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Al's Column: Avoiding the pitfalls of poor estate planning

October 9/16, 2017: Volume 32, Issue 9

By Roman Basi

 

Screen Shot 2016-07-15 at 3.49.34 PMIn my previous column, “Estate Planning: Leave it to the pros,” (FCNews, Sept. 11/18), I explained—citing several recent real estate tax cases—how unqualified advisors can potentially cause a host of problems for their clients. Despite having expertise in other areas, some attorneys, accountants and other professionals that do not specialize in estate planning can do more harm than good. In this installment, I will cover some of the financial repercussions of poor estate planning.

Choosing an unqualified person or firm to handle your estate planning can result in unforeseen financial consequences. The IRS has recently stated that for all 2017 cases attorney’s fees awards will remain at $200 per hour. This may or may not seem like a significant amount to some; however, the ramification is that if someone brings an action against a professional, that person may be subject to paying the attorney’s fees of the claimant at a higher rate than what they were paid to have the work completed in the first place.

And yet, while we caution everyone on proper planning, it does appear that our current system works well for encouraging charitable contributions. A report recently stated that over 2,600 estates with a net worth of approximately $61 billion made charitable contributions in their estates. This amount was a tax deduction for the estates and the government did not receive taxes in the range of $27.4 billion. It appears the estate tax law does in fact provide a substantial means by which charitable organizations can be funded. This is one key reason why charitable organizations do not want the estate tax to go away. If the estate tax did not exist, it appears that the donations to these organizations would decrease substantially as there would be no incentive to give as estate taxes would not be lowered.

Estate planning is very important to all of us as long as the estate tax law is in existence in the U.S. As a matter of fact, the IRS has recently released information about how important the estate tax is to the U.S. Over 11,917 estate tax returns were filed in a recent year. Of the taxable estates, 13.5% did not owe taxes, but the remainder owed estate taxes such that the total amount produced income to the U.S. Treasury of $17.09 billion. (And this is only for one year.) An interesting breakdown of the assets on the tax returns showed that traded stock, state and local bonds, cash and closely held stock and real estate—other than a personal residence—amounted to a total value of $60.12 billion.

Bottom line: Don’t put off creating an estate plan. And once you have created one, be sure to keep it current as your situation changes and as laws pertaining to estate taxes change. More importantly, use qualified professionals who specialize in estate planning. Remember, the Center has specialists that stay current with the tax laws and specialize in estate planning.

Be sure to attend my presentation on Tuesday, Jan. 30 at TISE, where I will discuss different ways to reduce your taxes and protect your assets. Following my session, I will be available for free, 30-minute consultations.

 

Roman Basi is an attorney and CPA with the firm Basi, Basi & Associates at the Center for Financial, Legal & Tax Planning. He writes frequently on issues facing business owners. For more information, please visit taxplanning.com.

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Engineered Floors poised to purchase Beaulieu Group

October 9/16, 2017: Volume 32, Issue 9

By Ken Ryan

 

Screen Shot 2017-10-17 at 9.27.53 AMDalton–Engineered Floors’ agreement to purchase substantially all operating assets of Beaulieu Group—a deal pending bankruptcy court approval—would make EF a dominant No. 3 player in the carpet segment, a billion-dollar player overall, trailing only industry titans Shaw and Mohawk.

If approved, which is expected, the deal could be consummated in November.

Back on Sept. 20, Engineered Floors and Beaulieu Group had agreed to terms in a letter of intent. (Beaulieu Canada, which is not a subsidiary of Beaulieu Group, is not part of this deal.) The companies have now concluded those negotiations and executed a definitive agreement.

Engineered Floors did not divulge many details of what its plans are post-acquisition, other than to say it intends to operate the assets going forward and continue to grow the residential and commercial businesses. “This will be good for both our business and the community,” said Bob Shaw, chairman and CEO, Engineered Floors.

When asked specifically if Engineered Floors would retain the Beaulieu brand, or whether it would bring back the Coronet name—as has been speculated—a company spokesman said there would be no comment beyond the initial press release.

Fast-track growth
Since Bob Shaw founded Engineered Floors in 2009, the company has quickly grown. Its 2016 sales were $659 million and it has a strong position in the multi-family builder market; it serves the residential sector through distribution under the Dream Weaver brand. In April 2016, Engineered Floors acquired J+J Flooring Group, a commercial carpet specialist with sales of approximately $140 million. Last summer the company launched its Pentz Main Street division.

Screen Shot 2017-10-17 at 9.28.02 AMSince its purchase J+J Flooring has operated as an independent division under Engineered Floors. There is speculation that Beaulieu could also be operated as its own entity under the Engineered Floors flag. James Lesslie, executive vice president of sales and marketing, came over from Beaulieu in 2009 when the company was started; he was chief operating officer at Beaulieu when he left. Beaulieu’s annual sales are estimated to be approximately $350 million. Combined with Engineered Floors, the entity would exceed $1 billion in 2016 sales.

Since founding Engineered Floors, Shaw has created thousands of jobs in Whitfield County. Today the company employs 3,000, with more to be added as manufacturing facilities come online. One well-placed industry executive said Bob Shaw contacted Beaulieu to obtain a list of all the Beaulieu employees who had been laid off in the past six months. Engineered Floors did not comment on a question regarding Beaulieu employees.

Beaulieu filed for Chapter 11 bankruptcy on July 17. At the time, the company believed the process of reorganization would position it for future success. “Beaulieu family members and our board of managers believe pursuing a restructuring through Chapter 11 is the best path forward at this time,” Michael Pollard, president of Beaulieu Group, said at the time. “We have evaluated alternatives to address Beaulieu’s capital structure, and we believe restructuring through the Chapter 11 process will best position all of Beaulieu Group LLC’s businesses for future success.”

Founded in 1978, Beaulieu America, which until recently was the No. 3 carpet mill, employs upwards of 2,500 associates in more than 12 facilities and offices across North America. In addition to the Beaulieu brand, the company manufactures medium-priced commercial carpet under the Cambridge label, high-end specified carpet under the Bolyü label, and needlepunch floor covering products sold through Murray Fabrics and the company’s surfaces divisions.