Gene Dickison, your host, your personal financial adviser, Gene Dickison, your host, your personal financial adviser, happy to be serving you for the next half an hour.

I am at your service.

And welcome.

If you're a loyal viewer of More Than Money, you know that we talk about lots of different topics, answer lots of questions, interview some very, very fascinating people.

But we don't do this in a vacuum and giving you just a hint.

Just as a peek behind the curtain of how we produce our show, we're generally about two, sometimes three weeks out in our production schedule.

So as you're watching this, this is two weeks ago, time travel for us.

And unfortunately, the day that we are producing this show for you is the day that Russia chose to invade the Ukraine.

It is an event that has all of us concerned.

Every thoughtful, caring person around the world sends prayers to the Ukrainian people and prayers that this conflict can be resolved quickly with minimal loss of life, minimal impact to the Ukrainian people.

It doesn't not currently appear that that's the resolution that we should expect, but that's why we have prayers.

So as you hear this, you are two maybe three weeks further into the news cycle than I am at the moment.

You will know at this moment whether my prayers have been answered and that this has been, conflict has ceased and that people are safe.

But these kinds of dramatic, impactful events sadly occur on a pretty regular basis.

So for young people who are going through this, perhaps for the first time, perhaps they're in their first job, their first 401(k).

They're investing as best they know how at their young age, and they hit a speed bump like this kind of an event that sent shock waves, not just geopolitical, but from an investment and economic standpoint, shock waves as well.

And how do they respond?

How should they respond?

How maybe should you respond?

Well, the best advice that we can give is, A, the stock markets, particularly on average, rise eight out of ten years.

So yes, there could be a year or two in a row where they decline.

But as they did in the mid eighties, I'm sorry in the mid 2008, 2009, when they declined.

that was followed by seven years of incline.

So bottom line is that there's lots of probabilities working on your behalf, working to your benefit.

If you have a good plan, stick with your plan, particularly if you're younger.

You've got decades to go, not minutes to go.

So don't let these kinds of events upset your plan.

If you're a little further down the field, perhaps you're retired.

Hopefully you still have a plan, one that weathers these kinds of storms.

Well, if you do not, it is absolutely mandatory that you put yourself in the position to obtain that plan.

There are lots of tools online that you can access if you're a do it yourself, person.

There are lots of financial advisors across the country that are tremendous, honorable.

They have a lot to offer, and perhaps you would benefit by seeking one of those.

And of course, if we can be of service, we want to do exactly that.

Speaking of being of service, we try to answer as many of your questions as we can.

Your questions come to me, Gene, at askMTM.com askMTM.com.

And we answer every single question, but not all of them on air.

Some will appear as you'll hear tonight, but every single question is answered directly back to you.

So we want to give you as much service as we possibly can.

And maybe, just maybe your question will be one that is selected for a future show.

So let's turn to our financial correspondent.

We'll talk to Megan and see what's our first question for this evening?

- Hi Gene, our first question says in 2019, my father in law passed away.

My husband has five siblings, with his one sister being designated as the power of attorney, per his will.

His sister apparently has shirked her responsibilities and has not pursued or has any interest in closing out his estate.

He was in a reverse mortgage and had little assets at the time of his death.

The house-slash-car have been sitting ever since his passing.

And my question is, can my husband's and my assets or his other siblings assets be in jeopardy because of this?

Thank you so much for your time and expertise.

- Well, you're very kind.

Your word kind.

Your situation is very unfortunate.

The easy answer is it is extremely unlikely that anyone's assets other than the decedent are at risk.

The decedent's assets, of course, are available to satisfy any and all of the debts or reverse mortgage is a debt like any other mortgage.

There may have been other debts as well.

The fact that your executrix in this case, sadly family member apparently not interested in doing her job even though she is a fiduciary, she has pledged to act in the best interest of the estate.

Apparently, that is not her intent.

If there were assets, if you were expecting an inheritance, if there was value in the estate, I would strongly urge you to contact an estate planning attorney.

Have your interest represented and force the issue even to the extent of having her replaced by the courts.

In this particular case, I would be reluctant to advise you to spend that time and money on legal services if the expectation was there was little or nothing in the estate at any rate.

Then it is unlikely that that would be a wise use of your resources.

I am more than a little shocked.

Shocked might be a strong word.

I'm curious, if there was a reverse mortgage, the reverse mortgage company has a vested interest in liquidating that home as quickly after your father in law's passing as possible to regain their asset to pay off their mortgage.

The fact that you're reporting the home as sitting vacant, sitting unattended to is a head scratcher.

That's one that just out of curiosity, I personally would want to know how that has come to be.

But if indeed you're not expecting an inheritance, I wouldn't be in fear that you're going to lose anything if you're not expecting to gain anything.

I would, as they say, let sleeping dogs lie.

But if curiosity being what it is and you're as curious as I am as to how this is allowed to unfold this way, yes, you're going to need to hire a trusted, experienced estate planning attorney to represent your interests and confirm all this for you.

Very interesting question.

Sad.

Not unusual, but sad.

Megan, our next question, please.

- This next viewer says, I have listened to your radio show for several years and occasionally your TV show.

I am 72 and my wife is 65.

I have done most of the financial planning in our 32 years of marriage.

I have been fairly conservative with my investments and we are blessed to have pensions and we are blessed with having pensions and live within our means.

We have about 695 K in cash assets and about 600 K in real estate.

My main concern is having someone in place to assist her if something happens to me and also to suggest some things that we might be missing currently.

Thank you in advance for your help.

- Well, you're very welcome and thank you for your question, an interesting one.

We selected this question specifically for the impact.

There are, gosh, countless folks out there in precisely this circumstance.

50 years ago, it was always husband in charge of the money, as this gentleman is and the wife perhaps not either informed voluntarily, involuntarily, but certainly not engaged.

And so his concern is very realistic, as you might expect as the world has changed.

We often find perhaps one out of three now where the wife has been in charge of the money.

She does.

all the bill paying, knows all the expenses handles the investments.

In many cases, husbands don't even know what their current salary might be because their wife has taken charge, understandably so.

If they have those skill sets, why the heck not?

So the concern is for the surviving spouse, male or female, who has not been participating in the financial mechanics and what might happen to them when the person who is predominantly responsible or 100% responsible is no longer in the picture?

Well, there are two ways to address this.

The first is one that most advisors would suggest you secure a financial advisor.

You allow that adviser, him or her, to assist you in your current affairs and involve your wife and train her up along the way.

That is certainly a reasonable course of action, but it is not typically a comfortable course of action for anyone involved.

And the reason I say that is with 780 years of experience working with millions and millions, with lots of clients, the do it yourself approach as this gentleman has done it is a mind-set.

It's how a person sees him or herself.

And very often they're not interested in having another cook in the kitchen.

So even though he has a very realistic concern, the opportunity to quote unquote give up control this early on, he's only 72, would be generally uncomfortable for him.

Frustrating for a financial adviser and perhaps not terribly productive for his wife.

The second alternative has worked out very well in many, many cases in our More Than Money World headquarters.

That is to bring in this case, his wife, introduce her to the team, the staff see the facility, get comfortable that she has a resource and then understanding that until the time comes, until it becomes necessary, he's going to continue just as he always has.

Along the way, if there are questions along the way, if there are concerns, of course, the financial advisor would assist.

And then when the time is right, when the passing has occurred, she walks right in.

She is comfortable, she's familiar.

She has a relationship with the Financial Advisory Group that can answer questions.

Of course, at that moment, immediate questions about settling an estate filing, tax returns, etc.

and then long term questions about retirement security income tax.

I'm sorry, income, cash flow, Social Security, Medicare, etc.

That has seemed to work out very, very well.

And it may even turn out, unusual, but it may even turn out that this gentleman finds out that, yes, the financial advisors have some very interesting, different perspectives that might benefit both of them while he's still with us, and hopefully he'll be with us for another, I don't know, 25, 30, 35 years.

He'd only be 107.

Miracles of modern technology and all that.

We might keep him around.

Excellent.

Excellent question.

Megan, what's next?

- Next question says, first, thank you for all you do to educate us in the world of finance.

On the recommendation of my financial adviser, I have been taking a distribution from my annuity for the last couple of years and I'm scheduled to continue that for a total of ten years.

My advisor told me that taking the enhanced appreciation value, which is significantly more than the normal value, is the only way I would actually realize the higher number.

Here's my problem.

Even though the annuity company sends me a check each year for 60 K, I have been turning that check over for investment into my IRA, my advisor run IRA, immediately and so have not actually cashed in these checks.

The IRS has been sending me bills saying that this is income and I haven't been paying income tax on these distributions to the tune of 20K.

My tax professional has been sending the IRS letters saying that this is not an actual distribution because the money has been immediately rolled into the IRA.

I know the IRS is running behind, but they are still sending letters saying I owe this tax plus penalty for a couple of years now.

My adviser and tax professionals say not to worry because of the money being put immediately into the IRA.

But I'm wondering what you think because I'm nervous.

- I think that you should be nervous.

I think unless your financial adviser and tax professional are willing to provide you with a statement of indemnity.

Fancy word for letting you off the hook, a statement that says we are 100% convinced that we have handled these transactions completely in keeping with the IRS code and that you owe no tax, even though the IRS is demanding it and no penalties.

And as such, if in the ultimate when it's all resolved, if indeed you owe tax and penalties, we'll pay the tax in penalties.

Now, I'm going to be fascinated if you would follow up, please, and let me know if your advisers are willing to do that.

My suspicion is they will not be.

And my concern is that the spirit of the law has been addressed.

You have done what your adviser and your tax professional has have told you to do and you have been confident that you've done it correctly.

That may be the case.

You're absolutely right, the IRS is behind by eons.

They're down to answering less than 3% of the phone calls that are placed.

And most of the time they just put people on hold for several hours and they hang up.

So yes, the IRS has a lot of responsibility for its own ineptitude.

But the concern I have here is a technical one.

IRA rollovers, which is what you've been doing, are permitted once every year, but not every calendar year, every rolling year.

So for example, you last year took an IRA distribution from your annuity on December 15th.

You immediately turn that check over.

It was made to you.

You turned it over to your adviser who put it back into another IRA and you effected one rollover in that 365 day rolling period.

If this year you got your notice, your check on December 10th, and you gave it to your financial adviser who put it in on December 11th, you've done two IRA rollovers in one rolling year.

You violated the law.

It is completely taxable.

And yes, you owe tax and penalties.

Now, is that what happened?

We don't have enough information from your e-mail to confirm that, but it feels like that's what's happened.

This has been done mechanically, in my opinion.

It appears it's been done mechanically incorrectly.

the transfer from the annuity, IRA annuity, into the rollover IRA should have been done directly from custodian to custodian.

It should never have been a check issued to you.

The function of the annuity I can circle back to in a moment about why it's being done, the way it's being done from a financial standpoint, but mechanically there's no excuse for not taking it directly from the IRA to the New IRA.

And in my opinion, you likely would have had no struggles whatsoever, no struggles at all, because that IRA rule would not apply for direct transfer from custodian to custodian.

I don't think it was done that way, it doesn't appear that it was done that way, you mentioned getting your check and turning it over.

The IRS considers that you have taken those funds and as a result, you're in a pickle.

Now, the annuity being paid out over ten years maximizes your pay-out, your financial adviser, if he or she were the person responsible for entering you into this annuity, has engaged in what I would consider to be, uh, not your best interest.

These types of annuities that almost certainly bind you to their pay-outs end up paying handsome commissions to the advisors.

But as you have found out, the only way to maximize your income is to stay another ten years.

My guess is that you are already in the annuity for seven, nine, ten or more years.

So in essence, this annuity company has bound you for a 20 year time period and paid a handsome commission to the salesmen for inserting you into this process.

Many annuities have no such restrictions, and you can get full benefit without this artificial calculation.

But water under the bridge, you're doing the best that you can with the asset that you currently have.

But I fear that your advisers have simply missed the deadlines and have caused you some tax but simple situation to solve.

Simply go back to them.

They're very confident they are right.

Have them put it in writing that will protect you in case the IRS is victorious and allow them to cover the cost.

That should be an interesting conversation.

Please circle back and let me know how that turns out.

Megan, speaking of interesting conversations, what interesting e-mail do you have for us next?

- The next e-mail says, we have four children and we have a substantial amount in our 401K.

When we both pass away, our will is written to divide it into quarters.

Will our children have to pay an estate tax and is there any way around that?

- Oh, goodness.

Let's assume for the moment that this is a Pennsylvania residence, if that is the case, then there is an inheritance tax, 4% and a half to direct descendants.

So there will be an inheritance tax on the 401(k) dollar value to the tune of about 4.5%.

There might be some slight deductions for final expenses, etc, but that's a good rule of thumb, kind of give you the worst case scenario.

In addition to the inheritance tax, there will also be income taxes because your 401(k) plan in all likelihood has assets in it that have not been income taxed to you.

So when those dollars come out, let's use simple numbers.

There's 400,000 in the account.

Each child receives $100,000.

They will pay four and a half cents on the dollar.

$4,500 in Pennsylvania inheritance taxes and the balance.

The $95,500 will be taxed as income unless they do an inherited IRA.

Rolling it into an inherited IRA gives them then ten years to stretch out those payments and hopefully with any luck at all reducing the overall tax bite from the inheritance.

Is there a way around it?

Not to my knowledge.

There is one technique that you can explore.

I don't know how successful you will be.

You would benefit, I think, from using a financial advisory to explore this technique.

And that's using the 401(k) money currently, maybe monies that you're not currently using, drawing some of that money out every year to pay the insurance premiums on a life insurance contract on either yourself or on you and your spouse.

A second to die policy on two people can be very inexpensive and as a result, again 400,000 in the 401(k), it's going to be exposed to all these taxes you?

Could you buy a $400,000 life insurance policy on the two of you when the second of you passes away, the children can inherit that 400,000 block free of income taxes if it's done properly.

The answer is, yeah, that's an interesting technique.

Requires, of course, that you be insurable, happy, healthy, all that kind of good stuff, that's up to the insurance company to determine, but it's certainly something that you can explore.

I would make one other observation.

You mentioned that this is being divided by your will.

It should not be.

It should be set up in your 401(k) beneficiaries.

Each of you should be the primary beneficiary.

Your four children should be contingent beneficiaries so that when both of you are gone, it doesn't go through the will.

It doesn't go through probate.

It's not delayed.

It's rather easily done.

Interesting.

Megan, do we have a short one back there?

- We do.

This one says, my wife and I are interested in speaking with an estate planner who is knowledgeable in special needs trusts.

Do you offer that service in addition to regular estate planning assistance?

- Yeah, we need to be really, really clear, this is a very important topic.

So many folks are faced with this issue.

Predominantly, they have adult children who have special needs.

Perhaps they're receiving special services, whether it's from Social Security or training services or employment services.

And in many cases, if they inherit from their parents a substantial sum of assets, they could be disbarred.

They could be prevented from using those social services that they rely on that are so important for their health and wellbeing.

So a special needs trust is a very specialized instrument that will protect the special needs individual, the adult child, in the event that the that his or her parents are no longer there to provide for them.

It is not something that you're quote unquote average estate planning attorney does on a regular basis.

We are not, in our More Than Money world headquarters, attorneys.

We do have access to a wonderful legal partner who has helped us on many, many occasions with many, many clients.

So we're very blessed to have that.

We also have access to various trust companies.

Special needs trusts are intended, intended to last for decades.

So naming a trustee, a good friend who happens to be, picking the number, 60 years old, probably not a great idea for a special needs student who may only be 20, 25 or 30 years old and as a result could expect that the trust will last for 40, 50, 60 years.

So an individual as trustee doesn't seem to work very well in my opinion, a trust company, especially one that has a deep experience in special needs trusts, in my opinion, is a better way to go.

It requires education and experience.

We are very fortunate to have all of that in inside the four walls of our More Than Money world headquarters.

But it's something that you need to educate yourself on, investigate, explore and get comfortable with because the reality is it's not an off the shelf kind of item.

It is very necessary that it be done very specifically attending to the rules of the programs that the adult child needs and also needs to be very specifically attending to income tax issues, trust issues, management of the trust issues and that long potential life of the trust itself.

So if you are in that scenario, please alert us and we'll be very happy to get you from point A to point B to explore all of the pros and cons, all of the nuances of a special needs trust and service.

The person that you care about person or persons that you care about most.

Folks, we've covered a lot of ground in a very short period of time.

I hope you picked up a lot of good ideas.

I hope some of them apply to you directly.

At least now you've got some insight into what your, your friends and your family, what your neighbors are thinking about, what concerns they have.

And perhaps you see where you can benefit from knowing all that good stuff as well.

And if there's something that we just haven't addressed, but you would like us to address, those kinds of topics are very valuable to us.

You do us a great service by sending those to us.

So if you have a topic you like us to explore or a personal question that you would like us to answer, you'll send that to me by e-mail.

I'll give you that in a moment.

Or if you have a guest that you would like us to interview somebody that you think would be bring real value to our More Than Money audience, we would accept those recommendations as well.

Send all of that to me directly, Gene at askMTM.com.

And I thank you in advance for your service, to us and to your audience.

Thank you so much for being part of our show this evening.

Hopefully, you'll rejoin us when we come back next week right here on More Than Money.

Goodnight.