Welcome once again to retire smart Austin with Phil Capriotti senior He is the founder of Empower Wealth and tax. I’m your host Spike spangle. Phil Capriotti man, great to see you again. Just did some stuff in the radio booth. But they let us out. Now we’re doing the TV and man, has your phone been ringing? We’re getting so many appointments from the QR code from your other co-host Cynthia, you’re covering so much information. What do you want to cover today?
Well, we’re gonna cover we’re gonna, we’re gonna go dealer’s choice. We’re gonna go with that. Okay, so we have a list of client questions that they’ll call in and they don’t want to come into the office, they just have a question. And then they expect that maybe they can get an answer and we address those questions. Okay. So, one of the questions Spike that we had was, my father was an attorney. Okay. And he saved approximately $1.7 million in an IRA. We’re getting ready to go into- he’s getting ready to go into a nursing home. They do not have a long-term care. My mom is concerned because she can no longer take care of him. She has been his primary caregiver for the last four years; it’s getting too much for us to handle. Our biggest concern is will we get a tax deduction for his care if we take funds from out of the IRA to pay for it? Now, I got to tell you, folks, that was a great, great question. Let me explain. When we look at healthcare deductions, all right. It’s really only up to the standard deduction. So, if let’s say you have a husband and wife and now we’re in 2024, so the exemption standard deduction went up. Okay. So, if your husband and wife, your standard deduction is about 29,900, and change, you also get a deduction of another, I think they jumped it up to 1650. Because you’re over 65? Well, if you have deductions that exceed that standard, that 29,000 plus the other 16, five, we’ll call it a total of 33,000. Well, then we have a leg to stand on. Okay. But the fact of the matter is, if you’re paying 70, 80, 90, 100, 110,000, for home health care and or long term care, and your idea of planning was to take it out of the IRA, because that’s the primary account that you had that has the majority of the money on it, you just created a an additional problem, you created an additional tax problem, because every dollar you take out of that IRA, even to pay for health care, is going to be considered a taxable event.
Okay. So, on today’s program, we want to continue talking about estate planning, how do we keep more of our earned money inside our own accounts? And this, this is really it’s a long play. This is something you’ve got to start earlier than later. Estate planning isn’t just for when were in those retirement years, as you were just saying, that family that came in, he was already in the need for long term care. It’s almost a little too late to start, or I don’t know, were you able to stop the (indistinct)
It is too late. No. And I told him, I said it is too late. And I told him to. He was a engineer, and he worked for one of the major oil companies. And when they first come into my office, his wife was concerned, she was a teacher, and he was the engineer, he was the primary breadwinner. And I said we need to start executing Roth conversions because what you need to do is if you if you do not qualify for home health care or long-term care or made no other provision and have no other assets, you know with some people: Well, I’ll just sell the house. You’re not selling the house at 80 years old You’re What are you you’re gonna sell the house. It doesn’t really, it’s not actual so we want to do is in this part of the estate planning is what account if I got forbid need health care, home health care, that’s covered limitedly with Medicare, if I need extended home health care, okay, not rehabilitation home health care. I need a practical nurse. I might need them 4 hours a day, 8 hours, 12, 24 hours a day. What account am I going to draw from to pay for that care? So as part of an estate plan or retirement income plan is we set a plan and up to accommodate this, do you realize that five out of six Americans, okay, that reach age 80 are going to need some type of home health care or long-term care, by the time they reach 85 to 90.
You know, I read a different but similar statistic, a couple age 65, 75% chance that one of you is going to need long term care. What bothers me about is that you’re always quoted that number: average stay is about three years, I’m not from my personal experience, both my grandmothers were in there for much longer than that.
Well, with all due respect to our government, anything, any type of program they touch ends up costing a fortune, they got into the education system and education, a college education has grown significantly. I mean, it’s averaging about 5-6% inflation, they got into health care, what’s that happening? Okay, now, health care is growing by 5-6%. Why? Because they don’t leave it to the open market. But the fact of the matter is for you individuals, okay, that are concerned, what type of care I don’t want to go into the nursing home, I want to stay home. Okay, eventually, if you think that your children will care for you, and I’m sure they will, they, I’m sure love you. They may not have the expertise. And also, I don’t want to take them out of their own lives. To depend on me. What I want to do is simple if you don’t want to pay for long term care, or even if you do have long term care, if you’re looking for- if I need home health care, and I need it for three, four or five years, okay, until the good Lord calls me home. Phil, what accounts can I access that are tax efficient?
Right, right. And I do want to do that after our message break here because we have some very specific ones. So, I kind of want to ask you, why don’t we get back who does need to do estate planning, who maybe doesn’t need to worry about estate planning, and you are going to talk about the very specific tools that we use, where you can actually get tax free income, but it takes some work. It takes some preplanning, right. I know that you do this. I’ll let you take us out to break here. First Five callers today. Can we do an estate plan review?
Yeah, we’ll do an estate plan review. And we also want to take a look at your portfolio and do a portfolio risk analysis. So, dial 888-818-6557 Or pick up your phone, snap the QR code in the lower left- or right-hand corner wherever it is today. And it’ll automatically take you to our website. The reason we can only take the first five callers, we now have two TV shows we have a TV show on ABC on Saturdays from 11 to 1130. And of course, our Fox show we’ve been on for over four years. And I we want to bring the services to everyone. Last week, we had like 13 Different callers and 12 Booked appointments which we it’s a good problem to have. Right? But the fact of the matter is we want to bring these services complimentary to you and your family. So, pick up the phone be one of the first five callers and I look forward to visiting with you.
More retire smart Austin with Phil Capriotti senior when we get back watch this personal message. This will tell you just a little bit more about Phil Capriotti senior call the phone number 888-818-6557 or use that QR code down at the bottom of the screen. We’ll be right back.
I watched my parents work, work themselves really to the bone. I saw my father retire at 63 and pass away. Six months later, once he had stopped working. My mom looked at me and she said, You better be an accountant. You better learn to tax law. I went to a private school, got a great education, lived in the library and graduated without any debt. I realized the benefit of being debt free at a very young age. And I also realized the benefit of educating and speaking to people and I liked working with folks who actually needed help. I started my company 17 years ago, and now we employ two CPAs and two licensed tax professionals. We have a legal arm that helps folks design trusts as well as wills. We have an insurance and that offers property casualty insurance, we sell health insurance, Medicare Supplements, long term care life insurance annuities, and we have wealth management that I started to work with Ed slot looking at tax efficient ways to have retirees or soon to be retirees retired tax free if your accountant or CPA is not also your financial advisor you really have a conflict of interest
Welcome back to retire smart Austin with Phil Capriotti, senior of Empower Wealth and tax. I’m your host Spike spangled we really want to help you with these strategies. But we do have to limit it this week to the first five callers the first five people who click on the QR code. Let’s continue our conversation. Phil, you’ve got the lead on this.
Yeah, one of the other calls that we had that came in and I look taken viewer calls and we can’t submit many times we can’t really answer them because we’re not verifying or talking with them for till a day or two later. It’s our call center, that and their experience, but they’re not going to answer complex questions. Now, one of the questions that we had from one of our callers is the sunsetting of the the estate tax, federal estate tax limits, and uniform gifting tax limits. Now, this has not been a problem in the past, because back over 20 years ago, when you had to pay an average of 50%, not federal income tax, federal estate tax. They’re two separate taxes. Federal income tax, a tax on your income while you’re alive. Federal estate tax is if you work too hard and save too much didn’t spend enough, okay, the government is going to help you out and spend some of that for you. Now, back in the day, the maximum was 1.5 for a single person or 2 million, and then 3 million for a family or 3.5 million. Well, they eliminated that, they didn’t eliminate it, for a short period of time they eliminated they it, made an unlimited gift tax and estate tax. Well, then that changed. And we started to have a graduate that right now, the federal estate tax, if you have an estate over 13,800,000, you end up paying an average of 50% in federal estate taxes on any amount over that amount. So, the first 13 million its exempt. Yeah, not too much of a problem. Most of our clients have somewhere between two, five 10 million, we work with high end clients as well. But again, there’s a special situation. So, what that’s getting ready to sunset folks and 2026. At the Congress, it’s actually going to revert back to the old values. So, they’re kind of kicking the ball kicking the can down the road, like normally done. And so, some folks are talking about lowering it to 5 million. So, your first 5 million you can gift, okay over your lifetime, and or exempt from federal estate taxes. Anything over that 5 million can be taxed at 50%. So let me give you an example. Let’s assume for a moment they pass this draconian bill on taxation on additional taxes on those of us who have worked hard, saved hard and wanted a healthy and complete retirement for ourselves and for our families. Let’s assume that they lower to 5 million. Let’s assume that you own a ranch. Let’s assume that you own a business. Let’s assume that you own real estate. Let’s assume that you own a farm. Let’s assume that you own raw land. What happens is when you die, when the last of the marriage dies, they’ll come in and they will estimate what the value is. Okay, so let’s assume I’ll give you an example. Our ranch and land passes. Okay, it’s estimated at about $8 million. So, in this situation, the first 5 million would be exempted the next 3 million we’d have to pay a 50% federal estate tax. So now that means your heirs have to come up with $1.5 million within a nine-month period to pay the federal estate taxes because we didn’t properly plan now.
That’s in a property though. So where are they going to get the taxes on $3 million.
And many? Well, it’s called a fire sale. So, if you have to come up with this type of money, you can do a couple things, you can have the liquidity set out already. So many of our clients will use what’s called an islet. All right and I’m we’re going to do a whole show on this next okay, but I will kind of whet your whistle. And islet is an irrevocable life insurance trust. For those of you who have life insurances, life insurance policies that are paid up, you’re still paying, it’s possible to do a 1035 and possibly convert it but an islet for many folks, they have these life insurance policies, they don’t need it. So, what we want to do is set up an irrevocable life insurance trust. Now this is why it let’s say I have an island for $3 million. That totally is excluded from my estate. Why? I don’t own it. It’s a trust. The trust owns it.
It’s an irrevocable (indistinct).
Life insurance, irrevocable. So, I’m setting this out to pay the taxes. I’m doing it ahead of time. It’s not in my estate. See one of the issues that we have folks get confused between federal estate taxes and federal income taxes. It’s true that life insurance proceeds at the death of an individual if you’re the beneficiary, their federal estate, their federal tax free, yeah. But they’re still included in your total Estate Tax Calculator.
That was where my simple thought was going with it. I said, Wait a second. Life insurance, we can make this simple. As long as I have the kids as a couple of beneficiaries on there. It surpasses going through probate, the kids would get it. But you’re saying it’s included in my estate? Yeah, by putting it into an irrevocable life insurance trust, yep. It’s now no longer part of your estate. That’s
exactly right. But it’s available to fund paying the government off. So, your children are not, or your spouse, depending on how they change this law, are not responsible to come up with this large sum of money. The last thing we want to do is we want to have funds, and this is why estate planning is so important, we have to have these conversations, what provisions have you made to pay the estimated taxes in the event A, B, and or C happens. So, these are the types of complex subjects we like to talk to, especially with our high net worth. Clients. And individuals folks have been watching the show, this is the type of planning that your regular broker dealer is not really talking about. So, we have associations with our law firms or law arm to specifically set these things up. It’s a trust. There are so many different types of trusts. But this is one that we like to use. In the event, especially when these new estate tax limits sunset and 2020.
My father had something that happened recently, and we needed to talk to an estate planning attorney, it was it was a very distant family member as well, you know, we’ll try to help out, we made a phone call, they said they were going to charge us and we wanted a $500 retainer, just to make a 30 minute phone call to talk with the attorney. If somebody wants to talk to you about estate planning and talk to him power, wealth and tax.
If he was one of the first five callers, we can talk about anything under the sun. Remember, I’m a tax advisor, a financial advisor and a wealth manager. Okay, and we have certain departments, so we have all of our all of our employees are licensed and capable. But the fact of the matter is, if you want to talk about this a complimentary consultation, dial 888-818-6557 Come on in make an appointment. Tell the gal or the guy, the gentleman who answered the phone, you know, Phil was talking about the uniform estate tax sunsetting in 2026. You know, I own a ranch, I own a farm, I own properties, we’re concerned that we may be forced to sell because I don’t think we have the proper liquidity. How do we set that plan in motion.
And with an irrevocable life insurance trust, I’m assuming that there’s a health element to it. So, starting it sooner than later, do we have to get this sooner than later?
Yeah, no, much sooner than later. And normally, what we’ll do with this is we’ll go through the underwriting, make sure that we have an approval before we start actually putting any money into it or funding it or anything like that. It’s a very easy process. But the fact of the matter is, many times what we’ll have is we’ll have we’ll have a healthy male or healthy woman, and the other spouse is not so. When we set these things up, we want to set it on a second to die islet. So, if we have one spouse that has great health, and one spouse that and not so good health, we can still get it issued and still provide the funding at a very, very reasonable rate.
Right. And one of the reasons that we want to do this is we want to make sure that we can protect the assets that we have. We have a very important message from Phil himself about the markets up and down right after this. So don’t go anywhere folks, call the phone number you see right here for the first five callers, we will do an estate plan review and also take a look at your assets, your taxes, Social Security, everything else that’s on your mind. But we’ll start with an estate plan discussion 888-818-6557 or open up your phone to the camera function pointed down at that black and white box, that QR code and when you click on that, it’ll take you over to the website. We can schedule an appointment there, but we will have to shut it down for the first five appointments more retire smart Austin with Phil, right after this.
You know in October of 1987, the stock market dropped 22% And what became known as Black Monday in April of 2000 the .com bubble burst dropping the market 25% And the banking and mortgage crisis of 2008 plummeted the entire global market 37% In a matter of weeks today, rising interest rates and raging inflation has caused the markets to drop significantly with no end in sight. During these volatile times, you want to be assured that your retirement investments are being managed by an experienced financial adviser who know how to weather the hardest of economic storms Do you want to take the next financial crisis alone, call me and my team here at Empower Wealth and tax using the number below. The closer you are to retirement, the more important it is to work with a team of professional licensed fiduciaries here at n power, wealth and tax. Thank you very much and have a blessed day.
Welcome back to retire smart Austin with Phil Capriotti, senior of Empower Wealth and tax. I’m your host, Spike spangle. And today we’re talking about solutions. And look, Phil does this every single day in the offices. So, I like hearing about the client case studies. You just had another couple come in recently. Was it about estate planning or different time?
Yeah, it was, it actually came in to put together a retirement income plan and talk about Roth conversions. And when we did the analysis of their estate, we realized they had they hadn’t even had the will update it in the last 15 years, believe it or not, they and I’ve seen some folks move in from other states and they don’t have the route their will or trust reviewed. Well, these states have different laws. So, you should always do that. And if you need a review, call our office. I have attorneys, we have them available to complimentary look at your current will or your trust and make the appropriate adjustments. Okay, for really pennies on the dollar. But getting back into the situation with we’re just going to call Mr. John and Miss Maryam. Okay, when they came in, we did the retirement income plan. But they these folks had land in their family for over the last 100 years. And when I’m talking about land, I’m talking about over 1000 acres. Wow. And they had this land up in a right above Liberty Hill. Most of you folks know Texas, of course you do. There’s a little area up there called Florence, Florence, Texas, it’s on your way up to lamb pass us? Well, this land was worth I think the parents they bought it at about $300 An acre $400 an acre. And they paid the thing off? Well, what happened is a firm from California came in, and they wanted to make it a little mini-Hollywood.
Oh, yeah. The exodus from California. They wanted to make television production and film production in Texas. Yeah, so
So, at any rate, so this land went again, and it was naturally appreciating this way that land owning land. And property is always a hedge against inflation. Well, now that land is worth $30,000 an acre. Okay, so, so what they decided to do was sell part of it, and they decided to keep part of it. So, they sold off about 275 acres. Now, of course, that’s a tax problem. Okay. And they have a CPA, which was good, and we’re working with the CPA. But the fact of the matter is, that’s only a long-term capital gains tax, they didn’t die, they don’t have a federal estate tax. Look at the land that they’re keeping.
So today, if you if you hadn’t use something like a trust, you take that amount of appreciation in that amount of property. If these was being left to the heirs, where would they have come up with the cash tax?
These folks were elderly, budding, good health, and they were great. They’re fantastic oaks, great personality. So, this is what we did. I said, look, let’s put you both through the underlying underwriting, I want to recommend an islet not for the land you’re selling. But for the land is going to be left to your children and grandchildren. Who knows what this land is going to it’s now worth 30,000 an acre, right? We don’t know what it’s got to be worth 510 15 years from now. So, what we did, and this is again, a constructive and creative as far as I’m concerned, concerned estate planning. What we did was we that sold the property right, they sold the property, we paid off the federal estate, we paid off the capital gains the long-term capital gains, which averaged about 20%. Okay, after that, I said, Let’s do a single premium into an eyelet. All right, let’s take 2 million, 3 million, very small percentage, okay, and this works with anything hundreds of 1000s. Let’s take this and let’s see how much we can put into an irrevocable life insurance trust to pay to provide liquidity for the kids to pay the federal estate taxes especially after these new unlimited state taxes sunset. So, we settled on 4 million and that 4 million bought $11 million and life insurance they paid one premium 4 million after we paid the long-term tax. They set that aside and an eyelet and they said this is the money our kids can use if they want to keep the property to want to sell the property. They don’t have to worry about selling it within a nine-month period or called a fire sale or for sale to have the liquidity to pay the Federal Government, on estate taxes wherever they’re at.
And we call this the transfer of wealth. We’ve joked about this before. But you know, the families of the Rockefellers, the Carnegie’s the melons, they were able to pass on their wealth. And you said during a time when there were very, very high tax rates.
See, I’ve had folks come in and they say, you know, I’ll just put my money in a trust, and now that’ll avoid any federal income tax. I’m like, No, you don’t understand that does a trust avoids unintended beneficiaries, not federal taxes. A trust is used to help a state federal estate taxes. Remember, folks, federal income taxes and federal to state taxes are two separate animals. So, eyelets are used to provide liquidity at the death of the first or second spouse so that out, we can keep our ranches, we can keep our properties in the family’s names, real estate, it’s just called a lot. This is called generational growth and-
Generational wealth. Let me let me take the numbers down. I mean, isn’t it relative to the family? Can you do the same thing with a half a million-dollar policy? Yes, you buy that single premium is you double maybe what the life insurance is for the kids and you’re starting to build that generational wealth with what you have?
Well, the whole idea is, is customized an island, it doesn’t matter if you have 20 million in it, or you have 200,000 in it, it depends on what your need or expected need will be at the time of so what we want to do is simply provide liquid resources that are not included in your estate, your regular life insurance, they’re going to include that in your estate. Yes, the proceeds will be federal income tax free, but not federal estate tax free. It’s included in the estate tax.
And a ticking time bomb on this is that these estate tax rates are very likely to sunset in the next two years.
They are sunsetting 2026. It’s changing. They’re trying to work on it. Now. Let’s see how far they get along on it. If you have any questions, if you own property, if you own real estate, if you own apartments, if you have wealth, that’s non liquid. Let’s talk about how we can protect this. What do you want this wealth to do for you and your family? And what resources and what avenues do we have to preserve your wealth for the next generation?
It Phil Capriotti senior thank you so very much, folks, call the phone number you see right here on the bottom of the screen 888-818-6557. We only have three spots available right now. Or you can use the QR code down to the bottom of the screen open up to the camera function pointer to the black and white box. Schedule your own appointment. Thank you so much for watching. We’ll be back next week.
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