Welcome once again to retire smart Austin with Phil Capriotti senior He is the founder of Empower Wealth and tax. He’s a radio personality, a TV personality. But more importantly, he’s a financial advisor and a tax specialist. I’m just his host spikes bangle. Phil, it is great to see how you doing buddy?
Spike, I’m doing fine. And it’s always a pleasure to work with you. Thank you. So, we got a lot of hours in the booth yesterday. And yeah, and that was kind of refreshing. It’s been a while.
So, you know, it’s, I think you and I both enjoy. I don’t mind getting gussied up with you. But the radio is great. Because we get to, we get to be relaxed.
That’s really in the summer, you know, flip flops t shirt. Yeah. And as long as you as long as you know exactly what you’re going to say, and you’re prepared. You’re, you’re good. And it’s pretty much always the topics of the day.
Yeah, I wanted to go back over a couple of things. If you didn’t mind, folks, over the last couple of weeks, we’ve been going really, really in depth into specific kinds of solutions, especially to get tax deferred out of your retirement plan. We want to try to pay the taxes, so we get some tax-free lanes. And we were talking about some specific tools. And we had a couple of emails and then a specific phone call from John in Austin. And John was saying I heard you talking about, and ILITs, I’ll let him go back over the acronym. But this sounds too good to be true. I’m worried about having to pay way too much in my estate taxes, because I have a lot of property is the eyelet too good to be true.
The ILIT is simply a trust. So, you have to understand the reason that we have trusts are to protect assets. Now some trusts are designed for many different reasons. Okay. That’s why we have so many an ILIT an irrevocable life insurance trust. And I read your question, John, your concern was, how can it be excluded from your overall estate because you have properties that are worth close to 10 million as it is, I guess you have some apartment buildings and things of that nature, which is great. The idea here is to take it out of your estate by making it a revocable so the key phrase here is irrevocable, which means I am giving it in said, in fact, to the trust, that’s what I’m doing, I’ve given it to the trust, I no longer own it. Now, because it’s a trust, it gets directed, okay by the directions or directives of the trust and the will. But it’s designed because life insurance is a tax-free transfer of wealth. Life insurance is not income tax free. When the trust owns it, as opposed to me owning it, it goes out of the estate. Now, there’s proper planning, we get our attorneys involved in this as well. So, when we set up an ILIT that would be an irrevocable life insurance trust is for folks just like you who are concerned with a couple of things. Number one, their current portfolio with their current assets exceeds what the uniform gifts tax or federal estate tax limit is right now, which was like 13 point 9 million. But more importantly, you’re concerned with the dropping down to 5 million, which is what is many of these folks in Congress are talking about. Again, this is extremely important, why your financial advisor should be in my opinion, a registered investment advisor, they should have their finger on the pulse of all of the different financial instruments we can use in order to achieve a tax free or tax efficient retirement. This is just one of the tools. What I would recommend Don’t be timid call 888-818-6557. Call, please set up an appointment with us. I’ll speak to you personally. I did look at the I did look at your overall portfolio. But they had mentioned that you hadn’t weren’t willing to make an appointment at this time. And by the way, thanks. Thanks. You also said you’ve been watching us for two and a half years. So, I appreciate that. Okay. Good credit question. And the key here is it’s irrevocable, which means I can’t take it back.
And I think I want to go to the function of the reason why he was asking the question. So, with these properties, I think that John wanted to be able to pass this on to his heirs, but the heirs if this goes over the estate tax threshold, they might not have the cash to be able to pay that estate tax. So, you’re talking about an irrevocable life insurance trust, we put life insurance in there. So, when he passes as well, because unfortunately none of us are getting out of this alive, the life insurance would pay out to the trust in the kids then would have this cash available to be able to pay for the surplus cost of the properties.
Yeah, that they could use it for it for that reason to actually allow the estate to be more liquid. And without counting against the federal estate tax. Here’s how it works. Once you’re over the limit, whatever the limit is, whether it’s 3 million, I’m talking about the new limit that they’re going to be posting for 2026. This is why the planning needs to start today. Let’s say it’s 5 million, let’s just say that that happens, because they need additional money to pay down the debt, pick a drama, it doesn’t really matter. The key here is to provide your beneficiaries or provide liquidity to the trust, that’s not known, but can also help pay the death taxes, so death anything over the limit. The other way we can use an ILIT is I’ve seen this where a client will come in, you know, and I’ve seen this 74 years old, excellent health plays golf, very, very healthy. I have, you know, I have a problem. I’ve had clients, I’ve had folks come up to me at the golf courses, hey, Phil, I need to talk with you, I think I have a problem I do call making Well, the problem is they have too much money or too many assets. And it’s not really a problem, what they have is they have a tax problem. And then the current advisor they’re working with really not sure how to handle it. Because again, it gets into a really gets deep into the weeds.
And it’s a specific tool for a specific function. Because, again, maybe you accumulated your wealth through these different properties. And the heirs might not have that also the cash to be able to take care of the properties or they could be in their other careers, they might need either pay management or maintenance to take care of these properties. So, there’s a lot of reasons to put that life insurance into the truck.
Also, it doesn’t affect your estate. So, it doesn’t go into probate. Nobody knows, really, that you have it except for you and the powers that be which is also good. This individual was John, I really enjoyed. I was intrigued by his story. He bought his first property at 18 years old. He bought a dive downtown and it was a fixer upper. He paid $4,500 for it. And that was the first thing and so and what he did, which I thought was genius, is he bought it in a lower income neighborhood. I think we’re kind of doing that now through other means. And he rehabbed it. And then and then what he did was he section 8 it. He Section 8’d the property out so the government would pay him 90% of the rents guaranteed the individuals who rent it only had to pay 10% and the long of the short of it, I said, Well how are the properties when they move out? He said normally every three years, my renters, okay, they move out, and I have to go in and rehab it again. But it’s okay. At least I have the guaranteed rents, and so whatever however, you’re a path to get to financial freedom, meaning having more money, feeling comfortable in retirement. Now we really have to focus on the tax issue. And this is why Empower Wealth and tax is here. And this is one of the reasons is because you know your local down the street adviser, they’re going to tell you to go talk to a CPA and many CPAs aren’t equipped to do trust planning. And this type of tax
will tell you to go find an estate planning attorney and we know the high costs on that we’re going to take a very short message break real quick. What we want to tell you about here is that you can get a tax review and estate plan review and your portfolio review right here at no cost. But we have to limit it to the first five callers or the first five people who click on the QR code below. We do have offices all around Austin, so we have to limit it. I know we say this during our program, but we were trying to help as many people as we can. But if we took the first 20-30 the appointment books would be booked out through the next couple of years. So, for the first five callers act on it, we know that estate planning trying to keep more of your money is important to you. So, call 888-818-6557 or use that QR code. Open up your phone to the camera function pointed at the black and white box, click on it. It’ll take you right over a landing page. You can schedule your own appointment with Phil Capriotti senior right after this.
I watched my parents work, work themselves really to the bone. I saw my father retire at 63 and pass away six months later and once he had stopped work and my mom looked at me and she said, You better be an accountant. You better learn a tax law. I went to a private school, got a great education, lived in the library and graduated without any debt. I realized for the benefit of being debt free at a very young age, 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 it offers property casualty insurance, we sell health insurance, Medicare Supplements, long term care, life insurance annuities, and we had 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 He is the founder of Empower Wealth and tax. I’m your host, Mike Spangle. And today we’re going over some of our viewer and listener questions for both radio show TV show. And we were going really deep dive into estate planning, and I had Maggie from Spicewood. Maggie says I have an annuity and you were talking about an annuity trust. I also want to get my funds out of my estate plan. But can I still take money from this annuity? Do I need to change my annuity? Do I have the proper kind of annuity? Great question from Maggie. She’s gotten an annuity as you put that in the trust. Yes.
So, annuity Maggie. Excuse me. Maggie, one of the things it depends number one on what type of annuity you have. I mean, there are literally five, six, just different types. There’s over 2000 Different annuities to choose from in the state of Texas. This is another reason that when you’re looking at an annuity and when even if you purchase an annuity, and if you own one, it’s always good to get a second opinion. If you can ask yourself the question. I have no idea why I bought this annuity. Okay, because most folks will say and I’ll ask them, Why did you buy it? And folks who say I don’t know, the advisor I was working with at the time said it would be good too good to have and it would keep my money safe. And basically, that’s not a good enough reason to care, because there are other vehicles.
There’s another way. Thanks, Ed and have your money safe? Yeah. So
I actually had a couple of questions along the same lines as yours, Maggie. And they were concerned what is a grantor retained annuity trust. So, with your annuity, it may be eligible to have a 1035. I don’t know whether it can be retitled as a grant. I do not know until you come in and we take a look at it. But we like to build these Okay, from the bottom up as the way we like to build it. So, the reason for it, if you have an estate over $10 million, and you need to you want to look at transferring appreciable assets to beneficiaries without including it in your estate without having an effect your estate tax. This would be one of the reasons we would use a grantor retained the grantor retains it and it’s an annuity trust. So that’s what it stands for. Look at grantor retained annuity trust. It’s a trust, but it’s funded by an annuity. Okay, so uh, one of the things is we want to reduce the state tax consequences. The other thing is asset freeze, we want to freeze the value of the asset for tax purposes. Most of these annuities especially the good ones will normally they should be averaging anywhere from three to seven 8% a year. That’s about the average about the norm. Some of them the lower participation I’ve seen some annuities only return one or 2% too much of a price to pay for safety but in in as we use it for estate tax planning purposes, what we want to do is we want to freeze the value of the assets for the tax purposes until time of transfer. You’re going to pass it on now many folks will have given an example let’s assume my bride is not as good with money as she would like to be okay that by the way she’s great with money don’t get me wrong, okay. Oh honey, honey, don’t do that when I come home. Okay. Thank the fact that matter is what we want to do is we kind of want to protect our spouses and our siblings against other folks when we’re not there. Okay, so you can set up this grantor retained annuity trust, I can receive income after I’m passed away, okay, I predeceased my wife. She can collect income from it. It still remains in the trust. We don’t own it; the trust owns it. After she passes away. Our child can receive income from it. Okay, so the idea is to consider is to receive continual increasing income that at least keeps pace with inflation but keeps it out of the estate tax for estate tax purposes.
Because we’ve given the annuity and the remainder of it will go to the heirs. So essentially what you’re saying, it is granted you are no longer in possession of it.
Whatever, when, when our estate, and account, jewelry, everything when our estate is over the maximum that’s exempt from estate taxes, we’re going into a 50% tax rent realm. Okay, so basically any dollar, any dollar over whatever the exemption is, you’re basically given the government, the federal government, okay, and estate tax of 50%.
Let’s say we’re, we’re in between the bubble, because you’re saying that the estate threshold is around 13. I think it’s 13.6 or 13.9. Let’s say it’s over 13. Let’s say it slides back down to 5 million. And let’s say you think you’ve gotten a state somewhere between seven and eight. Is it? So, is it worth doing right? Now? If we’re in that bubble? Or somewhere in between? Let’s say hey, let’s put it in a trust, just in case.
Maybe, maybe not. Okay, maybe not. Okay. This is something that we come up with, we’d have the- we’ve had the client come in, and let’s have a consultation and see, what are their goals? What do they want to achieve? What is the purpose of it? What other assets do they have? We have to really, it’s like a big puzzle. And we have to put all the pieces together so we can actually see the clear picture.
Phil, I know that you talked about I know you’re about to say something, but just real quick for our viewers out there. Because you’ve been doing this for a long time. You said 1035? I’m in the world of understanding it. Can you please explain? Because somebody might have an annuity? What is the 1035 exchange?
So, the 1035 exchange is, let’s assume for a moment, you’ve had your annuity for five years, six, seven, or even longer, some of these folks have had them forever. A you don’t really know what is there for, or maybe it doesn’t provide you enough income, or maybe it doesn’t provide you enough return.
Or maybe there’s better rates, because I mean, they’ve changed over the last couple of years to
1035 exchange allows you to transfer the funds from an existing annuity into another annuity. without having any negative tax consequences. Your current annuity may have built up 40, 50, 100 thousand in it, when we transfer it, instead of taking possession of it. It transfers the taxable effect to the new- into the new product.
So, kind of in the same world as your 401K’s as long as you move it from one tax protected account to another as long as you (indistinct) properly.
Great analogy. Right, great analogy.
So, you can say hey, you know, I’ve had this annuity, but I’ve actually heard of better things out there. You can exchange it with no cost note no tax consequence.
That’s the correct, that’s correct, because you’re really transferring the whole basis plus the earned interest or accrued interest right over. Thank you, because I wanted to enter and the reason folks are looking at this is because of these high interest rates, we’re experienced just spirits. And if you bought an annuity 3, 4, 5, 6, 7 years ago, chances are because interest rates were so low, you’re not seeing much of a return. And even though the market is doing extremely well, now, and that’s just by the way, these things are designed now because interest rates are high, the insurance companies can offer a much higher participation or a better return opportunity for a better return. Even our fixed annuities. I mean, we have fixed annuities right now that are paying 7.75%. You know, for a three-year, four-year period, just kind of like a-
And there’s nothing wrong with the representative who wanted to give you that annuity three years ago or even two years ago. It’s just the economics of interest rates change.
It was the best that was that- available at that time. Right. Right. Exactly.
You haven’t done an annuity review, what should they do?
Well, that should give us a call and come in and at least have our back because we have our own back office, Magellan financial wonderful company. I’ve worked with him for over 15 years. They have the expertise, and they can literally check your annuity or do what I call a benefit Comparison, where we can check your current benefits and features and expenses if you have any in there and compare it to all of the other products that are out there that are that are around today that are occurring today. Look at what you really need this for or think you need it for and then choose what’s best for you.
Very short message break. In fact, we have a dedicated message here about taxes right now and how Phil and his team can help you. But I’ll let you know while we’re sitting right here you can call the phone number on the bottom of the screen. We’ll do your portfolio investment and Tax Review. no cost to you for the first five callers. 888-818-6557 or you can use the QR code down on the bottom of the screen open up your phone to the camera function went into this black and white box and click on it. It’ll take you over where you can schedule your own appointment right away. Well, we feel Capriotti senior how do we get tax fish in a retirement? Right after this?
My personal feeling is that no one who has worked in this country and paid taxes for 50 years, or 55 years should ever have to pay taxes in retirement if you put a plan together, that is tax efficient, so that when you retire, receiving money from Social Security should be tax free. receiving money from your pension should be tax free receiving money for maybe life insurance policies are tax free. If you put together the right combination, what you can find as you can structure a tax-free retirement plan for just about anyone to accomplish any retirement income goal, I now currently have clients that one $120,000 A year 10,000 a month. And I have clients that we’ve worked with the last 10 years that pay zero taxes on that income.
Welcome back to retire smart Austin with Phil Capriotti, senior I’m your host, Mike Spangle. We’ve been bringing up a couple of things that we’ve done over the last month or so we’ve done a couple of times over the years and once every now and then on the radio show eyelets in grasp but really what we’re talking about here is estate planning, trusts tax efficiency, can you give me some of the benefits?
Well, basically, that’s exactly what we want to do, we want to prepare the estate, to be able to handle the potential estate taxes that are coming down the road, we want to make sure that we’re providing the client, we want to make sure that we’re providing the client the liquidity so that we don’t have to worry about a forced sale to pay the estate taxes on any value of the estate state above whatever the exempt amount is. So, I’m gonna give you five reasons why folks like and enjoy five benefits of the grantor retained annuity trust. Okay, now remember, it’s an annuity, but it’s also a trust. And number one, asset appreciation, here’s the scenario, individuals with assets that expect to appreciate significantly, okay, they want to shield them against estate taxes, against excess estate taxes. So, the grant allows transfer of appreciable assets with reduced gift tax consequences. So that’s the number one reason why we use this type of trust. Number two, with for estate tax mitigation. So, here’s how that works. There’s the scenario, individuals with a potential estate tax liability. And we’re talking about folks that own land. I mean, we’re not just talking about business folks, we’re talking about folks that have assets in excess of five $10 million, and expect those assets to continue to appreciate as we go into the future, individuals with potential estate tax liability, what is the grant do, it helps reduce your federal estate tax by freezing the value of the assets for tax purposes, when I put it in the grant, it freezes the assets even though it’s appreciating, and again, more specific answers, call our 888818 number, come on in and we’ll sit down, we’ll talk about it, I’ll even what we’ll do is we’ll even normally, after my first interview, if we need to get one of our attorneys to help in there to get a more further clarification, I’d be happy to do it. The other thing is wealth transfer planning. Many folks think that you know they want to transfer the wealth, I’ve had folks come in, you know, Bill comes in, you know, I have more money than I know what to do with we can only take so many vacations, I can only spend so much money. Okay, I want to start giving it to my kids to my grandkids, you know, but then they fear that the kids or maybe the grandkids, not so much the children hopefully are going to be spendthrift and spend it all. So, one of the things that they may want to do is set up one of these grants.
Okay, you got a radio program generational, as you’re saying, or not just the wealth transfer, that this can actually stay in the Trust for quite a long time or short time.
So that’s the other thing. It has a term limit, you set the term limit, gotcha. Okay, I want this to be I want this grant to go for 15 years, 20 years, 30 years, okay, unless they start putting restrictions or limits on. I want it to be a short term. I want it to be five years. So, this is all part of the planning and his way say, give us a call. The biggest thing is for income. I have folks that have talked to me in our office and say, Phil, I had no idea what’s going on in our in our country anymore. Some folks on this side say social security is going broke and this party wants to end it. Some folks on the other side say it’s political suicide that’ll never happen. My concern is what happens if Medicare not Medicare, Social Security goes bankrupt and unlikely specifically, what do you mean? What happens if they can’t send checks out anymore?
So, I’m talking about a reduction, you’re talking about zero?
Well, I’m just saying I’ve had clients ask me, do I think that’s going to happen? No, I don’t think that’s going to happen. Do we want to plan for alternative income? If God forbid, they reduced NFS not made to go away? I think they’re just going to tax it more. And yes, so a GRAT, a guarantor retained annuity trust can accomplish that. Here’s the key, when we set it up, I may want to set up this for income for my wife and my children. And then I may even when he gets certain grandchildren or other beneficiaries in there, I want to set the term up, I want to set the amount to fund it up. Why because I want to get this as the desired income annual income. Also, I want to include an inflation protection clause in there to where your income increases by three, four or 5% a year. So, there are many uses for annuities. Okay, if you have an existing one, let’s take a look at it. For any of you who would actually own a GRAT, call us up I’d like to see the way your financial advisor set your GRAT up.
Or just owning an annuity period to see if this is a tool. What I really liked you talking about is the generational wealth, transferring of the wealth, why lose 50% of this after you’ve spent a lifetime saving it, and then your kids having to start over and the grandkids having to start over again?
Well, here’s what some folks are, they want to get out of the estate. And the other thing is they want to make sure that the kids or grandkids have a steady income, they don’t want to give them a lump sum of cash, that they can go and blow or maybe get married and have, you know, when you get married, you have children and then all of a sudden money seems to disappear. What they want to do is protect their child and or grandchild and or spouses’ income from unintended beneficiaries. So instead of giving them a lump sum, they want to give them an annuity payment. And this is a way to ensure that their estate will be stretched and provides provide wealth through generational-
Phil, an amazing program. We talked a lot about estate planning, we only have about 30 seconds or so though. It isn’t just about the estate planning here at the firm. It’s also about the investment management, taxes, obviously estate planning, Social Security, everything else that goes into it, the complimentary review.
Yeah, folks, I’m a registered investment advisory firm. Okay, so we have many arms been our primary arm is our tax arm and also our wealth management. Give us a call dial 888-818-6557 Come in. Let’s sit down for a complimentary consultation. We’ll do a portfolio review and make sure your retirement income plan is set up and structured tax efficiently.
We have two more spots available call the phone number down at the bottom of the screen so you can come in for your own complimentary investment and Tax Review. Thank you for watching. We’ll be back next week.
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