Archive for December, 2009

What Happens to Assets Without a Trust During Divorce?

Dec 31, 2009 accountants

For the married couple, it is truly essential that an estate is properly structured, legally protected, and the disposition of assets in the case of separation clearly defined. If you have not yet started a trust for your assets as a property investor, perhaps this scenario will convince you of the need to do so.

The Case of the Trust-Less Divorce

In most cases, divorce is a messy matter. It is highly unlikely that the two parties will be able to reach an amicable agreement as to the disposition of assets. Even with a trust, in the absence of a Property Relationship Agreement a legal battle may ensue because there is still the issue of what to do with the assets in the trust.

Of course, the first step will be hiring a lawyer for each side. As we all know, legal fees can quickly add up to thousands of dollars. Consider the property investors who have a $500,000 house listed as an asset. Is a combined $100,000 in legal fees worth the argument? It may not make much sense, but this is what many couples end up doing – paying money to fight over a property that is still mortgaged.

Then again, during a divorce few people are going to act rationally. More often than not they are hurt, and those hurt feelings cause them to fight. Because legal issues can take months or even years to resolve, this must makes the pain last longer. The lucky couple engages a trustee who can help calm them both down and move them toward some agreement. The unlucky couple has no one to advise them thusly, or chooses to ignore attempts at resolution.

If an agreement cannot be reached, the next step is to go to court. It will be up to the court to decide the disposition of assets.

The Importance of a Property Relationship Agreement

If there is a trust in place without a Property Relationship Agreement, then the court must also review the terms of the trust, including how it was set up, how it has been run since its inception, who is in control of it, what assets have been transferred to it, and the amount of outstanding financing that is secured by the trust’s assets. Obviously, this could take some time.

Following the review, the court will set out its orders. Another individual could be put in charge of the trust, as trustee. The court will have to decide how much money is awarded to each ex-spouse. No matter what happens, someone is likely to be unhappy about the outcome.

The best way to avoid this scenario is for the property investor to create a trust where the assets are placed immediately. Following that, the creation of a Property Relationship Agreement which designates disposition of the assets is essential. A married couple may even want to consider creating two trusts, one for each spouse.

The time to protect your property is now.

Paul Easton works in marketing for Mathew Gilligan – an accountant and partner at Gilligan Rowe & Associates Ltd (GRA). GRA is a Chartered accountant firm specialising in property in New Zealand. Search Engine Optimisation by Digitalawol.com

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Changes Coming to New Zealand’s Tax System

Dec 30, 2009 accountants

As the end of the year rapidly approaches, the Tax Working Group is hard at work reviewing the current tax system of New Zealand. The Tax Working Group is a consortium of professionals in academics, government, and industry whose expertise shapes the proposals presented to the government.

The current proposals are expected to produce greater equity in the system and broaden the tax base to be used as funding for anticipated decreases in the rate for personal, corporate, and trust taxes. Property investors will be affected by proposed changes to the capital gains and land taxes as well as the addition of a risk-free rate of return income tax.

What’s Going to Happen?

Shortly after the beginning of the new year, the public can expect to be notified of the results of the review. What will the upshot of these proposals be?

More than likely major reform is coming. When it happens is questionable. Public and committee reviews will probably defer the chances changes are enacted any time soon.

Corporate and trust top marginal taxation rates will come into alignment (the 30-30-30 option) with Australia and be assessed at the same rate. Regular corporate and trust marginal taxation rates will also match those of Australia. Currently the Australian rate is set at 27% but that is expected to decrease to 25%. Clearly these reforms are meant as an economic boost.

How Will These Reforms be Funded?

Funding to make up for the shortfall in trust and corporate tax returns will obviously have to come from somewhere. Right now it appears as if the decreases will be financed through:

* The GST increasing to 15%. This is an easy and quick fix. * Imposition of ‘rifle taxes’ that are assessed on capital gains from rental and commercial properties. In addition, existing rules will be more rigorously enforced. * Speculative investors held to tax liabilities. Presumably this will reduce the risk of creating a market bubble based on speculative real estate investments. * Government spending will be reduced in order to effect cost reduction and economise current holdings. This is in direct opposition to a Labour type of government model.

Imposing a stamp duty on land transactions might be quite beneficial to the new tax program. Its progressive nature is both fair and equitable as well as being a simple piece of legislation that is easy to enforce. This would also reduce the practice of speculation by taxing the investor’s margin.

Only time will tell exactly what the Tax Working Group will propose to the government in the upcoming year but do expect change on the horizon.

Paul Easton works in marketing for Mathew Gilligan – an accountant and partner at Gilligan Rowe & Associates Ltd (GRA). GRA is a Chartered accountant firm specialising in property in New Zealand. Search Engine Optimisation by Digitalawol.com

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Inheritance Issues: No Surprises

Dec 29, 2009 accountants

Are your children going to be surprised after your passing by what they do or do not inherit? Perhaps it is time to sit down and have an honest discussion about the terms of your will.

This issue comes to light on the heels of a case that was tried in court last fall. The case involved a deceased man whose daughters were not notified of his death, nor did they inherit any part of his estate, per his will. There was only a public notification to creditors, of which there were none that came forth. The daughters tried to make a claim two years after their father died but the courts denied the motion. They were left with nothing, just as the father had wished.

This ruling is in direct opposition to historic cases where the courts were more sympathetic for the cause of the surviving children. Clearly there is no law stating that parents must leave an inheritance to their children. Luckily there were no creditors to lay claim to the estate and the man’s surviving partner received the inheritance.

How This Affects the Property Investor

In the previously mentioned case, the father drew up a will that designated the public trust as executors. For the investor, this is not a good plan.

It is advisable instead to place assets in a company trust, not one under your personal name. This type of legal structure protects any assets – including real estate – from creditors, the Official Assignee, and duties paid on gifts. This also allows the trust to be passed directly into another trust specifically established for surviving children upon the parent’s death.

Another good idea is to draw up a Memorandum of Wishes and ensure that it is kept updated. This will inform the trustees of exactly how your assets should be handled after your death. Along with the Memorandum of Wishes, a will should also be filed. Your will designates the disposition of personal assets outside the company trust.

Why go to all this trouble? For one thing, family relationships tend to change over time. Not all family members get along with each other throughout their lives. Having the proper legal documents in place before you die means that your assets will go where you want them to go and be safe from claim. It also relieves any possible family disputes over an inheritance someone feels entitled to.

As a property investor, it is important to think of all possible scenarios when planning an investment strategy. Take care of the necessary paperwork now, before it is too late. This is an action you won’t regret.

Paul Easton works in marketing for Mathew Gilligan – an accountant and partner at Gilligan Rowe & Associates Ltd (GRA). GRA is a Chartered accountant firm specialising in property in New Zealand. Search Engine Optimisation by Digitalawol.com

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Property Investment and Bank Securities, Part I

Dec 28, 2009 accountants

An important consideration as you expand your real estate portfolio for investment purposes is reducing the risk of losing assets in the case of insolvency due to bank securities. How you structure your business and its financing will largely determine how safe you are from the possibility of losing the property and its accrued equity.

First we present a bit of background.

Banks and Gearing Rules

Simply put, gearing rules dictate financing structure. The general rule of thumb is that a 20% deposit is required to purchase residential property whilst 33% is preferred for commercial or larger properties. New Zealand also requires an interest cover rate of 2.5 to 3%, which is determined by the formula of rent + income / interest expense.

It is important to figure these percentages in the equation when considering the viability of a real estate purchase. Do you have the necessary cash flow to seal the deal?

Financing Strategy

One way to minimise risk of losing assets and equity is to finance with a split loan structure. This refers to using two lending institutions.

With the first bank, finance a property investment using the real estate and a personal guarantee as security. With the second bank, put down a deposit using family trust assets. As soon as it is viable, refinance the loan with the second bank based on revaluation of the property as the sole means to secure it. In this way you eliminate any guarantees that could result in loss of the real estate and other assets.

Of course, this type of financing relies on the set up of a family trust. Do this now, and also institute a gifting programme for allotment. In the above scenario, you will need to refrain from giving the second bank security over the trust. Realise that this will probably be an automatic term of the loan, but it can be denied. Without a trust in place, the personal guarantee you give to the first bank in the above example places the property at risk.

In order to receive the most favourable terms at the bank, consider using a broker to do the negotiating for you. This allows you the strongest position from which you can stand firm and ensure that the security requirement does not eventually cause the loss of property. The trust must not be put at risk, nor should other assets.

Paul Easton works in marketing for Mathew Gilligan – an accountant and partner at Gilligan Rowe & Associates Ltd (GRA). GRA is a Chartered accountant firm specialising in property in New Zealand. Search Engine Optimisation by Digitalawol.com

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What Happens to a Trust in the Case of Divorce?

Dec 27, 2009 accountants

When financial woes hit a married couple the unfortunate outcome is often a divorce. Of course, this means the division of assets, along with the usual amount of bickering over that division. But if those assets are in a trust, what happens?

The Creation of the Trust

For the property investor or any other type of investor, a trust is always recommended for placing assets. Do take some care, however, before creating the trust. An individual’s rights to the assets are affected by this legal structure, so it is a good idea to consult a lawyer.

Property Relationship Agreement

In the case of a married couple, the two parties should also enter into a Property Relationship Agreement (PRA). This component is essential for laying out exactly what happens to the property in the future, particularly in the case of separation. The PRA prevents the parties from having to go to court and argue the disposition of assets.

The PRA covers such matters as who owns what assets before they are placed in the trust. Additionally, the disposition of those assets upon separation is laid out in exact terms, such as provisions for sale of property and using the assets to repay outstanding loans.

The agreement is implemented by lawyers if the necessity arises. Any amounts outstanding after payment of liabilities and proceeds from sale are divided between the parties, who each now have their own private trusts.

Two Trusts Are Better Than One

Another option for the married couple is to create two individual trusts right away, one for each spouse. This allows each spouse to transfer property that was owned before the marriage into a private trust, such as family heirlooms or inherited property.

Often, the couple will each get half the value of the family home added to their private assets. The trust should also include a PRA that specifies disposition of the home upon separation.

Any additions to the trust do not have to have the spouse’s approval, provided that they are not named co-trustee. Property that is inherited during the marriage can be added to the recipient’s private trust. As well, each spouse can designate the assets they bequeath to beneficiaries – a great option for couples who have children outside of the current relationship.

Paul Easton works in marketing for Mathew Gilligan – an accountant and partner at Gilligan Rowe & Associates Ltd (GRA). GRA is a Chartered accountant firm specialising in property in New Zealand. Search Engine Optimisation by Digitalawol.com

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Free QuickBooks Online Offer? – Pros and Cons

Dec 18, 2009 Small Business Accounting

Like any interested consumer, I was interested in knowing about the free accounting software that was being marketed as free by Intuit. An old finance professor from graduate school, taught his class the “no free lunch theorem”, which states that, there are no free lunches. What we have here is a very light lunch -without the meat rather than a three course meal. The pros and cons of QuickBooks online free version which was launched in October 2009 will be discussed below:

Let me first begin by analyzing the pros before the cons concerning the QuickBooks Online free version software.

The positive aspects are as follows: 1. Easy set up which includes different companies and numerous examples of sample chart accounts. 2. It is web-based which offers anytime and anywhere access and automatic backups at Intuit’s servers. 3. The ability to print vendor checks. 4. Balance sheet and Income Statements with some other supplemental reporting features 5. iPhone compatible with read-only rights.

Some of short comings are as follows: 1.Can only process five customers. 2.Does not have the ability to use form 1099 3.Does not produce statement of cash flows — this is important, since this financial statement illustrates the sources and uses of your business’s cash from the beginning of the year to the end of the year 4.Only 1 user access and your accountant does not have free online Internet access 5.Cannot export to Excel

When using this software you’re using the a very scaled down basic version of QuickBooks which is called QuickBooks Online Simple Start.

As I mentioned above the setup is relatively easy, however there is one aspect that deserves discussion and a word of caution. The setup begins with a simple registration, completion of a company profile which includes selecting an industry, classifying your source of revenue as a customer, client, patient, etc… Towards the end of this process, Intuit requests billing information, i.e. Credit card information which they clearly state will not be used unless you purchase the software. To Intuit’s credit this is very clear on the website after you press the submit button and you receive a receipt indicating that the price is free.

In summary, unless you have a very small business with less than five customers or it’s not important to track revenue by customer, then this version of free accounting software might be suited for your purposes. In addition, another use of the software would be to perform a write up of the accounting transactions which generally occurs after the fact, which means it’s not used for real-time purposes. An example of a write up, is to prepare the year-end tax return or to prepare a financial statement long after the transactions have occurred.

QuickBooks Online Basic and QuickBooks Online Plus, provide you with a 30 day free period to test the software . Albeit, there is no expiration for the free use of the QuickBooks Online Simple Start, which makes it an attractive means to test or to use QuickBooks Online for more than 30 days. Generally speaking, 30 days is an insufficient time period to test the accounting software. Consequently, the option is to either utilize the 30 day free period offered by QuickBooks Online Basic and QuickBooks Online Plus, and if you require more than 30 days, then just purchase QuickBooks Online Basic for $9.95 a month or QuickBooks Online Plus for $34.95 a month. This is a viable option, since the software can be purchased on a monthly basis. The Intuit website clearly indicates “No contract, cancel anytime”.

And don’t forget to involve your accountant in the process of deciding which version of QuickBooks to version.

Learn more about how QuickBooks Online can help you and your business and obtain free accounting software. You are welcome to reprint this article – but get your own unique content version here.

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Important Facts To Consider When Comparing Bookkeeping Rates

Dec 17, 2009 accounting bookkeeping

Most Small Business owners when considering hiring a bookkeeper for their business will begin by asking the question “What is your hourly rate for bookkeeping ” and base their decision on the cheapest hourly rate in the misconception that they may actually be saving their business money. They should consider many more factors that may affect the hourly rate before making an informed deciding.

Bookkeeping support from a subcontract bookkeeper to a dedicated Bookkeeping Company can vary from $30 per hour up to $60 per hour and there are many factors to consider what is a fair and adequate price to pay for your bookkeeping service.

If your business requires the bookkeeper onsite then you can expect your hourly rate to be slightly higher than an offsite bookkeeper. You could also expect to get a better rate if you have a certain number of hours to offer. It is also important to consider the state that your current bookkeeping is in, are your records and paperwork sorted and collated or in a real mess.

Business Owners should beware that there could be a number of reasons that a bookkeeper is charging lower fees such as inexperience or lack of industry knowledge.

Some important factors to consider when considering comparing a lower rate to a higher rate would be the following.

* Time Frames – If a bookkeeper is charging a lower rate and is inexperienced then your bookkeeping may actually take a lot longer and therefore cost you more money ! If you look at a 2 hour job for $60 per hour = $120 but a 5 hour job for $30 per hour = $150 ?? A bookkeeping company should also give a cheaper rate for data entry.

* Outsourcing your bookkeeping and Administration to a Bookkeeping Service Company completely can also be more cost effective for your business in the long term. You generally will have no software costs for upgrades or licencing. Consideration : Depending on your business it can also save on office space, rent and other overheads.

* Reliability is also an important issue to consider. A dedicated company will have accountability, no down time and other people to help you if your dedicated support person is not available. Consideration : This could save you thousands in fees with the Tax Office and other fees and charges and gives you a full time support.

* Industry Knowledge and Ongoing Training. Bookkeeping Companies constantly upskill and educate their staff on the latest news and developments regarding small business. Therefore investing in slightly higher bookkeeping rates from a Bookkeeping Company will ensure your business gets all the right deductions and tax offsets that are applicable for you.

Business Owners should see that it is evident that engaging the cheapest rate will not necessarily save their business money but in fact could cost them a lot more. By considering and employing a Bookkeeping Company they will making a progressive move for their business and actually investing in the welfare and best interest of their business.

Want to find out more about Bookkeeping, then visit Michelle Carr’s site on how to choose the best Bookkeeping Services for your needs.

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Accounting Inventory Software – Advantages and Out Comes of High-quality Inventory Management

Dec 11, 2009 accounting

Inventory management systems assist a company to control the flow of basic materials, transitional goods, final products, and give the staff the instrument to co-ordinate the range of actions essential for effective control of inventory

There are three central reasons for keeping an inventory:

- Big time savings.

- Acts as a buffer to meet uncertainties in supply & demand and the movement of goods.

- Balances supply and demand of products.

Inventory control systems do not direct decisions, but help personnel make prudent choices based on accurate and quickly obtainable statistics. A first-rate inventory management technique will aid in forecasting supply and demand and make certain that perplexing paper work is eliminated. It furthermore ensures that storehouse data and connections to providers of raw materials, customers, retailers and wholesalers is quickly accessible.

The major workings of an inventory system provide, sales forecast, production planning, advanced scheduling for the purchase of raw materials and intermediary materials for production and keeping inventory at the required level.

Features to look for in an Inventory Management System:

- Reasonable pricing.

- Excellent data safekeeping.

- Superior Technology.

- Custom Reporting.

- Quick turn-around processing time.

- Online Inventory Control and Reporting.

Business production can be increased through effective stock management in close collaboration with manufacturers, retailers and service providers across diverse industries.

Inventory management software will develop efficiency and lessen overheads, allowing company management to invest more time and resources in their core business activities.

First-class inventory management allows a business to maintain a precise balance of supply and demand. By keeping optimum levels of inventory in the warehouse expenses are reduced due to not overstocking at the same time as profits are maintained by ensuring supply.

Well-trained personnel using a high quality inventory management system will help to guarantee successful stock and inventory management. The ROI of inventory management will be given in the form of higher sales and profits, positive employee atmosphere, and an remarkable increase in customer satisfaction.

For Leading Inventory Tracking Software and Useful Tips to help you Find the Best Software Solution for your Business Visit: AccountingInventorySoftware.org

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Bar code Inventory System – Solutions For Business Owners

Dec 7, 2009 accounting

As any business proprietor knows, inventory accounts for a most important part of business investment whether we are talking on the subject of raw material, components or finished goods. A main factor in achieving a rewarding return on investment is to deal with it as cost-effectively as possible and an significant available tool is a bar code inventory system.

By means of such a system in place, you will realize the following benefits:

Information on precisely what is in inventory and the location. On-line real-time data regarding inventory levels and reorder levels and efficient order quantities. Tremendously effective information input and output. Entire incorporation with your supplementary systems including your bookkeeping and other systems.

Where to Start:

In general, you will discover that you will be able to put into operation some form of “just in time” inventory management which is nowadays widely established as the most effective.

Much hardware and software are reasonably low-priced and easy to find. Once you’ve bought hardware and the software and educated your workforce to use it, your bar code inventory system is ready to go. All you need to do is make use of the master list as a starting point and log all the data in your new system.

You will normally find that the bulk of the items already display bar code labels from the suppliers that you can use. Consider that the bar code inventory system labels that you produce should include locations because equally the system and your personnel need to identify exactly where each item is located. The most cost effective solution for bar code labels is to use bar code font which has high-quality resolution and offers the best value for money.

Before choosing a bar code inventory system it is worthwhile checking with other business owners that you may be acquainted with or feel comfortable approaching to find out about the systems they are using. Most business people would have no difficulties providing you with information if you approach them properly. You can then find what type of problems they came across and any pros and cons of the bar code system they are utilizing. Customer feed back is always a good indicator of a systems actual performance. You can also go to industry forums to post your questions there.

For Cutting Edge Inventory Control System and Handy Tips to help you Locate the Best Software Solution for your Organization Visit: BarcodeInventorySystem.org

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What Are The Two Types Of Cpa Marketing?

Dec 6, 2009 accounting

We are running and making business in this new world. Our culture has developed more intellectual to cater for the needs of the population, especially in the world of business and accounting. Certain companies need certain people who possess these talents. And the race to promote and win the job in the CPA marketing world is an important aspect of being an accountant. As the world is developing, new tends in the business also gas to change its phase. And the probability of getting a job and win contrast to accountants who are not keen on their environment is too low. The visibility of other individuals to find the potential buyer for a service is far too different as they have the right amounts of knowledge needed in doing the task.

There are two kinds of accountant practitioners who do CPA marketing. The first one is thus who keep acquiring clients and the other are thus making an expansion of an accounting firm.

The difference between the two is on the process on how they move in each step in there profession. The Client -acquiring CPA are compatible and feels too much that they really know the business strategies and are confident of market themselves to the clients that may become their potential partners in the future.

The other type is a business from expansion acquiring CPA marketers. They handle a job in a team and are confident of giving business solutions that served to answer the best problem in the market. Unlike a self acquiring-client marketer, the expansion team of CPA marketers solves a problem in groups making it release a more reliable solution.

As an individual, CPA marketing is difficult for him, but because of this courage and confidence, he has been able to find the right job for his own.

Accounting firms who relied on their staff to do the accounting are usually beginners on the business. They rely mostly on their senior staff to verify certain principles and aspect of accounting. Certainly, these firms acquire potential customers because they had built the trust and rapport to customers. Acquiring new teammates in satisfying the job makes it easier for them as long as they had experience accountants in their firm.

As a beginner, it is ideal for you to do will on your own without asking help to someone. It is always comfortable to make a certain hypothesis on a problem based on your own and not imitated from other thoughts.

To be an accountant needs to be something that you should have posses. The strategy to develop a new way in solving systematically is important. The ability of one accountant in making a CPA’s marketing tactics need to be more vigorous and potent to be able to the customers and future employer to give their trust on there CPA’s. Nevertheless, it is expected that beginners in the field may acquire the knowledge through leaching, it is always exceptional.

Joining the best CPA networks just became easy! You can learn about CPA marketing, find information, and work with people who have the common goals and objectives!

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