Episode Transcript
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Speaker 1 (00:00):
Good morning everyone. Welcome to Life Happens Radio. I am Lupiro,
your host for this morning on a beautiful sunny day
here in the Capitol Region. I hope you're enjoying your Saturday.
I hope you can stay with us for the hour today.
We have some great things to talk about, and I
want to pick up where Mr Kopik left off. We
were just talking to Dave after the show. We change seats,
he gets up, I sit down, and so we were
(00:22):
talking about long term care and the cost of long
term care. And one of the themes of today's show
is to look at where we are and prepare ourselves
for what I call crucial conversations. When you're sitting around
the table and you've got your relatives gathered, you visit
with your parents, your aunts and uncles, your brothers and sisters,
(00:44):
and the kids and the grandkids, and you look at
all the generations and all the issues that those generations have.
One of the things that is become over my career,
I always give this number out so you know how
old day. I've been a lawyer for forty two years
and practicing law for forty two years. Right here in
the Capitol Region, and I have seen the changes in
(01:08):
the way people get cared for, in the cost of
the care that they need as they go through the
aging process. I used to have a couple of aunts
who were in a nursing home. In the nursing home
back then, I'm going back probably forty plus years, the
nursing home costs five or six thousand dollars a month,
(01:30):
which was a lot. And you know, Medicaid is the
program we always talk about picks up the cost. The
cost today and we have clients come to our office.
We sit with them every day and we guide them
through this process and they start writing checks for eighteen
thousand dollars a month. Think about it, eighteen thousand dollars
(01:50):
a month. Now you're talking about two hundred and twenty
thousand dollars per year. How long can you last? How
long can your savings last if you have that kind
of an expense. And I know that most of our
listeners almost all don't want to go to a nursing home.
Who does it's not a fun place. Well, my aunts
(02:11):
were there forty fifty years ago. I used to pick
them up. They used to sit and play cards. They
were fairly active today. Nursing homes are very critical care institutions.
People in nursing homes are there for a reason. There
are now a lot of other options, assisted living and
home health care. Back then, there weren't that many, so
people ended up in nursing homes that were still relatively active.
(02:34):
Today's nursing home resident typically is not. So you're paying
eighteen thousand dollars per month and someone is getting care
that is really simply custodial care, where get they need
to be fed, they need meals, they need to be bathed,
and they have some activities. But that's it for two
hundred and twenty grand and the cost of comparison. I've
(02:55):
heard people do this comparison and say, okay, you could
have rented a cabin on the Queen Mary and sailed
around the world for a year for less money. But
this is where we're at. And Dave brought up a
good point, and he's got a workshop coming up. I
think Thursday. You need to prepare, you need to plan,
and you need to be ready when that event hits.
And so today what we're going to talk about is
(03:18):
give thanks and pass it on. We're coming up on
Thanksgiving and leaving and receiving inheritances is part of the planning.
When when you're a parent like me and I have children,
and I want to say, Okay, kids, here's what I've
been working on, Here's what I've been able to save.
Here's what your mom and I need to do to
(03:40):
live comfortably for our lives. But then we want it
to come to you. We want you to benefit from
a lifetime of hard work. And my dad taught me
this value. You want to leave the next generation a
little bit better off. And that's the that's the immigrant
story of America. My grandparents came to this country in
eighteen ninety six, and they brought with them one of
(04:04):
their children. The others were born here, and they came
in through the Bronx and moved upstate later on and
had a little Italian food business. And they worked that
Italian food business. My grandfather was a good chef and
they made and prepared Italian food. None of their children
went to college. My father never went to college. He's
(04:26):
a high school graduate, but worked his whole life. Went
into the military, went into the Armed Services, learned a
tremendous amount, became the deputy director of the New York
State Division for youth with a high school diploma, and
he sent both of his children to college. He sent
me to law school. And so each family wants to build,
(04:47):
you want to leave people a little bit better off.
Today's show, we're going to talk about how your current
assets and wealth can be maximized for you and then
maximized for the next generation. And when we have these
crucial conversations, we have to look at risks and we
have to look at rewards. And to help me out
(05:09):
today live here in studio with me, is Patricia Whalen.
Good morning, Patty.
Speaker 2 (05:13):
Hilu, Good morning, Thanks for having me on the show
this morning.
Speaker 1 (05:17):
Patty is one of our rising star super lawyer associates
who is working with me in the estate planning and
elder law areas. And we've been working together now for
a few years. And Patty, in your brief three year career,
you've met with a lot of clients. Yeah.
Speaker 2 (05:36):
Yeah, we haven't met with a lot of clients. I mean,
there'd be some days where we have five, six consults,
so and each one's very different, you know, there's different facts,
different people involved, and they're all interesting in their own ways.
Speaker 1 (05:48):
So and each family. That's a key point I try
to point out there's no cookie cutter for this. We
sit with families and we do the intake, and we
sit with them and listen as they talk about out
their health, their relationships, their children, their grandchildren, their home,
their assets, their careers, and everybody has a unique story. You,
(06:10):
every one of our listeners listening this morning has a
unique story and a unique set of circumstances that we
try to address in an estate plan. So when we're
talking about giving and receiving, leaving an inheritance, receiving an inheritance,
we want to have conversations. You don't want to be
(06:30):
in the dark on either end. You want to know
how to do it from the giving perspective. If you're
creating your own will, as you know if you've listened
to the show before, we're believers and trusts, because it
just is a much more efficient tool and you want
to create a plan. And I did a seminar yesterday
up in the Aquasani Indian Reservation. And if you don't
(06:50):
know where that is, folks, just drive north and west
for about four hours. You're on the Canadian border. And
I was up there talking about one hundred seniors for
the Office for Aging. And I use the analogy when
I give seminars that if you're on an airplane and
the airplane's going up and they're giving you instructions and
the yellow mask falls and they say, Okay, if that
(07:11):
mask comes down, the first thing you need to do
is put your mask on. You need to breathe. You
need to have oxygen because without you having oxygen, you
can't help anyone else. And in our retirement years, oxygen
is income and resources because we need to pay bills,
(07:31):
we need to pay for our living expenses, we want
to travel, we want to do nice things in retirement.
So we want to make sure that you have enough oxygen.
And we try to design plans that keep all of
your assets accessible to you. When do we give them?
When do we give And one of the things we're
going to start out with Patty and kind of put
(07:52):
it on the table and probably take it off the
table quickly is taxes. A lot of people think, oh,
there's a death tax, and how can I ever navigate this?
And the federal exemption January one, because of the One
Big Beautiful Bill Act, the Federal estate tax exemption and
(08:13):
if you've heard it called the death tax, that was
just somebody trying to convince you that it's scary. The
estate tax is fifteen million dollars per person. So when
we sit with clients, we do have clients that have
fifteen million and more and no much more in some cases.
Remember we practice in New York City and Manhattan, Long
Island and the Capital Region, and there are people of
(08:36):
high net worth that we work with, but most people
aren't at fifteen million dollars. And that's when they come
in they think, oh, I have to worry about the
estate tax, but they really don't.
Speaker 3 (08:46):
Right.
Speaker 2 (08:46):
Yeah, a majority of our clients are below you know,
that threshold. Where again it's interesting for me personally, is
when we have a client that's somewhere, you know, in
the middle where they're not quite there yet, but you know,
they're almost there. So that planning can be kind of
interesting because you know, we have to, you know, consider
how their assets will grow and you know, how that
(09:07):
will change over the next few years, because if they're
at like, you know, five six million, they're not quite
there yet. But you know, sometimes we still have to
consider planning for them because that might be something they
may need.
Speaker 1 (09:19):
To worry about it depends on where they live, right.
Speaker 2 (09:22):
Yep.
Speaker 1 (09:23):
We work in Florida. We have a lot of Florida clients,
and we have relationship with a firm in Florida, so
that's our Florida office. And in Florida there is no
tax other than federal a state tax at a fifteen
million dollar threshold. But that's not the case in New York. Yep.
Speaker 2 (09:38):
Yeah, New York is about what's seven point one per person?
Speaker 1 (09:42):
Now?
Speaker 2 (09:42):
Yeah, so and that is pretty generous though, I mean
considering some other states. What do you call Massachusetts?
Speaker 1 (09:49):
I love when you call it the exchutions?
Speaker 2 (09:50):
Yeah, yeah, yeah, so, and there's so much lower, you know,
two million or one million?
Speaker 1 (09:54):
Too many went it was one this couple of years ago,
went up to two. Wow. So if you're a Messages's resident,
you have to do a state tax planning. You do
have to worry about it at a two million dollar level. Connecticut,
we practice in Connecticut does not have an independent estate tax,
just as that same fifteen million dollar threshold. New Jersey.
We practice in New Jersey does not have an independent
(10:15):
estate tax. So New York and Massachusetts require additional thinking
in terms of a state tax planning, and in New
York there are some quirky rules. So the seven point
one million is each individual's exemption. But if you have
over seven point one million and you're married and you
leave everything to the surviving spouse, then the second estate
(10:37):
is the one that you have to worry about, so
over both spouses lifetimes. If assets are accumulating, and when
we do an inventory, when we're looking at giving assets
and worrying about how to give them and how to
prepare people for them, life insurance has to be included,
retirement accounts have to be included, all of your residents,
your real estate, business interests. So we do a very
(11:00):
careful inventory and maybe just talk about the process that
you go through with your clients in beginning this relationship
and how important it is to get all the details
out there, right.
Speaker 3 (11:12):
I mean.
Speaker 2 (11:12):
So, one of the things that we do that I
think is very helpful for us, especially when we're meeting
with new people for the first time, is that we
have them fill out in advance of the meeting a
questionnaire and an asset sheet. And the asset sheet is
pretty important because it allows us to have information regarding
their different assets that they have, So whether they have properties,
(11:33):
you know, what the rough value of the properties are,
if they have life insurance policies, what their retirement accounts
look like, you know, if they have businesses. And having
that information upfront is helpful for us because when we
meet with people for the first time, you know, we
need to have a you know, a good understanding of
you know, their circumstances and related to their family members
(11:55):
or you know, family matters. And then also what they have,
you know, what they own, you know, personally in terms
of assets, because depending on the assets, you know, it
really depends on what will do for them depending on
the things that they own.
Speaker 1 (12:06):
Yeah, and so that inventory is critical and we get
that in advance. There's a great online program that we utilize,
so our clients fill that out and we have that
information available to us. And when you look at that
chart of assets, each individual asset has a different tax situation.
(12:26):
So when we talk about a state tax fifteen million federal,
seven point one million state, if you get over that
seven point one million, New York taxes you as though
you don't have any exemption, they tax the entire thing.
Once you go five percent over seven point one million.
So you get to seven point five million, you go
from zero tax at seven point one to seven hundred
(12:46):
and forty thousand dollars of tax. And that's a real number, folks,
seven hundred and forty thousand at seven point five million.
So just on the change in value, you're paying double
the amount of tax in the increase in value. Then
the increase in value from seven point one to seven
point five and that's the New York system. They call
it the cliff. So there are ways we plan and
ways we plan around the cliff for a state tax purposes.
(13:08):
But when we look at that inventory, you have to
look at categories of assets. Retirement accounts have their own
set of tax rules, very complicated set of tax rules.
There was a law passed in twenty twenty again in
twenty twenty two, we call it Secure Act and Secure
Act two point zero, which govern how you receive retirement accounts.
(13:29):
And most parents say, well, I'm going to just leave
it our spouse to spouse and then onto my three kids. Well,
the three kids are treated differently depending upon their circumstances. Yes,
so asset by asset, it becomes very tricky because you
have a full range of income tax issues. Do you
want to do a roth conversion, do you want to
pull some money out? And by life insurance. So asset
(13:51):
by asset, how you treat the assets affects how your
children and beneficiaries will ultimately receive it. Highly appreciated assets
like stocks and bonds, and the market's bent up tremendously
over the last year or so. Highly appreciated securities going
to children are a great asset to leave them because
they get something called a step up in basis. So
(14:12):
we have to worry about capital gains tax and look
at how to treat capital gains taxes within an estate
plan for highly appreciated assets, income taxes for retirement accounts,
real estate, your home has a certain tax consideration. So
all of these kinds of assets life insurance, which is
a very favorable asset from a tax perspective, we have
(14:33):
to weave them into a plan. And when we come back,
we're going to talk about just that. How do you
take your estate, your retirement accounts, your life insurance, your home,
your investments, your bank accounts. How do you take all
of that? Make sure you have that oxygen, make sure
you can use it. You keep the income from it
and you can have access to it and then get
(14:55):
it to your next generation in the most favorable way possible.
And we have a technique that we think is pretty
powerful for this, and we're going to come back after
a break and talk to you about a bcet. So
stay tuned. We'll be right back after this and we're back.
Welcome back. I'm Lou Piro, your host for this morning
(15:15):
on Life Happens Radio, Live in studio with Patti Wheeling.
Associated at pier O'Connor and Strauss Ot a law firm
does a state planning, elder law, all those kinds of
good things, and we deal with clients and talk to
them about their lives, their families, their assets. And today
we're going to try to weave all that together for
you so that when you come up and you're sitting
(15:36):
around that Thanksgiving table, you're ready to have this crucial conversation.
You're ready to engage and say, Okay, here's what I've got,
here's how I'm going to think about it. I want
you kids to prepare and I mentioned long term care.
We're going to talk more about long term care in
the second part of the show. Second half of the
show because planning for long term care is a critical
element of all of this, making sure you keep access,
(15:59):
but at the same time you're protecting assets. And I
want to start and go back, Patty, because this is
over my career, an asset that used to be nonexistent.
IRA's four oh one, k's four h three, b's four
to fifty seven plans, all the different kinds of tax
deferred accounts that you can have. Clients didn't have those.
(16:21):
They had bank accounts, they had stock portfolios, they had pensions.
Define benefit plans to find contributions. Plans is how companies
used to reward workers who worked a career thirty forty
to fifty years and then got a pension when they retired.
That was the way the world worked today. Very few
of our clients who come through the door have a
(16:42):
fixed pension. If you were a school teacher, who knew
that you were going to be one of the best
suited retirees because of your state pension, teacher's pension, and
we look at that, and then people have deferred compensation
plans along with a pension. They're in pretty good shape
for the most part, and that's a great thing, but
(17:03):
most people don't have that. So you have iras for
one k's for a three b's and you have to
look at those assets and say, okay, at seventy three,
I have to start drawing on it, and I have
to start paying tax on it. And the game used
to be that you wanted to stretch the IRA as
long as possible because every dollar that you take out
(17:25):
of that tax deferred ira, a traditional IRA is income
taxable to you. When you leave that dollar to your children,
it's income taxable to them. And we used to do
very intricate trusts that would maximize tax deferral and we
would leave it to grandchildren who are you two year old,
(17:48):
had an eighty year life expectancy, So you could stretch
that IRA, keep it invested. And they say the power
of compounding is the eighth wonder of the world, and
tax free compounding inside of an IRA, and in particular
a wroth, which we're going to talk about next, is amazing.
To grow wealth. You don't pay tax on what you
(18:09):
earned while you were working, and you don't pay tax
on the growth until you take the money out. But
because of all of this planning and the stretching of
the iras, the government said enough, we want our money.
So they passed the Secure Act to squeeze the dollars
out of the iras. And the rule, Patty is a
ten year rule. So just talk a little bit about
(18:30):
that and what that means when when children inherit the IRA.
Speaker 2 (18:35):
So when children inherit an IRA, typically they have to
follow the ten year rule, which means that they have
to completely withdraw the account within ten years. They don't
have that lifetime strutge anymore, so they have to, you know,
within ten years, completely drain you know, the inherited IRA.
Speaker 1 (18:55):
So when you talk to your kids about their inheritance,
and this is kind of the part of the conversation, Okay,
I have an IRA, that's our biggest asset. It's going
to come to you kids. But you need to plan
and you need to look at a tax advisor, an
investment advisor, and an attorney and put that team together
because as you're drawing that money out, as they always say,
(19:17):
it isn't what you earn, it's what you keep, and
when you draw from an IRA, it's what you keep
after tax. So you try to plan and scheme to
maximize the value. If the person was in payout status.
If they were taking mandatory distributions, there is a required
minimum distribution over that ten years, but otherwise you can
(19:38):
use discretion and how and when to pull the money out.
So traditional iras, there are some exceptions to that ten
year rule. If you have a child with a disability,
we very often try to point the IRA in their
direction because they can get a lifetime stretch. So we
create special needs trusts and you can make a special
needs trust the beneficiary patty right of that IRAE.
Speaker 2 (20:02):
Yeah, so you know, that's one of the you know,
reasons why we ask for information not only about their assets,
but you know, their family members, their beneficiaries upfront because
you know, in talking with them about you know, the whole,
you know, estate planning as a whole, we look to
see if you know, one beneficiary would be better off
receiving assets from one source. Meanwhile another beneficiary would you know,
(20:24):
benefit from, you know, receiving different types of assets. So,
you know, I think in one file we worked on together,
we ended up doing just that. We directed the IRA
to the special needs trust for the one child, and
then we equalized it by giving the other child, you know,
real property, which would be something they would benefit more
from because you would.
Speaker 1 (20:45):
Get the step up and basis they don't have to
pay capital gains text and that's that's part of this.
You look at it and say, oh, I have three kids,
they're all going to get a third of every asset. Well,
that's not going to be the best solution in many
instances because from it, after ten perspective, it won't come
out equal. And so if you left that IRA a
third to third a third, one child's going to be
(21:06):
able to stretch the IRA. The other two have to
take it out over ten years, and the other class
of beneficiaries. I just want to throw this in here
because it does become part of our planning. If you
want to benefit a local charity, your university, your hospital,
a not for profit organization that you've participated in over
your lifetime, the best dollars to leave to charity are
(21:30):
what we call tax hostile dollars, things that have income
tax associated with them that don't wash out at death.
And this falls into maybe two or three categories. One
is the retirement accounts. The IRA is you can now
take one hundred and eight thousand dollars a year out
of your IRA and give it right to charity and
it never hits your adjusted gross income. It doesn't even
(21:52):
go on your return. It's just a contra charitable qualified
charitable contribution. And that's very powerful because medicare tes now
depends upon what your taxable income is, and this doesn't
hit the grid if you pull it out and use
a qualified distribution to a charity. So tax dollars inside
of retirement accounts go into charity are beautiful dollars because
(22:13):
the charity doesn't fade a penny of tax, and you
can leave all the other assets to get a step
up and basis to your individual family members. And we
very often just rewire the plan to leave retirement accounts
to charities and other assets to individuals and save hundreds
of thousands of dollars of income tax just by that
one simple step. When you have children and you're looking
(22:34):
at what assets to give the RAWTHIRA becomes again a
very powerful tool.
Speaker 2 (22:41):
Well, we met with some clients what two days ago,
and one of the interesting things that came up was
one of the last sort of categories in regards to
if you're leaving an IRA, for example, to someone who
is not more than ten years younger than you in
this situation. We met with a nice couple and one
of the things that came up, which you know sometimes
(23:02):
things you know, happened during the meeting, and you know,
this was really important to her, but we didn't have
any information you know about it beforehand, was that she
you know, needed to care and you know, do some
planning for her sister. And she had indicated that she
was going to be inheriting a you know, IRA from
her sister upon her sister's passing. And you asked the question, oh,
you know, what is the age difference between you two,
(23:23):
and it was eleven years.
Speaker 1 (23:24):
Yeah, for ten years and ten months.
Speaker 2 (23:26):
Yeah, that's exactly what it was. So just missed it.
Speaker 1 (23:29):
But yeah, I'm gonna you know, the wroth ira is
such a powerful tool. I want to pick back up
with that when we come back. We have to take
a hard break for the news, and I'm going to
open up the phone lines in the second half of
the show as well. If you have a question, give
us a call. Blue Piro Patty Wheeling here live in studio,
ready to take your calls. We're going to come back
talk about roth iras, other iras, different types of assets,
(23:51):
the Thanksgiving conversation about giving and receiving, and stay with us.
We're going to take short break for the news and
when we come back, we'll be giving you some great information.
Stay with us, and we're back. Welcome back. I'm Lupiro,
your host for this morning on Life Happens Radio. Hope
you're having a great day. Hope you're out there listening
and learning and getting ready for the holidays. And Patty,
(24:13):
this is a great time of year. I think my
favorite holiday of all is Thanksgiving because you get four
days and that Friday you can kind of pick and
choose catch up on things. I'm not a Black Friday shopper.
Speaker 2 (24:27):
Are you No? No, I'm not.
Speaker 1 (24:29):
No, I don't. I don't need that hord mess, you know.
Speaker 2 (24:33):
No, it's too stressful and sometimes I don't think the
sales are really as good as you know they're trying
to make it seem.
Speaker 1 (24:40):
Yeah, and now I know. I actually shop online now too,
and I never thought I would, but I do. And
that's all my kids do is shop online. So it's
something where you don't have to go to the store.
You can do your shopping and sale shopping right through
the internet. And that's something that is different in today's
society versus when I started this business. Yes, so when
(25:01):
we look at planning, I'm going to open up the
phone lines. If you have a question on planning particular asset,
how the tax ramifications work, give us a call. Eight
hundred eighty two five five nine forty nine. It's eight
hundred talk WGY. We'll open up the lines for you
eight hundred eight two five fifty nine forty nine. And
(25:21):
we left off our conversation Patty with iras and in
particular wroth iras. My prediction is, just like they did
the ten year rule through the Secure Act, my prediction
is that they will curtail the use of roth iras
because they are just too good. Anything too good is
going to get looked at and scrutinized and potentially changed.
(25:44):
There are people that are able to do something called
a backdoor mega wroth conversion, and they do large contributions
to retirement accounts and then convert them to roths, and
you can put a significant amount of dollars away doing that.
Other people do wroth conversions. The limitation on a wroth
(26:04):
is significant to try to fund it each year, you
only have a limited amount of dollars you can put
in year over year, and they have to be earned dollars.
I kind of saw these for my kids as a
way talking about giving and receiving. I had them all
get their work papers at fourteen and get a job. Kids,
you start earning some money. And they all had some job,
(26:27):
and I said, every dollar that you earn, I will
match into a roth ira. So they get to keep
the money that they earned at fourteen, fifteen, sixteen, seventeen, eighteen,
and I would match it and put the same amount
of money into a roth ira for them, and they
have those wroths. Now, there are also income limitations on
who can contribute to a wroth. Once you make a
(26:48):
certain amount of money, you're no longer eligible for a
direct wroth contribution. But the power of the wroth at
the end of the day, when you look at how
do your beneficiaries inherit. We talked about all of the
the evil rules of traditional iras, the ten year rule
and mandatory distributions. They want to get that money out
of there, folks, because the government needs the tax revenue.
(27:12):
But with roth iras, we have an ability to defer
tax and escape tax. It's a tax free vehicle. So
once you get money into a roth, you can let
that money cook tax free. That inheritance to the child
goes tax free, unless you're in a high bracket and
you're over the seven point one million. But they get
(27:33):
it tax free, and they can let it cook for
another ten years, and another ten years of tax free compounding,
depending upon how it's invested, will either double or triple
the value of that account after tax, because every dollar
comes out again what tax free. We have a caller
on the line. We have David from New York. Good morning, David.
Speaker 3 (27:54):
Good morning. How you guys doing.
Speaker 1 (27:55):
We're doing great. How are you today?
Speaker 3 (27:58):
Good?
Speaker 4 (27:58):
Good.
Speaker 3 (27:59):
So I just wanted to start off. I'm thirty one
years old. I'm trying to get I got I'm a
little late bloom around getting my finances all straightened out.
And I have the job I work with, I have
a great career path, I have a pension and an annuity,
and I'm just trying to figure out different avenues where
to put my money. Now. I've heard of rocks, I
(28:21):
heard of CDs, I heard a bond. I guess where
I'm trying to, you know, try to go with it?
Is you know where do I put my money, so
I know what it will be. That's for me, you know,
and hopefully in my family down the line in the
next thirty years, twenty years or so on and so forth.
Speaker 1 (28:38):
Sure, and you know we're sandwiched between two investment shows,
Take Copeck and Steve Bouche. We're the legal part of
the show. So I can tell you how to structure it.
From an estate planning perspective, I personally don't give investment advice,
but I advised my kids and I continue to maximize
anything you have available to you, to defer the income
(29:01):
and to put it into accounts that you can accumulate
and grow. So if you have do you have an
employer for one.
Speaker 3 (29:07):
K it goes right, and do a pension into a pension?
Speaker 1 (29:12):
Okay, good for you. Most employers don't have a fixed
pension anymore, so that's great.
Speaker 3 (29:18):
The wonderful thing about being a union member.
Speaker 1 (29:20):
There you go, there you go. But in terms of
the wroth, if you can get dollars into a wroth,
that's a great way to do it. I have to
look up the contribution limits around seven thousand dollars a year.
I think it seven thousand.
Speaker 3 (29:33):
Is that for a single correct?
Speaker 1 (29:35):
Yes, uh huh, And if you're married you can put
more in. Yeah. But getting money into the wroth is
a great way to set dollars aside. Grow those dollars,
let them accumulate. What did you say your age was again, David,
thirty one. Okay, so you're and you're thinking you waited
too long. But in our book, we're talking to people
(29:55):
that are eighty one saying should I start a plan?
So you're way ahead of the game, which is great.
You're starting at the front edge of the curve, which
is fantastic. So tax deferral is a big thing. So
if you can get into a roth, that's a great
way to put dollars aside. If you have disposable income,
life insurance is another way to put money aside on
(30:16):
a tax deferred basis. And at thirty one you mentioned
your family.
Speaker 3 (30:19):
You have kids, not yet we're planning.
Speaker 1 (30:22):
Though, okay, So you know when you get to the
point where you have children, you start looking at it
and saying, Okay, I've got this great job and I've
got a pension. But if life happens for me and
I'm not there for my kids, when they need to
go to college. Life insurance is a great vehicle, and
they're all different kinds of life insurance. You can do
term insurance if you need it just for a particular
(30:43):
period till your kids get old enough and get through college.
You can use them more permanent vehicle, and you get
to whole life and variable life policies which have inside
them accumulations, so you can start deferring money in a
whole life policy. Putting money in, you get the insurance benefit,
but you also get investments within the insurance contract. And
(31:08):
when we talk about income tax planning, and I'm jumping
ahead because insurance was on our list to talk about,
but when you look at life insurance, inside of that
insurance rapper, there's a contract, there's a rapper, and inside
of that goes investments. I have a couple of different
policies myself. One is a variable policy, so I'm in
the markets my insurance dollars that I put into a policy.
(31:31):
I have a five hundred thousand dollars death benefit and
it's growing. The cash value is growing. It's about one
hundred thousand dollars now, and it's accumulating on a tax
free basis. Because I don't have to pay tax unless
I cash the policy out. And the way that typically
you draw the money out is by borrowing it. So
you can take a loan against the policy, and you
don't take you don't pay income tax. So do you
(31:53):
have a good financial advisor?
Speaker 3 (31:57):
I don't have a financial advisor.
Speaker 1 (31:58):
Okay, So these are really the issues that a good
financial advisor is going to walk you through. And they
start looking at budgeting you saying, okay, you're thirty one,
here's the money you're putting away. Here's your expected retirement
dollars when you hit sixty five or whatever age you
plan to retire. If you're a union member, might be younger.
So looking at how do you get to the point
(32:20):
where you're secure and during that time period you can
cover all of the expenses that you're going to have.
Probably the biggest one during that time period is going
to be college education if you do have kids. But
then you're going to look at in retirement. We're going
to talk a little bit soon about long term care.
I want to mention one type of life insurance policy
that you can buy today, which is not a term policy,
(32:44):
but it's also not a cash accumulation policy. They call
it a guaranteed universal life product, and this is the
minimum amount of permanent insurance that you can buy. So
the company says, okay, we're going to charge you X
dollars a premium and guarantee you five hundred thousand dollars
death benefit, and you just keep paying the same premium
every year, and if you die, you get somebody gets
(33:07):
five hundred thousand dollars. But you can also put a
rider on that contract to say, well, if I get
to be a certain age and I need care, I
need home health care, I need to have somebody come
in and help take care of me, you can actually
use that policy that five hundred thousand dollars for yourself,
and you can access the policy and pay for long
(33:28):
term care expenses. And you know, in our office we
have people in long term care at the age of
thirty one because they've had an accent where they've had
some condition that has befallen them and they need those
dollars now. So that policy gives you a lifetime benefit
plus a death time benefit. I like them. They're cash indemnity,
so you get in that. The contract that I'm looking
(33:49):
at is ten thousand dollars a month tax free out
of your policy, and you begin to draw that five
hundred thousand dollars down, but you're using it for expenses
that you have now. But all things that a good
financial advisor can help you with. Tax deferral is a
big thing. The Wroth take a look at that. When
you have kids, life insurance will become more critical and
(34:10):
more important.
Speaker 4 (34:12):
Are you married, actually in the next four months that
will be married.
Speaker 1 (34:17):
Congratulations, So thank you very much. When we say with clients,
we look at you know, how much do you earn?
How much will your spouse earn? Is income replacement something?
One thing that people very often ensure is if you
buy a house and you have a mortgage, you may
want to have life insurance sufficient to pay the mortgage.
That's a good use for a life insurance policy. So
(34:37):
everybody's situation is unique. We'd be happy to sit down
and talk about your estate planning, but I highly recommend
that you search out and find someone who's a quality
financial advisor.
Speaker 3 (34:49):
Okay, all right, thank you guys so much.
Speaker 1 (34:52):
David, thanks for the call.
Speaker 4 (34:54):
I have a great day you guys, all right.
Speaker 1 (34:56):
You as well. All right, we have another call. We
have Bob from Schenectady. Good morning, Bob.
Speaker 4 (35:04):
All right, LOUI, how are you doing.
Speaker 1 (35:05):
I'm doing well. How about yourself?
Speaker 2 (35:07):
Great?
Speaker 4 (35:08):
Before I hit you with my question, I did the
same thing as you with my kids with the roth Ira.
It was one of the best things I ever did.
Speaker 1 (35:15):
Great tool, Yeah, great tool. That that rock is going
to spoil them.
Speaker 4 (35:19):
I figured, you know, delayed spoiling is not the worst
thing in the world.
Speaker 1 (35:22):
Yeah, if they are, if they get great return over
their life expectancy, they're going to have a lot of
money in that row.
Speaker 4 (35:33):
Oh yeah, yeah. So here's my situation. I'm retired at
sixty six. I had gone to an attorney prior to
twenty twenty on the Secure Act, set everything up. Everything
looked good.
Speaker 3 (35:49):
Uh.
Speaker 4 (35:49):
And I'm just picturing, you know, taking care of the
kids and they can do the stretch Ira and all
that's gone now. But I'm reading this book by Ed
Slott yep, and he makes it sound like there are
some ways to still get around that. Is that correct?
Speaker 1 (36:08):
Well, there are, it's complicated. We're talking a little bit
about those rules earlier. You have designated beneficiaries. Those are
the people that qualify for the ten year stretch. If
you don't have a designated beneficiary, you're in a five
year payout, but designated beneficiaries get ten years. And there's
something a special category called eligible designated beneficiaries, and the
(36:31):
eligible designated beneficiaries we articulated special needs children, someone with
a chronic illness, a spouse, or someone who is less
than ten years younger than you, so those people can
still benefit from the stretch. But there are other techniques
that we use for clients. One is a charitable trust,
(36:52):
and it's a little bit more sophisticated, but if you have
a large IRA and some charitable inclination, you can make
the charitable trust the beneficiary of the IRA, and the
charitable trust pays no tax, so all the money dumps
in tax free. It then comes out and it gets
taxed as it comes out. But you can create either
a lifetime or a twenty year annuity for the beneficiary,
so you can get twenty years of stretch as opposed
(37:14):
to ten and potentially lifetime depending upon their age and
the interest rates in effect at the time. So the
other way that people do this is broth conversions. One
other way is you can draw money out and put
it into a life insurance policy. So you start taking
against your retirement account, now put it into life insurance.
And the life insurance benefits we're going to talk about
(37:35):
in just a moment are fully tax free. So there
are ways. There are a lot of planning tools available
to you, and Ed's a brilliant guy. There are two
people in the country that kind of dominate the marketplace,
Natalie Chote and Ed Slot, and I've heard both of
them speak on multiple occasions, and they're very good and
(37:57):
they give out great information. Was not actually on public television.
He had a gig on public TV where he would
go on and talk about retirement planning, and I think
he had a package that he sold of different things
to form some things for There's another person who does
the same with financial planning on public television. But Ed's
(38:20):
a good guy and he's got some great ideas, and
there are ways to reinvigorate the stretch, but they're not simple.
And as we talked about earlier, looking at your situation,
your family, your beneficiaries, how can we best navigate and
negotiate the planning to minimize the tax, maximize the benefit
and look at it from all of.
Speaker 4 (38:42):
Those perspectives, okay. And would mental health diagnoses fall under
that exception that somebody might be able to qualify.
Speaker 1 (38:51):
For if they're disabled, which in most definitions is a
Social Security definition where they're unable to work because of
that condition.
Speaker 4 (39:00):
Yes, okay, absolutely, okay, gotcha?
Speaker 1 (39:05):
All right?
Speaker 4 (39:05):
Well, I think that answers my questions.
Speaker 5 (39:07):
I appreciate you.
Speaker 1 (39:08):
All right, sounds good. I appreciate the call. Take care Bob, allright, okay.
I don't think we have any other callers on right now,
so let's get back to it. Patty, and I kind
of got into the life insurance which is something that
we'll just jump right into now all the different kinds
of policies. But life insurance is a very tax advantaged vehicle,
(39:32):
and you can the way that life insurance gets taxed
in your estate is if you own the policy. So
when we have clients that have large life insurance policies,
what we typically do is put them in a trust.
And we have a particular trust called an irrevocable Life
(39:52):
Insurance trust. And you can take a life insurance policy
and if you think about it, you're going to build
wealth within it to access cash value. That's a little
different plan. But if really the policy is there for
death benefit purposes, you can eliminate that death benefit from
your taxable estates simply by putting the policy in a trust.
(40:15):
And we do quite a bit of that, and that's
a great way to get the life insurance in a
place where it's going to provide a great tool. And
we just were working on a plan for someone who
was really life insurance rich and wanted to create trusts
for children. So that's the topic that we're going to
come back with. When you look at giving and you're
(40:39):
passing the turkey and the mashed potatoes, and you look
at receiving the wealth at some point in time, what's
the best way for those children grandchildren that you're looking
at around that table to inherit wealth. And when we
come back, we're going to jump into that and try
to play with all of these assets and see how
they funnel best into the trusts for the children, something
(41:02):
we call a beneficiary controlled trust. Stay with us, we'll
be back right after this and welcome back. Thanks for
thanks for staying with us. And we have Justin from
Schenectady on the phone. Let's start with that. Justin, Good morning,
good morning.
Speaker 5 (41:22):
How's it going.
Speaker 1 (41:22):
It's going well. How about yourself? Pretty well? Good? How
can we help you this morning?
Speaker 5 (41:29):
So, if thirty six I owned six duplexes in the
Capital District, congratulations.
Speaker 4 (41:36):
Thank you.
Speaker 5 (41:37):
So I had a question, as far as you know,
I own them out right, I was debating getting a
blanket mortgage on them m hm, basically pulling the funds,
you know, pulling my equity out of them and either
investing it in like an ETF, or you know, going
further and buying more properties. So I was just curious
what your thoughts on that would.
Speaker 1 (41:59):
Be sure, when you look at it from an investment perspective,
what would be the rate of return that you could
get managing these properties in terms of income and growth.
Are you good with buying older properties, rehabilitating them and
turning them into cash products. Is that something that you've
done absolutely?
Speaker 5 (42:19):
Yeah, Yeah, that's basically all I do. I buy the
worst house in the block and make it the best.
Speaker 1 (42:24):
Yeah. So when you look at an ETF, you have
to look at what the rate of return is. And
I don't think for most of the people that I
know that are in your position, serial developers, serial entrepreneurs,
you want to invest in yourself, and typically you can
make more money on yourself than you can make in
the markets. So if you're good, if you have that
(42:44):
skill set and you're talented, you're thirty six years old,
you've already got six rental properties, I would recommend you
do something called a limited liability company. Do you have
any LLCs yet? I do.
Speaker 5 (42:56):
Only one of the properties is in the That was
the next thing I've heard, each house in its own
LLC or yeah, group a few properties, you know, I
have with one property in it.
Speaker 1 (43:10):
I would do it. If you want to get really
asset protected, you want your liability cordoned off, and we
use limited liability companies to cordon off liability form People
who come on the property, they fall on the property,
they sue the owner of the property. If that's you individually,
they sue not only the property, but they sue you
as well. But if you have the property owned by
(43:32):
the NLLC, they sue the property, but they don't get
through the LLC. They call it piercing the corporate veil.
They don't get through that. To you, if you've done
everything correctly, so you've insulated your other assets and you
can do it for all six properties. But then you
can also do a whole what we call a holding company,
and our larger developers we do this for because you
(43:53):
can take all of your properties put them into a
holding company. We do an operating agreement for that. We
go to your bank, we negotiate with the bank a
lending opportunity, and you can leverage all six properties together
through that LLC. And then what you're going to probably do,
and I would invest in you take the money that
you borrow against the other properties and buy another property.
(44:16):
And then you got seven, eight, nine, ten, eleven, twelve,
And now you're a real estate mogul and you know
you're You've got the fifty foot boat on Lake George
and you're having a good time. But diversification is also
part of that. So make sure you're doing a retirement account,
putting away some cash in a retirement account, and if
(44:38):
you can defer income tax on that, then you're going
to want to get that into an IRA. If you
can do a little bit of wroth. Those kinds of
things you would do now on your own because you're
not attached, you don't have a pension, your company isn't
putting the money away for you. You kind of have
to do that on your own. So I would get
a financial advisor and where I would put money aside.
(45:00):
Once you're earning rents and you've got a good net
rental role, going take some money and put it aside
in retirement accounts and then you can do your ETFs
and all your other investments and diversify the portfolio from
just real estate into real estate and investments. But some
tax leverage with the IRA.
Speaker 5 (45:16):
Okay, now I started doing that, but I ran into
an issue this year when I did my taxes because
I put money into a roth IRA and they wanted
to penalize me because I was able to get my
income solo with all the expenses and properties. Yes, sure,
they actually wanted me to pull that money out to
avoid a penalty. Hmm, well I'm not sure what Yeah,
(45:39):
that's what I said.
Speaker 1 (45:41):
Do you have an accountant that you work with?
Speaker 2 (45:44):
Uh?
Speaker 5 (45:45):
No, I usually do everything myself.
Speaker 1 (45:48):
Okay, well it's possible, but because I if I had
that response, I would go right to my accountant and
say what happened here, because they deal with that more
than we do. Or you know, financial advisor is somebody
that if you're going to start an IRA, you probably
won't have a financial advisor to help you with the
contribution limits and also help you with investment selection. Right.
Speaker 5 (46:08):
I think it was something to do with basically I
wasn't going to be paying any income tax in because
I paid so many property taxes and depreciation and everything
like that. Sure, uh, what an offset my income so
that for some reason, I don't know what it was,
but I've never had that happen before where I try
(46:29):
to put money in a Roth's IRA and they say no, no,
no's we're gonna We're gonna penalize you for that.
Speaker 1 (46:34):
Okay, Well, yeah, I would. I would maybe seek out
a tax advisor for that question. Uh, and see on
your return what's triggering that denial of your ability to
put money away in a row.
Speaker 5 (46:47):
All right, perfect, Thank you very much for the advice.
I appreciate it.
Speaker 1 (46:49):
Sure, justin great Thanks for a call. Appreciate it. And
we got about four minutes left, Patty, and I'm going
to go back to the Beneficiary Control Trust because, as
you know, it's one of my favorite things, and you've
been doing these now for clients and just kind of
talk about how you bring them into the conversation and
what they mean for clients.
Speaker 2 (47:08):
Sure. So, I mean, the most common way that people
think of when they think about leaving you know, inheritance
to their children or beneficiaries is just you know, gifting
it to them out right. But our opinion and we
believe that the far better way to do it is
byth you know, establishing and creating these beneficiary control trusts,
(47:28):
which are typically built in under you know, the parents
you know trust, and it doesn't get created or funded
until they both pass, but it's there to receive you know,
any assets, any inheritance that they're going to get upon
the passing of both of their family members, and it
allows them to you know, have full control over the
(47:50):
act the assets that are in their trust. They can
be the trustee and also the main beneficiary of it,
and you know, they can use it for things like
their health and education and support, and it provides them
with a great deal of asset protection, so you know,
if they ever get sued, if they're married and they
get divorced, if they ever need medicaid themselves, if they
(48:13):
have an estate tax you know issue like if they're
in Massachusetts, for example, These trusts can be very helpful
and beneficial for them.
Speaker 1 (48:22):
Yeah, and you said some magic words in there. The
D word is one that most parents light on. You know,
we've worked for this. And if we give our kids
this inheritance, when we die and they get married, they
get divorced. We don't want our property, all right, the
assets we have in our family to go through that
divorce and this trust. And I sat my kids around
the table, and this is the conversation we're talking about,
(48:43):
and I said, Okay, children, you know how hard I work.
You know I'm trying to try to do the right things,
and I'm trying to build some some assets up and
build some wealth for your family, for me, your mom,
and ultimately for you guys. So when you inherit, I
want to give it to you in a way that
benefits you the most. And here are the things that
I want you to know about that. I can leave
(49:05):
my trust, and I have a trust for myself and
for my wife, a revocable living trust. When we die,
we can just have that trust continue on and divide
into thirds, and you each get a third of the assets,
but you get it into a trust that you're the
trustee of. You can manage the assets. You can use
the assets for yourself and your family, but no one
else can touch them but you, creditors, creditors, spouses, divorcing spouses,
(49:31):
the government. They cannot unlock that box. It is a
fully asset protected trust. And my kids looked at me
and said, Dad, is that a trick question? Why would
we not want that? So as you're sitting around the
table this Thanksgiving and Patty, I'm hoping you can have
some good family time with your family and talk about BCTs.
Oh yeah, how to give, how to receive, what's the
(49:53):
best way to bring your family together, and to make
sure that what you've worked for is there for you
throughout retirement and for your kids in a way that
is fully protected. Patti, thanks for joining me in studio
this morning. Appreciate you taking the time. Thank you all
for listening. We love our life happens listeners. I talk
to you in the grocery store and in all the
(50:14):
different places. So stay you know, thanks for staying with us,
and fourteen years. We'll be back next week. Have a
great Saturday and see you on the radio.
Good morning everyone. Welcome to Life Happens Radio. I am Lupiro,
your host for this morning on a beautiful sunny day
here in the Capitol Region. I hope you're enjoying your Saturday.
I hope you can stay with us for the hour today.
We have some great things to talk about, and I
want to pick up where Mr Kopik left off. We
were just talking to Dave after the show. We change seats,
he gets up, I sit down, and so we were
(00:22):
talking about long term care and the cost of long
term care. And one of the themes of today's show
is to look at where we are and prepare ourselves
for what I call crucial conversations. When you're sitting around
the table and you've got your relatives gathered, you visit
with your parents, your aunts and uncles, your brothers and sisters,
(00:44):
and the kids and the grandkids, and you look at
all the generations and all the issues that those generations have.
One of the things that is become over my career,
I always give this number out so you know how
old day. I've been a lawyer for forty two years
and practicing law for forty two years. Right here in
the Capitol Region, and I have seen the changes in
(01:08):
the way people get cared for, in the cost of
the care that they need as they go through the
aging process. I used to have a couple of aunts
who were in a nursing home. In the nursing home
back then, I'm going back probably forty plus years, the
nursing home costs five or six thousand dollars a month,
(01:30):
which was a lot. And you know, Medicaid is the
program we always talk about picks up the cost. The
cost today and we have clients come to our office.
We sit with them every day and we guide them
through this process and they start writing checks for eighteen
thousand dollars a month. Think about it, eighteen thousand dollars
(01:50):
a month. Now you're talking about two hundred and twenty
thousand dollars per year. How long can you last? How
long can your savings last if you have that kind
of an expense. And I know that most of our
listeners almost all don't want to go to a nursing home.
Who does it's not a fun place. Well, my aunts
(02:11):
were there forty fifty years ago. I used to pick
them up. They used to sit and play cards. They
were fairly active today. Nursing homes are very critical care institutions.
People in nursing homes are there for a reason. There
are now a lot of other options, assisted living and
home health care. Back then, there weren't that many, so
people ended up in nursing homes that were still relatively active.
(02:34):
Today's nursing home resident typically is not. So you're paying
eighteen thousand dollars per month and someone is getting care
that is really simply custodial care, where get they need
to be fed, they need meals, they need to be bathed,
and they have some activities. But that's it for two
hundred and twenty grand and the cost of comparison. I've
(02:55):
heard people do this comparison and say, okay, you could
have rented a cabin on the Queen Mary and sailed
around the world for a year for less money. But
this is where we're at. And Dave brought up a
good point, and he's got a workshop coming up. I
think Thursday. You need to prepare, you need to plan,
and you need to be ready when that event hits.
And so today what we're going to talk about is
(03:18):
give thanks and pass it on. We're coming up on
Thanksgiving and leaving and receiving inheritances is part of the planning.
When when you're a parent like me and I have children,
and I want to say, Okay, kids, here's what I've
been working on, Here's what I've been able to save.
Here's what your mom and I need to do to
(03:40):
live comfortably for our lives. But then we want it
to come to you. We want you to benefit from
a lifetime of hard work. And my dad taught me
this value. You want to leave the next generation a
little bit better off. And that's the that's the immigrant
story of America. My grandparents came to this country in
eighteen ninety six, and they brought with them one of
(04:04):
their children. The others were born here, and they came
in through the Bronx and moved upstate later on and
had a little Italian food business. And they worked that
Italian food business. My grandfather was a good chef and
they made and prepared Italian food. None of their children
went to college. My father never went to college. He's
(04:26):
a high school graduate, but worked his whole life. Went
into the military, went into the Armed Services, learned a
tremendous amount, became the deputy director of the New York
State Division for youth with a high school diploma, and
he sent both of his children to college. He sent
me to law school. And so each family wants to build,
(04:47):
you want to leave people a little bit better off.
Today's show, we're going to talk about how your current
assets and wealth can be maximized for you and then
maximized for the next generation. And when we have these
crucial conversations, we have to look at risks and we
have to look at rewards. And to help me out
(05:09):
today live here in studio with me, is Patricia Whalen.
Good morning, Patty.
Speaker 2 (05:13):
Hilu, Good morning, Thanks for having me on the show
this morning.
Speaker 1 (05:17):
Patty is one of our rising star super lawyer associates
who is working with me in the estate planning and
elder law areas. And we've been working together now for
a few years. And Patty, in your brief three year career,
you've met with a lot of clients. Yeah.
Speaker 2 (05:36):
Yeah, we haven't met with a lot of clients. I mean,
there'd be some days where we have five, six consults,
so and each one's very different, you know, there's different facts,
different people involved, and they're all interesting in their own ways.
Speaker 1 (05:48):
So and each family. That's a key point I try
to point out there's no cookie cutter for this. We
sit with families and we do the intake, and we
sit with them and listen as they talk about out
their health, their relationships, their children, their grandchildren, their home,
their assets, their careers, and everybody has a unique story. You,
(06:10):
every one of our listeners listening this morning has a
unique story and a unique set of circumstances that we
try to address in an estate plan. So when we're
talking about giving and receiving, leaving an inheritance, receiving an inheritance,
we want to have conversations. You don't want to be
(06:30):
in the dark on either end. You want to know
how to do it from the giving perspective. If you're
creating your own will, as you know if you've listened
to the show before, we're believers and trusts, because it
just is a much more efficient tool and you want
to create a plan. And I did a seminar yesterday
up in the Aquasani Indian Reservation. And if you don't
(06:50):
know where that is, folks, just drive north and west
for about four hours. You're on the Canadian border. And
I was up there talking about one hundred seniors for
the Office for Aging. And I use the analogy when
I give seminars that if you're on an airplane and
the airplane's going up and they're giving you instructions and
the yellow mask falls and they say, Okay, if that
(07:11):
mask comes down, the first thing you need to do
is put your mask on. You need to breathe. You
need to have oxygen because without you having oxygen, you
can't help anyone else. And in our retirement years, oxygen
is income and resources because we need to pay bills,
(07:31):
we need to pay for our living expenses, we want
to travel, we want to do nice things in retirement.
So we want to make sure that you have enough oxygen.
And we try to design plans that keep all of
your assets accessible to you. When do we give them?
When do we give And one of the things we're
going to start out with Patty and kind of put
(07:52):
it on the table and probably take it off the
table quickly is taxes. A lot of people think, oh,
there's a death tax, and how can I ever navigate this?
And the federal exemption January one, because of the One
Big Beautiful Bill Act, the Federal estate tax exemption and
(08:13):
if you've heard it called the death tax, that was
just somebody trying to convince you that it's scary. The
estate tax is fifteen million dollars per person. So when
we sit with clients, we do have clients that have
fifteen million and more and no much more in some cases.
Remember we practice in New York City and Manhattan, Long
Island and the Capital Region, and there are people of
(08:36):
high net worth that we work with, but most people
aren't at fifteen million dollars. And that's when they come
in they think, oh, I have to worry about the
estate tax, but they really don't.
Speaker 3 (08:46):
Right.
Speaker 2 (08:46):
Yeah, a majority of our clients are below you know,
that threshold. Where again it's interesting for me personally, is
when we have a client that's somewhere, you know, in
the middle where they're not quite there yet, but you know,
they're almost there. So that planning can be kind of
interesting because you know, we have to, you know, consider
how their assets will grow and you know, how that
(09:07):
will change over the next few years, because if they're
at like, you know, five six million, they're not quite
there yet. But you know, sometimes we still have to
consider planning for them because that might be something they
may need.
Speaker 1 (09:19):
To worry about it depends on where they live, right.
Speaker 2 (09:22):
Yep.
Speaker 1 (09:23):
We work in Florida. We have a lot of Florida clients,
and we have relationship with a firm in Florida, so
that's our Florida office. And in Florida there is no
tax other than federal a state tax at a fifteen
million dollar threshold. But that's not the case in New York. Yep.
Speaker 2 (09:38):
Yeah, New York is about what's seven point one per person?
Speaker 1 (09:42):
Now?
Speaker 2 (09:42):
Yeah, so and that is pretty generous though, I mean
considering some other states. What do you call Massachusetts?
Speaker 1 (09:49):
I love when you call it the exchutions?
Speaker 2 (09:50):
Yeah, yeah, yeah, so, and there's so much lower, you know,
two million or one million?
Speaker 1 (09:54):
Too many went it was one this couple of years ago,
went up to two. Wow. So if you're a Messages's resident,
you have to do a state tax planning. You do
have to worry about it at a two million dollar level. Connecticut,
we practice in Connecticut does not have an independent estate tax,
just as that same fifteen million dollar threshold. New Jersey.
We practice in New Jersey does not have an independent
(10:15):
estate tax. So New York and Massachusetts require additional thinking
in terms of a state tax planning, and in New
York there are some quirky rules. So the seven point
one million is each individual's exemption. But if you have
over seven point one million and you're married and you
leave everything to the surviving spouse, then the second estate
(10:37):
is the one that you have to worry about, so
over both spouses lifetimes. If assets are accumulating, and when
we do an inventory, when we're looking at giving assets
and worrying about how to give them and how to
prepare people for them, life insurance has to be included,
retirement accounts have to be included, all of your residents,
your real estate, business interests. So we do a very
(11:00):
careful inventory and maybe just talk about the process that
you go through with your clients in beginning this relationship
and how important it is to get all the details
out there, right.
Speaker 3 (11:12):
I mean.
Speaker 2 (11:12):
So, one of the things that we do that I
think is very helpful for us, especially when we're meeting
with new people for the first time, is that we
have them fill out in advance of the meeting a
questionnaire and an asset sheet. And the asset sheet is
pretty important because it allows us to have information regarding
their different assets that they have, So whether they have properties,
(11:33):
you know, what the rough value of the properties are,
if they have life insurance policies, what their retirement accounts
look like, you know, if they have businesses. And having
that information upfront is helpful for us because when we
meet with people for the first time, you know, we
need to have a you know, a good understanding of
you know, their circumstances and related to their family members
(11:55):
or you know, family matters. And then also what they have,
you know, what they own, you know, personally in terms
of assets, because depending on the assets, you know, it
really depends on what will do for them depending on
the things that they own.
Speaker 1 (12:06):
Yeah, and so that inventory is critical and we get
that in advance. There's a great online program that we utilize,
so our clients fill that out and we have that
information available to us. And when you look at that
chart of assets, each individual asset has a different tax situation.
(12:26):
So when we talk about a state tax fifteen million federal,
seven point one million state, if you get over that
seven point one million, New York taxes you as though
you don't have any exemption, they tax the entire thing.
Once you go five percent over seven point one million.
So you get to seven point five million, you go
from zero tax at seven point one to seven hundred
(12:46):
and forty thousand dollars of tax. And that's a real number, folks,
seven hundred and forty thousand at seven point five million.
So just on the change in value, you're paying double
the amount of tax in the increase in value. Then
the increase in value from seven point one to seven
point five and that's the New York system. They call
it the cliff. So there are ways we plan and
ways we plan around the cliff for a state tax purposes.
(13:08):
But when we look at that inventory, you have to
look at categories of assets. Retirement accounts have their own
set of tax rules, very complicated set of tax rules.
There was a law passed in twenty twenty again in
twenty twenty two, we call it Secure Act and Secure
Act two point zero, which govern how you receive retirement accounts.
(13:29):
And most parents say, well, I'm going to just leave
it our spouse to spouse and then onto my three kids. Well,
the three kids are treated differently depending upon their circumstances. Yes,
so asset by asset, it becomes very tricky because you
have a full range of income tax issues. Do you
want to do a roth conversion, do you want to
pull some money out? And by life insurance. So asset
(13:51):
by asset, how you treat the assets affects how your
children and beneficiaries will ultimately receive it. Highly appreciated assets
like stocks and bonds, and the market's bent up tremendously
over the last year or so. Highly appreciated securities going
to children are a great asset to leave them because
they get something called a step up in basis. So
(14:12):
we have to worry about capital gains tax and look
at how to treat capital gains taxes within an estate
plan for highly appreciated assets, income taxes for retirement accounts,
real estate, your home has a certain tax consideration. So
all of these kinds of assets life insurance, which is
a very favorable asset from a tax perspective, we have
(14:33):
to weave them into a plan. And when we come back,
we're going to talk about just that. How do you
take your estate, your retirement accounts, your life insurance, your home,
your investments, your bank accounts. How do you take all
of that? Make sure you have that oxygen, make sure
you can use it. You keep the income from it
and you can have access to it and then get
(14:55):
it to your next generation in the most favorable way possible.
And we have a technique that we think is pretty
powerful for this, and we're going to come back after
a break and talk to you about a bcet. So
stay tuned. We'll be right back after this and we're back.
Welcome back. I'm Lou Piro, your host for this morning
(15:15):
on Life Happens Radio, Live in studio with Patti Wheeling.
Associated at pier O'Connor and Strauss Ot a law firm
does a state planning, elder law, all those kinds of
good things, and we deal with clients and talk to
them about their lives, their families, their assets. And today
we're going to try to weave all that together for
you so that when you come up and you're sitting
(15:36):
around that Thanksgiving table, you're ready to have this crucial conversation.
You're ready to engage and say, Okay, here's what I've got,
here's how I'm going to think about it. I want
you kids to prepare and I mentioned long term care.
We're going to talk more about long term care in
the second part of the show. Second half of the
show because planning for long term care is a critical
element of all of this, making sure you keep access,
(15:59):
but at the same time you're protecting assets. And I
want to start and go back, Patty, because this is
over my career, an asset that used to be nonexistent.
IRA's four oh one, k's four h three, b's four
to fifty seven plans, all the different kinds of tax
deferred accounts that you can have. Clients didn't have those.
(16:21):
They had bank accounts, they had stock portfolios, they had pensions.
Define benefit plans to find contributions. Plans is how companies
used to reward workers who worked a career thirty forty
to fifty years and then got a pension when they retired.
That was the way the world worked today. Very few
of our clients who come through the door have a
(16:42):
fixed pension. If you were a school teacher, who knew
that you were going to be one of the best
suited retirees because of your state pension, teacher's pension, and
we look at that, and then people have deferred compensation
plans along with a pension. They're in pretty good shape
for the most part, and that's a great thing, but
(17:03):
most people don't have that. So you have iras for
one k's for a three b's and you have to
look at those assets and say, okay, at seventy three,
I have to start drawing on it, and I have
to start paying tax on it. And the game used
to be that you wanted to stretch the IRA as
long as possible because every dollar that you take out
(17:25):
of that tax deferred ira, a traditional IRA is income
taxable to you. When you leave that dollar to your children,
it's income taxable to them. And we used to do
very intricate trusts that would maximize tax deferral and we
would leave it to grandchildren who are you two year old,
(17:48):
had an eighty year life expectancy, So you could stretch
that IRA, keep it invested. And they say the power
of compounding is the eighth wonder of the world, and
tax free compounding inside of an IRA, and in particular
a wroth, which we're going to talk about next, is amazing.
To grow wealth. You don't pay tax on what you
(18:09):
earned while you were working, and you don't pay tax
on the growth until you take the money out. But
because of all of this planning and the stretching of
the iras, the government said enough, we want our money.
So they passed the Secure Act to squeeze the dollars
out of the iras. And the rule, Patty is a
ten year rule. So just talk a little bit about
(18:30):
that and what that means when when children inherit the IRA.
Speaker 2 (18:35):
So when children inherit an IRA, typically they have to
follow the ten year rule, which means that they have
to completely withdraw the account within ten years. They don't
have that lifetime strutge anymore, so they have to, you know,
within ten years, completely drain you know, the inherited IRA.
Speaker 1 (18:55):
So when you talk to your kids about their inheritance,
and this is kind of the part of the conversation, Okay,
I have an IRA, that's our biggest asset. It's going
to come to you kids. But you need to plan
and you need to look at a tax advisor, an
investment advisor, and an attorney and put that team together
because as you're drawing that money out, as they always say,
(19:17):
it isn't what you earn, it's what you keep, and
when you draw from an IRA, it's what you keep
after tax. So you try to plan and scheme to
maximize the value. If the person was in payout status.
If they were taking mandatory distributions, there is a required
minimum distribution over that ten years, but otherwise you can
(19:38):
use discretion and how and when to pull the money out.
So traditional iras, there are some exceptions to that ten
year rule. If you have a child with a disability,
we very often try to point the IRA in their
direction because they can get a lifetime stretch. So we
create special needs trusts and you can make a special
needs trust the beneficiary patty right of that IRAE.
Speaker 2 (20:02):
Yeah, so you know, that's one of the you know,
reasons why we ask for information not only about their assets,
but you know, their family members, their beneficiaries upfront because
you know, in talking with them about you know, the whole,
you know, estate planning as a whole, we look to
see if you know, one beneficiary would be better off
receiving assets from one source. Meanwhile another beneficiary would you know,
(20:24):
benefit from, you know, receiving different types of assets. So,
you know, I think in one file we worked on together,
we ended up doing just that. We directed the IRA
to the special needs trust for the one child, and
then we equalized it by giving the other child, you know,
real property, which would be something they would benefit more
from because you would.
Speaker 1 (20:45):
Get the step up and basis they don't have to
pay capital gains text and that's that's part of this.
You look at it and say, oh, I have three kids,
they're all going to get a third of every asset. Well,
that's not going to be the best solution in many
instances because from it, after ten perspective, it won't come
out equal. And so if you left that IRA a
third to third a third, one child's going to be
(21:06):
able to stretch the IRA. The other two have to
take it out over ten years, and the other class
of beneficiaries. I just want to throw this in here
because it does become part of our planning. If you
want to benefit a local charity, your university, your hospital,
a not for profit organization that you've participated in over
your lifetime, the best dollars to leave to charity are
(21:30):
what we call tax hostile dollars, things that have income
tax associated with them that don't wash out at death.
And this falls into maybe two or three categories. One
is the retirement accounts. The IRA is you can now
take one hundred and eight thousand dollars a year out
of your IRA and give it right to charity and
it never hits your adjusted gross income. It doesn't even
(21:52):
go on your return. It's just a contra charitable qualified
charitable contribution. And that's very powerful because medicare tes now
depends upon what your taxable income is, and this doesn't
hit the grid if you pull it out and use
a qualified distribution to a charity. So tax dollars inside
of retirement accounts go into charity are beautiful dollars because
(22:13):
the charity doesn't fade a penny of tax, and you
can leave all the other assets to get a step
up and basis to your individual family members. And we
very often just rewire the plan to leave retirement accounts
to charities and other assets to individuals and save hundreds
of thousands of dollars of income tax just by that
one simple step. When you have children and you're looking
(22:34):
at what assets to give the RAWTHIRA becomes again a
very powerful tool.
Speaker 2 (22:41):
Well, we met with some clients what two days ago,
and one of the interesting things that came up was
one of the last sort of categories in regards to
if you're leaving an IRA, for example, to someone who
is not more than ten years younger than you in
this situation. We met with a nice couple and one
of the things that came up, which you know sometimes
(23:02):
things you know, happened during the meeting, and you know,
this was really important to her, but we didn't have
any information you know about it beforehand, was that she
you know, needed to care and you know, do some
planning for her sister. And she had indicated that she
was going to be inheriting a you know, IRA from
her sister upon her sister's passing. And you asked the question, oh,
you know, what is the age difference between you two,
(23:23):
and it was eleven years.
Speaker 1 (23:24):
Yeah, for ten years and ten months.
Speaker 2 (23:26):
Yeah, that's exactly what it was. So just missed it.
Speaker 1 (23:29):
But yeah, I'm gonna you know, the wroth ira is
such a powerful tool. I want to pick back up
with that when we come back. We have to take
a hard break for the news, and I'm going to
open up the phone lines in the second half of
the show as well. If you have a question, give
us a call. Blue Piro Patty Wheeling here live in studio,
ready to take your calls. We're going to come back
talk about roth iras, other iras, different types of assets,
(23:51):
the Thanksgiving conversation about giving and receiving, and stay with us.
We're going to take short break for the news and
when we come back, we'll be giving you some great information.
Stay with us, and we're back. Welcome back. I'm Lupiro,
your host for this morning on Life Happens Radio. Hope
you're having a great day. Hope you're out there listening
and learning and getting ready for the holidays. And Patty,
(24:13):
this is a great time of year. I think my
favorite holiday of all is Thanksgiving because you get four
days and that Friday you can kind of pick and
choose catch up on things. I'm not a Black Friday shopper.
Speaker 2 (24:27):
Are you No? No, I'm not.
Speaker 1 (24:29):
No, I don't. I don't need that hord mess, you know.
Speaker 2 (24:33):
No, it's too stressful and sometimes I don't think the
sales are really as good as you know they're trying
to make it seem.
Speaker 1 (24:40):
Yeah, and now I know. I actually shop online now too,
and I never thought I would, but I do. And
that's all my kids do is shop online. So it's
something where you don't have to go to the store.
You can do your shopping and sale shopping right through
the internet. And that's something that is different in today's
society versus when I started this business. Yes, so when
(25:01):
we look at planning, I'm going to open up the
phone lines. If you have a question on planning particular asset,
how the tax ramifications work, give us a call. Eight
hundred eighty two five five nine forty nine. It's eight
hundred talk WGY. We'll open up the lines for you
eight hundred eight two five fifty nine forty nine. And
(25:21):
we left off our conversation Patty with iras and in
particular wroth iras. My prediction is, just like they did
the ten year rule through the Secure Act, my prediction
is that they will curtail the use of roth iras
because they are just too good. Anything too good is
going to get looked at and scrutinized and potentially changed.
(25:44):
There are people that are able to do something called
a backdoor mega wroth conversion, and they do large contributions
to retirement accounts and then convert them to roths, and
you can put a significant amount of dollars away doing that.
Other people do wroth conversions. The limitation on a wroth
(26:04):
is significant to try to fund it each year, you
only have a limited amount of dollars you can put
in year over year, and they have to be earned dollars.
I kind of saw these for my kids as a
way talking about giving and receiving. I had them all
get their work papers at fourteen and get a job. Kids,
you start earning some money. And they all had some job,
(26:27):
and I said, every dollar that you earn, I will
match into a roth ira. So they get to keep
the money that they earned at fourteen, fifteen, sixteen, seventeen, eighteen,
and I would match it and put the same amount
of money into a roth ira for them, and they
have those wroths. Now, there are also income limitations on
who can contribute to a wroth. Once you make a
(26:48):
certain amount of money, you're no longer eligible for a
direct wroth contribution. But the power of the wroth at
the end of the day, when you look at how
do your beneficiaries inherit. We talked about all of the
the evil rules of traditional iras, the ten year rule
and mandatory distributions. They want to get that money out
of there, folks, because the government needs the tax revenue.
(27:12):
But with roth iras, we have an ability to defer
tax and escape tax. It's a tax free vehicle. So
once you get money into a roth, you can let
that money cook tax free. That inheritance to the child
goes tax free, unless you're in a high bracket and
you're over the seven point one million. But they get
(27:33):
it tax free, and they can let it cook for
another ten years, and another ten years of tax free compounding,
depending upon how it's invested, will either double or triple
the value of that account after tax, because every dollar
comes out again what tax free. We have a caller
on the line. We have David from New York. Good morning, David.
Speaker 3 (27:54):
Good morning. How you guys doing.
Speaker 1 (27:55):
We're doing great. How are you today?
Speaker 3 (27:58):
Good?
Speaker 4 (27:58):
Good.
Speaker 3 (27:59):
So I just wanted to start off. I'm thirty one
years old. I'm trying to get I got I'm a
little late bloom around getting my finances all straightened out.
And I have the job I work with, I have
a great career path, I have a pension and an annuity,
and I'm just trying to figure out different avenues where
to put my money. Now. I've heard of rocks, I
(28:21):
heard of CDs, I heard a bond. I guess where
I'm trying to, you know, try to go with it?
Is you know where do I put my money, so
I know what it will be. That's for me, you know,
and hopefully in my family down the line in the
next thirty years, twenty years or so on and so forth.
Speaker 1 (28:38):
Sure, and you know we're sandwiched between two investment shows,
Take Copeck and Steve Bouche. We're the legal part of
the show. So I can tell you how to structure it.
From an estate planning perspective, I personally don't give investment advice,
but I advised my kids and I continue to maximize
anything you have available to you, to defer the income
(29:01):
and to put it into accounts that you can accumulate
and grow. So if you have do you have an
employer for one.
Speaker 3 (29:07):
K it goes right, and do a pension into a pension?
Speaker 1 (29:12):
Okay, good for you. Most employers don't have a fixed
pension anymore, so that's great.
Speaker 3 (29:18):
The wonderful thing about being a union member.
Speaker 1 (29:20):
There you go, there you go. But in terms of
the wroth, if you can get dollars into a wroth,
that's a great way to do it. I have to
look up the contribution limits around seven thousand dollars a year.
I think it seven thousand.
Speaker 3 (29:33):
Is that for a single correct?
Speaker 1 (29:35):
Yes, uh huh, And if you're married you can put
more in. Yeah. But getting money into the wroth is
a great way to set dollars aside. Grow those dollars,
let them accumulate. What did you say your age was again, David,
thirty one. Okay, so you're and you're thinking you waited
too long. But in our book, we're talking to people
(29:55):
that are eighty one saying should I start a plan?
So you're way ahead of the game, which is great.
You're starting at the front edge of the curve, which
is fantastic. So tax deferral is a big thing. So
if you can get into a roth, that's a great
way to put dollars aside. If you have disposable income,
life insurance is another way to put money aside on
(30:16):
a tax deferred basis. And at thirty one you mentioned
your family.
Speaker 3 (30:19):
You have kids, not yet we're planning.
Speaker 1 (30:22):
Though, okay, So you know when you get to the
point where you have children, you start looking at it
and saying, Okay, I've got this great job and I've
got a pension. But if life happens for me and
I'm not there for my kids, when they need to
go to college. Life insurance is a great vehicle, and
they're all different kinds of life insurance. You can do
term insurance if you need it just for a particular
(30:43):
period till your kids get old enough and get through college.
You can use them more permanent vehicle, and you get
to whole life and variable life policies which have inside
them accumulations, so you can start deferring money in a
whole life policy. Putting money in, you get the insurance benefit,
but you also get investments within the insurance contract. And
(31:08):
when we talk about income tax planning, and I'm jumping
ahead because insurance was on our list to talk about,
but when you look at life insurance, inside of that
insurance rapper, there's a contract, there's a rapper, and inside
of that goes investments. I have a couple of different
policies myself. One is a variable policy, so I'm in
the markets my insurance dollars that I put into a policy.
(31:31):
I have a five hundred thousand dollars death benefit and
it's growing. The cash value is growing. It's about one
hundred thousand dollars now, and it's accumulating on a tax
free basis. Because I don't have to pay tax unless
I cash the policy out. And the way that typically
you draw the money out is by borrowing it. So
you can take a loan against the policy, and you
don't take you don't pay income tax. So do you
(31:53):
have a good financial advisor?
Speaker 3 (31:57):
I don't have a financial advisor.
Speaker 1 (31:58):
Okay, So these are really the issues that a good
financial advisor is going to walk you through. And they
start looking at budgeting you saying, okay, you're thirty one,
here's the money you're putting away. Here's your expected retirement
dollars when you hit sixty five or whatever age you
plan to retire. If you're a union member, might be younger.
So looking at how do you get to the point
(32:20):
where you're secure and during that time period you can
cover all of the expenses that you're going to have.
Probably the biggest one during that time period is going
to be college education if you do have kids. But
then you're going to look at in retirement. We're going
to talk a little bit soon about long term care.
I want to mention one type of life insurance policy
that you can buy today, which is not a term policy,
(32:44):
but it's also not a cash accumulation policy. They call
it a guaranteed universal life product, and this is the
minimum amount of permanent insurance that you can buy. So
the company says, okay, we're going to charge you X
dollars a premium and guarantee you five hundred thousand dollars
death benefit, and you just keep paying the same premium
every year, and if you die, you get somebody gets
(33:07):
five hundred thousand dollars. But you can also put a
rider on that contract to say, well, if I get
to be a certain age and I need care, I
need home health care, I need to have somebody come
in and help take care of me, you can actually
use that policy that five hundred thousand dollars for yourself,
and you can access the policy and pay for long
(33:28):
term care expenses. And you know, in our office we
have people in long term care at the age of
thirty one because they've had an accent where they've had
some condition that has befallen them and they need those
dollars now. So that policy gives you a lifetime benefit
plus a death time benefit. I like them. They're cash indemnity,
so you get in that. The contract that I'm looking
(33:49):
at is ten thousand dollars a month tax free out
of your policy, and you begin to draw that five
hundred thousand dollars down, but you're using it for expenses
that you have now. But all things that a good
financial advisor can help you with. Tax deferral is a
big thing. The Wroth take a look at that. When
you have kids, life insurance will become more critical and
(34:10):
more important.
Speaker 4 (34:12):
Are you married, actually in the next four months that
will be married.
Speaker 1 (34:17):
Congratulations, So thank you very much. When we say with clients,
we look at you know, how much do you earn?
How much will your spouse earn? Is income replacement something?
One thing that people very often ensure is if you
buy a house and you have a mortgage, you may
want to have life insurance sufficient to pay the mortgage.
That's a good use for a life insurance policy. So
(34:37):
everybody's situation is unique. We'd be happy to sit down
and talk about your estate planning, but I highly recommend
that you search out and find someone who's a quality
financial advisor.
Speaker 3 (34:49):
Okay, all right, thank you guys so much.
Speaker 1 (34:52):
David, thanks for the call.
Speaker 4 (34:54):
I have a great day you guys, all right.
Speaker 1 (34:56):
You as well. All right, we have another call. We
have Bob from Schenectady. Good morning, Bob.
Speaker 4 (35:04):
All right, LOUI, how are you doing.
Speaker 1 (35:05):
I'm doing well. How about yourself?
Speaker 2 (35:07):
Great?
Speaker 4 (35:08):
Before I hit you with my question, I did the
same thing as you with my kids with the roth Ira.
It was one of the best things I ever did.
Speaker 1 (35:15):
Great tool, Yeah, great tool. That that rock is going
to spoil them.
Speaker 4 (35:19):
I figured, you know, delayed spoiling is not the worst
thing in the world.
Speaker 1 (35:22):
Yeah, if they are, if they get great return over
their life expectancy, they're going to have a lot of
money in that row.
Speaker 4 (35:33):
Oh yeah, yeah. So here's my situation. I'm retired at
sixty six. I had gone to an attorney prior to
twenty twenty on the Secure Act, set everything up. Everything
looked good.
Speaker 3 (35:49):
Uh.
Speaker 4 (35:49):
And I'm just picturing, you know, taking care of the
kids and they can do the stretch Ira and all
that's gone now. But I'm reading this book by Ed
Slott yep, and he makes it sound like there are
some ways to still get around that. Is that correct?
Speaker 1 (36:08):
Well, there are, it's complicated. We're talking a little bit
about those rules earlier. You have designated beneficiaries. Those are
the people that qualify for the ten year stretch. If
you don't have a designated beneficiary, you're in a five
year payout, but designated beneficiaries get ten years. And there's
something a special category called eligible designated beneficiaries, and the
(36:31):
eligible designated beneficiaries we articulated special needs children, someone with
a chronic illness, a spouse, or someone who is less
than ten years younger than you, so those people can
still benefit from the stretch. But there are other techniques
that we use for clients. One is a charitable trust,
(36:52):
and it's a little bit more sophisticated, but if you have
a large IRA and some charitable inclination, you can make
the charitable trust the beneficiary of the IRA, and the
charitable trust pays no tax, so all the money dumps
in tax free. It then comes out and it gets
taxed as it comes out. But you can create either
a lifetime or a twenty year annuity for the beneficiary,
so you can get twenty years of stretch as opposed
(37:14):
to ten and potentially lifetime depending upon their age and
the interest rates in effect at the time. So the
other way that people do this is broth conversions. One
other way is you can draw money out and put
it into a life insurance policy. So you start taking
against your retirement account, now put it into life insurance.
And the life insurance benefits we're going to talk about
(37:35):
in just a moment are fully tax free. So there
are ways. There are a lot of planning tools available
to you, and Ed's a brilliant guy. There are two
people in the country that kind of dominate the marketplace,
Natalie Chote and Ed Slot, and I've heard both of
them speak on multiple occasions, and they're very good and
(37:57):
they give out great information. Was not actually on public television.
He had a gig on public TV where he would
go on and talk about retirement planning, and I think
he had a package that he sold of different things
to form some things for There's another person who does
the same with financial planning on public television. But Ed's
(38:20):
a good guy and he's got some great ideas, and
there are ways to reinvigorate the stretch, but they're not simple.
And as we talked about earlier, looking at your situation,
your family, your beneficiaries, how can we best navigate and
negotiate the planning to minimize the tax, maximize the benefit
and look at it from all of.
Speaker 4 (38:42):
Those perspectives, okay. And would mental health diagnoses fall under
that exception that somebody might be able to qualify.
Speaker 1 (38:51):
For if they're disabled, which in most definitions is a
Social Security definition where they're unable to work because of
that condition.
Speaker 4 (39:00):
Yes, okay, absolutely, okay, gotcha?
Speaker 1 (39:05):
All right?
Speaker 4 (39:05):
Well, I think that answers my questions.
Speaker 5 (39:07):
I appreciate you.
Speaker 1 (39:08):
All right, sounds good. I appreciate the call. Take care Bob, allright, okay.
I don't think we have any other callers on right now,
so let's get back to it. Patty, and I kind
of got into the life insurance which is something that
we'll just jump right into now all the different kinds
of policies. But life insurance is a very tax advantaged vehicle,
(39:32):
and you can the way that life insurance gets taxed
in your estate is if you own the policy. So
when we have clients that have large life insurance policies,
what we typically do is put them in a trust.
And we have a particular trust called an irrevocable Life
(39:52):
Insurance trust. And you can take a life insurance policy
and if you think about it, you're going to build
wealth within it to access cash value. That's a little
different plan. But if really the policy is there for
death benefit purposes, you can eliminate that death benefit from
your taxable estates simply by putting the policy in a trust.
(40:15):
And we do quite a bit of that, and that's
a great way to get the life insurance in a
place where it's going to provide a great tool. And
we just were working on a plan for someone who
was really life insurance rich and wanted to create trusts
for children. So that's the topic that we're going to
come back with. When you look at giving and you're
(40:39):
passing the turkey and the mashed potatoes, and you look
at receiving the wealth at some point in time, what's
the best way for those children grandchildren that you're looking
at around that table to inherit wealth. And when we
come back, we're going to jump into that and try
to play with all of these assets and see how
they funnel best into the trusts for the children, something
(41:02):
we call a beneficiary controlled trust. Stay with us, we'll
be back right after this and welcome back. Thanks for
thanks for staying with us. And we have Justin from
Schenectady on the phone. Let's start with that. Justin, Good morning,
good morning.
Speaker 5 (41:22):
How's it going.
Speaker 1 (41:22):
It's going well. How about yourself? Pretty well? Good? How
can we help you this morning?
Speaker 5 (41:29):
So, if thirty six I owned six duplexes in the
Capital District, congratulations.
Speaker 4 (41:36):
Thank you.
Speaker 5 (41:37):
So I had a question, as far as you know,
I own them out right, I was debating getting a
blanket mortgage on them m hm, basically pulling the funds,
you know, pulling my equity out of them and either
investing it in like an ETF, or you know, going
further and buying more properties. So I was just curious
what your thoughts on that would.
Speaker 1 (41:59):
Be sure, when you look at it from an investment perspective,
what would be the rate of return that you could
get managing these properties in terms of income and growth.
Are you good with buying older properties, rehabilitating them and
turning them into cash products. Is that something that you've
done absolutely?
Speaker 5 (42:19):
Yeah, Yeah, that's basically all I do. I buy the
worst house in the block and make it the best.
Speaker 1 (42:24):
Yeah. So when you look at an ETF, you have
to look at what the rate of return is. And
I don't think for most of the people that I
know that are in your position, serial developers, serial entrepreneurs,
you want to invest in yourself, and typically you can
make more money on yourself than you can make in
the markets. So if you're good, if you have that
(42:44):
skill set and you're talented, you're thirty six years old,
you've already got six rental properties, I would recommend you
do something called a limited liability company. Do you have
any LLCs yet? I do.
Speaker 5 (42:56):
Only one of the properties is in the That was
the next thing I've heard, each house in its own
LLC or yeah, group a few properties, you know, I
have with one property in it.
Speaker 1 (43:10):
I would do it. If you want to get really
asset protected, you want your liability cordoned off, and we
use limited liability companies to cordon off liability form People
who come on the property, they fall on the property,
they sue the owner of the property. If that's you individually,
they sue not only the property, but they sue you
as well. But if you have the property owned by
(43:32):
the NLLC, they sue the property, but they don't get
through the LLC. They call it piercing the corporate veil.
They don't get through that. To you, if you've done
everything correctly, so you've insulated your other assets and you
can do it for all six properties. But then you
can also do a whole what we call a holding company,
and our larger developers we do this for because you
(43:53):
can take all of your properties put them into a
holding company. We do an operating agreement for that. We
go to your bank, we negotiate with the bank a
lending opportunity, and you can leverage all six properties together
through that LLC. And then what you're going to probably do,
and I would invest in you take the money that
you borrow against the other properties and buy another property.
(44:16):
And then you got seven, eight, nine, ten, eleven, twelve,
And now you're a real estate mogul and you know
you're You've got the fifty foot boat on Lake George
and you're having a good time. But diversification is also
part of that. So make sure you're doing a retirement account,
putting away some cash in a retirement account, and if
(44:38):
you can defer income tax on that, then you're going
to want to get that into an IRA. If you
can do a little bit of wroth. Those kinds of
things you would do now on your own because you're
not attached, you don't have a pension, your company isn't
putting the money away for you. You kind of have
to do that on your own. So I would get
a financial advisor and where I would put money aside.
(45:00):
Once you're earning rents and you've got a good net
rental role, going take some money and put it aside
in retirement accounts and then you can do your ETFs
and all your other investments and diversify the portfolio from
just real estate into real estate and investments. But some
tax leverage with the IRA.
Speaker 5 (45:16):
Okay, now I started doing that, but I ran into
an issue this year when I did my taxes because
I put money into a roth IRA and they wanted
to penalize me because I was able to get my
income solo with all the expenses and properties. Yes, sure,
they actually wanted me to pull that money out to
avoid a penalty. Hmm, well I'm not sure what Yeah,
(45:39):
that's what I said.
Speaker 1 (45:41):
Do you have an accountant that you work with?
Speaker 2 (45:44):
Uh?
Speaker 5 (45:45):
No, I usually do everything myself.
Speaker 1 (45:48):
Okay, well it's possible, but because I if I had
that response, I would go right to my accountant and
say what happened here, because they deal with that more
than we do. Or you know, financial advisor is somebody
that if you're going to start an IRA, you probably
won't have a financial advisor to help you with the
contribution limits and also help you with investment selection. Right.
Speaker 5 (46:08):
I think it was something to do with basically I
wasn't going to be paying any income tax in because
I paid so many property taxes and depreciation and everything
like that. Sure, uh, what an offset my income so
that for some reason, I don't know what it was,
but I've never had that happen before where I try
(46:29):
to put money in a Roth's IRA and they say no, no,
no's we're gonna We're gonna penalize you for that.
Speaker 1 (46:34):
Okay, Well, yeah, I would. I would maybe seek out
a tax advisor for that question. Uh, and see on
your return what's triggering that denial of your ability to
put money away in a row.
Speaker 5 (46:47):
All right, perfect, Thank you very much for the advice.
I appreciate it.
Speaker 1 (46:49):
Sure, justin great Thanks for a call. Appreciate it. And
we got about four minutes left, Patty, and I'm going
to go back to the Beneficiary Control Trust because, as
you know, it's one of my favorite things, and you've
been doing these now for clients and just kind of
talk about how you bring them into the conversation and
what they mean for clients.
Speaker 2 (47:08):
Sure. So, I mean, the most common way that people
think of when they think about leaving you know, inheritance
to their children or beneficiaries is just you know, gifting
it to them out right. But our opinion and we
believe that the far better way to do it is
byth you know, establishing and creating these beneficiary control trusts,
(47:28):
which are typically built in under you know, the parents
you know trust, and it doesn't get created or funded
until they both pass, but it's there to receive you know,
any assets, any inheritance that they're going to get upon
the passing of both of their family members, and it
allows them to you know, have full control over the
(47:50):
act the assets that are in their trust. They can
be the trustee and also the main beneficiary of it,
and you know, they can use it for things like
their health and education and support, and it provides them
with a great deal of asset protection, so you know,
if they ever get sued, if they're married and they
get divorced, if they ever need medicaid themselves, if they
(48:13):
have an estate tax you know issue like if they're
in Massachusetts, for example, These trusts can be very helpful
and beneficial for them.
Speaker 1 (48:22):
Yeah, and you said some magic words in there. The
D word is one that most parents light on. You know,
we've worked for this. And if we give our kids
this inheritance, when we die and they get married, they
get divorced. We don't want our property, all right, the
assets we have in our family to go through that
divorce and this trust. And I sat my kids around
the table, and this is the conversation we're talking about,
(48:43):
and I said, Okay, children, you know how hard I work.
You know I'm trying to try to do the right things,
and I'm trying to build some some assets up and
build some wealth for your family, for me, your mom,
and ultimately for you guys. So when you inherit, I
want to give it to you in a way that
benefits you the most. And here are the things that
I want you to know about that. I can leave
(49:05):
my trust, and I have a trust for myself and
for my wife, a revocable living trust. When we die,
we can just have that trust continue on and divide
into thirds, and you each get a third of the assets,
but you get it into a trust that you're the
trustee of. You can manage the assets. You can use
the assets for yourself and your family, but no one
else can touch them but you, creditors, creditors, spouses, divorcing spouses,
(49:31):
the government. They cannot unlock that box. It is a
fully asset protected trust. And my kids looked at me
and said, Dad, is that a trick question? Why would
we not want that? So as you're sitting around the
table this Thanksgiving and Patty, I'm hoping you can have
some good family time with your family and talk about BCTs.
Oh yeah, how to give, how to receive, what's the
(49:53):
best way to bring your family together, and to make
sure that what you've worked for is there for you
throughout retirement and for your kids in a way that
is fully protected. Patti, thanks for joining me in studio
this morning. Appreciate you taking the time. Thank you all
for listening. We love our life happens listeners. I talk
to you in the grocery store and in all the
(50:14):
different places. So stay you know, thanks for staying with us,
and fourteen years. We'll be back next week. Have a
great Saturday and see you on the radio.
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