Episode Transcript
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Speaker 1 (00:00):
Story.
Speaker 2 (00:00):
He seeks peace and Iran should take that.
Speaker 1 (00:03):
Pash is changing by the minute.
Speaker 3 (00:06):
They don't know what they're doing.
Speaker 1 (00:08):
From what's happening on the ground, we devastated.
Speaker 2 (00:11):
The Iranian nuclear program to.
Speaker 1 (00:13):
What's happening at NATO. Allen Wilds is in big top.
The world is listening and the entire world is watching.
Check in at the top of the hour. Correct we
face are too serious? Fifty five krs the talk station.
Speaker 2 (00:35):
Tonight.
Speaker 4 (00:36):
Another positive quarter from ge Aerospace and a nice deep
dive into the one big beautiful bill you're listening to,
Simply Money, presented by all Worth Financial Laumbob sponsor along
with Brian James. Brian, we got some good headline news
out of our good friends over at GE Aerospace this morning.
Another looks like another blockbuster quarter down there in Evandale
(00:57):
fill us in on the details.
Speaker 5 (00:59):
Yeah, good story coming out this morning from our friends
just down the hill down there in the valley. So
shares are up in pre market trading here, of course,
but the earnings, of course came out the way we
want to see them. Their outlook is coming in between
five ten and five sixty five and lifted some long
term targets on the revenue side and profitability expectations.
Speaker 2 (01:19):
You know, blah blah blah. This is all good news, and.
Speaker 5 (01:21):
It's just a continuation of what we've heard all week,
which is good earning stories coming out of large companies.
Speaker 2 (01:27):
That's what we need to see.
Speaker 5 (01:29):
It's been, you know, ironically, Bob, it's been kind of
a quiet or it feels like it's been a quiet
week in terms of the business headlines, the market, and
all that kind of stuff.
Speaker 2 (01:37):
We're focused.
Speaker 5 (01:38):
The headlines, of course, are focused on all the chaos
and all the political related stuff. But underneath all this,
the stock market's holding up, doing okay, and the economy
seems to be pottering along just fine.
Speaker 4 (01:47):
Yeah, when earnings numbers come in as expected or even
a little better then and inflation is stable and interest
rates don't move, it tends to make for a pretty
calm scene out there on Wall Street, assuming you know
that countries aren't bombing each other or some of these
black Swan events. So it's kind of been a nice, quiet,
slightly up trending week in the market so far, which
(02:10):
is a great thing, which leads us into what we
want to spend most of the time this morning talking
about and Brian, I know you've done a ton of
work taking a deep dive into the recently passed big,
beautiful bill. And one of the things that I always
appreciate about you, Brian, is you do a great job
of taking a bunch of complex information and boiling it
(02:30):
down into how average regular people out there can take
advantage of this tax legislation. So let's spend a few
minutes and dive into that today, because I know you've
done a ton of work on it.
Speaker 2 (02:43):
Yeah, we wanted this as obviously we'll be get paid
to do. That's why we exist.
Speaker 5 (02:46):
So there was a reason that this tax bill was
near a thousand pages in detail. There's a whole lot
of detail and things going into it, and some of
it is pertinent right now as we speak to everybody
out there. Some of it is maybe not relevant to
to you, but it could affect your company, your employer,
maybe your family members, those kinds of things. So we
went through, went through and broke this down kind of
(03:06):
in in about nine nine groups or so of kind
of who it impacts directly. So we're going to start
and a lot of this had to do with with
with you know, cutting benefit programs and those kinds of
things that are deemed by some to be not efficient
ways to spend money. So there's also some tax benefits
in here as well. But for example, the child tax
(03:27):
credit that that's actually going in a good direction.
Speaker 2 (03:29):
The child tax credit is rising to.
Speaker 5 (03:32):
Twenty five hundred dollars per child and that potential or
that that provision is going to continue to exist through
twenty twenty eight. So that's some financial relief out there
to those lower middle income families that with a lot
of kids and you're getting some support from the IRS.
Speaker 2 (03:45):
That's a good thing.
Speaker 5 (03:47):
And in terms of the standard deduction, now here's something
that affects everybody. Remember, the standard deduction is the amount
of money that you can earn before the IRS starts
to tax you. Everybody gets a small chunk of money,
even Warren Buffett a little bit of money, uh, income
tax free.
Speaker 2 (04:02):
That's what the standard deduction is.
Speaker 5 (04:03):
So that is going to rise by about one thousand
dollars for individuals and two thousand dollars for married couples.
And so that's a good thing. We'll have a little
more income. Now, this is the one if you think
back to go ahead.
Speaker 4 (04:16):
No one thing I And this is something you hear
me talk about all the time, and I think this
is a good time to throw it in here, you know,
just a reminder, especially for people that are over you know,
seventy and a half years old. We find a lot
of people, Brian, especially in this community, that are very
charitably inclined. But unless you've got itemized deductions of you know,
over thirty and what looks like thirty two thousand dollars
(04:38):
now going into twenty twenty six for a married filing
joint couple, you can't really use you know, those normal
ties and gifts that you make to your local church
and other charities. And it's just a reminder, using those
qualified charitable deductions, making your charitable giving out of your
IRA accounts rather than writing checks or using appreciated stocks
(04:59):
to make charitable gives is a far more tax efficient.
Speaker 2 (05:02):
Way to go about it.
Speaker 4 (05:03):
And a lot of people miss that until and unless
we remind them of how it all works.
Speaker 2 (05:08):
Yeah. I think that's a great point.
Speaker 5 (05:09):
And thanks for calling it out and slowing slowing my
role there, because that's that is a very important point.
Speaker 2 (05:13):
And for those of you who again do those things.
Speaker 5 (05:15):
Another thing you might consider is doing more than one
year's worth of gifting. You can look into something called
a donor advised fund that allows you to do say five, six, seven,
even ten years worth of giving all in one year.
You get the deduction, but you do not have to
give it to the charity yet. The donor advised fund
is still a middleman. So something look into, all right.
So continuing on with the One Big Beautiful Bill, so
we're seeing also seeing some cuts to benefits SNAP, which
(05:38):
is the Supplemental Nutritional Assistance program. The funding is going
to get reduced there by about one hundred and eighty
six billion dollars over ten years, and it's going to
be a little tougher to get to as well, so
stricter income verification, and there's going to be mandatory work
requirements for adults between eighteen and fifty five who do
not have dependence. You know, I think the assumption there
is there's a lot of people out there, maybe God
(05:59):
to put the envelope in terms of whether they should
be on welfare benefits or not.
Speaker 2 (06:03):
So moving on to.
Speaker 5 (06:06):
People with disabilities, there are some new rules coming in
terms of reclassifying home and community based services making them
optional under Medicaid. That's going to make it a little
more vulnerable to funding cuts, making it easier for it
to be determined to be optional and not a requirement.
Therefore Medicaid wouldn't necessarily cover it. States will be permitted
if they want to. This is a per state basis
(06:28):
of course, up to thirty five dollars copays for services
provided under Medicaid. Remember this is not Medicare, this is Medicaid,
a little different situation, but that's going to affect access
for individuals who need frequent care and a little more
active in the Medicaid program. Also, the retroactive window is
going to drop from three months to one month. Again,
that's on Medicaid, so there's going to be limited, bad backdated.
Speaker 2 (06:50):
Support for people who have just enrolled.
Speaker 5 (06:52):
In Medicaid and able accounts for those of your using those.
You should know that the annual contribution account limit for that.
Speaker 2 (07:00):
Is going to be eighteen thousand dollars and that.
Speaker 5 (07:03):
That unfortunately is going to kind of limit the long
term ability for those things to grow.
Speaker 2 (07:07):
But now so move on to small businesses.
Speaker 5 (07:10):
The eligibility for something called the qualified small business stock
tax exclusions are going to increase the asset limit to
seventy five million, and there are going to be tiered
capital gains exclusions based on how long you've had that.
So again, if you're in if you've never heard what
I'm just talking about, then it probably doesn't affect you.
But if that's something you've dealt with in the past
on your tax returns, then that's something you're going to
(07:33):
want to look into and make sure that you're in
a good position and take advantage of it well.
Speaker 4 (07:36):
And get out in front of it with your CPA
or tax professional and just you know, at least have
the conversation and we talk about this all time. Proactive
tax planning. There's a huge difference between proactive tax planning
and just tax preparation after it's all said and done
at the end of the year. So another good reason
to reach out to your CPA if you own a
small business and see how this might affect you.
Speaker 5 (07:59):
Speaking of small businesses, there's something out there called the
Alternative minimum tax for small businesses. There's also AMT for individuals.
It's basically just another way of looking at your sources
of income and kind of closing some loopholes that's been
out there for a long time, but there's some changes
coming to the corporate level here, So corporate AMT will
be triggered when a corporation has about over a billion
(08:20):
dollars worth of statement income. So that's not gonna affect
many people directly, but it's something to think about out
there because it will cause your publicly traded companies to
behave a little differently. Let's get into something that does
affect you know, just about anybody within our listening space here,
and that's these new Trump victory accounts. These are accounts
that are gonna be set up for children born between
twenty twenty five and twenty eight and these are federally
(08:43):
funded with one thousand dollars initial deposit, and parents can
contribute up to five thousand dollars a year tax free
for education, housing, job training, things like that in the future.
So of course that again the federal government's gonna kick
it off for you, throw a thousand bucks in, you can.
Speaker 2 (08:58):
Add to it.
Speaker 5 (08:59):
Not a lot of information, of course, Bob, So we're
not really ready to say here's exactly what you should
do with these, here's the benefits, But in my mind
they kind of function like five twenty nine plans without
necessarily the same limitations with regard to college and those
kinds of things. So if you've got young families out there,
I think these are very very much things worth learning about.
Speaker 2 (09:17):
Yeah, definitely something to take advantage of.
Speaker 4 (09:19):
But the one thing that caught my eye is this
is one of the things in this bill that is temporary.
Speaker 2 (09:23):
Right.
Speaker 4 (09:23):
It's for children born between twenty twenty five and twenty
twenty eight, so it does expire, but for grandkids and
kids that are born here in the next four years,
it's free money.
Speaker 2 (09:35):
It's definitely something to take advantage of. Absolutely, yeah. And
so this is another thing.
Speaker 5 (09:40):
When we pass new things like this, they tend to
have expiration dates built into them.
Speaker 2 (09:43):
Because we don't know what's going to happen. We don't
know if it's going to cause unexpected issues that kind
of thing.
Speaker 5 (09:48):
But if it's determined that it's been successful, then we
will put it in permanently. And that's literally what we
did with this, with this one big beautiful bill that
put permanent the tax cuts from twenty seventeen, those originally
had an ex ration date at the end of this year,
not anymore. Uh A lot of some impact too on
the energy sector. So tax credits are going to go
up for a carbon capture and which you know, I
(10:11):
was a little surprised to see that in there, because
that's this bill has normally gone the other direction. But
there's we're also opening up oil and gas lease sales
on federal lands federal waters. That's obviously touching subjects for
a lot of people, but decision that is based on
the idea of making us more competitive with China, Russia
or in in some other places that don't have these
kind of liquid these kind of rules to limit things.
Speaker 4 (10:35):
Well, one thing that caught my eye too, and I
know you'll love this one, Brian, is hsas can now
be used to pay for gym memberships.
Speaker 2 (10:42):
Right, So middle aged guys.
Speaker 4 (10:45):
Like you and me that have a little bit of
too much room around the mid section, we've got no
more excuses. We can pay for up to five hundred
dollars a year using our HSA to get our rear
ends into a gym and get in shape, right Brian.
Speaker 2 (10:59):
Yeah, yeah, that.
Speaker 5 (11:01):
Unfortunately, I'm gonna have to come up with more excuses
to avoid doing that. You know, I'm pretty good at that.
Speaker 2 (11:05):
Over time.
Speaker 5 (11:05):
But yeah, this was more one more where it's just
going to make me work just that much harder. So also, somebody,
if you're into over the counter supplements, then those are
there's some new things that you'll be eligible that you
can use your HSA for.
Speaker 2 (11:15):
Remember hsas are one of our favorite things.
Speaker 5 (11:17):
If you use it properly, can be triple tax free,
no income tax. You can deduct it on the front end.
You can invest it. That's a separate step. You can
invest it, and then you can pull it out tax
free if it's used for medical expenses, simply taxable as income.
If you don't, it looks like a four oh one K.
But the neat trick about those, Bob is you can
you can fund it now, you can incur a bunch
of costs, now, keep the receipts, and then you can
(11:39):
take that You can take the money out twenty years
from now for something you had done this year. These
are pretty neat to that's not new, that's the way
it's always been. But that's why they're worth looking at all.
Speaker 4 (11:48):
And obviously something we didn't talk about today, But the
biggest benefit of this bill is we finally got permanency
on these marginal tax rate that went tax rates that
went into effect in twenty seventeen.
Speaker 2 (11:59):
So always good to have certainty. All right, great stuff, Brian.
Speaker 4 (12:02):
You're listening to Simply Money, presented by all Worth Financial
on fifty five KRC the talk station.
Speaker 3 (12:10):
Yes, he's a fifty five KRC Cincinnati available everywhere with
the iHeartRadio app.
Speaker 1 (12:17):
Down number one for podcasting. Fifty five KRC an iHeartRadio station.
Speaker 3 (12:23):
Allworth Financial a registered investment advisory firm. Any ideas presented
during this program are not intended to provide specific financial advice.
You should consult your own financial advisor, tax consultant, or
a state planning attorney to conduct your own due diligence.
Speaker 4 (12:42):
You're listening to Simply Money presented by all Worth Financial.
I'm Bob Sponseller along with Brian James. If you can't
listen to Simply Money every night, subscribe to get our
daily podcasts.
Speaker 2 (12:52):
Just search Simply.
Speaker 4 (12:53):
Money on the iHeart app or wherever you find your podcasts.
Straight ahead at six forty three, What to do and
significant ownership of your company's stock becomes a potential liability?
Speaker 2 (13:06):
All right? Does this describe you?
Speaker 4 (13:08):
You've got five different accounts or maybe ten, a dozen
mutual funds and a couple of ETFs. You think you're diversified, right,
but do you know whether those accounts are all holding
the same stuff. That's not diversification, that's duplication. And Brian,
we see this all the time. Bob, we're gonna go
to the story vault here. Let's talk shop a little bit.
(13:30):
You probably remember this too.
Speaker 5 (13:32):
We didn't know each other at the time that about
twenty years ago, the Janis Funds were just the greatest
things ever, and they were all anybody had to have
for a couple of year period. And there were four
of them, Janis Worldwide and Janis Enterprise and two other
ones that I don't that are lost to history. But
the reason everybody loved him was because they were up
double digits every single year. So people would say, I'm
just gonna get the Janis four. That's all I need.
(13:53):
Look at these things, they're just doing great. But if
you looked under the hood, which it's a lot easier
to do that now than it was then, you looked
under the hood, they all owned mostly the same stocks,
so that when things finally turned in two thousand and one,
two thousand and two, all those stocks took a beating
and all four came down, and people who thought they
were diversified were completely caught with their pants down because
there was nothing in that portfolio to support when when
(14:16):
the wind started blowing the other way. So, more accounts
doesn't mean more protection. That doesn't mean that you have
you know that you that you have things that offset
each other. Having the same stock across four different institutions
or the same mutual fund does not protect you at all.
It's going to behave the same way.
Speaker 4 (14:31):
Yeah, if you're gonna take me back twenty years, Brian,
do you remember the aim Wingarten Fund?
Speaker 2 (14:37):
I do?
Speaker 4 (14:38):
That was another fund that just they were selling this
as the widows and orphans fund. It could never go
down and lo and behold. You know, it had sixty
percent in tech stocks. And when we had the tech
bubble in two thousand to two thousand and two, boy
did that take a hit.
Speaker 2 (14:54):
And boy were.
Speaker 4 (14:54):
People shocked and disappointed and in a lot of cases angry.
All right, Well, back, what we want to do about it?
You know, we run into people all the time. You know,
the more institutions you have and the more you know.
Speaker 2 (15:07):
Accounts you have.
Speaker 4 (15:08):
What I like to tell people is you've got a
great collection of products, but you don't have a strategy,
and you don't have as much diversification as you think.
And to your point, Brian, the more institutions and funds
and all that you spread yourself out among you tend
to you when you actually look at what is comprising
(15:29):
these funds.
Speaker 2 (15:30):
People are amazed when you.
Speaker 4 (15:33):
Own the same stocks and those funds, and you know,
you look at the S and P getting as high
as thirty to thirty five percent over the last year,
and these mag seven stocks. People think because they have
five six hundred companies in their portfolio that they're diversified.
Speaker 2 (15:48):
They really are not right.
Speaker 5 (15:50):
And you have to look also at how some of
these index funds how they actually work. Right, So an
S and P five hundred, a lot of people think, well,
that's five hundred different stocks, I've got evenly spread cross
five hundred.
Speaker 2 (16:00):
Well that's not the case.
Speaker 5 (16:01):
The S and P five hundred itself is capitalization weighted,
meaning the bigger the stock is. In reality, the more
of the S and P, the more of the index
it makes up. It's not divided evenly across five hundred
different stocks. So to your point, those mag seven stocks
are the ones that are driving the S and P
five hundred right now. You can specifically look for other
funds that do not have that risk, same five hundred companies,
(16:24):
but equally weighted as as opposed to cap weighted. But
you have to understand what these things own, what's under
the hood of all these various mutual funds in extreme
exchange traded funds ETFs that you probably have, they do
serve the purpose of I own one thing that owns
underneath it five hundred, maybe a thousand different things. They
can serve the role of being the sort of the
Kellogg's variety pack, if you remember that from your family vacations,
(16:47):
by one thing that has a bunch of different things
in it.
Speaker 2 (16:49):
So it is diverse by that way.
Speaker 5 (16:51):
But you have to understand what those things are so
that you can make sure you're not duplicating. Even though
I have the ABC and the XYZ fund, they're both
the same.
Speaker 2 (16:58):
That's a risk.
Speaker 4 (16:59):
We only have to go back about six weeks, Brian,
to look at what can happen when the market takes
a turn and you are over allocated without knowing it.
In some cases, with a lot of overlap in certain
companies and certain industries. When that volatility comes, and it
always does, that's where you can see what actually happens
in real time with your own money when you're a
(17:21):
little underdiversified. So let's talk about what real diversification looks like.
At its core, it means owning investments that respond differently
to different economic conditions. And our industry likes to throw
around a lot of terminology, you know, like negative correlation
and all that. All that means is having some things
(17:44):
in your portfolio that zig when other things zag.
Speaker 5 (17:49):
The market gets distracted by different things at different times.
When we're in a rising rate environment, that means we
want to own a certain type of bonds, for example,
and sometimes we will pivot away from that the pendulum
back the other way, and we'll pivot away from that
rising rate environment. We'll sit in a flat rate environment,
and that means we need to change those bonds out
to something that reflects a little bit more accurately what
(18:11):
that portfolio needs to do, and then we'll be on
the other side where the rates start to drop. Whenever
the government feels like we need to sort of goose
the system a little bit that all three of those
scenarios require different types of holdings. In addition, you know,
most people think about stocks anyway. When we're talking about diversification.
At any given time, the herd wants to shy away
(18:32):
from one type of thing and invest in something else.
This is why we have that term. There are stocks
called defensive stocks. Defensive simply means, for example, grocery stores, right,
no matter what's going on, grocery stores are going to
make money. We may not go to Best Buy and
buy that new gigantic TV when the economy is a
little bumpy, but we are sure going to go buy
a loaf of bread and a bottle of milk on
the way home.
Speaker 2 (18:51):
That's a defensive stock.
Speaker 5 (18:52):
So the market will be attracted to the types of
things that it feels like are going to do better,
you know, in the very short run, and then as
things clear up, we'll move toward a more growth approach.
But that's the that's the reason we can't predict the
timing of these swings. That's the why we need to
own all of them at the same time and make
sure we're diversified.
Speaker 4 (19:09):
You're listening to simply money presented by all Worth Financial.
I'm Bob sponseller along with Brian James. Brian, let's get
into how a lot of this duplication happens for clients,
and and look, it's often unintentional.
Speaker 2 (19:22):
You open an account.
Speaker 4 (19:23):
Here, you do a rollover IRA there, You've got three
or four different advisors that adds news funds, and all
of a sudden, you've got this collection of products without
a strategy that I alluded to before. Sometimes people think
they're being cautious and they are diversifying by spreading money
across different firms. But if the advisors at these different
(19:46):
firms you and I know this, Brian, they don't talk
to one another, they don't coordinate with one another, their competitors,
and so the more you spread across your institutional exposure,
you're actually defeating the purpose of what you're trying to do,
which is build a consolidated, diversified portfolio, especially if you've
got three or four advisors all doing certain things with
(20:10):
your money and not talking to one another.
Speaker 5 (20:12):
Yeah, I'm thinking of an example of about about a
month ago, I had a client who was doing the
kind of the same thing she had. We would work
for her for a long time, and she had inherited
some assets from her deceased parents and she decided to
keep those with the other advisor. Didn't take very long
before she realized that that made her the advisor because
we would share our thoughts. She would talk to the
(20:32):
other side, who was perfectly legitimate firm, and now there's
a lot that way. We're good at what we do,
but we're not the only ones and they would share
some thoughts too, and it was up to her to
coordinate to make sure that we weren't. We can't see
what each other is doing, so it was up to
her to make sure that there wasn't a lot of overlap.
She basically got fed up with that and ended up
deciding just to bring it all to all Worth and
have us deal with it, just to remove that sense
(20:52):
of conflict. And so again having two is going to
it can cause more trouble than it could solve.
Speaker 4 (20:58):
Well, this is where just a simple port folio analysis
can really help. And this doesn't mean fire all your
other advisors and move all your money with one advisor
and one fell swoop, but most good, well intentioned fiduciary
advisors will do for no cost or no obligation, a
thorough portfolio analysis where we take all your statements and
(21:20):
there's really nice salts available today where you can show
a client here's what you really own. Here's how it's
broken down by asset class, here's some of the risks
inherent with the allocation you currently have. And Brian, that
helps people make an informed decision on how to proceed
going further.
Speaker 2 (21:39):
I find that to be very useful.
Speaker 4 (21:41):
And helpful, and potential clients really like that when we
take the time to do that for them.
Speaker 2 (21:47):
Yeah, I think that's great advice.
Speaker 5 (21:48):
Just understand, Like a lot of things we talk about,
look step back, look at your big picture and understand
what you have and what you're trying to do with it.
Speaker 4 (21:56):
Here's the all Worth advice. Ask yourself, am I diversified
or just busy? Because in investing motion doesn't always mean progress.
Coming up next, how to fireproof your finances from family drama.
You're listening to Simply Money, presented by all Worth Financial
on fifty five KRC the talk station.
Speaker 6 (22:17):
The world is listening and the entire world is watching.
Speaker 2 (22:21):
Check in.
Speaker 5 (22:22):
At the top of the hour, we devastated the Iranian
nuclear program.
Speaker 3 (22:27):
Fifty five KRS the talk station men the summer at
KARC and iHeartRadio station.
Speaker 4 (22:38):
You're listening to Simply Money, presented by Allworth Financial. I'm
Bob Sponseller along with Brian James. Time to tackle everyone's
favorite topic, money and family.
Speaker 2 (22:48):
What a loaded topic that is, Brian.
Speaker 4 (22:51):
And when they don't mix money and family, don't mix, boy,
the sparks can flying. We're not just talking about who
gets Grandma's china. We're talking about real money, inherited wealth,
business succession planning, estate planning decisions, and what happens when
your kids, your spouse, or your siblings don't see eye
(23:12):
to eye. It's a very important topic that we're going
to get into here, Brian.
Speaker 5 (23:17):
You know, Bob, one of my very first lessons as
to how people can be when I became an adult
and I was a young financial advisor, I got a
phone call from somebody who was in the hearse, their
father's hears on their way to the cemetery, wanting to
know if they could stop buy the office and pick
up their money. And I'm using air quotes. I want
to pick up my money because it's in a shoebox
with my name on it. Obviously that's not exactly that's
(23:38):
not a very common scenario, but people do think funny
about money and when they're different. No matter if they're
in the same family, everybody has different opinions on it.
So one of the big things we can run into
is values versus vision. What this means is, if you've
got a parent who built their wealth by being frugal, disciplined,
maybe they started a business which is its own, its
own huge lift to carry you got the next generation
that all they know was that they didn't really want
(24:00):
for anything. They kind of got whatever they wanted, did
not have to put that same amount of blood, sweat
and tears into growing that wealth. Their goals are very different,
their priorities are different. So we see this all the
time where the parents are the ones who want to
preserve that wealth and the kids kind of assume that.
Speaker 2 (24:15):
It's always there.
Speaker 5 (24:16):
They want to use it to start a nonprofit, which
is a very honorable thing to do, but it's a
very different mindset than something you know that they're trying
to grow something to provide for future generation. So one
child might be conservative with money, the other ones ready
to kind of live it up and you know, yolo.
Want you only live once and kind of live that
life of luxury. Maybe launch a music career, take a
(24:39):
swing for the fences, that kind of thing. That's when
the friction starts, when you've got those two children who
are arguing over what mom and dad built and how
we are treating it now.
Speaker 4 (24:49):
Well, and I'm dealing with this situation right now, Brian
involving a closely held business where this couple has four kids.
Two of the kids are actively involved in the business. Now,
I mean it's their livelihood, it's their paycheck. They are
putting blood, sweat and tears into that business. The two
other kids have nothing to do with the business. But
this is a significant chunk of this couple, meaning the
(25:12):
parents net worth. And when they came and met with me,
they had done zero estate planning. They knew it was
the elephant in the room, but they hadn't really sat
down and talked and thought through it as as spouses,
to say nothing of sitting down with their kids. And
the good thing is, you know, I brought in an
attorney that I've worked with for years that is wonderful
(25:33):
at working with closely held business owner clients. And Brian
in the course of about an hour and a half,
we were able to sit down together in one room,
throw around some ideas.
Speaker 2 (25:42):
And come up with an actual plan that we think
is going to make everyone happy.
Speaker 4 (25:46):
And boy, was at a game changer for that family
to head off some potential discord down the road.
Speaker 2 (25:53):
Yeah, you said the key word.
Speaker 5 (25:54):
The word is planned, just basically meaning do all have
this conversation in advance, not you know, on the deathbed
or you know, at the estate settlement meeting with all
the attorneys. So I'm reminded of another situation I had
years ago where there were two brothers who owned a
business and they both knew that they were about the
same age, and they knew they'd want to get out
at the same time. But they both felt kind of
equally about the business. They could continue it or they
(26:15):
could bow out at the right price. So what their
agreement was was that they were going to agree or
one of them would come up with the value of
the firm. Here's what the price of this firm is worth,
and we're going to split it in half, and then
the other would decide whether he was going to buy
or sell. And that worked out perfectly because that forced
them both to be honest about their intentions. If I'm
going to value my own business but I don't know
(26:36):
whether I'm on the buying or selling end, then it's
going to be a pretty fair valuation. So that's kind
of a unique situation. It did work out really well
for those two guys, but the whole point is they
had that discussion well in advance of any actual settlement
of this thing. For a lot of people, like you said,
it's going to involve bringing an attorney into the mix,
bringing everyone to the table and just talking about what
is important to you. What do you want to have
(26:57):
as a memory of mom and dad? Do you want
the business? Do you not want anything to do with it?
Lay it all out and then after everybody understands the
different points of view, don't do anything that's hail everybody,
go think about it.
Speaker 2 (27:08):
Then come back to the table and see where we land.
Speaker 4 (27:10):
Yeah, and even if we're not talking about ownership of
a family business, just basic a state planning, you know,
when you've got multiple kids or grandkids or what have you.
As you've already mentioned, Brian, everybody's interest and you know
their preferences can be different, and that's where you can
get created creative. It doesn't mean over complicate things. But
(27:31):
we might have one kid in the family that's maybe
not very responsible with money, and you don't want to
just dump a couple million dollars on them on one
day when you pass away, because they're not prepared to
handle it. And that's where you could put some contingencies
into that trust to dole that money out over time.
You can tie that with some incentives, you know, to
(27:51):
hopefully motivate them to do some right things with that
money rather than blow it. There's some creative things you
can do with trust and estate planning, but you got
to get out ahead of it, you know, proactively, to
make sure you don't leave a mess, you know, for
those you know coming in the next generation.
Speaker 5 (28:09):
Right, So you can do some mechanical things. You can
use what's called a discretionary trust. That's the trustee, so
the trustee decides on your behalf how and when children
get access to the funds. That way they don't have
a blank check. Well drafted trust can to protect assets
from expouses as well, and there's plenty of other toys
you can play with there.
Speaker 2 (28:26):
Here's the all Worth advice. You don't just pass on money.
Speaker 4 (28:29):
You pass on meaning protecting your legacy means protecting your
family from the drama that unmanaged wealth can create. Coming
up next, how to manage the risks of holding too
much company stock. You're listening to Simply Money, presented by
All With Financial on fifty five KRC, the talk station,
(28:50):
Mark Levin.
Speaker 7 (28:51):
We Americans, we patriots are irrational people. Irreasonable people, the
people who know good from either.
Speaker 2 (28:56):
Right from wrong.
Speaker 7 (28:57):
We also know hustlers and Marxists and fashion in islamis
will endanger our country every damn day. We're destroying our
culture into civil society. Who are breeding a youth that
hates America and embraces the wrong thing.
Speaker 6 (29:10):
Mark Levin, tonight at ten oh six on fifty five
krs the talk station, are welcome to here.
Speaker 2 (29:17):
I do think he is too old to run.
Speaker 3 (29:20):
In twenty twenty.
Speaker 1 (29:20):
Four, fifty five krs the talk station.
Speaker 4 (29:28):
You're listening to Simply Money because ied buy All Worth
Financial on Bob Sponseller along with Brian James. You have
a financial question you'd like for us to answer. There's
a red button you can click while you're listening to
the show right there on the iHeart app app simply
record your question and it'll come straight to us. All Right,
you've worked hard, you've climbed the company ladder, or maybe
(29:50):
you've built the business from the ground up. But now
you're sitting on a whole lot of one thing, your
company stock.
Speaker 5 (29:58):
Yeah, a company stock is not a bad thing at all. Right,
we should get paid, you know, we should be compensated
when our company does well. The risk, however, though, and
there's a lot of companies that put their their customer
or their their employees in this situation, is that now
a lot of your financial stability is tied to it.
Your salary comes from this company. If you've got your
you know, a large chunk or sometimes all of it.
(30:20):
I still see that every now and then, sometimes every
nickel of it is in the employer's stock. Then everything
you have in this universe is tied to that company.
And if it goes under, well, then that's going to
take everything with it. And we haven't heard a story
like this in a very long time. But if the
name Enron rings a bell. Enron was the Procter and
Gamble of Houston and was being the key word. It
(30:41):
no longer exists, and it basically evaporated overnight because it
was all a house of cards. Lehman Brothers a slightly
different story, but they made too many bets in too
many bad places. These are companies that went poof overnight,
and they took obviously the market. These things triggered market
downturns which dragged four O one k's down just in
general across the country.
Speaker 2 (30:58):
But if you had companies stock in.
Speaker 5 (31:00):
Those firms and a large chunk of it, then you
lost a heck of a lot more than, you know,
than a simple diversified portfolio would have lost in those
downtimes one hundred percent loss of course, in the case
of Enron. So these are things you want to pay
attention to make sure you know what position you're in.
Speaker 4 (31:14):
Well, we don't have to see a company entirely implode
like an Enron or a Layman Brothers. Those are pretty
severe examples. You know they're real, but they're extreme. I mean,
just a big market decline or a change in a
company's structure or earnings report, anything can cause a lot
of unexpected volatility when you're overexposed to anyone company. So, Brian,
(31:38):
let's talk about how people get stuck in this situation.
Why do people finding them why do people find themselves?
And let's face it, we're talking about well educated, very
intelligent people in most cases, why do they get stuck
in this position of being so highly concentrated in one position?
Speaker 2 (31:57):
Yeah.
Speaker 5 (31:58):
So, first, it starts off with a generous benefit package,
so you're rewarded this company stock year after year. We're
talking about restricted stock stock options in employee stock purchase
plans things like that, and you might even bought more
on your own, and a lot of times they entice
you with perhaps a fifteen percent discount. So, in other words,
if the stock is worth ten bucks to share on
the market, you're able to buy it as an employee
(32:18):
for eight dollars and fifty cents, meaning there's an instant
fifteen percent gain that's hard to resist. So, and a
lot of it comes from simply loyalty. I believe in
this company. I'm familiar with it, I know it. I
do this thing. I do this stuff every single day.
I can do it in my sleep, so I understand
it better than anything else that might be sitting inside
a mutual fund. And then after some time after you've
been in this situation, eventually it becomes taxes.
Speaker 2 (32:40):
Bob.
Speaker 5 (32:41):
If I sell, i'll oh too much. Therefore I'm never
going to sell. I just had this conversation with a
client yesterday who's got who has had stocks that he's
owned for forty some years, and he can't he doesn't
have the capital gains, let alone that he doesn't want
to pay it. He doesn't have the data to even
know what the capital gain is, so he's stuck in
a situation where he says it's going to cost so
much to eldest, I'm just never going to sell it.
(33:02):
That's great, but as your advisor, I need to take
it out of your financial plan. If you have walled
it off because you don't want to give a nickel
to the irs, then it is not an asset for you.
So I either need to solve that problem or find
another way to work your financial plan around it. That
tax can feel like a punishment, so people just hang
on and hang on.
Speaker 4 (33:20):
You're listening to simply Money presented by All with Financial
Umbob sponseller along with Brian James. Yeah, when people don't
even understand what their tax exposure is, I think sometimes
they underestimate what can be done with some proper planning,
and Brian just within the last you know, I'll say
five to ten years, there's been a lot of really
nice strategies come down the road to help people gradually
(33:42):
get out of these concentrated stock positions with way less
income tax exposure and capital gain exposure than they ever
thought possible.
Speaker 5 (33:52):
Yeah, there are vehicles out there, such as exchange funds.
An exchange fund is something where a lot of people
who own diversified or I'm sorry who The whole point
is that they're not diversified who own a single stock,
own one a big position in one thing. If I
have fifty different people who have nothing to do with
each other who have too much in one stock, that
those fifty stocks probably make up a decent portfolio. So
(34:15):
there's something called an exchange fund where everybody can contribute
their stock as is and receive in exchange a share
of that whole pile of stocks. The point of that
is you didn't sell it. The IRS does not recognize
that as a sale. You just you exchanged it for
a different pile of securities. So that is a way
to diversify their risk without actually selling it. There's other
(34:35):
things you can do as well, you can also do
what's called a collar around a major position, which basically
means you place option trades on the upside and the downside,
and that will at least restrict the stock. It can't
go can't go through the floor because you'd have an
option in place to protect that also won't grow to
the sky. Should the thing ten x in the next
couple of years, it's not gonna help you because you
(34:56):
have something else on the top side. But when we've
got this situation, the main one thing we're trying to
protect from is a massive loss from something unpredicted that
can happen to any company out there.
Speaker 4 (35:06):
Other things we talk to our clients about are more
gradual selling strategies, and this is where we can dovetail
of client's charitable intentions or goals with gradually diversifying out
of these highly concentrated positions, things like charitable remainder, trust
donor advise funds where you can give a chunk of
this stock away, get all the tax benefits now, avoid
(35:28):
the capital gains taxes in entire you know, entirely avoid them,
and dole that money out to charities over time. In
the case of a charitable remainder trust you can retain
an income stream from what you gave away.
Speaker 2 (35:41):
If that's something you.
Speaker 4 (35:42):
Need to do, it can literally be a win win
for everybody except the irs. And you don't need to
dump everything overnight. And what this comes down to is
a well planned multi year approach, especially in coordination with
your income and your tax strategy, and that could really
soften the tax hit while getting you out of this
(36:04):
concentrated position that exposes your overall portfolio to too much
volatility and risk.
Speaker 5 (36:10):
Bob, I'm going to take a step back even before that.
Those are great entities that can be set up. But
before you even do that, one simple thing you can do.
If you regularly give money to some charity, a church
or some other kind of charity or some whatever out there,
you can simply give them the stock. You don't have
to write a check, give them the shares of the
stock directly. All you have to do is contact the
(36:31):
development person whoever handles that for that charity, and they
know how this game works. They're going to give you
something called a DTC number and an account number, and
they'll tell you where the broke where their investment account
is held. You provide that to whatever firm is holding
your shares and tell them I want to send one
hundred schaires of Procter and Gamble, for example. And the
IRS does not recognize that as a sale. You did
(36:52):
not sell it. You simply gave it to a charity.
The charity, of course, is a five oh one C three,
meaning it doesn't pay taxes. They sell it, and they
will most likely do so instantly because they don't want
to speculate. They just need the cash. They sell it
and do not incur any taxes, So you get the
credit for having given them the same dollar amount that
you give them every single year, but you don't have
(37:12):
to pay any taxes for having liquidated it.
Speaker 4 (37:15):
Great stuff, Brian, here's the all Worth advice. Your company
helped you build your wealth. Now your wealth has a
new job, protecting your future. You're listening to Simply Money
presented by All with Financial on fifty.
Speaker 1 (37:27):
Five KRC the talk station, Mark Levin.
Speaker 7 (37:32):
This is why I feel you and I we have
a special relationship. Really, I don't deal well with Washington,
I don't deal well with clique social circles, and I
don't deal well with the media. Just being honest with
you when I come on this program and do my
own research.
Speaker 2 (37:46):
We talk about independent media.
Speaker 7 (37:48):
I am independent from independent media.
Speaker 2 (37:51):
In other words, I do as I wish to do.
Speaker 1 (37:53):
I do what I do.
Speaker 6 (37:54):
Tonight at ten oh six on fifty five KRC the Talk.
Speaker 2 (37:58):
Station, and of course not just one sided view news.
Speaker 1 (38:03):
That affects you.
Speaker 6 (38:04):
At the top end to bottom of the hour, fifty
five KRZ the Talkstation, you're.
Speaker 4 (38:14):
Listening to Simple Money, presented by all Worth Financial.
Speaker 2 (38:16):
I'm Bob Sponsller along with Brian James.
Speaker 4 (38:19):
Brian, I want to take a few minutes to just
really get on my high horse about what we talked
about earlier in the show, and that's just the importance
of having a truly coordinated financial plan and the value
that a good fiduciary advisor can bring to the table
in that area. And I'm thinking of a meeting I
had earlier this week with a new client that's coming
(38:40):
on board or looking at hiring us.
Speaker 2 (38:43):
And you know, Brian, this was a two.
Speaker 4 (38:45):
Hour meeting, you know, And at the beginning of the meeting,
they shared a little bit of information and asked a
lot of questions. The more I answered the questions, the
more information was shared and as we went on, you know,
I found out just what we talked about stuff was
with in five or six different places, with four or
five different advisors, no coordinated strategy. And I explain the
(39:07):
fact that you know, we don't have to take over
management of everything in one day to add the value
of a truly comprehensive financial investment and tax strategy, because
you don't have that today. And the longer that meeting
went on, and the more comfort they had with that
whole concept, which they had never experienced before, they were
(39:33):
more and more open to sharing information. And I think
it's set the table for a good relationship going forward
where we can really add the value to their situation
that Brian, honestly, I think they've been looking for for
twenty plus years and have never found.
Speaker 2 (39:48):
I'm sure you've had similar meetings.
Speaker 5 (39:51):
Yeah, And I'm thinking back over my past so and
when I first got started, everything was product based, right.
It was everybody knew a guy who had a hotstock
tip from last month, or the Janus Mutual Fund or
the aim Wine Garden Fund or whatever something out there
that was just the coolest thing ever know was all
we are gonna need to own for us, right. I
was all product based and it would change every year
(40:12):
or two. And that's nothing to build a career on,
let alone a fiduciary relationship. So eventually it pivoted to
what am I going to do with all that? How
does it all fit together? And I think nowadays when
we talked to new clients or perspective clients, the very
first thing they say is, well, all we really talk
about with my advisor is what the market did last
quarter and what we think it might do this quarter,
(40:32):
which nobody knows anyway, And I don't really get the
point of this anymore.
Speaker 2 (40:35):
How are these people helping me? I'm in a different
situation now.
Speaker 5 (40:38):
I got a lot of moving parts to my situation
about to retire, you know, I've got social Security decisions
to make, I got a pension, maybe a business to sell.
How does all this coordinate together? And how do I
get the conversation off of just what is this pile
of money doing?
Speaker 2 (40:52):
There's so many more moving parts nowadays.
Speaker 4 (40:54):
Yeah, you repeated that keyword coordination, coordination, and that's really
the value add that comes from having a good, qualified
fiduciary financial advisor on your team.
Speaker 2 (41:08):
Thank you for listening.
Speaker 4 (41:09):
You've been listening to Simply Money, presented by all Worth
Financial on fifty five KRC, the Talk Station.
Speaker 1 (41:16):
During the week we get a little dirty mud, dirty mud, dirty,
really nasty. But on the weekend we get dirty in
the mud, dirt everything to get your yard, plant, city
garden growing.
Speaker 6 (41:32):
And Monday, when you notice dirt under your fingernails, you
know you're doing it right.
Speaker 1 (41:37):
But I figured i'd call you get dirty, Get Growing.
Speaker 6 (41:40):
Ron Wilson, Saturdays at six on fifty five KR The
Talk Stage