How Your Financial Advisor Can Help You Make an Estate Plan

ST. CROIX INSIGHTS

How Your Financial Advisor Can Help You Make an Estate Plan

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC
financial advisor consulting a couple customer

Estate planning can be a very intimidating conversation. In fact, some may find it scary to plan for what happens once they’re gone. The complexity of strategies and planning involved may feel overwhelming if tackled alone. Fortunately, your advisor is equipped to simplify the process and provide valuable guidance every step of the way.

Key Points

  • Your financial advisor can guide you through the estate planning process, making it more manageable and less daunting.
  • Initiate the conversation by educating yourself on the benefits of estate planning and asking relevant questions.
  • Involving family members and seeking expert advice when necessary are essential steps in the process.

Getting Started with Estate Planning

The first step in the estate planning journey is often the most challenging. Your financial advisor can help ease you into this process by explaining the various benefits. It’s important to understand that without careful planning, a significant portion of your estate could be subject to taxes, probate court proceedings, or distributed in ways you may not have intended. With a well-thought-out plan, you can:

  • Minimize tax liabilities on your income and estate
  • Control the distribution of your assets, including when and how they are received
  • Ensure timely payment of estate obligations and taxes

Gathering Information

Once you recognize the importance of estate planning, your financial advisor will guide you through a series of questions to gather essential details. These questions aim to understand your goals, assets, beneficiaries, and any potential obstacles. Some key areas of discussion include:

  • Your intentions regarding the distribution of your assets
  • Details about your significant assets such as properties, investments, or businesses
  • Identification of primary beneficiaries and their specific needs
  • Existing estate planning documents and their last review date
  • Preferences for healthcare decision-making in case of incapacity
  • Awareness of any significant debts or obligations affecting your estate
  • Charitable objectives or organizations you wish to support
  • Concerns about potential tax implications for your heirs
  • Specific personal items or properties you want to allocate to certain individuals

Remember, these questions are designed to facilitate a comprehensive dialogue and ensure that your estate plan reflects your wishes accurately.

Involving Family Members

Estate planning discussions should involve not only you but also your spouse or partner, as these decisions directly impact them. Additionally, depending on your circumstances and preferences, your financial advisor may recommend involving adult children in the conversation.

This inclusive approach ensures that everyone affected by your estate plan is informed and can help prevent any misunderstandings or disputes in the future.

Creating an Individual Plan

As your financial advisor gathers information about your estate planning needs and goals, they will recommend suitable strategies to achieve them. These strategies may involve various financial tools and instruments aimed at protecting, growing, and distributing your wealth efficiently. Some examples include:

  • Grantor Retained Annuity Trust (GRAT) to minimize gift taxes
  • Charitable Remainder Trust (CRT) for supporting charitable causes while receiving tax benefits
  • Roth conversion for income tax planning and spousal protection
  • Nonqualified annuity stretch for multigenerational wealth transfer

Each of these tools serves a specific purpose in estate planning, and your financial advisor will tailor their recommendations to align with your unique circumstances and objectives.

Seeking Expert Advice

Estate planning often involves complex legal, tax, and financial considerations that may require specialized expertise. Your financial advisor can collaborate with outside experts such as attorneys, tax professionals, or estate planners to ensure a comprehensive and robust approach to your estate plan. This collaboration adds an extra layer of assurance, reduces the risk of oversights, and streamlines the planning process.

Crafting Your Legacy

Estate planning is not just about managing wealth; it’s about crafting a lasting legacy that reflects your values and priorities. As your trusted financial advisor, I am here to guide you through every step of the estate planning process. From partnering with you to create a tailored plan to updating it as life changes, I will be by your side to simplify the process and provide valuable guidance.

While it may seem daunting, a collaboration between your financial advisor and an estate planning attorney can empower you to ensure that your legacy is preserved according to your wishes. Contact me today to start the conversation and take control of your estate planning needs. Together, we can create a comprehensive plan that reflects your values and priorities, ensuring a lasting legacy for generations to come.

 

Estate planning can be a very intimidating conversation. In fact, some may find it scary to plan for what happens once they’re gone. The complexity of strategies and planning involved may feel overwhelming if tackled alone. Fortunately, your advisor is equipped to simplify the process and provide valuable guidance every step of the way.

Key Points

  • Your financial advisor can guide you through the estate planning process, making it more manageable and less daunting.
  • Initiate the conversation by educating yourself on the benefits of estate planning and asking relevant questions.
  • Involving family members and seeking expert advice when necessary are essential steps in the process.

Getting Started with Estate Planning

The first step in the estate planning journey is often the most challenging. Your financial advisor can help ease you into this process by explaining the various benefits. It’s important to understand that without careful planning, a significant portion of your estate could be subject to taxes, probate court proceedings, or distributed in ways you may not have intended. With a well-thought-out plan, you can:

  • Minimize tax liabilities on your income and estate
  • Control the distribution of your assets, including when and how they are received
  • Ensure timely payment of estate obligations and taxes

Gathering Information

Once you recognize the importance of estate planning, your financial advisor will guide you through a series of questions to gather essential details. These questions aim to understand your goals, assets, beneficiaries, and any potential obstacles. Some key areas of discussion include:

  • Your intentions regarding the distribution of your assets
  • Details about your significant assets such as properties, investments, or businesses
  • Identification of primary beneficiaries and their specific needs
  • Existing estate planning documents and their last review date
  • Preferences for healthcare decision-making in case of incapacity
  • Awareness of any significant debts or obligations affecting your estate
  • Charitable objectives or organizations you wish to support
  • Concerns about potential tax implications for your heirs
  • Specific personal items or properties you want to allocate to certain individuals

Remember, these questions are designed to facilitate a comprehensive dialogue and ensure that your estate plan reflects your wishes accurately.

Involving Family Members

Estate planning discussions should involve not only you but also your spouse or partner, as these decisions directly impact them. Additionally, depending on your circumstances and preferences, your financial advisor may recommend involving adult children in the conversation.

This inclusive approach ensures that everyone affected by your estate plan is informed and can help prevent any misunderstandings or disputes in the future.

Creating an Individual Plan

As your financial advisor gathers information about your estate planning needs and goals, they will recommend suitable strategies to achieve them. These strategies may involve various financial tools and instruments aimed at protecting, growing, and distributing your wealth efficiently. Some examples include:

  • Grantor Retained Annuity Trust (GRAT) to minimize gift taxes
  • Charitable Remainder Trust (CRT) for supporting charitable causes while receiving tax benefits
  • Roth conversion for income tax planning and spousal protection
  • Nonqualified annuity stretch for multigenerational wealth transfer

Each of these tools serves a specific purpose in estate planning, and your financial advisor will tailor their recommendations to align with your unique circumstances and objectives.

Seeking Expert Advice

Estate planning often involves complex legal, tax, and financial considerations that may require specialized expertise. Your financial advisor can collaborate with outside experts such as attorneys, tax professionals, or estate planners to ensure a comprehensive and robust approach to your estate plan. This collaboration adds an extra layer of assurance, reduces the risk of oversights, and streamlines the planning process.

Crafting Your Legacy

Estate planning is not just about managing wealth; it’s about crafting a lasting legacy that reflects your values and priorities. As your trusted financial advisor, I am here to guide you through every step of the estate planning process. From partnering with you to create a tailored plan to updating it as life changes, I will be by your side to simplify the process and provide valuable guidance.

While it may seem daunting, a collaboration between your financial advisor and an estate planning attorney can empower you to ensure that your legacy is preserved according to your wishes. Contact me today to start the conversation and take control of your estate planning needs. Together, we can create a comprehensive plan that reflects your values and priorities, ensuring a lasting legacy for generations to come.

Changes to the Estate and Gift Tax Exclusions Are (Maybe) Coming

ST. CROIX INSIGHTS

Changes to the Estate and Gift Tax Exclusions Are (Maybe) Coming

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC
Back view of extended family exploring the best place for their picnic in autumn. Copy space. Man is aiming at distance.

The rules governing estate and gift tax exclusions are undergoing potential changes. You need to be aware of these to ensure you maximize your tax benefits.

The 2017 Tax Cuts and Jobs Act (TCJA) significantly increased the lifetime estate and gift tax exemption, which currently stands at $13.61 million per individual and $27.22 million for married couples in 2024.

However, these provisions are set to sunset at the end of 2025, reverting to lower 2017 levels. This could potentially reduce the exemption to around $7.5 million per individual and $14.5 million for married couples by 2026, depending on inflation.

NOTE: Keep in mind that this situation is subject to change, depending on factors like the 2024 election outcomes or legislative amendments.

Given this uncertainty, families interested in preserving and passing on their wealth should be proactive in reviewing their estate plans. Waiting until the last minute could result in missed opportunities to minimize estate taxes.

The annual gift tax exclusion also increased in 2024 due to inflation, reaching $18,000 per recipient. This presents an opportunity for individuals to transfer assets tax-free, further maximizing tax benefits.

Here is an example to show a basic way to take advantage of the increased annual gift exclusion:

John and Sarah have three children and five grandchildren. In 2024, they decide to utilize the increased annual gift tax exclusion to transfer wealth to their descendants.

Using the $18,000 per recipient annual gift tax exclusion, John and Sarah can collectively gift $18,000 to each of their eight descendants, totaling $144,000 per year. Over the course of 2024, they can transfer a total of $288,000 to their children and grandchildren without dipping into their combined $27.22 million gift tax exemption.

To leverage the current higher exemptions and potentially avoid future tax implications, individuals should consider gifting strategies.

Questions to ponder include:

  • Can you afford to gift a significant amount to leverage the increased tax exclusion?
  • What assets and how much should you consider gifting?
  • Are your intended recipients prepared to receive these gifts, or should there be controls in place, such as trusts?

If you decide to proceed with gifting, there are various options available, including setting up trusts:

  • Spousal Lifetime Access Trust (SLAT): This trust allows your spouse to receive distributions if needed, providing added flexibility. It’s essential to plan and draft the trust properly to ensure its legitimacy.
  • Trust for Non-Spouse Beneficiaries: This type of trust, benefiting children or grandchildren, offers different setups, including keeping the trust-owned assets with income tax consequences falling on the trust creator. This arrangement reduces the creator’s estate without counting as a gift to the trust heirs.

For individuals whose wealth is primarily tied up in business ownership, gifting business interests may be an option. Discounts for lack of marketability and control could apply, reducing the amount of lifetime exclusion used upon gifting. Valuation methods should adhere to IRS guidelines, often requiring a qualified appraiser’s assessment.

For those with significant brokerage accounts, gifting securities to trusts or outright to recipients is another possibility. Publicly traded securities make determining fair market value straightforward. It’s essential to consider the basis in these securities, as the recipient inherits the donor’s basis for tax purposes. Holding onto low-basis securities may be advantageous for a step-up in basis upon the owner’s death.

Gifting property is also an option, typically requiring a property appraisal to establish fair market value. Similar to securities, considering the basis in the property is important, as the recipient assumes the donor’s basis for tax purposes. Some trusts may allow for substituting trust-owned assets with personal assets later on, capitalizing on a potential basis step-up.

Overall, understanding the implications and exploring various gifting strategies can help individuals maximize tax benefits while ensuring their estate planning aligns with their goals and circumstances.

As your financial advisor, I’m here to provide guidance and support as you navigate these important decisions regarding estate planning and gifting strategies. Whether you’re considering leveraging the current tax exclusions or exploring various options to pass on wealth to your loved ones, don’t hesitate to reach out. My expertise and personalized advice can help you make informed choices tailored to your financial goals and objectives. Let’s work together to ensure your wealth transfer plans align with your overall financial strategy. It’s everyone working in concert—your Estate Planning Attorney, CPA, Financial Advisor, and you—to navigate this ever-changing landscape.

 

The rules governing estate and gift tax exclusions are undergoing potential changes. You need to be aware of these to ensure you maximize your tax benefits.

The 2017 Tax Cuts and Jobs Act (TCJA) significantly increased the lifetime estate and gift tax exemption, which currently stands at $13.61 million per individual and $27.22 million for married couples in 2024.

However, these provisions are set to sunset at the end of 2025, reverting to lower 2017 levels. This could potentially reduce the exemption to around $7.5 million per individual and $14.5 million for married couples by 2026, depending on inflation.

NOTE: Keep in mind that this situation is subject to change, depending on factors like the 2024 election outcomes or legislative amendments.

Given this uncertainty, families interested in preserving and passing on their wealth should be proactive in reviewing their estate plans. Waiting until the last minute could result in missed opportunities to minimize estate taxes.

The annual gift tax exclusion also increased in 2024 due to inflation, reaching $18,000 per recipient. This presents an opportunity for individuals to transfer assets tax-free, further maximizing tax benefits.

Here is an example to show a basic way to take advantage of the increased annual gift exclusion:

John and Sarah have three children and five grandchildren. In 2024, they decide to utilize the increased annual gift tax exclusion to transfer wealth to their descendants.

Using the $18,000 per recipient annual gift tax exclusion, John and Sarah can collectively gift $18,000 to each of their eight descendants, totaling $144,000 per year. Over the course of 2024, they can transfer a total of $288,000 to their children and grandchildren without dipping into their combined $27.22 million gift tax exemption.

To leverage the current higher exemptions and potentially avoid future tax implications, individuals should consider gifting strategies.

Questions to ponder include:

  • Can you afford to gift a significant amount to leverage the increased tax exclusion?
  • What assets and how much should you consider gifting?
  • Are your intended recipients prepared to receive these gifts, or should there be controls in place, such as trusts?

If you decide to proceed with gifting, there are various options available, including setting up trusts:

  • Spousal Lifetime Access Trust (SLAT): This trust allows your spouse to receive distributions if needed, providing added flexibility. It’s essential to plan and draft the trust properly to ensure its legitimacy.
  • Trust for Non-Spouse Beneficiaries: This type of trust, benefiting children or grandchildren, offers different setups, including keeping the trust-owned assets with income tax consequences falling on the trust creator. This arrangement reduces the creator’s estate without counting as a gift to the trust heirs.

For individuals whose wealth is primarily tied up in business ownership, gifting business interests may be an option. Discounts for lack of marketability and control could apply, reducing the amount of lifetime exclusion used upon gifting. Valuation methods should adhere to IRS guidelines, often requiring a qualified appraiser’s assessment.

For those with significant brokerage accounts, gifting securities to trusts or outright to recipients is another possibility. Publicly traded securities make determining fair market value straightforward. It’s essential to consider the basis in these securities, as the recipient inherits the donor’s basis for tax purposes. Holding onto low-basis securities may be advantageous for a step-up in basis upon the owner’s death.

Gifting property is also an option, typically requiring a property appraisal to establish fair market value. Similar to securities, considering the basis in the property is important, as the recipient assumes the donor’s basis for tax purposes. Some trusts may allow for substituting trust-owned assets with personal assets later on, capitalizing on a potential basis step-up.

Overall, understanding the implications and exploring various gifting strategies can help individuals maximize tax benefits while ensuring their estate planning aligns with their goals and circumstances.

As your financial advisor, I’m here to provide guidance and support as you navigate these important decisions regarding estate planning and gifting strategies. Whether you’re considering leveraging the current tax exclusions or exploring various options to pass on wealth to your loved ones, don’t hesitate to reach out. My expertise and personalized advice can help you make informed choices tailored to your financial goals and objectives. Let’s work together to ensure your wealth transfer plans align with your overall financial strategy. It’s everyone working in concert—your Estate Planning Attorney, CPA, Financial Advisor, and you—to navigate this ever-changing landscape.

The Importance of Planning: Create an Emergency Packet

ST. CROIX INSIGHTS

The Importance of Planning: Create an Emergency Packet

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

the lessons never end

Life, with its twists and turns, presents us with certainties we often prefer to overlook—sickness, mortality, and the unexpected. These topics rarely claim space in our day-to-day conversations, yet they remain an undeniable reality.

In my years as a guide through the realms of financial planning and insurance, I’ve encountered numerous instances where clients faced illness, hospitalization, or life-altering diagnoses. A friend once remarked, “The stuff you’ve been selling for the last 25 years is finally coming true.”

Translation: aging is universal, and while it’s convenient to postpone contemplation on these matters, illness and mortality touch us all.

One aspect that frequently emerges, surprising in its significance, is the prevalence of passwords as vital information within our personal ecosystems. Passwords guarding phones, emails, safes, and online accounts now hold crucial importance. I’ve even layered passcodes atop passwords to fortify the shield around my online presence.

When life takes an unexpected turn, the last thing our loved ones should endure is a scavenger hunt for critical information. I call this crucial data “Waldo,” the linchpin that holds the keys to our vital documents—power of attorney, health directives, financial portfolios, insurance policies, and the roster of contacts (CPAs, attorneys, advisors).

Picture the distress of assuming funeral expenses were prepaid, only to struggle locating the necessary paperwork. Let this serve as a gentle nudge to revisit and reassess your estate plan, life insurance beneficiaries, retirement arrangements, and beyond.

Create an Emergency Packet for your family. Whether physical or digital, it should include all the vital documents in one place. Once you create it, tell your family it’s location and how to access it if it’s behind a safeguard.

Having witnessed and experienced these “Where’s Waldo” scenarios both professionally and personally, I can tell you that being prepared and making these items easily accessible is one additional way you can show how much you love your family.

(However, as I’ve told my kids and continue to remind them, they’d better treat me well; if they don’t, I have no problem playing Where’s Waldo from the grave too. I guess it’s the reverse way of me showing them I love them; if they want my passwords and information, they’ll need to work for them. There is no free lunch!)

As for where to safeguard these folders, the choice is yours. Whether in a physical safe, your desk drawer, or an agreed-upon location, communication with your loved ones about their whereabouts is crucial. Some individuals even maintain vital documents in a folder labeled “Call Brett.” The simplicity of this approach cannot be overstated. Making these documents easily accessible significantly alleviates stress and time for your loved ones during challenging times.

Share Your Blessings: Life Lesson 43 of 50

ST. CROIX INSIGHTS

Share Your Blessings by Giving Back

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

share your blessings

Photo by Elaine Casap

Whether or not we recognize it every day, you and I are incredibly blessed in our lives. But hold on—how can I possibly know this about you when I don’t even know who you are?

Consider this: You’re reading this piece. That means you have access to the internet or someone who values you enough to have printed this for you. Either circumstance is a blessing. When you share your blessings, their impact multiplies.

How to Give Back

For many of us, a monetary gift is the easiest way to give back: we just pull out the checkbook, sign our name, and put the issue out of our minds until the next round of charitable giving. However, giving back can take many different forms. More difficult in this busy world—and therefore potentially more rewarding and more personally impactful—is giving your time and talent.

Here’s a list of just a few possible things you might do to leverage your time and talents for the greater good:

  • Volunteer at your place of worship.
  • Offer tutoring or childcare services to local schools or after-school programs.
  • Organize a book donation drive for your neighborhood or install a Little Free Library on your property.
  • Ask your local library, food pantry, or animal rescue service how you can help.
  • Contact a nonprofit organization whose mission resonates with your passion and offer your time and skills.

This list is not exhaustive. Observe the needs of your community, tap into your unique strengths, and you’ll unearth countless new ideas for giving back.

Share Your Blessings, Multiply Their Effects

However you choose to be impactful in the world, know that you aren’t just benefitting others with your service; you’re multiplying the blessings in your own life.

Some of your most significant and impactful experiences will come from helping others. Giving benefits both the giver and the receiver, and those blessings can ripple out into the community in unexpected ways.

Bucket Lists: Life Lesson 1 of 50

ST. CROIX INSIGHTS

Bucket List Items – Why Do We Wait?

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

Over the years, I’ve created a dream board of items I’d like to achieve within the next year or two. Some of these aspirations deal with money, having more time, and how I can become more impactful with those around me. It’s a board I look at every day, using it as a constant reminder to evaluate whether my choices align with what truly matters to me.

Recently, during a lunch conversation with a client, we delved into discussions about our parents. Spending time and sharing stories it always a treat.

He told a story about inviting his brother on a fishing trip with their dad. Their dad wasn’t much into fishing, but rather enjoyed spending time with his boys. Even though dad was done fishing after a few casts, he enjoyed spending time and sharing stories. Yet, his brother felt he had to work and couldn’t make this trip work into his work schedule. After all, he had 48 other weeks he could get his work done, but this particular week looking back today, he can’t remember what was so important he couldn’t go fishing.

Within six months of this trip, their dad passed away.

Here’s a sample list of items I have on my bucket list: travel to a variety of places in Europe, New Zealand and the Galapagos Islands, volunteer in a more impactful way, tithe so I can help others, and deepen my relationship with God. Your list is going to be unique to you and your wishes.

I have a variety of friends and family that helped me achieve bucket list items over the years and I have so many more items I’d like to achieve with my time on Earth. Yet, you and I can’t wait. Time is so precious and you and have no idea if we’ll even achieve our entire bucket list.

Crafting a meaningful bucket list can be a challenging task. If need help creating a list that holds personal significance and impact, feel free to reach out. I invite you to engage in a meaningful conversation with me about shaping your bucket list, and together we can strategize on its contents.

When Your Bus Ticket Gets Punched

ST. CROIX INSIGHTS

When Your Bus Ticket Gets Punched

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

Photo by Danist

My favorite breakfast place in my hometown of Woodbury, Minnesota, is Keys. The Italian sausage is the best. I can’t remember ever ordering anything different there for breakfast. My friend Jack enjoyed a Keys breakfast too. We’d meet up a couple of times a year to catch up and solve the world’s problems over hash browns and orange juice.
One of Jack’s passions was politics. It was a topic he would talk about for hours during our breakfasts. Yet one topic Jack never wanted to focus on in our conversations was his cancer diagnosis. I get it, but this time was different. I arrived for breakfast early to get a few things done prior to our meal, and I noticed Jack’s walking style as he entered the restaurant. He was shuffling his feet four or five inches at a time—nothing like that stride you and I would use to walk forward. I had a suspicion that this would be our last smart-talking meeting of the minds, solving the world’s problems over breakfast. And it was.

The most common question people ask me is, “What would you do?” Sometimes we just need someone as a sounding board to help us make a big decision: to retire, purchase that dream home, or finally snag that car you’ve always wanted. Sometimes, even when they know exactly what Brett’s answer would be, people do the opposite anyways. Life is short, and sometimes we throw caution to the wind. And I’m no different, even though I get in trouble with Mrs. Anderson when I purchase a $200 cooking pan or replace my holey socks when I could have just sewed them up instead. (I’ve created a financial ninja!)

Those are the easy questions to answer. But sometimes, it’s not always possible to answer these types of questions for others.

One afternoon, I was sitting on the coach next to my mom, my sister’s dog snuggled against her. At that time, Mom was going through extensive chemotherapy to reduce a tumor in her pancreas. She was in a battle for her life. The chemo and cancer were winning, and she knew it…which is why she asked, “What would you do?” I knew what she was asking. She was tired, and the battle seemed to be nearing the end. And I know Mom didn’t want to give up on living.

Assuming I have a choice when my bus ticket gets punched, I’m not sure how I’ll respond. Sure, today I can talk big, but that’s today. I simply told Mom that my ticket hasn’t been punched yet (that I know of). Many of us will eventually have life-changing decisions to make. My friend Jack and my mom had one thing in common: they both said they were grateful they got cancer. Grateful because they had time to process their situations and get their remaining days in order.

It’s a topic we talk about a little bit, but discussing it on a deeper level could help us be even more impactful with our family, our loved ones, our pastors, and even our advisors. Whatever our situation, we can all breathe a sigh of relief when we have not only our financial house in order but also our wishes on record for the host of events that could happen to us or a loved one, including sickness or death.

With all the upcoming Federal estate tax law changes I expect to come our way shortly, now is a good time to revisit your estate plan, from power of attorney to health care directives. Remember, not everyone gets a warning notice! If you need a referral to an estate planning or elder law attorney, let me know.