Episode Transcript
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Speaker 1 (00:12):
He served at the Pentagon as an army jag. He
graduated from Notre Dame and has two law degrees from
Boston University and Georgetown University. He's been practicing law for
over thirty years. He's your family's personal attorney. It's time
for the David Carrier Show.
Speaker 2 (00:33):
Oh, and welcome to the David Carrier Show.
Speaker 3 (00:35):
I'm David Carrier, your family's personal attorney, and you have
found the place where we talk about a state planning,
elder law, real estate and business law.
Speaker 2 (00:45):
So give us a call.
Speaker 3 (00:46):
Why don't you just six one six seven seven four
twenty four twenty four. That's six one six seven seven
four twenty four twenty four. Of course, this is our
very famous, the very famous Daylight Savings Time edition of
the David Carrier Show.
Speaker 2 (01:01):
What does that mean? It means. It means that.
Speaker 3 (01:05):
You're probably still asleep and you're not listening and nobody
out there. But but I know there's some of you,
some of you. You know, you sprang forward, right, you
lost that hour of sleep. So so what was the
point of that?
Speaker 2 (01:20):
Oh? Yeah, so it's not so dark when you get
up or something. I yes, I don't know.
Speaker 3 (01:23):
Anyway, Welcome welcome, Welcome, Give us a call six one, six, seven,
seven four, twenty four to twenty four. If you'd like,
you can always go to the website David Carrier Law.
All one word, David Carrier Law, Push that together.
Speaker 2 (01:39):
Dot com.
Speaker 3 (01:40):
Yeah, there you go, David Carrier Law dot com. And
if you want to send me an email, David at
David Carrier Law dot com.
Speaker 2 (01:47):
Is the way to the.
Speaker 3 (01:48):
Way you get that job, the way to get that
job done. Of course, we talk about a state planning,
elder law, real estate and business law, all.
Speaker 2 (01:56):
Of which is really retirement law.
Speaker 3 (01:58):
That's a really the way to think about this because
if you are retired, if you wish you were retired,
you'd like to be retired at some point, right, You've
got to deal with all these issues in the over time,
these issues have changed a lot.
Speaker 2 (02:17):
We did our first AI based.
Speaker 3 (02:21):
What do you call webinar, right, so we had a
national audience for that one.
Speaker 2 (02:28):
And the challenge is, well, what is this AI?
Speaker 3 (02:31):
Says artificial intelligence, this new computer stuff all about and
like every other computer, Oh, this is going to save
the world or destroy the world, or you know, be
wonderful or great or terrible or awful.
Speaker 2 (02:44):
Whatever it is.
Speaker 3 (02:45):
You know, I've been hearing this stuff since I've been
a lawyer right at the Pentagon, you know it sort
of the Pentagon as an army jarg Yeah. Well, what
I did was software development in order to make it
easier to the troops who didn't have wills or powers
of attorney or anything, and get them done at the
(03:06):
what we would call the CIF the Central Issue Facility.
So as you're pulling your boots and your shelter half
and all the rest, that's what we had back then. Anyway,
as when you're pulling your equipment, you could also get
go through the jagline there and get your wills and
powers of attorney then and back then. Of course, you know,
(03:26):
a hard drive was five megabytes five seriously, first ones,
I both or five megabyte hard drives and for the army.
But since then it's just it just keeps it just
keeps going. So the question is what's so different now?
(03:48):
Is it different now? And the answer is yeah, it
really is kind of radically, radically different. Even though people have,
as I said, people have been promising me, oh, this
will change everything, this will get lawyers out.
Speaker 2 (04:02):
Of the mix. You know, we won't need lawyers anymore
to do this stuff.
Speaker 3 (04:07):
And I don't know if you're familiar the old saying
about how to error is human. To really screw things up,
you need a computer. Well, that's especially true when it
comes to legal stuff, as some lawyers, especially with this AI.
As lawyers have been finding out, it's not enough simply
(04:27):
to put your question in or whatever and hope that
the machine gets it right. The machine gets it wrong
most of the time, but the AI is a very
useful tool. What it does is it enables us to
do much more complex stuff than we used to be
able to do at the same fee. So one of
(04:51):
the frustrations faithful listeners know, we don't just worry about
your stuff when you're dead. We worry about it mostly
while you're alive. We figure out, well, how do we
not lose what you've got? That's the real you know, obviously,
that's the real question that we have to solve for.
How do we make sure that you don't go broke?
(05:11):
How do we hang on to the stuff that you've
earned over your lifetime? That's the question and the answer
is for most people, you're not gonna with most estate
plans as we've seen them. They have nothing to do
with the long term. You have nothing to do with
How do you hang on to your stuff for you?
It's all about assuming that there will be stuff. And
(05:34):
you know what happens when we assume I don't have
to tell you that one anyway? How do we hang
on to it for you? And then once we've done that,
how do we get it to the kids in the
best way possible maximizing the tax benefits that you can
get through your iras. That's in a nutshell what it is?
Speaker 1 (05:53):
Where?
Speaker 4 (05:54):
What it is? We're all about here? Now?
Speaker 3 (05:57):
How do you do that when you're using sort of
the sort of the traditional the traditional tools. How do
you do it when you're using Well, the answer is
you put a whole bunch of paralegals on it. You
put a whole bunch of your atturning time into it.
You have to train folks up.
Speaker 4 (06:14):
It's not train folks up. It's not that easy.
Speaker 3 (06:20):
It's not that easy, right because frankly, most people, you know,
they don't.
Speaker 4 (06:27):
You know, what can you say? People don't want to.
Speaker 3 (06:31):
There's plenty of places you can work where you don't
have to you don't have to do as much of
that stuff put it that way right where it's fairly straightforward.
You just do your thing and you're done. Well, it
doesn't work that way. And so the team that we
have are people very dedicated to it. They work very
hard at making sure that everything is going to be
(06:53):
done correctly. Okay, but those people are few and far between,
few and far between. We've got Jim on Jim on
the line. Hello, Jim, welcome to the David Carrier Show,
Working and working Man having a ball. It's uh spring
spring forward day here, so great and we're both away.
Speaker 4 (07:18):
Good for us.
Speaker 5 (07:18):
Huh. Yeah, I have a question about just like David
and beneficiaries, is better to be the beneficiary or just
give it to the children.
Speaker 4 (07:32):
Yeah.
Speaker 3 (07:33):
So, so here's the Could you turn the radio down
just a little bit. Hopefully other people like listening to me,
but I don't. Here's the here's the thing, the uh
and we don't have enough. We've got two minutes to
talk about it, but we can get it at least
get started. Let me warn your first when you say
(07:55):
put the trust as the beneficiary, most trusts, most to
the trust that people do are not intended to. This
is where the AI helps us out. Most trusts that
you do are not intended to be what they call
conduit trusts or IRA trust there's different words for him.
But the point is they're not tailored to take advantage
(08:18):
of the IRA. But but and let me just we'll
close on this one.
Speaker 4 (08:22):
But I'll get back to it. Right.
Speaker 3 (08:25):
Here's the thing with iras. Here's what's so special about
the IRA or four oh one K or four three
B or four fifty seven plan or the THIRST savings
plan for your federal employee. All these retirement plan assets
plans where you get tax deferral right where the money grows,
(08:49):
It gets deposited and grows without you paying tax on it.
And this includes the WROTH traditional mostly but also including
the roth IRA which you've already paid the teen when
you earn the money, now you put it into the
IRA and it grows, it compounds without paying tax. It's
(09:10):
it's in ten years, you'll have three times as much
money if you keep it in a ROTH versus just
regular investments. And it changes based on your assumptions. But
the overall point is it's very very beneficial, very beneficial
over time, I mean like multiples beneficial to keep your
money in the IRA, and I know they challenge out
(09:32):
rageous fees and every time you turn around, they're hitting
you with another feet. But if you are not Bill Gates, right,
if you're not you know, Warren Buffett who made all
his money in stocks and stuff. If you're regular people
who made your money working, then the IRA is the
major tax deferred vehicle. That you've got annuities too, I suppose,
(09:56):
but really it's the IRA is the special thing for
middle class folks, all right. So it's the one gimme
that rich people don't get, okay, because they don't take advantage.
It would hurt them to take advantage of the four
h one K the IRA, because then they'd have to
have income. They don't want income so that they get
(10:16):
the advantage of capital gain thing.
Speaker 4 (10:18):
It's a whole another thing.
Speaker 3 (10:19):
But the point is that iras are the middle class
tax break. And we're gonna I'm gonna tell you why
you need to do this stuff, and then how to
do it.
Speaker 4 (10:30):
If you don't mind, but.
Speaker 3 (10:32):
Don't, okay, but you can't, well we have to do
We're going to back up in the next segment. We're
going to back up and say, Okay, iras middle class
tax benefit. Really good thing, super duper okay, And even
if it wasn't super duper, it's still where most of
our clients, most middle class people have most of their money,
(10:54):
so we have to address it for that reason alone.
You've been listening Jim will be back with you, okay,
and listening to the David Carriers Show. I'm David Carrier,
your family's personal attorney.
Speaker 1 (11:23):
This hour of the David Carrier Show is pro bono,
so call in now at seven seven twenty four, twenty four.
This is the David Carrier Show.
Speaker 3 (11:35):
Welcome back to the David Carrier Show. I'm David Carrier,
your family's personal attorney. Bumper music this hour Appellation Spring.
That's right because why because we're springing forward and uh yeah,
we'll get back to the rock and roll. Don't worry
about it. But but you've got to do, you know,
come on, Aaron Copeland, Appellation Spring. You know, everybody said, oh,
(11:58):
mister Copeland, it's amazing you've evoked the beauty of the
Appalachian Mountains, and his response was always, well, I've never
been there. Really, it's a purely an active imagination. Anyway,
we're talking with Jim, we're talking about iras and who
should be the beneficiary of the IRA, And what I'd
like to start with is number one, what the hell
(12:20):
is the IRA? It's tax deferred or tax free if
you already paid the tax up front. Right, it's the
one real financial benefit available primarily to middle class folks, which,
of course is they've regretted making that deal back in
the eighties, right, They wish they hadn't done that benefiting
regular folks. What the hell were we thinking? And so
(12:43):
there's been some chopping back recently.
Speaker 4 (12:47):
Now.
Speaker 3 (12:48):
The fact of the matter is that money in an IRA
compounds grows much faster at whatever rate of return you want.
Wherever ray to return your investments will get you. It
compounds fast. Or because the taxing authorities are not taking
their cutout every time you make a little dull every
time you get ahead, they're not slice taking a slice.
(13:10):
What that means is there's more to grow on and
so the compounding goes faster. That's my point. It's great,
it's wonderful. And the fact is you can't get anywhere
else annuities texted for newdies I suppose anyway, it's a
very good thing. So of course they want to screw
you up with it. Now, here's the problem, here's the
(13:30):
hidden risk. Why I always say the worst horriblest thing
you can do is make your kids beneficiary of your
IRA traditional ira. And the reason is if I make
the kid the traditional the beneficiary on the traditional IRA.
It's just about ten years ago now the United States
(13:52):
Supreme Court decided that inherited iras, the iras that you
get from your folks or whoever, or put you on
there as beneficiary. Inherited iras are not not retirement plan assets.
Inherited IRA is not a retirement plan asset. Obviously I'm
(14:13):
simplifying breaking it down, but this is the point. Retirement
plan assets cannot be taken away from you by a judgment.
Speaker 4 (14:22):
So if you get a.
Speaker 3 (14:23):
Horrific car accident, you have a million bucks, your IRA
is off the table, your four oh one k, they
can't touch it.
Speaker 4 (14:30):
Okay.
Speaker 3 (14:31):
This is even more protection if you've got a for
your social security, but for the retirement plan assets in
your IRA that should be it makes sense that this
would be the last money that you spend, okay, because
it's some of the most protected money that you have.
I said, well, that's wonderful. I say, yes, it is wonderful,
(14:53):
and you say, it's also wonderful that instead of them
taking the tax out, so I have what's left.
Speaker 4 (14:59):
To inherit to invest. Excuse me.
Speaker 3 (15:02):
Instead, I've got one hundred percent of what I put
in my four when km a IRA because I didn't
have to pay income tax on it. Oh boy, I'm
starting you know, I'm starting ahead and it compounds without
paying tax. So, oh my goodness, it's just wonderful. Now,
the downside of that is you have to pay the
income tax when it comes out. Yeah, that's the downside.
Speaker 4 (15:24):
I get it. But then we'll get that.
Speaker 3 (15:27):
You know, there's snakes in the grass when it comes
to that as well, but we'll talk about that. So
so that's why people like iras. Now the wroth is
even cooler because you typically pay a much lower rate
of income tax during your work in life, right until
you get later on in it. But at least in
the beginning you're paying a lower rate of income tax,
(15:47):
and you never you put the money in the wroth,
and now you never pay income tax on that money
or its earnings. Same way for your kids. Here's the
danger of the tree. Additional IRA. Why you should never ever,
I think horrible, bad idea to ever ever put your
kid as beneficiary on the IRA.
Speaker 4 (16:10):
Traditional IRA.
Speaker 3 (16:11):
The reason is it's the one way you can leave
your kid in debt. I get pushback on this. Oh,
you can't leave your good in debt. Yeah, follow the
follow the reality. You die, you leave the IRA to
the kid, right, So half a million dollars half a
million dollars IRA money.
Speaker 4 (16:30):
Oh boy, that'll solve all the problems.
Speaker 3 (16:32):
Okay, Now I know that none of this bad stuff
would ever happen to your kids, and I'm being irresponsible
doom longer or whatever you want to say, glumendomer by
even bringing it up. But if after you die, your kid, oh,
I don't know. What if there was humm, I don't know,
(16:53):
some weird virus showed up from somewhere and they shut
the whole government down and closed, you know, bankrupted sixty
percent of small businesses and your kid was running a
small business like that would never happen, I understand. Or
maybe you could be in a car accident again something
that would never happen. Or what if there were student
loan deck because your kid foolishly co signed for his kids,
(17:15):
your grandkids student loans, which of course would never happen.
Or what if your kid I don't know, got divorced
and the others, the ex spouse has a money judgment
which would never happen. What are some other things that
would never happen, I don't know, Make them up yourself,
all these things that would never happen, Because God forbid,
I should be suggesting that bad things would ever happen
(17:36):
to anybody in the real world, because we know that
that doesn't happen. In the real world. Nothing bad ever happens. Okay, great,
got it. But let's go crazy Sunday morning. I know,
but let's go crazy and imagine that something bad did happen.
So now your kid, for whatever reason, COVID student loans, divorce,
car accident, whatever it was Martians, I don't know, obviously
(18:00):
observed even to worry about it. But what if your
kid's got a half a million dollar judgment against them?
Now you die and the kid inherits the IRA? What
the Supreme Court decided? I think it's like ten years ago.
Now what they decided was, oh oh oh, that's.
Speaker 4 (18:18):
Not an IRA.
Speaker 3 (18:20):
You can't say you don't want it. You have to
take it.
Speaker 4 (18:25):
That's what was the.
Speaker 3 (18:25):
Court in That was the case in the Supreme Court
was a bankruptcy and the kids said, oh, I don't
want it. You know, I think it was his uncle
or aunt left it to him. And the kids said, oh,
I don't want it, and the bankruptcy court said, oh,
you got to take it. And then he said then
the kids said, oh yeah, but it's an IRA, so
you cannot. You can't take it away from me. It's protected.
It's retirement plan assets. You can't take it away from me.
(18:48):
It's got the IRA protection. And there's a lot of
argument at the time whether or not that was true.
The Supreme Court nine to zero said, it's not true.
It's not protected. It's not retirement plan ass It may
have been retirement playing assets for your mom or dad,
but it's not retirement playing assets for you because you
weren't retiring. It just kind of showed up. You say, WHOA, Well,
(19:12):
who cares? I'll tell you who cares? Because now you
got to take it and there's no asset protection. What
does that mean? It means the beneficiaries, creditors can snag it.
It's just another checking account okay, so, oh, I'm leaving
half a million dollars to my kid.
Speaker 4 (19:31):
Oh they don't put them on Easy Street. That'd be great.
Speaker 3 (19:34):
And then the creditor shows up, Supreme Court decision in
hand and says, uh.
Speaker 4 (19:40):
Give me, gimme, gimme.
Speaker 3 (19:42):
Okay, I mean for all reasons that would never happen
to any of your kids or anybody you would ever know. Okay,
now the IRA is gone, So the money is gone.
Guess what remains? And when we get back from the news,
I will.
Speaker 4 (19:58):
Tell you what remained.
Speaker 3 (20:01):
You've died, left the irate to the kid. Kid's creditors
snagged the money, but there's something left. Surprise when we
get back. You're listening to the David Carrier Show. I'm
David Carrier, your family's personal attorney.
Speaker 2 (20:22):
Welcome to Spring.
Speaker 1 (20:43):
David's got the how to you're looking for. Just call
seven S four. This is the David Carrier Show.
Speaker 3 (21:21):
Wellcome back to the David Carrier Show, the show where
the bumper music is almost always better than the show itself.
Hard to admit, easy to observe. Okay, we're talking with Jim.
I don't know, Jim.
Speaker 2 (21:33):
Are you hanging in there? Man?
Speaker 4 (21:34):
Oh? Just barely, all right.
Speaker 3 (21:39):
See, you think you have an easy question, and you
know I don't get many callers, Jim.
Speaker 2 (21:44):
You know I got to.
Speaker 3 (21:47):
Ride them to the sunset man. So here's the deal.
I raise very special deal. Okay, deferred taxes, tax benefits,
it's wonderful. But here's the problem. When you die and
you leave it to your kid as a beneficiary, the
kid gets it. According to the Supreme Court ten years ago,
it's just another checking account. It is not retirement playing
(22:09):
assets anymore. It has no protection from execution, which means
that anybody can snag it away from the kids. And
you think, oh, well, so what I mean if the
kid's a jerk and COVID happens, and it's obviously COVID,
their kid's fault, right, So that's why their business went
out of business. And obviously this is just desserts and fairness.
I guess I don't know. Or if your kid winds
(22:31):
up a barista, and you know, after four years of
U of M and four more years of graduate school, whatever,
I guess that's that's on you.
Speaker 4 (22:40):
True, it is on you. But here's the deal.
Speaker 2 (22:44):
They snagged the IRA.
Speaker 3 (22:45):
The IRA goes away the money in the half a
million dollars is what we said. Half a million dollars
of IRA money goes away, right, who owes the and
here comes to surprise and hopefully it's not a surprise.
The shot fucking surprises the kid owes the income tax
on the money. Well, the kid doesn't have any money.
(23:06):
That's why I was hoping and wishing him, praying that
this you're gonna finally kick off and they would get.
Speaker 4 (23:12):
The IRA money.
Speaker 3 (23:13):
Oh boy, But no, they get the money, somebody else
takes the money. The kid still ows the income tax
on the money because the money went to pay the
kid's debts. All right, that's how it's that's how it's treated.
And nobody seems to be aware of this. It drives
me nuts. So what we do instead, instead of allowing
(23:34):
that to happen, what we do is a and we
do it two ways. There's sort of the basics like
if you've got less than one hundred thousand, oh well,
you know, and there's there's spousal benefits to these as well.
But if you've got less than one hundred thousand, then
we're not gonna worry about.
Speaker 4 (23:50):
It too too much.
Speaker 3 (23:51):
And in your basic trust we're going to put the
IRA language. Which if you don't do that, if you
don't plan for your basic trust to be a beneficiary
of an IR, then all the tax gets paid at once,
which is what some financial advisors have either seen because
it happens, they've either seen it or they've heard about it. Okay,
(24:15):
and so that's why you know, the financial advisor's hair
goes on fire when you suggest using a trust as
a beneficiary of an IR. They're not always wrong, okay,
because that can it's possible for that to really screw
things up. All right, But what if you did it correctly,
What if you did it in such a way that
(24:36):
it actually protects the IRA, that there is no adverse
tax consequence to it, Well, your financial advisor will be disappointed.
I've seen it. They're like, you're like, oh, oh, you
figured that out, because you know, everybody likes to bring bad.
Speaker 2 (24:53):
The wolf, the wolf.
Speaker 3 (24:54):
You know it's no, no, no, there's no wolf. Well
it looks like a wolf. Yeah, I know it looks
like a wolf, but it isn't. It's something else.
Speaker 4 (25:01):
Anyway.
Speaker 3 (25:02):
The point is financial advisors, you know, they get disappointed
when they are incorrect about this. But what you're doing
by making the trust the beneficiary of your IRA, if
it's done correctly. I always got to say that, if
it's done correctly, is you're protecting your kid against the
worst kind of debt there is, which is tax debt.
(25:25):
Now here's the other thing. If you do a dedicated
IRA trust, which we do and most of our clients
before the Secure Act, before the Secure Act, which was
the Reform Secure Act, Secure Act too, Before that, you
could stretch out the IRA over your kid's life expectancy,
(25:46):
so you could provide anything that you had left over
and you ain't spending your IRA nine times out of ten,
so you could stretch it out over the kid's lifetime. Now,
you're not going to put your kid on easy Street
for that. That's not going to be. You know, you
don't have to worry about your trust turning into a
Disney air or Walmart air and or Ford Foundation air
(26:08):
and going nuts because it wasn't that much money, but
it was enough to make a difference, an ongoing difference
right when you stretched.
Speaker 4 (26:17):
It out that way.
Speaker 3 (26:17):
Now, you didn't want to do that without also protecting
it in the trust against creditors and all the rest.
But when you did that. Now lifetime makeme. Well, they
took that away, so now it's ten years and they
threw a bunch of more rules at it. So it
got all confusing. Gee, I wonder why they did that.
Speaker 1 (26:35):
Hmm.
Speaker 2 (26:36):
Can we think about why they did that? I can't
figure out why they did that.
Speaker 3 (26:39):
Let me tell you why they did that my opinion.
I haven't seen this written down anywhere, but I did.
I did spend a few years at the Pentagon, you know,
and you get to appreciate how the reasons quote unquote
reasons are not the reasons. Yet you can't be you
can't listen to what they tell you. You have to look
(27:01):
at the consequences. Okay, whenever you're dealing with those organizations,
government organizations. So here's the consequence. There's no estate tax,
and everybody tells you this, Oh, you don't have to
worry about.
Speaker 4 (27:16):
The estate tax.
Speaker 3 (27:16):
You don't have to worry about the estate tax because
why because the limits like thirteen million each? Right, So
that's good, good, let's not worry about the estate tax.
We don't have to do that. We have to do
all this planning worrying about the federal estate tax anymore.
But there is a new estate tax, which isn't an
(27:37):
estate tax. It's okay, back up forty trillion dollars or so,
who knows. Nobody really knows. But let's say there's forty
trillion dollars. That's the number I've seen in retirement plan
assets iras.
Speaker 4 (27:51):
Four to h one K. Is that kind of thing?
Speaker 3 (27:53):
Forty trillion dollars and the federal deficit is only thirty
six trillion. Wouldn't be nice if we could swap one
for the other. Yeah, except that they will never touch
this is my opinion. Obviously they will never touch, in
my opinion, your IRA. The reason they won't touch your
IRA because that would give up the game. If they
(28:16):
ever taxed your IRA directly, right, you wouldn't put any
more money into an IRA, and neither would anybody else.
And they want to keep that game going. They want
you to put your money in the IRA because that way,
social security isn't the only game in town, right, so
(28:39):
that you can save plus to be blowback. So they're
not gonna mess with the IRA. They're not going to
tax the IRA directly. But my goodness, forty trillion dollars,
says Chuck Cheaper, is Nancy. I wish there was some
way we get a hold of that, Yes, Chuck, says Nanty,
that's Nancy's voice. Yes, Chuck, I should sure like to
(29:02):
get that money, and we could do good things for
all other people. Those people putting money in their iras. Oh,
you know, they don't really deserve it. We should never
give them that tax break back in the eighties when
I was a whippersnapper. And okay, so they regret ever
giving you the middle class tax cut. But fine, you
know the middle class thingy. So how are they going
(29:27):
to get the money?
Speaker 5 (29:29):
Hmmm?
Speaker 3 (29:31):
Well, let's see when we let people take it out
over their kids' lifetime and do a trust that would
require that take an hour over the lifetime. Then there's
no big lump some distributions. If there were no big
lump some distributions, then the tax rates are are what
hmm low.
Speaker 4 (29:53):
Gosh.
Speaker 3 (29:54):
Wouldn't it be great if there was some way, if
there was just some way where we could get the
kids to take big lump sums so that we could
tax it at the thirty seven and a half federal
rate plus whatever the state is. Gee, you know, and
during the break, we're going to think about how we
(30:14):
might possibly encourage families to take it out as a
big lump sum.
Speaker 2 (30:20):
What do you say?
Speaker 3 (30:21):
All right, when we get back, we'll tell you how
they did that.
Speaker 4 (30:25):
You're listening to.
Speaker 3 (30:26):
The David Carrier Show on David Carrier, your family's personal attorney.
Speaker 1 (30:52):
David's working and working and taking your calls. Now this
is the David Carrier Show.
Speaker 3 (31:01):
Welcome back to the David Carrier Show. I'm David Carrier,
your family's personal attorney. Jim made the mistake of calling
in first segment and asking, Hey, should I put beneficiaries
on the.
Speaker 4 (31:15):
Im my IRA?
Speaker 3 (31:16):
And so now we're getting the whole recap. So here's
the here's the deal. Forty trillion dollars in retirement plan
asset's middle class retirement plan asset's which people don't have them. Okay,
they get their money somewhere else. There's a whole bunch
of people got nothing at all. So it's the middle
class again.
Speaker 4 (31:35):
And that's all. That's why this is.
Speaker 3 (31:37):
All common sense planning for the middle class, because the
idea is that they would like to get the money,
but they can't get the money directly because if they did,
you'd never put any more money in the IRA. And
let's look at how it is that most folks view
the four oh one K the IRA, which is where
(31:57):
they do have most of their money. For most that's
the last money they'll spend, okay, because it's the tax
advantage money. And you know what people hate hate They
hate the idea of having to take out required minimum
distributions from the IRA, because like, that was my tax
benefit and now I got to take it out and
(32:18):
I got to pay the tax, and what am I
gonna do with the money. I'm not gonna spend that anyway, Okay,
So that's why the government now lets you put it
in longer. Remember it used to be seventy and a
half you had to start taking the money out. Well
now it's what seventy three, it's going up to seventy
five before you have to take the money out. Plus
there's all kinds of ways for you to stuff more
(32:39):
money in there, which you love because it's your tax benefit.
And I sympathize and appreciate that. However, however, the goal,
if you look at the consequences, not what they tell you,
but the goal is to leave a big chunk of
doray me for the next generation. To you, it's Fort
(33:02):
Knox and let's hope the gold bars are still.
Speaker 4 (33:04):
There for you.
Speaker 2 (33:05):
It's bury treasure.
Speaker 3 (33:07):
You know you'll never spend it, but oh it makes
you feel good knowing it's there. It's like that for
your kids. It's a piniana and they can't wait till
you reach room temperature to smash the damn thing and
give forty x percent of it to the government. D
you see this is what they're doing. Now, you got
to out You can out fox them, you can outsmart them,
(33:29):
but not if you put your kids's beneficiary on the IRA,
because number one, you put your kid at the tremendous
risk of losing it and being stuck with a tax bill.
That's number one. Do no harm, that's harm my opinion.
The other one is how can I benefit the kids
in the best way possible. Well, if I wrap that
sucker in the trust, the number one, they can get
(33:51):
suited all day long. Nothing's coming out of it because
it was done.
Speaker 4 (33:55):
You know.
Speaker 3 (33:56):
The basic planning that we do is a conduit trust. Okay,
it pays it to the kid, but there's limited asset
protection there and it does prevent it from being snagged
at once, but now it's got to pay out, right.
Whereas when we get a little more sophisticated about it
with the IRA Trust, I can accumulate the distributions in
the IRA Trust. You say, ooh, that's bad, you're going
(34:18):
to pay the high rate ATTACKX. I say, yeah, I know,
I'm going to pay the high rate ATTACKX if I
accumulate the distributions, you know, and all that. But I'd
rather have sixty percent of something than one hundred percent
of nothing. So that's a trade off. The other thing
is that if you can force your kids not to
(34:40):
not to take it all at once, please God, you
know you're never going to get this again. Mom and
Dad aren't going to die again. Then they didn't accumulate
this money over the last forty or fifty years. Again,
that's not gonna happen again. This is your one shot.
Let's not be stupid about it. Okay, let's stretch that
out over the ten years. Yeah, you gotta take rmds
(35:01):
in the meantime, they just came out with that, right,
finally agreed on that several years later. But anyway, the
point is that you can set this up with the
dedicated IRA Trust and I haven't even gone into the
spousal benefits because there's significant assets, significant reason there. But
let's just focus on because that was your question. See
how I'm getting back to what your question was? What
(35:23):
was it three hours ago? With the beneficiaries? Much better
to make the trust that you are thinking about that
you're actually went through the process of Hey, what is
it I'm trying to do here? Well, I'm trying not
to leave a time bomb to my kids. I'm trying
not to do that. Cool, this will help you with that.
(35:45):
I would also like this thing to be just as
beneficial as possible because guess what, Hello, waki Waki. Middle
class is getting screwed. Middle class is paying for everything,
and what do you get out of it?
Speaker 4 (35:59):
Nothing? Not much? Okay? Are you getting a return on
everything you paid in?
Speaker 1 (36:04):
No?
Speaker 4 (36:04):
And they've got these traps in.
Speaker 3 (36:06):
There, behavioral traps, not legal traps, but behavioral. Just observe
what people are actually doing. You can see what's happening.
They're getting forty plus percent, you know, and if you're
in New York at California and you're in Florida, it's
only what thirty eight percent? If you're in California. Now
it's fifty five percent of the money that you shielded
(36:27):
from taxes in your traditional IRA because when the kids
cash it in, boom up, goes to the tax rate.
Speaker 4 (36:34):
Right.
Speaker 3 (36:35):
And now most of your money not in Michigan's in Michigan,
it's only two percent is going to go to the
federal government or the state government. But oh plus if
you're in Detroita, I think they have a local income
tax there too. Yay, there's more taxes anyway. The point
is if you do this thing right and you stretch
(36:55):
it out over the ten years, okay, then the kid
not only is going to pay a lower rate of
tax because the money's coming out over time in lower
tax brackets instead of one enormous heroin shot eight ball
of money, right, which is going to have dislocating consequences. Instead,
(37:18):
you do it over time, which, as they say, we
usuld be able to do a lifetime which that's a
happy memory. And the point is that you're going to
pay the kids are going to pay a lot less
in tax.
Speaker 4 (37:29):
Here's the other thing.
Speaker 3 (37:31):
If you take just to give you an example, if
you take ten thousand dollars, you know, tax paid dollars
and you put it in a CD at I think
the numbers, Well, use it. We're six percent, twenty percent
marginal rate attax, okay, six percent marginal rate attacks at
twenty percent, and you let it go for ten years,
(37:54):
just in a regular taxable CD. Every time you get
a little bit of interest, it gets taxed. Every time
time you get a little bit of interest, it gets
tax Now it still compounds, yes it does, but you're
paying a reduced You're compounding at a reduced rate because
of the taxes that you're taking out. If you put
the same money in a wrath, everything exactly the same,
(38:17):
but now because you're not paying the tax, at the
end of ten years, there'll be three times as much
money in the wrath. Now you say, well, you know
my kids might need the money. I say, we'll sell
your freaking house, will you.
Speaker 4 (38:31):
You know what I mean.
Speaker 3 (38:31):
Don't blow the money. Don't be stupid. Right, Let's treat
this one gimme that is a middle class gimme, because
it's the middle class that uses it, the middle class
that benefits from it. Let's ride that horse.
Speaker 4 (38:45):
Till it.
Speaker 3 (38:47):
Peter people call me anyway, you know, ride it till
it's dead. Right, I mean, you got ten years. Let's
squeeze it here. Forget about the horse. Let's squeeze every
drop a juice out of that freaking lemon because you
aren't getting more lemons that it was the last lemon
in the world. How tightly would you squeeze the day?
(39:07):
You know how you know, how hard would you work?
And people blow off the iras left, right, and center
and they don't even recognize the danger, and then they
don't recognize the opportunity. Okay, So Jim.
Speaker 4 (39:22):
That's an hour later. That's my answer.
Speaker 6 (39:27):
Okay, So what you're saying is, if the trust is
a beneficiary, these funds don't have to be dispersed all
at once. It can be spread out over that ten
year time frame.
Speaker 3 (39:39):
It's done, correct, Yes, it all has to be distributed
by the end of the ten years. By the end
of the ten years, it all has to be gone.
All right, The party's over ten years later. But it's
an important ten years, and it's important how you get there.
Why would you run your kid through the gauntlet?
Speaker 4 (39:56):
You know what I mean?
Speaker 3 (39:57):
Protect them number one, and then because of the magic
of tax free compounding, you'll leave them three times as
much and all you have to do is whack their
fingers and it's like, hey, one piece at a time.
Speaker 4 (40:11):
That makes sense.
Speaker 6 (40:13):
Sort okay, So thank you David.
Speaker 3 (40:21):
Thank you Jim, thanks for calling, thanks for teeing that
one up. You're listening to the David Carrier Show. I'm
David Carrier.
Speaker 2 (40:28):
You're a retirement Losch specialist. If it was the cost
He served at the Pentagon as an army jag. He
graduated from Notre Dame and has two law degrees from
Boston University and Georgetown University. He's been practicing law for
over thirty years. He's your family's personal attorney. It's time
for the David Carrier Show.
Speaker 2 (00:33):
Oh, and welcome to the David Carrier Show.
Speaker 3 (00:35):
I'm David Carrier, your family's personal attorney, and you have
found the place where we talk about a state planning,
elder law, real estate and business law.
Speaker 2 (00:45):
So give us a call.
Speaker 3 (00:46):
Why don't you just six one six seven seven four
twenty four twenty four. That's six one six seven seven
four twenty four twenty four. Of course, this is our
very famous, the very famous Daylight Savings Time edition of
the David Carrier Show.
Speaker 2 (01:01):
What does that mean? It means. It means that.
Speaker 3 (01:05):
You're probably still asleep and you're not listening and nobody
out there. But but I know there's some of you,
some of you. You know, you sprang forward, right, you
lost that hour of sleep. So so what was the
point of that?
Speaker 2 (01:20):
Oh? Yeah, so it's not so dark when you get
up or something. I yes, I don't know.
Speaker 3 (01:23):
Anyway, Welcome welcome, Welcome, Give us a call six one, six, seven,
seven four, twenty four to twenty four. If you'd like,
you can always go to the website David Carrier Law.
All one word, David Carrier Law, Push that together.
Speaker 2 (01:39):
Dot com.
Speaker 3 (01:40):
Yeah, there you go, David Carrier Law dot com. And
if you want to send me an email, David at
David Carrier Law dot com.
Speaker 2 (01:47):
Is the way to the.
Speaker 3 (01:48):
Way you get that job, the way to get that
job done. Of course, we talk about a state planning,
elder law, real estate and business law, all.
Speaker 2 (01:56):
Of which is really retirement law.
Speaker 3 (01:58):
That's a really the way to think about this because
if you are retired, if you wish you were retired,
you'd like to be retired at some point, right, You've
got to deal with all these issues in the over time,
these issues have changed a lot.
Speaker 2 (02:17):
We did our first AI based.
Speaker 3 (02:21):
What do you call webinar, right, so we had a
national audience for that one.
Speaker 2 (02:28):
And the challenge is, well, what is this AI?
Speaker 3 (02:31):
Says artificial intelligence, this new computer stuff all about and
like every other computer, Oh, this is going to save
the world or destroy the world, or you know, be
wonderful or great or terrible or awful.
Speaker 2 (02:44):
Whatever it is.
Speaker 3 (02:45):
You know, I've been hearing this stuff since I've been
a lawyer right at the Pentagon, you know it sort
of the Pentagon as an army jarg Yeah. Well, what
I did was software development in order to make it
easier to the troops who didn't have wills or powers
of attorney or anything, and get them done at the
(03:06):
what we would call the CIF the Central Issue Facility.
So as you're pulling your boots and your shelter half
and all the rest, that's what we had back then. Anyway,
as when you're pulling your equipment, you could also get
go through the jagline there and get your wills and
powers of attorney then and back then. Of course, you know,
(03:26):
a hard drive was five megabytes five seriously, first ones,
I both or five megabyte hard drives and for the army.
But since then it's just it just keeps it just
keeps going. So the question is what's so different now?
(03:48):
Is it different now? And the answer is yeah, it
really is kind of radically, radically different. Even though people have,
as I said, people have been promising me, oh, this
will change everything, this will get lawyers out.
Speaker 2 (04:02):
Of the mix. You know, we won't need lawyers anymore
to do this stuff.
Speaker 3 (04:07):
And I don't know if you're familiar the old saying
about how to error is human. To really screw things up,
you need a computer. Well, that's especially true when it
comes to legal stuff, as some lawyers, especially with this AI.
As lawyers have been finding out, it's not enough simply
(04:27):
to put your question in or whatever and hope that
the machine gets it right. The machine gets it wrong
most of the time, but the AI is a very
useful tool. What it does is it enables us to
do much more complex stuff than we used to be
able to do at the same fee. So one of
(04:51):
the frustrations faithful listeners know, we don't just worry about
your stuff when you're dead. We worry about it mostly
while you're alive. We figure out, well, how do we
not lose what you've got? That's the real you know, obviously,
that's the real question that we have to solve for.
How do we make sure that you don't go broke?
(05:11):
How do we hang on to the stuff that you've
earned over your lifetime? That's the question and the answer
is for most people, you're not gonna with most estate
plans as we've seen them. They have nothing to do
with the long term. You have nothing to do with
How do you hang on to your stuff for you?
It's all about assuming that there will be stuff. And
(05:34):
you know what happens when we assume I don't have
to tell you that one anyway? How do we hang
on to it for you? And then once we've done that,
how do we get it to the kids in the
best way possible maximizing the tax benefits that you can
get through your iras. That's in a nutshell what it is?
Speaker 1 (05:53):
Where?
Speaker 4 (05:54):
What it is? We're all about here? Now?
Speaker 3 (05:57):
How do you do that when you're using sort of
the sort of the traditional the traditional tools. How do
you do it when you're using Well, the answer is
you put a whole bunch of paralegals on it. You
put a whole bunch of your atturning time into it.
You have to train folks up.
Speaker 4 (06:14):
It's not train folks up. It's not that easy.
Speaker 3 (06:20):
It's not that easy, right because frankly, most people, you know,
they don't.
Speaker 4 (06:27):
You know, what can you say? People don't want to.
Speaker 3 (06:31):
There's plenty of places you can work where you don't
have to you don't have to do as much of
that stuff put it that way right where it's fairly straightforward.
You just do your thing and you're done. Well, it
doesn't work that way. And so the team that we
have are people very dedicated to it. They work very
hard at making sure that everything is going to be
(06:53):
done correctly. Okay, but those people are few and far between,
few and far between. We've got Jim on Jim on
the line. Hello, Jim, welcome to the David Carrier Show,
Working and working Man having a ball. It's uh spring
spring forward day here, so great and we're both away.
Speaker 4 (07:18):
Good for us.
Speaker 5 (07:18):
Huh. Yeah, I have a question about just like David
and beneficiaries, is better to be the beneficiary or just
give it to the children.
Speaker 4 (07:32):
Yeah.
Speaker 3 (07:33):
So, so here's the Could you turn the radio down
just a little bit. Hopefully other people like listening to me,
but I don't. Here's the here's the thing, the uh
and we don't have enough. We've got two minutes to
talk about it, but we can get it at least
get started. Let me warn your first when you say
(07:55):
put the trust as the beneficiary, most trusts, most to
the trust that people do are not intended to. This
is where the AI helps us out. Most trusts that
you do are not intended to be what they call
conduit trusts or IRA trust there's different words for him.
But the point is they're not tailored to take advantage
(08:18):
of the IRA. But but and let me just we'll
close on this one.
Speaker 4 (08:22):
But I'll get back to it. Right.
Speaker 3 (08:25):
Here's the thing with iras. Here's what's so special about
the IRA or four oh one K or four three
B or four fifty seven plan or the THIRST savings
plan for your federal employee. All these retirement plan assets
plans where you get tax deferral right where the money grows,
(08:49):
It gets deposited and grows without you paying tax on it.
And this includes the WROTH traditional mostly but also including
the roth IRA which you've already paid the teen when
you earn the money, now you put it into the
IRA and it grows, it compounds without paying tax. It's
(09:10):
it's in ten years, you'll have three times as much
money if you keep it in a ROTH versus just
regular investments. And it changes based on your assumptions. But
the overall point is it's very very beneficial, very beneficial
over time, I mean like multiples beneficial to keep your
money in the IRA, and I know they challenge out
(09:32):
rageous fees and every time you turn around, they're hitting
you with another feet. But if you are not Bill Gates, right,
if you're not you know, Warren Buffett who made all
his money in stocks and stuff. If you're regular people
who made your money working, then the IRA is the
major tax deferred vehicle. That you've got annuities too, I suppose,
(09:56):
but really it's the IRA is the special thing for
middle class folks, all right. So it's the one gimme
that rich people don't get, okay, because they don't take advantage.
It would hurt them to take advantage of the four
h one K the IRA, because then they'd have to
have income. They don't want income so that they get
(10:16):
the advantage of capital gain thing.
Speaker 4 (10:18):
It's a whole another thing.
Speaker 3 (10:19):
But the point is that iras are the middle class
tax break. And we're gonna I'm gonna tell you why
you need to do this stuff, and then how to
do it.
Speaker 4 (10:30):
If you don't mind, but.
Speaker 3 (10:32):
Don't, okay, but you can't, well we have to do
We're going to back up in the next segment. We're
going to back up and say, Okay, iras middle class
tax benefit. Really good thing, super duper okay, And even
if it wasn't super duper, it's still where most of
our clients, most middle class people have most of their money,
(10:54):
so we have to address it for that reason alone.
You've been listening Jim will be back with you, okay,
and listening to the David Carriers Show. I'm David Carrier,
your family's personal attorney.
Speaker 1 (11:23):
This hour of the David Carrier Show is pro bono,
so call in now at seven seven twenty four, twenty four.
This is the David Carrier Show.
Speaker 3 (11:35):
Welcome back to the David Carrier Show. I'm David Carrier,
your family's personal attorney. Bumper music this hour Appellation Spring.
That's right because why because we're springing forward and uh yeah,
we'll get back to the rock and roll. Don't worry
about it. But but you've got to do, you know,
come on, Aaron Copeland, Appellation Spring. You know, everybody said, oh,
(11:58):
mister Copeland, it's amazing you've evoked the beauty of the
Appalachian Mountains, and his response was always, well, I've never
been there. Really, it's a purely an active imagination. Anyway,
we're talking with Jim, we're talking about iras and who
should be the beneficiary of the IRA, And what I'd
like to start with is number one, what the hell
(12:20):
is the IRA? It's tax deferred or tax free if
you already paid the tax up front. Right, it's the
one real financial benefit available primarily to middle class folks, which,
of course is they've regretted making that deal back in
the eighties, right, They wish they hadn't done that benefiting
regular folks. What the hell were we thinking? And so
(12:43):
there's been some chopping back recently.
Speaker 4 (12:47):
Now.
Speaker 3 (12:48):
The fact of the matter is that money in an IRA
compounds grows much faster at whatever rate of return you want.
Wherever ray to return your investments will get you. It
compounds fast. Or because the taxing authorities are not taking
their cutout every time you make a little dull every
time you get ahead, they're not slice taking a slice.
(13:10):
What that means is there's more to grow on and
so the compounding goes faster. That's my point. It's great,
it's wonderful. And the fact is you can't get anywhere
else annuities texted for newdies I suppose anyway, it's a
very good thing. So of course they want to screw
you up with it. Now, here's the problem, here's the
(13:30):
hidden risk. Why I always say the worst horriblest thing
you can do is make your kids beneficiary of your
IRA traditional ira. And the reason is if I make
the kid the traditional the beneficiary on the traditional IRA.
It's just about ten years ago now the United States
(13:52):
Supreme Court decided that inherited iras, the iras that you
get from your folks or whoever, or put you on
there as beneficiary. Inherited iras are not not retirement plan assets.
Inherited IRA is not a retirement plan asset. Obviously I'm
(14:13):
simplifying breaking it down, but this is the point. Retirement
plan assets cannot be taken away from you by a judgment.
Speaker 4 (14:22):
So if you get a.
Speaker 3 (14:23):
Horrific car accident, you have a million bucks, your IRA
is off the table, your four oh one k, they
can't touch it.
Speaker 4 (14:30):
Okay.
Speaker 3 (14:31):
This is even more protection if you've got a for
your social security, but for the retirement plan assets in
your IRA that should be it makes sense that this
would be the last money that you spend, okay, because
it's some of the most protected money that you have.
I said, well, that's wonderful. I say, yes, it is wonderful,
(14:53):
and you say, it's also wonderful that instead of them
taking the tax out, so I have what's left.
Speaker 4 (14:59):
To inherit to invest. Excuse me.
Speaker 3 (15:02):
Instead, I've got one hundred percent of what I put
in my four when km a IRA because I didn't
have to pay income tax on it. Oh boy, I'm
starting you know, I'm starting ahead and it compounds without
paying tax. So, oh my goodness, it's just wonderful. Now,
the downside of that is you have to pay the
income tax when it comes out. Yeah, that's the downside.
Speaker 4 (15:24):
I get it. But then we'll get that.
Speaker 3 (15:27):
You know, there's snakes in the grass when it comes
to that as well, but we'll talk about that. So
so that's why people like iras. Now the wroth is
even cooler because you typically pay a much lower rate
of income tax during your work in life, right until
you get later on in it. But at least in
the beginning you're paying a lower rate of income tax,
(15:47):
and you never you put the money in the wroth,
and now you never pay income tax on that money
or its earnings. Same way for your kids. Here's the
danger of the tree. Additional IRA. Why you should never ever,
I think horrible, bad idea to ever ever put your
kid as beneficiary on the IRA.
Speaker 4 (16:10):
Traditional IRA.
Speaker 3 (16:11):
The reason is it's the one way you can leave
your kid in debt. I get pushback on this. Oh,
you can't leave your good in debt. Yeah, follow the
follow the reality. You die, you leave the IRA to
the kid, right, So half a million dollars half a
million dollars IRA money.
Speaker 4 (16:30):
Oh boy, that'll solve all the problems.
Speaker 3 (16:32):
Okay, Now I know that none of this bad stuff
would ever happen to your kids, and I'm being irresponsible
doom longer or whatever you want to say, glumendomer by
even bringing it up. But if after you die, your kid, oh,
I don't know. What if there was humm, I don't know,
(16:53):
some weird virus showed up from somewhere and they shut
the whole government down and closed, you know, bankrupted sixty
percent of small businesses and your kid was running a
small business like that would never happen, I understand. Or
maybe you could be in a car accident again something
that would never happen. Or what if there were student
loan deck because your kid foolishly co signed for his kids,
(17:15):
your grandkids student loans, which of course would never happen.
Or what if your kid I don't know, got divorced
and the others, the ex spouse has a money judgment
which would never happen. What are some other things that
would never happen, I don't know, Make them up yourself,
all these things that would never happen, Because God forbid,
I should be suggesting that bad things would ever happen
(17:36):
to anybody in the real world, because we know that
that doesn't happen. In the real world. Nothing bad ever happens. Okay, great,
got it. But let's go crazy Sunday morning. I know,
but let's go crazy and imagine that something bad did happen.
So now your kid, for whatever reason, COVID student loans, divorce,
car accident, whatever it was Martians, I don't know, obviously
(18:00):
observed even to worry about it. But what if your
kid's got a half a million dollar judgment against them?
Now you die and the kid inherits the IRA? What
the Supreme Court decided? I think it's like ten years ago.
Now what they decided was, oh oh oh, that's.
Speaker 4 (18:18):
Not an IRA.
Speaker 3 (18:20):
You can't say you don't want it. You have to
take it.
Speaker 4 (18:25):
That's what was the.
Speaker 3 (18:25):
Court in That was the case in the Supreme Court
was a bankruptcy and the kids said, oh, I don't
want it. You know, I think it was his uncle
or aunt left it to him. And the kids said, oh,
I don't want it, and the bankruptcy court said, oh,
you got to take it. And then he said then
the kids said, oh yeah, but it's an IRA, so
you cannot. You can't take it away from me. It's protected.
It's retirement plan assets. You can't take it away from me.
(18:48):
It's got the IRA protection. And there's a lot of
argument at the time whether or not that was true.
The Supreme Court nine to zero said, it's not true.
It's not protected. It's not retirement plan ass It may
have been retirement playing assets for your mom or dad,
but it's not retirement playing assets for you because you
weren't retiring. It just kind of showed up. You say, WHOA, Well,
(19:12):
who cares? I'll tell you who cares? Because now you
got to take it and there's no asset protection. What
does that mean? It means the beneficiaries, creditors can snag it.
It's just another checking account okay, so, oh, I'm leaving
half a million dollars to my kid.
Speaker 4 (19:31):
Oh they don't put them on Easy Street. That'd be great.
Speaker 3 (19:34):
And then the creditor shows up, Supreme Court decision in
hand and says, uh.
Speaker 4 (19:40):
Give me, gimme, gimme.
Speaker 3 (19:42):
Okay, I mean for all reasons that would never happen
to any of your kids or anybody you would ever know. Okay,
now the IRA is gone, So the money is gone.
Guess what remains? And when we get back from the news,
I will.
Speaker 4 (19:58):
Tell you what remained.
Speaker 3 (20:01):
You've died, left the irate to the kid. Kid's creditors
snagged the money, but there's something left. Surprise when we
get back. You're listening to the David Carrier Show. I'm
David Carrier, your family's personal attorney.
Speaker 2 (20:22):
Welcome to Spring.
Speaker 1 (20:43):
David's got the how to you're looking for. Just call
seven S four. This is the David Carrier Show.
Speaker 3 (21:21):
Wellcome back to the David Carrier Show, the show where
the bumper music is almost always better than the show itself.
Hard to admit, easy to observe. Okay, we're talking with Jim.
I don't know, Jim.
Speaker 2 (21:33):
Are you hanging in there? Man?
Speaker 4 (21:34):
Oh? Just barely, all right.
Speaker 3 (21:39):
See, you think you have an easy question, and you
know I don't get many callers, Jim.
Speaker 2 (21:44):
You know I got to.
Speaker 3 (21:47):
Ride them to the sunset man. So here's the deal.
I raise very special deal. Okay, deferred taxes, tax benefits,
it's wonderful. But here's the problem. When you die and
you leave it to your kid as a beneficiary, the
kid gets it. According to the Supreme Court ten years ago,
it's just another checking account. It is not retirement playing
(22:09):
assets anymore. It has no protection from execution, which means
that anybody can snag it away from the kids. And
you think, oh, well, so what I mean if the
kid's a jerk and COVID happens, and it's obviously COVID,
their kid's fault, right, So that's why their business went
out of business. And obviously this is just desserts and fairness.
I guess I don't know. Or if your kid winds
(22:31):
up a barista, and you know, after four years of
U of M and four more years of graduate school, whatever,
I guess that's that's on you.
Speaker 4 (22:40):
True, it is on you. But here's the deal.
Speaker 2 (22:44):
They snagged the IRA.
Speaker 3 (22:45):
The IRA goes away the money in the half a
million dollars is what we said. Half a million dollars
of IRA money goes away, right, who owes the and
here comes to surprise and hopefully it's not a surprise.
The shot fucking surprises the kid owes the income tax
on the money. Well, the kid doesn't have any money.
(23:06):
That's why I was hoping and wishing him, praying that
this you're gonna finally kick off and they would get.
Speaker 4 (23:12):
The IRA money.
Speaker 3 (23:13):
Oh boy, But no, they get the money, somebody else
takes the money. The kid still ows the income tax
on the money because the money went to pay the
kid's debts. All right, that's how it's that's how it's treated.
And nobody seems to be aware of this. It drives
me nuts. So what we do instead, instead of allowing
(23:34):
that to happen, what we do is a and we
do it two ways. There's sort of the basics like
if you've got less than one hundred thousand, oh well,
you know, and there's there's spousal benefits to these as well.
But if you've got less than one hundred thousand, then
we're not gonna worry about.
Speaker 4 (23:50):
It too too much.
Speaker 3 (23:51):
And in your basic trust we're going to put the
IRA language. Which if you don't do that, if you
don't plan for your basic trust to be a beneficiary
of an IR, then all the tax gets paid at once,
which is what some financial advisors have either seen because
it happens, they've either seen it or they've heard about it. Okay,
(24:15):
and so that's why you know, the financial advisor's hair
goes on fire when you suggest using a trust as
a beneficiary of an IR. They're not always wrong, okay,
because that can it's possible for that to really screw
things up. All right, But what if you did it correctly,
What if you did it in such a way that
(24:36):
it actually protects the IRA, that there is no adverse
tax consequence to it, Well, your financial advisor will be disappointed.
I've seen it. They're like, you're like, oh, oh, you
figured that out, because you know, everybody likes to bring bad.
Speaker 2 (24:53):
The wolf, the wolf.
Speaker 3 (24:54):
You know it's no, no, no, there's no wolf. Well
it looks like a wolf. Yeah, I know it looks
like a wolf, but it isn't. It's something else.
Speaker 4 (25:01):
Anyway.
Speaker 3 (25:02):
The point is financial advisors, you know, they get disappointed
when they are incorrect about this. But what you're doing
by making the trust the beneficiary of your IRA, if
it's done correctly. I always got to say that, if
it's done correctly, is you're protecting your kid against the
worst kind of debt there is, which is tax debt.
(25:25):
Now here's the other thing. If you do a dedicated
IRA trust, which we do and most of our clients
before the Secure Act, before the Secure Act, which was
the Reform Secure Act, Secure Act too, Before that, you
could stretch out the IRA over your kid's life expectancy,
(25:46):
so you could provide anything that you had left over
and you ain't spending your IRA nine times out of ten,
so you could stretch it out over the kid's lifetime. Now,
you're not going to put your kid on easy Street
for that. That's not going to be. You know, you
don't have to worry about your trust turning into a
Disney air or Walmart air and or Ford Foundation air
(26:08):
and going nuts because it wasn't that much money, but
it was enough to make a difference, an ongoing difference
right when you stretched.
Speaker 4 (26:17):
It out that way.
Speaker 3 (26:17):
Now, you didn't want to do that without also protecting
it in the trust against creditors and all the rest.
But when you did that. Now lifetime makeme. Well, they
took that away, so now it's ten years and they
threw a bunch of more rules at it. So it
got all confusing. Gee, I wonder why they did that.
Speaker 1 (26:35):
Hmm.
Speaker 2 (26:36):
Can we think about why they did that? I can't
figure out why they did that.
Speaker 3 (26:39):
Let me tell you why they did that my opinion.
I haven't seen this written down anywhere, but I did.
I did spend a few years at the Pentagon, you know,
and you get to appreciate how the reasons quote unquote
reasons are not the reasons. Yet you can't be you
can't listen to what they tell you. You have to look
(27:01):
at the consequences. Okay, whenever you're dealing with those organizations,
government organizations. So here's the consequence. There's no estate tax,
and everybody tells you this, Oh, you don't have to
worry about.
Speaker 4 (27:16):
The estate tax.
Speaker 3 (27:16):
You don't have to worry about the estate tax because
why because the limits like thirteen million each? Right, So
that's good, good, let's not worry about the estate tax.
We don't have to do that. We have to do
all this planning worrying about the federal estate tax anymore.
But there is a new estate tax, which isn't an
(27:37):
estate tax. It's okay, back up forty trillion dollars or so,
who knows. Nobody really knows. But let's say there's forty
trillion dollars. That's the number I've seen in retirement plan
assets iras.
Speaker 4 (27:51):
Four to h one K. Is that kind of thing?
Speaker 3 (27:53):
Forty trillion dollars and the federal deficit is only thirty
six trillion. Wouldn't be nice if we could swap one
for the other. Yeah, except that they will never touch
this is my opinion. Obviously they will never touch, in
my opinion, your IRA. The reason they won't touch your
IRA because that would give up the game. If they
(28:16):
ever taxed your IRA directly, right, you wouldn't put any
more money into an IRA, and neither would anybody else.
And they want to keep that game going. They want
you to put your money in the IRA because that way,
social security isn't the only game in town, right, so
(28:39):
that you can save plus to be blowback. So they're
not gonna mess with the IRA. They're not going to
tax the IRA directly. But my goodness, forty trillion dollars,
says Chuck Cheaper, is Nancy. I wish there was some
way we get a hold of that, Yes, Chuck, says Nanty,
that's Nancy's voice. Yes, Chuck, I should sure like to
(29:02):
get that money, and we could do good things for
all other people. Those people putting money in their iras. Oh,
you know, they don't really deserve it. We should never
give them that tax break back in the eighties when
I was a whippersnapper. And okay, so they regret ever
giving you the middle class tax cut. But fine, you
know the middle class thingy. So how are they going
(29:27):
to get the money?
Speaker 5 (29:29):
Hmmm?
Speaker 3 (29:31):
Well, let's see when we let people take it out
over their kids' lifetime and do a trust that would
require that take an hour over the lifetime. Then there's
no big lump some distributions. If there were no big
lump some distributions, then the tax rates are are what
hmm low.
Speaker 4 (29:53):
Gosh.
Speaker 3 (29:54):
Wouldn't it be great if there was some way, if
there was just some way where we could get the
kids to take big lump sums so that we could
tax it at the thirty seven and a half federal
rate plus whatever the state is. Gee, you know, and
during the break, we're going to think about how we
(30:14):
might possibly encourage families to take it out as a
big lump sum.
Speaker 2 (30:20):
What do you say?
Speaker 3 (30:21):
All right, when we get back, we'll tell you how
they did that.
Speaker 4 (30:25):
You're listening to.
Speaker 3 (30:26):
The David Carrier Show on David Carrier, your family's personal attorney.
Speaker 1 (30:52):
David's working and working and taking your calls. Now this
is the David Carrier Show.
Speaker 3 (31:01):
Welcome back to the David Carrier Show. I'm David Carrier,
your family's personal attorney. Jim made the mistake of calling
in first segment and asking, Hey, should I put beneficiaries
on the.
Speaker 4 (31:15):
Im my IRA?
Speaker 3 (31:16):
And so now we're getting the whole recap. So here's
the here's the deal. Forty trillion dollars in retirement plan
asset's middle class retirement plan asset's which people don't have them. Okay,
they get their money somewhere else. There's a whole bunch
of people got nothing at all. So it's the middle
class again.
Speaker 4 (31:35):
And that's all. That's why this is.
Speaker 3 (31:37):
All common sense planning for the middle class, because the
idea is that they would like to get the money,
but they can't get the money directly because if they did,
you'd never put any more money in the IRA. And
let's look at how it is that most folks view
the four oh one K the IRA, which is where
(31:57):
they do have most of their money. For most that's
the last money they'll spend, okay, because it's the tax
advantage money. And you know what people hate hate They
hate the idea of having to take out required minimum
distributions from the IRA, because like, that was my tax
benefit and now I got to take it out and
(32:18):
I got to pay the tax, and what am I
gonna do with the money. I'm not gonna spend that anyway, Okay,
So that's why the government now lets you put it
in longer. Remember it used to be seventy and a
half you had to start taking the money out. Well
now it's what seventy three, it's going up to seventy
five before you have to take the money out. Plus
there's all kinds of ways for you to stuff more
(32:39):
money in there, which you love because it's your tax benefit.
And I sympathize and appreciate that. However, however, the goal,
if you look at the consequences, not what they tell you,
but the goal is to leave a big chunk of
doray me for the next generation. To you, it's Fort
(33:02):
Knox and let's hope the gold bars are still.
Speaker 4 (33:04):
There for you.
Speaker 2 (33:05):
It's bury treasure.
Speaker 3 (33:07):
You know you'll never spend it, but oh it makes
you feel good knowing it's there. It's like that for
your kids. It's a piniana and they can't wait till
you reach room temperature to smash the damn thing and
give forty x percent of it to the government. D
you see this is what they're doing. Now, you got
to out You can out fox them, you can outsmart them,
(33:29):
but not if you put your kids's beneficiary on the IRA,
because number one, you put your kid at the tremendous
risk of losing it and being stuck with a tax bill.
That's number one. Do no harm, that's harm my opinion.
The other one is how can I benefit the kids
in the best way possible. Well, if I wrap that
sucker in the trust, the number one, they can get
(33:51):
suited all day long. Nothing's coming out of it because
it was done.
Speaker 4 (33:55):
You know.
Speaker 3 (33:56):
The basic planning that we do is a conduit trust. Okay,
it pays it to the kid, but there's limited asset
protection there and it does prevent it from being snagged
at once, but now it's got to pay out, right.
Whereas when we get a little more sophisticated about it
with the IRA Trust, I can accumulate the distributions in
the IRA Trust. You say, ooh, that's bad, you're going
(34:18):
to pay the high rate ATTACKX. I say, yeah, I know,
I'm going to pay the high rate ATTACKX if I
accumulate the distributions, you know, and all that. But I'd
rather have sixty percent of something than one hundred percent
of nothing. So that's a trade off. The other thing
is that if you can force your kids not to
(34:40):
not to take it all at once, please God, you
know you're never going to get this again. Mom and
Dad aren't going to die again. Then they didn't accumulate
this money over the last forty or fifty years. Again,
that's not gonna happen again. This is your one shot.
Let's not be stupid about it. Okay, let's stretch that
out over the ten years. Yeah, you gotta take rmds
(35:01):
in the meantime, they just came out with that, right,
finally agreed on that several years later. But anyway, the
point is that you can set this up with the
dedicated IRA Trust and I haven't even gone into the
spousal benefits because there's significant assets, significant reason there. But
let's just focus on because that was your question. See
how I'm getting back to what your question was? What
(35:23):
was it three hours ago? With the beneficiaries? Much better
to make the trust that you are thinking about that
you're actually went through the process of Hey, what is
it I'm trying to do here? Well, I'm trying not
to leave a time bomb to my kids. I'm trying
not to do that. Cool, this will help you with that.
(35:45):
I would also like this thing to be just as
beneficial as possible because guess what, Hello, waki Waki. Middle
class is getting screwed. Middle class is paying for everything,
and what do you get out of it?
Speaker 4 (35:59):
Nothing? Not much? Okay? Are you getting a return on
everything you paid in?
Speaker 1 (36:04):
No?
Speaker 4 (36:04):
And they've got these traps in.
Speaker 3 (36:06):
There, behavioral traps, not legal traps, but behavioral. Just observe
what people are actually doing. You can see what's happening.
They're getting forty plus percent, you know, and if you're
in New York at California and you're in Florida, it's
only what thirty eight percent? If you're in California. Now
it's fifty five percent of the money that you shielded
(36:27):
from taxes in your traditional IRA because when the kids
cash it in, boom up, goes to the tax rate.
Speaker 4 (36:34):
Right.
Speaker 3 (36:35):
And now most of your money not in Michigan's in Michigan,
it's only two percent is going to go to the
federal government or the state government. But oh plus if
you're in Detroita, I think they have a local income
tax there too. Yay, there's more taxes anyway. The point
is if you do this thing right and you stretch
(36:55):
it out over the ten years, okay, then the kid
not only is going to pay a lower rate of
tax because the money's coming out over time in lower
tax brackets instead of one enormous heroin shot eight ball
of money, right, which is going to have dislocating consequences. Instead,
(37:18):
you do it over time, which, as they say, we
usuld be able to do a lifetime which that's a
happy memory. And the point is that you're going to
pay the kids are going to pay a lot less
in tax.
Speaker 4 (37:29):
Here's the other thing.
Speaker 3 (37:31):
If you take just to give you an example, if
you take ten thousand dollars, you know, tax paid dollars
and you put it in a CD at I think
the numbers, Well, use it. We're six percent, twenty percent
marginal rate attax, okay, six percent marginal rate attacks at
twenty percent, and you let it go for ten years,
(37:54):
just in a regular taxable CD. Every time you get
a little bit of interest, it gets taxed. Every time
time you get a little bit of interest, it gets
tax Now it still compounds, yes it does, but you're
paying a reduced You're compounding at a reduced rate because
of the taxes that you're taking out. If you put
the same money in a wrath, everything exactly the same,
(38:17):
but now because you're not paying the tax, at the
end of ten years, there'll be three times as much
money in the wrath. Now you say, well, you know
my kids might need the money. I say, we'll sell
your freaking house, will you.
Speaker 4 (38:31):
You know what I mean.
Speaker 3 (38:31):
Don't blow the money. Don't be stupid. Right, Let's treat
this one gimme that is a middle class gimme, because
it's the middle class that uses it, the middle class
that benefits from it. Let's ride that horse.
Speaker 4 (38:45):
Till it.
Speaker 3 (38:47):
Peter people call me anyway, you know, ride it till
it's dead. Right, I mean, you got ten years. Let's
squeeze it here. Forget about the horse. Let's squeeze every
drop a juice out of that freaking lemon because you
aren't getting more lemons that it was the last lemon
in the world. How tightly would you squeeze the day?
(39:07):
You know how you know, how hard would you work?
And people blow off the iras left, right, and center
and they don't even recognize the danger, and then they
don't recognize the opportunity. Okay, So Jim.
Speaker 4 (39:22):
That's an hour later. That's my answer.
Speaker 6 (39:27):
Okay, So what you're saying is, if the trust is
a beneficiary, these funds don't have to be dispersed all
at once. It can be spread out over that ten
year time frame.
Speaker 3 (39:39):
It's done, correct, Yes, it all has to be distributed
by the end of the ten years. By the end
of the ten years, it all has to be gone.
All right, The party's over ten years later. But it's
an important ten years, and it's important how you get there.
Why would you run your kid through the gauntlet?
Speaker 4 (39:56):
You know what I mean?
Speaker 3 (39:57):
Protect them number one, and then because of the magic
of tax free compounding, you'll leave them three times as
much and all you have to do is whack their
fingers and it's like, hey, one piece at a time.
Speaker 4 (40:11):
That makes sense.
Speaker 6 (40:13):
Sort okay, So thank you David.
Speaker 3 (40:21):
Thank you Jim, thanks for calling, thanks for teeing that
one up. You're listening to the David Carrier Show. I'm
David Carrier.
Speaker 2 (40:28):
You're a retirement Losch specialist. If it was the cost
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