Financial Planning


CARES Act for Attorneys

The CARES Act contains several key provisions helpful to attorneys and law firms.

On March 27th, the President signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  These rules are brand new and include significant tax and cash flow planning opportunities.  These are just a few of the provisions.  You should consult with your tax professional to understand the final rules and regulations and how it might affect you.  I have bolded potential planning opportunities that you may want to consider:

  • Individuals who had up to $75,000 in adjusted gross income in 2019 (or 2018 if 2019 is not filed) will receive a one-time payment of $1,200, while married couples with AGI up to $150,000 will get $2,400. Additionally, taxpayers will receive an additional $500 for each qualified child, while individuals and families with income above their respective thresholds will see their relief payments reduced by $50 for every $1,000 in AGI.

Delay filing your 2019 tax return if you would qualify on your 2018 tax return.

  • Small businesses (up to 500 employees) are eligible for SBA 7(a) small business loans up to a maximum of the lesser of $10 million, or 2.5 times the average monthly payroll costs over the previous year (excluding amounts over $100,000 per person). The loan can be used to cover payroll, rent, utilities and group healthcare insurance premiums.  The loan may be forgiven is specific criteria are followed.  The loan interest is set at a maximum of 4%, making this loan incredibly affordably.

If you follow the guidelines, your loan may be 100% forgivable, making this free money to keep your employees on the payroll.  Contact your local banker immediately to get started as the bankers are going to be incredibly busy helping people. 

  • If you do not qualify for the loan program, you may qualify for tax credits equal to 50% of wages paid to each employee, up to a maximum of $10,000 per employee. You must show a decrease in revenue in one quarter of more than 50% compared to the same quarter in 2019. The rules are very complicated, so check with your tax professional.

Small businesses may receive a credit of up to $5,000 for each employee that they pay over $10,000.  You should begin to run pro-forma calculations on your revenue to determine if you qualify for this benefit.

  • Required minimum distributions are waived in 2020, and taxpayers who have already taken their RMDs for 2020 have the option of returning them, if they so desire.

Consider altering your RMD payments this year to reduce your tax liability.  Utilize other sources of cash flow besides IRAs.

  • The 2019 IRA contribution deadline has been extended to July 15, 2020.

Consider contributing additional amounts to an IRA, including Roth IRAs. If you are not eligible due to income limitations, consider non-deductible contributions and if possible, a roth conversion strategy.

  • Federal Student Loan payments can now be deferred until September 30, 2020. No interest will accrue during this time.

Check to see if your student loans qualify.  They must be federal loans.  Private loans do not apply, but many lenders may follow the Federal rule.  Check with your lender.  Also consider paying down student loans now.  You will effectively be reducing your loan principal by 100% while interest is at zero percent.

  • The Act provides for special “coronavirus-related” distributions from IRAs and employer-sponsored retirement plans of up to $100,000 that are exempt from the 10% early withdrawal penalty, can be repaid over a three year period and are includable in taxable income over a three year period to the extent not repaid. A coronavirus-related distribution means a distribution made on or after January 1, 2020 and before December 31 and generally may not exceed $100,000 in total for an individual.    The term “coronavirus-related” distribution means any distribution from an eligible retirement plan made to an individual:
    • who has been diagnosed with COVID-19 (as confirmed by a CDC-approved test),
    • whose spouse or dependent is diagnosed with COVID-19, or
    • who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury.
    • The Act permits the Plan Administrator to rely on the participant’s certification that they qualify for the distribution.

If you need cash flow now, you can take a non-taxable distribution without penalty and repay it within a 3 year period.

  • 401(K) loans have a temporary increase in the loan limit of up to the lesser of $100,000 or 100% of the participant’s vested account. (The usual limit is the lesser of $50,000 or 50% of the participant’s vested account balance). This provision applies to loans made during the next 180 days.

Consider a 401(k) loan carefully and use some cash flow modeling software to determine if this is in your best interest.  This is very tempting, but probably not a good time to take a 401(k) loan.

  • Any loan payment due on any outstanding loan between now and December 31, 2020 is delayed for one year. The five-year repayment timeframe is extended for one year and interest continues to accrue on the loan during the delay period.

If you currently have an outstanding 401(K) loan, contact your service company to suspend payments for all of 2020.

  • $300 above the line charitable deduction- Taxpayers who do not itemize are now eligible to deduct up to $300 from a cash only contribution to a qualified charity.  This does not include donor advised funds or 509(a)(3) supporting organizations.

Consider making up to a $300 charitable donation to help out your community.  This is new if you do not itemize.

  • The AGI limitation on qualified cash contributions to charity (for those who itemize) has been temporarily increased to a maximum of 100% of AGI.  In essence, one could wipe out their entire tax liability for 2020 by donating cash to charity.

If you have cash available you can significantly reduce your current tax liability.  Utilize some cash flow planning software to determine how much this can help.

Self-employed individuals may be eligible for pandemic unemployment insurance. If you are self-employed, you now may be eligible for some unemployment benefits which has never happened before.

As you can see, the provisions in this new bill can be incredibly helpful to you, your business, and your family.  The rules are complicated and be sure to follow them in order to be eligible for these benefits. 

Our team at Envision Wealth Management is ready to help you and your business.  If you would like to speak with me and brainstorm how this new law can help you, I am available for 15 minute phone calls here: 

Jonathan Muhlendorf Schedule




Does The Secure Act Affect Me?

Congress recently passed—and the President signed into law—the SECURE Act, landmark legislation that may affect how you plan for your retirement. Many of the provisions go into effect in 2020, which means now is the time to consider how these new rules may affect your tax and retirement-planning situation. However, clients, financial advisers and tax professionals must pay close attention to the effective dates of the various provisions of the SECURE Act. For example, some of the SECURE Act’s provisions became effective prior to 2020.

Here is a look at some of the more important elements of the SECURE Act that have an impact on individuals. The changes in the law might provide you and your family with tax-savings opportunities. However, not all of the changes are favorable, and there may be steps you could take to lessen their impact.

Setting Every Community Up for Retirement Enhancement Act (SECURE Act)

Selected key provisions affecting individuals:

Repeal of the maximum age for traditional IRA contributions.

Before 2020, traditional IRA contributions were not allowed once the individual attained age 70½. Starting in 2020, the new rules allow an individual of any age to make contributions to an IRA, if the individual has compensation, which generally means earned income from wages or self-employment.

Required minimum distribution age raised from 70½ to 72.

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Before 2020, retirement plan participants and IRA owners were generally required to begin taking required minimum distributions, or RMDs, from their plan or IRA by April 1 of the year following the year they reached age 70½. The age 70½ requirement was first applied in the retirement plan context in the early 1960s and, until recently, had not been adjusted to account for increases in life expectancy.

For distributions required to be made after December 31, 2019, for individuals who attain age 70½ after that date, the age at which individuals must begin taking distributions from their retirement plan or IRA is increased from 70½ to 72. In addition, certain individuals working past age 72 may be able to defer RMDs even further.

Partial elimination of stretch IRAs.

For deaths of plan participants or IRA owners occurring before 2020, beneficiaries (both spousal and nonspousal) were generally allowed to stretch out the tax-deferral advantages of the plan or IRA by taking distributions over the beneficiary’s life or life expectancy (in the IRA context, this is sometimes referred to as a “stretch IRA”).

However, for deaths of plan participants or IRA owners beginning in 2020 (later for some participants in collectively bargained plans and governmental plans), distributions to most nonspouse beneficiaries generally are required to be distributed within ten years following the plan participant’s or IRA owner’s death. So, for those beneficiaries, the “stretching” strategy is no longer allowed.

Exceptions to the 10-year rule are allowed for distributions to (1) the surviving spouse of the plan participant or IRA owner; (2) a child of the plan participant or IRA owner who has not reached majority; (3) a chronically ill individual; (4) a disabled beneficiary; and (5) any other individual who is not more than ten years younger than the plan participant or IRA owner.

Those beneficiaries who qualify under this exception generally may take their distributions over their life expectancy (as allowed under the rules in effect for deaths occurring before 2020).

Note: This particular provision of the SECURE Act can significantly affect your current retirement plans and planning for beneficiaries of your IRAs and certain qualified plans (e.g., IRC section 401(k)) upon your death.  For individuals who died prior to 2020, the SECURE Act’s impact will be more limited regarding stretch IRAs. 

If your retirement and/or estate plan include designated beneficiaries, other than those enumerated exceptions in the paragraph above, then you need to determine whether your goals and objectives are impacted by the SECURE Act.  For example, if your designated beneficiaries include adult children, a trust, etc., the SECURE Act will affect such beneficiaries’ ability to accomplish a stretch IRA strategy.

 While a stretch IRA strategy may be limited under the SECURE Act, there are other strategies that can help extend a beneficiary’s recognition of income. In addition, there are methods to replenish (or replace) the benefits lost, that were available to designated beneficiaries prior to the passage of the SECURE Act.

Expansion of IRC section 529 education savings plans to cover registered apprenticeships and distributions to repay certain student loans.

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An IRC section 529 education savings plan (a 529 plan) is a tax-exempt program established and maintained by a state, or one or more eligible educational institutions (public or private). Any person can make nondeductible cash contributions to a 529 plan on behalf of a designated beneficiary. The earnings on the contributions accumulate tax-free. Distributions from a 529 plan are excludable up to the amount of the designated beneficiary’s qualified higher education expenses.

Before 2019, qualified higher education expenses didn’t include the expenses of registered apprenticeships or student loan repayments.

However, for distributions made after December 31, 2018 (the effective date is retroactive), tax-free distributions from 529 plans can be used to pay for fees, books, supplies, and equipment required for the designated beneficiary’s participation in an apprenticeship program. In addition, tax-free distributions (up to $10,000 per beneficiary) are allowed to pay the principal and/or interest on a qualified education loan of the designated beneficiary, or a sibling of the designated beneficiary. Be aware that some states may not follow the federal law changes relating to 529 plans.

Kiddie tax changes for gold star children and others.

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In 2017, Congress passed the Tax Cuts and Jobs Act (TCJA), which made changes to the so-called “kiddie tax,” which is a tax on the unearned income of certain children. Before enactment of the TCJA, the net unearned income of a child was taxed at the parents’ tax rates if the parents’ tax rates were higher than the tax rates of the child.

Under the TCJA, for tax years beginning after December 31, 2017, the taxable income of a child attributable to net unearned income is taxed according to the brackets applicable to trusts and estates. Children to whom the kiddie tax rules apply and who have net unearned income also have a reduced exemption amount under the alternative minimum tax (AMT) rules.

There had been concern that the TCJA changes unfairly increased the tax on certain children, including those who were receiving government payments (i.e., unearned income) because they were survivors of deceased military personnel (“gold star children”), first responders, and emergency medical workers.

The new rules enacted on December 20, 2019, repeal the kiddie tax measures that were added by the TCJA. So, starting in 2020 (with the option to start retroactively in 2018 and/or 2019), the unearned income of children is taxed under the pre-TCJA rules, and not at trust/estate rates. Additionally, starting retroactively in 2018, the new rules also eliminate the reduced AMT exemption amount for children to whom the kiddie tax rules apply and who have net unearned income.

Penalty-free retirement plan withdrawals for expenses related to the birth or adoption of a child.

Generally, a distribution from a retirement plan must be included in income. Unless an exception applies (for example, distributions in case of financial hardship), a distribution before the age of 59½ is subject to a 10% early withdrawal penalty on the amount includible in income.

Starting in 2020, plan distributions (up to $5,000) that are used to pay for expenses related to the birth or adoption of a child are penalty-free. That $5,000 amount applies on an individual basis, so for a married couple, each spouse may receive a penalty-free distribution up to $5,000 for a qualified birth or adoption.

Taxable non-tuition fellowship and stipend payments are treated as compensation for IRA purposes.

Before 2020, stipends and non-tuition fellowship payments received by graduate and postdoctoral students were not treated as compensation for IRA contribution purposes, and so could not be used as the basis for making IRA contributions.

Starting in 2020, the new rules remove that obstacle by permitting taxable non-tuition fellowship and stipend payments to be treated as compensation for IRA contribution purposes. This change will enable these students to begin saving for retirement without delay.

These are just some of the SECURE Act’s significant changes that may affect your current retirement and/or estate plans. Please contact us so we can help tailor a plan, with your other advisers, that will work best for you.


The content of this material was provided to you by Lincoln Financial Advisors Corp. for its representatives and their clients. Lincoln Financial Advisors Corp. and its representatives do not provide legal or tax advice. You may want to consult a legal or tax advisor regarding any legal or tax information as it relates to your personal circumstances.

7 Ways To Spend Your Summer Bonus

Summer is a great season.  We spend more time outside, take a vacation, or just cut out from work a little early, perhaps to enjoy a local concert or meet friends on the beach.   Summer is also when many bonuses are distributed.  If you got one, congratulations!

Do yourself a favor and first consider taking up to 25% of your mid-year bonus and spend it on you and your family.  You worked hard and deserve to enjoy the fruits of your labor.

Consider these 7 ways to spend your summer bonus to help accomplish your financial goals.

1 Put Your Bonus Back Into The Business

The best use of your mid-year bonus may simply be to re-invest in your business.  Review your business plan (you do have one right?) and determine where you can put a few dollars to work.  In most cases our client’s money is invested in new technology, marketing, or human capital.


2 Pay Down Student Loans

You may choose to pay down your student loan.  Many clients ask us if it is better to pay down student loan debt faster or invest extra dollars in the stock market.  There is no question that over a longer period of time you may be able to do better investing extra cash as opposed to saving on the student loan interest.  This depends on the interest rate that your lender charges you.  If you can get a higher return than the interest you are being charged, it may make sense.  Our cash flow modeling, available to all of our clients on their personal website, is a great tool that we use to help our clients make this decision.


3 Increase your retirement plan contributions

Now is a good time to calculate just how much you are saving in your 401(k) retirement account and if you should contribute more.  People under 50 can save a maximum of $19,000 from their paycheck in 2019.  If you are over age 50 in 2019, you can save a total of $25,000.  Since we are halfway through the calendar year, look at where you are and adjust your contributions.  Consider contributing to your Roth 40(k) account which may provide tax-free income during retirement.

4 Fund Emergency Reserves

Most financial planners recommend 3 to 6 months of expenses be held in cash for emergency purposes.  That is a lot of cash on the sideline.  Our customized financial plans consider access to lines of credit and liquid investments to help determine the proper emergency reserve amount.  If you have access to a line of credit or other assets that can be easily converted into cash without penalty (within 3 days), then we recommend no more than 2 months of expenses to be held in cash as an emergency reserve.  Ensure that you have the proper amount of reserves and then deploy the rest of your bonus in other areas to help you reach your goals instead of making the banks richer.


5 Fund a 529 college savings plan

A 529 college savings plan allows you to set aside dollars that can grow tax-free if used to pay for higher education qualified expenses.  A recent change in the laws also allows you to use up to $10,000 per year for private high school tuition.  We almost always recommend that law firms and other businesses set up an employer-sponsored college savings plan.  In Virginia you can purchase a 529 plan with no upfront or back-end sales charges using the employer sponsored share class.  This could potentially save you thousands in fees.  This design does not increase overhead and is simply a way to pass along a savings to all employees.


6 Fund your Flexible Spending Account

Many employers offer a healthcare flexible spending account.  Adjust your future paychecks and fund this account with pre-tax dollars which also will save you on taxes.  FSAs cover a variety of healthcare products and services, from acupuncture and physical therapy to vaccines.  The best use of the benefit is to pay for any deductibles and co-payments, but you cannot use the funds to pay premiums.

You can put up to $2,650 of tax-free money into this account in 2019, according to the IRS. Note that you must spend the money saved in an FSA by the end of the year.


7 Fund Your HSA Account

Another health-related benefit you may be able to use is a health savings account (HSA).  Many high deductible health plans (HDHP) include this valuable pre-tax benefit.  Again, you may want to adjust your future paychecks to fund this account. The contribution limits are higher than FSAs.  You can save up to $3,500 for an individual or up to $7,000 for a family.  If you are older than age 55 you may also contribute an additional $1,000.  The contributions are tax-deductible, the earnings inside the account grow tax-free, and distributions may also be tax-free if used for qualifying medical expenses.  Most HSA providers now include access to investment accounts so you can grow this money for future medical expenses.


If you need help deciding what to do with your bonus, give us a call and we will be glad to brainstorm for a few minutes with you or set up a quick cash flow model to help you make a better decision so you can reach your financial goals.

Jonathan Muhlendorf Schedule


Envision Wealth Management is a marketing name for registered representatives of Lincoln Financial Advisors Corp.  Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment advisor.  Insurance offered through Lincoln affiliates and other fine companies.  We do not give tax or legal advice. CRN-2665968-080119


5 Cash Flow Issues Attorneys Face And How To Fix Them

At some point, almost all lawyers struggle to find the cash necessary to pay both business and personal expenses on time.  The variability of your income is typically to blame.  Managing your expenses properly can ease the stress.  Here are 5 tips from Envision Wealth Management to help attorneys manage both personal and business cash flow issues:

  1. Many lawyers underpay themselves and then “catch-up” after quarterly distributions. Consider setting your salary to cover your basic core household expenses.  Expenses such as vacations, excess loan payments, eating out, and entertainment should be considered non-core expenses.  We often recommend that our attorney clients utilize 3 credit cards combined with 3 checking accounts:  1) for business expenses 2) for core household expenses 3) taxes and “joy” expenses.  Try this over three months and in most cases, a pattern of business vs core vs joy expenses will emerge to help you set the proper salary.

  2. Set a realistic cash balance in your business and household checking accounts that can cover 2 months of core monthly expenses, and don’t go below this number at any time.  We find that the stress related with a lack of cash on hand can reduce your productivity and often leads to problems at home.

  3. Maintain separate lines of credit for your business and for your household.  Each line of credit should be large enough to cover 3-4 months of core expenses. Lines of credit are very useful during difficult times, but should be avoided for day-today expenses.

  4. Quarterly bonus payments should be deposited into the third “joy” checking account.  Pay quarterly estimated taxes owed, then “joy” credit card bills.  Excess cash accumulated after vacations and entertainment should be transferred and invested to support your other goals, such as college funds, or retirement.

  5. Avoid paying invoices too quickly.  We find many firms process payables when they are received.  Instead, set up a system to pay invoices a few days before they are due.  This will allow you to hold onto your cash a little longer, giving you some breathing room.

Although differences between firms exist, one constant is our ability to help you.  Our short term and long term cash flow modeling is part of every client’s overall plan and is always available on a personalized website for review at any time.  Let our team help you better understand your cash flow and we will provide actionable recommendations to ease the stress of your variable income.

Jonathan Muhlendorf is a registered representative of Lincoln Financial Advisors. Securities and advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer and registered investment advisor.  Insurance offered through Lincoln affiliates and other fine companies. CRN-2560447-053019


8 Smart Year End Financial Planning Moves

8 Smart Year End Financial Planning Moves

1.Review your income or portfolio strategy

Are you reaching a milestone in your life such as retirement or a change in your circumstances? Has your tolerance for taking risk changed? If so, this may be just the right time to evaluate your approach.  However, let me caution you about making changes based simply on market performance.

One of my goals has always been to remove the emotional component from the investment plan. You know, the one that encourages investors to load up on stocks when the market is soaring or one that prods us to sell when volatility surfaces.

2. Take stock of changes in your life

Review insurance and beneficiaries.Let’s be sure you are adequately covered. At the same time, it’s a good idea toupdate beneficiaries if the need has arisen.

3. Mind the tax loss deadline

You have until Monday, December 31 to harvest any tax losses and/or offset any capital gains. But be careful. There are distinctions between short- and long-term capital gains, and you must be aware of wash-sale rules (IRS Publication 550) that could disallow a capital loss.

It may be advantageous to time sales in order to maximize tax benefitsthis year or next. We may also want to book gains and offset any losses.

4. Mutual funds and taxable distributions—be careful

This is best described using an example.

If you buy a mutual fund on December 18 and it pays a dividend and capital gain December 21, you will be responsible for paying taxes on the entire yearly distribution, even though you held the fund for just three days. It’s a tax sting that’s best avoided because the net asset value hasn’t changed. It’s usually a good idea to wait until after the annual distribution to make the purchase.

5. Don’t miss the RMD deadline

Required minimum distributions(RMDs) minimum amounts a retirement plan account owner must withdraw annually, generally starting with the year that he or she reaches 70½ years of age. Some plans may provide exceptions if you are still working.

The first payment can be delayed until April 1 of the year following the year in which you turn 70½. For all subsequent years, including the year in which you were paid the first RMD by April 1, you must take the RMD by December 31.

The RMD rules apply to traditional IRAs, SEP IRAs. Simple IRAs, 401(k),profit-sharing, 403(b), 457(b) or other defined contribution plans. They do not apply to ROTH IRAs.

Don’t miss the deadline or you could be subject to steep penalties.

6. Contribute to a Roth IRA or traditional IRA

 A Roth gives you the potential to earn tax-free growth (not just deferred tax-free growth) and allows for federal-tax-free withdrawals if certain requirements are met.

You may also be eligible to contribute to a traditional IRA, and contributions may be fully or partially deductible, depending on your circumstances. Total contributions for both accounts cannot exceed the prescribed limit.

There are income limits, but if you qualify, you may contribute $5,500, or $6,500 if you are 50 or older. In 2019, limits will rise to $6,000 and $7000, respectively.

You can make 2018 IRA contributions until April 15, 2018 (Note: stateholidays can impact final date).

7. Consider college savings

A 529 plan allows for high contribution limits, and earnings are not subject to federal tax when used for the qualified education expenses of the designated beneficiary.

8. Wrap up charitable giving

Whether it is cash, stocks or bonds,you can donate to your favorite charity by December 31, potentially offsetting any income. 

Did you know that you may qualify for what’s called a qualified charitable distribution (QCD)” if you are over 70½ years old? A QCD is an otherwise taxable distribution from an IRA or inherited IRA that is paid directly from the IRA to a qualified charity(“End-Of-Year Contribution and Distribution Planning for Tax-Favored Accounts”–

This becomes even more valuable in light of tax reform as more taxpayers will no longer be able to itemize, and an RMD that is taken, then donated to a charity, may not provide tax benefits.

Given the increase in the standard deduction and limits on state income and property taxes, annual year-end gifts to your favorite charity may not exceed the higher thresholds. Therefore, you may consider giving an annual gift in early January. Coupled with an annual gift next December, you might reap the tax advantages from itemizing in 2019.

You might also consider a donor-advised fund. Once the donation is made, you can generally realize immediate tax benefits, but it is up to the donor when the distribution to a qualified charity may be made.