Land Trusts: An Estate Planning Tool

Carolyn Swafford, CTFA, Vice President/Trust OfficerSwaffordC_BUS014qc

Land trusts are a versatile legal tool for holding title to real estate. Individuals, investors, businesses and families all use land trusts to accomplish specific goals regarding the acquisition, ownership and transfer of property.

Land of Lincoln…and Trusts

Illinois is among only a handful of states that allows the creation of land trusts. Although the legal precedent originated in England, land trusts also began popping up in the United States. They first appeared in Illinois in the late 19th century and were used by real estate developers to acquire multiple parcels of land needed to build large-scale developments.

Using Land Trusts

Privacy is a popular reason to establish a land trust. Property can be deeded into a land trust either at the time of purchase or anytime afterwards. The trust becomes the owner of the property. The individual then becomes the beneficiary with all the rights, avails and proceeds to the property. Since the trust is the owner of the property, the beneficiary is able to keep their name off all public records.

As a legal tool, therefore, a land trust can be used to accomplish very specific goals. Here are three of the most common uses.

Protecting Business Interests

Land trusts are a great way to add a layer of protection between the beneficiary and the property that is contained in the trust. This protection ensures judgment claims against a beneficiary do not automatically become a lien on the real estate or otherwise cloud the title.

Bypassing Probate

If an individual or individuals are named to inherit the beneficiary’s interest after their death, the land trust is not subject to the probate process. This allows the remainder beneficiaries to manage or sell the real estate much faster.

Transferring Interests

When there are multiple beneficiaries in a land trust, there may be a time when one beneficiary buys another out. Individuals may also want to gift their share to another person. Transferring interests within a land trust is accomplished easily and quickly without the need to record public documents.

Flexible and Easy to Establish

Since a land trust is a legal entity, you will want your attorney to prepare the Land Trust Agreement and Deed in Trust. In cases where Old Second is named as the trustee, the necessary forms are downloadable from our website.

For more information on land trusts, click here or contact me directly at 630-906-5470 to discuss how this legal tool might benefit you.

 

 

How to Navigate the Wealth Management Milestones in Your Life

Jacqueline Runnberg, CFP®

Jacqueline Runnberg, CFP®Everyone travels a different path through their financial life. But like any well-traveled road, there are milestones along the way. Here are the common life events you are likely to pass through—along with a few roadblocks and detours—and a checklist of what you should be considering as you reach each one.

First Job

  • Understand employee benefits and employer-sponsored (especially tax-advantaged) savings opportunities for health care expenses, retirement and student loan repayment
  • Create a will and set up powers of attorney

Career Changes

  • Review the impact a change will have on your insurance coverage
  • Rollover your retirement account to keep savings on track and tax deferred

How to Navigate the Wealth Management Milestones in Your LifeRelationship Commitments

  • Talk about money with your life partner—different attitudes can be reconciled but not if they are unknown to one another
  • Know each other’s debt load and credit scores
  • Determine how your assets and income will be pooled together, saved and spent
  • Decide the best way to obtain health insurance coverage
  • Review your named beneficiaries on your employee benefits and in your will and power-of-attorney documents

Home Ownership

  • Buy what you need, not the maximum you can afford—it’s likely going to be your biggest asset

Side Trips
These events can require that you immediately revisit your portfolio allocation, named beneficiaries, and state and local laws affecting personal property, liability and estate settlement:
➢ Moving to a new state
➢ Starting a business
➢ Receiving an inheritance

Children

  • Review your budget for different spending needs
  • Initiate saving for future expenses
  • Revisit your will or trust documents and be sure to name a guardian
  • Start saving for college

Detours
To avoid unintended consequences, update documents that name beneficiaries and those for insurance coverage with these events:
➢ Divorce
➢ Unemployment

Retirement Planning

  • Determine what retirement means to you
  • Periodically reassess and gauge your progress
  • Plan for healthcare expenses
  • Understand your options and benefits under Social Security

Estate Planning

  • Consider that having more assets require more tax planning to ensure efficiency
  • Take into account beneficiary considerations
  • Preserve wealth as it grows and the process becomes more complex
  • Plan for your legacy

Roadblocks
Be prepared to reroute for:
➢ Illness or disability
➢ Changes in laws

Retirement

  • Test income plan before fully retiring
  • Determine the best withdrawal strategy for your circumstances

We’ve helped many generations of financial travelers plan for their journey and for any side trips, detours or roadblocks they might encounter along the way. Give us a call to meet with a wealth management representative today. We’ll help you determine the best route for realizing your financial goals.

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

3 Reasons You Need a Will Today

Andy Roche, MBA, CPA, CFP®

June_andy_roche_portraitIf you don’t have a will, you’re not alone. Approximately 55 percent of Americans have yet to prepare this essential document.[1] It’s understandable: No one wants to spend a lot of time planning for when they are no longer around.

But as valid as the reason for avoidance is, every adult, regardless of age, should have a will. Here’s why.

Reason 1: It’s Not About You

Though a will is the legal expression of your last wishes, it’s really not about you so much as the people you care about. These are the people who will have to carry on…without you…and without directions on what to do with your financial and personal assets if you don’t leave a will.

When you don’t have a will, decisions like who receives your property and in what amounts are determined by state law. The matter can take months, and even years, to sort out if there are challenges by potential heirs. It can also lead to unintended consequences. For instance, parents or siblings you’ve been estranged from for years could end up inheriting your property rather than your fiancé or life partner.

Even if the state laws lead to the same distribution you would have preferred, the uncertainty can cause disagreements among your survivors. These can then result in lengthy and emotionally exhausting divisions over who was promised what and make holidays a minefield of hurt feelings and misunderstanding for years to come.

Reason 2: Unclear Future for Your Children

Arrangements for the care and custody of underage children are also covered within wills. State law and state welfare agencies can quickly get involved and undermine your intentions. For instance, custody could end up reverting to an ex-spouse despite your remarriage or bypass a life partner and send your children to live with a grandparent, or even foster care.

Reason 3: Undermining Your Legacy

For many, causes and support for community initiatives or organizations are important elements in their lives. Without a will, these causes may be left without your support—personal and financial.

Don’t Be That Person

As intimidating as it is to think about your last wishes, the process can be fairly simple, especially when you are younger and have a less complicated financial life.

Online legal advice services provide ready access to immediate, do-it-yourself options. But to ensure your assets are properly titled and your wishes accounted for, a family law attorney may be a better alternative.

If named as your executor or trustee, Old Second will enact your documents when the time comes. It’s an option that can spare your family from the responsibility and the time involved in settling an estate. Talk to any of our wealth management representatives about these services or if you need help creating a list of questions and considerations to discuss with your attorney. We can also review a draft of your documents once they are prepared and answer any additional questions that may have come up since your first meeting with your attorney.

 

[1] A.L. Kennedy, “Statistics on Last Wills & Testaments,” legalzoom.com, retrieved 5/21/16.

What You Need to Know When Starting Your Own Business

Jane Miller, Vice President—Business Banking

Miller, JaneWhen you’re ready to talk about making the leap from dreaming about starting your own business to the reality of having one, so are we. And, talking is exactly where we’ll start.

Because, this is about more than helping you open a checking account and advising you on how to get your documentation in order. It’s about really getting to know your business, your potential target market and your goals so we show you the right mix of products and services to help you grow.

Get Services Matched to Your Anticipated Needs
Unlike many banks, we make all of our services available to business customers, regardless of their size, as long as it makes sense. This means you don’t have to achieve certain revenue levels to gain access to what you need, when you need it. For instance, if your business is to be a one-person operation, we want to make sure you have access to all of our online and mobile services—from deposit to payment services. Because when you are doing it all, the last thing you need is to spend time away from serving your customers to do your banking.

Find Affordable Borrowing Options
The trickiest part about a small business owner is often financing—making sure you have sufficient funding and additional sources lined up to ensure ongoing liquidity. Many new business owners assume they’ll need to seek alternative online financing sources to do this. But, as a full-service bank, we will work with the business owner to provide options for them to make funds available at a lower interest rate and with more convenient repayment terms than many of the newer alternatives.

Also, unlike many larger banks that require business owners to take on personal loans to fund their businesses, we can structure nearly any size financing. We can even transition a business owner who has already borrowed elsewhere into a more stable lending structure to arrange a more affordable payment and ease stress on their liquidity.

Start Thinking Like an Owner
Once you become a small business owner, our full-service bank offerings can also help you by addressing more than your immediate cash management needs. We can also work with you to set up the type of employee benefits you’ll need to attract and retain quality workers and to secure your own future.

From retirement plans to payday services and cash management tips, we’re here to help you become the business you want to be.

Start-Up Resources for Sole Proprietors
While we’re always ready to serve as a support and sounding board, here are some other resources you may want to take a look at to make sure you are in compliance with state and local regulations:

The Best Time to Refinance a Mortgage

Troy Langeness, Vice President—Residential Lending

Troy LangenessToo often, homeowners refinance in reaction to interest rate levels, assuming that if rates are low or about to rise, it’s a good time. But, it may not be the best time.

For that, the determining question should be: Is now the right time for your circumstances? Because when it comes to refinancing, it’s not really about the current level of interest rates as much as it is about what you personally will accomplish by pursuing one.

What a Refinancing Can Do for You

Refinancing has a cost—generally adding up to several thousand dollars. This is why you should work with a lender to make sure going through the process will be worth the expense.

The basic rules of thumb for determining that include your intention to live in your home for at least four to five years and, when the numbers are crunched, that the refinancing will either literally pay for itself within 18 months or help you achieve some other financial goal.

These goals could include:

  • Shortening the pay-off period for your home so that you will own it free and clear before you retire. This is usually accomplished by replacing a 30-year mortgage with a 20-, 15- or 10-year mortgage.
  • Lowering your monthly payment by refinancing your current home loan balance at a lower interest rate, enabling you to put more money into savings or take on other expenses.
  • Consolidating high-interest debt (such as credit card balances or auto loans) with lower-rate mortgage debt to make monthly payments more affordable and tax deductible.
  • Accessing the home equity you’ve built up over the years to purchase another asset that you might not be able to finance otherwise due to circumstances beyond your control.
  • Eliminating private mortgage insurance (PMI), which is mandatory on loan to values greater than 80 percent.
  • Locking in a fixed rate and retiring an adjustable-rate mortgage (ARM).

Online refinance comparison calculators can help you estimate the benefits of refinancing. But, talking to a lender who will listen, check your numbers and even customize the loan structure to make sure refinancing makes sense for you is highly recommended before you apply.

How To Prepare For a Refinance

Other Considerations

Once you determine that refinancing is right for you, be aware that the approval process for home-based lending has changed dramatically since 2009. Nearly all the changes were made to improve consumer protection. That said, refinancing takes more documentation than it used to.

Even when these loans are handled online, they now require a deeper dive into your credit history. Borrowers are required by the government-sponsored enterprises, including Fannie Mae and Freddie Mac, to do more explaining about their assets, sources of income and any recent money transfers that result in large deposits. These, in turn, need to be documented to establish their paper trails.

Old Second continues to leverage technology to ensure your refinancing is as efficient as possible. We accept applications online, face to face or by phone and offer the option of electronic signatures on many of the documents.

If you think a refinancing would help you accomplish your financial goals, call us. We’re always happy to talk it through and create the right loan structure for your situation.

Accessing the Keys of an Effective Employee Retirement Savings Plan

Sean O’Connor, First Vice President/Retirement Benefits Officer

OConnorSAttracting and retaining skilled workers is challenging enough for any company. But for those who don’t offer a retirement plan, it’s even harder. It doesn’t have to be. With the right trustee, even smaller companies can afford a state-of-the-art retirement plan.

A Bank With a Plan

Full-service commercial banks, like Old Second, offer a range of benefit plan solutions to their business clients. While a company may not think to look to their bank for such services, those who do can find a sophisticated yet cost-effective solution, especially when it comes to their retirement plan.

As a community bank with a full-service trust company, we’ve served in a fiduciary capacity and as an asset manager for decades. It’s this wealth management experience that enables us to address the concerns that keep many companies from successfully offering a retirement plan benefit.

But, ultimately, our corporate plan clients’ success comes from our commitment to incorporating these five key elements into each of our plans.

OConnor-InfographicFive Key Elements to a Successful Plan

1. Communication that keeps participants engaged

An effective employee communications plan reaches each participant in a way that is most comfortable for them—whether that is Web based and interactive or through onsite meetings and customizable materials.

2. Investment options that accommodate all participants

Appealing across the range of age groups, lifestyle preferences and risk profiles of diverse workforces requires access to a variety of investments, including target date funds. A solid history of generating long-term results for clients also helps, along with an open architecture platform to suit each company’s investment needs.

4. The ability to fulfill fiduciary responsibilities

Business owners already wear too many hats. They need to be able to rely on a trustee with demonstrated experience in protecting and directing a firm to fulfill its fiduciary responsibility toward plan participants.

4. Administrative and compliance expertise

The right trustee will help with annual testing, discrimination limits and reporting. They’ll also provide timely and accurate record-keeping, on both a daily and balance-forward basis.

5. Dedication to cost effectiveness

While plan sponsors can’t control the performance of the securities markets, they can control how much they pay in plan fees. A trustee who recognizes this and works to contain costs—and for opportunities to reduce them—can add to participants’ returns over the long run.

As an experienced plan administrator, we work with each of our clients to develop a solution that meets the firm’s objectives. We can also analyze existing plans and recommend ways a company can improve participation and satisfaction. In many cases, we can also convert an existing plan into a new one with minimal disruption.

To learn more about how we can do for your company’s benefits plan, click here.

 

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

A Collection Option That Pays

Karen Nelson, Senior Vice President—Treasury Management

Karen Nelson, Senior Vice President—Treasury ManagementOur still relatively new Customer Payment Portal (CPP) service is proving very useful to a wide range of clients. From non-profits involved in fundraising activities for local causes and religious organizations to daycare centers, unions and medical practices, all have experienced improved collection efficiencies and cash flow.

The reason is simple. The service reduces the act of making a donation or payment to a single button for donors or customers. That single-button option automatically launches an online payment form. The actual processing of payment information is handled externally by a third-party payment processor. This removes the burden of collection from office staff, freeing them up for other activities.

CPP accommodates direct debit payments from checking and savings accounts, all major credit cards and payments made through PayPal. While convenient for our banking clients’ donors and customers, it also helps reduce the occurrence of returned checks or skipped payments. Recurring or installment payments can also be set up, a feature that has been particularly useful for bank clients like orthodontists whose patients may take years to pay for their services.

In addition to the convenience of enabling donors or customers to pay online—regardless of office hours—the service also gives users access to their payment or donation history for tax purposes directly through CPP.

As a software-based add-on to your website, the CPP button is customizable to whatever call-to-action you require. The process also assumes responsibility for PCI compliance, making it even easier to implement credit card payments for smaller organizations with volunteer staffs.

Basic Requirements

To implement CPP, your organization, practice or company needs to meet the basic requirements for credit card processing. These involve having a refund policy, a privacy policy and SSL certification for your website. If meeting these credit card processing requirements is not feasible, there is an option for just accepting direct debits from checking and savings accounts through CPP.

To discuss how to speed up the collection of your receivables and offer a secure, 24/7 payment option while improving reporting and operating efficiencies, contact us. We’d be happy to show you how this feature can make a difference for your office.

What You Should Know About Retirement

Jacqueline Runnberg, CFP®, Vice President/Wealth Advisor

Runnberg_2015 (1)For most, retirement is what you save for. It’s an activity that keeps you focused on accumulating assets and making long-term investment decisions. But, it’s hard to know how much to save and if you’ve saved enough. To do that, you need to know what your retirement will look like and when it will begin—things that are different for everyone.

To help you gain clarity, here are some factors to consider as you think about what you want to happen next, after the saving stops.

➢ Be realistic: Age 62 might be a little premature for retirement.
Although the age of 62 is still associated with retirement, if your birthday is between 1943 and 1954, your full retirement age for Social Security purposes is actually 66. The age increases gradually for those born in subsequent years, until it tops out at 67 for those born in 1960 or later.

While you can still initiate benefits at age 62, they will be seriously discounted (between 25% and 32.5%) from your full retirement age benefit for those born after 1942.1

This is why retiring early may not make financial sense—quite a bit of money could be left on the table, unless you’ve saved enough to cover expenses in the early years of your retirement without Social Security benefits.

➢ Think long term: Savings (and benefits) need to last longer than ever before.
According to the Social Security Administration, a man who reaches age 65 can expect to live, on average, until age 84.3. A woman can expect to see age 86.6. But, these are just averages. One-fourth of 65-year-olds will live past 90 and one-tenth can expect to live past 95.2 This means you’ll need a strategy for how your savings can be invested (and withdrawn) in a way that lasts your lifetime, a period that could rival the number of years you spent working.

➢ Rethink expenses: Your retirement spending level may not change as much as you think.
It’s entirely possible your expenses in retirement won’t change so much as what you spend your money on. And, that is likely to keep changing. For instance, in early retirement more of your budget will probably be devoted to entertainment and travel than in the past. If your health needs change, entertainment and travel expenses may fall as home care and medical needs rise.

➢ Sweat the details: It’s what you can’t control that you most need to plan for.
Both inflation and health care costs can seriously impact your financial footing in retirement. Any financial strategies you develop will need to be flexible enough to accommodate these factors. They are also the reason you can’t afford to be a conservative investor—you will need to keep a portion of your assets growing if these factors are to be addressed. You’ll also need a withdrawal strategy that can tolerate the unknowns as well as the knowns.

Retirement Is Another Beginning
Retirement is really more like the last quarter of a game that is likely to see multiple overtimes. That’s why envisioning what your retirement will look like and how you will sustain it over three to four decades is so critical while it’s still early in the game.

This is something our wealth management professionals can assist you with. Working together, we can create a plan that helps ensure what you save over your working life will support the retirement you envision and deserve.

 

1 Social Security Administration website, retrieved November 3, 2015.
2 Social Security Administration website, retrieved November 3, 2015.

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

BusinessManager: The New Way to Unlock Liquidity

David Mottet, First Vice President—Commercial Lending

Let’s face it, when accounts receivable start to build, it’s usually a good problem to have. It’s a sign you are doing something right.David Mottet, First Vice President—Commercial Lending

But, you can face as much as a 90- to 120-day delay before you collect on your receivables. Meanwhile, you still have to replenish inventory, possibly expand the workforce and gear up to meet increasing customer demand. This is what makes maintaining liquidity so tricky.

This is also why we are excited about having a new solution to offer you: BusinessManager. It’s an online program accessible directly from anywhere you have Internet access. It can help keep your sales growing without the financial hiccups since it enables you to convert your receivables into cash. That cash is then deposited to your account on a next-day basis. But unlike a traditional receivables-based line of credit, the advance rate under the BusinessManager program is up to 90 percent.

How it works
You simply enter the pertinent data from your invoices into the Web-based software. Once added to the system, the receivables are then automatically tracked and aged until they are paid by your customers.

The advance your firm receives is also calculated automatically and made next day through a deposit to your Old Second checking account.

Because of the tracking component, receivables reports are generated for you on an ongoing basis. The system is compatible with most popular accounting software programs, making integration into your operations fairly straightforward. The collection of your receivables is then made through a lockbox service managed at the bank.

BusinessManagerClick here to view our BusinessManager Infographic.

Positive cash flow with benefits
As an accounting tool, BusinessManager does more than simplify the process of accounts receivable-based borrowing. It speeds the process to create a quicker turnover ratio.

It also means that in addition to the improved cash flow and the freeing up of your staff’s time for other activities, you are better positioned to capitalize on new business opportunities. With access to cash, you can also take full advantage of supplier discounts when paying your expenses to lower your own operating costs.

To get your receivables working harder for you, contact your lender to set up an appointment to learn more about BusinessManager and the other cash management strategies available at Old Second Bank.