The Financierge – January 2022

Dear Clients and Friends,

Happy New Year! As we launch into 2022, it’s a great time to set goals for the year. As a management consultant for Ernst & Young, I had the good fortune of being trained in the art and science of strategic planning. I look at it as a process of setting and achieving balanced goals. Over my career, I evolved what I learned in strategic planning and learned to apply it not only to business but to family wealth management and even holistically to life. The beauty I find in strategic planning is that it helps us develop a roadmap we can use to drive real purpose and decision-making in what to do and what not to do. Ultimately, a clear strategy helps us to use our limited time, talents, and treasures to achieve our highest and best use – a life of both success and significance. As a private wealth advisor at The Bahnsen Group, I am thankful for the privilege of being able to create value for clients and friends and to help them set and achieve their lifetime goals.

In this month’s issue of The Financierge, we discuss some of the latest topics that reflect the diversity of the planning and thought leadership we provide clients as part of our wealth management platform. Not only do we guide clients through all the phases of wealth accumulation, distribution, and transfer, but we also do so in a context that is holistic and comprehensive – from investment management, retirement planning, tax, and risk management to estate and charitable planning, real estate, business consulting, and family and lifestyle management. So, off we go . . .

Tax Planning

2022 Tax Rates, Schedules, and Contribution Limits

*IRS and Social Security Administration 2022

Charitable Planning

Give Both Now and Later

According to a survey by Rockefeller Philanthropy Advisors, more and more donors are moving from perpetual giving to giving-while-living. Most plan to reduce philanthropic assets within 15 years. The Gates Foundation is an example of spending down its assets to make an impact now. Traditional models, which aim to pay out charitable gifts for generations, are increasingly being replaced by plans that emphasize immediacy over perpetuity. The giving-while-living trend is driven by a desire by donors to see the impact of their gifts. Tax planning is an important part of giving now and in the future. For example, if you gift appreciated assets now, you don’t have to pay capital gains taxes and you get a deduction for the donation. If you give a gift at death, a charitable deduction isn’t permitted. Although some might not consider this charitable planning, I encourage clients to consider giving to their children now. While this may not be traditional charitable planning, it does involve and teach generosity. One ideal way is to use the annual gift tax exclusion of $16,000 per beneficiary. For example, you and your spouse can gift $32,000 to each child. You can put it in a 529 education savings account or just give an outright gift. I have a few clients that when their children get married, they will help with a down payment on the house if the children can afford the house mortgage. Even if this goes over the annual exclusion amount, you can file an IRS form 709 to apply it to their federal estate tax exemption of $12.06 million for 2022. Several other clients take their children (and grandchildren) on vacation and use some of the time to share family values.

Using a Charitable Lead Trust with a Donor Advised Fund

According to the Association of Fundraising Professionals, a planned gift is structured and integrates estate planning goals with a donor’s giving whether the giving is done while they are alive or at the time of their death. Many planned giving vehicles are available, including bequests, donor-advised funds, private foundations, and charitable trusts. Sometimes optimal results can be attained by combining two vehicles, for example, a donor-advised fund (DAF) with a charitable lead trust (CLT). For those familiar with a charitable remainder trust (CRT), the CLT is reverse. The CLT receives cash or property from the donor and the donor specifies the trust timeframe, the trust’s income beneficiary (typically the charity), and the beneficiary (typically the heir(s) of the donor). CLTs are beneficial when there are low-interest rates and the donor does not need current income from the trust; has charitable intent; is looking for a tax-efficient means to make a future transfer to heirs, and is concerned about income tax or estate tax exposure.

Real Estate

Residential Real Estate – Orange County, California

Whether it’s Orange County, California, or possibly in your hometown, realtors are forecasting another strong year for housing supported by a recovering economy, strong demand, limited inventory, and stable mortgage rates. Although they acknowledge potential inflation pressures, they believe this will subside in 2022.  Even with Federal Reserve reversing mortgage-backed securities purchases and raising the Federal Funds Rate (short-term rates), long-term mortgage rates are expected to average between 2.75% to 3.5%. Annual appreciation is expected to be 8-10% mostly occurring between now and July.

Retirement Planning

Moving in Retirement

According to U.S. Census Bureau’s Current Population Survey, 226,000 people moved for retirement in 2021, down 43% from 2020. This is surprising given that Covid forced an estimated three million Americans to retire earlier than planned. Some believe this is likely caused by Covid, increased housing prices in retirement destinations, and lack of retirement savings. The states that attracted the most out-of-state moves were Tennessee (13.1%), Florida (11.3%), Pennsylvania (10.7%), North Carolina (10.3%), South Carolina (9.4%), Kansas (7%), Arkansas (6.5%), Georgia (6.3%), Maine (5.4%) and Louisiana (4.1%).  The states where retirees were most likely to leave were Delaware (22.5%), Maryland (21.7%), Utah (19%), Virginia (16%), Maine (15.6%), West Virginia (15.3%), New Jersey (15%), Iowa (14.7%), Nevada (14.2%) and Massachusetts (12.7%). Last month I discussed that if you are considering moving in retirement because of taxes, it is important to understand both quantitative factors like state income, sales, property, estate, and other taxes, as well as qualitative factors such as family, friends, community, food, and weather.

Risk Management

Advantages of Owning Long-Term Care Insurance

There are a lot of advantages to owning a tax-qualified long-term care policy. It helps you remain in your home as long as possible, ensures you won’t have to rely on your kids to take care of you, provides protection for your retirement nest egg, and there is a potential to save on federal and state income taxes. For individuals, you may be able to deduct a portion of the premium you pay, benefits are tax-free, and can deduct out-of-pocket long-term care expenses as a medical deduction. For business owners, if you are self-employed eligible premiums may be tax-deductible when the business purchases long-term care insurance for owners, spouses, and dependents. Actual premiums may be tax-deductible for employees. For owners of C Corporations, actual premiums may be tax-deductible for owners, spouses, dependents, and employees.

Will Your State Require You to Buy Long-Term Care Insurance?

The state of California is planning to implement something similar to what the state of Washington did in 2021. Washington added a payroll tax of 0.58% on all wages for all W-2 employees to provide a very expensive long-term care policy (otherwise known as the WA Cares Fund). Washington residents were allowed to opt-out of this payroll tax if they purchased a Long-Term Care policy from an insurance carrier. Thousands of people submitted applications to all the insurance carriers offering LTC products in Washington. The industry was so inundated with applications that all the carriers stopped selling LTC products in the state of Washington. The WA Cares Fund only provides a small LTC benefit of $36,500 (that’s not an annual benefit, that’s the total LTC benefit). A person making $300,000 per year would have to pay $1,740 a year for this tiny LTC policy. By contrast, a male age 45 could purchase a $100,000 hybrid LTC policy in the state of California for only $998 a year. A private opt-out LTC policy provides substantially more coverage for a lot less money and includes a death benefit, as well as a fixed premium and benefit. Many other states are looking to implement a similar government-run LTC fund in the not-too-distant future, including California, Alaska, Colorado, Hawaii, Oregon, Illinois, Michigan, Minnesota, Missouri, New York, North Carolina, and Utah.

Family

Consider Getting Your COVID-19 Vaccine Booster Shot

Medicare.gov explains that even if you’re fully vaccinated for COVID-19, it’s still important to get your COVID-19 vaccine booster shot. A booster shot increases the strength of your antibody response, so when the COVID-19 virus mutates, a boost makes it more likely that your antibodies can protect you against variants, like Omicron and Delta. Medicare covers a COVID-19 vaccine booster shot at no cost to you. If you’re fully vaccinated, you can get a booster from the same COVID-19 vaccine that you originally got, or choose a different one. Everyone 18 years and older should get a booster shot 2 months after their Johnson & Johnson vaccine, or 5 months after completing their primary COVID-19 vaccination series of Pfizer-BioNTech or Moderna. Adolescents and teens ages 12 to 17 should also get a booster of Pfizer-BioNTech 5 months after their primary series. Continue wearing a mask in indoor public places in areas of high or substantial community transmission. Click on this COVID-19 County Check Tool to find your county’s level of community transmission.

Just for Fun

Celebrate January and the New Year!

Here are some fun days to celebrate in January. There is something for everyone:

  • January 1st – New Years Day (If you missed it, celebrate it again)
  • January 4th – National Spaghetti Day (For my awesome Italian friends)
  • January 7th – National Bobblehead Day (David Bahnsen Bobbleheads!)
  • January 9th – National Law Enforcement Appreciation Day
  • January 10th – National Clean Off Your Desk Day (You Know Who You Are!)
  • January 13th – Korean American Day
  • January 14th – National Dress Up Your Pet Day (and Bring Them to Work)
  • January 15th – National Bagel and Hat and Strawberry Ice Cream Day
  • January 16th – National Religious Freedom Day
  • January 17th – Martin Luther King, Jr. Day
  • January 19th – National Popcorn Day!
  • January 21st – National Hugging Day and Squirrel Appreciation Day. (Hug a Nut!)
  • January 22nd – Celebration of Life Day
  • January 23rd – National Pie Day (Bring an Apple Cinnamon pie to Work)
  • January 25th – National Florida Day
  • January 26th – National Spouse Day (Remind Your Spouse)
  • January 31st – National Backwards Day.
Life Lessons from Mister Rogers : )

Fred McFeely Rogers was the host of the iconic Mister Rogers’ Neighborhood TV series from 1968 to 2001. He was known for his calm, friendly attitude, and wisdom. Here are some of his most memorable quotes.

ON KINDNESS

All of us, at some time or other, need help. Whether we’re giving or receiving help, each one of us has something valuable to bring to this world. That’s one of the things that connects us as neighbors — in our own way, each one of us is a giver and a receiver.

As human beings, our job in life is to help people realize how rare and valuable each one of us really is, that each of us has something that no one else has or ever will have, something inside that is unique to all time.

When I was a boy and I would see scary things in the news, my mother would say to me, “Look for the helpers. You will always find people who are helping.”

Imagine what our real neighborhoods would be like if each of us offered, as a matter of course, just one kind word to another person.

ON LOVE

Love isn’t a state of perfect caring. It is an active noun like “struggle.” To love someone is to strive to accept that person exactly the way he or she is, right here and now.

Everyone longs to be loved. And the greatest thing we can do is to let people know that they are loved and capable of loving.

Listening is where love begins: listening to ourselves and then to our neighbors. 

I don’t think anyone can grow unless he’s loved exactly as he is now, appreciated for what he is rather than what he will be.

Mutual caring relationships require kindness and patience, tolerance, optimism, joy in the other’s achievements, confidence in oneself, and the ability to give without undue thought of gain.

ON HEALING

Forgiveness is a strange thing. It can sometimes be easier to forgive our enemies than our friends. It can be hardest of all to forgive people we love. Like all of life’s important coping skills, the ability to forgive and the capacity to let go of resentments most likely take root very early in our lives.

There is no normal life that is free of pain. It’s the very wrestling with our problems that can be the impetus for our growth.

When we can talk about our feelings, they become less overwhelming, less upsetting and less scary.

ON LIVING LIFE TO ITS FULLEST

It’s not so much what we have in this life that matters. It’s what we do with what we have.

The thing I remember best about successful people I’ve met all through the years is their obvious delight in what they’re doing, and it seems to have very little to do with worldly success. They just love what they’re doing, and they love it in front of others.

It’s good to be curious about many things.

You rarely have time for everything you want in this life, so you need to make choices. And hopefully your choices can come from a deep sense of who you are.

ON INDIVIDUALITY

If you could only sense how important you are to the lives of those you meet; how important you can be to the people you may never even dream of.

We all have different gifts, so we all have different ways of saying to the world who we are.

It’s really easy to fall into the trap of believing that what we do is more important than what we are. Of course, it’s the opposite that’s true: What we are ultimately determines what we do!

The greatest gift you ever give is your honest self.

Bottom Line

At The Bahnsen Group, our objective is to provide you with comprehensive and holistic services to help you grow, protect, and steward your wealth toward a multigenerational family legacy of both success and significance. We are grateful for the privilege of creating value for clients and friends. Please reach out to me if you have any questions or if there is anything we can do for you.

We wish you and your family a blessed year ahead!

Warm and best regards,

Don B. Saulic, CFP® CPA

Managing Director, Partner
dsaulic@bahnsengroup.com

The Bahnsen Group is registered with HighTower Securities, LLC, member FINRA and SIPC, and with HighTower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through HighTower Securities, LLC; advisory services are offered through HighTower Advisors, LLC.

This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.

All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The team and HighTower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice.

Third-party links and references are provided solely to share social, cultural and educational information. Any reference in this post to any person, or organization, or activities, products, or services related to such person or organization, or any linkages from this post to the web site of another party, do not constitute or imply the endorsement, recommendation, or favoring of The Bahnsen Group or Hightower Advisors, LLC, or any of its affiliates, employees or contractors acting on their behalf. Hightower Advisors, LLC, do not guarantee the accuracy or safety of any linked site.

Hightower Advisors do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax advice or tax information. Tax laws vary based on the client’s individual circumstances and can change at any time without notice. Clients are urged to consult their tax or legal advisor for related questions.

This document was created for informational purposes only; the opinions expressed are solely those of the team and do not represent those of HighTower Advisors, LLC, or any of its affiliates.

About the Author

Don B. Saulic

Managing Director, Partner

Don is a Partner in the team’s Private Wealth Management practice specializing in helping affluent families develop comprehensive strategies for all phases of wealth accumulation, preservation, and transfer.

He also leads our Financial Concierge Services platform of professional alliances and serves as the editor of The Financierge.

Play Video
Play Video
Play Video
Play Video
Play Video
Play Video
Play Video
Play Video