How Can You Reduce Lifetime Taxes for Your Family?

This is the Truth Network. Um Welcome to Finishing Well, brought to you by CardinalGuide.com with certified financial planner Hans Scheil, best-selling author and financial planner, helping families finish well for over 40 years. On Finishing Well, we'll examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes.

Now, let's get started with Finishing Well. Welcome to Finishing Well with Certified Financial Planner Hans Scheil and today's show: how exciting, really, how can. You reduce lifetime taxes for your family. Like what a great Thing to reduce lifetime taxes, not just this year, because it's a matter of planning. But over your lifetime.

And so, as I was thinking about this, when you might remember in 2 Kings chapter 20, Hezekiah, who'd been an amazing king and saved Israel from. Sent a cherub that had destroyed the northern kingdom, and he'd done a lot of things, and he became quite wealthy, and so. The Babylonians came to his kingdom to see, you know, what is it with this great king here in Israel? And Unfortunately, as it turned out, he decided Okay. I don't think with a lot of planning to show them all the wealth of the kingdom.

He showed them his gold, his silver, his treasuries, all the great. planning that you know that he had done in order to get to where he was but Unfortunately, as these people left, the prophet Isaiah came to him. Isaiah loved Hezekiah, but nonetheless, he told him. He said, in the next generations to come, those same Babylonians are going to carry away all the treasure that you just showed them. And the point of that is That it wasn't just a m It was great that he had accumulated these things that God had given him the provision.

What wasn't so great is he hasn't planned necessarily on how to make sure that it was going to get to the successive generations because it's not just our lifetime that we're planning for, it's actually. We're taking The larger story of God's story of how we're going to get it to the next generation, the next generation. And the really neat thing is, like, it's. God's junior partners We get a chance to do this planning, and it's always my joy to work with Hans to show us how we can actually do this stuff practically. And here's eight ways today that we can do it, Hans.

So, every time I'm going to an Ed Slot conference, which we go to twice a year. Um in there and were there for two days. And it's a long two days, if you can imagine, going through tax strategies. tax rulings, tax Provisions, and then a lot of this isn't done by a slot, it's done by. is technical assistance.

Yeah, that it's lot. is getting up at the beginning. And then he's getting up there every hour or two. and talking and adding really meaning and purpose. behind the whole thing.

And I think that's what you just did. Robbie with the A correction. to the story. Yeah. You know, it's like, why do we study tax planning?

Why do I do tax planning? And it's really to put your to to really steward stewardship to your to your treasure that God has provided to you. Yeah. You know, you've saved money. You're at retirement.

And You've got this money, you've got money in an IRA, you've got money in regular savings. You've got Social Security check coming in. where it's going to start and come in and then there's a social security check for your spouse. And you might have to pay taxes on that, and you got Medicare. And you've got your IRA.

Yeah. You've got to live off that the rest of your life. Um So, what this video is about today in this radio show is we're going to talk about a piece that Ed Slott created for me. and it goes in and it asks you eight questions. And I'm going to go through them real quick.

You know, all eight questions, and then we're going to go back and we're going to go through them one by one.

So, are you exposed? to higher future tax rates. That's question number one. Number two is: are you using the years before RMDs?

So, RMDs are going to start at 73. And once you hit 73, You're not in. Control of the amount of the RD, it's just what is what it is. Are you using the years between now and RDs? Number three is will your retirement accounts create a tax problem for your heirs.

Yeah, I can.

So now you've got this retirement account. We want to be a good steward. And we're going to provide for our family for the rest of our life, but have you really got a tax problem for your heirs? Um are Roth conversions being considered at the right time? ever repeatedly Are you giving to charity in the most tax efficient way?

And we're called Two Give to the kingdom. And so which I'm sure you're all doing that. And so the question that I'm asking there And we're asking is, are you giving to the kingdom in the most tax-efficient way. Do the 2026 tax rule changes affect you, the one big beautiful bill, OBA? How do they affect you?

Are Irma, the Medicare tax, thresholds limiting your Roth conversions? And number eight, are you prepared for the widow's penalty?

So that's a whole mouthful.

So we better get started. Let's go to the first one. Are you exposed? to higher future tax rates. And you know the answer to that is I'm just going to answer it for myself.

Yeah, and when they raise taxes in the future Am I exposed to that? Yes.

Okay. Um and I I think that When when you get tax rates it. 12%, 22%. 24%. Even 32%, 35%, and 37%, which are the current.

tax a maximum of 37% federal tax. Historically, that's love. And when you look at the $40 trillion deficit, it just went over $40 trillion. for this past week Um And you just look at that. Are tax rates going to go up in the future?

Probably. At least I think they are. And then so what that leads to is are you doing everything you can to prepare for that. Yeah. Like it's just real simple.

We're going to get on to some other questions, is that Roth conversions In an intelligent amount, or one way you can control that by paying the taxes now.

Well, it's a low rate. Yeah, that's how, you know. like you said, well, you know, the government It's way in the hole. They're going to have to do something to balance the budget. And yes, they can clearly.

Reduce spending on all sorts of levels, but at some level, you realize that some kind of tax thing is going to happen. Like you said, we got All-time low tax rates, it's pretty well. figure out, you know, how do I maximize um paying what taxes I can and that At the same time, you know not reducing what I've accumulated. It's interesting balance, but That's where do you could do some help? Yeah.

So the next one, are you using the years before RMDs?

So what that's really saying. Yeah. Okay, so if you're 66 now. And required minimum distributions, RMDs, are going to start for you at 73.

Now you'd well be draw you may be draw you may be retired. and you may be drawing down your IRA to lip off of. Paying the taxes. Taking the distribution, paying the taxes, and living off of the balance.

So you are using the years between now And to your best advantage on the tax system. But if you're one of these people that's just living off your Social Security and living off of savings and not taking anything out of your RMD, out of your IRA. Because you don't have to. till you're 73. you might be just postponing a problem.

And when you get to 73, your RMD required minimum distribution is going to be what it's going to be, or if it's 75. If you're young enough that it's 75, but when you hit that point, Now you're going to have to take an RMD and you have to pay taxes on it. Yeah. You know, it's out of your control.

So, really, the question is: are you using this time between now and RMDs? To your biggest balance. Yeah, I lo I love what you've done personally. You know, and I am aware of it. is that understanding that you were In historically low tax rates, You took all of your traditional IRA money that you had.

and you're 68 years old now, and you've converted it From what I understand, you've completely converted it now to where all of it's in Roth. IRAs So they are there is no future tax. Going to happen on those. Essentially, you've paid the taxes at the lowest possible rate, and now you move into your retirement years. With your money in buckets, that you don't have to necessarily raise your income with, right?

Yeah, that's that is Correct. The only piece of that I've kept some back in the traditional IRA. Because I'm going to use Q C D's when I'm seventy and a half to give to Cherokee.

Okay. Yeah, and I'm going to do my tithing. True. The IRA. and I'm not going to pay taxes on that.

So I want to keep them back. But besides that The rest of it's converted. And so I'm going to have tax-free income. coming out of tax-free annuity payments for as long as my wife and I are alive.

Okay. And that tax-free income is going to go with Almost tax-free or totally tax-free social security income. because I don't have other taxable income. And I'm also not going to pay Irma when I'm old and retired.

Okay. So Yeah, that's kind of the extreme plan. I'm not recommending that for everybody that's on the show, but really the question was: are you using the years between now and 73? their followers. And what I'm going to tell you is that's what we do in tax planning.

in in retirement planning when we put plans together for people is we're gonna figure out an amount and recommend a Roth conversion that's appropriate.

So Yeah. And I think that one of the one more thing I would say about that. You know, if you're analyzing the situation. Cardinal, you know, there's no product that they're selling you to make our Roth conversions, these are just taking your money. In other words, This isn't Some commercial idea here that we want you to do Roth conversions.

I mean, Hans is recommending this simply as a point of stewardship.

So, this would be a good time to remind you that this show is brought to you by Cardinal Guide, CardinalGuide.com. And if you go to CardinalGuide.com, You're going to see the seven worries tabs, like menu tabs, and one of those is IRA, and that's the show that this would be under today. And you're gonna, if you go to that IRA tab, you're gonna see a YouTube video with this exact same title, and it has show notes with great details and phenomenal information on everything, all these eight that we're gonna talk about today.

So, all sorts of resources there at cardinalguide.com on this very idea of the eight ways you can reduce your lifetime taxable income. And of course there, you'll also find Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement, the workbook that goes with that. And of course, my favorite, just contact Hans and Tom page again. These things are just great stewardship ideas that we're sharing on today's show. We're going to be right back with a whole lot more.

How can you reduce lifetime taxes for your family? be right back. Investment advisory services offered through Brookstone Capital Management LLC, abbreviated BCM. a registered investment advisor. BCM and Cardinal Advisors are independent of each other.

Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. Welcome back to Finishing Well with Certified Financial Planner Han Scheil, and today's show. How can you reduce lifetime taxes for your family, Hans?

So number three is, will your retirement accounts create a tax problem for your heirs? And the answer is yes.

Okay. Um So If you don't have some of it put in raw. And you just pass away. with what is a big traditional IRA balance. It doesn't go to your spouse.

Your spouse has maybe already passed away. Or You're single. or but it goes to your kids, your heirs. Again They've got a tax problem.

Okay, at the very least they got a 10-year rule where they've got to empty the account. And if it's in a traditional IRA, pay the taxes. And this could very well hit them in their highest earning years when they're in their forties. fifties and sixties. and you've just passed away.

And you really didn't address the taxes, you just postponed the taxes and then passed away. You leave them as the beneficiary. And a lot of kids don't know how to handle the money. and they want to get it, what they can get at. and spend it.

They have maybe out of need. They they could pay taxes at really high rates.

So the ten years of rule is a problem. The end. the high taxation because Whatever they inherit And the year they pull it out of the IRA. And use it. is going to be added to their taxable income for that year.

So Yeah, and and I I think that You know, and I went through this with my own father. Um That it sounds really good. Like, I'm leaving this child $200,000 in this IRA. It sounds great. Right?

But in the reality of it, that you're not leaving the child $200,000 in the RA. You're leaving the child. The tax liability of $200,000, but the actual net income from that won't be the same, especially if they take it in the first couple of years as soon as they got it. But there's still that mental thing, well, I'm leaving them this much. And as good as that may sound, it really is a pretty good idea to think through.

Gee, how much am I really leaving them? And what can I do to make sure That that's leveraged as highly as it possibly can. Does that make sense? Yeah, it's as a state plan consideration.

So Next question, are Roth conversions being considered at the right time?

Okay. And what they mean by the right time. Yes.

You can't necessarily wait till seventy three and when you all of a sudden see this big tax bill on an R and D You can say, Oh, I want to convert it. No, you can't convert. VR and B.

Now you can convert. Amounts once you take the RMD.

So, when they're asking about are you considering ROP conversions at the right time, the time to consider them. is now. And if you're still working And anticipating retirement, that may be while you're listening to the show. I'd still say, come on in now. I mean, let's get together now and start putting together a plan.

Because of it. We have a lot of people do Roth conversions while they're still working because there's Plenty of room in those brackets, and they're not on Medicare yet.

So that's another show. And Irma Um So Just The right time to be doing Roth conversions is in your sticks position.

Okay, and early seventies.

So The next one, are you giving to charity in the most tax-efficient way? We've done other shows on QCD. And so once you're 70 a half. You can take mine. Out of your IRA.

and directly contributed To the church. Any qualified charity. You can do up to like 108,000 in any given year. not really the limit is a problem for most people. But if you're Giving five thousand dollars To the church.

every year and you're just doing it out of your regular money. Then you're over seventy and a half. You got an IRA. you can just give that $5,000. directly to the church in the form of Q C D.

and avoid taxation on the $5,000 total.

Okay. Now don't go doing this at home just based on the radio show. I'd like to take a look at things in the professional, and then I'd tell you all the steps you need to follow. Because if you miss one. You could lose the you know, the tax-free nature of Right.

So there's a lot of churches out there that could benefit perhaps from me coming and speaking to them and speaking to the older people in the church, because I bet you there's a lot of loaded IRAs. And it's just sitting there. And this also counts as your R I D.

So that five thousand dollars that you give to the church that you don't pay taxes on. directly out of the IRA. Also counts. toward your R and D or counts as your R and D. Self-move.

It's to some degree it's a no-brainer. We have a lot of clients that do these every year. Number six. Do twenty twenty six tax rule changes affect you? And the answer to that is yes.

So the the new senior deduction. Yes.

Well If you're Adjusted gross income. is 150,000 or less. as a married couple. It has a single 75,000 or whatever. you get an additional deduction of six thousand per person.

And that's basically going to save you twelve hundred bucks in taxes. Right. Each for a couple 2400 bucks.

So yeah, that affects you. Um And then they extended the tax rates. At their low levels that were set in 2018.

So, yeah, the 2826 tax rules. And there's a number of other things you can Give $2,000 and A year starting in 2026 for the church or any other qualified charity, not from the IRA, just from your regular funds, and you can write it off your taxes. even if you're taking the standard deduction.

Sounds. Oh. That's a consideration. Um Number seven are Irma the Medicare tax thresholds limiting your Rothconvert.

So now we're going to go to the other extreme. is once people learn about Irma, They become Some people become obsessed with it. and they start letting it drive the oh they they take the Irma driver And they move them right up to the front seat of the bus and they put them in charge.

So everything we do in their planning. It's got to eliminate Irma. or in other words the stop sign. And that's really true with Rothko. I've had many clients.

But we're doing plans for And they're there, and they've already learned about Irma, perhaps from me. And we've already done a bunch of planning or they you know, we've appealed it or whatever, and now we're making recommendations. that they convert $100,000 a year of their IRA for several years, thrusting them right into IRMA. And boy, they're saying, Boy, that doesn't make sense.

Well Irma planning is fine to an extent. But if it gets in the way of something that is gonna provide you and your heirs Maybe tens of thousands of dollars, hundreds of thousands of dollars. Jack savings. But we gotta pay a little Irma to get all that.

So be it.

So that's kind of giving you my opinion on that.

So make sure you don't go overboard. with your planning. Once you're in the interim. And the last one. question is are you prepared for the widows?

And the widow's fenalty is pretty simple. And when people hear that, it sounds awful. You mean the govern the tax code of the United States of America? is penal to widows. And the answer to that is yes.

because you go from being a married couple filing jointly to a single taxpayer. Yeah. It just we have a lot of people after one spouse dies, their tax bill goes up. And I don't want to get into all the intricacies of that. But in your plan.

Do you come to us? we're going to plan for this is you don't know which one of the two of you is going to pass away first. You you truly don't know, but It you can textually now open. When that one person passes away, the survivor is going to live on as a single taxpayer. And that means we need to do everything we can.

to prepare that single taxpayer, the widow or widower, to be in the best situation they could be to live out the rest of their life. Then you know sort of You come into me, I'll explain the widow's analysis to you. The more detailed thing. Yeah, that's a freaky thought that You know, not only is your wife or your spouse, as the case may be. gonna reduce you know You're going to lose one Social Security check.

If you have a pension, you're going to lose the pension. But then all of a sudden you're you're filing singly at the same time and it's kind of like the double whammy. Um The same thing with Irma, etc. And that Those things are definitely something to plan for, and all the more reason. that you just can't get in the rut and think, I don't need to do some planning towards the end, because things will change.

And This idea of a lifetime tax plan definitely comes down there. It's at some point to actually, you know, not only considering your children, but considering your wife or your husband, as the case may be, right?

Well yeah, I That's why it's nice to have a Roth account. In an IRA, and then your wife or spouse inherits that. And now when they're a single taxpayer, They can make withdrawals and From that tax-free. to make up for all that messed up. Yeah, that's That's in my plan.

Right, and I think that it took me a long time for that to completely sink in my brain, but if if I have a regular IRA and my and I'm dead, And my wife goes to get money out of that IRA to help her. with the mortgage or to help her Yeah. you know, whatever the situation is now, she owes taxes on that money. And In other words, that's got to be paid. It changes her income.

It changes her income not only. For regular income, it changes their income for Irma. And so, but if I had a. A Roth IRA since I've already paid the taxes on it. That income is just like a life insurance check or something.

Like, you can just take that money and. And spend it or do whatever you need to do with it, and there's no tax ramification for it. And that's absolutely huge.

Well, as always, we ran out of time before we ran out of show. But we're going to remind you that the show is brought to you by CardinalGuide, CardinalGuide.com. And if you go to CardinalGuide.com, great news, there's a whole video on all this subject. It's under the IRA tab, under the seven worries tabs at cardinalguide.com. And that, again, goes into great details, show notes, et cetera, as well as Hans's book, The Complete Cardinal Guide to Planning for and Living in Retirement, the workbook that goes with that.

And again, just simple enough, just go to cardinalguide.com and contact Hans or Tom. And It'll be amazing how they can help you with these eight items. And so great show, Hans. Thank you and God bless you. God bless.

The opinions expressed by Hans Scheil and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such. Any statements or opinions are subject to change without notice. Investments involve risk and, unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results.

Any strategies mentioned may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you. Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation. Finishing Well is designed to provide accurate and authoritative information with regard to the subject covered. Investment advisory services offered through Brookstrone Capital Management LLC, abbreviated BCM, a registered investment advisor.

BCM and Cardinal Advisor Are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. We hope you enjoyed Finishing Well, brought to you by CardinalGuide.com. Visit CardinalGuide.com for free downloads of this show or previous shows on topics such as Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes, as well as Han's best-selling book, The Complete Cardinal Guide to Planning for and Living in Retirement and the Workbook.

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