facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
That's Just What You Do, Right? Thumbnail

That's Just What You Do, Right?

Over the years, we have met with many people regarding their wealth management plans, working through a variety of different pieces in their financial puzzles. During this time, there are some things we’ve seen come up over and over again. It’s as though these things are part of our culture; almost like, “well, that’s just what you do, right?” The problem is, in many cases, these ideas can be completely wrong. In this article, we are going to cover two of them, both having to do with estate and medical planning, and hopefully set the record straight.


My guess is, if you have ever been part of family wealth planning as it relates to aging parents, somewhere along the way there has been discussion about what to do with the house. The common scenarios tend to revolve around trying to protect the assets if there are extended medical needs. While we are not attorneys and do not give legal advice, we do want to say that it’s important to understand the asset requirements and time frames associated with making the decision. While there may be times when prudent planning and advice says it’s appropriate to retitle the house to the kids, we find that, all too often, it is done without looking at the bigger wealth picture. For example, moving real estate may remove significant tax benefits. Specifically, if a person lives in their home for two of the past five years, they can sell their home and not pay tax on the first $250,000 of gains ($500,000 for a couple). Additionally, if they pass away as owner of the home, the value upon death is “stepped up” to the heirs. By putting the home in the kids’ names, this is all removed and your basis transfers to them.


The second piece to this puzzle relating to longer term planning has to do with giving away assets to protect them. This one is a little more complex, however, the lines of thinking can be similar. We tend to look at our assets and think, “what if I get sick?” “Let’s get the money out of our names so the medical system does not take everything we worked for all our lives.” While we understand the fundamentals here, we often see it misapplied. There are many factors that go into deciding whether or not this “spend down” strategy makes sense for you. Timing is one of these factors. Sometimes we see planning started after it is too late where starting the clock on a gifting strategy can prove fruitless. Size of the wealth portfolio is another factor. Take, for example, a family that has three million dollars, good health coverage and/or long-term care insurance. At this level of wealth, it might not make financial sense to move all the money out, just to protect assets in case of a medical situation. While the thought of paying our own money to fund medical expenses can be frustrating, each situation needs to be kept in context. For some, it may be the more financially advantageous decision. There are many things which come into play when planning for wealth preservation and transfer. Asset ownership, estate taxes, gifting, legacy, and of course medical expense planning are just a few. All these things must work together as part of a bigger picture to maximize planning opportunities. When we let one topic take over the situation, we might have different consequences and end up in a place other than where we wanted. Sometimes it’s just not what you do.

Investing involves risk. No investment strategy can guarantee positive results. Loss, including loss of principal, may occur. Material discussed is meant to provide general information and it is not to be construed as specific investment, tax or legal advice. Keep in mind that current and historical facts may not be indicative of future results. Diversification is an investment strategy that can help manage risk within a portfolio, but it does not guarantee profits or protect against loss in declining markets.

This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. (C) Twenty Over Ten