John, good to see you, as always. Today we're talking about the importance of an estate plan and a tax plan. When we take a look at what makes up your taxable estate, take a look at this visual because it kind of incorporates everything. It’s clear almost everyone needs an estate plan, but too often a lot of people aren't thinking about a tax strategy within their estate plan. So we've heard about the estate tax, but now let's talk about the death tax. How do we make sure that we are leaving as much as possible with our beneficiaries instead of the IRS? Yeah, and you know, that's a great distinguishment you may Erin. The estate tax and the death tax. Yes, the estate tax limitations have been cut in half now. But for the most part, very few people in this country will be subject to the estate tax, however, everyone will be subject to death taxes. So when we look at this graph, we have to understand that your house, your real estate, your investments, we're not talking about retirement investments, we're talking about brokerage investments, they're gonna have a step up in basis or potentially have a step up in basis, which could be a big tax advantage to your beneficiary. Your life insurance, that's a tax-free death benefit to your beneficiary. And then you are probably the most common asset class left and that's the IRA and the 401k, which is loaded with tax-deferred income tax.

It's important to understand that each of these assets has different tax buckets within them.

This is why you know, we need to talk about the importance of advanced tax planning, something we specialize in. Advanced tax planning should include a closer look at each beneficiary's tax bracket. Why is that? Yeah, and this is really where I think estate planning has kind of met its limits with a lot of bites. People think, “Hey, I'm just gonna leave 50% to one beneficiary and 50% to the other” within their trust of the beneficiary documents, and there's no real thought process about what we're doing and potentially leaving the IRS as our biggest beneficiary. And here's what I tell people. If you have two beneficiaries, for this example, and one is the high-income earner making a 37% tax bracket. And the other one is let's just say an average class, average middle-class earner making in the 24% tax bracket, then you're not going to want to leave those IRAs and your assets just straight across 50/50 to them. Because of the IRA, that 401k, those accounts have to be emptied out to 10 years. And when the distributions are taken from those accounts, all you're going to be doing is adding to the income of those earners. So if you have a child that's making $500,000 a year and they're taken out $100,000 a year in these distributions from this IRA, to get the money out within 10 years, now they're making $600,000. So the thought process needs to be “Hey, let's take a step back. And let's perhaps leave a little bit more of a percentage share of the house that gets a step up in basis to the higher income earner, let's leave a little bit higher Ira amount to the lower income earner”. So it nets out after tax to be fair to both of them. And best of all, you're not making the IRS your biggest beneficiary.

That is best of all right, So John I have to ask then, What is your one favorite strategy to make sure that you're not saddling your beneficiaries with a huge tax liability? Oh, my one favorite strategy we talked about time and time again, is the Roth conversion. And here's why– especially if your kids are high-income earners in your lower bracket than them then you're converting at your bracket. And when you leave that money to them, if you leave, Erin if we can pull up that six asset classes there, Let's talk it through again, the house, the investments, the real estate, they may be subject under current law and under specific under certain situations to step up in basis. The taxable event will actually be based on the amount when you die and then any growth happens. Then you have your life insurance, that's a tax-free death benefit from day one. But now if you take that money out and you invest it, now you have to deal with Capital gains taxes every year. The Ira we already talked about loaded with ordinary income taxes is gonna be passed on to your kids. And in most cases, those accounts have to be emptied out in 10 years. Now, the Roth IRA also has to be emptied out 10 years, but let's say you leave $500,000 to your beneficiary and they get good advice and therefore do not touch their IRA money for 10 years. Then that money grows to a million dollars, in the 10th year, they take a million dollars out tax-free so they got the $500,000 tax-free. They kept it in that account. It grew another 500,000 They got some $500,000 of growth. million dollars tax-free. In my opinion, that is one heck of a strategy. Not only a great strategy but what a great legacy to leave your beneficiaries. That's just fantastic. John, clearly, as you mentioned, there's some advanced planning that goes into this. If somebody has questions about how to create this legacy within your own family. What's the best way to reach you? Well, you can always go to our website, www.gosecurus.com. And while you're visiting the website, go over to the Contact Us Page and you can set up a 15-minute phone call or a complimentary visioning clarity consultation right there on the contact us tab or give us a call at the office at 858-935-6210. John, thank you so much. Thank you, Erin.