A RehmA nn PublicAtion Vol. 15 | SPRinG 2013 BWD Business Wisdom Delivered

[8] For Sale By Owner Selling a business is a lot like selling a home … except when it isn’t

[14] Keeping Schools Safe campus security and learning institutions’ obligations

[20] SkyBooks leverage the cloud to work smarter, respond faster and remain competitive

Rehmann chief investment officer Jeffrey Phillips understands the juggling act required in today’s financial landscape. You outgrew such things long ago. Life has gotten more complicated since then. Fortunately, we’re here to help.

Changes to the tax landscape make big news nowadays, as the reverberations they cause may be felt by many people. Whether those changes involve private households or major corporations, one thing is certain: dealing with them requires skill and experience.

At Rehmann, our tax advisors stand ready to help you address the impact of such changes. Plus, our innovative Rehmann Experience means you’ll also have access to a full portfolio of potential solutions for every challenge facing your business … no matter how complicated.

Contact me to learn more.

Cindy Cattran, CPA Principal 734.761.2005 [email protected] rehmann.com A RehmA nn PublicAtion Vol. 15 | SPRinG 2013 A letter from The SpringPublisher 2013 | BWD 3 BWD Not just information: Business Wisdom Delivered the information you need Focusing on making a difference to your business today

i don’t have to tell you that we live in an age of information overload: you likely see it, firsthand, every day. but the scope of this overload — the breadth of which cannot be taken in by the naked eye — is remarkable. For example, every 60 seconds: • Nearly 170 million emails are sent • Approximately 600 videos are uploaded to YouTube • More than 6,600 pictures are uploaded to the photo-sharing site Flickr

What’s more, as of December of last year there were 634 million websites, 51 million of which were added during the year. Google clearly has its hands full — in recent months, the search engine handled in the neighborhood of 11 billion searches per You outgrew such month. to help you cut through this overload, we redesigned our website, rehmann.com, to make it easier to find the information you need. Without casting aspersions on the other 633,999,999 or so other websites out there, we’re thrilled with the way it things long ago. turned out and welcome you to visit today. indeed, several of the articles contained in this magazine come with bonus Web content.

(learn more about the new rehmann.com on page 5.)

As incredible as the internet is, however, there are many questions that simply cannot be answered online. that’s because while there is a great deal of valuable content there, the proper context is more difficult to come by. Getting to that proper context can be challenging, which is why your relationship with Rehmann can be so vital: our professionals help you cut through the mass of data floating around out there and get you to the most important information you need.

We follow the same approach with this very magazine, carefully curating the content to have the greatest possible applicability to the work you do each and every day.

included in this edition:

• What you need to do to prepare your company for a potential sale (page 8). hint: in some ways, it’s surprisingly similar to preparing to sell a house. • How to respond to a malware attack (page 10). Another uncomfortable subject, but don’t ignore this one. • Why second-to-die life insurance is something you need to worry about now (page 18). What seems like an uncomfortable subject to address can be one of the most important things to take care of right away. there’s plenty more, of course, both within these pages and at rehmann.com. I invite you to spend some time with both of them; those 170 million emails can wait.

Steven D. Kelly, cPA chairman and ceo A RehmA nn PublicAtion Vol. 15 | SPRinG 2013 BWD Business Wisdom Delivered

IN THIS ISSUE

8 [05] The All-New rehmann.com

[06] Nuggets of Wisdom

[08] For Sale By Owner 13 [10] Successfully Combating a Malware Attack [12] Tax Gut Check

[13] GASB’s New Pension Standards 16 [14] Keeping Schools Safe [16] Nonqualified Deferred Compensation

[18] Second-to-Die Policy Provides “Legacy Insurance”

[20] SkyBooks

18 [22] Carpp’s Book Corner

BWD Staff: Contributors: Subscriptions & Circulation: Publisher: ...... Steven D. Kelly Kirk balcom Send inquiries to: Assistant Publisher: ...... mitchell Reno Sharon berman Rehmann – bWD managing editor: ...... Steve tschirhart Stephen W. blann 1500 big beaver Rd, 2nd Floor copy editors: ...... claudia brim Jim carpp troy, mi 48084 miranda Stempien bryan Kearis 248.952.5000 | [email protected] creative Director: ...... marcy meinke bill Kowalski cover Photography: ...... John martin mike mccarthy Subscriptions/circulation: ...... teri Stora Jeffrey Phillips laura Reindel bill Stewart Spring 2013 | BWD 5

Some website revisions are the digital equivalent of slapping a fresh coat of We’re proud paint on the same old structure. We opted for a full-on remodel. Check out the new rehmann.com today for a completely reimagined site that features: to present • A comprehensive portfolio of Rehmann’s services • Video introductions to Rehmann associates, along with full bios the all-new • Business news, articles and overviews • Tax guides and updates rehmann.com • A calendar of events and registration options

Designed for faster, easier-to-use navigation and bursting with compelling Easy-to-use navigation, enhanced content, rehmann.com is the website you need in our 24/7 world. And it’s all functionality and everything else presented in a device-friendly format so you’re always just a smartphone or tablet away from the business wisdom you need to gain an edge in today’s you need to access Rehmann in competitive economy. today’s 24/7 world. Visit the new rehmann.com today. You’ll love what we did with the place. 6 BWD | Spring 2013

Nuggets of wisdom

Americans tapping retirement funds pre-retirement According to a recent study, over 25 percent of u.S. workers participating in a 401(k) plan will access their 401(k) savings before they reach retirement. the study analyzed consumer finance data from the Federal Reserve and the u.S. census bureau. Among the study’s findings: • One out of four participants in 401(k) retirement Pet owners not programs will either cash-out their savings before prepping properly retirement — incurring substantial penalties and taxes — or forfeit them to loans. What happens to a pet when its owner dies? Pet owners might not be making proper provisions to • 26 percent of 401(k) participants now use their 401(k) answer that question. savings for non-retirement needs. • Only 17 percent have taken legal action (a will, a • 75 percent report that they breached their savings trust fund or some other legal document) to plan because of basic money management problems. for the care of any of their pets should they die. • Workers now withdraw or breach over $70 billion • Dog owners are more likely to take legal steps to annually out of their 401(k)s for non-retirement needs. plan for their dogs (17 percent) than cat owners • Penalized withdrawals increased from $36 billion to are to plan for their cats (11 percent). about $60 billion between 2004 and 2010. • Even pet owners who have taken legal steps • Workers in their 40s are most likely to breach their to plan for their own death in general have not savings for non-retirement needs. necessarily included their pets in that planning. of those who have completed a will for themselves (Source: HelloWallet) (42 percent of cat or dog owners), only 18 percent have included their pets in that will. • The most common form of estate planning for the care of pets is speaking to a friend or family member about caring for a pet (53 percent of dog or cat owners have done so), followed by creating a pet portfolio containing the information needed for someone else to care for a pet (39 percent have created one).

(Source: The American Society for the Prevention of Cruelty to Animals) Spring 2013 | BWD 7

Personal life comes first for single professionals Opposites attract … sort of. A new dating survey reveals that 70 percent of respondents prefer to date someone who works in a completely different industry. other notable findings: • 44 percent prefer post-work cocktails as an ideal first date over the Highly qualified? more traditional “dinner and a movie,” which saw a mere six percent choose that once-popular option. So what? • 47 percent think business discussion is interesting from time to time, If you’re a hard-working people person, you might but prefer to discuss other things. (only four percent love talking about want to keep that to yourself. Senior managers business during dates and find it interesting.) were asked to identify the most overused terms on • 41 percent always make time for dates, and only two percent often resumes. their list included: cancel on dates for work-related issues. • Highly qualified • 42 percent would consider dating one of their company’s clients or clients or • Hard worker potential clients if the situation felt appropriate. • Team player (Source: It’s Just Lunch) • Problem solver • People person • Self-starter the problem? none of the terms provide important details — resume writers need to provide specifics, we like teams, not clichés. we hate teams (Source: OfficeTeam) Clearly, we have a love-hate relationship with teams. They can be an invaluable means of delivering top-notch results ... • 95 percent of those who have ever worked on a team say teams serve an important function in the workplace. • 65 percent say that collaboration and team-building are among the necessary skills for students coming out of school today. … or a real pain in the butt. • Only 24 percent of those who have ever worked on a team prefer to do so. • 36 percent would prefer to work alone all the time. not helping matters? the fact that a whopping 68 percent — nearly 7 in 10 — admit they were part of a dysfunctional unit.

(Source: University of Phoenix) 8 BWD | Spring 2013

By Mike McCarthy, CPA, CfP®, Mst For sale By OwNer selling a business is a lot like selling a home … except when it isn’t

the scene is a familiar one on any number of cable television’s housing programs: pensive home sellers listen intently as hosts and remodeling experts alike expound on the efforts necessary to prepare their property for market. the advice isn’t too far afield of what awaits a business owner preparing for a sale: it’s important to be brutally honest about the current condition of the business, address potential trouble spots and make sure finances are in order. Spring 2013 | BWD 9

enhance your curb appeal. I’m not talking about mowing the lawn, trimming the bushes or slapping on a fresh coat of paint. But just like those measures can make a house more appealing from a distance, selling your business requires a few steps to make sure prospective buyers don’t drive right on by. One of the first things a prospective buyer will request is the You won’t find any cable television programs financials. High-level, full-disclosure financial statements will make about how best to prepare a business for sale, the impression the business is well run. One such step is a financial audit or review. Some businesses conduct annual compilations rather but the next time one of those housing shows than incur the expense of a full audit or a review, but now’s the time comes on, look a little closer: there might be to incur that expense. (Depending on your business, an annual audit some business tips for you there regardless. might be required, in which case you’re a step ahead of the game.) The audit isn’t just for prospective buyers; it can help uncover any []issues you should address whether or not there’s a sale at all. Referring to a due diligence checklist at this point is also a good idea. The checklist can help you gather up necessary documents and information, including internal management reports and Prospective buyers aren’t going to be worried about the number memoranda, policy and procedures manuals, legal and regulatory of bedrooms and bathrooms, or the color of the paint in the compliance paperwork, and contracts and arrangements for supplies master suite. Instead, they’ll focus on matters such as determining or services. This is comparable to homeowners having a home the value of the business, any risks involved in its purchase and inspection conducted prior to placing their house on the market whether or not it is complying with the proper regulations. so that problems can be resolved before the buyer’s home inspector Investing in the time and effort it takes to address these issues can discovers them. Visit rehmann.com/BWD to download a convenient help ensure the selling process is a smooth one that nets a higher due diligence checklist. final price. So let’s borrow a page from the home selling process and look at some of the steps you can take as part of the business Be prepared to fall in love again. selling process. It happens. Once all of this work is done, you might decide that the issues you’ve addressed, along with any changes you’ve made, have Begin with the end in mind. made the business more appealing to you again. Even if it turns It’s not just a habit of highly successful people; Stephen Covey’s out that you simply could not get the asking price you wanted, the For sale advice is something that home sellers consider at the very aforementioned steps have likely left you in a better position than you beginning of the sales process. After all, they’re not just moving were in at the beginning of the process and able to more confidently from somewhere: they’re also moving to somewhere. So, where lead your business into the future, with you still at the helm. is it that you plan to move? What do you hope to achieve from By OwNer the sale of your business? If the goal is to sell but remain with the company in a management capacity, you’ll likely focus on a Bonus Content few different aspects than if you plan to retire. For example, you Visit the all-new rehmann.com/BWD for additional info. selling a business is a lot like selling might be happier taking a percentage of annual revenue than a home … except when it isn’t maximizing a one-time payout. Go with a pro. ABOUT THE AUTHOR Everyone thinks his or her house is special. There are a lot of mike mccarthy is a Principal in our Ann Arbor office and is a member of the tax team. memories there; a lot of hard work, too. But the fact of the matter is that those memories and that hard work don’t matter to a mike began his public accounting career in 1983 and specializes in trusts, estates, and employee benefit plans, prospective buyer. Cold, hard facts matter. Objectivity matters. as well as individual and business taxation. he is involved Which is why having a business valuation may help identify in research, analysis, planning, review, tax return the market value of your business. Like a residential real estate preparation and compliance with the increasingly professional, a valuation professional will help you see beyond complex requirements of state and federal law. the rose-colored glasses of ownership to something much closer contact mike at [email protected]. to reality. 10 BWD | Spring 2013

By Bill Kowalski, JD Successfully combating a malware attack take charge of your defense today for a more secure tomorrow

it’s 1982 and one of the earliest recorded computer viruses is running amok. called “elk cloner,” the code displays a message after the 50th time an infected computer booted up. the message, in part:

Elk Cloner: The program with a personality

It will get on all your disks It will infiltrate your chips Yes it’s Cloner!

the virus is not malicious, but rather a relatively harmless joke perpetrated by a 15-year-old programmer. The nature of viruses — and the damage they cause — will change rapidly in the coming years. Spring 2013 | BWD 11

Today, malware — which includes viruses, spyware, worms and other Documentation nefarious software loaded on a user’s computer without their approval — is It is critically important to document all major actions leveraged in attacks against banks, credit cards companies and consumers. taken during the incident. Things will be very chaotic and, Increasingly, they’re also involved in battles between nations. They strike despite your best intentions, you will not remember all the without warning and can propagate extremely fast. details. Create a timeline of events which will help during the If your organization finds itself in the unfortunate situation of combating response and investigation. malware that has infected your network, the following suggestions will help you protect your organization, reduce the damage and recover from what Remediation can be a very traumatic experience. Develop a remediation plan that ensures all systems are scanned and protected. Document your actions. No Incident response team consideration is too minor; on large, decentralized networks Form an incident response team and assign one individual to manage the with mobile users it is very easy to forget something. Take the team. This person should have decision-making, organizational, delegation time to walk through every possible avenue available to the and communication skills. The person should also have the authority to malware to ensure your systems are safe and secure. make critical decisions since time is of the essence and there is little time for debate. If you believe your company’s IT department is not large enough Logging and monitoring to handle the threat themselves, bring in outside resources to bolster If you did not have logging and network monitoring turned your incident response team. You may also want to consider engaging an on, turn it on as soon as possible. Network monitoring experienced incident response consultant to assist your in-charge person. allows you to see what traffic is on your network. This is Having a documented incident response plan already prepared will make important for a couple of reasons, not the least of which being responding to an incident faster, easier and more efficient. that malware has to generate outbound traffic in order to communicate with hackers and/or send your compromised Command center information. Having that information could help you identify Establish a command center for the incident response team with all the the malware’s behavior and determine additional security necessary resources to address the threat and communicate to incident measures to implement. response team members in other locations. Postmortem analysis Communications Shortly after the crisis is over, meet with all incident response Ensure that you have a means to communicate with all your employees personnel involved to review the event, note lessons learned as normal methods such as email, IP phone, VPN, company website, etc. and improve your security and incident response plan. may not be functioning or available. You may also need a communication channel to reach customers or the media — controlling the message and Thousands of viruses have followed Elk Cloner and thousands ensuring consistent information is critical. If there has been a breach of more are still to come. Such attacks are no joke, but the right non-public personal information, you’ll need to comply with data breach preparations can make a tremendous difference with who has notification laws and may be required to engage an attorney who specializes the last laugh. in data breaches before making any announcements or decisions. Threat identification Identify the malware, its attack vector (how the malware infiltrated ABOUT THE AUTHOR your system) and any other available information. Communicate the bill Kowalski is the Director characteristics of the malware to your anti-virus vendor. Understanding of operations for Rehmann the malware and what it does/wants will help you contain it and reduce corporate investigative Services. the damage. bill began his investigative career in 1983 as a Special Containment Agent with the Federal bureau Take steps to limit the spread of the malware to other segments of your of investigation (Fbi) where he received numerous awards network. Do not focus on remediation early on — focus on limiting the and letters of commendation spread of the malware and safeguarding your data and systems. Isolate during his 25-year career. infected systems until remediation methods are available. Document contact bill at your containment efforts and review periodically to ensure you have [email protected]. covered everything. Don’t forget about your mobile devices and cloud services; if the malware collects user IDs and passwords from a Web browser, you might have to temporarily terminate access to any vulnerable cloud services. 12 BWD | Spring 2013

By Laura Reindel

TAX Play the long game. If you’re used to making your financial plans in 12-month increments, get used to taking a little longer view of things. Rehmann’s Chief Investment Officer, Jeffrey Phillips, says that doing a two- year tax projection may be more helpful. When paying your winter property tax bill, check to see if paying this year versus next year is more advantageous. gut Also consider whether additional deductions (such as accelerating charitable contributions) could have a bigger impact on your marginal tax bracket in 2013 versus 2014.

Be flexible. A flurry of rate changes took effect on the first of the year, check including those on income and estate tax; get ready to roll with the punches. Load up on 401(k) contributions because of the possible tax rate effects and 2013 is rolling along; are use nonqualified deferred compensation if you’re maxing out your 401(k).* you doing everything Familiarize yourself with the increased capital gains tax rate. A capital gain occurs when a capital asset is sold or exchanged at you can to improve your a price higher than its basis. Rehmann Principal Bryan Pukoff reminds us that tax situation? no tax is currently paid by those in the lower tax brackets (10 and 15 percent) on most long-term capital gains, while investors in the higher tax brackets previously faced a 15-percent tax rate. While those who are currently paying According to the chinese calendar, 2013 is the no tax on capital gains will continue to experience that tax rate, the rate will year of the snake. it’s an appropriate analogy given increase from 15 to 20 percent for many others. how changes to tax rates and exemptions will require many Americans to shed certain financial Consider your options. While the estate tax exemptions remain habits. because planning for yourself and your unchanged, the tax rate on estates has increased. If your taxable estate is family may take more scrutiny than ever before, valued over $5 million, Phillips suggests revisiting the liquidity levels in here are a few tips on how to help prepare. your estate to address the potentially higher tax rates. These individuals may want to move their existing insurance into an irrevocable trust or purchase additional insurance to address the increase.

Pay it forward. Individuals over 70 1/2 years old can direct up to $100,000 of qualified charitable distributions (QCD) from their IRA to a charitable organization through the end of 2013. In order to make a QCD, ask your advisor to make a distribution directly from your IRA to a qualified 501(c)3 charity. If you file a joint return, your spouse may also exclude up to $100,000 in QCDs.

change can be intimidating — especially when there’s money involved — but taking the time to prepare now can help you meet the changes with confidence and help make 2013 the year ofyou.

* Learn more about nonqualified deferred compensation on pages 16-17. Spring 2013 | BWD 13

By stephen W. Blann, CPA, CgfM, CgMA GASB’s new pension standards sweeping changes may have dramatic effect in a move aimed at increasing financial transparency for Impact to local governments state and local governments, the Government Accounting While much information about pension plans currently exists within Standards board (GASb) recently made sweeping changes governmental financial statements, historically there has been no single to the way public sector pension plans are accounted for place that an interested reader could look to get the complete picture. That’s by issuing Statements No. 67 and 68. because governments have previously taken a “funding” approach to their pension benefits, which focused on a long-term strategy of setting aside funds the GASb uses such statements to set generally accepted in trust to pay future pension benefits. As long as a government was “on accounting principles for state and local governments. track” to set aside resources over time, there was no requirement to record a liability for any current shortfall. At a time when many of even the healthiest governmental pension plans are only 75-80 percent funded, this significant GASB’s approach new liability could have a dramatic effect on their financial statements. Pension benefits are essentially a form of compensation However, because of the dual focus found in governmental financial earned by employees during their working lifetimes, and statements (showing both long-term economic condition and short-term paid out after retirement. Accordingly, the GASB believes fiscal liquidity), this information will still only be presented in certain parts that the cost of those benefits should be accounted for in of the financial statements. For example, the general fund of most municipal the years when that work was actually performed. In the governments will not be affected by Statements No. 67 and 68 at all (unless case of defined contribution pension plans, that is fairly their elected officials decided to make larger contributions to the pension simple. However, the process of projecting how much plan to help cover any accumulated net pension liability). As with any new future pension benefits will cost in a defined benefit plan accounting standard, it will take users of the financial statements some time to is more complicated. adjust to the new way this information is reported. Using the work of an actuary, governments are required to project the future benefits that will be paid out of their Looking ahead pension plans. This process involves extensive estimation GASB Statement No. 67 becomes effective for public pension plans in 2014. and actuarial assumptions. Once that is done, future GASB Statement No. 68 becomes effective for the governments participating payments have to be discounted to reflect assumed in those plans a year later. While these new standards currently focus investment growth over time and allocated over the exclusively on pension benefits, the GASB is working on developing similar assumed working lifetime of each employee. The final standards for other post-employment benefits (such as retiree healthcare) that result of these actuarial calculations is a number known are expected to follow within the next two years. as the government’s total pension liability. Under the new pension standards, governments will ABOUT THE AUTHOR then compare their total pension liability to the amount Stephen W. blann is a Principal with Rehmann Robson, and serves as currently held in trust to pay pension benefits. Any the firm’s Director of Governmental Audit Quality. he’s one of several shortfall will be recorded on the government’s statement Rehmann associates available to help governing boards address this complicated topic and may be reached at [email protected]. of net position (balance sheet) as a net pension liability.

Bonus Content For more information on GasB statements No. 67 & 68, including an archived webinar on the topic, visit rehmann.com/BWD. 14 BWD | Spring 2013

By Kirk Balcom, CIA, CIsA, Cfe and Bill Kowalski, JD

KeePING SCHOOLS SAFe Campus security and learning institutions’ obligations

Recent events highlight the critical importance of campus and school security — for higher education institutions as well as high schools and elementary schools. universities and colleges have a dual obligation: to provide a safe and secure learning and living environment, and also to report crime and safety information under the clery Act and other federal laws. Spring 2013 | BWD 15

Keeping the campus community informed of incidences is extremely important, but it’s Navigating the gray areas even more important to take steps to prevent One of the biggest compliance challenges is dealing with the law’s “gray areas.” For example, does a particular those events from occurring. incident constitute disorderly conduct, which isn’t included []in campus crime statistics, or does it rise to the level of aggravated assault, which is included? Is a threat significant or immediate enough to trigger the institution’s timely Failure to comply with the Clery Act can be costly. The U.S. Department warning or emergency response obligations? Was a crime of Education recently raised the maximum penalty to $35,000 per committed on public property close enough to campus to violation. To date, the largest penalty imposed under the Clery Act has require disclosure? been $350,000, and that was before the increase. In that case, among other violations, the university was cited for failing to notify the campus To avoid running afoul of the Clery Act, institutions should community that a student had been murdered in a dormitory room and develop clear policies and procedures detailing how — and that the perpetrator was still at large. by whom — these decisions are made. When incidents occur, institutions should document the decision-making what’s required process. In the event of a violation, the authorities will likely consider school officials’ good-faith compliance efforts as The Clery Act, formerly the Campus Security Act, is part of the Higher a mitigating factor prior to a decision on the imposition of Education Act (HEA). Together with other sections of the HEA, the Clery penalties. Act requires colleges and universities to: • Publish an Annual Security Report (ASR) describing security Assessing the risk policies and procedures (including emergency response plans) and Keeping the campus community informed of incidences providing statistics on the following crimes: criminal homicides, sex is extremely important, but it’s even more important to offenses, robbery, aggravated assault, certain burglaries, auto theft take steps to prevent those events from occurring. Physical and arson security systems — including alarms, cameras, lighting, • Issue “timely warnings” about crimes that pose a serious or ongoing locks, guards and other measures — are essential. But while threat to students and employees access control is a key component of campus security, too often institutions underestimate the threat posed by people • Develop an emergency response plan to inform the campus with legitimate access, such as new employees or service community of situations that involve an “immediate threat to the providers. That’s why thorough background checks can be as health or safety of students or employees” vital a preventative tool as any other. • Establish policies and procedures for handling missing-student reports There’s little question that safety is of paramount importance An institution’s reporting obligations extend to off-campus crimes on to anyone administering a learning institution. With the property owned or controlled by the institution or public property “within proper support and careful attention, Clery Act compliance the same reasonably contiguous geographic area of the institution.” can help contribute to just such a secure environment.

ABOUT THE AUTHORS Kirk balcom and bill Kowalski are part of Rehmann’s team of advisors and corporate investigators that can help schools assess their risk, evaluate their security systems and practices, and meet their reporting obligations. in addition, they also provide independent validation of compliance with reporting requirements of the clery Act. contact them today at [email protected] and [email protected]. 16 BWD | Spring 2013

On New Year’s Day, Congress passed Nonqualified the American taxpayer Relief Act of 2012, narrowly averting a “fiscal cliff” deferred of across-the-board tax hikes and automatic spending cuts. but while compensation the act preserves the “Bush-era” tax cuts for most people, high-income earners will face significantly higher taking the sting tax bills in 2013. in this environment, nonqualified deferred compensation out of higher taxes (nQDc) plans are an attractive option.

By Jeffrey Phillips, CfA, CPA & Bryan Kearis, CPA, CgMA, Ms

ABOUT THE AUTHORS Jeffrey Phillips is chief investment officer and Director of operations for Rehmann Financial and serves clients out of the troy office. he leads all firm-wide research efforts and assists advisors and clients with portfolio construction and management. bryan Kearis is a Principal with Rehmann and is located in the Farmington Hills office. With over 17 years of experience in tax, assurance and closely-held business consulting, he provides corporate and personal tax preparation services to both medium- and large-sized clients. contact them today at [email protected] and [email protected]. Winter 2012 / 2013 | BWD 17 Ready … Behind every success By deferring a portion of your salary on a story, there’s a team. pre-tax basis into an NQDC plan, you can reduce the impact of these taxes. You may Whether the venue is a sports arena or an office building, the ultimate prize is even be able to eliminate them. attainable only with the right team — ][ individuals brought together to reach a common goal.

At Rehmann, we understand that success stories require teams to achieve their happy endings. It’s why we For those who did not receive an extension of tax rates following the American offer The Rehmann Experience, an taxpayer Relief Act of 2012, here are some of the ways your taxes may go up innovative team-based approach to this year: providing the wisdom and experience • The top income tax bracket is now 39.6 percent (up from 35 percent) for you need, precisely when you need it. individuals with taxable income above $400,000. The threshold is $450,000 for joint filers and $425,000 for heads of household. Contact us today. We’re ready to help. • The top tax rate for long-term capital gains and qualified dividends is now 20 percent (up from 15 percent) for taxpayers in the highest bracket. • Itemized deductions (with certain exceptions) and personal exemptions are reduced when adjusted gross income exceeds the following thresholds: $250,000 for individuals, $300,000 for joint filers, $275,000 for heads of household, and $150,000 for married taxpayers filing separately. • Individuals with modified adjusted gross income above $200,000 are now subject to an additional 3.8 percent medicare tax on net investment income — including capital gains and dividends — to the extent their income exceeds the threshold. The threshold is $250,000 for joint filers and $125,000 for married taxpayers filing separately. By deferring a portion of your salary on a pre-tax basis into an NQDC plan, you can reduce the impact of these taxes. You may even be able to eliminate them by bringing your 2013 income below the applicable thresholds. NQDC plans are ideal for highly-compensated employees. They’re similar in many respects to 401(k) plans, but they’re not subject to contribution limits and other restrictions placed on qualified plans. For example, employee deferrals to 401(k) plans are currently limited to $17,500 per year ($23,000 for employees over age 50). If you’re an employer, consider setting up an NQDC plan for your highly- compensated employees. In today’s higher-tax environment, it can be a powerful recruiting and retention tool.

Bonus Content For more information about NQDC plans, see www.rehmann.com/BWD.

Securities offered through Royal Alliance Associates, member FinRA/SiPc. investment advisory services offered through Rehmann Financial, a Registered investment Advisor not affiliated with Royal Alliance Associates. 1500 W. big beaver Rd, troy, mi 48084 248.952.5000 18 BWD | Spring 2013

Second-to-die policy provides “legacy insurance”

By Bill stewart, CLu®, ChfC®

For years, married couples have used second-to-die (or “survivorship”) life insurance to provide liquidity for Because second-to-die estate taxes and other expenses. Without it, their heirs might be forced to sell off real estate, business interests insurance is relatively or other illiquid assets — often at fire-sale prices — to inexpensive, it’s ideal for pay these expenses. meeting financial needs Now that the “fiscal cliff” legislation has made the $5 that won’t arise until after million gift and estate tax exemption “permanent,” the second insured’s death. fewer families are affected by estate taxes. but even if ][ taxes aren’t a concern, a second-to-die policy can be a highly effective, low-cost tool for providing your family with financial security. Spring 2013 | BWD 19

As the name suggests, a second-to-die policy insures the lives of two people — typically a married couple — and pays a death benefit when the second person … Set … dies. Its value comes from “leveraging” the premiums: insuring two lives reduces the insurer’s risk, so premiums are significantly lower (as little as half the cost of A team of professionals, two individual policies). And it’s available even if one person is uninsurable, so long as the other is in good health. ready to help. Because second-to-die insurance is relatively inexpensive, it’s ideal for meeting financial needs that won’t arise until after the second insured’s death. Examples include: “Buy low, sell high.” It’s an axiom you don’t hear too much anymore. That’s • Protecting minor children. Second-to-die insurance is an economical because the world has become a lot more option for protecting your minor children in the event that both you and your spouse die. If one of you has a serious medical condition, it may be complicated than that. the only affordable option. Today, successfully managing your • Ensuring financial security. Second-to-die insurance offers peace of mind portfolio, building for retirement and by providing a guaranteed source of funds for your surviving children, even planning your estate requires a broad if your other assets are depleted. swath of experience and wisdom. • Providing for children with special needs. If you have a disabled child, Rehmann’s wealth advisors can provide you can use second-to-die insurance to fund a special needs trust that will the support you need to make informed provide care for the child after you and your spouse are gone. decisions that will allow you to face your • Making charitable gifts. Second-to-die insurance is a cost-effective way to future with greater confidence. support charities without reducing the amount of wealth available for your family. Contact us today. We’re all set to help you. • Funding estate tax liability. The federal estate tax exemption is now set permanently at $5 million (an inflation-adjusted $5.25 million in 2013), limiting the tax to only the largest estates. Couples whose estates fall into this category should consider second-to-die insurance as a liquidity tool. It’s a good idea to name a trust as beneficiary of a second-to-die policy. Although trusts are often associated with minimizing estate taxes, they provide significant benefits even if your estate is well under the exemption amount. Among other things, a trust can protect the assets against creditors’ claims and establish conditions for distributing assets to your heirs. If estate taxes are an issue, you should establish an irrevocable life insurance trust as owner and beneficiary of the policy to keep the proceeds out of your taxable estates. Under the right circumstances, a second-to-die policy can be a powerful tool. To be effective, however, it needs to be integrated into your overall estate plan. Your advisor can help you determine whether this option is right for you.

ABOUT THE AUTHOR billill Stewart is a Principal and Financial Advisor for Rehmann Financial and located in the troy office. Since 1988 billill hashas provided financial planning, investment consulting services and retirement planning to high net worth individuals, families and business owners. contact bill today at [email protected]

Securities offered through Royal Alliance Associates, member FinRA/SiPc. investment advisory services offered through Rehmann Financial, a Registered investment Advisor not affiliated with Royal Alliance Associates. 4086 Legacy Parkway, Lansing MI 48911 | 517.316.2400 20 BWD | Spring 2013

SkyBooks: Leverage the cloud to work smarter, respond faster and remain competitive

sharon Berman, CPa, CGMa SkyBooks is Rehmann’s cloud accounting solution, a Web-based service that combines rehmann Prinicpal the omnipresent strength of cloud computing and the seasoned wisdom and industry experience of Rehmann’s dedicated advisors. The result: 24/7 access to the key financial metrics you need to run a successful business, presented via clear and easy dashboards that you can view on your computer, smart phone or tablet device.

BWD spoke with Sharon Berman, Rehmann’s chief SkyBooks evangelist, about SkyBooks.

So, SkyBooks is accounting software I can access through the Internet? It’s much more than that. You can access your accounting information, in real time, from any computer connected to the Internet. You can access it from your iPad or other tablet device, too. But using SkyBooks also means you’ll receive guidance from a dedicated Rehmann advisor. The SkyBooks team can help you streamline your accounts payable process, and transactions interface directly with whatever general ledger solution you are currently using.

How SkyBooks Time management Peace of mind running a small business It’s an unfortunate fact of life that catastrophes takes extraordinary strike businesses on a regular basis, whether can impact your commitment … and a lot of through fire, flood or other disaster. In such precious time. skyBooks situations, important financial data can be lost. business today makes it easy for you to check With skyBooks, your data is safe in the cloud, on your finances when it best housed in redundant U.s.-based data centers and fits into your busy schedule. protected by the same data encryption used by reclaim your time right now. banks on servers protected with biometric security. Spring 2013 | BWD 21

Whether that’s QuickBooks, Peachtree – – or Intacct. Exactly. And you have access to all of this information through customizable online dashboards. It’s a robust system controlled entirely by the business owner. They can review their entire financial landscape, approve the … Go! payments quickly and easily, and more. Who was SkyBooks developed for? With the right help, SkyBooks is so scalable that it can work for a wide array of companies and organizations, but we do think it’s especially relevant for business owners who have you can achieve the to be sensitive to staffing efficiencies. As an example, let’s talk about a fictitious right results. company. Alexander Architecture is a small firm with a staff of five, and one of the administrative support people also handles accounts payable. This takes up 75 percent of her time, though she’s really needed for a wide array of support. Rehmann’s corporate investigators can Using SkyBooks, Alexander Architecture can offload that work and free up her help you avoid the traps you might time to focus on other important efforts more closely related to the business’ core face along the way with solutions competency. And the information is being entered by a CPA firm, which helps such as background investigations, ensure greater accuracy of data. What’s more, the owner now has immediate access to real-time accounting information; if it’s one thing small business owners need, it’s digital forensics, and fraud and risk that kind of prompt information about finances. management.

SkyBooks essentially adds the capabilities of another staff member without Contact us today. We’re ready to go. many of the related costs.

Right. It alleviates overhead costs such as health care, training, and office and computer equipment.

What do you say to folks concerned about security? It’s on the Internet, after all. Isn’t it vulnerable? This is a remarkably secure system. It utilizes the same data encryption used by banks, the data is backed up in redundant U.S.-based data centers, the servers are protected with biometric security and there’s a detailed audit trail of every approval and payment.

This seems like just the kind of edge a business would be looking for. We truly believe it is and are very excited to offer it. You could say the sky’s the limit.

Thank you for your time, Sharon. You’re welcome. SkyBooks is cool and I love talking about it.

sharon has over 20 years of experience in public accounting at local and national firms, as well as experience in private industry. Want to learn more about Rehmann’s skyBooks service? Contact her today at [email protected].

Staffing real-world solutions If you are relying upon a staff optional support from one of member to handle bookkeeping rehmann’s CFo executive duties as well as other important advisors — professionals with tasks, skyBooks will help you extensive financial and consulting alleviate their workload so they experience — can help you are free to focus more on projects identify cost-saving strategies that help your bottom line. and potential future markets. 22 BWD | Spring 2013

carpp’s Book Corner JIM CoLLINs

in any business endeavor, it can be difficult to chart and Built to Last sustain a course. With that in mind, we are taking a look Jim Collins and Jerry I. Porras at some of the body of work by Jim collins, a noted Built to Last focuses on the question, “Why are some academic and author. the books are insightful, challenging companies able to achieve and sustain success?” Jim and Jerry and potentially game-changing. If you are looking to build, explore the concepts of clock building; big, hairy audacious enhance and sustain your organization’s performance, i’d goals; the genius of the and; cult-like cultures; and good is never pick up and devour all four. Good reading! enough. If you are interested in sustaining your organization’s performance, this one is well worth your time.

Good to Great Jim Collins Here, Jim grapples with the concept of whether a good company can become a great company. He opens with the statement that “good is the enemy of great,” then goes on to explore Level 5 leadership, first who then what, confront the brutal facts, the hedgehog concept, and the flywheel and doom loop. If your goal is to take your organization’s performance to Jim Carpp, CISA/CIRM the next level, start here. Director of consulting How the Mighty Fall Jim Collins In How the Mighty Fall, Jim explores the five stages of decline, which include: hubris born of success, undisciplined pursuit of more, denial of risk and peril, grasping for salvation, and capitulation to irrelevance or death. Despite the apparent tone of these stages, the book is not alarmist; rather, it was written as a response to the following question: “When things are going well, how do you know if you might already be on the path to decline?”

Great by Choice Jim Collins and Morten T. Hansen “Why do some companies thrive in uncertainty, even chaos, and others do not?” is the central question in Great by Choice. Jim and Morten develop the concepts of 10Xers, 20 mile marches, firing bullets before cannon balls, leading above the death line, Specific and Methodical and Consistent (SMaC) as well as summing it all up in the concept of return on luck. The concepts are thought-provoking and will challenge you to potentially rethink your strategy. One. Great. Team. Looking to do more than simply cross the finish line? We can help.

We built Rehmann on the principle of providing a full range of exemplary services. This means our team is well-positioned to help your team reach its full potential.

Contact us today to learn more.

Fred Schaard, CFP® President, Rehmann Financial 517.316.2400 [email protected]

Sharon Berman, CPA, CGMA Principal 248.579.1100 [email protected]

Bill Edwards Director of Financial Investigations 248.614.6452 [email protected]

Securities offered through Royal Alliance Associates, member FINRA/SIPC. Investment advisory services offered through Rehmann Financial, a Registered Investment Advisor not affiliated with Royal Alliance Associates. 4086 Legacy Parkway, Lansing MI 48911 | 517.316.2400

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