One Heck of A Christmas Gift

How does a cool $13 million dollars sound for Christmas? This holiday season, we had the pleasure of welcoming a new client who was truly astonished to discover the extent of their inheritance. This remarkable windfall was the result of years of diligent saving and astute investing by their mother, whom we’ll refer to as Cinthia.

Cinthia’s journey took an unexpected turn when she faced serious health challenges that necessitated memory care. Her two devoted children, Rob and Meredith, found themselves tasked with unraveling the complexities of her estate, which consisted of over 30 accounts, spanning various types including checking, savings, money market, CDs, IRAs, Roth IRAs, and non-qualified accounts (in addition to a few properties).

Upon our initial assessment of Cinthia’s estate, it became evident that she had not established any trusts, leaving her vulnerable to a substantial estate tax burden upon her passing. To address this concern, we collaborated with our estate and tax planning attorney, Matt Guanci, to establish an Irrevocable Grantor trust. Meredith, entrusted with power of attorney, then began the process of transferring assets into this trust.

Working closely with our team, Meredith and Rob successfully consolidated the numerous accounts into five streamlined accounts, categorized by owner and taxation type. This strategic move not only centralized their assets but also shielded them from probate and saved them millions in estate taxes, thus resolving the primary challenge facing Cinthia’s estate.

The next crucial step was determining how to manage this newfound wealth. Rob and Meredith engaged in a series of exercises to determine their financial goals, their intended spending, and the legacy they wanted to leave for future generations. After deciding to set aside $5 million to preserve for future generations, we structured a private placement life insurance policy, owned by the irrevocable trust.

For this purpose, we selected a Defender Trust, known for its durability across generations and stringent criteria for fund usage. This approach not only created an investment vehicle with tax-free gains for an entire generation but also ensured funds could only be utilized for specific, trustee-approved purposes, such as medical expenses, education, business ventures, and marital & child support.

This strategic maneuver is expected to result in this portion of the family trust to be valued at approximately $600 million upon Meredith’s passing, all free from taxation.

Given the significant long-term gains on the remaining assets, we implemented a direct indexing strategy to strategically tax loss harvest the account. This approach preserved their asset allocation while reducing capital gains exposure.

In the case of their valuable real estate, a charitable remainder trust was the ideal choice, as the property had appreciated significantly, exceeding $3 million, and was mortgage-free. We recommended short-term renting of the property to generate passive income to cover Cinthia’s memory care expenses, which exceeded her Medicare and pension coverage. The expenses related to property repairs and updates could be deducted from this income, further minimizing taxes. Upon eventual sale, the trust will receive payments over 20 years, with the remainder allocated to charitable causes. To safeguard any remaining equity, a secondary, smaller life insurance policy was established, payable to the trust upon Meredith’s passing.

Working with families like Rob and Meredith’s showcases our expertise in tax mitigation, asset protection, and wealth accumulation strategies. Initially overwhelmed by the intricate details of their financial situation, they found solace in our clear and comprehensive plan. Together, we’ve created a generational legacy in Cinthia’s name, a testament to her life and the bright future she envisioned for her family.

One of the most moving moments of 2023 was witnessing Meredith’s emotional reaction, stepping out of our meeting briefly, as she never imagined such a transformative outcome for her family. It’s experiences like these that remind us why we are dedicated to what we do.

**All client names and identifiable factors have been changed**

Securities and advisory services offered through Packerland Brokerage Services Inc., an unaffiliated entity – Member FINRA & SIPC.