NavStar Currents

Although the person I'll reference in this study is fictional (I'll call her Mary), her circumstances are certainly not. Let's take a look at Mary's financial situation:

Mary is a widow, and her husband Bud passed away five years ago. Her financial situation is still very similar to what it was before Bud died.

She has $350,000 in a brokerage account, which is an IRA, and another $50,000 in bank CD's. She has an accountant who does her taxes, a financial advisor from her bank, and an attorney who has helped her prepare legal documents, such as her will. She has no trusts. Her sources of income are social security, a survivors pension from Bud, and a 4% drawdown each year from her IRA. 

One afternoon Mary has a stroke. She loses the ability to speak and all mobility.

The Scenario:

Jack Howard, age 70, and his wife Marcy, 64, are very comfortable financially. Jack made a large amount of money from a series of successful patents obtained through the years. The value of Jack and Marcy's estate is calculated to be $11.9 million. Included in that amount will be a $1 million life insurance payout, from a policy on Jack, to Marcy. The life policy currently has a cash value of $700,000

Unfortunately, that million dollars will be included in Marcy's estate when she dies, and it will push her over the Estate and Gift Tax exemption, which is $5.45 million for the first to die, and then is rolled over to the surviving spouse, for a total exemption of $10,900,000. That will leave an estate tax bill of around $400,000. Now, that amount can easily be obtained from the life insurance payout. But is there a better way?

Although the person I'll reference in this study is fictional (I'll call her Mary), her circumstances are certainly not. Let's take a look at Mary's financial situation:

Mary is a widow, and her husband Bud passed away five years ago. Her financial situation is still very similar to what it was before Bud died.

She has $350,000 in a brokerage account, which is an IRA, and another $50,000 in bank CD's. She has an accountant who does her taxes, a financial advisor from her bank, and an attorney who has helped her prepare legal documents, such as her will. She has no trusts. Her sources of income are social security, a survivors pension from Bud, and a 4% drawdown each year from her IRA. 

One afternoon Mary has a stroke. She loses the ability to speak and all mobility.

The Scenario:

Death and Taxes

Everyone knows that death and taxes are unavoidable. For many, the two go together! If you have been able to accumulate considerable assets in the course of your life, you are probably more aware of this than most. Depending on how much your estate is worth, it's possible that your obligation to the government after you are gone could be quite substantial. 

Stories of celebrity estate taxation are legendary. Some of America's most famous have seen their net-worth reduced by 40-70% because of the federal estate tax. Walt Disney died with a $23 million estate, but paid almost $7 million in taxes. John D. Rockefeller was worth $27 million but ended up paying more than $17 million - a 64% reduction! 

Yet, it doesn't have to end up this way.

A well crafted and properly implemented estate plan can enable you to cut the IRS completely out of your estate.

A Brain is a Terrible Thing to Waste

Should your child go to college?

My parents were part of the "greatest generation." Dad was a veteran of WWII (and not happy about it. He was on the verge of being called up from a minor league baseball team to play in the majors when Uncle Sam summoned him instead...) and came home in 1945 to a world finally at peace. In those days, a college education was considered a sure ticket to success. That's not so much the case today. It really depends on your field of study as to what your opportunities will be, and many college graduates come into the workforce only to discover that it's very difficult to find employment using their particular field of study. Many skilled trades pay as much or more as could be earned with a degree. I'm of the opinion that college isn't for everybody, and many are in college who shouldn't be.

Nevertheless, most parents have the hope that their little angel or angel-ette will one day discover the cure for cancer, bring about world peace, or colonize Mars, and to do that, they're going to need to attend college. 

And so the next question is: how are we going to pay for it?

Although the person I'll reference in this study is fictional (I'll call her Mary), her circumstances are certainly not. Let's take a look at Mary's financial situation:

Mary is a widow, and her husband Bud passed away five years ago. Her financial situation is still very similar to what it was before Bud died.

She has $350,000 in a brokerage account, which is an IRA, and another $50,000 in bank CD's. She has an accountant who does her taxes, a financial advisor from her bank, and an attorney who has helped her prepare legal documents, such as her will. She has no trusts. Her sources of income are social security, a survivors pension from Bud, and a 4% drawdown each year from her IRA. 

One afternoon Mary has a stroke. She loses the ability to speak and all mobility.

The Scenario:

Jack Howard, age 70, and his wife Marcy, 64, are very comfortable financially. Jack made a large amount of money from a series of successful patents obtained through the years. The value of Jack and Marcy's estate is calculated to be $11.9 million. Included in that amount will be a $1 million life insurance payout, from a policy on Jack, to Marcy. The life policy currently has a cash value of $700,000

Unfortunately, that million dollars will be included in Marcy's estate when she dies, and it will push her over the Estate and Gift Tax exemption, which is $5.45 million for the first to die, and then is rolled over to the surviving spouse, for a total exemption of $10,900,000. That will leave an estate tax bill of around $400,000. Now, that amount can easily be obtained from the life insurance payout. But is there a better way?

The Scenario:

Death and Taxes

Everyone knows that death and taxes are unavoidable. For many, the two go together! If you have been able to accumulate considerable assets in the course of your life, you are probably more aware of this than most. Depending on how much your estate is worth, it's possible that your obligation to the government after you are gone could be quite substantial. 

Stories of celebrity estate taxation are legendary. Some of America's most famous have seen their net-worth reduced by 40-70% because of the federal estate tax. Walt Disney died with a $23 million estate, but paid almost $7 million in taxes. John D. Rockefeller was worth $27 million but ended up paying more than $17 million - a 64% reduction! 

Yet, it doesn't have to end up this way.

A well crafted and properly implemented estate plan can enable you to cut the IRS completely out of your estate.