Inter vivos and testamentary trusts can help you achieve different estate planning goals

Robust sales don’t always translate into strong profits. A popular product could produce disappointing returns when you account for discounts, shipping, returns and support costs. At the same time, a lower-volume product could quietly generate an attractive profit margin. How can you tell what’s working? The solution may be product-level analysis that shows where you’re generating profit and where strong revenue might be masking weak performance. This holds true whether your business manufactures, distributes or sells products through sales reps, online channels or brick-and-mortar stores. Calculating the full cost Start by identifying each of your product’s direct costs, such as materials, inventory purchases, production labor and packaging. Then consider expenses that might be easier to overlook, including: Freight, warehousing and inventory carrying costs, Sales commissions, Payment-processing charges, Promotions and discounts, Returns, spoilage and shrinkage, and Customer service and technical support. Overhead expenses — including rent, insurance, technology and administrative salaries — also affect product profitability. However, allocating them solely by sales volume can distort results. A product that requires, for example, customized packaging or extensive customer support should receive a greater share of those costs. Activity-based costing can provide a more realistic view by assigning expenses according to the activities that generate them. Beyond gross margin No single measurement tells the whole story. Gross margin shows how much revenue remains after covering cost of goods sold. Meanwhile, contribution margin subtracts variable costs from revenue. A positive contribution margin generally means a product helps cover fixed expenses and generate profit. So if a product appears unprofitable after allocated overhead, don’t automatically discontinue it. Because many fixed costs will remain, eliminating the product could reduce your business’s overall profit. Instead, consider whether the product attracts new customers or supports sales of more profitable items. Also evaluate product profitability by sales channel and customer segment. The same item may be profitable in a store but lose money through an online marketplace because of commissions, fulfillment expenses and returns. In a similar vein, a large customer’s discounts could erase the benefit of high sales volume. Turn findings into action Reliable product data can support better pricing, purchasing, marketing and inventory decisions. It can also help you negotiate supplier terms, adjust sales and distribution channels, and evaluate new products. Product-level analysis shouldn’t be a one-time exercise. Market and economic conditions often change, so you should review margins regularly and investigate major variances. Also contact us. We can help you develop a practical approach to turning product data into profitable decisions. © 2026 

Many individuals invest in real estate to help diversify their portfolio, create an income stream for themselves from rental income and build net worth over time. Often, this is a side activity to a career in another field or running another type of business — not the individual’s primary source of income. Holdings might range from a condo or small house you rent out to a multifamily residential building or even a commercial property. Whatever type of property you own, investment real estate comes with special tax considerations you need to be aware of. With proper planning, you can maximize your after-tax returns. Rental activity rules One important consideration is the tax treatment of income and losses from rental properties. They’re considered passive by definition — unless you’re a real estate professional. Even then, you generally must “materially participate” in a rental activity for it to be treated as nonpassive. Why is this important? Passive income may be subject to the 3.8% net investment income tax (NIIT) on top of any income tax otherwise due, and passive losses are deductible only against passive income, with the excess being carried forward. For investors who have another primary occupation, qualifying as a real estate professional can be difficult. To qualify, you must annually perform: More than 50% of your personal services in real property trades or businesses in which you materially participate, and More than 750 hours of service in these businesses during the year. Each year stands on its own, and there are other nuances to keep in mind. To materially participate in an activity, generally you must participate more than 500 hours during the year or demonstrate that your involvement constitutes substantially all of the participation in the activity. But there are other ways to meet the material participation test. Carefully track the time you spend on your real estate activities. If you own rental properties in addition to working in another business or profession, also carefully track the time spent on those non-real-estate activities, so you can see if you spend a small enough portion of your time on them vs. real-estate activities that you can pass the first real estate professional test. Although your spouse’s hours can’t be counted toward the tests for qualifying as a real estate professional, special rules for spouses may help you meet the material participation test: Generally, your spouse’s participation can be counted when determining whether you materially participate. Depreciation breaks Buying an investment property may be only the beginning of your expenditures. If you renovate or improve a property, the tax treatment of those costs can vary depending on the type of property and improvement. Generally, residential real estate, including improvements, must be depreciated over 27.5 years and commercial real estate over 39 years. But three valuable depreciation-related breaks may be available to real estate investors: 1. Qualified improvement property (QIP) deduction. QIP is defined as an improvement to an interior portion of a nonresidential building placed in service after the building was initially put into use. So these rules can apply to qualifying improvements to commercial real estate, but not to improvements to a residential rental property. QIP has a 15-year Modified Accelerated Cost Recovery System (MACRS) recovery period and qualifies for bonus depreciation and Section 179 expensing. However, expenditures attributable to the enlargement of a building, elevators or escalators, or the internal structural framework of a building don’t count as QIP. They usually must be depreciated over 39 years. 2. Bonus depreciation. This additional first-year depreciation allowance is available for qualified assets, including QIP. Bonus depreciation is 100% for eligible assets acquired and placed in service after January 19, 2025. 3. Section 179 expensing election. This allows you to currently deduct qualified property, subject to certain limits. This includes QIP, certain depreciable tangible personal property used predominantly to furnish lodging and for the following improvements to nonresidential real property: roofs, HVAC equipment, fire protection and alarm systems, and security systems For 2026, the maximum Sec. 179 deduction is $2.56 million. The deduction begins to phase out if the cost of qualifying property placed in service during the year exceeds $4.09 million. Deferring gains Eventually, you may decide to sell an appreciated rental or other investment property. You might be able to structure the transaction to defer some or all of the taxable gain. Such strategies may even help you keep your income low enough to avoid triggering the 3.8% NIIT and the 20% long-term capital gains rate. One example is an installment sale. It allows you to defer gains by spreading them over several years as you receive the proceeds. But ordinary gain from certain depreciation recapture is recognized in the year of sale, even if you receive no cash. Another option is a Section 1031 exchange. Also known as a “like-kind” exchange, this technique allows you to exchange one real estate investment property for another and defer paying tax on any gain until you sell the replacement property. If you receive cash or other non-like-kind property as part of the exchange, however, you generally must recognize gain to that extent. These tax deferral strategies aren’t without risks. For example, if tax rates go up, you could ultimately end up paying more in taxes. They also have detailed requirements, so it’s important to consider the tax consequences before completing a sale or exchange. Tax-smart decisions Taxes can affect the economics of an investment property from the time you buy it through the time you sell it. Decisions about your involvement in rental activities, improvements to the property, and the timing and structure of a sale can all have tax consequences. Contact us to discuss tax planning related to your investment real estate. We can help you identify potential tax-saving opportunities and avoid tax pitfalls. © 2026 

Payroll administration can be challenging for small business owners — and mistakes can create problems for both employers and employees. Incorrect paychecks can frustrate employees and require time and resources to fix. Errors involving tax withholding, deposits or reporting can also expose your business to interest and penalties. Mistakes can happen even with payroll software or an outside payroll provider. Here are some steps you can take to reduce your risk. Withhold and deposit taxes properly Employers generally must withhold income tax and employees’ share of Social Security and Medicare taxes from their wages, as well as pay the employer’s share of Social Security and Medicare taxes. You’re also responsible for depositing these amounts with the IRS and reporting them on the appropriate payroll tax returns. Additional rules may apply to the 0.9% additional Medicare tax, federal unemployment tax, and various state and local taxes. Errors when entering information from an employee’s Form W-4, “Employee’s Withholding Certificate,” can result in incorrect federal income tax withholding. Changes to an employee’s name, address or visa status can create problems, too. Perhaps the most dangerous mistake is failing to deposit withheld federal income tax, Social Security and Medicare taxes and the employer’s share of Social Security and Medicare taxes on time. IRS penalties accrue quickly because they increase with the length of the delay. That is: If a deposit is one to five calendar days late, the penalty is 2% of the unpaid deposit, If a deposit is six to 15 calendar days late, the penalty is 5% of the unpaid deposit, and If a deposit is more than 15 calendar days late, the penalty is 10% of the unpaid deposit. The penalty rate may increase to 15% if more than 10 calendar days elapse after the date of the first notice or letter from the IRS. Alternatively, a 15% penalty may apply on the day a notice or letter for immediate payment is received. If the IRS can make the case that a failure to deposit withheld taxes (income tax and the employee’s share of Social Security and Medicare taxes) was willful, a 100% penalty may apply. Such penalties can also be levied personally against all responsible individuals in an organization. To reduce the risk of withholding and deposit errors, establish procedures for reviewing employee withholding information and monitoring deposit deadlines. Even if you use an outside payroll provider, your business generally remains responsible for making sure federal taxes are deposited and paid — and payroll tax returns are filed — on time. Regularly reconcile your payroll records with amounts reported and deposited, and promptly investigate any discrepancies. Report all forms of taxable compensation Remember, salaries or wages aren’t the only items that must be included in employees’ taxable income. You must also include the value of bonuses, awards and certain fringe benefits. Failing to withhold sufficient amounts from employees’ total reportable income can also result in noncompliance with IRS rules. In turn, this could lead to penalties for failing to properly withhold or deposit payroll taxes. What’s more, the employer could be subject to information return penalties for incorrect Forms W-2, “Wage and Tax Statement.” To minimize your exposure, review the tax treatment of bonuses, awards and fringe benefits before processing them through payroll. This is particularly important when adding a new benefit or revising a compensation arrangement because the rules for federal income tax withholding, Social Security and Medicare taxes aren’t always the same. Correct mistakes promptly Despite your best efforts, mistakes can happen. When you discover one, first determine: What went wrong, Which employees and payroll periods are affected, and Whether the error involves taxable wages, withholding, deposits or information reporting. Then determine the appropriate correction. It’s important to act promptly because available correction procedures may vary based on when you discovered the error. Depending on the mistake, you may need to adjust an employee’s pay, correct your payroll records, make an additional tax deposit or correct a previously filed employment tax return. For example, certain errors reported on Form 941, “Employer’s Quarterly Federal Tax Return,” may need to be corrected using Form 941-X, “Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund.” An incorrect Form W-2 may require Form W-2c, “Corrected Wage and Tax Statement.” Keep records explaining the error and the steps taken to correct it. If employees’ pay or tax information is affected, communicate with them promptly so they understand what happened and what, if anything, they need to do. Keep your payroll on track Payroll mistakes can be costly, but strong review procedures can reduce the likelihood that they’ll occur — and prompt action can limit the damage when they do. If you discover a payroll error or have questions about your payroll tax obligations, contact us. We can help you understand the applicable rules and refine your payroll practices to stay in compliance. © 2026 

Life insurance can provide critical financial protection for the people who depend on you or help you achieve other estate planning goals. But to serve its intended purpose, the coverage amount, policy type, ownership structure and beneficiary designations must all be carefully considered. Determine how much coverage you need There’s no universal formula for calculating the appropriate amount of life insurance. Your needs depend on your income, debts, family responsibilities, assets and long-term objectives. Begin by estimating the financial obligations that might remain after your death. These may include: Funeral and other final expenses, Mortgage balances and other debts, Income replacement for a surviving spouse or partner, Child care and education costs, Support for a dependent with special needs, and A desired inheritance or charitable gift. Next, subtract resources available to meet those obligations, such as savings, investments, retirement benefits and existing insurance policies. The difference can provide a starting point for determining how much additional coverage you need. Warning: Don’t assume employer-provided insurance is sufficient. Group coverage is often limited to a multiple of salary and may end when you leave your job. Select coverage that matches your objectives Term life insurance generally provides coverage for a specified period and may be appropriate for temporary needs, such as replacing income during your working years or paying off a mortgage. It typically costs less initially than permanent coverage. Permanent insurance, such as whole life and universal life, is designed to remain in force for life as long as the required premiums are paid. It may also accumulate cash value. This type of policy can be useful when the need for coverage is expected to continue indefinitely, such as providing estate liquidity, supporting a lifelong dependent or funding a legacy. Affordability matters. A policy offers little protection if rising premiums or changing circumstances may make it difficult to keep the coverage in force. Review policy guarantees, projected values, fees and premium requirements carefully before you buy. Coordinate life insurance with your estate plan Life insurance can replace income, equalize assets among children active and inactive in a family business, provide cash to pay estate tax, or serve as a vehicle for passing leveraged funds free of estate tax. Policy proceeds generally aren’t subject to income tax. But if you own the policy, the proceeds will be included in your taxable estate. If your estate is large enough that estate taxes are a concern, some or all of the proceeds could be subject to estate tax. Ownership depends on several factors, including who has the right to name the beneficiaries of the proceeds. Generally, to reap maximum tax benefits, you must sacrifice some control and flexibility as well as some ease and cost of administration. Determining who should own the life insurance policy is a complex task because there are many possible owners, including you or your spouse, your children, your business, or an irrevocable life insurance trust (ILIT). An ILIT can own one or more policies on your life, and it manages and distributes policy proceeds according to the terms you establish when you set up the trust. The trust keeps insurance proceeds, which could otherwise be subject to estate tax, out of your estate (and possibly your spouse’s). You can’t retain any powers over the policy, such as the right to change the beneficiary. The trust can be designed to make a loan to your estate to meet liquidity needs, such as paying estate tax. To choose the best owner, consider why you want the insurance, such as to replace income, to provide liquidity or to transfer wealth to your heirs. You must also determine the importance of tax implications, control, flexibility, and ease and cost of administration. Review your coverage Life insurance shouldn’t be a “set it and forget it” decision. Many factors affect your need for life insurance, and these factors change over time. To make sure you’re not over- or underinsured, review your insurance needs periodically — especially when your life circumstances change. We can help you assess whether you have sufficient life insurance coverage for your needs and goals. © 2026 

Hiring independent contractors provides your business with valuable flexibility, particularly when you require specialized expertise or help with a short-term project. But calling someone an independent contractor doesn’t automatically make them one. Worker status depends on your actual working relationship. And getting it wrong can expose your business to tax liabilities and other consequences. What’s in a name? Businesses generally must withhold federal income, Social Security and Medicare taxes for employees and pay the employer’s share of Social Security and Medicare taxes, as well as federal unemployment tax. These obligations typically don’t apply when you engage an independent contractor. So if you misclassify an employee as an independent contractor, your business could become responsible for unpaid employment taxes, penalties and interest. Depending on the circumstances, you may also be liable for unpaid payroll taxes. Consequences can extend beyond taxes. Misclassified employees may be able to claim unpaid minimum wages, overtime pay and other workplace protections. State laws could impose additional requirements involving unemployment and workers’ compensation insurance, paid time off, and other benefits. All of these could lead to legal costs and other unplanned expenditures. Working relationship For federal employment tax purposes, the IRS looks at the entire relationship between a business and worker. No single factor determines classification. Instead, relevant facts generally fall into three categories. The first is behavioral control, which concerns whether your business can direct what a worker does and how the work is performed. Instructions about when, where and how to work, as well as training your business provides, may point to the worker being an employee. Second is financial control. This focuses on the business aspects of the relationship. Relevant considerations include: How you pay the worker, Whether you reimburse the individual’s expenses, Which party supplies tools and equipment, Whether the person offers services to other businesses, and The worker’s opportunity for profit or risk of loss. Finally, the type of relationship matters. Employee status may be supported if you provide certain benefits to the worker or the person handles ongoing responsibilities that are central to your operations. A written agreement identifying someone as an independent contractor can be relevant, but it doesn’t override the facts of the relationship. Remote work doesn’t change these basic principles. Someone who works from home or another location other than your business’s primary workplace isn’t automatically an independent contractor. The question remains how much control and independence exist in the actual working arrangement. Different laws, different tests Worker classification has become an especially important area to monitor because different laws can apply different tests. The IRS uses a common-law framework for federal employment taxes. Meanwhile, the U.S. Department of Labor proposed new independent-contractor regulations in February 2026 for federal wage-and-hour law purposes. The proposal would replace the agency’s 2024 rule with a streamlined “economic reality” test. As of this writing, the proposal hasn’t been finalized. State tax, wage-and-hour and employment laws may apply their own standards as well. As a result, a classification that seems appropriate under one law may not be so under another. But this doesn’t mean you should wait for an audit, complaint or tax notice before reviewing your worker classifications. Before problems arise We can help you evaluate worker relationships under current rules and determine whether you need to reclassify anyone working for you. Addressing questions early can be far less costly than correcting them after a government agency or worker raises the issue. © 2026 

Teachers and other educators often spend their own money on books, supplies, equipment and other classroom needs. For 2026, eligible educators may have two ways to deduct qualifying unreimbursed expenses. One deduction is available whether or not they itemize, and a new deduction under the One Big Beautiful Bill Act (OBBBA) is available to itemizers. The long-time deduction for nonitemizers and itemizers Eligible educators can deduct some of their unreimbursed out-of-pocket classroom costs under the educator expense deduction. This is an “above-the-line” deduction, which means you don’t have to itemize to claim it and it reduces your adjusted gross income (AGI), which has an added benefit: AGI-based limits affect a variety of tax breaks, so lowering your AGI might help you maximize your tax breaks overall. To be eligible, taxpayers must be kindergarten through grade 12 teachers, instructors, counselors, principals or aides. Also, they must work at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law. For 2026, up to $350 of qualified expenses paid during the year that weren’t reimbursed can be deducted. (The deduction limit is $700 for married couples filing a joint return if both spouses are eligible educators, but they can’t deduct more than $350 each.) The limit is annually indexed for inflation and was $300 for 2025. But it typically doesn’t go up every year. Examples of qualified expenses include books, classroom supplies, computer equipment (including software), other materials used in the classroom, and professional development courses. For courses in health and physical education, the costs for supplies are qualified expenses only if related to athletics. The new deduction for itemizers The OBBBA made permanent the Tax Cut and Jobs Act’s (TCJA’s) suspension of miscellaneous itemized deductions subject to the 2% of AGI floor. This had included unreimbursed employee business expenses such as teachers’ out-of-pocket classroom expenses. The suspension had been in place since 2018. But the OBBBA created a new miscellaneous itemized deduction for educator expenses. And this deduction isn’t subject to the 2% of AGI floor or a specific dollar limit. The new deduction is available for eligible expenses incurred after December 31, 2025. This is in addition to the $350 above-the-line deduction. So educators eligible for both deductions can first claim the above-the-line deduction and reap the benefits of reducing their AGI and, if they have eligible expenses in excess of $350, claim the itemized deduction for those excess expenses. (Educators can’t claim both deductions for the same expenses.) Who is eligible and what expenses qualify are a little broader for the itemized deduction than for the above-the-line deduction. For example, interscholastic sports administrators and coaches are also eligible. And, for courses in health and physical education, the supplies don’t have to be related to athletics. Before deciding to claim the itemized deduction, you need to determine whether itemizing makes sense for you overall. Taxpayers can choose to itemize this and certain other deductions (such as mortgage interest, property tax and charitable donations) or to take the standard deduction based on their filing status. Itemizing deductions saves tax only when the total is greater than the standard deduction. The OBBBA made the nearly doubled standard deductions under the TCJA permanent, so fewer taxpayers benefit from itemizing. For 2026, the standard deduction is $16,100 for singles and married taxpayers filing separately, $24,150 for heads of household and $32,200 for married couples filing jointly. Keeping good records Do you expect to qualify for one or both of these deductions? Be sure to track your qualifying expenses carefully. Save your receipts to document the date and amount of each purchase, and note the purpose. Good records are especially important now that there are two educator deductions with differing rules. Contact us to discuss which educator expenses you can deduct and how the deductions may affect your 2026 taxes and planning strategies. © 2026 

To attract and retain skilled workers, your small business needs to offer more than competitive pay. Your benefits package matters, too — and benefits with favorable tax treatment can be even more valuable to prospective and existing employees. Open enrollment is right around the corner for many businesses. As you review your benefits package for 2027, here are some benefits worth considering. Although the IRS won’t announce the inflation-adjusted amounts for 2027 until later this year, the 2026 figures provide a starting point for planning. In addition, the One Big Beautiful Bill Act (OBBBA) changed certain tax rules for fringe benefits that you should be aware of. Insurance Businesses can provide several types of insurance benefits that may be fully or partially tax-free to employees. The rules vary by benefit: Health insurance. If you maintain a health care plan for employees, employer payments for coverage generally are excluded from taxable wages. This includes coverage for an employee’s spouse and dependents. Employee contributions can also be excluded from wages when made on a pretax basis through a cafeteria plan. Otherwise, such amounts are included in their wages but may be deductible by employees as an itemized deduction, subject to the applicable limits. Disability insurance. Employer-paid premiums for disability coverage generally aren’t taxable to employees when the coverage is provided under a qualifying plan. Employee-paid premiums generally aren’t deductible by the employee or excludable from income, except for pretax contributions through a cafeteria plan. The tax treatment of disability benefits received later depends in part on who paid the premiums and whether they were paid on a pretax basis. Consider the tax treatment of benefits when deciding how to structure employer and employee contributions under your plan. Long-term care insurance. Employer-provided long-term care insurance can generally be excluded from an employee’s wages. Long-term care coverage provided through a flexible spending arrangement or similar arrangement is treated differently and can’t be excluded from an employee’s wages for federal income tax purposes. However, employer contributions aren't subject to Social Security, Medicare or federal unemployment taxes. Life insurance. Employees generally can exclude the cost of up to $50,000 of employer-provided group-term life insurance coverage from income. The cost of coverage above $50,000 is generally taxable to the employee based on IRS rates, reduced by amounts the employee paid toward the coverage. Other tax-advantaged benefits Insurance isn’t the only way to provide tax-favored compensation. Other benefits to consider include: Dependent care assistance. Starting in 2026, the OBBBA increased the annual exclusion for employer-provided dependent care assistance from $5,000 to $7,500 ($3,750 for married filing separately). The exclusion is subject to other limitations, including the employee’s and spouse’s earned income and the requirements that apply to dependent care assistance programs. Adoption assistance. Employer-provided benefits under a qualified adoption assistance program may be excluded from income, subject to the applicable rules and limits. For 2026, the maximum exclusion is $17,670 per child. The exclusion begins to phase out at modified adjusted gross income of $265,080 and is fully phased out at $305,080. Employer-provided adoption benefits generally remain subject to Social Security, Medicare and federal unemployment taxes even though they’re excluded from federal income tax. Both the exclusion amount and applicable income thresholds are adjusted annually for inflation. Educational assistance. Employers can provide up to $5,250 of tax-free educational assistance per employee each year under a qualifying written educational assistance program. The OBBBA made this exclusion permanent and provided that the $5,250 limit will be adjusted for inflation for tax years beginning after 2026. The benefit can cover qualifying education expenses, including graduate-level tuition, and can also be used for principal or interest payments on an employee’s qualified education loans. Transportation benefits. You can provide qualified transportation benefits tax-free within federal limits. For 2026, the monthly exclusion is $340 for qualified transportation in a commuter highway vehicle and transit passes, and $340 for qualified parking. These amounts are adjusted annually for inflation. However, businesses generally can’t deduct qualified transportation fringe benefits they provide to employees. De minimis fringe benefits. You can generally provide employees with certain low-value benefits tax-free when the value is so small — and the benefit is provided with such infrequency — that accounting for it would be unreasonable or administratively impracticable. Examples include occasional personal use of an employer’s copier, tickets to entertainment or sporting events, noncash holiday or birthday gifts, and certain meals. Cash and cash-equivalent benefits, such as gift cards and gift certificates, generally don’t qualify for this exclusion. No-additional-cost services. You may be able to provide employees with certain services tax-free when doing so doesn’t impose a substantial additional cost on your business. This benefit generally applies to excess-capacity services that you ordinarily provide to customers in the same line of business in which the employee works. For example, a hotel may allow employees to use vacant rooms, or an airline may allow employees to fly in otherwise-empty seats. Additional eligibility and nondiscrimination requirements apply. The OBBBA also made some unfavorable changes to the tax rules for fringe benefits. For example, it permanently eliminated the exclusion for qualified bicycle commuting reimbursements. It also permanently eliminated the exclusion for qualified moving expense reimbursements for most employees. (Exceptions may apply to certain members of the U.S. Armed Forces and the intelligence community.) Beware: Some fringe-benefit exclusions are subject to nondiscrimination rules. A benefit that’s tax-free for rank-and-file employees may not receive the same treatment for certain highly compensated employees or owners. Special rules also apply to certain business owners, including more-than-2% S corporation shareholders and partners. Enhance the value of your benefits package Fringe benefits can add significant value to your compensation package. By understanding how different benefits are taxed, you can offer employees benefits that may improve their after-tax compensation while making the most of your business’s compensation budget. Contact us for help evaluating your current benefits and fine-tuning them as needed before open enrollment begins. © 2026 

Do you hold an interest in a business that’s closely held or family owned? If so, a buy-sell agreement should be a component of your estate plan. It establishes how your ownership interest (and those of other owners) will be handled following certain triggering events, including death, disability, divorce, retirement, termination of employment or withdrawal from the business. But that’s not all. Determining an ownership interest’s worth Depending on its terms, a buy-sell agreement may give the business or the remaining owners the option — or obligation — to purchase the departing owner’s interest. Life insurance is often used to provide funding when an owner dies. One of the most important provisions in a buy-sell agreement is the method used to determine what an ownership interest is worth. An outdated or poorly designed valuation provision can create financial problems — and potentially disputes — precisely when the agreement is needed most. Buy-sell agreements generally use one or more of the following approaches: Independent appraisal. A qualified business valuation professional determines the value of the ownership interest when a triggering event occurs. A predetermined formula. The agreement calculates value using measures such as book value, revenue or a multiple of earnings. A negotiated price. The owners agree on the value of the business or the departing owner’s interest. An independent appraisal can provide a valuation based on the company’s circumstances at the time of the triggering event. A formula may be simpler, but it can become outdated as the business evolves. Changes in profitability, assets, industry conditions and other factors can cause a formula to produce a price that no longer reflects economic reality. Negotiation offers flexibility, but it also carries risk. Reaching an agreement may be difficult after an owner’s death or during a contentious departure. One alternative is to allow the parties to negotiate first and require an independent appraisal if they can’t agree within a specified period. 2 buy-sell agreement types The type of buy-sell agreement you use can have significant tax and estate planning implications. Two common options are redemption agreements and cross-purchase agreements. A redemption agreement permits or requires the company to purchase a departing owner’s interest, while a cross-purchase agreement permits or requires the remaining owners to purchase the interest. A disadvantage of cross-purchase agreements is that they can be cumbersome, especially if there are many owners. For example, if life insurance is used to fund the purchase of a departing owner’s shares, each owner will have to purchase an insurance policy on the lives of each of the other owners. But redemption agreements may trigger a variety of unwelcome tax consequences. Miscellaneous benefits A carefully structured buy-sell agreement does more than establish what happens when an owner leaves the business. It can also help prevent ownership from unexpectedly passing to outsiders, provide a market for an ownership interest that might otherwise be difficult to sell and create liquidity for an owner’s estate. For a family business, these provisions can be especially valuable. A buy-sell agreement may help keep control in the hands of family members or other intended owners while providing cash to an estate or beneficiaries who won’t participate in the business. Under certain circumstances, an agreement may also affect how an ownership interest is valued for federal estate tax purposes. Because the tax rules governing these arrangements are complex, the agreement should be coordinated with the owner’s broader estate and tax planning. Review your agreement regularly Even a carefully drafted buy-sell agreement can lose its effectiveness as circumstances change. A business may grow significantly, new owners may join, existing owners may leave, insurance coverage may become inadequate or the owners’ estate planning goals may evolve. So regular reviews are essential. We can help you develop a buy-sell agreement in conjunction with your estate plan or evaluate whether your existing agreement’s provisions still fit your business and estate planning objectives. © 2026 

Occupational fraud can occur at any level of an organization. But misconduct by owners and senior executives can be particularly costly because they usually have greater authority and can override internal controls. According to the Association of Certified Fraud Examiners’ (ACFE’s) Occupational Fraud 2026: A Report to the Nations, owners and executives account for 16% of all occupational fraud perpetrators. Yet they cause nine times the median loss associated with nonmanagerial fraudsters. Even if you trust your leadership team, strong safeguards can help protect your business and its reputation. Why it happens Forensic accountants commonly use the “fraud triangle” to understand occupational fraud. It focuses on three factors that generally need to be in place for people to steal from their employers: pressure, opportunity and rationalization. Pressure can be personal or professional. An executive facing financial difficulties or aggressive performance targets may be tempted to manipulate financial results. The ACFE found that perpetrators experiencing excessive organizational pressure are associated with a median fraud loss of $532,000 — the highest among the behavioral warning signs identified. Opportunity exists when someone has the access or authority to commit and conceal wrongdoing. Executives pose an elevated threat because they may approve transactions, influence employees, or override established procedures. More than half of the ACFE report’s cases involve either inadequate or overridden controls. Rationalization occurs when perpetrators can justify their dishonest behavior. Executives might, for example, believe they’re entitled to steal because their compensation is inadequate or that manipulating results is acceptable because it will eventually benefit the business. You can help reduce fraud risk by keeping this triangle in mind and promoting an antifraud culture. For instance, try to set realistic, achievable performance goals and intervene if executives seem excessively entitled or secretive. Strengthen safeguards at the top Internal controls that protect key functions — such as your accounting, and shipping and receiving departments — are also essential. But preventing executive fraud may require additional measures. For example: Establish clear rules for overriding controls, including requiring a second approval and documentation explaining why the exception is necessary, Mandate fraud awareness training for employees, including executives, Conduct management reviews, surprise audits and financial monitoring activities, and Offer tiplines or web portals that enable employees to anonymously report suspected wrongdoing. Reporting systems are especially important because tips remain the most common way to detect occupational fraud. The 2026 ACFE study found that 43% of cases are uncovered through tips, and employees provide more than half of them (other tips come primarily from vendors and customers). Because of the risks of retribution, confidentiality is critical if you want workers to blow the whistle on crooked executives. Allegations involving a senior executive or other influential individual may warrant engaging an independent fraud specialist to help ensure an objective investigation, including evidence gathering and witness interviews. If fraud is confirmed, your organization should respond based on the circumstances, applicable laws and its own policies, not the perpetrator’s position. Promote accountability Executive fraud may never be completely preventable, but you can make it harder to commit and easier to detect. To promote accountability, implement strong controls, effective employee training and confidential reporting mechanisms. Contact us for help assessing fraud risks and strengthening the safeguards that will protect your business. © 2026