When training to become a financial professional, much of the course work centers on the six critical areas of creating a financial strategy. Some recognize October as Financial Planning Month, so it’s an excellent time to review those six personal finance areas of a financial strategy.1
Cash Management: This an important part of a financial strategy and is a broad topic that can address many issues. One area is creating an emergency fund, which is money that’s set aside for unplanned expenses. Cash management also can include looking at your “sources and uses” of money. Financial Planning Month focuses mainly on cash management and spending habits.1 Investment Approaches: Concerns about investment approaches are among the key reasons people start a relationship with a financial professional. When reviewing investment approaches, it’s critical to consider a person’s goals, time horizon, and risk tolerance. Retirement Preparation: This is another crucial reason why a person approaches a financial professional. The chief concern for 49 percent of Americans is running out of money in retirement. The retirement preparation process reviews your current situation and helps you better understand your choices.2 Protection Strategies: This area looks at how well you are prepared for life’s potential financial risks such as premature death or permanent disability. Protection strategies also can include health-care considerations. By the way, did you know that 44 percent of Americans cite “declining health” as their second biggest retirement concern?2 Tax Management: Do you feel comfortable with current tax laws? Are you confident about your approach to tax management? Tax rules are constantly changing, and there is no guarantee that the tax landscape will remain the same in years ahead. Financial professionals often work with tax, legal, or accounting professionals when creating an overall tax management strategy. Estate Strategies: How well you prepare today may help determine how your assets are distributed after you’re gone. Much like tax rules, estate rules are continually changing, and today’s landscape may change in a few years. Financial professionals often work with legal professionals when creating an estate approach. It can be a challenge to feel confident in all six key areas of creating a financial strategy. If you think you may need help, contact CapSouth Wealth Management at 800.929.1001 or visit our website at www.capsouthwm.com or https://capsouthwm.com/services/financial-estate-planning/ We’d welcome the chance to review your approach.
1. NationalDayCalendar.com, October 20202. AARP.com, May 21, 2019
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with CapSouth Wealth Management. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Copyright 2020 FMG Suite.
CapSouth Partners, Inc., dba CapSouth Wealth Management, is an independent registered Investment Advisory firm. CapSouth does not offer tax, accounting or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences.
You’ve invested your life
into caring for your family’s wellbeing. You cherish them and want them to
mature into smart, healthy, successful adults. Naturally, as they become adults
and grow older, your authority over them recedes. They make their own
decisions, and you just hope it’s for the best.
Your feelings don’t change.
They are your children. And they’ll always be your children. The same goes for
your closest, most intimate friends. You want their futures to be safe and
secure; you want them to prosper in life. And what better way to show your
devotion and appreciation than by ensuring your hard-earned money and
investments go to them—after your passing?
In other words, how do you
keep your money in your family or within your circle of closest friends?
Estate planning is the key. Why is planning your estate so important?[i]
You avoid probate court. In many states, probate
fees can reach 5% of the value of the estate. For an estate valued at $400,000,
legal fees may reach $20,000.[ii]
Planning your estate will lessen the tax burden
on your heirs. If you die without a will, the laws of your state, not you,
govern how your estate is distributed. However, inheritance laws generally
favor spouses, domestic partners, and blood relatives. But why leave it to the
legal system to decide?[iii]
Many people who are beginning to plan their
estates seek professional financial advice following the loss of a loved one or
a close friend. While wise, the timing may be off. The best time to start
estate planning is immediately—to avoid potential worst-case scenarios, such as
mental decline or sudden death of a spouse or loved one.
Comprehensive estate planning, ironically, helps
protect beneficiaries, both adult and children. With adults, a plan helps guard
against bad financial decisions later or potential credit problems. With children,
it designates guardians or conservators to protect minors’ financial interests.[iv]
A solid estate plan with asset protection
provisions may help shield your assets from potential creditors.[v]
You’re planning to enjoy
many more years with your family and friends. What can you do now to ensure
your money goes to loved ones—as opposed to Uncle Sam?
Here are 5 ways to maximize
your family money in the here and now:[vi]
You can
spend your money and your assets, which will ultimately reduce your tax burden
and benefit your family. Obviously, your first priority is to your loved ones,
not to bolstering government coffers. The problem, however, is that you may
live a good, long life, and your goal is to ensure you don’t outlive your
wealth. This option is worthwhile if you have plenty of cash reserves and a
robust estate.
Gifts
pose the same challenge if your estate and your assets have the potential for a
long-shelf life. While giving to family and friends is noble, the IRS
establishes restrictions on giving levels. You may give up to $15,000 each to
individuals or charities before having to file gift tax returns. The maximum
lifetime gift tax exemption is $11.18 million.[vii]
You may
lend to family members and friends. However, to stay IRS compliant, you should
draft a loan note that includes the loan amount, payback date, interest rate,
and any collateral or security. This enables you to avoid the IRS’s gift
classification.[viii]
You may
pay wages to your family; 4 in 5 older Americans suffer from at least 1 chronic
disease and may need care.[ix]
By 2030, more than 1 in 5 Americans will be over the age of 65.[x]
The IRS allows for the paying of wages to family members, which helps build
their Social Security earnings record.[xi]
Services may include providing home health care or performing other household
or small business-related work.
You can
create a life estate deed, which transfers the family’s house to a child while
the parents retain the right to live in the house. Following the death of the
parents, children don’t have to go through lengthy probate proceedings. The
home transfers to children—beneficiaries or remaindermen—as a gift.[xii]
A life estate deed may also remove the home from consideration as a personal
asset when applying for Medicaid assistance for long-term care needs.[xiii]
Seek guidance from a
financial professional to learn more about your rights and opportunities to
provide for your family—even in future generations.
Contact CapSouth at 800.929.1001 or visit our website at www.capsouthwm.com to learn more about CapSouth or to speak with an advisor about estate planning.
Investment
advisory services are offered through CapSouth Partners, Inc., dba CapSouth
Wealth Management, an independent registered Investment Advisory firm.
Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness
of the information. This material has
been prepared for planning purposes only and is not intended as specific tax or
legal advice. Tax and legal laws are
often complex and frequently change.
Please consult your tax or legal advisor to discuss your specific
situation before making any decisions that may have tax or legal consequences.
This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.
CapSouth Partners, Inc., dba CapSouth Wealth Management, is an independent Registered Investment Advisory firm. CapSouth does not offer tax, accounting or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences.
How CapSouth Advisors are Responding to the Bear Market & Recent Legislation – April 13, 2020
You can tell a lot about your broker or advisor from the actions they take (or don’t take) in market disruptions. The current period, with steep market declines, extreme volatility, pandemic fear, and emergency legislation packages certainly qualifies as a market disruption. We believe good advisors and brokers excel in communicating with clients regarding the markets, financial plans, and legislative effects in such periods.
The current
period offers many topics, and even opportunities, that should be discussed.
These include:
Basic Communication
Touching base with clients to determine their mindset. Is the current environment causing fear or is it looked upon as an opportunity to purchase assets at a reduced price? Each client will have a unique perspective, and it is important for your advisor or broker to understand your view. Any appropriate action will vary based on your circumstances and perspective.
2. Focus on Goals
It is extremely important that any action be consistent with long term goals and an established financial plan. Often emotional and hasty decisions made in times of market turmoil are harmful to the ability to achieve a long-term plan.
3. Put Cash to Work or Increase Risk
If you see investment opportunity when markets fall, this is a great opportunity to discuss investing extra cash or increasing risk in accounts.
4. Roth IRA Contributions and Conversions
Consider making 2020 contributions and conversions while markets are lower.
5. Tax Considerations of the Market Decline
If you have investments with a low cost basis that you have held to avoid taking the gains, these positions will likely have lower gains or no gains at this point. This may be a good time to discuss reducing or getting out of such positions.
Gains on investments made in non-retirement accounts will be subject to long-term capital gains rates if held for twelve months or longer
For some clients a partial or full conversion from a traditional IRA to a Roth IRA should be considered. Funds in a traditional IRA have not been taxed. By converting, taxes will likely be owed. Because balances in most traditional IRAs are presently lower, the associated taxes owed may also be lower. As an added bonus, if the markets bounce back in the next couple years, the growth on any converted money will occur in the Roth IRA and should not be taxable in the future.
6. Periodic Withdrawals
If you have consistent withdrawals, monthly or quarterly for example, from investment accounts, you may want to discuss funding the withdrawals from any cash or fixed income investments that are available. This will keep you from selling equities at a reduced price.Legislative Updates
7. Legislative Updates
Filing deadline – For most people, 2020 tax filings are not due until July 15th (instead of the normal deadline of April 15th).
Federal quarterly estimated tax for April 15th has been extended to July 15th; second quarter estimated tax payment has also been extended to July 15th.
Required Minimum Distribution (RMD) – If you are normally required to take an RMD from any type of IRA or from your workplace retirement plan, you will not have to do so in 2020.
IRA Withdrawals and 401k Loans – the CARES Act relaxes some of the rules regarding these items. Your advisor or broker should be able to discuss this in more detail should you have a need.
Charitable Contributions – for 2020 there is no limit on the amount of a cash gift you can donate to a charity and subsequently receive an offsetting deduction, in the amount of the gift, from your income. If you’ve ever considered a large gift to a charity, you should discuss with your advisor if 2020 is the appropriate year. This change does not apply to donations to donor advised funds.
CapSouth advisors are prepared to discuss all these topics with clients and prospects, and they have been actively doing so over the last few weeks. If your current advisor or broker is not discussing them with you or you have no current advisor, we would welcome the opportunity to speak with you and to potentially begin a new relationship.
To speak to a CapSouth advisor about these topics, contact our office at 800.929.1001 or visit our website at www.capsouthwm.com
Investment advisory services offered through CapSouth Partners, Inc., an independent Registered Investment Advisor, dba CapSouth Wealth Management. CapSouth Partners does not provide tax or legal advice. Please consult your tax or legal advisor prior to making decisions which may have tax or legal consequences. Information contained herein is believed to be reliable but is not guaranteed as such by CapSouth. Nothing contained herein should be construed as individual investment advice; all commentary is of a general nature. This commentary contains opinions; any opinions presented should not be construed as fact and are not in any way a guarantee of future events, returns, or outcomes.
