March 17, 2014

Since January 1, when Colorado’s marketplace for the legal sale of recreational marijuana first opened, all eyes have been on the state to see what consequences unfold. Already, early estimates are showing tax revenues from pot sales to be far exceeding expectations-from the $70 million provided to voters to $98 million recently predicted by Colorado governor John Hickenlooper for the next fiscal year. 

Until recently, processing money from marijuana sales put federally insured banks at risk of drug racketeering charges. But just weeks ago, the Obama administration gave the “ok” for banks to lend to pot sellers, at least with a complicated list of due diligence requirements and over 20 red flags that must be reported to ensure business legitimacy and compliance with federal law. FinCEN, the Treasury Department’s Financial Crimes Enforcement Network, has a vested interest in helping to keep cash off the streets since it writes the rules that banks follow to mitigate money laundering and the financing of terrorism.

Yet many banks are reading the new guidelines as more of an outline to all the risks of doing business with pot sellers than a green light. The American Bankers Association says the new regulations simply aren’t enough, since they don’t change the fact that marijuana sales are still illegal under federal law. That means property used as collateral for loans would potentially be subject to federal drug-seizure laws. According to The Denver Post, Colorado’s two largest banks, Wells Fargo Bank and FirstBank, aren’t offering new loans to landowners with pre-existing leases with pot businesses.

You don’t have to be selling marijuana to run into obstacles with a financial institution, particularly when it comes to getting a loan or line of credit. If you’re seeking to obtain financing for cash flow and daily operations, growth plans or other needs, Talley & Company’s team and relationships with lending institutions can help. Our advisors can present and prepare your company’s financials in ways that increase favorability with lenders, helping to make sure your efforts don’t go up in smoke. 

March 7, 2014

Sadly, this isn’t the first time we’ve seen a story like acclaimed actor Philip Seymour Hoffman’s play out. Early this month, the headlines announced the lead Capote star’s premature death from an apparent drug overdose. This week, we find that as his loved ones attend to their grief, so must they contend with complicated issues arising from his poorly planned estate. Though Hoffman had thoughtfully created a will, it was over a decade old. Consequently, it not only contained gross omissions but was poorly designed to minimize the tax burden on his benefactors.

While Hoffman’s will included his son Cooper, his two daughters born after the will was made (and never amended) were effectively disinherited. New York law attempts to protect children with a special provision for this kind of scenario, but there’s no guarantee it will apply. These are not the kinds of matters you want to leave for the courts.

 Then there’s the mother of Hoffman’s three children-his longtime companion Marianne O’Donnell. She will reportedly inherit Hoffman’s estate outside the money allocated for his son. Had the couple been married, O’Donnell would have received an unlimited amount tax-free. Because they weren’t, O’Donnell will hand over anywhere from $11 to $15 million in taxes if the actor’s $35 million estate figure is right. No matter how the two felt about the institution of marriage, Hoffman’s estate planners could still have mitigated some tax expenses through other strategies, including trusts and gifted amounts during his lifetime.

Celebrities may be more likely to make the news, but they are far from the only ones with poorly planned estates. We understand how periodic reviews can seem less than urgent against the barrage of all of our growing to-do lists. So what’s our best advice? Schedule a regular time with your advisory team to review your will and update your estate. Once built into your calendar, you’ll not only have peace of mind but a signed legacy of caring and responsibility your loved ones will appreciate.

 So go ahead, make that appointment.

February 21, 2014

Michael Jackson had an amazing 13 number 1 hits as a solo artist, but the enormous disparity between the IRS and his estate’s executors in the valuation of his assets – to the tune of more than a billion – really tops the charts. 

How bad is it? Well, the IRS will tell you Michael Jackson’s estate was worth $1.125 billion at his death. Yet if you ask the estate’s executors, they’ll say it was more like $7 million. Yes, you read that right: billion versus million. From the IRS’s point of view, the estate’s undervaluation is so egregious that it qualifies for double the typical 20% penalty for underpayment. The agency is asking for the $505 million in taxes it finds the estate owes and an additional $197 million in penalties, totaling over $702 million.

There are points of contention between the two sides on almost every kind of asset, from music rights to automobiles. For starters, the IRS believes the use of Jackson’s likeness to create income is worth $434 million, yet Jackson’s executors assert it’s worth just $2,105. We can’t be sure who’s right on this one, but come on, there are washer/dryers worth more than that. Here’s another one – the IRS claims Jackson’s rights to certain Beatles songs are worth $469 million, not $0 as executors claim. Again, we’ll never know for sure who’s more on target, but a CPA did previously testify that Jackson borrowed $320 million against the music catalog.

As for MJ’s share to the rights of Jackson 5 master recordings? The IRS believes it’s worth $45.5 million, and the Jackson estate says $11.193 million. The battle that ensues over the taxable value of all these assets will be a big one, with both teams already singing vastly different tunes.

Getting agreement from the IRS on an asset’s value doesn’t just affect the likes of pop stars and celebrities. It’s true few of us deal with assets as unique and challenging to appraise as Beatles songs, master recordings, and the marketability of our likenesses. But even so, making sure appraisals of stocks, real estate, businesses, or any other more standard assets are fair and creditable can make all the difference when it comes to sailing swiftly through a potential audit – and maybe even avoiding one altogether.

February 14, 2014

After announcing the departure of 33-year company veteran and CEO Steve Ballmer last August, Microsoft has only just declared his successor – Satya Nadella. While tech news insiders agree with the internal Bill Gates-like choice, the lack of a clear succession plan from the start, has left an indelible mark.

Ballmer held his position as CEO for the last 14 years, giving Microsoft more than a decade to develop a succession plan. Yet when the announcement was made that he would step down, not only was a successor not named but the timeline and process for finding his replacement was vague. This left the company open to commentary from all sides for potential candidates, and it created damaging uncertainty with investors. Months without a clear, singular vision for any company can also create political minefields, with people unsure of whose approval to attain due to divergent visions and others jockeying for positions in the senior ranks.

If all that alone wasn’t enough to create confusion, only two weeks after Ballmer’s noted departure Microsoft announced that it would be acquiring Nokia for $7.2 billion, the second-largest acquisition from the company behind Skype.

As we can see, even a large corporation with plenty of visionary leaders on its Board of Directors, including Bill Gates, can fumble on a succession plan. While the situation is unfortunate, it is far from uncommon. The reality is, and perhaps understandably so, planning your exit isn’t usually the most exciting task for a leader, but it is essential.

In what can be a harrowing process, many business leaders who doattempt to make a plan take on too many tasks by themselves. Others simply don’t start early enough to identify and prepare the right people for future roles. With so much at stake – both emotionally, financially and professionally – the key is simply to bite the bullet, start early, and be thorough. Doing so can create a smooth transition that keeps confidence strong among customers, investors, and employees. This confidence can play a major role in ensuring the success of your company’s future and enhancing your own personal legacy.