This is the Truth Network. Welcome to Finishing Well brought to you by CardinalGuide.com with certified financial planner, Hans Scheil, bestselling 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.
Let's get started with Finishing Well. Welcome to Finishing Well with certified financial planner, Hans Scheil, and today's show is really, really cool stuff. It's beneficiary restricted payout or a middle-class trust. And I know those words are confusing. They would certainly be to me if I hadn't watched the video at a time. But I think you're going to find this is really some fresh information. And again, it gets to the heart of this idea of, I think we all would really like to help our loved ones pass through. And that's what, you know, again, we're going to talk about in this middle-class trust is helping people control, you know, their assets past the point of our departure from this world anyway. And so as I think about that, I've often thought that one of the coolest things you could do past the grave for your relatives is to have a written version of your own testimony or an audio version or a video version of, you know, here's how I came to know Christ.
Here's the effect he's had on my life. In other words, I'm not going to be able to do that. In other words, this testimony that could be passed down maybe through your ancestry account or wherever you put it so that it would be found for future generations, that people would be given this unbelievable asset transfer of your story, which is, you know, how cool would it be for you to find your great, great, great grandfather's testimony, whatever that might be, and just think how cool it will be for future generations as you get yours written out. Take it from here. And frankly, most beneficiaries, they just want the money.
And this never comes up. Occasionally, I think it could come up if, you know, like you have a widow that doesn't know what to do with a large life insurance settlement, like she gets $500,000 and she wants to know, do I have to take all this money all at once? Would it be a way to just send me a check for the rest of my life? I mean, there's reason for people to take advantage of settlement options, and they're all in there. And what we're talking about today is not really making a deal with the beneficiary when after the person's passed away. We're talking about taking advantage of where you're the policy owner, you're the insured, this is your annuity, this is your life insurance policy, and you want to stipulate how the beneficiary receives the money, okay?
Yeah, I think that's, it's really, really, you just want to help the people, right? So, you know, I see a lot of times, you know, in my own family, I won't mention any names where a great deal of money went to somebody that's just not used to dealing with that kind of money. And they really make some choices that you wish they hadn't made, especially when other people find out that that money is coming and they come and lump onto them to, you know, get them to invest in some crazy scheme.
You know, there's just a lot of ways that it would be nice to help people if you got large sums of money coming that way. Yeah, I mean, people are spent, I mean, just like the story of the product of the sun, I mean, it's just, I think in my own kids, I mean, I just, you know, my younger son, I would have no issues just leaving him any amount of money just because I know that he'd be very prudent with it and he'd be very thoughtful. In fact, I've even thought about leaving him in control of his older brothers, part of the inheritance just because now I don't have to worry about that so much because his older brother has a wife that is very responsible and he was smart enough and God matched him up with a responsible, financially responsible wife who I really do business with her when I'm helping him. And point being that I like have some concern in my own family that how my older son would handle a large amount of money that he's probably going to get after my wife and I pass away. So what this thing does and when we say beneficiary restricted payout, it says middle class trust, I mean, an annuity paying out to a beneficiary or a life insurance policy paying out to a beneficiary can be, have some resemblance to a trust. I mean, the money is parked there with the insurance company and, you know, so they have the option of just leaving it at the insurance company, the beneficiary does, and then taking the money either in lifetime payments or payments for 10 years or just taking part of the money and then paying out the rest over a number of years. They have that option, but this isn't taking advantage of that at the time of death or the time of payment. This is where you as the policy owner are going to be thinking about this in advance and you're effectively going to be forcing upon them because you're the owner, it's your money, and you're willing it to them so that you can save them from themselves, essentially, or in the case of like a widow that's going to have to support the family for a whole bunch of years on this life insurance payment, you can have the thing turned into where she can't take all the money or he can't take all the money all at once. Maybe he gets or she gets $50,000 or $100,000 and then the balance of the thing gets paid out in monthly installments for the rest of her life. So she can't squander the money. So it's pretty cool. And so this particular company has a form that we fill out and we can use it with either annuities or life insurance and it's very simple. We can say give them this much in cash or give them 10% or 20% in cash and then the balance, we can have it paid out over a number of years in a whole bunch of situations.
Yeah. And I think about that actually in my own situation. I go, okay, well, I know that I have substantial life insurance policies, but they're really meant to be. And I've often talked to Tammy like be very careful when this comes, you get to get with Hans or somebody to make sure that this becomes an income for life because this is it. You've got your social security, you've got other investments, but for the most part, here comes this life insurance and you want it to be turned into it.
In fact, from the very first life insurance policy I ever bought, the idea was they told me that I needed to be able to create an income for life for my spouse with that amount of money. That did happen. And let's just say for purposes, she comes to Tom instead of me because I'm not going to be in the same boat as you. I get it. You get what I'm talking about.
Yeah, I know. She comes to Tom and she's 70 years old and there's a half a million dollars that we're getting a check for and we could obviously use the life insurance company that she's getting the check from, but more than likely, we're going to sit down with her and put together a financial plan. And we're going to decide she's going to need a certain amount of money that she's going to need to take in cash and put in the bank and have to pay off things. Let's just say we have $500,000 benefit. We're probably going to say that we're going to take $100,000 and put it just in the bank and she's going to use that to pay bills, pay off debts, keep a certain amount of cash on hand.
But not $500,000, $100,000. And then if she gets done paying bills, it will be down to about $40,000 or $50,000. And then the remaining $400,000, we're going to figure out some way how much we can pay in an income for the rest of her life. Now, if she's in poor health herself, then we may not use an annuity with a life contingency just simply because that's not a good bargain for her to buy something that's going to pay her for life if she doesn't have a long life expectancy. But if she has a reasonable to long life expectancy, then we're going to put a good bit of that $400,000 into a life income annuity and perhaps put a period certain on there. So that if she were to die in the first 10 years, then the rest of the payments would go to your kids or something. But the whole focus would be on her and it's very easy to do this with the whole assortment of annuities we have. We just put together a little financial plan. And what we're talking about today is you could actually do that right now for her with us. You could just set up the whole thing so that nobody has to do that.
You just say, well, Robbie set up this thing. You're going to get a check for $100,000 and then the remaining $400,000 is going to pay you so much a month for the rest of your life. And then if you die within the first 10 years, then the balance of those 10 years of payments go to your kids. Yeah, that's exactly what I want.
Sign me up. Where do I go with it? I think that's what every person, they just want to know that this is going to be essentially her taken care of with an income because having a big, large sum of money with no income is not of all that much value. See, this is what well-to-do people do with trust, and they've done it for years, is they set up a trust, they set up a living trust, and then they either put their money in there now or they put their money in there at death or they put the life insurance proceeds in there, the annuity proceeds. And then it's all stipulated in the trust how the money is to be paid out to the beneficiary.
And with a trust, the nice thing is you can put some discretion in there with a trustee that she needs to rob some principal for something, but that gives you a little protection against people that come into her with investment schemes and that kind of thing. Well, we could go to a break, but we want to remind you, of course, that so you can help set up your own plan, you've got to remember that this show is brought to you by Cardinal Guide. It's cardinalguide.com, and there you're going to find the Seven Worries tab.
And today, I'm sure, is estate, right? And under the estate tab, you're going to find a video that's right on the same idea, the Beneficiary Restricted Payout Middle Class Trust. And you can go there. It's got show notes of all kinds of details, and they've got three different examples that they go through in that that you can see kind of how these things work and what might fit you best. But of course, one of the most important things at cardinalguide.com is I contact them. So you can contact Tom and Hans for your personal situation. Of course, Hans has booked the complete cardinal guide to planning for and living in retirement.
And so we'll be right back with a whole lot more of this middle class trust idea. 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 Hans Scheil, and today's show is Beneficiary Restricted Payout Middle Class Trust. And I know that's a mouthful, but can you give us a brief description of what that means, Hans? Yeah.
And so we talked in the first part of the show. It's you as the policy owner of a life insurance policy or an annuity. You're stipulating how the beneficiary is going to be paid. And without filling out this form, they're just going to get a check for whatever's in there.
You know, it's just kind of that simple. And this gives you, as the policy owner and the insurer, the opportunity to have some control over how your beneficiaries are paid. And, you know, it gives you some protection and protects them against themselves being spend thrifts or poor investment management, tax management, that kind of thing.
Investing where they're not so wise and following the direction of some people maybe that aren't looking after their best interests. And it also protects them from relatives and friends, bringing investment schemes. I mean, somebody inherits some money and they got a big chunk of cash.
All kinds of people show up and they've got a boy, we got just the thing for you. You can double it, you know. And by stipulating that they're only going to get so much cash or they're not going to get any cash. And what they're going to get are monthly or annual payments for a period of years or the period of their life gives you the ability to protect them and make sure that this money still exists five or ten years down the road. And so, you know, right off the form, I mean, you could choose, first of all, you can sit down and you can say, give them so much in cash.
So, which I highly recommend. The whole benefit payout is not restricted. Some of it comes in cash. And then the balance is it could be paid out in a life annuity with no period certain. And that's the way they get the largest monthly check and it's just going to start sending checks and it's not going to stop sending checks until they die. And so, you know, for somebody that inherits at 45 years old and they live to 100, they're going to get checks for 55 years. Now, you can also pick a life annuity with a period certain. And on this particular policy, you can get a five-year period certain, a ten-year period certain, or a 20-year.
And that just simply means, like in your example, your wife would get the example we gave in the first part of the show. She'd get $100,000, $400,000 would be left to pay out over her lifetime. And I would recommend with somebody at about her age that they'd have a ten-year period certain, meaning that if she passed away shortly after you, that there would be payments. If she passed away, you know, like in the second year after you, there would still be eight years of payments going to your three kids. So, I don't want to get into the details of it so much, and there's also the annuity for a period certain, is for somebody that has, you're uncertain about the life expectancy, well, we're all uncertain about that, but if it's, you know, they're not in great health, or for whatever reason, you just want to pay them off over a shorter period of time, like five years, ten years, or 20 years, you can take away the life contingency and they're going to get more money out of the thing, and then the payments will stop after the period. You can even pick the frequency. You want monthly, quarterly, semiannual, or annual.
And I really want to get into the examples, and I want to talk, I mean, we went over the example of you in the first part of the hour. So, why don't we jump into the next one that we talked about in the video, and so we've got this guy, Mike, who's 73, and his significant other, who's not his wife, is Stephanie, who's 70, and they live in separate places, but they've been together for a good period of time. He has no children, and so he plans to leave his estate to, most of it to charity. But he's going to leave his house to her, and he's going to leave an income of $40,000 a year for life to her. And he just wants her to have a $40,000 income that she can't outlive. In other words, if she lives to 95, she gets 40 grand a year. If she lives to 78, she gets 40 grand a year, and there's a 10-year period certain on that, just like I'd recommend it for you. And, you know, she gets this life income, and he's all happy with that. So, it's going to take $430,000 to purchase that. And, you know, he's still alive. He doesn't know when he's going to die, and so it'll actually... What he's purchasing is an annuity, right? Yeah. He's putting $430,000, which is the amount of money he's got to stick in the annuity, to create this $40,000 a year for life for her right now.
Okay? And he's doing that, but he's knowing that he's not going to pass away like next month. I mean, so more than likely, he lives 5, 10 years. This annuity is going to grow, so the $430,000 is going to grow, and then she's going to have a shorter life expectancy if he dies in 10 years. So, in other words, she could very well get more than $40,000 a year for life, depending upon how long he lives. And then, he's just setting this up for her, and there's a chance that she could predecease him.
I mean, she could die before he does. He still owns this annuity, so then he would just, you know, he'd start withdrawing it, living off of it himself, or he'd give it to charity, change the beneficiary to the charity that he's sending all his other money to. So, it's just kind of a particular little different situation, but he was just thrilled with this, because he is very concerned about all the people coming to her, and talking her into some sort of investment scheme with his whole estate.
I mean, he's got well over $2 million, and he's just going to give it all to charity, rather than have them steal it from her. But, he wants to make sure that she's well taken care of for the rest of her life. Right, and it seems like a fantastic deal when you think about it, because after she lives 10 years, she's money ahead, or 11 years. You know, if he originally put in $430, then obviously at 11 years, it's paying out more than he ever put in, and will continue to do that.
If she lives to $90 or $100, it was really an investment, right? Yeah, and so the next example that we have, so Joe is 80, he's the father, and he has one son, 48, he's not married, and he's a spendthrift, he's the prodigal son. And Joe has this $500,000 that is basically going to go to the son, but he's not ready to give it to him yet. But he wants to protect it, he wants access to it while he's alive, but more than likely he's never going to touch it, and then his son is going to receive it. And so he puts it in an annuity, he has the ability to access 10% of it every year for himself, and then when he passes away, Joe doesn't get anything right away. I mean, he gets the first monthly check, and he has a life income with a 10-year period certain. And so how much that's going to be in that life income, we don't know because Joe is still alive, and Joe might live to 90, and the longer he lives, and the more he doesn't touch this $500,000 which is growing, the more Tom's monthly income is going to be, but Tom's not going to be able to get his hands on all this money and squander it. I mean, it's just simple, they're going to withhold taxes from those monthly payments so that he doesn't get in tax trouble with this newfound income wealth kind of a thing.
That's brilliant. Really. But, you know, it sounds like it's controlling, but on the other hand, he's just trying to help, he's trying to make sure that it just doesn't put a snare in his way, right?
Yeah. And as I said earlier, wealthy people have been doing this with trust their whole life, and you know, I mean, Joe is a retired guy. I mean, he's got 500 grand. He's got some other money in his home and some other things, but what he's leaving to this son is this annuity, and then he may not have a whole annuity. He may have to spend it on something, but nonetheless, he's making sure that when his son receives this lump of money, he ain't going to get a lump of money. He's going to get this piece of paper that says, give us your checking account. We're going to transfer this much. This insurance company is going to pay you every month for the rest of your life, Tom. And there you go. Who wouldn't love that? Yeah.
Hook me up. So another place that we look at this kind of a thing with a restricted payout is George is 75. He's got a $4,500 a month Social Security check.
Mary is 72. She has an $1,800 Social Security check. And there's $6,300 a month.
They live pretty close on that. Folks, they have some other savings, but they really don't spend that. They have to take some minimum distributions and that kind of thing, but they live pretty comfortably on this $6,300 a month. And when I showed them how they, when the first one of them dies, that smaller check of $1,800 a month is going to go away. And so we put $250,000 in an annuity and that $250,000 of annuity is still accessible to them.
Well, they're both of them are alive and they needed it. They can get it, some of it, 10% a year. They could withdraw and live off of it or do something with it.
But the whole idea is to leave it there and then have it replace the $1,800 a month check that goes away when the first one dies. We want to remind you at this point that the show is brought to you by Cardinal Guide, cardinalguide.com. And there you're going to find the seven worries tab.
This show is under the estate tab. And if you go there, you're going to find another video that's along these lines, show notes, all sorts of details on these examples that we gave you. But we want to make sure you have all those resources. Of course, the best resource of all, if you ask me, is the contact page at cardinalguide.com. And Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement. And so, you know, it's amazing what God provides. And we are hoping that you'll catch the vision that they have for this and contact them. It's a great show, Hans. Thanks you.
Thank you and God bless you. 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 Whale is designed to provide accurate and authoritative information with regard to the subject covered. 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. We hope you enjoyed Finishing Whale 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 Hans' best-selling book, The Complete Cardinal Guide to Planning for and Living in Retirement, and The Workbook. Once again, for dozens of free resources, past shows, or to get Hans' book, go to CardinalGuide.com. If you have a question, comment, or suggestion for future shows, click on the Finishing Whale radio show on the website and send us a word. Once again, that's CardinalGuide.com. CardinalGuide.com. This is the Truth Network.
