prospects as moderate to high, an increase of 10 percent over last year.
• Seventy-three percent of respondents forecast moderate to rapid growth for their key customers for the next 12 months.
• A record number of companies (72 percent) are planning capital expenditures in computer hardware and software.
• Health insurance premiums increased for most respondents in the past year and nearly every company (94 percent) is anticipating an increase in healthcare premiums this year.
• Top priorities in 2013 include cutting operational costs, developing new products and services, and seeking new markets for products and services.
• Nearly half of U.S. manufacturers (46 percent) have engaged with local educational providers in order to train workers (up from just 19 percent in 2012).
• More companies are planning to increase the number of employees in 2013 (49 percent of respondents, up from 41 percent in 2012).

To learn more about this study, please visit www.primeadvantage.com or contact the LEAN Accountants of McKonly & Asbury, LLP.

May 15 – Maximizing Community Impact Through EITC Webinar

On May 15, Greg Lowe, Partner, COO and Michael Eby, CPA, Tax Supervisor with McKonly & Asbury will present “Maximizing Community Impact Through EITC”. During this webinar, Greg and Mike will discuss Pennsylvania’s Educational Improvement Tax Credit Program.  Participants can expect to learn what this program is all about, what type of businesses can participate, and what the eligible taxes are for which the credit can be applied.  Several examples will be reviewed so that an understanding of the tax credit can be gained and the webinar will conclude with instructions for how an organization can apply. Perfect for executives looking to expand their organization’s community impact, non-profit board members, and accounting staff seeking to understand the program.

This free, 30 minute webinar will take place on Wednesday, May 15 at 2:00 p.m. EST.

Reserve your webinar seat now by clicking here:
https://www1.gotomeeting.com/register/863686649

May 30 – Successful Investing in Human Capital Webinar

On May 30, Greg Lowe, Partner, COO with McKonly & Asbury will present with Mark Pulaski, Senior Consultant of Cornerstone Advisors. This webinar, entitled “Successful Investing in Human Capital”, will objectively discuss recruiting strategies and the pros and cons of the various methods available in the marketplace today.  The conversation will then turn to the various tools used for assessing potential new hires, as well as existing staff members that might be considered for promotion.  When faced with difficult decisions, choosing the best person with the highest probability for success is how high performance organizations gain an edge.  This webinar’s focus is on both the process and the tools necessary to make the best human capital investments for your organization. Perfect for hiring managers, human resource professionals, or those seeking to evaluate promotion decisions among many good choices.

This free, 50 minute webinar will take place on Thursday, May 30 at 2:00 p.m. EST. This program is a live webinar which offers you the opportunity to ask questions and interact with the presenters. There is no quiz and no exam. This webinar qualifies as live CPE and is not considered self-study. No prerequisites are necessary for this webinar and the program level is intermediate.

Reserve your webinar seat now by clicking here:
https://www1.gotomeeting.com/register/250224120

After registering, you will receive a confirmation email containing information about joining the webinar.

For more information, please contact us at info@macpas.com.

McKonly & Asbury Spring 2013 Affordable Housing Seminar

Thursday, June 13, 2013
10:00 am – 3:00 pm

Giant Community Center
3301 East Trindle Road
Camp Hill, PA 17011

Topics & Speakers Include:

Holly Glauser, Director of Development, PHFA
News from PHFA and What to Expect in the 2014 Qualified Allocation Plan

Karen Arnold, Keystone Grant Manager, PA Historical & Museum Commission
Federal and PA Historic Tax Credits

David Buches, FHLBank Pittsburgh
Affordable Housing Program (AHP) and Community Lending Program

Elizabeth Brooks, Principal, McKonly & Asbury, LLP
The 50% Test, The 10% Test, and Development Cost Certifications

There is a registration fee of $35 which includes lunch.

Click here for registration information.

We reviewed the key provisions of the Patient Protection and Affordable Care Act (also known as “Obamacare” or “PPACA”) and although many of the major provisions of the law do not become effective until 2014, now is the time to gain an understanding of how the law will affect your business. Familiarizing yourself with the law now can significantly reduce the risks of penalties and additional costs once 2014 arrives.

We then covered several other topics including:

• Various requirements of the “Large Employer Mandate”.
• Determining which employees are entitled to health insurance coverage.
• What constitutes adequate health insurance coverage.
• Establishing and utilizing “look back” or “measurement periods”.
• When and how penalties will be assessed and calculated.

Check out our Upcoming Events page for news and updates on our future seminars and webinars.

For more information on this topic or to submit a question for Suzanne, use our contact page at www.macpas.com/contact. You can contact Micah at msaul@devineoffice.com or visit online at http://www.devineoffice.com/the_lawyers/micah-saul.

Below you can watch a recording of the presentation, view the slides, or download the audio file.

Download the audio file as an MP3 (30 MB)
Click here to download

Click here to view the video on YouTube.

This article was originally posted on Bridgeford Trust Company’s website. Bridgeford Trust Company is an affiliate of McKonly & Asbury and provides holistic multi-family office wealth management and third party fiduciary services to affluent families. Bridgeford Trust Company offers an independent, collaborative, and world-class approach to wealth management with a strong focus on wealth education and preparing the next generation for the responsibilities of wealth and business ownership. To view the original article on Bridgeford Trust Company’s website, please click here.

Spending rose in the three major categories from January to February. Private residential construction spending was up 2.2 percent, while private non-residential spending was up 0.4 percent. Public construction spending rose 0.9 percent in February. Private residential construction spending is leading the economy, and was up 20.1 percent in February from one year earlier as the homebuilding recovery continues. Private non-residential spending was up 6.1 percent year-over-year, while public spending was down 1.5 percent.

Residential building has been running ahead of overall construction over the past year. Many areas of the country have worked off the excess supplies of homes that developed during the housing boom. With prices down substantially from a few years ago, an improving labor market, very low mortgage rates, and gradually easing lending standards, residential construction activity has steadily improved over the past two years.

Conditions in the rest of the construction industry are more mixed (see Chart 1). There has been more modest growth in non-residential private construction recently. Office-using employment has been increasing for three years, but is still down by almost 600,000 from its peak in the summer of 2007, limiting the need for new office space. The drop in consumer spending during the recession and the increasing importance of internet-based retailing has weighed on the recovery in construction of retail space. And spending cuts at all levels of government have hit public construction, with spending down 16 percent from its peak four years ago.

Construction employment has increased by more than 280,000 since industry payrolls bottomed out in early 2011, but is still down by almost 2 million from its peak in 2006. The labor market recovery will remain disappointing until there is stronger growth in construction employment. The industry should continue to improve throughout 2013 and into 2014. Residential construction will continue to lead the industry this year. Excess supply continues to diminish, and housing starts are still running well below long-run demand given demographics. Non-residential construction will also continue to improve, but at a slower pace given the surfeit of commercial space in many markets. Private construction will remain a drag in 2013 given tight budgets and especially federal spending cuts from the sequester.

Taking place on Thursday, June 6 at the Best Western Premier Eden Resort & Suites in Lancaster, PA, this full day conference has a variety of topics and speakers planned, including a keynote address and group sessions, as well as breakout sessions for you to choose from.

Highlights of our Collaborate 2013 Conference include:

• Keynote address focused on the state of the economy and tax legislation, delivered by alliantgroup’s experts, Dean Zerbe, former Senior Tax Counsel to the U.S. Senate Finance Committee, and Mark Everson, former IRS Commissioner
• State of PA Address from special guest, Lieutenant Governor Cawley
• Tax, audit, and accounting updates
• Industry experts including construction, manufacturing, nonprofit, and more
• CPE credits
• Breakfast, lunch, and networking
• Reception after the day’s sessions featuring food, drinks, and a drawing with the opportunity to win some great prizes, including an iPad mini!

For more information on the day’s events, including the full agenda, breakout choice options, speaker biographies, and registration information, please click here.

The deadline to register is Friday, May 31 and limited space is available, so register today!

Contact events@macpas.com or call Melissa Roberson at 717-972-5822 with any questions.

We discussed the application of ethics from a professional standards perspective. We also highlight the Codes of Professional Ethics including American Institute of Certified Public Accountants (AICPA), The Institute of Internal Auditors (IIA), and Information Systems Audit and Control Association (ISACA).

Referenced Links

• AICPA Code of Professional Conduct
• AICPA Exposure Draft
• AICPA Plain English Guide to Independence
• IIA Standards

Check out our Upcoming Events page for news and updates on our future seminars and webinars.

For more information on this topic or to submit a question for Mike or Elaine, use our contact page at www.macpas.com/contact.

Below you can watch a recording of the presentation, view the slides, or download the audio file.

Download the audio file as an MP3 (26 MB) Click here to download