And good evening.

You've got more than money.

You've got Gene Dickison, your host, your personal financial advisor.

Happy to be with you this evening.

Happy to spend the next half an hour, hopefully answering your questions.

If you are a loyal viewer, you know exactly how this works.

You have sent us your questions.

We have received them by email.

You send those to me gene at ask MTM dot com.

We select some of those and we air those in future shows.

We don't have time to air all of them, but we do answer every question back to you that we are able and if you haven't received your response, maybe follow a back up and include a phone number that would help a very, very much.

For those of you who are just joining us, you may find this is a different type of financial show.

First of all, we are the most relevant financial show on television today, without a doubt.

Bold statement, indeed.

What does he think he way?

It's not about me.

It's all about you.

Because you're asking the questions.

You're setting the priorities.

You're setting the agenda.

We are the most relevant financial show to you.

And that's all that really matters, isn't it?

So if we can answer your questions about anything that's got a financial inclination to it, although the title is more than money, we've covered a number of questions that ended up being more Dr. Phil than financial.

But bottom line is that we're here to serve you.

We're here to be of as much assistance as we possibly can.

So send us your emails and we're happy to respond.

And you will find.

If you're just joining us for the first time, a couple of things that you should note.

Number one, half an hour goes very, very quickly.

So don't wander off.

You're going to miss way too much.

Number two, if at any point you find yourself being even mildly entertained, you have my sincerest apologies.

One comment before we get started.

There is a tremendous amount going on in the world.

All of us are aware of of whether it's a full scale armed conflict or whether it's goodness, citizen against citizen.

There is so much going on that the media brings to us into our homes on a 24 seven basis, that it is it is a risk that you might begin to believe, gosh, the whole world has gone crazy.

And I am here to assure you, since I have the luxury of meeting so many of you interacting with so many people on on a regular basis, I have a very broad sampling.

There are, in my opinion, far more wonderful people than evil people, far more outstanding folks than bad folks.

If I were to guess just a guess, my own assessment anecdotal, of course, 98% of the people I meet, they're wonderful.

They're just wonderful.

Do not be led astray and do not let your heart be burdened by something that, as far as I can tell, simply isn't true.

So as we turn to our financial correspondent, Megan, I ask you a question to start.

The folks that you know, the folks that you're with on a daily basis, what percentage of those are quite wonderful?

I think I'm with you on the 98%.

I yeah, I'm I always go into a situation assuming that that person's a good person because I would want them to assume that about me.

And if they prove me wrong, they prove me wrong.

But for the most part, if you go into it with a positive attitude, I think people are pretty awesome.

Outstanding.

Outstanding.

Well-said.

Well-said, indeed.

And that and good advice as well.

So next, where do we start this evening?

Sure thing.

Our first question is a little lengthy, but I think it's a good one.

It says we discovered your show at the start of 2024 and appreciate all the valuable advice you provide.

My question is have to do with taxable, taxable capital gains from a house sale.

As I understand it, if the sale of a primary homes results in a capital gain, single filers may qualify to exclude as much as $250,000 from income, and joint filers can exclude $500,000 from income.

Also, home improvements might reduce the taxable income if the capital gain exceeds those thresholds.

We bought our home 40 years ago for $142,000, and Zillow and similar sites provide sale prices ranging from 675 to $800000.

These numbers are consistent with sales in our neighborhood in recent years.

So the capital gains exclusion issue may be applicable to us when we sell.

Hopefully not for some more years.

Here are our questions.

Number one, what is the lookback period for home improvements that would go toward reducing possible capital gains?

We've made numerous improvements over the decades and fortunately have the receipts to prove them.

For example, we've put on two roofs, replace the heating system twice and have bought a couple rounds of kitchen appliances, as well as installing a whole new AC system.

Presumably only the existing roof heating system and appliances would be deductible expenses against capital gains over $500,000.

On the other hand, we assume the cost for the kitchen and bath upgrades added hardwood floors, and the only AC system to date would be applicable if it is more than ten years beyond its installation date.

Please confirm if these assumptions are right.

Do landscaping expenses qualify?

We've had hardscape installed and added planted of perennial beds at significant costs.

Number two, if we sell our house and go into a monthly pay as you go senior apartment situation, would the entire capital gain be taxable?

Or is the $500,000 exclusion firm regardless of whether a replacement home is purchased?

And lastly, what are the tax consequences of a House sale after one spouse dies?

Does that mean the capital gain exemption would be reduced to $250,000?

What if the sale of the residence occurs after one spouse dies, but within the tax filing year of the spouse's death?

Is there any grace period so that the surviving spouse can claim that full $500,000?

Thank you for any reply you can provide.

Well, you're very welcome.

And you're very kind with your words and you ask very, very interesting questions.

There are so many questions that are appropriate, even though we put Megan to the test.

She's going to be exhausted back there.

That might be the longest e-mail that we've had her report on, on our show.

But it's got so many important points to be made that will apply.

Not all of these points apply perhaps to you, but one or more of them likely will.

So if you are in a similar circumstance that you live in a home you've been in for many, many years and you've got questions about, well, what happens if or what happens to be fair, What happens when these this email has easily three or four emails worth of valuable questions within it.

So let's unpack the look back period.

These folks have been in their home for 40 years.

The look back period is 40 years to look back.

Period goes back to the day that you purchased the home.

So using an extreme example, you bought a home for $143,000.40 years ago and a month after you moved in, you had to replace the roof for $10,000.

Your new cost basis is $153,000.

The original cost of the home and that immediate cost to replace the roof.

The key issue here is that any capital improvement adds to cost basis.

It is very important that we understand what in the world is a capital improvement.

The IRS gives you pretty clear guidelines and their guidance will tell you that a capital improvement is something that helps you, improves the value of the property, improves the value of your residence.

So adding a new roof, if your roof is leaky, absolutely adds to the value of your property.

Adding new kitchen, new bath upgrades absolutely adds to the value of your property.

Planting flowers does not, creating hardscape being does.

Painting the walls in your den does not.

You see how this differentiation is really, really important?

Basic maintenance is not at does not add to capital gains.

I'm sorry to cost bases.

It does not reduce capital gains, but any capital improvement does, even if it's been done multiple times.

So in their case, they've replaced the roof at least twice.

Both of those will add to capital gains.

In my example, they bought it for 143.

They added 10,000 immediately.

30 years later, they did it again for a while.

30 years later, it wasn't going to be ten, it was going to be 30.

So it's gone from 143 to 153.

Now adding 30, it's 183.

This is very, very important because their assumption that there is an exclusion is 100% correct.

If you're a single taxpayer, it's $250,000 of profit, not of sale price.

And the the profits are determined by the difference between the sale price and your cost basis.

So having good records as they do, even if they are multiple purchases that will add to cost basis and likely hopefully bring them to a point where very little, if any, of the capital gains on their residents will be taxable.

If we looked simply at the current number, it looks like it's about $650,000.

That's a profit.

Half a million is deducted.

They would pay tax on 150.

I am quite certain, based on this description, they will find $150,000 of capital improvements that will drive that cost basis lower.

I'm sorry.

Add to that cost basis drives that capital gains lower, probably to the point where they zero zero.

The second question, if they go into a senior facility soon after, does that in some way, shape or form affect their capital gains exclusion?

The answer is no.

There is no required meant that you go from this home to another home many, many years ago.

I've been around many, many years.

I remember there was a requirement you had to buy a new home from the proceeds in order to get to the exclusion that has gone by the boards years and years.

Decades ago, in fact, if you were of a mind, very few people would be.

But if you were of a mind that in your retirement years you'd like to buy live in and flip houses live in a constant state of renovation, you could create for yourself a tremendous cash flow tax free.

You could buy a home for 200,000, spend two years.

That is the requirement.

You must live there at least two years as your residents spend two years rehabbing, doing the landscaping, adding some capital improvements, and then sell it for, let's say, a profit of $100,000.

All of that would be tax free.

So for two years you would be paying yourself approximately $50,000 a year with no income taxes, no Social Security taxes, no workman's comp, nothing.

It is fabulous.

But then you get to go buy another house and keep doing that.

It's a rare couple that would be happy making that gypsy kind of life.

But it could be pretty wonderful and it could add an awful lot of cash flow if you're enjoying yourself along the way.

And finally, what are the consequences of selling a house after a spouse has passed?

And sadly, this happens on a pretty regular basis.

The IRS has anticipated that, you have a window.

It's a two year window.

If you sell the home within the two years, you maintain the full $500,000 exclusion.

If you wait two years and a month, the exclusion drops back to 250.

Excellent questions, very detailed, covered a lot of ground.

I'm sure we helped an awful lot of people out there.

But if your situation's a little different, hey, that's kind of what we're faced with.

But we've got a wrinkle.

Make sure you send us that email, Gene at ask MTM dot com, and we'll explore that with you.

Speaking of exploring Meg's where do we explore next?

Well, we have kind of a grim segway from the last question, but this one says I am 79 years old with a traditional IRA account.

My wife does not have an IRA account.

She is the beneficiary of my IRA, and my two sons are contingent beneficiaries.

If I should pass away, what is the correct titling for this new IRA account for my wife?

And does she need to complete withdrawals within ten years from the date of transfer or the year end of that date?

Thank you for your help.

Well, you're quite welcome.

This question is very important.

And it's important because the topic of inherited IRAs has exploded.

The rules have changed dramatically.

And as a result, lots of conversation around what you may do, what you may not do.

What can my wife do?

What can't she do?

What can my sons do?

So as a result, there's lots of confusion and lots of misinformation out there.

Lots of folks who believe they understand the IRA rules are not as informed perhaps, as they would like to believe.

And they do not understand, for example, that the rules for inherited IRAs are quite different than the rules for an IRA.

You set up an IRA, you have a certain set of rules during your lifetime and in your retirement if you inherit an IRA.

Totally different.

With one exception, that's if you're a spouse.

So this gentleman is anticipating that if he should pass away, his wife will have an inherited IRA.

She will need to set that up in an account that says inherited IRA from her husband for the benefit of herself.

So if it were John and Jane Doe, it would say inherited Ira from John Doe for the benefit of Jane Doe.

And that would establish it as an inherited IRA.

And now she must follow those rules.

She, as a spouse, has the option to do that, but likely 90% plus likely she won't want to do that.

Following that IRA format, she yes, must then start taking money out over a ten year period with little or no relief.

If she has a second option and she does, to take that money from her husband's IRA and add it to her own IRA.

Her life becomes much simpler and it becomes a much easier set of requirements to meet.

Now, is it always the case that the spouse should take that money and drop it into their own account?

The answer is no.

There is a specific set of circumstances where the spouse would be very, very wise to do an inherited IRA, and here's how that might look.

Let's say that a spouse is lost very young.

Let's say the spouse that is lost was 50 years old.

The spouse that has inherited this IRA, perhaps the 50 year old, had a41k at work.

Perhaps they've been saving money assiduously.

And as a result, this is a very substantial sum of money.

But the spouse that remains is only 50 years old.

Too early to take money without penalty from a traditional IRA.

This is not a traditional IRA.

The spouse in this case, the surviving spouse, should accept that as an inherited IRA because any distributions from that inherited IRA while they are income taxable, there is no penalty.

So for a young woman who is ten years away from being penalty free from a traditional IRA could take money from her deceased husband's IRA year by year, no penalty whatsoever paying only tax on the money that comes out.

So it is very much a highlight, a a priority that should you lose your spouse, that you are very careful at how you proceed with the moneys that are available to be inherited, particularly if they're in an IRA or 41k, a retirement plan, by the way.

All of those options disappear for their sons, disappear without a doubt.

They go into an IRA that's inherited.

Without a doubt.

They must follow the inherited IRA rules.

Those rules include you must take required distributions on an annual basis over ten years, and by the end of the 10th year, the money must be completely out of the IRA.

Now, having said all of that, depending on when you see this show, I am speaking in the midst of 2024.

You may find this later on the Internet or you may find it at some other point in your life.

At this point in time for the year tax year 2024, the IRS has waived the R&D requirement for inherited IRAs.

They have acknowledged that their rules are simply not clear enough and that too many people are being pinched due to no fault of their own.

So this question seems very simple, but it ends with a further complication, which is if indeed you have an inherited IRA that you received after the person passed from January 1st, 2020 on, you don't have to take an R&D this year and maybe that's a good thing, Max.

It would be a good thing if we could help somebody else.

Sounds good.

Our next question says, I am 66 and widowed.

I work and hope to continue to work until I'm 70.

I just have I have just I have just over $265,000 in my IRA wondering, should I take my Social Security now right at $2,000 a month and use it to pay off my credit cards?

Should I use it to build an emergency fund that I do not currently have?

Or should I wait until I reach 70 and my benefit goes up to 20 $700?

Thank you.

Okay.

The most critically important tool that an adviser must have in his toolbox or her toolbox when responding to questions that have relatively limited information is it depends.

And I mean that in in all sincerity, this question needs to be the background.

The context needs to be fleshed out in order for an answer to this question to have any value whatsoever.

And for those of you who have already selected your Social Security benefit, this may be a I've already been there, done that.

Not terribly interesting for folks who are coming up on selecting their Social Security benefits.

Start date.

This is a very important question.

And for those of you who are kind of thinking you're on the glide path to retirement, you get three or four years out, you may be thinking, I didn't know I had an option.

I didn't know that the numbers were that different.

If he takes it now, if I'm looking correctly, 2000 bucks a month, if he waits four years, 20 $700 a month guaranteed, it's a guarantee increase of goodness, 35%.

That's huge.

It's huge if he can collect it.

So one of the issues that would be asked if this gentleman was sitting in front of me was would be, how's your health?

Because someone who's in robust housing comes from a family with long livers.

It's an old joke.

I'm not going to go into it.

If you have a family history where people live long lives, you might absolutely want to roll the dice of waiting and then taking it at 70 with much more income and then living 30 or 40 more years and draining the IRS dry.

Fantastic.

If, on the other hand, you've got some concerns, then taking it earlier might very well be in your best interest because you can accomplish the things that you're mentioning.

There's no question about that.

But in addition, there may be a lower probability that you will live a very long time at a very high income rate.

I would give some peace of mind to this gentleman when he says he doesn't really have an emergency fund.

You're 66.

You have 265,000 in your IRA.

In some very real sense, that could be an emergency fund for you.

And while this email does not report this, I'm hopeful he owns a home.

And if he has equity in his home, that also could be an emergency fund.

And by the way, if you have equity in your home, I'll paint the best possible scenario.

He owns a 250,000 art house, free and clear.

I would absolutely investigate using a line of credit at a relative low interest rate to pay off any credit card balances you may have that are obviously, sadly at a much higher rate.

Lots of ways to skin the cat.

So the answer to this question is a very firm and definitive.

It depends makes do we have a question that I can actually answer?

Well, we'll see.

This next one has four little questions.

It says, My primary question is in regard to the expense ratio as to how it really affects my holding.

Does it impact the purchase price, the yield, the sale price or its implication to the net asset value?

Thank you.

My goodness.

Yes, that talk about power packed.

There's a lot in a very short email.

Let me see if I can do this logically.

The question is really directed at the trying to measure the impact that an investor would feel on how much the investment management company that's overseeing that investment, where it could be a mutual fund, it could be an exchange traded fund, could be an annuity.

There are lots of different platforms where people get paid to manage the investments for for an individual.

And so the question really is, where is the fly in the ointment?

If one company charges 1% a year, another company charges 3% a year is it always better to go with a company that charges less?

And interestingly enough, the answer is no, it's not always better.

It would be lovely if it were.

Then it would be easy to compare apples to apples.

But because management styles are so very different, it is gosh, incredibly common to see two different investment funds purportedly to do the same things.

Let's let's pick on large cap growth funds, very large companies that they want to grow.

It is very common for them to have different expense ratios.

Again, let's use simple numbers, 1% and 2%.

You would say, well, they do the same thing.

I'll take the 1%.

What if the advisor what if the manager that charges 2% is so much better that they are making you 5% more return per year for that extra 1%?

Would you not want to trade one for five as often as you could?

And the answer is of course you would.

Now, expense ratios yields net returns.

All of these things can be very confusing.

Mind bending on occasion.

They don't need to be the vast majority of the tools that are available to investors to evaluate investment options.

Morningstar, Lipper, Standard and Poor's.

These are typically available online.

People will compare funds.

What they compare is net return.

So if the example I gave 1% expense ratio is giving us a net of 9% and 2% expense ratio, the managers giving us a net of 12%.

You are comparing apples to apples.

All the rest of the questions become almost irrelevant.

You can choose the one that gives you the best profit for your investment.

Thank you so much for the question.

We just have a moment or so left in this edition.

More than money.

So first of all, I want to thank you.

Thank you for making it through the end of the half hour.

And hopefully you picked up a couple of ideas along the way, if indeed your questions are a little different or totally different.

You like totally different.

Gene at ask MTM dot com works very, very well.

We answer every single question back to you.

Some of those get caught in your spam filter, so make sure you're paying attention.

And if you want to avoid that potential issue, just include your phone number one of our More than Money team.

We have a tremendous team.

Obviously, I don't do all that work.

We have a tremendous team reaching back out to you and a phone number would work very, very well.

Again, hopefully you learned enough, maybe entertained a little bit that you're looking at this and saying, this is something I want to put on my schedule so that every week, certainly next week I want to return.

When they return to this podium for another edition of More Than Money.

Good night.