How Do We Stay Ahead of the Retirement Game |Weekly Wednesday Wisdom Webinars

Certified Elder Law Attorney and Financial Advisor Chris Berry of Castle Wealth Group answers questions on retirement and estate planning every Wednesday at 1pm.

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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 the below questions.

  • Changes with regard to Secure Act
  • Implications of naming beneficiaries of grandkids versus skipping your kids.
  • Any change to the Roth 10-year distribution?
  • If you passed, does your spouse have to take out Roth in any specific time frame?
  • Roth 10-year distribution, it seems like the kids inherited the Roth, should take out all of the income in the first year, move it to regular investment so that there is no tax, and they don’t have an RMD, is that correct?
  • What is the pre-tax moving strategy? Max out annual Roth Conversions?
  • Where are taxes going in the future?
  • Should we consider giving our assets away to use up the current gift tax exclusion before it is reduced to a million dollars?
  • Are the $11 million, $5 million, and $3 and a half million dollars per spouse?
  • Are assets in a Family Inheritance Trust included in Medicaid look back?
  • Change from joint spousal trust to separate trust
  • Do we need to meet with you to discuss where to move pre-tax accounts? Do we need to bring our tax records?
  • Is there a way to locate a copy of a will, even though we don’t know which lawyer provided it?
  • How do we stay ahead of the retirement game IRA, 401k et cetera, when the government can change the rules whenever they like?
  • Does an adult child who’s excluded from a trust as a beneficiary, are they entitled to a copy of the trust from the trustee?

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Episode Transcript

All right see some more people logging in again if you do have questions please feel free to put in the question and answer section. I don’t have a lot of questions submitted ahead of time so this is really kind of a free open office time now. So if you do have questions submit those otherwise there are a couple things I want to talk about. And then we do have a question that’s submitted but again feel free to go to the question-answer section and type in that question before we get started. And with that let me see here all right we will go ahead and get started to make sure all right this is going out. We are recording and streaming we got everything going on perfectly all right. So like I said my name is Chris Sperry. We do these wisdom webinars every week so if you do have questions this time is for you So if you do have questions please put that into the question and answer section and I’ll go ahead and answer that live. These are unscripted they’re really just here to provide you value and knowledge. Any information we share again it’s going to be general. 

If you want to see how this applies to your situation please let’s sit down or have a phone conversation because one of the things that I’m going to talk about today is just that there’s a variety of different places where you can get information and not all the information that you get might be appropriate to your situation. So if you do have questions please make sure to submit those questions and I will go ahead and either answer it live. If it’s a more detailed question because my head is only so big there’s only so much I can store in my head. If I need to circle back with you then I’ll circle back to answer your question but I do want to make sure all of your questions get answered okay. And so with these webinars I always like to start with a positive focus. Something positive that happens either professionally or personally and if you want to enter something in the chat that is something positive that happened over the last week feels free to go ahead and do that and I’ll read it out I can. I’ll protect your personal information but if you have something positive that happened the last week I always like sharing. That it’s something I do with my family where we sit down we always share a positive focus before we start our dinner just something that we’re grateful for. 

So for me, I’ll start off positive focus really two-fold one personally. One is a parent personally I had a total hip replacement about a month ago march 9th and I’m already in a lot less pain. I can walk a lot further than I could prior to the surgery. So 42 is kind of young to have a total hip replacement. I played a lot of sports. I’m a big guy who did a lot of basketball and soccer. So there’s a lot of wear and tear in my joints and prior to the surgery I couldn’t even get through a trip walking through Costco without being in a ton of pain. And already I can walk over a mile granted I’m using a cane and everything but it just feels good to see it going in the right direction. So my first positive focus is medical improvements. The fact that they can literally cut out the bone. Replace it with titanium and throw it in there and be pain-free that’s pretty awesome. So I’m a big fan of that and then also personally my kids are 10 and 8 and I am coaching them in soccer. And again one of the reasons I wanted to have the hip replacement is to be able to run around and play soccer with my kids but they just started their soccer season my daughter just had her first soccer scrimmage and it’s just great to be able to spend time with my kids coach them in soccer and just really enjoying that. So those are my positive focuses if you have a positive focus that you want to share feel free to put it into the chat otherwise I’ll get started and get into the questions and answers. And again if you do have a question I don’t have a lot of questions submitted ahead of time so if you do have a question now’s a great opportunity to submit that and I’ll go ahead and address that today. And so I have two questions submitted and I’ll give some more time for some more questions to come in. 

So if you do have a question feel free to put that in the q a section. I’ll go ahead and address that but in the meantime, there’s a couple of things that I just wanted to address right off the bat. So I’m going to share my screen here. So the first thing is to change with regards to the Secure Act. So the secure act affects really IRAs and 401ks anything that is pre-tax and so the Secure Act it actually passed back in December of 2019 which seems like a lifetime ago. And so we started off doing a lot of workshops and face-to-face workshops talking about the changes of the Secure Act but then the pandemic happened and so we had to switch to webinars for our education with regards to Secure Act. 

So the secure act really did two things and the two things that it did is first it pushed back the RMD age. So those required minim distributions so that age that you have to start taking money out of your IRAs or foreign case it used to be 70 and a half which is a weird age like does anyone know what their half birthday is most people don’t other than my kids because they think they should get a present on their half birthday. But most adults don’t know when their half-birthday is. So prior to the Secure Act when you turn 70 and a half you would have to start taking out required minim distributions from your IRAs or 401ks. So whether you liked or not you had to pull money out of these pre-tax accounts and pay the tax and so what the secure act did is that it pushed the RMD age back from 70 and a half 72. So now if you’re younger than 72 you don’t have to take any money out of your pre-tax accounts. Now that said you’re not forced to take money out. I would suggest that it probably does make sense to pull money out of your pre-tax account sooner rather than later because most people think taxes are going up in the future. So what the Secure Act did is it pushed back the required RMDs or pulling money out of the pre-tax accounts push back the requirements from 7.52. But I would suggest that still you explore a strategy of pulling the money out sooner rather than later and that’s really been one of the things that we’ve been spending a lot of time on the last couple of years. The last couple of months working with clients to pull money out of those pre-tax accounts because most people think taxes are going up in the future. 

Now the second thing and this is really the big change that we just saw a couple of days ago is that when you leave IRAs to the next generation prior to the Secure Act. So prior to the secure act they had to take out the taxes over their lifetime. So if you’re leaving pre-tax money to the next generation they could stretch out the tax burden over their lifetime and this really became interesting. When we left money to like grandchildren where their age was so low their RMDs would be less than whatever the account was generating but with the secure act what they did is they instituted a 10-year rule where now all the taxes have to be paid within 10 years. So this was our understanding is that all the taxes would have to be paid within 10 years. With the idea that okay you don’t have to pay the tax all in year one if you’re leaving it to the kids or the grandkids or you’re two you’re three just all the taxes have to be paid within 10 years. So that was everyone and literally, I mean everyone’s understanding of the IRS rules. And then a couple of days ago about a week ago, the IRS released a publication that threw the whole investment the whole tax world for a loop and this just shows just or I share this to show that like there’s like logical decision making and then there’s what the government does. And so what the IRS said and this is completely different than everyone’s understanding completely different than everyone’s reading of the IRS code. Including people like ed slot who are very well respected CPA. Wall street journal has called him America’s CPA. I’m friends with him I’ve trained with him anyone else. If you look to the news or any commentary on the Secure Act the story was that all the taxes have to be paid within 10 years. Now the understanding that everyone had based on what the IRS proposed is that just all the taxes had to be paid within 10 years. Meaning in year one you could pay zero tax year two zero tax year three zero tax but then year ten then the tax had to be paid. 

So you could defer deferred defer and then pay all the tax in your tent for the kids right. Well, what the IRS said and this is as as of March 25th they released a publication to say that RMDs are still due years one through nine four beneficiaries. And then year ten all the tax has to be paid at the end of the day it doesn’t really change things. A great deal but what it does is it creates more of just a reporting issue for those beneficiaries inheriting free tax accounts. So we already knew that taxes had to be paid within 10 years when you inherit an IRA but everyone’s understanding was that you could just defer deferred defer and then year 10 you could pay it all upfront at year one. But now this IRS ruling says that all that if you were to defer it at the very least RMDs would have to be paid. So it doesn’t really change anything from a planning standpoint it’s just another arrow in the quiver of maybe you should not be leaving pre-tax accounts to the next generation because now not only do they have to pay all the taxes within 10 years which could drive up their income tax. But on top of that they had this reporting issue that we didn’t think we had in the first place. 

So a couple takeaways from this again first think about what you’re leaving to the next generation is it pre-tax money is it post-tax money ed slot and most experts myself included say okay now that we know taxes are going up now that we have the secure act now that we’re 30 trillion dollars in debt everyone thinks taxes have to go up in the future. It probably makes sense to look at paying the taxes sooner not only for your retirement but also now what you leave to the next generation and then with this change in the interpretation of the Secure Act which just happens in 2019. Now the kids are going to have more of a reporting issue if you do leave pre-tax accounts to them so again it’s the government is always going to change things we’re watching it and then the second takeaway is looking at moving money out of these pre-tax accounts sooner rather than later. So that was something that we just saw across that happened within the last couple of days last week we had an article that we just emailed out where my friend Ed Slott. He actually just talked about this how this was kind of blindsided everyone at the end of the day it’s not really going to change a lot of the strategy. 

We’ve talked about but it’s just more of a reporting issue for the next generation. So that’s the first thing that I wanted to bring up is this change in the Secure Act the big change in law doesn’t really change the strategy we’ve always been talking about moving the money from free tax to post-tax. A question that just came in on this is the esp is the spouse exempts from the 10-year rule the answer is yes. So this is not talking about a spousal rollover. This is talking about leaving it to the next generation. Leaving pre-tax dollars to kids or to a trust we have the secure act that we have to worry about. If you’re leaving the pre-tax accounts to a spouse they still typically do a spousal rollover the rules there remain the same it’s when we’re leaving it to the next generation that we have to worry about the Secure Act. So again typically nine times out of ten we’re still naming the spouse as a primary beneficiary of 401ks and IRAs. It’s just how do we leave it to the next generation whether you leave it outright to a beneficiary or outright to a trust. We now have to operate within the Secure Act. A couple questions that come in based on this do beneficiaries get the RMDs during the 10-year period the answer is yes. So if we do leave let’s say a million-dollar IRA. Let’s say the IRA and I’m just making up numbers is 50 000. They would have to take out that RMD of 50 000 and pay the tax another question implications of naming beneficiaries of grandkids versus skipping your kids. So in the past prior to the secure act if we were leaving pre-tax dollars to the next generation there was an advantage to naming younger people as beneficiaries of those IRAs and we would structure separate trust. We call them IRA inheritance trusts. Where now we don’t want like a grandchild who’s five managing the money. But we do like the fact that they’re so young their RMD is so low so we would name an inheritance trust as the beneficiary to inherit the IRAs. And then as they inherited these IRAs they wouldn’t manage it. We would have someone else manage it because they were so young their RMDs were so low that we were almost creating an annuity for the next generation where their RMDs might be one percent but if we were gaining three percent. We were creating this like pension for the grandkids when the secure act passed that really defeated that whole strategy because if you were to name the grandkids as the beneficiaries regardless of their age or what the RMDs are now all the taxes still have to be paid within 10 years. 

So I’m not saying we don’t name grandkids as part of the planning but we used to have this huge tax opportunity. Where we would name the grandkids as beneficiaries they’d have such low RMDs we stretch it over their lifetime. Now we could almost create annuities or pensions for the grandkids where the RMD coming out was one percent but we were earning five or six percent. We were growing this legacy for the grandkids with the Secure Act. We cannot do that with IRAs anymore. So again that’s where a lot of experts myself included ed slot. IRAs used to be one of the best things to leave to the next generation. Now those have dropped to the bottom instead we want to leave things like Roths or life insurance or whatever would be tax-free to the next generation. Let’s see whoops all right I answered that any change to the Roth 10-year distribution. So a question people have is with regards to Roths. 

So you do not have to take out any required minim distributions from your Roth IRAs while you’re alive because you’ve already paid the tax is now or the growth is now tax-free. But when you leave it to the next generation even though they don’t have required minim distributions. Where they have to pay the tax they still have required minim distributions well they have to take out money okay. So when you leave a Roth to the next generation even though they don’t have to pay the tax they still have to take out an RMD and this is where the secure act clarified it is prior. When the secure act first passed. We didn’t think they had an RMD. We just thought that they had to take out all the taxes or they had to take all the money out of the Roth within 10 years. They did not have to pay tax because the tax was already paid they just had to take it out of the Roth and do something else with it. Now with this clarification of theSecure Act that no one expected and you know I’ll give you a Starbucks five-dollar gift card I’ll buy you coffee. If you can find someone that talks about the secure act any difference within the last year than what I’m talking about it now. No one expected this okay but now with a Secure Act all the money has to be pulled out of the Roth within 10 years. And then on top of that, they have to take out required minim distributions based on their age. So there’s going to be a little amount that’s going to be required in year one year two year three year four no taxes are due they just have to take the money out and then by year 10 all the money has to come out of those Roths. So again this recent publication by the IRS really doesn’t change strategy per se it’s just it’s a head-scratcher like it doesn’t really make sense. No one expected it and it creates more of a reporting issue than anything else. So Jim that answers your question with the Roth 10-year distribution. They still have to take out RMDs however still they do not have to pay tax. Allen this does imply to inherited Roth IRAs as well again they do not have to pay a tax they still have to take everything out of the Roth within 10 years. Now with this change, they owe RMD where they have to take out a certain amount each year. They do not have to pay any tax again it’s not really changing any of the strategies. We talked about the implementation of the secure act it’s just changing some of the details of it et cetera. Phil writes in is the RMD requirement based on a 10-year time frame again this is where it’s like a head-scratcher for all of us the answer is no. Like you would think that it’s like one-tenth of the value every 10 years for 10 years the answer is no. It’s going back to the IRS tables that we use when we’re talking about taking out RMDs and there are two big ones. One is yours and then one is a single life. And so, for example, yours and I are just kind of ballparking for right now when you turn 72 your initial RMD might be 3.5 or 3.65 meaning you have to pull that money out. 

Okay, when it becomes an inherited diary day a little inherited IRA or inherited Roth let’s say you’re age 40 your RMD again it’s based on your age might be two percent okay. So this is where it’s like a head-scratcher for us and more of a reporting issue than anything else when you pass away you leave this to the next generation. They have to take out their RMD based on their age. So it might be two percent in year one-two points three percent in year two point three percent or four percent in year four ongoing and then you’re ten. They still have ninety percent still in the IRA or the Roth now they have to liquidate the whole thing right. You would think logically it might be one-tenth of one percent for ten years but it’s not. So that’s why like everyone that’s looking at this publication. We’re all like what are you doing why are you doing it this way it’s not logical it doesn’t make sense but it is what it is. So as of right now, this is the rule what we’ve been talking to clients about is if you’re looking at doing Roth conversions or pulling money out of IRAs or you have an inherited IRA. Just like last year mid-year in March, they passed the cures act that changed that. You didn’t have to take out an RMD. We’re telling clients that unless you need have a need let’s wait until all this kind of fleshes out this year and then in the fall so September, October, November let’s look at end of year tax planning. 

Let’s look at RMDs let’s look at Roth conversions let’s look at pulling money out of these accounts. Just so that everything settles because we foresee with the change in presidency with the pandemic we had last year with the 30 trillion dollars in debt with these infrastructure improvements. That this administration is proposing there’s a lot of things up in the air right now. So we look at it as we have this tax year where we’ll we’re still operating within the tax cuts and jobs act. We kind of know how things are going to work let’s use this tax year and near the end of the year. Let’s do this end-of-year kind of tax planning issues. Other comments or questions so what is a pre-tax moving strategy to move money out of. Okay, yep we’ll talk about that in a second. So Roth or all right what if my inherited Roth IRA was a Roth conversion and the five years are not up from the Roth conversion. Okay so if you’ve done a Roth conversion that that’s like a different conversation okay. So when you do a Roth conversion depending on your age the idea is that you wait five years before you start pulling money out that’s a completely different conversation and really that’s unaffected by the Secure Act So let’s put that one aside. Santos writes in if you pass does your spouse have to take out Roth in any specific time frame. So if we name the spouse as a beneficiary and this is typically what we do then it becomes a spousal rollover. Where that surviving spouse does not have to pay any tax does not have to take out any RMDs especially if it’s a Roth IRA. So we don’t have the rules of the secure act kicking in. If we leave it to a spouse with a secure act we’re talking about leaving it to anyone other than a spouse. Typically there are some exceptions like if you have a disabled child but really we’re talking about leaving this to anyone other than a spouse. So if you do leave this to a spouse then you don’t have to worry about the security act. The spouse doesn’t have to worry about RMDs. Eileen writes in so a Roth 10-year distribution. It seems like the kids who inherited the raw should take out all of the income in the first year move it to regular investment so that there is no tax and they don’t have an RMD is that correct? Not necessarily Eileen so when you leave a Roth that money is tax-free. You’ve already paid the tax so the growth on the Roth is tax-free. 

So when I’m talking about RMDs for the kids they have to take money out of the Roth but they don’t have to pay tax on it okay. So I’m not advocating for them to pay to pull all the money out at once with the Roth in fact it might be the opposite. We might want them to keep it in a Roth as long as possible but at the end of the day really and this gets to one of the chat questions that come in at the end of the day really when we’re talking about moving money and creating a tax-free plan. So this is something we’re really focusing on our firm is tax planning, not just tax preparation but tax planning is this is one of the focal points of what we do and what we have is we have these different tax buckets. So first we have what we call taxable accounts okay. So these are things like checking savings money market cash and the thing here is that you have to pay tax on any gains right and then we have our taxable accounts or tax-deferred accounts. So tax-deferred accounts would be like IRA this is money you haven’t paid taxes on 401k for 3b 457. And the important thing here is that anything you pull out of here is taxed at ordinary income and that’s really whatever the tax brackets are at right and then third we have and now to clarify we call this income tax free okay. So these are things like roths cash value life insurance 529s. They have to be used for education health savings account they have to be used for health care right. So the nice thing about this is that the growth is tax-free the downside of these accounts and this is something that’s becoming a bigger issue with the current tax or the current infrastructure here. The current government is that we have to worry about estate taxes. 

So when you pass away Roth IRAs count towards your estate tax and then we have estate tax plus income tax-free and this is where we get into irrevocable life insurance. Trusts family inheritance trusts charitable remainder trusts. All right so the question was like what is a kind of tax plan look at the idea is that we’re moving money out of these accounts because we know taxes are going up to let’s move it to a taxable account. Whoops, that’s a horrible arrow income tax-free or in a state tax-free and I’ll tell you a majority of my clients. When I initially sit down with them a majority of their money is sitting in these 401ks IRAs because they subscribe to this old paradigm of investing of just stock away as much as you can in the 401k IRA. But the concern is how we’re 30 trillion dollars in debt most people think taxes are going up in the future. So now we need to try to figure out a tax plan to minimize taxes and so tax planning really comes down to two steps. One is so tax planning really comes down to two steps that we’re doing with our clients and like even yesterday. I met with five clients and three out of five clients were having this discussion about how much to move. So that’s kind of the science and the numbers behind it. And the second piece of it is where to move it to and this is the art of things okay and this is where I’ll tell you what there is a lot of bad advice on where to move it. The assumption is we just do Roth conversions but depending on your situation. A Roth conversion might be the last thing that you want to do. There are other options depending on your situation. So yeah so that’s to answer his question what is the pre-tax moving strategy max out annual Roth conversions not necessarily it is all really about figuring out how much convert on it or move to on an annual basis and then the second piece is where to move it and for every situation, it’s a little bit different. Okay all right answering questions here Nikhil besides the secure act says. Pass what anticipated tax changes impact the state and tax planning for funding blah blah blah there’s lower a little attack. So the buying administrator okay all right. So here’s a common question that I’m getting a lot of is. Where are taxes going in the future let me save what I’m doing here all right? So where are taxes going in the future so there are two big things to think about. 

First is the tax cuts and jobs act okay. This runs from 2018 and it’s scheduled to run to 2025. okay but I’ll tell you what Biden ran on a proposal regardless of where your taxes are of repealing this and this could have two effects. One is income tax where now your 22 tax bracket will be going to 25 if it’s repealed 12 is going to 15 25. If you’re at the 24 tax bracket you’re going to 28. So I have a lot of clients in retirement that they’re right now in that 24 tax bracket and so under Biden’s proposal you’re looking at more income tax if he repeals the tax cuts and jobs act the second piece of that is with regards to estate taxes. So right now if you have less than 11 million dollars. You don’t have to worry about the estate tax but if the tax cuts and jobs act is repealed that’s dropping down to five million dollars. So if you add up your assets your real estate your life insurance your Roths your traditional IRAs if it’s greater than five million you’re going to have a tax issue. And then Biden and sanders proposed a recent bill that’s going to lower it even further. So now the estate tax exemption is at three and a half million dollars okay. So really at the end of the day, there are two things we need to take into account one is going to be income tax planning looking at tax brackets. So this is moving money from pre-tax to post-tax or tax-free and this is something that everyone should be looking at this is where we’re looking at your tax bracket figuring out how much room we have in the tax bracket and calculating how much can we move. And the second piece is where do we move it do we do a Roth conversion are we moving it to an irrevocable life insurance trust are we moving it to a family inheritance trust and the second big thing is estate taxes. 

So if you’re on this call and you have more than three and a half million dollars of total assets or five million dollars of total assets. There are some things that we need to do right now before this window closes to look at protecting this from estate taxes because again there are opportunities right now. Before there’s a change in law utilizing the estate and gift tax to take advantage where we can move five million dollars out of your estate you remain in control. But now it’s removed from that estate tax calculation and this is something that has to happen before the estate tax exemption drops. So these I can’t stress this enough these are two huge things that we need to think about marginal tax brackets going up this affects everyone and we look at your tax return we look at your income we look at where your income is going to go and the second thing is if you do have an estate that’s greater than three and a half million dollars these two issues. We need to take into account and this needs to be done this year okay we don’t know how long this window of opportunity is going to last. So we’ve been banging this dr for a while that the biggest risk I see is tax risk. And the biggest opportunity based on our current laws is planning for taxes both on marginal income taxes and then now based on the Biden and sanders proposals on estate taxes all right. So with that couple of questions coming in. So how do we access recordings of previous sessions. Go to our youtube channel just shoot me an email if you’re not subscribed. I can share that with you and we record all these all these go to our youtube channel. I think that answered nick Kiel’s question with regards to the Biden proposals anonymous writes in should we consider giving our assets a way to use up the current gift tax exclusion before it is reduced to a million dollars. I’m not a big fan of gifting instead if you wanted to move money out of your estate if you’re concerned about estate taxes then what I’d recommend is we can set up what we call a fam family inheritance trust. Where you can still manage it but now it’s removed from the estate tax question and then you can divvy it up to the kids or grandkids as much as you want. So big picture think of it like whoa that’s a horrible drawing. So assume right now we have 11 million dollars oh holy cow we have 11 million dollars that we can we have a stating gift tax exclusion. Let’s assume in the future that’s going to three and a half million right. 

So what we can do is this money here let’s move that out of your estate and now we move it into a family inheritance trust where you can be the trustee. You can manage it but now let’s say this six million dollar you can decide how that’s divided up to the kids the grandkids. You can manage it. So I’m not a big fan of gifting it outright but instead, I’d rather gift it to something that’s out of your estate for estate tax purposes. But you can still manage and then you can divvy it up between the kids and the grandkids and charities however you like but that’s really a big opportunity. I have a client who has 12 and a half million dollars has some real estate businesses we’re moving this to the family inheritance trust. He can still control it he can still manage it now it’s out of the estate and then if he wants to give portions or give some to the kids or grandkids. He can do it under his control versus just our gifts where now it’s lost now if one of the kids gets a divorce and creditor action bankruptcy that money is lost. So it’s maintaining control but still and still building asset protection. So yes we should look at moving money out of your estate. If this is money that you’re not going to use but instead of gifting it outright I’d prefer to gift it to a trust for a variety of reasons could we gift real estate? The answer is yes that’s a perfect thing to gift real estate gifting. Business interests all of those are perfect opportunities to gift money. This is from Tom and Terry Chris are the 11 million five million three and a half million dollars per spouse. The answer is yes so it is per spouse as of right now. We have what’s called portability that could go away in the future but as of right now that is per spouse okay. Assets in a fit included in Medicaid look back the answer is no. So the money that you give to a family inheritance trust is out of your estate for estate tax purposes. It is out of your state for Medicaid look-back purposes change from joint spousal trust to separate trust. So in the past, we would utilize a lot of separate trusts because in the past the estate exemption was locked into just one spouse each. So each of you would have a coupon and if one of you passed away that coupon would disappear. So we used to do separate trust to lock in both of those coupons so if it’s at three and a half million dollars. We would do a b trust separate trust where each spouse now would have their three and a half million dollar exemption locked in. So we could pass seven million to the next generation 2010 they had portability that said we don’t have to do separate trusts anymore. So separate trusts are more complicated to administer and I’m always a fan of trying to keep things as simple as possible. All of this is complicated enough let alone adding in any type of additional complications. So if we can do a joint trust think of trust like a piggy bank or a suitcase now both spouses are holding on to if one spouse passes away. Everything remains for that surviving spouse. Typically we’re doing a joint trust. If we have a married couple unless it’s unless we have kids from previous marriages or something like that. So we do not have to do separate trusts to protect against estate taxes. We would typically do a joint trust. All right couple of things coming in via the chat. So what is the pre-tax moving strategy? We talked about that so do we need to meet with you to discuss where to move pre-tax accounts i’d recommend that. So when we meet with you need to bring our tax records yeah we do taxes for clients we do tax preparation we have a cpa and we also we do tax planning if you do your taxes or you have someone doing your tax preparation already that’s great. What we would do is we would open up a secure portal. So it’s not floating around on the interwebs and what we would do is we would ask for your last tax return. 

Last investment statements and gives us a baseline to talk about the different strategies that are available. So yes all right that was all thank you you’re welcome yes I appreciate that it’s good manners. My kids are 10 and 8 so we’re always working on manners. So the question came in right before we met. Is there a way to locate a copy of a will even though we don’t know which lawyer provided it etc? Is there something to compel family members to produce a will what are our options if a will was not filed? So when someone passes away there are two key documents that are involved in terms of administrating their estate one is a trust. This is a private document that doesn’t have to be recorded or anything however any beneficiary is entitled to see an accounting inventory and a copy of the trust. The other option is a will all a will does is gives instructions to the probate court on how to administer that estate and so a will is typically recorded at the probate court especially. If there’s an estate so if you’re trying to track down one of those things the best bet is to reach out to the law firm or attorney that prepared it if you know it. 

For example any documents we draft our information is included in there the other option. Is you can go to the county where someone passed away or they own assets and then if there was a probate estate that’s a public record. You can see the will and you can see whatever is going through probate court. That’s going to be true no matter what state you’re residing in. So if you had a loved one that did pass away in North Carolina. You would reach out to the county the probate register to see if there was a probate estate open and then you would open up. You would look to see if there was any will filed there but if there even if there wasn’t a will let’s say there’s a trust there are certain requirements that are included in administrating a trust one of those would be an inventory and an accounting to any named beneficiaries. So even if it was a trust and there wasn’t a will if you were named as a beneficiary. You’d be entitled to see how those assets were handled and you’d be entitled to see what your cut of that was. So hopefully that was helpful. Mike writes in how do we stay ahead of the retirement game IRA 4a 401 etc. When a government can change rules whenever they’re like yeah. This is a battle we’re always fighting. Is again I don’t want to get political but my goal my feeling is that you can spend your money better than the government can spend your money. So if I can put more dollars in your pocket versus more dollars and the internal revenue services that’s a win. That brings me this joy in life right and so that’s really the focus of our firm is we work with good families to help them plan protect and preserve what’s important to them. Protect against probate protect against the IRS protect against nursing home costs. So I don’t have any magic wand answer to protect against taxes really at the end of the day it’s looking at what are the current rules. Where do we see things going in the future and then figure out what is from a number standpoint? The best plan and then also looking at the art of it. So how much should we move out of those pre-tax accounts or if you’re still working maybe we should rethink where we’re accumulating wealth this is a big discussion. I have a lot of I have with a lot of my clients or my client’s kids who are still working maybe we shouldn’t overfund that pre-tax 401ks. Maybe we should look at saving money in raw saving money in cash value life insurance. Saving money in 529 saving money in a health savings account. I’m a big fan of diversification not just diversification in terms of having all your money in one stock. But diversification of the tax buckets maybe we shouldn’t be retiring with four million dollars pre-tax okay or if we are in this situation congratulations you did a great job of accumulating wealth. Now we need to diffuse that ticking tax time bomb that’s in those four million dollar pre-tax accounts. What is our strategy to defuse that ticking tax time bomb how much should we move and where do we move it. All right additional questions here assets and effectively controlled by the giver but can’t be used by the giver yes and no. 

So you would be the trustee of the trust. You would decide how it’s invested but you cannot take the money directly out of the trust put it back into your name. You would you could get the money back but we’d have to go through one extra step but it is a way that you can control it. We would just remove it from your estate for estate tax purposes. Another question that comes in from anonymous. Does an adult child who’s excluded let me try that again does an adult child who’s excluded from a trust is a beneficiary are they entitled to a copy of the trust from the trustee? That’s a tricky situation so I will give you a legal answer but then also there’s more of a family dynamic answer. 

The legal answer is that the only person people entitled to see a trust are named beneficiaries. So if they’re not entitled to anything they’re not entitled to necessarily see anything but what that’s going to lead to so this is the real world family dynamic issue is that now they’re going to in this vacuum of information because they don’t know what’s going on. They’re going to create their own scenario and now they might be more likely to now hire an attorney and challenge that and then if they were to challenge it now they might be entitled to the trust because they’re challenging it. They’re throwing a flag on it now this is where the judge would look at. The trust and say you have no legs to stand on and now attorney fees might be awarded to the trustee because this was a fraudulent lawsuit. So legally they’re not entitled to a copy that said maybe you do want to show them the page that says that hey I acknowledge that there’s this child out there who may think that they may be entitled to something. But typically the way we drop a trust is to say that we acknowledge this person is out there. We do not give a reason because they could challenge a reason but we just say that we have not provided for them in this document that’s the way typically we handle it. It makes it clear there’s no question there’s nothing to challenge right. Versus let’s say I disinherit my son John because he has a drug problem. Well now if five years go down the line you pass away and john doesn’t have a drug problem anymore maybe now there are likes for him to challenge that disinheritance. So typically when we’re excluding a child or any beneficiary we do not give a reason. We just say we acknowledge this person’s existence but we say that we’ve intentionally not included anything for them because again they do not have a right to inheritance no one has a right to an inheritance. Like when I’m working with my clients I tell them the best estate plan is to go in the last check bounces right and I have some clients that say you know what if anything is left over that’s gravy. But I’m not looking to leave anything to the kids first is I have other clients that decline today that they did legacy was important to them. They had seven grandkids and they wanted to make sure there was something left over for each one of those seven grandkids but understand as a beneficiary. There’s no right to an inheritance we run into this a lot with like when maybe dad gets remarried and now the kids are concerned about what happens if everything goes surviving spouse well dad is in control of his money. He can do what he wants there are things we can do ahead of time but if dad wants to leave everything to the surviving spouse. Versus leaving things to the kids that dad’s entitled to that if he still has capacity. 

So to answer the question from anonymous does an adult child who’s excluded from a trust are they entitled to the trust from the trustee the answer is no. Legally they’re not entitled to that but just from a family standpoint maybe you want to share it just to prevent any issues in the long run all right. So I think that is all the questions I had submitted the last thing I have just this is for just a little bit of fun is who wants to see Joe Biden’s tax return because it’s public knowledge. So one of the things I did is I took a look at Joe Biden’s tax return and I did a tax analysis on that. So this might be a little bit different than your situation but this isn’t anything that you can’t look at because it is public knowledge but I was just having some fun one day and said let me take a tax analysis and this is something that we can do for your family of looking at the opportunity. So I did this for our vice president and the president so let’s start with the Joe Biden and Jill Biden tax return. So this is based on their 2019 tax report which is public knowledge they had a total income last year of or 2019 of about a million dollars. The total tax they paid on it was about three hundred thousand interesting things and this is something I talked to clients about is the difference between marginal tax rate versus your effective or average tax rate. So the way marginal tax rates work is even Bill gates or Joe Biden the first twenty thousand dollars is taxed at ten percent. And then the next sleeve is taxed at 12 and then 22 24 32 35 and 37 percent. So right now a majority of my clients in retirement they’re in about the 22 tax bracket and again when the tax cuts and jobs act expires this 22 percent is going up to 25 percent. So this is why we’re having tax conversations of maxing out the 22 or 25 tax bracket and then based on your taxes that determine your capital gains right. So this is that taxable bucket whether your gains are taxed or not and it’s again based on your taxable income so of course for Joe and Jill Biden they’re maxing out the 37 tax bracket which is going up when the tax cuts and jobs act expires and this is something again I want to talk about. So Joe Biden ran on this promise of not raising taxes on anyone with more than four hundred thousand dollars or less than four hundred thousand dollars worth of income. Well guess what if he fully repeals the tax cuts and jobs act if you’re making a hundred thousand dollars your taxes are going up because this will go up to 25. If he fully repeals the tax cuts and jobs act just something to keep into account and here’s something that’s interesting. Where was it so one thing that Joe Biden wasn’t taking into account was qualified charitable distributions? So one thing if you do have a charitable interest. You can have your RMDs going directly to a charity and it lowers your taxable income and one thing that he wasn’t doing was taking into account his qualified charitable distributions. So that was something that I found interesting and I did the same thing for the vice president as well as the interesting thing vice president. They’re actually were earning more money on their last tax return than the president but again this is part of our tax planning is we’re looking to see where are you falling in terms of these tax brackets and then we can run different scenarios based on that of maybe we want to max out. Like, look at bigger Roth conversions or something like that. What if okay what if we wanted to do a 300 000 Roth conversion. What’s that going to look for look at in terms of your total tax and everything. So just something that I thought it was kind of fun and interesting but this is part of the planning that we’re doing is really we think a big opportunity and big risk is taxes going up in the future and the big opportunity is minimizing taxes in two respects. One is looking at taxes in terms of your retirement and marginal income tax rates especially with the tax cuts and jobs act and then also looking at taxes through a legacy lens of estate taxes and what are you leaving to the next generation. So hopefully this was all helpful. I have to hop off I have another call in about four minutes and I need to catch my breath before I do that but I just want to thank everyone for attending. Phil writes in thank you. you are so welcome I really enjoy this again if you want to see how this applies to your situation shoot us an email just reply to one of the emails. Let us know what you want to accomplish and we’ll talk about strategies to help you accomplish that a couple more things. Gary thank you anonymous great presentation today thank you so much nancy thank you you’re welcome anonymous you’re welcome excellent today as always thank you so much really my pleasure. I really enjoy these thank you so much we’ll do this again next week make it a great week.

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