Episode 62: So, Youve Received an Inheritance. Now What?
Welcome to your retirement solution. Podcast imagine the value in knowing exactly what day you could retire and have the income you want it for the rest of your life. Listen on to explore the strategies that are designed to set you on track to living your happily ever after in retirement now onto the show. Hello and welcome to another retirement solution. Podcast with Jim Black. Now here's the thing. Part of the planning process at the retirement solution is that it's very very fluid and it's available for changing even if you know how much money you're going to get for the rest of your life after you receive that. Lice paycheck in today's podcast. I'm going to interview Jim Black. But what happens when you get a sudden influx of wealth or just a sudden influx of money after the plan has been created in after you retire so Jim? Welcome to the show here first off I think the biggest sudden influx of wealth that we are hearing a kind of buzzing around in the industry is inheritance? People are living longer. There are a lot of people who are retired who are taking care of their aging parents that whole sandwich generation sort of thing but when their parents passer when loved ones pass a lot of times there is an influx of money. How often do you see that number one and the number two? Where do you even begin a conversation there? Jim A. That's a great question because when we put a plan together one of the things that we're doing when we create that plan is trying to determine how much money you was. A client can spend every month and every year for the rest of the rest of Your Life. And that's how you kind of figure out how you're gonNA live in retirement. What kind of travel or you're going to be able to do all of those kinds of things where you're gonna live and so it's interesting when that comes up most of the time we'll have a conversation about one of the expected things that could happen out there certainly one of them somebody will say. Hey you know what I think. Sunday may downsize my house now. What's great is client is that you have a lot of control over whether you downsize your house or not when you sell it and if you can how much you're going to get out of it but some of these other events like an inheritance we will typically build an inheritance into the plan and say hey you know what we think you know. Ten YEARS DOWN THE ROAD. Fifteen years down the road. Maybe they'll be some money from my folks or maybe they're every there won't be or in some cases people say. Hey you know what? I don't know what my parents self is going to be. I don't WanNA count for at all and so we don't build it into the plan but more times than not That's exactly what happens and you do see a situation where money pops out at. Somebody wasn't expecting by the way is great news but money pops out that we weren't planning on and then it's a matter of determining how do we want to adjust the plan going forward because we can easily add that money in and say. Hey you know what you just inherited in a five hundred thousand dollars. Do you want to give it to the kids right now? You want to travel you. Maybe get a vacation on. I mean whatever you WANNA do. What's great about the planning process? We just plug it in and the plan will tell you how much you can actually spend or what that what's going to happen by adding that little influx of cash into your plan. The other great thing about that process is it really gives you control as the client control over how they WANNA do and when they wanna do it again even though they were expecting the money and they're living a great retirement a great life Boy There's not many people on fine to say you know what I don't want get rid of. It asked the money on somebody else so it is always a great learning planning opportunity. I love the idea. Where clients do this conservatively. Because the world were in with healthcare and all those kinds of things where it is possible that parents can and may end up needing that I had no idea and I. I'm a little surprised of this because I don't review you guys for a long time Jim that you guys already built that into the plan. Which means that you're already have regardless if they actually want it physically in the plan or not. You're having the conversation. Let's talk about that conversation very quickly because those conversations are difficult conversations and when you're talking to them about that what are the sort of emotional responses that you get to the clients feel at ease that you're bringing that up very early before it happens instead of being reactionary which talking about that a little bit. That is a great question because I do see exactly that way. It's very interesting conversation that I have clients most of the time during the planning process and I do see a distinct difference when an client is currently going through an issue where they're dealing with their folks dealing with having to play that apparent into a facility you are bringing in a nurse on a regular basis or some of those issues that are really kind of towards the end of life issues that Rupe by the if it gets to that point we have the by the time we have the conversation not in the mindset to have that conversation they do want the plan put together but they're so focused on just trying to make sure that mom and dad are okay and dealing with all the additional expenses that they hadn't really counted on for. Mom and dad that they don't want to have that conversation now in a regular situation where somebody's coming through their retiring their fifty five sixty sixty five hundred dollars and we talk about. Hey others a possibility that you may inherit acids out there or is there a possibility? Yeah we talk a little further and so k kind of what's happening now let's Kinda see where things and and build a number in there that allows them to really live the lifestyle. They want a situation where we had a client come in. She was in her early seventies at the time when she came in and she said. Hey I know I'm gonNA inherit money when my bad guys but I don't know how much it is. And she said in fact. Jim I'd like you to call him and ask him if the numbers because he won't tell me because I'm a girl and but maybe he'll tell you so you can build it into the plan which figure this out and so I call him head conversation with him and he was. It was somebody who was handling loud resort investments. And it always you would expect you would share anything with me said. Nope nope none of actually just a might visit was not Herbert's which was a little surprising and so we have for client for a couple of years and you kind of look at the plan in what she wanted she wanted to do. Maybe a little bit more travel than she has but she wasn't comfortable spending more of her assets not knowing how much she was actually going to inherit and so she finally after a couple of years convince me to call him back against the. Hey you know in his sets a little different now. He's had some health issues in by the way. He's in his mid nineties. This conversation mental late nineties. I think at that point and so I got him on the phone and we chatted for a few minutes is attitude had not changed it all about this. He was not telling her anything about it. And whatever it was was it was. He was handling everything just fine so we actually built the plan for her and she didn't without his assets witness took the inheritance out of out of her plan. Completely so it's interesting as he did pass away and she was probably in her. Mid Seventy seventy three seventy four finally passed away and she inherited about three point. Eight million dollars from him. Who though she disclaimed the entire thing? She was so irritated with him that he would share. Tell her anything she's about. I would would've liked to have that some of that money when I was fifty years old. You know when the kids were you know doing things in school and all these other kinds of things and it left a very bitter taste in her mouth so I. I don't know what he was saying. I do get his old generation. He's got your girl. This none of your business. I mean it's very antiquated. Thank you but nevertheless it was his thinking and it actually created a huge wedge or her now the only reason I bring that up and just for parents are those who are thinking about that out there of dealing with this. We're talking about it from the perspective but we also have people who are on the other end who are the people who will be passing assets when they die and the best thing I can say for you and it helps. It might play in process with clients to is communication. I know everybody. Nobody wanted to talk about religion. Or money those taboos. I'm as a family. But you need to get over that if that's taboo It's going to be a problem I've had situations where people inherited money and I will tell you. The amount was over a quarter of a Billion Dollars. And because dad hadn't communicated with how he wanted his assets distributed basically. They were distributed evenly. Even though there was a company involved them until working company. Just the next time I saw those those four kids. They all showed up with their attorneys and nobody communicated anymore. So and the kids weren't willing to talk back and forth because they're gonNA say something that would get in trouble so my point is when it comes to dealing with inheritance in retirement the first first and most important thing is communication. If you're the person who may inherit a may see my kind of an odd conversation with mom and Dad. Lots of Times. People have made make that conversation. Say Listen. I'm trying to put a plan together for them to retire and I just trying to build their. If there's any potential things that are out there and lots of times most of the time Parents who are going to be giving money. Their kids have an open conversation. You're they're going. Hey you know I never really talked to the kids. We weren't really sure what was going to be there. When we're GONNA get their hopes up. I get all of those things but sometimes I can have that conversation so that we can build it into the plan so that when they do get to that point they really care enjoy it. I mean I have a plan right now. Where I'm the way it's built is the client is going to spend all of their assets over the course of the next fifteen years now. I will tell you her. Her father's passed away or shooting. Her mother's passed away and her dad's still here but he's not in great health. He's in his early nineties. We're one hundred percent positive. Well not hundred percent pretty positive. You probably won't make it fifteen years. But in that case he actually has a life insurance policy for her. So she's inherent for million dollars when he dies whenever that happens so we feel pretty confident building that four million into the plan So that she can spend all of their assets. Then spend the inheritance money when it comes in down the road if it comes in five years or ten years no big deal even if it comes in logger. We've actually got contingency plan. That goes next seven years but now you said a couple of things that just raised some bigger picture questions and I know the you're not an attorney but the the estate plan aspect of this the you guys have great relationships at the state plans but what are some of the things that you've seen from an estate planning perspective especially when it comes to taxes because you now. I'm thinking this leads a huge layer of complexity here. Because you've got this plan in place you know. We know what their social security is. we know what their income is. I'm assuming that Ian know I'm not saying I know that you guys do some projections on those things but if there's a sudden influx of money doesn't that can't that screw up a lot of the taxation and they're big picture. Estate Plan will absolutely so I think taxes are going to be even a bigger issue as we go forward than they are today. We're starting to see a a real kind of swing in not just in Congress but even in politics in general that there seems to be a strong feeling that any assets that you have when you die should go to the state instead of to your fam- so there's some things replied in opportunities. They're coming up but you do need to take into account. Also what is those assets that you inherit? I know that when you look at some of the politics out there most of the people who are out there talking about eliminating what's called the step up and step up means if let's say somebody your mom and Dad bought a house for one hundred thousand dollars and they die. It's worth a million. You can sell it for a million dollars in pay no tax. That step up is eliminated. You would pay taxes on everything over one hundred thousand. So that's one tax issue to deal with the other. One is most retire. Most acids the people have Are IRA type assets for a when case which is going to be taxed at your tax bracket When you receive it and of course we just had some new legislation came out that eliminated the ability to stretch over the course of your life. So that's another issue that you have to deal with from a tax perspective that maybe people weren't necessarily thicker. Now the other side is say if you get one hundred thousand dollars in yesterday. Thirty thousand tax is tough. Seventy grand. Didn't have before a boy. Wouldn't it be great to do some planning so that you get more of that grand that woods the IRS? Now you're talking about the secure act the security which actually we've had a couple of your team members talk a little bit about What is what changed that The the IRA to be able to spread out over. You had to take it within a certain amount of time and also raising the age right so those are the two big things in that new law correct. Correct now Yeah the layers of complexity. There are interesting especially when they're taking income from that 401K and they're paying taxes based off of their specific income bracket at the time that they're taking that I really I really wanted to repeat that because that's a piece of communication education idol. Honestly think Jim a lot of people Really truly understand about what happens in retirement. Now let's talk about some legacy stuff so let's talk about the fun side of this so there is kind of a of a silver lining a happily ever after for lack of a better description after someone that you loved us pass if you do this influx of money because it does open up some opportunities would you mind sharing a story or two about some some of your existing clients some clients who had these situations happened. And maybe what they did with some of this money so Yeah it's true. There are a ton more of those stories out there where people have inherited money A said I give you one example where we built into the on early knowing that those assets. We're going to be there. That's certainly one way to do it. We have had situations where we have clients who inherited some property. And what are the property was in? I remember Wyoming Montana but the other one was in Hawaii and so they loved going to Hawaii They had been to this place that they're folks have for many many years of the trade office. I was getting a little older a little dated and they didn't WANNA spend a ton of money though that up so what they did was they sold the place in Hawaii. They sold the place in as said it was Montana and Wyoming and with that cash switched islands. They bought a beautiful place. I mean the pictures are stunning on on the on the big island of Hawaii and created now a new legacy for their family. When a little bit bigger a little bit nicer I won't call it a compound for sure by a property there on the water that tag gives their family someplace that they can go and creates a memories forum. Which I'm they're going all the time. It's great for them to go with their grandkids and meet the grandkids. There may span in a month their time and one of the grandkids are westerly. One of their kids and they talk about the great kids. The kids break the grandkids. We'll come and stay for a week at a time and it's just it's exactly how they wanted to spend their retire. I mean it's just perfect. I have another client. Who again in his plan? We actually get built any money because he said you know what I just don't know is doubted passed away when we did the plan but his mom was still there and she was NFL at the time. And so we're going you know this. Is this facilities. A lot of money. She had some pretty good assets but not knowing how long was no. We didn't build anything into the plant and then when she passed away after bills and everything else she walked away with a logo her five hundred thousand dollars and so his scenario. What we did was we actually just put the five hundred thousand dollars out of what we call the travel bucket and he basically said okay. This is my travel money now for the rest of my life and he has done some spectacular trips and get a fifty eight day cruise from New Zealand. I think he got on Zealand and they ended up getting off in Rio and went through anarchic. Cg and all kinds of different places and so they are really spending money a way. That is amazing for them. It's creating Alex experiences that they would have never been comfortable. Norwood may have had the assets to span to do those jobs they would have been only do some of them but not nearly to the extent that they're able to hear plus the ability to bring along kids and grandkids on of those trips that they just couldn't have done. It's you know that extra ten grand here in twenty grand there that they're able to now drop in and create memories that even these kids to inherit the money wouldn't be the say as the memories that they have now with mom and dad or in this case grandma and GRANDPA traveling not just the world but even closer to home even some of the things that they're doing here. They did a they went. They took the entire family for Christmas which I told him would be crazy Christmas but they took entire family to Disneyland and stayed at the California resort there and they got big huge Sweet they said that sleep fourteen fifteen people at least had a marvelous time with the whole family together. Actually you're right. It was crowded but nevertheless they got that experience that they just couldn't have had I'm had they not inherited that money and had we not had an opportunity to build them and know. Here's the bigger ones bigger. The fact that they knew they didn't need it made it okay for them to spend if they'd just inherited most of the people who come in to see us have no idea how much they can actually spend. They come in and say well. I've got five hundred thousand. I've got a million. I've got five whatever it is. Nobody knows how much they can spend every month and not run out of money before they got one of two things happens to most people out there. I mean these are not our clients but the rest of the world. You'RE A. They live a life that they could have done so much more. They're so afraid to spend money that they don't and so they ended up leaving millions of dollars to their heirs or the other side. They retire do all the things that they wanted to do on the bucket list not realizing they didn't really have the money to do all of that stuff and then run out of money whether eighty five years old and they're looking for a job as a greeter at Walmart and so it's really kinda figuring out how you WanNa live the rest of your life and being able to build. All these is is miraculously. I love being a part of it. You can just hear it in your voice. Jim I it. You were wildly transparent with your excitement on on on things like that and telling stories like that. I absolutely love that. That's that's absolutely fantastic. Now if Our listeners have not sat down with somebody and had a plan like this built. Jim What what should they do? So I know that you guys do. A lot of workshops around town I I know that they can just call the office. But what's the best way for somebody to sit down and understand? That planning should be flexible. Planning should be able to let you have some Understanding of what you're going to be able to have every month until you know you're no longer here so that is that is really an interesting point because it's funny right now you turn on the radio the TV is out there social media. Everybody says we plan for retirement. Create a plan and the reality is. It's nothing more than a sales process where they're selling some product. And so what's unfortunate is the the public doesn't know the difference. They don't until they come in. Sit Down until unless they sat down with somebody else. Income sat down with her. They have no idea how different we are. A typical experience for client coming in is the broker. I sat down with at one time. And and Builds Vapor Guy. Before being a product gave let's the brokers job is to sell products. But that's not a plan. A plan is not a product and so for us the process for somebody to go through the planning process to really figure out what possible that means sitting down one on one with a retirement planner for seven eight. Maybe ten times an hour each time to go through all of the different stuff. That's GONNA come up. It's very comprehensive and a lot of the issues that people that he will have in retirement they don't think about until it blows up right in their face. One of the advantages we've had we've had over a thousand people through the planning process and so we've been there done that as it were. We know what it takes to actually have a plan that shows you. Hey you can spend you know. Five thousand four hundred eighty six dollars or twelve thousand nine hundred twenty two dollars or whatever. That monthly number is every month every year grow that with inflation taxes and not run on a month that is. I can't imagine I cannot imagine going into retirement without knowing what your number is without mill. How much you could actually spend every month without running out of money or without leaving too much. She came in and she said Jim. You have got to talk to care. I said what was Carol and she said. Carol is my neighbor from two doors that we've been neighbors for twenty years. I said okay. I'm great. I'm having talked to Carol. I said why and she said before we retired the four of US Carol and her husband Mike Line. Her husband would go tricks. I think it's pretty Nice drips. You know why Europe and all that kind of thing and she said I know they have more money than US re talked about but my client had a plan and sue said. Hey I know how much we can spend. I know that we can go on these trips in. Its own pay a carol. She's afraid to spend money. She won't spend any money. She won't go on trips with anymore because she doesn't know what she can afford. And that's exactly what happens most of the time. It's people are so afraid that they can't afford to do what they WANNA do that. They don't live retirement. They don't live their life in retirement. They live their life at home or they live the life less than they wait than they cut up if they had actually had a plan. You know when we first started this podcast. Jim opie are so to almost two years ago. We talked a lot about people who came in. Who when when you told them how much they could spend in could show them. You know that this is what you're going to be able to spend the the feelings of of just kind of being overwhelmed. And Oh my gosh. I can't believe that I never thought I'd be able to do that. Because there are other advisors. Who really don't have that planning process in place and so on the adviser sits down with the client. Says you know Mrs Johnson. You can spend this amount of money. Mrs Johnson doesn't believe it because she can't see it and you guys really do put it down so if you want to know more make sure you go to the retirement solution dot com. Jim Thank you so much for this call today. This was super awesome. My I always always loved being on here. If you have not subscribe to the podcast make sure you click. That subscribe nobody low. And please make sure you go to the retirement solution dot com and check out all of the wonderful things on the website including finding out more about who they are. What makes them tick their team their process and where you can go to get a little bit more education from all of the educational outreach that everybody at the retirement solution does in the community and if you know somebody just like that neighbor two doors now who doesn't know if she or he can spend any money and retirement and they're terrified to do anything to truly live retirement the way that they've always wanted to make sure that you share this podcast with them or just say hey look you know. I was listening to this podcast. I happen to be a client. It'd be great for you to go ahead and give them a call so for everybody at retirement solution. This is Matt Halloran. And we'll see you on the other side of the Mike very soon. The retirement solution INC is an independent financial services firm that helps people create retirement strategies designed to endure the changing market and increase their odds of success in retirement consultation with a financial planner helps determine which strategies may be appropriate for you.