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What is Reverse Estate Planning?
NewsApril 18, 2022
Most Americans follow the “classic” method of estate planning, that goes from older generations to their younger ones. However, that perspective doesn’t take into consideration some opportunities to increase family after-tax wealth.
Effective estate management enables you to manage your affairs during your lifetime and control the distribution of your wealth after death. An effective estate strategy can spell out your healthcare wishes and ensure that they’re carried out – even if you are unable to communicate. It can even designate someone to manage your financial affairs should you be unable to do so.
It usually involves creating a living trust for the purpose of avoiding conservatorship in the event of incapacity and avoiding probate upon death. There is no question that being able to avoid the cost, expense, frustration, and other hassles with conservatorship and probate is worth the legal fee in creating such an important document.
Sadly, many Americans have not seen additional benefits of creating a living trust beyond avoiding conservatorship and probate. However, there is much more than meets the eye. The idea behind Reverse Estate Planning is that adult children can use an array of standard tax and estate planning strategies to transfer assets to their parents in a tax-advantage way.
Here’s what you need to know about Reverse Estate planning, and if it might be for you.
Reverse Estate Planning 101
When most individuals consider Estate Planning, they look “downstream” to future generations. They think about how to structure the Estate Plan so as to provide for children, grandchildren, and other younger beneficiaries.
The perspective has always been, “How can we benefit future generations?” And while this is a key aspect of any Estate Plan, there is not enough focus on the reverse, also known as “Upstream Estate Planning”. You should also focus upon how gifts and inheritances you expect to receive should be structured in order to benefit you.
The idea is the adult children can use an array of standard tax and estate planning strategies to transfer assets to their parents in tax-advantaged ways. The parents then use their lifetime exemptions to pass that wealth to their younger generations through either their estates or lifetime gifts. They might even benefit their adult children at little or no tax cost by passing the money to irrevocable trusts the adult children can’t control.
It’s also a good way for family members to make loans. For example, the adult children can take out low-interest loans for their parents. The parents use the loan incomes to buy assets that are expected to grow. At some point, they repay the loans and let the appreciation pass through their estates tax-free to the younger generations, either directly or through trusts. Or the parents can make lifetime gifts to the grandchildren or the trusts, using part of their lifetime exemptions.
Is Reverse Estate Planning for You?
As mentioned, traditional Estate Planning usually involves creating a Living Trust for the purpose of avoiding conservatorship in the event of incapacity and avoiding probate upon death. There is no question that for the vast majority of Americans, being able to avoid the cost, expense, frustration, and other hassles with conservatorship and probate is worth the legal fee in creating a Living Trust.
Nowadays however, most of the widely-used strategies for transferring wealth to younger generations also can be used to transfer wealth to the older generation.
Some adult children who have more assets than parents and can help take care of the older generation. In these cases, Reverse Estate Planning can play a valuable role. Some families would also benefit by using Reverse Estate Planning to pass assets now to the older generation so their excess exemptions can be used to transfer assets tax free for the benefit of their grandchildren or later generations.
Be aware, the lifetime estate and gift tax exemptions might not remain at their current levels much longer. The 2017 tax law is scheduled to expire after 2025, which would cut the exemptions in half. So, if Reverse planning seems like a good idea for your loved ones, now is the time to take advantage of it.
Final Thoughts
The key is to be aware of the concept of “Reverse” or “Upstream” Estate Planning and if it’s for you, you should ask your benefactors if they’d be willing to sign a Heritage Trust and make a modification to their Estate Plan.
There’s no better time to plan for the future than right now. At Agemy Financial Strategies, our first priority is helping you take care of yourself and your family. We want to learn more about your personal situation, identify your dreams and goals, and provide you with the highest level of service.
Whether you think Reverse Estate Planning is for you or you’d like to explore a more traditional Estate Planning route, reach out to our Fiduciary advisors here to instantly book the day and time you’d like to connect with us for your complimentary 30 minute consultation. Our financial advisors in Guildford, CT and Denver, CO are looking forward to speaking with you.
Holistic Financial Tips for Earth Day
NewsApril 14, 2022
First held on April 22nd 1970, we appreciate the awareness that Earth Day has brought to protecting our environment and the urgency that it’s instilled in all of us. As we strive to better our world this Earth Day, there are some takeaways that we can apply to our personal finances.
Earth Day comes around only once a year but reducing, reusing, and recycling can become an everyday habit. Not just for the environment, but financially as well. This year you can take action to save money in a sustainable way.
April 22 is Earth Day, a yearly celebration of the beauty that Mother Earth gifts her residents every year. With the holiday often comes a reminder that we need to be doing more to preserve our land, water and precious resources. In fact, Americans create 4.5 pounds of waste every single day—1,643 pounds a year—and three times more than the global citizen’s average.
Here are a few things you can start working on to reduce your carbon footprint financially.
Go Paperless – Sign up for eStatements
Tired of having your mailbox full of unwanted statements that end up in the trash? There’s an easy fix for this! Most financial institutions are taking steps to reduce their environmental impact by having their customers enroll in eStatements. It’s a win-win for both ends.
You may be incurring a small monthly fee — which some banks charge for paper statements — that can be eliminated by going paperless. Some financial institutions may provide a monetary perk for those who enroll in eStatements. Switching to online statements is significantly easier because they are readily accessible through your online account. Making for a simpler and more cost-effective solution.
Minimize Your Spending to Help Reduce Waste
Cutting back on unnecessary purchases will both help you put more money into savings and reduce waste from store packaging. According to the recent report by the Environmental Protection Agency (EPA), the containers and packaging category had the most plastic tonnage at over 14.5 million tons in 2018.
Here are a couple things you can do to minimize unnecessary spending and reduce waste:
Adjust Your Commute
Most people are used to working from home, especially after the coronavirus pandemic shut down offices and workspaces. If your work allows you to, see if you can continue working at home for part of the week. Some workplaces have adopted a hybrid work model where you come into the office two or three days out of the week and work from home the days you’re not in the office.
Better yet, see if you can limit your business travel by opting into more virtual meetings and conferences. That might free up even more cash, with the average American spending $1,186 on gasoline in 2019, according to the U.S. Energy Information Administration. (Let’s not begin to talk what that number is today with inflated gas prices!)
Look out for tax credits that can reward you for sustainable decisions
Saving money on energy costs and helping the environment are a big incentive you can take advantage of. You might be able to claim tax credits and other tax-advantaged opportunities at both the state and federal level by “green-ifying” your home.
Those tax credits range from the well-known to the obscure. If you own property, consider participating in one of the U.S. Department of Agriculture’s various environmental assistance programs, such as the Conservation Reserve Program (CRP) that pays a yearly rental payment in exchange for farmers removing environmentally sensitive land from agricultural production. There might be more options exclusive to your area.
Work with a tax advisor and Fiduciary financial planner to help you track down all that could be out there for you.
How Agemy Financial Strategies Can Help
Who knew Earth Day could provide so much inspiration for improving upon your personal finances? If you’re looking for ways to save holistically for Earth Day and beyond, look no further. Working with the advisors at Agemy Financial Strategies can help you get ready for the future and future generations. Because making just a couple adjustments to your financial lifestyle can be greatly beneficial in the long run.
Click here to instantly book the day and time you’d like to connect with us for your complimentary 30 minute consultation. Our financial advisors in Guildford, CT and Denver, CO are looking forward to speaking with you.
Happy Earth Day to you and yours. Here’s to a happy, healthy and wealthy future ahead.
TAX DAY: LAST MINUTE CHECKLIST FOR MONDAY’S DEADLINE
NewsApril 13, 2022
If you’re reading this, chances are you’re running a bit late with your tax return this year. No worries, and no need to panic! Agemy Financial Strategies’ Fiduciary advisors are here to help you sort everything out just in time to make Monday’s deadline.
Tax Day is Monday, April 18th, 2022. If you’re unsure about which items you need for a last-minute tax appointment, you’ve stumbled across the right post, we’ll provide you with an up to date tax checklist that will make your appointment run smoothly.
Most taxpayers will be required to file their federal income tax return by April 18. However, there are some exceptions to this deadline and it’s certainly not the only date to mark on your financial calendar this year. Individuals who are self-employed, who file an extension or who are at an age when minimum distributions are required, for example, need to be aware of other important tax deadlines.
Here are the 2022 tax day tips you need to know.
Request a transcript from the IRS
Individuals can actually request a transcript from the IRS of your account history from all of 2021. It includes everything you need regarding wage and income information throughout the year. So if you misplaced any important documents such as a W-2 or a 1099 form, this is where you can rely on to find that information. For this all you need is your social security number, and you can view this information immediately online or have it mailed to you.
Re-visit your return from last year
Unless you’ve had a drastic life change over the last year such as marriage, divorce or children, most likely your tax return from the year prior will be an excellent place to start. Whether you’re employed through a company or if you’re self-employed, or even if you went through a bout of unemployment, having last year’s return handy may help to recall certain memories of deductions you typically make, any missing income, and/or expenses related to job searching and looking for new clients. This also will save you the hassle of recalculating the square footage of your home office cubicle.
Look for any stray documents and receipts
Let’s be honest with ourselves here, if you’re just now starting your tax return, that probably means you aren’t the person who also has their paperwork filed away neatly or scanned into a document safekeeping app on your iPad. Time to drag out the box of receipts, and look through any miscellaneous income statements and payments that may need to be included in your tax return. This also includes downloading your bank and credit card statements and do a scan of emails for any non-profits you may have donated to over the past year.
Calculate in any random pay days
Did you win big in Vegas this year, receive a big bonus, or stocks took off in 2021? If you can recall it, the IRS already knows about it as well. How you file these types of incomes will completely vary depending on how you came up with the money. Contact us at Agemy Financial Strategies if you have questions on how this should be filed.
Verify. Verify. Verify again.
If there’s anything that should be double and triple checked, that would be your tax return. As they say, the devil is in the details. Returns can be flagged for even the smallest of mistakes, perhaps a stray zero or a missing income figure.
An important note that is commonly missed: If you owe a penalty of some sort and you provide your routing number for direct withdrawal, or you list that the account is savings rather than a checking account, the IRS won’t be able to process your payment. That means even if your bank account is entered correctly, you’ll receive a penalty for a failure to pay.
Don’t forget to send it in!
Make sure to mail or e-file this year by Monday, April 18th, 2022. This seems pretty obvious and straightforward right? You would be surprised at how often people complete their taxes, only to set them aside and forget about them, and never get back to it. Maybe you’re thinking that you and your family don’t owe anything and weren’t expecting any refund. The potential consequence of this? Thousands in failure-to-file penalties. Make a reminder to yourself on your phone, in your calendar, and anywhere you need to make sure you have all of your ducks in a row by the due date.
More from Agemy Financial Strategies
Tax season is almost coming to a close. We just reviewed your tax checklist of the most common things to remember. When in doubt, it’s best to call your financial advisor to ensure nothing is forgotten.
Still a bit lost and need help with your 2021 taxes? Don’t panic, Agemy Financial Strategies is here to help you.Contact us today, and we’ll help you with a personalized plan to ensure you properly file and check all the confusing tax boxes. We’ll also evaluate your current tax strategy for 2022 to make sure you’re not paying more tax that you need to.
Women and Financial Literacy: Facts You Should Know
NewsMarch 23, 2022
As National Women’s History Month comes to a close, we take a look at why financial planning for women is more important today than ever. Whether you are a working woman, a retired woman, a stay-at-home mom or a mom with a son or daughter in college, you have to think about your retirement now. This is your money and your financial future. It’s time to take charge and start taking some steps that’ll help you move closer to your retirement dreams.
Let’s give a shout-out to all the women out there first and foremost—because there’s no doubt that women have been making serious strides lately.
Managing money and financial planning can be a tough task if you don’t have the proper information at hand. Women especially bear the brunt of this while caring for a family and having a retirement plan in place. However, the barrier is closing between segregated duties, and more men and women are sharing financial tasks as a result of women becoming more confident about managing money, according to an annual survey on women and investing by OppenheimerFunds of New York.
Women Investors Breaking Financial Barriers
According to the Fidelity 2022 Money Moves Study, women currently ages 18-35 years old are starting to invest nearly a decade earlier than women ages 36 and older. On average, this younger generation of women started investing in a brokerage account at age 21, compared with age 30 for older women who started to invest during the same age frame.
Beyond opening a brokerage account by age 21, the study shows that younger women also opened a retirement account even earlier, at age 20, compared with their older peers who opened one at age 34. Not surprisingly, the pandemic has caused many people to reevaluate their finances and in the case for some younger women, this was the time to start investing with 50% reporting they have started to invest in the past six months, or they plan to do so in the next six months.
Those are some great reasons to celebrate. But there’s work to be done… A recent study found that only 12% of women are very confident they’ll be able to retire comfortably. Meanwhile, more than half of women (55%) expect to retire after age 65 or don’t plan on retiring at all.
Taking the initiative to educate yourself about complex financial decisions will help you achieve your financial goals. Here are a couple facts and tips on women and financial planning which can help you better prepare for the future.
Women can Struggle with Financial Literacy
Financial literacy is the most important and fundamental stepping stone to building and maintaining wealth. A lack of financial confidence keeps many women from pursuing education in personal finance. It’s because of this, that women are less likely than men to view themselves as financially savvy. As a result, women are less prone to negotiate salaries and attain financial independence.
Here’s The Facts:
Income Disparity & Gender Wage Gap
Women playing an active role in the workforce is a unique situation. An unfair wage gap and life interruptions have slowed career progress and have forced some women to struggle with basic living expenses.
On the brightside, the pay gap between men and women is narrowing. However, this development is progressing slowly. The pandemic caused income disparity across the board which had many women face financial challenges to their overall well-being and threatened their ability to gain financial independence.
Here’s The Facts:
Retirement Planning Priorities
Women tend to live longer than men. As a result, they must draw out their retirement savings for a longer period of time. Trends show women risk falling into poverty if they don’t have sufficient funds for retirement.
Single women of all types — unmarried, divorced and widowed— from age 44 to 64 are underprepared for retirement. One of the worst outcomes of not prioritizing savings is missing opportunities to leverage time in your favor. Money kept in interest-bearing accounts for years can grow into a substantial asset. Employer-offered accounts include tax advantages and sometimes match plans that double savings.
The wage-earning gap also limits available Social Security benefits — a built-in foundation that some seniors rely on for retirement expenses. As a result of these challenges, fewer resources and a lack of planning, women are more likely to encounter poverty in old age and be forced to rely on government programs for living expenses.
Here’s the Facts:
and 42% who plan to work part time.
Overcoming These Challenges
There are steps you can take as you get ready to start thinking about your retirement future. These include:
Final Thoughts
Planning for retirement should look different for women and men given the different life cycles – and it’s never too late to start your journey to financial planning. You can improve your financial welfare by making a plan for how you will use your income wisely. The power to make positive and healthy spending and saving choices is yours. But a dream without a plan is simply a wish. You need to take the first step in taking control of your finances.
A great way to get started is by reaching out to a trusted Fiduciary Advisor. Your financial advisor should provide the education, time frame, and comfortable setting appropriate for your needs. And, if your advisor does not listen or pay attention to what you want for your financial future, find someone else to work with. At Agemy Financial Strategies, we have all of the tools you need to make the leap towards a healthy financial future. Our firm exists for the purpose of helping people achieve their personal and financial goals. Our philosophy is to deliver quality financial programs and teach principles for successful living. By working with us, you can envision your roadmap to success.
Click here to instantly book the day and time you’d like to connect with us for your complimentary 30 minute consultation. Our financial advisors in Guildford, CT and Denver, CO are looking forward to speaking with you.
Happy National Women’s History Month from the entire team at Agemy Financial Strategies!
Digital Currency and the Future of Retirement Planning
NewsMarch 16, 2022
Cryptocurrency is everywhere. From being used for charitable donations and even on our TV screens during the Superbowl commercials. But when it comes to the future of retirement planning, how do these new world assets come into play?
With the popularity of cryptocurrency on the rise, everyone is eager to invest in it or invest it for retirement. Because crypto is so new, there are still rules and stipulations being crafted to be able to save it for retirement.
The IRS has rules in place stating you cannot contribute cryptocurrency directly into your Roth IRA, but there are currently no rules about adding crypto to your Roth IRA via purchase.
Here’s a look at digital currency and how planning for retirement could change.
Crypto & Roth IRA
Bitcoin IRA’s are retirement accounts designed to let you invest in cryptocurrencies. It’s important to be aware of the risk you are taking if you’re considering investing in crypto. Because crypto is so volatile, it would be considered unsuitable for somebody approaching retirement who cannot afford to ride out a downturn.
In 2014, the IRS considered Bitcoin and other cryptocurrencies in retirement accounts as property, so that coins are taxed in the same fashion as stocks and bonds. Thus, cryptocurrency held in a Roth IRA has an income tax basis for purposes of measuring gain or loss upon occurrence of a taxable sale or exchange.
Even though you can’t add cryptocurrency directly to your Roth IRA because of Section 408(a)(1). This section requires that contributions to IRAs need to be made in cash. You can however, add cryptocurrency to a Roth IRA by purchase, because cryptocurrency is considered a property.
Bitcoin IRAs
For those who are committed to include Bitcoin in their IRAs, self-directed IRAs (SDIRAs) allow for an alternative asset like cryptocurrencies. Recently, there have been companies designed to help investors include Bitcoin in their IRAs. Some of these companies include BitIRA, Equity Trust, and Bitcoin IRA.
One of the positives of adding crypto to your portfolio is that it can add further diversification to Roth IRAs, and others that cryptocurrencies which will continue to increase in popularity and price into the long-term future. However, one of the negatives is that crypto is characterized by being volatile, and this represents a huge risk for those investors approaching retirement who cannot wait out a downturn.
You should also be aware that fees for crypto IRAs are typically much higher than for “traditional” IRAs. There are also recurring custody and maintenance fees charged by providers of such services, and fees associated with individual cryptocurrency trades. A typical provider may charge 3.5% per transaction for each purchase and 1% or a flat fee for each sale. Cumulatively, those fees could negate the tax advantages offered by IRA accounts
Crypto & Charitable Donations
For charitably minded individuals, cryptocurrency investments held for more than a year could provide a unique opportunity to leverage highly appreciated assets to achieve maximum impact with charitable giving. Bitcoin and other cryptocurrencies can be donated to charity, just like stocks and other property. Donating cryptocurrency can, however, be a little more complicated.
Some benefits of using Crypto for charitable donations include avoiding Capital Gains taxes. Taxpayers can avoid having to pay capital gains taxes yet still claim the full donation as a charitable deduction if they donate the Bitcoin directly to the charity. If a taxpayer sells Bitcoin and donates the after-tax cash to a charity, the capital gains will be subject to short-term or long-term capital gains taxes, depending on how long they held the Bitcoin before selling it.
What’s more, if you itemize deductions on your tax return instead of taking the standard deduction, you may claim a fair market value charitable deduction for the tax year in which the gift is made and may choose to pass on that savings in the form of more giving. Donor-advised funds, which are 501(c)(3) public charities, can be a tax-efficient solution for accepting contributions of cryptocurrency, as the funds typically have the resources and expertise for evaluating, receiving, processing, and liquidating non-cash assets.
To substantiate your charitable income tax deduction, you are required to complete Form 8283 and obtain a qualified appraisal from a qualified appraiser for contributions of cryptocurrency valued at more than $5,000.
Final Thoughts
Investing in crypto is a tricky topic to say the least. Since there’s no one size fits all plan for everyone, it’s important to look at the risk and see if it’s something you believe you can take on. While holding crypto in your IRA can increase diversification, the extreme volatility of crypto makes it a poor choice for a retirement investment.
The good thing is that there are alternatives: crypto IRAs, which allow you to invest in crypto for your retirement accounts. Whatever your retirement strategy, there are risks to identify and manage as you navigate retired life. But one key factor remains the same: the more you prepare, the less nasty surprises you’ll face along the way. Plus using crypto for charitable donations could save you on Capital Gainss taxes and also may increase the amount available for charity by up to 20%.
At Agemy Financial Strategies, our first priority is helping you take care of yourself and your family. We want to learn more about your personal situation, identify your dreams and goals, and provide you with the highest level of service.
Click here to instantly book the day and time you’d like to connect with us for your complimentary 30 minute consultation. Our financial advisors in Guildford, CT and Denver, CO are looking forward to speaking with you.
What does Socially Responsible Investing (SRI) Mean?
NewsMarch 16, 2022
The last few years have been ones of stress and uncertainty – but it’s also been a time that’s brought to light issues of social justice, climate change and social responsibility. Here, we look into how more and more investors are opting to align their portfolio with their greater social beliefs and ideals.
Socially responsible investing (SRI), is an investment that is considered socially responsible due to the business company conduct code. Socially responsible investments can be made into individual companies with good social value, or through a socially conscious mutual fund or exchange-traded fund (ETF). And it’s not going away anytime soon. In fact, between 2016 and 2018 alone, assets being placed in socially responsible investments rose 38 percent. Of the $46.6 trillion of assets under management, one in four dollars was in SRI assets.
Becoming a socially responsible investor isn’t difficult — and can be even more lucrative than traditional investing. Here’s a look at SRI and what you should know.
Examples of Socially Responsible Investing
The abbreviation “SRI” has also come to stand for sustainable, responsible and impact investing. Some SRI practices use a framework of environmental, social and governance factors to guide their investing.
There are two inherent goals of socially responsible investing: social impact and financial gain. The two do not necessarily have to go hand in hand. When an investment is risking gambling itself as being socially responsible, it doesn’t mean that it will provide investors with a good return. An investor must still assess the financial outlook of the investment while trying to gauge its social value.
One example of socially responsible investing is community investing. Community investing goes directly toward organizations that have a track record of social responsibility through helping the community, as well as being unable to garner funds from banks and financial institutions.
The funds allow these organizations to provide services to their communities, such as affordable housing and loans. The end goal is to improve the quality of the community by reducing its dependency on government assistance such as welfare, which in turn has a positive impact on the community’s economy.
Understanding Socially Responsible Investing
Investors interested in SRI don’t select investments by the typical performance metrics or expenses, they make investments on whether a company’s revenue sources and business practices align with their values. Everyone has different values, how investors define SRI will vary from person to person. There’s no one size fits all in this scenario.
If you’re passionate about the environment, your portfolio will likely have investments in green energy sources such as wind and solar companies. If you care about supporting women, people of color and other marginalized groups, you may have some mutual funds that invest in women-run companies or hold stock in Black-owned businesses. Socially responsible investing is as much about the investments you don’t choose as the ones you do.
SRI vs ESG vs Impact Investments
In the realm of SRI, you’ve likely heard other terms like ESG and impact investments. So, what’s the difference? Here’s a quick breakdown:
How to Build a Socially Responsible Investment Portfolio
Creating an ethical portfolio doesn’t have to be difficult or intimidating. As long as you know the values that are important to you, you can start using your investment dollars for good. Here’s a couple tips on how to build an SRI portfolio:
Outline What’s Important to You
It may be helpful to specifically write down what you’re looking for in an SRI or ESG investment. Would you be comfortable owning stock in a company that scores lower in the environmental category if it had a majority-female board of directors? Knowing what industries you are and aren’t OK with supporting will make it easier to include or exclude certain investments.
How Much Help Do You Want?
There are a couple of avenues you can choose when it comes to creating an ethical portfolio. You can build it yourself, picking and choosing specific investments and monitoring them over time, or you can get some help. If you want maximum assurance that the companies you’re investing in support your personal definition of SRI, you may want to create your own SRI portfolio.
A majority of people prefer to make socially responsible investments when possible — but it takes some work to figure out how committed a company really is to ethical practices. This is where robo-advisors come in. Robo-advisors use algorithms to build and maintain an investment portfolio based on your risk tolerance and goals.
The upside of robo-advisors is they’re inexpensive, and several offer SRI portfolios that will do all the work of finding ethical investments for you. The downside is that they don’t let you add in specific investments you’re interested in.
Research with Care
An easy way to judge how socially responsible a company is is to review ratings from independent research firms. Two types of investments you may consider for a sustainable portfolio are stocks and funds.
Final Thoughts
For many investors, socially responsible investing is a powerful way to align their investment portfolios with their personal philosophies.
When you’re getting started with investing, it’s important to research the options available to you. Now you know that Socially Responsible Investing (SRI) involves investing in companies that promote ethical and socially conscious themes including environmental sustainability, social justice, and corporate ethics, and fight against gender and sexual discrimination – how will you use this information?
If you’re interested in getting involved with SRI and looking to add it to your portfolio, Agemy Financial Strategies can be of assistance to you.
Our team of Fiduciary financial advisors only have your best interests at heart and are here to help you understand the ins and outs of investing for retirement income.
For more information on our financial advisory services, contact us here today.