Member withdrawal payment method
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Member withdrawal payment method On rare occasion we have a member of our club withdraw. The majority of our members prefer to pay out in cash instead of selling or transferring stock to process the withdrawal. Lately we have been discussing setting aside a portion of our monthly dues in a mutual fund or similar vehicle, and then use it for payouts. Any suggestions for a fund, etc. that we may want to look into for this? Gretchen Smith The Women's Investment Group Our club has uses an ETF called SCHD to park cash until we decide how to invest it. Sent from my iPad > On Mar 11, 2014, at 11:52 AM, Gretchen Smith <gsmithreal@aol.com> wrote: > > On rare occasion we have a member of our club withdraw. The > majority of our members prefer to pay out in cash instead of > selling or transferring stock to process the withdrawal. > Lately we have been discussing setting aside a portion of > our monthly dues in a mutual fund or similar vehicle, and > then use it for payouts. Any suggestions for a fund, etc. > that we may want to look into for this? > > Gretchen Smith > The Women's Investment Group Our club also pays in cash. We have 90 days to pay per our bylaws. That will give us time to collect the quarterly dues and sell stock if we need to. Since you seldom have members leaving, I would let your money ride on the good stocks and sell something that may not be doing so well when you need cash. You need to let your money work for you and a mutual fund usually isn't the best way. From: Gretchen Smith <gsmithreal@aol.com> To: club_cafe@bivio.com Sent: Tuesday, March 11, 2014 1:52 PM Subject: [club_cafe] Member withdrawal payment method On rare occasion we have a member of our club withdraw. The majority of our members prefer to pay out in cash instead of selling or transferring stock to process the withdrawal. Lately we have been discussing setting aside a portion of our monthly dues in a mutual fund or similar vehicle, and then use it for payouts. Any suggestions for a fund, etc. that we may want to look into for this? Gretchen Smith The Women's Investment Group We used to pay in cash but now we transfer stock and pay the balance in cash. This method is more lucrative for both the club and the withdrawing member. Please excuse my typos, Sent from my iPhone.
There are significant benefits for paying departing partners in stock (keeps cash for investments for club,transfers gains to departing members, also way to tweak portfolio). It really is an easy process to get departing members/brokerages to complete... And treasurer process is not substantially different. And Laurie/bivio will assist if questions. The issue of keeping stocks with losses and transferring "gainers" also provides offsets for end of year taxes (departing partner gets new stock basis). Your club should reconsider cash only withdrawals. Just my $.02 Be Well. Irina Sent from my iPad Please note: The departing members tax basis is the departing members tax basis in the club. The capital gain the member realizes will be the difference between the market value of the stock the day the member sells it and this tax basis. The remaining members do not transfer any capital gain to the departing member. Their capital gain is deferred until they leave the club. Sent from my iPhone
This has been a club treasurer discussion item for many, many years. So long as your partnership agreement makes provision for it, it benefits the remaining members to transfer appreciated stock because that defers taxes on the unrealized gain. It also benefits the remaining members to sell losers and book the loss for tax purposes. The withdrawing partner is not affected in any way since his/her cost basis equals his/her cost basis is in the club at the time the withdrawal is processed. I suppose most people would rather receive cash because that's less of a hassle for them, but the club should do whatever is in the best interest of the remaining partners. Mike Jones Wall$treet Wannabees Bloomington, MN From: Irina Clements <irina39@verizon.net> To: "club_cafe@bivio.com" <club_cafe@bivio.com> Sent: Tuesday, March 11, 2014 5:32 PM Subject: Re: [club_cafe] Member withdrawal payment method There are significant benefits for paying departing partners in stock (keeps cash for investments for club,transfers gains to departing members, also way to tweak portfolio). It really is an easy process to get departing members/brokerages to complete... And treasurer process is not substantially different. And Laurie/bivio will assist if questions. The issue of keeping stocks with losses and transferring "gainers" also provides offsets for end of year
taxes (departing partner gets new stock basis). Your club should reconsider cash only withdrawals. Just my $.02 Be Well. Irina Sent from my iPad We have very few withdrawals (knock on wood) but in the early days that wasn't the case and sometimes would be "cash poor" and needing to quickly sell stocks to pay off a member. We have in our bylaws that we can pay a member in stock, but everyone wants cash. We modified our bylaws a few years ago to say that a withdrawing member will be paid within 90 days. That at least gives us a little time to get some cash together. We tried to keep enough cash on hand in case someone left, but some of our longer-time members have member values of excess of $15K and we hate keeping that much liquid. So far, this method has worked. No one has needed to exit quickly and get their cash right away. New members understand our policy.
On Wed, Mar 12, 2014 at 9:46 AM, Mike Jones <oracle_guy_2@yahoo.com> wrote:
My club values a partner's share at the meeting following the one at which a withdrawal request is received and then has until the following meeting to complete the withdrawal. This was established 15 years ago to prevent someone from 'timing the market". It also allows us to transfer stock if we desire and that action often requires the departing member to establish an account at our broker to minimize withdrawal expenses. Our bylaws specify that any expenses incurred in selling stocks are paid by the withdrawing member so there is no additional cost to the remaining members. Of course most people want cash, but if that means that remaining members have to pay more in taxes this year because we sold appreciated stock, that is undesirable. Leaving a pile of cash on the table receiving 0.01% interest just in case someone wants to withdraw is not good management. Buying a mutual fund for that purpose is only some better. Our club's main purpose is to learn how to invest in stocks and we would really like to grow our funds as much as we can. Even though we are a very small club, our decisions reflect the best interests of those who remain in the club, not the desires of those who are leaving it. Mike Jones Wall$treet Wannabees Bloomington, MN From: Kimberly Hazen <hazenfree@gmail.com> To: The Club Cafe <club_cafe@bivio.com> Sent: Wednesday, March 12, 2014 10:01 AM Subject: Re: [club_cafe] Member withdrawal payment method We have very few withdrawals (knock on wood) but in the early days that wasn't the case and sometimes would be "cash poor" and needing to quickly sell stocks to pay off a member. We have in our bylaws that we can pay a member in stock, but everyone wants cash. We modified our bylaws
a few years ago to say that a withdrawing member will be paid within 90 days. That at least gives us a little time to get some cash together. We tried to keep enough cash on hand in case someone left, but some of our longer-time members have member values of excess of $15K and we hate keeping that much liquid. So far, this method has worked. No one has needed to exit quickly and get their cash right away. New members understand our policy.
On Wed, Mar 12, 2014 at 9:46 AM, Mike Jones <oracle_guy_2@yahoo.com> wrote:
> We have in our bylaws that we can pay a
member in stock, but everyone wants cash. <
The model partnership agreements state that the
decision to pay a fully withdrawing member in stock or cash is made by the
remaining members, not the departing member.
> We modified our bylaws a few years
ago to say that a withdrawing member will be paid within 90 days. <
That has the potential to be pretty dangerous
for the club in a declining market.
-Jim Thomas
Thank you all so much for your insight. Your comments have helped our members understand that forms of payment other than cash can work just fine. This will definitely factor into our discussions. Gretchen Smith
The Women's Investment Group
-----Original Message-----
From: Jim Thomas <jimt075@comcast.net> To: club_cafe <club_cafe@bivio.com> Sent: Wed, Mar 12, 2014 12:23 pm Subject: Re: [club_cafe] Member withdrawal payment method > We have in our bylaws that we can pay a
member in stock, but everyone wants cash. <
The model partnership agreements state that the
decision to pay a fully withdrawing member in stock or cash is made by the
remaining members, not the departing member.
> We modified our bylaws a few years
ago to say that a withdrawing member will be paid within 90 days. <
That has the potential to be pretty dangerous
for the club in a declining market.
-Jim Thomas
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