Legal, Financial and Tax Planning Move in Scary Times

The Legal, Financial and Tax Planning Response Standpoint

What are the things you should be doing to move forward and put yourself in the best position from a legal, financial and tax response standpoint during this scary time? This sounds cliche but I’m sure you’ll agree that we can’t control the things happening around us. But we can choose where to focus our attention and I personally prefer looking at things I can control. When you are paralyzed by fear at times like this, setting the correct mindset and knowing your next move can make a difference.

Today, I will discuss the two most important legal documents you need to have right now. We’ll also talk about correct financial responses and we’ll review a tax strategy through a macro lens.

In this episode, you’ll learn…

  • Chris’ positive focus for the week
  • 6 points to change your mindset from Dan Sullivan
  • Two most important legal documents you need to have in place right now
  • How to handle your situation with a medical power of attorney through us
  • If you are a healthcare frontliner, we will arrange a financial and medical power attorney for free
  • Proper structure to pass on to avoid probate upon death
  • How do assets get transferred to someone else’s name based on state administration
  • 4 ways assets can be transferred upon death
  • What is fortified retirement plan
  • Two types of financial structure – Offensive and Defensive
  • How to increase your income score
  • Tax planning over your lifetime and your beneficiaries 
  • Different Tax buckets – taxable bucket, tax deferred buckets and tax free buckets
  • What is tax efficient retirement

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Episode Transcript:

This is The Chris Berry Show, expert information on wealth, estate, and tax planning for the second half of life. Information that you can understand. Here’s your host, Chris Berry.

Hey, everybody. I hope you’re hanging in there in these scary times. This is, of course, Chris Berry with The Chris Berry Show. And we’re going to start this show off with a positive focus, just like we start off every show, no matter what’s going on. In this positive focus, something I learned from Dan Sullivan who’s a business coach and mentor of mine. And he invites us to start every day, every meeting off with a positive focus. It’s something that I start my dinners with my family off. We go around and say a positive focus.

And no matter how life is going, it’s always important to start with gratitude and think of something positive. It creates a good framework, a good lens to view the world through. And so Right now with everything going on and people staying home, my positive focus is this past weekend, of course, we’re trying to stay home as much as possible, and we got our spring cleaning done. So it’s kind of a forced spring cleaning. But I’m a big believer in trying to keep things simple and minimalizing as much as possible. So it gave us an opportunity to go through and kind of clean out some of that junk. Weren’t planning on doing it right now. But with what’s going on, it gave us something to do.

And so today on the show, what we’re going to talk about is the scary times and we’re not going to talk about it from a negative standpoint, we’re going to talk about it from our response standpoint, what are the things that we should be doing to move forward to put ourselves in the best position coming out of this from a legal financial and tax standpoint. And before we do that, I think the first thing we need to work on is just our mindset, just understanding that we can’t control the events that are happening outside. We should be worrying about the things that we can control. Because if you’re paralyzed by fear in a time like this then anything else that I mentioned really won’t resonate or won’t stick.

So what I wanted to share is a couple just ideas before I get into the meat of what should we be thinking about from a legal, financial, and tax standpoint. And so again, I’m going to share some things that I’ve shared before in the show from, again, a mentor of mine, Dan Sullivan. And these are some of the things that he wrote about, some tips to think about to adjust our mindset during these scary times. Now I want to share just six of these.

So first, forget about yourself, focus on others. I think this is important and this is something that I’ve struggled with is me worrying about how this affects my life. But if I focus on how can I help others right now, it shifts my focus a little bit. It shifts to more gratitude. Second, forget about the difficulties, focus on the progress. So yeah, I could focus on we’re basically at home all weekend, or I could focus on the positive of, “Hey, we had a chance to declutter and do that spring cleaning.”

Forget about the “future” you had, focus on today. I can tell you the way I planned out my 2020 looks very different than how 2020 is operating. Very, very different. But I need to forget about that future 2020 that I had and focus on just what is the best next action I can take today. What is the best next action for my family, for our business? What is the best next action for today and forget about what I had in mind for what my 2020 was going to look like? Because for everyone out there, I’m sure it looks very different now.

Forget about who you were, focus on who you can be. So a lot of times we have ourselves tied up in numbers, whether it’s the amount in our retirement accounts or I’m a millionaire or no, I’m not a millionaire because I’ve gone under that amount. But we can’t control that old future self. We have to think about and focus on who we can be in the future. So forget about the past, focus on the future.

This is a big one and this is one that I’ve been repeating to my clients as we’ve had phone calls and webinars and video conferences, which we’ve done a lot of these past couple weeks, forget about events, focus on responses. I think this is one I would put a star next to. This is just a great way to go through life. We thought 2020 was going to be a volatile year. We positioned the clients’ portfolios accordingly. But that said, no one expected this. It was a presidential election year, we expected some volatility, we were on a 12-year run, but no one expected what we’re going through right now.

I can’t control that event. No one can control that, right? But what we need to do is put that behind us and now focus on the logical responses, not emotional responses. Focus on logical responses. And that’s really, I think, over the past couple of weeks the biggest value add I’ve had for my clients is being able to take the emotions out of this, look it and analyze the environment and make the best next logical response given that we cannot control the circumstances. We cannot control the events.

Ask yourself, what is the best next action, the best next response? And I think this is just a good way of life as well. Forget about complaints, focus on gratitude. So sure, we could all make a list of all the things that we’re frustrated with that didn’t go our way with these events that are transpiring but instead, focus on gratitude. Something that I do in my personal practice each morning is I write out three things that I’m thankful for. And at night, I try to write three things that happened during the day that I’m happy with. And what it does is just put me in a mindset of gratitude, which is very different than fear and hate and anger.

So I think those are important. And I wanted to start the show off the kind of going over these again because again, I think, to be able to make the next best logical response, we have to be operating from a sense of peace, not fear. Fear is going to breed emotional responses to things. So again, those six concepts that I want to share with you, forget about yourself, focus on others, Forget about difficulties, focus on progress. Forget about your “future,” focus on today, the next best step. Forget about who you were going to be, focus on who you can be.

Forget about events, focus on your responses. And again, I would put a star next to that one. Forget about complaints, focus on gratitude. I’d put a star next to that one as well. I think those last two really drive home the concept. And it’s something that I struggle with, I try my best, but I think that if we kind of move towards gratitude, put the events behind us, focus on responses, everyone will be a little better off.

So with that out of the way, now that we’ve got a sense of peace, a sense of calm, let’s logically look at what responses should we be taking right now from a legal, financial, and tax perspective. And we’re going to start from a legal perspective. One of the most important things you can have right now, probably the most important two legal documents to have right now in this environment is what’s called a financial power of attorney and medical power of attorney.

So a financial power of attorney is a legal document that gives somebody, a person you’ve appointed the ability to make financial decisions for you to be able to work with banks, work with retirement accounts. And then second is a medical power of attorney. A medical power of attorney appoints someone to make medical decisions if you’re unable to. So if you got a knock in your head, who would make those medical decisions, and included in that would be decisions with regards to life support.

So you might have heard a Terri Schiavo. She was a woman down in Florida a number of years ago. She was in a vegetative state for a number of years. Her husband wanted to remove her from life support. Her family wanted her to remain on life support. It became a big court battle that lasted over eight years. Well, all of that could have been avoided had Terri Schiavo had medical power of attorney in place. And in this environment right now, that medical power of attorney is probably number one in terms of the legal documents you need to have in place right now. I’ll share a couple of stories from the last couple of weeks.

So first was a situation where we had a husband and wife. The husband was incapacitated with dementia. They had a financial power of attorney in place, but they didn’t for some reason have a medical power of attorney in place. And now the wife wanted to be able to make some medical decisions for the husband, but she was unable to because, and this is a big point I need to drive home. Just because you’re married doesn’t automatically give you the authority to make medical decisions for your spouse. Similar to that Terri Schiavo’s situation.

She was married but her spouse didn’t have the ability to make medical decisions. And so they were in this crisis situation. How I heard about this was actually another attorney asking for advice on an email listserv of how to handle things. Because this wife didn’t have the medical power of attorney, normally, what you would do is you would go get a guardianship, you’d have to go to court to get a guardianship. Well, guess what, with everything going on right now, it’s very difficult, near impossible to get a guardianship. So now she’s in a state of limbo trying to take care of her husband all because she didn’t have this very simple tool, this simple medical power of attorney document.

All of this crisis and stress granted it was a difficult situation, but if she would have had medical power of attorney in place, she would have been able to make a decision like that. But now, I’m not sure if she’ll even be able to. And so, again, probably the most important document right now is a medical power of attorney. And right now we are an essential business, obviously. And so if you’re listening out there and you don’t have a medical power of attorney, please give us a call.

We can get this set up for you pretty cost-effectively, pretty efficiently, pretty darn quick. Give us a call at 844-885-4200 or shoot us an email at I cannot stress enough the most important legal document out there right now is that medical power of attorney. And I’ll share another story that’s happened over the past couple of weeks.

In this situation, mom was in the hospital, she had no documents in place. And there were five kids and one of the sons was kind of mom’s caregiver but they were starting to butt heads. And mom ended up going into the hospital and suffering a stroke and really being unable to communicate. And the discussion was that maybe she should be going on hospice. Well, she was unable to communicate at this point. And the one brother said, “No, she shouldn’t be on hospice,” while every other sibling thought that mom probably should be on hospice and that was her desire. That she wanted to receive palliative care.

And now, there’s a family squabble trying to figure this out. We were going to try to get an emergency medical power of attorney in place when she went into the hospital. But now because she had a stroke, she doesn’t have the capacity to sign those documents. So again, this might be a situation where they’re going to have to go to court to fight it out. But the courts are stalled right now. They’re taking very limited cases. And again, this would be normally a guardianship scenario. But because the courts have slowed down and effectively closed almost. Now, mom’s going to be in a situation of limbo, and there’s more family crisis on top of already what’s going on in terms of the health care needs.

So again, those medical powers of attorney, it’s the most important legal document you can have right now. And if you don’t have it or yours hasn’t been updated in a number of years, there’s been a change with law, please give our office a call 844-885-4200. We can get those put together very quickly, very efficient, and very cost-effective as well. And then also, one of the things that we’re offering is if you are a healthcare provider, we’ll put together your medical and financial power of attorney at no cost during these times, because we understand you’re frontlines.

If we go back to 9/11, we respected and really appreciated the work of our first responders, the firefighters, and the police. I think this is our 9/11 in terms of our healthcare professionals, understanding they’re really the first line of defense against what’s going on and they’re putting themselves at risk. So if you’re a healthcare provider, we’ll be more than happy to put together a financial or medical power of attorney for you at no cost right now during these times.

Now, the next key document so that medical power of attorney, that’s number one by a long shot in terms of documents you need. The next legal document that you need to have in place, and I’ve seen this in this past week, is that financial power of attorney. That financial power of attorney. So if the medical power of attorney appoints someone to make medical decisions for you, the financial power of attorney appoints someone to make financial decisions, being able to manage money, access retirement accounts.

And just this week, I had a situation where an individual was meeting in a nursing home paying long-term care costs over $8,000 a month. But they didn’t have a power of attorney in place. And they were running out of money on their checking account to be able to pay the bills. And with no power of attorney in place, the only way to access funds in the situation was from a retirement account. But because there’s no power of attorney in place and this person was incapacitated, the retirement account, the financial institution in this situation, Fidelity, wouldn’t even talk to that person.

So again, what needs to happen normally in this situation is that person would petition the court to become a conservator to be able to manage money for an incapacitated individual. But because the courts are shut down, now again, we’re in a status of limbo. More confusion versus clarity or peace of mind or as much peace of mind as you can have during a health crisis like that. So they don’t know how they’re going to pay and what happens when they stop paying.

Are they going to be kicked out of the nursing home now because guess what, here’s something that’s a little bit scary, is that some of these nursing homes are taking additional clients in who are suffering from the virus? So it’s a scary time, but you need to have these legal documents in place, that financial and medical power of attorney. Those are the two most important key legal documents to have right now because A, we need to get things done quickly, efficiently during this period of uncertainty, and we can’t necessarily rely on the courts as a backup. And that’s never been a great option. But especially now, you don’t have another option.

So again, if you’re listening to this and you don’t have a financial or medical power of attorney, it’s vitally important you get these set up as quickly and efficiently as possible. And we’re set up to be able to provide these for our clients and listeners. So if you do want to get started with us, give us a call at 844-885-4200. And we can start this process very efficiently, very effectively, very cost-efficient, honoring all of the social distancing that we’re doing now.

Hi, we’re Madison and Ryan Berry.

Our dad is Chris Berry from the Castle Wealth Group.

The Castle Wealth Group used to be the Elder Care Firm. But dad wanted the company to be broader in its scope of services.

To not only protect and preserve assets but to help people grow their assets to prepare for retirement.

As a certified elder law attorney and fiduciary financial advisor, our dad and his team at Castle Wealth Group can help you with lots of important things.

To tell you more, here’s our dad, Chris Berry.

Thanks, Maddie and Ryan. Here at the Castle Wealth Group, we can help you put together an estate plan to avoid probate, work with you on a tax plan to keep more money for your family, and less for Uncle Sam and protect you against the devastating cost of long-term care. Our team is here for your family. I invite you to learn more about the Castle Wealth Group at our next free workshop where you will learn the three steps to create a legal, financial, and tax plan for the second half of life. Call us today to register at 844-885-4200.

The Castle Wealth Group, formerly the Elder Care Firm.

Learn more at the today.

So we’re talking about these scary times and what responses should you have from a legal perspective, the two most important having that financial and medical power of attorney in place. We’re set up to provide those right now for our listeners and clients. And then the third thing to think about is with the idea that we’re all going to pass away at some point and especially, for our older loved ones, it’s very important that we have things structured properly. So that if someone, a loved one, were to pass away, things pass as efficiently and effectively as possible. And typically, the number one goal as it relates to that is avoiding probate upon death. Because guess what, right now, if you have a loved one that ends up passing away and their assets end up going into probate, probate courts are basically shut down right now and nothing’s going to happen. Everything’s going to be stalled out.

But if you’re set up to avoid probate and you do have a loved one passed away, everything can be handled pretty efficiently if you set things up properly. And the key is to understand how a state administration works, how do assets transfer out of someone’s name when they pass away. And the key is to avoid probate by understanding how estate administration works. Because again, we don’t want to have anything going to court normally, let alone right now when things are shutting down. So we need to avoid probate.

Financial institutions are still operating. We’re operating, trying to be as virtual as possible, but the courts really are shutting down. So we don’t want anything to go into probate while we’re alive. That’s why we need to have that financial and medical power of attorney and we don’t want anything to go into probate upon death. That’s why we need to understand estate administration.

So when someone passes away, there are four ways assets can transfer out of their name. First would be through joint ownership. So let’s say we have husband and wife joint on a checking account. One spouse passes away, the assets, transfer to the surviving spouse. That would be joint ownership. Second, we have beneficiary designations. You might have a beneficiary designation on your life insurance, your 401(k), your IRA. One thing I would suggest is double-checking your checking and savings accounts. Make sure you have transfer on death or payable on death on those accounts.

A lot of times people forget about that. But as long as you have a beneficiary on that account, it’s going to avoid probate. The third way is through trust. So there are different types of trusts out there. But think of a trust like a suitcase. While you’re alive and well, you’re holding on to the suitcase. God forbid something happens to you, you pass that suitcase onto a successor trustee who distributes the assets wherever they’re supposed to go thereby avoiding probate. But if an asset doesn’t pass through joint ownership, beneficiary designation, trust, then it ends up going through probate. And that’s that core process that in scary times like this has basically stalled out. So we know that we want to avoid probate.

Now, what’s the one tool I didn’t mention? I didn’t mention a will, right. A lot of people assume that a will avoids probate, but here’s the thing. A will does not avoid probate. What a will does is gives instructions to the probate court and how to administer your estate. So if you’re looking at avoiding probate, you don’t want to rely on a will to control the distribution. Instead, you want to rely on either joint ownership, beneficiary designations, or a trust. Now the typical asset that we see ending up in probate, a lot of times it’s checking and savings accounts and then also real estate.

So one of the simplest ways to avoid probate with your home or any real estate is to use what’s called a ladybird deed, a ladybird deed. And what a ladybird deed is a type of deed that says it’s in your name while you’re alive, and then upon death goes to whoever you’ve named as a beneficiary, thereby avoiding probate. Now, sometimes you might hear what’s called the deed in the drawer trick where you do a quick claim deed but you don’t record it. That’s fraught with a whole lot of other issues. You might have stepped up in basis issues. You might have problems with the city tax assessor. You might lose that deed and so ends up going into probate anyways.

The ladybird deed, which is basically a beneficiary designation for your home, much more efficient way to handle things. So again, if you do have a loved one and concerned with everything that’s going on, make sure that they have a plan that avoids probate, and that’s understanding estate administration either through joint ownership, beneficiary designations, a trust, but if it doesn’t pass through one of those first three ways, then it ends up going into probate which, in times like this, we very much want to avoid because the courts are slowing down and shutting down left and right.

So again, in summary, the legal things to think about in these scary times, have that financial power of attorney in place. That’s going to allow you to manage or make financial decisions if you have to for a loved one. Have a medical power of attorney in place. That’s that patient advocate designation in Michigan. Appoint someone to make medical decisions if you’re unable to. And then make sure you have a plan to avoid probate, whether you’re relying on joint ownership, beneficiary designations, or trust.

So if you have those things in place from a legal perspective, you’re going to be pretty good for right now. Now, let’s start talking about this from a financial and tax perspective. Because again, our firm, we focus on five key areas and we call this the fortified retirement plan. So having an income plan, having an investment plan, having a tax plan, having a health care plan, and having a legacy plan.

So now let’s switch gears and we’ll talk about this from a financial and tax perspective. What are the things that you should be thinking about? Well, number one, don’t panic. Don’t make emotional decisions right now. If necessary, kind of walk through that mindset exercises that I started with. Focus on others. Focus on progress. Focus on today. Focus on who you can be. Focus on your responses. Focus on gratitude. That should help kind of bring some peace in this scary time. So don’t panic. And with that, look at your overall portfolio.

I had some calls with some clients these past couple weeks, and with the markets going down and all the volatility, of course, there would be concerns. But one of the first things I would do with clients where we structured a good plan is we would first focus on the overall portfolio, not just focus on a single investment. Understand that some investments are going to be more offensive and some of the investments and tools will be more defensive. So think of it like a football team, right? You have your offense players and your defense players. Well, guess what, depending on the time, sometimes offense is going to be more important, they’re going to be doing great. And that’s what we’ve seen over the last 12 years is that if you had some investments in a more offensive, more of a growth type of bucket or type of investment, then they’ve been outperforming the defensive players the last 12 years or so?

Well, this year, it’s looking like the defensive players are really going to be the stars of your investment portfolio. So hopefully, you structured a plan where you have both offense and defense covered. Too often, and I’ve seen this where we only have offensive players. And that’s worked for you the last 12 years but now you see this is why you have to have a true plan. You need to have some defensive players as well in a volatile market.

And so I was having a conversation with a client. We’ll call it a hypothetical client. And just this past year, as he moved into retirement from GM, we moved a hefty portion of his investments into kind of defensive players. And so we had a conversation and we’re talking about the market and I reminded him, “Hey, we have half of your portfolio in this defensive position. The other half, which we don’t plan on touching for another five to 10 years, you’re good. We have an income plan for the next 10 years for you so you don’t have to worry.”

That’s the peace of mind that having a true plan can offer. So don’t focus just on one investment is down, focus on the overall portfolio or the overall plan that you had. Because again, not all investments are the same, some should be set up for offense, some should be set up for defense. And if you don’t feel comfortable knowing who your offensive or defensive players are in your portfolio, maybe it’s time to give us a call. And we can relook at this or put together a plan for the first time, especially if you had all your players on offense, now’s the time to maybe rethink that and put together a true plan, a true investment team, if you will, not just offensive players.

So that’s the first thing is don’t panic, look at that overall portfolio. And for a lot of my clients as we had this conversation, they felt a peace of mind. Second, maybe now is a time for risk realignment. So over the past 12 years with this market run, everyone’s been comfortable taking on the risk, taking on the volatility, because of the more risk, the more reward, right. And so everyone felt good being aggressive because basically, you could throw a dart at a list of investments and it would have gone up basically over the last 12 years.

Well, that’s not how the market always works. We need to have these ups and downs. That’s why there’s a premium on equities, more risk equals more reward. And now we’re feeling that and now it might be time to think about realigning how much risk we’re willing to take on, especially if you just took a punch to the gut. Maybe that’s showing you that you’re not comfortable with the amount of volatility in your portfolio.

Now, I’m not saying just pull everything out of the market and sit in cash. But there are different investment tools that can limit volatility while still taking advantage of the growth in the markets. And maybe it’s time to look at rebalancing the amount of risk you’re willing to take on. And one of the things that we can do is we can assign you after asking some questions, we can assign a risk score. So how much risk are you truly willing to take on? And we’re able to quantify that. And then from those questions, we get a risk score on a scale of one to 100, one being or think of it as a speed limit. 20 is like going 20 miles per hour in a school zone, you’re going very safe, but you’re going to get there slowly. Versus going 80 is like going 80 on the highway. You’re going to get there fast, but there’s a chance you might wipe out.

So everyone has a risk score. So what we do is we ask you some questions, figure out how much risk you’re truly willing to take on, and maybe we segment it out into two buckets. Okay, and then soon bucket so over the next, say, five to 10 years, how much volatility are you willing to take on? And then we create a second bucket of investments are later bucket of money that’s more geared towards growth that maybe has more risk associated with it. So, understand, we can’t control the markets but we can create time horizons. And we can use these tools effectively. Because a lot of the people that have been hurt in this downturn, a lot of people that are concerned are people that follow that 4% rule of, “Well, my investments will just… as long as I keep taking out 4% a year, I’m going to be okay.”

Well, maybe but that’s not guaranteed. And now we’re seeing that. If you’re subscribing to that 4% rule, you just lost years of income. And that brings me to the next thing to think about from a financial standpoint. And that’s what I call the fortified income score. So what is your income score? And you might be asking, “Well, what is an income score?” Well, what it is we look at your guaranteed sources of income, so things like social security pensions guaranteed lifetime income from annuities. Those are fixed sources of income.

And then what we do is we look at your expenses, okay? What are your expenses on a monthly basis? And what we do is then we run it over a lifetime. So what is your income need over your lifetime? What is your expenses over the lifetime? And we divide your income, your guaranteed income sources by your expenses, and that gives us a percentage. So let’s say you needed $2 million lifetime income and it looks like $4 million of lifetime expenses. Well, that would be a fortified income score of 50%.

Well, maybe we want to work the tools to get that to a higher score, maybe 80 to 100%. And there are different ways we can structure that through the different investment tools that are available. So it’s all about looking at how protected your income is because that’s one of the most important things in retirement. It’s not about accumulation or collecting or having as much as possible. It’s creating income for you. Because understand it, as you move into retirement, you’re changing where you’re at in terms of the money lifecycle.

So while you’re working is all about accumulation, accumulate as much as possible. And then once you get to retirement, we need to flip the switch. And now it becomes about preservation and distribution. Think of it climbing a mountain, like while you’re working, you’ve reached the top of the mountain and you use a certain skill set to climb that mountain. But then the trick is to get to the bottom of the mountain. And that’s where we start thinking about preservation and distribution, and it’s a different skillset.

So, understand the tools and strategies you used to accumulate as much wealth as you did might be different than the tools and strategies you need to use to make sure that your money lasts at least as long as you do. And so that’s where we use this concept called the fortified income score to grade the security of your income. Because let me tell you if your income was guaranteed over the next, say, five to 10 years, chances are you’re not going to worry as much about the volatility going on right now in this market because you’re able to write it out because you have a true income plan.

Now, a lot of people, they have investments, that’s great. But even more important than having investments is having a plan for your income. And we can do that through a variety of ways that we can structure, create time horizons where we have a now, bucket of money that’s maybe safe and liquid for you. Then you have your soon bucket of money that’s maybe invested more conservatively or is geared more towards an income over the next five to 10 years. And then a later bucket of money where we’re more willing to take on more risk and growth. So stick with me as we continue this conversation of what should we be doing from a legal financial and tax standpoint in these scary times.

Hi, Madison and Ryan Berry here from the Castle Wealth Group, formerly the Elder Care Firm.

Our dad is Chris Berry.

He’s an attorney and fiduciary financial advisor, which means he helps families plan, protects, and preserve their assets.

The entire team at the Castle Wealth Group can help you with lots of important things. To tell you more, here’s our dad, Chris Berry.

Thanks, Maddie and Ryan. Here at the Cast Wealth Group, we can help you put together an estate plan to avoid probate, work with you on a tax plan to keep more money for your family, and less for Uncle Sam and protect you against the devastating cost of long-term care. Our team is here for your family. I invite you to learn more about the Cast Wealth Group at our next free workshop where you will learn the three steps to create a legal, financial, and tax plan for the second half of life. Call us today to register at 844-885-4200, 844-885-4200, or visit us at

The Castle Wealth Group, formerly the Elder Care Firm.

Learn more at the today.

So continuing the conversation talking about legal, financial, and tax planning moves to make during these scary times. Next, we’re going to talk about financial and tax planning strategy that made a lot of sense prior to what we’re going through now but makes even more sense now and maybe should be pushed forward in terms of timeframe. And what we’re talking about is looking at tax planning, not through a microlens of just minimizing taxes in one specific year, but looking at tax planning through a macro lens of minimizing taxes over your lifetime and your beneficiary’s lifetime.

So let me lay out that strategy, the big picture, then talk about why right now might be the time to do the analysis. So first, let me ask you this question. Do you think marginal tax rates across the board are going to go up or down? Most people would say taxes have to go up. And there’s a variety of reasons for that, even prior to what we’ve been going through recently. And those reasons are that, first of all, with the tax cuts and JOBS Act, taxes are on sale. Because from 2018 to 2025, at least the way the law currently is written, taxes are going to go up in 2025. So right now, if you’re at the 22% tax bracket, it’s jumping up to 25. If you’re at 24, it’s jumping up to 28% in five years. If you’re at 12, it’s jumping up to 15.

So we know that the way laws currently are written, taxes are on sale because I’d rather pay a 12% tax than a 15. I’d rather pay a 22% tax than a 25 or even a 24% tax than a 25. So the idea is to maybe move money out of those traditional IRAs, traditional 401(k)s, your 403(b)s, 457s, and pay the tax sooner rather than later. So taxes are scheduled to go up. And then the second reason why a lot of people think taxes are going to go up, not just because that’s the way the law currently is written, but because of the amount of debt we have as a country right now.

So prior to this whole scary times we’re going through, we had $23 trillion in debt. And just recently, they allocated another $2 trillion to fight this crisis that we’re facing right now. So just on the books, we’re $25 trillion in debt, let alone, what is the interest rates on that, we’re not curbing spending at all so we got to pay that bill at some point. We can’t just keep kicking the can down the road. So for that reason, a lot of people think taxes have to go up because we can’t even conceptualize what 1 trillion is, let alone 23, now $25 trillion. So we got to pay that debt at some point, right?

And then also, third, historically, we’re at one of the lowest historical marginal tax rates ever in history. You might have heard of President Ronald Reagan, right? What was he doing before he was a politician? Well, he was an actor. Can you guess what the highest marginal tax rate was when he was an actor? It was 94%, 94%. Do you know where the other 6% went? Some people say Nancy but it went to California. So effectively, if he made two movies in one year, 100% of his next dollar earned would go to taxes.

Now, what was going on during that time period? Conflict. And if we look back historically, all of our periods of highest marginal tax rate has been during periods of conflict, World War II, 94%; Korea, Vietnam, 60, 70%. And what have we been in since the ’90s? Conflict in the Middle East, right? So for all these reasons, that’s why a lot of experts think taxes have to go up, including America’s CPA, Ed Slott who I was at a workshop with earlier this year. A lot of experts think taxes have to go up. So if that’s the case, the seed I want to plant, and this has lots of different ramifications, is why do we defer paying taxes as long as possible? Shouldn’t we pay the taxes sooner rather than later?

And now I’m going to throw two more reasons. Well, three. So in addition to the tax cuts and JOBS Act, we also just had the SECURE Act, which just passed and became effective January 1st of this year that says if you leave pretax dollars to beneficiaries, like IRAs, 401(k)s, instead of being able to stretch it out over their lifetime, now they have to pay all the tax within 10 years. So they’re penalizing beneficiaries for inheriting these pre-tax IRAs. So that’s one reason why this year was really important to look at tax planning.

Now on top of that with what’s going on now, they just said we have another $2 trillion of debt. We’re adding on to the 23 trillion we already had. So again, we have even more debt now. And here’s why this strategy, you should explore it right now. If you believe taxes are going up in the future, then you might have thought about pulling money out of those IRAs, doing things like Roth conversions, looking at alternative approaches where we could use index universal life or permanent life insurance to create more tax-free income and long-term care benefits and increased death benefits.

So you might have been planning on doing this at some point this year. Well, with the market volatility, this might be the time to do it. Because if you look at your IRA and it’s down, right now, and a lot of people’s are, then maybe now in this downtime, it makes sense to pull the money, do that Roth conversion, a fund that permanent life insurance you’re planning on doing. Doing that now, so that you can create more growth in the tax-free bucket.

So again, think of it as we have these different tax buckets. We have a white paper that talks about this, the different tax buckets, but you have your taxable bucket. Think of that as your checking, your savings, your brokerage, your CDs. Basically, you have to pay capital gains on that. Then you have your tax-deferred bucket, your 401(k), your IRA, your 457s, your 403(b)s, the traditional. Those are tax-deferred meaning when you pull the money out, that’s when you pay ordinary income tax. And we’ve just agreed that marginal tax rates are going up in the future.

So the strategy is to pull the money out of that tax-deferred account and maybe put it into the taxable account or the third bucket is the tax-free bucket. These are assets or investments that grow tax-free. What am I talking about here? I’m talking about Roth IRAs. I’m talking about Roth 401(k)s, 529s. They have to be used for education. Health savings accounts have to be used for healthcare. Permanent life insurance, if it’s structured properly, can grow tax-free. So now’s a perfect opportunity to think about creating some tax diversity.

Too often, I see people with all their money sitting in tax-deferred accounts. They don’t have a lot of money sitting tax-free. Well, I think this, you could be shooting yourself in the foot in the long run because if taxes are going up, understand your net worth is going down. You have debt. You have a debt that’s owed to the Internal Revenue Service. And a lot of people talk about being debt-free in retirement. Well, guess what, if you have pre-tax accounts, you’re not truly debt-free. You have a debt that’s owed to the Internal Revenue Service. And it’s kind of like a mortgage.

If you look at your home and it’s [inaudible 00:43:03] at $1 million and you have a $300,000 liability or mortgage on it, how much real money do you have? 700,000, right? Similarly, with your IRAs, if you have $1 million IRA, you probably have a tax liability of 25, 30%. So in reality, spending money, you only have $700,000. Now, what type of mortgage is it though? Well, in reality, it’s an adjustable-rate mortgage, because if they adjust taxes up, on those pre-tax accounts, your equity just dropped. And if you think taxes are going up in the future and a lot of experts think it’s going to happen. They see this tax train coming down the tracks, doesn’t it make sense to pull some of that money off of the tracks, get it protected, get it out of that partnership with the Internal Revenue Service?

And right now is the opportune time to take a look at this because the markets with all those volatility, your IRA may be lower than it was before. And if you pull the money out, and with the assumption that the markets are going to come back up, now it can come back up inside of one of these tax-free buckets. So you defuse that ticking tax time bomb that’s sitting in your retirement accounts. And you’ve repositioned those assets into either a taxable or even a tax-free bucket of investments where you pull money out of the IRA, you do a Roth conversion, now it’s over in Roth, now it can grow tax-free. Or you pull the money out of the IRA, you withhold the taxes, you pay the tax, now it goes to index universal life that grows tax-free that is tied to the index. So if the market goes down, you don’t lose anything. If the market goes up, you participate in the upside of the market.

Now you’ve also built in some long-term care protection as well and maybe additional death benefit tax-free to your beneficiaries. There are lots of different tools, there are different strategies if your goal is to get to a tax-efficient retirement. And the key to this is you need to be looking at taxes from a macro lens, not a microlens. Don’t look at taxes over the year, look at taxes over your lifetime, as well as your beneficiary’s lifetime. And we have some tools and strategies to help clients get more tax efficient.

Coming into 2020, this was going to be one of the big strategies, big opportunities available. But now with all this market volatility, as well as the additional debt the country has, now really is the time to look at moving money to more tax efficient. In fact, with some of our clients, we had earmarked having conversations near the end of the year to talk about Roth conversions or funding permanent life insurance or 529, whatever it may be, because that’s typically when we do it. But with this market volatility, this has become a priority because again, now with the IRA value going down, you can move that money and I’ll take advantage of the growth in something that’s either taxable or tax-free, which is much better than being tax-deferred at this point, given the amount of debt this country has.

So, that’s a little of a tax planning tip or tax planning response we can have in these scary times. So recapping the show, I started off with the first thing we need to do is get some calmness, get some peace of mind so we can make logical decisions. And I talked about forgetting about yourself, focusing on others. Forget about the difficulties, focus on the progress. Forget about the “future,” focus on what the best next action today. Forget about who you were, who you thought you’re going to be, focus on who you can be now. And this is the big one, forget about events, focus on your responses.

We can’t control the events. All we can do is control and make sure we make the best responses possible. Forget about complaints, focus on gratitude. So with that, and that’s something I remind myself and I have it hanging up at my desk every day because our goal is to be a source of comfort, source of peace, a source of logical responses for our clients. Now that we’ve calmed ourselves, we can make rational decisions versus emotional decisions. Let’s look at what are the legal tools we need to have right now. And the first two, the most important is the medical power of attorney.

You need to have that medical power of attorney. And I went over some reasons why just within the last couple of weeks how important that document is, that tool. And then second, the financial power of attorney. And I went over some reasons why that financial power of attorney is so important in times like this because if we need to move money around, we can’t go to the courts. We can’t go to some of these other options. We have enough stress going on right now. Let alone trying to figure out whether we can or cannot make decisions for our loved one who’s incapacitated.

So please, that medical, financial power of attorney, if you don’t have those in place, or they haven’t been reviewed since 2012 where there were changes in the law, give our office a call at 844-885-4200. We’ll set up a short phone call to get you started on that. We can do that very efficiently, effectively, even operating in times like this. We’re one of those necessary businesses. And then the third legal thing to think about right now is making sure you have a plan to avoid probate. And it doesn’t have to be perfect right now but you just want to avoid probate. And that’s what that financial and medical power of attorney does while you’re alive. And that’s by understanding estate administration, maybe having even a basic revocable living trust right now, having that in place so that you can avoid probate because the courts are basically shut down.

So we start with that because that’s relying on your rule book versus relying on the government’s rule book. We need to have that in place. And then I laid out some financial responses that maybe you should be thinking about. The first one, not panicking, looking at your overall portfolio versus a specific investment. Understand investments are… it’s like a football team. You have your offensive players and your defensive players. And depending on the circumstances, sometimes the offensive players will shine and that’s where equities have been the last 12 years. And then in certain circumstances, sometimes that’s when you’re going to have to rely on your defensive players. And too often people, especially in the markets that we’ve seen, only had offensive players.

So maybe now it’s time to make sure that you have a solid team, that you have both offense and defense covered. Because now’s not the time to move everything defensive because you’re going to miss out on the growth that I’m sure will happen in the future. So first, don’t panic. Look at the overall portfolio. Consider the offense and defensive players in your investments.

Second, reanalyze risk. Let’s take another look at your risk alignment. Are you comfortable with where you’re at now that you’ve suffered that gut-punch of what a down market really looks like? And then third is figuring out what your fortified income score is, taking a look at your expenses versus fixed sources of income, and seeing if you’re around that 80 to 100%. And if you are, chances are you’re not super concerned, you’re not happy, but you’re not super concerned because you have a plan for the next five to 10 years. And if you need help with that, we’re here for you. Give us a call, 844-885-4200.

And then the last thing from a tax perspective, look at moving money out of those tax-deferred accounts. This is a unique opportunity with the laws, the amount of debt, the way taxes are going in the future, how they’re coming after taxes for beneficiaries, and then with this downturn in the market. This is the perfect storm to look at moving money out of tax-deferred to tax-free or even taxable, Roth conversions, permanent life insurance, 529s, HSAs if they’re available, you have a lot of options.

So hopefully that’s been helpful. Again, we’re here for you. We’re going to have logical, not emotional conversations. We help good families plan, protect, and preserve what’s important to them. And at the end of the day, it’s all about family. And with that, I wanted to leave you with my kids. They wanted to wrap up the show today. So this is my son and daughter, Ryan and Maddie. They’re aged nine.

Hi, this is Maddie and Ryan Berry. Make it a great week.

Hi, this is Maddie and Ryan Berry. Make it a great week.

Make it a great week, everyone. Take care.

Learn more about Chris Berry and how he can help your family by visiting online at That’s You can also call Chris Berry at 810-355-2584. That’s 810-355-2584.

This program content reflects the opinions of Chris Berry and his guests, not the Elder Care Firm, Prosperity Capital Advisors, or the Castle Wealth Group, and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment or legal advice or as a recommendation regarding the purchase or sale of any security or to follow any legal or tax strategy. There’s no guarantee that the strategist’s statements, opinions, or forecasts provided herein will prove to be correct.

Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk, including the potential for loss of principal. There’s no guarantee that any investment plan or strategy will be successful. We recommend that you consult with a professional dedicated to your needs. This program is furnished by the Elder Care Firm.

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