I have been writing all year about savvy planning strategies to transfer assets intelligently to the next generation or your favorite charitable endeavor, but recently I encountered a bit too much savvy planning at one time and thought I’d spice things up a bit: when is too much planning also bad planning?
Now, I love a good loophole as much as the next person when it comes to winning with money but sometimes the concept of “winning at all costs” can become a slippery slope with money. It’s when people ask me how to put tax free investments into a tax shelter that I know they are not seeing the forest for the trees. Or creating multiple legal entities to house multiple assets to shelter multiple streams of income for multiple humans to inherit. And my personal favorite: how to maximize social security income payments in retirement while sheltering as much income from social security taxes as possible. Their heart is in the right place, but the practical application of executing the strategies may not be.
Something I urge you to consider when developing your financial strategies is to streamline as much of the work as possible for your beneficiaries while creating your master plan. While your spreadsheets may be your emotional support documents, your children may not share your love language. If you have created trust after trust (after trust) to create a symphony of tax shelters, how much work has been put on your heirs to disassemble them…and actually enjoy the fruits of your labor? I’m not saying these strategies are bad, I’m just saying they can be overused and the loopholes could be filled with professional fees and/or time spent away from work to decipher seventeen different entities and track down just as many bank accounts. I urge you to consider the bandwidth of your next generation and if they are even capable of continuing the financial programs you have painstakingly created for their benefit?
And that’s where I come in.
You see, I make a living doing other people’s planning. Not yours, I know you got this, but usually for those that you are creating empire for. I am often hired when tragedy strikes and the heirs have no idea what is going on and can’t understand much more than how to spell IRA at this point. I see the intentions, I really do. I also see the hours and hours if not years of work it will take to execute the intentions of the benefactor of this master plan. And I also see hours and hours if not years of professional or legal fees that can stack up. An unintended burden to the recipients not projected on the spreadsheets. I tend to watch a masterpiece of planning unwound and wonder if the amount of savings was worth all of the time and effort in the end? Sometimes it is. Sometimes it isn’t. I’m just urging you to consider your situation carefully, play it all out postmortem, and realistically see if the juice was worth the squeeze.
Kimberly Enders CFP® CPFA
CERTIFIED FINANCIAL PLANNER®
Enders Wealth Management
37800 Van Dyke Ave, Suite 125
Sterling Heights MI 48312
www.enderswm.com
#kimenderscfp
Distributions from traditional IRAs and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty.
All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Wealth Services, LLC, nor any of its representatives may give legal or tax advice.
The views stated are not necessarily the opinion of Cetera Wealth Services, LLC, and should not be constructed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.