Estate Planning & Elder Law Hour - 3.3.18

Saturday, March 3rd

I believe that Estate Planning is here to give you control over who is in charge of taking care of you and control over how you take care of your family after you are gone.  Without proper planning you can lose control and your family will not be able to take care of you as easily, or you will not leave your estate for the benefit of your family according to your wishes.

I had an experience in my own family where during a crisis, we lost control over where my grandmother was going to receive care.  This caused my grandparents in their last years to be separated by a long distance after more than 60 years of marriage.  I believe that my grandparents have drawn me into the field of estate planning and elder law to affect the lives of my clients so that they can have a different experience at the end of their lives than my grandparents did.

I place a special emphasis on protecting the assets of aging loved ones and educating families about complicated laws and the best options available to them.  I am passionate about helping others preserve their money, avoid probate, and achieve lifetime estate planning goals. 

I started my post law school career working for a large financial company helping financial planners with advanced estate planning and tax planning. I utilize this financial services experience to bring a different perspective to my estate planning and elder law clients.  My number one priority is to educate and empower clients to make the best decision for them and their family; there is no one way to do things.  I strive to give clients options and let them choose which direction they want to go.  I like to say, “If you don’t ask yourself the right questions, you never get the right answer for you and your family.”

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Transcript - Not for consumer use. Robot overlords only. Will not be accurate.

This is the estate planning an elder lauer with skip Reynolds. Are we dive into wills trusts powers of attorney and so much more now here's your host skip Reynolds. Welcome everybody to the estate planning an elder law hours this fine Saturday hopefully year doing a fantastic really appreciate you listening. Again on skip Reynolds. The purpose of this showed just to kind of laid out really fast for use to make sure that. You guys think about something that maybe you have never thought about so unique is correct choices across the board. Today my goal is to challenge. You're thinking about higher rates I've talked about it in the past but I'm gonna talk about today. What I see as common mistakes that people make with their higher rates. And in some of these mistakes are not your fault. Some of on all our old thinking some of them are. Maybe you question what's going on with taxes. Or your tax rates or we don't want it ever pay any taxes I know that's a big one for people. But I'm gonna challenge you today folks. Because I think that these are mistakes. That. Many many people make and actually what ends up doing is it could cost you more money in the long run. But it also from the estate planning perspective. Gives you less control over what's going on. While you're alive but also after you're gone and you're leaving these IRAs and 401 case to your family so. Just real fast as I talk about ire race I'm specifically talking about retirement accounts that are tax deferred. I'm not talking about Roth firings. I'm talking about regular IRAs or one case for a three d.s all of those types of accounts so just to kind of put that out there. Or us. But I'm gonna talk about these five common mistakes that I see in my practice all the time and I am gonna challenge in particular on this first one. Your thinking. I'm gonna challenger financial advisors thinking potentially I'm also gonna potentially challenge you work accountants thinking or maybe you're your own account. Because I think sometimes. We. And that's the only way in our minds. So. What I wanna start out with the first common mistake that I see people make with their higher rates. Are trying to avoid the taxes. Now. A what do I mean by that well. Most of us since the mid 1980s. That's about the time. We started borrowing k.s and that was the big switchover from having pensions and so forth so. For most of us if you've been. Working since the eighties you've been saving into their retirement account of some sort. But we've been told all these years that. It would be better if say we're making 4050000. Dollars a year that if we took some of that money included over into our 401K. Or if we took that money included in two and a higher rate now IRAs have lesser limits for how much you can put into them. But we were told to do this indicate tax deferred we can lower our income or taxable income in that particular year so that we can. Have you know let's see we're putting 5000 dollars into that. Retirement account so that we get all 5000 dollars into debt retirement account because depending on your tax bracket. If you put 5000 dollars into UA. Non retirement account you may not actually be putting 5000 dollars because you had to pay some taxation on net income as you've earned it. And I think when we started way back in the eighties with these types of things. It made a lot more sense because it tax brackets were pretty high. You know I was in paying taxes back in the eighties but I looked at those tax rates and they were higher than they are last year. This year. And really since 2001. We've had pretty much the lowest tax brackets. In the history of the US. But we still were in this stinking up tax deferred tax deferred tax refer. And and that's been the common knowledge that's what the advisors have been taught that's what CPAs I mean CPAs goals. Are to make sure that you pay as little taxes as possible. All one of those features is to not take anything out of your higher rates or to not. You know or to put money into your I raised to lower your income tax. And so we've we've been taught this thinking and we don't want to pay the taxes now. Now we're immunity challenge you is we just change the tax rates. Starting January 1 of this year. This runs out in 20/20 five. What are the tax rates going to be in the future after 20/20 five. I have no idea you have no idea your advisors have no idea. You're CPAs have no idea congress has no idea. I heard one congressperson say well hopefully twenty point five we can fix it we can you keep things the way they are now. Well. This sounds all well and good but. It depends on who's running in Washington. It depends on what's the environment then it depends on our deficits it depends on so many question marks. And so trying to plan for the future with your retirement accounts. In my opinion is just one gigantic question mark. How much are you actually going to pay on that money as you withdraw. And it's a gigantic question mark. But I can tell you what it's gonna be right now. And I can tell you historically speaking we are in if not the lowest one of the lowest tax. Brackets that we've ever seen. But yet we still have this stinking up oh I got to grow this account I don't ever want to take out more than my required distribution once they turn seven unit. And and we pushed out this problem. 'til later on disk and ignore this prom I don't really want them money I don't really need them money right now I'm just gonna let it keep growing. Now the problem is is let's say that your IRA grows to 750000. Million doesn't matter the number. That is not how much money you actually have in that account. It looks like it on paper but you get the nice little statements as all of got a million dollars in here. But you really don't have a million dollars nor are you passing a million dollars to your spouse you're married or to your children or other beneficiary yours. Because Uncle Sam will get his cut. When he gets from you or whether he gets it from somebody else he will get his cut of that money at some point in the future. And we don't know how much set cuts going to be. I beginning a 25% so is that million dollars now 750000. Are they gonna get 20% 15% 30%. I don't know because I don't know your tax rickets in I don't know the tax brackets of your ears. One thing that I saw here recently. With somebody and I guess I knew it but until it hit me in the face. It it didn't really resound in my mind. So I have a client who lost their spouse last year. So 2017 will be the final year and if she were to remarry which I'm not sure she will or not. Is she could file married. Well filing married or income purposes. It's those thresholds are much higher. Essentially doubles those threshold so here in 2018. I was talking with her just a couple weeks ago. She was telling me well all of this IRA money rolled over from her husband she was younger than him rolled over from her husband was she's over seventy and a half. What she's gonna have to take our MD's now granny she was slightly younger than her husband so the aren't deep percentage will be less. But now all of that diary money at her percentage. With that aren't geez get a kick her to a higher tax bracket did she was when she was Mary Fannie jointly. So in fact her tax bracket went up when he died. And now more resources to her Social Security's gonna get taxed she's gonna pay more cents on the dollar. On those warranties or any other withdrawal from those accounts. In effect. The IRS. Won that game with her. As she can go and take more but she's going to pay more cents on the dollar that she would have had her husband lived in between eighteen or beyond. Because her tax status has now changed. So pushing it off to a leader. Every dollar that she takes out of that account. Our dear otherwise. Will be paying. More cents on the dollar then she would have if data taken more and 2017 year he died or more in 20162. Years before Rita. And so one. And yet we have this. Kind of long term thinking well I need this money don't want this money set aside but we may be sometimes miss something right in front of us. This could actually make that money worth more. Long term if we know that there's going to be some taken out. Should we not take the opportunity if it presents itself. To get more cents on the dollar because that dollar you have in that account is not worth a dollar. It's worth question marker axe if you're a mathematician. What about when you start taking these aren't these there're many of my clients that are running into that when they turn seven and a half. Magically. More of their Social Security is being taxed. So some of you know this or some of you may not know this but if you make over certain thresholds. If you're a married couple and you make. Believe a got to look at different this year refer last year he made over about 3435000. Dollars. And they calculated all different ways of not gonna go through that if you made over that amount. Every dollar that you get from Social Security. 85%. Of those dollars will be taxed now it's not tax it 5% is tax that your tax bracket. But 85% of the benefits you receive from Social Security. Is taxable so if you made a thousand dollars from Social Security 850 dollars of that is now taxable. At your income tax rate. So what happens to many my clients is they've got. Their Social Security is their main source. Baby don't need more than that because they've got their house paid off and other. Things going for them. But now they get starting to get hit with these armed east and the aren't easy increases you know every year that you get older the percentage increases slightly. So now you've lost control now you may start paying other taxes that you didn't have to pay prior to turning seven and a half. Because now your Social Security's going to be taxed more because that our. And a lot of people. Maybe don't even consider that it till it affects them. So in my opinion in some ways. After 59 and a half on him talk about that here in the second. After 59 and a half. You have an opportunity until seventy how the other eleven year window to taxed playing your IRA money. If you have the ability to do it. He words there if you have the ability to do it some people you don't gain anything by taking more but there are many of us that you deal. But yet we don't do it because we've been taught tax deferred tax deferred tax defer. And then all the sincerity and a half happens now BI arrests. Takes control and you've lost some level of control over the taxation on your money as you receive. So wanna give you an example of kind of what I'm talking about here so. We'll just use the name that these are mr. and mrs. Smith. So they've got an irate with about a 100000 dollars in it. The R&D coming out of it this year would be about 3950. Dollars. They have in come from their Social Security that's their main source of income. 27950. Dollars. Of that income because of San reductions and other kinds of things that's just say that they're taxable income is 111150. So that's all the amount of money that they're making it would be taxable. But here in 2018. Their standard deduction that's just call it 24000 dollars for this example. How much more could they take out of their 100000 dollar higher rate. And potentially pay zero dollars a taxation on. And the answer is. 121850. Dollars so. They could take an additional 121850. Above and beyond their RMD. And goes in give that money tax. Brief. By using this standard deduction. And subtracting their taxable income from it. We can't figure out how much they can take out extra. And pay zero dollars of tax on that money now I don't know about you of this. Example doesn't fit everybody scenario right. If you if you wanna look at these I would recommend that you go talk to your tax professional and that your accountant your CPA whatever it might be. To see if you have an opportunity to take more like here in the Smith's example. But why would you not take it dollar for a dollar if you have that opportunity. But it unfortunately what happens is most people like this Mets don't. Think about the fact that they might be able to take more and a little to no tax on it. Because of using C introduction and other kinds of factors in into play for them. And so they don't do it. It's really just take that 3915 and next year's 4000 and the next year's 4100 whatever the numbers are. And they just keep kicking the can down the road further and further and further. And one ends up happening is. They've got now a 150000. Dollars in that account. But now who 225 arrives that say the tax brackets jumped even worthy word December 31 of last year. Guess what they just lost. Potentially three cents on every dollar that they take from it. While no value but if I could take three cents less. I'm inclined to consider that. But yet we kick the can down the road because we've been taught all these years by our professionals by the news whatever it is that you know. To kick the can down the road. And I would challenge you to consider. Looking at should we not kick the can down the road anymore. Should we not take this money control. Rather than letting ERS control letting congress control it letting unknown factors control. Or should we say. Okay looking historically. This is a good time to take this money and I know exactly how much money I can give it. From these accounts and pay X amount attacks but it zero whether it's 101215. Whatever that number might be. The other thing is when we kick these things down the road too far where does it end up okay so. I die my wife dies where's it gone. Well you have children or even if you don't you're leaving it to somebody in less it's a charity. Well what tax bracket are today. How old are children when we die. Both typically there depending on when we serve damning. They might be in their highest earning years they might have kids that are out of college so now they've lost all their deductions maybe their house is paid off that Sadr. What's their tax Iraqi going to be. So yes they can stretch these things out they can continue to tax deferral. But that doesn't mean that they're not paying more cents on every dollar they take out that C. That your kid only has to take 4000 dollars but if they're in the 22% tax bracket and you're in this twelve. Yes well it. They just pay ten cents more on a dollar than you did or you would have if you had taken it out. But we kick the can down the road only looking at today and not want you to pay the taxes today. I argue consider paying the taxes today controlling taxation. And taking back control. Over how much money is lost from that account. Because that account value is not the real number. And then end and the same thing applies it just gives you left your kids a 500000 dollar IRA. What if you got one kid that's got really high tax bracket one kid that doesn't. OK so that we can that doesn't may benefit more than the other kids. Always that your intention or did you want them to benefit equally it's not just about splitting this 525250. What about how much that 250 turns into for each of them. You really wanted to be vastly different taxpayer can receive Medicaid it's up in the 35% tax bracket. Many got a kid this down here in the 22% tax bracket. That kid they got 250000. From you. This in the 35% tax bracket will get thirteen cents less on every single dollar then his or her sister or brother. Was that your intention of really leave it that differently. Maybe maybe not or maybe you don't care. And that's OK too. My goal is to challenge you to think outside the box so you take active control over your state. Now everything that I just went through I'm not a tax professional on an attorney. Talked your tax professional. Talk to your CPA tuck your accountant about these things but I challenge you to. It what I call lift up the rock and look underneath the see what's there. It may not be a benefit to you but if it is and you don't take it you've missed out on an opportunity. And it's an opportunity that you should definitely consider if it's available to you. All right so that was the first common mistake. I wanna move on after the break cure to the second common mistake. That I see people make with their retirement monies and that mistake just to kind tees it. Is incurring an unexpected excise taxes. So when we come back we'll continue our discussion on five big mistakes you make with our race specifically talking now. Incurring unexpected excise taxes stick around. This is the estate planning an elder law hour with skip Reynolds. Are we dive in the wills trusts powers of attorney and so much more now here's your host skip Reynolds. Welcome back everybody to be estate planning an elder a lot hour with me skip Reynolds thanks so much for joining me this Saturday afternoon. This is our the second segment ever show if you missed any of the first segment of the show. What I've been talking about today's five common mistakes I see in my office around your higher rates. Any particular I was talking about trying in the first segment I would kind of off the rails talking about. Trying to avoid the taxes now and how sometimes trying to avoid the tax is now may actually end up costing you more long term. So if you missed any of that segment of the show and wanna go back and listen to it. You go to do crews in 1430 website. You can click on shows than go to the weekend shows and then you can click on the estate planning an elder law power. Or you can go to my website at skipped into law dot com that's SK IP TO and law dot com. And then you can go to blogs you'll drop down go to radio and you can find the show and previous shows as well right there. All right so I wanna continue this discussion up by com mistakes that I see. Around ironies in my office. In how can we protect that I array more mean that's the goal that's my goal for my clients is to give you more information. So the you can protect your ire race better long term not just now but also in the future. So this second one and talked about it just real briefly before the break was incurring unexpected excise taxes now. Those of you that are over 59 and a half this is not a concern to you but those of you that are under 59 and a half. And on an excise tax on New York. Retirement money would be if you don't qualify for any of the exceptions and I'm not gonna go through with those exceptions are. You wanna find those you can you talk to me your you can talk to your tax professional. But if you're under 59 happy and you need access to that money. If you pulled out money out. You will pay. In addition to the taxes so at that money to your income earned that year and pay Uncle Sam his share. You'll pay 10% excise tax or penalty tax. So if you have a 100000 dollars in need 101000 dollars on that count because he got nowhere else to pull that 101000 for a medical Biller. Or you know buying new car whatever is going on for you. That 101000 dollars that you pull out is not really 101000 dollars. So if you really need 101000 dollars you got to pull up more than 101000 dollars because your house you're gonna pay some Uncle Sam. But you also are good ol' Uncle Sam 10% penalty on that money. So let's say if you need to net 101000 dollars that scene need to poll thirteen hundred easier in the 30% tax bracket let's say. That's high I know let's just see it that's where you're at breezy numbers. OK so you need people thirteen hundred we've got to pull thirteen hundred to get to the 30% tax bracket but you're also gonna uh oh. 10%. On net thirteen thousand dollars that you had a poll. So is extra money out of your pocket. To get to your net 101000 dollars. And he got to calculate this exam. So the IRS had come up with. And instill is available different rules on one rule is is what's called 72 UT itself IRS regulation 72 T. Which allows you to tap into your higher rate before 59 and a half. And if you follow their rules where it's five years or until your 59 and a half whichever is longer. You can take out a percentage of your account every single year. And all you're going oh is it taxation you're not going to blow that excise tax on top. Now a lot of advisors financial advisors CPAs and attorneys we know about this rule. You out there in the general public you may know about he may not know about maybe this is the first time you've heard of it. But let me tell you a little hidden secret here. I had an experience. About eight years ago now where I was so working with an advisor and he was advising his client. There under the rules of 72 T because he had actually done it for himself. Armed it and starting a business he had tapped into his IRA. He would advise his client did as long his client was. I wanna say it was 55. He advises clients that he could in effect. They key is this call 800000 dollar IRA. And liquidated over five years and that would qualify under the rule seventy tootsie. Because he took it in five. Equally periodic payments. The problem with that was he was missing one key component of the 72 T. The way they calculate the 72 TE is the use your age they use a federal rate. And they do a multiplier of them. To figure out exactly how much can you take out of your accounts that they take your account value your age and this federal raids. And they calculated altogether and they say you can take out X amount. Well. It believe me at first until I Hagman got more evidence for him. Because he had done it in the fight equal payments need liquidated his whole account. Now I would argue he got lucky that you know IRS's understaffed in didn't come after him for. On additional excise taxes because he was under 59 nap at the time. But. This client. Could take nowhere near when you do the calculation what he was saying the client could take nor what the client needed. And so he was talking about a rule but he didn't understand all of the parts of the rule. And he was advising his client to get something that could've blown up in his face. And so what ended up happening was the client ended up taking what they needed. Hey this excise tax campaign attacks in making it one time transaction just to take care what he needed. Rather than potentially come pounding his problem because what happens with a 72 T is if you take out more than your allotted to. Let's say you're five years in air for years ending a one more year to go and you take extra in your four. Years 12 and three. All are now subject to a backs at back excise tax. If you take too much and people do this all the time they don't quite understand the rules. So this excise tax could make your 100000 dollar irate worth even less if you're under 59 and so I just want you to be aware that depending on your age if you don't qualify for any of those exceptions you may have an issue here. Now last week I was at a via conference. And I learned something new I'm not gonna talk a lot about it but. There are ways that if you need to get money out of your retirement accounts. There are ways that you can shift it if you're married. Between spouses. And take out an amount during the shift. That would only be subject to attacks not subject to the excise tax in addition if you're under 59 and that. That's a very complex technique in fact. Knowing if if somebody wanted to do that my office. I would actually be hiring somebody outside of my office to you do all of that paperwork for my client but. He is a way. To use the IRS rules to our advantage to give up that money if we needed it. Under 59 and half. And trying to use some additional rules that are not common knowledge to our advantage to avoid that excise tax. Because losing 10% extra makes your count worthless even more Lewis. Arts and Ellis number two number three. Losing your higher rate too long term care costs of those of us that are in our 60s80s. Whatever it might be. Long term care costs are to become more real. Because now you know we're having more those aches and pains maybe we're having some memory issues BD we're seeing it with our parents if we're. Younger and our parents are now in their 70s8090s. Whatever it might be. Long term care is very expensive. And I think it's only gonna get more expensive. Every single year. But. All of that ire raise money in the state of Colorado may be at risk. To have to be need TV stands down. So that you could. Pay for your long term care or before you could qualify for program like Medicaid. Or if you're a veteran before you could qualify for program. Like VA eight in attendance help pay for your long term care in your home or elsewhere. If you need do you stand down to qualify for one of those programs. Your higher raise money will need to be dealt with in some manner. And Uncle Sam is gonna come for this year. Now in the city Colorado for Medicaid if you have asked that's that are not your house and not your car. Above and beyond a hundred this year 123600. If you have assets above those levels every dollar of that IRA. Money that's over that amount. Is now at risk to having to be dealt within some manner in order for you qualify for program like Medicaid. If you're trying to qualify for veterans dated tenets that number is under 80000 dollars. So if you have more than 80000 dollars and that money is in the form of retirement accounts. We're gonna have to deal with it in some way. And you may not get every dollar out of that account because Uncle Sam is gonna get a piece of it. So if you're hiring is that risky you have most of your money in IRAs which is what I see in my office. Every single day. I mean I'll be honest folks you guys have done a great job of saving. But you saved it all in your retirement money. So now whenever you need it above and beyond your bank money. The C need to go buy new car. Guess where it comes out of your ire way guess who gets a share of all that money that you took out to buy that new car Uncle Sam. Maybe he gets in next your share because that bumps you do new tax bracket I don't know. But I am seeing people with. Upwards of two thirds. To three quarters of their total estate value. In the form of retirement accounts. And if that's the case folks. That means two thirds to three quarters of your state may always be yet wrist your long term care costs but guess what nobody buys long term care insurance. Less than 10% of us. Have bought it because its insurance. And just take me up on the hill and push me off the cliff if I get sick I'm never going to a nursing home. Now. I understand that way of thinking. Unfortunately. That is not everybody's experience if you were to go poll the people that are in nursing homes today. Or an assisted living today it. Did we. 51015 years ago when they were more healthy. I would venture to say bit. Ninety to a 100% of those people would prefer to not be there. But life throws curve balls as we all know. In those curve balls can affect where we end up needing to receive our care. And if we have too much in one bucket of money mainly our retirement accounts. We may lose a significant portion of that in paying for that long term care paying for a medical care. To Uncle Sam. Now there's ways that you can. You know if you have more than 10% of your adjusted gross income in the form of medical expenses. Which would include long term care costs. You may be double to. Right off some portion of those distributions from your hiring. But he may still not make you have a nothing costs. To make that happen and if you're lesson that 10% you're having to pull from your ire race you just adding to your income and you're adding to the loss inside of that account. Whereas you could've thought Ford back to my first. Speaking point in the first segment of the show I'm not avoiding taxes now. You could've potentially before he got sick. Controlled how much they got put it in places where it could be protected. Such as. Asset protection trusts that I view or other kinds of vehicles. To try to protect that money if you didn't want to have to lose so much to your long term care costs in addition to the taxation on it. But most of us don't do this most of listeners have been taught for so many years that it's almost second nature. Notation is don't take this money just defer it. I really don't want anything more than the ire Adele RMD I don't want and I don't wanna I don't want it. And it ends up happening is that you may lose more. In the long term because of health event. Or other factors outside of your control. So that was the third mistake that I see people. The other mistake is. The port mystic is paying income taxes and estate tax so. This doesn't imply quite as much as it did in previous years but. Like I said earlier with with the tax rates none of this was fixed permanently. At least not for us on the personal side. So in 20/20 five. We have a gigantic question mark coming yet again much like what happened in 20092000. Intent. As you what's going to happen with not only income taxes but estate tax gift tax etc. You know right now the number result over eleven point one million dollars that's a gigantic number. But what if that number drops again. But if that number drops to three and a half million. What if that number drops to five and a half million akin or goes back to where it would've been inflated CU. Stopping in 2070. We don't know the answer to that question well if you have enough in your. State pool. You could not only owe more in it in income taxes. But you might have estate taxes on top of that. Or what if you but if that the state of Colorado brings back its estate tax. Or what if you moved to a news this state that has estate estate tax such as Massachusetts. At a client whose mother died in Massachusetts. They have a state is the tax if you have more than one million dollars. In total in your estate you oaks on taxation to the state of Massachusetts. Even if you don't owe anything to the federal government. What about if you live in a state like Nebraska. Nebraska has a county tax of 1% on your entire state. Including assets that pass outside of the probate. Wow okay. So not only do you vote and a state type tax. But now you go income tax because two thirds or three quarters of your State's passing to your ears. Is in this diary form. All right so. To kind of sum up what I was talking about I talked about incurring unexpected excise tax is like taking it out early before your 59 and a half and paying penalties. I talked about losing it to Europe Europe long term care costs because it may be on the hook. And I talked about paying income and estate taxes. So when I come back I wanna talk more about this in the fifth and final mistake IC. Is naming your beneficiaries. As the direct beneficiaries of your account. So when I come back I wanna talk about that but just a reminder here. I I do the public workshops you wanna can hear me talk about I raise other types of estate planning topics. I had to workshops coming up in March here. I won Thursday march 22 is actually here to cruise in 1430 building. Just south of Bellevue and I 25 from 930 to 1130 this is free free to come to. I also have on Tuesday march 27 to set the lonetree library from one to 3 PM if you like to make a reservation for any of those. It's free to come in if you wanna sit down at me review your plan or start your plan you will get a free meeting with me. Which is a 300 dollar value. All you have to do is come to the workshops if you wanna sign up you go to my website skipped in law dot com. Then click on it. Workshops and you could sign up there are if you prefer to use the phone you can call my office and talked to Stacy. At 17044027742. When I come back a minute talk about. A mistake of needing our beneficiaries is the direct beneficiaries of our retirement accounts stick around. This is the estate planning an elder lauer with skip Reynolds. We dive into wills trusts powers of attorney and so much more now here's your host skip Reynolds. Welcome back everybody to view C planning an elder law power would he skip Reynolds this is our third and final segment if you missed any the first two segments of the show. But tucking it did today about five common mistakes and I see people make with their retirement accounts there I raise their 401 k.s it there. Or three b.s whatever it might be. A wanna kind of jump right into the fifth and final mistake that I see. If you miss seeing those segments of the show you can go to the crews in 1430 website. If you can find them right there or go to my website it skipped in. Law dot com and you can find the radio page and find. The podcast there as well so. This fifth and final one is naming your beneficiaries. Which could be your spouse your kids your other beneficiaries nieces nephews whatever. Anyone other than a charity. As he direct beneficiary of your hiring. Now what do I mean by that. Well the typical knowledge that typical the UC. Working with financial planners. Whatever it might be is OK I've got an I raid by dial one it's paid in my life. And if she's not there it's gonna pay to my kids as the contingent beneficiaries that is what you see almost every single account set up like. It's it's like clockwork because these diary type of accounts. Before she did name a beneficiary on the paperwork when you open these accounts wherever the account is that bank. Or investment firm whatever it might be. Now let me walk you through why this might be problematic. So if I named my wife as the beneficiary of my hiring. And I dye who has that money. She does right chino has all of that money and what can she do without money. Anything that she wants to deal. Right she can go travel around the world she can meet joke in my workshop she could meet bits the pool boy. Know that pool that I said we couldn't have because it's too cold here in Colorado most of the year guess what she can now use that money to go by a pool. And guess who comes and it because she is a wanted to remain its its fifth. Well what if it's the other way around these are wife dies first he could be damned be the army because now we're drowning our sorrows every single night at the local pub. Right. And now we can be taking management or what if it's the caregiver I heard a crazy story just the other day. Of of an individual who is you know the caregivers moved in to help care for a spouse. And now there's a romantic relationship between the nonstick spouse and the caregiver. Meanwhile the six spouse is still living their tip. It's a crazy scenario these happen right but it was an Anna Nicole Smith years ago. You think she really marry that ninety plus year old man because. He had a sexy body I mean not to be crude but my guess is it was because he had a little bit of money. And then they fought over for years and years and years after his death even after her death that man. So once you give it to that spouse they can do whatever they want with it. They can get married or not or they can spend it unwisely or what if they get sick. What if they get sued. Now it's exposed to all of those potential risks right. So bagel and a long term care I talked about as number three losing your higher rate too long term care costs well if I die and I leave it to my wife and then she. As dementia later after my death. Guess what could be on the radar could be lost all of it to you taxation and or long term care costs. Well what about our kids so so before I go on to the kids if you leave it year 2000 they roll it into their own irate. It is protected from their creditors. Creditors be driving down I 25 and you have an accident. But it's not protect you from your long term care costs it's not protected from Medicaid it is on the hook. But when we leave it to our children. That creditor and bankruptcy protection. Balls away. In 2014. The Supreme Court. In. Ruling called Clark. Purses ran occur. Said that there's a differentiation. Between the retirement money that we saved. Vs the retirement money that we need receive as a beneficiary from C our parents. And that differentiation is there will never ever ever be a 10% excise tax on that money even inherited from an IRA. Just taxation. And so by that differentiation they said you could in theory. But the child could file bankruptcy. And the next day to liquidate that whole account and the only. Issued them would Dave I pay taxes on it but the creditor can't come in give any of that money. And the Supreme Court came down and said yes now the creditors and bankruptcies can get out that money. Now you may be seeing what my kids don't have any creditor issues and they may not as we sit here today. We do we know what's really going on in their financial situation. Could that businesses seem to be running so great. Blow up in their face now they've run up huge credit card debts to try to keep that thing afloat and all this and now they're in a pickle. Or what happens if they made some really bad investment decisions. You know there are a whole Lotta people back in 2007. 2006 there were investing all these rental properties and fixed and flippers in all of these sayings and then back in 2008 hits. And there wave behind the eight ball and they're filing bankruptcy like crazy to get out from underneath these mortgages and other kinds of things. The number one reason that people filed bankruptcy right now is not credit card debt. It's medical debt medical expenses. He gets sick in your in the hospital for six months. How much are you gonna hope how much easier insurance covering. It could break your family. Well guess what they've got this inherited diary for view. And now they have that happen yes what's on the hook your inheritance is that really how you continued your inheritance to be used. Would you have preferred to have been protected. So that this. That child could file that bankruptcy. Get out from under their debt and still have your money leader. To help get them back on their feet. I think a lot of people would say yes I would like debt to be an opportunity. But most of us have been taught advisors as well give it to my spouse give it to my kids it's nice and easy it's outside of probate boom boom boom. But that's all you've done so if all you wanna do is give the kid your money and let them control it that's all you've done. You haven't given us any opportunity whatsoever. To do anything else where that money. Vijay after he died ten years after you die whatever the amount of time might be. And we don't know what the future may bring if you're concerned about the future and you want to try to protect that money. Naming your beneficiaries your spouse your children your nieces nephews whatever might be as the direct beneficiaries of your retirement accounts. Could end up costing that whole account. And or more in taxation. As I've talked about with these other mistakes. So just because it's the way we've done it in the way it's easier had a financial advisors say that to me recently well this is how all of our clients have done it. Well that doesn't mean that what you're you've done with all of your clients is a 100% right. All the time. If you haven't asked them the right questions you never got the right answer if you just told them what they were gonna do. There is doing what you told them. I encourage you to think outside the box folks ask questions. Make sure that you are making good short the end of long term decisions with your wiring money. All right so a wanna kind of sum up. Quickly here those five common mistakes if you missed any of those you can go back and say hey wanna listen to this segment this jokes I wanna hear about it. So the first segment of the show I was challenging you listeners out there to think differently. To look under the proverbial rock. And see where you can control the taxation on your iris because too many of us in in common mistake number one is trying to avoid the taxes now. We've been told forever defer defer refer. That may or may not be the best decision for you short indoor long term. Because we have so many question marks with with the tax rates are going to be in the future. What happens when you're married and then now one spouse dies now refiners single are you the same tax bracket. As he's armed he's come out or did you just jump tax brackets. Could be you know higher tax bracket when your firing single. But about how it the armed denied effective taxation on your Social Security if he weren't getting taxed now that our. You're getting tax on Nestle security. So now you're getting less money. It and you were otherwise. What about the tax rates for your kids could be higher. Could it be different for each of the kids. You got one kid in high tax bracket one kid a low tax bracket did you really needed to be equally then. What do you do wanna have to pay more tax on every which all even if it's a minimum withdrawal. Because the amount in your account is not the actual value of your account is some question mark less. But not excise taxes if you are under 59 and a half that's the second mistake. He needs access that money under 59 and a half you're not only paying Uncle Sam you're paying a 10% penalty unless you meet other exceptions. Or you limit your access to that money it near me not solve the issue you're trying to solve with accessing them money. There are three losing it to your ire using your IRA. Too long term care costs if you get sick you're hiring in city Colorado above and beyond the limits is at risk. And may be lost in have to be spent down on your care. Number four paying income taxes in this state taxes. So you live here now in Colorado we don't have a status as state tax the federal estate tax just jump to an astronomical number of over eleven million per person. What's gonna happen in 20/20 five. Could that come back down and now affect you. Couldn't seeded Colorado if you continue to live your till your death reinforced their steep estate tax for budgetary reasons. Could right it's still on the books they're just not utilizing what if you moved to a state that has an estate tax. That is lower than the amount nearest date when he moved to a state like Nebraska that has a county tax based on your state of 1%. To be got a million dollars that you got to pay 1% of it to you the state or two at a county there. And then the last one that I just talked about was needing your beneficiary as the direct beneficiary of your retirement accounts. By doing that you have not accounted for any question marks that would happen in the future. But there before your spouse there long term care cause they're remarriage. Other kinds of things of Michael one for them. Same thing with your kids. So I challenge you folks to think outside the box most of us have. Half to two thirds to three quarters of our state wrapped up in our retirement accounts now. And we have less control than you think over that money. Both now and in the future I challenge you to try to take more active control. Think outside the box look under the rock talked to your financial planners talk to your attorney such as myself. Talk to your seat peer accountant about how can we use this money more effectively now in in the future. And protect it more a bit from the tax man that will be coming. So real fast just to remind you folks. I do the public works shots twice a month two coming up here in March. On Thursday march 22 it's actually here to cruise in 1430 building. Just just off the bill you and I 25. From 930 to 1130 and then I've got one on Tuesday the 27 to march. At the launch you library from one to 3 PM if you wanna come. Please come and listen. If you wanted to come and meet with me afterwards it is a free meeting that's a 300 dollar value TO I will review the plan you have in place if you have one. Talk about what needs to be filled in if anything or even just give you hey you're doing great. Or if you don't have a planning now is it time to start talking about it and thinking about it. Common in Simi come to the workshop learn ask yourself more questions. So that you get to the right plan that's my goal for you. So if you wanna sign up you go to my website skipped in law dot com Hulu workshop page. And you can sign up there or he can call my office at 1704402774. You talk to Stacy and we'll get you signed up. So everybody I hope you enjoy the show today may be thinking about something I hadn't considered before as it pertains to your hiring money. Really appreciate you listening but we have a great rest of your Saturday great rest of the weekend and I can't wait to talk team. Next week everybody have a great week. Take care. Thanks for listening to be state planning an elder law our would skip Reynolds. Tune in next week where we talk about some great new topics this is the estate planning an elder law hour with skip Reynolds that's every Saturday from two to three on cruise in 1430. You can Reynolds is a licensed attorney in Colorado all of the stories and content of this state planning an older life hour are not intended to be directly to a -- they are for illustrative purposes only additionally no attorney client privilege has been performed with the law officers have been Reynolds LLC we're still in Reynolds as wire went to seek legal counsel before making any estate planning or elder lob city. All of the views of the guests of the show are their own and are not views of the law office looks at the Reynolds LLC or skipping right over Esquire. Nor is their appearance and endorsement of goods or services for the law offices and Reynolds LLC was it to Reynolds Esquire.
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