Tag Archive for: estate planning

A New Year: The World is Your Oyster!

A tumultuous and challenging 2020 for everyone is coming to a close so it’s time to turn the page to 2021 and a new year of opportunities to live your Best Life!

Before you say goodbye to 2020, as challenging as it might seem at first glance given the COVID world we’ve experienced, take a moment to reflect and feel good about what improvements took place in your life this year.

With life moving so fast these days, and with so much negativity being shown on the news, we all tend to selectively remember things.  Especially good things!

There’s a concept known as primacy in recency, which means we tend to recall what just occurred vs. what occurred at some moment in the past. 

We then put more emphasis on what recently occurred and forget to contrast what’s true in your life today vs. last year at this very time.

Because of this, it is increasingly important to pause, take stock, and proactively recall the positive. So, before you do anything, STOP and take a moment to reflect on the past twelve months.

Write down anything and everything that comes to mind.  For example:

  • Health (without it, nothing else matters very much),
  • Vacations taken: did you take the vacations that you planned on, or did they have to go on hold?
  • Fitness: did you stick with your plan?
  • Projects: did you have any projects that you wanted to complete? (house, business, etc.)
  • Books read (it’s been said that the difference between who you are now and who you’ll be in 10 years will be the books you read and the people you meet and interact with)
  • Time spent being “present” with your family?

After listing them all out, take an extra minute and, for each one, write down:

  1. Why it was important to you
  2. What further progress you’d still like to make in that area, and
  3. What’s the first step you need to take right now to do so

Keep your momentum going by taking the next step immediately!

Positive Mode

What this first step does is allow you to recognize success in your life.  That it’s not only possible, but that it has already occurred

While experiencing this higher level of confidence, now it’s time to move into your bigger and better life going forward. 

Yes, better!  What keeps you alive and vibrant is knowing that your future will be even more bright than your past.

In today’s world of massive distractions, mixed messages, and more and more people vying for your attention to advance their own personal agendas, it becomes more and more important to take greater and greater responsibility, ownership, and control over your life.

Don’t allow anyone or anything to distract you from living exactly the way you want. 

A Clear Statement of Priorities

The secret to this is to clearly state what’s most important to you.  If you don’t, others will do it for you and you will be on your deathbed someday questioning why your life turned out the way it did.

I’m a big believer in having lots of clearly defined goals going all the time; some big, some small.  It’s what keeps me going.

I certainly don’t accomplish every one of them, nor do I accomplish them on the timeline I set. 

However, having them keeps me focused and allows me to “filter out” and prioritize when confronted with the myriad of options available to me at any given moment in time.  This alone makes this process worth it. 

It’s natural for everyone to want to improve their lives.  Pursuing what’s in your rational long-term best interest is not something that has to be taught. 

You’re born with that inside of you. And, as long as you don’t use force or fraud against others to achieve what you want, you should never be discouraged from doing so no matter how guilty someone else tries to make you feel.    

Progressing Toward Something

The most exciting part of life is knowing that you’re progressing toward something.  And, that’s why it’s so important to have written goals (clear statements of what’s most important to YOU), not just weakly stated ones like “new year’s resolutions” that go sour the moment you state them. 

A crystal-clear statement of what you want (goals) has a way of magnetically pulling you forward to what’s most important to you. However, like anything else, it requires action on your part.  You have to constantly and consistently evaluate and adjust your approach.

I actually began doing this way back in high school.  Writing down my goals actually led me to change high schools before my senior year.  (As you can imagine, the overwhelming majority of friends and family members weren’t exactly thrilled with my decision.)

However, had I not done so, I wouldn’t have been recruited by and attended Holy Cross College.  Had I not gone to Holy Cross, I would never have met my wife Colleen, had Caroline and Michael, and likely wouldn’t even be living in Massachusetts.   

If I didn’t live in Massachusetts, you and I wouldn’t have the relationship we have, and I wouldn’t be writing this to you. 

Making that decision based on my written goals led me down a path which put me closer to what I wanted vs. what I didn’t want.

Inspiring Goals Come From Asking Yourself Questions

As we enter a brand new year, it’s a perfect time to ask yourself, “am I closer to or further away from what I really want?

To answer that question, you have to first be clear on what you really want, not what everyone else or “society” thinks you should want

If you don’t know, then you’re at the mercy of those who have plans for you to carry out what they want! (Think of politicians!)

While you’re thinking about it right now, go to a quiet place, take out a pad of paper, close the door, and allow yourself to just think without interruptions. 

Ask yourself this question:

If I was sitting here 3 years from today, and I was looking back over those 3 years back to today, what would have to have happened in order for me to feel happy with my progress?”                

Now, I’m not just talking about your financial life.  I’m talking about your entire life. 


  • What would you like to eliminate
  • What opportunities would you like to take advantage of? 
  • What strengths would you like to build on

  (I personally go through this exercise every quarter)

If you’re having a difficult time answering this question, begin with this:  What’s most important to me in ________ (my life, my relationships, my health, etc.)?

Then, what has to happen in order for me to experience ________ (whatever it is that is most important to you)?

As I’ve mentioned before, take money out of the equation for now.  Don’t let “perceived” financial limitations govern your thought process.  Remember, money is only a means to get you what you really want.  It’s not the end.

Allow your mind to wander a little and just write down everything that comes to mind.    

To increase the likelihood of getting what you want, take 4 more quick steps: 

  1. Rewrite the list in order of priority and put it where you can easily see it every day,
  2. Immediately write a plan of action and list out who you need help from (you’d be surprised how much people will help you get what you want, starting with me.  Just ask!)
  3. Measure and Adjust: Nothing ever happens in a straight line.  Expect to be confronted by opposition and to have to make adjustments along the way,
  4. Remember: it’s about progress, not perfection.  Reward yourself for your progress!

Here’s to a happy, HEALTHY, and prosperous 2021 for you

Happy New Year!

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Three Steps to Take For Your Family This Holiday Season

As we begin another holiday season with our families, I can’t help but think about two of the most passionate desires expressed by our Relaxing Retirement members during hundreds of discussions over the years:

  1. I don’t ever want to be a burden to my spouse, children, and grandchildren, and
  2. I want to make everything is as easy and seamless as possible when I’m no longer able to help.

It’s never a “good” or “convenient” time to think about these challenging issues.  There’s only a “right” time.  Let that be right now. 

Simply take a few moments during this holiday season to verify that you’ve “dotted all your I’s” and “crossed all your Ts” in three very important areas you’ve heard me discuss many times. You may very well have everything in order already.  If so, then this will provide you with another much-deserved jolt of confidence that you have your house in order:

  1. Estate Plan: Colleen and I recently updated the estate plan we first established twenty years ago, and it reaffirmed how critically important it is to have the four documents I outlined on page 134 of my book, The Relaxing Retirement Formula current and in place:
    • Will (“Pour Over” for everything you haven’t re-titled to your trust)
    • Durable Power of Attorney
    • Health Care Proxy
    • Revocable Living Trust  (And, that you have re-titled your assets to your living trusts to avoid probate)
  2. Long Term Care Insurance: There are elder care attorneys running scare tactic ads on the radio daily warning you not to let nursing homes “take” your home and your life savings, and implying they have a magic pill solution. There is no such magic pill that doesn’t have extensive negative consequences, i.e. giving up ownership of everything you’ve built. 

If you haven’t already done so, take the time to proactively evaluate your personal risk level so that you can make an educated decision about long term care coverage.  It remains the best tool I’ve seen to mitigate this risk.

  • What To Do When You’re No Longer Here Instructions: Statistics confirm that it’s unlikely your spouse, children, and/or grandchildren know exactly what to do with everything you’ve accumulated when you’re no longer here to help them.  A horror story we experienced with the best friend of one of our members many years ago led us to create The What To Do When I’m No Longer Here Program

If you don’t have a copy, please let us know and we’d be happy to get a copy out to you.  If you do, please commit to spending just one hour making sure your current information is available for your family.  After speaking with several family members at the funeral services of our Relaxing Retirement members, I can confirm that your family will be extremely grateful and appreciative that you took the time to do so.

Enjoy your holiday season with your family!

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Annual Tax Loss Harvesting

Before the clock strikes midnight on New Year’s Eve, I strongly recommend taking a moment to review your tax strategy for opportunities.

One of the areas where proper planning can help is tax loss harvesting, i.e. utilizing any unrealized losses or unused capital losses that you have realized in prior years (and potentially earlier this year during the COVID crash), to reduce your income tax burden in 2020. 

While nobody likes to realize a capital loss, the great news is you can recover a portion of any loss if you handle it properly.

Given the market’s resurgence since the COVID-19 crash earlier in 2020, your opportunities will not be as great to realize a capital loss as they were earlier in the year.  However, putting prior realized losses to use to free up needed cash flow is a great strategy you don’t want to pass up.

Let’s quickly review capital gains tax law for a moment so we can clarify where this opportunity lies for you.

Capital Gains Tax Law

For investments you currently own outside of IRAs (you don’t pay capital gains when you buy and sell investments inside your IRA), all “realized” gains are taxed at capital gains tax rates.

For example, if you purchased a stock or stock mutual fund for $100,000 and later sold all of it for $175,000, you would owe capital gains taxes on the growth, i.e. $75,000.

On the flip side, however, if you purchased a stock or stock fund for $100,000 and, after temporarily falling out of favor, you sold all of it for $75,000, you can declare a capital loss of $25,000.

While painful to realize, that $25,000 capital loss has significant value if handled properly.  For example:

  1. You may use it to offset $25,000 of capital gains you realized in the same year, thus eliminating taxes on $25,000 of capital gains.  This saves the average taxpayer a minimum of $3,750 in federal taxes, not to mention state taxes here in Massachusetts.
  2. If you don’t have $25,000 of capital gains to offset, you can use $3,000 of the loss to offset $3,000 of ordinary income you have this year.  That would save the average taxpayer approximately $750.
  3. You can then carry the unused portion ($22,000) over to next year and continue the same strategy.  If you have a $22,000 gain next year, you can offset the entire tax due.  If not, you can offset another $3,000 of ordinary income tax and carry the remaining $19,000 over to the following year.


If you sold any investments in the past, thus “realizing” a capital loss, i.e. earlier in the year during the COVID market crash, you now have the opportunity to put those losses to use offsetting realized gains this year after the market’s recovery.

Or, if you have any investments today held outside of IRAs where the cost basis is higher than the current market value, you have an opportunity to lock in a capital loss right now and use it against your realized gains this year. 


My recommendation for you is three-fold:

  1. Review your 2019 federal income tax return.  Take a look at the bottom of Schedule D to determine if you have any unused capital losses carrying forward into this year.  And, if so, how much?
  2. Determine if you have any realized gains in your non-IRA accounts so far this year: 
    • Have you sold any of your holdings at a gain, thus already realizing gains in 2020 that you may want to potentially offset?
    • If you own actively managed stock mutual funds, go to your fund company(s) website and you will typically find year-end “internal” capital gains distribution estimates.  Do your best to determine what your short and long-term gains will look like.
    • Do you have any stocks or stock funds that you have thought about selling, but you haven’t pulled the trigger because it will carry a large capital gains tax with it? 
  3. Take a look at your unrealized gain/loss positions on your non-IRA account statements:
    • Is the cost basis for any of your holdings greater than the current market value?  If so, this may be due to three situations:
      • The share price is lower today than when you purchased the fund due to market forces, or
      • The share price is lower today because your fund declared capital gain distributions in the past and you have already paid tax on them, thus raising your cost basis above what you paid for the investment, or
      • You have been reinvesting the dividends from your fund to purchase more shares over the years, thus raising your cost basis.
    • If this is true for any of your holdings, you have an opportunity to “realize” a capital loss before year-end (tax loss harvesting) and offset any of your realized gains.

Once you’re armed with this information, look for opportunities to offset this year’s gains with prior losses you’ve carried forward, or with losses you could “realize” this year by selling specific holdings at a loss, and replacing them with substantially similar holdings adhering to the “wash sale rule.”

This is a discipline and exercise we continue to go through for Relaxing Retirement members each year, especially at year-end.   

If you haven’t done so already, take a moment to explore harvesting opportunities prior to December 31st

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Before You Help Your Grown Children

One of the most difficult challenges I have seen some of our Relaxing Retirement members embroiled in is the anxiety surrounding helping their adult children transition to becoming fully financially independent.

This is a very delicate subject and one that I have spent a lot of time discussing with several members.

If you’ve had to deal with this, you already know that you have to walk a fine line between your desire to help them avoid the struggles you went through when you were younger vs. helping them learn financial self-sufficiency.

It’s a very precarious situation, and as a father of a soon to be high school senior (son) and college junior (daughter), I sympathize completely. 

Helping them with month-to-month expenses….to paying off school loans, car loans, and credit card debt….to helping them with the down payment for their first home…all the way to bailing them out of challenging financial times if and when the need arises.

Whether or not you choose to help your grown children financially, and to what extent you choose to do so, will definitely have two extremely important outcomes you can count on:

  • It will affect your long-term relationship with them, and
  • It may very well shape the way they handle all their finances for the rest of their lives.

For starters, after creating your Retirement Blueprint™, and knowing your numbers as well as we all do as a result, we can confidently clarify to what degree you are in a financial position to help your children  

However, that’s very different than suggesting that you should help them financially.  Everyone’s situation and background is so unique that no one stock answer will suffice.

However, with that said, if you choose to help, here are some thoughts I recommend considering before you do.

Before You “Help”

To the extent that you can, given that you’re dealing with your children, and potentially your grandchildren, my first recommendation is to de-emotionalize yourself from the situation and try to think as rationally as you can. 

I recognize how difficult this is given the circumstances.  After all, we’re talking about your children and your grandchildren!  I know from experience how hard it is to resist going to every length to make things easier for them at every turn. 

However, I also recognize that all of our good long-term decisions are based on rational thought, and not on spur of the moment emotions.  So, as difficult as it may seem at the moment, try to make these decisions after careful thought.  (No different than any other significant financial decision.)

Questions To Ask Yourself

Ask yourself a few very important questions:

  • What is my goal in giving this money to them?  And, what is the most likely outcome once I do?
  • Do they really need the help, or are there areas in their lives where they could prioritize a little better and free up the necessary money?  This is extremely difficult in today’s “I want it right now” world that we live in.  Things that were luxuries years ago, or that didn’t even exist, are now absolute necessities. 
  • Does this help them become more independent and self-sufficient, or does it increase the likelihood that they will be back for more later?
  • How will this affect my relationship with my other children?

The most important factors are clear communication and expectation.  It’s never easy to engage your children in financial conversations.  However, the more explicit you are from the beginning, the more likely you are to get the outcome you’re looking for.

You want them to understand your reasons for assisting them, your limitations in doing so, and any parameters you may have for giving them money, i.e. expectations for the use of the money, limits on how they use it, reporting results back to you, and terms of repayment if so desired, etc.

Put it in the form of a letter if discussing it is difficult.  They will appreciate your honesty, and the fact that you took the time to give it so much thought.

In situations in which they come to you for help, I also recommend that they provide full disclosure.  By that, I mean laying out for you where their income comes from and precisely where it is spent. 

Chances are extremely high that they’ve never done this before.  Putting it all down on paper in black and white is amazingly curative all by itself.

What it also forces them to do, which they need to learn to do at some point anyway, is face the reality of the results of the choices they make. 

For example, even though their buddy drives a new BMW, that doesn’t mean they’re entitled to drive one as well, thus leading them to a $680 per month car payment when they only make $500 per week!  Likely an extreme example, but you get the point.

Again, in many cases, what used to be a luxury is now interpreted as a necessity.  Putting that down on paper in black and white usually brings the point home very clearly.

Bottom Line

The bottom line is that you have to take the time to think about your goals in giving.  And, then what you believe the outcome will be from doing so.

Are the likely outcomes in line with your goals?  If not, one of them has to be adjusted or you’re in for a potentially tumultuous long future with your family.

And, that’s no fun. 

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The Confidence and Strategy to Help Your Grandchildren Pay for College

In addition to answering your three biggest questions, 1) “Do we have enough built up in our Retirement Bucket to free ourselves of dependence on a paycheck from work,”  2) “How much can we afford to spend without running out of money,” and 3) “How can we make our Retirement Bucket™ last,one of the benefits of designing your Retirement Blueprint™ in our program is the ability to determine precisely how much you can afford to help your children and grandchildren without jeopardizing your long term financial security. 

This has been a real eye opener for many new members over the years as they had no idea how much they could afford to help, so they held back.  Now that they know exactly how much they can afford to help if they choose to, their questions all center around “how” to help, i.e. where should they invest?

There are several factors that go into selecting the best approach, such as the child’s age, and thus proximity to college, the family’s financial aid strategy, and the amount of money you’re looking to invest. 

However, in the overwhelming majority of cases with our members, the answer is pretty straightforward: 529 College Savings Plans

For the purposes of this discussion, I’m going to assume that your children will be saving for their kids’ education costs, and not planning on receiving financial aid.  

A strategy of hoping for financial aid is just that: hoping.  As you know, the priorities of the government change all the time so counting on financial aid is not a sound long term strategy.

How 529 Plans Work

Let’s take a look at the benefits of 529 Plans:

  • 529 plans are set up with you (or your child/grandchildren’s parent) as the custodian and the grandchild as the beneficiary. You may have all investment statements and correspondence sent to you exclusively, or to your grandchild as well.
  • You retain control of how the money is invested in the plan. Most plans offer a large selection of investment options as well as “age-based portfolios” where the company automatically adjusts the allocation of the investments to coincide with your grandchild’s age and years remaining before the money is needed to pay for college. 
  • All money deposited into the plan grows tax deferred just like your IRA. This is the first BIG long-term benefit.  You will not receive a 1099 each year to report gains on your tax return.
  • As long as the money is used to pay for education expenses, such as room, board, tuition, books, etc., all money is withdrawn from the plan tax free, similar to a Roth IRA. This is the biggest benefit.  Imagine how 18 years of growth would be taxed under normal circumstances!
  • If your grandchild decides not to go to college, you have two choices:
    • you may transfer the balances in the plan to another grandchild without paying taxes, or
    • your grandchild will simply pay taxes on the gains generated in the plan over the years when he or she withdraws the money to pay for anything other than college.
  • Plans have become very liberal, so your grandchild may use the money to pay for virtually any college. In other words, most plans don’t have a limited “approved” list such as in-state schools only.
  • In the new Secure Act, 529 balances may now also be used for private high school expenses (with certain limitations).
  • The last big benefit is that 529s are an estate planning tool for you. All funds deposited into a 529 Plan are considered a gift and are removed from your taxable estate.  Over the years, many Relaxing Retirement members have used this technique to systematically move funds out of their estate which would otherwise be taxed as high as 50% when they pass away. 

The last factor you will want to consider is which 529 college savings plan to invest in.  There are several good ones out there.  Take your time to evaluate the quality of investment options offered and the fees they charge to run the program. 

Tax-deferred or not, what drives the real value of these plans, like all other investments, is the quality of the underlying investment options available. 

If you need help selecting a plan, let us know. 

Once you have the plan set up, step back, and feel great about the fact that you’re helping your grandchildren get off to a better start than you did. 

Imagine how your grandchild may feel someday when he or she finds out that the reason they’re able to go to the school of their choice is because you helped pay for it by investing for them!

That will make it all worth it.

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Why a Revocable Living Trust Provides the Most Control

While a Will, Durable Power of Attorney and Health Care Proxy are all important and necessary pieces of an effective estate plan, a revocable Living Trust provides three levels of control that the others do not. 

Control Over Timing

A properly structured living trust allows you to specify when you want who to get what in a way that a will does not. It gives you the power to delay passing on your assets to one or more of your beneficiaries while paying out immediately to others. You can stagger the delivery of funds over time, or stipulate conditions on their distribution on a person-by-person basis such as having funds available upon graduation from college.

Control Over Circumstances

Setting up a living trust gives you the freedom to decide, in advance and with great specificity, what you want to have happen in every scenario: if one spouse is incapacitated and the other is not, if both are, if one is healthy and the other passes away, and in the event that beneficiaries divorce. A living trust allows you to spell out exactly what happens, who’s in charge, who gets to make what decisions, and where your assets go. A will can’t give you that level of control.

Control Over Probate

Probate involves validating a person’s last will and testament in a court of law.  The will must be presented by an attorney to the court in the jurisdiction where you live. Once a judge declares it valid, notice is given to any potential debtors, and all of your assets are listed in the newspaper. Although it’s time-consuming, expensive and invasive, every will must be validated before it becomes a legal document on which anyone can act.

If you’ve ever had the unfortunate job of settling an estate for a family member or friend who didn’t have a proper plan in place, then you know just how awful the probate process can be.

A properly funded revocable living trust allows your family to avoid the probate process entirely, something a will can’t do. 

WARNING #1: Your estate planning attorney may suggest that you don’t need a living trust because your estate will owe no federal estate taxes upon your death based on current laws. 

And, in many cases today that is true because estate tax exclusions have rapidly increased in the past few years to $11.58 million per individual on the federal level or $23.16 million for couples. 

In Massachusetts, however, the estate tax exemption is still only $1 million per person.

However, the real problem as I described above is the cost and delay of the probate process.  And, only a properly funded living trust can help you avoid it.

WARNING #2: “Creating” a Living Trust alone does not avoid probate.

You must take step two which is “funding” your trust while you’re still living. Funding simply means re-titling your assets to your trust prior to our death.

The first step is to determine which assets will go into whose trust (i.e. your trust and/or your spouse’s trust).  If your estate planning attorney is doing his/her job, they will spell this all out for you.

The next step is to change the title of ownership on each of your non-IRA assets, a bank account for example, to your trust so that your statement now reads “John Jones, Trustee, for the John Jones Revocable Trust” instead of just “John Jones”. 

Make sure you do this with all of your non-IRA assets so nothing gets left out. 

Additionally, your estate planning attorney should also spell out how your beneficiary designations should read on your life insurance, IRAs, and annuities. 

** A key point here is, if you are going to name your respective trust as your beneficiary, your trust MUST qualify for “pass-through” status so your trust beneficiaries have the opportunity to save thousands of dollars in income taxes by taking advantage of Inherited IRA rules.

While you’re completing the paperwork to re-title your assets to your respective trusts, take care of all your beneficiary designations at the same time. 

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