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KJCE 1370AM>Audio on Demand>>Worth Pointe Wealth Watch 3/9/14

Worth Pointe Wealth Watch 3/9/14

Mar 9, 2014|

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And for war point will watch with the Christopher -- -- Partner and founder of the worst point LLC. Tired of the same sales pitches disguised as financial advice -- for business certified financial -- Real facts about and this -- my. This afternoon Austin, Texas this is Christopher fans like and this is the -- point -- watch. We are fi only certified financial planners why is that important to you. Because were qualified and we have nothing to sell you but advice you can find -- on Linkedin Twitter and FaceBook as well as at work -- -- radio dot com. Today were going to be talking about life insurance everybody's favorite topic. And -- greeted like -- basics this week we're going to doing. Advanced life insurance concept so. You know don't worry if all this sounds really complicated because it is really complicated how we're gonna find all the answers on today's show. But we did bring an expert that is -- Abbott from TIAA-CREF. Fat out of New York Casey there. Think certainly yes. -- great to have you this and we also have Scott O'Brien Maurice Smith he has -- say hi good afternoon. Good afternoon Austin, Texas is -- they are certified financial planners from the four point office in Austin, Texas we also have offices him. Or tell them just to clarify -- Casey. Does not from New York. So he's denouncing and no we wouldn't -- much different. How -- you are you from Houston Casey. I do I -- it used to work out of Houston and I covered the state checkers and essentially the middle part of the country -- we're growing body and check this -- -- I grew up in -- yeah -- senatorial what do you -- middle school high school college there. And I have lived in Houston what -- what if she gets about the past seven years. Well I grew up in Houston and god bless you for an endowment for the -- that. Scott. -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- But I just didn't make mistakes did you. Actually make it must not read Warner says you should buy -- Mexicans the -- well look the thing I thought it interesting episodes for a long letter but he was talking about how we bought this -- -- -- in Nebraska. Many years ago he also one of the -- commercial real -- is there anything Warren didn't buy. Yeah it's about everything that's being built he must. He but what he still owns those things also for twenty years and and but he he made appointee doesn't -- excellent you're not having to look at the value every day. And that. Because he hasn't had to be -- get them and if it's a moment I'll -- -- don't -- Fulton. -- -- he's telling me to visits a farm in Nebraska and you've never seen as prep in new York and to think he'd accept payments -- -- -- back. That's the show up so. That's that's a little bit Warren might be what we call an ordinary investor because all of us do better when we don't enterprises limited in what -- diversify -- -- -- stay diversified agricultural -- and -- and was able to -- -- everything -- -- -- different occasions -- -- -- -- that's -- and he made -- -- they didn't he -- he can actually sees some signs -- recession coming in 2007. He didn't decide to sell everything interest kinda with a real Smart -- get out of it. And then an -- -- -- just -- just and I guess that's literally a point here in the that the struggle that people have with public rated securities is they can see the prices move around even during the day makes me nervous. Whereas if you got a little thing in the mail every night that's at your house is worth -- -- two or 3% less or more every day that would make you nervous to be you don't get -- tended to sort of radical right. Let's get into our topic today which is advanced life insurance we do have an expert witness. Today Casey -- with TIAA-CREF. And I think the first one tackle is is something called asset protection. In particular how taxes applies its laws to the protection of your assets so this is basically. You know hit by a run in the somebody -- my car and kill him. Their family is Shirley and come after my assets they're gonna come after my house are gonna have to come after my bank accounts. So there there are techniques. And one of them I imagine case is gonna Telesis to use life insurance. For protecting your -- that's essentially erecting barriers in between people who want to get your money. And your money. -- lawyer's league discharge. As many of you may know. And they're quite good it. -- not only getting court orders to seize assets but did but finding them and getting control them. So Casey tell us how what what gives the basics about how life insurance. That is used to protect people's assets and what -- what do you know about. But Texas laws that relate that. Yet Texas by statute didn't think different didn't have a flood insurance and -- cash value life insurance and -- value a new age from creditors. And so essentially what that means is that person can put an unlimited dollar balance. Into a life insurance policy or annuity products. And judge cannot attach a lien or -- or -- actually get a judgment. To order that that be liquidated. And so this is for creditor protection and an accident that they go into bankruptcy and things like that registered for creditor protection if somebody were to do you know. You're gonna have to protections using these products because -- taxes that we -- -- -- we think there -- very valuable options are our residents. Every bit different there are some states Texas probably has just about the strongest asset protection statutes when it comes to the types of products the fifty states. I'm date they are part of -- unit staying put as much as you want it and nobody can you know essentially get to it if it's the fact you are student and you are found to be liable for some action you hop went down. Yes that we see it it's a lot like ideally homestead exemption star persona to determine you know making you sell your home if you get that I attacked by a creditor. -- -- we -- a lot of people that that you know may have -- -- may be involved in. -- either profession that may lend to lawsuits that doctors lawyers savage but really anybody can benefit from best parents though it's. Definitely somebody driving the car. -- -- -- -- if you buy the insurance contract in Texas. And you move out of state or somebody files. Some some. Something in -- out of state. Do those statutes -- with respect to the insurance the protection still hold. You know it is -- technology policy so the policy would be -- this contract. Though it would be you know it's it's an interesting argument I don't know that I CNET tested. If you move out of state I would assume that you have got value you're trying to. And beholden to the court at which you -- parents the judgment levied against you. I think it would be very difficult to force somebody to say that you need to liquidate. Their contracts. But again that's something that you know I haven't been attacked and so I'm not exactly sure how that would operate. How does we what do you wherever -- -- -- in about a minute here but how does it how is it viewed in a bankruptcy. So let's say -- bankrupt and you -- I can't make good on my obligations with the court makes you liquidate your life insurance. To pay the obligations. The only time I have ever seen any single liquidated by exporters is what would be acquired through action and accused of a divorce really. And when a divorce happens and let's say. Husband has an annuity. Oftentimes courts will issue -- as which essentially split annuities and how. Slumped -- it was different let's stick with -- like -- really do annuities nurtured. So let my current spirit with with hole with cash values. Exactly civil life insurance contract in the -- as well. And out the cash value would then be distributed to beat the order of the court so should -- -- to -- this is the community property -- -- remember that. I'm and that's the reason that that there was often hold up now bankruptcies. -- Casey were gonna have to take a break here. We'll pick up right where you left off for memory you are we come back and we'll also get into retirement planning and estate planning uses a life insurance. Yeah. The and. Heard. The between -- government spending and uncertainty about our economic future most Texans are having doubts about their own financial future. Are you ready to take a serious look at your financial goals using the experience the only certified financial planner practitioner is it worth -- point. Would you like a second opinion on your current advisor who may be selling you investments and insurance for commissions is it worth forty radio dot -- to make an appointment or call 8885447. 760. That's worth point radio dot com 8885447760. Welcome back to work quite well why should giving you an unbiased people under the hood of wealth management. Investment and financial planning. Once again here's Christopher advanced. -- welcome. Back Austin this is the -- went well clutch. And that we are talking about advanced concepts in life insurance and we're speaking with Casey -- TIAA-CREF. And that we were just talk a little bit about it's uses. In life in asset protection. Then we're talking about how the court would. Treat life insurance and bankruptcy. -- you're saying that in the in the case of the quadra bill ripped apart but I wonder would that make you liquidated to satisfy creditor. Yeah I like it would not have to be satisfied in the extent savage or perhaps -- independent technical that it -- -- -- the liquidity that some federal bankruptcy. And so you know -- air. Certain exemptions I mean some of you don't have to know all these answers these and this is these these guys have been tough legal questions that. The only thing I can think doubt we're stepping may have to be liquidated would be a wrestling. That that says yeah hold tight let's -- may have to liquidate a life insurance contract but. -- from creditors -- -- -- you know bankruptcy -- -- you configure your contract. -- these are good conversations I have with your financial advisor in the context of state planning rigorous firming may be your trust himself to cover them. But for example -- better. Yeah this all dovetails with trust planning that's for sure let's move -- retirement planning so. You maxed out your 401K plan you Max out your -- as soon as you. You've got to a profit sharing plan works and you wanna save some more you can just put money in brokerage accounts -- by mutual funds. -- but I think Casey's gonna make the argument that you could put some your money into a life insurance contract may be some benefits to that. What is your what is your take on that this this is a controversial topic in the field the world but I I'd like to hear you -- your take on my case it. Yeah and there there are a couple of ways we can go with the conversation so traditional elated he sold its its its at this supplemental savings plan works a lot like a rock fire -- -- taking after tax dollars. Investing them in this tax deferred vehicle because any games that you have a contract not rocket packs a lunch and then if the contract destruction properly. You can withdraw your basis -- the amount of money paid into the contract tax free. And then withdraw the alone. They didn't gain in the contract so essentially you're putting money ends throwing tax free ticket out tax break -- Yankee. What does this concept I hear sometimes where they say it will that will quote blow up the policy there -- there won't be enough cash value America. Pay the premiums and and still have this event where everything becomes taxables their way to avoid that is that true. She they're definitely is -- and we've got to protections it's in my policy -- some writers that that we call overload protection writers that we won't actually we'll let you take out enough to -- your policy. But you know traditionally if you take too much money out of the policy you're you're you you Bartlett racing out of it. Andy used. Paying premiums and then let's say the market tanks. You know you -- -- -- cash valuing your contract. When that happens the policy would -- And that would be treated then at that as a taxable distributions -- -- the loan and your your basis that you would structure that can catch the unit that. Tax reduction in the beginning to struggle would be treated as ordinary income tax. And -- under 69 and helping your policy lapses you also get -- nice 10% penalty. -- we're taking data as well so you got a couple of things you wanna look out for but what propaganda that's where proper planning is key. You want somebody to continually. On an annual basis at least keep on top of the contracts to make sure that you're still -- -- get -- I tell it well you have to pay attention to is the way the investments are organized in these contracts. I think what happened is a lot of people didn't realize that I don't. They were responsible for the investment outcome in these variable universal -- policies in particular and if they weren't skilled investors -- didn't pay attention that that's what got their -- guys as much as the fact they. -- not -- funded and not ready and you know that we've I've seen these use. My company's four key executive compensation. So what are the can you can review the employee -- benefits to doing some recent contract for a few points. The other key employees who really can't we we used some pretty plans that -- -- says that no longer to qualify -- -- -- trying to win which. Small businesses in particular would who -- large cash I like insurance policies they would should whether or not it was right or wrong they would like premiums to get the business cost. Though they've gone. But first -- you know what people can't believe it faith do you have that employees -- like seats. There are some kind of executive benefit plan that they can setup that. Really your personal life insurance and abolishing the key employee option and what that bonus check the purchasing life insurance just like life insurance. The main thing about it is the business of the owner. Right and so you can put certain vesting schedules and things like that are really trying to retain these key employees. By you know we get -- and put plastic back. And that -- that's for example you wanna have a five year vesting schedule but at least you -- it probably stay around if you don't understand miniature grand a year into life insurance policy. Not invited you up to 2000 dollars I give them. 50000 reasons you like you know stay with the employer is a valuable piece of the business. What back to their retirement planning piece is one thing I don't overlook so. Putting money into a life insurance contract gives you tax deferred growth and possibly tax free withdrawal if you do with a loan. Including your bases but there aren't there is one important difference and that would be either a lot more fees inside of a life insurance policy than in Iraq fire right now. That's correct so you always want to keep in mind you're going to have to getting on the type of policy you -- it. You're going to cost of insurance which is the pure insurance costs it costs us too much. From that potentially injure your life so that's always going to be there don't that that's something that that's what they're up higher here and have not cost. -- with the variable contract and there is cost of the mortality and expense charger in any charge. That is in addition to the cost of insurance charge and you've also got you know -- -- mutual twenties your advisory charges so asked that there are usually. All things vehicle you better up putting money in Iraq in the situation if you donate life insurance but if you maxed out your Roth contribution -- Then you may wanna look at this kind of thing we're always told people is if you need a life insurance and you need an additional savings vehicle that this really starts to make more sense. You're absolutely right -- always needs to be some life insurance -- bear on you know I don't. A lot of people well what really check out injured desire Swiss army not to -- investment -- does everything right you have -- but instead it's a retirement vehicle shot. I don't really see it that way I think it got a few things pretty well but it doesn't do all things well and so you're absolutely right this is a supplemental savings Freddie Mac other things out. And have a lot -- Turkey. 100 -- but -- -- working to remember is there's a income. Limitation. With regard to rock so contributions so there may be somebody out there who just makes him to any kids yet we often get to Celeste it and if you -- -- Alex -- started so I went off the -- -- everything else -- you still on six more money. Then this is an avenue for habits and it's really for people usually I run into their doctors or very high compensated. Individuals have just smacked derivative financial Raj -- probably also talked about if you if there's an insurance need buying term and investing in tax efficient tax Morton who offered all right. We're gonna go to break -- -- -- kiosks. But I -- currently. You're gonna go to break now and we come back we're gonna talk about this state planning uses of life insurance. And maybe we'll talk a little bit about our business planning in buy sell agreement that kind of stuff so we'll see -- on the other side I loved the church lady. You can imagine and it. Okay. Then. Between ramping government spending and uncertainty about our economic future most Texans are having doubts about their own financial future. Are you ready to take a serious look at your financial goals using the experience the only certified financial planner practitioner is it worth point. Would you like a second opinion on your current advisor who may be selling you investments and insurance for commissions music worth when he radioed I've come to make an appointment or call 8885447760. That's worth point radio dot com 8885447760. Welcome back to work quite well watch giving you an unbiased people under the hood of wealth management investment and financial planning. Once again here's Christopher advanced. -- hello. Austin welcome back. We are talking with Casey -- TIAA-CREF. About advance uses of life insurance. Last week we did the basics you can go to our website -- point radio dot com and listen to. The basic show if you -- review and any of our passion that is wanna throw that out there. But casing we were kind of of right on the cusp of talking about estate planning uses of life insurance and this is. Probably what we see the most sense in our businesses. As financial planners who work. -- individuals. In particular we saw this when the the amount of money could lead -- your -- was smaller than it is now. But there's still a need so what he tells tells how you view given the new five point 34 million dollar individual. Exemption amount how do you see the use of -- life insurance in the state planning. That not only for for the avoidance of the estate tax early minimum -- of the estate tax from -- but for a state equalization and liquidity and so forth which is run to that. -- you know that's -- good point and you know with the increased attention laments about portability. You know we are seeing fewer and fewer people that will probably -- and but at the time being -- in the state tax issue right. And so real estate planning is turning into is more of an income tax planning strategy and these two tax breaks converged. And so you're looking at top tax rate to 39 point six income tax and state tax rate at 40% couch. You know it's becoming more more important for people planned during their lives to help minimize their income tax exposure. And -- tells Angela that we mean -- that. Yes Hillary we argued -- a contractor to talk about you know saving for retirement with somebody contracts. Working poor who are you to catch -- like insurance and -- from very high income are very -- where people just trying to minimize some some current income tax. And by that you know you're you're getting tactical on your investment gains. Also the Medicare surcharge that it's 4% surcharge -- -- -- now you can't you know you can -- as well and so that's where some of this planning it is really kind of become more exciting overseeing you know you increase in sales to larger cash value like the church policy. I'm from the state planning perspective -- injured since -- Dictator really help the situation a record a situation we want to make sure that if you do you have a potential state tax issue. You talked to a financial advisor and probably get an attorney involved and -- get the proper -- definitely don't need all -- He does -- you're gonna definitely want that to them so yes and so. You know because you can really need -- compound problem or you can help. If you know what I don't know what I find interesting is. Oftentimes people unaware of whether or not he proceeds from my entrance is actually included in their -- And whether you -- did you hear about these pilots which -- life insurance trust common on comment Kasey a moment. Yep so let's say -- you do unlike insurance policy about the benefits are actually equitable thing here -- Now that a way to get around that it's you have a life insurance policy on your life. What do you not own it and have an irrevocable life insurance trust on the policy for year. In which case then didn't didn't approach into the death benefit no longer include -- your state and so we have seen there are examples out there we're planning. Which you know maybe somebody who wasn't gonna run a bit to the estate tax when it but they had a three million dollar life insurance policy. And they own it personally they diet -- that put her up over the threshold and clearly state tax. That's that's -- -- that to me and you know what I think I've never done the state planning primarily due to minimize the estate tax them I've always believed that estate planning is important. Secure your family and in particular you have seen situations where. Maybe their three children are ten to one is gonna take over the family business and the other two aren't but it's gonna be difficult if the sun number one gets the business to make sure that the other two kids get a similar mountain. You're buying buying enough life insurance to make that happen quickly and easily and efficiently and keep your -- have to be happy after you're gone seems to me via. More important use of the state planning and avoiding estate tax but you know. Everybody's different -- I solving those needs definitely exist regardless of the size of your state. I don't know what do you see that kind of thing in your in your business Casey but I've just always believed in the state planning further. What I believe the real purpose to be which is to create harmony and love and your family after you're gone. You're absolutely right I mean we see that quite often you've got. -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- You can plan and the plan accordingly you -- purchase policy that should you know we'll give you immediate liquidity bypassing probate issues. And be able to pay out the children in May not want to be involved in the business and everything it is shuttled up. Trust me they don't know wanna be involved in the -- they never agree on her to do what what this leads me right into our next advanced topic which is the the business use of life insurance. So let's say I'm in business with Fred and Fred Mary's -- young lady of the night as they say perhaps -- yet. It worked this. But the yellow rose and when he matter and a Fred died of a heart attack them because he's having too much fun with the young -- through yellow rose. It's my new partner is his wife right. Well but that's probably not a good though this is an extreme example but almost nobody is married to somebody. Who would be the same partner that you have in your business now. So Patrick. And did you know having had many discussions with the widow. After. And that the gentleman usually it's a gentleman but -- but not always dies they don't really wanna work in the business -- they want the money. To look at it this occasion it simple buy sell agreement between the two right is what -- alive and hardly take care of that. Yeah what we reduced oh -- prosper just buy sell agreement and that can be done using up. Variety of them don't have insurance policy I can be used -- policies the GOP's terms. Essentially what happened to partner aid by the policy apartment beat life partner beat by the policy partner ape like. And hit one of them -- then the other partner get let's sum of money in a little too I opt out. -- and -- other opportunities to combine the the tax deferral benefits that we talked about middle segment -- -- this. By self funding agreement. Problem it let's say you to do the cross purchase agreement and -- you have to buy some insurance on your partner anyway it to -- let's say they don't die before the businesses sold what happens to all that different cash value. Yeah I mean that is -- -- to keep us happy you know there are becoming a part of structured and that's very simplistic answer that question. And that money is still there now whether that company owns the policy to how the money is actually have to write -- -- -- the policy -- -- company name. Yet though there I'll be -- -- that are trying to general from the popular first set up but you about if you buy dot com and I'll get some of the benefits and it just doesn't expire worthless. -- -- -- there's so we'll. I guess if I guess of the partner prefer to hang out the -- rose it's it's a moot point for sure not exactly. I don't know and if you will push the -- What else what do you businesses uses a life insurance why I keep hearing about this -- group term what does that. Yeah you know group term is not just simple and easy way for employers stepped out of benefits. Opt for their employees act is he needed really don't -- so it's just that anybody out there and what their land has ever find it per job at it you're you're signing up -- your initial benefits and you automatically a lot of companies will give you you know what -- are salary if you have to let it go to your beneficiary tonight actually group here. I -- -- -- but -- -- coming back next week to talk about -- with us we're almost at the end of the -- Scott O'Brien here has got a couple things you want to share of the audience -- But remember work -- radio dot com we'll see you next week Scott. -- two things we we're gonna offer listeners they policy review of given existing policy or you're looking. At one so has -- in Cuba are already we -- have played an independent. Actuarial firm look at. The policy and give you much that -- -- -- it was there's nothing about which isn't -- records. -- we'll accept them. So -- so that's a service we want invite you to you email us in in that caucus among other thing is I've put together a list of eleven. The questions you might wanna ask the someone's talking about and new policy or like insurance policy. They might not all applied -- which are looking -- put her release on English and you should be asking and that she hadn't worked -- radio dot com and -- to the clay resources and then education section and we'll have a post there -- The scene as he goes yeah. -- It. Okay.

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