Strategic Financial

Can my spouse or kids manage my money if I become incapacitated?

You might assume they can just step in and take care of things.

Unfortunately, it's not always that simple.

Even your spouse may run into problems accessing accounts, managing investments, or handling financial matters that are only in your name.

That's why a Durable Power of Attorney it key.

It's one of the most important documents in your estate plan, and one that deserves just as much attention as your will.

A will outlines what happens to your assets after you're gone.

A Durable Power of Attorney allows someone you trust to manage your financial affairs while you're still alive, if you're unable to do so yourself.

❗And that word "Durable" is important.

It means the authority continues even if you become incapacitated.

Without the proper documents in place, your family could find themselves going through a court process just to get the authority to help you.

That means legal fees, delays, and a whole lot of unnecessary stress at an already difficult time.

And while you're reviewing your documents, make sure you have a Healthcare Power of Attorney as well.

That's what allows someone you trust to make medical decisions if you can't.

If you need help reviewing your plan or coordinating with an estate planning attorney, we're happy to help.

Link in bio.

I have company stock in my 401k. Should I roll it into an IRA when I retire?

Usually, rolling you 401(k) into an IRA is a perfectly reasonable option to consider depending on fees, flexibility, and other planning strategies.

But if you own company stock inside your 401(k), there is a specific tax rule to evaluate before you make that decision that could potentially save you thousands of dollars in taxes.

It's called Net Unrealized Appreciation (NUA).

Here’s an example.

Let's say you've accumulated $1 million in company stock inside your 401(k), but the original cost of those shares was only $200,000.

If you roll everything into an IRA, future withdrawals on the entire $1M are generally taxed as ordinary income.

But if you qualify for NUA treatment, you may be able to transfer those specific shares of company stock directly into a taxable brokerage account, (while rolling any remaining amount in your 401(k) into an IRA).

You would then pay ordinary income tax only on the $200,000 cost basis of the company stock, and eventually pay long-term capital gains rates on the $800,000 of appreciation.

That's potentially a 15% or 20% federal tax rate instead of 32% or more on a substantial portion of your retirement savings.

Big difference.

As always, there are very specific rules you have to follow to qualify, and this strategy isn't right for everyone. You'll also want to consider the upfront tax bill, timing, and how concentrated your portfolio is in company stock.

And the timing really matters.

Once you've rolled that company stock into an IRA, you've generally lost the opportunity to use NUA on those shares.

So if you're approaching retirement and have company stock inside your 401(k), make sure you're working with someone who understands NUA and can evaluate this opportunity before you initiate any rollover.

If you'd like us to take a look, click the link in our bio.

We'd be happy to help.

Should you leave your kids equal amounts in your estate plan?

Maybe. But leaving your kids equal dollar amounts doesn't always mean they'll receive equal amounts after taxes.

And sometimes, a little planning can help your family keep more of what you've worked so hard to build.

Here's an example.

Let's say you have $1M, split between a traditional IRA and a Roth IRA, and two adult children. One is a high-earning executive in the 35% tax bracket. The other is a teacher in the 22% bracket.

And the goal is to leave each of them the same amount. $500,000.

If you leave each child $500,000 in an even split from the traditional IRA and the Roth, the withdrawals from the Traditional IRA are generally taxable as ordinary income.

And your higher-earning child could end up paying significantly more in taxes.

So while they may have started with what seemed like equal amounts, they each ended up with very different amounts.

If, instead, you left more of the traditional IRA to the child in the lower tax bracket, and more of your Roth IRA or taxable investment accounts to the higher earner, you could potentially reduce the family's overall tax bill without changing how much you actually intended each child to receive.

Of course, beneficiary designations, withdrawal rules, tax brackets, and family circumstances all matter.

And any changes should be coordinated with your estate plan.

If you haven't reviewed which accounts you're leaving to which beneficiaries, it may be worth another look.

If you need help figuring out how to pass along your assets more tax-efficiently, we're happy to help.

Link in bio.

Here's a quick breakdown on how improvements, credits, taxes and transaction costs determinewha what you actually get to keep.

What should you do financially when a loved one dies?

First, know what needs to happen immediately and what can wait.

Here’s a way to break everything down without feeling overwhelmed.

In the first few days, keep it simple.
Order extra certified death certificates.

Don't throw away the mail or delete their email account. There may be an old 401(k), insurance policy or account you don't know about, and some statements only come once a year.

And within the first week or so, call the financial advisor. They can start notifying the right institutions, tell you what information will be needed and coordinate with the estate attorney and accountant.

Then slow down.

You do NOT need to immediately close every account, move all the money or start distributing the estate.

That's where I think a lot of families put unnecessary pressure on themselves.

You're grieving. Most of this can wait.

And getting the right people involved early will help you stay on track for the things that actually do have real deadlines.

There are deadlines around things like estate tax filings and certain estate planning decisions.

For example, federal estate tax returns, when required, are generally due nine months after death. A qualified disclaimer also generally has a nine-month deadline.

Your financial advisor, estate attorney and accountant can help separate the things that need attention now from the things you don't need to worry about yet.

You don't need to know how to settle an estate.

You just need to know what needs to happen now, what can wait, and who is helping you through it.

If you've recently lost someone and aren't sure where to start financially, we're happy to help.

What’s the best state to retire in?

If you’re asking strictly from a tax perspective, Florida, Texas, Tennessee and Nevada usually get a lot of attention because they don’t have a broad individual income tax.

But I wouldn’t choose where I’m spending the next 20 or 30 years based on taxes alone.

There are other states worth looking at depending on where your retirement income is coming from.

Pennsylvania, for example, generally doesn’t tax qualifying IRA and pension distributions once you meet its retirement requirements. Georgia offers a sizable retirement income exclusion for people who qualify.

But before I start comparing tax rates, I’d probably draw a circle on the map.
Where can I get the weather I want?

Where am I close enough to family and the people I actually want to see?

Where can I get really good medical care, and what does that care cost?

Where can I afford the house and lifestyle I want?

Then, once I know where I’d actually enjoy living, I’d compare the tax consequences of those choices.
Saving money on taxes is great.

Saving money on taxes while living somewhere you’ll hate isn’t.

Taxes should absolutely be part of the decision. They just shouldn’t make the entire decision for you.

We can help you model all of that out.

Is the widow’s penalty real, and can you do anything about it before retirement?

Yes, unfortunately, it’s real.

And also yes. You may be able to plan for it to reduce the impact.

The Widow’s penalty basically means that when one spouse passes away, the surviving spouse can eventually find themselves paying a lot more taxes on less household income.

Less income. But more taxes.

Why?

Because you go from Married Filing Jointly to Single.

Your standard deduction gets smaller. Your tax brackets get tighter.

But a lot of the taxable retirement income may still be there.

Especially if you and your spouse have built up significant balances in traditional IRAs and 401(k)s, those accounts can eventually create substantial required minimum distributions, or “forced” income that will now be taxed at a higher rate.

Planning ahead can make a difference.

The years before RMDs begin can be an opportunity to strategically convert some of those traditional retirement dollars to Roth.

Yes, you will pay taxes on the roth conversion today. But you're potentially shrinking future taxable RMDs and reducing the amount of taxable retirement income a surviving spouse may eventually have to deal with.

If you're approaching retirement with significant IRA or 401(k) balances, you definitely want to run these scenarios to see if it’s better long term to pay some of the tax now or wait.

This is one of those tax planning conversations worth having well before RMDs begin.

Everyone’s situation is different. So be sure to check with your CPA or advisor to see how this might impact you.

Which estate planning document do people forget before retirement?

Your beneficiary forms. And that’s a critical one.

Because on specific accounts, your bene form overrides your will.

There are a lot of checklists floating around with the 5 or 6 documents everyone needs before retirement.

And they are all important and needed.

A will. Power of attorney. Healthcare documents. Maybe a revocable trust, depending on your situation.

But your 401(k), IRA, and life insurance don't follow your will. They pay whoever is named on the beneficiary form.

So you can spend real time and money getting your estate plan exactly right…

…and still have an old 401(k) naming someone you haven't thought about in 15 years.

Or no backup beneficiary.

Or your kids listed directly while they're still minors.

Or an IRA beneficiary that made sense when you filled out the form but doesn't fit the plan you have today.

Before you retire, don't just ask your attorney, "Do I have all the documents?"

Pull everything together and ask: "Does all of this actually work together?"

Your estate documents. Your retirement accounts. Your insurance. Your beneficiary forms.

Life changes a lot faster than those forms do.

If you're getting close to retirement and haven't looked at all of this together in a while, now's a good time.

And if you want help, we do this all the time for our clients. Link in bio or send me a message.

What's the most tax-efficient way to get paid as a 1099 consultant?

If you're now a six-figure independent contractor, but still getting paid the same way as your first 1099 client, an LLC taxed as an S Corporation might be worth a look with your CPA.

With an S Corp, your clients pay the business, not you personally. The business pays you a reasonable salary through payroll, and additional profits can generally come out as distributions that aren't subject to self-employment tax. Which could save you thousands a year.

There are real trade-offs to consider.

Under this structure, there's payroll to run. Extra accounting and admin costs. Rules around what counts as a reasonable salary. Potential state taxes.

And depending on your situation, a completely different structure may make more sense.

But once your income gets to $100k and more, the savings often outweigh the extra payroll and admin costs.

This is where the planning question evolves from “how much am I making” to “am I getting paid the right way?”

Everyone’s situation is different and always good to work this through with a CPA and advisor.

If your consulting income has taken off and you've never revisited how the business is structured, send me a message or find the link in our bio.

Happy to walk through it with you.

#1099