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Financial Symmetry: Balancing Today with Retirement

When considering retirement, do you wonder what financial opportunities you may be missing? Busy lives take over and years pass without taking advantage. In this retirement podcast, Chad Smith and Mike Eklund unveil financial opportunities, to help you balance enjoying today so you are ready to retire later. By day, they are fiduciary fee-only financial advisors who answer questions about tax savings, investment decisions, and how to save more. If you’ve been putting off your financial to-do list or are just not sure what you’ve been missing, subscribe to the show and learn more at www.financialsymmetry.com. Financial Symmetry is a Raleigh Financial Advisor. Proudly serving clients in the Triangle of North Carolina for over 20 years.
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Now displaying: June, 2019
Jun 17, 2019

Nobody likes to talk about the 2 certainties of life: death and taxes. So much so that we delay important decisions on how to deal with our assets for our heirs. On this episode, Cameron Hendricks and Grayson Blazek join in to discuss specifics on how to handle accounts and property, filing taxes and how to better prepare for passing on your estate to your loved ones. Find out how to handle all of this now to save your loved ones added stress during a difficult time.

Ensure that your loved ones are prepared to understand your financial life

To ensure that others are prepared for your own passing, make sure that your loved ones understand your financial life as a whole. This will make your passing a much smoother process. It is important to ensure your will is readily available and is up to date. Another way to be prepared is to have your assets properly titled. It's also important to periodically check all of your accounts’ beneficiaries to ensure that you have the right beneficiaries named and that you don’t have too many. The more information that you provide up front will really help along the way.

How to help your loved ones prepare for your passing

Taxes can be confusing enough, but doing the taxes of for the deceased is even more challenging. This is why it is so important to ensure that your loved ones have all the information that they need to prepare your final tax return during this time. Before making someone an executor of your estate it is important to talk to them and give them all of the information that they may need. This will make sure that everything transitions as smoothly as possible. If you are the executor of the estate make sure that you know where all of these income sources are. The more information that you provide up front will really help along the way.

How to prepare taxes for the deceased

Preparing taxes for the deceased isn’t as complicated as you may think. A person that has passed is called the decedent. Whether you are the surviving spouse or the child of a parent that has recently passed someone will need to work through a couple of tax returns for the decedent. You will have to fill out the final 1040. It is similar to every other tax return that you have filled out. You can continue to file as married filing jointly if you don’t remarry within the year and you will include any income received. The second form you may encounter is the estate income tax return. The last tax form you may need is the gift tax return. Listen to this episode to hear Cameron Hendricks and Grayson Blazek provide their expertise on preparing taxes for the deceased.

What are some common financial questions people ask about death?

There is a myth that people think everything is going to be taxed upon death, but that is untrue. Life insurance is not taxed and 401K’s and IRA’s will not be taxed in the way you think. When passing wealth to your heirs think about whether they are ready to be heirs. You can set up a testamentary trust and create rules around the trust to prepare your heirs for receiving an inheritance. You want to make sure to have an estate plan. The default estate plan will certainly not be what you actually want. Remember, you won’t be around to clarify your wishes so make sure you clearly state your intentions.

Outline of This Episode

  • [2:47] Ensure that your loved ones are prepared to understand your financial life
  • [7:17] What kind of income tax return will you need?
  • [18:28] The estate income tax return
  • [21:48] How to handle the 709
  • [26:58] What are the common questions people ask?

Resources & People Mentioned

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Jun 3, 2019

You may have seen more news stories mentioning Opportunity Zones of late, but there are still plenty of questions surrounding this part of the latest tax reform. Today we're discussing the ins and outs of investing in Opportunity Zones to help you understand how, in the right circumstances, they could help you save thousands on your taxes. We’ll discuss what opportunity zones are, why they were created, what the tax benefits are and how to spot the risks involved when investing in opportunity zones.

What are opportunity zones under the new tax law?

The new tax law was created to spur economic investment in low-income areas throughout the U.S. by providing individual investors with tax incentives for investing in impoverished communities. The low-income areas are called opportunity zones and are identified by governors of each state. Although it was rolled out in 2017 it wasn’t until recently that the IRS updated investors on how the program is actually going to work. This program is geared toward long-term private investors with a high net worth. There are 3 benefits to the tax side of this law: tax deferral, tax reduction, and tax elimination for an investment held for more than 10 years. The primary purpose of the reform is to help economically distressed communities and in turn, it can help you save thousands in taxes. Find out how by listening to this episode of Financial Symmetry.

What are the benefits of the new tax reform law?

Under the new tax reform law, you can defer capital gain tax from the sale of real estate, a business, or stock. You can also reduce your taxes on something you recently sold and even completely eliminate taxes by reinvesting.

Here’s an example:

You sell something and earn a million in capital gain. Normally you would pay $240,000 in taxes on that capital gain. Now with the opportunity zones if you reinvest your capital gains into a qualified opportunity zone fund within 180 days you get to defer the capital gain tax on the million dollar sale. So instead of paying those $240,000 in taxes in 2019, you won’t have to pay that until 2026. Then in 2026 if you continue to hold that investment in the opportunity zone then you only pay tax on $850,000 of the million dollar original capital gain. So you’ll save about $36,000 there. But the biggest benefit overall for the program is that if you put that money into a new investment for 10 years or more you’ll pay no capital gains tax on the original investment.

What can you do to do to take advantage of the new tax reform?

To invest in opportunity zones and save on capital gains taxes you can invest in a qualified opportunity fund. A qualified opportunity fund is a corporation or partnership that is created for the purpose of investing in qualified opportunity zone property and holds at least 90% of its assets in qualified opportunity zones. The typical investment options are real estate, such as multi-unit apartment buildings, or a business located in a qualified opportunity zone.

You have to spend 100% of the purchase price in the first 30 months. So if you purchase a property for $800,000 then you have to spend another $800,000 within 30 months. The idea is that you are substantially improving the property for the amount that it is valued at. If you buy a business the same rules apply. You have to improve it somehow for that purchase amount. Remember, this is not an investment in the stock market, there is a higher degree of research involved.

What are the different risks involved?

There are different risks involved in taking advantage of the new tax reform law. As with all investing situations, attention to detail is key. Here are some of the risks with this type of investment.

  • What happens if there is a political change? If Congress changes its course over the next few years they could overturn this law.
  • You are invested in a limited partnership so you have to pay fees to the managers of the funds. They may charge 2% or you may pay a percentage of the profit. The fees involved may eliminate the tax benefits completely.
  • The money isn’t liquid. You have to hold it in the investment for at least 10 years and you won’t receive the benefits if you pull out early.
  • You’ll have to be an accredited investor.
  • You must not only buy but improve the property.
  • The 180-day rule may spur some people to rush into an investment rather than do their research into the options.

Many people don’t take advantage of things because they don’t know about it. We’re here to give you ideas and strategies that you may not be aware of. The overall goal of the new tax law is a great cause but the investment options are still pretty new. This was just an overview of rules and regulations, so do your own research. Don’t let taxes decide your investment decisions. Remember a bad investment is still a bad investment no matter what the tax benefits are.

Outline of This Episode

  • [4:07] How should the tax strategy be implemented
  • [9:19] What do you need to do to take advantage of the new tax reform?
  • [12:03] There are 3 benefits to the tax side
  • [13:45] What are the risks involved?
  • [20:27] What are other alternatives for capital gains?

Connect With Chad and Mike

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