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Attorney’s Guide to Building and Protecting Personal Net Worth 07.08.2022

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A Ben Franklin Redux – Build Net Worth

Remember how you felt the day you said “I passed the bar!”?

That day, you no doubt celebrated your great accomplishment. It marked not only the closing chapter of your law school career, but the opening of an important new chapter in your personal and professional life, one with tremendous economic upside if properly harnessed.

In his essay Advice to a Young Tradesman, Benjamin Franklin famously states, “Time is money.” This phrase, which he wrote in 1748, still rings true today, especially for busy attorneys and law-firm partners like yourself, who earn a living primarily from billable hours.

As the numbers increase on your net worth statement, so does the responsibility of managing them correctly. As you accumulate wealth, have you achieved economic peace of mind? Not having the time, expertise, or patience, to establish and execute on a customized wealth-building and retirement strategy is neither a failing nor a flaw – it is a very common problem. 

Finding an expert, trustworthy partner to help you manage and coordinate much of this “financial heavy lifting” can lead you closer to  the economic peace of mind you have been working so long and hard for.

Emotional Awareness – Your Strength and Your Weakness?

As a successful attorney, you are committed and laser focused on helping your clients, managing and collaborating with colleagues, and balancing the administrative obligations of running your practice.

You are working to strike the appropriate balance between your career and your family life. It is challenging — and stressful — to  properly coordinate all of this. Consider too, that you have a responsibility to develop and execute on a well-thought-out and disciplined plan to grow and protect your personal wealth. It’s no wonder this task often gets back-burnered until you “aren’t so busy.” 

Unfortunately, for many lawyers, “not so busy” only becomes a reality once retirement does, and by that time, many critical economic decisions, key financial and investment planning opportunities, and basic compounding benefits have come and gone.

Get Help, and Don’t Get Burned!

If you haven’t yet hired a professional to help, it might be because you’ve heard about uninspiring, unsettling, or even outright illicit experiences with so-called “financial-advisors.” Certainly, what tends to be the most challenging aspect of hiring an advisor is finding one who cultivates your trust.

An important part of the wealth building journey is partnering with the right financial advisor. The first step you can take is to ask friends and colleagues to share their successful experiences with advisors. The advisor is providing a service that will have a lasting impact on your financial future, so you need to be sure you are hiring the right person to meet your specific goals.

Your advisor will need to know every single aspect of your financial life, and oftentimes many aspects of your personal life as well, in order to provide the most appropriate advice and customized solutions. Each member of your family, especially your significant other, must have confidence the advisor will always hold your family’s best interests above their own. Because most attorneys have uneven cash flow throughout the year, complicated tax issues, and complex retirements, your advisor will be able to best serve you when they have a strong understanding of how you are compensated and the complexities of it.  These things that make financial planning difficult for you, are well inside a fiduciary advisor’s wheelhouse.

“Suitable” versus “Fiduciary”Fiduciary Financial Advisor

A second extremely important step when searching for an advisor is to assure they are bound to a legal fiduciary standard. As a legal fiduciary, a financial advisor is typically regulated by the Securities and Exchange Commission (SEC), and is legally held to the highest standard in the industry, the fiduciary standard. They are required to discharge their planning, counsel, and advice solely in the best interests of the client, even if it means placing the client’s interests ahead of the advisor’s.

Starkly contrasting the fiduciary standard and obligation is suitability standard, which simply requires a financial advisor to make recommendations that are “suitable” for a client.  Importantly, the suitability standard does not legally require an advisor to act solely in a client’s best interests. Another significant distinction between these two very different professional standards is how an advisor is compensated. A fiduciary advisor’s compensation generally is via an annual, asset-based fee, computed based on a percentage of the client’s assets under management. A financial advisor who is not a fiduciary oftentimes receives hidden compensation from products with higher fees and lower returns that they’ve steered you into.  Recently, theWhite House Council on Economic Advisers found that non-fiduciary advice costs investors $17 billion a year! And, as Franklin said in his aforementioned essay: 

“You will discover howsmall, trifling expenses mount up to large sums, and will discern what might have been…saved.”

With a commission-based compensation structure, there is the possibility for conflicts of interest.  If a prospective advisor is not 100% transparent about how he or she answers the question, “How do you get paid?” look elsewhere. A true fiduciary will be quick to point out how, and wherefrom, they derive professional compensation for their time, service, and planning. How do I know if a financial advisor is a legal fiduciary? 

The simple answer – ask! You will quickly find out which standard a prospective financial advisor adheres to when you ask:

“As my prospective financial advisor, would you be a legal fiduciary to me, and are you willing to attest to that in writing?”

What Can I Expect From a Good Financial Advisor? 

Because every individual has a unique set of personal and financial circumstances, it is a crucial first step for your financial advisor to help you determine and set your financial goals. Sounds easy, right? Maybe — until you seriously consider your responses to the following questions:

  • What money concerns keep you up at night, and how would you like me to work with you so you can rest soundly? 
  • What are you doing now, and what do you want to accomplish in life?
  • What decline in your overall investment portfolio, in hard dollars, would cause you great personal discomfort such as lack of sleep, anxiety, worry, or even despair?
  • Why do you think you need financial help and guidance?
  • What changes do you expect to occur in the future?
  • How do you picture your ideal life five years from now? Ten? Fifteen?
  • How would you describe the emotions you had about money growing up?
  • What are three financial milestones you hope to accomplish?

By no means all-encompassing, this list of questions is meant to illustrate the depth and sincere interest in you that the right financial advisor will demonstrate during the discovery phase of your relationship. In addition to asking, listening to, and considering your answers to thoughtful questions such as these, any good advisor will dedicate their time and energy to you in order to develop a rapport, and ultimately, trust. 

Investing, coordinating, and managing your wealth and assets is a challenge that increases as your net worth does, and just like in law, where having a good lawyer when entering the courtroom should yield the highest probability of success, the same holds true for wealth management and working with a qualified financial advisor.

Financial Emotional Awareness 

Managing emotions and remaining objective when making financial decisions is an essential component of longer-term success in building, and protecting, one’s wealth. Every day, individuals are bombarded with information that can make them question whether or not they are making the right choices with their finances. A quality, trustworthy financial advisor will help guide you through the noise and protect you from making emotional or irrational decisions to ensure you  stay on your path to financial freedom.

My Lawyer Does the Same Thing…

When working with an attorney, a client should expect to receive custom-tailored planning, advice, and counsel only after a myriad of different possibilities and probabilities about the future have been considered. This construct of a financial advisor-client partnership differs little, as this same process holds true in finance as it does in law.

A high quality financial advisor will leverage a broad-based array of resources to provide solutions and advice, much of which you may never have heard of, thought about, or had access to.

They will help you identify your level of acceptable risk, and a target rate of return to be able to meet your personal and economic goals. As is true in the courtroom, there is a direct correlation between taking risk and the potential for obtaining the desired results. The financial relationship between risk and return is inextricable, and needs to be consistently monitored due to the ever-evolving landscape of the economy, politics, the financial markets, and most importantly, your own personal circumstances. Having a professional help you manage this balance between risk and reward increases the probability of your achieving financial success.

You and Your Life - “An Attorney’s Guide to Building and Protecting”

Reducing Drag and the “Necessary Evils”

Keeping what you have saved and earned is just as important as growing it. 

Specifically, a good financial advisor will work with you to manage and minimize the two major necessary evils:

  1. Income taxes
  2. Costs/fees/expenses

Understanding almost all financial transactions incorporate a tax and a cost component, your financial advisor and your tax advisor should consistently interface with each other to develop and implement effective tax mitigation strategies to help you keep as much of your hard-earned dollars in your pocket as possible. For most attorneys, current self-employment and income tax rates are high, and will likely only increase in the future. The efficiency of growth in your net worth can be directly affected by lackluster tax planning, not only by the choices you make in how you receive and allocate your ordinary income as you save and invest, but also in how and where you derive investment income. This is especially true when it comes to your 

retirement planning. As you accumulate wealth, it is imperative for your financial and tax advisors to work together to maximize how and where you are making retirement contributions, and how and where to leverage the multitude of tax benefits that are available.

During retirement, as you begin strategic withdrawals from your nest egg, your advisors should regularly analyze not only the sustainability of how much you are taking, but should also weigh  in on how and where to make withdrawals, based largely on your current tax bracket as well as the expected future tax environment. For attorneys fortunate enough to have a retirement pension, an analysis should be done to determine whether it is better to take as a single-life or joint-life annuity or as a lump sum in order to  maximize your net dollars.

Lastly, to enhance the longer-term growth of your wealth, your financial advisor should work with your investment managers to methodically select the right investment vehicles that produce the greatest after-tax returns for both your managed and unmanaged assets. After all, it is not what you make but what you keep that is important. 

Time to Enjoy!

Planning your financial future in addition to all your other professional and personal responsibilities is a daunting task, but you don’t want to wake up one day and ask yourself why your colleagues are retired while you are still working. Being a lawyer is rewarding job, but it can  be very stressful and requires long hours. Thirty or more years of this lifestyle can take quite a toll on the body and mind, and you deserve a rewarding financial future and economic peace of mind. Time is money. Beginning a succinct and custom-tailored wealth management plan now will help you achieve your goals, and ultimately, help you retire on your schedule. Partnering with an advisor that not only understands you, but also the  unique financial challenges that attorneys face, means you may spend less time worrying about this aspect of your life.

You wouldn’t hesitate to hire a legal expert to help you win a case or strengthen a lawsuit, and the same can certainly be said about hiring a financial expert advisor to help you properly coordinate all of your financial affairs and ideally, build economic peace of mind.

How Can We Help?

At Towerpoint Wealth, we are a legal fiduciary to you, and embrace the professional obligation we have to work 100% in your best interests. If you would like to discuss whether a Roth conversion may make sense for you, we encourage you to call 916-405-9164).

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President Joseph Eschleman Earns New Digital Assets Credential 1.7.2022

Earlier this week, our President, Joseph Eschleman, earned his Certificate in Blockchain and Digital Assets from the Digital Assets Council of Financial Professionals.

President, Joseph Eschleman, earned his Certificate in Blockchain and Digital Assets from the Digital Assets Council of Financial Professionals.

The Certificate in Blockchain and Digital Assets course is the only certificate program designed for financial professionals. Graduates of the program gain the essential knowledge and understanding of blockchain and digital assets, better equipping them to provide investors the expertise and advice they need about this new and transformational asset class.

Click HERE to see what Joe learned.

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No No, I Really AM a Long-Term Investor! 10.15.2021

“I’m definitely a long-term investor.”

“I don’t get worried about the negative news headlines.”

“Declines happen – I get it.”

We have heard these lines uttered by the most well-intentioned and intelligent investors time and time again. Sometimes, they hold true to their word. Sometimes, the polar opposite. Saying you are a long-term investor is easy; behaving like a long-term investor is much more difficult, as this is clearly easier said than done. 

Put differently, as the great boxer Mike Tyson said: 

Mike Tyson

When things are relatively “normal,” investing seems easy. However, when things get (pick your favorite adjective): crazy, volatile, unbelievable, explosive, unpredictable, turbulent, harrowing, and/or unsettling, it becomes much more difficult to tolerate, endure, and absorb a major body blow to your “nest egg” (read: a consequential drop in value). Watching your money SHRINK can be a very emotional and traumatizing experience. And while there is no perfect recipe for becoming a successful long-term investor, at Towerpoint Wealth we believe it all starts with three basic ingredients: 

  1. Consistent objectivity
  2. Measured behavior
  3. Disciplined thinking and execution

In addition to the inherently emotional nature of money, there are a myriad of uncontrollable variables populating the external environment we live in: The movements of the stock market. The vicissitudes of the US and global economy. The fickle nature of the political winds. Increases and declines in interest rates, income taxes, and inflation. Just a few examples from a very lengthy list of items that are out of our control. And while it is human nature for us to think (even to outright believe) that we have some control over many of these things, the truth is, if we want to truly be a successful long-term investor, we must recognize and accept the things we do not control.

At Towerpoint Wealth, we believe that the most successful long-term investors and wealth-creators have a somewhat-unique capability, a skill, that allows them to maintain appropriate perspective, to exhibit a high degree of humility, and to be laser-focused on the bigger picture. Fortunately, this is a skill that can be coached, cultivated, and learned, and is something that we have a relatively high degree of control over.

Long-Term Investor

Investment Strategy

Let’s make this more tangible – below are seven key principles that, at Towerpoint Wealth, we believe are necessary to be a successful long-term investor:

  1. Be humble, be aware of, and accept, things that are out of your control
  2. Keep your emotions in check, and be acutely self-aware of the fear and greed that we may feel when considering our finances and investments, especially in periods of extremes
  3. Plan to live a long life, which we do have some control over!
  4. Einstein was right: The power of compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays
  5. Volatility should be expected, embraced, and taken advantage of, not feared nor averted
  6. Unless you have the unique ability to consistently AND accurately predict the futurestay properly invested and diversified, regardless of what you believe may happen in the market and in the economy
  7. Have a plan and a strategy, and be disciplined in sticking to it, regardless of the things you have no control over
Investment Strategy

In opining about what we believe it takes to be a successful long-term investor, we would be remiss if we did not directly integrate Warren Buffett’s (aka the “Oracle of Omaha”) wisdom on this subject into this newsletter. Please click below to watch an excellent YouTube video, featuring a 2016 CNBC interview of Warren, where he outlines his FIVE best tips for successful long-term investors:

Do you have a plan to properly manage and coordinate all of your financial affairs and a strategy to grow and protect your wealth and investment portfolio, even during turbulent times?

If so, are you being disciplined in consistently following it? If you have concerns, or simply would like to discuss how you can apply the long-term investment principles discussed above, we welcome having a conversation with you. Click HERE to message us, as we regularly have no-strings-attached conversations about these issues, and are happy to be an objective resource for you as you begin to consider your personal and financial circumstances further.

What’s Happening at TPW?

Nathan P. Billigmeier Director of Research and Analytics

Our Director of Research and Analytics, Nathan Billigmeier, took last Friday off to spend time in Wheatland, CA at Bishop’s Pumpkin Farm with his two boys, Ethan and Grayson, specifically helping Grayson celebrate his 2nd birthday!

Philly cheesesteak

Our President, Joseph Eschleman, devouring a Philly cheesesteak (the only way a cheesesteak should be ordered, a “wiz, wit”) before jumping on a flight back to Sacramento earlier this month. Fuhgeddaboudit if you think you will find a better cheesesteak than Pat’s!

Graph of the Week

Yikes – inflation is at a 13 year high!

If you have any exposure to bonds in your portfolio, we strongly feel that it is time to take a hard look at:

How you are allocated within bonds

Your exposure to interest rate fluctuations (specifically, to rates going UP) due to inflation

Whether the risk you are taking is appropriate for your set of unique personal and financial circumstances

At Towerpoint Wealth, we have been successfully modeling what the value of a client’s portfolio would look like if interest rates INCREASE by ½, 1, or even 1 ½% over the next year or two. Message us by clicking HERE if you would like this custom analysis done for you.

Inflation Hits 2021

Cartoon of the Week

Issues with global supply chains will impact the holiday season…

Cartoon long term investor

As the 24/7 news cycle churns, twists, and turns, a number of trending and notable events have occurred over the past few weeks:

As always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. We encourage you to reach out to us at any time (916-405-9140info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

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– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle

We love social media, and are always actively growing our social media community!

Long Term Investing Tips

Twenty Tips for No-Nonsense Investing

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Time to Tiptoe Towards That Crypto? 06.18.2021

Whether you are skeptical, cautious, and apathetic, OR enraptured, excited and intrigued by it, crypto has exploded in global popularity over just the past year, and has, to one degree or another, captured the attention of most of the civilized world.

Bitcoin was released as the first decentralized cryptocurrency in 2009, and nine years later, in 2018, the Merriam-Webster Dictionary approved “cryptocurrency” as an official word. While many (ourselves here at Towerpoint Wealth included) believe that crypto is here to stay, there are still plenty of “no-coiners” who feel otherwise:

Many Westerners find it difficult to understand how a 12-year-old digital currency could be safer to hold than the US dollar, which has long been recognized as the reserve currency of the world. However, once you understand that the Federal Reserve, America’s central bank, has inflated the money supply to achieve its macroeconomic goals, it becomes a bit clearer. Note the “infamous” comment made by Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, in a March 22, 2020 interview on CBS’ 60 Minutes:

Do we have your attention now?

Rather than opine on the intrinsic details and inner-workings of crypto, it is important for most investors to note three main takeaways:

  1. Cryptocurrency is a digital, or virtual, asset. Many cryptocurrencies are decentralized and aspire to be a form of money and a medium of exchange
  2. Unlike fiat currencies, most cryptocurrencies operate without government oversight or intervention
  3. Most cryptocurrencies are managed by a large group of network participants, and are secured by advanced cryptography. Explaining the Crypto in Cryptocurrency does an excellent job of explaining cryptography further

Concurrently, the shift to embrace crypto as an investment vehicle is certainly on the rise. According to the Financial Planning Association’s 2021 Trends in Investing Survey, conducted by the Journal of Financial Planning:

  • More than a quarter (26%, to be exact) of financial advisors plan to increase their use or recommendation of cryptocurrencies over the next 12 months
  • Almost half (49%, to be exact) of advisors indicated that clients had asked them about investing in cryptocurrencies over the past six months

Do these two facts alone make crypto “good” or “appropriate” for integration into one’s investment portfolio? Certainly not, but it does speak to the inflection (some may say tipping) point where we find ourselves. El Salvador is pushing to become the first country to adopt bitcoin as legal tender. This feels more like a movement than a trend.

As a brief crypto aside/FYI, the term HODL (hold on for dear life) was coined (yes, pun intended) by a user in an internet bitcoin forum who misspelled “hold,” and now refers to a devout buy-and-hold crypto philosophy. Now you know!

Perhaps next month, Trending Today (TT) should pivot from cryptocurrency and cover NFTs (non-fungible tokens)? Is your head spinning and ready to explode yet? While we are joking about NFTs being the next TT topic, we cite them in light of our dialogue above about cryptocurrency, as NFTs are just another specific example of how quickly our world (both inside and outside the world of finance and investing) is changing. Are these immature assets with room for development? We would argue yes. However, we also argue for (read: encourage) you to be careful about dismissing new technologies too quickly, and to be scrutinous yet open-minded about the speed at which our society is evolving.

Aside #2: If you have three minutes, click HERE to watch an extremely funny (and surprisingly educational) Saturday Night Live skit about NFTs.

Crypto – Join Us for Our Cryptocurrency Webinar!

Bitcoin and Ethereum are two of the most popular of the more than 4,000 different cryptocurrencies in existence as of January 2021. Crypto has exploded in popularity over the past year, and has emerged not only as a new asset class, but also as an alternative store of value – some call it “digital gold.”

Click below to RSVP for this 45-minute educational Zoom webinar, in which Christopher King, CEO and Founder of Eaglebrook Advisors, will discuss the question: “Bitcoin – what is it?” as well as how cryptocurrencies and digital currencies can play an important complementary role within a properly diversified investment portfolio.
Wednesday, June 23
12:00PM – 12:45PM PST
Click HERE to RSVP

For every participating attendee, we will make a $10 donation to the Leukemia and Lymphoma Society – please invite a friend, colleague, or family member to also RSVP with this link!

What’s Happening at TPW?

As a work family, part of the Towerpoint Wealth culture is to regularly volunteer and find opportunities to give back to our community. Earlier this week, in conjunction with the Cathedral of the Blessed Sacrament and with the help of Marilynn Fairgood, the Cathedral’s Brown Bag Lunch program coordinator, we had an opportunity to assemble, and then distribute, sack lunches and other supplies to assist Sacramento’s homeless community.

Unquestionably this was a fulfilling experience for everyone involved, as the sincere gratitude and appreciation we received was both heartwarming and priceless.

Click HERE for an excellent article from KHOU-11 for additional information on how to help and volunteer for the Brown Bag Lunch program.

Chart of the Week – Crypto, Bitcoin

In our opinion, the most effective way to reduce and manage the risk of a properly diversified portfolio is to own various assets and investments with low correlations to each other. Understanding that no one can accurately predict the future performance of any investment, owning low (or even negatively) correlated assets can help mitigate damage during any particular market cycle.

Below is a simple chart (specifically, the darker blue dotted rectangle) that delineates the correlation between Bitcoin and the S&P 500 – at 0.19, this is an attractively low correlation. Put differently, Bitcoin oftentimes zigs when the stock market zags.

In addition to technology’s permeation into finance, a number of trending and notable events have occurred over the past few weeks:

As always, we sincerely value our relationships and partnerships with each of you, as well as your trust and confidence in us here at Towerpoint Wealth. We encourage you to reach out to us at any time (916-405-9140, info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely unsettled and complicated place, and we are here to help you properly plan for and make sense of it.

– Joseph, Jonathan, Steve, Lori, Nathan, and Michelle

Towerpoint Wealth Sacramento Independent Financial Advisor
Click here to Download
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Towerpoint Wealth Co-Sponsored Educational Event with First Citizens Bank 06.11.21

“Coming together is a beginning. Keeping together is progress. Working together is success.” -Henry Ford

We feel sincerely fortunate and grateful for the partnership our firm has with First Citizens Bank here in Sacramento (and Roseville and Folsom), as the talent, knowledge, products, and services that FCB offers helps us more deeply help our clients manage their ENTIRE personal balance sheet, in the interests of removing the hassle of properly coordinating all of their financial affairs.

A big thank you to Ty Gibney for inviting us to participate in FCBs financial educational workshop yesterday, and to our Partner, Sacramento Wealth Advisor, Jonathan LaTurner, for hosting everyone at The Sutter Club! It was a thoughtful and well-assembled event, and in the interests of maintaining and growing the comprehensiveness of the service offering our wealth management clients require, we look forward to maintaining and deepening our partnership with FCB for many years to follow. 🙏

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401(k) Loans 03.31.01

401(k) Loans | You’ve recently made some money in the stock market and interest rates are still low, so you decide it is the perfect time to buy a home. But there is a dilemma – which assets should be used, and which accounts should be drawn from to fund the down payment? Should you liquidate investments held in your “regular” non-retirement account, or should you borrow from your 401(k)?

Many people don’t like the idea of funding a down payment by selling investments in a “regular” non-retirement account because of the possible income tax consequences. Instead, they sometimes choose to borrow from their 401(k), saying to themselves: I can save money NOW by borrowing from myself, AND I am paying myself interest on the loan! Sounds harmless, right? Not so fast!

Watch this video from our Sacramento Wealth Advisor and CPA, Matt Regan, to learn why treating your 401(k) like a piggy bank could have a material impact to your retirement plan and longer-term economic health.

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Comprehensive Estate Planning | TPW White paper 03.08.2021

Download White Paper Towerpoint Wealth

Navigating the Tax Laws to Maximize | Your Beneficiary’s Inheritance | Comprehensive Estate Planning

When most individuals are establishing an estate plan, they generally only think about the tax consequences to themselves. But a truly comprehensive estate plan is one that takes planning a step further and considers the tax consequences the beneficiaries of the estate may face. When creating an estate plan, having a clear understanding of, and properly planning for these taxes will help ensure your beneficiaries get the largest inheritance possible.

Need more information on what estate planning documents do I need? Click here.

When one inherits money as a beneficiary of an estate, there are three different taxes that oftentimes need to be understood and accounted for:

Let’s take a look at these individually:

Estate and Gift Tax

• The 2021 federal estate tax exemption (commonly known as the unified tax credit) amount is $11,700,000 per individual.
• Only the deceased taxpayer is subject to the estate tax when the estate value is greater than the unused exemption.
• Even if the decedent did not have a taxable estate, the estate of the decedent survived by a spouse should file Form 706, Estate Tax Return, to pass any remaining/unused unified tax credit exemption to the surviving spouse.
• When someone dies, their assets become property of their estate. Any income those assets generate is also part of the estate, and may trigger a requirement to file Form 1041, Income Tax Return for Estates and Trusts.
• An inheritance is not considered taxable income to the beneficiary.
• Currently, in addition to estate taxes assessed at the Federal level, 12 states and the District of Columbia also collect an estate tax. California does not currently have an estate tax.

Inheritance Tax

• Only six states currently collect this tax (Iowa, Kentucky,Maryland, Nebraska, New Jersey, and Pennsylvania).
• Property passing to a surviving spouse is exempt from inheritance taxes in all six of these states.

Income Tax

• Inherited retirement account distributions are subject to ordinary income taxes.
• If you sell or dispose of inherited property that is a capital asset, you will be subject to either a long-term capital gain or loss, regardless of how long you, as the beneficiary, have held the asset.

Additional considerations

Inherited Pre-Tax Retirement Accounts

• Eligible Designated Beneficiaries and Non-Eligible Designated Beneficiaries are subject to different required distribution rules.
• Consider Roth conversions to allow the beneficiaries to take tax-free distributions.

Lowering the Value of Your Estate – Gifting

• Make annual cash gifts to your children, grandchildren, other family members, and even friends. You can also contribute cash to a 529 plan to help pay for future school to any individual you would like. The receipt of cash is non-taxable to the recipient, and, if the gift is below the $15,000 annual exclusion amount, you will not eat into your above-mentioned $11,700,000 lifetime estate and gift tax exemption amount.

Lowering the Value of Your Estate – Philanthropy

• If you are charitably inclined, you can make gifts of any size at any time while alive directly to charities or to a Donor Advised Fund. The donation of appreciated securities provides not only an immediate deduction of the fair market value of the stock at the time of contribution, but also avoids capital gains tax upon sale.
• Charitable contributions due to the death of the taxpayer result in a dollar for dollar reduction of the taxable estate.
• Additional vehicles available include Charitable Remainder Trusts or Charitable Lead Trusts.

Life Insurance

• If you are considering buying life insurance to either pay for the estate tax liability or provide more for your beneficiaries, set up a life insurance trust and have it purchase the policy so the death benefit isn’t included in your taxable estate.

Step-Up in Cost Basis – Take Advantage!

If you have appreciated stock or property and gift it to someone, the recipient gets the carried over basis and will have to pay capital gains when he or she sells the asset. Instead of gifting before your death, have them inherit it after your passing so they get a “step up” in basis and recognize a smaller gain on future disposition.

The Future of Estate Taxes Under the Biden Administration

• During his campaign, President Biden discussed the possibility of decreasing an individual’s federal estate tax exemption amount either to $5 million per individual (and $10 million for a married couple) or to the pre-Tax Cuts and Jobs Act amount of$3.5 million per individual (and $7 million for a married couple). This decrease in lifetime exemption could be paired with an increased top tax rate of 45 percent.
• President Biden also proposed eliminating stepped-up basis on death and possibly taxing unrealized capital gains at death at the proposed increased capital gains tax rates.

How Can We Help?

At Towerpoint Wealth, we are a legal fiduciary to you, and embrace the professional obligation we have to work 100% in your best interests. If you would like to learn more about Towerpoint Wealth and how we can help you achieve your financial goals, we encourage you to call (916-405-9166) or email (spitchford@towerpointwealth.com) to open an objective dialogue.

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Five Things I Wish Someone Told Me Before I Became A Founder 02.12.2021

Our President, Joseph F. Eschleman, CIMA®, was interviewed by Candice Georgiadis, a contributing writer to Authority Magazine, as part of her series about leadership lessons of accomplished business leaders. Joseph’s story and message does an excellent job of summarizing not only how passionate and driven he is as President and founder of Towerpoint Wealth, but also the grit, tenacity, and hard work it takes to build and grow an individual advisory practice, and to then pivot, and ultimately build and grow a $300 million boutique wealth management firm.

Click HERE to read the Joseph Eschleman / Towerpoint Wealth story!

Matt Regan No Comments

Cryptocurrency – Wait, I Have to Pay Taxes??!!

Do you own/trade cryptocurrency? Interested in investing in BitcoinEthereum, or any of the other 4,000 cryptocurrencies currently available to own and trade?

If so, it is important you understand the income tax consequences of owning crypto.

If you are thinking about buying, selling, or trading cryptocurrencies, watch this quick video from our Wealth Advisor, Matt Regan, to learn the tax consequences of doing so.


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Suitability vs. Fiduciary

When hiring a financial advisor, you expect him or her to always act in your best interests, 100% of the time, right? Unfortunately, this is not always the case. Click below and watch a quick video from Matt Regan, and learn about the important difference between the fiduciary standard and the suitability standard, how they can impact your financial and wealth management plan, and ultimately, your success in growing and protecting your net worth and assets.