Social Security Benefits

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For many people, social security remains a significant part of their overall financial plan.  To be eligible for benefits, a person must have worked and paid into the Social Security Administration (SSA) system for at least 10 years (40 quarters) and have earned more than $4,640 per year (in today's dollars).   The amount you are eligible to receive can be determined from your SSA statement which is available online at www.ssa.gov.

To access your Social Security information online, you will need set up a SSA online account.  To verify your identity, the SSA website will ask you some personal questions.  The SSA system is  linked to the Experian credit reporting system.  Questions it might ask you include where do you work, what is your address, when was your current home built, and/or when did you last open an AMEX credit card.  If you answer any of the questions wrong it bars you out of the SSA system for 24 hours.

If you were born in 1960 or after, full retirement age is currently 67 ("FRA").  Some people may retire before they reach their FRA.  Others may want to wait until after they reach their FRA.  The earliest possible Social Security retirement age is 62.  Retiring at 62 causes a reduction to the benefit that would otherwise be paid if the person retired at FRA.   For each year up to age 70 that a person waits after FRA to retire, the social security benefit increases 8%.

There is no limit on the amount of money a person can earn after they reach their FRA.  If a person wants to collect Social Security before they reach their FRA, then the social security benefit is reduced if the person earns more than a threshold amount.  The threshold amount for 2013 is $15,150.

Planning for your retirement can be complicated.  Social Security is just one component.  You need to consider all of your assets, liabilities, income and expenses from all sources.  You also need to consider life style choices and family commitments.  Please contact me or one of our estate planning attorneys at 937-223-1130 or Jsenney@pselaw.com.

AND ONE MORE THING.  In previous blogs we talked about the importance of properly classifying workers as employees or independent contractors.  If you misclassify a worker as an employee, you perhaps will pay more in the way of payroll taxes and workers compensation premiums than would otherwise be required.  On the other hand, if you misclassify a worker as an independent contractor, you face the risk of being subject to significant payroll taxes, income tax withholding, penalties and interest.  A recent news release shows that US workers are filing a record number of federal lawsuits against employers alleging violations of wage and hour laws including misclassification of their status as independent contractors.  If you would like to discuss worker classification further, please contact me or Matt Stokely at 937-223-1130 or Jsenney@pselaw.com.

Tax on Unearned Income

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Effective in 2013, some individuals will be subject to a new 3.8% medicare contribution tax on unearned income.  The new tax applied to single taxpayers with modified adjusted gross income over $200,000 and to married taxpayers filing jointly with MAGI over $250,000.  The unearned income to which the tax applies includes interest, dividends, annuities, royalties, rents, passive income and other net investment income.

Investors might want to consider tax-free bonds since the interest on these bonds is not subject to the new tax.  Investors might also want to consider insurance products since the inside build-up of life insurance cash value is not subject to the new tax.   Investors should also maximize investments inside qualified retirement plans and IRAs since income/gain inside these vehicles is not subject to the new tax.

Income received by an individual from a business is subject to the new tax if the business is a passive activity for the individual.  But don't forget, if the new tax applies because the business constitutes a passive activity, the individual would not be subject to self-employment tax on the same income since self-employment tax only applies to earned income.   Furthermore, if an "S" corporation owner actively participates in the business, he or she can avoid both the new tax and self-employment tax on the dividend distributions he or she receives from the "S" corporation.

This can be a bit complicated.  Call or email me to discuss at Jsenney@pselaw.com or 937-223-1130.

Estate Planning for "Digital Assets" or Who Reads My Emails When I Die?

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Have you thought about what happens to all the emails, pictures, contacts, messages, phone numbers, email addresses, on-line accounts and other information on your personal and work cellphones and computers after you die?  Do you want anyone to have access to these “digital assets” after you die?  If so who should have access to what?  You  need to consider these digital assets as well as your other assets when doing your estate and succession planning.

What are Digital Assets?  Digital assets include any online account that you own or any file that you store on your computer or in the cloud.  Digital assets can include your on-line banking account, your e-mail accounts, your picture and video storage sites, your social networking sites, your domain names, your games and leisure sites, your business, professional, marketing and networking sites, your frequent flier mile and other award program accounts, and all your storage and backups.   Digital assets also include all the electronic information and data on your personal and business cellphones, laptops, I-pads, computers, hardware and software.

Passwords.  Many of your digital assets are protected by usernames, passwords, and security questions.  If these digital assets are to be easily accessible to your chosen beneficiaries, you need to make sure such access information is recorded and transferred to such beneficiaries.
Need to Plan.  It is important for many reasons to carefully plan for the eventual transfer of your digital assets.   These reasons include: (1) the uncertainty of existing digital asset privacy and other laws, (2) prevention of on-line identity theft, (3) making sure the right parties receive your digital assets, and (4) making sure others do not gain access to your digital assets.

No Body of Law.  Digital assets are a new phenomena.  There is no well-developed body of law that describes the rights and obligations of executors, agents, guardians, and beneficiaries with regard to digital assets.  Very few jurisdictions have dealt with this issue.  Facebook, Twitter, Linked-In and other on-line services have their own policies for how to deal with a user’s death or incapacity, but not all such services have developed policies, and the policies that are in place may not be consistent with your personal wishes.

Prevent On-Line Theft.  Proper planning for your digital assets can prevent on-line identity thefts.  When you die or are otherwise unable to monitor the activity on your on-line accounts, thieves have an opportunity to hack your accounts, open new credit cards in your name, obtain identification cards and make purchases and take other actions in your name.

Executor Needs Access.   Giving your trusted executor access to on-line to digital and other assets would greatly improve the efficiency of the administration of your estate.   Making sure the executor knows which bills you paid on-line or by automatic checking account deduction would help ensure these bills do not go unpaid and would make it easier for the executor to pay such bills.

Transfer of Digital Assets.  Some digital assets may not have any monetary value, but many may have personal or emotional value.  You may have established on-line photo albums and accounts that preserve photos and letters. If your family and friends do not know you have these assets or how to access these assets, these photos and letters may be lost forever.  And if no effort is may to protect these digital assets, the personal and emotional value attributable to these assets may be diminished or destroyed by addition or deletion of material by spammers and hackers.

Transfer to the Right People.  You may not want all your family and friends to have access to all your digital assets.  Emails and messages are often quick off-the-cuff posts or responses.  Some of your emails or messages may contain rude, crude or hurtful jokes, stories or rants that you did not really mean or that were meant only for the recipient.  If you are not careful about who gains access to your digital assets, the wrong people may gain access.

How to Plan for Digital Assets.   The first step in planning for digital assets is to do an inventory of these assets, including usernames, passwords, and answers to “secret” questions.   The next step is to determine for each digital asset whether such asset is subject to deceased/incapacitated user provisions and whether there are ways to change or opt out of such default provisions.

Using Wills or Trusts to transfer Digital Assets.  Wills can be used to transfer digital assets, but Wills are probably not the right place to handle disposition of digital assets or to list digital asset access information because such information changes from time to time and because Wills are eventually made public.  In addition, a Will transfers ownership and control of the digital assets to named-beneficiaries immediately when the Will is probated (rather than maintaining ownership and control in the hands of a trustee).    A Trust is probably a more appropriate location to include the transfer of digital asset provisions because a Trust can be changed more easily and because it does not become part of the public record.   The use of a Trust also gives you the ability to have your digital assets maintained and controlled after your death for so long as appropriate by a trustee you name.

Storing Access Information.  While Wills and Trusts can be used to transfer digital assets, they are not the best place to store the access information.  It is advisable to prepare a separate document with all of the access information related to your digital assets.  This separate document would be a list of all of your digital assets including your on-line accounts, passwords, security questions, and answers.  This separate document could also designate who gets access to which asset, and which assets get deleted.  This separate document can be in writing, but it also could be stored electronically on  a computer data file, USB flash drive, or in a cloud.

During your lifetime you are creating a wealth of electronic information about yourself, your family and  your friends.  Some of this you may want to pass on.  Some of this you for sure do not.  If you would like to speak with me or one of our estate planning attorneys about how to handle your digital assets please give us a call at 937-223-1130 or Jsenney@pselaw.com.


AND ONE MORE  THING.  PS&E is sponsoring a FREE   seminar at Dayton Country Club on Wednesday May 22 from 7am to 9 am on “Essential   Legal Documents, Planning Considerations and Legal Updates for Every   Business.”   It is not too late to register.  But you need to hurry since space is limited.  You can register by clicking on the following link Register   Now! or by contacting Jan Burden at 937-223-1130 or Jburden@pselaw.com.

Importance of Competent Professional Help

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Sometimes you get what you pay for. And sometimes you don’t. In an effort to save a few dollars, some business owners prepare legal documents themselves, or buy one-size-fits-all documents off the internet, or get a friend of a friend to do the work for cheap. The results often are not what the business owner expected.


I encountered a recent situation where a business owner wanted to prevent a former employee from competing. At the time of hire, the business owner required each employee to sign a non-compete agreement. So far so good. The problem was that the language used to describe the non-compete restricted area was not properly worded. The business owner intended to restrict the employees from competing within a 5 mile radius of the existing business location. Unfortunately, the language in the non-compete agreement which defined the restricted area was based on a  5 mile circumference rather than a 5 mile radius. This improper wording had a dramatic effect. The restricted area is approximately 78.5 square miles if the restricted area is based on a radius of 5 miles from the existing location.   But the restricted area is less than 2 square miles if the restricted area is based on a 5 mile circumference around the existing location. This is a huge difference. This drafting fiasco could have been avoided.


Please call or email me or Matt Stokely if you would like us to review or help you draft a non-competition or non-solicitation agreement at 937-223-1130 or Jsenney@pselaw.com.


AND ONE MORE THING.  The IRS has issued a press release (IR 2013-49) reminding tax-exempt organizations to file their Form 990 annual return by May 15, 2013 or risk having their tax-exempt status revoked.  Contact Jeff Senney at 937-223-1130 or Jsenney@pselaw.com if you would like a copy of IR 2013-49 or have any questions about establishing a tax-exempt organization or filing the annual return.

Internet Sales Tax Legislation

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Over the years, states have attempted to impose sales tax collection responsibility on out-of-state retailers.   As laid out in numerous court cases over the years, states cannot impose sales tax collection responsibility on a retailer unless the retailer has “nexus” with the state.   For this purpose, nexus has meant means some physical contact or connection between the retailer and the state such as having business assets, employees, or offices in the state.  In the past, merely contacting customers by phone, mail, internet or traveling salesmen has not been enough to impose sales tax collection responsibilities.   This worked to the advantage of out-of-state retailers who did not have to charge and collect sales tax, and to the disadvantage of traditional brick and mortar retailers located within the taxing state.  Big retailers with stores all over the country like Wal-Mart, Best Buy and Target have been required to collect sales taxes when they sell products over the Internet. But online-only retailers like eBay and Amazon have not been required to collect sales taxes except in states where they have offices, distribution centers or other physical presence.


But all that is changing.  The US Senate has sided with traditional retailers and financially strapped state and local governments by passing legislation that would subject online-shopping to state sales tax.


Internet giant eBay is leading the fight against the legislation, along with lawmakers from states with no sales tax and certain anti-tax groups. The bill's opponents say it would put an expensive obligation on small business because they are not equipped to collect and remit sales tax to many different state and local governments at many different rates.   Under the legislation, businesses with less than $1 million in online sales would be exempt.   But eBay wants to exempt businesses with up to $10 million in sales or fewer than 50 employees.


Many governors, both Republicans and Democrats, have been lobbying the federal government for many years for the authority to collect sales tax from online retailers.  While under most state laws the consumers have an obligation to pay a “use” tax if the retailer does not collect a sales tax on their purchase, most consumers do not comply.  And it is not generally cost-effective for the states to chase individual consumers for use tax on small purchases.


This issue continues to grow as more people make purchases online.  Last year, Internet sales in the U.S. totaled over $226 billion according to government estimates.  States lost a total of $23 billion last year because they could not collect taxes from out-of-state retailers.  Supporters say the bill makes it relatively simple for Internet-only retailers to comply.  States are required to provide free computer software to help retailers calculate sales taxes, based on where shoppers live. States must also establish a single organization to receive the Internet sales tax revenue, so retailers don't have to send it to individual counties or cities.

Give me  a call or email if you want to talk about the new legislation or have any sales or use tax questions at Jsenney@pselaw.com or 937-223-1130.



AND ONE MORE THING.  Let’s give a hand to Tony Desjardins and the gang at UDECX, LLC who  won the prestigious Soin Award for Innovation at the recent 2013 Dayton Chamber of Commerce Annual Meeting.   UDECX has developed and is marketing the only modular, portable, and completely DIY patio decking product on the market today.  If you are interested in learning more about UDECX, check out their website.