1 00:00:00,000 --> 00:00:01,290 Intro: Hi, I'm Ed Slott. 2 00:00:01,320 --> 00:00:02,340 And I'm Jeff Levine. 3 00:00:02,430 --> 00:00:06,090 And we are two guys who just love to talk about retirement and taxes. 4 00:00:06,120 --> 00:00:10,050 Look, our mission is simple to educate you, the savers, so that you can make 5 00:00:10,050 --> 00:00:14,130 better decisions because better decisions on the whole lead to better outcomes. 6 00:00:14,160 --> 00:00:15,780 And here's how we're going to do that. 7 00:00:15,840 --> 00:00:20,010 Each week, Jeff and I will debate the pros and the cons of a particular 8 00:00:20,015 --> 00:00:22,880 retirement strategy or topic with the. 9 00:00:23,215 --> 00:00:25,915 Helping you keep more of your hard-earned money. 10 00:00:26,035 --> 00:00:29,425 Yeah, but we won't know which side of the debate we're taking until we flip 11 00:00:29,425 --> 00:00:33,205 a coin winner of the coin flip gets to pick which side of the debate they want 12 00:00:33,205 --> 00:00:37,975 to argue, and both of us will have to argue in favor of our respect positions, 13 00:00:38,185 --> 00:00:40,215 whether we agree with them or not. 14 00:00:40,455 --> 00:00:45,135 At the end of each debate, there's going to be one clear winner you, a more 15 00:00:45,135 --> 00:00:48,585 informed saver who can hopefully apply the merits of each side of the debate 16 00:00:48,885 --> 00:00:52,785 to your own personal situation to decide what's best for you and your family. 17 00:00:52,815 --> 00:00:53,685 So here we go. 18 00:00:53,685 --> 00:00:55,875 Welcome to the Great Retirement Debate. 19 00:01:02,025 --> 00:01:04,185 Jeffrey Levine: Hello everyone, and welcome back to 20 00:01:04,185 --> 00:01:05,384 the Great Retirement Debate. 21 00:01:05,384 --> 00:01:08,450 I'm Jeff Levine, Ed, good to be with you today. 22 00:01:08,979 --> 00:01:09,440 Ed Slott: Yep. 23 00:01:09,440 --> 00:01:13,230 And we're going to have another great episode of the Great Retirement Debate. 24 00:01:13,230 --> 00:01:14,340 That's why it's called Great. 25 00:01:14,700 --> 00:01:14,910 Jeffrey Levine: Yeah. 26 00:01:14,910 --> 00:01:17,400 Well, you know, I was, I was reading over the weekend and I saw an 27 00:01:17,750 --> 00:01:21,990 interesting quote, really reminded me of, uh, of why we do this episode. 28 00:01:21,990 --> 00:01:26,009 It was from, uh, a person named Joseph, uh, Juber, and hopefully 29 00:01:26,009 --> 00:01:27,150 I'm pronouncing that correctly. 30 00:01:27,150 --> 00:01:28,530 I suspect it's French. 31 00:01:28,830 --> 00:01:32,940 Uh, someone's gonna probably be listening and say, Jeff, that was terrible. 32 00:01:33,000 --> 00:01:37,725 But, uh, the quote was, it is better to debate a question without 33 00:01:37,730 --> 00:01:41,655 settling it than it is to settle a question without debating it. 34 00:01:42,115 --> 00:01:43,225 I thought that was great. 35 00:01:43,255 --> 00:01:46,164 You know, that really sums up why we're doing this, is just to 36 00:01:46,164 --> 00:01:49,765 get that information out there to give everyone kind of two sides 37 00:01:49,765 --> 00:01:51,054 of the same coin as we always say. 38 00:01:51,054 --> 00:01:51,384 Right? 39 00:01:51,774 --> 00:01:51,925 Ed Slott: Yeah. 40 00:01:51,925 --> 00:01:55,765 Well, today we have a great topic, gifting versus inheriting. 41 00:01:55,824 --> 00:01:56,304 Jeffrey Levine: Ooh. 42 00:01:56,455 --> 00:02:01,210 Ed Slott: So just as a setup for this, obviously, you have to be in 43 00:02:01,450 --> 00:02:03,460 a position to gift versus inherit 44 00:02:03,700 --> 00:02:08,410 So, uh, and if you are the beneficiary, either one is good. 45 00:02:08,410 --> 00:02:09,639 So there's no debate. 46 00:02:09,880 --> 00:02:10,269 Jeffrey Levine: That's right. 47 00:02:10,329 --> 00:02:12,130 That's, it's a, it's a win either way. 48 00:02:12,279 --> 00:02:16,360 So, to, to get this straight Ed, you're, you're saying the topic for today then 49 00:02:16,370 --> 00:02:21,490 is, someone who has money, are they better off gifting it while they're alive 50 00:02:21,490 --> 00:02:25,719 versus letting it, like holding onto it and then passing it up upon death? 51 00:02:25,719 --> 00:02:26,500 Is that right? 52 00:02:26,589 --> 00:02:29,000 Ed Slott: That's exactly it, and there advantages both 53 00:02:29,000 --> 00:02:30,709 way, personal and financial. 54 00:02:30,714 --> 00:02:32,989 And that's why there's two sides to this issue. 55 00:02:33,320 --> 00:02:35,450 Jeffrey Levine: All right, well, your topic. 56 00:02:35,510 --> 00:02:37,670 Uh, I get to pick the coin flip today. 57 00:02:38,029 --> 00:02:39,019 I'm gonna go with tails. 58 00:02:39,019 --> 00:02:40,640 I think I'm on a losing streak here lately. 59 00:02:40,640 --> 00:02:43,040 Ed Slott: So coin here. 60 00:02:43,370 --> 00:02:43,700 Jeffrey Levine: All right. 61 00:02:44,339 --> 00:02:45,320 What do we got, Ed? 62 00:02:45,870 --> 00:02:46,540 Ed Slott: Tails. 63 00:02:46,579 --> 00:02:47,109 Jeffrey Levine: Tails. 64 00:02:47,135 --> 00:02:47,464 All right. 65 00:02:47,464 --> 00:02:51,964 I am gonna go with, uh, I'm gonna go with gifting. 66 00:02:51,964 --> 00:02:55,445 I'm gonna, I'm gonna be the gifter, which means, Ed, you're 67 00:02:55,445 --> 00:02:57,424 gonna argue you gotta inherit it. 68 00:02:57,605 --> 00:02:58,174 You leave it. 69 00:02:58,179 --> 00:02:59,765 Don't, don't use it until you die. 70 00:03:00,814 --> 00:03:01,265 Ed Slott: All right. 71 00:03:01,265 --> 00:03:01,654 All right. 72 00:03:01,894 --> 00:03:05,765 Like I said, you know, if you are, uh, listening to this and you have issues, 73 00:03:05,765 --> 00:03:09,364 you know, you could have estate issues and uh, things with issues with your 74 00:03:09,364 --> 00:03:13,325 beneficiaries, and you just want both sides to see what's best for you. 75 00:03:13,325 --> 00:03:14,605 Jeffrey Levine: All right. 76 00:03:14,630 --> 00:03:18,230 Well, I think, you know, I think the biggest reason I like gifting, Ed, is, 77 00:03:18,230 --> 00:03:21,859 and I, I think I'm gonna use a line straight from the Ed Slott playbook. 78 00:03:22,040 --> 00:03:22,219 Ed Slott: Oh, no. 79 00:03:22,225 --> 00:03:23,269 With the warm hand. 80 00:03:23,420 --> 00:03:23,959 Jeffrey Levine: That's right. 81 00:03:23,959 --> 00:03:27,380 It's better to gift with warm hands than cold hands, you know? 82 00:03:27,380 --> 00:03:33,170 And yeah, I, I think about, You know, uh, my, my grandfather, you 83 00:03:33,170 --> 00:03:35,059 know, is, is still alive today. 84 00:03:35,059 --> 00:03:38,450 And one of the things he always used to talk to me about was, you know, he could 85 00:03:38,454 --> 00:03:42,559 have held on to everything and never, never tried to do anything for his kids 86 00:03:42,559 --> 00:03:47,000 or his grandkids or, or, or now his great-grandchildren while they were alive. 87 00:03:47,359 --> 00:03:51,540 But, you know, he's 94 now at the time when he passes away. 88 00:03:51,965 --> 00:03:53,465 Who's gonna need any of that? 89 00:03:53,465 --> 00:03:57,905 And what sort of, you know, if you, if you gift and you help earlier in life, first 90 00:03:57,905 --> 00:04:03,274 off, you get to enjoy, uh, you know, the, seeing what it can do to help others. 91 00:04:03,280 --> 00:04:06,725 Whether it's, you know, helping someone pay for college or, you 92 00:04:06,730 --> 00:04:08,674 know, even just a new bike for a kid. 93 00:04:08,680 --> 00:04:09,095 Right? 94 00:04:09,305 --> 00:04:12,995 And wouldn't it be better to see that child ride the bike and enjoy that, 95 00:04:12,995 --> 00:04:14,734 get that enjoyment than it would be. 96 00:04:15,075 --> 00:04:18,104 To hold onto that money in your account until you pass away. 97 00:04:18,104 --> 00:04:20,235 I mean that, I think maybe that's the biggest argument for 98 00:04:20,235 --> 00:04:22,245 gifting is you get to enjoy it. 99 00:04:22,245 --> 00:04:26,534 It's, it's a gift for someone else, but if you're, if you're doing it the right way, 100 00:04:26,895 --> 00:04:28,664 it may really be more of a gift for you. 101 00:04:29,495 --> 00:04:32,885 Ed Slott: Well, uh, you used my words and I've said that for years. 102 00:04:32,885 --> 00:04:36,305 It's always better to give with warm hands than cold hands. 103 00:04:36,305 --> 00:04:39,965 So, uh, I, you know, there's a lot to be said for that. 104 00:04:39,995 --> 00:04:42,365 But I've also worked with clients over the years. 105 00:04:42,365 --> 00:04:46,025 People, like many of you listening, that might say, you know, that sounds good. 106 00:04:46,030 --> 00:04:47,645 I'd love to see what it would do. 107 00:04:47,885 --> 00:04:50,825 But I've had people, you know, that you might say, oh, they 108 00:04:50,825 --> 00:04:52,325 have millions and millions. 109 00:04:52,655 --> 00:04:57,754 But I tell you in today's world, with so much uncertainty, many people are 110 00:04:57,754 --> 00:05:00,635 afraid, what if I need the money? 111 00:05:01,025 --> 00:05:03,155 And it doesn't matter how much they have. 112 00:05:03,159 --> 00:05:04,564 There's always that feeling. 113 00:05:04,624 --> 00:05:09,304 And remember, gifting is a one-way street, especially for family. 114 00:05:09,335 --> 00:05:09,424 Mm-hmm. 115 00:05:09,900 --> 00:05:12,015 , once you give, it does not come back. 116 00:05:12,015 --> 00:05:13,935 That is a total one-way street. 117 00:05:14,115 --> 00:05:16,095 Once you give, it's gone. 118 00:05:16,095 --> 00:05:17,865 And you have to be okay with that. 119 00:05:18,375 --> 00:05:23,205 And if you give, now, you could control your gift, uh, better in certain ways. 120 00:05:23,505 --> 00:05:27,770 But some people want both control and they wanna be able to, and this 121 00:05:27,775 --> 00:05:29,300 is where some people get in trouble. 122 00:05:29,539 --> 00:05:30,650 They wanna gift. 123 00:05:30,650 --> 00:05:34,150 So they create these more complex structures. 124 00:05:34,150 --> 00:05:37,700 And that's not really what we're talking about, where you kind of gift 125 00:05:37,700 --> 00:05:41,479 it, but you still have control, which the, you know, you still have strings 126 00:05:41,485 --> 00:05:45,890 attached and that probably won't help you for estate planning purposes, 127 00:05:45,969 --> 00:05:49,640 cause it would go right back into your estate if you still maintain control. 128 00:05:49,789 --> 00:05:51,950 It wasn't what we call a completed gift. 129 00:05:52,010 --> 00:05:54,650 You didn't really give give up control. 130 00:05:56,115 --> 00:06:00,164 That I think you mentioned one big issue on your end if, for gifting is the 131 00:06:00,164 --> 00:06:04,965 feeling you get, but it could work, the, the emotion could work the same way, 132 00:06:05,175 --> 00:06:09,914 uh, by leaving money as an inherent, by not gifting, by saying, you know what? 133 00:06:09,974 --> 00:06:11,805 I want to keep control of my money. 134 00:06:11,805 --> 00:06:16,485 I'll do things when I can, but I worry about needing money, whether it's 135 00:06:16,485 --> 00:06:18,495 health or medical, re whatever it is. 136 00:06:18,854 --> 00:06:22,485 And again, I've seen it with clients where you'd say, oh, they have millions. 137 00:06:22,485 --> 00:06:28,140 Matter of fact, I got a call over the weekend, uh, from a client who had, 138 00:06:28,260 --> 00:06:33,450 I, I think I forget the number, like 8 million in his IRA and he's 92 and 139 00:06:33,450 --> 00:06:35,220 he's still worried, what if I need it? 140 00:06:35,280 --> 00:06:38,280 So that's, that's a mentality sometimes. 141 00:06:38,940 --> 00:06:41,740 Jeffrey Levine: Well, you know, that's, that's a really good point and I, I 142 00:06:41,745 --> 00:06:44,880 certainly understand that and, you know, again, that's always where I 143 00:06:44,880 --> 00:06:49,170 say maybe a, a good financial advisor or, or some other sort of financial 144 00:06:49,170 --> 00:06:53,694 professional coming in and helping people understand how secure versus how not 145 00:06:53,700 --> 00:06:57,444 they are can, can empower someone to have the comfort to gift during life. 146 00:06:57,444 --> 00:07:00,804 But you know, the other thing that strikes me about one of the best reasons 147 00:07:00,809 --> 00:07:08,184 to gift during life is you get to see a little bit what your kids or others 148 00:07:08,184 --> 00:07:10,194 are going to do with those gifts. 149 00:07:10,200 --> 00:07:10,684 Right? 150 00:07:10,854 --> 00:07:15,575 And that can maybe help you decide what you want to do when you pass away. 151 00:07:15,575 --> 00:07:18,245 Because when you pass away, once you, once you're gone, Ed, you're gone. 152 00:07:18,684 --> 00:07:20,694 There is no coming back from that either. 153 00:07:20,744 --> 00:07:24,374 Uh, and you know, you only get one shot at doing it correctly. 154 00:07:24,674 --> 00:07:26,414 And you talked about complex structures. 155 00:07:26,414 --> 00:07:30,344 Oftentimes people look and they say, well, you know, maybe I want to trust to control 156 00:07:30,349 --> 00:07:32,024 things a little bit more after I'm gone. 157 00:07:32,024 --> 00:07:35,834 But trust can be expensive to create, expensive to implement. 158 00:07:36,014 --> 00:07:39,434 There are tax consequences and that can make trust more costly. 159 00:07:40,004 --> 00:07:44,655 A lot of times the most, uh, the simplest way and the most cost effective way 160 00:07:44,655 --> 00:07:47,954 of leaving money to someone is leaving it to them outright, but if they're 161 00:07:47,954 --> 00:07:53,114 just gonna spend it and on, on things that perhaps you wouldn't approve of, 162 00:07:53,114 --> 00:07:57,104 and that's a problem for you, well, knowing that before you pass away 163 00:07:57,104 --> 00:08:02,199 would allow you to help create your estate plan and modify it in a way that 164 00:08:02,199 --> 00:08:04,629 would help reflect your wishes more. 165 00:08:04,869 --> 00:08:08,559 And so if, if, if you don't gift during life, you may not have that opportunity. 166 00:08:08,559 --> 00:08:12,099 But if you start by gifting and you see that you're, again, I'll just 167 00:08:12,099 --> 00:08:13,299 use your children as an example. 168 00:08:13,304 --> 00:08:15,999 If you can see that they're being responsible with that, you know, 169 00:08:15,999 --> 00:08:20,139 they're taking that and using it to, to do things that you would approve of. 170 00:08:20,199 --> 00:08:21,519 Again, cause it's your money, right? 171 00:08:21,519 --> 00:08:24,459 I mean, you could say on one hand, well, you know, what do you care? 172 00:08:24,459 --> 00:08:25,899 Once you give it to them, it's gone. 173 00:08:25,899 --> 00:08:26,769 It's theirs. 174 00:08:26,944 --> 00:08:29,434 But if you're giving it, you're probably giving it for a purpose. 175 00:08:29,434 --> 00:08:33,914 Whether that's to help them with their own education, their own children's 176 00:08:33,919 --> 00:08:37,564 education perhaps to, to be able to buy a house, to raise their family. 177 00:08:37,564 --> 00:08:42,184 I mean, there are, there are things that just naturally we gravitate towards. 178 00:08:42,424 --> 00:08:46,564 Uh, and it's not, you know, going out and spending it at the casino. 179 00:08:46,844 --> 00:08:51,584 Or, uh, you know, spending it on a Ferrari or look in some cases, Ed, you 180 00:08:51,584 --> 00:08:55,785 know, the sad reality is, um, there are so many people in this country 181 00:08:55,785 --> 00:09:00,644 who have some sort of health issue either with, with drugs or alcohol. 182 00:09:00,884 --> 00:09:03,464 Uh, those things remain a challenge for so many people. 183 00:09:03,795 --> 00:09:08,535 And obviously having the means to, to purchase more of those things, 184 00:09:08,894 --> 00:09:13,244 um, or the means not to work as much, can give people more time to 185 00:09:13,244 --> 00:09:14,894 engage in those sorts of activities. 186 00:09:14,894 --> 00:09:18,290 And it is, Uh, you know, I mean, we have opioid epidemics. 187 00:09:18,290 --> 00:09:21,949 We have, you know, uh, uh, issues with other sorts of drugs and alcohol. 188 00:09:22,250 --> 00:09:24,350 Uh, these are things we don't really like to talk about. 189 00:09:24,770 --> 00:09:29,510 But again, giving your, uh, your beneficiaries a chance with 190 00:09:29,510 --> 00:09:34,490 something during your lifetime can allow you to see what happens. 191 00:09:34,520 --> 00:09:38,840 And then you can modify your plans once you're gone based 192 00:09:38,840 --> 00:09:40,470 on how they deal with that. 193 00:09:41,070 --> 00:09:44,770 Ed Slott: Yeah, I've had clients that, uh, have thought about that and what we're 194 00:09:44,775 --> 00:09:49,260 talking about when we say gifting, making lifetime gifts versus leaving it at death. 195 00:09:49,589 --> 00:09:51,329 There are a couple of issues here. 196 00:09:51,480 --> 00:09:54,780 We're talking about personal, emotional, behavioral, but there's 197 00:09:54,780 --> 00:09:56,910 also financial reasons too. 198 00:09:57,120 --> 00:10:00,555 Maybe you have a large estate and you have to reduce it to 199 00:10:00,555 --> 00:10:02,774 avoid possible estate taxes. 200 00:10:03,224 --> 00:10:07,994 But a lot of those issues, Jeff, that you talked about, uh, some people don't even 201 00:10:07,994 --> 00:10:10,035 want, again, I've had clients like that. 202 00:10:10,185 --> 00:10:11,894 I said, should we bring your family? 203 00:10:11,894 --> 00:10:12,224 Nope. 204 00:10:12,224 --> 00:10:13,874 I don't want them to know any of that. 205 00:10:14,174 --> 00:10:16,394 You know, they, they wanna stay close to the vest. 206 00:10:16,399 --> 00:10:18,824 They don't like it to be known how much they have. 207 00:10:18,824 --> 00:10:22,634 A lot of the, I don't know if a lot, but some people don't even tell 208 00:10:22,634 --> 00:10:26,024 their children, which I don't know if I agree with how much they have. 209 00:10:26,024 --> 00:10:29,204 And they just said, look, they'll deal with it when I'm gone. 210 00:10:29,319 --> 00:10:30,699 And this way I'll control it. 211 00:10:30,699 --> 00:10:34,569 And if I see their behavior is bad, I can change my will and trust 212 00:10:34,719 --> 00:10:38,680 before I've given the money away and they'll deal with it later. 213 00:10:38,859 --> 00:10:41,650 And I've had people that say, look, my kids don't even get along. 214 00:10:41,709 --> 00:10:43,030 I don't want to be in the middle of that. 215 00:10:43,060 --> 00:10:43,839 After I'm done. 216 00:10:43,900 --> 00:10:45,339 Let, let them fight it out. 217 00:10:45,400 --> 00:10:49,629 I'll do it either equally or how I see fit without disclosing it. 218 00:10:49,839 --> 00:10:53,009 And maybe for that reason, I feel better about it. 219 00:10:53,219 --> 00:10:57,930 But I have to say, and I hate to go on your side of the argument, uh, with 220 00:10:57,930 --> 00:11:03,180 gifting, you have a, a better shot when you go to the financial and tax reasons, 221 00:11:03,420 --> 00:11:05,729 if you might have a taxable estate. 222 00:11:06,180 --> 00:11:08,999 And right now the exemption is very high. 223 00:11:08,999 --> 00:11:12,599 As we're talking, it's 12 million going up to almost 13. 224 00:11:12,629 --> 00:11:15,269 But actually by the time somebody's hearing this, it'll be 225 00:11:15,269 --> 00:11:18,839 almost 13 million a person, but that's not gonna last that long. 226 00:11:19,139 --> 00:11:22,049 According to tax, it's supposed to get cut down in half. 227 00:11:22,319 --> 00:11:24,779 So you have to look at the planning reasons too. 228 00:11:24,929 --> 00:11:29,879 Your estate value may go up and your exempt amount may come down by half. 229 00:11:30,389 --> 00:11:35,964 Now, uh, I said I, I jumped over to your side for the tax planning part 230 00:11:35,964 --> 00:11:40,314 of it, which we said we wouldn't do, but it's such a, a glaring item. 231 00:11:40,584 --> 00:11:45,294 But, uh, if there's any reason to keep it and leave it as an inheritance, I 232 00:11:45,294 --> 00:11:52,174 think it's the personal, uh, disclosure, keeping it, uh, personal to you and, uh, 233 00:11:52,594 --> 00:11:55,564 control keeping, uh, money in control. 234 00:11:55,564 --> 00:11:56,854 People are living so long. 235 00:11:56,854 --> 00:12:00,185 Like I mentioned that 92 year old guy, you know, what, if I last 236 00:12:00,185 --> 00:12:01,534 10 years, I might need money. 237 00:12:01,534 --> 00:12:03,574 I might, I may want a special kind of healthcare. 238 00:12:03,574 --> 00:12:06,674 I'm not sure about the healthcare situation and I'm worried about 239 00:12:07,114 --> 00:12:10,834 needing it and I don't wanna have to deal with this with my kids. 240 00:12:10,834 --> 00:12:15,795 Let 'em have what's left when I'm gone and whatevers left, people tell me it's 241 00:12:15,795 --> 00:12:17,714 gravy, whatever they get, it's gravy. 242 00:12:17,834 --> 00:12:18,944 It's always a plus. 243 00:12:18,944 --> 00:12:22,694 If I have anything left, they're going to be in the up column, 244 00:12:23,155 --> 00:12:25,604 whatever I leave them, they'll just have to wait longer for it. 245 00:12:26,264 --> 00:12:29,144 Jeffrey Levine: Well, that's, I agree with all of that. 246 00:12:29,144 --> 00:12:32,694 And I would also add though, you know, you brought up the estate tax and right 247 00:12:32,694 --> 00:12:36,984 now, you know, 13 million per person, if you're a married couple with portability, 248 00:12:37,134 --> 00:12:41,184 that gives you the ability to have almost, you know, $26 million passed. 249 00:12:41,184 --> 00:12:44,934 But even if we go back, as you mentioned, you know, at the end of 2025 here, 250 00:12:44,934 --> 00:12:49,574 we're scheduled to see some changes that were implemented back in the Trump era. 251 00:12:49,839 --> 00:12:53,979 Uh, the Tax Cuts and Jobs Act, they're set to, to sunset, and we'd go back to, uh, 252 00:12:54,249 --> 00:12:57,789 you know, roughly six and a half million dollar exemption in today's dollars. 253 00:12:58,089 --> 00:13:01,929 That's still more than enough for most people, and this is $13 million 254 00:13:02,289 --> 00:13:05,409 for married couples without any sort of advanced estate planning. 255 00:13:05,679 --> 00:13:09,549 To me, it's more of, uh, in some cases an income tax play. 256 00:13:09,549 --> 00:13:09,759 Right? 257 00:13:09,759 --> 00:13:13,294 If you're thinking about gifting, you're probably doing okay for yourself. 258 00:13:13,624 --> 00:13:17,889 And you, if you are keeping those assets, let's say they're revenue 259 00:13:17,889 --> 00:13:22,329 generating assets, uh, bonds or real estate or things like that, if 260 00:13:22,334 --> 00:13:27,234 you hold onto them, That income is going to be taxed at your tax rate. 261 00:13:27,624 --> 00:13:31,674 If you gift an asset that is generating income, well now all of 262 00:13:31,679 --> 00:13:35,514 a sudden that income is taxed to the individual who you gifted it 263 00:13:35,514 --> 00:13:37,044 to who may be in a lower bracket. 264 00:13:37,044 --> 00:13:38,784 That may be while you're gifting because they're not as 265 00:13:38,784 --> 00:13:40,764 financially secure as you are. 266 00:13:40,769 --> 00:13:45,774 And so there can be not just estate tax benefits, but also income tax benefits. 267 00:13:45,774 --> 00:13:49,614 And just based on where we are today in the current regime, again, even if we 268 00:13:49,614 --> 00:13:54,669 go back to half of today's exemption, so instead of 99.9% of people not 269 00:13:54,669 --> 00:13:57,129 having estate tax, it'll be 99.7, right? 270 00:13:57,129 --> 00:14:00,539 It's still gonna be the overwhelming majority of people, but everyone 271 00:14:00,544 --> 00:14:02,709 still has to worry about income tax. 272 00:14:03,159 --> 00:14:04,059 Ed Slott: Yeah, that's true. 273 00:14:04,059 --> 00:14:08,139 Those points are all well taken, but we never really talked about what kind 274 00:14:08,139 --> 00:14:09,894 of property we're we're talking about. 275 00:14:09,894 --> 00:14:13,704 I think we both agree we're talking about straight cash, because if 276 00:14:13,894 --> 00:14:15,234 we're talking about appreciative 277 00:14:15,234 --> 00:14:15,414 Jeffrey Levine: What are you? 278 00:14:15,414 --> 00:14:16,194 Randy Moss? 279 00:14:16,194 --> 00:14:17,214 Remember Randy Moss? 280 00:14:17,814 --> 00:14:18,654 Straight cash homie. 281 00:14:18,949 --> 00:14:19,519 Ed Slott: Oh yeah? 282 00:14:19,609 --> 00:14:21,209 Jeffrey Levine: Yeah, straight cash. 283 00:14:21,529 --> 00:14:21,809 Ed Slott: Alright. 284 00:14:22,209 --> 00:14:23,029 Straight cash in a bank. 285 00:14:23,179 --> 00:14:26,509 Um, we're not talking about, just to be clear, I don't think we're talking 286 00:14:26,509 --> 00:14:27,859 about, but I'll mention it anyway. 287 00:14:27,864 --> 00:14:29,119 Appreciated assets. 288 00:14:29,119 --> 00:14:32,389 Let's say you bought stocks years and years ago for, I don't 289 00:14:32,389 --> 00:14:34,129 know, 10,000, a hundred thousand. 290 00:14:34,129 --> 00:14:35,719 Now it's worth 15 million. 291 00:14:36,019 --> 00:14:40,519 Those are the assets you wanna hold until death to get a step up in basis 292 00:14:40,834 --> 00:14:46,174 and have your beneficiaries actually do a lot better by eliminating the potential 293 00:14:46,174 --> 00:14:50,794 capital gains tax you would've paid if you sold out and get and, uh, sold out 294 00:14:50,794 --> 00:14:54,904 that property during your life, you'd pay capital gains on that appreciation. 295 00:14:55,204 --> 00:15:00,104 All of that is eliminated if you have highly appreciated property, so for highly 296 00:15:00,104 --> 00:15:05,024 appreciated property, I think even you may have, like I did for you where I came onto 297 00:15:05,024 --> 00:15:09,104 your side of the argument, you'll have to come over to my side for this one for 298 00:15:09,104 --> 00:15:13,064 highly appreciated property including real estate and stocks and things like that. 299 00:15:13,459 --> 00:15:16,909 You do wanna hold them to death, especially the older you are and 300 00:15:16,999 --> 00:15:21,889 the closer hate to say it, but the older you are, uh, you know, the less 301 00:15:21,894 --> 00:15:23,419 you'll, they'll have to wait for it. 302 00:15:23,599 --> 00:15:23,959 Jeffrey Levine: Yes. 303 00:15:24,049 --> 00:15:27,619 That's a, well, look, I think that is certainly the strongest financial 304 00:15:27,619 --> 00:15:29,499 argument or the strongest argument period. 305 00:15:30,404 --> 00:15:33,954 For, for not giving away things during your lifetime. 306 00:15:33,959 --> 00:15:37,064 Because if you do, you know, as you mentioned, the, the step up 307 00:15:37,064 --> 00:15:41,324 and basis is probably, uh, the biggest, if not certainly one of the 308 00:15:41,329 --> 00:15:44,384 biggest glaring gaping loopholes. 309 00:15:44,389 --> 00:15:47,204 And I say loopholes, it's not really a loophole because it's intentional, but, 310 00:15:47,504 --> 00:15:54,179 uh, it is a gaping hole in the tax code that allows assets, not just to delay 311 00:15:54,479 --> 00:15:57,779 taxation, but to avoid taxation forever. 312 00:15:57,899 --> 00:15:58,469 Ed Slott: That's gone. 313 00:15:58,469 --> 00:15:58,619 Yeah. 314 00:15:58,619 --> 00:16:02,099 I mean that the tax on all that appreciation goes, uh, by the 315 00:16:02,099 --> 00:16:05,939 wayside at death, beneficiaries can pick up that property at its fair 316 00:16:05,944 --> 00:16:10,109 market value the data death and pays z sell it, and zero income tax. 317 00:16:10,109 --> 00:16:14,309 So you talked about an income tax play, uh, leaving it that kind of 318 00:16:14,789 --> 00:16:17,569 property at death and letting them inherit it rather than gift it, 319 00:16:17,589 --> 00:16:19,779 you're in way better financial shape. 320 00:16:20,169 --> 00:16:24,429 But, so there's two kinds of property and the decision might be different 321 00:16:24,429 --> 00:16:25,989 for different types of property. 322 00:16:26,179 --> 00:16:26,659 Jeffrey Levine: That's true. 323 00:16:26,749 --> 00:16:29,479 I'll throw one more out there for you, Ed, in terms of gifting then I'll, 324 00:16:29,629 --> 00:16:31,579 that maybe be my final argument here. 325 00:16:31,579 --> 00:16:34,519 I mean, we could always go on forever, but I think I'll make this my final 326 00:16:34,524 --> 00:16:39,889 argument and that is, you know, Ed, what is, what is the, uh, from a financial 327 00:16:39,889 --> 00:16:44,209 perspective after maybe running out of money, right, running out of money, before 328 00:16:44,209 --> 00:16:50,564 running out of life, uh, what is perhaps, retirees most significant concern? 329 00:16:51,404 --> 00:16:52,514 Ed Slott: I think that's it. 330 00:16:52,519 --> 00:16:55,704 We're living too long and running out of money or, or health reasons. 331 00:16:55,724 --> 00:16:56,594 Jeffrey Levine: Ah, there you go. 332 00:16:56,594 --> 00:16:58,424 That's the one I was looking for at health. 333 00:16:58,904 --> 00:17:02,894 And, and, and part of the reason health is such a concern is obviously everyone 334 00:17:02,894 --> 00:17:07,185 wants to be healthy from a physical perspective, but there are also tremendous 335 00:17:07,214 --> 00:17:13,709 financial costs to being, you know, to, to, to being ill, to being, uh, if 336 00:17:13,709 --> 00:17:18,719 you need to be hospitalized, or even worse from a financial perspective, if 337 00:17:18,719 --> 00:17:23,219 you need extended care in some sort of skilled facility, you know, that can be 338 00:17:23,219 --> 00:17:25,739 easily upwards of six figures a year. 339 00:17:26,159 --> 00:17:28,349 And that's if you're paying out of pocket now. 340 00:17:28,685 --> 00:17:32,165 The nice thing, when I say nice, of course it's all, all relative, right? 341 00:17:32,165 --> 00:17:34,024 It means you still need, uh, care. 342 00:17:34,145 --> 00:17:38,314 But from a financial perspective, if you cannot afford it, kinda like 343 00:17:38,314 --> 00:17:39,424 that old attorney thing, right? 344 00:17:39,424 --> 00:17:41,435 If you cannot afford one, one will be provided for you. 345 00:17:41,915 --> 00:17:45,094 Well, if you cannot afford care, care will be provided for you. 346 00:17:45,094 --> 00:17:51,279 Now under medicaid, medicaid is a federal, state partnership program that 347 00:17:51,279 --> 00:17:56,949 provides, uh, healthcare to those who have, um, neither you know, who both have 348 00:17:56,949 --> 00:17:59,379 assets and income below certain levels. 349 00:17:59,739 --> 00:18:01,809 You can gift away assets. 350 00:18:01,809 --> 00:18:04,899 Now you do need to, to worry about time periods and all that sort of stuff, 351 00:18:04,899 --> 00:18:07,929 which we won't get into today just cuz it's, it gets very complicated 352 00:18:07,929 --> 00:18:09,580 to make a great episode of its own. 353 00:18:09,879 --> 00:18:14,679 Uh, but if you effectively give away money to make your. 354 00:18:15,645 --> 00:18:19,094 Uh, look or appear, uh, to be you. 355 00:18:20,199 --> 00:18:23,969 Uh, uh, needing of care from the federal government and the state. 356 00:18:24,149 --> 00:18:28,199 In other words, you've gifted away enough of your assets that you're below the means 357 00:18:28,199 --> 00:18:30,779 testing guidelines, which are pretty low. 358 00:18:31,109 --> 00:18:34,709 Then Uncle Sam and your estate will actually come in and pay for 359 00:18:34,709 --> 00:18:38,789 that care for you, potentially, again, saving you upwards of six 360 00:18:38,794 --> 00:18:42,569 figures a year in some situations. 361 00:18:42,899 --> 00:18:46,649 Well, that's a pretty strong, um, yeah, that's a pretty strong argument for 362 00:18:46,654 --> 00:18:48,419 potentially gifting away those assets. 363 00:18:49,069 --> 00:18:53,159 Ed Slott: Yeah, I don't, uh, that may be true financially, but again, I've 364 00:18:53,159 --> 00:18:56,790 got a lot of experience with clients and every time that subject come up, oh, 365 00:18:56,790 --> 00:19:01,600 so you want me to give away everything, uh, in the hopes that one day I'll be 366 00:19:01,604 --> 00:19:04,589 poor enough to qualify for Medicaid? 367 00:19:04,960 --> 00:19:07,210 And the, you know, they just look at you. 368 00:19:07,210 --> 00:19:07,870 Are you kidding? 369 00:19:07,870 --> 00:19:10,179 No, I'm not giving, I worked too hard for this money. 370 00:19:10,179 --> 00:19:11,469 Back to the original issue. 371 00:19:11,469 --> 00:19:12,669 I had, the control. 372 00:19:12,969 --> 00:19:16,330 Most people are just not going to wind down and give it all away. 373 00:19:16,330 --> 00:19:18,159 And like you said, there's time periods. 374 00:19:18,489 --> 00:19:21,699 They're not gonna do that in the hope that one day they get sick 375 00:19:21,699 --> 00:19:24,710 enough and poor enough to get all these government benefits they 376 00:19:24,710 --> 00:19:26,090 won't even know they're enjoy. 377 00:19:27,870 --> 00:19:28,680 Jeffrey Levine: That's fair. 378 00:19:29,130 --> 00:19:30,060 That is fair. 379 00:19:30,240 --> 00:19:30,420 Yeah. 380 00:19:30,420 --> 00:19:34,050 No, and, and I think we really covered a, a, a broad cross section today, and 381 00:19:34,050 --> 00:19:38,880 this is one of those topics that, you know, for, for, for those who have been 382 00:19:38,880 --> 00:19:43,770 successful enough in life, to reach a point where they do feel comfortable 383 00:19:43,770 --> 00:19:48,935 enough that they can gift, is often still a, a struggle as to what should they do. 384 00:19:48,935 --> 00:19:51,544 And I think we've given people a lot to think about today, both 385 00:19:51,544 --> 00:19:55,054 between the financial and the non-financial elements of gifting 386 00:19:55,054 --> 00:19:56,314 versus inheriting, wouldn't you say? 387 00:19:56,625 --> 00:19:56,925 Ed Slott: Yeah. 388 00:19:56,930 --> 00:19:59,625 And, uh, just so we, you know, we're clear, we say this on 389 00:19:59,625 --> 00:20:01,215 every one of our episodes. 390 00:20:01,385 --> 00:20:05,135 We just took a, uh, coin toss and we took different sides of this argument. 391 00:20:05,435 --> 00:20:06,635 Uh, I am not Mr. 392 00:20:06,635 --> 00:20:07,205 Scrooge. 393 00:20:07,205 --> 00:20:09,365 I love giving and all of that stuff. 394 00:20:09,515 --> 00:20:10,565 It was just the argument. 395 00:20:10,570 --> 00:20:11,105 Jeffrey Levine: Don't don't believe him. 396 00:20:11,235 --> 00:20:12,435 No, don't, don't no. 397 00:20:12,615 --> 00:20:14,285 Ed Slott: The side of the argument. 398 00:20:14,285 --> 00:20:17,285 Leave it to them, you know, uh, keep it till the, you know, 399 00:20:17,525 --> 00:20:18,905 out of my cold, dead hands. 400 00:20:18,910 --> 00:20:20,285 That's the argument I'm taking. 401 00:20:20,285 --> 00:20:24,125 What are the, I'm not, you know, giving a dime till I, I get outta 402 00:20:24,125 --> 00:20:27,325 here, but there are some benefits and some people will say, you know what? 403 00:20:27,325 --> 00:20:28,585 I wanna hold onto it. 404 00:20:28,585 --> 00:20:30,445 But I think we hit all the big issues. 405 00:20:30,445 --> 00:20:33,595 And now you, this is something, as you said, Jeff, you have to speak to your 406 00:20:33,595 --> 00:20:38,425 advisors and how you feel emotionally, uh, about letting go of money. 407 00:20:38,430 --> 00:20:40,135 And that's a tough thing for people. 408 00:20:40,490 --> 00:20:41,360 Jeffrey Levine: It is, it is. 409 00:20:41,360 --> 00:20:44,240 Well, we've given people a lot to think about and that's always the mission here. 410 00:20:44,240 --> 00:20:48,310 So I would say, you know, hey, there are two sides, as we always say, Ed, 411 00:20:48,310 --> 00:20:49,970 to every coin, we covered both of them. 412 00:20:49,970 --> 00:20:55,550 But your life and your decisions are too important to leave up to that coin flip. 413 00:20:55,550 --> 00:21:00,545 And that's why the one thing Ed and I will always agree on is that, you should 414 00:21:00,545 --> 00:21:03,335 make sure you're talking through any big decision like this, whether it's 415 00:21:03,335 --> 00:21:06,785 gifting assets, whether it's creating an estate plan that we'll see your 416 00:21:06,785 --> 00:21:10,715 legacy through with a knowledgeable financial advisor or tax professional 417 00:21:10,720 --> 00:21:14,705 so that you can weigh the pros and the cons of different options against your 418 00:21:14,705 --> 00:21:16,715 specific set of goals and objectives. 419 00:21:17,075 --> 00:21:20,375 If you'd like to continue the discussion with Ed and I, we'd love to hear from you. 420 00:21:20,555 --> 00:21:22,215 You can reach out to us on Twitter. 421 00:21:22,405 --> 00:21:24,675 You can reach Ed @TheSlottReport. 422 00:21:24,690 --> 00:21:29,975 Again, that's @TheSlottReport where you can reach me @CPAPlanner. 423 00:21:29,995 --> 00:21:31,985 Once again, that's @CPAPlanner. 424 00:21:32,305 --> 00:21:33,295 We'd love to hear from you. 425 00:21:33,325 --> 00:21:34,555 So what do you wanna do? 426 00:21:34,555 --> 00:21:38,365 Do you wanna leave your assets to your heirs when you pass away, or are 427 00:21:38,365 --> 00:21:39,955 you looking to make lifetime gifts? 428 00:21:40,285 --> 00:21:42,475 How are, do you have a suggestion for a future topic? 429 00:21:42,715 --> 00:21:45,205 We'd love to hear it from you so that we can debate it there. 430 00:21:45,625 --> 00:21:50,185 Ed, as always, this was a lot of fun and uh, some really good arguments here. 431 00:21:50,185 --> 00:21:51,745 I'm looking forward to our next debate. 432 00:21:52,280 --> 00:21:53,030 Ed Slott: Yeah, me too. 433 00:21:53,030 --> 00:21:57,050 So join us next time for the next episode of The Great Retirement. 434 00:21:58,055 --> 00:22:01,295 Outro: Jeffrey Levine is Chief Planning Officer for Buckingham Wealth Partners. 435 00:22:01,355 --> 00:22:04,535 This podcast is for informational and educational purposes only, and should 436 00:22:04,535 --> 00:22:07,835 not be construed as specific investment accounting, legal or tax advice. 437 00:22:07,865 --> 00:22:10,775 Certain information mentioned may be based on third party information, 438 00:22:10,780 --> 00:22:13,625 which may become outdated or otherwise superseded without notice. 439 00:22:13,685 --> 00:22:16,895 Third party information is deemed to be reliable, but it's accuracy and 440 00:22:16,895 --> 00:22:18,365 completeness cannot be guaranteed. 441 00:22:18,485 --> 00:22:21,485 The topic discussed in corresponding arguments are those of the speakers 442 00:22:21,665 --> 00:22:24,455 and may not accurately reflect those of Buckingham Wealth partners.