A Wiser Retirement®
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A Wiser Retirement®
219. Do you have a wealth preservation plan?
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On this episode of A Wiser Retirement™, Casey Smith is joined by Missie Beach, CFP®, CDFA®, to discuss wealth preservation plans and various asset protection strategies. Wealth preservation is more than just preparing for retirement; it involves a strategic approach to safeguarding your assets for future generations while maintaining a comfortable lifestyle today.
Related Podcast Episodes:
- Ep 145: Dying without Estate Planning: Do you hate your family?
- Ep 175: Passing Down Generational Wealth
Related YouTube Videos:
- Prevent Family Conflict with Legacy Planning
- Using an Online Estate Planning Service vs Using a Local Attorney
- Meaningful Ways to Leave a Financial Legacy for Your Heirs
Related Blog:
- Legacy Planning vs Estate Planning: Understanding the Difference
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Preserving Family Wealth Through Financial Planning
Speaker 1you have to teach next generation , you have to tell your story . This is how we got here , this is what we have , this is what we did , this is what we sacrificed to get here . Um , just so that they understand that this stuff just didn't magically appear , right ?
Speaker 3Yeah , and I think a lot of clients fall into that false sense of security Like , oh , my kids are grown now , like I don't need to redo my estate documents , and I say , well , that's precisely why you do need to . Now you have a better sense of who they are as adults , how they manage money . So maybe look at your documents , see how your assets pass to them and , you know , let's look at these milestone ages .
Speaker 1Welcome to a Wiser Retirement Podcast , where we believe the best financial advice should always be conflict-free . I'm your host , casey Smith , guiding you to financial freedom . Today is my co-host , missy Beach the world's best financial planner .
Speaker 3That's a little much , but hello , Casey .
Speaker 1Hi , missy . So we are coming off . We are recording this just off the end of Masters weekend , so we have at least I do my sunburned arms and my yellow shirt . It was interesting Masters this year , did you watch ?
Speaker 3I watched some yes .
Speaker 1I was on hole 12 . I really thought that we were going to have a close masters really , and didn't happen no , it wasn't much of a battle , it was pretty , it all kind of it always seems to like change right there at uh 11 , 12 and 13 um , but uh yeah it was . It was a great weather , a little windy on uh on friday , but , oh yeah , big winds friday , but was great weather , a little windy on Friday .
Speaker 3Oh yeah , big winds Friday .
Speaker 1But great weather . I feel like summer can come now .
Speaker 3Oh , that was like the intro .
Speaker 1That's the intro .
Speaker 3Let it happen .
Speaker 1It's going to Augusta All right ?
Speaker 3well , hopefully the pollen will go away now and we can usher summer in .
Speaker 1Yes , I , um yeah , I I took some allergy meds , cause every year I come home and then next Monday I'm like sick Cause just oh really , I'm not outside that much A gust of pollen .
Speaker 3You should get out more .
Speaker 1I know I probably should , but , uh , I don't like all the all the pollen . It's not the pollen you see Before you see yellow . I think that's when it gets really bad .
Speaker 3Sneaky pollen Watch out .
Speaker 1All right , so let's get started . We're going to talk about how to have a wealth preservation plan today , and I think we have some really good points for our listeners . So much of what we talk about is building wealth but , yet what we really do is preserve wealth as help people , preserve wealth as planners .
Speaker 3Absolutely . Why build it if you're not going to keep it ?
Speaker 1And most people don't come to a wealth management firm if they don't have anything right , exactly . So I'll actually talk a little bit about what we actually do in a lot of our planning meetings . So obviously , the most important step number one is to create a financial plan to protect family wealth . Right , I mean , you got to have a plan .
Speaker 3Must be intentional .
Speaker 1Yes , correct , which is the whole theme of this podcast , which is , I assume , why you mentioned that , missy . But yeah , you have to have a financial plan put together , which is why every one of our clients has a financial plan and we update that .
Speaker 3We spend more time on the planning than we probably do in asset performance
Importance of Financial Planning and Diversification
Speaker 3reviews .
Speaker 1But the planning part is very important . So a financial plan is made up of a lot of different things . It's not just assets . And this is where I get so frustrated with our industry and that they think people think they have a financial plan and clients will come to our firm and they say I already have a plan . Here it is , and I'm like this is just a really expensive time value money calculation . There's really no planning done here other than yeah , congratulations , you have enough money to provide income for yourself . But that's literally all they did .
Speaker 3Yeah , is that enough income ? For how long ?
Speaker 1Yeah , was inflation taken into account ? I mean , you have so many questions that go with that , and what's so frustrating for consumers is the fact that a lot of them have some of the same software that we have . They just don't know how to use it . Scary Isn't ?
Speaker 3that crazy , isn't that crazy ?
Speaker 1I mean , I've literally have had people come to me hand me a piece of paper that's clearly the software that we use from another advisor and I'm like , wow , this is crazy .
Speaker 3And then we use the exact same tool and give them a totally different picture . That's the scary thing about calculators you can have anything you want to come out of it . Come out of it . Yeah , you can manipulate any results .
Speaker 1It's just a tool . If I went out and had to start digging ditches , I'd be it'd be going very slow , but if a person who digs ditches every single day yeah . Use that exact same tool , there'd be a totally different result , right ?
Speaker 3Oh absolutely .
Speaker 1There's no difference in that and and financial tools that we that we use .
Speaker 3Oh true , Well , think about it . If you go online with your 401k calculator to get , you can manipulate that thing and be like . Oh yeah , I'm fine for retirement Sure .
Speaker 1Using a 12% rate of return Exactly . You just manipulate it until you get the outcome that you want and go on with your day , feeling , oh , I'm fine , so that's the danger . Excess is really generational wealth that you're building .
Speaker 1And they might start off small , but by the time you get 20 , 25 , 30 years into retirement , that excess could be much bigger , and so it's very important . We talk a lot about legacy planning in our prior podcast , but it's very important that you do things to preserve that wealth , that you do things to preserve that that wealth . So that kind of breaks us down to number two which is saving for emergencies and large purchases ?
Speaker 3Oh , absolutely , and that's the biggest thing , to start with , after you've paid off all debt , because that's one thing that we didn't mention and we're just assuming is taken care of in this situation . So , once you've paid off all your debt , yes , then we go into the emergency savings and so , really , three to six months of core living expenses like no extravagant travel , clothing , purchases , going out to eat , just your core living expenses Sock away in a cash account that's actually earning interest now . So I think , if you're a wiser client , word's gotten out that that needs to be an online high yield savings account .
Speaker 1And the reason why you do that is if you were in a situation where you needed money , you never want to have to go to a your retirement accounts If you're not retired yet to your brokerage account ? Yeah , so what if ? What if you've lost your job or or kind of going through a hard time at the exact same time that there's a big financial sell-off ? Now , maybe not as bad as a way , but maybe , just like 2022 , you're now have being forced to liquidate money , possibly at losses which will never recoup .
Speaker 1And so that's where it's important to have cash reserves , and the good news is the cash reserves , you get paid for it now .
Speaker 1So you should be getting four to 5% 5.5% in some cases on your cash , and I think this is a pretty common question . A lot of people ask in our planning meetings how much should they keep at their local bank , and I typically tell them $20,000 to $30,000 . If they have to have $100,000 in reserve , $20,000 to $30,000 might be at the local bank , not earning much , but you can get to it instantly .
Speaker 3Yeah , exactly that's the thing your online savings account is going to be a couple days away in terms of a transfer back to your local account . Yeah , so keep that in mind . So you don't want to leave yourself cash poor if you need it today , correct .
Speaker 1So , and then some people tend to get too much money in their cash accounts , I know , and so this is where you have to have a . You have to know what your big expenses are coming up . So if there's a car purchase coming up , then yes , you're letting that cash drift higher to either pay cash for the car or put down more money on the car .
Speaker 2Absolutely so the lower payment .
Speaker 1If you know that there's a roof coming or HVAC , you know the big life ticket items . Those are all things that that you allow cash to build from . So an example would be for most clients , $50,000 in savings is enough and for a hundred thousand dollars anything over a hundred thousand dollars . We put that into what we call opportunity money .
Speaker 1Money that's not necessarily for retirement , but it's money that you have in excess that could be in the market . It's not going to be spending it in the next five years that kind of thing , and some families are different . Some families are between $200,000 and $300,000 in cash for good reason . Some families are between $10,000 and $50,000 .
Speaker 3It depends on what stage of life that you're in . Yeah , your annual living expenses , how many drivers you have in the house and how many car purchases you have on the horizon , right , how much you're going to spend in remodeling . You know your backyard when your appliances are going to burn out ? I mean , yeah , you know how much you have in the pipeline , correct , you know how much you have in the pipeline , correct . But the biggest mistake people are falling into this day and age is cash is paying interest , and so they think , oh , I'm just going to hoard some cash now , but you're really losing purchasing power by hoarding cash instead of putting it in the market if you really don't need it right now .
Speaker 1Correct .
Speaker 3So don't fall into that falsehood .
Speaker 1Yeah , there's a you know , that are paying down debt .
Speaker 3Oh yeah .
Speaker 1You had a great point in one of our planning sessions yesterday that people are they have three and a half percent mortgages , they have enough money in savings to pay off the mortgage , but they think they're making more money on their 5% money market but they're not after tax .
Speaker 3They're not your tax .
Speaker 1Yeah , so a lot of these people are in the highest tax bracket . If you're paying 37% tax on the income from a 5% yield , you are actually losing money versus a three and a half percent mortgage .
Speaker 3I know , yeah , think about it .
Speaker 1A lot of times it's better to just pay off the debt .
Speaker 3Bite the bullet and pay it off .
Speaker 1Right , so anyway , that's important to protecting family wealth having cash reserves so you don't have to go selling your real estate or your portfolios , uh , things of that nature .
Speaker 1Uh , other thing is diversifying your portfolio . Um , you know , I I got uh asked to have a lunch with a gentleman um at our , at our club Um , this has probably been a year or two ago and nice young man uh worked hard , corporate America and finally gotten uh . Uh got in a nice corner office , we'll say , and was making good income came from nothing really and how he put it and invested a bunch of money into the QQQ leverage fund .
Speaker 1So basically it was like 3X NASDAQ , right , so he'd gone from like $3 million in a brokerage account down to $2 million . He was really nervous . This was in 22 .
Speaker 3Oh yeah , the big down year , the big down year Leverage fund .
Speaker 1And basically I said well , you didn't know better , but leverage funds are very volatile , but leveraged funds are very volatile , and so what I would do is take this out and invest in a normal , just a normal investment portfolio at this point .
Speaker 3Diversification .
Speaker 1Yeah , you need to diversify the holdings Because literally he had everything in this one fund .
Speaker 1Now the good news is that one fund owns a bunch of right , a bunch of individual securities from the nasdaq , but it's it's borrowed money , uh , at this point , so it it what gets you sometimes , what gets you to where you are . So a better example might be people who buy individual stocks . Um , the new one would be nvidia . So nvidia got , has done very well , uh , and if , if I think it's it's time , not because it's at a all-time high , necessarily , but but , and not because it won't go higher , uh , but because this got you here . You created wealth . If it falls apart for some reason , then you're just right back to where you started . Why not take the gain , some of the gains , off the table , diversify that into the overall market like the s&p 500 ? I'm not saying go to cash or go to bonds , even but just keep it in a diversified portfolio .
Speaker 1So what got you here may not be the same strategy that you need to have to continue . And then diversifying a portfolio could also mean not having less in stocks and bonds . Maybe it's better to have a third of your money or a third of your wealth in real estate . It doesn't have to be rentals , it could be second or third properties , but just diversify your holdings .
Speaker 3Yes , but I would say that's more at higher net worth levels .
Speaker 1Yes , If you have $10 million and you're , you're living on $150,000 a year , $200,000 a year you probably don't need to have a hundred percent of that in stocks ?
Speaker 3Oh yeah , exactly . But if you're like the million , $2 million net worth really .
Speaker 1No , that would . That would make sense .
Speaker 3Long-term asset classes are your best bet .
Speaker 1Yeah , the real estate part wouldn't make sense , because now you're going to have a loan , yeah , and so you're not really not that the loan's bad , but uh , you could , you could . You could have some things . Cramp your style if um if you don't rent it out for some reason and you're stuck with that mortgage and you have to cover that mortgage .
Speaker 3Yeah no-transcript .
Speaker 3Although I think there's some areas that prices are coming back down to . That we're helping a lot of clients recently is concentrated company positions , because a lot of companies are into the restricted stock grants which vest on an annual basis , and so we try to tell our clients , like you're already invested so heavily in your company they're paying your salary , all your benefits , your medical insurance , matching your 401k , some group term , you name it You're getting so much from this company you don't want to double down and now hold shares in that same company .
Speaker 3You know , granted , sometimes there's holding requirements that you must maintain . But if you can get out of your company stock , it's time to get out of your company stock and thank them for that award , but then move that to a diversified holding right .
Speaker 1We've used those awards over the years to pay off a lot of houses tuition is another great annual use for it for private school or college I see that applies to everybody except our spacex clients , right ? I wouldn't be selling that at all .
Speaker 3We do have one .
Speaker 1I would not . I would not be selling SpaceX , I'd be holding that Nothing , nothing but up there . Plus that's private . So it's a lot harder to liquidate ?
Speaker 3Yeah , good point .
Speaker 1It's not on the open market .
Speaker 4Are you curious why annuities keep coming up as a potential investment option ? People are often told that annuities can effectively mitigate investment risks and help secure their financial future . However , annuities often benefit the salesperson and might not be the best choice for you as a consumer . To learn more about the various types of annuities , the negatives of owning them and better investment alternatives , we have a free ebook on our website just for you To download our ebook . Buyer , beware , why Do they Keep Trying to Sell you that Annuity ? Simply click the link in the episode notes or visit wiserinvestorcom slash guides . Now let's get back to the episode .
Wealth Preservation Strategies
Speaker 1But yes , and there's actually ways we're doing this now with direct indexing , where we can take that individual position . If it's in a brokerage account , we can add cash to it from the client , obviously cast to have additional cash or things we can liquidate to cash , and then we can move that into a custom index built around it so for instance , the largest holding in the S&P would be Apple .
Speaker 1So if you had a lot of Apple stock you would just build . You build a custom index without Apple stock in it . So now you get a diversified , not doubling up on Apple inside the ETF . So that's a big game changer . And then you can do tax loss harvesting at more like a micro level , which allows you to sell off some of that Apple for no capital gains over time . Exactly Maybe about 6% of it a year or so .
Speaker 3Yeah , oh , it takes time . Exactly , maybe about 6% of it a year or so .
Speaker 1Yeah , oh , it takes time it takes time to do all that , but those are all things that uh , I guess as part tax strategy , um , for wealthy people to help preserve wealth and not have to pay the income tax . Exactly , cause you just have to have patience for that with the process .
Speaker 3You're going to need it down the road , so might as well mitigate those long-term capital gains .
Speaker 1And if you have a tremendous amount in a position , um , you can also , uh , buy puts so you could take , you could take a option strategy not like not not the ones you see at midnight on CNBC advertising some some crazy strategy but but you buy it , you just buy insurance basically . So if it drops below this price , then you can eliminate it . Uh we did that with a company that had , or a family that had , a lot of Boeing stock .
Speaker 1So , after the second max crash we were like , um , something's not right to lose two airplanes that close to each other and the investigations weren't even done on the first one yet , and I think we were able to sell a Boeing at $380 a share a year later , when it was trading around one 80 because of the put .
Speaker 3Yeah , so a put is your right to sell a share at a certain price .
Speaker 1You're buying it . It's like buying an insurance policy on a stock , smart which which helped protect their their wealth . If it had gone to zero , they probably been still been okay , but it still protected their wealth we've done it . We've done it with uh home depot , with a few clients and less worry about that one . But uh , the the puts were a little cheaper because the market wasn't worried about it either yeah , exactly those are things , those are strategies you can look at to help preserve that , that position .
Speaker 1We did it with apple a really long time ago for a gentleman who's now passed away but he needed that money to in order in order to pay for nursing home .
Speaker 3And so if his .
Speaker 1If Apple had just fallen apart , his , his livelihood or his wellbeing would have been at risk . So unfortunately , his ability to pay the premium was very small . Oh , okay , so we ended up having to sell a call on the other side .
Speaker 3Yeah , okay .
Speaker 1So I said it like 30% higher , but he got called away . It went up by 30% in a six month time span . This is a long time ago , but it got . It got called away . But but the fact that it got called away , there was enough premium there that it covered the tax bill and all that . So there's lots of advanced strategies you can be using to help mitigate the risk of individual securities .
Speaker 3I'm just kind of anchoring on the Boeing put , Like how expensive do you think Boeing puts are in this right now ?
Speaker 1Oh , I know I haven't looked in a while because we don't have anybody else in that position . But yes , um , yeah , I know , right , yeah , they just keep having things pop up , it seems like , or pop out as , long as it's not people yeah .
Speaker 1That'd be different . Yeah , boeing might become something else at that point at this , at this stage . Um , another , another way to protect a family , protect family wealth , is insurance . You know everyone goes ugh insurance , right . It's funny because when I was researching this topic to see , hmm , what else is out there , annuities kept popping up . And I will say this is my disclosure that annuities are not good wealth vehicles . When those gains are passed past the next generation , they're fully taxable as income . You don't get a step up in basis . It does allow you to never make money again . I mean because the salespeople who sell them like to say you know , you're guaranteed you know whatever . And I was like , well , you're guaranteed never to make money .
Speaker 3That's what it tells me You're just capped .
Speaker 1There are some ancient products or ancient annuities that we've seen pass through here that you can't buy anymore . That really weren't that bad .
Speaker 3No , that are like 25 , 30 years old .
Speaker 1But that was really a long time ago . And if they had put the money in the S&P 500 , they still would have done way better . Yeah , but they weren't . Uh , for what it is they , I would say that they weren't worse off necessarily no , and they usually have expensive riders that clients have bought on them .
Speaker 3So it's like the you know confluence of all these factors that make these things good .
Speaker 1Even the insurance company realized it was a little too good of a deal so they don't even offer those anymore . So if you have one should be analyzed to say this is a good idea . Not a good idea to keep this . But as far as our discussion today with wealth preservation , a lot of it has . You know , life insurance serves a purpose . It replaces income . So if you're still in your wealth building phase and you want to make sure that the family gets to the finish line , life insurance is a way to make sure that that happens .
Speaker 1Whole life insurance is a permanent policy so it doesn't expire at a certain age . A whole life can be used at times to help preserve wealth . For example , if you have a special needs child and you want to be able to live your best retired life but also know that there's X amount of dollars for this person that you might still be caring for as an adult , then that sometimes is a good strategy . If you have the resources to purchase the policy because it won't be cheap , correct , but it could give you the peace of mind that you're looking for . Whole life also could be used to cover estate
Tax Planning Strategies for Wealth Preservation
Speaker 1taxes .
Speaker 3Which we could be getting back into , who knows ?
Speaker 1We'll find out about what .
Speaker 3Year and a half .
Speaker 1Yeah .
Speaker 3I mean they'll sunset in a year and a half , so we'll see . Really depends on how the next election goes right .
Speaker 1Because we wouldn't get past the two-year mark before it sunsets again . Correct yeah , so it really depends on who's in power this next election cycle . So what we're talking about is 1231.25, . We revert back to the 2016 tax brackets .
Speaker 3Yes .
Speaker 1Which I think are about 5% to 8% higher than where you are now pretty much across the board for the most part .
Speaker 3Yeah Well , at the top , 37% goes up to what ? 39.6% ?
Speaker 1Yeah , but the mid and the bottom change , those get crushed kind of yeah .
Speaker 3Mm-hmm , that's , that's wrong .
Speaker 1I know , isn't it , especially with all this inflation . So you would think that they would modify it to at least where the bottom stays , where it is that would be the right thing to do . Just increase the tap but my part of me thinks that they're going to fight so much about it that it will revert back to the original oh yeah , they'll fight , that's a given , yeah true .
Speaker 1So investing in insurance um , I hate that phrase , but purchasing insurance , I'll say yeah it could be an opportunity to help preserve things , but you never should talk to the insurance salesperson about it . You should be talking to an independent advisor who does not sell the product to see if this would make sense . Then you you go to the person who sells it to make the decision .
Speaker 3A broker who sells multiple carriers .
Speaker 1Yes , correct , don't buy something that has the same name of the company in the insurance .
Speaker 1Ding ding ding Be tax smart to preserve wealth . Okay , so we already touched on this a little bit where , if you have wealth inside a brokerage account , you really should be looking at transitioning into direct indexing now , because you have the opportunity to create your own tax credits and also build your own indexes . So we have whole podcasts that we can reference on that in the show notes . But the important part is understanding that you can use the capital gains or capital losses to your benefit to reduce your taxes .
Speaker 1Other one , too , is looking down the road at Roth conversions . So we're starting to do this for wealthier clients , knowing what's coming up with some potential tax changes . But if you have family members that are going to be in a higher tax bracket once they receive , once you pass away then your tax bill , it might be better to pay your tax bill now . Also , too , you have to remember if you have millions of dollars inside an IRA , the first year you take an RMD which would be 73 or age 75 , depending on your birth year you're paying probably about three and a half percent that first year of what the balance is as your requirement of distribution . But if you forecast out , you go out 15 years , that three and a half percent is like what five it's number oh yeah , down the road , because every year that that number grows .
Speaker 1So what we like to do in our , in our tax planning is we'll look at where you start and then where do you finish up in your 80s so it could be you go from a 24 to a 37 or 35 percent bracket , so maybe it's better to convert some now at 22 to 24 , so that you have you can pay less later .
Speaker 3Absolutely , and you know , casey , another time where it makes really good sense to do this is if you have a couple with a big age difference , and so the one spouse might die , you know , a decade or a decade and a half before the second spouse . So when the second spouse inherits that IRA , she or he's going to be taxed at single tax rates . So that vaults it up . That RMD is now like at the 37% tax rate , so getting more out of the IRA earlier with a Roth conversion just makes even more sense with that big age gap .
Speaker 1Yeah , that's a very good point . Also , too , is charitable giving strategy . A lot of people are still giving to their churches and other organizations out of their checkbook after they hit the RMD age , and you can even do it before then 70 and a half , you can still do charitable contributions . But think about this If you're required to pull $30,000 out of your IRA , every year you give $20,000 to a charitable organization every year , or multiple organizations , you could give it out of your IRA . Instead , it wouldn't count as taxable income .
Speaker 3No tax .
Speaker 1No tax , so you're saving . Ordinary tax wouldn't count as taxable income .
Speaker 3No tax , no tax .
Speaker 1So you're saving , but so you ordinary tax , right . So you end up with the same amount of money in the end . Because you're not writing it out of your checkbook and you don't , you don't get the deduction on the tax return . It's just that the money never came to you , so it didn't get taxed . So if you're in the 37% bracket , that's saving 37% , so it requires some paperwork . So this is something that you would not do in a monthly basis , but maybe a couple of times a year . One time a year is what we prefer .
Speaker 3Yeah , cause it has to be the first money that comes out of the IRA each year .
Speaker 1Correct .
Speaker 3Like you can't take a monthly to your own account and then do the charitable . You've got to do the charitable first , right ?
Speaker 1Well , if you do it , if you do it the way you're talking about , what's the negative consequences of that ? Because if you give it first , you're still going to pay the income tax and then it's just the end , right ?
Speaker 3right , but technically I think the qcd qualified charitable distribution has to be the first money out each year okay irs code I wonder how they police that yeah , exactly it's like when you miss your rmd .
Speaker 1I've always wondered how they police missing an rmd , but I guess they do somehow . Big brothers watching yeah interesting um , so yes , uh , also where you're saving . So it could be that it's better to put money more into Roth than it is to pre-tax , but I would say it's all family dependent . Every family has a little different strategies . I wouldn't say that there's any one piece of advice I could give all of our listeners that apply to all of them .
Speaker 3True . Another strategy is if you're not 70 and a half yet and so you can't give money from your IRA to get money out of there , you can give appreciated securities . Yep , that's correct , that Apple stock . We get the full tax deduction for that market value and then you don't have to pay the capital gains on that and the charity gets the full value , so it's a win-win . So we have to let everybody know never be giving cash . You always have an appreciated security or something in your ira .
Speaker 3So think twice before you're ever writing a check or swiping your card to give to a charity uh , another , another , uh .
Speaker 1angle two on this is , um , just forecasting out your , your income , where you're pulling money from , because , uh , a lot , most brokers just say you know we're going to send you X amount of dollars but they say talk to your tax person .
Speaker 4They're not actually doing any tax planning .
Speaker 1So you have to do some tax planning as far as your your wealth preservation strategy to understand where you're pulling money from .
Estate Planning and Wealth Protection
Speaker 1Another thing I thought about , too , is second homes , some people you have to pay capital gains tax on the sale of those . And occasionally people run into people who sold a home and bought another second home and they have to pay capital gains tax on the first home and all they had to do was a 1035 exchange .
Speaker 1Yeah , Right , so you could sell , I'm sorry , sorry , uh , yes , thank you 31 exchange , so you could have done a exchange and from like , kind , yeah , and be able to purchase um the next home and roll the capital gains into that home . Uh , there's a process for that .
Speaker 3Right , so so you , in a limited timeframe , in a limited timeframe ?
Speaker 1Yes , but there's there's companies who specialize that , attorneys who specialize in that .
Speaker 1Another one , too , is the sale of a business . So you're selling your business , assuming that you're not selling the stock of the company . So sometimes people are , but most of the time you're selling the assets and the company just kind of disappears . If that were to happen , you have the opportunity to use that money to purchase a home , right , so you could buy an investment property that you're using as your second home . Maybe it's on the Airbnb rental , enough to qualify for that , but you you could do a 1031 exchange from your business sale to buy a property . So if you're selling your business for $30 million , you could pick up a $4 million beach house right , and not have to pay tax on the $4 million , cause usually the people who are buying you want you to roll up . They want you to reinvest in their company going forward , and sometimes it's required and sometimes it's not Now , if you're selling .
Speaker 1Usually the people who are buying you want you to roll up . They want you to reinvest in their company going forward , and sometimes it's required and sometimes it's not . Now , if you're selling stock , you can't pull quite pull that off it has to be like cash , like kind , yeah , yeah um , all right . So there's lots of tax strategies , all which are very legal and all require some forethought oh yeah , it's not something that you're in the middle of doing this .
Speaker 3The transaction .
Speaker 1And now you need to do it . You need to be thinking about this a good six months to a year before you even take any action with a business sale , maybe , maybe two years before Estate planning . So this is also very important and how you transition your assets to the next generation , and I I , I can't help it but think about . You know all of our episodes on legacy planning , but you have to teach next generation , you have to tell your story . This is how we got here , this is what we have , this is what we did , this is what we sacrificed to get here , just so that they understand that this stuff just didn't magically appear right , yeah .
Speaker 3And I think a lot of clients fall into that false sense of security . Like , oh , my kids are grown now , like I don't need to redo my estate documents . And I say , well , that's precisely why you do need to . Now you have a better sense of who they are as adults , how they manage money . So maybe look at your documents , see how your assets pass to them . And you know , let's look at these milestone ages Like , oh , you know , like two out of three of your kids have already blown by all the milestone ages . They're going to get all your millions outright . Is that a good thing ? And they're like , well , yeah , maybe not .
Speaker 1Yeah .
Speaker 3So you have to readdress all these things .
Speaker 1Yeah , and then probably review those documents every every few years . Also , if you have , if you move .
Speaker 3Oh yeah .
Speaker 1You need to redo the will power chain medical directive for the state that you actually live in . If you're spending a lot of time out of state , you should have documents for both .
Speaker 3Not a will , but the power of attorney .
Speaker 1medical directive for both states should be in place . And then , if your estate is more complicated , meaning that you have rental properties , second third homes , at some point someone needs to map that out and say this home is in this LLC . If something happens to me , what happens to the LLC ?
Speaker 3Does the ?
Speaker 1LLC go through probate , or have you in the bylaws , have you created a process for the member dying ? So there's a lot of things that can get really complicated , but they need to be laid out because most of these estate planning attorneys are just working through creating documents . I don't know how much advice they're actually giving .
Speaker 3Yeah , like how it all coordinates together .
Speaker 1You're young , in their twenties , just had a baby . It's easy . You can go and find an attorney who just does these things every day , just cranks them out . But sometimes you need the attorney that costs a little more money , who's pausing and talking you through the process or listening to you . That's part of our jobs as quarterbacks for the family , as advisors , is to make sure that all the other professionals are doing what they're supposed to be doing . But sometimes I have to take my whiteboard in my office and I just have to draw it all out and then you see the holes and you go , oh , and then you call the attorney and go hey what are we going to do about this ?
Speaker 1And it's just , they didn't even realize it .
Speaker 3No , yeah , we have to tell the clients . These are the things to be thinking about before you go meet with the attorney . So try to get the brains going and think of all the people that you're going to name . Think about the things that the attorney is going to present you with to decide upon .
Speaker 1You know I as we kind of wrap up here , I have a great book which we'll link in our show notes , but it's called the psychology of monies by Morgan Housel .
Speaker 1He's become uh , become uh , a famous writer , uh in the in our space , uh , but he had a interview , or he . He quotes an interview from Charlie uh and Warren uh , warren Buffett and kind of came up with these uh , survival mindsets . Real-world outcomes really come down to these three things . I'll just read the first one . You can buy the book and read the other two .
Speaker 1But one is this is more than I want big returns . I want to be financially unbreakable . If I'm unbreakable , I actually think I'll get the biggest returns because I'll be able to stick around long enough for compounding to work wonders . So that that to me , um , it kind of summarizes up how do you protect wealth ? Is that you have a good segment , um , of your estate that is secure and you know that you never have to tap into these other resources ? Yes , and then it allows all these other resources to grow and flourish , right , and then , as you know , some people have a lot more money and they will use a bit of leverage to in parts of their portfolio to be able to do other things . It could be real estate , it could be . No one that I know is borrowing money to invest . I don't know anybody actually does that , no Other than complete fools .
Speaker 3Other than those .
Speaker 1But real estate is a common example of that , especially income generating real estate . So just understand that what got you here ? Then there's a whole nother level that takes you to the next . You know a whole nother steps to take you to the next level . And how you got here is not maybe not the same way as you keep growing your wealth .
Speaker 3Right .
Speaker 1And there's a different things that you can do . Whole life insurance and annuities are not going to be your first stop , but but maybe there's some , some case for insurance possibly . But I think more importantly , it's just understanding . These are my , this is my monthly need . This is how I'm going to secure my monthly need . This is my backup plan , my emergency reserve , and then everything else can grow and compound and build legacy for the next generation .
Speaker 3Absolutely .
Speaker 1All right , missy great conversation . Thanks for talking .
Speaker 3Thanks .
Speaker 1Casey , you can learn more about uh , this , these topics . Uh , episode 145 , dying without an estate plan . Do you hate your family ? That was the one , uh , I did with Brad a while ago . Uh , passing down generational wealth episode 175 . Uh , that's a really good episode . To uh videos reference we have a YouTube channel . Hey , we hit a thousand subscribers on YouTube . On our last podcast I think , I said , hey , like and subscribe , and people did so . Thanks for doing that . Past the thousand mark . That's big for a , for a little firm like ours , that's right . So we also own a wiser retirement . On the YouTube channel we have a couple of video short videos prevent family conflict with legacyict , with Legacy Planning , online Estate Planning Service versus Local Attorney and Meaningful Ways to Leave a Financial Legacy to your Heirs . Those are all things that are in the show notes . This is episode 219 . Thanks for listening . We'll see you guys next week .
Speaker 2Thanks for listening to a Wiser Retirement Podcast . We hope you enjoyed today's episode . Make sure to subscribe wherever you're listening . That way you don't miss any new episodes . We'd also appreciate if you could leave a rating and review . If you have any questions about anything that was discussed today , head to wiserinvestorcom and reach out .
Speaker 2This episode was produced by Edward Resendez . This podcast is strictly for informational purposes only and is not to be considered as investment advice or a solicitation to buy or sell any financial products , securities , digital assets or any other investment vehicles , or a basis to make any financial decisions . Wiser Wealth Management Incorporated is a registered investment advisor with SEC . The host and or guest may personally own securities , digital assets or other investment vehicles mentioned on this podcast . Neither the host nor guest of the show are compensated for their participation and no referral fees are paid to or received by any host or guest for clients , listeners or similar interests . Investments involve risk and , unless otherwise stated , are not guaranteed . Be sure to first consult with a qualified financial advisor , tax professional , insurance professional and or legal professional before implementing any strategy discussed herein . Past performance is not indicative of future performance .
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