Small Business Big World
New episodes every Tuesday discussing the challenges, adventures and fun of being a small business owner. Each week we'll delve into various small business topics, from real-world DEI considerations to selling your business, using video to market your business, unique benefit offerings for your employees and so much more. Curated by the crew at Paper Trails.
Small Business Big World
Legal Tax Avoidance
In this episode, we sit down with Josh Holt from Steward Partners to break down essential tax strategies and investment advice for small business owners. We'll talk through complex tax laws and discuss the value of professional advice in protecting and growing your assets.
Moreover, we delve into broader investment and financial planning, highlighting options like cash balance plans and Employee Stock Ownership Plans (ESOPs). We also cover recent updates in tax legislation that could impact your business. Join us to gain insights into securing your business's financial health.
This is Small Business Big World, our weekly podcast prepared by the team at Paper Trails. Owning and running a small business is hard. Each week, we'll dive into the challenges, headaches, trends, fun and excitement of running a small business. After all, small businesses are the heartbeat of America and our team is here to keep them beating. Welcome to another episode of Small Business Big World. Today's topic is legal tax avoidance, and that sounds a little sketchy, but it also sounds a little fun, I think.
Speaker 2:A little better than illegal tax avoidance. Yes, that's for sure.
Speaker 1:So my guest today is Josh Holt. He is a partner at Steward Partners in Portsmouth, new Hampshire. Josh, among many other things, is a wealth manager, vice president and partner down at Steward Partners Global Advisory. Sounds very official.
Speaker 2:It is very official, jeez. Compliance wanted that in there, yeah.
Speaker 1:And Josh is an accredited asset management specialist and a certified financial planner, so he's got his shit together. I think that's what that means. Well good, so obviously, today's topic is legal tax avoidance. Quick disclaimer neither of us are a CPA, neither of us are an attorney. This is for informational purposes only. Please consult with your qualified tax professionals before you think about doing any of these things. Let's do it that way. So they're great topics. Everything out there is public information, it's all in the tax code, it's all legal. It's just. You know, there are certain considerations that should be taken into account anytime you employ these.
Speaker 2:Personalized advice is critical. Right, personalized advice is critical, yeah.
Speaker 1:And I think that's one of the things we're going to talk about. You know, the first thing, just a little housekeeping. Before we get into the meat of it, be sure to please subscribe, like, follow, share rate, review, all those fun things. We are everywhere. Hopefully you're listening to us somewhere exciting probably Apple Podcasts, spotify, tiktok. You know Facebook, instagram, all of those places. Visit us at smallbusinessbigworldcom and if you have any questions about anything we talk about, always feel free to reach out to podcast at papertrailscom and we'll get back to you or even talk about them on a future episode. So so you know, josh, we we talked about. You know about the team, right? I think that's the most important thing for any small business owner is having a team of advisors around them to help them figure these things out, right? What are you thinking about that team? Who's part of that team?
Speaker 2:That's a great question, right, because it's almost like a medical profession too, right. We have our general practitioner and then we have all the specialties that go with it, or if you have something happen, you want to have those specialists there. So first and foremost I would say, is you need the accountant the CPA is kind of the key to that the financial advisor a wealth manager and then the legal is a huge piece of that along with the other business consultants where Paper Trails is right, and HR and all those different pieces there are part of that team.
Speaker 1:I think that's really great and you know we all, I think everyone has had some experience with an accountant and attorney. And I think you know everyone's first thought when they hire an accountant and attorney is how expensive, is it going to be? First of all, right, that's, you know these guys. You know they're not cheap, right, and I think that you know we have clients that say, oh, I had this accountant but he charged me a fortune. Well, how much did he save you? That's my question. What advice did he give you that helped you enable to pay less taxes or to have better cash flow, all those kind of things.
Speaker 2:And you may not see the savings at first. I would say as well, you may see it later, down the road. But that cost is up front. But that can save you tens, hundreds of thousands of dollars down the road.
Speaker 1:Right, you know we were talking just before here. Don't TikTok your taxes, right? Don't listen to Grant Cardone, right, he does great things and he plays the same game that we all want to play, but usually on a bigger scale. And I think you know talk to your accountant and a lot of things that we're going to kind of get into here are all things you could talk to your accountant about, Right, and you should and should Absolutely, and I think you know those are, you know, real, real. These are real world tools that small businesses can use to to kind of handle that. So you know the other thing, you know we talk a lot about structure and you know everyone on TikTok, I think, has a trust Right, and I know very few people in the real world that actually have a trust. I think it's certainly a good tool, but you know everyone on TikTok says have a trust, right. I mean, what do you think those guys are?
Speaker 2:So there's all kinds of different. We talked before about the advice I just saw the other day on social media. That was you can write off your dog on your taxes if it has the ability to bark, if you work from home and alert you that there's someone at the door Doorbell.
Speaker 2:But going to the trust piece, I mean in general there's two types of trust out there. Right, I mean there's multiple types, but in general it's revocable and irrevocable. And I was just talking to a partner of mine the other day about how we see people go into these irrevocable trusts, sometimes to save on the Medicaid piece down the road. However, if you put your primary residence into a Medicaid trust, you better be in that house for the rest of your life. If you sell it now, you've lost your capital gains exclusion along the way. So you've lost either 250 or 500 if you're married, by putting that into your irrevocable trust. So there's multiple factors in here. So when we talk about the team, it's not just having the right people on your team, it's giving them the information they need to help you and give you the correct advice.
Speaker 1:And that's a great point. I mean, we hear from a lot of clients that say, oh, I just dropped the shoebox off at the account, right, and hopefully, hopefully you have yourself a little more organized in general your business. But you know, if you're giving them garbage, you're going to get garbage out, right. You have to take responsibility as a business owner to provide these folks with the stuff that they're going to help, that they're going to give you back in good advice, right?
Speaker 2:So so a lot of times I say to my clients is like or a potential client is that if someone comes in and goes, hey, I have a sore foot, and you go to the doctor and you're like, hey, I don't care about what else is going on, Don't ask me about my weight or if I ran a marathon last month or anything like that. Just focus on the foot. They need to know everything that's going on your CPA, your lawyer, your financial advisor. They need to know all of it?
Speaker 1:Sure, yeah, Because I think that all plays into the whole picture right, and we had a client once that had a different accountant for their business than their personal taxes, and I said you're not giving either of them a fair shake at seeing the whole picture, and you know they're. The reason you aren't happy with the results is because this person's not talking to this person, and rightly so, because you said I only want you to do my business taxes and I only want you to do my personal taxes. Well, as a small business owner, we all know they're intricately connected and you know it's really important to make sure that you, like I said, you're giving them the right information, you're giving them the ability to give you the right advice. So I think that's certainly a really good topic in there. You know, what do you think about business structure in terms of small businesses? What are, what are you seeing folks employ in terms of organizing their businesses? Certainly, we briefly touched on the trust stuff personally.
Speaker 2:But what do you think about kind of the structure? So there's two aspects to that. There's a legal piece and then there's a tax piece, right, and then I'll throw a third piece on there which is the financial planning piece. But that's really tertiary compared to the other two. So from a tax perspective, working out whether it's an S-corp, c-corp, lp, whatever it is, that's all CPA-driven to the most part. Your team needs to be in on it. But, for an example, I'm working with a client right now where she owns multiple businesses with multiple partnerships. So it's not just the ownership in those partnerships, but it's on the personal side. It's how does she want to own these? So from a liability standpoint, is she okay having that in one business piece or we want to separate that out? And that's where that team comes together.
Speaker 1:Well, that's, I think you know. We talked about the whole TikTok trust thing. Everyone says I don't own anything. I don't own anything, everything's in my trust and I my trust owns 37 LLCs. Right, I think you know that's definitely a strategy. Probably not for most small businesses, but I think having that structure and that conversation with your attorney or accountant is important for sure. It's huge. I mean, we do have clients who legitimately own multiple pieces of real estate, who own multiple operating companies, and they may not stop and think about what that risk looks like to them should someone slip and fall at this real estate or whatever. Right, so, certainly having that team and that sometimes comes in with your insurance advisor and everything else too, right.
Speaker 2:And I think with that team it's just a simple thing of getting on an hour-long Zoom with them right, getting the insurance agent, the lawyer, the accountant and the financial advisor all on the same call and having that conversation agent, the lawyer, the accountant and the financial advisor all on the same call and having that conversation.
Speaker 1:I'll say you know, one of the things we experience a lot in our area is our accountants are busy, they're overwhelmed, they don't have the help. There's a shortage of qualified CPAs in our area anyway, and so I encourage our clients you need to push your accountant, you need to take responsibility for your own destiny. They're wonderful people, they're great, they clients. You need to push your accountant, you need to take responsibility for your own destiny. They're wonderful people, they're great, they're smart, they're hardworking, but they just don't have the time to be as proactive as you would like them to be.
Speaker 1:So I always tell people you really need to take that time, reach out to your CPA two or three times a year. It's not just a March or April problem, this is an August and an October or November problem as well, and really kind of figure that out. And there are things that have certain time horizons and so if you want to change something for the following year, you may have to start in July or August. For if you're going to do a qualified retirement plan right, I mean some of those things have cutoffs of October or November 1st to start a new plan for the following year. So if you wait till December 29th or until March when your taxes are done. You're too late, right, you're behind the eight ball, so being engaged is certainly important.
Speaker 2:One of the things we started doing is doing quarterly meetings with that team. Just a half hour Zoom call, right, Like hey, has anything changed? What are we looking at? What's changed? Payroll wise, Big expenses coming up, big revenue changes coming up Just a half-hour call.
Speaker 1:Yeah, and that's a great idea. I mean, especially, the more complicated your stuff is, the more it is. But even if you're just a regular old I'm the guy turning the wrench under the car I still think it's important to be talking to your accountant and your financial advisor a couple of times a year. Don't wait until tax season to talk to them because, frankly, they don't have time to talk to you at tax season, right? So you know everyone wants to sit down and have that. You know, hey, april 14th meeting and say, hey, what, how'd I do this year? Right, and that's not the time to have that conversation.
Speaker 2:April 14th is too late to tax plan for the year?
Speaker 1:Yes, absolutely for sure. So so some of the things we see you know, or you see people do you know? One of the things is kind of charity. What is that you know in terms of contributions? I know things have changed. What does that look like today?
Speaker 2:Yeah. So with the Tax and Job Cuts Reconciliation Act back in 2018, is that we're seeing more qualified charitable distributions coming out now, right, so you take your and again, this is all generalized advice here, right, it's not personalized advice is that you take out, instead of taking your RMD, your required minimum distribution. That money goes directly to the charity right From the custodian.
Speaker 1:So when you're and let's break that down right we use a lot of big words, big fancy financial advisor terms you have a qualified retirement account like a 401k or an IRA right and instead of there are times in your life where you are required to take a distribution and you're saying, instead of taking that required distribution, you can make a contribution to charity instead.
Speaker 2:Correct. Okay, and it used to be that you could write off that charitable distribution if you just wrote it out of your checkbook, but now that threshold is much higher. Okay, we're not using that Schedule A as much, so with that now we just take it directly from there and never hits your personal income statement, if you will.
Speaker 1:And it goes directly to that charity, mark BLYTH. So in that situation because when you do typically take a draw from your retirement account, you pay taxes on it right, one of these qualified accounts? Right, if it's a Roth, you may have already paid taxes on it, but that's a different topic, right? So you know that's a way to avoid paying the taxes on that distribution and seeing some of that stuff.
Speaker 2:And the charity benefits more. Right, Because you don't have to take out the normal amount of taxes you would take. You take out $100,000 you're required to take out. Well, now you can give all $100,000 to the charity instead of accounting for your taxes on your side, sure.
Speaker 1:So that's a really interesting kind of model. And certainly other tax contributions. If I go, you know, hey, I'm down the street and any 501c3 I want to make a donation are those still, you know, applicable deductions? So there's thresholds to all this right.
Speaker 2:So one of the things we're seeing a lot of donor advised funds, so at a very high level a donor advised fund is you put money tax deductible donation if it's big enough into a donor advised fund where it's managed and you have control over how those distributions are made out to a qualified charity. So you write that $100,000 check. Now you get to take that as a deduction depending on your income and all those different pieces. You work with your CPA but now you can control that money going out in little dribs and drabs over the next 10 years. Okay, that's interesting.
Speaker 1:That's probably a more advanced kind of charitable contribution, for sure, but those are. You know it's not given to the little league anymore. Now it's. You know we're talking about institutional giving, probably, but big stuff. So you know, we see a lot of small businesses dealing with real estate. You know, certainly most of us need real estate to do business right, so we become property holders, real estate owners through that. But then there's a lot of folks that are buying rental properties and things like that. I mean, what? What are the? You know again, I'll refer to everyone that sees on TikTok. Well, I bought this $10 million property and I took a loss on it and I, you know, I didn't have to pay any taxes for 10 years and I don't think that happens in the real world for 99.999999% of taxpayers. But what are folks doing in real estate to help them manage their tax burden?
Speaker 2:So there's multiple things. One of the things we see is that and this is a very complex strategy, so there's a lot of risk that goes in with this, including loss of principal but is a 1031 exchange into a paper product. So you, Chris, you save up. I'm going to use you as an example. You save up, you buy all these rental properties along the way and you're 75 years old now and you're like I don't want a landlord anymore, right, I don't want to run a management team, I don't want to do any of this stuff.
Speaker 2:These properties I've been depreciating these, right? So my cost basis is next to nothing and if I sell, I've got all this basis I've got to take out. And so with that is we have paper. There are paper 1031 products out there now so you can invest co-mingled into what's called a Delaware statutory trust Throw the buzzword out there, Let me make TikTok there but you go with other investors inside this managed portfolio. You receive your distributions as a paper product and there's a lack of liquidity in there and there's all kinds of different risks that are involved in that.
Speaker 1:So a 1031 exchange for those that don't know is a like kind exchange. So essentially what that means is if you sell a building you can buy another more expensive building, use any of the gain, any of the profit you made on the sale of that and roll it over into the other property and not have to pay any capital gains.
Speaker 2:Right, there's all kinds of little caveats, absolutely.
Speaker 1:Absolutely there's. Hire a 1031 advisor if you want to do that, they're great. I've done it. They're wonderful people, they, you know, with 1031, usually we hear that as a like-kind exchange. So what you're kind of saying, what I'm interpreting anyway, is that you're selling your real estate and the like-kind exchange is a real estate investment trust, essentially.
Speaker 2:Real estate investment trust.
Speaker 1:So it's real estate to real estate, but it's not.
Speaker 2:Actively managed real estate. Right, you're not actively managing.
Speaker 1:So that's an interesting model. So, like I said, typically we see people who are going to 1031, they sell one rental property to buy another, for example, and in this case you're saying I want to sell my rental property, I don't want the headaches anymore and I'm going to just convert that into essentially an equitable asset, right?
Speaker 2:You're into something that's traded on the market and so forth, right. Typically they're private, they're illiquid, but they're owned real estate. So you get to defer those taxes and at some point we're all going to expire. So the hope here is that at the end of the day, when you expire, you get that step up in basis for your heirs.
Speaker 1:Interesting, interesting, and that's a whole different wills and estates, and that's something you should talk to your advisors about as well.
Speaker 1:But that's you know. Again, I think people hear that 1031 and it's interesting. It's the buzzword. Everyone thinks it's the end-all, be-all, which is a wonderful tool. But it's an interesting. I had never heard of that kind of paper transfer, which is kind of neat. So, looking at, you know different stock options, so I've got extra money laying around. You know business has gone well. How are people taking that and using that to their benefit, right? I mean, what are people doing with you? If someone says I got extra money, what do I do?
Speaker 2:Yeah, so a couple of pieces there. So there's all kinds of different ways that business owners can invest their money. Most of the time, we want to be hands-off because we want to be in our business working it, adding the most wealth. I think, when it comes to tax efficient investments, there's a lot of good choices out there now, and getting that team in place that has a plethora of options in their toolbox is key. Having ETFs or direct indexing, all these different options out there that they can discuss with their wealth advisor and make the choices tax advantage for them. It could be municipal bonds or whatever, and all these have risks, right. So, like my compliance department put that in there is that there's all these and you're going to work out for alternative minimum tax and all these different pieces in there, but working on a personalized basis for that is really important to get those tax advantage investments.
Speaker 1:Yeah, and I think you know we talk to clients and everyone has a different mindset of. I think the first thing that we talk about with our clients is where do you want to be, right? Who do you want to be? Where do you want to be? Where do you want to be in 20 years? And sometimes I mean I'm 35 years old and I'm hoping and praying that when I get to retirement I have enough to say okay, I will be ready for that from a tax perspective in 30 years, I will be ready for that from a lifestyle perspective in 30 years. And I think taking stock today is important, right? I think managing your strategy today leads to success in the future, right? So some of those plans you know, certainly we talked about some of the qualified plans the 401ks, the simple IRAs, those kind of things are qualified retirement plans that folks can use, right?
Speaker 2:Yeah. So as a business owner, I know you deal with a lot of small business owners. That design of that plan is critical, right? You don't want a cookie cutter plan. You won't want this design directly for that business owner.
Speaker 3:Sure.
Speaker 2:So that could be a direct benefit plan, a cash balance pension plan. It could be just a 401k with the ability to add additional money above and beyond the IRS limits, where you can also put that money in after tax and convert it to a Roth. There's all kinds of options out there and using a third-party administrator, retirement specialist, retirement plan specialist that's key.
Speaker 1:Right, and the nice thing about a lot of these qualified plans is there are a lot of levers and switches that you can push and pull, that can design things that to benefit you but also your employees, right? I mean, you know, when we look at the plan design of our own 401k, for example, I want to make sure it benefits me, but I also want to make sure that's a really great benefit for my employees because they need to retire one day. Uh, you know for sure, and you know, and that's, I think it's. There's a statistic. You know what's it? 87% of statistics are made up. This is probably going to be one of those. There's a statistic that says, like, retirement is one of the top benefits employees want, you know, when they go to work for somewhere right, especially in this tight job market.
Speaker 1:Absolutely, and I think anything you can do to be competitive is important. So you know, when you talk about those, you know we've had the cash balance plan. Those kind of things seem to be making a little bit of a resurgence, that kind of quote-unquote pension right, you know, we saw what was it back in the 80s everyone started to drop their pensions in favor of the 401ks and those types of plans, and now we seem to be seeing a little bit of that come back. Are you seeing that too?
Speaker 2:Absolutely. There's more control. There seems to be now. So and again you've got to use a third-party administrator with this, a CPA with this. But the contributions can be made. There's multiple ways to make those contributions in multiple amounts. So if business slows down, there are some off-ramps as well, which makes it easier for a business owner to commit to the plan longer term.
Speaker 1:As they continue to make updates to ERISA and all that stuff. They're refining those as well. Certainly, we're seeing a lot of ESOPs. That's another vehicle, right. That's an employee stock ownership plan and that's certainly very unique to some businesses, right. Some businesses have that ability to sell a portion or all of their business to their employees, and I think there's a lot of planning and strategy that goes into that, of course, too, but that's a really unique offering and in Maine particularly, we're seeing a ton of people go that road. What are you seeing and what are the benefits of an ESOP?
Speaker 2:On a regional basis. Sullivan Tire I believe it's Sullivan Tire, just did yeah, adam Astruz absolutely Huge right. They're all over the Red Sox games, all those different pieces. It's a great way to give back to the employees first and foremost, but it's a good way to capture the value of the business, the biggest value of the business. A lot of times is done through the ESOP.
Speaker 1:So when you talk about the large value of the business, one of the things with ESOP, my understanding is if you do an ESOP conversion, if you're a business owner that has very little basis in your business and you're going to have a huge gain when you sell your business, there's tax benefits from that as well. Right, if you convert to an ESOP, which might not be right for you, but this is one way, right. What does that mean? What does that look like?
Speaker 2:Yeah, so I'm trying to stay over my skis here too. So are tools available within the ESOP that may apply to help you really decrease the sale value in the case that you just brought up right. So you're getting the cash out, but the actual value is lower. So your basis the difference in price and basis is smaller than it would be otherwise, but you're still taking more cash out.
Speaker 1:And I think it's particularly with ESOPs working with a bank, with financial advisors, with the third-party administrators working with folks that understand that particularly is a huge imperative.
Speaker 2:And years ahead of time Right. Years ahead of time Right.
Speaker 1:Really thinking about that, because there's a lot of structure and things like that that go along with that and that's a really complicated, very complicated. Really complicated piece and I think culturally you have to be ready to employ a tool like that right. Certainly using that ESOP benefits all of your employees, benefits you as the probably former business owner, but it's certainly you need to have the culture to accept that.
Speaker 1:And you have to have the management team and everything needs to be humming right along, because essentially you probably are kind of financing your own destiny here, and if you leave this off to Joe Schmo, who you think can do a good job, are they really going to do a good job and are you going to be stuck back in a situation in five or ten years where you don't want to be? Those are interesting things as well. What are you seeing for success stories with your small business clients? How are things going?
Speaker 2:There's a bunch of different things. Let me talk about the value of advice, having that team in place, and the advice if that makes sense, is just a couple stories. I was talking to some people this week at my office about how I'm doing the podcast with Chris and we just came up with some stories and irrevocable trust. That was one of them right, that they put it in. Or something as simple as tax loss harvesting. So at a very basic level, it's selling XYZ stock when it's down and buying something else. So you take a paper loss on that stock and it could be a cash loss in that stock as well and then you invest in something else, but you have that paper loss. So 2022, the market was down we did a lot of tax loss harvesting.
Speaker 2:People are like I don't really want to take a loss of $100,000 on this thing, just trust me, go into it, we're going to buy something else. And then Trust me, trust me. They say Trust me. They say right, that's always a big thing. But let's just take you sell one ETF and you buy another ETF. That's very similar, right, and there's some wash rules in there. You got to make sure you work with your CPA and make sure they're not. You're not going to wash yourself out, but but with that, as you come back two years later and we were talking about, this person bought a piece of art, right, and they bought a piece of art and they go to sell it. Sotheby's wanted to buy it, so now they've got this huge capital gain of $100,000. It's like, hey, well, great, we can use that $100,000 loss we just took two years ago. Remember how you didn't want to take it. Well, when Mark is huge, if they're going to sell their business down the road and they can use that.
Speaker 1:Because you can save that paper loss until you need it. Is that correct?
Speaker 2:Yeah, there's rules with it. But yes, you can carry it forward.
Speaker 1:So that's why, when Donald Trump said he didn't pay taxes for 20 years, that's what he did, right? He took a huge paper loss and carried it forward for certain people. Part of it yes, Part of it, Not that we're going to talk about his situation, but that's what everyone says. Right, that's again the TikTok stories.
Speaker 2:TikTok stories.
Speaker 1:So that's the theory behind it, and a lot of you know I was talking how do they do this and I said well, you're already doing this, just on a much smaller scale. You didn't buy the $10 million jet, but you bought the $100,000 truck and you use the same depreciation method to save yourself taxes, right? So you know, sure, you might want to go buy a jet someday, but that's unlikely for most small business owners, and you know. But using the same tax theory and tax laws to for the work truck that you need works the same way as you know the jet thing, right? So you know. A lot of the things that we've talked about here maybe are bigger scale than you may be doing, but the rules are the same across the board and it doesn't matter what scale. You save a thousand dollars in taxes. That's a thousand dollars that you keep in your pocket, right?
Speaker 2:I think the point, chris too,000 that you keep in your pocket. Right, you got it. I think the point, chris too, is that you want to run these by your CPA, you want to run this by your attorney and your wealth manager and say, hey, what do you think of this idea? And it's like no, maybe you save $10 at the end of the day.
Speaker 1:Right, $10 might not be worth it. But again, if you where that strategy comes in the planning piece, yeah, the planning, and that's you know. Again, I think a lot of small business owners are so busy running their businesses they don't have time to take a step back and look at the big picture for themselves and for the business sometimes, and actually, you know, advocate for themselves and have those conversations with their advisors. So but, yeah.
Speaker 1:So what about? You know? We've heard a lot about Secure 2.0 and now potentially 3.0 and all those kind of things. What changes are coming down the road? How is that going to impact our small business friends?
Speaker 2:So maybe I'll shift off the small business a little bit. This probably impacts a lot of small business owners, but one of the best things that came out of Secure 2.0, in my, was the ability to convert some of the money that you have inside of a 529. I'm generally not a huge fan of 529s, aside from estate planning, because that money can get trapped in there and a 529 is an educational savings account for a college Correct.
Speaker 1:Yeah, thank you. Sorry, I go into the jargon right away.
Speaker 2:Is that the money can get trapped in there. Right, if your child decides not to go to school or it's not qualified educational expense, it gets trapped inside there and you can change beneficiaries and there's different ways to do that but it can get trapped With Secure 2.0, it allows up to $35,000 to be converted into a Roth, which is just a tremendous piece, a great head start for someone 18 years old or 22 years old at $35,000 into a tax.
Speaker 1:And I mean, I have a friend that same thing. His son's 18,. He's a senior in high school. He's probably going to go to trade school. They've been socking money away in a 529 for 18 years and they're like he's never going to use this, right. The community college is wonderful, it's not? He's going to make a great living as a welder, but you know he doesn't need $100,000 in that account, right? So you know that's a really huge benefit, amazing benefit. Yeah, you know. Certainly you know any of the kind of Roth conversions I know. Again, we a lot of people talk about, you know, a backdoor Roth, right? There's some opportunity to do some of those conversions when, as you're looking at your tax, overall, tax strategy, right?
Speaker 2:Yeah, and I think this goes down to having an advisor that knows you and doesn't need to make money off you, if that makes sense. Like I said, I was talking to a couple of people in my office about it. It's like some of the biggest things we've done have actually cost us, as advisors, money right, and we're in a place in our careers where we don't need every penny right Versus when we were early in our careers. In our careers where we don't need every penny right, like versus when we were early in our careers. And with that is that maybe you don't roll over money from your 401k, right? I'm just going to use you as an example. Maybe you start a new 401k, you switch jobs or you sell this or whatever. Now you have to have this old 401k out there and maybe you don't roll all that money over, because if you roll that over to a traditional IRA, you make some contributions to it and you want to do a Roth conversion. Well, now we got like it can get convoluted pretty quickly.
Speaker 2:Right, and so with that is getting an advisor is like whoa, hold on, slow down, let's look at this big picture first. Like let's do the calculations, and we have someone in the office that was Roth conversion on a big scale, right. So he's like, hey, we're looking at estate planning, you're never going to touch this qualified money in your 401k and your IRA.
Speaker 2:If we do a Roth conversion now, you're going to end up leaving your kids $500,000 less ballpark when everything's said and done. But would you rather leave them $7 million as taxable, or six and a half? That's not taxable and with those Secure Act changes is now. The length of time that you have to take that money out has been condensed in almost all circumstances. So why not leave that tax free if it makes sense, and then they can take the money out at their leisure within those first 10 years and maybe buy the jet? I don't know.
Speaker 1:We all want to buy the jet.
Speaker 3:We all want to buy the jet.
Speaker 1:Someday we all want to buy the jet. That's the goal. As a small business owner, I think. So you know you've made it. Maybe that's the thing. So any other kind of tax strategies what else is out there? What are people feeling? Anything else that you think is beneficial for our small business friends to think about?
Speaker 2:Yeah, I think it's just it's always good to go over the basics, right. It like it's just like I coach a lot, do a lot of coaching is the basics are where it's at right. So it's making sure that you have that plan in place of where you actually want to go to your point, right, where am I today, where do I want to go? How do I get there? And having that plan in place allows you to say, hey, here's where I want to go. How do I do it most tax efficiently? How do I pay the least amount of taxes over my lifetime? Or I'd rather pay a little more taxes personally to let my kids not have taxes down the road. So it's all those different pieces, but that's personalized, right.
Speaker 2:That may not be the case for you. You may say the dog doesn't care. The dog doesn't care. Like, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what, what? Your accountants?
Speaker 1:your attorneys, all your professional advisors. This is informational only, certainly great information. Hopefully you get some good ideas. But before you implement any of these, please, please, please, talk to them, and certainly we just have a couple of notes at the end. Just take a minute to hit that as well. So, as a reminder, please be sure to like, follow, share, subscribe, rate, all of those fun things. Just engage with us, please, please, please. If you have any questions for us, certainly email us. Podcast at papertrailscom. Josh, how do people get in touch with you if they want?
Speaker 1:to, I think it's through you, okay.
Speaker 1:So, reach out to us that podcast at papertrailscom. We can certainly get you in touch if you'd like and we'll go from next week. Thanks for listening to this week's episode of a small business big world. This podcast is a production of paper trails. We are a payroll and HR company based in Kennebunk, maine, and we serve small and midsize businesses across New England and the country. If you found this podcast helpful, don't forget to follow us at at paper trails payroll across all social media platforms and check us out at paper trailscom for more information. As a reminder, the views, opinions and thoughts expressed by the hosts and guests alone. The material presented in this podcast is for general information purposes only and should not be considered legal or financial advice. By inviting this guest to our podcast, paper Girls does not imply endorsement of or opposition to any specific individual, organization, product or service.
Speaker 3:Individuals are encouraged to consult their tax and legal advisors A before establishing a return on account and B regarding any potential tax or risk that Interest on municipal bonds is generally exempt from federal income tax. However, some bonds will be subject to the alternative minimum tax, amt Typically state tax exempts and applies a security issue with one state presence and local tax exempts and typically applies a security issue with one state presence.
Speaker 3:The tax exempts and municipal securities may be changed by legislative process, which could affect their value and marketability. Alternative investments are often attractive and include a high degree of risk. Investors. Thank you.
