Month: September 2022

September 8, 2022

Fleming Investment Group has merged with 360 Financial! Together, we can all provide a broader range of services than previously managed. We’re excited to announce that as of September 8, 2022, both firms will be operating together.

We continue to enrich lives through values-based principles for our clients, employees, and team members. By living and breathing six core values: confidence, going above and beyond, positivity, problem-solving, community impact, and integrity, we hope to achieve your genuine satisfaction as we help you pursue your aspirations.

We are very excited to offer expanded services, a wonderful team, and an entire disciplined financial services team to support you and your family’s financial needs.

You can now choose between one of two convenient office locations. The additional team members strengthen our bench as we continue to grow and remain on the 2022 Inc. Magazines Best Workplaces list. 360 financial made the list of 475 companies, is one of 35 companies in the financial industry, and is the only one based in Minnesota.

Warmest welcome to the new 360 team members; Brian, Danielle, Naomi, and Patty!

NOW two convenient locations!

Read the Press Release

Fleming Investment Group has been compensated in connection with this merger. Clients are under no obligation to remain with Brian Bohnsack in connection with the merger.

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Life insurance is essential in providing for beneficiaries upon your death, but it can also offer other tax advantages you may not know. For this reason, whole life insurance, also called cash value life insurance, is often used as a vehicle to reduce your taxes while alive and for your estate and beneficiaries. Here are five ways whole life insurance provides tax advantages to you today and to your heirs in the future:

#1- Tax-free death benefit– The money you pay into a permanent life insurance policy grows tax-free and remains tax-free to your beneficiaries.

#2- Tax-free loan- The policy owner can take tax-free loans from the cash value of the life insurance policy for various reasons, such as retirement income or to pay for college for a child or grandchild. The loan doesn’t need to be paid back but will reduce the death benefit beneficiaries receive. Using a cash value loan may result in interest charges and a reduced death benefit and may collapse the policy if not appropriately managed. Consult your insurance professional, so you fully understand life insurance policy loans before initiating a policy loan.

#3- Tax-free earnings- The tax-deferred growth inside a whole life insurance policy doesn’t count as income for Social Security or Medicare taxes.

#4- Tax-deductible- If you own an organized business, life insurance premiums may be deductible if the policy is part of a business succession strategy. Consult your financial and tax professionals if this is your situation.

#5- Tax strategies- There are tax-advantaged strategies using life insurance that may be appropriate for your situation. Consult your financial, legal, and tax professionals before using life insurance as part of an estate or trust plan:

• Life insurance to annuity 1035 exchange- The IRS lets you exchange your permanent life insurance policy’s cash value for an annuity, a 1035 tax-free transfer of one contract for another. The exchange may generate more income, and an annuity can also guarantee payments for life, but the exchange will cancel the life insurance policy and death benefit.
• Irrevocable life insurance trust (ILIT)- Using this strategy, you make a cash gift to the ILIT to purchase a permanent survivorship life insurance policy directly to exclude it from one’s estate. The ILIT is the owner and beneficiary of the policy. When the survivor dies, your heirs will not have to pay estate and income taxes on the death benefits.

This article has highlighted one type of life insurance, whole life, but term life insurance or variable life insurance are other options that may be appropriate for your situation. Life insurance can play an essential role in protecting your family from financial hardship and estate planning and retirement planning by providing a tax-free source of income.

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any life insurance product. To determine which products(s) may be appropriate for you, consult your financial professional prior to purchasing.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by Fresh Finance.

LPL Tracking #1-05283597

Sources:

https://www.investopedia.com/articles/pf/07/permanent_life_insurance_taxes.asp

https://www.kiplinger.com/personal-finance/insurance/life-insurance/602644/7-ways-to-utilize-life-insurance-cash-value

https://www.nerdwallet.com/article/insurance/tax-consequences-whole-life-insurance

Baby Boomers — those born between 1946 and 1964 — hold about $20 trillion in wealth.¹ Over the next few decades, many Boomers may transfer this wealth to their Gen X, millennial, and Gen Z children, perhaps incurring a hefty tax bill. Here are some ways to handle multigenerational estate planning so that the generations after you may keep these assets in the family.

What is Generational Wealth?

As the name implies, “generational wealth” is the wealth that transfers from generation to generation. Think of “old money” families whose generational wealth allowed members of the younger generations to run for office, start businesses, invest in startups, and create family charities.

How May You Build Generational Wealth?

Building generational wealth may come from various sources such as a job, a career, a business, or passive income like royalties or dividends.

After generating enough income to cover your monthly expenses, you might consider ways to use your extra income to build assets for a potential future source of wealth. Some income sources include:

• Investing in blue chip or dividend-paying stocks
• Purchasing rental real estate
• Creating something that pays royalties, like self-published books or a social media channel
• Starting a side business

The more sources and forms of income you have available, the more funds you may have to begin building generational wealth, even at a young age.

Multigenerational Estate Planning: Dos and Don’ts

There are a few “dos and don’ts” when planning an estate to create and hopefully preserve generational wealth.

DO: Talk to a financial professional.

Navigating the complexities of investing and tax implications might be tricky, and a single misstep may cost you dearly. Having a financial professional review your portfolio and recommend some options may help you save more now to provide more income later.

DON’T: Ignore tax considerations.

When it comes to building wealth, it is often not how much you earn but how much you keep. Your financial professional may help you manage tax efficiency for your assets, working toward the goal of preserving and reinvesting more of what you earn. These considerations may mean putting assets in a trust, or investing income in an individual retirement account (IRA).

DO: Diversify your portfolio and assets.

Investing in only a particular asset or sector may leave you vulnerable to market volatility. Suppose you depend on some of these funds to provide you with income in the future. In a downturn, you might sell assets at a loss to stay even. Diversifying your portfolio and managing over-exposure to any particular asset or sector may help avoid major market losses and hopefully help your portfolio maintain its value during periods of high inflation.

Footnotes

¹ Millennials’ wealth more than doubled to over $9 trillion since the pandemic began, but Baby Boomers are still worth almost 8 times as much, Fortune,
https://fortune.com/2022/03/22/millennial-wealth-doubles-during-pandemic-9-trillion-boomers

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal.  Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #1-05301724

One silver lining in the current bear market is that this could be a good time to convert assets from a traditional IRA to a Roth IRA. Converted assets are subject to federal income tax in the year of conversion, which might be a substantial tax bill. However, if assets in your traditional IRA have lost value, you will pay taxes on a lower asset base when you convert. If all conditions are met, the Roth account will incur no further income tax liability for you or your designated beneficiaries, no matter how much growth the account experiences.

Tax Trade-Off

The logic behind deferring taxes on retirement savings is that you may be in a lower tax bracket when you retire, so a current tax deduction might be more appealing than tax-free income in retirement. However, lower rates set by the Tax Cuts and Jobs Act (set to expire after 2025) may have changed that calculation for you. A cost-benefit analysis could help determine whether it would be beneficial to pay taxes on some of your IRA assets now rather than later. One strategy is to “fill your tax bracket,” meaning you would convert an asset value that would keep you in the same tax bracket. This requires projecting your income for 2022.

Lower Values, More Shares

As long as your traditional and Roth IRAs are with the same provider, you can typically transfer shares from one account to the other. Thus, when share prices are lower, you could theoretically convert more shares for each taxable dollar and would have more shares in your Roth account to pursue tax-free growth. Of course, there is also a risk that the converted assets will go down in value. You may have the option to take taxes directly out of your converted assets, but this is generally not wise.

Two Time Tests

Roth accounts are subject to two different five-year holding requirements: one related to withdrawals of earnings and the other related to conversions. For a tax-free and penalty-free withdrawal of earnings, including earnings on converted amounts, a Roth account must meet a five-year holding period beginning January 1 of the year your first Roth account was opened, and the withdrawal must take place after age 59½ or meet an IRS exception. If you have had a Roth IRA for some time, this may not be an issue, but it could come into play if you open your first Roth IRA for the conversion.

Assets converted to a Roth IRA can be withdrawn free of ordinary income tax at any time, because you paid taxes at the time of the conversion. However, a 10% penalty may apply if you withdraw the assets before the end of a different five-year period, which begins January 1 of the year of each conversion, unless you are age 59½ or another exception applies.

More Favorable RMD Rules

Unlike a traditional IRA, Roth IRAs are not subject to required minimum distribution (RMD) rules during the lifetime of the original owner. Spouse beneficiaries who treat a Roth IRA as their own are also not subject to RMDs during their lifetimes.  Other beneficiaries inheriting a Roth IRA are subject to the RMD rules. In any case, Roth distributions would be tax-free. The longer your investments can pursue growth, the more advantageous it may be for you and your beneficiaries to have tax-free income.

All investing involves risk, including the possible loss of principal, and there is no guarantee that any investment strategy will be successful.

This article was prepared by Broadridge.

LPL Tracking #1-05304304