Latest / Money In Motion with Klaas Financial / Passing Wealth with Purpose

Transcript

Passing Wealth with Purpose · Money In Motion with Klaas Financial

0:01
Speaker 1: Our phone lines, they are open to you right now.
0:03
Speaker 2: If you've got questions for our retirement planning professionals from
0:08
Speaker 2: Kloss Financial, Eric Schwartz and Nate Bribie, telephone number to
0:11
Speaker 2: get on the air, 608-321-1310.
0:11
Speaker 3: That's 608-321-1310.
0:12
Speaker 2: Love to have you join us this morning. Anything retirement related,
0:16
Speaker 2: retirement planning related, We've got our professionals in the house
0:23
Speaker 2: and here to take your calls. Again, telephone number to
0:25
Speaker 2: get on the.
0:25
Speaker 1: Air, 608-321-1310. That's 608-321-1310.
0:27
Speaker 2: Don't forget, you can learn all about Kloss Financial on
0:33
Speaker 2: their website, klossfinancial.com. That's Kloss, K-L-A-S, financial.com. You can learn
0:39
Speaker 2: about Kloss Financial. You can learn about the team. You
0:41
Speaker 2: can also learn about the separate divisions there. at Kloss Financial,
0:44
Speaker 2: how they can help you. Also, if you're an employer,
0:46
Speaker 2: some great opportunities for you at Kloss Financial as well.
0:50
Speaker 2: Speaking of the website, you can schedule a complimentary chat
0:53
Speaker 2: right from klossfinancial.com. Again, that's going to be free to you,
0:57
Speaker 2: or you can give them a call, 608-442-5637. That first appointment,
1:02
Speaker 2: that first conversation at Kloss Financial will be complimentary to you. Again,
1:06
Speaker 2: that telephone number, 608-442-5637. And to join us this morning,
1:10
Speaker 2: love to get you on the air, just call the station,
1:12
Speaker 2: regular number, 608-321-1310. That's 608-321-1310. As mentioned, joined this morning
1:18
Speaker 2: by Eric Schwartz and Nate Bribie. Eric, how you doing
1:21
Speaker 2: this week?
1:23
Speaker 4: I'm doing pretty well, Sean. How are you doing this week?
1:25
Speaker 2: I can't complain. And when I do, nobody wants to
1:28
Speaker 2: hear it. So I just kind of.
1:30
Speaker 4: Fair enough.
1:30
Speaker 1: Yes, exactly. Nate, how have you been? It's been a while.
1:34
Speaker 1: Doing good, Sean. Happy to be back.
1:35
Speaker 2: It's great to have you along. And we've got a
1:37
Speaker 2: great conversation, really important conversation ahead. We're going to be
1:40
Speaker 2: talking estate planning, specifically passing wealth with purpose. And I
1:44
Speaker 2: know for a lot of folks, as we accumulate and
1:47
Speaker 2: really build, we want to leave maybe a legacy. And
1:50
Speaker 2: whether it's for a family or for really important organizations
1:54
Speaker 2: and other things in our life. We really want to
1:57
Speaker 2: benefit them, and we'll talk about some of that stuff
1:59
Speaker 2: this morning on the program. Mention our phone lines are open.
2:02
Speaker 2: I mentioned the website as well, KlausFinancial.com. A feature I
2:05
Speaker 2: didn't mention on the website is the opportunity to listen
2:07
Speaker 2: back to this and previous shows' podcasts as well as
2:10
Speaker 2: subscribe to it right at KlausFinancial.com. That's Klaus, K-L-A-A-S, Financial.com.
2:15
Speaker 2: Speaking of great features, mentioned some of the great features
2:17
Speaker 2: of the website. I haven't mentioned one of the greatest
2:19
Speaker 2: features of the program is your chance to win a
2:21
Speaker 2: $ 25 gift card to Amazon from our friends at Kloss Financial,
2:26
Speaker 2: of course, with the Kloss Quiz Question League. A little tip,
2:28
Speaker 2: listen close to the program, because just about every show,
2:31
Speaker 2: the question and answer to the Kloss Quiz Question League
2:34
Speaker 2: come up during each week's program. And before we start
2:37
Speaker 2: talking about passing wealth with purpose, Eric, let's look back
2:41
Speaker 2: at last week's program and get the Kloss Quiz question
2:44
Speaker 2: and answer there as well.
2:48
Speaker 3: Yeah, last week, Sean, we were talking about employer-sponsored plans.
2:52
Speaker 3: CJ and Aaron were talking about that. And we're talking
2:55
Speaker 3: about encouraging people to participate in their employer plan. So
3:00
Speaker 3: our question was, true or false, the employer match is
3:03
Speaker 3: the only plan design feature that significantly influences employee participation.
3:09
Speaker 4: And the answer to that actually was false.
3:11
Speaker 3: So the match is pretty important, but it's often just
3:14
Speaker 3: one piece of a bigger opportunity. So that was our
3:17
Speaker 3: question for last week.
3:19
Speaker 2: It was a really good program as we talked about, yeah,
3:23
Speaker 2: that the employer match and other important factors when it
3:26
Speaker 2: comes to... getting employees to participate in the 401k programs
3:31
Speaker 2: and other options. And of course, you can listen back
3:32
Speaker 2: to that right online at klossfinancial.com. That's Kloss, K-L-A-S, financial.com.
3:37
Speaker 2: Don't forget, we'll have a question again this week as well.
3:39
Speaker 2: So pay close attention to the program for your chance
3:42
Speaker 2: to win. Today's show, we're talking about passing wealth with purpose.
3:46
Speaker 2: And Eric, many people assume estate planning is simply about
3:50
Speaker 2: deciding who receives what. What does it mean when we
3:53
Speaker 2: talk about passing the wealth with purpose?
3:58
Speaker 3: Yeah, that's certainly one function of estate planning, making sure
4:01
Speaker 3: things go where you want them to go. But I
4:03
Speaker 3: think passing with purpose really means starting with the outcome
4:07
Speaker 3: that you want for the people and the causes that
4:09
Speaker 3: you care about, and then building the legal and the
4:11
Speaker 3: financial structure kind of around that purpose. So starting with
4:14
Speaker 3: the end in mind. Now, for one family, the goal
4:17
Speaker 3: may be.
4:17
Speaker 4: Simplicity, right?
4:18
Speaker 3: Just transfer the assets to a surviving spouse and then
4:21
Speaker 3: equally to the kids.
4:23
Speaker 4: But another family, they may want to protect.
4:25
Speaker 3: A beneficiary who is young or who has special needs
4:28
Speaker 3: or going through a difficult marriage. Someone else, you know,
4:32
Speaker 3: they want to support a charity or help with grandchildren
4:35
Speaker 3: with education. The point here is that an estate plan
4:38
Speaker 3: should really do more than just move money. It should
4:41
Speaker 3: really communicate the intentions of an individual. It should reduce
4:45
Speaker 3: our uncertainty and really just give a practical roadmap to
4:49
Speaker 3: the next generation.
4:50
Speaker 2: Think about having an impact as well and, of course,
4:53
Speaker 2: properly planned and, of course, as planned estate is. really
4:57
Speaker 2: important stuff. So we talked this morning with Eric Schwartz
4:59
Speaker 2: and Nate Brivey. They are our retirement planning professionals from
5:02
Speaker 2: Kloss Financial. Learn more online, klossfinancial.com. That's Kloss, K-L-A-S, financial.com.
5:08
Speaker 2: And Nate, before folks consider some of these advanced strategies,
5:12
Speaker 2: let's kind of get to the basics, talk a little
5:13
Speaker 2: bit about some of the foundational pieces that need to
5:15
Speaker 2: be in place here.
5:17
Speaker 5: Yeah, sure. So the foundation of an estate plan usually
5:21
Speaker 5: includes current legal documents, such as a will, a power
5:24
Speaker 5: of attorney for finances and health care, and perhaps even
5:28
Speaker 5: a trust. Also, you want to make sure that your documents,
5:31
Speaker 5: or excuse me, your accounts have proper ownership, accurate beneficiary designations,
5:36
Speaker 5: and capable people named to carry out the plan. So
5:41
Speaker 5: documents alone are not enough. Families also need to confirm
5:44
Speaker 5: how assets are titled and whether beneficiary forms match the plan.
5:48
Speaker 5: Retirement accounts, life insurance, annuities, and transfer on death accounts
5:53
Speaker 5: generally move according to their beneficiary designations, not simply according
5:57
Speaker 5: to the will. This is why implementation matters. A beautifully
6:01
Speaker 5: drafted trust that is never funded or a will that
6:04
Speaker 5: conflicts with the old beneficiary form can create exactly the
6:07
Speaker 5: confusion the family hopes to avoid.
6:10
Speaker 2: Really important details, too, this morning as we... As Nate
6:14
Speaker 2: did a really good job there, kind of laying out
6:15
Speaker 2: that foundation, talking this week about passing the wealth with purpose,
6:19
Speaker 2: smart estate planning techniques to transfer assets efficiently and provide
6:23
Speaker 2: clarity to the next generation. If you've got a question,
6:26
Speaker 2: love to get you on the air with Eric and Nate.
6:28
Speaker 2: All you got to do is pick up phone dial
6:29
Speaker 2: and 608-321-1310.
6:29
Speaker 1: That's 608-321-1310.
6:33
Speaker 4: 321-1310.
6:33
Speaker 2: We'll get you right on the air with Eric and Nate.
6:37
Speaker 2: Don't forget as well, you can learn about the whole
6:38
Speaker 2: team at Kloss Financial, including Eric and Nate. Just head
6:41
Speaker 2: on over to the website, klossfinancial.com, or give them a call, 608-442-5637.
6:46
Speaker 2: Don't forget, no charge for that initial get-to-know-you appointment at
6:49
Speaker 2: Kloss Financial. It will be complimentary to you. Again, their number, 608-442-5637. So, Eric,
6:56
Speaker 2: let's talk about beneficiary designations. Why are they one of
7:00
Speaker 2: the most important and sometimes... Most overlooked welfare transfer tool
7:05
Speaker 2: or wealth transfer tools. Although I know with my kid,
7:08
Speaker 2: he's probably looking at it like it's going.
7:09
Speaker 1: To be welfare to me, but wealth transfer tools to folks.
7:17
Speaker 3: Yeah, we spend a lot of time talking about beneficiary designations.
7:21
Speaker 3: Not only because they're really simple and they're easy to miss,
7:26
Speaker 3: but because they're really powerful too.
7:27
Speaker 4: I think people often.
7:29
Speaker 3: you know, get so focused on building their estate plan
7:31
Speaker 3: that they think, gosh, as long as I have, you know,
7:33
Speaker 3: this really nicely drafted document like Nate was referencing there,
7:37
Speaker 3: I'm in good shape. But beneficiary designations, they can transfer
7:41
Speaker 3: certain assets directly to people or organizations without a, you know,
7:48
Speaker 3: extensive estate plan. And when you coordinate that properly, that
7:51
Speaker 3: can make the transfer process more direct and a lot
7:54
Speaker 3: easier to administer, even compared to like a will or
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Speaker 3: a trust. Now, common mistakes we see here, not naming
8:02
Speaker 3: a contingent beneficiary, right? So you list a beneficiary who
8:06
Speaker 3: you want to receive your assets, but then you can
8:08
Speaker 3: also list a contingent or secondary beneficiary of who you
8:12
Speaker 3: might want to receive the funds if your primary beneficiary
8:17
Speaker 3: has either passed away or if they just decide, and
8:20
Speaker 3: I know this sounds crazy, but you will have this,
8:22
Speaker 3: especially with spouses that pass away, they'll just claim their
8:26
Speaker 3: interest in that asset. They'll say, I don't want and
8:28
Speaker 3: it actually then transfers to the contingent beneficiary. Another mistake
8:33
Speaker 3: we see is leaving a former spouse or a deceased
8:35
Speaker 3: family member on an account. I've joked about this on
8:38
Speaker 3: the show before. More than once, I have seen clients
8:44
Speaker 3: not get that updated and assets be set to go
8:50
Speaker 3: to a former spouse. Luckily, we caught it and switched
8:52
Speaker 3: it before anything happened, but that is not something that
8:56
Speaker 3: most folks want to have. Another mistake, naming a minor
9:00
Speaker 3: child outright. And now this can be, I mean, it
9:05
Speaker 3: can work. It just is generally a little bit messier
9:09
Speaker 3: and you want to build some structure around that minor
9:11
Speaker 3: child who can't actually own the account. And then the
9:14
Speaker 3: last one here is people assume that if they just
9:16
Speaker 3: update their will, that automatically updates their beneficiaries.
9:20
Speaker 4: Not the case.
9:21
Speaker 3: Your beneficiaries will overrule your will if you have a
9:25
Speaker 3: beneficiary on an account. So We want to make sure
9:27
Speaker 3: we're doing a really good review of these things. And
9:29
Speaker 3: a good review is going to look at every primary
9:32
Speaker 3: and contingent beneficiaries. It's going to look at the percentages
9:35
Speaker 3: assigned to everybody. And, you know, it's going to look
9:38
Speaker 3: at what should happen if a beneficiary dies first.
9:40
Speaker 2: Right.
9:41
Speaker 3: So talking about making sure that we have those contingent
9:43
Speaker 3: beneficiaries in place. So make sure we're reviewing this plan
9:47
Speaker 3: after big life events. Think marriage, divorce, a birth. a death, or,
9:52
Speaker 3: you know, really any meaningful family change.
9:55
Speaker 2: And Erica, as you highlight there, I think for a
9:57
Speaker 2: lot of folks, that's really surprising. We assume that you're
10:00
Speaker 2: is the be all the end all when it comes
10:02
Speaker 2: to these to these designations. And that is not the case.
10:06
Speaker 2: And that's a really, really important point. nuance and part
10:09
Speaker 2: of this conversation as well. As we talk with Eric
10:11
Speaker 2: Schwartz and Nate Bribie, our retirement planning professionals from Klaus Financial. Nate,
10:15
Speaker 2: where can a trust add value beyond simply naming beneficiaries outright?
10:21
Speaker 4: Sure.
10:21
Speaker 5: Such a great question, Sean, that we get from our
10:23
Speaker 5: clients all the time. So a trust can add instructions, timing,
10:27
Speaker 5: and oversight. And let's talk about oversight. So when we
10:30
Speaker 5: say oversight, we mean Someone's going to be around what's
10:33
Speaker 5: called a successor trustee if something happens to you to
10:36
Speaker 5: make sure your wishes are carried out correctly. Now, this
10:39
Speaker 5: could be an individual or a family member or perhaps
10:42
Speaker 5: a corporate trustee, such as a bank or independent trustee,
10:46
Speaker 5: to oversee your wishes. So instead of just giving your
10:49
Speaker 5: inheritance outright one day, which is what a beneficiary does,
10:52
Speaker 5: it says who gets the assets, a trust can direct
10:56
Speaker 5: how the assets are managed and when distributions are made. So,
11:00
Speaker 5: for example, a parent may want to allow for funds
11:02
Speaker 5: to only be used for health, education, support, or a
11:05
Speaker 5: first home, or a modest first car, or until a
11:09
Speaker 5: child reaches certain ages before they get principal distributions. A
11:14
Speaker 5: trust may also help when a beneficiary has special needs,
11:17
Speaker 5: when there is concern about creditors, divorce, addiction problems, or
11:22
Speaker 5: when the family simply wants professional management of complex assets.
11:26
Speaker 5: But a trust should actually solve a real problem, It
11:28
Speaker 5: should not just add complexity simply for the sake of
11:31
Speaker 5: sounding sophisticated. an estate planning attorney can help determine which
11:35
Speaker 5: type of trust, if any, fits the family's goals.
11:38
Speaker 2: Really, really important highlights, some nuances there as well from
11:42
Speaker 2: Nate Bribie, and of course talking with Nate Bribie and
11:44
Speaker 2: Eric Schwartz, our retirement planning professionals from Kloss Financial. Learn
11:47
Speaker 2: more online, klossfinancial.com. That's Kloss, K-L-A-S, financial.com. Their telephone number, 608-442-5637.
11:56
Speaker 2: No charge for that initial get-to-know-you appointment at Kloss Financial.
11:59
Speaker 2: It will be complimentary to you. Again, their number is 608-442-5637.
12:04
Speaker 2: And Eric, bringing you in on this, I know a
12:06
Speaker 2: lot of folks may want to help their children or
12:09
Speaker 2: grandchildren while they're still alive. We'll get into that actually
12:14
Speaker 2: with Eric in just a moment. We'll talk a little
12:16
Speaker 2: bit about that. helping the kiddos and grandkids while they're
12:19
Speaker 2: still alive, and, of course, the lifetime gift fit. And
12:23
Speaker 2: we'll get into that plan in just a moment with Eric,
12:26
Speaker 2: of course, talking this morning with Eric Schwartz and Nate Bribie,
12:29
Speaker 2: our retirement planning professionals from Kloss Financial. We're going to
12:32
Speaker 2: take a short break. In the meantime, I want you
12:33
Speaker 2: to head on over to klossfinancial.com. That's Kloss, K-L-A-S, financial.com.
12:38
Speaker 2: learn all about them. You can also schedule a complimentary
12:40
Speaker 2: conversation right from the website or give them a call 608-442-5637.
12:45
Speaker 2: And Eric, I was going to go to a break,
12:46
Speaker 2: but instead I'm going to go right to you because
12:47
Speaker 2: we're just talking about, you know, folks that may want
12:50
Speaker 2: to help their kids or grandkids while they're still alive.
12:53
Speaker 2: How can lifetime gifting fit into a purposeful plan?
12:58
Speaker 3: Yeah, this is something we talk about all the time
13:00
Speaker 3: with clients. Folks love to be able to, you know,
13:03
Speaker 3: support their kids and grandkids once they've kind of gotten
13:06
Speaker 3: to the point of understanding that they've provided for their
13:09
Speaker 3: own means in retirement. And lifetime gifting is a great
13:13
Speaker 3: option here. So it can allow someone to really see
13:16
Speaker 3: the impact of the gift they give and help family
13:20
Speaker 3: members when the money would be especially meaningful. So think
13:23
Speaker 3: helping with educational costs or a first home or starting
13:26
Speaker 3: a business. And I think this is something that uh, is,
13:32
Speaker 3: is maybe something we're seeing change in the last five
13:34
Speaker 3: to 10 years, this sort of transition to gifting during
13:37
Speaker 3: lifetime versus, um, waiting until someone passes away now for 2026.
13:41
Speaker 3: And we've done shows about this. So, so, um, look
13:44
Speaker 3: back at, at the details, but for, for 2026, the
13:48
Speaker 3: federal annual gift tax exclusion is $ 19, 000 per recipient. A
13:52
Speaker 3: married couple may generally combine their exclusions and give $ 38, 000
13:55
Speaker 3: per recipient. I'm assuming you're following all the rules there.
14:01
Speaker 3: Gifts above that annual exclusion, they're not automatically subject to
14:05
Speaker 3: a gift tax, but they may require a gift tax return.
14:09
Speaker 3: And they may use part of that giver's lifetime federal
14:12
Speaker 3: gift in a state tax exclusion. So, again, we've done
14:14
Speaker 3: shows on this before. It's really complicated. Go back and
14:17
Speaker 3: listen to that where we really dive into the details
14:19
Speaker 3: on gifting.
14:21
Speaker 2: And that is, as you mentioned, we've done shows on that.
14:23
Speaker 2: It's a very fascinating part of the work that you
14:27
Speaker 2: guys do at Gloss Financial and a really important part
14:29
Speaker 2: as well. As far as gifting and estate planning, of course,
14:31
Speaker 2: you can listen back to that and previous shows, podcasts,
14:33
Speaker 2: including this one right at KlausFinancial.com. That's Klaus, K-L-A-A-S, Financial.com.
14:38
Speaker 2: You can subscribe to the podcast as well right from
14:40
Speaker 2: the website, KlausFinancial.com. You can schedule a conversation, a complimentary
14:45
Speaker 2: chat right at KlausFinancial.com, or you can give them a
14:47
Speaker 2: call right at the office, 608-442-5637. No charge for that
14:51
Speaker 2: initial get-to-know-you appointment at KlausFinancial.com. It will be complimentary to you. Again,
14:55
Speaker 2: their number is 608-442-5637. We'll continue our conversation with Eric
15:00
Speaker 2: and Nate. We will do that next as Money in
15:02
Speaker 2: Motion with Kloss Financial continues right here on 1310 WIBA.
15:20
Speaker 2: Talking this morning with our retirement planning professionals, Eric Schwartz
15:22
Speaker 2: and Nate Bribie. Of course, they come to us from
15:25
Speaker 2: Klaus Financial, the website, klausfinancial.com. That's Klaus, K-L-A-A-S, financial.com. Great
15:32
Speaker 2: website to learn all about Klaus Financial, learn about the team,
15:34
Speaker 2: their separate divisions, listen back to this and previous shows,
15:37
Speaker 2: podcasts as well, all available to you at klausfinancial.com. You
15:40
Speaker 2: can also schedule a complimentary chat right from the website,
15:44
Speaker 2: or you can pick up the phone, give them a call, 608-442-5637.
15:48
Speaker 2: That initial get-to-know-you appointment at Colossus Financial. It's not going
15:51
Speaker 2: to cost you a thing. It will be complimentary to you. Again,
15:53
Speaker 2: you can make that appointment either online at colossusfinancial.com or
15:56
Speaker 2: give them a call, 608-442-5637. four, four, two, five, six, three, seven,
15:59
Speaker 2: talking this week about passing wealth with purpose. And, and Nate,
16:04
Speaker 2: I think a lot of us then think, well, this
16:06
Speaker 2: is Eric was talking earlier in that last segment, just
16:09
Speaker 2: about some of the exclusions and some of the, some
16:12
Speaker 2: of the, the, the tax conversation folks will think, well, well,
16:15
Speaker 2: cash gifts. I mean, they're gotta be the most tax
16:18
Speaker 2: efficient assets to transfer right or.
16:21
Speaker 1: Wrong on that one.
16:23
Speaker 5: No, I mean, the type of asset does matter. So,
16:25
Speaker 5: you know, cash generally comes to mind for folks.
16:27
Speaker 4: But, of course, you can.
16:28
Speaker 5: Always do highly appreciated assets as well, such as land or,
16:33
Speaker 5: you know, appreciated stock in a brokerage account or something
16:36
Speaker 5: like that. That may help as well. Now, highly appreciated
16:39
Speaker 5: assets given during the life generally carry the donor's cost
16:42
Speaker 5: basis to the recipient. So by contrast, if those assets
16:46
Speaker 5: stay in your estate and you die with them, they
16:49
Speaker 5: generally receive an income tax basis adjustment. So a well-intended
16:54
Speaker 5: lifetime gift of appreciated stock or real estate, farmland, for example,
16:58
Speaker 5: there too, can therefore create a much larger future capital
17:02
Speaker 5: gains bill for the recipient. But on the other hand,
17:05
Speaker 5: if that asset is expected to appreciate significantly, it may
17:09
Speaker 5: be a good time to do a lifetime transfer to
17:13
Speaker 5: the right recipient there. Now, this, of course, depends on
17:17
Speaker 5: the best choice, depends on the basis, the expected growth.
17:20
Speaker 5: income needs, estate tax exposure, and the recipient situation. Now,
17:24
Speaker 5: Eric's going to talk a little bit about the federal
17:26
Speaker 5: estate tax, but down here in Illinois, it's much more
17:29
Speaker 5: prevalent for our clients with only a $ 4 million exemption
17:34
Speaker 5: down here. So a lot of times we have folks
17:37
Speaker 5: like actually needing to get highly appreciating farmland out of
17:40
Speaker 5: their estate quite earlier in their seventies, for example, or
17:44
Speaker 5: employer stock that they may have owned for generations or
17:48
Speaker 5: out of their estate sooner just to get that future
17:50
Speaker 5: appreciation out of their estate. So they're not paying the
17:53
Speaker 5: state of Illinois an estate tax if something happens to them.
17:56
Speaker 2: Really important to be strategic with this stuff as we
17:58
Speaker 2: talk this morning with Nate Bribey and Eric Schwartz, our
18:01
Speaker 2: retirement planning professionals from Kloss Financial. Again, the website klossfinancial.com.
18:05
Speaker 2: That's Klaas, K-L-A-A-S, financial.com. And Eric, retirement accounts are often
18:11
Speaker 2: a pretty significant and major part of family wealth. Are
18:15
Speaker 2: there some special planning issues that come with passing on
18:19
Speaker 2: those assets?
18:22
Speaker 4: Well, of course there is. There has to be, right, Sean?
18:25
Speaker 1: It would be great if you came back and said, nope.
18:27
Speaker 4: Next question. Nope, super simple here.
18:31
Speaker 3: No, retirement accounts, those are going to require their own
18:34
Speaker 3: strategy because they generally transfer through beneficiary designations, and then
18:38
Speaker 3: distributions are generally taxable to the recipient. So many non-spouse
18:43
Speaker 3: beneficiaries are subject to a 10-year distribution period for inherited
18:47
Speaker 3: retirement accounts, and the timing of these withdrawals can affect
18:51
Speaker 3: your taxable income. So if you're leaving a large traditional
18:55
Speaker 3: IRA account, to beneficiaries, that's much different from leaving cash
19:00
Speaker 3: or a brokerage account or a Roth IRA. So we
19:03
Speaker 3: need to be a little bit more strategic when we're
19:05
Speaker 3: thinking about passing retirement accounts along.
19:07
Speaker 2: Really important nuances there and talk about that strategy. Nate,
19:12
Speaker 2: we'll talk too about Roth conversions come up there. How
19:16
Speaker 2: can they become part of a wealth transfer conversion?
19:21
Speaker 1: Yeah, it does matter.
19:22
Speaker 5: So, I mean, you know, for most folks that have
19:24
Speaker 5: worked for their wealth, they may have pre-tax 401ks or IRAs.
19:28
Speaker 5: And generally, honestly, those aren't a great asset to leave
19:31
Speaker 5: to kids just because they're going to have to pay
19:33
Speaker 5: income tax on those at some point. So what a
19:35
Speaker 5: Roth conversion does is that that shifts the income tax
19:38
Speaker 5: from the next generation to the current owner. So the
19:40
Speaker 5: current owner decides to pay tax on the pre-tax dollars
19:44
Speaker 5: when they convert them and put them in a Roth IRA.
19:47
Speaker 5: Then when the children, in most cases, inherit the Roth IRA,
19:50
Speaker 5: those are generally income tax-free. So if you should do this,
19:54
Speaker 5: the decision depends on current and future tax brackets, which
19:57
Speaker 5: is an educated guess. Other Medicare premiums, Social Security taxability
20:02
Speaker 5: come into play if you decide to pay that tax
20:05
Speaker 5: from cash on hand or withhold from the conversion. If
20:09
Speaker 5: you intend to give to your church or charity in
20:11
Speaker 5: your 70s, it may not make as much sense to
20:13
Speaker 5: do large conversions. And also the tax situation of the beneficiary.
20:18
Speaker 5: If your kids are high income earners and they would
20:21
Speaker 5: pay at 32%, but you can convert at 12%, maybe
20:24
Speaker 5: it's a better deal for mom and dad to convert.
20:26
Speaker 5: So it all depends on the situation. And there's a
20:31
Speaker 5: lot of different multi-year conversion strategies that we look at
20:34
Speaker 5: doing 20 or 30,000 in a few years and later
20:37
Speaker 5: doing larger conversions. So case-by-case strategy that we look at
20:40
Speaker 5: each year for our clients.
20:41
Speaker 1: You talk about church and charity.
20:43
Speaker 2: We're going to get into that part as well for
20:45
Speaker 2: folks that are looking at charitable giving and as part
20:48
Speaker 2: of their legacy. We'll talk about some of the factors there.
20:51
Speaker 2: We'll talk with Eric and Nate about that in just
20:53
Speaker 2: a moment. In the meantime, I hope you have a
20:55
Speaker 2: chance to check out the website, KlossFinancial.com. That's Kloss, K-L-A-S, Financial.com.
21:00
Speaker 2: And their telephone number, 608-442-5637. Don't forget, no charge for
21:05
Speaker 2: that initial get-to-know-you appointment at Kloss Financial. It will be
21:07
Speaker 2: complimentary to you. We'll continue our conversation with Eric and Nate.
21:10
Speaker 2: We will do that next as Money in Motion with
21:13
Speaker 2: Kloss Financial continues right here on 1310 WIBA. Talking with
21:21
Speaker 2: our retirement planning professionals this week, a practical roadmap, talking
21:25
Speaker 2: about passing wealth with purpose with Eric Schwartz and Nate Bribie.
21:29
Speaker 2: A lot of great information, as always, in the program.
21:31
Speaker 2: Don't forget, if you miss any part of this show,
21:33
Speaker 2: you want to subscribe to the podcast, listen back, all
21:35
Speaker 2: that stuff. It's available to you at KlausFinancial.com. That's Klaus, K-L-A-A-S, Financial.com.
21:41
Speaker 2: And their telephone number is 608-442-5637. As we talk about
21:46
Speaker 2: passing the wealth with purpose, Eric, a big part of
21:48
Speaker 2: this is, of course, I think for a lot of
21:50
Speaker 2: folks is charitable giving. What if that is part of
21:52
Speaker 2: somebody's legacy? What do they need to be aware of there?
21:57
Speaker 3: Yeah, so assuming that charitable giving is part of your legacy,
22:01
Speaker 3: obviously your estate plan is going to need to say yes.
22:04
Speaker 3: who you want to give to and, you know, how
22:07
Speaker 3: much and that sort of thing. But the really important
22:09
Speaker 3: thing to think about is what types of assets we're
22:12
Speaker 3: actually using to give to charitable organizations. Okay, so let's
22:16
Speaker 3: just think about this for a second. If you name
22:18
Speaker 3: a qualified charity as beneficiary of your traditional retirement account,
22:22
Speaker 3: your tax deferred account, that can be a really tax
22:26
Speaker 3: efficient way to give because the charity generally does not
22:29
Speaker 3: have to pay income tax on the distributions from that account.
22:32
Speaker 3: And that may allow you to leave other more tax
22:35
Speaker 3: efficient assets to family members who would potentially have to
22:39
Speaker 3: pay income taxes on those distributions. Some other options for
22:44
Speaker 3: including a charitable request in your will or trust is
22:48
Speaker 3: a donor advised fund or a charitable trust. So these
22:51
Speaker 3: are going to be some more advanced planning techniques. The
22:54
Speaker 3: right choice here really is going to depend on your
22:56
Speaker 3: desired level of control timing, your tax situation, how much
23:00
Speaker 3: you actually want to give. But these are great things
23:03
Speaker 3: to be thinking about when we're reviewing the estate plan.
23:05
Speaker 2: And feel good stuff, too. I think a lot of
23:08
Speaker 2: folks just feel great to know that they have that
23:10
Speaker 2: option and great opportunities to learn more online.
23:13
Speaker 1: KlausFinancial.com. That's Klaus, K-L-A-A-S, Financial.com.
23:17
Speaker 2: And Nate, purposeful planning also seems to require a bit
23:21
Speaker 2: of communication. How much should parents be sharing with the
23:24
Speaker 2: next generation?
23:26
Speaker 5: So that's a good question, Sean, because we really encourage families,
23:29
Speaker 5: our clients as the age or at any age, honestly,
23:31
Speaker 5: just to have that conversation with their adult children. So
23:34
Speaker 5: they don't necessarily need to disclose every dollar, but at
23:37
Speaker 5: least some communication can prevent confusion and conflict. So, you know,
23:41
Speaker 5: even having a spreadsheet with a list of all your
23:43
Speaker 5: account numbers, you know, custodians, who to call, phone numbers,
23:47
Speaker 5: and you don't have to put dollars on there, but
23:49
Speaker 5: verified beneficiaries just say, here's what I got, right? So
23:52
Speaker 5: And at a minimum, people serving as executor, trustee, or
23:55
Speaker 5: power of attorney should know that they have been named
23:57
Speaker 5: and understand where the important documents and contact information are kept.
24:01
Speaker 5: And honestly, even if they even want that role or
24:03
Speaker 5: understand what they're doing, because I've had some interesting experience
24:06
Speaker 5: with that lately too. But adult children may also benefit
24:10
Speaker 5: from understanding the values behind the plan, especially if inheritance
24:14
Speaker 5: will not be equal or assets will remain in trust.
24:17
Speaker 5: So certainly having a family meeting can explain the purpose
24:21
Speaker 5: without turning the conversation around. into negotiation, clarity may be
24:26
Speaker 5: one of the most valuable parts of the entire plan.
24:28
Speaker 2: Speaking of family meetings, sometimes the taxman feels like a
24:31
Speaker 2: member of your family, and Eric, federal estate tax obviously
24:36
Speaker 2: gets a lot of attention in these conversations. What should
24:38
Speaker 2: folks understand about the current rules without getting kind of
24:42
Speaker 2: lost and bogged down with the numbers?
24:45
Speaker 3: Yeah, I don't know if I would say they're the
24:46
Speaker 3: most popular members of your family, but they may feel
24:49
Speaker 3: like part of the family for sure.
24:50
Speaker 5: Yeah.
24:52
Speaker 3: So just real briefly here, I was mentioning the federal
24:56
Speaker 3: gift and estate tax exclusion earlier at the federal level.
24:59
Speaker 3: Nate was touching on it at the state of Illinois level.
25:02
Speaker 3: But just to put a little bit more clarity around that,
25:05
Speaker 3: that exclusion amount is $ 15 million per individual or potentially
25:10
Speaker 3: $ 30 million for a married couple with proper planning. And
25:16
Speaker 3: federal estate tax will not apply to most families, obviously.
25:20
Speaker 3: These are huge numbers. But that does not mean it's unnecessary.
25:24
Speaker 3: Number one, you may live in a state where there
25:29
Speaker 3: is a state-level estate tax, like Nate was.
25:31
Speaker 4: Talking about with Illinois.
25:32
Speaker 3: You still need to be thinking about income taxes, beneficiary rules, probate, incapacity,
25:38
Speaker 3: business succession, family dynamics.
25:41
Speaker 4: That's a big one.
25:42
Speaker 3: And married couples with larger estates should also understand that.
25:47
Speaker 3: what's called portability, which can help you preserve a deceased
25:50
Speaker 3: spouse's unused federal exclusion when the required estate tax return
25:56
Speaker 3: is filed and the election is made. Again, we have
25:58
Speaker 3: done shows on this and really gotten into the details
26:01
Speaker 3: of this, so refer back to those. But the federal
26:05
Speaker 3: estate tax, it kind of has gotten ignored in recent
26:09
Speaker 3: years just because the exclusion has gotten so high, but Again,
26:13
Speaker 3: there may be something at the state level or, you know,
26:16
Speaker 3: down the road that that exclusion amount could change as well.
26:19
Speaker 2: It feels like, Eric, and this we're talking maybe a
26:22
Speaker 2: decade or more ago, I feel like we talked about
26:25
Speaker 2: that number being much lower as far as what was
26:28
Speaker 2: what that exclusion number was. And I remember a lot
26:30
Speaker 2: of folks, you know, especially folks with like farmland and
26:33
Speaker 2: other things getting being really cued in on that number
26:37
Speaker 2: and really important stuff. Speaking of listening back to podcasts,
26:40
Speaker 2: as Eric mentioned, you can always check us out. KlausFinancial.com.
26:43
Speaker 2: That's Klaus, K-L-A-A-S, Financial.com. For a wrap this week, Nate,
26:47
Speaker 2: I did want to ask you then, of course, the
26:49
Speaker 2: importance of reviewing your plan. How often should that be done?
26:53
Speaker 4: Sure, yeah.
26:54
Speaker 5: A good rule of thumb is every five years or
26:57
Speaker 5: sooner if there's been a major change in family, finances, law,
27:00
Speaker 5: or the people named to serve in those trustees or
27:03
Speaker 5: executor roles. So this could include a marriage, divorce, birth, death, retirement, relocation,
27:09
Speaker 5: business sale, or significant change in net worth. or also
27:13
Speaker 5: a beneficiary developing new financial or health needs. So be
27:17
Speaker 5: sure to review the legal documents, account ownership, beneficiaries, insurance,
27:22
Speaker 5: tax assumptions, and the decision makers. An estate plan is
27:25
Speaker 5: not a one-time transaction. It is an ongoing part of
27:28
Speaker 5: the financial plan.
27:30
Speaker 4: Important to review.
27:31
Speaker 2: And speaking of important things, I hope you have a
27:32
Speaker 2: chance to check out the website, KlausFinancial.com. That's Klaus, K-L-A-A-S, Financial.com.
27:37
Speaker 2: Great opportunity to get to know the team. Of course,
27:38
Speaker 2: you can schedule a conversation right from the website. You
27:41
Speaker 2: could submit a question to be answered as well on
27:43
Speaker 2: the program in the Money in Motion listener question corner.
27:46
Speaker 2: Just head on over to KlausFinancial.com. That's Klaus, K-L-A-A-S, Financial.com. Also,
27:51
Speaker 2: while you're there, as I mentioned, you can schedule that
27:52
Speaker 2: complimentary conversation right from the website or give them a
27:55
Speaker 2: call right here in Madison, 608-442-5637. That first appointment at
28:00
Speaker 2: Kloss Financial will be complimentary to you.
28:02
Speaker 1: Again, their number, 608-442-5637.
28:03
Speaker 2: You want to hold on to that telephone number because
28:07
Speaker 2: it's time now for the Kloss Quiz Question of the Week.
28:08
Speaker 2: It works like this. In just a moment, I'll ask
28:10
Speaker 2: you the Kloss Quiz Question of the Week. You will
28:12
Speaker 2: then have 30 minutes from the end of today's program
28:14
Speaker 2: to call the Kloss Financial office right here in Madison
28:16
Speaker 2: at 608-442-5637.
28:17
Speaker 4: 442-5637.
28:18
Speaker 2: If you are the first caller with the correct answer,
28:21
Speaker 2: you win this week's prize, which is a $ 25 gift
28:24
Speaker 2: card to Amazon. This week's class quiz question week is this,
28:28
Speaker 2: true or false? If your will says one thing, but
28:32
Speaker 2: a retirement account beneficiary form says something different, the will
28:37
Speaker 2: generally controls where the retirement account goes. Is that true
28:42
Speaker 2: or is that false? If your will says one thing
28:44
Speaker 2: and a retirement account beneficiary form says something different, the
28:47
Speaker 2: will will generally control where that retirement account goes. Again,
28:51
Speaker 2: is that true or is that false? Telephone number 608-442-5637.
28:54
Speaker 2: First call with the correct answer, win that $ 25 gift
28:57
Speaker 2: card to Amazon. And again, that's Kloss Financial's office right
29:00
Speaker 2: here in Madison, 608-442-5637. Eric, Nate, it's always great chatting
29:06
Speaker 2: with both of you. You guys enjoy this beautiful day.
29:08
Speaker 1: Thanks, Sean.
29:09
Speaker 4: Take care.
29:10
Speaker 1: Take care, guys. News comes your way next right here
29:12
Speaker 1: on 1310 WIBA.
29:14
Speaker 2: This is Money in Motion with Kloss Financial Asset Advisors, LLC,
29:18
Speaker 2: a registered investment advisor registered with the SEC. The contents
29:23
Speaker 2: of this show are for informational purposes only and should
29:26
Speaker 2: not be considered individual investment advice.
29:28
Speaker 1: Kloss Financial does not offer tax or legal advice.
29:32
Speaker 2: Any opinion offered during the course of this show is
29:35
Speaker 2: the opinion of that particular investment advisor representative and not
29:39
Speaker 2: necessarily the opinion of Kloss Financial.