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Employee Stock Ownership Plans for Executives
Tips to navigate ESOP suitability within the context of financial planning strategies
Employee Stock Ownership Plans (ESOPs) have emerged as a popular mechanism for companies to foster employee ownership and align the interests of employees with those of shareholders. For seasoned executives, considering participation in an ESOP entails a careful evaluation of the potential benefits and risks involved.
Benefits of ESOPs for Seasoned Executives
Ownership and Alignment of Interests: ESOPs grant employees, including seasoned executives, a direct stake in the company’s performance and financial success. By owning shares of the company, executives are motivated to work towards enhancing shareholder value, fostering a sense of ownership, commitment, and alignment of interests across all levels of the organization.
Wealth Accumulation and Retirement Planning: Participation in an ESOP provides seasoned executives with an opportunity to accumulate wealth over time, leveraging the potential appreciation in the value of company stock. ESOPs can serve as a valuable component of executives’ retirement planning strategies, allowing them to build a diversified portfolio of assets while benefiting from potential tax advantages associated with qualified retirement plans.
Tax Deferral and Liquidity Options: ESOP contributions are typically made with pre-tax dollars, allowing participants to defer taxes on the value of the contributed shares until distribution.
Additionally, ESOP participants may have access to various liquidity options, including the ability to sell shares back to the company or on the open market, providing flexibility in managing their investment portfolio and liquidity needs.
Retention and Incentive Alignment: ESOPs can serve as effective retention tools for seasoned executives, incentivizing long-term commitment and loyalty to the company. By offering a stake in the company’s ownership, ESOPs reinforce the executive’s connection to the organization’s mission, values, and long-term success, fostering a culture of employee engagement and dedication.
RELATED: Understanding Stock Options: ISOs, NQSOs, & Restricted Stock
Risks and Considerations for Executives
Concentration of Risk: Participation in an ESOP exposes seasoned executives to concentration risk, as their investment portfolio becomes heavily weighted towards company stock. In the event of adverse developments or underperformance of the company, executives may experience significant declines in the value of their ESOP holdings, potentially jeopardizing their financial security and retirement goals.
Lack of Diversification: ESOP participants may face limited diversification options, particularly if the company’s stock represents a substantial portion of their investment portfolio. Without adequate diversification, seasoned executives may be vulnerable to market volatility and sector-specific risks, underscoring the importance of implementing sound diversification strategies to mitigate downside risk.
Liquidity Constraints: Unlike publicly traded stocks, shares held in an ESOP may have limited liquidity, making it challenging for seasoned executives to convert their holdings into cash when needed. Illiquid ESOP shares may pose liquidity constraints and inhibit executives’ ability to access funds for personal financial goals, necessitating careful planning and consideration of alternative liquidity options.
Regulatory and Fiduciary Compliance: ESOPs are subject to a complex regulatory framework governed by ERISA (Employee Retirement Income Security Act) and other federal and state laws. Seasoned executives serving on the board of directors or as trustees of the ESOP bear fiduciary responsibilities and must adhere to strict compliance requirements, including the duty to act prudently and in the best interests of ESOP participants.
Navigating the Decision Process with Care
For seasoned executives contemplating participation in an ESOP, the decision entails a nuanced assessment of the potential benefits and risks in light of their financial objectives, risk tolerance, and long-term outlook.
Consultation with financial advisors, legal experts, and other professionals can provide valuable insights and guidance in navigating the complexities of ESOPs and evaluating their suitability within the broader context of executives’ financial planning strategies.
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Love and Money: What to Do When Your Spouse Won’t Talk About Finances
If Financial Communication Doesn’t Come Naturally, You’re Not Alone
Money conversations with your spouse are imperative when you want to achieve joint goals, and yet they don’t always come easily. Money is a very personal topic, and many people are not accustomed to discussing it. It can be downright perplexing when your spouse refuses to work on a budget with you, create financial goals and objectives, or talk about a habit that may need to be addressed. Perhaps they are actively avoiding or even refusing to discuss a specific issue, or maybe they simply fail to engage when you raise a topic. Regardless, if you want to jump-start money conversations with your spouse, it’s helpful to first begin with why they are practicing avoidance.
There’s almost always a root cause for tension about money in a relationship. A survey conducted by the American Psychological Association found that almost one-third of adults with partners reported that money is a major source of conflict in their relationships. Your significant other’s feelings (or fears) about money may come from a myriad of experiences that may lead them to be non-communicative. Perhaps they have experienced a past financial failure, or feel financially unskilled, or they could even be keeping a financial secret.
If talking about money usually leads to conflict between the two of you, then pause to give some thought to what the underlying issues may be. While you may not arrive at a solution right away, it’s still important to determine the ‘why’ so you can move towards having money conversations with your spouse that are useful, if not entirely harmonious. With this in mind, approach the conversation in a general manner as opposed to focusing on a specific money issue. This may give you some insight into your spouse or partner’s general feelings about money. Here are six pointers to keep the conversation productive:
- Invite your partner to have a conversation and set a time and date for it, rather than springing the topic on them.
- Use inclusive “us” language that promotes and supports the two of you as allies and teammates.
- Avoid bringing up specifics so that you are not implying blame.
- Identify some shared goals and focus on them.
- Listen carefully to your partner and don’t interrupt or correct them.
- Maintain a calm demeanor and display openness to their thoughts.
If you believe that having this conversation will be too difficult, you might consider inviting a trusted third party to help facilitate. A financial advisor can often fill this role for a couple with multiple financial issues or planning matters to discuss.
Put the Focus on a Team Approach
Let’s dig into the second point above a bit more. It’s quite common for money conversations with your spouse to become contentious if you feel like you’re at odds, rather than on the same team. It’s also common for spouses to have different ideas and habits concerning spending and saving, organizing a budget, or using credit cards. This doesn’t mean you can’t successfully work together. It may just take a bit more effort – and more structured money conversations with your spouse – to learn how to take a team approach to accomplish your goals. It’s not just your finances that can benefit either. A 2021 survey by Fidelity Investments about couples and money found that couples who communicate well about money experience positive benefits in their overall interactions with one another.
As the two of you talk, make an effort not to lay blame or focus on previous mistakes or missteps. Bringing up the past or reminding them of your ongoing efforts to educate them about finances and money will most likely prove counterproductive. Bring the perspective of this being a fresh approach, where you can start anew and move forward together as a team. Talk about what might work best for the two of you, such as watching a video series or working together with a financial advisor who can help guide you toward improved financial literacy.
Initiate Solutions to Face the Challenges
You might think you’re keeping the peace by not addressing your partner’s lack of communication about money, but this is a misguided approach in the long run. It amounts to ignoring a problem that may only grow larger and be harmful as time goes on.
Though challenging at times, money conversations with your spouse are critical because they help ensure that the two of you participate together in your finances. If your partner expresses that following a budget will cause them anxiety and stress, and you therefore allow them to do as they please, you are really only reinforcing their ability to remain removed from the process. However, you need a household budget, and that takes two people who are willing to work as a team to meet both of your goals and create financial security.
It may be up to you to find a solution that will bring your partner to the table. Using the household budget as an example, perhaps you can re-work and streamline the spending categories such as dining out and entertainment, and identify a single dollar amount that is their monthly discretionary spending limit. You may want to consider working from a cash budget that basically eliminates the ease of using credit and debit cards so you can only spend the cash in your wallet.
Take Your Time with Your Approach
When you are the financially minded partner in the relationship, you might be very eager to have money conversations with your spouse. Remember to give your partner the grace to grow and become comfortable in their role. It takes patience, and it may be a slow process to build your partner’s willingness to talk about money and adopt a team mindset about household finances. There will likely be times when one or both of you will slide back into old habits and patterns. Try to be aware of these times and resist laying blame, bringing up former disputes, or shutting down altogether.
In fact, since we are all fallible, it can be helpful to be prepared for the inevitable course corrections on your journey together. A few phrases that may be helpful to use when it seems like money and marriage matters are going off-course:
- I don’t think either of us is comfortable with this situation, so let’s work together to get out of it.
- Let’s give ourselves some time to be thoughtful and write down why we’re feeling so frustrated right now.
- Let’s identify a goal that we share and are excited about and brainstorm together about how to achieve it.
It’s good to have a “reset plan” that works for both of you. Keep it handy and use it as needed so you can stay on a positive course as you manage money and marriage together.
Love and Money: Have Better Money Conversations with Your Spouse
While it can be frustrating to feel like you’re alone in the financial part of your relationship, remember that learning to talk about money with your partner is a process. Money conversations with your spouse won’t always come naturally, and they won’t always be comfortable. Persist, however, because money issues can impact many parts of your lives, and thus have a negative impact on other areas of your relationship. The tips in this article may help you gain some forward momentum in money conversations with your spouse but be sure to reach out to Lane Hipple if you think you could benefit from professional guidance.
Illuminated Advisors is the original creator of the content shared herein. I have been granted a license in perpetuity to publish this article on my website’s blog and share its contents on social media platforms. I have no right to distribute the articles, or any other content provided to me, or my Firm, by Illuminated Advisors in a printed or otherwise non-digital format. I am not permitted to use the content provided to me or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.
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New Year, New Goals: Planning Your Money Moves for 2024
Smart Money Moves: Will You Start the New Year with a Roadmap to Success?
The coming of a new year inspires much thinking and planning. You may be looking for ways to structure and organize your life to be prepared for a brand-new year, especially when it comes to your personal finances. As you plan your money moves for 2024, it’s important to consider both short- and long-term goals. It’s also beneficial to arrange finances for emergencies or unexpected situations. How should you plan your money moves for 2024 to ensure economic stability and prosperity? Here are key strategies to consider.
List Short-Term Goals
When people discuss personal finances, they tend to think in generalized terms. How much wealth have they accumulated? How are their finances positioned for the future? Will they be able to retire comfortably?
While all of those objectives are important, you still have to live in the present. This means taking care of short-term needs that may arise within the next few years. Your money moves for 2024 should account for these smaller-scale goals and unexpected events.
Short-term goals can include:
- Paying down credit debt
- Building an emergency fund
- Saving for vacation
- Purchasing new appliances
- Exploring additional income streams
- Renovating or improving your home
- Planning for marriage, children, relocation, or other life transitions
Many other goals and ambitions can be characterized as short-term needs. Whatever they are, make room for them in your plans for money moves in 2024. You may have big ideas in mind for the future, but you still need to live day to day. Plan your finances to take care of the present, too.
Articulate Long-Term Goals
While you’ve got to consider your short-term financial goals, it’s essential to keep your long-term goals in sight, too – even though these are goals that won’t be met for years, or even decades down the road. They can include:
- College tuition for children
- Saving for retirement
- Paying off a mortgage
- Starting a business
- Planning for long-term healthcare needs
- Achieving financial independence
- Establishing a legacy
Thinking about long-term goals can be frustrating at times because they often feel aspirational. You can expect to make gradual progress – even slow at times – which can be a hit to your motivation. It’s not necessarily easy to track your success in meeting them. However, it’s very beneficial to itemize them while you’re still working to set a framework for your future.
Keeping these goals uppermost in mind will help you make more responsible financial decisions now, planning your money moves for 2024 to pay off handsomely in the future.
Identify Middle-of-the-Road Goals
Sometimes, it’s hard to determine whether a certain financial goal or need is short- or long-term. Some may consider buying a home within 10 years to be a long-term goal, while others who are positioned to buy a house outright might think about it as a short-term goal.
The good news is that you don’t have to classify these middle-of-the-road goals. You can set a reasonable timeline for accomplishing them that works for you. Some of these goals might include:
- Maximizing 401(k) contributions
- Improving your credit score
- Supporting charitable causes
- Taking on home renovations
- Growing your savings and emergency funds
- Pursuing a “passion project”
These goals can also be considered “active” ones that aren’t defined by time. Although many people prefer to have some sense of time for each goal, you can give yourself the freedom to identify timelines that work best for you, identifying money moves for 2024 that suit you personally.
Make a Realistic Budget
One of the biggest pitfalls of setting financial goals is harboring unrealistic expectations. You might expect to be able to conclude payments on your car loan within three years, but you can’t account for uncertainty or surprises. It might not even be possible to construct a timeline until you’ve been working at achieving your goals for a time.
On the other hand, you might discover that you have the means to pay off certain debts earlier than expected. You may find yourself able to pay double your current mortgage and get on track toward an early payoff. If you’ve set a realistic budget that allows you the time and room to make alterations, you’ll find it easier to accomplish your goals.
When you make money moves for 2024, approach them from a realistic standpoint. This goes beyond daydreaming — it means thinking rationally, preparing honestly, and putting pen to paper. Don’t be afraid to switch short- or mid-range goals to long-term goals if the situation warrants. Think about the future, but also think about how to maintain a content existence from day to day.
Get Help with Your Money Moves for 2024
January is Financial Wellness Month and there’s no better time to think about your financial future. If you would like to update your Lane Hipple financial plan or simply refresh your memory as to the financial goals we set out to achieve for you, please do not hesitate to reach out and schedule an appointment.
Happy New Year!
Illuminated Advisors is the original creator of the content shared herein. I have been granted a license in perpetuity to publish this article on my website’s blog and share its contents on social media platforms. I have no right to distribute the articles, or any other content provided to me, or my Firm, by Illuminated Advisors in a printed or otherwise non-digital format. I am not permitted to use the content provided to me or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.
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Legacy Planning for Families: Passing on Your Values and Wealth
Tips to Serve Your Family Now and into the Future Through Smart Legacy Planning for FamiliesAffluent individuals often turn to legacy planning for families to ensure that they protect not only their financial standing but also their values and missions. Some of the steps they may take include designating an executor to manage the distribution of assets, writing a will, and filling out beneficiary forms on retirement accounts. However, these steps are only the start of what legacy planning for families involves. Below, we’ll share tips for building your family legacy in a way that both serves your present needs and preserves your family’s wealth for generations to come.
Understand Your Options
A surprisingly large number of families miss out on some of the most important opportunities to transfer their wealth in a way that’s secure and tax-efficient. One of the most missed key opportunities is account titles. Many spouses choose to title their assets jointly, leading these jointly titled assets to count toward their individual estate tax exemptions when they pass away. Current tax law, however, allows each spouse to own up to the state tax exemption before becoming subject to the tax. By titling assets more strategically, couples can own twice as many assets before having to worry about estate taxes.
Corporate executives and individuals who own businesses might also overlook certain beneficial wealth-planning tactics. For instance, business owners can pass their companies down tax-efficiently, but doing so requires them to begin succession planning years in advance. Executives who have stock options will want to use these options before they expire as well.
To make the most of the available opportunities, it’s essential to work with a qualified financial advisor to understand the options available to you. A professional can point out the best strategies for reducing estate taxes while at the same time helping to make sound decisions for the remainder of your life.
Choose a Non-Family Executor
In the process of legacy planning for families, assigning the role of executor to the eldest child is a common practice. However, it’s not necessarily the best option. Depending on the size and complexity of the estate, being appointed executor can be a full-time responsibility, one that requires a significant amount of financial expertise. This may become an issue for individuals who have ownership stakes in multiple businesses or those with operations in different states where they’re required to file taxes.
Some states also require the executor to attend probate court, meaning they may have to travel. Additionally, the executor might need to turn to various real estate agents to help them sell homes. All of this adds up to a lot of time and effort.
Instead of saddling a family member with these responsibilities, choosing an institution as executor can be the better call. An institutional executor will adhere to all key state laws and protocols while keeping the family updated and helping you avoid the kind of conflicts that are common when a family member is appointed executor.
Review and Revise Regularly
Perhaps the most common error in legacy planning for families is failing to update paperwork. It’s crucial to review all financial paperwork to avoid possible complications following any major life event that occurs within the family, including marriage, divorce, birth, death, and new money-making opportunities.
Even if there haven’t been any major life events, it’s still a good idea to revisit all financial paperwork with your financial advisor every three to five years. They’ll be able to point out any changes in tax laws or your personal financial situation that could impact your assets.
Opt for Customized Plans
Every family is different and will face unique challenges, making it vital to have a unique legacy plan that reflects this reality. It’s particularly important for parents to think about what their children will receive, as certain concerns or obstacles may disqualify a particular child from being considered the best recipient of the family assets. For instance, if a child has substance abuse issues or mental health concerns or lacks a sound work ethic, making other arrangements may serve to protect a family’s wealth.
Trusts are powerful tools in legacy planning for families in these instances. Some trusts will pay out funds to the beneficiary if they earn an income, with select options even paying out dollar-for-dollar amounts. These types of arrangements can help incentivize the beneficiary while preventing them from spending the assets all at once.
Prepare Your Heirs
Money is a very personal matter, and it can be difficult to talk about the specifics of your assets and inheritance plans, even with your closest loved ones. Many people choose to withhold this information out of fear that it will curb their loved ones’ motivation to accomplish their goals or spark conflicts between family members. However, open and honest communication is a crucial part of preparing heirs to inherit family assets.
A beneficiary who isn’t aware of what they’ll inherit – and is subsequently handed a complex estate, business, foundation, or other investment – likely won’t be ready to manage it. Instead of keeping your heirs in the dark, it can be helpful to give them at least a basic understanding of how to manage various family assets so they don’t make costly mistakes once they come into possession of them.
With that in mind, take your heirs to meet the family’s financial advisor as part of your legacy planning for families process. Doing so will give them not only a more thorough understanding of the family’s wealth but also someone to call on after the head of the family passes away.
Another crucial aspect of legacy planning is ensuring that the family’s values are respected. Addressing family history and philanthropic goals while demonstrating how they connect to family wealth helps beneficiaries understand what they should focus on in the future.
For most families, successful legacy planning for families involves offering clear family objectives. This means providing age-appropriate transparency and creating a positive learning environment so that financial literacy receives intentional focus.
Legacy Planning for Families: Looking Ahead
Dealing with end-of-life topics isn’t easy for anyone, which is why too many people avoid these conversations until it’s too late. If you’ve spent your entire life building your wealth, you want to do everything possible to ensure that it’s safe when you’re no longer there to manage it. That’s what legacy planning for families offers — it allows you to provide for your family while preserving your core values and passing them onto the next generation.
By turning to reliable strategies like choosing a non-family executor, communicating with your beneficiaries, opting for customized plans, understanding all of your options, and regularly reviewing your financial paperwork, you can effectively safeguard your life’s work through the legacy planning for families process.
Having a trusted and experienced financial advisor on your side to help you navigate the process of legacy planning for families will help you avoid common pitfalls while ensuring that your heirs have the support they need at all times. With the right people on your team, you can safely pass on your values and wealth to future generations without burdening your beneficiaries or leaving your wishes unfulfilled.
Contact Lane Hipple Wealth Management Group at our Moorestown, NJ office by calling 856-406-5120, emailing info@lanehipple.com, or to schedule a complimentary discovery call, use this link to find a convenient time.
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Lane Hipple’s Annual Donation Drive
Updated 12/20/23 –
THANK YOU so much to our clients for your generosity and kindness! Our collection for families with children from the local school district was very successful. Every item on their wish list was purchased and then some! We have no doubt the children will have a great holiday and their parents will be grateful. Upon delivering to the school yesterday, we were told this really is a Christmas Miracle!
“There were a lot of tears today when families picked up their amazing gifts. You and your clients are giving a beautiful holiday to so many children.”
– Maureen Ioannucci, SVE School Counselor“Words can’t express our gratitude. Your company’s generosity is remarkable, it’s surreal the amount of items collected. Please know how much this has made an impact on these families and kids. Just purely beautiful……..we are humbled and grateful for Lane Hipple!”
Heather Hackl, SVE PrincipalWe hope you all have a wonderful holiday and new year.
Hello friends,
Let’s come together again and support families in our community this holiday season. We will be collecting items for local families.
Please do not wrap the gifts. If you buy a specific item, please email melissa@lanehipple.com so we can try to prevent duplicates. This list will be updated weekly. Gift cards will be accepted also. The requested items are below:
Girl age 8Girl’s size 14/16
Needs winter coat, hat, gloves, maybe snow pants.
Loves arts and crafts.Boy age 11Men’s medium in pants and shirts
Needs winter coat, hat, gloves, maybe snow pants.
Would love a fat tire bike (Walmart)Girl age 11Girl’s size 18 or XXL, women’s size 8 pants and 8 ½ shoes
Roller skates size 8 ½
Girl Lego setsBoy age 10Boys size 14-16 boys, size 8 men’s shoes
Roller blades men’s size 8
Pogo stickBoy age 8Boys size 8/10, size 3 shoes
Toy remote Bugatti
iFly droneGirl age 13Size medium jr/women, jean size 4, shoe size 10
Would like anything Nike, her favorite color is red, she loves to paint.
CanvasesBoy age 6Size ⅚, shoe size 12c, loves anything Spiderman.Girl age 7Size 7 clothing, shoe size 2
Loves Barbies, any Barbie sets.
Her dream gift would be the Barbie Malibu Dream HomeBoy age 2Size 3T clothing, shoe size 7T
BooksGirl age 7Barbie Club Chelsea Camper
Barbie Chelsea Doll and Unicorn Car
Gabby’s Dollhouse
Barbie Doll & Playset, Cook & Grill Restaurant w/ Pizza Oven**Same family**Boy age 8 – Size 10/12
Boy age 6 – Size 7/8
Boy age 3 – Size 4/5
Boy age 2 – Size 3t**The boys love Pokemon, dinosaurs, cars, coloring books, books, and puzzles but said anything would be appreciated.Thank you for your generosity through the years. This group has made a difference in lives.