We have a couple of years before my H has to start taking RMD’s. We need some sort of strategy to maximize these low earnings years as far as ROTH conversions and/or selling stock in the most tax advantaged ways. How do we find a professional to help up with this? Would that be a tax accountant? We are not used to consulting professionals! We did briefly use a fee only financial planner but she did not do tax planning and has since moved away from fee only.
you might try the Bogleheads forum.
Low earnings can mean a lot of different things. For example, keep it low enuf to quality for ACA subsidies? Keep it low for the 0% capital gains bracket? Or, keep it below 24% (current) bcos in retirement, you will jump to 32%. (ignoring any tax changes)
Normally, I’d recommend doing tIRA conversions to Roths, and keep cap gains for later or even your estate for teh stepped up basis.
But that raises a key point: cap gains are lower than income tax rates, but may change as soon as this year. Stepped up basis might go away too. (As John Bogle was fond of saying, nobody knows nothing.)
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I would look at a tax lawyer specializing in asset protection as opposed to an accountant. They will know best how to protect your assets and can do gifting strategies as well to help with a lot of these issues to protect your wealth and estate from taxes.
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A CPA with a Masters in taxation is the skills we utilize. But they should also work with your FA if possible. There are often things to consider which bring together various approaches.
Does anyone have insight with buybacks recently reaching peak levels? As markets recover and edge higher, a company completes a buyback when it purchases its own shares in the stock market - the company may believe their shares are undervalued, or best place to invest their cash is to put it in their own stock.
Any wider implications on what is going on?
Also recently (mid March) equity dividend yields no longer were more attractive than treasuries (cross over of S & P 500 12 month dividend yield compared to US 10 yr treasury yield). There have been a few times with cross over on these two trends in recent years - in 2017 and in 2020.
Be careful out there…
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My Finance prof was fond of saying that companies do buybacks bcos they can’t find anything better to do with the their cash, i.e., internal R&D or acquisitions, and that they use the ‘undervalued shares’ story as an excuse. Plus, its safer than starting a higher dividend amount.
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I agree @srparent15. Asset protection is pretty arcane stuff. Get good help if you want to accomplish it.
@SOSConcern and @bluebayou, I think buybacks are also linked to executive bonuses/options. A properly timed buyback can increase stock prices at the times the CEOs option grants or bonuses are due to be set.
Yes, this is true. This is a specialty that not every attorney is as well versed in as one might think.
@rickle1, I don’t think you had a rant. I’m less concerned about how much my FA makes (though I do want the amount they make from me to be related to the value they are adding) and am more concerned about whether his/her incentives create the possibility of bias, which is @Happytimes2001’s concern. So, my wealth manager gets not only fees per AUM but can be compensated by a) mutual funds or purveyors of annuities and structured notes or b) bonus programs from his firm. As a consequence, from him, I often see otherwise sensible investments layered with high fees. Even the selections of mutual funds in a 529 fund he managed were high-fee funds (albeit in the lower fee classes). Sometimes I make the investments with him, but I tend to put most of my money with the FA who is not biased.
The interesting thing is that the wealth manager no doubt thinks he is doing the best for us.
But, financial incentives typically influence behavior even if the decision-makers aren’t aware of the effect of the incentives. So, my general feeling is that if I have two capable people, I skew the decision toward the one whose incentives are relatively unbiased. The other FA has a much smaller bias: her compensation is fixed but because the fixed rate is related indirectly to AUM, she will have a bias to have me maximize financial assets. As a consequence, she has an incentive for me to maintain a mortgage on real estate and invest the borrowed amount rather than pay off a mortgage. But, she has no incentive to put my into higher fee investments (she actually has a disincentive to have me in higher fee investments as it slows down asset accumulation) or even whether I have my assets with her firm or the wealth manager’s. I’ll take the latter bias over the former.
So, I want to make sure that the professional service providers have an interest in my long-term success and are willing and able to put in the effort. My wealth manager’s bias is typically mis-aligned with my long-term interests – putting me in higher fee investments is not, generally, as good as similar lower-fee investments. In contrast, I think both of my FAs have sufficient incentive to put in the effort.
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My FA gives his investors the incentive fees he gets from investment opportunities (e.g., preferred stock in hotel properties). It builds goodwill with me and other clients. Overall equity fee is 0.9% AUM.
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That works well. He will pick the investment choices that produce the highest return net of fees (and subject to risk constraints etc.) and in particular, has no incentive to put you in higher fee investments.
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Quiet times in this thread, so I’ll start Stock topic… Joint Tenant vs TOD (Transfer on Death)?
In general I understand that JT TEN is like co-owner, TOD like beneficiary (no right to funds while owner is living). Perhaps this savvy group has more comments or links about nuances such as tax implications to survivors etc.
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Both avoid probate. With JT, when one spouse passes away, the other inherits the account. JT is most common for married couples. TOD is good for a single person like a surviving spouse - basically names a beneficiary to the account. You can name your kids or a trust and avoid probate without actually putting the account in a trust. TOD is better than joint ownership with kids. It might be done for convenience but then account could be subject to their creditors, say if they got divorced.
Both JT and TOD are good for smaller accounts. For a very large account, you might want a trust instead.
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ToD/PoD is excellent for simple estates, and the beneficiaries are 18+. Assets pass immediately to beneficiaries upon presentation of a death certificate. ToD/PoD assets are not subject to a Will; they avoid Probate. As of today, they receive stepped-up basis as of date of death.
Note, you can do both: JT with parents and then list kids at ToD/PoD beneficiaries.
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My mom had all her $ in TOD/POD so that when she died, there was no need for any probate, and evenly split to all children. I had one account with her that was joint tenant. That came in very handy. When she died, all the TOD/POD accounts had to go through a process, and some banks were pickier than others, so it still took some time. The joint account, however, was immediately accessible, and allowed me to pay for all her funeral & other expenses without dipping into personal savings.
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When my mother passed away, I was a stealth co-owner of her local credit union accounts. I didn’t realize that since only her name was printed on the checks. It would have come in handy writing check to funeral home (which was not a crazy bill, since no services during Covid). But I am in same credit union, so it was quite easy to “push money” for reimbursement when I showed death cert the next week to make my name primary. They gave me temp checks, which I used for some bills and donations. Supposedly though it would have been legal to sign her old checks with “joint” notations.
On most other accounts Mom had assigned me and/or sister as TOD or co-owner, a wonderfully thoughtful way to plan. She did have some shares stock without any designation, so I had to do a simplified probate which is pretty easy to do in CO - no lawyer was needed, just $200 court fee. That was OK because there were also 2 minor bank accounts that required me to show Letter of Testamentary to close.
Now I am trying to help my 94 year old Dad (divorced from Mom decades ago) with his stock paperwork / online account setup. He is in NY , where probate is supposedly more painful. So we are researching options.
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Mother in law died March 2021 and Father in law died Dec 2020. Most everything was being handled by local brother, and everything seems to be going well on closing it all down. We have a joint memorial Mass and columbarium site/cemetery site final prayers in May. The house deed was taken care of, and was not needed to sell - it is staying in the family and right now a grand-daughter eventually wants to buy when she retires from military service.
My parents had been deceased with last one (mother) passing in 2010 - they had all things legally taken care of, and mom’s funeral arrangements were already worked out/similar to dad’s.
If we decide to stay in our current state, will work out more details on our ‘estate’. I already have cemetery spots - which are next to parents/grandparents in a beautiful spot and was a reasonable price. DH and I both want to be cremated so I actually have an extra ‘spot’ with grave as H and I can be in one spot. If DH and I ‘predecease’ anyone in family needing, will leave it up to DDs on use. Still have to work out getting the same granite headstone and all what I want put on both sides.
So much better to do these things w/o having to decide things ‘at death’ for spouse. If I go before it’s planned, well then I just won’t get what I want on the granite headstone…
I had set some Roth IRAs up for DDs maybe 9 years ago with putting in money that matched what they had earned as teenagers that year when I had some extra funds. DD2 is eventually going to change jobs, so she has a spot to roll over retirement funds – and she knows she will need to pay taxes on non-Roth to Roth but she also understands how good it is to get what retirement funds she can in Roth.
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Yes, upon the death of a co-owner, the surviving owner now owns the account in full, so yes, you could have easily written checks against mom’s account even tho your name was not printed on the checks. (Adding an adult child on a checking account for convenience in event of death is common.)
Suggest you look into ToD/PoD for Dad’s brokerage accounts.
btw: for others reading, some states allow for ToD for a primary home.
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