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You want to leave a legacy, but if you don’t have a plan to preserve and grow your legacy, do you really care about it? Hi, I’m Hunter Brockway, founder of Boca Retirement Strategies, here to guide you to a successful, stress-free retirement while spending more and avoiding being killed in taxes. When it comes to leaving a legacy, in my experience, most can be broken down into three categories. Don’t care about leaving behind a legacy at all. If there’s anything left over, that’d be nice. And specific legacy goals. If you have specific legacy desires and goals, let’s talk about how you can help preserve and grow that legacy. The first strategy to grab in legacy planning is getting rid of taxes. The more Roth conversions you can do, the more you can move money from tax-deferred to after-tax, the more impact your legacy will have. If you have dollars sitting in an account, tax-deferred, growing, that means by the time your heirs get to spend it, it is a bigger tax bill that they have to pay. Not to mention, if tax rates go up in the future, paying taxes on a smaller amount, then letting the after-tax legacy grow, can leave a much bigger impact. The way heirs can receive this money changes as well.
When heirs receive money in tax-deferred accounts, they will be forced to withdraw that money through RMDs, usually within the 10 years after your passing. Paying taxes on all of that. This can often be in the heir’s highest taxable years as well due to high levels of income. Legacy and Roth accounts do have a form of RMDs, but it’s not taxable. Legacy planning can sometimes benefit from the use of insurance products. Insurance products can offer certain tax advantages and RMD advantages. Trusts are commonplace in legacy planning. Trusts give you control beyond your own years. Trusts can establish rules for the preservation and investment of your legacy, the distribution of your legacy, the timing of distributions, and what the legacy can be used for. Trusts can also offer protection from creditors.
You should also take into account the lifetime gift exemption rule. You may know that there is currently an $18,000 per year gift limit rule before that gift becomes taxable, but there is also a lifetime gift tax exemption rule. This rule says that if you gift over the $18,000 in one year, you can count it against your lifetime gifting. That number is currently $13.61 million per person or $26 million for a married couple. If you gift above the annual threshold, you are to file form 709 counting against your lifetime exclusion. Now this exclusion is set to be cut back by more than half following the end of the Tax Cuts and Jobs Act. What’s great about using gifting as a strategy in legacy planning is minimizing taxes and being able to see your legacy put to use while you’re still around. You can support heirs when they need it and not have them waiting on you to die. A critical component to legacy planning is family. During family meetings, you will have a chance to explain what your legacy should mean even if you have a trustee established. I would urge you to hold family meetings with your financial advisor present.
I would prefer not to meet clients’ children for the first time to discuss financial matters after their parents’ passing or them calling me to discuss their parents’ declining health. Many of our clients have appreciated our facilitating of a family meeting to share your plans for retirement, end of life, and the great beyond at whatever level of financial detail you prefer. Family meetings can help prevent feuds over your legacy, save your family from falling apart, and save your legacy from being spent in legal fees. So take action, create a legacy plan, host a family meeting, and subscribe to our YouTube channel. If you have any financial questions, feel free to reach out at contact at BocaRetirement.com. I’m Hunter Brockway, founder of Boca Retirement Strategies. Enjoy your successful retirement, and thank you for watching. Bye.