by Robin L. Cook, Wealth Advisor,
Suncoast Prosperity Advisors a division of Suncoast Equity Management
Whether you are focused on accumulating enough funds for a worry-free retirement, ensuring that the funds you’ve already saved will be protected and last throughout your lifetime, or aiming to reduce estate taxes for your family, the creation of a financial roadmap can ensure you are successful.
Your financial roadmap construction starts with some basic building blocks:
1. A personal financial statement listing all your assets (bank accounts, investment accounts, real estate, business interests, insurance, etc.) and liabilities.
2. Your estimated annual spending amount/needs.
3. Income sources and amounts both now and future.
4. Future large purchase desires or liquidation expectations.
5. Charitable intentions.
6. Legacy desires for family/heirs.
7. Date you would like to retire if you are still employed.
Once you have gathered this pertinent information it would be beneficial to have discussions with your wealth advisor so they can communicate and help build a strategy with your wealth team. Your wealth team will often include your wealth advisor, estate attorney, tax advisor, and insurance agent who join forces to help create a road map specifically tailored for your desired outcome. Your personal roadmap will use the variables you shared above to illustrate how your assets with last throughout your lifetime, and the estimated value of your estate when it passes to your heirs or charity.
The value of your estate when it passes on is important because tax laws are continually changing.
For example, the current 2023 federal estate tax (currently 40%) exemption limit of $12.92 million per person/$25.84 million per couple is sunsetting in 2026. As a Florida resident with no state gift or estate tax, these limits are currently the amount of money you can leave to heirs with no federal estate tax – (minus any prior gifts over the current annual $17,000 per person gift limit). In 2026 the exemption limit drops back to the 2017 number of $5 million per person adjusted for inflation.
There are various types of trusts, gifting strategies, charitable giving, portability, and other techniques that your estate attorney, tax advisor and wealth advisor can help you employ now to take advantage of the current high limits to reduce future federal estate taxes for your heirs. You should also confer with your advisors about the most tax advantageous assets to give now or bequeath to charities.
Since withdrawals from traditional IRAs are taxed as ordinary income and annuity gain withdrawals are subject to ordinary income tax rates, they can be a good choice to bequeath to your favorite qualified non-profit organizations. If your passing estate is over the federal estate tax limits these assets could be subject to a dual tax 40% federal estate tax, plus income tax when withdrawn. Your tax advisor should always be consulted for the most advantageous gifting methods, and beneficiary designations to fit your circumstances.
None of us know for certain what the future holds. Many of us who own property on Sanibel, Captiva, and SW Florida had our financial circumstances changed courtesy of Hurricane Ian. You or a family member may develop a health concern adding excessive medical needs and expenses. You can ease the burden of unforeseen events and expenses by having a solid roadmap. This map will have its fair share of detours, but it will help keep your finances on track and ultimately give you the best chance to reach your desired destination.