Episode 13 | Estate Planning & Helping the Next Generation Grow Their Wealth
0:00:02.1 Speaker 1: Welcome to Your Wealth Journey podcast, powered by Bradford Financial Center, where we'll always share how small changes equal big results, because your wealth journey is our focus.
0:00:12.4 Shallon Weis: Hello everyone and welcome to Your Wealth Journey, the podcast brought to you by Bradford Financial Center. I'm Shallon Weis and I'm joined by my co-host and fellow financial advisor, Jim Tausz. And today we have an important and often overlooked topic to discuss, and that's estate planning and how to help the next generation grow their wealth.
0:00:33.5 Jim Tausz: Absolutely Shallon, estate planning is not just about preserving your wealth, it's about ensuring that the next generation is set up for success. Passing on wealth goes far beyond monetary assets. It's about creating a lasting impact and wellbeing for future generations of your family. One key aspect of this financial security, of course, by providing the solid financial foundation, you empower your relatives and also generations that follow to have financial security to grow, and who doesn't wanna grow as they grow older? It might be helping them pursue education, career aspirations, and overall personal development without the burden of financial stress, whether it's passing on family assets, planning for business succession, or utilizing trust, there's a lot to consider in this complex but very critical area in one's life.
0:01:30.8 SW: So that's a great tease to what's ahead in this podcast, Jim. And as we guide our listeners through the ins and outs of estate planning, we'll be discussing various aspects that go beyond your own wealth. So stick around for the last five minutes where our Five in Five segment keeps on wrapping this topic to answer five tax saving ways to transfer wealth. So let's jump right in today. To start, Jim, let's talk about the importance of family succession planning within estate planning. So what are some key considerations for our listeners?
0:02:05.9 JT: Well, family succession planning is essential to ensure a very smooth wealth responsibilities within the family. It involves identifying potential successors, addressing any conflicts that might arise, and creating a plan that supports family long-term goals. I mean all the family. One critical element we encourage our clients to consider, we initiate it, is communication between everyone. Communicating openly with family members about what you have planned or even some of your philosophic incentives, in other words, giving incentives, it needs to be shared. Sharing your intentions can also prevent misunderstandings with everyone and also foster unity within the family to attain those goals. I mean, it's not just about passing financial assets, but it's also passing on values and traditions. For many, it's about passing on a family legacy.
0:03:01.1 SW: So passing on wealth is a powerful way to shape the future and leave a lasting positive influence on generations to come. And for those who have businesses as part of their estate, what steps can they take to plan for a successful business succession?
0:03:15.9 JT: Well, business succession planning is definitely a critical aspect of estate planning for business owners. It involves identifying and preparing the next generation of leadership, considering the most tax efficient transfer methods, which obviously is one of the biggest expenses we all have. And ensuring the continuality of that business that you've worked so hard to have this often requires careful coordination with legal and financial professionals like me.
0:03:41.5 SW: Now let's shift our focus to trust, Jim. What role do Trust play in estate planning and how can they benefit the next generation?
0:03:54.9 JT: Well, trusts are very much underused and should be used by just about everybody that has any kind of estate that they want to have work out right. Trusts are powerful tools in the estate planning to say the least. They allow for efficient transfer of assets, provide control over distribution of wealth, and it can offer protection from creditors and other potential threats as well. Establishing trust can be especially beneficial when planning for minor children or individuals who may not have the financial expertise to manage a large inheritance. Bradford Financial Center is experienced in helping business. Actually, take care of these assets and ensuring that all the legal steps are covered so that you can have a peace of mind within the whole family as you begin to wind down your career and pass on the burdens and the baton to the next successor.
0:04:46.9 SW: And what about charitable giving within estate planning? How can individuals incorporate philanthropy into their plans for the next generation?
0:04:55.2 JT: Well, when I hear the word charitable, Shallon, I think that I'm a charity. [laughter] I definitely need it.
0:05:01.3 SW: Would you like a donation?
0:05:02.5 JT: I'd like to have a big one, [laughter] especially from you 'cause I know you have it. Charitable giving is a wonderful way to leave lasting legacy as we hit on earlier. But it's good to have these charitable requests well documented. So there aren't any problems down the road. This can happen within a will and through an established charitable trust. And even by creating a private foundation, you can accomplish a lot of things that you couldn't otherwise. We're honored that we get to work on all kinds of plans out there with all kinds of clients. It's a special thing to see the passion that they have for the arts or the education or making sure the less fortunate population are cared for a long time even after they're gone. This not only benefits these charitable causes individuals care about, but it also provides valuable lessons in giving for the next generation as well.
0:05:57.8 S1: In our last five minutes, we'll bring listeners a roundup of five smart ideas they can apply to their own wealth journeys. So let's get started with this episode's Five in Five.
0:06:11.2 SW: As we approach the last five minutes of our podcast, it's time for our Five in Five segment, and today we're unraveling five tax saving ways to transfer wealth. Jim, take it away.
0:06:23.2 JT: Well, you're looking at the king of unraveling things. Absolutely Shallon, I'm ready to go. And this is a quest that we all need to be on. Question one is, how can giving and gifting be a tax efficient way to transfer wealth?
0:06:37.0 SW: Well, gifting allows individuals to transfer assets to their heirs while taking advantage of an annual gift tax exclusion? So by staying within these limits, you can reduce the size of your taxable estate while providing financial support to your loved ones. Our teams at Bradford can help you make the right moves to reduce your tax liability year over year. It's best to seek a professional about these important tax reducing moves.
0:07:01.2 JT: Well, question two, of course then, would be followed up with what is the significance of a lifetime gift tax exemption anyway, Shallon?
0:07:10.5 SW: Well, obviously the exemption is determined by tax laws and is always subject to change, but the lifetime gift tax exemption, it allows individuals to make larger gifts without incurring gift tax. So it's a powerful tool for those looking to transfer substantial wealth over their lifetime. It is useful in helping to support disabled family members who will require extra care if you're gone or fund an education or contribute to charitable causes without the burden of an immediate tax. Again, a tax and financial professional team, it can really help you understand and strategically use this lifetime gift tax exemption and suggest the right moves so you can maximize the impact of your generosity while also minimizing potential tax liabilities.
0:07:55.5 JT: Great job of answering, Shallon. That was excellent, but we gotta move on now to number three and see if you can do as well. How does the step-up in basis work and why is it essential for estate planning to have step-up basis?
0:08:10.1 SW: Well, the step-up basis adjusts the value of an inherited asset to its current market value at the time of the benefactor's death. It is a tax provision that adjusts the value of inherited assets to their fair market value at the time of the owner's death. So this means that when an individual inherits assets such as stocks or real estate, the cost basis is stepped up to the current market value so it can minimize capital gains taxes for their heirs when they decide to sell those inherited assets. So this adjustment helps beneficiaries minimize tax liabilities by only taxing the appreciation that occurs after the inheritance. So providing a significant financial benefit in estate planning.
0:08:48.3 JT: Well, that brings me then to question four, Shallon. We'll see how sharp you are on this one. What role does the Generation Skipping Transfer GST tax play in estate planning exactly?
0:09:02.6 SW: Well, the GST or Generation Skipping Transfer tax is a federal tax that's designed to prevent wealthy individuals from avoiding estate taxes by transferring assets directly to grandchildren or others who are more than one generation below them. Using this as a tax saving approach, it involves taking advantage of the exemption amount, which allows a certain portion of wealth to be transferred to grandchildren or future generations without incurring the tax. By strategically leveraging this exemption through trust and other estate planning mechanisms, individuals can potentially reduce their overall estate tax burden while still providing for the financial wellbeing of multiple generations.
0:09:42.4 JT: Boy, Shallon, it's like you actually wrote the book, question five now, let's see how you do on this one. How can Qualified Personal Residence Trust be a tax efficient estate planning strategy out there for the folks that are listening today.
0:09:57.9 SW: Well, a QPRT or a Qualified Personal Residence Trust allows individuals to transfer their primary residence or even their vacation home to an irrevocable trust while still retaining the right to live in it for a specified term. So this can result in reduced estate taxes, especially if the property appreciates over time.
0:10:19.7 SW: Well, that concludes another insightful episode of Your Wealth Journey. So, thank you, Jim for your expertise and guidance on estate planning.
0:10:28.5 JT: Well, thank you, Shallon. You certainly have the subject down yourself as well. I really appreciate all you've done today and I think our listeners are very appreciative as well. And thank you listeners for joining us today, of course. If you have any questions or topics that you'd like us to cover in future episodes, please reach out to us at the Bradford Financial Center. We're always ready to give you our thoughts.
0:10:50.9 SW: And remember, your financial journey is our priority and we're here to help you navigate it successfully. And until next time, take care and plan wisely.
0:11:01.9 S1: Thank you for tuning into Your Wealth Journey podcast, powered by Bradford Financial Center. Be sure to tune in to our next episode where we'll continue to explore the smart financial strategies you need to know. Securities are offered through United Planners Financial Services member FINRA, member SIPC. Advisory services are offered through Bradford Financial Center, a registered investment advisor. Insurance services are offered through Bradford Insurance. Tax and Accounting services are offered through Bradford Tax & Accounting Network. Bradford Financial Center, Bradford Insurance, and Bradford Tax & Accounting Network are not affiliated with United Planners. Neither Bradford Financial Center nor United Planners provide tax or legal advice. This podcast is for general information and educational purposes only and is not intended to be specific advice for any individual. Consult your financial professional regarding your personal situation. All investing involves risk and there's no guarantee that any strategy will be successful.
