I mentioned that profits have to do with increased wealth; and increased wealth is not the same as cash. If we fail to understand those differences, we can run into some serious trouble.

I thought I would illustrate what I am talking about. Read the rest of this entry »

What are profits?

I don’t think most of us really understand the concept very well. In fact, I’ll include myself in the number who struggle to understand what profits are.

To illustrate: When you hear that a company made, say, $8 billion last year, what image comes to your mind? –For me, I tend to think: “Oh, wow! They have $8 billion in cash in a bank somewhere–$8 billion that they did not have the year before.” “Profits” mean “cash.”

That’s what many people think. But that’s not right.

I’m sure there are more technically correct definitions of the word profits, but here’s a the best working definition I’ve been able to come up with: Profits are any increase in assets for which a business does not have increased liabilities (or debts) other than to the owners. Put another way, profits are an increase in wealth–and (most important to understand–and something I still tend to forget!) wealth comes in many forms other than money!

I say this because, for the longest time, I thought of profits in the same way I thought of a paycheck: profits are the same thing as a paycheck. You take them, bring them to the bank, and buy stuff with them.

But that’s not the case. Read the rest of this entry »

Five questions, in order, will give you a broad-stroke-overview understanding of the legacy planning process. A few additional questions help clarify. Read the rest of this entry »

Today was the big day. I’ve been committed to acquiring a legacy plan, now, for almost a year and a half. Of course, I don’t merely want a plan; I want to implement a plan. But simply to get a proposal in hand so Sarita and I can look at it and (hopefully) say, “Yay, verily, this is what we want to do . . . ” –It’s been just shy of a year and a half.

So our legacy planner and his assistant came to our office and we spent about 3 1/2 hours going through their proposed plan. And it includes: Read the rest of this entry »

A couple of weeks ago, Sarita and I were at a conference for major donors sponsored by one of the charities we support.

Henry Doorn, president of the Barnabas Foundation, noted there are only three places your money can go when you die: to your heirs (family, friends), to charity, or to the government. He didn’t quite put it this way, but my mind put his follow-through question in the form of Evangelism Explosion‘s standard opening. As I remember it, he asked, “If you were to die tonight, do you know for sure where your money would go?”

Sarita and I spent a lot of money back in 1998-99 getting an estate plan put together. But when Doorn asked the question, I realized, in my heart of hearts, that I didn’t know the answer!

I knew we had done everything possible to minimize taxes and maximize transfer to our heirs, our children. But we had done nothing to ensure anything goes to any of the charities we care about. And, worse, Read the rest of this entry »