Are you concerned about losing your home due to a long-term care need?

One of the most significant risks as we age is long-term care. Throughout the years, we have had clients who wanted to protect their homes in the event of an extended long-term care need.

One solution often considered is transferring your home to your children. Before this is done, one needs to consider the unintended consequences and additional risks that may occur.

In the example below, we walk you through a family considering this option. The family has a home, cottage, other equipment, and investment accounts, including IRA accounts of $1,000,000.  The question of transferring the title of their home to their adult children arose.

The following are some of the unintended consequences.

• Transferring the house does not protect their other assets. The protection of the house will only come into play after they have spent down their liquid assets, including the IRAs. Then the non-liquid assets, such as the home, cottage, equipment, vehicles, etc., will come into play.
• In a worst-case scenario (if both parents are in a nursing home), they would be spending about $200,000 per year for their care from their investments.  They would have about five years of spending down their IRAs alone before the house would even be considered.  Since the average stay in a nursing home is three years, the transfer potentially would do nothing to protect the home.
• The house would be subject to the liabilities of their children (bankruptcy, lawsuit, etc.).
• If the children ran into financial difficulty or were at fault in an accident, the home could be lost even while they are living in it.
• The house would be an asset to their children and would be included in any divorce agreement.
• Transfer of title to the house moves the house from a tax-free asset, due to step-up in basis upon either of the parents passing, to taxable as capital gain with no step-up at deaths.
• Scenario A – Transfer house to children.
  • House value = $500,000 (original cost, plus improvements of $250,000)
  • Husband passes – No step-up.
  • Five years later, wife passes – No step-up.
  • Children sell the house for $750,000
    1. $750,000 sale price – $250,000 basis = $500,000 realized capital gain, split between the children.
    2. Depending on their tax situation, this realized gain could be taxed between 20% and 28% between federal and state taxes.

$500,000 realized capital gain x 28% = $140,000 tax due.

• Scenario B – No transfer of house
  • House value = $500,000 (original cost, plus improvements of $250,000)
  • Husband passes – Basis steps up to $500,000 current value.
  • Five years later, wife passes – basis steps up to FMV = $750,000.
  • Children inherit the house and sell it for $750,000
    1. $750,000 sale price – $750,000 new basis = $0 realized capital gain = $0 tax due.

Other solutions to consider: These options will effectively transfer their house while maintaining the tax benefits without incurring additional risks but will not protect the home from long-term care costs.

• Establish a living (revokable) trust and transfer the house and other non-IRA assets into it.
• Complete a Transfer on Death Deed naming the adult children as direct beneficiaries of the house.

If the situation warrants the transfer of one’s home, most of the above risks could be mitigated through a properly written irrevocable trust.  This option does lose the step-up in basis on the house, and therefore, it needs to be thoroughly analyzed before being implemented.

Most often, one of the best ways to protect your assets from potential long-term care costs is using an insurance option.

If you are concerned about protecting your home and other assets you have spent a lifetime obtaining, schedule a time to have one of our wealth managers provide options to avoid unintended consequences.

Many of us make New Year’s resolutions to lose weight, eat healthier, exercise more, read more… This year why not make a resolution to review some overlooked areas of your financial life?

Review Retirement Savings

Contribution limits have increased for 2023 – do you need to update your deposit or payroll instructions to take advantage of the new savings limits? Will you turn 50 in 2023 and  are now eligible to make catch-up contributions?

2023 Contribution limits

• 401(k)/403(b)/457 = $22,500 + $7,500 catch-up
• SIMPLE IRA = $15,500 + $3,500 catch-up
• IRA/Roth IRA = $6,500 + $1,000 catch-up
• HSA = $3,850 Individual or $7,750 Family

Review Insurance Policies

When was the last time you reviewed your Home/Renter/Auto/Umbrella policies to ensure coverage limits are adequate? Can you afford to raise your deductibles to save on premiums? Do you qualify for any discounts (veteran, bundling policies, senior rates, good student, etc.)? Contact your agent and schedule an insurance review.

Review Budget

Inflation was the talk of 2022, and it is not going away so it may be time to review and update your household budget or consider starting one by tracking spending for 3 months using an App (Mint, Rocket Money, NerdWallet), spreadsheet, or pen & paper.  Can you save money on subscriptions you no longer need (Streaming services, online services, etc.) or making coffee at home more?

Review Savings

Is your emergency fund adequate? We recommend 3-6 months of expense in a savings or money market account.  Additional cash reserves should be working for you – consider putting excess cash in CDs, I-bonds, or other safe options to take advantage of higher interest rates.

Review Debt

Interest rates have increased over the past year, are you paying more on your debt? Could you save by consolidating debt or taking advantage of a lower balance transfer promotional rate?  Can you increase your payments and accelerate debt payoff?

Review Charitable Giving

Do you regularly or periodically give to church or charities?  Review who, what and how you give.  Is it the most tax-advantageous option available to you? Are there organizations you no longer want to give to or new causes you want to support? Review charities you support on Charity Navigator, CharityWatch or GuideStar to evaluate the organization on a number of metrics. Do you want and can you afford to give more?  Have you incorporated your charitable giving into your estate planning?

If you would like any help with these areas of your financial life or have any questions or concerns, please reach out to us here at AEGIS Financial.  We are always happy to help.

What has changed for you in 2022? This year has been as complicated as learning a new dance for some. Did you start a new job or leave a job behind? That’s one step. Did you marry? There’s another step. Did you retire? That’s practically a pirouette.

If notable changes occurred in your personal or professional life, you might want to review your finances before this year ends and 2023 begins. Proving that you have all the right moves in 2022 might put you in a better position to tango with 2023.

Even if your 2022 has been relatively uneventful, the end of the year is still an excellent time to get cracking and see where you can manage your overall personal finances.

Do you engage in tax-loss harvesting? That’s the practice of taking capital losses (selling securities worth less than what you first paid for them) to manage capital gains. If you are thinking about this move, and haven’t done so already, consider seeking some guidance from one of our wealth managers.

You could even take it a step further. Consider that you can deduct up to $3,000 of capital losses over capital gains from ordinary income. Additional capital losses above that amount can be carried forward to offset capital gains in upcoming years. ¹

Do you have the opportunity to convert IRA funds to a Roth IRA?  You may benefit from converting a portion of your IRA to a ROTH if your income is down or if you have room to add income to your tax return without going into a higher tax bracket.

Are you thinking of gifting? How about donating to a qualified charity or non-profit organization before 2022 ends? Your gift may qualify as a tax deduction. You can also donate appreciated assets and receive a tax deduction without paying capital gains tax on the appreciation. If you are over 70 1/2 you can also make a Qualified Charitable Deduction (QCD) if you donate to a qualified charity directly from your IRA.

Do you want to itemize deductions? You may want to take the standard deduction for the 2022 tax year, which has risen to $12,950 for single filers and $25,900 for joint filers. If you think it might be better for you to itemize, now would be an excellent time to get the receipts and assorted paperwork together.²

While we’re on the topic of year-end moves, why not take a moment to review a portion of your estate strategy? Specifically, take a look at your beneficiary designations. If you haven’t checked them for some time, double-check that these assets are structured to go where you want them to go, should you pass away. Lastly, look at your will to ensure it remains valid and up to date.

Check on the amount you have withheld. If you discover that you have withheld too little on your W-4 form, you may need to adjust your withholding before the year ends.

What can you do before ringing in the New Year? New Year’s Eve may put you in a dancing move, eager to say goodbye to the old year and welcome 2023. Before you put on your dancing shoes, consider speaking with a financial or tax professional. Do it now rather than in February or March. Little year-end moves might help you improve your short-term and long-term financial situation.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Phishing scams and identity theft reports are all too common in today’s world. In fact, it seems that every day we are inundated with story after story of someone falling victim to one of these scams. Sometimes it’s even people we know. Cybercrime is constantly on the mind of most consumers and it’s important that we continue to educate on the risks associated with today’s technology-infused world and mitigate potential issues. Knowledge is the number one weapon in fighting against cyber-crime.

What are phishing scams and identity theft?

Phishing scams are a fraudulent practice of sending emails to individuals trying to convince them to reveal personal information, such as passwords, credit card information, banking accounts numbers and other personal data. To take that a step further, identity theft is the acquisition of this information, usually for financial gain. This information can be used to open bank accounts and new credit cards, or even sell the information to third parties to use it for illicit and illegal purposes.

How can I recognize a possible scam?

Cyber criminals will try to get information from you by sending you a link via an email or a text that looks like it is from a legitimate source. Once you click on this link, you have now provided them access to your information on your phone or your computer. They will likely provide you a number to call so you

can speak with someone directly. Once they get you on the phone, cyber criminals will try to convince you that your information, your money, and your investments are not safe. Through building rapport with you and discussing how they are going to protect you; they will attempt to gather personal information. In most cases, they will also tell you that you cannot tell anyone about what is happening.

How can I protect myself?

There are certain steps individuals can take to prevent taking any unnecessary risks in their day or day technological interactions. Below are a few considerations to help protect yourself from falling victim to a cyber-crime.

  Create a unique and complex password for each account and do not share those passwords with anyone. A legitimate company will never ask you to provide them your personal password to access your account.

  Never give out personal information on a call you did not initiate. If you are provided a number to call, look up that company separately and verify the number you received is a listed number for that company.

 Check statements for your financial accounts, credit cards etc. and report any suspicious activities.

 Do not click on any links, open any attachments or respond to emails from unfamiliar or untrusted sources.

What steps should I take if I think I was a victim?

• Change passwords to your
• Contact banks, credit card companies, investment companies, the social security office etc., to add a security protection to your account. In some cases, cancelling or closing accounts and opening new ones may be
• File a police
• Contact at least one credit bureau to report the identity theft.
• File a report with the Federal Trade The FTC also has guidance on recovery plans at www.identitytheft.gov.

If you believe that you or someone you know has been a victim of a cyber-crime, please reach out to our office. We will help you navigate what steps to take to protect your information and report the crime to authorities.

If you have any questions or concerns or would like to discuss potential cyber security measures you should take, please contact Amanda Ross, Compliance Manager at (920) 233-4650.

 The Tax Cuts and Jobs Act of 2017 made some significant changes in Tax law. One of the changes increased the standard deduction to $25,900 (for 2022) for married couples. This change has benefited many taxpayers and simplified tax preparation by eliminating the need to itemize deductions. Taxpayers can still itemize but many receive a larger tax benefit from the standard deduction. One drawback of the higher standard deduction is the inability to benefit from your annual charitable deductions. Donor Advised funds can be a solution to this drawback. 

Donor Advised Funds are the fastest-growing charitable giving means in the United States because they are one of the easiest and most tax-advantageous ways to give to charity. We recently had the opportunity to work with a few clients using a Donor Advised Fund. 

In our first example, the client sold his business and wanted to set aside funds to give to charitable causes over the next five years. By placing the amount he wanted to give over the next 5 years in a Donor Advised Fund, he was able to take an immediate tax deduction for the full amount of the gift used to offset the gain on the sale of the business. He then can disburse the funds to charities over the next five years from the Donor Advised Fund. 

In our second example, the client was giving $10,000 each year to a charity. When combining their annual gifting with other itemized deductions they did not have enough deductions to exceed the $25,900 standard deduction. Therefore, they received no benefit from charitable giving. We recommended taking the next ten years of gifts and placing the money in a Donor Advised Fund. The client would then receive an immediate tax deduction for the full contribution to the Donor Advised Fund and can disburse the funds to the charity over the next ten years. 

There are limitations on the use of a Donor Advised Fund so if you or someone you know would like to determine if they would benefit from a Donor Advised Fund, please set up a time to meet with one of our Wealth Managers. 

A client of ours was able to retire after a career in law enforcement in her mid-fifties.  She had taken the accelerated pension benefit, which provides a higher income stream from retirement until age 62 at which point the pension drops by the amount of the individual’s social security benefit. The plan for this client was to turn on her social security benefit at age 62.  However, while reviewing her situation with our planning experts, we noted that she was eligible for a survivor’s benefit from her deceased husband.  We then called the social security office during her review to get the benefit estimates for the survivor’s benefit and her own benefit.  One of the complexities of social security benefits is that widows or widowers are able to take their survivor benefit as early as age 60, while still allowing their own benefit to continue to grow until age 70.  After receiving the benefits estimates, we were then able to confirm this client should indeed take the survivor’s benefit at age 60, and then switch to her benefit at a later date.  This resulted in a substantial raise in income for two years which she had not planned on but will now be able to complete several projects much sooner than expected.

Here’s an example:

We recently had a client reach out to us to let us know his wife’s health was declining quickly and she was moved to hospice. We immediately had a meeting with him to discuss anything that needed to be completed.  At times like these, we pride ourselves on bringing a voice of reason and logic along with the necessary compassion and empathy.

This client’s wife had a checking account which was titled solely in her name only, and it did not have a “Payable on Death (POD)” designation.  Due to the size of the account, it would have gone through Probate when she passed away without the POD designation.  The account would then have been declared to all pass to her husband, but only after a lengthy and costly court process. The client then noted that he had the Power of Attorney documents in force at that bank and was able to act on his wife’s behalf to pay the bills out of that account which he had been doing. We then encouraged the client to instead write a very large check to virtually empty this account into one of their jointly owned checking accounts.

This creative method saved the client a substantial amount of fees and hassle.  Losing a loved one is an incredibly painful and emotionally draining process, at times such as those, we want to be there to guide and support however we are able. We are always here to help.

When a Client passes away there are alternative options for Beneficiaries

 Having a conversation with your AEGIS Financial advisor will provide you with straight- forward answers and a clear picture on how to move forward …

When one of our clients passed away earlier this year, he left all his investment and IRA accounts to one Beneficiary. While grateful for the windfall, the Beneficiary asked if there was a way, she could refuse some of the money and instead have it pass directly to her adult children. Although inconceivable to some people, there is a legal process that one can employ if they choose to refuse an inheritance. This process is referred to as Disclaiming an Inheritance. Once the decision was made to disclaim, the team at AEGIS Financial contacted the Estate attorney to help ensure that all the proper steps were taken and the proper documents were completed.

When might it make sense for me to disclaim an inheritance?

There are no specific rules for when you can or cannot disclaim an inheritance; it is more a matter of personal choice. With that in mind, you may choose to refuse an inheritance for any of the following reasons:

• You would rather have someone else, such as a sibling, child, or charity, inherit the assets that were intended to go to you, and you want a workaround for paying gift
• Inheriting assets would increase the size of your estate and potentially create tax planning complications for your own heirs once it is time to pass your assets
• Accepting certain assets, such as money held in an IRA, would push you into a higher tax bracket and you would rather avoid getting stuck with a large tax
• Allowing the inheritance to pass to someone else would allow for the wishes of the deceased person to be more accurately
• Receiving an inheritance would affect your ability to qualify for certain types of federal benefits, such as student loans or
• You just do not need the inheritance because you are financially stable and would rather someone else benefit from

Those are all valid reasons to disclaim inheritance, but in some instances, it may come down to simply not wanting whatever it is you are supposed to inherit.

Say, for example, a relative leaves you their home, which needs extensive repairs or has back taxes due. If the will stipulates that you cannot sell the property and renting it out is not an option, then disclaiming it may be the best choice for shifting the financial burden of owning it to someone else.

What are the general guidelines for Disclaiming?

Any primary or contingent IRA beneficiary can disclaim all or a portion of his or her beneficial interest in a deceased participant’s IRA but only if certain conditions are met. The disclaimer must be a “qualified disclaimer” under Internal Revenue Code section 2518 and is an irrevocable election.

To qualify under section 2518 of the Code, the disclaimer must:

• The disclaimer must be in writing, in accordance with, and specifically reference, sections 2518 (a) & (b) of the IRS
• The disclaimer must be received by Custodian not later than the date which is 9 months after the later of:
  • the date of death of the participant, or
  • the date the beneficiary attains age 21
• The disclaimer must include the disclaimant’s name, the name of the deceased and the Custodian’s IRA
• The disclaimer must reference the disclaimed amount (i.e. entire account, 20% of their beneficial share, $30,000).
• In the disclaimer, the beneficiary disclaiming the IRA account cannot designate who is to receive the funds once they
• The disclaimer must be notarized but does not have to be signed by the
• The beneficiary cannot have taken any distributions or have claimed any interest from the deceased participant’s IRA. A very limited exception applies in the case of a deceased participant’s RMD that has already been taken or will be taken by the beneficiary. Under this exception, all the conditions of IRS Revenue Ruling 2005-36 must be followed. See IRS Revenue Ruling 2005-36 for more information.

What is the best option?

Every situation is different. Just know that the clock is ticking, taking money from any account impacts your ability to disclaim, and it is one of those “forever decisions”. We pride ourselves on always giving advice which benefits you, the client, first and putting your interests before ours. If there is someone you care about who needs unbiased client-first advice, please feel free to refer them to the advisors at AEGIS Financial.