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Long Term Care Q & A · Money In Motion with Klaas Financial

0:00
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Speaker 1: to you at class financial dot com and join us.
0:51
Speaker 3: This morning our CJ. Closs and Eric Schwartz.
0:54
Speaker 2: CJ. How you doing this morning?
0:56
Speaker 4: I'm doing great.
0:57
Speaker 2: Good morning Sean, Good morning, CJ. Eric Hof you Ben,
1:01
Speaker 2: I've been doing great.
1:02
Speaker 5: I'm glad to see some temperatures above zero.
1:04
Speaker 1: Yes, yeah, yeah, it's always nice to have to have
1:08
Speaker 1: a solid whole number, a positive, a plus number firs
1:12
Speaker 1: for sure.
1:13
Speaker 3: Speaking of positives and really good good things.
1:18
Speaker 1: I know this time a year, a lot of folks
1:20
Speaker 1: start thinking about gift giving and other things, and we're
1:23
Speaker 1: to talk about gift giving and when it comes to
1:25
Speaker 1: adult children and other areas of that. This Morning with
1:29
Speaker 1: Eric and CJ here on Money in Motion thirteen to
1:31
Speaker 1: ten WIVA. Before we get rolling though on this week's conversation,
1:35
Speaker 1: another great feature of the show is the Closs Quiz
1:37
Speaker 1: Question of the week, your chance to win a fantastic
1:39
Speaker 1: prize this week, no exception, our friends from Class Financial
1:42
Speaker 1: provide a twenty five dollars gift card to Cheesecake Factory
1:46
Speaker 1: and we'll let you know how you can win that
1:48
Speaker 1: before the end of the program. A little tip they'll
1:50
Speaker 1: listen closer to the show because most of the time
1:52
Speaker 1: the question and answer come up during the show. And
1:54
Speaker 1: before we get rolling on this week's topic and conversation,
1:57
Speaker 1: let's actually take a look back at last week's program
2:00
Speaker 1: at the Class Quiz question, the week question and answer
2:02
Speaker 1: from last week's show as well.
2:05
Speaker 5: Yeah, so, as always, thank you to everyone for listening.
2:07
Speaker 5: And our winner last week was Alex from Madison, So congratulations.
2:12
Speaker 5: Alex got the question correct, which was what is the
2:15
Speaker 5: new standard deduction for single taxpayers in twenty twenty five?
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Speaker 5: The choices were ten thousand dollars or fifteen thousand and
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Speaker 5: the answer is that in twenty twenty five, for single
2:26
Speaker 5: taxpayers and married individuals filing separately, the standard deduction rises
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Speaker 5: to fifteen thousand dollars.
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Speaker 2: Fantastic and it was a great show last week. And
2:36
Speaker 2: I know a lot of folks have questions as we get.
2:38
Speaker 1: Prepared for this year, and there's always great information up
2:41
Speaker 1: at classfinancial dot com. That's Class klaasfinancial dot com. So
2:46
Speaker 1: as we talk about obviously here on the program saving
2:49
Speaker 1: for Retirement, another area that comes up is adult children,
2:52
Speaker 1: specifically helping them out. What are some things that we
2:55
Speaker 1: need to be aware of when it comes to gifting
2:58
Speaker 1: object option CJ.
3:00
Speaker 4: Yeah, So we're excited about this topic today because often
3:03
Speaker 4: inside of our meetings there's confusion between the difference of
3:06
Speaker 4: a gift to a child or individual relative or in
3:11
Speaker 4: comparison to a gift to a charity or a charitable donation.
3:15
Speaker 4: And so we're going to talk about gifting today a
3:17
Speaker 4: little bit. And I guess first, let's define what is
3:20
Speaker 4: considered a gift. The IRS considers any transfer to an individual,
3:25
Speaker 4: either directly or indirectly, where full consideration measured in money
3:30
Speaker 4: or money's worth is not received in return. The general
3:35
Speaker 4: rule is that any gift is a taxable gift. Now
3:40
Speaker 4: I'll just pause right there. A lot of times that
3:42
Speaker 4: final sentence, the general rule is that any gift is
3:45
Speaker 4: a taxable gift freaks people out because they.
3:48
Speaker 1: Go, whoa, whoa, whoa, whoa, whoa whoa.
3:49
Speaker 4: What do you mean by every gift is a taxable gift? Well,
3:52
Speaker 4: there's all these exceptions that make it so that that
3:55
Speaker 4: final statement rarely is actually impacting individuals, and so kind
4:03
Speaker 4: of stick with us here. So every year, there's something
4:06
Speaker 4: called a gift tax Exclusion amount for and this is
4:10
Speaker 4: for federal gift tax purposes, and that amount is currently
4:13
Speaker 4: nineteen thousand dollars in twenty twenty five. That means that
4:17
Speaker 4: you can gift nineteen thousand dollars per person to as
4:21
Speaker 4: many people as you want with no federal gift tax consequences. Now,
4:27
Speaker 4: if you split gifts with your spouse, that total is
4:29
Speaker 4: thirty eight thousand dollars per person. So think of this
4:31
Speaker 4: in terms of children, right, Hey, I'm going to give
4:34
Speaker 4: money to my children, and I don't want to pay
4:36
Speaker 4: more taxes and I don't want them to pay any
4:38
Speaker 4: taxes on this cash that I have sitting in my
4:39
Speaker 4: savings account. How do I give it to them? Well,
4:42
Speaker 4: you could just use the gift tax exclusion amount of
4:45
Speaker 4: nineteen thousand dollars per person, or if you're you know,
4:47
Speaker 4: if you're married, you could do nineteen times nineteen thirty
4:50
Speaker 4: eight thousand to each child. I mean, it's a lot
4:53
Speaker 4: of money, as you can imagine. And here's the key.
4:56
Speaker 4: If you stay under that gift tax limited amount for
4:59
Speaker 4: each gift to each of those children, you know, you
5:02
Speaker 4: could give away a lot of money without any tax repercussions.
5:07
Speaker 4: And the ones those gifts are made, that money is
5:09
Speaker 4: removed from your taxable estate. And here's the other kind
5:13
Speaker 4: of cool thing. In twenty twenty five, the max you
5:17
Speaker 4: can give without any federal estate tax is thirteen million,
5:24
Speaker 4: nine hundred and ninety thousand dollars to as many individual
5:28
Speaker 4: or I'm sorry to you know, beneficiaries. Let's say this
5:31
Speaker 4: is during or after life or times two for a
5:34
Speaker 4: married couple, So twenty seven million, nine hundred and eighty dollars,
5:38
Speaker 4: and again you would pay no federal estate tax or
5:41
Speaker 4: gift tax. Now here's the key that nineteen thousand dollars
5:44
Speaker 4: I was talking about earlier, that those gifts do not
5:48
Speaker 4: apply towards reducing what is called your lifetime exemption amount.
5:53
Speaker 4: So lifetime exemption is that call it. I'm just going
5:55
Speaker 4: to round up, call it fourteen million dollars. So during
5:59
Speaker 4: or after life you can give up to fourteen million
6:02
Speaker 4: dollars with no gift tax or federal estate tax. However,
6:07
Speaker 4: those nineteen thousand dollars gifts all throughout your life don't count.
6:10
Speaker 4: It would only be the amounts that go over that.
6:13
Speaker 4: So imagine that I want to instead of giving nineteen
6:15
Speaker 4: thousand dollars to say one of my children, I want
6:18
Speaker 4: to give them one hundred thousand dollars. Well, the way
6:21
Speaker 4: that would work is I would take one hundred thousand
6:23
Speaker 4: dollars minus nineteen thousand that doesn't count towards the towards
6:27
Speaker 4: the lifetime exemption amount. I would then take that number,
6:31
Speaker 4: so call it, what is that eighty one thousand dollars,
6:34
Speaker 4: and I would reduce that from my fourteen million dollars
6:38
Speaker 4: that I can give during my life, actually during or
6:41
Speaker 4: after my life. So you see my point. That final
6:44
Speaker 4: sentence that I read, which is the general rules that
6:47
Speaker 4: any gift is a taxable gift, you kind of pause
6:49
Speaker 4: and you go, really because it sounds to me like
6:52
Speaker 4: there's a lot of ways for me to give money
6:54
Speaker 4: away without having to worry much about it. Let me
6:57
Speaker 4: add one other factor here. That nineteen thousand dollars for
7:01
Speaker 4: every individual from you to any individual you want to
7:04
Speaker 4: per year without reducing your lifetime exemption amount. That is
7:07
Speaker 4: a really critical number to remember because if you stay
7:10
Speaker 4: under that number, you don't have to fill out what's
7:13
Speaker 4: called a Form seven oh nine. Think of that Form
7:16
Speaker 4: seven oh nine. It's called a gift tax return as
7:19
Speaker 4: the certificate. Right, So let's say I can give away
7:22
Speaker 4: fourteen million dollars during or after life. Well, if I
7:25
Speaker 4: go over that nineteen thousand, I have to start filling
7:27
Speaker 4: out that certificate aka Form seven oh nine that keeps
7:31
Speaker 4: track of how much I'm reducing my lifetime exemption amount.
7:36
Speaker 4: Now final thought here on this kind of little section
7:39
Speaker 4: is that at the end of twenty twenty five, the
7:41
Speaker 4: federal estate and gift tax exemption amount is scheduled to sunset.
7:46
Speaker 4: Assuming Congress and the President take no action, this gift
7:49
Speaker 4: tax exemption could decrease to approximately seven million dollars per person.
7:54
Speaker 4: So it's about fourteen million dollars it could decrease to
7:58
Speaker 4: seven Now, I'll be frank with you, we have no
8:00
Speaker 4: idea whether or not this will change. There's people guessing
8:04
Speaker 4: that it will change under on the Trump administration, but
8:06
Speaker 4: we we really still do not know. So just be aware.
8:10
Speaker 4: Lifetime amount you can give away is fourteen million. Now
8:13
Speaker 4: it could be down to seven million as early as
8:16
Speaker 4: twenty twenty six.
8:17
Speaker 2: Talk this morning with CJ.
8:18
Speaker 1: Closs and Eric Schwartz, our retirement planning professionals from Class Financial.
8:21
Speaker 1: Their website Class financial dot com. That's Coss Klaas Financial
8:26
Speaker 1: dot com and they're telephone number six So eight four
8:28
Speaker 1: four two five six three seven that's four four.
8:31
Speaker 2: Two fifty six thirty seven.
8:32
Speaker 1: Don't forget no charge for that initial get to know
8:34
Speaker 1: you appoyment at Class Financial.
8:35
Speaker 2: AIG will be complementary to you.
8:37
Speaker 3: What are some of the things then, CJ that we
8:40
Speaker 3: do know.
8:41
Speaker 4: Yeah, so just just some things for people to be
8:44
Speaker 4: aware of. Here there are again there's no taxes on
8:47
Speaker 4: the giver and again usually no taxes paid by the recipient.
8:50
Speaker 4: Now I say usually, and people hate that word, they
8:53
Speaker 4: would be definitive. Well, listen, if you if you gift stock,
8:58
Speaker 4: highly appreciated stock to your child that you have not
9:01
Speaker 4: paid the capital gains tax on. Well, if you gift
9:05
Speaker 4: them that, you're gifting them not only the value of
9:07
Speaker 4: the stock, but also the basis of the stock. Aka,
9:10
Speaker 4: you didn't pay tax, they're going to have to pay tax.
9:13
Speaker 4: So if you give them that stock and then they
9:14
Speaker 4: go and sell it, they're gonna pay the capital gains
9:17
Speaker 4: tax on it. But assuming you're giving cash of some sort,
9:20
Speaker 4: so money you've already paid tax on. So not retirement accounts, right,
9:24
Speaker 4: because you can't gift money out of a retirement account
9:26
Speaker 4: that's pre tax. But let's say this is money in
9:29
Speaker 4: a checking savings stock account that you've already paid tax on.
9:33
Speaker 4: Generally speaking, you as the giver will pay no tax
9:35
Speaker 4: and the recipient will pay no tax. Now here's a key,
9:39
Speaker 4: one of the biggest questions. We get this is great, well,
9:42
Speaker 4: then I will just I'll give nineteen thousand to each
9:44
Speaker 4: of my children and then I'll deduct that on my taxes.
9:47
Speaker 4: No no, no, no, no, no no no. We didn't
9:50
Speaker 4: say you'd get a deduction. They are not charities. So
9:54
Speaker 4: that's where the kind of the line in the sand
9:55
Speaker 4: comes in here. The good news is you don't have
9:57
Speaker 4: to pay any tax. They don't pay any tax upon
9:59
Speaker 4: rescups even get assuming it's cash. But it does not.
10:04
Speaker 4: It's not a gift to a charity, and therefore you
10:06
Speaker 4: cannot deduct that gift to your children. I mean, that
10:09
Speaker 4: would be great, and then if we could just give
10:10
Speaker 4: money away to our children and take it off our
10:12
Speaker 4: own income for the year, But that is not the
10:16
Speaker 4: way that it works. And so I already mentioned as
10:18
Speaker 4: long as you are aware of that nineteen thousand dollars
10:20
Speaker 4: limit and you try to avoid going over it to
10:23
Speaker 4: any one individual in a year, then you don't have
10:26
Speaker 4: to fill out that Form seven o nine. And the
10:28
Speaker 4: beauty there is then you preserve your lifetime exemption amount.
10:33
Speaker 4: Now why would you want to do that, Well, because
10:34
Speaker 4: when you die, everything you own, including any life insurance
10:39
Speaker 4: proceeds goes towards that lifetime exemption amount. So there is
10:45
Speaker 4: kind of this incentive to try to preserve that if
10:48
Speaker 4: you don't need to use it. Now, I'll admit to you,
10:51
Speaker 4: for ultra wealthy family families, they're actually not trying to
10:54
Speaker 4: preserve that. They're actually trying to do very large gifts
10:57
Speaker 4: to use up their lifetime exemption amount and then get
10:59
Speaker 4: large portions of their estate out to an irrevocable trust.
11:03
Speaker 4: But more to come on that later in our show. Today.
11:05
Speaker 2: We'll get to that and so much more as we
11:07
Speaker 2: continue our conversation with CJ. Closs and Eric Schwartz.
11:09
Speaker 1: Of course, they are our retirement finding professionals from Class
11:12
Speaker 1: Financial the website Coss financial dot com. That's Coss k
11:15
Speaker 1: l A A S Financial dot com. And they're telephone
11:18
Speaker 1: number six so eight four four two five six three seven.
11:21
Speaker 1: So Eric, let's talk then about if you give money
11:24
Speaker 1: to someone, do I have to pay a gift tax?
11:29
Speaker 5: That's a great question, Sean. In most cases, as CJ
11:33
Speaker 5: was saying, there is no gift tax to be paid. However,
11:36
Speaker 5: if there is, you know, we just talked about a
11:39
Speaker 5: bunch of the ways of UH. Basically excluding gifts from
11:43
Speaker 5: your taxable income. But if there is a tax to
11:46
Speaker 5: be paid, the donor is generally responsible for paying that tax.
11:50
Speaker 5: There are some special arrangements where where the receiver can
11:53
Speaker 5: can pay the tax, but in most cases it's going
11:55
Speaker 5: to be the donor. But let's I want to dig
11:58
Speaker 5: in here a little bit more on some of the
12:01
Speaker 5: exceptions and why we say, you know, generally there's not
12:04
Speaker 5: going to be any gift techs do on this. So
12:08
Speaker 5: the one that the first one and the one we
12:09
Speaker 5: talk about most often with our clients and CJ is
12:12
Speaker 5: just talking about here, is the any gifts that don't
12:16
Speaker 5: exceed that nineteen thousand dollars per individual per year. Those
12:21
Speaker 5: are that's your freebie, right, That's not even going to
12:23
Speaker 5: be considered when it comes to your your lifetime credit
12:26
Speaker 5: or anything. So that nineteen thousand number is generally what
12:30
Speaker 5: people are focusing on when they're when they're giving money
12:33
Speaker 5: to those non charitable organizations, regardless of how the parents
12:37
Speaker 5: feel about the kids. Another exclusion is going to be
12:42
Speaker 5: a tuition or any medical expenses that you pay for
12:46
Speaker 5: someone else. So I'm going to discuss more about this
12:48
Speaker 5: in a moment. In terms of the rules around that.
12:51
Speaker 5: But the you know, tuition support, medical expenses that you
12:55
Speaker 5: pay off, those are not subject. Those are those are
12:58
Speaker 5: not subject to the gift texts.
13:00
Speaker 2: Fantastic, Oh go ahead, No, I'm.
13:03
Speaker 5: From gifts to your spouse. So the irs allows you
13:08
Speaker 5: to gift as much as you would like to your spouse,
13:11
Speaker 5: assuming that they are US citizen. And finally, gifts to
13:15
Speaker 5: a political organization for its own use, those are are
13:19
Speaker 5: automatic subject any gift tax rules.
13:22
Speaker 2: Really important.
13:23
Speaker 1: It's interesting that they that the politicians would leave that,
13:26
Speaker 1: leave that little loophole there for you.
13:27
Speaker 2: It really is ironic.
13:29
Speaker 3: I'm talking this morning with CJ.
13:31
Speaker 1: Closs and Eric Schwartz, our retirement planning professionals from Class
13:33
Speaker 1: Financial website Class.
13:35
Speaker 2: Financial dot com.
13:36
Speaker 1: That's Coss k l a as Financial dot com and
13:38
Speaker 1: their telephone number six so eight four four two five
13:41
Speaker 1: six three seven. We'll continue our conversation with CJ and
13:44
Speaker 1: Eric and take your call next as Money in Motion
13:46
Speaker 1: with Class Financial continues right here on thirteen ten doll
13:49
Speaker 1: will u ib A getting charitable this week with our
13:52
Speaker 1: retirement planning professionals from Class Financial, Eric Schwartz and CJ.
13:55
Speaker 3: Closs the website you can learn more about Class.
13:57
Speaker 2: Financial, the team, the separate divisions.
13:59
Speaker 1: Also and sign up for the weekly market Ball's newsletter
14:02
Speaker 1: and listen back to this in previous shows podcasts.
14:05
Speaker 2: All of that available to you at class financial dot com.
14:07
Speaker 1: That's colss k l a as Financial dot com at
14:10
Speaker 1: the teleph number six so eight four four two five
14:12
Speaker 1: six three seven. No charge for that initial get to
14:15
Speaker 1: know you appoyment dech loss financial. It will be complimentary
14:18
Speaker 1: to you. So, Eric, just before the break, we started
14:20
Speaker 1: talking about some of the areas where there would not
14:25
Speaker 1: be a gift text. What are some of the other
14:27
Speaker 1: benefits then of giving gifts to families or other folks?
14:33
Speaker 4: Yeah, I think.
14:34
Speaker 5: I think in general it's nice to give a gift
14:36
Speaker 5: and actually see the recipient enjoy it, rather than waiting
14:40
Speaker 5: until you're no longer here. So we see a lot
14:42
Speaker 5: of people once they've kind of gotten to a point
14:44
Speaker 5: where they feel comfortable that they have enough for themselves,
14:47
Speaker 5: they will begin gifting to their kids and and beyond that.
14:52
Speaker 5: If you're giving to children, for example, they probably have
14:56
Speaker 5: a greater need for that financial support when they're in
14:59
Speaker 5: their thirty or their forties compared to when most folks
15:03
Speaker 5: pass away. So let's think about this. If people live
15:06
Speaker 5: into their seventies or maybe their eighties, their children are
15:10
Speaker 5: likely closing in on retirement when they pass away, and
15:14
Speaker 5: they've already had to do, you know, a lot of
15:17
Speaker 5: the what i'll call it financial hard work at by
15:21
Speaker 5: that point. So are they going to be grateful for
15:24
Speaker 5: the gift, obviously yes, But will it be as impactful
15:28
Speaker 5: as it would have been when they were younger. Probably not.
15:31
Speaker 5: And you know, so, I think those are just a
15:33
Speaker 5: couple of things we think about when we're thinking about gifting,
15:37
Speaker 5: specifically to family. And regardless of who you decide to
15:41
Speaker 5: give to or when you decide to start gifting, it's
15:44
Speaker 5: really important to create a gifting strategy. So, like I said,
15:48
Speaker 5: once you have enough resources to take care of your
15:51
Speaker 5: needs during your lifetime, giving assets to your children or
15:55
Speaker 5: to charities, which we haven't talked too much about yet,
15:59
Speaker 5: it could be helpful from the state planning perspective, and
16:01
Speaker 5: it can have a really really large impact on the
16:04
Speaker 5: quality of life of your errors your favorite causes, and
16:10
Speaker 5: for yourself, a strategy for gifting can help you minimize
16:14
Speaker 5: your future state taxes and really really want to drive
16:18
Speaker 5: home the fact that if you're giving to family, giving
16:21
Speaker 5: to them earlier on generally is a lot more impactful
16:26
Speaker 5: than waiting until later. But earlier we were talking about
16:31
Speaker 5: the gift tax exclusion for education and medical expenses, and
16:35
Speaker 5: I mentioned that we were going to dig into that
16:37
Speaker 5: a little bit more because it's a little bit more
16:39
Speaker 5: complicated than the nineteen thousand dollars rule. So one of
16:44
Speaker 5: the exceptions to the nineteen thousand dollars annual gifting limit
16:47
Speaker 5: is that you can give an limited amount to your
16:50
Speaker 5: children for tuition or medical expenses. So education and retraining
16:55
Speaker 5: that can be an excellent way to help your kids
16:57
Speaker 5: be more self sufficient, and you know it has the
17:01
Speaker 5: potential to make them more employable or maybe even help
17:03
Speaker 5: them earn more in their current job. But two really
17:07
Speaker 5: important things to understand around the education and medical expense
17:13
Speaker 5: exception was that the money it must be paid directly
17:16
Speaker 5: to the educational institution or the medical provider. It cannot
17:20
Speaker 5: go to the kids first. At that point you're going
17:23
Speaker 5: to be subject to that nineteen thousand dollars rule again.
17:28
Speaker 5: And then helping to pay off student loans would not
17:30
Speaker 5: count as an exception unless you were a co signer
17:33
Speaker 5: on the loan. That's despite the fact that it originally
17:37
Speaker 5: came from tuition obviously, but you must have been a
17:40
Speaker 5: co signer on that loan in order to not have
17:44
Speaker 5: it count as a taxable gift. And the last thing
17:48
Speaker 5: I want to talk about in this section here is
17:51
Speaker 5: another great way to benefit your errors is by giving
17:56
Speaker 5: them money that they can then contribute to their retire accounts.
18:00
Speaker 4: Okay, so.
18:02
Speaker 5: If you think about an individual retirement account, the annual
18:05
Speaker 5: contribution limit to that is currently seven thousand dollars a
18:08
Speaker 5: year for those who are under fifty. So you could
18:12
Speaker 5: give a gift to the kids with the expectation that
18:14
Speaker 5: it is then used to say for their future.
18:18
Speaker 1: It's really really good to really good to options and
18:21
Speaker 1: really really good opportunities for folks, and of course something
18:24
Speaker 1: worth exploring. You can learn more online Clasfinancial dot com
18:28
Speaker 1: delvium number six so eight four four two five six
18:30
Speaker 1: three seven so CJ. Earlier, you kind of alluded to
18:33
Speaker 1: trust that we were going to get into them a
18:35
Speaker 1: little bit more. Let's talk about using trusts to make gifts.
18:38
Speaker 2: What do we need to know there?
18:40
Speaker 4: Yeah, so we're going to talk about those trusts. I
18:41
Speaker 4: do want to make a quick comment on what Eric
18:43
Speaker 4: was just mentioning there on retirement accounts, because, as Eric
18:46
Speaker 4: can attest, every once in a while we'll have somebody say, hey,
18:49
Speaker 4: I heard what you saw said on the air, and
18:51
Speaker 4: I want to make a contribution or set up a
18:53
Speaker 4: roth IRA for my adult daughter and put seven thousand
18:58
Speaker 4: dollars into it, and we go, hmm, you slightly misunderstood
19:03
Speaker 4: what we were saying there. So just to clarify, you
19:05
Speaker 4: can give money to your children. You can't be making
19:09
Speaker 4: contributions on their healf without their awareness. Now give a
19:12
Speaker 4: minor child. That's a little bit different. There's these things
19:15
Speaker 4: called custodial retirement accounts or custodial roth I raise. I
19:18
Speaker 4: was just helping a client set up one yesterday on Fidelity.
19:21
Speaker 4: But generally speaking, what Eric is saying here is like
19:23
Speaker 4: you can give it with the expectation of a going
19:26
Speaker 4: into a retirement account, which is again it can be
19:28
Speaker 4: a huge blessing to your children when they have cash
19:31
Speaker 4: to live off of, so that those earnings that they
19:34
Speaker 4: receive from their employer can go into a retirement account. Well,
19:37
Speaker 4: that being said, yes, so your question about trust and
19:42
Speaker 4: what I alluded to earlier, so a state planning just
19:46
Speaker 4: it's not just about preparing for the future, it's also
19:49
Speaker 4: about taking strategic steps during your lifetime to benefit your
19:53
Speaker 4: loved ones. Using specialized trust can help you pass on
19:57
Speaker 4: wealth efficiently, reduce taxes, and preserve the value of your estate.
20:02
Speaker 4: So here's a breakdown of three key points as it
20:05
Speaker 4: relates to trust and kind of gifting and moving money
20:07
Speaker 4: to the next generation while being tax efficient. Item number
20:11
Speaker 4: one would be an irrevocable trust. This can shift growth
20:16
Speaker 4: to the next generation. So here would be a concept.
20:19
Speaker 4: Let's say that I own I've been blessed throughout life,
20:22
Speaker 4: I built maybe a small business. That small business has grown,
20:26
Speaker 4: I don't know, I own a good portion of it,
20:28
Speaker 4: and suddenly I'm left in a position where I go, goodness, gracious,
20:33
Speaker 4: my stock when I die is gonna put me over
20:37
Speaker 4: some of these limitations on lifetime exemption amounts. And now
20:41
Speaker 4: again these are large amounts, right, but often people say,
20:45
Speaker 4: what the heck do I do? Because I've got these
20:47
Speaker 4: lifetime exemption amounts, I can only gift so much to
20:49
Speaker 4: my kids without using up my lifetime exemption. So how
20:53
Speaker 4: does this work? C how could I and not to
20:54
Speaker 4: mention I've still got the business. This this thing is
20:56
Speaker 4: still growing. It could be fifty eighty one hundred million
20:59
Speaker 4: dollars by the time I die, and then my family
21:02
Speaker 4: just has to get blown up with taxes. Well, no
21:06
Speaker 4: one thing you can do if you're operating agreement allows
21:09
Speaker 4: for it, which you do have to start getting pretty
21:12
Speaker 4: specific here on working with lawyers and accountants. But is
21:15
Speaker 4: you can actually gift some of that stock into an
21:17
Speaker 4: irrevocable trust. Once it goes into the vocabal trust, two
21:20
Speaker 4: things happen. You are using up some of your lifetime
21:22
Speaker 4: exemption amount that you know, fourteen million dollars we talked
21:25
Speaker 4: about to put money into that trust. But let's say
21:27
Speaker 4: I put ten million dollars hypothetically of that highly appreciated
21:31
Speaker 4: you know stock into that irrevocable trust. Well, all the
21:35
Speaker 4: future appreciation on that is now outside of the estate.
21:39
Speaker 4: It can still benefit my children, so it can still
21:41
Speaker 4: say the beneficiaries of this stock are my children. But
21:44
Speaker 4: the beauty is I have used some of my lifetime exemption.
21:48
Speaker 4: I've gotten that money into a trust, and then all
21:50
Speaker 4: the future appreciation of that stock is outside of the
21:53
Speaker 4: estate and it can't impact my lifetime exemption amount. Another
21:58
Speaker 4: concept might be, so stick with that idea of the
22:00
Speaker 4: highly appreciated stock. Well, what if I my corporate governance
22:04
Speaker 4: doesn't allow for that, or I just don't want to
22:06
Speaker 4: put that much money into an irrevocable trust, or I
22:10
Speaker 4: should say that much stock. What are other options? Well,
22:13
Speaker 4: another option would be doing what's called an irrevocable life
22:16
Speaker 4: insurance trust known as an islet. Because we know our
22:19
Speaker 4: industry loves our acronyms, so islets. It's this idea of saying, Hey,
22:23
Speaker 4: I'm going to keep all that stock inside of my estate,
22:25
Speaker 4: but I don't want to my kids get blown up
22:28
Speaker 4: on taxes when I die. What do I do? Well,
22:32
Speaker 4: you could buy a life insurance policy inside of an
22:35
Speaker 4: irrevocable life insurance trust if you do it all appropriately,
22:39
Speaker 4: and by the way, you really need to work with
22:41
Speaker 4: a lawyer, accountant advisor on this is not something to
22:44
Speaker 4: try to do on your own and my humble opinion,
22:46
Speaker 4: but if you do it all appropriately, that large life
22:49
Speaker 4: insurance policy when you die can come swooping into the
22:52
Speaker 4: estate without counting towards your federal estate tax exemption amount.
22:59
Speaker 4: So it comes swoop in And why does it come
23:01
Speaker 4: swooping in to pay all the taxes, right, so it
23:04
Speaker 4: pays the taxes without increasing your taxes. So ear Vocal
23:09
Speaker 4: Life Insurance trust can be a great way to pay
23:11
Speaker 4: final expenses, pay pay any taxes that would be due
23:15
Speaker 4: upon the estate without kind of forcing the beneficiaries to
23:19
Speaker 4: have to sell a bunch of your stock or to
23:21
Speaker 4: have to, you know, sell a bunch of land. Think
23:23
Speaker 4: of a farmer with a lot of land. So these
23:25
Speaker 4: can this can be another great estate planning tool. And
23:29
Speaker 4: then finally there's these concepts of grantor retained annuity trust
23:33
Speaker 4: known as grats. And I will just warn everybody, as
23:35
Speaker 4: much as I love talking about this, just a word
23:39
Speaker 4: to the wise, none of these strategies we're talking about
23:42
Speaker 4: should be something you jump on Google and say, I'm
23:44
Speaker 4: gonna I'm gonna do this tomorrow. Please don't. These are
23:48
Speaker 4: advanced financial planning strategies that often require you know, expert
23:53
Speaker 4: legal advice, good accounting advice, good financial advice, advisor feedback.
23:59
Speaker 4: So with that being said, though, the concept of a
24:01
Speaker 4: grant or retained annuity trust is that they're ideal for
24:05
Speaker 4: gifting assets that are likely to appreciate significantly in value.
24:09
Speaker 4: So a lot like the irrevocal trust. So this could
24:12
Speaker 4: be again privately health shares of a company, you know,
24:15
Speaker 4: hedge funds, private equity stocks, real estate interests, and closely
24:18
Speaker 4: held business and you transfer assets to the grat and
24:22
Speaker 4: retain the rights to receive an annuity aka income for
24:26
Speaker 4: a set period. When the trust term ends, any remaining
24:31
Speaker 4: assets pass to your beneficiaries free of federal gift tax.
24:35
Speaker 4: This allows you to lock in today's asset value while
24:38
Speaker 4: giving your loved ones the benefit of future growth, while
24:42
Speaker 4: also getting some income along the way. So think of
24:45
Speaker 4: that original irrevocable trust concept I talked about at the beginning,
24:49
Speaker 4: that once it's out, it's out, you can't get it back.
24:52
Speaker 4: Whereas this granted retained annuity trust, you still can't get
24:55
Speaker 4: the money back, but you can get an income stream
24:58
Speaker 4: off of it, which can be nice because lest you
25:00
Speaker 4: put the money in you use part of your lifetime exemption.
25:03
Speaker 4: That money goes to your children a state tax free
25:05
Speaker 4: later on. But along the way you're able to get
25:09
Speaker 4: an income stream to you know, offset any any income
25:12
Speaker 4: needs you have in retirement. So very advanced estate planning techniques,
25:17
Speaker 4: this is actually just the tip of the Iceberg of
25:20
Speaker 4: various estate planning advanced estate planning techniques, but these are
25:24
Speaker 4: a few that we see commonly, commonly used.
25:27
Speaker 2: Really fascinating stuff. This week, as we talked with CJ.
25:29
Speaker 1: Closs and Eric Schwartz, oh were retirement finding professionals from
25:32
Speaker 1: Class Financial, the website COSS Financial dot com. That's Coss
25:35
Speaker 1: k l a A S Financial dot com and their
25:38
Speaker 1: telephone number four four two, five, six three seven. More
25:41
Speaker 1: of Money in Motion is next right here thirteen ten
25:43
Speaker 1: WI b A and the website Colss Financial dot com.
25:49
Speaker 1: That's k l a A S Financial dot Com. They're
25:52
Speaker 1: telephone numbers six so eight four four two, five, six
25:55
Speaker 1: three seven. Coming up with later this segment will do
25:57
Speaker 1: our class quiz quesch Leak, So you want to hold
25:58
Speaker 1: on to that number for that as well. Talking this
26:01
Speaker 1: week about charitable giving and Eric, what about incorporating charitable
26:06
Speaker 1: giving into our estate planning.
26:09
Speaker 5: Yeah, we've been talking a lot about giving gifts to
26:12
Speaker 5: family members or other individuals in your life, but we
26:17
Speaker 5: wanted to touch on charitable giving here a little bit
26:19
Speaker 5: before the end of the show. And when it comes
26:22
Speaker 5: to charitable giving, there are more options than just writing
26:25
Speaker 5: a check to the charity, and I know that's how
26:28
Speaker 5: most folks will do it, but there are some more
26:31
Speaker 5: we'll say advantageous options as well. So whether you're looking
26:35
Speaker 5: to give back to your community or just support a
26:37
Speaker 5: cause that you really love, there were some really impactful
26:41
Speaker 5: ways to do that. We're going to look at four
26:43
Speaker 5: of them here briefly. The first one is the simplest. Okay,
26:47
Speaker 5: so it's just an outright charitable gift. This is, you know,
26:51
Speaker 5: sending a check to the Salvation Army or whichever organization
26:55
Speaker 5: is important to you. You're giving cash directly to the charity,
26:59
Speaker 5: and provided that you are able to itemize your taxes,
27:05
Speaker 5: you can often get an income tax deduction for this,
27:09
Speaker 5: and you know, in the long run it can also
27:11
Speaker 5: reduce your estate taxes, and you know, really simple win
27:17
Speaker 5: win for the charity and for the individual. But the
27:21
Speaker 5: second one here is is actually when we're seeing a
27:23
Speaker 5: lot more since since the Tax Cuts and Jobs Act
27:28
Speaker 5: raised these standard deductions so high and made it less
27:32
Speaker 5: likely that folks will itemize their taxes. And that's a
27:34
Speaker 5: donor advised fund or a daft CJ says, we love
27:38
Speaker 5: the acronyms, but think of this as like your personal
27:42
Speaker 5: charitable giving account. So when you contribute dollars to this
27:46
Speaker 5: fund that you set up at you know, a brokerage
27:49
Speaker 5: house or wherever it is, you get an immediate tax benefit.
27:53
Speaker 4: Okay.
27:54
Speaker 5: So let's say you put in a big chunk of money.
27:56
Speaker 5: Let's say you put in twenty thousand dollars. You get
27:58
Speaker 5: an immediate twenty thousand dollars today deduction. But you don't
28:02
Speaker 5: have to give all of that money right away to
28:06
Speaker 5: the charitable organizations. Okay, it gives you time to decide.
28:11
Speaker 5: It can be you know, years before you actually give
28:13
Speaker 5: the money out of the out of the account. Now,
28:17
Speaker 5: it's important to remember, even though you don't have to
28:19
Speaker 5: give all the dollars to the charitable organizations immediately, your
28:22
Speaker 5: contribution is irrevocable.
28:24
Speaker 4: Okay.
28:25
Speaker 5: The IRS gave you a deduction, they're not going to
28:27
Speaker 5: allow you to take it out later on. But these
28:30
Speaker 5: funds can remain in the account, they can be invested,
28:33
Speaker 5: they can grow tax free, and you can you can
28:37
Speaker 5: have some flexibility and time in making your charitable giving decisions.
28:43
Speaker 5: And the really really important part about this is it
28:46
Speaker 5: allows you to what we call bunch your gifts in
28:51
Speaker 5: one year, so that you can get enough to deduct
28:55
Speaker 5: to use the itemized deductions and actually be able to
28:57
Speaker 5: deduct the contributions, and then you know, in future years
29:02
Speaker 5: you can give the dollars away having gotten that large
29:05
Speaker 5: tax benefit right up front. The last two that I
29:09
Speaker 5: want to talk about here are actually forms of irrevocable trusts,
29:13
Speaker 5: which CJ was just just talking about in our last
29:16
Speaker 5: section here. The first one is a charitable lead trust.
29:20
Speaker 5: So this arrangement allows a charity to benefit first from
29:24
Speaker 5: the dollars and basically any income generated by the assets
29:29
Speaker 5: in the trust goes to a charity for a set
29:32
Speaker 5: period of time. After that, the remaining assets are passed
29:36
Speaker 5: to your beneficiaries, all while potentially lowering your estate tax burden.
29:41
Speaker 5: So it's a great way to support an organization that's
29:43
Speaker 5: important to you, but also leave a legacy for your heirs.
29:48
Speaker 5: And then the last one here is a charitable remainder trust.
29:51
Speaker 5: So this is the reverse of the charitable lead trust. Okay,
29:54
Speaker 5: so in this case, your beneficiaries are receiving income from
29:58
Speaker 5: the trust for a set period of time time and
30:01
Speaker 5: then any assets left over go to the charity at
30:04
Speaker 5: the end of the term. So you'll receive a charitable
30:07
Speaker 5: deduction upfront, you'll reduce your state taxes, and this approach
30:11
Speaker 5: allows you to support a cause while ensuring that your
30:14
Speaker 5: loved ones are still cared for for that set period
30:16
Speaker 5: of time. Now, I know all of these strategies seem
30:20
Speaker 5: like I don't know. People may to hear them and say, gosh,
30:24
Speaker 5: that just seems so far away from me. I'm not
30:25
Speaker 5: going to think about that right now. But thinking about
30:27
Speaker 5: these strategies earlier, it gives you more control and flexibility
30:32
Speaker 5: in managing your legacy. So whether you know you're trying
30:35
Speaker 5: to protect your state, maximize your growth, ensure liquidity, all
30:39
Speaker 5: of these are going to be more impactful if you
30:43
Speaker 5: actually think about them strategically and plan for them ahead
30:47
Speaker 5: of time, and make sure you speak to a professional
30:50
Speaker 5: to see how you can implement these two best benefit
30:54
Speaker 5: you a lot of.
30:55
Speaker 2: Great tools and a lot of great options.
30:58
Speaker 1: Just got to make sure that you're putting these things
31:00
Speaker 1: in place and putting that plan together. If you've got questions,
31:03
Speaker 1: don't forget great website cossfinancial dot com great resource you
31:06
Speaker 1: can learn more about Class financial folks. At class Financial
31:09
Speaker 1: you can learn about their separate divisions as well, that's
31:11
Speaker 1: all at Cossfinancial dot com. That's Coss Klaasfinancial dot com
31:16
Speaker 1: and their telephone number six oh eight four four two five,
31:19
Speaker 1: six three seven. And you want to hold on to
31:20
Speaker 1: the telephone number. Now it's time for the Class Quiz
31:23
Speaker 1: Question the Week.
31:23
Speaker 2: It works like this.
31:24
Speaker 1: In just a moment, I'll ask you the Class Quiz
31:26
Speaker 1: Question the Week. You then have thirty minutes from the
31:27
Speaker 1: today's program to call the Class Financial Office right here
31:30
Speaker 1: in Madison at six oh eight four four two five
31:33
Speaker 1: six three seven. If you are the first caller with
31:35
Speaker 1: correct answer, you'll win this week's prize, which is a
31:37
Speaker 1: twenty five dollars gift card to the cheesecake Factory. This
31:42
Speaker 1: week's Class Quiz question week is this what amount can
31:45
Speaker 1: you gift per person in twenty twenty five with no
31:49
Speaker 1: federal gift tax consequences? Is it fifteen thousand dollars or
31:55
Speaker 1: nineteen thousand dollars? Telephone number six oh eight four four
31:58
Speaker 1: two five six three seven. First call correct answer, we'll
32:01
Speaker 1: win that twenty five dollars gift card too the cheesecake factory.
32:03
Speaker 1: Don't forget as well, that's Class Financials Office right here
32:05
Speaker 1: in Madison again the number six O eight four four
32:08
Speaker 1: two five six three seven CJ Eric. Always great chatting
32:12
Speaker 1: with both of you.
32:12
Speaker 2: Guys.
32:12
Speaker 4: Have a great day, thanks Sean, Thanks Sean, take care guys.
32:15
Speaker 1: Doctor Marty Greer joins us next here on thirteen ten
32:18
Speaker 1: WIV eight