The Financierge – March 2022

Dear Clients and Friends,

According to CNBC, it is estimated that in the U.S. $68 trillion of wealth will transfer from generation to generation by 2047. This massive transfer of wealth presents significant opportunities and challenges for grandparents, parents, heirs, and charities. Some of these opportunities include how to prepare the next generation for wealth, how much to transfer when, what are the appropriate estate and tax strategies, and how to make sure the family business thrives? As a wealth management firm, not only do we help you grow and protect your wealth, but we also help you achieve both success and significance through our comprehensive and holistic planning.

The purpose of The Financierge is to discuss several of the latest topics that reflect the diversity of planning and thought leadership we provide our clients. In this month’s issue of The Financierge, we start by covering several topics on real estate, tax planning, estate planning, and risk management. Then we conclude with a few topics on family, health & wellness, and fun. There is a lot here, so hopefully, you will find something interesting for your own circumstances. So, off we go

Real Estate

U.S. Commercial Real Estate Holding Steady

According to Wealth Management Real Estate Daily, commercial real estate in the U.S. appears to be holding on as a stable destination for investments. Large commercial real estate firms are capitalizing on the sector’s ongoing bullish growth in apartment buildings, logistics facilities, and industrial properties. In the past month, one firm acquired nearly $6 billion in affordable housing. Continued growth suggests that U.S. commercial real estate assets will continue to be viewed as popular investment options despite market uncertainty in the world.

Luxury Real Estate – Emerging Housing Markets

According to data from The Wall Street Journal and Realtor.com’s Emerging Housing Markets Index, the top 20 emerging housing markets for October 2021 were dominated by much smaller markets such as Elkhart County, Indiana; Raleigh, North Carolina; Colorado Springs, Colorado; Waco, Texas; and Sarasota County, Florida.  Data shows that 6.4% of movers in these markets were from other places. According to Sotheby’s International, high net worth buyers from tech-driven fields such as life sciences, engineering, technology, and telecommunication are shaping the luxury real estate market in these locations incented by more land and spacious remote-work lifestyle, cost per square foot, and reduced individual and business taxes.

Tax Planning

**April 18, 2022 – Tax Filing or Extension Date for 2021 Taxes

A Few Tax Changes You Need to Know Before Filing

A few temporary tax provisions for the 2020 tax year were extended through 2021, while others were not. Along with the usual updates to tax brackets, standard deductions, and more, here are several tax changes you need to be aware of when you file in 2022.

  1. Canceled Student Loans – If your student loans were forgiven, canceled, or discharged in 2021, you’re in luck. Starting in 2021, loan cancellation for post-secondary education is no longer considered taxable income. This tax perk is expected to last through 2025, and it may become permanent. If your employer helped you pay down your student debt faster, you can exclude up to $5,250 of that money. This is another temporary benefit that started in the 2020 tax year and has been extended through 2025.
  2. Higher Deductions for Medical Expenses – If you itemize, unreimbursed medical expenses that exceed a certain percentage of your income are tax deductible. That percentage has moved between 7.5% and 10% of your adjusted gross income (AGI) for the past several years. For your 2021 taxes, it’s back down to 7.5% of your AGI which means if your AGI is $100,000, you can deduct unreimbursed medical expenses that exceed $7,500.
  3. Increased Child Tax Credit – In 2020, eligible taxpayers could claim a $2,000 credit per child 16 years old or under. These credits were partially refundable, meaning the government sent refund checks of up to $1,400 per child for low-income filers with at least $2,500 of earned income. In 2021, the government increased the credit to a maximum of $3,000 per child 17 and under, and $3,600 for children five and under. These credits are fully reimbursable, with no $2,500 earned income requirement. However, eligibility rules have also changed. To receive the maximum credit, your AGI must be under $75,000 for single filers; $112,500 for head-of-household filers; and $150,000 for married couples filing jointly. If your earnings pass those thresholds, the credit starts to phase out. If you didn’t receive advance payments that you were eligible for, you can file at tax time.
  4. Higher Standard Deduction – When you pay taxes, you can either take the standard deduction to reduce your tax bill or dive into the details and itemize your deductions. For the 2021 tax year, the standard deduction is getting bumped up to $12,550 for single filers and married couples filing separately; $18,800 for heads of households; and $25,100 for married couples filing jointly. If you’re age 65 or older, you can tack on an extra $1,350 per person if married and filing jointly or an extra $1,700 for household heads and single filers.
  5. New Income Brackets – Tax rates remain unchanged for 2021, but the brackets themselves expanded to account for inflation. The 2021 tax brackets are 37% for incomes over $523,600 ($628,300 for married couples filing jointly); 35%, for incomes over $209,425 ($418,850 for married couples filing jointly); 32% for incomes over $164,925 ($329,850 for married couples filing jointly); 24% for incomes over $86,375 ($172,750 for married couples filing jointly); 22% for incomes over $40,525 ($81,050 for married couples filing jointly); 12% for incomes over $9,950 ($19,900 for married couples filing jointly); and 10% for incomes of $9,950 or less ($19,900 for married couples filing jointly).
  6. Required Minimum Distributions – Once you reached age 72, you must start withdrawing money annually from tax-advantaged retirement accounts (for example, traditional IRAs and 401(k)s). These required minimum distributions (RMDs) count as fully taxable income. If you turned 72 in 2021, you have until April 1, 2022, to take your first distribution. If you fail to withdraw, you could get up to a 50% tax penalty.
  7. $300 Per Person Charitable Deduction – For the 2021 tax year, you can deduct up to $300 per person. So, if you file jointly with the standard deduction, you can deduct up to $600 for charitable contributions.

*Internal Revenue Service (IRS) is the source for all tax data

Charitable Planning and Donor Advised Funds

As you meet with your CPA or financial advisor to review the past year and look ahead, charitable planning has become much more of a topic because of recent tax law changes. We encourage clients to bunch their charitable contributions, establish donor-advised funds (DAF), and donate appreciated assets instead of cash. Sometimes, clients are guided to open DAFs to complement their private foundations or to simply close their foundations and open DAF accounts due to the small size, complexity, responsibility, publicity, and expense. There are several prominent local or national names, but sometimes no one sponsor is ideal for every client. We can help you select a DAF aligned with you charitable planning goals. In most cases, we can also manage the assets in your DAF account.  

Estate Planning

Several Estate Planning Tips to Keep in Mind

The inheritance you leave could be reduced by taxes or given to the wrong person. Here are several estate planning tips to keep in mind:

  1. Create a Will – A will describes how your assets will be divided after your death. Without a will, your estate will be divided in probate court, meaning someone else decides who gets your money. Having a will doesn’t mean your heirs avoid probate though. They still need to go through the court system to have the will reviewed and confirmed as valid.
  2. Check Beneficiaries – To avoid probate court you can have beneficiaries named for your assets. Some accounts, such as retirement funds and life insurance policies, let owners name beneficiaries who will receive that particular asset. The beneficiary or TOD designation outweigh anything written in a will, so it’s a good idea to review beneficiary information after every major life change, including the birth of children, marriage, or divorce.
  3. Set up a Trust – If you have a sizable estate or are worried your heirs won’t be wise with your money, you can set up a trust and appoint a trustee to distribute your wealth. Trusts can be set up in several ways, but irrevocable, or permanent, trusts may offer the most tax benefits. When money is put into an irrevocable trust, the assets no longer belong to you. They belong to the trust itself. As a result, the money cannot be subject to estate taxes. While a trustee ultimately controls the money, you can create stipulations on its use, and money can be distributed from a trust even while you are alive. To keep money in the family bloodline, a dynasty trust can be used to ensure that money is passed from one generation to the next and protected from divorces, lawsuits, and creditor claims. Because of the complex nature of trusts, you’ll want to consult with an estate attorney to determine how best to create one that meets your goals.
  4. Convert Traditional Retirement Accounts to Roth Accounts – Those with traditional 401(k) or IRA accounts could inadvertently leave their heirs a big tax bill. Regular income tax must be paid on distributions from all traditional retirement accounts. In the past, non-spousal heirs such as children had the option to stretch those distributions over their lifetime, effectively reducing the total taxes due but now, heirs other than spouses must withdraw all money from an account within 10 years. If the account balance is large, that could require significant distributions that may be taxed at a higher rate. If you’re looking for how to pass money to heirs tax free, that may be accomplished by converting traditional accounts to Roth accounts. The converted amount is subject to regular income taxes, but withdrawals – either by you or your heirs – are tax free. What’s more, with tax rates at near historic lows, it may be better to pay taxes on the money now rather than later.
  5. Gift Your Money While You’re Alive – You might not have to worry about estate tax planning if you simply give away your money while you’re alive. As of 2022, the IRS allows individuals to give up to $16,000 per person per year in gifts. If your goal is avoiding estate tax, those gifts can bring its value down. The money is also tax-free for recipients. However, be careful about giving away assets that appreciate, such as stocks or a house, which receive a step-up in basis when part of an estate. That means the taxable amount of an asset is adjusted upon the owner’s death and, as a result, it may be beneficial to transfer certain assets after death rather than before. Speak to a tax professional for guidance in this area. Married couples can use a spousal lifetime access trust to gift a large amount of money from one spouse to the other. This irrevocable trust can be used to move cash out of an estate while keeping funds accessible. Another way to reduce your estate value is through charitable donations. Rather than giving a one-time gift, consider setting up a donor-advised fund. This option would give you an immediate tax deduction for money deposited in the fund and then let you make charitable grants over time. A child or grandchild could be named as a successor in managing the fund as well.

Risk Management

What Type and How Much Life Insurance Do You Need, If Any?

As risk management practice helps clients identify and mitigate risks in client financial plans. One area is life insurance. One of the biggest questions is what type of life insurance – term where you ‘rent’ insurance for a period of time, or whole life where you ‘buy’ insurance. Renting is less expensive, and you don’t build cash values. Buying is more expensive, and you build cash values. Most advisors recommend term insurance to cover your risk while you are building your wealth. One to the next biggest questions is how much do I need? I found the best way to determine your need is by completing a thorough financial plan that takes into consideration the net present value of income replacement to achieve your long-term goals.  Our financial planning team can help you here using our sophisticated financial planning software. Other ways to calculate your life insurance need includes looking at how much you need to eliminate your debt, pay for children’s education, or replacing an income stream. In addition, you may also consider philanthropic, family foundation, and estate tax planning needs.

Family

Get Free COVID-19 At-Home Tests!

Every U.S. household can get a total of eight free COVID-19 at-home tests shipped directly to their home at no cost. Visit COVIDtests.gov to order tests or learn more about testing. At-home tests provide rapid results and can be taken anywhere, regardless of your vaccination status or whether you have symptoms. Visit CDC.gov to learn when to test yourself, how to use an at-home test, and what your test results mean.

Health & Wellness

What Are Electrolytes and Why Are They Important?

Electrolytes are essential to many basic body functions. They play a role in keeping your body hydrated, maintaining cellular balance, and conducting nerve impulses and muscle contraction. Since electrolytes play so many important roles, it is important to ensure your body gets the electrolytes it needs to function optimally.

  1. What Are Electrolytes? – Electrolytes are minerals obtained from the diet that carry an electrical charge. They are absorbed into the body during digestion and present in blood, urine, sweat, and other bodily fluids. The minerals that are classified as electrolytes include calcium, chloride, magnesium, phosphate, potassium, and sodium.
  2. What Do Electrolytes Do in the Body? – Electrolytes are important because they are involved in the balance of the amount of water in the body, your body’s pH level, movement of nutrients into cells, elimination of waste from cells, and the proper functioning of nerve, muscle, heart, and brain cells.
  3. Electrolytes and their Function? – We need electrolytes in different amounts, and although electrolytes work together synergistically, they each have their own roles.

Calcium is the most abundant mineral in the body. Its functions include conducting nerve impulses and hormone secretion; keeping muscle tissue rigid, strong, and flexible; maintaining the structure and strength of bones and teeth; and helping blood vessels distribute blood throughout the body.

Chloride is found in all body fluids, with the highest amount in the blood and in the fluid outside of the body’s cells. Chloride is a component of sodium chloride (salt) and potassium chloride. Its functions include maintaining fluid and acid-base balance; regulating muscular and nervous system activity; and supporting the production and release of hydrochloric (stomach) acid.

Magnesium is involved in more than 300 different chemical reactions that regulate several functions in the body. The functions in which magnesium is involved include blood sugar regulation; blood pressure regulation; bone development; calcium and potassium ion transportation across cell membranes; DNA and RNA synthesis; nerve and muscle function; and protein synthesis.

Phosphorus, when consumed through food, combines with oxygen particles in the small intestine and becomes electrically charged, forming the electrolyte phosphate. The functions of phosphate include maintaining and building strong bones and teeth; metabolizing carbohydrates and fat; regulating heart rhythm, kidney function, muscle contraction, and nerve signaling; and synthesizing protein for the growth, maintenance, and repair of cells and tissues.

Sodium is consumed in the form of sodium chloride, or salt. Sodium has many functions and is required for cellular transport; fluid balance; muscle function; nerve function; and nutrient absorption.

Potassium is found in the intracellular fluid, making it the most abundant electrically charged particle within the cell. Potassium plays important roles in heart function; kidney function; muscle contraction; nerve transmission; and the movement of nutrients into cells and waste out of cells.

Please work with a nutritionist and your doctor to determine what is best for you. We have a wonderful nutritionist in our professional network.

Just for Fun

Celebrate March!

“Nothing in life is to be feared, it is only to be understood. Now is the time to understand more, so that we may fear less.” – Marie Curie, the first woman to be awarded the Nobel Prize, and the only person to have won two Nobel prizes in two different fields.

March is Women’s History Month!

Here are some fun days to celebrate in March:

  • March 1 – National Horse Protection Day
  • March 2 – Ash Wednesday
  • March 6 – National Oreo Cookie Day
  • March 8 – International Women’s Day
  • March 12 – National Girl Scout Day and National Working Moms Day
  • March 13 – National Good Samaritan Day & Daylight Savings Time (Clocks Forward)
  • March 14 – National Pi Day – (3.1415926535897932384626433832795028841971!)
  • March 15 – National Equal Pay Day & March Madness
  • March 17 – St. Patrick’s Day
  • March 20 – First Day of Spring & International Day of Happiness
  • March 21 – National French Bread Day and California Strawberry Day
  • March 23 – National Puppy Day
  • March 30 – National Doctor’s Day & Manatee Appreciation Day
  • March 27 – NCAA March Madness – Final 4 (Championship 4/2 Men’s, 4/3 Women’s)

Motivating Quotes from Women Throughout History

“If we have no peace, it is because we have forgotten that we belong to each other.” – Mother Teresa, Patron Saint of Calcutta

“Women are like teabags – you don’t know how strong they are until you put them in hot water”- Eleanor Roosevelt (1884–1962), American first lady and United Nations diplomat

“Knowing what must be done does away with fear.”- Rosa Parks, American civil rights activist

“To be ‘in charge’ is certainly not only to carry out the proper measures yourself, but to see that everyone else does so too.” – Florence Nightingale, British nurse, and social reformer

“You can start late, look different, be uncertain and still succeed.” – Misty Copeland, The first female African American principal dancer at the American Ballet Theatre

“The most difficult thing is the decision to act, the rest is merely tenacity.” – Amelia Earhart, Aviation pioneer and author

“I believe that without God I am nobody, but that with God, I can do anything.” – Dolly Parton, Singer, actress, and humanitarian

“I’ve always been a big believer in paying it forward, and I feel that if you’re lucky enough to be successful, you have a responsibility to give back.” – Lori Greiner, Entrepreneur and Shark Tank investor

“When the whole world is silent, even one voice becomes powerful.” – Malala Yousafzai, Education activist and Nobel Peace Prize laureate

“Loss is real, parents pass, and hearts break, but the truth is that love never dies, not really. Love lives on through us. Not just in our memories but through our actions and the choices we make. In the way we live our lives we can make a difference.” – Roma Downey, actress 

“It’s one of the greatest gifts you can give to yourself, to forgive. Forgive everybody.” – Maya Angelou, Poet, singer, and civil rights activist

“The best thing to hold onto in life is each other.” – Audrey Hepburn, actress, and humanitarian

“Optimism is the faith that leads to achievement.” – Helen Keller, author, activist, and lecturer

“When life seems hard, the courageous do not lie down and accept defeat; instead, they are all the more determined to struggle for a better future.” – Queen Elizabeth II

Bottom Line

At The Bahnsen Group, our objective is to be your trusted and competent financial advisor. We do so by providing comprehensive and holistic services to help you grow, protect, and be a good steward of your wealth and your life – helping you achieve a multigenerational family legacy of both success and significance.

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 March and year ahead!

Warm and best regards,


Don B. Saulic, CFP® CPA

Managing Director, Partner
dsaulic@thebahnsengroup.com

Internal Revenue Service (IRS) is the source for all tax data

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 Managing Director and Partner in the team’s Private Wealth Management practice, where he advises on comprehensive strategies to help clients achieve their long-term goals. Areas of focus include investments, estate and tax planning, financial planning, risk management, real estate, wealth transfer, life management, and charitable planning.

With over four decades of C-Level corporate executive and financial advisory experience, Don previously worked at several private and Fortune 1000 global companies holding positions such as Independent Board Director, President & Chief Operations Officer, and Global Chief Information Officer. Don has an M.B.A. from DePaul University and a bachelor’s degree in Accounting with Economics minor from Illinois State University.