Table of Contents
by James Lange, CPA/Attorney
Socially Responsible Investing and Charitable Giving Techniques
The fall season is usually one of our busiest times for traditional in-person workshops. Due to COVID-19, we have canceled all conventional workshops for the rest of the year. We will assess the safety of holding live workshops as we learn more about what is safe and possible. Until further notice, I will continue my client education efforts via webinars.
We are offering three webinars over three days, each with a specific focus. I hope you will consider attending at least one of them.
Environmental and Socially Responsible Investing and Getting the Most Bang for Your Charitable Buck
How IRA and Retirement Plan Owners Should Respond to the SECURE Act, COVID-19, and the CARES Act
Special Q & A Session Devoted to Your Concerns and Questions
For more information, see below.
Despite all that is going on, everyone is busy, though mainly at their home offices. Our CPAs are finishing up tax returns to meet the July 15th extended tax deadline. The pile of “running the numbers” jobs for existing and new clients is stacking up, but that work will become the first priority after the July 15th tax deadline. Our attorneys are drafting and updating wills and estate planning documents. All of which keeps our invaluable support staff providing all the support that is required—never a dull moment.
Further, we are unflagging in our commitment to keep clients and readers informed about new and valuable tax and estate planning strategies. This is a particularly critical time with the near-simultaneous impact of the SECURE Act, COVID-19, and the CARES Act. For most IRA and retirement plan owners, it is time for a re-examination of your retirement and estate plans.
I hope you and your family are safe and healthy. I am continuing my super COVID-19 safe lifestyle by staying away. I am in Dillon, CO now (near Keystone, a little more than an hour west of Denver) and will be in Heber, Utah (45 minutes from Salt Lake City) in the fall. Hopefully, I can come home soon. I am lucky our business is as strong as ever and we continue working at near capacity except for the in-person workshops and meetings.
Tuesday, July 28, 2020, 1 – 3 pm (EST)
How IRA and Retirement Plan Owners Should Respond to the SECURE Act, COVID-19, and the CARES Act
On Tuesday, July 28, 2020, at 1:00 pm EST, we will have a specific webinar on the provisions and consequences of the SECURE Act and the CARES Act for IRA and retirement plan owners. Topics will include strategies to counter the disastrous consequences for your heirs upon receiving an Inherited IRA. You can sign up by going to https://paytaxeslater.com/July28Webinar.
Thursday, July 30, 2020, 1 – 3 pm (EST)
A Special Q & A Session Devoted to Your Concerns and Questions
On Thursday, July 30, 2020, at 1:00 pm (EST) we will devote an entire webinar to answering your specific questions and questions that have been submitted or generated from other webinars that we have held. You can sign up by going to https://paytaxeslater.com/July30Webinar.
Wednesday, August 12, 2020, 1 – 3 pm (EST)
Environmental and Socially Responsible Investing and Getting the Most Bang for Your Charitable Buck
More investors are choosing to invest with companies whose values more closely conform with their personal values—particularly after the way some companies have responded to COVID-19. Those values can include social responsibility, environmentally sustainable practices, being a good corporate citizen, and many other concerns.
Of the concerns, environmental and socially responsible investing has become a priority for many investors. But, as you well know, I leave investing recommendations to experts in that field. So, I asked the people at Dimensional Fund Advisors if their top expert on the topic would be willing to join me for a Zoom webinar. He agreed. His name is Will Collins-Dean, Senior Portfolio Manager and Vice President at Dimensional and is Chairman of the firm’s Investment Stewardship Committee. The webinar will be held on Wednesday, August 12, 2020, at 1 pm EST. You can sign up by going to https://paytaxeslater.com/Aug12Webinar.
Experience tells me webinar attendees don’t want an entire session on investments, socially responsible or not. So, Will’s information will complement my discussion of three charitable giving techniques. The newest topic, naming a charitable trust as the beneficiary of your IRA may be an excellent choice, even if you aren’t charitable. The other two charitable ideas will help IRA and retirement plan owners get the most for their charitable buck. All three techniques have the potential to be enormously valuable from a tax perspective. The three techniques are:
- Naming a Charitable Remainder Unitrust (CRUT) as the beneficiary of your IRA or retirement plan—even if providing for your family is a much higher priority than providing for a charity.
- Qualified Charitable Deductions (QCDs) which have even added value this year for taxpayers age 72 and older.
- The best dollars to leave to charity so more money goes to your family.
I will spend the most time on CRUTs. Their value in estate planning has increased dramatically as a result of the SECURE Act.
Will’s discussion on environmental and socially responsible investing is scheduled for roughly one hour, between 1 p.m. and 2 p.m. EST and my discussion on charitable trusts will run from 2 to 3 pm EST. You can sign up for the webinar by going to https://paytaxeslater.com/Aug12Webinar.
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Thursday, July 16, 2020, 9 am – 4:30 pm EST
For Attorneys Only: An Opportunity to Earn Six Hours of Continuing Legal Education Credits
Proven Strategies to Protect Your Family from New Death Tax 2020: An Attorney’s Guide to Beating the SECURE Act
Every year I offer two (sometimes more) days of workshops for Pennsylvania Bar Institute (PBI). I usually give one in Pittsburgh and one in Harrisburg. The one is Harrisburg is simulcast to local bar associations across the state. Hundreds of attorneys attend. This year, an in-person workshop is obviously not possible, so the PBI asked me to offer a webinar. All interested attorneys should sign up on PBI’s web site. You can attend from the comfort of your home.
It is an all-day webinar that costs $299. Attorneys will get credit for 6 hours of continuing legal education—5 substantive/1 ethics. It will be similar to my in-person, all-day client workshops. The only difference is that I have to dumb it down a little knowing my audience is attorneys (just kidding, maybe).
Our Latest Book Is At Press!
The IRA and Retirement Plan Owner’s Guide To Beating The New Death Tax
We are excited and very proud of our latest book. As soon as we have copies, we will be mailing them to you. We anticipate an end of August/beginning of September distribution date.
Also, we finally have the DVD of the first session of our three-session live workshop—the last one we held before the COVID-19 pandemic. We have mailed this DVD to our AUM clients and to those clients/prospects who had called to request it. If you would like a copy, please call Alice at 412-521-2732.
The Benefits of Combined Strategies
by James Lange, CPA/Attorney
In the real world, the best response to defend your family from the dreaded SECURE Act does not merely involve one strategy or one “answer.” We almost always recommend a combination of strategies to get the best result for you and your family.
One advantage that we have is that we look at things from a strategic standpoint, a legal standpoint, an investment standpoint, and a tax standpoint. We have CPAs, estate attorneys, wealth advisors all working as a multi-disciplined unified team on the client’s behalf.
It is also much better for a client who often gets conflicting advice from his CPA and his attorney, wealth advisor, etc. and must decide who to follow.
Roth IRA conversions, Lange’s Cascading Beneficiary Plan (LCBP), life insurance, low-cost enhanced index funds, asset location, and other strategies can be used individually in your retirement and estate plan to benefit you and your heirs. But by combining two or more of these strategies, you can create even greater wealth not only for you and your spouse but for your entire family.
The practice of combining different strategies forms the cornerstone for most of our client recommendations. We have long been fans of combining Roth IRA conversions, optimizing Social Security strategies, investing in low-cost index funds, gifting, and using our favorite estate plan, Lange’s Cascading Beneficiary Plan, for many, if not most, married couples who have children from only that marriage (we have other solutions for blended families and same-sex couples). We also combine those strategies with low-cost index/ enhanced index investments using the asset location techniques.
Combine Roth IRA Conversions and Life Insurance
The below graph literally blew me away when I saw it. It seemed too good to be true. The United States has enacted laws that provide enormous rewards for implementing tax-savvy strategies. We examined the combined benefits of Roth IRA conversions and life insurance, two examples of paying taxes now in return for tax-free growth. The graph quantifies the benefits of combining Roth IRA conversions (done over several years) and life insurance.
Assumptions for Graph:
Planning parents do five $100,000 Roth conversions.
Both parents die at age 85.
The child inherits the balance of all accounts at age 45.
The child lost his savings and retirement plan in divorce.
An unmarried child retires at age 60.
An unmarried child collects $15,000 in Social Security at age 62, COLAs at 3.0%.
An unmarried child spends $120,000 annually.
Numbers are in actual dollars.
Rate of return 7%.
Rate of inflation 3.5%.
This graph compares two families with identical resources. One family makes a series of Roth IRA conversions and buys life insurance. The other family neither makes any Roth IRA conversions nor buys life insurance. The graph shows the trajectory of wealth over the life of the child. The child of the family who made the optimal series of Roth IRA conversions and bought life insurance has $7 million when he is in his eighties and the child of the family that neither bought life insurance nor did Roth IRA conversions is broke at the same point in time.
Though in this example, we combine life insurance and Roth IRA conversions, we usually arrive at the best solution by combining a number of different strategies after “running the numbers.” One of the reasons that running the numbers is so hard is that the person running the numbers has to decide which strategies to run and how to combine different strategies. Then even if you know which strategies you are going to combine, the next questions are, “How much of each? How big of a Roth IRA conversion should you make and when?” The same with life insurance and many of these calculations are synergistic meaning that what you do with one variable will have an impact on a different variable, but potentially using both strategies in concert will confer more advantages than using both strategies separately.
The other thing I should mention is that the insurance product in this analysis is a Second-to-Die policy. We are currently looking at using First-to-Die policies and then a Roth IRA conversion after the first death.
The combination of Roth IRA conversions and life insurance is a powerful combination. Is it time for your life insurance check-up? Inherited life insurance is not taxable to your beneficiary and it is a great solution to the SECURE Act. We are available to consult with you regarding your life insurance planning. Simply call Alice at 412-521-2732 if you would like to schedule a Zoom consultation.
As you can see, there is an enormous difference between optimal and mediocre planning. But this is a huge opportunity to protect yourselves and your heirs and give them a lifetime of financial security. Please consider a combination of strategies to have the biggest impact for yourself and your family.
Roasted Garlic with Olive Oil and Rosemary
Makes: ½ cup
Prep: 5 minutes
Cook: 45 minutes
- 2 heads garlic, unpeeled
- 2 teaspoons extra-virgin olive oil
- 1 rosemary sprig
Preheat oven to 400⁰F. Using a serrated knife, slice both heads of garlic crosswise so you have top and bottom layers.
Rub each of the 4 cut surfaces with olive oil and then place the garlic and rosemary on a sheet of aluminum foil. Wrap the garlic and rosemary in foil to seal it up tightly and place it directly on the rack in oven.
Roast the garlic until it is very soft and fragrant, about 45 minutes. Allow to cool and then squeeze the roasted garlic from the cloves. Can be used as a spread, mixed into sauces or added to pureed vegetables and soups.