Pathways with Amber Stitt

Focus on Money: Let's Discuss how Secure 2.0 affects our Inheritances, Taxes & Legacy

April 04, 2023 Amber Stitt
Focus on Money: Let's Discuss how Secure 2.0 affects our Inheritances, Taxes & Legacy
Pathways with Amber Stitt
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Pathways with Amber Stitt
Focus on Money: Let's Discuss how Secure 2.0 affects our Inheritances, Taxes & Legacy
Apr 04, 2023
Amber Stitt

In today's episode of #TheAmberStittShow, Heidi Thompson, Ed.M, JD, and I discuss the impact Secure 2.0 will have on your inheritance and legacy.

Heidi is a Trusted AZ Estate Planning Attorney and helps her clients Lifeguard their Legacies!

Overall, the Secure 2.0 Act was designed to encourage Americans to save more for retirement and to make it easier for them to do so. However, it is important for individuals to understand the tax implications that are present
now moving forward.

It is wise to work with trusted financial professionals and attorneys to develop planning that meets your needs and goals while also providing some control of your money and tax reduction strategies. It is important now more than ever!

Focus Points:

-What retirement accounts are affected?
-What distributions and taxes will look like in the future in these accounts.
-How taxes will play a role in the money you planned to leave behind to your family?
-How your planning will now change for any money you have inherited.
-How Life Insurance is a tool to cover taxes.

You can find Heidi at https://lifeguardinglegacies.com/ and you can find her book on Amazon here:
 
https://www.amazon.com/stores/Heidi-Thompson/author/B084Z3BNQM?ref=ap_rdr&store_ref=ap_rdr&isDramIntegrated=true&shoppingPortalEnabled=true

You can follow her on social!

LinkedIn: https://www.linkedin.com/in/heidithompson/
YouTube: https://www.youtube.com/channel/UC2D7WpEhjD7tYYJtGh9ePQg
Instagram: @drjosi
Facebook: https://www.facebook.com/lifeguardinglegacies

Show Notes Transcript

In today's episode of #TheAmberStittShow, Heidi Thompson, Ed.M, JD, and I discuss the impact Secure 2.0 will have on your inheritance and legacy.

Heidi is a Trusted AZ Estate Planning Attorney and helps her clients Lifeguard their Legacies!

Overall, the Secure 2.0 Act was designed to encourage Americans to save more for retirement and to make it easier for them to do so. However, it is important for individuals to understand the tax implications that are present
now moving forward.

It is wise to work with trusted financial professionals and attorneys to develop planning that meets your needs and goals while also providing some control of your money and tax reduction strategies. It is important now more than ever!

Focus Points:

-What retirement accounts are affected?
-What distributions and taxes will look like in the future in these accounts.
-How taxes will play a role in the money you planned to leave behind to your family?
-How your planning will now change for any money you have inherited.
-How Life Insurance is a tool to cover taxes.

You can find Heidi at https://lifeguardinglegacies.com/ and you can find her book on Amazon here:
 
https://www.amazon.com/stores/Heidi-Thompson/author/B084Z3BNQM?ref=ap_rdr&store_ref=ap_rdr&isDramIntegrated=true&shoppingPortalEnabled=true

You can follow her on social!

LinkedIn: https://www.linkedin.com/in/heidithompson/
YouTube: https://www.youtube.com/channel/UC2D7WpEhjD7tYYJtGh9ePQg
Instagram: @drjosi
Facebook: https://www.facebook.com/lifeguardinglegacies

Amber Stitt 0:06
Today we welcome one of my sisters from Phoenix, one of my WIFS sisters Heidi Thompson. Welcome to the show, Heidi!

Heidi Thompson
Oh, thank you so much for having me here.

Amber Stitt
So I've been dreaming about this episode since our tea party. Did you know that I've been thinking about all these things that Heidi knows I just want people to know more about what you do and your expertise? So I am really fortunate to have you here today.

Heidi Thompson 0:31
Such a great conversation and I just know this is going to be super valuable content.

Amber Stitt

You are the founder of lifeguarding legacies, is that the correct name of the company? You're a legacy lifeguard, right? Yes, that's correct. You got that perfect. So yes, lifeguarding legacies, because the goal is to actively do this with people. For more than 25 minutes. So I've got a cease and I believe it's the lifeguard to my knowledge. I think I was the first attorney in the US to decide to pull in the lifeguard. You know, all the symbolism and all the fun, especially with the beach. Oh, they obsess about it. So well, I think before we dive into some of the Meteor topics, I think it's kind of fun to go back and say you have something you say about where you've been. You've landed in Arizona, we're talking about the beach. There's no beach here. So what inspired you to land here? Well, you know, I do I introduce myself as a Washington Carver to Texas Caledonian because I have lived all over the country. You know, our family just took turns, who got to live in different places. We moved to Florida when we were only married for just two or three.

Heidi Thompson  1:43
We were there for six years, and we left there. So I go to law school in Virginia. And then we plan to go back to Florida, but the economy kind of tanked. 2007 Eight and ended up in Houston. I ended up going back into education and stayed another decade in education. Even though I have a law degree and passed the Florida Bar Oh my goodness. So you know, California called for my son so that he could go do a little Hollywood career. Move back to Washington after his Hollywood career to go be near my family and then a job opportunity for my husband led us back here to Arizona while it's not the beach, it's still a wonderful place and I slipped in shine and it can't get hot enough for me so it's okay. Yeah, yeah, sure that I'm always chilly. Yeah, nothing worrying to shovel.

Amber Stitt 2:37
Right. So I know we have listeners everywhere. So yes, we will just admit we don't do all of this. No, but that's okay. You know, there's just to each its own But what fascinated me about your practice is that back before I was in this business over 10 years now I was a paralegal working for attorneys and I love estate planning and business entities and different more the corporate not litigation side of things, the business world and the way you built your practice to be able to just make it so simple. You were telling me and I can see it on your website, too. So I'll link up ways that people can find you but I feel like you must have had a calling to figure out how do we streamline this to make it easy for people because you say things like I've written the documents to the people and it's really making it so seamless, I think is what you do. So can we talk about that a little bit? Because I think that's important for people to know to take that overwhelm away from this topic.

Heidi Thompson
Sure. Well, I'll tell you, I don't claim to have many superpowers. I certainly don't have a sense of direction. Thank God for ways because I get lost, you know, northeast, what is that? Termite pest the Chick-fil-A, that makes far more sense to me. But anyway, what I do have as a superpower is I have the ability to take really complex things and make them super simple. I can take any complex idea that I understand and reduce it down to something a sixth grader can understand. I basically feel like I've done that both with my book and with my practice for people. So I come to people's homes, we sit at their dining room table, I asked them about 50 questions, and from that, we come up with a great estate plan that fits their needs. And it's very custom. It's very special. It always feels like I'm well the clients have me because it doesn't feel like a lawyer. It feels like you know, we went and when I was in education, I was mostly a counselor. I had a master's in education and counseling and so I feel like I use that degree an awful lot when I'm working with clients as well.

Amber Stitt

Yeah, I think that's a neat testimony to also that you can blend in different things that you are whatever you're talented in, and create something there. I think that even in my business with insurance planning, I know that people tend to do a lot of nothing. If they're worried about thinking some of these negative thoughts while we're in planning. Being proactive can also make people feel like gosh, if I think about these awful things, they might happen. But we're really taking a proactive approach, but it can be so overwhelming. So if you can simplify the process I mean, that's really what stood out to me when I met you that people need this. The other is almost like a myth that we could probably boss he would agree that a lot of people assume with estate planning in their head. There's this big house with this huge green lawn and it's just we're worth so much money. And it's an interesting word, and maybe it's from, you know, before our time, but can you speak to that a little bit about how even the younger generations might benefit from some of the work that you do?

Heidi Thompson

Sure, well, first I'll just kind of do the tongue-in-cheek thing that sounds salesy, but it's it's true. It's just so true. It's you may not think you have an estate but you have an estate plan. It's the state plan. If you don't trust the state and manage your affairs for you, then you need to have a legacy lifeguard. So that salesy little phrasing on it, but the truth of it, I mean, there's just so much truth in there. There are some issues you're stepping into because he plans to go and it's not just your spouse. It's also your medical decision-making insulting to your kid's school too. It's also your babies go to like all kinds of tasks question or, you know, what way you deal with your house and in your statement. There are so many real pieces to it, but you think the idea that you could possibly go on Google and figure it out yourself. Right, and you recommend that there's almost to this process when you have someone like me that can walk you through it if he can.

Amber Stitt 6:40

Yeah, well, we talked about taking things and breaking them down into a process and so looking at something that we can comprehend. There is a big topic lately that I know that you've been studying and we have a lot of affiliates or other people in different communities or organizations that we know that you are involved with. Been working hard to Secure 2.0 However, there are some things that you and I have talked about that I think are very important and so if we're just relying on congrats, Secure 2.0 has been established. You're saying well, hold on. Now we need to talk because there's more to that story, outside of our high level, what we're hearing about things that you've probably picked for the job to break this down for the audience so that they can really understand how this can affect them. And then further, might have to do some adjustments to planning and so I'm going to hand off a kind of like big topic your way but I feel like you're good for the job. So in general, should we just define what Secure 2.0 has done?

Heidi Thompson
This is exactly where I was gonna go. So during the Trump impeachment hearings, when that was all over the press, there was a very important this was December, very important piece of legislation called the Secure Act. And what it was going to do is make it easier for businesses to offer retirement planning to their employees and it didn't have those provisions in it. But what it really was was a very strange text. And it was in Congress realized that people had IRAs that they just rolled them down for generations were on about generation for these things, and you could inherit someone's IRA rollover tears and a tiny amount of tax throughout your lifetime as you withdraw money during retirement and then you could when you die, the rest of it just goes into your kids when they do the same thing and then it goes to their kids and it does the same thing. And Congress was never getting the tax promise that they had when they created these so they came up with this sneaky and what this does is you can flip and roll your IRA to a spouse. But if you have someone 11 years younger than you think about the kids, they're always going to be 11 years younger than you That's right.

Instead what they're going to get is they're going to get a 10-year distribution from the date of your death where it's distributed to them fully and taxed at their receiving tax rate. So you think about the 18-year-old that dies, their kid is 55 in their 10-year highest tax rate or life when they're taking this distribution, the worst possible timing to inherit this amount of money that they can't roll out and pay later. It was a brilliant tax grab. But what that did is it made IRAs now still a decent vehicle for your own retirement but a terrible vehicle now for inheritance.

Amber Stitt
Okay, so let's pause there and I think a lot of people can nod their heads to the IRA. Let's define IRA are we talking about qualified and then going outside of work? So let's do a little vocab kind of like a quick because I don't want our audience to know what that might mean. Because is this even this is not in the 401k world traditionally the IRA is 401k as well.

Heidi Thompson
Okay, so let's do it. Let's talk about that. So it's anything where you didn't pay taxes when you put it in? So if you didn't pay taxes when you put it in, and then that means later on, when you take it out, you pay taxes and it was designed. I mean, the goal around IRAs in the bill of goods that I was sold is that if you invest you know your whole life, then when you retire, you'll only pay a small amount of retirement taxes. And so this is a great vehicle, save money now save money later. But really what they've done by changing the rules on us and 2019 is we always thought well, what we don't use goes to our kids. It's a great inheritance thing. And it's not I mean, so this is true for 401 ks and IRAs now also for rocks now rocks, you remember those are different special kinds of IRA that you can only do so much a year and only if you qualify, and it always grows tax-free and that's still true and it'll still be tax-free to your kids. But they're going to receive it still over that 10-year period when they don't necessarily need it. You know, kind of something now that they can hold on to whenever they need it. So really, it just screwed up all of our retirement Based Investing when it did it messed with the distribution on that. It messed with the taxation on that. I think the wrapper, the way that this was almost advertised was hey, look, we're letting you leave your money in there longer. Thank you. You're welcome.

Amber Stitt

I mean, now, those are the things I would hear from a high level between some of the organizations that were posting bulletins about, you know, the progress that we have been making, but it's almost like I think the thing that you and I were resonating with is the lack of control that we're seeing, and just believing that putting all this money in and saving on taxes today. is so beneficial. And I'm 43 now and I've been in the business for over 10 years and there is this kind of this preconceived like something we grew up hearing about always putting the money in the account and getting the match and free money from your employer. But what is it to what No, what is it costing us and I feel like from a legal perspective that's really where you're going to need to watch out for that. Would you agree with that?

Heidi Thompson
I would agree. I would 100% agree with that. So really, if you have most of your savings in your house and your retirement, your IRA type account that could be a 401k or a traditional IRA but anything where you didn't pay taxes going in and we'll pay taxes coming out. You've now made that a very difficult thing to leave your kids. So now people are kind of waking up to that and realizing that there are just better alternatives that are better inheritance vehicles. And I mean, number one on that list. I mean just an argument is always going to be life insurance, investing, and there are just so many things you can do in there that can become tax-free to your kids. You can borrow against them. Some of them have life benefits and things that can take care of you. There are some really wonderful things you can do with life insurance that your IRA can't do. And it's not the same when you start thinking about inheritance. And it's not that IRAs are suddenly bad, but it's like you're now suddenly bad for an inheritance for so as you're building out that legacy. So when you think of legacy, what you want to leave behind for your family, we're in an environment, we're seeing inflation. We talk about taxes, historically speaking, I mean, I cannot see that taxes could go down. So we really have to be mindful of the tax deposits we're making. losing the opportunity cost us in general so that's just life for us today. Opportunities, but then again, the legacy piece is just what's going to show up for the family after we've worked so hard to get there. So it's become very interesting.

Amber Stitt
So are you discovering through the estate planning process that we have to start updating beneficiaries and talk about other solutions now? I mean, is it almost like you have to enhance and amend maybe the initial plan? Are you seeing out with your clients?

Heidi Thompson
Well, another thing to keep in mind is Can your distribution cycle now on the IRAs, you know, they're gonna go out and invest 10 years they're gonna be taxed to your kids over those 10 years. You don't have the same level of control that you once had on the distribution of your IRAs. So it used to be you could do all kinds of creative provisions over time knowing that they could just roll it into their own IRAs, and it was and it was easy. It changed the planning substantially. It made my job a lot more difficult for people who were iron-heavy, because of the consequences of putting it in the past or even worse than the tax consequences of putting it out. So now you're pretty much limited to that 10-year distribution plan that the government came up with instead of a distribution plan you would have had, whereas if your money was in life insurance, for example, you could do a distribution plan overtime when you're doing all kinds of creative things for your kids. You can do small amounts every month, every quarter every year you could do you know different bites of the apple where they get large amounts several different years. There are just so many options you have, that you no longer have if your primary investing was in an IRA.

Amber Stitt
We cannot predict there are other things that are in our future fit. There could be some of the histories that talk back up. But then there are new things that can occur with just life events and technology. So that's really interesting. We cannot truly predict what might happen. So the life insurance piece of course, you know, I'm a little biased, but that certainly can help build in those provisions there. So is there anything right now that you think we should still discuss on secure 2.0?

Heidi Thompson
Sure, so I'm not a financial advisor. So I shouldn't be going too deeply into what you should do with your money. I'm more about what looks good for an inheritance, and what makes sense for an inheritance, but it's definitely a good idea to speak to the people you trust. If you do have heavy IRAs, talk to your financial adviser about the possibility of maybe backdoor Roth things, some of it maybe moving some of it over to insurance products. If you've got more than what you need for your own retirement sitting in IRAs, and you're looking at it as inheritance, it may be time to look at converting something.

Amber Stitt
L
egal disclosures were always good about saying that, right? Like I'm not a tax advisor, you're an attorney. sounds like to me in my world, a lot of the clients that I meet are doing now in financial boot camps and reading books on proficiency, and financial competency, but for a lot of us that is not our day job. So unless you love finance, it sounds like now even more than ever, we need to have our advisory panel truly, our legal advisors, and then we need to make sure that our let's say accountants, CPAs Enrolled Agents are very proficient in tax law, because of everything that you just said there.

Heidi Thompson 16:37

Also, if you're getting close to retirement, somebody does understand these distributions, Social Security, and all of those things blended together. I don't know if this is something we can really do on our own anymore. S

Amber Stitt
I am finding that a lot of my medical professionals are reading books and trying to do a lot of this on their own. And some people can and are capable of that. But if you're really that is not your finance background, and that's not your thing. I think you really do need to bring in a trusted network and I know that you and I can both provide resources as needed. But when I think about the Pathways to Peak Performance audience, I tried to blend in ways to fit the 5-steps that are on the YouTube channel on the podcast. It's Focusing on Talents and if you're not talented with the financial competency because your talents lie somewhere else, we certainly need to bring in a trusted Alliance focusing on money goals, we have to figure out what's important to the family but then the risk management piece can sound very stuffy but we really need to transfer risk and with what you are saying about the Secure 2.0 presently we really got to look at things now and really be careful there. But there are some strategies as you said with planners or other advisors to start transitioning funds to make them more tax appropriate especially for yourself today and then for the beneficiaries, right so any takeaways that you could give the audience if you're really looking at things now, and this is not something that will sunset correct. So this is the new way of living, right?

Heidi Thompson
It doesn't look like it's going away anytime. I mean, there's just no talk about it going away. Congress, frankly, needs the money it's missed four generations of generational transfer of wealth and it's not going to miss another one. And this is the way they worked around that. So if you inherited anything after December of 2019, and it was 11 years older than you You're damn taxed at your tax bracket on that inheritance. And before that, you weren't that you just rolled it into your own IRA. So that's takeaway is to recognize who's receiving your IRAs take if you do have heavy investments there who are receiving them, maybe a lot of you are charitably minded maybe that's the part you send to charity, or maybe an advisor about doing some conversions. Yeah, it's not a bad idea. It's just there are a lot of possibilities. And I don't think a person can figure it all out on their own. I think they're gonna need to have some trusted people like you in their life like a good adviser. And on the estate side, someone that's an attorney that knows what they're doing in this you know, there are plenty of people who can do a well, that you can find online for cheap, but they're not going to be able to have these conversations about well, what happens with the different assets and how they're going to distribute that we haven't even talked about. I mean, I know that doesn't always play into community property who are the states from things but I have to say I didn't even go online.

Amber Stitt
I actually had a tax advisor, give me somebody out of my state of Arizona to help me with my initial estate plan. And I told you, though, that I had to actually go through it again with local representation before I met you and found loopholes. I mean, these weren't really awful things that were not done correctly, but gosh, silly things. Once we've looked at everything and filed them correctly for the state of Arizona, I just felt so much better. And there's just this feeling when you take action and you literally put all this in motion, it feels so good to walk away from it. It's not always fun while you're in it, but it feels so good when you actually get this all suddenly done.

Heidi Thompson
That's what I feel like I sell actually and you too you should you honestly you sell the same thing. What I really sell is healthy. Oh, absolutely. It's not worrying at night about what's going to happen. Because that's in a binder on the shelf that has been taken care of.

Amber Stitt
Oh, absolutely. So to me, that was really where the podcast and some other things popped up after just doing this insurance planning how do we take the stress out of our lives? Well, we have to have some accountability, and we have to work through our systems process, but once it's done, you might need to do some tweaking along the way but it feels pretty amazing. So as life can throw you curveballs it's really about having resilience when these steps are done, you really can overcome a lot because life can be hard and that's okay as long as we have the steps and our teams in place. So anybody that's listening to that does have a question. I know that I'll give them your information but also you have a book that's available to people. So if anything, you're not really sure where to start. They could start there, correct?

Heidi Thompson
That's correct. It will break down everything. It's written for Arizona having said that probably 80% of the content would be good anywhere except when I'm talking about numbers in Arizona. Sure. It breaks down what I think is just like I said, my superpower everything into blogs, lots of easy stories very jagged, digestible language. It gives very specific examples and it will make you understand what you need to do with your estate plan. And you won't be able to do it yourself.

Amber Stitt 21:38

But you'll understand what needs to happen in it and be very clear about what it is you're looking for. Your book is linked below in the description box. And so that's an easy click and then there's a downloadable version. So if anything that can tee up questions and I always say look at things on audit. Don't a little less because that's where if you're not sure about how to answer some of these questions, when you're reading through this, then you certainly do need to be walking through with an expert so I appreciate you breaking that down because I feel like you're getting people who are not honest, behind the scenes look at some of this and we have to be cautious and really pay attention and not just hide from the fact that there's a change. Let's do something about it. Well, we feel good and we're able to so so I really appreciate you being here on the show today.

Heidi Thompson
Oh, thank you for having me. It's a great conversation. I knew it would be alright. Until next time, Heidi.

Amber Stitt
Thank you.

You can find Heidi at https://lifeguardinglegacies.com/ and you can find her book on Amazon here:
 
https://www.amazon.com/stores/Heidi-Thompson/author/B084Z3BNQM?ref=ap_rdr&store_ref=ap_rdr&isDramIntegrated=true&shoppingPortalEnabled=true

You can follow her on social!

LinkedIn: https://www.linkedin.com/in/heidithompson/
YouTube: https://www.youtube.com/channel/UC2D7WpEhjD7tYYJtGh9ePQg
Instagram: @drjosi
Facebook: https://www.facebook.com/lifeguardinglegacies

This transcript was generated by https://otter.ai