Leaving Assets to Loved Ones?

Leaving Assets to Loved Ones_.mp3: Audio automatically transcribed by Sonix

Leaving Assets to Loved Ones_.mp3: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker 1:
Welcome back to the Federal Retirement Show. I'm your host, Val Majewski, with American Benefits Exchange. And I really appreciate you taking the time out of your busy schedule to join us, because this is what it's all about. It's for you, the federal employee that is looking for information when it comes to your benefits and retirement. And today, we're just going to talk about something a little different. Uh, when it comes to leaving money to your loved ones once you pass away. Now, I know we don't want to think about that, but I talked to a lot of federal employees along the way that that want to build up these assets and leave their assets to their loved ones, and they don't want to spend them. They want to leave them to their loved ones. And I'm like, no, I want you to enjoy your retirement. I want you to enjoy the money you've saved. I want you to enjoy, you know, the freedom that you have when you retire, and you should reward yourself and don't feel like you need to save up all these assets to leave to your loved ones. But if you are going to do that, if you are going to leave something to a spouse or to kids or grandkids or whoever, it might be a charity, it might be your church. It might be something that you want to leave money to. What's the most effective way to do that? And that's what we're going to talk about today.

Speaker 1:
So are you leaving money to to your loved ones or leaving assets to your loved ones? If so, I'm going to talk very boldly and say buy life insurance. Let's dive into today's content and talk about leaving assets to your loved ones so you can guess which direction we're going to go in. And yes, I'm, I'm impartial on this, right? I'm, uh, I am partial. I'm going to be talking about something specific about buying life insurance. If you want to leave your assets to your loved ones. But I want to explain why. And you might think life insurance or people that offer life insurance, it's like, uh, get me away. That person's just trying to sell me life insurance. Not not the case. Because this is for those who want to leave something to their loved ones but want to do it more effectively. So what does that look like? And what's the scenario that we're going to go over? Let's say you're a federal employee and the numbers are are don't mean anything, but we're just going to say you want to leave your assets, whether that's TSP or other financial accounts that you have or other assets, you want to leave those things to your loved ones, and you want to give them a certain dollar amount in the end. And let's say a federal employee had $1 million in their TSP and another million dollars in other assets and other things.

Speaker 1:
And what would it look like? How would you be able to leave $2 million to your loved ones most effectively? What's the best way to do that? Now, again, this is not for everybody. I'm not talking about, hey, you're using your money in retirement and you need that money in retirement. You just happen, you pass away and there's money left over and it goes to somebody. No, but if this is money that you've earmarked, this is something you specifically want to do. You want to leave something to your loved ones. And how is it more effective? Well, how can we set it up to make it most effective? And the best way to transfer that wealth over to somebody else? And why? Why are those things? So what is the best way to do that? And I already told you at the beginning, I said buy life insurance. Yeah. And just a little caveat, life insurance, if you want to make it the most cost effective thing, you've got to qualify for it. And they're going to ask, uh, health questions. You have to answer those questions and you might have to take an exam. And yeah, there, there are things that that need to happen in order to qualify for that. But also there are ways where people that think they're unhealthy might still be able to qualify. So you never know.

Speaker 1:
But, um, that's the only negative I'll say at the beginning. What's the negative? What's the catch when we go over all this stuff. Yes. You have to qualify for it. These, these life insurance companies are not just giving away policies to anybody, whether you're, you know, healthy or sick or smoker or a non-smoker, male or female. You've got to qualify as an individual. You've got to answer health questions for it to be the most cost effective. You know, they'll say the cheapest life insurance plan that you can get, you have to qualify. And the healthier you are, well, you get some good health discounts. You the healthier you are, the cheaper it's going to be. But why? Now there's there's other people I say I shouldn't I'm going to back up a second. Why would this be the best way to go? We'll go over those those reasons. And why would you want to do that? There's a famous person that specializes in retirement and he says, do not leave your kids or your loved one's assets. Leave them life insurance. Because for the reasons we're going to mention, it's not just me that's saying these things. The experts out there when it comes to retirement, you can look them up. I'm not going to go over all the names, but you can look up these expert opinions when it comes to leaving assets, leaving money, leaving a legacy to your loved ones.

Speaker 1:
It's through life insurance. So let's get into the the why part of this. Now, I want to stop there a second because I want to look at this too, as an example. When you retire. I said it earlier, I want you to enjoy your retirement. I don't want you to be stockpiling this money and think you're never going to use it because you want to leave it to your loved ones. What if we can free up some of that and you can still leave the same legacy, the same gift, the same amount to your loved ones? Is that something that you'd be interested in? So if you had this plan, like, I'm going to leave this million dollars in my TSP to my loved ones, and I'm not going to spend it because I want to give them $1 million gift. Well, what if we can give them $1 million gift in a different way? That's going to give them some more advantages and things like that? Was that would you be open to it? And we help federal employees out in this way all the time. Because when it comes to leaving a legacy, you want to do it in the most effective way, the way that's going to benefit your loved ones the most. So let's go into the why part of it. First of all, life insurance is income tax free. It's tax free. It goes to your beneficiaries.

Speaker 1:
No taxes due. Doesn't matter how much the life insurance is. If the life insurance policy is a life insurance policy, the death benefit is going to go to your beneficiaries tax free. Think about the TSP. If you're going to leave $1 million in your TSP to your loved ones. Part of that is going to be taxable, if not all of it. If you're in the traditional bucket, all of it is going to be taxable. And if they got that death benefit, they're going to have to drain that account. If it's a non spouse, if it were kids or grandkids non-spouse, they'd have to drain that account within a ten year period to pay the taxes on that. And how much are they going to net? You know, even if it works out where they only pay 20% of taxes, $1 million gift is going to net them 800,000, you know, after taxes. So just understand that $1 million in a life insurance policy is going to go to your beneficiaries and still be $1 million because of the income tax or in lack of income tax. It's income tax free. When it comes to life insurance, number two, it bypasses probate. Now, probate can be a long process when somebody passes, and a life insurance does not go through the probate process, it bypasses probate. And the money can go directly to your loved ones. They don't have to go through that process and which can be long.

Speaker 1:
So this is an easier way to transfer the wealth and a quicker way to transfer the wealth. As long as they're filing a claim in an appropriate manner. I just helped a federal employee family do that recently. Unfortunately, a federal employee client of mine had passed away, and now helping the surviving spouse and child go through the claim process to get this money. But it happens relatively quickly. You fill out the form, you provide the death certificate, and they will send the check or EFT the money directly to the bank account. So understand this can be a quicker process on top of the tax free nature of the life insurance Bypasses creditors. So the life insurance death benefits are not part of the legal estate, which then very often will allow them to just go straight to the loved ones. Instead, it's bypassing probate. It's bypassing creditors. Now, if your money just went into the estate, or if this were TSB or another IRA or other financial accounts that you were going to leave because it was just assets, it was just money. There's a chance that creditors can get their hands on it. Hey, this person owed me money and this person owed me money. And next thing you know, that gift that you, the federal employee, are looking to leave may not be as large after taxes and creditors come in. So understand that the life insurance death benefit can bypass creditors and bypass probate.

Speaker 1:
Getting the money to your loved ones faster. On top of being tax free. And my last point here is talking about pennies on the dollar. These are not the only points for life insurance, but the main points. Why? If you're going to leave a legacy, if you're going to transfer wealth to your loved ones, Utilize life insurance, it's going to cost you pennies on the dollar. Now, if you want to leave $1 million to your loved ones, it is not going to cost you $1 million in life insurance premiums to leave that gift, that asset now turning into a life insurance policy. You can utilize a portion of that asset. Let's say you had $1 million sitting around and you wanted to leave $1 million death benefit. You can either leave it in the asset we just mentioned, TSP will be taxed, or at least a portion of it taxed when it's passed on to beneficiaries. That million dollar life insurance will be tax free, but it will cost you pennies on the dollar to leave that million dollar policy. Now, let's just say over time that you paid $500,000 into this plan to leave $1 million. Now, chances are it may not even be that much, but I'm just overestimating here. If I were to say you wanted to leave $1 million to your loved ones in order to do that, it only cost you 500,000.

Speaker 1:
Would you do it? What if I said only cost you 300,000 or 250,000 to leave your beneficiaries a tax free lump sum benefit of $1 million? Would you do it? Or you can just say I'll leave my money in TSB. A million. I'm not going to use any of that to buy life insurance. And when I die now my beneficiaries get the million minus taxes, which may only be 800,000. It costs you money to leave the benefit. In fact, it costs you negative dollars because of the tax implication to leave your loved ones 800,000, you have to pay a million to give them 800,000. Here you're going to pay a couple hundred thousand, maybe even up to 500,000, whatever it might be, whatever the premiums might cost over the rest of your lifetime to leave your beneficiaries a million. Now, your need may not be a million, but either way, proportionately, it's going to be pennies on the dollar to leave the amount that you want to leave. So and the younger you set that up, the cheaper it's going to be, the healthier. In general, you're probably are the younger you are. So to set this up to leave your family, your and your future loved ones, ones that may not even be here yet, like, you know, kids or grandkids, what have you, it's going to cost you pennies on the dollar to leave that legacy gift to them.

Speaker 1:
So this does take some forward thinking. And even if you're older now, but in relatively good health, and you can still qualify, the best transfer of wealth that I know of is life insurance is life insurance. Even if you did something called a single premium life insurance plan. Single premium whole life plan, and you had $1 million and you put that into a single premium, one time payment, that million then could generate for you maybe 1.2 million in death benefit, maybe 1.5, depending on your age, you're still going to get better value, better rate of return on the money overall that you're leaving to your loved ones. So it's a great transfer of wealth thing and something people I again get a little skittish, skittish about when it comes to the words life insurance. I think it's like a four letter word like, ah, get me away from this. This is life insurance. No, but it's something that, if used properly, is a better transfer of wealth. So I'm not talking about those that need that money or all of your TSB for your retirement. If that's the case, utilize your money. I want you to use your money as best as possible. But if you want to leave a gift, a legacy to your loved ones, the verdict is in. Do not leave them. Your assets. Leave them life insurance. Assuming you can qualify. The younger you are, the more likely you're going to be healthy enough.

Speaker 1:
And the younger you are, the cheaper it's going to be, the less it's going to cost you over time to leave that gift. So then we can use, once you set that up, you know, 100%, as long as you pay that premium going forward, that gift is there for your loved ones. You've earmarked that you've set that aside the rest of your money utilized for you in retirement. You worked hard. You worked long with the government. You deserve to utilize it. Join the country club, sail around the world, travel all over the place, use the rest of your money, and you can be, uh, very confident in knowing that you've got this legacy gift saved up for your loved ones. You don't have to say, ah, I don't need to. I don't want to spend my TSP because I want to make sure I leave enough to my, my kids or grandkids. That's not the case. When you set up the life insurance you've earmarked that you've set that aside, set it and forget it. Let them know that you have it. And that way, if something does happen to you long, long, long, long, long down the road, then they follow the claim and can get that money, tax free, probate free, creditor free and get it for pennies on the dollar compared to just leaving them the asset. So look, this was yeah, it was a pitch for life insurance, I will tell you that.

Speaker 1:
But if you are looking to see if you qualify, if you're looking to see, would this be right for me, for my family. Would this be something that my loved ones can benefit from? Absolutely. But could you qualify? Reach out to us. Go to our website. It's federal retirement show.com. Fill out the form. And one of our experts across the country that specialize in federal employees and federal employee benefits will reach out. Go over all your benefits with you, but can answer the specific questions that you have about life insurance and how it can benefit you and be part of your overall plan. Any good financial planner or advisor will have some sort of life insurance in your portfolio. You might have a risky bucket, a safe bucket, an income bucket, but you have to have that protection, that legacy bucket as well. And this is the part that we're talking about creating that legacy bucket for pennies on the dollar. Assuming you're healthy enough to qualify. So again, if you want to find out if you do qualify or what it takes to qualify, reach out to us. Now, we have a lot of other episodes, over 170 of them. Now that we record for you, the federal employees, looking for this information. I highly encourage you to go back and view all of our episodes. You can find them on a variety of different ways.

Speaker 1:
Um, go to our website and go on YouTube. You can go on Apple Podcasts, what have you, and you can listen to or watch all of these different episodes. And there's a lot of other information in there that is extremely beneficial for you and your benefits and retirement situation and your planning opportunities as you go through your career. Lastly, I'm going to highly recommend that you refer us the federal retirement show to a colleague. Ask somebody, hey, have you seen this channel? Have you seen this guy Val, that's talking about benefits and retirement? I just had a lot of, you know, this, um, I, I played baseball professionally. I played baseball professionally for, for ten years with a several different teams, mostly in the minor leagues. But I played in college and this past weekend I was at a college kind of reunion. They were honoring one of our championship teams, a team from 2000 that won a championship. Uh, and all of my teammates came back or a good amount of them. And it was kind of like a reunion. We were catching up. And one of my former teammates is a federal employee now. And he said that he had no idea that this is a teammate that, you know, I hadn't seen in a while was like, hey, I found your your channel, I found your podcast, I found your radio show and, you know, awesome information.

Speaker 1:
So I got a lot of great compliments. And I know he was interested in talking about, you know, his future of retirement and what that's going to look like because he didn't know everything that went into it and, and how to calculate all the numbers and how to properly prepare. So it's awesome to hear these stories that people are finding the federal retirement show, but they're finding it by happenstance. What if there were more people like you that's watching this right now that were proactive in passing along and sharing the federal retirement show with your, your colleagues and the people that you're working with. How many more federal employees can we reach, and how many more federal employees can be confident going through their career that they're making the right decisions, setting themselves up properly and going out with their head held high? When it's all said and done, knowing they did everything because they properly prepared, that I'm going to be is going to be a challenge for you. Share it with as many colleagues as you can. Start with one, then add two and keep going until you've reached everybody in your office or on your team or what have you. So I really appreciate it, and thank you in advance for that. Once again, you've been watching the Federal Retirement Show. My name is Val Majewski, and I look forward to seeing you on a future episode.

Speaker 2:
May is Military Appreciation Month a time to honor the men and women who serve and have served our great nation. And while we honor those associated with the military, members and veterans are fighting a different battle. Finances and purpose. I'm Jim Talbot here for the Retirement Radio Network powered by Emerald Life. For many who leave the military, the biggest challenge isn't just money, it's finding purpose in a new civilian world. After years of mission driven service with tight knit camaraderie, the transition can feel like losing your compass. Veterans often speak of searching for that same sense of meaning. Brian O'Connor, co-founder of Veteran Enhanced Technology Solutions, explained at a recent Ted talk. Where to start that search.

Speaker 3:
Once you have your identity, you can then begin searching for purpose. We chose to focus on identity, purpose and belonging, and do so through a routine of familiarity. We considered what did we do in the military that made us feel bonded.

Speaker 2:
Financial stability plays a key role in the search for purpose. With a solid financial foundation, veterans gain the freedom to chase meaningful work instead of just any paycheck. Fortunately, several powerful financial vehicles are available specifically for former service members. The VA Home Loan Program stands out, offering the chance to buy a home with no down payment and no private mortgage insurance. Many also tap the G.I. Bill to invest in education or training that aligns with a new, purpose driven path for those drawn to entrepreneurship. The VA and Small Business Administration offer support for veteran owned businesses, including special loan programs and certifications that open doors to federal contracts. Veterans can continue growing retirement savings through the Military Savings Deposit Program and a CNBC Sharon Epperson reiterates don't forget about the Thrift Savings plan.

Speaker 4:
It's a low cost version of a 401 K that's open to all service members. Choose a traditional TSP or Roth TSP, which will allow you to make tax free withdrawals in retirement.

Speaker 2:
So whether you're still in uniform or years into civilian life. May is a good reminder. The best way to honor service is to make sure those who served are set up for financial success and purpose, long after they take off the uniform for the retirement radio network powered by a marine life. I'm Jim Teraoka.

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