Limitless Learning – Learn from the Experts

limitless learning Where Will My Treasures Go?

Human beings have been collecting things since the dawn of civilization. We collect coins, stamps, artwork, comic books, dolls, firearms, figurines, baseball cards, memorabilia, china, automobiles, jewelry, wine, timepieces, antiques, and so on.

How do you make sure your valuable and treasured collectibles will not wind up in the attic, a landfill, or a shelf in a local thrift shop? Or worse yet, become the subject of family strife and rancor? You need a written and legally enforceable estate plan that begins with a complete and thorough discussion about your wishes and concerns regarding your property, the future, and all your treasures, especially your family.

Consider the following:

Would it be best to transfer your collection during your lifetime or after death? What happens to your collection if you become incapacitated? Should you leave your collection to a charity or an individual? Do you want your collection sold and all the proceeds divided amongst your heirs? Are you concerned about protecting your family’s privacy; or are you comfortable with the details of your collection becoming a public record? Will a handwritten list referenced in your will be sufficient to transfer your treasures? Would it be best to transfer your collection to a Trust that plans for incapacity, protects privacy and assures that a qualified person distributes your property in accordance with your detailed instructions? If you want your grandson to have your coin collection, or your niece to inherit your artwork, you need to make your wishes known in a properly drafted and executed Will or Trust Agreement. If you die without a Will, the Court will appoint someone to administer your estate after your death. Family disputes over personal property will typically be resolved by an order to sell your personal property, including your collections, at a public auction, so the net proceeds can be divided amongst your heirs. To ensure that your treasured collectibles end up where you intend, reach out to an experienced estate planning attorney for help.

Louise Paglen, Estate Planning Attorney

The McIntosh Law Firm, P.C. McIntoshLawFirm.com

True Wealth– Pursue It Means Go!

As a child, I remember hearing that one of my relatives had won their state lottery. While it did not have a large effect on their lifestyle, it certainly was a stroke of luck. Though the outcome of winning was “lucky” the activity that led to the win is the basis of my focus in this first quarter of 2021 for True Wealth. Let me be more specific.

Dream It - the January focus: Who would purchase a lottery ticket if they did not dream of winning it? My relatives imagined a different life for themselves due to the new found wealth they pictured they could have from winning it.

Plan It - the February focus: They had to determine steps and consider their options. In this case buy the ticket, which may not have been that complicated but still had to exist.

Finally, Pursue It – this month’s focus. They had to commit to and actually take action. Consider that in almost every sports race, whether horse, car or human, the word GO (or some kind of start indicator) starts the action.

In your personal race to financial wellness, make this month your commitment to GO! Commit to start, to review your plan, and your progress on a monthly basis so that you can make adjustments as needed. Commit to increase your knowledge and become more educated about financial issues that may impact your wellness plan. Commit to a positive attitude because bumps will be encountered. And lastly, commit to celebrate your success as you move closer to your goals.

Whether you like the phrase one foot in front of another, one hand over the other, travel the road one mile at a time, or my favorite, a pizza is eaten one slice at a time, financial wellness is an empowering journey not a moment in time. It is a trip meant to be traveled with the help and support of others and controlled by you.

“The way to get started is to quit talking and begin doing.” – Walt Disney

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC

Jeffrey Karp, CLU®, ChFC®, CASL® founder of Karp Financial Strategies and is a registered representative of LPL Financial. More information and his blog, Permission GrantedSM can be found at www.karpfinancial.com.

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What’s the difference between qualified and non-qualified money?

The financial planning community can be a confusing place even for experienced investors. One of the most common questions we’re asked is the difference between qualified (tax deferred) accounts, and non qualified (taxable) accounts. These are important questions, so let’s review this so you’re better equipped to understand how each account can work for you.

Qualified accounts are most commonly your employer sponsored retirement plans such as 401(k)’s 403(b)’s, 457(b)’s or even your traditional IRA. There are two primary benefits to qualified accounts.

First, contributions to your qualified plan are deducted from your taxable income in the year that you make the contribution.

Second, the growth on the account grows tax-deferred until you take money out. This offers compounded growth on your investments, which offers significant growth potential over time.

But, you trade liquidity and flexibility for the tax advantages. They’re considered retirement accounts for a reason. The government has attached restrictions to ensure you don’t touch them before you retire. If you need money out of your retirement account before you reach age 59 ½, the government penalizes you an additional 10% for taking the early withdrawal (plus the tax owed on the withdrawal).

The second issue is the IRS forces you to begin taking money from these accounts at age 72. They call this your Required Minimum Distribution, and they even tell you how much you have to take. In the event that you don’t meet the requirement, you’ll face a penalty of 50% on the withdrawal and still owe taxes on the distribution.

So the reality of your plan is that you have a 12.5 year planning window where you have control over whether you take money out of your account or not, without penalty.

This brings us to #3 - the future tax implications of your accounts. The tax that you owe on the withdrawal will be based on your tax rate when you take the money out. Guidance tells you that you’re likely to experience a lower tax rate in retirement. We question the likelihood of that. From a lifestyle standpoint, do you think you’ll want to take a pay cut in retirement?

Moving on to non-qualified accounts which don’t receive preferential tax treatment today. No deductions for the money you contribute, and no deferral on the growth you earn. There’s no restriction on how much or how little you decide to invest, and no limitation on what or when you take it out. The money that you use to invest in non-qualified accounts is the money that shows up from your paycheck and ends up in your bank account, so you’ve already paid tax on it.

These dollars that you reinvest establish your “cost basis”. This is the money recognized by your investment company as dollars that have already been taxed, to make sure you won’t be taxed on them again. When you go to take money out of these accounts, you’ll be taxed on the growth in the account, but not on your cost basis.

Finally there’s a third type of account - tax-exempt accounts. These are accounts that offer tax-free distributions. These are your Roth 401(k)’s Roth IRA’s, and HSA’s. There are also provisions in the tax code that exempt certain permanent life insurance from taxes. These accounts can be valuable if you think taxes might be higher in the future, because they can take tax risk and uncertainty off the table.

A properly constructed financial plan should seek to achieve tax-diversification. With proper balance, you have the opportunity to potentially cut your tax bill in retirement - keeping more of your money where it belongs, in your pocket.

If you have questions about your personal tax strategy, we invite you to schedule a 30-minute discovery call by visiting www.twwcall.com.

Derek Bostian, CFP® Professional | Jason Rindskopf, WMCP® Two Waters Wealth Management | 704.275.2500