Transcript:

[00:00:00] Voiceover: Welcome to the Life Unlimited Podcast with Larry Heller. You deserve complete financial advice so you can confidently live your life your way. For life. Now, let’s get into this week’s podcast episode.  

[00:00:19] Matt Halloran: Hello and welcome to another Life Unlimited podcast with Larry Heller. Today is a two-part series on the great wealth transfer. 

[00:00:26] Matt Halloran: Uh, Larry and I were talking a little while ago and he was like, Hey Matt, you know, what are you hearing? Uh, cause I go to a lot of conferences and what we found out is this is the topic, uh, that all financial advisors are talking about at all of these conferences 74 trillion over the next 10 to 15 years that is going to be transferred. 

[00:00:46] Matt Halloran: And so I said to Larry, man, this is like right in your wheelhouse with everything that you guys do at Heller wealth management. So Larry, welcome to the show.  

[00:00:53] Larry Heller: Oh, hi, Matt. Thanks. Great to be here again, as usual,  

[00:00:57] Matt Halloran: right? So we’re going to do this in a two-part series. So let’s talk about what part one and what part two is going to be. 

[00:01:03] Matt Halloran: And then let’s dive into part one.  

[00:01:05] Larry Heller: Yeah. So part one is going to be from your parents perspective. So if you’re a baby boomer and you’re going to be transferring money to the next generation, mostly the millennials, this is going to be from your perspective. And then we’re going to have a separate podcast for those that are going to be inheriting the wealth transfer. 

[00:01:25] Larry Heller: Maybe how do you speak to your parents about what’s going on? So two different sides [00:01:30] we’re going to look at it from.  

[00:01:31] Matt Halloran: Well, and we’re also going to have a couple of different numbers here. Cause it really does depend on who you research you’re looking at. It’s anywhere from 68 trillion to, so everybody knows full disclosure all the way up to 74 trillion, which I don’t know about you, Larry. It’s just a lot of money.  

[00:01:48] Larry Heller: Yeah. Not that much, not that much of a difference. The 68 trillion is from a Forbes, um, a Forbes, uh, study, uh, that’s going to be, they’re actually calling it the greatest wealth transfer, as Matt said, and it will make the millennials the richest generation in American history. So I guess good millennial. 

[00:02:09] Matt Halloran: Yeah, I guess so. All right. So Larry, you’re, you’re a financial planner by training, right? So, so where, where do we begin with all of this stuff?  

[00:02:18] Larry Heller: Yeah. Yeah. So there’s, there’s a lot of things. There’s a lot of things to think about as you’ve gotten into some financial and some non-financial, and we’re going to talk about both of those as far as the wealth, the wealth transfer. 

[00:02:30] Larry Heller: You’ve accumulated, you’ve worked, you maybe had a business. accumulated a significant amount of assets and you’re getting towards the latest stages in your life and you have children and you want to kind of be able to pass that onto them as far as this great wealth transfer. 

[00:02:47] Larry Heller: So there are some minefields out there, some things that you want to avoid, uh, limiting some of the money that you’re going to transfer. So we’re going to talk a little bit about that. The first one really is, is income [00:03:00] taxes. So you have a lot of this money and a lot of this money is sitting for a lot of people is sitting in qualified accounts, IRAs, 401k plans. Um, and now you, you’re getting older and there may be significant amounts of money in here. And guess what, Matt, what have, what hasn’t happened on these IRAs and these 401k plans? 

[00:03:21] Matt Halloran: I don’t know, Larry taxation.  

[00:03:25] Larry Heller: You haven’t paid what yet? You haven’t paid your taxes. Yeah. You haven’t paid taxes. So that money in there is pre-tax money. 

[00:03:33] Larry Heller: and we’ve talked about required minimum distributions. And one of the things that they’ve done is they, they’ve moved these dates back from remember 70 and a half. to 72 to 73. And now if you’re born in 1960 or later, it’s 75. So that’s a good thing. So you can defer your taxes, but guess what happens? 

[00:03:53] Larry Heller: These pots accumulate. And if you wait, you may be kicking yourself into a much higher tax bracket later on. When you have this, when you need to take this money out. So one of the things is looking at your withdrawal strategies. Should you withdraw some of this money earlier? Maybe you’ve retired and you’re not taking social security yet, and you’re in a low tax bracket and that it goes against sometimes, especially a lot of accounts that say defer you to taxes, but know, your bracket, maybe you’re in a 12 percent bracket, uh, and you [00:04:30] should withdrawing some of that money now. 

[00:04:32] Larry Heller: From your account, which you can then pass on to your Children, um, later on versus waiting to later. And now you were drawing money out of that IRA account and the taxes go to the government. Less money go into your Children. So know what tax bracket you’re in and do some withdrawal strategy planning before you hit your required minimum distribution. 

[00:04:54] Matt Halloran: Now you have done podcasts previously on Roth conversions, but I know that’s going to be a big part of this aspect of this great wealth transfer. So in IRAs and 401k plans, would you mind giving us a little bit of a brief synopsis on how one makes those decisions? 

[00:05:10] Larry Heller: Absolutely. And there’s a couple of different decisions. So again, we’re talking about the tax. brackets, tax brackets you’re in. So if you’re going to be in a lower tax bracket before your quiet minimum distribution, maybe you convert some of that instead of taking it out of your IRA, maybe you convert that into a Roth and now that money grows for you. So there is, where later on you’re at a higher tax bracket. 

[00:05:34] Larry Heller: So the Roth conversion is really two things. One is a Roth conversion for yourself. Does it make sense for, is it beneficial for your. Self or your spouse, but that’s not what we’re talking about here. We’re talking about the great wealth transfer. So there’s reason number two, why you want to do a Roth conversions. 

[00:05:52] Larry Heller: And one of those has to do with the secure act because they changed one of the greatest things out there that that could happen. If you would [00:06:00] inherit a quiet minimum distribution, you used to be able to take a small amount out. If you inherited from your parents over your lifetime and let that continue to build up tax free. 

[00:06:10] Larry Heller: Uh, Not anymore. Now you have to take it out within 10 years of the death of your parent. Now that doesn’t include spouses. They still get that. they don’t have to do that, but anyone else has to withdraw it over 10 years. So guess what? Let’s say you’re 42, 45 and unfortunately your parents died and now you inherited that money and guess what you can be for the next 10 years you can be in your prime earnings so now you’re in the highest tax bracket And federal and state are over 40%. 

[00:06:46] Larry Heller: So now you’ve inherited this money that your parents worked really hard from. And for, um, four out of every $10 is going to go to the government because those 10 years you’re in the highest bracket. But if your parents are willing to pay some of these taxes, they could convert it at a low tax bracket. Um, maybe not even 12, maybe 24 doesn’t really, you don’t really know. That’s why having some of these conversations with your children while you’re alive is great because you can plan together. So maybe them paying these taxes. And a lot of times We have a lot of clients out there and we just had a conversation with one. 

[00:07:24] Larry Heller: they’re well off. They don’t need the money from their IRAs. It’s not going to do anything [00:07:30] for them. So the only thing they’re willing to do is do this for their children and possibly even their grandchildren. So if they can pay the taxes for them themselves and give money to the next generation, they could do that at a much. 

[00:07:45] Larry Heller: Less income taxes, the wealth transfer now is more in your pocket. So these are Roth conversions and having these conversations every year, especially towards the end of the year, when you know what your taxes are going to be a super important. So before it’s too late in 2023, determine if a Roth conversion makes sense for you. 

[00:08:05] Matt Halloran: Well, and there’s a lot going on there and I need to kind of. Take some of that apart and have you elaborate a little bit because you were just talking about actually sitting down with dad for lack of a better description and the kids and having this tax discussion as something that is a family meeting. 

[00:08:24] Matt Halloran: Uh, which is really, really, really important, especially for mom and dad, who are going to be transferring this money to the kids. Do you have any experience with that specifically already?  

[00:08:34] Larry Heller: Absolutely. So, there’s a lot of things. We’ll talk about some of the non-financial things, um, and the reasons why you want to start bringing in your children. 

[00:08:43] Larry Heller: Now, a lot of, a lot of parents don’t want their kids to know what they have. especially maybe a previous generation, but that’s not the, that’s not the best thing because you may get sick or you get ill. Eventually you’re going to die. So [00:09:00] having planning opportunities to talk about minimizing finances. 

[00:09:05] Larry Heller: or guaranteeing their wishes, which we’ll talk about in some of the non-financial. So a lot of times we’ll have a meet, we’ll have a meeting with their, parents and they’re like, great idea. And then we’ll bring their children in and we’ll have a joint planning meeting on both their financial aspects, but also the non-financial aspects and some of their wishes. 

[00:09:25] Larry Heller: So everybody’s on the same page and after there are certain ages where the parents are, the, the children are adult children and a lot of times, and so it’s fine to bring them in, but I’m still amazed that there are certain people that just don’t want to do that and that could happen. costs you a lot of money. 

[00:09:44] Larry Heller: and even on the nonfinancial, I was going to wait till later, but just one of the stories that we had, we had a client that almost paid for their funeral twice, because the parents had gotten older. One spouse died. he had prepaid the funeral, never told his children. And luckily the housekeeper going through the paperwork a day before the funeral said, ah, look what I found. 

[00:10:04] Larry Heller: So having those conversations with your children, so there is nothing like that can happen is so important.  

[00:10:11] Matt Halloran: we’re going to, I’m going to have you dive in much more deeply into the non-financial, The, the psychological, the relational components of having these family meetings, but before we get entirely off taxes, I want to have you rewind a little bit, because let’s, so we talked about income taxes. 

[00:10:25] Matt Halloran: Now let’s talk about in the minimization potentially of estate taxes and [00:10:30] estate planning stuff. So, so where, where are you going to take that from here?  

[00:10:33] Larry Heller: a lot of people don’t have estate tax issues. There are some pretty significant numbers you have to reach before you have to do that. We’re gonna have a whole separate podcast on estate tax planning, and right now it’s 13, almost $13 million. 

[00:10:46] Larry Heller: And if you’re married, it’s $26 million, it’s gonna sunset, uh, which means it’s going back to the old lawyers in 2025, the end of 2025. So we’re gonna go back down to maybe 7 million each. and 14 million combined. So there are certain people that are a big part of, uh, the United States is not going to be over those numbers. 

[00:11:08] Larry Heller: But for those of you that are, you want to make sure that you do certain planning to minimize some of the estate taxes, whether it’s gifting, asset titling, credit shelter trust, there’s a lot of things that could be done. And, and in New York for those in New York, uh, it’s a little different. 

[00:11:26] Larry Heller: Because in New York that they don’t have, you don’t combine the two for husband and wife. So it’s, it, properly. making sure that if you’re over the 7 million, roughly 7 million in New York, if you’re over it by a little bit, It’s called the cliff tax and you’re taxed from dollar one. So it could be seven figures that that you owe right from the beginning. 

[00:11:48] Larry Heller: So, and it is no portability. So what you want to make sure that you do, you want to make sure that you have your assets titled, right? And you want to make sure that things are set up and there’s so many different estate tax [00:12:00] ramifications, but you’ve built all this money up. And if you can legally. put some things in place to avoid these taxes. 

[00:12:07] Larry Heller: It could be millions and millions of dollars. And there’s so many other strategies as far as irrevocable trust and insurance and other types of strategies to, to do this. But, you know, the, the wealthiest, wealthiest people really need to plan for this. And you hear a lot of people that don’t plan for this. 

[00:12:25] Larry Heller: Um, I’m going to deep myself a little bit, but a former. NFL owner. Uh, I don’t know if you know this, uh, Matt, but Joe Robbie was the NFL owner of the Miami Dolphins. And when he died, his kids were forced to sell the team because they didn’t have an estate plan. And there was no money to pay the estate taxes because the team was worth so much more. 

[00:12:47] Larry Heller: So just making sure that you have a potential, a game plan in place and to see, to find ways to minimize your estate taxes.  

[00:12:55] Matt Halloran: Larry, many moons ago I actually worked with a, a CFP CPA JD, uh, he was an estate planning attorney, a CPA and a financial advisor, a little smart for his own good. And uh, I went to one of his seminars at one point and the beginning of the seminars were pictures of all of these famous people who died without estate plans, right? 

[00:13:14] Matt Halloran: And so, I mean, you look at Prince and Elvis, and I mean, All of these people who are really, really famous. So you would like all of course, their people got it all taken care of. A lot of people don’t. So, I mean, this can really be a wake-up call. If you are in that seven to 14 million range, even if you’re [00:13:30] not, you still need to sit down with an estate planning attorney and a qualified financial advisor to make sure that you’re right. Making those right money moves. Right.  

[00:13:39] Larry Heller: Yeah. money moves in some non-financial aspects, which some are related to money or not that we’re going to talk about, in a second. So before we get into the non-financial, uh, we’re gonna, we’ll get back to our podcast, but, but first there’s a special offer for our listeners. 

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[00:15:04] Matt Halloran: All right, Larry, so let’s dive into what a lot of financial services professionals in my experience shy away from, which is the other aspect of this very important great wealth transfer conversation, which is the non-financial components of it. 

[00:15:21] Matt Halloran: You have a lot of experience here just in who you are and how you interact with your clients. Let’s talk about some of the things that you bring up during these conversations that aren’t necessarily about. The actual money in the numbers.  

[00:15:35] Larry Heller: I mean, that, that’s so important. And we, and we talk a lot, a lot about that the non-financial not even while you’re dying, but while you’re living, uh, and we have a whole book on retire right. That talks about that, that your second act that when you’re retired, you have another 30 years and what are you going to do and what’s your purpose and, how do you make sure that you get to enjoy that? 

[00:15:54] Larry Heller: And that’s a whole separate. So. podcast, but some of the non-financials, as far as the wealth transfers, one of them has to do with asset protection that from two things that we’ve, we’ve seen. Uh, and one is from a long-term illness, uh, and a long-term illness could really have an impact, not only the wealth transfer, but even the, if you’re married, the, the impact on the. 

[00:16:17] Larry Heller: Other spouse because this it’s so expensive for the, for the care and how to do that. So do you have long-term care illness, long long-term care insurance? Um, has a [00:16:30] game plan been set up, has been talked about? What are your wishes? Some people want to make sure no matter what they stay in their home. Some people are okay going to assisted living facilities. 

[00:16:41] Larry Heller: Um, and unfortunately there are certain instances where there is. There’s a significant amount of money, but they want to protect it. And do you do some, what’s called asset protection trust? So protecting some of these assets for maybe not just the wealth transfer entirely, but just making sure that you have enough to take care of yourself. 

[00:17:01] Larry Heller: Uh, and the second one is, is scams and everyone’s starting to hear some of these stories, uh, and we’ve, we’ve heard them recently. We’ve had, multiple clients that unfortunately we’ve heard from that their parents were scammed out of, um, X amount of money. They had to give money. Their grandchild was being held up and detained and they have to wire us money. So it’s important to have those conversations when they get older. And unfortunately, they may not want to give up some of this control over their money and doing that. But taking over that at a certain period of time could avoid losing tens, sometimes hundreds of thousands of dollars to these scam artists that are very good. 

[00:17:50] Larry Heller: so I’ve had conversations with a few people that have gone through this and they’ve explained the scenarios and how they’ve gotten taken in there. really, really good. And unfortunately, as you get [00:18:00] older, you’re kind of, uh, susceptible to that. So, uh, so having those conversations, maybe bringing in a third party to pay the bills, which is not just for scams, but making sure that their bills are. 

[00:18:12] Larry Heller: Paid, including a long-term care insurance policy, um, having those conversations as your parents, um, get older, it’s tough, ha bringing it to the child, we’ll talk about the other way around, but if you see that, you know what, you want to make sure that something’s wrong. Uh, go to your children, have those conversations with them and bring them into that. 

[00:18:34] Larry Heller: So that’s part of the asset, the asset protection on a non-financial, uh, and then it’s really the, some of the, the critical documents and actually how things get, passed. I can’t tell you, you mentioned how many famous people have died without a state plan, but there are so many people out there, smart, wealthy people, and they don’t have the right Right. 

[00:18:56] Larry Heller: planning documents. I mean, people do think that they’re immortal and they’re going to go on forever. I have time to do it. I’ll have time to do that at a time, but you don’t even know when that time is up. So making sure you have the right documents, the right wills, the right healthcare proxy, who’s someone to make. 

[00:19:13] Larry Heller: medical decisions for you, the right power of attorney in case you can’t pay your own bills and somebody needs to come in, come into place. And now, a lot of states, especially, um, New York has had delays in passing money to the next generation, uh, [00:19:30] through probate before COVID probate. So when you die, your assets would, would go through probate certain of your assets. 

[00:19:37] Larry Heller: And the local government would sign off on it, and then four to six weeks later, it would go to the next generation. Now it’s taking nine months and sometimes longer. So does it make sense to what’s called a revocable trust to, eliminate or avoid having to go through probate so the assets can transfer? 

[00:19:55] Larry Heller: Not that the kids need it that quickly, but they may need to pay some final bills. They may want to sell the house. So there are simple things to do pass these along. and just, you know, knowing one of the other nine fenders that happened, happened in my own life, my own mom, um, I had to take it to the hospital. 

[00:20:12] Larry Heller: Unfortunately, she wasn’t able to talk and they asked me who was a primary doctor. And I’m like, I have no idea. So they weren’t able to get her records from that. So one of the things we do is we have a list. That we keep on our portal with all the key people who are their insurance, who’s their account, and then who are their doctors. 

[00:20:30] Larry Heller: And we give them a copy of this and the kids should have a copy of this. So somebody knows, Oh, something happens. They can contact all these people. And there’s also an authorization. that we use. So we have a client portal with everyone’s um, entire financial picture there. So if something happens to them, we’re able, we get authorization, we’re able to open up the portal to the executor, which in the most cases is one of their children. 

[00:20:57] Matt Halloran: Well, we also need to make sure that there’s medical power of [00:21:00] attorneys, healthcare power of attorneys, regular power of attorneys, you know, and, and that’s, that’s actually something I’m going through with my mother now is making sure that my brother and I are on all of those documentations, just in case what happened with your mom happens with ours, that we can actually make decisions based off of her in. 

[00:21:21] Matt Halloran: And in your experience, Larry, and I know in mine, are, in my opinion, are as important.  

[00:21:25] Larry Heller: So we just had a meeting. We had a client, who inherited a significant amount of money from a non-family, non family member, and it’s a second marriage. And Now, what happens when something happens to her because she’s married and technically in New York, one-third of her assets would go to her second current husband. 

[00:21:49] Larry Heller: And she was like, what? I want that money to go to my children. It’s I’ve only been remarried a few years. I inherit this other money. I don’t want it to go to my second husband. So there are things that you can do to. make sure that gets done and having that done. And then we had a meeting with all three of their adult children who happened to be, she had three girls and they didn’t want to hear the fact that their mom was one day going to pass away, but it was important that we brought them in. 

[00:22:18] Larry Heller: We explained it. We talked about which one of them is going to be power of attorney, which one of them is the healthcare proxy, how this would get passed on God forbid. There was a. common disaster and money, how to go to a [00:22:30] minor child, how that works and having that whole conversation and letting them all know that just would eliminate a lot of problems and a lot of delays and uncertainty later on. 

[00:22:42] Larry Heller: So have those conversations now. Don’t wait until it’s too late.  

[00:22:47] Matt Halloran: Well, in this is one of the reasons why I was so excited that you were going to be doing this podcast, because there are a lot of financial services professionals who are not comfortable talking about, you know, having these conversations about the financials about illness and about inevitable death. 

[00:23:04] Matt Halloran: And this is something that you have leaned into a lot more with that, though. You said something earlier that I want to make sure that we circle back around to, because you said it very quickly, but I think our audience needs to hear it again, that there are some people, and I know it was more of the silent generation than it is the baby boomers who just didn’t want to have their kids know, how much money they had or where everything was. 

[00:23:28] Matt Halloran: Since you’ve been an advisor for a while, have you seen a shift in the consciousness of people who are getting greater in age and who are going to have these legacy issues?  

[00:23:36] Larry Heller: you mean whether they’re willing to now have those conversation? Yes. So maybe it was the generation that grew up in the depression and some of that that were more or not as willing, but now we’re seeing more of that. 

[00:23:50] Larry Heller: They are willing and sometimes they need to have a little bit of a. You know, I don’t want to say a push, but hey, you know, when I talk to a client, Hey, [00:24:00] it’s a good idea. We should have these conversations. Just had this conversation. We have an, a client. now we, the whole plan is put, was put in place, but she’s now close, close over 90 and her three children don’t live close to her. 

[00:24:14] Larry Heller: So as she’s no longer able to maybe live alone, she’s still living by herself. Self, what is going to happen somewhere down the road? Having those conversations with the three children is important. So we, and she was a little skeptical about that at first, but, was after speaking to her, okay, let’s do it. 

[00:24:36] Larry Heller: And then she’s glad that we went ahead and do it. So we’re seeing more, more and more people willing to have those conversations, have those conversations now.  

[00:24:45] Matt Halloran: All right. As we wrap up and prepare for the part two of this podcast, what else do you want to say before we wrap this puppy up?  

[00:24:53] Larry Heller: Yeah. So it’s just, it’s important. 

[00:24:55] Larry Heller: If you accumulate a lot of your assets and just making sure that it, that it flows the way, the way you want, we, we During the last month, we’ve had a lot of these conversations. We have these meetings in September and October, and I think they’re more appreciated of these meetings than when we have some of the investment meetings and showing them the rates of return, that they’re really appreciated that we’re having these conversations because it, it sparks some things that they may not have done that they want to do, or maybe want to change, or they want to want to update. 

[00:25:29] Larry Heller: So having [00:25:30] these planning. Conversations every so often and going through all their documents to see if they need to be updated are extremely well-valued by everyone out there and extremely important for the next generation and the wealth transfer.  

[00:25:43] Matt Halloran: All right, everybody. Uh, so. Here’s the thing. Number one, please make sure that you listen to part one and part two of this podcast about the great wealth transfer. 

[00:25:52] Matt Halloran: So Larry, let’s again, let’s preview. so who is really this next episode going to be focused on? And, so right now we’re kind of talking to, to grandma and grandpa, who are we going to be talking to in this next one?  

[00:26:03] Larry Heller: So now we’re going to be talking to their children and what do they do? How do they approach their parents? 

[00:26:11] Larry Heller: And why is it important? How do they do that? What, how thinking the parents thinking that there’s a money grab in here? Cause it’s not really that it’s really, how do they protect themselves and then how to minimize some of the amount of taxes and non-financial issues and problems that could, could happen. 

[00:26:30] Larry Heller: So a little bit more. Touchy, maybe coming from a child. So we could talk about some of that and some of those suggestions going, uh, going forward.  

[00:26:39] Matt Halloran: All right, Larry, if people want to know more about who you are and what you do, what should they go?  

[00:26:43] Larry Heller: Absolutely. You can go to our website, hellerwealthmanagement.com and, uh, you can click right on there for a free 20-minute consultation with myself and one of our financial planners, or feel free to call the office at 631 248 3600.  

[00:26:58] Matt Halloran: And you can also take [00:27:00] the get take the financial resilience test, uh in order to really fear Find out where you are from a resilient standpoint of where you are to retire Uh the way that you want to all right larry. Well, thanks for your brain today. I always appreciate you brother.  

[00:27:12] Larry Heller: Great. Thanks Matt That was great  

[00:27:15] Matt Halloran: All right, everybody, listen, this is really an important conversation that you need to make sure that you’re tracking with your friends and family. This is a wonderful opportunity to share just a couple of podcasts with people that you know, so that these conversations can happen. 

[00:27:28] Matt Halloran: If you are a family member who knows that this conversation needs to happen within your family, please make sure that you share this podcast with them. It’s very, very easy. All you have to do is click that share button. So for Larry and all of us here, we’ll see on the other side of the mic very soon.