We’ve recently met with several families who have successfully managed their own investments and are enjoying a comfortable and secure retirement. In many cases only one spouse was confident in their ability to manage the family finances. These families aren’t seeking an advisor to provide higher investment returns; they are looking for peace of mind. They want someone they trust to provide financial guidance for their loved ones when they are no longer able.
As a multi-generational team of fiduciary financial advisors, our clients are confident that, by working with us, they and their loved ones will receive unbiased advice and continuity for years to come.
Our focus is on delivering thoughtful planning strategies that can reduce their tax burden and efficiently gift to the people and organizations they care about.
One family wishes to leave 20% of their assets to charity with the remainder to their adult children. After reviewing their accounts, we uncovered their retirement accounts were set to go to their adult children, while the charitable organization was the beneficiary of their non-retirement assets. This setup would have left the adult children with a tax burden, as withdrawals from retirement accounts are taxed as ordinary income, while the charity would not be subject to such tax. By updating their beneficiary designations, we were able to maximize the after-tax inheritance for their children.
Another couple came in with substantial assets in retirement accounts. Once they begin taking Required Minimum Distributions (RMDs), those distributions will be taxed as ordinary income. If one spouse passes away, the survivor will still have RMDs, potentially pushing them into a higher tax bracket due to the shift from joint to single filing status. In this case, the surviving spouse could see their tax rate spike by 11%. We recommend they do systematic Roth conversions now to avoid this potential outcome. Implementing this strategy will provide the surviving spouse with greater financial security. This same strategy can be effective if you are leaving a large retirement account to a younger beneficiary, such as your adult children, who are in their peak earnings years. If you are retired and in a significantly lower tax bracket than your beneficiary, you may consider doing systematic Roth conversions to keep more money in the family.
You may wish to give a gift to family or charities during your lifetime. We can help you discern which assets would be best to gift depending on the asset and the type of recipient. It could make sense to gift part of your RMD directly to a charity, in effect lowering your taxable income. When giving gifts to individuals, it may make sense to gift cash instead of low basis stock that might be eligible for a step up in basis.
Whether you manage your investments independently or are working with another advisor, we encourage you to reach out for a complimentary review of your strategy. Together, we can help ensure your plan aligns with your goals and protects the people most important to you.
