FINANCIAL PLANNING Archives - Page 4 of 4

Keep the Government and Lawsuit Happy Opportunists Away From Your Children’s Inheritance

Posted on February 27, 2023October 18, 2023 by LegacyLawGroup

If you have a current estate plan, I’ll bet you plan to leave your assets to your children outright and unprotected by age 35, or maybe a little later. Go take a look at your estate plan, and see what it does right now. And, if you don’t have an estate plan, and you have kids or other people you care about, contact us today and let’s get that handled for you.

If you do have a plan and it distributes your assets outright to your kids — even in stages, over time, some at 25, then half of what’s left at 30, and balance at 35 (or something along those lines), you’ve overlooked an incredibly valuable gift you can give your children (and the rest of your descendants for generations); a gift that only you can give them. And a gift that, once you’ve died and left them their inheritance outright, is lost and cannot be reclaimed.

Leave your kids a nest egg protected from lawsuits, divorce, and estate taxes.

While you may think to yourself, my kids’ inheritance doesn’t need to be protected. They aren’t going to get sued. You may be right, but you may also be overlooking one of the most common “lawsuits” that causes inheritances to be lost everyday, and that’s divorce. If you want to protect the money you are leaving to your children from their future divorces, even if you love their spouses nor or expect you will, in the future, you can easily do so using a protected trust.

And, if your child is ever involved in a lawsuit, for example, a simple car accident, or if a business transaction goes bad, what you leave to your child can be protected from all future lawsuits or claims against them.

The best part is that if your child has their own taxable estate when they die, your planning now could save your family 40 cents on every dollar (or more) handed down from one generation to the next.

Save your family Up to 40 cents on every dollar — currently — at each generation.

As of 2023, the current federal estate tax rate is 40% — meaning that every dollar passed on over the estate tax exemption rate is taxed at 40%. And it has been as high as 55%. On top of that, many states have estate taxes as well.

This all adds up fast, and can decimate your family’s financial legacy, over time For every million dollars you leave outright to your children, if your children have a taxable estate when they die, could result in your grandchildren receiving only $550,000, with $450,000 going to the government … unnecessarily.

So, if you want to know that everything you’ve worked so hard to create will stay in your family for generations to come and not be lost to outsiders, leaving your assets to your children protected in a trust we call a Lifetime Asset Protection Trust, instead of outright is the way to go. And, it can be easily built in to your existing estate plan or trust, you just need to ask us to help you get a Lifetime Asset Protection Trust added to your plan.

But how will my kids get to use what I leave to them?

Here’s the best part about leaving your assets to your children in a Lifetime Asset Protection Trust. Not only is what you leave protected, but your children control what you leave them when you decide they are ready.

After your death, the assets you leave behind will pass to your children (and your grandchildren, great-grandchildren, and so on for successive generations) in a Trust that your child can control, as the Trustee of the Trust. You can decide when your child is mature enough to act as a Trustee.

As the Trustee of the Trust, your child decides how what you’ve left is invested and what to do with the Trust assets. And your child will even be able to determine the amount of control vs. the amount of asset protection he or she wants based on his or her specific circumstances.

Is this still important if I don’t have much money?

If you only leave your children a small amount of money, this is still incredibly valuable for protection, if you are leaving assets that will be invested and grown, and not just spent right away on consumables. Some might say it’s even more important because your family has less to lose to taxes, lawsuits, and divorce each generation. And the impact of such losses is much greater.

A mere $10,000 protected now can become millions for the people you love for generations to come.

Imagine that you leave just $10,000 to your child in a Lifetime Asset Protection Trust, and instead of spending that $10,000 or losing it in a divorce, they invest that $10,000 in creating their own business inside their trust, and then grow that business into a million dollar or multi-million dollar venture because of how you chose to leave your child that $10,000 gift … and it’s fully protected for generations.

Secure the future of your family today by speaking to us, Personal Family Lawyer®. We review estate plans and inherited funds with you, ensuring that all legalities are in place so generations can enjoy the benefits according to your wishes. Don’t wait, get peace of mind now – contact us today to get started.

Checklist: 5 Financial Decisions to Consider Before December 31

Posted on December 27, 2022October 18, 2023 by LegacyLawGroup

This week, before the year ends, consider these 5 financial, retirement and tax actions you may need to take before it’s either too late or very costly for your family. And, if you have living parents in their 70s, make sure you cover these considerations with them this week..

01 – Review Your Investments to Harvest Losses This Year

If you have investments in a taxable account (including cryptocurrency investments), you may want to consider selling off any losers to offset any gains you have made. Selling losses can help reduce your tax liability for the year, if you have any capital gains, and then you can carry forward investment losses to offset capital gains in the future.

If you are sitting with cryptocurrency losses that you haven’t recognized yet because you haven’t sold your cryptocurrency due to wanting to stay in the market for when crypto goes back up, you can have the best of both worlds. Sell your cryptocurrency now before the end of the year, and because the “wash sales” rules don’t apply to crypto tokens, you can buy the exact same tokens right back. In contrast, with non-crypto investments, you’d have to wait 30 days to buy back into the same investment, in order to harvest non-crypto losses.

Once the year 2022 ends, you can no longer harvest losses to offset against 2022 capital gains.

02 – Contribute to a Retirement Account

If you have not yet reached your retirement account contribution limits for the year, you may want to consider contributing to a retirement account such as a 401(k) or traditional IRA.

Here are the contribution limits for 2022:

401(k), 403(b), and most other defined contribution plans: $19,500
Traditional and Roth IRAs: $6,000 (plus an additional $1,000 catch-up contribution for those age 50 or older)
SIMPLE IRA: $13,500 (plus an additional $3,000 catch-up contribution for those age 50 or older)
SEP IRA: 25% of salary, up to a maximum of $58,000

03 – Required minimum distributions (RMD) and qualified charitable distributions (QCD)

If you have a traditional IRA and you (or your parents) are age 73 or older, you (or they) need to take an RMD for 2022 by the end of the year.

If you are 72 in 2022, you have until April 1, 2023 to take your first RMD. Failing to take an RMD can result in a penalty of 50%. If you don’t need the income, consider converting your RMD into a qualified charitable distribution (QCD), which is a tax-free transfer directly from your IRA to a charity of your choice, up to $100,000 per year.

You must take RMDs or make a qualified charitable distribution by December 31, 2022, or you’ll pay the 50% penalty. Don’t miss this one.

04 – Inherited IRA Required Minimum Distributions

If you inherited an IRA prior to the SECURE Act or if you are an eligible designated beneficiary who inherited in 2020 or 2021, you will need to take an RMD for this year. In addition, if you inherited an IRA this year, and the family member who left you that IRA did not take a required minimum distribution, you’ll need to take a year of death RMD this year, before the end of the year.

Note: The IRS has waived the 50% penalty for 2022 RMDs that are not taken when a beneficiary is subject to the 10-year payout rule under the SECURE Act due to confusion surrounding this new rule.

If you have an inherited IRA and you do not have a financial advisor, contact us to ask for our best recommendation for support.

05 – ROTH IRA Conversion

If you are considering converting to a Roth IRA, now may be a good time to do so, as tax rates are currently low and markets have come down from their previous highs. You will need to act quickly, as the deadline for converting for 2022 is December 31.

NOW IS YOUR LAST CHANCE TO SAVE ON YOUR 2022 TAXES

Posted on October 3, 2022November 3, 2023 by LegacyLawGroup

When you first realize that your biggest personal and business expense—bar none—is taxes, it can come as quite a shock. Seeing so much of your hard-earned money wind up in the government’s hands can feel like a shakedown. That said, focusing a relatively small amount of time and effort into strategically reducing your taxes can pay major dividends.

Some people resist implementing creative tax strategies because they’re worried it’s going to get them in trouble with the IRS. However, as long as you do things properly, there’s absolutely nothing illegal—or even risky—about strategizing to pay the least amount of taxes possible.

On the other hand, it is illegal to evade taxes. As the late Martin Ginsburg, Georgetown Law professor and husband of the recently deceased Supreme Court Justice Ruth Bader Ginsburg, used to say, “Pigs get fat; hogs get slaughtered.” In other words, you want to be smart when it comes to saving on your taxes, but not greedy.

As we head into the final weeks of 2022, we’re entering into the most critical time of the year for your company’s tax strategy, and here we’ll outline how you can get fat, without getting slaughtered.

PREPARE YOUR FOUNDATION

To save on your 2022 taxes, your first step should be either building or rekindling your relationship with your team of financial professionals. These are the individuals who will support you in establishing the foundation for developing and implementing your tax-saving strategies. At the very least, this team should include a Legacy Law Group, a bookkeeper/financial manager, and a tax advisor, which should be either a Certified Public Accountant (CPA) or an Enrolled Agent (EA).

If your bookkeeper’s job is more about data entry than financial management, you should look for someone new—or quickly get your current team member trained and up to speed. An effective bookkeeper will be managing your books on a week-to-week basis (if not daily, depending on your business). Note I said “week-to-week,” not just “month-to-month” or “quarter-to-quarter.”

Your bookkeeper’s primary responsibilities should include daily/weekly cash-flow management, monthly review of reports and categorization of expenses, and quarterly updates of your forecast and projections. Again, if your bookkeeper isn’t providing these types of services for you, your business is missing an essential part of its financial foundation.

Outside of your bookkeeper, your tax advisor is the person who actually files your taxes. Ideally, you should meet with your tax advisor at least twice a year: once in May/June (after tax season) and once approaching year’s end in October/November. Obviously, it’s already quite late in the year to start your year-end tax planning, but you still have time if you act immediately.

The May/June meeting is a general catch-up, mid-year review that lets your tax advisor know what you’re financially on track to do for the year. Based on that information, your advisor can consider the most effective tax strategies for the coming year.

When you meet again in October/November, that’s when you’ll really get down to business. This is when you’ll project cash flow through the end of the year and get a tax estimate using a couple different assumptions, both with and without tax-saving strategies included.

If your tax advisor cannot provide this level of service and is merely a tax filer, it’s time to get a new advisor. As your Legacy Law Group, we can help you find a tax professional that offers these kinds of services, so contact us today if you need to find a creative tax advisor who’s capable of handling such matters.

Additionally, as a Legacy Law Group we meet regularly with many of our clients and their team of financial professionals throughout the year to ensure your financial and tax-saving strategies are supported with the legal implementation necessary to tie it all together and ensure it works properly. To find out if we are available to support you in this way, contact us today.

CREATE YOUR TAX PROJECTIONS

Once you’ve got your LIFT (legal, insurance, financial, and tax) team in place, you should meet monthly with your bookkeeper—within the first 10 days of the month—to review your profit and loss statement (P&L). You should review the categorization of your income and expenses each month, rather than scrambling to get your receipts to your CPA in February or March just before taxes are due. Your bookkeeper should have your books reconciled, including all bank accounts and credit card expenses, prior to this meeting.

To be most effective, your bookkeeper needs to understand all of the ways you earn revenue and know the expenses required to fulfill the delivery of your product and/or service. Using this knowledge, your bookkeeper should update a daily forecast each week, and produce your monthly P&L, so you can stay regularly apprised of your company’s financial health and make strategic decisions on that basis.

Each month, when you review your P&L, you’re looking for variances from the prior month as well as expenses that are improperly categorized or not categorized at all. It’s crucial to properly categorize all expenses, so you can measure trends in your business and write off as many deductions as possible against your taxable income.

In late October or early November, your bookkeeper should send a year-to-date profit and loss (P&L) statement to your tax advisor, along with projections of income and expenses for the remainder of the year. Your tax advisor will then use that data to create tax projections based on your current earnings versus expenses and how much you expect to bring in over the remainder of the year.

Using these projections, you can put strategies in place to minimize your tax liability. That said, most of these strategies need to be in place BEFORE the end of the year, so ideally you should make sure you’ve started this process by the final weeks of November.

If your tax projections indicate that you’re going to owe money, meet with your CPA and us, your Legacy Law Group to strategize the best year-end tax strategies to implement. And if you haven’t run your tax projections yet because you don’t have a qualified bookkeeper or tax advisor, we can refer you to the professionals we trust most.

PUT YOUR STRATEGIES INTO PLAY

Once you have your tax projections ready, you want to look at whether you’re likely to be in a higher tax bracket this year compared with future years. Determining this will allow you to save on your taxes by managing when you receive your year-end income and pay your year-end expenses.

After reviewing that data, if you’re likely to be in a higher tax bracket this year than in the future, it makes sense to push taxes off into the year(s) when your tax rate will be lower. Even if your tax bracket will be higher in future years, it still might be worthwhile to push your taxes off into the future. This way, you’ll be able to use those funds, which would otherwise be in the hands of the government.

This is the question to ask yourself: Can I make more money with those funds now than I’d pay in higher taxes by pushing those tax payments off until later?

If you can make more money now, you can decrease this year’s taxes by pushing income into the future and accelerating expenses that you’d otherwise pay next year into this year, or even use additional available cash to fund tax-deferred retirement plans like a 401(k) or IRA.

If you’d prefer to pay taxes this year because you’re currently in a significantly lower tax bracket than you are likely to be in future years—or you have losses that will be expiring to offset your income—you should increase this year’s income. One way you can generate more revenue now is by offering year-end discounts on products and services that may not need to be delivered until next year.

PLAN AHEAD TO MAXIMIZE SAVINGS

Managing when your company receives income and pays expenses in this manner can save you big money on your taxes, not just for 2022, but every year. And this type of creative tax planning is just one small part of an effective tax-saving strategy.

If you have further questions, or wish to schedule a consult, feel free to reach out to our office at legacylawgroupcolorado.com

Category: FINANCIAL PLANNING