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White Elephant Inheritance

White Elephant Inheritance

By Uncategorized

Have you ever had to deal with a “white elephant”? Not the actual pachyderm, but what Merriam-Webster calls “a property requiring much care and expense yielding little profit” or, more simply, “something of little or no value.” Of course, we’re not talking about the sort of “white elephants” you might get in a humorous gift exchange over the holidays, like a tacky t- shirt that isn’t even your size or an inexplicable kitchen gadget.

Not everyone has a rich uncle who will present them with a simple cash gift in his will. A “white elephant” is a gift that may cause more issues than it resolves, much as an elephant might eat an unwitting recipient out of house and home. It’s an asset that comes to you via gift or inheritance and needs to be quickly sold, liquidated, or transferred to avoid further expenses of time or money. In such cases, it is crucial to understand how to disclaim an inheritance properly and avoid holding the burden. The average American household stands to inherit $46,200. Not all those bequeathments are straight cash, and some might prove inconvenient or troublesome.1

There are several reasons why someone might not want to accept an inheritance:

  • Income:

If the inheritance generates income, such as a business or rental property, it may push you into a higher income tax bracket. This might be good in many cases, but there are situations where this might prove inconvenient, such as—

  • Litigation or Bankruptcy:

If you face a lawsuit or anticipate bankruptcy, disclaiming the inheritance may be wise. However, it’s important to note that if you are currently undergoing bankruptcy proceedings, you may be unable to deny the inheritance.2

  • Inability to Maintain:

If the inheritance includes property or assets that require ongoing maintenance and you cannot fulfill those obligations, disclaiming may be the best choice. This could be real estate, a business, or perhaps even a literal white elephant.

  • Honoring the Decedent’s Wishes:

Circumstances may have changed since drafting the will, and accepting the inheritance may no longer align with the decedent’s original intentions.

Remember, this article is for informational purposes only and does not replace real-life advice, so consult a legal professional before deciding on an inheritance. The article provides high-level considerations, but a legal professional who is familiar with your situation may be able to provide more insights and guidance.

To officially disclaim an inheritance, you must meet the following requirements set forth by the Internal Revenue Service:

  • Provide written notice to the executor or administrator of the estate, clearly stating that you are disclaiming the assets and that the decision is irrevocable.
  • Submit the statement within nine months of the decedent’s death (minors have until they reach the age of majority).
  • Ensure that you do not benefit from the disclaimed property, either directly or indirectly. Example: What if you were to live with the new recipient in a house you declaimed? The IRS might perceive this as you benefiting indirectly.

Notably, once you disclaim an inheritance, you have no say in who receives it. The estate will be treated as if you died before accepting it and will go to the contingent beneficiary named in the will. If there is no will, the distribution will resume according to the next person, in line with state law.3

However, disclaiming an inheritance may not be the best choice for individuals receiving Medicaid benefits. If you reject an inheritance while on Medicaid, it could be considered a transfer of assets, potentially making you ineligible for Medicaid for a certain period. It is crucial to seek guidance from a professional with information specific to your situation if you receive Medicaid benefits.

Again, you may not have the choice or inclination to refuse this inheritance. Let’s look at a few options open to you.

Donating Assets:

Several tax strategies exist for charitable contributions. One method is to donate assets to charity. By doing this, you may be able to manage capital gains taxes and receive an income tax deduction for the full fair market value of the assets.

This is an overview and is not intended as tax or legal advice. Please consult legal or tax professionals for specific information if you want to donate the assets you received as part of an inheritance.

Real Estate:

Unwanted land can become a financial burden. Selling land can be difficult if it has been on the market for months or years without any offers. The most common reason for this is that the price is too high. Determining the value of land can be challenging, so setting a realistic price is essential. Another reason for a property’s failure to sell is poor marketing. Undesirable features or location can also contribute to a property’s inability to sell, as can title issues such as liens or property boundary problems.

If you need help selling your inherited land, there are several strategies you can try. Listing the land for sale online on various platforms can provide maximum exposure. Contacting neighboring property owners may also be effective. Other options include donating the property to a charity. Several charities accept land donations, but they typically have a screening process and often sell land to raise funds for their organizations.

Collectibles:

Perhaps the most common of these white elephant inheritances include collectibles, esoteric items that future heirs have no wish to inherit, such as stamps, baseball cards, comic books, figurines, or dishware. The inheritance may also require more thought or consideration, such as an art collection that includes several large canvases or a cache of ephemera, such as old letters that may have historical value and require special preservation.

Most metropolitan areas have resources for liquidating collectibles or helping you get in touch with collectors who might purchase these items wholesale. Holding an estate sale is another common step for quick movement. If you believe you can earn more, you might list these items for sale online. However, in most cases, you may have to decide whether this is worth the effort or whether donating the items to a charity might be simpler.

In short, don’t let the elephant gobble up your time and money! Another step, when possible, is to speak to your relative in advance if you anticipate inheriting something you can’t handle or don’t want. Conversations with your relatives might go a long way toward averting more work later and give them the satisfaction of knowing they are caring for you in the present.

If you have questions about your finances, take advantage of American Wealth Management’s 1- hour no-cost financial consultations. Submit this form to us and we will contact you to schedule a video call with one of our advisors.

American Wealth Management Reno, Nevada

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1. Finance.yahoo.com, September 15, 2023
2. NasonLawFirm.com, September 27, 2023
3. GreatAOakAdvisors.com, September 27, 2023

The 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. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. 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. Copyright FMG Suite.

Investment advice offered through American Wealth Management (“AWM”), a SEC-registered investment adviser. Certain personnel of AWM may also be registered representatives of M.S. Howells & Co. (“MSH”), Member FINRA/SIPC, a registered broker-dealer, and therefore, may offer securities through MSH. AWM and MSH are not affiliated entities. M.S Howells does not provide tax or legal advice. Please consult your legal or tax advisor regarding your individual situation.

HOW TO KNOW WHEN IT’S TIME TO HIRE A FINANCIAL ADVISOR

How to Know When It’s Time to Hire a Financial Advisor

By Uncategorized

Are your finances complex enough to seek help? Find out when your financial situation calls for a financial advisor.

Stuck on the fence about whether to hire a financial advisor? Apparently, you’re not alone.

According to an international survey conducted for CNBC and Acorns, 99% of people in the United States don’t use a financial advisor.

Why Don’t More People Use a Financial Advisor?

There are a few possible reasons people are hesitant to connect with a financial advisor:

(1) Many people have the perception that financial advisors are only for the wealthy.
(2) The perception that investing is too risky, and people are better off saving their money in traditional savings accounts.
(3) With so much financial information at our fingertips, many believe they know enough to manage their own finances well.

And yet, according to a different survey by cloud-based technology platform Intelliflo, “59% of Americans [say they] want financial advice, but do not know how to get it.”

Could financial advisors be underrated and underutilized in the United States?

Here are some questions to consider as you determine whether or not you could benefit from the help of one of these professionals.

It’s Never a Bad Time to Invest in Financial Literacy

You’re probably familiar with the adage, “It’s not how much you make. It’s how you manage it.”

The idea is that even if you earn a high income, poor money management can lead to financial troubles. On the other hand, people with modest incomes can still achieve financial security through effective budgeting, saving, and investment strategies.

Even though we’re looking at some financial complexities that do warrant professional advice, a financial advisor can help just about anyone (even those without complex finances) improve their money management skills and plan for the future.

How to Assess Whether You Need a Financial Advisor

There are plenty of factors at play when it comes to seeking help with your money. The time you spend on money management, whether you feel confident or knowledgeable enough, and how stressed your money makes you all add to the decision.

But first, let’s just look at your finances.

1. Take Stock of Your Finances

Answering some simple money questions will help you get a bead on whether a financial advisor is a good idea for you.

How Many Income Streams Do You Have?

Having multiple income sources complicates your financial picture in a couple of ways:

For one thing, not all incomes are alike. Different income streams come with their own tax implications and reporting requirements.

Beyond your primary job or business, do you have money coming in from rental properties, investments, freelance work, side hustles, or other sources?

The more diversified your income, the more financial complexity you might encounter. If you’re juggling multiple income streams and feel lost about how to report come tax season, some professional guidance may be beneficial.

What’s Your Debt Load?

Debt isn’t anything to be ashamed of. However, it can make managing your finances more complicated.

The main reason is that different types of debt come with different terms, interest rates, and repayment schedules. Paying off one debt might take a completely different strategy from paying off another.

Mortgages, for instance, are often long-term commitments. Credit card debt, on the other hand, can carry high interest rates and require more immediate attention. Student loans may come with unique repayment options and potential forgiveness programs.

If your debt load is becoming a financial burden or if you’re struggling to make progress in reducing it, a financial advisor can help you craft a comprehensive debt repayment strategy and potentially save you money in the long run.

Is Your Tax Situation Becoming More Complex?

This is an area where even the most financially savvy individuals need a guide.

If you own a business, whether it’s a side venture or a full-scale company, you’ll likely encounter intricate tax implications, such as self-employment tax and deductions specific to your industry.

If you invest your money, various types of income—from capital gains to dividends—may introduce another layer of tax considerations. And, if it wasn’t complicated enough, changing tax laws can make it even worse. Tax codes can be absolutely byzantine in their complexity and are frequently subject to revision, making it hard to keep up on what you’ll owe the government.

If you own a business, have a diverse investment portfolio, or find it challenging to keep up with changing tax laws, it might be an ideal time to get some professional advice.

Do You Have a Diverse Investment Portfolio?

A diverse investment portfolio can be a powerful tool for wealth building, but it also introduces a new layer of financial complexity.

Diverse investments can include stocks, bonds, mutual funds, real estate, and other assets. Each of these comes with its own risk factors, market behaviors, and tax considerations. For instance, stocks can be volatile, bonds are influenced by interest rates, and real estate may require property management.

As you evaluate your investment mix, consider whether you are comfortable with the level of risk in your investments and if you have a strategy in place to achieve your financial goals.

If you find that your investment portfolio is starting to feel complicated or if you’re struggling to maintain a diversified, balanced, and tax-efficient approach, a financial advisor could be a wise call.

Are You Prepared for Retirement?

Do you have a clear retirement plan in place, with savings goals and strategies to meet them?

Are you well-versed in the various retirement account options, such as 401(k)s, IRAs, and pensions, and their associated tax benefits?

A financial advisor can help you define your retirement goals, determine how much you need to save, and develop a customized plan to reach those goals. They can also provide valuable insights into retirement account options and the best strategies for optimizing them.

Whether you’re just starting your retirement planning journey or reassessing an existing plan, a financial advisor can be a valuable resource to help you secure a comfortable retirement.

Estate Planning—Have You Thought About It?

Estate planning might not be on everyone’s radar, but for some individuals, it’s a critical consideration.

It involves crafting a plan for your assets, including wills, trusts, and inheritance strategies, to ensure they’re distributed according to your wishes when you’re no longer here. If you haven’t thought about these aspects, it’s a good time to reflect on your estate planning needs.

If you’re uncertain about where to begin, a financial advisor can help you create an estate plan that safeguards your assets and minimizes potential tax burdens for your beneficiaries.

2. Life Events and Financial Stress: Are They Taking a Toll?

After getting the lay of your finances, it’s time to look at your life and how money affects it. Does money cause you stress? Have you undergone a life event that will change how you manage money?

Here are some questions to consider, the answers to which might shed light on whether a financial advisor can help you.

Life Changes: Any Major Life Events Recently?

Major life events can quickly complicate your finances. Have you experienced any lately? Marriage, divorce, the birth of a child, buying a house, and starting a business are all significant life changes.

If you said yes, how has that change impacted your financial situation? Life changes can affect not only how much or how little money you have, they can also affect how you pay taxes.

A financial advisor can help you navigate these changes and make a plan to help you protect your livelihood.

Is Money Stress Keeping You Up at Night?

Is financial anxiety becoming a regular part of your life? Constant financial stress can be a red flag and a sign that some outside help is called for.

A financial advisor can help you see the whole picture as you seek peace of mind about your financial decisions.

3. Time, Expertise, and Goal-Setting

Time, know-how, and vision are three rare commodities, without which it can be very difficult to manage a complex financial situation.

Do You Have the Time and Expertise?

In the world of personal finance, time and expertise are invaluable commodities. Do you have the time and financial knowledge required to manage your affairs effectively?

Can you confidently navigate the complex landscape of investments, taxes, debt management, and retirement planning on your own?

Have You Set Financial Goals?

Setting and achieving financial goals is another aspect of your financial life to ponder. Are you actively defining and working toward your financial objectives, or does it feel like you’re wandering aimlessly, without a clear path to your desired financial destination? Your financial goals should be more than just wishes; they should be well-defined and attainable.

If you find that time constraints, lack of expertise, or unclear financial goals are hindering your financial progress, this might be the moment to consider engaging a financial advisor.

Takeaways

As you’ve explored the complexities of your financial situation, you might have realized that managing multiple income streams, debt, taxes, investments, retirement planning, and estate matters can be overwhelming.

But remember, seeking help from a financial advisor isn’t a sign of weakness; it’s a resource for those who value expert insights and customized strategies. Whether you’re a Millennial, a Gen Xer, or a Baby Boomer, the path to financial well-being will be as unique as you are.

By enlisting the support of a financial advisor, you can simplify, set goals, and secure a more stable and prosperous future.

Don’t hesitate to reach out for professional assistance when you need it.

Find a Financial Advisor

American Wealth Management is a financial management company based in Reno, Nevada, that caters to both local residents and individuals nationwide.

Feel free to get in touch with our team for tailored assistance in handling your finances and strategizing for your retirement.

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Investment advice offered through American Wealth Management (“AWM”), a SEC-registered investment adviser. Certain personnel of AWM may also be registered representatives of M.S. Howells & Co. (“MSH”), Member FINRA/SIPC, a registered broker-dealer, and therefore, may offer securities through MSH. AWM and MSH are not affiliated entities. M.S Howells does not provide tax or legal advice. Please consult your legal or tax advisor regarding your individual situation.

Do you know the difference? Read on to discover exactly how these two service providers differ.

What’s the Difference Between a Financial Advisor and a Wealth Manager?

By Uncategorized

Do you know the difference? Read on to discover exactly how these two service providers differ.

Maybe you’ve heard the terms wealth manager and financial advisor around the workplace, on TV commercials, or on LinkedIn.

You might wonder: Are they interchangeable? Or are we talking about two completely different services? And how do I know if I need one or the other?

You’re not alone in these questions—after all, they sound very similar.

So What’s the Difference Between Financial Advisors and Wealth Managers?

The short answer is wealth managers are a subgroup of financial advisors.

Wealth managers typically help individuals who have substantial assets and don’t know how best to manage them. Most individuals don’t need to consider a wealth manager until they have at least a few hundred thousand dollars in assets.

How Do Wealth Managers Help?

A wealth manager is a financial advisor who offers a more specialized level of service, typically to individuals with considerable assets. They help their clients grow, protect, and manage their wealth.

Even though wealth managers are a subset of financial advisors, wealth managers handle quite a few different facets of your overall financial health.

Financial Planning: Cover the Basics

One of the primary tasks of a wealth manager is to create a comprehensive financial plan tailored to the client’s goals, risk tolerance, and financial situation. This plan encompasses various aspects of a person’s financial life, including retirement planning, tax strategies, estate planning, and investment management. Essentially, they aim to provide a roadmap for your financial success.

Investment Management: Turn Wealth into More Wealth

Like most financial advisors, wealth managers also design investment portfolios that align with your financial objectives and risk tolerance. Unlike standard financial advisors, however, wealth managers are known to employ a broader range of investment strategies, including alternative investments like private equity or hedge funds.

Tax Optimization: Be a Smart Tax Payer

Wealth managers are skilled in tax planning, aiming to minimize the tax impact on your wealth. This can involve strategies like tax-efficient investments, capital gains planning, and charitable giving. They’ll work closely with tax professionals to ensure your tax liabilities are optimized.

Estate Planning: Protect Family and Loved Ones

For individuals with substantial wealth, estate planning is critical. Estate planning involves the intended distribution of your wealth after you die. Wealth managers can assist in structuring your estate to pass assets to heirs efficiently while minimizing estate taxes. This can involve setting up trusts, wills, and other legal mechanisms.

Wealth Managers Offer Specialized Services

Compared to financial advisors at large, wealth managers tend to be more involved in the nuts and bolts of their clients’ financial situation. Wealth managers continuously monitor your investments and overall financial plan.

This level of personalization often involves regular check-ins and quick adjustments to your financial plan as circumstances change. This is partially why wealth managers are normally a more costly option and tend to cater to those with substantial assets.

Benefits of a General Financial Advisor

A financial advisor offers many of the same services, but they are less client-specific. They’re trained to serve a wide range of clients to help them manage their finances.

Financial Advisors Have a Broader Client Base

Financial advisors often work with a more diverse client base, which often includes people with varying income levels and assets. They cater to a wider audience, from individuals just starting to save to those with moderate wealth.

Financial advisors are generally more accessible and cost-effective for individuals who may not have the substantial assets required to engage a wealth manager. They can be a great choice for people seeking basic financial guidance and investment support.

Financial Advisors Are Adept at Most Financial Situations

Financial advisors are well suited to assist individuals with relatively straightforward financial situations. They help clients set up and manage basic investment accounts, create budgets, and offer guidance on retirement planning.

While they provide valuable advice, they typically do not handle the complexities associated with substantial wealth.

Financial Advisors Offer Basic Investment Recommendations

Financial advisors primarily focus on offering investment advice and managing investment portfolios. They may recommend stocks, bonds, mutual funds, and other traditional investments, whereas wealth managers often have access to a wider range of investment options, including alternative investments and private equity.

Regulations and Qualifications of a Financial Advisor

Financial advisors may have different licensing and qualification requirements than wealth managers. They are often registered representatives of broker-dealer firms and can offer a broader range of financial products.

Which Should You Hire, a Wealth Manager or a Financial Advisor?

Financial advisors are ideal for those with simpler financial situations, offering basic financial guidance and investment advice.

In contrast, wealth managers are tailored to individuals with sizable assets and complex financial goals, providing specialized, personalized services.

While wealth management may come at a higher cost, it’s worthwhile for those with significant wealth or intricate financial needs. Your choice should align with your unique financial objectives and complexity.

Key Takeaways

“Wealth manager” and “financial advisor” are often used interchangeably but the professions serve different needs.

Wealth managers work with those who have substantial assets, offering specialized services like financial planning, investment management, tax reduction, and estate planning.

Financial advisors have a broader clientele, catering to various financial situations with basic advice and investment support.

Your choice depends on your specific financial goals and complexity; if your finances are simple, a financial advisor is suitable, while substantial wealth or intricate needs might call for a wealth manager.

Find a Financial Advisor

American Wealth Management is a financial management company based in Reno, Nevada, that caters to both local residents and individuals nationwide.

Feel free to get in touch with our team for tailored assistance in handling your finances and strategizing for your retirement.

American Wealth Management Reno, Nevada

Investment advice offered through American Wealth Management (“AWM”), a SEC- registered investment adviser. Certain personnel of AWM may also be registered representatives of M.S. Howells & Co. (“MSH”), Member FINRA/SIPC, a registered broker-dealer, and therefore, may offer securities through MSH. AWM and MSH are not affiliated entities. M.S Howells does not provide tax or legal advice. Please consult your legal or tax advisor regarding your individual situation.

Where Will Your Retirement Money Come From?

Where Will Your Retirement Money Come From?

By Uncategorized

What workers anticipate in terms of retirement income sources may differ considerably from what retirees actually experience. For many people, retirement income may come from a variety of sources.

Here’s a quick review of the six main sources:

Social Security

Social Security is the government-administered retirement income program. Workers become eligible after paying Social Security taxes for 10 years. Benefits are based on each worker’s 35 highest earning years. If there are fewer than 35 years of earnings, non-earning years are averaged in as zero. In 2023, the average monthly benefit is estimated at $1,827.1,2

Personal Savings and Investments

Personal savings and investments outside of retirement plans can provide income during retirement. Retirees often prefer to go for investments that offer monthly guaranteed income over potential returns.

Individual Retirement Account

Traditional IRAs have been around since 1974. Contributions you make to a traditional IRA may be fully or partially deductible, depending on your individual circumstances. In most circumstances, once you reach age 73, you must begin taking required minimum distributions from a Traditional Individual Retirement Account (IRA). Withdrawals from Traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. You may continue to contribute to a Traditional IRA past age 70½ as long as you meet the earned-income requirement.

Roth IRAs were created in 1997. Roth IRA contributions cannot be made by taxpayers with high incomes. To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawals also can be taken under certain other circumstances, including as a result of the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals.

Defined Contribution Plans

Many workers are eligible to participate in a defined-contribution plan such as a 401(k), 403(b), or 457 plan. Eligible workers can set aside a portion of their pre-tax income into an account, which then accumulates, tax-deferred.

In most circumstances, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in the year you turn 73. Withdrawals from your 401(k) or other defined contribution plans are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty.

Defined Benefit Plans

Defined benefit plans are “traditional” pensions—employer–sponsored plans under which benefits, rather than contributions, are defined. Benefits are normally based on factors such as salary history and duration of employment. The number of traditional pension plans has dropped dramatically during the past 30 years.3

Continued Employment

In a recent survey, 73% of workers stated that they planned to keep working in retirement. In contrast, only 23% of retirees reported that continued employment was a major or minor source of retirement income.4

Expected Vs. Actual Sources of Income in Retirement

What workers anticipate in terms of retirement income sources may differ considerably from what retirees actually experience.

If you have questions about your finances, take advantage of American Wealth Management’s 1- hour no-cost financial consultations. Submit this form to us and we will contact you to schedule a video call with one of our advisors.

 

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1. SSA.gov, 2023
2. SSA.gov, 2023
3. Investopedia.com, December 30, 2022
4. EBRI.org, 2023

The 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. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. 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. Copyright FMG Suite.

Investment advice offered through American Wealth Management (“AWM”), a SEC-registered investment adviser. Certain personnel of AWM may also be registered representatives of M.S. Howells & Co. (“MSH”), Member FINRA/SIPC, a registered broker-dealer, and therefore, may offer securities through MSH. AWM and MSH are not affiliated entities. M.S Howells does not provide tax or legal advice. Please consult your legal or tax advisor regarding your individual situation.

How Will Working Affect Social Security Benefits?

By Uncategorized

In a recent survey, 70% of current workers stated they plan to work for pay after retiring.1
And that possibility raises an interesting question: how will working affect Social Security benefits?
The answer to that question requires an understanding of three key concepts: full retirement age, the earnings test, and taxable benefits.

Full Retirement Age

Most workers don’t face an “official” retirement date, according to the Social Security Administration. The Social Security program allows workers to start receiving benefits as soon as they reach age 62 – or to put off receiving benefits up until age 70.2

“Full retirement age” is the age at which individuals become eligible to receive 100% of their Social Security benefits. Individuals born in 1960 or later can receive 100% of their benefits at age 67.

Earnings Test

Starting Social Security benefits before reaching full retirement age brings into play the earnings test.

If a working individual starts receiving Social Security payments before full retirement age, the Social Security Administration will deduct $1 in benefits for each $2 that person earns above an annual limit. In 2023, the income limit is $21,240.3

During the year in which a worker reaches full retirement age, Social Security benefit reduction falls to $1 in benefits for every $3 in earnings. For 2023, the limit is $56,520 before the month the worker reaches full retirement age.3

For example, let’s assume a worker begins receiving Social Security benefits during the year he or she reaches full retirement age. In that year, before the month the worker reaches full retirement age, the worker earns $65,000. The Social Security benefit would be reduced as follows:

Earnings above the annual limit of $65,000 – $56,520 = $8,480
One-third excess $8,480 ÷ 3 = $2,827

In this case, the worker’s annual Social Security benefit would have been reduced by $2,827 because they are continuing to work.

Taxable Benefits

Once you reach full retirement age, Social Security benefits will not be reduced no matter how much you earn. However, Social Security benefits are taxable.

For example, say you file a joint return, and you and your spouse are past the full retirement age. In the joint return, you report a combined income of between $32,000 and $44,000. You may have to pay income tax on as much as 50% of your benefits. If your combined income is more than $44,000, as much as 85% of your benefits may be subject to income taxes.4

There are many factors to consider when evaluating Social Security benefits. Understanding how working may affect total benefits can help you put together a strategy that allows you to make the most of all your retirement income sources – including Social Security.

If you have questions about your finances, take advantage of American Wealth Management’s 1- hour no-cost financial consultations. Submit this form to us and we will contact you to schedule a video call with one of our advisors.

American Wealth Management Reno, Nevada

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1. EBRI.org, 2022 2. SSA.gov, 2023 3. SSA.gov, 2023 4. SSA.gov, 2023

The 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. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. 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. Copyright FMG Suite.

Investment advice offered through American Wealth Management (“AWM”), a SEC-registered investment adviser. Certain personnel of AWM may also be registered representatives of M.S. Howells & Co. (“MSH”), Member FINRA/SIPC, a registered broker-dealer, and therefore, may offer securities through MSH. AWM and MSH are not affiliated entities. M.S Howells does not provide tax or legal advice. Please consult your legal or tax advisor regarding your individual situation.

Irrevocable Life Insurance Trusts

A Primer on Irrevocable Life Insurance Trusts

By Uncategorized

“I’m proud to pay taxes in the United States; the only thing is, I could be just as proud for half the money.”
Entertainer Arthur Godfrey

Irrevocable Life Insurance Trusts

The irrevocable life insurance trust (ILIT) can be an important estate strategy tool that may accomplish a number of estate objectives; however, it may not be appropriate for every individual.

Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

What Is an ILIT?

An ILIT is created by an individual (the grantor) during his or her lifetime. The ILIT owns a life insurance policy on the grantor’s life via the transfer of ownership of an existing policy or through the grantor’s annual contribution of cash to pay the premiums on a policy purchased by the trust.

The grantor designates beneficiaries, usually family members, who will typically receive the proceeds upon the death of the grantor.

The trust is irrevocable, meaning that the grantor forfeits all rights to the property contained in the trust. Its irrevocable nature is integral to accomplishing the ILIT’s objectives.

What Can an ILIT Accomplish?

The ILIT may be able to accomplish several estate objectives, including:

  1. Meeting liquidity needs;
  2. Managing estate taxation on the policy proceeds;
  3. Providing income to survivors.

How Does an ILIT Work?

When you die, the trust is designed to receive a payment equal to the policy coverage amount, e.g., $500,000. Since the trust’s ownership of the policy is irrevocable, the proceeds are not considered your property. Consequently, they do not fall into your estate, thus potentially avoiding estate taxation. (Remember, generally no income tax is due on such life insurance proceeds.)1

Keep in mind, that this is a hypothetical example used for illustrative purposes only. It is not representative of any specific estate or estate strategy. 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 trust provisions should be set up to provide direction about how and to whom payments may be made. You may direct that the trust pay out cash to cover certain expenses, e.g., funeral costs, probate, taxes, final medical expenses, and debts.

This may obviate the need to sell less liquid assets at an inopportune time to cover such costs.

The trust’s beneficiaries may receive the proceeds (after any payments are made to satisfy liquidity needs), creating an inheritance free of estate taxes.

Finally, creditors should not be able to attack these assets since they belong to the trust, not you.

Creating an ILIT should be done only with the assistance of a qualified estate planning attorney. It is a complicated exercise in which mistakes may result in losing the benefits ILITs offer.

If you have questions about your finances, take advantage of American Wealth Management’s 1- hour no-cost financial consultations. Submit this form to us and we will contact you to schedule a video call with one of our advisors.

American Wealth Management Reno, Nevada

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1. Investopedia.com, January 5, 2023

The 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. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. 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. Copyright FMG Suite.

Investment advice offered through American Wealth Management (“AWM”), a SEC-registered investment adviser. Certain personnel of AWM may also be registered representatives of M.S. Howells & Co. (“MSH”), Member FINRA/SIPC, a registered broker-dealer, and therefore, may offer securities through MSH. AWM and MSH are not affiliated entities. M.S Howells does not provide tax or legal advice. Please consult your legal or tax advisor regarding your individual situation.

Preparing for Retirement

Insurance Needs Assessment: For Empty Nesters and Retirees

By Uncategorized

Preparing for Retirement

With the children now out of the house, financial priorities become more focused on preparing for retirement. At this stage, you may very likely be at the height of your earning power and fast-approaching peak savings as you lay the groundwork for retirement. During this final leg to retirement—and throughout your retirement period—wealth protection is critical.

The preservation of your assets may not be solely a function of your investment strategy but may include a comprehensive insurance approach to protect you against an array of financial risks, most especially health care.

In addition to wealth protection, you can also now be seriously contemplating a number of important estate and legacy objectives.

Home – Homeowners Insurance

Even though your mortgage may be paid off—and thus released of the lender’s requirement to have homeowners insurance—it remains important to consider coverage against property loss and exposure to personal liability. Now is an ideal time to review your policy as the cost of replacing your home and the belongings contained therein may have grown over the years.

Also, consider an umbrella policy, which is designed to help protect against the financial risk of personal liability.

Health Insurance

There are several key health insurance issues facing empty nesters and retirees.

If you retire prior to age 65 when Medicare coverage is set to begin, you will need coverage to bridge the gap between when you retire and when you turn 65. If your spouse continues to work, you may want to consider getting yourself added to his or her plan, though you may need to wait until the employer’s annual enrollment period.

Alternatively, you may purchase coverage through a private insurer or through HealthCare.gov (or your state’s program, if available).

Once you enroll in Medicare, you should consider purchasing Part D of Medicare, the Medicare Prescription Drug Plan, which can help you save money on prescriptions.

Additionally, you may want to consider other Medigap insurance, which is designed to pay for medical care not covered by Medicare. Medigap plans are bought through private insurance companies and best purchased within the first six months of turning age 65 in an effort to get the best price and the most choices.

Disability Insurance

This coverage may continue until you retire. When you stop working, you should consider canceling your disability insurance as the need for it has expired.

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.

Life Insurance

The financial obligations that drove your life insurance needs while you were raising a family may have evaporated. However, you may find new needs arising from estate issues, such as liquidity, creating a legacy, etc.

Several factors will affect the cost and availability of life insurance, including age, health and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Extended Care Expense

For some, extended care insurance is a priority in this stage of life. With the expense of children in the rearview mirror, you can now turn your focus to buying protection against potentially the most significant health-care expense you are likely to face in retirement.

Designed to pay for chronic, long-lasting illnesses and regular care, whether in-home or at a nursing home, extended care insurance coverage is critically important since most of these costs are not covered by Medicare.

If you have questions about your finances, take advantage of American Wealth Management’s 1- hour no-cost financial consultations. Submit this form to us and we will contact you to schedule a video call with one of our advisors.

American Wealth Management Reno, Nevada

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The 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. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. 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. Copyright FMG Suite.

Investment advice offered through American Wealth Management (“AWM”), a SEC-registered investment adviser. Certain personnel of AWM may also be registered representatives of M.S. Howells & Co. (“MSH”), Member FINRA/SIPC, a registered broker-dealer, and therefore, may offer securities through MSH. AWM and MSH are not affiliated entities. M.S Howells does not provide tax or legal advice. Please consult your legal or tax advisor regarding your individual situation.

Immediate vs. Deferred Annuities

By Uncategorized

Despite not being as well known as some other retirement tools, annuities account for 6% of all assets earmarked for retirement. With about $2.6 trillion in assets, annuities hold more funds than Roth IRAs.1

An annuity is a contract with an insurance company. In exchange for a premium or a series of premiums, the insurance company agrees to make regular payments to the contract holder. The funds held in an annuity contract accumulate tax deferred.

For individuals interested in accumulating retirement assets, annuities can be attractive because they are not subject to contribution limits, unlike most other tax-deferred vehicles. In other words, retirement-minded individuals can set aside as much money as they would like into an annuity.

Two Phases

Annuity contracts pass through two distinct phases: accumulation and payout. During the accumulation phase, the funds accumulate until the annuity contract reaches its payout date. At that time, the total will either be paid out as a lump sum or as a series of payments over a period that can stretch as long as the account holder’s life.

The funds attributed to the initial premium will not be taxed, but any earnings on those funds will be taxed as regular income.

Immediate Annuity

As its name implies, an immediate annuity is structured to provide current income. After paying the initial premium, an individual receives regular income, which can be deferred up to twelve months. The funds remaining in the contract accumulate on a tax-deferred basis. And only that portion of each payment attributable to interest is subject to taxes; the rest is treated as a return of principal.

This article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals before modifying your tax strategy.

Deferred Annuity

It is also possible to purchase an annuity contract that defers payout until a specific date in the future. The premiums you pay to a deferred annuity accumulate and earn interest during the accumulation phase. The annuity holder determines the amount of payments and when the payouts begin, which is usually in retirement. With a deferred annuity, the earnings credited to your contract are taxed when they are withdrawn.

Annuities have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits. Most annuities have surrender fees that are usually highest if you take out the money in the initial years of the annuity contract. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made prior to age 591⁄2, a 10% federal income tax penalty may apply (unless an exception applies). The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Annuities are not guaranteed by the FDIC or any other government agency.

Variable annuities are sold by prospectus, which contains detailed information about investment objectives and risks, as well as charges and expenses. You are encouraged to read the prospectus carefully before you invest or send money to buy a variable annuity contract. The prospectus is available from the insurance company or from your financial professional. Variable annuity subaccounts will fluctuate in value based on market conditions and may be worth more or less than the original amount invested if the annuity is surrendered.

For retirement-minded investors, annuities have some attractive features that may be worth exploring. Annuities also have certain limitations and expenses that need to be considered before committing to a contract.

If you have questions about your finances, take advantage of American Wealth Management’s 1- hour no-cost financial consultations. Submit this form to us and we will contact you to schedule a video call with one of our advisors.

American Wealth Management Reno, Nevada

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1. ICI.org, 2022

The 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. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. 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. Copyright FMG Suite.

Investment advice offered through American Wealth Management (“AWM”), a SEC-registered investment adviser. Certain personnel of AWM may also be registered representatives of M.S. Howells & Co. (“MSH”), Member FINRA/SIPC, a registered broker-dealer, and therefore, may offer securities through MSH. AWM and MSH are not affiliated entities. M.S Howells does not provide tax or legal advice. Please consult your legal or tax advisor regarding your individual situation.

4 Steps to Protecting a Child with Disabilities

By Uncategorized

Raising a child is expensive and can cost about a quarter of a million dollars, excluding college. For a child with special needs, that cost can more than double. If you’re the parent of a child with special needs, it’s vital to ensure your child will continue to be provided for after you’re gone. It can be difficult to contemplate, but with patience, love, and perseverance, a long-term strategy may be attainable.1,2

Envisioning a Life After You

Just as every child with special needs is unique, so too are the challenges families face when preparing for the long term. Think about the potential needs of your child. Will they require daily custodial care? Ongoing medical treatments? Will your child live alone or in a group home? Can family members assume some of the care? Answers to these and other questions can help form the vision of what may need to be done to plan for your child’s care.

Preparing Your Estate

Without proper preparation, your child’s lifetime needs can quickly outstrip your funds. One resource is government benefits, such as Supplemental Security Income (SSI) and Medicaid, which your child may qualify for depending on their situation. Because such government programs have low-asset thresholds for qualification, you may want to consider whether to make property transfers to your child with special needs.

You should also make sure you have an up-to-date will that reflects your wishes. Consider creating a special needs trust, the assets of which can be structured to fund your child’s care without disqualifying them from government assistance. Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.

Involve the Family

All affected family members should be involved in the decision-making process. If at all possible, it’s best to have a unified front of surviving family members to care for your child after you’ve passed on.

Identify a Caregiver

In order for a caregiver to make financial and healthcare decisions after your child reaches adulthood, the caregiver must be appointed as a guardian. This can take time, so start setting this in motion as soon as you are able.

To do this, you can write a “Letter of Intent” to the caregiver and family to express your wishes along with information about your child’s care. This isn’t a legal document, but it may help communicate your desires. Store this letter in a safe place, alongside your will.

Outlining an approach for a child with special needs can be complicated, but you don’t have to do it alone. Working with loved ones and qualified professionals can help you navigate the various facets of this challenge. If we can help, please don’t hesitate to reach out.

If you have questions about your finances, take advantage of American Wealth Management’s 1- hour no-cost financial consultations. Submit this form to us and we will contact you to schedule a video call with one of our advisors.

American Wealth Management Reno, Nevada

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1. Investopedia.com, January 9, 2022
2. AmericanAdvocacyGroup.com, May 3, 2022

The 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. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. 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. Copyright FMG Suite.

Investment advice offered through American Wealth Management (“AWM”), a SEC-registered investment adviser. Certain personnel of AWM may also be registered representatives of M.S. Howells & Co. (“MSH”), Member FINRA/SIPC, a registered broker-dealer, and therefore, may offer securities through MSH. AWM and MSH are not affiliated entities. M.S Howells does not provide tax or legal advice. Please consult your legal or tax advisor regarding your individual situation.

Deciding When to Take Social Security

By Uncategorized

Most Common Questions People Ask About Social Security

One of the most common questions people ask about Social Security is when they should start taking benefits. Making the right decision for you can have a meaningful impact on your financial income in retirement.

Before considering how personal circumstances and objectives may play into your decision, it may be helpful to preface that discussion with an illustration of how benefits may differ based on the age at which you commence taking Social Security.

As the accompanying chart reflects, the amount you receive will be based on the age at which you begin taking benefits.

Monthly Benefit Amounts Based on the Age that Benefits Begin1

    Age          Benefit Amount

62                    $1,050.00

63                   $1,125.00

64                     $1,200.00

65                    $1,300.50

66                    $1,399.50

67                     $1,500.00

68                     $1,620.00

69                     $1,740.00

70                    $1,860.00

*This example assumes a benefit amount of $1,500 at the full retirement age of 67 months for those born after 1960.

At first blush, the decision may seem a bit clear-cut: Simply calculate the lifetime value of the early benefit amount versus the lifetime value of the higher benefit, based on some assumed life expectancy.

The calculus is a bit more complicated than that because of the more favorable tax treatment of Social Security income versus IRA withdrawals, spousal benefit coordination opportunities, the consideration of the surviving spouse, and Social Security’s lifetime income guarantee that exists under current law.2

Here are three ideas to think about when making your decision:

  1. Do You Need the Money?

    Retiring before full retirement age may be a personal choice or one that is thrust upon you because of circumstances, such as declining health or job loss. If you need the income that Social Security is scheduled to provide, however reduced, then taking benefits early may be the only choice for you.

  2. Consider the Needs of Your Spouse

    If your spouse expects to depend on your Social Security income, the survivor benefits he or she receives after your death may be reduced substantially if you begin taking benefits early. It’s important to remember that, based on current life expectancy tables, women are likely to live longer than men.

  3. Are You Healthy?

    The primary risk in retirement is running out of money. The odds of living a long life in retirement calls for waiting until you reach full retirement age, so that you receive a full benefit for as long as you live. However, if your current health is poor, then starting earlier may make sense for you.

There are several elements you should evaluate before you start claiming Social Security. By determining your priorities and other income opportunities, you may be able to better decide at what age benefits make the most sense.

If you have questions about your finances, take advantage of American Wealth Management’s 1- hour no-cost financial consultations. Submit this form to us and we will contact you to schedule a video call with one of our advisors.

American Wealth Management Reno, Nevada

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1. SSA.gov, 2023
2. Once you reach age 73 you must begin taking required minimum distributions from a Traditional Individual Retirement Account in most circumstances. Withdrawals from Traditional IRAs are taxed as ordinary income and, if taken before age 591⁄2, may be subject to a 10% federal income tax penalty. Contributions to a Traditional IRA may be fully or partially deductible, depending on your adjusted gross income.

The 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. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory

firm. 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. Copyright FMG Suite.

Investment advice offered through American Wealth Management (“AWM”), an SEC-registered investment adviser. Certain personnel of AWM may also be registered representatives of M.S. Howells & Co. (“MSH”), Member FINRA/SIPC, a registered broker-dealer, and therefore, may offer securities through MSH. AWM and MSH are not affiliated entities. M.S. Howells does not provide tax or legal advice. Please consult your legal or tax advisor regarding your individual situation.