You’ve Inherited Wealth: Now What? Video from Savant Wealth Management.

Download our complimentary guide books, checklists, and other useful financial resources at savantwealth.com/guides. Everyone, welcome to today’s Savant live webinar. Thanks for joining us. I’m Dominic Pillo, Savant’s director of wealth transfer, and I’m joining you live from our Manasses, Virginia office. Today we’re excited to discuss what to do when you receive an inheritance. And there’s there’s really a lot in this topic and we want to give everyone listening and viewing today um a good starting place and some takeaways to further your discussions with your team of financial adviserss and other experts. Uh I’m proud to welcome Michael Goldstein uh to the conversation as well. Michael’s a financial adviser at Savant. Welcome Mike. Thank you Don. It’s great to be here today to discuss this very important topic. Uh happy to have you here. I think this is going to be great. We got a really good program. Uh just a couple of items before we get rolling with our agenda. Uh if you have any questions throughout today’s presentation, there is a Q&A feature at the bottom of your screens. So if you click that Q&A box, you can type in your questions live. At the end of our discussion, we have planned to address as many of the questions live that we can with our remaining time and also uh note that this webinar is being recorded. Uh we don’t necessarily send out the slides but you will see a recording in your email that you registered and this and all the other webinars we’ve done on different topics are also available on Savant’s website. So we invite you to check out uh www.savantwealth.com savvantwealth.com so you can see again this webinar and other webinars that we’ve done in the past. But back to today’s topic of inheriting wealth, we want to give everyone some good insights into the income, estate, and gift tax. Uh just issues to think about when you inherit wealth. Oftentimes after you receive an inheritance, it’s going to change the paradigm for your own personal estate plan. So, proper trust establishment for asset protection and estate tax goals is going to be important for you and your family. Mike’s going to give us an overview of some investment considerations and also a little bit about what we do as financial adviserss and holistic wealth managers and then we’ll wrap up uh with a few topics thinking about flexibility and planning for generational wealth. also some common pitfalls that we find uh people run into when they’re navigating an inheritance in their own wealth picture. And then again at the end we’ll have some Q&A. All right, let’s get started. So, and I’m sure you get this a lot, Mike, but when people inherit wealth, they usually say, “Do I have to pay tax on this? How does this work?” And today we want to focus on really two different tax systems. You have income tax which we’ll start with and estate tax or transfer tax. So when you think about income tax, income tax is the tax that you pay on income that you earn or tax you pay on investment income like interest, dividends, capital gains. And it also applies to withdrawals from retirement accounts that you might have funded yourself or have inherited from a loved one for example. So first question again, do I have to pay tax on this inheritance? Typically, when you in at least initially when you receive an inheritance from a loved one or even a lifetime gift uh if that person is still alive, you don’t pay income tax at least initially on that gift at the time of transfer. But depending on the asset that you received via the inheritance or the uh the gift, you may pay income tax when, for example, we’re dealing with an an after tax brokerage account. That asset in the account is later sold. Uh there’s a capital gain that would apply. So, so I just want to make that distinction clear. the income tax that you might be faced with paying is really going to be dependent based on the type of asset that you inherit. Um, so I mentioned the term after tax assets. That could be a brokerage account that you inherit from a parent or maybe that parent had a revocable living trust that owned some various investment uh um securities, mutual funds. uh uh th those are after taxed uh assets and that means that when money is withdrawn from those accounts and assets are sold not every dollar is subject to taxation. With an after tax account only the appreciation from the time the asset was originally purchased and when it sold is is taxed in the form of a capital gain. Now what’s unique about inheriting an asset is that if these after tax accounts are included in the person who passed away that you received the asset from estate for estate tax purposes there is called step up in basis that applies. So essentially any built-in capital gains that that original owner had uh accumulated during their lifetime go away for all intents and purposes because the tax basis that you have as the inheritor of that asset becomes the the market value on on that person’s date of death. So said differently, if mom owned a hundred shares of Apple and she paid, you know, $20 a share and now it’s worth $600, $700, right? If mom would have sold that asset during her lifetime, she would have capital gain based on the difference between original purchase price, current market value. Well, if mom held that asset until she passed away, now your tax basis as the inheritor is that market value that’s $6 or $700, whatever that that value is at mom’s death. So, if you sold it the next day after you inherited it, there’d be no capital gains implications for you as the uh as the new owner. Hopefully, that makes sense. Now if a asset is gifted to you during your lifetime, you didn’t inherit it uh on account of death. Whatever that original account owner’s tax basis or cost basis in that asset was at the time of the gift gets transferred to you as the new owner. So if you were again to sell that same uh share of Apple, if it was gifted to you during a lifetime, you would have capital gain based on what mom originally purchased it and the market value at the time you sell it. So again, it depends on the type of asset that you receive, whether it was received at death or during a lifetime. That’ll that’ll really impact the potential capital gain uh liability that you have if that asset is sold. But at the time the gift is made or the time you inherit it, there is no income tax. It’s only when that that asset is sold. But even if you hold an asset and you don’t sell it, if there are interest in dividends, let’s say from an investment portfolio, those interest in dividends would be taxable to you as the new investment uh holder. And again, that would apply via lifetime gift or at death. So hopefully that gives you a little bit of insight as to how these assets are taxed and particularly with after tax assets that you might receive via a lifetime gift or uh via an inheritance at death. Now the other type of asset that’s really common is life insurance. And generally if you are the beneficiary of a life insurance uh a life life insurance death benefit rather there’s no income tax ramifications for you as the recipient and uh it’s essentially a cash payment which can then be invested in securities or held in the bank account. The last type of asset that’s really common to inherit is a retirement account. And these retirement accounts like IAS, 401ks, 403bs, these are very very common for most Americans because this is the primary retirement savings vehicle, right? When you when you uh are working, you’re contributing to your 401k, you’re getting an income tax deduction, and then um you can also contribute to self-directed IAS as well, receiving an income tax deduction. The rules are totally different for inheritors of retirement accounts. These are IRD assets or income with respect to a deedent asset class. And essentially every dollar that you withdraw from those inherited retirement accounts is not subject to capital gains taxation, but ordinary income taxation. So every dollar that you withdraw ends up going on your tax return as if it was ordinary income and it’s taxed at your marginal income tax bracket based on your other income sources and deductions. And I’ll go to the next slide. The Secure Act, many of you have probably heard about this, has really changed the game for how inherited IRA assets can be held and how they’re ultimately taxed as uh an inheritor of these accounts. And the big takeaways are prior to the passage of the Secure Act, which was in 2019, this law became effective 2020, uh, six years ago, if you can believe it. time flies, but as a an inheritor of an IRA account, generally that that person that inherited the IRA could defer income tax on that inherited IRA account for their entire lifetime. It was this uh stretch IRA concept that you may have heard about. The big change with Secure Act is that unless you are a special class of inheritor called an eligible designated beneficiary, you’re really limited to a 10-year income tax deferral limit. So, the the inherited IRA account that you receive has to be fully distributed and you have to pay all of the income tax on it uh within a 10-year period following death of the original owner. And that that’s created a lot of uh planning issues for for inheritors of wealth having to minimize income tax exposure. So I know Michael, you’re going to go through a little bit of this in your section, but uh having a good understanding of the types of assets that you own will also help you come up with a withdrawal strategy that can minimize overall income tax you have to pay. A little bit more on the secure act. I mentioned this class of eligible designated beneficiaries. If you’re an eligible designated beneficiary, instead of having a 10-year limit for how long the IRA account can be open, you’re still able to use your life expectancy under the old Secure Act uh pre I’m sorry, pre-secure act rules. So eligible designated beneficiaries are surviving spouses, uh children who are under the age of 21, so minor children, uh disabled and chronically ill individuals, or people that are not more than 10 years younger than the original IRA IRA owner. That’s typically a sibling or a friend. That’s the most common scenario where the the inheritor of that IRA is is not more than 10 years younger than the IRA. So, if you’re in these classes of beneficiaries, you you can use your life expectancy to take distributions. You’re not limited to the 10-year limit. Uh surviving spouses actually have the most flexibility under the uh tax code for required distribution purposes. On the next slide, I’m going to give you a little bit more of a detailed view on how to navigate these issues. Again, if you’re the the recipient of an IRA, but surviving spouses can actually treat an IRA as their own that they inherit from a spouse, add it to their own existing IRA, they can defer taxes based on their life expectancy. Uh they’re treated as having owned the IRA uh from the beginning. Uh so here here’s a good view on some of the the details. Again, this will help guide you if you are an inheritor of an IRA. And I want to point out two uh sort of spectrums and this is important if you’ve received an IRA and you’re now the beneficiary of one. But understanding the original beneficiary structure is is really critical. In many cases, if people fail to name a beneficiary designation on their IRA account, their estate becomes the default beneficiary. Now, you might ultimately receive an IRA, an inher excuse me, an inherited IRA in your name as the beneficiary uh via the estate settlement process. But if an estate was originally named as the IRA beneficiary, you might have completely different rules. It might not be 10 years. uh it might be a five-year period that you have instead of a 10-year period if that original IRA owner died before their required beginning date when they had to take RMDs or if they died later in life after their required beginning date. It might be based on their remaining life expectancy, a period potentially longer than 10 years. So don’t always assume if you are um not an eligible designated beneficiary that it’s going to be 10 years. It really depends on how that original IRA beneficiary designation was uh was set up. Um also interesting to note if if a charity is named as an IRA beneficiary on a beneficiary form, the charity does not pay any income tax on the uh the IRA distribution. So essentially everything is liquidated in the first year and and that retirement income um would be paid payable to the qualified charity a 501c entity and there’s no income tax payable. Uh that that can be important if you are acting as an executive or a trustee and you’re trying to quantify any outstanding uh income tax liabilities you might have to pay before you distribute assets. Again, spouses have the most flexibility. Spouses can can treat IRA accounts that they receive as their own, have very flexible uh income tax deferral. It’s also common, and I’m going to highlight this in a few slides, for trusts to be beneficiaries of an IRA uh because uh it’s often important to preserve assets for the family after the first death in the event of a possible remarage by the spouse. So, uh it’s becoming more common for let’s just say a family trust or a marital trust to hold IRA assets for the benefit of the spouse. uh even after the first death. And the good news is Secure Act gave us a great gift, a lot of flexibility for that surviving spouse as beneficiary of a family or marital trust that holds an IRA. Uh the trust just has to be drafted properly to allow the spouse to utilize life expectancy and have some of the benefits for income tax deferral that they would have had if they just inherited the IRA directly. So really happy that we got some uh guidance and clarity on that because uh asset protection is becoming increasingly important um just to again preserve those those marital assets after the first death. Uh if you’re a non-eligible designated beneficiary typically a adult child again you have a 10-year time window uh in which to keep the IRA open. uh the entire IRA account has to be liquidated and distributed to you within 10 years and you pay income tax and all those distributions and that raises some some planning opportunities, right? Um you can do a forecast of your projected income tax brackets and figure out a tax efficient withdrawal strategy. Uh, one thing to note is the timing of when the original IRA o owner died is really important for you as a non-eligible designated beneficiary because if the IRA owner died before they were required to start taking minimum distributions, there is no minimum distribution for you in each of the 10 years as the IRA owner. uh that the beneficiary IRA owner that is. So you have a lot more flexibility in tax planning. But if that original IRA owner died after they were required to start taking minimum distributions, then there is an annual minimum distribution that you have to take. Uh this is something I think that gets missed all the time. These rules are pretty mechanical, but they’re confusing. They really are. So, uh, the first step is just understanding what type of assets you you’re you’ve inherited, getting familiar with the tax attributes, and then if you’re dealing with an IRA, really reach out to your your financial advisor, tax accountant, so you can make sure that you’re complying with any minimum distribution rules correctly and not making any missteps when you are uh taking distributions because there are are potential penalties if you underdistribute IRA dollars. Okay. Uh that was a lot on income tax. So we’ll shift gears and talk a little bit about estate tax because that’s the other tax that could apply when you inherit wealth. Uh so estate tax is a tax on the transfer of wealth from a deedent to a beneficiary, often a loved one. And there’s two estate tax systems to be aware of. There is the federal estate tax system and then that person who died they may have lived in a state with a statebased estate tax and those state based estate tax limits thresholds and rates vary greatly depending on the state of residence of the uh the the deedent from a federal transfer or estate tax uh standpoint. Each individual in 2020, that should say 2026 on the slide. We’ll have to correct that, but everyone in 2026 has a $15 million per person estate tax exemption. Uh so if you’re a married couple, that means you have $30 million that you can pass estate taxfree at the federal level to uh to anyone, any beneficiary. uh a single person again has $15 million. If you’re married, the federal exemption is portable between spouses. So if the first person dies has less than $15 million in their estate, the surviving spouse can add the unused exemption amount to their own $15 million number at their death. Uh so you don’t lose the benefit of the married exemption. and it’s indexed for inflation. The federal estate tax exemption increases every year based on CPI. This number is now permanent based on uh the passage of the one big beautiful bill act. That’s not true for state estate tax. Oftentimes state estate tax threshold are much much lower than the federal threshold. oftentimes don’t have inflation adjustments annually and in many cases uh there’s no portability feature. So, so why is this important for you as an inheritor of of wealth? Um, often the first step when someone passes away before the wealth can be transferred is paying all estate tax obligations, final income tax obligations, um, you know, funeral last illness expenses. So, if you’re wearing an executive or trustee hat, really important to quantify any estate tax obligations uh, that could be out there. Also, you might find yourself in an estate tax situation, especially if you receive a pretty significant inheritance from a loved one. Uh here’s a map of states that do have statebased estate or inheritance tax. Uh real quick, uh you might be wondering what’s the difference between estate and inheritance tax. Estate tax is the tax on the transfer of wealth and it’s assessed on the estate of the deedent. The inheritance tax is similar. It’s actually a tax on receiving wealth and it’s typically paid uh by the beneficiaries based on the amount of money that they receive at an individual level. Um, so you know, if you’re in a state that has an estate tax and you receive an inherited wealth, even if you’re nowhere near that $15 million number for federal purposes as a single person or 30 million married, really, really important to understand how this inheritance tax, I’m sorry, how this inheritance is going to impact your own estate or inheritance tax future for your children or their loved ones that you ultimately transfer wealth Yeah, which leads us to our next topic. There’s always, you know, there’s never a bad time, I should say, to review your own estate plan, especially after a major life event. Uh, you know, death of a loved one being a big one, but um significant change in net worth, which could occur when there is a death of a loved one, changing state, doicile, birth of a child, grandchild, a divorce situation. So just a few thoughts with regard to issues you might want to be aware of when you think about your own estate plan when you inherit wealth. So here’s uh some illustrative examples. Uh this is a t very typical estate plan that we encounter a married couple and there are two uh separate revocable living trusts. In our example, wife inherited $2 million from her her parents and she has a couple of uh decisions to make. Well, how how should I title these assets? Should I should I put them in a uh a joint account? Should I keep them in my name? um the titling after you inherit an asset has big implications for whether or not that that inherited account is going to be includable in a uh divorce settlement for example. So before you think you know before you start titling assets either in a joint account or a trust just be aware that there are some implications based on what that ultimate titling is. oftentimes you don’t want to co-mingle inherited assets with marital assets because marital assets that are inherited aren’t automatically considered marital property for example and the reason I say this is that often times it’s important for people that inherit wealth to preserve that wealth for their family uh and protect that wealth so like I said earlier with IRA planning inherited wealth that you receive can be held in a trust structure that protects and preserves that wealth for a surviving spouse. So there’s a little bit more I guess certainty or confidence that that wealth ultimately passes down through your bloodline or gets to the the people that you care about uh versus let’s say a new spouse or uh you know some other unforeseen person. So when you inherit wealth, review the terms of your own estate plan. Really think about what this wealth means to you because it can change a lot, right? It can change your retirement time frame, your investment strategy. Michael’s going to go through that a little bit more detail, but big impact on your own personal estate planning objectives. Um, it’s also important, like I said earlier, to think about your estate tax picture. So, in this example, we have a $2 million estate uh inherited dollar amount, which is perfect because we have many um uh people we know in the state of Massachusetts. And Massachusetts, coincidentally, has a $2 million per person estate tax exemption. So, you might not have had a Massachusetts estate tax problem with your own wealth, but if you receive a significant inheritance, a couple million dollars, and that inheritance is given to you outright, well, now that estate tax uh number is is is is going to be um you know, real you’re going to have some estate tax exposure. Sorry, I’m stumbling a little bit. Um, so there is an opportunity even before you inherit wealth, if you find yourself uh in a state with a a low estate tax threshold to maybe coordinate with your own family, your parents or whomever you’re expecting to receive the wealth because they can create a structure to protect and preserve the wealth so it’s not included in your estate for estate tax purposes. Um, and that also leads to just understanding how you can even access these money. So I mentioned the term outright. If you inherit money and it’s just given to you in your name, you basically have free and unfettered use of the assets. It’s fully includable in your estate. There’s there’s no formalities, no protections whatsoever. But if you inherit the assets in in a trust for example, there’s a lot of rules and distribution guidelines that have to be followed. You might not even be the trustee, right? So understanding that structure of the inheritance, I would say equally important. Um, you know, can I access access these monies for any any reason whatsoever? Is it limited to let’s say a health education maintenance support standard? Um yeah, again just more issues, more more things to be aware of. Uh so it’s yeah, the types of assets that you inherit, uh the the tax attributes that go along with those different types of assets and then the structure of the inheritance very very important. Okay, you might think about your own IRA or retirement accounts because the same issues that we spoke about just a moment ago with regard to your inherited IRA that you might receive are also going to apply to your intended beneficiaries in the future. So, you have choices when it comes to naming your own beneficiary designations. uh if you’re a noneligible designated beneficiary, you are limited to that 10-year window when you inherit an asset. But if it’s your own IRA that you funded that you contributed to, you’re going to have income tax deferral for the rest of your life. And this is going to become a potentially a large part of your overall estate and uh you know distribution plan. So the big choice is do I want to name my beneficiaries as individual outright beneficiaries on my beneficiary form or do I want to have a trust name for example to protect those IRA assets and it there’s not really a right answer. It’s really a tradeoff because um of the income tax attributes of those IRA assets. I said before that when money is withdrawn from an IRA account, you pay income tax on it at your ordinary income tax rate. Well, people individuals generally have lower effective income tax rates because of the marginal uh tax brackets that apply. If you name a trust, for example, and you want to have trust protection for a a young child or a uh you know um a loved one or child that isn’t good at handling money, even if they’re an adult, or maybe you’re doing this for uh estate tax avoidance objectives, like I mentioned before, the uh the IRA dollars that are held in a trust are uh typically taxed at a higher effective income tax rate because the income tax rates in a trust, for example, uh the top rate of 37% from a federal standpoint starts at it’s about $16,500 of income. So, it’s it’s a more compressed marginal system. And if those IRA dollars when they’re withdrawn or withheld in trust, you know, a higher effective income tax rate is is typically paid. So that that’s the trade-off is higher potential income tax uh dollars paid if the assets are held in a trust versus your asset protection or estate tax minimization objectives. Again, not an easy answer. Uh it’s it’s the secure act has really created a little bit more of a paradigm when it comes to these assets because of the the loss of that stretch IRA feature. So, um, when you’re thinking about your own estate plan, how to structure your own assets from a titling standpoint, beneficiary standpoint, it’s really important to sit down with someone and understand, you know, the really the trade-offs and pros and cons of these different approaches. And it’s going to be unique to everyone. Uh, so this is just another visual of of all those decisions that I laid out. Um, again, if you’re a spouse, you have really uh maximum flexibility and control if you’re named as the outright beneficiary, but it’s possible to name a a family trust or credit shelter trust, for example, as the beneficiary of that IRA account if you want to provide protection for your spouse and you want to preserve those assets in a trust. So, so, uh, those ultimately go down to your own children or your own intended beneficiaries. This is really common in a blended family situation, by the way. Um, we encounter this all the time. And like I said earlier, uh, if you’re if you’re doing this sort of planning, you want to make sure that that family or credit shelter trust or marital trust even is structured properly to to maximize income tax deferral and minimize overall income taxes paid by your family. um children uh most adult children have the 10-year uh distribution limit, but many many parents uh do want to protect assets for their children in the form of a trust. So remember uh that that can be done. You can name a trust as beneficiary for a child too. But you have those income tax tradeoffs that I described earlier. and uh the structure that you put in place for your children might not be the same as you might put in place for a young grandchild in the event that a child predesases I’m sorry predesceases you and now young grandchildren are uh named as beneficiaries. So oftentimes parents like the idea of distributing assets to their children outright and free of trust but knowing that the grandchildren are younger they want to have a trust that continues for their benefit. So the big takeaway here is that you have to really think about those beneficiary designations because if you don’t have the beneficiary designations list properly, your asset protection and income tax goals might be completely defeated. And this is something I think Michael you’ll agree uh often gets overlooked because people assume that when I have a trust or a will in place takes care of everything. beneficiary designations pass independently of what your written estate plan says. So you have to look at each individual asset and make independent decisions at each account level. So I know this was a lot but these are really important topics and um this is just another summary of some of the the decisions that go into uh proper alignment of beneficiaries. I want to turn it over to you, Michael, so you can give our our listeners a uh some insight in how to invest and just some information on wealth advisory. Yeah, thank you Dom. I certainly appreciate the introduction. So, first and foremost, it is a pleasure to be with all of you here today and uh you know, we certainly appreciate the opportunity to discuss a topic that can be certainly emotional and very financially um important, which is the idea of inheriting wealth. So, my name is Michael Goldstein. I’m a certified financial planner and financial adviser here um at Savant based out of our Lincolnshshire Illinois office. So an inheritance can create an opportunity but it can also bring many questions, uncertainty and of course responsibility. So today we’ll just talk a little bit about um you know certain ways of asset allocation taxes. Of course, some of this might might echo um what you said, Dominic, a little bit um regarding taxes, but taxes are very very important aspect of this. So, so that that’s why we seem to talk about it at Nauseium. So, so let’s let’s start with the big picture here. So, before making major decisions, we we really want to take a step back with this. So, when someone receives an inheritance, they’re very often times pressure to act quickly. But in many cases, the very first thing you should do is really just just pause and and get organized. And some questions you’ll really want to ask yourself, you know, would be what did I just inherit? What what are the tax implications? Do I need income from this money? Um should I pay down debts? How does this fit into my overall financial plan? Um what would my loved one have wanted me to do with with this with these assets? So inherited wealth re really should be viewed should not be viewed in isolation and it it really should be integrated into your overall financial picture. So your goals and objectives should really be the key factor of of how your assets are invested um and managed. So w with this slide looking at some some asset allocation details here. So how the inherited assets are invested may have a a major impact on your long-term outcomes. So asset allocation is is really the mix of invest investments in your portfolio. So that just might include stocks, bonds, cash, alternatives or um any other investments. So the right allocation really depends on a number of different factors and that would include your goals of course, your time horizon, your risk tolerance, your income needs, your tax situation. So whether the inheritance is intended for spending um invest investing gifting or legacy planning those those are quite a few factors that you really want to uh really want to consider. Uh one of the most important decisions is simply not what you inherited but how the inheritance should be positioned for your life. So why does diver diversification and asset allocation matter? So diversific diversification really can help reduce the risk of having too much money tied in one particular company. U if you want to go back real real quick Dom sorry. So so many inheritances actually come in concentrated form and that this could be you know a single stock a family business real estate so many of us will inherit our parents’ homes one day or a retirement account which is usually the most common. So an important thing to consider is that a portfolio that was designed for someone else is not necessarily designed for you. So diversification does not really guarantee a profit or prevent a loss, but really it can it can help create a more balanced investment uh experience. So really here a key item to remember is that a portfolio that made sense for someone else may not make sense uh for you. So just to kind of understand the differences between stocks, bonds and alternatives here. So with stocks, stocks are generally the growth engine of a portfolio and they really help the inherited wealth grow over time, but they they also come with some volatility as we have seen over the last uh last couple of years. So stocks may be appropriate when the money has a longer time horizon or when the investor is really just seeking out growth. and stocks can certainly be powerful over time, but the amount that you own uh really should be considered u with your overall financial plan. Now, with bonds, bonds can certainly provide some income and stability and risk management of course, but bonds may help reduce volatility and provide a cushion during difficult stock market environments, which we have seen this this year in April and last March actually. So bonds can especially be important, you know, when there’s income needs or you’re nearing retirement or just simply to uh preserve capital. So bonds may not be exciting as they really aren’t so far in 2026, but they can play a very very important role for inherited wealth. So alternative investments is really the third leg of the stool here. And alternatives may really provide a third layer of diversification or in terms of reducing risk with the portfolio. And alternatives might include things like real estate, private credit, uh commodities, managed futures, or other other non-traditional uh strategies. And they may or may not be appropriate for everyone. So when used thoughtfully, alternatives can be a tool uh just to make the portfolio a little bit more resilient. Uh next slide, please, Dom.

So I want to briefly explain what the efficient frontier is. Now bear with me here. This is a little bit of a technical concept, but we certainly believe here that it could be a very very important tool. So the efficient frontier is really a way to show the relationship between risk versus return. And it really helps investors understand how to build a portfolio that seeks the best possible return for a given level of risk. So every investment has some level of risk and some expected rate of return. And really what the the efficient frontier is just a visual concept that compares different combinations of investments such as stocks, bonds, cash, and alternatives. So portfolios that fall on the efficient frontier, which is on the curve that you see, is really the most efficient and and really what we strive to um to accomplish. and portfolios that you might see fall below the efficient frontier are may not necessarily be as efficient. So in simple terms, the efficient frontier really helps us ask a very important question. Am I being properly compensated for the risk I am taking? And the one thing to note here at Savant, we can help you actually determine your current risk versus your return level in your own portfolio and and where it might lie on the efficient frontier. So, how does this relate to inherited wealth? Well, when someone inherits wealth, they may receive assets that were designed for someone else’s goals, as I previously mentioned, someone else’s risk tolerance or tax situation or their income needs. So, that inherited portfolio may not be efficient for the new owner. So for example here the portfolio may be too heavily concentrated in one particular stock maybe too conservative for a younger beneficiary um maybe too aggressive for someone nearing retirement or even too concentrated in one particular sector. We see this all the time um and it may not be aligned with the beneficiaries need for income or liquidity. So let’s talk about how this relates to your overall plan. So the efficient frontier is really not not meant to create a perfect portfolio on paper. It it’s really meant to kind of help thoughtful decision- making. So a good financial plan would consider how much growth is needed to reach my goals, how much risk uh does the can the investor tolerate? How much income is needed for the portfolio? Very important question for someone who’s nearing retirement. tax impact, your time horizon, your estate planning goals, charitable g uh charitable giving, and and even your liquidity needs. So, the goal here is really not to build the most aggressive portfolio or the most conservative portfolio. The goal is really to build a portfolio that gives the investor the best chance of achieving their goals uh while taking the most appropriate amount of risk. Uh, next slide, please, Dom.

So Dom, you spent a lot of time talking about taxes and that’s something we want to be extremely mindful of. So taxes can have a major impact on how much of the inheritance you actually keep. So tax treatment depends on the type of asset you inherited. So looking at this slide, so there’s pre-tax, taxable, and Roth money. So uh for the pre-tax that could be an IRA. We also have Roth Roth IAS on on the right side. uh tax your taxable investment account, real estate assets, life insurance, trust assets. So, some inherited, excuse me, some inherited accounts may have required distribution rules. So, some assets may receive a step up in cost basis. Dom, I know you mentioned that uh earlier. Uh and some accounts may create taxable income when money is withdrawn. And these are all things that we want to plan out and pay attention to. So before selling, withdrawing or reinvesting inherited assets, it’s extremely important to understand the consequences of everything that you inherited. Um I want to briefly talk about some common mistakes that we see uh with inherited assets. So a thoughtful plan can help avoid some very very costly emotional or financial decisions. Now, some of these mistakes might be uh spending too quickly, leaving too much money in cash for too long, uh taking a large taxable withdrawal without planning, uh keeping a portfolio that was designed for someone else. That one is extremely common. We see that all the time. Uh failing to update your own estate plan, um ignoring debt, insurance, or retirement planning opportunities. And and a key one here is is making decisions while grieving. And this is this is a very difficult thing. Um, everyone has their own unique grieving process. So, you know, we do encourage you to take your time if you’re going through going through that process. So, an inheritance can really be a blessing, but also really needs to be handled with care. Um, next slide, please, Dom. So, so what do we do? So, so here at Savant, we really want to create a personal action plan. So inherited wealth could really be connected or should be connected to your own goals as as we previously talked about. So a good action plan or a good financial plan would be reviewing your full financial picture. I would say um understanding the type of assets that are inherited extremely important. Identifying tax issues uh creating your own investment strategy. Reviewing your retirement goals of course evaluating debt payoff opportunities. updating your estate documents and consider considering gifting or charitable giving that there’s nothing here that’s more important or less important than the other. They’re all extremely important and all things that should certain be certainly be considered when inheriting uh assets and and really the the goal is to turn inherited wealth into a thoughtful plan that supports your life, your family and of course your future. Um, next next time. So, so really here at Savant, so investing is only one small piece of the puzzle here. And as you can see, there’s a number of things, another a number of different services that we offer. So, while investment management is extremely important, true wealth management goes far beyond building a portfolio. So, at Savant, we take a comprehensive approach that looks at the full financial picture. And as you can see, there’s quite a few things, and we did allude into some of them earlier. Um but when someone inherits wealth the you know the natural first question that comes up is how should we invest it right? Uh next next slide down. So we have a concept here called um your ideal futures and these are basically the you know the key areas of financial planning that we really focus on here at Savant which are of course I know I mentioned them before you know retirement retirement income building a paycheck for yourself. So you’re we’re going to retire at some point. How do we recreate your paycheck? uh tax planning, estate planning, trust administration, charitable giving, family wealth transfer, insurance needs, um business or company retirement plans, legal coordination, and of course your long-term financial goals. I hope I’m not overwhelming anybody by by um you know discussing all these different aspects of financial planning, but it is extremely important to recognize all of these things if you do have a substantial inheritance coming your way. So, you know, at Savant, we believe, like I said, investing is just really one piece of the puzzle and comprehensive wealth management means, you know, helping us make smart decisions across all of these all of these different lines and not just investing. So, really the goal is not just to manage money. Um, you know, I would say the goal is to help us make better decisions with our money by considering all these different factors. And you know, a portfolio tells us what you own, but a financial plan really goes much deeper about what we’re trying to accomplish. Um, so next slide, uh, down. So, so estate planning and administration, that’s one thing that, you know, that’s kind of what we’re focusing on here today. Uh, the next slide, this is just a sample of what we use in our financial planning software. So, everyone who we work with uh, will uh, will receive a net worth statement. It’s important. This is one of the most important things that we need to address early just so we have a a clear understanding of exactly what it is that we’re working with because without doing this first, it’s really kind of hard to work on planning on all those other different aspects. So, this is something that we have with our software. We’ll know your investment assets um um and any other assets you might own uh which would be your home and any uh you know any other property you might have. We’d also include your liability. And when we look at all this together, that’s what would would give us um the net worth. Uh moving on, moving on. D and the last thing I’ll I’ll actually focus on today, what what we like to do with a lot of folks who we meet with, we like to do what’s known as um our ideal future is health assessment. And really what this is, it’s like a 10 or 15 minute survey where you you’ll take some time and and and start to address the the 10 key areas of financial planning that that we previously discussed. And what this will do is actually give us and and yourself um a much clearer picture of of what really needs to be addressed and and focused. And if we could see on the next slide once the questionnaire is actually completed. Um there we go. So we’ll actually get an overall score as well as a score on the the 10 key areas of financial planning. So a lot of folks that come to us don’t need services on every every aspect of financial planning as we can see on here. So um you know business succession planning and and this is just a sample uh is rated a 10. Investment planning is rated a 10. Debt management is rated a 10 which is fantastic. So that tells us that things are in good working order in those areas of financial planning. But as you can see there’s a number of other areas here um on this little wheel that do need to be addressed. So, for example, retirement planning, which is a big one. Um, income tax planning, education planning, and estate planning are usually one of the more important items and by by looking at at something like this. So, that that’s our goal in working with you and and certainly something that we’d be happy to to take a look at. So, so uh with that said, Dom, I’m going to turn it back over to you just to uh discuss the estate planning uh considerations for generational planning. Yeah, thanks, Michael, for your insights. Uh there’s one thing I I never really thought about, but when you inherit wealth from a loved one, you know, you might you’re inheriting somebody else’s portfolio and those invest I I thought that was great. Um you know that those those holdings made sense for for mom or dad, but do they make sense for you? I never really thought about it that way. Uh so a couple more items as we wrap up our discussion. We focused a lot on understanding the unique uh income tax attributes of the assets that you inherit, the structure, uh what that might mean for the design of your own estate plan. And we’re going to turn our attention on just really planning for generational wealth. And that that’s that that has a different meaning for for everyone. But one thing that is universal is just trying to create an orderly and efficient plan after you’re gone to dispose of the inherited wealth, the assets that you’ve accumulated, and just make things as easy as possible and clear for your family. So being organized is one of the greatest gifts that you can give outside of the financial wealth that you’re going to be. Uh your legal documents, your your wills, trusts, power of attorney documents, those are important because they list your fiduciaries, agents, executives, trustees, but they don’t capture other important information like who to contact if something happens to you or your spouse. uh where important documents are located, some of your family values, context for why you designed the plan, uh and ultimately what the family wealth that you’re bestowing on on your loved ones really means, right? Money money is often a tool to do good things with, right? And you might value family and friendships. So don’t forget about these guiding principles. Uh getting organized, providing letters of instructions or ethical wills. I think it’s all very very important. Uh I mentioned fiduciary earlier. We talked a little bit about trustee in our diagram, right? Are you the trustee? Are you going to somebody else to access your inherited wealth? Well, trustee selection and that that structure that I alluded to, what what the trust document actually says for how monies can be accessed, extremely important. So, when when you’re thinking about your own estate plan, uh really think about the right people that are going to be in charge in the future. And that could be your adult children. It could be uh you know a parent or a sibling if you have a young family or maybe you don’t have children or surviving family your death. Uh one thing that’s becoming more common is the concept of appointing an independent or corporate trustee in estate planning documents because that can promote family harmony. It can remove administrative burdens off the shoulders of your loved ones. Being a trustee is a thankless job. For those of you that are currently in that role, I think you know what I’m speaking about. Uh but um again, having the right lineup of fiduciaries, thinking about these issues, you know, are the people that you’re nating in your documents the right people? Are you are you um you know, creating a situation that might be overwhelming for others? So, if you’re interested in speaking about options or uh the potential use of an independent trustee, uh we’d we’d love to sit down with you and and and talk about your own situation and some of the options out there. Uh asset protection, again, that’s the right structure to protect uh the beneficiary, sometimes from themselves, but more often than not from outsiders trying to take advantage and access that inherited wealth. uh a lot of uh people don’t don’t uh remember or understand uh what their estate documents say uh as far as how those trusts are going to continue or not for their their own loved ones. So again, just a good time to review your own estate plan, understand how your wealth is going to pass in the future. Uh yeah, I mean distribution standards are key. Um yeah, there’s there’s like the health education maint maintenance and support our first one. I mean, that’s often very common that those words come from the tax code. Uh, it’s an ascertainable standard that can keep assets out of a beneficiary’s estate. But, um, there might be other very particular and important things for you to put into your document that gives your trustee or name fiduciary a little bit more guidance like um, you know, down payment on a home, uh, money to start a business, uh, weddings. you really have flexibility when it comes to designing the terms of your own estate plan. Uh, and if you’re the inheritor of wealth and you you have your your your money um in in a trust basically for your benefit, you having a good understanding of what these terms mean in your access is also very important. So, these are just examples. Uh, again, everybody’s situation is unique. the right distribution standards are going to really be dependent on what your objectives are and what protections you want to put in place. Uh flexibility is really key. We talked about trustees, uh executives, uh distribution standards, but a a trust protector is a is a is a person or entity you can name your document that allows for trust to be amended posthumously by this named individual. They can remove and replace trustees. uh this this is important because if you have long-term trusts in place the future is uncertainty and having a mechanism to allow changes in a changing world and changing beneficiaries situation is is very very important. So we often discuss these concepts too especially again if you’re going to have a longer term trust arrangement. Uh we’ll end here with a couple pitfalls and we’ve got uh time for questions and a few other items, but and these are meant to recap some of the concepts that we discussed. Michael had a really great one on on investments, right? Holding the wrong investments that don’t make sense for you. Uh you know, maybe putting uh the wrong assets in the wrong uh tax buckets just to inefficient um um you know, income planning. But uh we talked about this earlier. Failing to take the proper required minimum distributions from inherited accounts can be dire with with penalties. Comingling inherited assets with marital assets. You can lose separate property uh status and and end up inadvertently uh subjecting those those inherited dollars to uh a divorce settlement. This we talked about basis step up. A lot of times this isn’t done shockingly, but if you inherit an aftert tax asset like a trust account or a brokerage account, make sure before you sell anything in that asset and put it into a portfolio that better meets your needs that the step up was actually done by the prior account owner or custodian. Uh again, failure to updating failure to updating your own estate plan very uh critical misstep because you know your wealth can cause you to outgrow the legal terms of your own written documents and that can lead to unintended or state tax consequences uh and just asset protection issues for your loved ones. And then lastly, this is the big common one. beneficiary designations are often not updated when they should be and aligned properly with the uh the overall estate plan objectives that you might have. So, just some good takeaways. Um, reach out and let us know if you’d like to have a 15minute complimentary introductory call with one of our Savant adviserss. On your screen, there should be a link that you can click in the chat box if you’d like to schedule that call or learn more about Savant. Um, we’ll have some time for questions and we we really thank everybody for joining us today on on our call. We’re going to try to get through as many questions as we can, but if we can’t get to all the questions, we’ll we’ll circle back on those that we can’t answer. Uh, Michael, what are you seeing coming through the the question box? Yeah, I got a a real good one here. Um, how should I think about investing inherited assets differently than the money I saved myself? That’s uh that’s one of my favorite questions and really and as I mentioned before an inheritance should not be viewed in isolation at all. So I would say the first step here is to understand how it fits into your overall financial picture. Right? So you know before making investment uh decisions we would really want to look at your goals, your current assets. We looked at the net worth statement before um your your income needs your risk tolerance your tax situation time horizon. So quite a few things you’re really going to want to take a look at. So sometimes inherited assets can help strengthen retirement security and that’s kind of one of the bittersweet things about it. Um but other times they may create an opportunity to pay down debt, you know, increase cash reserves, you know, funded education or help support family members. So, like I said before, the the key here is really not to rush on this and the inheritance should be, you know, really incorporated into, you know, a thoughtful financial plan, you know, so the investments are aligned with your own own strategies, I’d say. Thank you for that. Um, we’re at time for our scheduled webinar, but I’m going try to answer this one very quickly so we can get everybody on with their days. Can I add an IRA that I’ve inherited from a loved one to my own IRA account? Uh we spoke about this a little bit. It depends on what type of beneficiary you are. If you’re a surviving spouse, that option is available, but if you’re not a surviving spouse, you cannot co-mingle or add inherited IRA dollars from a loved one with your own IRA account. It has to remain in an in in an inherited or beneficiary IRA account because those distribution rules are very very different. Uh thanks again everyone. We’ll get back to those that ask questions that we didn’t have time for today. Uh, at any time if you’re looking for more information about Savant and what we do, we invite you to check out our website at www.savantwealth.com to learn more. And please sign up if you’re interested for a complimentary 15minute uh call with one of our adviserss. And uh also we also invite you to sign up for our retirement readiness e newsletter where you can get a lot of other great information and uh topics to consider. Thank you everyone. We’ll see you next time. Thank you. 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