Estate

• toomeyinvest
• Estate
• April 24, 2024

Maximizing Your Estate: Advanced Wealth Transfer Techniques

You spend a lifetime building up wealth. The last thing you want to see is the entirety of your estate going into the pockets of nursing homes, tax agencies, or hospitals. Most people strive to leave as much of their estate as possible for future generations, friends, and charitable causes. Unfortunately, many people leave their heirs with little due to medical and care requirements that come with advancing age.

To safeguard the wealth you’ve worked tirelessly to accumulate and ensure it benefits your loved ones and chosen causes, strategic planning is crucial. A comprehensive wealth management strategy aligned with your personal financial goals can make all the difference. Here are some of the many strategies often used to maximize an estate transfer:

Generation-Skipping Trusts (GST): A GST is a legally binding trust agreement that directs assets to grandchildren instead of children, primarily for tax efficiency. By sidestepping a generation in inheritance, estate taxes can be minimized. This doesn’t imply neglect of children but rather a strategic tax planning approach within a broader investment strategy.

Charitable Giving: Donations to charitable organizations not only fulfill philanthropic goals but also offer significant tax advantages. Whether through direct contributions, donor-advised funds, or charitable trusts, structuring your giving can yield tax benefits during your lifetime and within your estate plan. This proactive approach can reduce tax burdens on both your heirs and your estate while supporting causes that align with your values.

Tax-Efficient Gifting: Leveraging annual gifting limits is an effective way to diminish the size of your taxable estate. As of 2023, the annual gift limit stood at $17,000 per giver/receiver, with provisions for doubling or quadrupling for married couples. Exceeding these limits necessitates filing IRS Form 709 and accounting for gifts against the lifetime giving allowance. Planning these gifts with the help of a financial planner can optimize outcomes and support your long-term retirement planning goals.

In addition to these strategies, it’s crucial to be aware of asset management approaches such as asset spend-downs to qualify for Medicaid, especially if long-term care becomes necessary. Medicaid eligibility often requires individuals to meet specific asset thresholds, and spending down assets to qualify is a common practice. This can involve utilizing assets for approved expenses such as medical bills, home modifications, or prepaid funeral expenses.

Moreover, a Medicaid annuity can be a valuable tool in asset management and Medicaid planning. By converting excess assets into an annuity, individuals can create a stream of income that is exempt from Medicaid asset calculations. This strategy allows for the preservation of assets while meeting Medicaid eligibility requirements. However, it’s essential to navigate the complex rules and regulations surrounding Medicaid annuities with the guidance of knowledgeable financial and legal professionals.

By implementing these strategies and understanding the nuances of asset spend-downs and Medicaid planning, you can effectively protect your estate and ensure that your wealth serves its intended purposes for future generations, charitable causes, and personal legacies. These steps can also reinforce your broader investment strategy and support saving for retirement with greater confidence.

Seek Professional Investment Advice

To engage in the best possible estate and retirement planning, it’s worth seeking advice from a professional who can help you protect as much of your assets as possible while aligning with your personal financial goals. Toomey Investment Management, Inc. is a Wallingford, Connecticut-based financial advisory company that offers clients expertise in independent portfolio management and comprehensive wealth management solutions.

At TIMI, our business model is designed to treat all of our clients equally and fairly. We realized long ago that the financial industry dedicated many resources to capture money from prospective clients but much less on service and accountability for existing clients. At Wallingford, Connecticut-based TIMI, we listen carefully, keep in touch, and return your calls and communications quickly, so you can count on us. We will work effectively to optimize your financial situation and solve your problems—whether it’s through tailored asset management, smart investment strategy design, or focused support in saving for retirement.

• toomeyinvest
• Estate
• October 11, 2023

The Great Wealth Shift from Baby Boomers to Millennials

There is much being written today about the “great wealth transfer.” What it refers to is a massive shift in assets from the aging Baby Boomer generation to their children, who are primarily of the Millennial generation. In this blog, we’ll take a look at some of the issues involved in the transfer.

Baby Boomer Wealth

Baby boomers are still the most significant generation when it comes to wealth, primarily because of historical circumstances. They began their careers in an economy that provided them with a relatively low-cost education followed by the strong availability of jobs and affordable housing. Because of a variety of socioeconomic and environmental factors, Baby Boomers were able to build wealth in a way no other generation before them had. 

Millennial Wealth

Millennials, on the other hand, saw an unprecedented spike in the cost of education, and many of them are still saddled with student loan debt even into middle age. Home prices soared, as well, shutting many of them out of home purchases. The result is millennials often have far fewer assets than their parents did at the same age. The coming wealth transfer should be a massive, long-term financial opportunity to restore personal financial health.

So Where Is the Shift Originating?

As Baby Boomers continue to age, many will sell massively appreciated homes to downsize and reduce their expenses with less travel and mobility, all while continuing to grow their wealth through various investment vehicles. The oldest Boomers are reaching a fairly advanced age, meaning that their passing is the start of the largest generational wealth transfer in history. This wealth is in the form of a variety of inherited assets, such as retirement accounts, taxable brokerage accounts, annuities, personal property, real estate, life insurance, and much more. 

What Are the Tax Implications? 

As the transfer of wealth takes place, the government will effectively shift the tax burden (as well as tax revenue) from Baby Boomers living on a fixed income at a lower marginal tax rate to millennials in the prime earning phase of their careers. The result is that Millennials may face an enormous tax burden particularly when it comes to inheriting pre-tax assets.

Prior to 2020, the beneficiaries of inherited IRAs or similar plans such as 401ks, were able to transfer money into an inherited IRA and elect to “stretch” the distributions over their lifetime. This allowed them to minimize, or stretch the distributions and subsequent tax burden out over many years.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 essentially eliminated the inherited IRAs stretch election. Under the new legislation, heirs of pre-tax assets have only two options: they can take a lump sum distribution and pay all the taxes at once, or transfer the money to an inherited IRA. If they choose the latter, the funds must be withdrawn and taxed over 10 years following the death of the decedent. Both these options increase the tax burden.

Minimizing the Tax Burden

There are tools that can be used to minimize the tax burden, and the best place for guidance is with a professional financial advisor and tax firm. Toomey Investment Management, Inc. is a Wallingford, Connecticut-based financial advisory company that offers clients expertise in portfolio management.  

At TIMI, our business model is designed to treat all of our clients equally and fairly. We realized long ago that the financial industry dedicated many resources to capture money from prospective clients but much less on service and accountability for existing clients. At Wallingford, Connecticut-based TIMI, we listen carefully, keep in touch, and return your calls and communications quickly, so you can count on us. We will work effectively to optimize your financial situation and solve your problems. Call us at 203-949-1710 or visit our website for more information. 

• toomeyinvest
• Estate
• October 13, 2021

5 Practical Estate Planning Tips

Planning for what will happen as you approach the end of your life and after you pass away can make it easier for your loved ones to cope. Where indicated, an estate plan can help them avoid much of the probate court processes and fees and also provide instructions for taking care of their minor children. If you haven’t yet created an estate plan, here are some issues to consider.

1. List your Assets

Everything you own is includable in your gross estate. There are some assets that are more vulnerable to unforeseeable events, and some that are more shielded. It is important that you list everything you own and chart out whom you would like to inherit these assets. Whether your goal is to create multi-generational wealth, or you are charitably inclined, having this high-level conversation sooner than later can make a substantial difference.

2. Create a Living Will

You may become unable to make medical decisions for yourself and unable to communicate your wishes to doctors and loved ones. A living will allows you to make your preferences known ahead of time so that others will be able to take actions that reflect your wishes. A living will addresses matters such as whether you want to receive life support, pain medication, blood transfusions, and other forms of care.

3. Granting Power of Attorney/Appointment

Power of Attorney (POA) or appointment gives a person you trust the authority to make financial or medical decisions on your behalf if you become physically or mentally incapacitated. This can also be an effective tool in getting the clock ticking on assets you may not want to leave inside your estate. You can select one person to handle both types of issues, or you can designate multiple agents.

The individual to whom you grant a financial POA will be authorized to make financial decisions on your behalf and will have access to your accounts. The person you give a medical POA will be authorized to make medical decisions on your behalf.

4. Draft a Will

A will is a legal document that lays out how you want your assets to be divided after your death. If you have minor children, your will can make clear whom you want to be their guardian.

If you pass away and you haven’t created a will, those matters will be decided by a probate judge in accordance with your state’s laws. A judge may make decisions that are not what you would have wanted. Drafting a will can help you ensure that your affairs will be handled in accordance with your wishes after you pass on.

5. Periodically Review and Update Your Estate Plan

Your circumstances will change in the years ahead, so you should review your estate plan every 3-5 years. You may decide to allocate your assets in a different way after the birth of another child or grandchild. You may change your mind about who should be your children’s guardian after your death or the person you initially chose may no longer be able to fulfill that role for some reason. Most importantly, all estate plans are subject to legislative risk, so it is imperative that you keep your plans current with evolving estate law.

Get Help with Estate Planning

Toomey Investment Management, Inc., has a team of professionals who can work together to handle all aspects of your estate planning. Keep in mind that this article represents the basics of estate planning and high net worth individuals with diverse asset bases usually require more intricate planning measures. We can discuss your current situation and your wishes, and connect you with an attorney to draft legal documents that reflect them. Contact us today to learn more.