And good evening.

You've got more than money.

You've got a senior Megan.

Smile.

You have an entire team here at PBS bringing you this edition of More Than Money.

And we boldly, proudly, but boldly say the most relevant financial show on television today.

No matter what station you may be watching, no matter what time of the day or what geography you may find yourself in, we are the most relevant financial show on television today because of you.

Yes, we could be very proud and tell you about my 780 years of experience and gosh, hundreds of shows that we've done.

Thousands in total.

But that's not really the secret sauce.

There's lots of folks that could say that lots of folks who have been on air for even longer, many, many thousands of shows hmhmm, but they're not as relevant because we allow you to set the agenda.

We allow you to tell us what's most important to you.

What topics are the most important?

What concerns do you have that keep you, in some cases, awake at night?

And certainly we don't want that.

Certainly that's not acceptable.

So we're in a position where hopefully we can serve you.

Hopefully we can answer the kinds of questions that mean the most to you.

And we make that effort rather sincerely.

Not rather completely.

Sincerely.

It's an honor.

It's an honor to serve you.

We do it simply.

You send us your emails, your questions, your observations, your concerns, your criticisms.

Those are some of the most fun, actually.

But bottom line is, if you send those to Jean at ask mtm.com Jean at ask mtm.com works out fantastically well.

We answer every question back to every single one.

We have a complete team of financial advisors, a wonderful, wonderful team of wonderfully nice folks.

Not me particularly, but wonderfully nice folks, who answer every question back.

Not every question gets on.

There's obviously there's far too many, but we try to get a selection that would be of interest to the most people that we can think of.

So if you are so inclined, send us those emails and if you would like to receive our newsletter, it's absolutely free.

It's sent electronically.

You'll get it in your email inbox for your email.

All you have to do is let us know that as well.

We're happy to do that.

There's no cost, there's no obligation.

And, goodness, it's fantastic, if I do say so myself.

So don't miss out.

Enjoy every show.

Of course.

But also get that extra added touch as you get to hear, not just for me and our newsletter, but from so many of the folks, on our team.

If you've been watching regularly the last few weeks, we've had a couple special shows, you'll see, articles written by many of the folks who appeared on those shows.

But, this today's show is a bit more traditional for us.

It's where I answer questions, and it's where Megan, our financial correspondent, asks the questions.

Mags, where do we start?

Hi, Jean.

Our first email tonight says I have a very modest sum in my CD checking and savings accounts, approximately $150,000.

I have set up a payable on death designation on all of these accounts.

I have named my daughter as the recipient and beneficiary on all my accounts, including my pension, insurance policy, and any Social security benefits I completely trust her as she is an intelligent and responsible individual.

She is married and has two half siblings from my wife's first marriage.

By creating the pod, I have several questions one.

Will my daughter avoid probate by having the funds transferred directly to her, to where there will be any, costly penalties or taxes associated with using the Pod method three is there a more efficient method, such as setting up a trust to transfer the funds upon my death?

And lastly, I have considered adding my daughter to my accounts, but ultimately decided against it.

If anyone were to file a criminal or civil suit, those funds would potentially be vulnerable and these suggestions would be greatly appreciated.

Thanks.

Well thank you.

Thank you for sending us your questions, and thank you for having the trust in us to give you good information.

However, I think you're way ahead on this.

I think you've thought through this.

I think you've done some excellent, homework.

If you will, or some studies and a gathering of information, because what you've done is largely, complete.

I'm going to buffet up just a little bit.

You've done the hard work, you've got the superstructure in place, the framework in place, a better term.

But we'll just put this up a little bit.

Having payable on desk designations in addition to beneficiary designations.

And you talk about both of those, in your email, life insurance, Social Security and pension as beneficiary designations with your daughter.

Absolutely appropriate.

The pod payable on death.

Now, for some folks, that's not a phrase that they're comfortable with.

They haven't heard that before.

Some folks have heard transfer on death.

That works absolutely fine.

Some banks, depending on the geography, use in trust for so that, the accounts, that these designations are attached to, end up.

You are correct.

And your very first question, will that avoid probate?

The answer is yes.

It avoids probate.

All of these assets, the 150,000 in the bank, the pension, the Social security benefits, if there are any left, and, and life insurance will go directly to your daughter.

They will not go through probate.

A question you did not ask, but I will answer anyway, is that there is often confusion on the part of folks who have set these things up.

Well, that by avoiding probate that they will also be avoiding, any state inheritance taxes.

And sadly, that is not the case.

Assets that avoid probate, are passed very simply, very quickly, very little fuss or must.

That's fantastic.

But they are still included in the taxable estate.

If your estate if the state in which you reside in the estate in which, your your residence and, and in which you pass away, if they have an estate tax.

We are broadcasting from Pennsylvania.

We do not that great if you're listening, in Florida, you don't.

That is great.

So if everything passes without going through probate.

Easy.

Simple.

Quick.

Less expensive.

And if you're in a state with no inheritance tax, life is grand.

You've done very, very well.

Are there costly taxes or penalties?

The answer is no.

There are no additional costs or penalties for, having these things set up the way you have versus going through an estate.

It's a matter of fact, quite the opposite.

If all of this was funneled through an estate account, the taxes will be higher and the penalties will be higher.

The interest will be higher.

The cost will be higher.

It is, it is the opposite of what you've done and the opposite of what you've tried to set up.

So well done.

You, is there a reason to set up a trust in this case?

The answer is absolutely not.

Pod, beneficiary designations today, all of these can be put into effect.

There's no cost.

It's signatures and paperwork.

Trust can be either reasonably expensive, dramatically expensive to set up.

And then there's ongoing costs year by year for filings, taxes, etc.. There's no reason for you to do that.

You mentioned, how, trustworthy your daughter is, how much confidence you have in her.

You're very, very blessed.

Three daughters feel the same about all three granddaughter.

She's on her way.

She'll be great.

But for you to have, that means there's no need for a trust.

Now, I didn't mention my granddaughter.

Two years old.

That's how she says two years old.

And then she asks, how old is this many?

All right, that's painful.

But anyway, would there be, a reason for a trust for her?

The answer's sure.

She's only two.

She needs that.

Protection does not apply in this case for you.

In your last comment.

Very appropriate.

The idea of adding someone to an account.

While it has some attraction, I absolutely understand that, the ability to access the account in case you can't, etc., etc.. Creating a power of attorney, in my opinion, is a much better way to go because it would, then it, permit her, to act on your behalf if necessary, but give her no legal standing during your lifetime.

And you're absolutely right.

If something should, sadly, go off the rails in her life, that could take you off, the financial rails of your life.

You don't want that.

You have done an outstanding job, of, doing your research, putting these things in place.

You're very blessed to have a daughter that you trust that you can put yourself in such a strong position and has such peace of mind in doing it.

Well done.

You, outstanding.

Outstanding indeed.

Meg's outstanding.

What a what a great way to start.

Somebody who's, really, really done a fine job.

Where do we go next?

Well, our next question is also about planning for the future and thinking about the kids.

This one asks, is there any legal way to avoid capital gains on a second home?

We are retired and have about $1 million gain on a home in a high tax state.

We do not want to make this house a primary residence for tax reasons, but hope to pass on ownership to three children in the future.

I was thinking of an irrevocable real estate trust, but wondering, is this a good idea?

Thanks!

I love your show.

Well, thanks.

We love that, you love our show.

That's fantastic.

This is an interesting question.

One that, when I first, read the the opening line or two, I said, we've got a great idea.

It's a great show.

And then it was taken off the board, for demonstration purposes, not answering this question specifically for demonstration purposes.

If you find yourself in the position where you have a primary residence and you have a secondary residence, it might be a beach house, it might be a vacation house on the lake mountains.

It doesn't matter.

And you're expecting or you're planning on selling both of them in a relatively short period of time.

And would like to minimize, the income taxes that you, and perhaps your spouse might face, in selling both of these, there is a strategy that you might consider, the rule of personal residence and the benefit that comes from personal residence identification, is very generous.

For example, if you had a home that was worth $750,000, you pay $250,000, you sell it, you're looking at a $500,000 capital gain, and your heart sinks, thinking, I'm going to have, gosh, $100,000 or more of taxes.

That's really painful.

The answer is no, you won't.

Because if it's you and your spouse, a married couple can have up to $500,000 of profit and pay no, a capital gains tax.

You take the money, walk free and clear.

There is a rule, however, that you must have had this as your primary residence for two out of the last five years.

They don't have to be consecutive, but at least two out of the last five years.

So assuming it makes logical sense that you would have met the two out of five years it's been your residence, that's fantastic.

That money is free and clear.

Now we turn our sights to the vacation home and let's use a similar scenario.

We paid 250 some years back.

It's worth 750 if you were of the mind and if you were comfortable, and if you were flexible enough that you would move your personal residence to the vacation home, you would need to live there two years, two years and a day.

So, two years after moving there, making it your personal residence, you would sell that property as well.

Again, $500,000 of profit, no tech, no capital gains tax at all.

So in effect, you would have been able to secure, realize, $1 million of profit.

In our example, a $1.5 million of proceeds, but $1 million of profit paid no tax whatsoever, none whatsoever.

So if you're in a position where you can have that flexibility, have a, a personal residence designation for your primary residence, and then after selling that, spend two years in your vacation home, you might very well find yourself in a very similar position.

This gentleman negated that by saying, we don't want to make this house a primary residence for tax reasons.

Not really clear what tax reasons would cause him to say that, but let's leave that at face value for the moment.

And let's consider what happens in terms of passing the ownership to the three children.

Let's assume again for our example, we pay 250.

We've got 500,000 of profit at $750,000.

If you were to, sell the property to them, tax, if you sell it to somebody else, you don't want to.

That's a problem.

If you were to do something just this simple, leave the home to your children, in your estate, at your passing.

When they receive it, they will receive a stepped up basis.

So the basis goes from 250,000.

What you paid to 750,000.

A stepped up basis increases the cost basis for the beneficiaries to the value.

The market value on the date of death.

So you will eliminate all those, capital gains.

You will eliminate all those capital gains taxes, potentially, by allowing this to naturally flow to them, through, your estate.

You mentioned an irrevocable trust.

It's a dreadful idea.

Absolutely dreadful idea.

Irrevocable.

Sounds very ominous, because it is irrevocable.

Indeed.

Unable to be changed for any reason.

Life tends to throw us curveballs.

Things tend to get off the rails on occasion, and being in a position where you simply can't change your mind for any reason is a dreadful idea.

What I would suggest is that your children might consider, the three of them setting up a an entity, whether it's a trust, it could be an LLC, it could be a corporation, could be any of these legal entities where they have shares in that property so that, for, transference purposes, for future planning purposes, that things get a bit easier.

Not a bad idea to counsel them to have that set up and ready long before you pass away and to counsel them to, start thinking in advance about all the logistical things that will come a cropper when there are three owners of a vacation home.

And how do they share time?

How do they share expenses?

What if it needs a new roof?

What if, what if, what if having all those things decided well in advance could potentially solve some really big problems?

Really big conflicts that might arise in the future and we really don't need them.

So having an attorney, assist them in drafting the, the legal entity, having an attorney with experience in these things, assist them in setting up how the, the logistics, how the the ground rules, so to speak, will operate.

Very wise idea.

Interesting question.

Half my answer was for people that are not involved in the email and the other half addresses them directly.

Hopefully that kind of covers almost everybody out there that has two homes.

Very interesting indeed.

Meg, do we have something equally interesting?

We do.

It's not about a house this time, though.

This one says, I would like to discuss converting my 401 K account into a brokerage account.

Could you please outline the process?

Any potential tax implications, and what options are available for managing or investing the funds after the rollover?

Thanks.

And and you see my headline converting.

Really?

The, in this particular case, the impact of the question, not terribly, dramatic.

You'll see in a moment.

Not terribly dramatic.

The impact of the of the terminology of the phraseology.

Pretty serious stuff.

Pretty serious stuff.

If this individual had gone to, a brokerage house, a bank that offers brokerage services and says, I have this IRA, my apologies.

I have this for one k, I would like to convert that into a brokerage account if they followed their instructions.

These instructions, accurately, 100% of the 41K balance would be taxable because a brokerage account is not the same as an IRA.

Now, it gives me hope that this individual's not going to create a massive problem because later in the question says, what, options are available for investing after the rollover and rollovers only occur between, like accounts, retirement accounts for all in case to IRAs, pensions to IRAs, IRAs to IRAs, 403 BS to IRAs.

You get the idea.

So having said that, it gives me some hope that this individual is simply being, what, a bit careless, perhaps a bit loose, maybe, a bit misinformed about the terminology.

But in this case, and for IRS purposes, the terminology is insanely important.

The differential is massive taxes on the entire for one k balance or not or not take it to a brokerage.

Massive taxes, roll it to an IRA.

No immediate taxes at all.

That's fantastic.

So, what are the mechanics?

It's really amazingly simple.

If you already have an IRA, you can direct your for one K with a little bit of paperwork or many for one KS.

Now are doing it by phone.

I would like to send it from you to this custodian.

Here's my account balance.

Here's my account number done and it shows up automatically just a few days later.

In some cases, you've got to fill out some paperwork.

That's fine.

In some cases, if you don't currently have an IRA, you need to set that up first.

Again, if you're working with a brokerage or if you're working with a, a family wealth advisor that you trust, they would set that IRA up.

It would take moments, literally moments electrons.

Then you would instruct or you and your advisor would instruct the 41K to send the funds, directly to that IRA.

Again, no immediate tax impact.

It is a tax free, transaction.

This is fantastic.

Now, thereafter, what investments or options are available?

The answer is far too many for us to even begin to scratch the surface on in this brief, show that we're putting together this evening.

Almost anything you can think of from extremely conservative.

You can't lose a dollar or principal to extremely aggressive.

You'll be lucky if you don't lose all of your principal and anything in the middle, and any combination of those that you might think, the most important guideline I can give you, is to make sure that whatever investments you're using, that they fit you, that they fit what you're trying to do.

And again, in my opinion, the vast majority of your 97% or so would benefit from having a family wealth advisor guide you, for 3% of you or so who are quite trained and and you have the time and the talent, the temperament, the training.

To do this yourself, you might very well be able to design your own investments.

But, having a professional at your side might give you a bit of, extra peace of mind, but take your time, use the right terminology.

Don't pay any major taxes upfront.

And, and then design your investments as they fit you.

Precisely.

Well done, well done.

You make.

I think we have time for for one more.

Okay.

You might need your calculator for this one.

It says I am single and I have no children.

I have two grand nieces, ages five and ten.

I want to leave them each an inheritance from investments that will become available when they become 18.

I would like the amount they inherit to end up in the same ballpark, but one child's full well portfolio will have an additional five years of growth.

So any suggestions on that?

Thanks.

Well, yes.

Max is absolutely right.

I should have a calculator for that.

I, I don't and and that's just as well that's the ones I'm, I dreadful TV.

Hang on a second.

I'll be right with.

No that's.

Can't do that.

This is a far less, challenging, scenario than it might first appear, or it's far worse.

And there's, there's there's reasons to think about, each of those.

And here's why.

Targeting the end result is a, a, it is a challenge.

It will require that you make certain assumptions.

And the most important assumption is the rate of return that you might see on these investments.

So the differential, in terms of number of years, is compensated for by the rate of return.

If you say I'm going to use 10% as a guideline, then some simple calculations.

Indeed.

May be guided by, either a quality, family, wealth advisor, a CPA could easily do similar calculations, would tell you exactly how much money you would need to put into each account, so that one account that has far longer to grow would start with less money.

The second account that has far less years to grow would start with more money, but with an assumed rate of return again, say 10%.

You will get to approximately the same, end result.

That's one approach.

Another approach is to say, well, gosh, maybe it'll be ten some years, it'll be for some years it'll be 15.

That's getting, challenging.

The answer sure is sure is.

And if the rate of return is not your concern, if the final number is your concern, then I would strongly encourage you to simply look to something that is guaranteed.

Whether it's a CD could be a fixed annuity.

There are lots of, investment options out there that carry a very, fixed rate of return and principal protection in all likelihood, far lower than you might get if you're invested directly in the stock market or if you have a portfolio designed around the stock market, but makes the calculations precise, absolutely precise.

If you're targeting X number of dollars in the future, you simply look at each of those, time frames.

Factor in calculating, the rate of return having a fixed rate of return, you'll know exactly what to to put into each account so that the end result will be, either precisely the same or within, just fractions within fractions.

Interesting idea.

Bless you.

Circle back with us.

Let us know how you make out with that.

I, I find that rather interesting.

Interesting, indeed.

And in my world, interesting is something I've not bumped into before.

Which is why, at this advanced age, I'm still in front of you every week and excited to share new ideas.

I love having Meg.

She's, a year or two younger.

He's he said, very much tongue in cheek, always bringing new ideas, always bringing new questions, and surrounded by a team that does exactly that in our more than money world headquarters.

We're very, very blessed because I'm always intrigued, always interested, always being challenged.

What a lovely thing.

I am so very blessed.

I'm also very blessed that you spend part of your evening with us.

You could be anywhere, you could be doing anything, and yet you choose to spend your time with us.

And that means the world.

If you'd like to have us answer your question, send it to us.

Jeanne@mgm.com.

Get our newsletter, jean@mtm.com and return next week when we're back behind this podium for another edition of more than one.