Monday, April 28th, 2008
Rose and Eric have an unusual story. They both came over from Europe in the 20’s when they were small children, with their families who knew each other in the old country. When they settled here in the U.S., they lived very close to each other and saw one another all the time. When they got to be teenagers in this land of opportunity, they fell in love, and got married right out of high school.
Eric went to work for the same company his dad worked at, which was very common in those days. Rose stayed home to raise their two boys, Arnie and Jack, and held the traditional role as a stay at home mom. For a while, that is.
One day, Rose’s neighbor had asked Rose to fix a pair of trousers her husband had ripped at work at the loading dock. Rose was known in the neighborhood as a top seamstress, and was asked to help people with sewing problems, so this request was nothing out of the ordinary. But when Rose’s neighbor picked up the pants she remarked to Rose, “You do such a great job, even better then the tailor down the street. If you weren’t a woman, you could have your own shop and be the richest tailor in town!” (This was way before equal rights and political correctness, as you know.)
Rose kept thinking about what her neighbor had said. It really bothered her. Why shouldn’t she be the best tailor in town just because she was a woman. Why were women relegated to the role of a “seamstress”, while men automatically became “tailors”? When she brought this up to Eric one night, he nearly flipped out. “After all, he retorted, a woman’s place is home with her family, and besides, women aren’t tailors!”
In spite of his objections, Rose went out and rented a little space in a friend’s general type store. She hung out her sign, and waited for people to bring her business.
And she waited. See, at first, no one took her seriously. She got a quick reputation for being a little wacky. But she didn’t care. Eventually, some of the women brought her work, and told their husbands the male tailor did the work so they wouldn’t get into trouble at home. And as time went on, and people realized the truth, Rose became very busy. So busy, she started a real company, and built a hugely successful string of tailoring and clothing companies.
Eric went to work for Rose a couple of years after it appeared she was on her way, and the two of them enjoyed a happy and fulfilling life together. Arnie and Jack got married and had kids, whom Rose and Eric absolutely adored.
So here’s how they came to us, and how we saved them from committing a huge error. HUGE!
See, Jack, who is our client, casually mentioned that his mom was tired of working so hard, and that she and Eric were about to put the businesses up for sale. Jack said he’d get them to come in for planning AFTER they sold out. When we found out that the value was over $2,000,000, we nearly went ballistic!
We told Jack that whether they came to us or someone else qualified, they had to get help BEFORE making any decisions, or even talking to anyone about selling. We pointed out that if they got the $2,000,000, they would pay about $300,000 in federal taxes…all of which, could be avoided!
Jack said his folks had figured there was nothing to do about the taxes, since their accountant had told them they had no tax basis, and that the entire sale proceeds would be taxed in full. There was nothing they could do about it, said their accountant.
We begged to differ, and told Jack so. Fortunately, when he got home that night, he called his folks, and told them what we had said. They were going to have a meeting with a competitor of theirs the very next morning, to see if they were interested in acquiring their interest in the businesses. But they had not specified to the competitor what the nature of the meeting was. (Whew!)
Instead, they canceled and came in to talk to us.
We explained options they had, and how they could, pay as little as ZERO income taxes, if they chose to do so. But, they had to set things up first, BEFORE doing anything!
So they hired us to do a plan, which we accomplished quickly. We showed them choices and opportunities they had to pay a lot less in taxes, and options to pay nothing in taxes. We showed them the pros and cons of each choice, and let them decide which path to follow…BEFORE making a move with the sale!
And due to our planning advice, they opted to pay ZERO in taxes (totally legally, of course) and keep all the money for themselves and their family.
Imagine the horror if they had talked to buyers, or actually sold the businesses…and then found out they could have saved $300,000 in taxes…IF they had just planned properly! Imagine how you’d feel getting such horrible news!
Well, while your story might not be the same as Rose and Eric’s, you shouldn’t take that to mean your planning needs aren’t just as critical! PLANNING BEFORE TAKING ACTIONS IS THE MOST FUNDAMENTAL, AND IMPORTANT ELEMENT OF FINANCIAL SUCCESS!!
So… make sure you call us BEFORE making any moves! We’re here to help you plan, and make sure you have the best shot at financial security!
