Planning for SUCCESS(ion)

By Alyssa J. Skoyen, J.D., VP & Personal Trust Officer

You’ve put endless hours into ensuring your business is successful. You’ve carefully cultivated its growth and profitability every step of the way, and it has flourished under your leadership.

But, what will happen to your business when you or others step down from leadership roles?

What is succession planning? 

Investopedia defines succession planning as “a strategy for passing each key leadership role within a company to someone else in such a way that the company continues to operate after the incumbent leader is no longer in control” and “ensures that businesses continue to run smoothly.” At the heart of succession planning is replacement planning:

  • Evaluating the skills of current leadership
  • Determining the availability of internal or external successors
  • Purposefully developing the skills of any internal candidates

Why does succession planning matter?

Succession planning is sometimes referred to as “continuation planning” for its vital role in ensuring that businesses continue to exist despite a transition in management or ownership.  More than just planning for who will inherit key roles, succession plans:

  • Provide a medium for businesses to detail how they will minimize potential tax liability
  • Maintain the value of company stock and assets
  • Ensure lending covenants remain fulfilled during a transition

Succession plans are also a useful vehicle for contemplating how to preserve adequate liquidity and cash flow despite the potential need for “stay bonuses” to retain top employees and, in the case of a CEO who was taking a small draw, substantially higher expenses to replace the principal.

Similar to business plans, a succession plan is a means to an end, not an end in itself. The true strength of a succession plan lies in its implementation.

What can go wrong without a plan?

Short answer: everything. Without a succession plan, the business is put at risk as its stakeholders scramble to hold the pieces together through a series of desperate, rushed decisions. In the oft-quoted words of Sir Winston Churchill, “He who fails to plan is planning to fail.”

I need a succession plan… Now what?

Congratulations!  You’ve taken the first step in ensuring the longevity of your business’ success. The succession planning process will no doubt vary depending on the size and structure of your business, but key starting blocks are:

  1. Involving your business’ stakeholders
  2. Assessing availability of internal and external candidates
  3. Pulling together a team of professional advisors including your attorney, CPA, and others to assist in planning and implementation

If you would like more information about getting started with succession planning, contact me directly at (608) 826-3505 or

Investment Products:
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Tax Tips and Planning

wealth management tax tips

By Jeff Supple, CFP | Vice President & Trust Officer

According to the Pew Research Center, approximately one-third of Americans do their own taxes. Whether you prepare your taxes yourself or get help from an accountant, nobody wants to miss a beneficial deduction or tax credit. The following are often overlooked opportunities:

Backdoor ROTH IRA

The details of the backdoor ROTH IRA strategy need to be examined, but it is viable for those with incomes that don’t allow for regular ROTH IRA contributions. The basic premise is that a non-deductible traditional IRA contribution is made and then those dollars are converted into a ROTH IRA. There is no taxable event on the conversion up to the contributed amount. If there are earnings made after the contribution and before the conversion, those earnings (but not the contribution) would be subject to tax if converted.

This strategy was made possible when the income restrictions on converting to a ROTH IRA were removed starting in tax year 2010.

Saver’s Credit

Many people know there are tax advantages to saving money in an IRA or employer-sponsored retirement plan like a 401(k). However, some don’t realize you may qualify for an additional tax credit based on your income level. The code rewards the act of saving for those who have the most difficulty finding extra money to set aside (the lower your adjusted gross income, the higher the tax credit).

The value of a tax credit cannot be understated.  While a deduction simply lowers your taxable income, a credit actually reduces the amount of your tax bill dollar for dollar. The credit specifics can be found on the IRS website.

0% Capital Gains

A long-term capital gain tax is applied to the appreciation of an investment held longer than 12 months.  The federal tax rate on long-term capital gains is 15 percent or 20 percent if you are in the 39.6 percent tax bracket. For people in the 10 percent and 15 percent tax brackets, the capital gains rate is 0 percent.

This may be a smart consideration for those who control their taxable income more easily in a given year (e.g. retirees) and are looking to sell an appreciated investment.

Planning Ahead for 2017

In addition to being aware of opportunities for deductions and tax credits, it’s important to be aware of the changes made to the IRS tax code annually. Below is a brief summary of the updates for 2017 to help you plan for taxes next year:

Standard Deduction

The standard deduction for married couples filing jointly is $12,700 for tax year 2017 (up from $12,600 in 2016). Single tax filers have standard deduction of $6,350 (up from $6,300 in 2016). Note that the personal exemption amount is $4,050 for tax year 2017, which is unchanged from 2016.

Tax Brackets

While the actual tax brackets have not changed, the income thresholds have. For example, the 25 percent tax bracket for a married couple filing jointly starts at $75,901 in tax year 2017 (up from $75,301 in 2016).

During this time of year, it’s always a good idea to be educated on the changes and look to the future as well, so you can easily plan for next year. We strongly suggest that you please consult your tax advisor for more information.

Investing in Bonds: Should Your Strategy Change in a Rising Rate Environment?

By Dan Savage, Senior Vice President and Senior Trust Officer

The wait is finally over! Just a few short weeks ago, the Fed increased the Fed Funds Rate for the first time in a year and only the second time since the onset of the financial crisis. That may leave you with a few questions:

  1. Why did the Fed raise rates by 25 basis points? The short answer is that the Fed now believes that U. S. economic growth and employment characteristics are sufficiently strong to warrant a rate increase.
  1. When will the Fed again raise rates and by how much? No one knows for sure, but most economists and financial analysts believe that it will be a gradual process over three or more years. One popular view is that 2017 will see two or three modest increases leading to a Fed Funds rate range of 1 to 1.25 percent by year-end. More importantly for investors, however, is the 10-Year Treasury, which has recently been trading around 2.5 percent. Many analysts predict little if any change over the next year.
  1. Should bond investors be concerned? Although rising rates can depress bond valuations and disturb equity markets, it’s not all bad news. The plus side is that rising rates are beneficial to long-term investors and savers over time. More importantly, as stated above, we believe that rate increases will be gradual. If true, this will help manage price volatility while offering slowly improving yields.
  1. What strategies might help make the best of this environment? First, remember why people typically include bonds in a portfolio: bonds provide stability when stock market volatility increases. Said differently, successful portfolio construction isn’t only about returns; rather, it’s also about diversification and downside protection. Second, don’t chase yield by excessively extending maturities. You can benefit by including short- and intermediate-term maturity exposure. Finally, laddering individual bonds (staggering their maturities) can be very beneficial when rates are still near historic lows. Yield-to-maturity is knowable and locked in at the time of purchase…provided the investor does not sell the bond prior to the maturity date.

In summary, focus on your overall investment goals and risk tolerance rather than on interest rates alone. Your exposure to bonds should be tailored to your personal financial goals in relation to your other investments. A seasoned Wealth Manager can help design your portfolio to accommodate changing economic circumstances.

Investment Products:

Are Not FDIC Insured | Are Not Bank Guaranteed | May Lose Value