SML Planning Minute

Episode 238 – A surprisingly large number of parents are jeopardizing their financial futures to support their adult children. Is it worth the risk?

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode: Parenting doesn’t end when your kids become adults.

According to a new survey by Bankrate, an independent publisher and financial comparison service based in South Carolina, over two-thirds of parents of adult children have made a financial sacrifice to help out their kids. The results are concerning: a significant number of respondents say they are sacrificing retirement savings (43 percent), emergency savings (51 percent), paying down their own debt (49 percent) or reaching a financial milestone (55 percent).[1]

The unanswered question is this: How much help is too much? In other words, does helping adult children jeopardize their parents’ long term financial security? Every situation is different, and some hardships can’t be avoided. Some families are dealing with children who are physically disabled, while others are dealing with adult children who are financially irresponsible or dependent on drugs or alcohol. Others simply have too much student loan debt.

The situation is bad enough for most parents. According to a recent survey, only about 40 percent of Americans say they have enough money set aside to cover an unexpected $1,000 emergency expense. In fact, 25 percent say they would pay such an expense by using a credit card.[2]

Inflation has become an important complication in all this. Young adults are facing a higher cost of living, and wages that may not be keeping up with inflation. It’s likely that Mom and Dad will want to help, if at all possible, and the need is probably greater today than it was just two years ago.

Setting limits up front is certainly a good idea, both in the amount and duration of any assistance. The tough part is knowing how far they should go. Perhaps the best question to ask is: Will providing this financial support to my child effect my standard of living at some future date? If the answer is yes, then it’s probably too much. As we are reminded every time we ride an airplane, it’s a good idea to put on your own oxygen mask before trying to help others.

As a parent, you need to do a certain amount of homework. No matter how much you trust your kids, it’s usually a good idea to verify that the need is real. Sadly, there are some adult children out there who are all too willing to take advantage of their loving parents. And since the pandemic, there has been an increased tendency for adult children to stay home longer, get married at a later age, and rely more on their parents for the basics.

You need to be careful not to create a dependent adult child. To combat this, some experts have suggested that it is best to charge your adult children rent, and to not pay any allowance without some strings attached.

And exactly how do you provide that help? It doesn’t have to be a gift. It could be a loan, or maybe even an advance against their inheritance. If it’s a loan, it’s best to make sure that it’s fully documented. Otherwise, there’s a risk that your loan may eventually be deemed a gift.

Your Security Mutual Life insurance advisor can help you sort through your options and help get the process started.  Your advisor will assemble your team and coordinate with your attorney and tax professional to review your situation and to determine the plan and strategies that are appropriate for you and your family.

[1] Gillespie, Lane. “Survey: 68% have made a financial sacrifice to help their adult children with money.”  https://www.bankrate.com/personal-finance/financial-independence-survey/ (accessed May 25, 2023)

[2] Gillespie, Lane. “Bankrate’s 2023 annual emergency savings report.” https://www.bankrate.com/banking/savings/emergency-savings-report/#less-than-half  (accessed May 26, 2023)

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the Company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances. Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York. Product availability and features may vary by state.

Episode 237 – Retirement confidence is eroding in America. What can you do about it?

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the Company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances. Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York. Product availability and features may vary by state.

• COVID-19 (coronavirus) Information

Episode 236 – The process of getting life insurance is a lot easier than it used to be. In this podcast, we will learn why, with special guest Angela Thieschafer.

Hello, this is Bill Rainaldi with another edition of Security Mutual’s SML Planning Minute. In today’s episode, getting life insurance is a lot easier than it used to be, with special guest Angela Thieschafer.

Angela Thieschafer is Vice President and Assistant Chief Underwriter at Security Mutual Life. She has been actively involved in the life insurance industry for nearly 25 years, of which she has spent the last 17 exclusively in underwriting.

Having a degree in both nursing and business has aided her in having a deeper knowledge and understanding of the life insurance underwriting world. During her career, Angela has worked for some major carriers, but finds her position at The Company That Cares® to be extremely rewarding, as she feels this motto is truly the foundation of Security Mutual Life.

Angela, welcome to the program.

Angela Thieschafer:
Thank you, Bill. I appreciate the introduction.

Just to start off, I really would like to just provide a little history on life insurance. The concept of life insurance itself dates back to 600 to 100 years BCE in Rome as a burial club. The intention was to cover burial expenses for military members.

And over the years, the concept has evolved, and the first American life insurance companies started forming in the 1700’s. During that time, obviously little underwriting was done. But in the 1900’s, a plethora of data was being obtained. Which included medical exams, inspection reports, and even medical records. And it was also during this time that a urinalysis, or in insurance terms, a “home office specimen” was introduced.

Bill Rainaldi:
Sure. This is very interesting, Angela, and I want you to continue. I’m just wondering how the underwriting process has changed in the last 10 to 20 years. And I would just say to you that I remember very well getting a life insurance policy myself back in the early nineties, and it seemed to be a process that took months, and involved all kinds of tests and all kinds of statements from doctors and things like that. It seems to be streamlined a lot since then. Is that fair to say?

Angela Thieschafer:
Bill, you are so correct. The old school traditional process, it could take weeks to months for a life insurance application to officially be approved. But over the last 10 to 20 years, there has been a significant change in the life insurance world when it comes to underwriting. With almost all the industries, technology definitely had a substantial impact when it came to that.

So life insurance companies went from analyzing those home office specimens, or that urinalysis, and they started moving to other realms of underwriting. Like including tele-interviews, a paramedical exam, even advanced blood and urine panels, and even EKGs, portable EKGs brought to the applicant’s home. So really, it took away that inconvenience of going to a doctor’s office, and it was just done at the comfort of the insured’s home. So it’s great. And most recently, electronic health records have become mainstream for the medical industry itself. The adoption rate of physician clinics is nearly at 90% right now, which is doubled since 2008. Back in the day of being a nurse, it was very critical for us to have medical records in-hand. A lot of times you would just have a patient, and you could only go by verbally from what they gave you.

So being a nurse by trade, this advancement is an absolute necessity in the medical industry, and it allows medical professionals instant access to patient’s health records. Say in the event of a life threatening emergency. But not only that, it also allows the patients themselves an opportunity to get instant access to their own records. So they can view test results, they could see when their next visit’s due. Even scheduling their next physical exam, so it’s really great.

And I would say, I would highly recommend anyone who doesn’t currently have a health portal with their clinic that they should really inquire if it’s available so that they too can have access to their own electronic health records. But with this as well, a client can provide access of their electronic health records and grant permission to outside sources.

So say, one were to apply for life insurance, and by doing that, it cuts the time of underwriting down, like you had mentioned, from weeks, months, to potentially a same-day approval.

Bill Rainaldi:
Wow.

Angela Thieschafer:
Yeah. Quite amazing.

Yeah, so even with the onset of the electronic medical records being available, there’s also an opportunity of other electronic data availability that underwriters can obtain. And really, what that does is it takes out that need for any type of invasive testing, such as that collection of blood and urine, or maybe even EKG.

If we know that somebody has a history of atrial fibrillation, obviously EKGs give you a very good knowledge of their control, things of that nature. So it is definitely a necessity from our end. However, we can obtain that information directly from these third-party sources.

The other thing is the onset of Covid, the pandemic, it forced almost every industry to develop new and creative ways to do business. And even though third-party data was available prior to the pandemic, it was really during this time that the life insurance industry adopted new ways to utilize that data, and make obtaining life insurance even easier.

So as with electronic medical records, similar services are made available that revolve around prescriptions, lab results that are done with your medical professional, and even more.

But it also provides us even more data and availability of the data in the timeframe that it comes in. In years past, it might have taken days for us to obtain that data, and now that is almost instantaneous being relayed to us.

Bill Rainaldi:
Well, that’s fantastic. Would it also be fair to say, Angela, that certain people who might not have been able to get life insurance at all a few years ago might have a better chance now, or might get a better rate now just because of the way the information is processed?

Angela Thieschafer:
That is a very fair statement to say. Like I had mentioned before, technology really has been a game changer, and especially with new advancements in the medical world itself.

For example, a coronary artery disease. In the past, in years past, that might have been a declinable impairment for life insurance. But today, with all of the technology for bypasses, stents, the medications, post-op, a lot of times individuals will still qualify for coverage. So it is quite the game changer.

And typically, again, an individual might not have to have an invasive exam done. But the underwriting can just be done behind the scenes, based off of the available data that’s out there on that applicant.

Bill Rainaldi:
Well, that’s fantastic. So not only is it easier to apply, it’s easier to get approved. You might get a better rate than you would have a couple of years ago, and it’s going to take less time on top of all that. Is that fair to say? In some cases, of course.

Angela Thieschafer:
Yes. Obviously there would be eligibility criteria involved, but that is truly the correct answer. It is much easier today than it was in years past to obtain life insurance.

Bill Rainaldi:
Well, fantastic. That sounds good.

So Angela, before we wrap things up, is there anything else left that you think we should have talked about that we haven’t talked about?

Angela Thieschafer:
So when an applicant applies for life insurance, the company will determine what requirements will be necessary, and that’s usually based on the client’s age, the amount being applied for, their medical history and certain other factors involved.

And depending on that availability and the results of the third-party data, the company may waive certain requirements. And we also have SML Express, which is a program in which an exam in labs can be waived, provided the applicant meets eligibility requirements.

Both of these options are determined by the quality and quantity of the data received, and it provides an opportunity for clients to put coverage in place much faster than traditional underwriting.

Bill Rainaldi:
Oh, fantastic. So that applies to a certain number of people, I believe. What happens to people who cannot get that kind of underwriting?

Angela Thieschafer:
So even if an applicant doesn’t qualify for accelerated underwriting, the entire process of underwriting review today is pretty painless. In addition to the amount of information that’s gathered from completing a paramedic exam and that blood and urine findings, it typically yields even more data than a traditional basic metabolic profile, which is what’s ordered on most physical exams for applicants. So it’s so nice to have these comprehensive insurance lab findings. And often, you’ll find that these lab results will bring about peace of mind for the clients. But even in the rare event that an adverse finding is discovered, it doesn’t always mean a client doesn’t qualify for life insurance. But it gives them an opportunity to address the healthcare concerns with their provider and take the next steps.

Bill Rainaldi:
And give them a better quality of life, hopefully, from that point forward as well.

Angela Thieschafer:
Absolutely. Yes, yep.

Bill Rainaldi:
Great, Angela.

Angela, so I presume that Security Mutual is not the only company that does this sort of thing anymore. Is that correct?

Angela Thieschafer:
That is correct. The life insurance industry in general has adopted new ways to underwrite, to be able to provide coverage for applicants quicker and easier.

Bill Rainaldi:
Well, fantastic. Well, listen, Angela, it’s been great having you on the program. Thanks for joining us today.

Angela Thieschafer:
Thank you so much. I really appreciate your time today.

Bill Rainaldi:
Take care.

Angela Thieschafer:
Bye-bye.

Bill Rainaldi:
Bye.

Angela Thieschafer:
Bye.

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the Company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances. Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York. Product availability and features may vary by state.

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the Company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances. Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York. Product availability and features may vary by state.

• COVID-19 (coronavirus) Information

Episode 234 – States with high income and estate taxes may cause the wealthy to move to another state with one or the other, but not both taxes.

 Hello, this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, Does State Taxation Cause the Wealthy to Move to Different States?

The financial news company, Bloomberg, recently reported[i] on a study published in the May 2023 issue of the American Economic Journal: Economic Policy[ii], that revealed some interesting data on the cause and effect of taxes on the ultra-wealthy moving to different states. The study was conducted by Enrico Moretti, an economics professor at the University of California, Berkeley, and Daniel J. Wilson, an economist for the Federal Reserve Bank of San Francisco.

The study analyzed the behavior of hundreds of billionaires since 2001 and found that of the dozen states that had a state estate tax, over 21% of the billionaires moved to other states that did not have a state estate tax. The Bloomberg article noted: “States controlled by Democrats have been raising taxes on the wealthy, arguing that it spreads wealth and funds services like education that boost growth and innovation over the long term. Those run by Republicans have been cutting levies on the rich, betting that low rates can attract people, businesses and investment.”

Professor Moretti summed up the research by saying “You can either be progressive on income tax or be progressive on adopting an estate tax, but if you do both it’s going to backfire.” Washington state was cited as an example where there is no state income tax but has the highest state estate tax. Even if some billionaires left, revenues would be more than made up through the estate tax on the remaining wealthy. On the other hand, California is known to have many billionaires and it also has high income tax rate. However, California does not have an estate tax, and there has not been a significant exodus of billionaires from California. The study suggests imposing an estate tax would cause the ultra-wealthy to flee California. New York, which also has a high number of billionaires, is one of those states that has a high income tax rate, and also high state estate tax. Having both kinds of taxes appears to cause many of the super-rich to move to a different state that may have one, but not both of those types of taxes.

It is estimated that nearly 2,000 millionaires moved out of New York in 2020. An additional 1,453 millionaires moved out of New York in 2021[iii].  Many moved to New Jersey, which no longer has a state estate tax.

If you’re wealthy and live in a state that has high income taxes, as well as an estate tax, you may have already thought about relocating. If so, you’re not alone. Before you make any decisions, make sure you consult with your tax and legal advisors to determine if that is the right move for you.

[i] Steverman, Ben. “Taxing Wealthy Dynasties Seen Backfiring in States Like New York.” Bloomberg.com. https://www.bloomberg.com/news/articles/2023-05-03/tax-the-rich-targeting-billionaire-family-estates-seen-backfiring-in-new-york?leadSource=uverify%20wall (accessed May 3, 2023)

[ii] Moretti, Enrico, and Daniel J. Wilson. 2023. “Taxing Billionaires: Estate Taxes and the Geographical Location of the Ultra-Wealthy.” American Economic Journal: Economic Policy, 15 (2): 424-66

[iii] Barron, James. “Some Millionaires Moved Out, but There Are Still Plenty Left.” Nytimes.com https://www.nytimes.com/2023/02/23/nyregion/millionaires-new-york-taxes.html (accessed May 3, 2023)

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the Company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances. Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York. Product availability and features may vary by state.

Episode 233 – According to a new study, a shocking 41% of people withdraw, rather than roll over, their 401(k) balances when leaving their jobs.

Hello, this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, a surprising statistic. More than 40 percent of Americans take cash out of their 401(k)s when they change jobs.

The traditional 401(k) is one of America’s most basic retirement tools. Through the use of forced savings, and often, an employer match, the 401(k) helps millions of Americans save significant amounts of money for their retirement. But maybe not as much as we thought.

According to a new study by the University of British Columbia, rather than rolling over their 401(k) balances when they leave their jobs, a stunning 41.4 percent of U.S. workers choose to withdraw money instead. And the overwhelming majority of people who make a withdrawal—85 percent—withdraw the entire account.[1]

There are three significant reasons why, for most people, this is likely a terrible idea.

1. Taxable income. Remember that a traditional 401(k) is a tax-deferred account. It is not tax-free. You do not pay income tax when you contribute to the account. The employer generally withholds the contribution from your pay before the money can be subjected to income tax. The employer also often matches some of the contribution to the account, to incentive employees to save for retirement. There’s no tax going in, but when you take the money out it is considered ordinary income, and subject to income tax.

One further potential complication arises when you take the money out as you leave your job. If the amount is significant, not only is it all taxable, but it could also push you into a higher tax bracket for that year.

2. 10% penalty. There is also a 10 percent penalty if you withdraw the money before you reach age 59 ½. This is in addition to the federal and state income taxes you pay on this withdrawal.

There are a few exceptions to this early withdrawal penalty, though. Disability is one. You must meet the IRS definition of total and permanent disability as documented by your doctor. Death is another. You also won’t owe a penalty if the IRS draws on your account to collect unpaid federal taxes. Another exception—up to $5,000—is available for the adoption or birth of a child.

And finally, there is the “substantially equal payments” exception, also referred to as the 72(t) exception. This is when you take your distributions through a series of equal payments over time. There are many potential tax traps here, but the strategy would not be an option if you withdraw the entire 401(k) balance because you leave your job.

3. Erosion of retirement savings. As we’ve discussed previously, there is an ongoing retirement savings crisis in this country. Withdrawing money from a 401(k) before retirement doesn’t help. And two recent surveys indicate that last year’s record inflation has made the situation worse. According to TIAA, an international insurance company based in New York, 25 percent of U.S. workers have cut back on their retirement savings because of inflation. Even worse, 12 percent stopped saving entirely.[2]

Also, the Senior Citizens League, an advocacy group based in Alexandria, Virginia, surveyed over a thousand people aged 55 and older. They found that 49 percent of seniors spent at least some of their emergency savings in the first quarter of 2023, up from 38 percent in 2022.[3]

The 401(k) study generated some other interesting tidbits. For example, they concluded that a higher employer matching contribution rate actually increases what they refer to as the “leakage” rate, or the percentage of the account that comes out at job termination. The study estimates that a 50 percent increase in the employer match rate increases leakage probability by 6.3 percent at job termination. Or as they say, “Employers with more generous matches care about their employees’ well-being in retirement, but unintentionally nudge employees to cash out when they change jobs.”[4]

There are, of course, some good reasons why an individual would need to cash out of their 401(k), such as severe financial hardship. Remember to consult your tax advisor to help you fully understand the income tax implications of cashing out.  As a general rule, if you need money, this should be one of your last options.

[1] Wang, Yanwen, Zhai, Muxin, and Lynch, John G.  “Cashing Out Retirement Savings at Job Separation.”  Marketing Science, University of British Columbia, Vancouver V6T 1Z2, Canada (accessed May 4, 2023) https://pubsonline.informs.org/doi/full/10.1287/mksc.2022.1404

[2] Yakoboski, Paul Lusardi, Annamaria Hasler, Andrea. “Financial well-being and literacy in a high-inflation environment” TIAA Institute (accessed June 5, 2023), New York, NY.  https://www.tiaa.org/content/dam/tiaa/institute/pdf/insights-report/2023-04/tiaa_institute_gflec_2023_personal_finance_index_ti_yakoboski_april_2023.pdf

[3] Place, Nathan. “Record inflation has devastated America’s retirement savings.” Financial-planning.com. https://www.financial-planning.com/news/record-inflation-has-devastated-americas-retirement-savings?position=editorial_1&campaignname=V2_FP_BestoftheWeek_2021-05052023&bt_ee=5C0W0TOcz8ZTfdXSizcLEqX3Z2yxFKkgZXkuchG8Umt5fvvp%2FwzKIte9%2FHrXOZ4W&bt_ts=1683302581142(accessed May 3, 2023); Senior Citizens League, Alexandria, VA. “2023 Senior Survey” https://seniorsleague.org/2023seniorsurvey/ (accessed June 5, 2023)

[4] Wang, Yanwen, Zhai, Muxin, and Lynch, John G.  “Cashing Out Retirement Savings at Job Separation.”  Marketing Science, University of British Columbia, Vancouver V6T 1Z2, Canada (accessed May 4, 2023)  https://pubsonline.informs.org/doi/full/10.1287/mksc.2022.1404

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the Company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances. Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York. Product availability and features may vary by state.

Episode 232 – Before you try to take an income tax deduction for the charitable gifts you made during the tax year, make sure you comply with the various IRS requirements for documentation and qualification of the donation.

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, Documentation of Charitable Gifts.

Many people make charitable gifts each year. Often, the donation is in cash. Other times, it could be a non-cash asset like a car, furniture, used clothing, collectibles, etc. Charitable donations may yield income tax deductions, but before you can qualify for the deduction, the IRS requires you to comply with certain requirements and to provide certain documentation.

We’ll review a few of the main requirements, but qualifying for a deduction can get complicated. IRS Publication 561 provides detailed guidance on how to value certain types of property such as securities, jewelry, used clothing, artwork, furniture, automobiles, and other items. It also provides guidance on how to document charitable gifts and how to qualify for a tax deduction. Of course, your best course of action is to consult with your tax advisor.

For contributions of cash, including checks or credit card donations, you must maintain a record of the contribution. That could be in the form of bank records or a receipt from the charity that includes the name of the organization, the amount, and the date of the contribution. If the contribution is $250 or more, you must also obtain, a contemporaneous written acknowledgment from the charity indicating the amount of the donation and a description of any property, other than cash contributed. The acknowledgment must say whether the organization provided any goods or services in exchange for the gift and, if so, must provide a description and a good faith estimate of the value of those goods or services. This is commonly referred to as the “contemporaneous written acknowledgment” requirement.

For each non-cash contribution, a determination of the fair market value of that asset must be determined. Depending upon the type of asset being donated, that determination could be difficult and may involve the hiring of a qualified independent appraiser. What makes the appraiser a “qualified” appraiser is the requirement that the individual meet certain qualifications, including holding a professional designation from a recognized appraisal institution, minimum education requirements, and more. Again, refer to IRS Publication 561 and your tax advisor for more information.

IRS Form 8283 is also required for each non-cash contribution or contribution of a group of similar items exceeding $500. It is also required when certain non-cash donations are made of specific types of property, such as publicly traded securities or an automobile.

Generally, for non-cash contributions of property exceeding $5,000, a qualified appraisal of the property is required. In order for the appraisal to be considered “qualified,” it must meet certain requirements spelled out in IRS Publication 561. The appraisal must be in writing and signed and dated by a qualified independent appraiser. You must also obtain a contemporaneous written acknowledgement from the charity, as well as file Form 8283 with your income tax return. A copy of the appraisal is not required with the tax return. However, if the donation exceeds $500,000, then the qualified appraisal must be attached to the tax return.

As you can tell, qualifying a charitable contribution of non-cash assets, for an income tax deduction, may require several stringent measures. Failure to satisfy the requirements may result in the denial of your charitable income tax deduction. For more information, consult with IRS Publication 561 and your tax advisor.

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the Company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances. Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York. Product availability and features may vary by state.

Episode 231 – The IRS released Revenue Ruling 2023-2 stating that assets held in a grantor trust do not receive a step-up in basis upon the grantor’s death. What does that mean?

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, No Step-Up in Basis for Assets in a Grantor Trust.

On March 29, 2023, the IRS issued Revenue Ruling 2023-2 to settle a tax question that some estate planning attorneys and tax commentators believed to be in question. Let’s briefly discuss the issue that you and your legal and tax advisors may need to decide if it applies to you.

Grantor trusts (a/k/a “intentionally defective grantor trusts” or “defective trusts”) are very common estate planning tools used by high net-worth individuals, who may have an estate tax exposure upon death. Generally, the person making the gift, referred to as the grantor, transfers assets through gifts into an irrevocable trust designed to be a grantor trust. Retention of certain powers by the grantor that satisfy Internal Revenue Code Sections 671, et seq., would allow an irrevocable trust to be considered a grantor trust.

Grantor trust status generally means that the assets transferred are no longer considered owned by the grantor for gift and estate tax purposes. For income tax purposes, however, the grantor is still considered the owner and is subject to the income tax consequences resulting from those assets, such as the payment of income tax on taxable income generated by those assets. From an estate planning perspective, the gifting of assets into an irrevocable trust removes the value of the asset, and its potential future growth, from the value of the taxable estate at death. Payment of income taxes on income generated by the trust asset further depletes the taxable estate.

One of the basic axioms of estate planning is that assets acquired or passed from a decedent, as defined in Internal Revenue Code Section 1014, receives a basis adjustment to the fair market value as of the date of death (i.e., “step-up in basis”). What does that mean? Let’s review a simple example. A parent purchased an asset years ago for $10. That is the parent’s basis. It is now worth $100, and the asset is gifted to a child. The child’s basis remains at $10. That’s known as “carryover” basis. The child turns around and sells the asset for $100. The child is now subject to $90 of capital gains. Contrast that to the situation where the asset is passed to the child through a bequest, because of the parent’s death. The child’s basis in that asset has been “stepped up” to its fair market value on the date of death, which is $100. If the child immediately sells the asset for $100, there would be no capital gains.

Some prominent estate planning attorneys and tax advisors have argued for years that assets placed into a grantor trust should still receive a basis step-up upon the death of the grantor. They reason that nothing in Internal Revenue Code Section 1014, the applicable regulations, or legislative history, expressly precludes transfers made under a lifetime trust from qualifying as a bequest or devise at death. Since the assets in a grantor trust are still deemed owned by the grantor during the grantor’s lifetime, for income tax purposes, an argument can be made that the assets passed as a result of the death of the grantor, since the trust no longer qualifies as a grantor trust at the moment of death. Therefore, the assets in the trust should receive a “step-up” in basis upon the death of the grantor.

Revenue Ruling 2023-2 declared the IRS’s official position that assets held in a grantor trust do NOT receive a basis “step-up” upon the death of the grantor. Since that Revenue Ruling was issued, commentators have continued the debate, noting that a Revenue Ruling while an official interpretation by the IRS on how the law is applied to a specific set of facts, a Revenue Ruling does not have the same force and effect as a statute, regulation, or court case. But it must be pointed out that if a taxpayer continues to argue the counterpoint, the IRS may also seek to apply penalties and interest.

So, while the IRS has issued a Revenue Ruling, the debate is far from over. Aggressive taxpayers may decide to challenge the IRS’s position.

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the Company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances. Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York. Product availability and features may vary by state.

Episode 230 – A lot has been written about planning for families with children, but approximately 44 percent of non-parents under age 50 say they are unlikely to have kids. What about them? In this episode we suggest some ideas for an underserved group of people.

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the Company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances. Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York. Product availability and features may vary by state.

• COVID-19 (coronavirus) Information

Episode 229 –Individuals and charities have been adversely affected by post-pandemic circumstances. We can help charitably inclined individuals meet philanthropic goals without sacrificing personal financial security.

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the Company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances. Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York. Product availability and features may vary by state.

• COVID-19 (coronavirus) Information