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Are my loved ones protected?
The goal of estate planning is to direct the transfer and management of your property in a way that makes the most sense for you and your family. While this may sound simple enough, it is only through careful planning that you can achieve this result. Without careful planning, your property may pass on your death to unintended beneficiaries or may be reduced unnecessarily by transfer taxes.
While planning for your death is a significant part of the planning process, estate planning addresses more than just the transfer of your assets upon your death. Your estate plan may also provide for the transfer of assets during your lifetime through gifts. In addition, prudent planning may involve planning for the current management of your assets in the event you become incapacitated or desire independent management of your assets as a matter of convenience.
There are a number of considerations that drive the estate planning process. Family considerations are important. For example, you must consider not only whom you want to receive your assets but when and how. Should your children receive their inheritance outright, or should it be managed for their benefit in trust? When should the trust terminate? Should your spouse be a beneficiary? Who should serve as trustee? Does a program of lifetime gifts make sense?
Perhaps just as important as the family considerations are the tax considerations.There are federal and state transfer taxes that apply to lifetime gifts and transfers at death. It is very important to understand the important tools available to minimize total transfer taxes.
What are stock options?
Stock options are benefits that give employees the right, but not the obligation,to purchase company stock at a specified price, known as the grant price, over a specific period of time, known as the vesting period.
Stock options are used by many employers as additional forms of compensation to employees. Companies who issue stock options to their employees are, in effect,offering the right to own a piece of the company. Employees with stock options have a vested interest in the performance of their company’s stock. An increase in performance by the employees may lead to higher profitability of the firm, which in turn, may lead to higher stock prices.
If managed correctly, stock options may provide employees with an opportunity to build and maintain significant wealth.
Two Types of Stock Options
There are two types of stock options, classified by their tax status: Non-qualified Stock Options (NSOs) and Incentive Stock Options (ISOs).
Non-qualified Stock Options are options that do not meet certain IRS requirements and therefore do not receive special tax treatment. NSOs are taxed when you exercise the stock options. Exercising a stock option means purchasing the company’s stock at the grant price. The IRS levies ordinary income tax, social security tax, and Medicare taxes on the different between the fair market value when you exercise the stock options and the grant price.
Incentive Stock Optionsare options that do meet the IRS requirements for special tax treatment. With ISOs, you do not have to pay ordinary income taxes when you exercise, as long as you satisfy the holding period requirement. You must hold your shares at least one year from the date of exercise and two years from the grant date in order to receive the special tax treatment.
Special tax treatment means that you will be taxed at the more favorable capital gains tax rate as opposed to ordinary income tax rates. If you do not satisfy the holding period requirement, however, you will be required to pay ordinary income taxes on the different between the fair market value at exercise and the grant price.
What is a Restricted Stock Unit (RSU)?
A Restricted Stock Unit (RSU) is a grant valued in terms of company stock, but company stock is not actually issued at the time of the grant. The recipient of an RSU must satisfy the vesting requirements in order to be distributed the stock (or cash equivalent). Vesting requirements may be time-based (a stated period from the grant date) or performance-based (tied to achievement goals for the employee).
Once an employee is granted an RSU, the employee must decide to accept or decline the grant. If the employee accepts the grant he/she may be required to pay the employer a purchase price for the grant. When the Restricted Stock Unit vests, the employee receives the shares of stock (or a cash equivalent) without restriction. Some companies may provide for the employee to defer receipt of the shares (or cash) until a later date.
What is an Employee Stock Purchase Plan (ESPP)?
An employee stock purchase plan is a way for companies to reward employees by offering to them the opportunity to purchase their company’s shares, often at a discount from the market price (typically at the end of an offering period). Employees usually indicate their interest to participate in the ESPP at the beginning of an offering period.
How do I rollover my 401(k)?
Leaving your job can be hectic, whether you’re retired, laid off or moving to a new company. It may not cross your mind to take care of your previous employer-sponsored retirement plan, but this is an important box to check during your transition.
You have four options when it comes to your retirement assets:
1. leave them with your former employer,
2. roll them over into your new employer’s retirement plan,
3. roll them over into an IRA or
4. cash out.
As with most financial decisions, there are pros and cons to each choice, and your specific circumstances may make one choice more appealing than the others.
Do I have enough money to retire?
Do you know your retirement number? Consider the factors that go into estimating your retirement savings goal and decide how much you’ll need to live your retirement dream.
Without a goal in mind, saving for retirement can feel like running a marathon without a finish line—a constant and tiring struggle. Lacking a retirement savings objective can make it difficult to set up a realistic savings plan, determine a retirement budget or even accurately manage your retirement investments. Yet fewer than half of Americans reported that they or their spouse have tried to predict how much money they’ll need for retirement, according to the Employee Benefit Research Institute’s (EBRI) 2013 Retirement Confidence Survey. With all of the retirement estimates out there suggesting different ways to calculate how much you’ll need (it’s 12x your annual salary! No, it’s 85 percent of your ending salary! No, it’s 8x!), you can hardly blame people for being hesitant to settle on a number. It’s true that there’s no “magic number” for retirement saving; however, even setting a ballpark goal and a system for working toward it is crucial to the retirement planning process.
Letter from the CEO
We founded Ferris Capital after spending 12 plus years at a large Wall Street brokerage firm. We left that model because we wanted to create an environment that minimized conflicts of interest and put the client first.
We believe that transparency and honesty are critical to building long-term relationships with our clients. That’s why we chose to build an independent Registered Investment Advisory firm (RIA).
At Ferris Capital, we act on behalf of our clients as their fiduciary which means that each recommendation we make is made in good faith and contributes to our goal of making the best, rational decisions for our clients and their loved ones. We do not sell products like the broker dealers do, but rather create long-term financial plans to help our clients meet their goals and objectives. We are not incentivized like the broker dealers with commissions to trade in client accounts, but rather provide advice to get our clients to where they want to be, without the biases associated to commissions.
The success of Ferris Capital is not about the investments, it’s about the people. First, our clients are some of the most successful individuals in the entire country. It is their continued trust in Ferris Capital that has allowed us to become who we are today.
Their confidence and support speaks volumes about the firm and its staff. Second, our professionals are some of the most intelligent and trustworthy individuals in the business. They have grown Ferris Capital significantly because of our well received process, world-class service and commitment to the client.
Our goal is to help our clients make financial and investment planning easy. Our clients have been successful in creating wealth and it is our job to help them protect and grow that wealth for the generations to come. We are true wealth managers, working with clients to navigate their financial situations through in- depth planning. We are big believers in understanding valuations and that low cost, tax efficient investment strategies are keys to success.
Ferris Capital is not your traditional firm - we are so much more. Please feel free to use us as a sounding board. We encourage questions and look forward to hearing from you.