Death & Taxes
Jeff Martin is a financial advisor at Cornerstone based in Reno, NV. Jeff has earned the Life and Health Insurance Licensure and has passed the Series 65 examination. He enjoys being able to help clients create customized strategies for their portfolios based on their unique financial goals.
DEATH & TAXES
I am sure you are familiar with Benjamin Franklin’s quote: “In this world nothing is certain, but death & taxes.” I tend to agree. It was likely not lost on Ben, that death can trigger taxes as well.
I was recently involved in a situation where someone reached out with some questions, and some very real concerns for her mother. Her mother had recently lost her husband, and aside from her world already being turned upside down, her mother was now being told she was going to have to pay several hundreds of thousands of dollars in taxes. Naturally, this did not sit well.
Her husband had invested in a few non-retirement annuity contracts. It turns out they never began drawing on them and substantial earnings were accrued over the years. The broker shared that she would need to liquidate the annuities (realizing all the earnings as taxable income at once), which in turn, would place her in the highest tax bracket at 37%. Ouch! Not only would this be a substantial financial pain, but potentially put her financial security at risk as well.
It is nothing more than speculation, but I believe either the broker was likely encouraging a direction that would benefit him/her more than the client or he/she was possibly unaware of some other options that would lighten the tax liability profoundly. Either way, by following the broker’s initial recommendation, her mother was going to get completely hammered by taxes.
Fortunately, I was able to share some thoughts and other options that led to significantly mitigating the tax liability, in turn bringing her mother more financial security. I should clarify that I unfortunately do not have a magic wand to waive and make taxes disappear, but by going with a different approach, she will be able to avoid paying tax on the earnings in the highest bracket and can spread the liability out over a number of years.
You cannot avoid the certainty of taxes while living, and in some cases, even after the only other certainty in life: death. Each situation is unique, but all have the commonality of taxes. Pending how this is approached, either you/your beneficiaries, or Uncle Sam will be happy with the outcome. I adamantly encourage the topic of taxes be discussed with your financial professional both from a living perspective, as well as what it looks like after passing as it can have a considerable impact and an impressively far reach.
Fortunately, tax planning is one of the retirement planning aspects that Cornerstone specializes in. By using our Cornerstone Retirement Road Map, we can help you to create tax efficiencies in your retirement. To see what your Retirement Road Map looks like, give our office a call at 775.853.9033.
Based in Reno, NV, Cornerstone is for individuals and families looking to grow wealth, protect and preserve their life savings, and plan for the distribution of their estate in a tax-efficient manner through a tailored strategy. Schedule a time to discuss your financial goals with us.