Retirement and Legacy Blueprint Webinar – Episode #11

Estate Attorney and Advisor Chris Berry of Castle Wealth Group answers questions on retirement and estate planning every Wednesday at 1pm to register or give our office a call at 844-885-4200.

Castle Wealth Group and Christopher Berry help families with estate planning, elder law, retirement planning, and tax planning from their offices in Brighton, Ann Arbor, Livonia, Bloomfield Hills, and Novi.


On this week’s webinar, attorney and advisor Chris Berry of answers questions regarding Taxes as risks and opportunities, managing money in pre-tax cuts, Traditional IRAs, Multiple QCDs, beneficiary designation and a lot more.

In this episode, you’ll learn…

  • Chris’ positive focus for the week
  • The taxes are the biggest risk and biggest opportunity right now
  • Tax Cuts and Jobs Act
  • Managing money in pre-tax accounts
  • Putting money to tradition IRAs
  • Advantage is getting a tax plan
  • Can you make a qualified charitable distribution directly from the RMD this year to reduce tax liability?
  • Can we do multiple QCDs to multiple organizations?
  • What is the best way to leave a percentage of an estate to charities?
  • Beneficiary designation on the life insurance policy
  • Is there any negative tax consequences of naming the trust?
  • Setting up a irrevocable trust 
  • What is the difference between a revocable trust and irrevocable trust, and also specifically, a Castle Trust? 
  • Are IRAs protected from lawsuits?
  • How do gifts above fifteen thousand dollars affect taxes? 
  • If I want to convert a portion of my IRA to Roth, can I roll it into an existing Roth or does it have to be a new one?
  • What should be done with an estate plan if retiring to Florida, Mexico, or Canada?
  • Should a trust be named as a beneficiary of an IRA?

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Episode Transcript:

All right, now we’re recording. So with the events of last week, one of the big things I saw is that there’s the flip in the Senate. And so I’ve been talking about, really since 2018, that we have this window of opportunity from a tax perspective. The taxes are the biggest risk and biggest opportunity right now, in terms of pre-retirees and retirees trying to more money in their pocket, less money in the Internal Revenue Service’s. And we have, since 2018, we have the Tax Cuts and Jobs Act. It was scheduled to run from 2018 to 2025. And across the board, what it did is it lowered marginal tax rates about three to four percent, so prior to 2018, if you were at the 15 percent tax bracket, once the Tax Cuts and Jobs Act was enacted in 2018, it dropped down to the 12 percent tax bracket. If you’re a married couple making a hundred thousand dollars, you were in the 22 percent tax bracket, and when the Tax Cuts and Jobs Act expires, that’s going up to 25 percent.

And this has implications for where you’re saving, where you’re accumulating wealth, and then if you’re retired, has implications on making sure your money lasts as long as possible. Because a lot of my clients have money in pre-tax accounts, things like IRAs, 401(k)s. And so the drum that we’ve been beating since 2018 is looking at, “Hey, if you think taxes are going up because we were 22 trillion dollars in debt, now coming into 2021, we’re over 30 trillion dollars in debt, if you think taxes are going up, maybe we should not save as much into the tax-deferred bucket. Or if you’re near or at retirement, maybe we should defuse that ticking tax time bomb that’s in your pre-tax IRAs.”

And what we do is we first calculate how much should we move, and then we calculate where do we move it? And so with the events of last week, I was confidently talking to people, that as long as the Senate remained the way it was, there would be at least a little bit of a roadblock to repeal the Tax Cuts and Jobs Act. And now with everything looking like that it’s going to go Democrat, without getting political, Biden did run on the proposal of repealing that Tex Cuts and Jobs Act. And what that means is we thought we had this window from 2018 to 2025 with artificially low marginal tax rates, but now with Biden running on the proposal to repeal the Tax Cuts and Jobs Act, that means that taxes, marginal tax rates across the board are going to go up three to four percent.

Which means that when that happens, if you pull money out of those traditional IRAs, you’re going to be losing three to four percent of the value. Now, couple that with the fact that we just got, we’re not even through, we’re still dealing with this pandemic, where the government’s giving us checks, paying people to stay at home, sending money overseas is a part of this Coronavirus Relief Act, a lot of people think taxes have to go up a lot more in the future. And so the big thing is, that if you do have pre=tax accounts like traditional IRAs or 401(k)s, tax planning is probably one of the biggest risks for you, and biggest opportunities right now. And that window of opportunity is probably shrinking, where confidently I say we have this year to maybe look at tax planning maneuvers, but after this year, especially with the Senate flipping, we don’t know what the future’s going to hold.

But my guess is that this is going to be the cheapest time from a tax perspective that we’re going to see for a very, very, very long time. And so I can’t stress it enough, the biggest risk in the future is taxes going up, and that’s really the biggest opportunity right now, is looking at this from a tax perspective. How do we minimize taxes, not in a specific year, but minimize taxes over your lifetime, over your retirement, and what you leave as a legacy. Because also, prior to this year, or prior to 2020, in 2019 in December we had the SECURE Act, that said that if you’re leaving pre-tax dollars to the next generation, instead of them stretching out the IRAs over their lifetime, and paying the tax over their lifetime, they have to pay all the taxes within 10 years.

So I think we’re going to see a lot of changes from a tax perspective, and again, I think getting a tax plan now is one of the most important things that you can do to put more money in your pocket for retirement, as well as what you’re leaving to the next generation. So those are just my initial thoughts based off of what happened last week. I don’t get sucked into the drama of it, but I’m just looking at it from “What can we do moving forward given the facts of what happened, and the fact that now the Senate, House, and Presidency is all leaning one direction, and given the fact that we’re coming through this pandemic, and all the unemployment that’s going on.” So I think taxes really are one of the biggest questions right now that people need to solve. And that’s something that we can help you with. And we’ve been doing this, just banging this tax drum for the last couple of years.

So with that, again, if you do have questions, feel free to put it into the question and answer, and I’ll try to answer it as we go along. But what I’m going to do is share my screen because we had a whole slew of questions coming in this week, I think we had about eight of them. So give me a second as I work the technology… Click that button, and go over here, and let me hit this button, and then I hit that button, and you should be seeing my screen in just a moment. There we go. All right. So again, we do these weekly webinars every week. If you do have a question or want to see how any of this applies to your situation, feel free to go to Just plug that into your browser and then that takes you to my calendar, where we can then address the issues.

So the first question that was submitted: “My wife is 68, has an inherited IRA, I’m over 70 and a half, can we make a qualified charitable distribution directly from the RMD this year to reduce tax liability? Also, can we do multiple QCDs to multiple organizations, is there a dollar amount?” So the big thing here is what’s called a qualified charitable distribution. So this is available to people over the age of 70 and a half that have required minimum distributions. So the interesting thing is with the SECURE Act, your RMDs, or required minimum distributions, start at age 72. But if you have a loved one that left you a, or I guess not even a loved one, if you had someone that left you an IRA, and it’s an inherited IRA, no matter what your age is, you have to take RMDs.

And the interesting thing is the SECURE Act kept this 70 and a half age to be able to do what’s called a qualified charitable distribution. And what this is is you’re taking your RMD and instead of taking it, you’re sending it directly to a charity. Now, in this situation, and I’ll have to double-check with our CPA, but it’s the wife that has the inherited IRA. It’s not the husband who’s over 70 and a half. So my feeling would be that because it’s the wife’s inherited IRA, and she’s not over 70 and a half, that can’t be sent over as a qualified charitable distribution. Now that said, I’ll have to double-check with our CPA and I’ll double-check on that one to clarify, but my feeling would be that because the wife is not over the age of 70 and a half, and because it is her inherited IRA, she would not be able to do that qualified charitable distribution. But let me double-check on that and I’ll email you directly the answer on that one.

Can QCD, qualified charitable distributions, be sent to multiple organizations? The answer is yes. Is there a multiple dollar amount? This is supposed to be minimum dollar amount. No, it’s just whatever that RMD is. Whatever that RMD is, you could split up amongst different charities. So the advantage of the qualified charitable distribution is that it lowers your income, versus having to add that into your gifts. With a standard deduction, it’s really devalued gifting to charities, but using your RMDs and sending it directly to a charity directly lowers your income, which is better than cutting into your standard deduction. So that’s why, if you do have a charitable intent, if you’re giving money to a church, a lot of times using a qualified charitable distribution might be the best way to do that, so… Hopefully that’s helpful.

Number two. Let me see if we have any questions, no questions so far. Number two: “What is the best way to leave a percentage of an estate to charities? Is it through wills, trusts, beneficiary designations? Are there negative tax consequences of naming the trust? Should the gifts be left outside the trust so they don’t show up in the accounting?” Well, there’s a lot that goes into this. So I can’t tell you the best way, but typically what I would recommend is, I would name the trust as the beneficiary… I would have everything flow into the trust, because a trust, kind of think of a trust like a funnel. We want everything to go into this funnel, all the assets, so that then they’re distributed wherever they’re supposed to go, whether that’s charities, kids, grandkids, wherever it’s supposed to go.

So this trust ends up being like your rule book, where it’s the definitive guide of where everything’s supposed to go. If you start carving out things outside of the trust where you just list those charities as beneficiaries, it can create some confusion for the beneficiaries, because a lot of people will look at a will or a trust as that definitive rule book. I even had this, in my situation growing up, my uncle, he didn’t have a lot of money. He worked for Ford, hurt his back, unfortunately got hooked on painkillers and passed away prematurely, he overdosed. He was on disability. Really the only thing he had was a ten thousand dollar life insurance policy. Basically enough to bury him. And he had a will that said everything should be split up amongst three kids.

And I was maybe 12 at the time. And so the oldest two kids, they looked at the will and said, “Hey, youngest child, everything should be split up three ways,” that’s what the will said, but the beneficiary designation on the life insurance policy said it should go to the youngest child. So because we had this will that said one thing, and then a beneficiary designation that said something else, it ended up being this big family fight that now, thirty, forty years ago, they still don’t talk over it. And it’s all over like a six thousand dollar swing. So I like the trust or the will to really be the rule book, the definitive guide of what’s supposed to go on, and everything should flow into the trust.

Now the question is, is there any negative tax consequences of naming the trust? If the trust is set up correctly, there’s no negative tax consequences of naming the trust. Sometimes you get into situations with unsophisticated financial advisors or attorneys who don’t set up the trust in such a way that the beneficiaries can receive everything in a tax-efficient way, but still name charities, especially as it relates to IRAs. But as long as a trust is set up well, then there’s no negative tax consequences of naming the trust as a beneficiary, or the trust to then have it then shoot out to the charitable distributions. And then also, the nice thing is it would show up, I want it to show up in the accounting so everyone is aware of what’s going on, everything is above [inaudible 00:12:08], everything is clear.

Because really what we want is, when someone passes away, we want clarity and peace of mind. So that’s why I like everything flowing into the trust, and the trust directing where it’s supposed to go. So again, it could be maybe we have 10 percent going to the charities, 80 percent going to the kids, and 10 percent going to the grandchildren or grandkids. And the trust would direct that. And so we’d have everything flow into the trust, and then the trust directs where everything is supposed to go. Plus you have one trustee who manages it all, or it could be co-trustees. So it just makes everything a lot more clear if we do name the trust as the beneficiary of basically everything, and then the trust directs where everything should go. And it helps keep things organized, and there’s no negative tax consequences, or any other consequences, as long as the trust is set up properly. So that’s number two.

And again, if you do have any questions or something is unclear, feel free to put it into the question and answer section. All right. And then that will bring me to question number three. Question number three: “My wife and I have Roths naming each other, then there’s a irrevocable Roth IRA trust with nine beneficiaries. Must it be an irrevocable trust to be a look-through trust? Am I correct it becomes irrevocable upon the second to die?” So the first thing is, without looking at the trust myself, I cannot tell you what type of trust it is.

Typically, if it’s a trust that’s going to kick in when the second of you passes away, then typically we would do a revocable trust that becomes a irrevocable trust upon death, upon death. Especially if we’re talking about qualified accounts, because typically the only time we’re setting up a irrevocable trust is if we want to remove it from your estate for estate tax purposes, or if we want to remove it from your estate for asset protection purposes. So if you were to face a lawsuit or face long-term care, and the trust was the owner of the assets, then we would look at a irrevocable trust. But when we talk about things like Roths, which is, a Roth is a qualified account, just like a traditional IRA. And anything that is a qualified account has to be with a individual owner. It has to be your Roth IRA.

Now upon death, so if you were to pass, then it can go into a trust, but you have to be the owner of the Roth. So without looking at the trust, I’m guessing it’s probably a revocable living trust while you’re alive, and I’m guessing if you set this up a while ago, the idea behind this was to stretch out the Roths over the lifetime of the beneficiaries. But the big thing is, in 2020, January 1st, which seems like a lifetime ago, we had the SECURE Act. And what the SECURE Act does, it says that whether it’s a Roth or traditional IRA, everything has to come out of that account within 10 years. So we used to do a lot of separate share, or standalone retirement plan trusts to stretch out either the Roth or stretch out the IRA over the lifetime of beneficiaries, especially younger beneficiaries. But with the SECURE Act passing this past year, doing these separate, standalone retirement plan trusts, it’s a little bit of a overkill and it’s unnecessary.

So what I would suggest is that if you do have something that’s like a standalone retirement plan trust, it may be a good time to review this, in light of the SECURE Act that just passed this year. So hopefully that’s helpful… Talking about segregating out the qualified accounts for either the next or the following generations. A lot of times those standalone retirement plan trusts just aren’t necessary anymore.

That brings me to question number four: “What is the difference between a revocable trust and irrevocable trust, and also specifically, a Castle Trust? Well, there’s a lot of different types of revocable trusts as well as irrevocable trusts. Now what I would say is, we always have to have a reason to do a irrevocable trust, and a lot of irrevocable trusts are created differently that are going to have different rules. So where a Castle Trust fits in, is that it takes the best parts of a revocable trust, where we can change beneficiaries, it is not taxed from any different, you don’t have to do a trust tax accounting. You can be the trustee, you can decide how the assets are invested. But then also it builds on some of the advantages of the irrevocable trust, where it builds in lawsuit protection, builds in protection from long-term care costs.

So a Castle Trust kind of operates in the middle of these two, where, in a lot of senses, or a lot of respects, it acts like a revocable trust, where you can change beneficiaries. So if one of the kids back talks you, you can threaten to take them out of the trust. You can serve as trustee, you decide how the assets are invested, you can sell a property and the proceeds can come back to the trust… But whatever remains inside of the trust is protected from lawsuits, creditors, avoids probate, and can protect your kids as well. So that’s a Castle Trust. It has a lot of the advantages of the revocable trust, it’s just a little bit more complicated than a revocable trust, where it does build in the asset protection.

Now, irrevocable trusts, we do a lot of these for the lawsuit protection, long-term care protection. And then with Biden becoming President, we might have to look at irrevocable trusts also for estate tax purposes now as well. I can’t spell as I talk at the same time. Where now, if you have more than three point five million of total assets, and that’s counting life insurance, real estate, business interests, we might want to look at a irrevocable trust to remove some portion of your assets from your estate, because Biden has ran on revoking the Tax Cuts and Jobs Act, which means your estate tax exemption of 11 million will now drop down to five million.

And then also, not only did he run on repealing the Tax Cuts and Jobs Act, he also wants to lower that federal estate tax exemption to three and a half million. Where if you add up the value of all of your assets, all of your life insurance, even if it’s term life insurance, all of your real estate, if it’s greater than three and a half million dollars, we might want to look at a irrevocable trust because of this estate tax issue. So it’s just something to keep in mind.

And you might be asking, “Well, should I be doing a revocable trust or a irrevocable trust?” Understand that we don’t first focus on what tool, our approach is first figure out what are your goals, what’s the best strategy to help you achieve those goals, and then, and only then, do we start talking about tools. So a question of, “Do I want a will, or a trust, or a Castle trust, or an estate tax trust?”, let’s take a step back, and first figure out what are your goals, talk about the different strategies, and then, and only then, will it pick the right tools.

And it’s not really tied to the size of your estate, it’s more tied to “What are your goals?” Now when we’re talking about estate taxes, obviously we need to talk about the size of your estate. But the simple question of “Do I need a will, a revocable trust, or a Castle Trust?”, it’s not tied to the size of your estate, it’s tied to what your goals are, and then we developed a strategy to help you achieve the goals.

A question that came in: “Are IRAs protected from lawsuits?” The answer to this is, it depends. So IRAs and 401(k)s are protected up to a million dollars, if you’re to be sued and go through a bankruptcy. So, to a certain extent, yes, IRAs and 401(k)s are protected from lawsuits up to a million dollars. And that’s aggregate, so you can’t have a bunch of 900,000 dollar IRAs and expect asset protection. So if you were to hit a school bus full of kids and it goes over and above whatever insurance you have, and you have IRA money, and now you go bankrupt to get around that lawsuit, up to a million dollars of that IRA or 401(k) would be protected from lawsuits. Where IRAs are not protected, they’re not protected from long-term care costs.

So 401(k)s, IRAs, Roth IRAs, if you were to go into a nursing home and need long-term care, they would not be protected from that nursing home or Medicaid spend down. So that’s why, one of the reasons for a lot of our clients, especially if they’re doing Castle Trusts, not only from a tax planning perspective, but also from an asset protection perspective, they’re paying the tax on the IRA, moving it into the trust, and then investing it inside of the trust. Because now we’ve paid the tax, so we’ve minimized the tax moving forward, and now we’ve built in asset protection, not just from lawsuits, but also from long-term care costs. So again, IRAs, 401(k)s, Roths, they are asset-protected from creditors up to a million dollars, but they’re not protected from that long-term care, nursing home spend down. All right.

That brings me to question number five, as we’re flying along, and feel free to put in more questions, if you do have any. “How do gifts above fifteen thousand dollars affect taxes? Can it be gifted by paying bills or giving to individuals, does it reduce your income?” So let’s start with this part first – does it reduce your income? The answer is no. If you have, say, a hundred thousand dollars, and you gift away fifteen thousand dollars, so you have a hundred thousand dollars of income, you gift away fifteen thousand dollars, does that reduce your income tax? The answer is no, okay? It still shows up on your income tax.

Now, how do gifts above fifteen thousand, so we have an annual gift tax exclusion, where you can gift to as many people as you want, up to fifteen thousand dollars, without having to worry about any taxes. You don’t have to fill out a tax form or anything. And if you’re married and you’re gifting to one person, that’s thirty thousand dollars. So if you’re gifting to your son, you’re a married couple, you can gift them, husband or [inaudible 00:23:23] spouse gifts their child thirty thousand dollars. And then if they’re married and you’re comfortable, then to the spouse you could gift another thirty thousand dollars. So for married parents to married children, you could gift roughly sixty thousand dollars without having to worry about any taxes, it would not be income to them, it does not lower your income, it just happens. We don’t have to report it, it doesn’t have really any effect.

Now the question is what happens if you gift more than that fifteen thousand? So let’s say that we gift a hundred thousand. Well what happens is that that’s greater than thirty thousand, so now we have to fill out a gift tax form to notify the IRS that we’re cutting into our lifetime gift tax exclusion amount, which is, right now, tied to the estate tax. So we call this a unified credit. And this is one of the opportunities that is available, and this window is closing. And this is really for large estates. I was sitting down with clients that had over 12 million dollars, and we were talking about what this change in presidency, the change in Senate means. Well what it means is right now, and this is a little bit complicated, so bear with me. Right now we have an 11 million dollar unified credit, meaning between our estate tax exemption and our gift tax exemption, we have a total of our lifetime of 11 million dollars. And based on Biden, what he said, and if what he proposes goes through, then this unified credit’s going to drop down to three point five million. And this is just for a single individual, so I’m keeping it clean.

So right now, you could gift, let’s say, five million dollars, gift that away, and all you’d have to do is fill out a gift tax form and we could gift this either to individuals or to a trust, and it would be gift tax free, meaning we’ve removed it from the estate. Now the question was, “When the Tax Cuts and Jobs Act is repealed or the estate tax exemption drops down, if you’ve already gifted five million, is that going to affect the three and a half million that you have left over?” And the IRS has said no, meaning that, if you gift a large portion now, that’s not going to affect your estate tax exemption in the future.

So I was having this conversation with the clients, where if we gift, say, five million now, then that removes it from the estate, so we already have this five million that’s gift and estate tax free, and then we still have this three and a half million. And this opportunity is going to close when the Tax Cuts and Jobs Act expires. So right now if you have a large estate we can gift a large portion out of your estate pretty, it’s sophisticated planning, but pretty easily, all we do is gift it either directly to the kids or directly to a trust that’s out of your estate, so that when the estate tax exemption does expire, you still have that remaining estate tax exemption, we’ve already gifted a large portion out of your estate.

So that was a little more detailed than you were asking, but this is one of the things that with this window closing with the Tax Cuts and Jobs Act, it’s one of the arrows we have in our quiver if we do have a larger estate and we’re concerned about estate taxes. We can move money out of the estate using this gift, lifetime gift tax exclusion, the unified credit, move it out of the estate now so when the estate tax exemption expires, you still have room in that estate tax exemption. So, long story short, you gift more than fifteen thousand dollars, it cuts into your lifetime gift tax exclusion, there’s still zero gift taxes earned. And this is, again, a big opportunity if you have a larger estate, especially with businesses and real estate. All right.

That was number five. Number six: “If I want to convert a portion of my IRA to Roth, can I roll it into an existing Roth or does it have to be a new one?” You can roll it into an existing Roth. You don’t have to open up a new Roth. The only thing you have to keep in mind of, and we’ve talked about this the last couple of weeks, is the five-year rule. You have two rules – one, when you open up an existing Roth, that starts a five-year clock where you don’t want to pull the money out, otherwise it might be taxed, and then whenever you do a conversion, that has its own five-year rule tied to when you do a conversion. So you might want to keep them separate just to keep clear on when the five-year rules are running, You can [inaudible 00:28:05] in the same exact bank, or if you can keep track on your own, you could just keep it in the same existing Roth that you have, okay?

That’s number six. Number seven: “What should be done with an estate plan if retiring to Florida, Mexico, or Canada?” This is a common question of, “I do an estate plan here and then I move out of state. Is my estate plan still going to be valid?” The answer’s going to be yes. If you move to any other state in the United States, your estate plan is valid, especially your trust. Your trust is very portable. So I have a lot of clients that we set up a Castle Trust here in Michigan, and then they move down to Georgia, or… I have probably at least five clients that at least spend some time in Fort Myers. We kind of joke around about opening up our Fort Myers office, especially during the winter. So, especially the trust, that’s the most important document, that is valid wherever you are. A lot of times we’ll have a trust that has pieces of property in Florida, Georgia, California, all part of the trust. So your trust is very portable.

The one thing that I would look at maybe having updated is your medical power of attorney. This is, a lot of times, state=specific, but what I would say is having a medical power of attorney that’s done in Michigan is better than having a medical power of attorney in any other… Or better than not having a medical power of attorney. So I’d rather have a Michigan medical power of attorney, because that’ll most likely still be honored, rather than not having any type of medical power of attorney.

Now, Mexico and Canada, and [inaudible 00:29:41] just commented, that’s going to be a completely different story. So what I recommend for clients that have property in other countries, is that if you’re going to have assets in other countries, or you’re going to have assets here, you should have, if you’re going to keep it that way, you should have an estate plan, a legal plan in each one of those countries. Unfortunately it makes it more complicated, but understand the rules in the U.S. are very different than Canada and very different than Mexico. I have a lot of clients that have property over in India, and so I recommend that they have a plan for their Indian property, and then they have a plan for their United States property. Because it’s going to be very, very different.

As [inaudible 00:30:22] commented, there’s going to be a lot of different tax consequences, so I recommend that you have someone advise you or counsel you in the United States, if you’re going to remain in the United States and have property in the United States, and then also if you’re going to either remain in Canada or another country or keep property in another country that you get counsel, advice, or advisor in that country as well. So it’s one of those things, more money, more problems. The more you have things spread out, the more issues you’re going to have, okay? So yeah, if you are retiring to Mexico or Canada, I’d advise you to sit down with someone in that country and figure out how it’s going to work in that country. I can’t advise on that. My advice would be get specific advise in that country.

Number eight: Should a trust be named as a beneficiary of an IRA?” So, we have a trust, right? And there’s two ways that a trust can control property. One is, it can be the owner. Or, the trust can be a beneficiary, okay? Now, as I said before, with any qualified accounts, that’s a IRA, that’s a Roth, that’s a 401(k), that’s a 43B. If it’s yours, you’re the one that earned it, it has to be in your name. Qualified accounts have to be in your name. If it’s an inherited IRA and they named a trust to the beneficiary, the trust can be a beneficiary of that account. So the way that, typically, we set it up is that, if you have a 401(k) or IRA, you’re the owner of it. You have to be the owner of it. And then typically we’ll name the spouse as a beneficiary, and then we’ll name the trust as the contingent beneficiary.

So, more times than not, with any type of qualified account, this is a Roth, this is a 43B, this is a traditional IRA, any type of qualified account, primary beneficiary is almost always the spouse, because the spouse can do what’s called a spousal rollover. And the contingent beneficiary, if we’re setting up a trust, almost always is a [inaudible 00:32:41]. So again, the trust cannot be the owner of your IRA. Now that said, and this has been the drum that we’ve been beating since the Tax Cuts and Jobs Act expired, is that we should be looking at, from a tax perspective, even if we don’t have a trust, pulling money out of those traditional 401(k)s/IRAs, paying the tax, and then now we can invest it, now the trust could be the owner.

So, especially if we set up a Castle Trust, it makes sense for two reasons – one, from a tax perspective, we’re going to pay less tax over time, because taxes are lower right now than they’re going to be in the future, and then the second piece of it, is that if it is in that asset protection trust, now we have that asset protection. So, almost always, if you’re going to keep it as an IRA, or a Roth, and that’s a different discussion, but if you are, you’re going to be the owner, primary beneficiary will be spouse, contingent beneficiary will be the trust. But again, I invite you, and we can help you with this, if you do have, especially, pre-tax IRAs, let’s explore a strategy – pay the tax on it now, because if you don’t you’re going to pay more tax in the future.

So that’s all the questions I had submitted. If you do have questions, please submit those real quick. Here’s a comment: “If my wife and I want to give large gifts to take advantage of current unified credit to our respective kids, can we give money from our retirement funds or must it come from post-tax dollars?” So again, if you have pre-tax dollars, if it’s in a qualified account, you have to be the owner, and the first thing that you have to do if you want to do anything with it, is you need to take it out of that qualified account, okay?

So if it’s traditional IRA, you have to pay the tax, put it into your checking account, and then if you trust your kids, you can directly gift whatever that amount is to them, or we could set up a type of trust where you could remain in control, but it’s now removed from your estate, and they could be the beneficiary. So maybe you want to control it a little more, plus provide them some asset protection, because if you gift to them outright, then if there’s a divorce, half that money might be lost, or if they were to get a creditor action, etc, that money could be lost.

So a lot of times what my clients will do is they’ll set up, we’ll call it a family inheritance trust, where while you’re alive, you set up this trust, and it’s in a different tax ID number, so it’s removed from your estate as you gift into it. You could manage it, you could decide how it’s invested, you could distribute assets to the child if you wanted to, and then if you pass away, all of it could go to the child. But to answer your question, Mark, it does have to come from post-tax dollars. Again, anything that’s in a qualified account, like a traditional IRA, 401(k), a Roth, you’re still in partnership with the Internal Revenue Service. And before you can really do anything with it, you have to get out of that partnership. Even if it is post-tax inside of a Roth, you still have to remove it from that qualified account. You’re still in a partnership with the IRS. So hopefully that answered the question.

Okay. So, again, if you do have any last questions, please feel free to put them into the question and answer section or the chat. Otherwise, again, I started off with this, the big thing from the events of last week, it was disheartening on a number of levels, but the biggest thing I see is just from a change in, not to get political, but with Biden going in, and the flip in the Senate, a lot of Biden’s proposals, better chance of those going through.

And the biggest thing, again, is going to be repealing the Tax Cuts and Jobs Act, sooner rather than later. The other big thing is going to be lowering the estate taxes, that might happen sooner than later. So, again, we’ve been banging this drum for awhile, we thought we had a window of opportunity from now until 2025, but it looks like that window’s closing, This might be the last year where we’re in this environment of this lower tax environment. Whether you think that’s a good idea or not, there may be some things that you need to think of in terms of your own planning, to make sure that you’re putting your family in the best position possible.

If you want to see how this information applies to you, just go to to get on my calendar. Another question came in here. Annual tax reporting for trusts. So the question is, if I have a trust, are there annual taxes that have to be reported? Do I have to do a separate tax return for that trust? The answer, frustratingly, is it depends. So with your typical revocable trust, while you’re alive and well, there’s no additional reporting, it’s all still in your social security number. So there’s nothing you need to do from a tax reporting standpoint. With our asset protection trusts, specifically our Castle Trust that avoids probate, can protect your kids, and then protect you from creditors, lawsuits, and protect against long-term care costs, there’s still no annual tax reporting.

Now, if we are to get into those estate tax planning trusts that I touched upon today, yes, we would have to get a separate tax ID number, and there’d be a separate tax reporting, but a lot of times we still want that tax at a personal income tax rate. We don’t want it taxed at a trust tax rate. And then also when we’re talking about leaving trusts or separate share trusts for our beneficiaries, typically we have all the income going out of those trusts, and so even though we would get a separate tax ID, you would have a separate tax accounting, it would still be taxed to the personal income tax of whoever those beneficiaries are.

So yes, in certain situations, not often, I’d say a majority of our trusts that we set up, there are not any additional tax reporting requirements. Occasionally there are more tax reporting requirements. But of those times when we do have additional tax reporting requirements because of a separate tax ID, I would say nine times out of 10, it’s still taxed in individual tax rates, not trust tax rates, which get to a much higher tax very, very quickly. So very few of the trusts, and we always have to have a specific reason why, very few of our trusts are taxed at trust tax rates. Almost always, our trusts are taxed at a personal income tax level, whether that’s you as the individual, or it may be one of the beneficiaries. But almost always our trusts are taxed at personal income tax rates, not trust tax rates.

All right. With that, it looks like I’ve answered all the questions that have come in. I appreciate everyone sticking around. This is the most people we’ve had on one of these webinars so far, so I do appreciate that. And this just reinforces our approach of providing education, and people finding value in the education that we provide. It’s something that I’ve taken from my father who was a professor for 47 some years. I think it just comes naturally to us. And so if you do have questions, feel free to reach out to us. You can go to or shoot us an email at any time.

Here’s a question: “Do transferring assets deeds to kids count as gifts?” The answer is yes. So that would be a gift. And especially with real estate, you have to be careful with that, because depending on when the real estate was purchased, you might lose what’s called a step-up in basis. So that’s why a lot of times, real estate, we like to transfer at the time of death, either through a trust or through a lady bird deed. So we have to take into account what’s called step-up in basis, where if you bought it for a hundred thousand… Let’s say you pass away at 200 and then you sell it for 210, the kids, as of right now, would get a step-up in basis, where if they sell it, they’d only have 10,000 dollars worth of gains. Now if you’re to gift it to them, then the original basis would be a hundred thousand, and now they sell it for 210, now they have a hundred and 10,000 dollars worth of gains. So it’s just something we need to take into account. But to answer your question, yes. Gifting real estate, would be a gift.

All right. Okay. So with that, I’m going to hop off. Thank you everyone. If you do have more questions, feel free to submit them. Next week we’ll make sure to answer them. And then if you need something specific, either shoot our office an email or you can go to to get on the calendar. Happy to answer those questions with you directly so that I don’t have to give you these annoying “It depends” answers. I know they can be frustrating, but a lot of times there’s the simple layer, and then there’s all the exceptions that go under those, so… Being a fiduciary and an attorney, always having to act in my client’s best interests, I need to, I’ll just preface it with, on these questions I have a limited amount of knowledge and a lot of times I need to ask more questions.

With that, I hope everyone has a great week. I forgot to start off with a positive focus. We always like to start the webinars off, and any meeting, with something positive. My positive focus is that my family’s healthy, we’re all safe, we made it through the New Year, and we’re doing our best. My wife has birthday coming up, we’re figuring out a way to social distance and make sure all of our family’s safe and healthy. So my positive focus this week is just that I continue to be blessed, very happy. My kids are 10 and eight, they’re doing well in school, both my kids got their report cards, and I couldn’t ask for anything better, so my positive focus is that even though the world’s a little bit crazy, in my sphere of what I can control, I couldn’t ask for anything else.

So with that, take care of everyone. I appreciate it and I appreciate you. See you next week. Take care.

Castle Wealth Group Legal in Media

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