- And good evening.

You've got More Than Money, you've got Gene Dickison, your host, your personal financial adviser, claiming... claiming 780 years of experience.

Look at that mug.

You would believe that, wouldn't you?

Seems that it could possibly... Nah, we're just kidding.

780 years of experience at your service for the next half an hour right here on More Than Money.

Happy to be of service to you.

More Than Money has covered a lot of ground in recent weeks.

We have met lots of inspiring folks, we have answered lots of your questions, and we're going to devote our entire show today to answering more of your questions.

We are so very grateful to folks who email us.

And many of your emails include incredibly kind comments.

And we appreciate them very, very much.

On occasion, we get somebody who gets a little snarky.

That's fun, too!

That's perfectly reasonable.

We're big boys and girls.

We can handle that.

So, whatever your needs, questions, of course, concerns, of course, comments, of course, we'll take the positives most, but we'll take the negatives, of course, we are grateful that you're sharing our More Than Money adventure with us.

So, thank you so very much.

As we tell you every week, send us your e-mails, Gene@AskMTM.com.

That comes right into our More Than Money world headquarters in the holy lands between Bethlehem and Nazareth, and happy to be responsive to you.

And when I say "responsive", every single email is responded to, every single email receives our, either my personal attention, or from our team.

And we are happy to share all that information with you.

Even though not every email can be on a future show, we can't promise that, there are too many, but we do promise that we will answer every single one.

So let's get to it.

Let's answer our very first email this evening.

Very good question.

Lots of folks are finding himself in the position where their children, perhaps in their 30s or 40s, are working very, very hard.

But they may not be in a position to be able to contribute themselves to their retirement funds.

And so, folks who are perhaps a little further along perhaps have determined that they have a little extra, have instincts that say "I'd rather give them the benefit of my estate now "while I'm alive, and while it will really benefit them, "than allow it to accumulate for many, many years where, "at some point, when I have reached the great reward that "they may have already retired, "and may at that point not really need it.

"So, maybe we can benefit more by contributing "to retirement plans."

And the answer is yes, you can.

Yes, you can.

Now, there may be some mechanics that need to be addressed.

There may be some mechanics.

If you're doing an IRA, it may need to go to your child first, grown child, your child first, and then, into the IRA.

Certainly, if it's a 401k plan, that will absolutely need to be done, 104k plans rarely, if ever, accept direct deposits and in a block from a cash and certainly rarely, if ever, from a non-employee.

So again, it may need to be a gift that goes into your child's hands, then they redirect that into either an IRA or a 401k, or some other type of retirement plan.

I think it can be a tremendously beneficial thing.

Do not worry about gift tax issues.

There are none.

You are permitted to give any other human being you wish, and as many other human beings as you wish, every year, up to $15,000 and, not or, and in addition to that, you may give away over $11 million in your lifetime with no hassle whatsoever.

Income tax issues, you will have no benefit.

Your child may very well have a benefit, if you're putting money into a Roth, they get no immediate deduction, but they will grow their account tax sheltered, and then receive it in retirement tax-free.

If it goes into a standard IRA or 401K, there will be a tax deduction that will be on your child's tax return.

So, there are benefits, but there are benefits that accrue to your child.

Gene@AskMTM.com is the email address that was the recipient of this next question.

Well, thank you very much.

OK, a couple of things jump out at me at this.

Number one, very generous of you, kind of similar to our last question, Dad's giving money to son to specifically use for retirement purposes.

Fantastic.

Son is consulting, son is now self-employed.

Son now has the opportunity to do a number of different types of retirement plans.

He could do his own IRA, his own Roth IRA, his own 401K, his own Roth 401K, a profit-sharing plan, and a pension plan.

So, there's a lot of options that he may choose from, all of which have their own pros and cons.

They have their own good news, bad news.

They have their own benefits, advantages, disadvantages.

So, is it worthy for this young man to sit with a financial adviser, the answer is, oh, my goodness, yes, absolutely.

You want to have his situation analyzed with some significant precision to determine which of these plans best fits his needs, gives him the best opportunity going forward to have a successful retirement.

$3,000.

If that's the limit, then things can be very, very simple.

If he is very successful and needs to put away significantly more dollars, there are retirement plans out there for the self-employed that would allow him to put away $30-50,000 a year, and more, tax deductibly if he wishes, or tax deferred, and then, tax-free in retirement.

So, the opportunities here are tremendous.

You're giving him good advice.

Yes, indeed, you got this paid revenue increase.

You went from a smaller salary to a higher income.

Don't allow that advantage to slip through your fingers.

Make sure you're taking as much opportunity as you can to feather your nest going forward.

Gene@AskMTM.com.

Send me your emails, just as this gentleman has.

...a significant amount of money...

Thank you for your email.

Very, very nice.

OK, let's start with the basics.

529 plans are set up mechanically with one owner.

You noticed in the gentleman's email there were two accounts.

It's quite obvious.

Dad has one, mom has one.

So, there's one owner.

So, his initial concern is what happens if, we'll pick on dad, what happens if dad passes away and there's no beneficiary?

Who's going to end up with this money?

Who's going to end up owning this money?

The mechanics of a 529 plan say this.

If dad is the owner, it is almost certainly the case that mom has been named as the successor owner.

It's not referenced as a beneficiary.

The student, in this case, the son, is the beneficiary of the 529 plan, but there is a successor-owner designation.

Now, having said that, hopefully that's been completed, both mom and dad should absolutely insist that that be confirmed with their financial adviser, or whomever is the custodian of their 529 plan.

But successor owner says dad passes, mom is automatically the owner of that plan.

Mom passes, dad is automatically the owner of the plan.

What if they both pass away?

Common incident.

Hmm.

In that case, the son indeed can be his own owner of his own plan.

Many folks are confused about this situation.

Many folks are misunderstanding the impact of a 529 plan in the sense that they have not yet the knowledge, they've not yet been trained, that they can own their own 529 plan.

Face it, there are tons of folks out there who don't have the luxury of a mom and dad giving them money in their 529, perhaps they're in their teens or 20s, and they want to get a financial advantage for education.

But it's their money.

They can set it up.

They own it.

They are the beneficiary.

The corollary to that interesting fact, that you can be the owner and the beneficiary, is that there are a lot of folks today that are setting their 529 plans up exactly that way early on in their marriages.

So, let's paint this scenario that two young people get together, they fall in love, a beautiful thing.

They end up getting married.

They're planning a family, but they're not yet...

The children have not yet arrived.

They can set up a 529 plan right now.

Dad can set one up.

Mom can set one up.

It doesn't matter.

It doesn't have to be two separate ones.

They can set it up with their ownership being themselves, their own selves as the beneficiary.

And that way, they get a head start on the 529 plan, the educational assets that they may accumulate for their children.

When the child arrives, the beneficiary can be replaced.

Child becomes the beneficiary, mom or dad is removed, child steps right in.

It's perfect.

In the original construction of 529 plans, they were intended for college only.

As a matter of fact, that was the rule.

That was the law in the IRS code.

Post-secondary education.

That was changed in the most recent administration, presidential administration, so that 529 plans can be used for anything from preschool right on up, high school, college, postgrad, et cetera.

So, for a lot of folks who are hoping against hope that they can afford to send their children to private schools starting early on using a 529 plan and starting it as early as humanly possible, gives them some tax advantages, and perhaps some accumulation gains, as well.

So, lots of interesting wrinkles around 529 plans.

The question that was asked was actually pretty straightforward.

Mom and dad are well-protected, and so is son.

It's a substantial amount of money.

What they didn't ask what happens to all that money when their son is complete with his education, and there's still plenty left over?

Hmm.

That might be a question that you send me in your email to Gene@AskMTM.com.

Let's go right back to the emails.

Oh, this gets interesting.

Goodness!

The dramatic reading, I added.

It's an email.

I don't know that it was as dramatic as that.

Ahem.

It was kind of fun.

Interesting.

Interesting, indeed.

Yes.

I confess, I'm guilty as charged.

In a recent show, we had a young man, 19, as I recall, who inherited $18,000 from his uncle in an IRA, as a matter of fact.

And he was able to then take some money out, put it into his own IRA, do it over the course of 2-3 years, and end up with approximately $20,000 in his own IRA.

And then, to give a kind of an incentive, maybe a motivation for him to not touch it, I started going through some numbers, and I said if he were to receive, on average, 10% per year net return, a pretty reasonable number over many, many, many, many years, I'll come back to the criticism of that number here in a second... His money would double every seven years, if he's 20 years old.

If we go out to age 69, that means his money would double seven times.

So, 20 would become 40, become 80, become 160, become 320, become 640.

Are you getting excited yet?

Become a million 280, and become 2.5 million bucks.

20,000 bucks tucked away when you're 19-20 years old, left to cook for 50 years, earning 10% a year on average.

2.5 million bucks.

And, if it's done in a Roth, 2.5 million bucks tax-free.

Pretty powerful stuff.

This gentleman says, "Oh, your reputation!

"We haven't been able to get "those kind of returns for years."

Sadly, this gentleman simply doesn't know what he thinks he knows.

Simply isn't as informed as he believes he is informed.

Now, admittedly, he does not have the advantage of 780 years of experience.

I do.

Admittedly, he doesn't have the advantage of working in the financial industry, investment world, of course, on a day-by-day basis, for these many years.

I do.

He doesn't have the advantage of being able to look back on 2020, when the world was in chaos, and yet many of our clients received seven, ten, 12, 15, 20% returns in a chaotic world.

And aggressively investing, investing at the high end of risks, as a 20-year-old should.

Averaging 10%, averaging, some years plus 20, plus 25, some years minus 20, minus 25.

Heartsick, the roller coaster ride is almost intolerable!

But only almost, because the way we get from 20,000 to 2.5 million is riding the roller coaster.

If we follow this curmudgeon's advice, we can't possibly do that, we stick it in an account earning 2% a year.

By the way, if you earn 2% a year, your money will double in 36 years.

So his 20,000 in 36 years will be 30,000.

And when he retires, it'll be 37.5.

Oh, my goodness, 10% doesn't sound like that big a difference, 2.5 million.

So, number one, bless him.

Bless him!

He's worried about my reputation.

Tell him to take a number and stand in line.

There's a lot of folks worried about that.

But bottom line for us is, makes perfect sense.

And again, does it require patience?

Absolutely.

It's 49 years.

Persistence through tough times?

Oh, without a doubt.

2008, when the market drops 50%, particularly if he was getting close, if he was at a million, then it's half a million, his heart's going to pound.

But if he holds true, he can do very, very well.

Gene@AskMTM.com for your comments and criticisms.

They're great fun.

And your questions.

Wow, that's interesting!

OK, so let's set the scenario, I'm going to I'm going to put some examples to this email.

Obviously, I'm reading between the lines.

But this, I'm going to say, this is a young lady.

There's two children.

One is a very strong personality, the other perhaps a bit less confrontational.

Her intention is for them to split the estate equally.

That's what her will says.

That's what her executor will be entrusted to do.

And her fear is that the powerful personality will overpower the more timid.

Hmm.

It is...

I understand the concern, but my suspicion is that this is highly likely in the event of a poorly-constructed set of estate planning documents, if you are writing out your last will and testament on a yellow pad, with perhaps not as much clarity or precision as you require, and if you happen to make the error in judgment of naming the more powerful personality as the executor, putting that person kind of in charge of settling the estate, then I understand your concerns significantly.

I think there's significant concerns.

If, however, you have done quite the opposite and that you've engaged the services of a trusted, experienced estate planning attorney, not just any old attorney, lots of attorneys do "everything".

And when you do "everything", you don't likely do any of them very well.

So, there are specializations.

Obviously, they are legally permitted to do everything, but there are specializations that allow folks to accumulate tremendous amount of experience.

They have been there and done that.

You're going to pass away once.

They have helped hundreds of people, perhaps thousands of folks settle their estates successfully.

They can anticipate, make sure that the legal phrasing is precise, correct, and as close to bulletproof as humanly possible.

And protect the person involved that you're most concerned about.

Now, having said all of that, is it possible that there's still going to be an issue?

Whenever there's an estate and whenever there's money, and whenever there's a personality that wishes to be troublesome, they can be troublesome.

But if you do your part, if you work with a trusted, experienced estate planning attorney, you can largely, largely protect the individuals involved, in some cases, even from themselves.

Gene@AskMTM.com.

Send me your estate-planning questions, and we'll certainly consult with our estate-planning attorney, as well, to give you as much correct and accurate information as we possibly can.

Let's go back to the email bag.

...Thank you very much.

That's our Saturday morning radio show... Great.

Ah!

IRS rules can be challenging.

IRS rules can be mind-numbing and befuddling.

That can be head-scratchers.

In the interest of everyone listening, who maybe has never even considered the issue of an inherited IRA, inherited IRAs are treated very, very differently than standard IRAs.

When you set up your IRA, there are certain rules and regulations.

When you set up your Roth IRA, there are certain rules and regulations.

When you receive an IRA as an inheritance, those rules and regulations are radically different!

Completely and utterly different in almost every case except between spouses.

So, husband passes away, wife can inherit the IRA of either type, standard or Roth, as if it were her own, and vice versa.

But in this case, we're talking about children.

And children, indeed!

If you inherit an IRA from someone, this gentleman was in his 90s, was taking his RMD, one of the first requirements is that you satisfy that gentleman's RMD.

Using simple numbers, he had $100,000 in the IRA.

He was required to take out ten.

He took out about 800 bucks... not nearly enough.

So, in order for his final tax return, 2021, to be appropriate and precise, and correct in the eyes of the IRS, the balance of that $10,000, 9,200 bucks, has to come out.

It will be taxable to the decedent, to dad.

He will declare that on his income tax.

Of course, the CPA or EA will do that on his behalf, on his final income tax return.

And the balance, exactly right, goes into these three IRAs.

They are all designated as inherited IRAs.

And again, you're absolutely correct.

You have, each of you now, ten years to withdraw that money.

The IRS gives you tremendous latitude.

You could take it all out today, and it would be taxed in the year 2021.

You could wait ten years and take it all out at the very end of the ten-year period, and it would all be taxed in the year, what, 2030, 2031.

Now, having said that, you can also take it out in pieces, you could take it out on an as-needed basis.

But whatever you take out, you will pay income tax on, you will not pay a penalty on, even if you're not yet 59-and-a-half.

But you must take it all out within ten years.

It's a relatively new tax law.

And for many folks, kind of a head-scratcher, or maybe even a shocker.

Obviously not for this gentleman.

And I think they're absolutely on the right track.

We have covered a lot of ground on this show.

I hope you were taking notes.

I hope a pad and pen were at the ready, because we've really covered a lot of ground on a lot of different topics.

Many of those, of course, they don't apply to you.

They certainly may not apply to you specifically at this moment.

But our show is intended to answer the questions that do apply to you specifically at this moment.

PBS 39, in our partnership with them, has given us this platform to be of great service to you about any question that you may have, whether it's investments or retirement, income taxes or Roth IRAs, estate planning, wills, trust, insurance, et cetera, or starting a business, running a business, or selling a business, perhaps, for maximum benefit.

We're here to help send me those emails directly, Gene@AskMTM.com Not every question will end up on a show, but every question will be answered.

Thanks for spending part of your time with us.

We'll see you next time on More Than Money.