Cljarlotte ^osft
THURSDAY, JANUARY 18, 1996
6A
STRICTLY BUSINESS
Who owns your
life insurance
Policy?
CHARLES ROSS
Your
Personal
Finance
Covering life insurance
needs is a key part of financial
planning. Without life insur
ance, your family may not be
protected in the event of your
premature death. But, if
you're like most people, the
owner of your policy is you,
and that could be an expen
sive mistake.
Such a simple choice can
make the difference between
paying thousands of dollars in
estate taxes and paying none.
The reason? If you own the
policy, when you die, the pro
ceeds could be subject to feder
al estate taxes of 37 to 55 per
cent. The IRS counts insur
ance proceeds as part of your
estate, so if the death benefit
pushes the value above
$600,000, the excess is subject
to estate taxes.
Your spouse as owner
One alternative to your own
ing your insurance policy is to
transfer ownership to your
spouse, then the proceeds
won't be taxed if you die pre
maturely. However, if your
spouse names someone else as
the beneficiary, such as a
child, another relative, or a
friend, the Internal Revenue
Service considers the death
benefit to be a gift. Anything
above ten thousand dollars
can be subject to gift taxes of
anywhere from 37 to 55 per
cent, costing your beneficiary
thousands of dollars, and
reducing the benefits of your
policy substantially.
It is wise not to have more
than two people involved in a
life insurance agreement.
Consider a non-spousal bene
ficiary as owner, or have a
trust own the policy.
Non-spousal beneficiary
as owner
You can transfer ownership
of your policy to a beneficiary
other than your spouse, to
your child, for example. But,
be aware that if you give the
policy to a beneificiary, the
IRS regards the transfer as a
gift. As long as your policy has
no cash value or is valued
below ten thousand dollars,
the transfer won't be taxed.
Note that most states don't
allow minors to own insurance
policies. You may need to put
the policy in a custodial
account with someone other
than yourself as the custodi-
Trust as owner
A trust ownership of your
life insurance policy is a way
to protect your beneficiaries
from estate taxes, and it can
be set up by a lawyer for as
little as five hundred dollars.
With a trust as owner, the
IRS does not consider the
death benefit as part of your
taxable estate, making the
proceeds tax-free. As long as
the policy has cash value
below ten thousand dollars,
gift taxes do not apply either.
See INSURANCE page 7A
Taste Of Ownership
Sandwich shop
franchisee likes
independence
By John Minter
THE CHARLOTTE POST
K atherine Harris
was over 30 by
the time her son
entered school.
She was an Army
veteran, with several years in
the work force managing a
word processing center.
But starting over in a new
job after five years meant
going back to the bottom of
the stack. It could be years
before she worked her way
back up to a supervisory posi
tion with the desired income.
Unless...
Unless she went into busi
ness for herself.
So Harris, now 35, bought a
Subway franchise in 1994,
opening for business last April
at Lawyers and Lebanon
roads in Mint Hill.
“My husband (Calvin) and I
decided that rather than
starting over to build up a
decent wage, we would try a
business,” Harris said. “We
decided to go with a franchise.
They had an on going opera
tion...a successful operation.”
She said Subway stood out
because it was not as expen
sive as some franchises, such
as McDonald’s or Kentucky
Fried Chicken.
“We went to a business bro
ker and looked at businesses
which were for sale, and a
Subway was for sale,” Harris
said.
After looking at their
finances, location of the busi
ness and other factors, the
Harrises decided to try owner
ship.
The franchise fee was
$10,000, but by the time
Harris was ready to open,
she’d spent about $100,000.
That’s another area where
going with a franchise helped,
Harris said.
“It is easier to put together a
business plan for a franchise,”
she said. “So much is stan
dardized. That carries some
weight with financing.”
Harris said she never
thought of herself as a busi
ness woman before. Running
the Subway shop is not diffi
cult since the company pro
vides a clear road map of how
to operate.
“The procedure is in place.
They teach you all you need to
know. It’s pretty regimented,
so systematic. It can be done
by anyone,” she said. “It’s
pretty much by the book.
“The biggest problem is
employees. They are not as
dedicated as you are. Finding
good people is hard. Finding
people that will show up every
day is hard. A lot of time I
come home and have to go
Kathy Harris decided owning a business would more advantages than working her way back up
the corporate ladder. She owns a Subway sandwich shop at Lawyers and Lebanon roads in Mint
Hill and plans to open another in the Charlotte area, photo/calvin ferguson
back in the evening.”
Normally Harris goes home
after the lunch hour, about 2
p.m. or so. That puts her home
in time to meet her son, a stu
dent at David Cox
Elementary. John Calvin
Harris is 8 years old now.
“I like that,” Harris said.
“With advance notice I can go
on field trips with the school
and visit the classroom more
often than I could if I worked
a regular 9-to-5.”
Harris joined the Army after
high school, serving four years
before getting out and trans
ferring to the National Guard.
She met her husband in the
Army. Calvin Harris is an offi
cer now. Kathy Harris became
an officer by going to Officer
Candidate School in the
National Guard. She’s still in
the Guard, supervising a
maintenance crew which
repairs and overhauls engines
on tracked vehicles, such as
tanks.
Running her own business
has taught Harris some tough
lessons.
“Something I realized is the
level of commitment it takes,”
she said. “You can get home
and have dinner in the oven.
Have your shoes off and be in
a robe or something, and have
to turn around and go back. I
have worked every day,
Monday through Sunday so
See SUBWAY page 8A
Money management
Recordkeeping
101
Amanda S. Danchi
SPECIAL TO THE POST
If you needed your 1992
tax return m a hurry,
would you know where to
look? What about last mon
th's mutual fund state
ment? Or last year's can
celed check.s? If you
answered ’no" to these
questions, you're not alone.
Most people amass so much
financial documentation
that they don't know how to
organize it all. But don’t
give up. The North
Carolina Association of
CPAs says recordkeeiang is
vital to effective money
management, and offera
this primer on what you
should retain, why,. for
how long.
Your tax returns
Keep all federal tax
returns and supporCmg doc
uments for at least six
years. The Internal
Revenue Service (IR® gen
erally has three years after
your return is filed to
assess tax (If yoctiRed jmur
tax return prior to the due
date, it’s deemed filed on
the due date.) This three-
year statute of limitations
is extended to six years if
amounts in excess of 25
percent of your reported
gross income have been
(iriiued fioin -oirreturn II
yuu file a fraudttlent tax
return, the IRS can come
after jou at any time
State laws on tax audits
vary, so be sure to check
with local authontie«
before discarding old
returns. While its gener
ally safe to di.vcard tax-
supporting documents
after six years, it's a good
idea to keep your tax
returns indefinitely.
Copies of past returns can
help remind you of carry
over items, such as capilel
losses and depreciation,
for your current return.
Your investment doc
uments
It's important to retain
trade confirmation notices
you receive from your
stockbroker or mutual
fund when you buy or sell
securities. 'You’ll need the
information to calculate
you capital gains and lo.'-s-
es. When you sell an
investment, it's a good
idea to attach the buy and
sell confirmation form to
your copy of your tax
return for that year to doc
ument the capital gain or
loa.s you reported. Keep
your monthly brokerage or
mutual fund statement”
at least until you receive
your annual statement. If
that statement summa
rizes all transactions and
related data for the year,
toss your monthly state
ments. If you’re reinve.st-
ing dividends, save each
reinvestment transaction
See ORGANIZE page 7A
Tax planning for ‘96
By Gregory J. Hettrick
SPECIAL TO THE POST
The holidays are behind us;
the bills are rolling in and you
have already started your
1996 holiday savings plan.
Good for you.
But there's more to do. Go
ahead and get a jump on your
taxes. You should already
have received your state and
federal income tax forms. Dig
up your checkbook register
and receipts. Get out your pen
and paper and your pay stub
from Dec. 31.
There's no point in waiting
until April 15, the day you
must file your taxes with the
Internal Revenue Service.
If you expect to receive a
refund, you'll want to go
ahead and file quickly so you
can bank the money you
receive. If you are going to
owe, you might as well know
how much, even though you
can wait until April to
mail
your
check.
And filing is easier than
ever. If you are single and
earned less than $50,000 in
1995, and have no deductibles
to report, you can use a
1040EZ. If the 1040EZ will
not meet your needs, use the
1040.
You'll need to figure out the
charitable contributions
you've made. If you gave more
than $250 to charity in 1995,
the IRS now requires an offi
cial receipt from the charity -
no more personal receipts or
canceled checks. In addition to
contributions you'll have to
figure dependent care expens
es, deductible interest, taxes
paid, dividends, medical
expenses and interest earned,
among other items.
Your employer should have
your W-2 form to you by the
end of January with
accurate 1995
income and feder
al and state taxes
withheld.
While you're
waiting to
receive your
W-2, you may want to gather
the correct tax forms and pub
lications you must file. Your
local library should have
forms or you can call the IRS
at (800) TAX-FORM to have a
form mailed to you.
If you are getting a refund,
consider using it either to
invest for the future or to help
pay off or consolidate debts. If
you have a child's education to
consider, you may want to
give serious thought to setting
up an account in your child's
name. The money placed in
this account reduces the
amount of tax you pay and it
benefits your child.
If you owe, start putting
aside your money now so that
writing the check in April will
be easier. Also, start planning
for 1996 taxes. If you owe for
1995, there is a good chance
you'll owe again, so establish
your savings plan now. Before
you get too stressed out, give
the IRS a call. In most cases,
they can arrange for you to
pay what you owe in manage
able installments.
To prevent owing again next
year, consider adjusting
your withholding. You
can make changes any
time during the year
by asking your
employer
See TAX
page 7A
BUSINESS TO BUSINESS
CRAIG MICHAEL SIPUN
Multimedia Specialist
Keep The Faith
Matthew 7:7
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SPECIAUZING IN REPAIRING
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Computer Monitors, Selling Repaired & Used Equipment
SERVING AU OF METRO CHARLOTTE • (704)-523-O642
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* BLACK ■ OWNED ENTERPRISE *
If you have an idea for a
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at 376-0496.
ecause you can not physically reach all of the people
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CR EATlVE IN N OVATIO NS
QUALITY TYPESETTING & DESIGN
3400-D ^t. Vardell Lane • Charlotte, NC 28217
Phone 704.^9.1195 • Fax 704.522.8737