Family money: Trusts, taxes and how to plan lifetime gifts

Warren Buffett said that the perfect inheritance is enough money so that children feel they can do anything, but not so much that they could do nothing. This is pithy advice.

How much inheritance that amounts to, when to give it, and how, is the real crux of the matter for most families.

New laws motivate gifting.

Intergenerational transfers of wealth are nothing new. Passage of California’s new Proposition 19 caused significant upticks in the lifetime gifting of real property. And now, President Joe Biden’s tax proposal seeks to lower the estate tax exemption to $3.5 million per person, lower the gift tax exemption to $1 million, eliminate the step-up in income tax basis at death, and raise the capital gains tax rate.

As a result of all these changes, we are likely to see another tsunami of intergenerational gifting to take advantage of the current, more favorable tax laws.

Current law allows for lifetime gifts or gifts at death up to $11.7 million per person. With the expected decrease in the estate and gift tax exemptions, it’s likely many parents will consider gifting assets to children before any new tax law tax effect.

If a parent gifts $5 million in assets currently, the gift would be covered by the current exemption. If the estate tax exemption is later lowered to $3.5 million, the parent will have no further estate tax exemption remaining, but will not be subject to gift or estate tax on the “excess” $1.5 million they were able to gift before the law changed. In addition, the appreciation of the $5 million in assets between the time of the gift and the death of the parent will occur in the child’s hands, and thus outside the estate of the parent, saving even more in estate taxes.

The tax tail wagging the dog

While there can be significant benefits to gifting property to your children, or even grandchildren, sooner rather than later, how that is done should be considered carefully. Whether your estate is likely to be taxable or not, taxes are not and should not be the only concern.

Also, consider your family goals, the legacy you mean to leave, and whether or when your child or grandchildren might be able to handle the responsibility of such a gift. Also consider the vehicle for the gift, whether that should be a gift outright, in trust, in family partnership interests, or another business entity.

Gifts in trust

Large gifts to children and grandchildren should almost always be made using trusts. A gift during a lifetime or at death can be made through an irrevocable trust for the benefit of your children, and even your grandchildren.

An irrevocable gifting trust allows you to do tax planning while also providing your heirs with other benefits. It is not “controlling from the grave” so much as it is giving your heirs a leg up.

A trust can serve as a vehicle to train your heirs in the management of assets by providing for a third party to serve as trustee, allowing your heir to become a co-trustee at a certain age, and a sole trustee at a later age.

If your heir is in a high-risk job where lawsuits are a concern, a trust can provide them with protection from creditors. If you’re worried your child’s spouse would burn through your child’s inheritance, a trust can be structured to prevent that.

Think of the grandchildren

Grandparents can also provide for their grandchildren in a trust.

A trust can provide for the benefit of a child during the child’s lifetime and then for the grandchildren under similar terms. If the child has no choice and the grandchildren are the mandatory successor beneficiaries, the assets of the trust will not be included in the child’s estate, which could save significant estate taxes.

However, such a trust, known as a “generation skipping” trust (the tax skips a generation, not the trust’s benefits) would mean there is no step-up in income tax basis in the assets. If instead, the child was not likely to have a taxable estate even with the trust assets counted in their own estate and the income tax step-up in basis would be more valuable, the trust could simply give the child the option to exercise a power of appointment to say where the assets go at the child’s death.

If the power is not exercised, the trust terms providing for the grandchildren will prevail. In a sense, this is advance estate planning for the children by providing a default plan.

Trusts, whether for children or future generations, can provide very specific terms for when income or principal can be distributed to the beneficiaries to assure that your family goals and values are maintained.

The family business

A family-owned business often presents the biggest dilemma for parents, especially if one or more of the children (or perhaps the spouse of a child) is involved in the business, but the others are not.

Generally, a family business should be held in an entity (corporation, limited liability company or partnership) for centralized government, protection from creditors and ease of transferring between generations.

With an entity, parents can assure that control is in the hands of the active participants in the business by creating voting and non-voting ownership interests, adopting a business succession plan for leadership, and/or giving the majority interest to the child involved in the business.

If the parents also own the real estate on which the family business operates, consider gifting the real estate to the children not involved in the operating business, and the business itself to the active child.

Gifts of business interests in trust should also be considered since the trustee can then be carefully selected to manage the interest on behalf of all beneficiaries.

A legacy

Carefully considering when and how your children and grandchildren receive an inheritance is an opportunity for leaving not just property, but a legacy. A well-drafted and often reviewed trust is a vehicle that allows for that legacy to be maintained for generations to come.

Teresa J. Rhyne is an attorney practicing in estate planning and trust administration in Riverside and Paso Robles, CA. She is also the #1 New York Times bestselling author of “The Dog Lived (and So Will I)” and “Poppy in The Wild.”  Reach her via email at

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A new year after a tumultuous one: What’s your net wealth now?

Many of us are relieved that 2020 is over and we are beginning a new year.

Last year was not a year that any of us would have wished for. The firestorm arrived in March when the whispers of COVID-19 became a reality. Our rug was pulled out from under us, and life quickly changed. The stock market fell, unemployment levels climbed and anxiety became an emotion we felt daily. In the end, the year was full of highs and lows. The markets recovered, some businesses failed while others thrived, all while we quarantined. In some manner or another, life was different.

This year, we may have the same resolutions as in the past — such as losing weight, exercising or eating healthier. Or our normal resolutions may feel frivolous because our needs have significantly changed. Our goals may be much direr this year, such as finding a job or putting food on the table for our family.

No matter where you fall on the spectrum, as we enter the new year, take a bit of time to review your finances.

Do you know your net worth?

Whether your net worth is high or low, you should understand what it is. Without understanding where you are now financially, how do you plan for your future? Calculating your net worth sounds complicated, but for most people, it’s not. Make a list of your assets (what you own). Then, subtract the liabilities from the assets (what you owe) to determine your net worth. If you have never done this, use this year’s net worth statement as a benchmark going forward. Every January, compare your statement of net worth to those of prior years.

Is your net worth growing or decreasing? Understand why it has changed. Are you saving more, has your debt increased or was the stock market up or down?

Create a budget

Do you know where you’re spending money? Most people know their mortgage and car payments, but fewer pay attention to the amounts they spend on food, Instacart or online purchases, especially if they are using a credit card.

Budgeting will help you understand how you’re spending. Track all expenses for a minimum of 30 days or, better yet, the entire year. Write out monthly expenses first, then add up any additional spending. After you’ve tracked expenses for a month, think about the following:

— Where can you reduce spending? If your income has decreased and there’s a monthly shortfall, examine which expenses can be eliminated or minimized.

— Are you using credit cards monthly because you’re short on cash? If so, does the card come with a low interest rate? Do not avoid looking at the statement to understand the rate and your options.

— How can you eliminate outstanding debt?

— Are you maximizing your annual contribution and employer match in your retirement plan?

— How much will you need to save to maintain the same standard of living in retirement?

— Are you saving enough to meet goals?

Plan for big-ticket items

Are you planning on moving, buying a car, replacing your roof or paying for college tuition in the future? Do you know how much this expense will cost, and have you thought about how to pay for it? If the money is not readily available in the savings account, pencil out a timeline, break the expense down to a monthly cost and plug the expense into your budget.

To avoid accumulating unwanted debt, what changes in your spending can you make now to save for this goal?

Prepare for the unexpected

As we were reminded in 2020, life can change unexpectedly and fast. Are you prepared for a job loss, illness, disability, natural disaster or lawsuit? Insurance and savings can protect you against unforeseen events.

— Do you have an emergency fund with at least six months (or more) of expenses in a savings or money market account?

— Are you adequately insured to meet your risk?

— Do you have a disaster plan in place and supplies readily available if an unexpected natural disaster occurs?

If you are tech-savvy, consider storing inventories and important documents on a portable hard drive. It’s also a good idea to retain copies of birth certificates, passports, wills, trust documents, records of home improvements, and insurance policies in a small, secure evacuation box (the fireproof, waterproof kind you can lock is best) that can be grabbed in a hurry in the event of an evacuation.

Protect your estate

Without proper beneficiary designations, a trust, a will, and other basic documents, the fate of your assets or minor children may be decided by attorneys and tax agencies. Probate fees, taxes and attorneys’ fees can erode your estate and delay the distribution of the assets when heirs may need them the most. If estate planning documents are not in place, schedule a meeting this year with an attorney who specializes in estate planning.

As we enter a new year and ponder the outcome of 2021, the unknowns are many. While our future may be uncertain, understanding where we stand financially provides the opportunity to make sound financial decisions, not emotional ones. While we cannot control our future, we can control our actions, understand where we stand financially, and make sound financial decisions based on that knowledge.

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Reset, reboot, relaunch – it’s all about 2021

As 2020 comes to a close, it is natural to feel hopeful about 2021.

We have promising vaccines to combat the COVID-19 virus, which has, up to now, dictated how we redirect and lead our lives over the majority of this current year. We had a tense presidential election, no matter how one voted. The emotions surrounding the process and the event have been significant. Other local, national and world events have added to this stress.

It is only natural then, that coming to year-end, people reflect on renewal and relaunching their lives. Whether or not you are a fan of New Year’s resolutions, almost all of us hope to experience a more positive and enjoyable 2021.

Part of a great “reset” involves three steps:

Reflection. A reflection on what went well. What were your accomplishments? For what would you like to congratulate yourself? What did not work well? For example, if you found a creative way to strike a work-life balance, this is a win to be congratulated. If you made the commitment to exercise 5 times weekly and did not meet this, flag this as something that did not work well. Write these wins and losses down.

Learning. What lessons have you learned after reflecting on the wins and losses that you have listed? Perhaps you decided to turn off your computer at a certain time each day so that you could turn to your family and respect the work-life balance you created. As a result, the learning might be that putting a structure in place such as specified work hours helps support your goals. And in the case of missing the mark with your commitment to exercise, what did you learn there? It may be that you didn’t leave room in your schedule, or that you didn’t identify what kind of exercise might work for you.

Commitments. After listing what you have learned, identify what commitments you want to make to yourself going forward. What do you want to bring forward into the new year, and what do you want to leave behind? Again, using our examples, if your learning is that you want to continue structuring time or being more specific for important goals and priorities, how can you apply this to your goals for 2021?

This is a fruitful exercise and my executive clients find that it helps them to stay sharp in their decision-making and execution moving forward. However, when it comes to leaving behind those things that they have identified no longer serve them, it becomes challenging to let go.

Why is this? We human beings are wired for comfort. This means that we also carry a natural inclination to resist change. It’s hard to leave the perch! The first step is deciding how you want to leave behind those things that are no longer useful.

Consider the following three choices as you ponder how to streamline and better your upcoming new year.

1. Release. Let it go. As you look back at 2020, what can you let go without remorse or anguish? Generally, the kinds of things that respond well to release are low-stakes commitments, decisions, or relationships. Often, they come disguised as enjoyable or previously more important, but upon closer inspection, they may now keep you from having the energy and time you might need for greater or more relevant things. What things might you be holding on to out of habit that should be eliminated from your life or work?

2. Reframe. Look at the situation differently. Reframing calls on us to take a different perspective about a situation or person. An example might be that you have been seeing a particular situation as irritating, or a person as prickly and thus someone to be avoided. Taking a posture to reframe means attempting to “find the gold” or different aspects of that situation which may lend to you feeling better about it. This is often adopted when the stakes are higher. What have you been putting up with experiencing this year that you feel you need to see a different way? Where in your life or work might you benefit from greater tolerance, compassion, or appreciation of the larger picture?

3. Reconcile. Bring resolution to the problem. Notice that the previous steps of releasing and reframing require only action on your part. Reconciliation, however, generally requires two or more people (or two or more parts of yourself!) to work. We generally seek to reconcile when stakes are high; when we want to save the situation or relationship. This will require a negotiation of sorts, or at the very least, a revisit of the situation you deem needs reconciling, a conversation, and a shared agreement to resolve the situation.  Sometimes, it requires that we also forgive either the other person or ourselves in order to feel that all is safely put to rest.

As you reflect on this year, and on rebooting life and work to make it even more meaningful and rewarding in the coming new season, what do you need to celebrate? And what do you need to leave behind? I challenge you to stretch your mind and take the steps to intentionally embrace 2021.

Cotton works with executives, business owners, and their companies, to elevate and support leadership at all levels. Reach her at

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California’s Prop. 19: Key things the new property tax law gives and takes away

Proposition 19, billed as “The Property Tax Transfers, Exemptions, and Revenue for Wildfire Agencies and Counties Amendment,” passed with  51.1% of California voter approval in November. As a result, 2021 will see sweeping changes in property taxes assessed on personal residences. There’s good and bad news.

Let me note here that I’m going to simplify the math. Your tax base is the assessed value — the value listed on your property tax bill on which the property tax is calculated. It is typically the fair market value of your home at the time you bought it, adjusted annually by the 1% allowed under Proposition 13 and local taxes and assessments. For the examples below, I’m using the purchase price as the “property tax base.”

The good news

For residents age 55 and older, severely disabled, or a victim of a wildfire or natural disaster, there is much to like about Prop. 19. Effective April 1, 2021, those eligible homeowners can sell their homes and take their property tax base with them to any other property they buy for the same value or less in the state of California.

Before Prop. 19, if Susie Seventy bought a home in 1980 for $200,000 and the property was now worth $1 million, Susie may have resisted selling even if the house was too large and the stairs were too steep. To sell and downsize to a smaller home worth $500,000, unless she moved to a county with reciprocity and could transfer her property tax basis, Susie would wind up paying more than twice the property taxes she was paying, as she’d be taxed on the $500,000 tax base rather the $200,000 base in her current home.

Under Prop. 19, Susie is now free to sell her home and buy another home valued at $1 million or less and have her same tax base ($200,000) — anywhere in California. (Cue the cheers of real estate agents everywhere, which is precisely who championed this proposition.)

For people age 55 and older or severely disabled, this property tax base transfer can now be moved up to three times in your life anywhere in California.

The semi-good News

Residents over age 55, the severely disabled, and wildfire or natural disaster victims can also benefit from Prop. 19 after April 1, 2021, if they’re looking to upgrade to a more expensive home.

Say that Sam Sixty has a nice home he bought for $400,000 many years ago, and it’s now worth $800,000. But Sam’s now divorced, the kids have moved out and since he’s always preferred blondes, he’s looking to spend more time at the beach. When he finds that classic California beach bungalow for the low, low price of $1.5 million, Prop. 19 still has some advantages for him. His new tax base will be $400,000 on the first $800,000 of value, with the remaining $700,000 taxed at the normal rate. Sam can carry over the tax base value up to the fair market value of the “old” home to the property tax base of his new home. (Cue more real estate agent cheers.)

The bad news

The 55 and over set may love Prop. 19, but their children aren’t going to like it.

Before Prop. 19, parents could transfer their primary residence and $1 million (per parent) of other property to their children without triggering a reassessment of those properties. After Feb. 15, 2021, that exemption is severely curtailed.

Beginning Feb. 16, a transfer of a principal residence by a parent to a child is only exempt if the parent was using the property as their principal residence and the child will also be using the home as their principal residence immediately following the transfer. No other transfers of property between parents and children will be exempt from reassessment, except in the case of “family farm,” which is thus far only vaguely defined but appears to include land farmed even if there is no home on such land.

Even those transfers qualifying as exempt from reassessment have limits. The exemption will only apply as far as the assessed value at the time of the transfer plus $1 million. Anything above that will be assessed at the normal tax value.

Assume Ed and Eleanor Eighty have lived in their quaint Laguna beach home since they bought it in the early 1970s. Their tax base is a mere $80,000, but the home is valued at $2 million. Prior to Prop. 19, when Ed and Eleanor passed on, they could have left their home to their artist son Elijah who could have moved in and painted en plein air on the deck to his heart’s content or kept the property and rented it out. Either way, he’d pay only what his parents paid in property taxes, and with a stepped-up income tax basis at the $2 million value, so even if he sold the property, he’d pay no income tax.

Under Prop. 19’s new rules, if Elijah moves into the home and files the homeowner’s property tax exemption within one year, he will be able to exclude $80,000 plus $1 million from increased property tax assessments, but the remaining $920,000 will be taxed at the regular property tax base. This would result in roughly $9,200 a year more than his parents were paying.

If Elijah does not move into the home, the property will be assessed at the full $2 million value, with the property tax bill then exceeding $20,000 a year.  Let’s hope Elijah can sell those paintings, or he just might have to sell the beach house. (There are those real estate agent cheers again).

The scramble

Parents looking to pass their principal residences or other property, such as family business property, would do well to seek advice soon.

There are options, including the use of trusts, forming business entities to hold the properties, and lifetime gifts before Feb. 16th but each of these techniques is very fact-specific and requires a “running of the numbers” to see what makes sense. This is particularly true since a lifetime gift of property transfers the income tax basis as well, and you may be trading lower property taxes for higher income taxes down the road.

Prop. 19 giveth, but it had to taketh away to keep those property tax revenues coming in. The proposition was said to eliminate “unfair tax loopholes used by East Coast investors, celebrities, wealthy non-California residents and trust fund heirs to avoid paying a fair share of property taxes on vacation homes, income properties, and beachfront rentals they own in California.” (ACA-11 Section 2.1(a)(2)).

Alas, it likely affects many normal California families as well.

Teresa J. Rhyne is an attorney practicing in estate planning and trust administration in Riverside and Paso Robles, CA. She is also the #1 New York Times bestselling author of “The Dog Lived (and So Will I)” and “Poppy in The Wild” released on October 6, 2020.  You can reach her at

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What kind of tax changes can we expect under President Biden?

People are generally comfortable and feel secure when their lives are stable, predictable and filled with certainty. This year will be remembered for all of the drastic changes.

We have endured a pandemic, a stock market crash and the election of a new president, all in a matter of eight months. Our world has been unpredictable, uncertain and unstable. To sum up 2020, it has been a year of change.

Fortunately, as we are approaching the end of this year, the stock market has rebounded from its historical lows, COVID-19 vaccines are on the horizon and elections are now over.

As we enter 2021, many unknowns will still exist. We do not know the long-term ramifications of COVID-19 on our economy or how quickly the logistically challenged vaccines will be administered to 7.8 billion people around the world.

What we can anticipate is that new tax legislation will be proposed under President-Elect Joe Biden’s incoming administration. Biden’s current plans include many changes to our current payroll tax, individual income tax and estate and gift tax laws. According to, we should be prepared for the following:

A 12.4% Social Security payroll tax for wages above $400,000. This would create a “doughnut hole” in the current Social Security payroll tax, where wages between $137,700, the current wage cap, and $400,000 are not taxed. However, for earned income above $400,000, the 12.4% payroll tax would be reinstated. The Motley Fool estimates this would raise between $797 billion and $1.04 trillion over the next decade.

The top individual income tax rate for taxable incomes above $400,000 will revert to the pre-Tax Cuts and Jobs Act level of 39.6% from 37% under current law. For the 2020 tax year, this top marginal rate is applied to earned income above $518,400 for single filers and more than $622,050 for married couples filing jointly.

Long-term capital gains tax and qualified dividends will increase to the ordinary income tax rate of 39.6% on income above $1 million, as well as eliminating the step-up in basis for capital gains taxation.

Expect the restoration of the Pease Limitation on itemized deductions for taxable incomes above $400,000. Under the Pease Limitation, the itemized deductions for the high-income taxpayer are reduced by the lesser of 3% of adjusted gross income above a specified income threshold or 80% of the filer’s allowable itemized deductions.

A limit of 28% on itemized deductions. For each dollar of itemized tax deductions, including charitable contributions, a taxpayer or couple filing jointly would only receive a maximum benefit of $0.28. This 28% limit would hold true even if a filer is paying a higher marginal tax rate.

Phasing out of the qualified business income deduction (Section 199A) for filers with taxable income above $400,000. As the law stands now, the qualified passthrough business deduction allows small business owners to deduct up to 20% of their business income under the TCJA, capped at $163,300 for single filers and $326,600 for joint filers in 2020.

However, for individuals and couples earning above these thresholds, an abundance of rules exist that determine whether or not you’re allowed to take qualified business income deductions. Biden’s plan aims to simplify this by keeping QBI deductions in place for those with less than $400,000 in earnings but phasing out passthrough deductions for those with more than $400,000 in earnings.

Expansion of the earned income tax credit for childless workers age 65 and over and providing renewable-energy-related tax credits to individuals.

In 2021, if economic conditions require, the child tax credit could increase from a maximum value of $2,000 to $3,000 for children 17 or younger, while providing a $600 bonus credit for children under 6. The CTC would also be made fully refundable, removing the $2,500 reimbursement threshold and 15% phase-in rate.

Expansion of the child and dependent care tax credit from a maximum of $3,000 in qualified expenses to $8,000 ($16,000 for multiple dependents) and increases the maximum reimbursement rate from 35% to 50%.

Reintroduction of the first-time homebuyers’ tax credit, which was originally created during the Great Recession to help the housing market. Biden’s homebuyers’ credit would provide up to $15,000 for first-time homebuyers.

Equalization of the tax benefits of traditional retirement accounts such as 401(k)s and individual retirement accounts by providing a refundable tax credit in place of traditional deductibility.

Expansion of the estate and gift tax by reducing the estate tax exemption amount to $3.5 million from the 2020 limit of $11.58 million and increasing the top rate for estate tax from 40% to 45%.

Limitations on the step-up in basis rules. A step-up in basis refers to the cost basis of assets or property transferrable to an heir upon death. If an individual purchased a home for $300,000 but it was worth $600,000 at the time of death, the heir would pay capital gains on anything over $600,000 when the home was sold. If Biden’s proposal were to become law, heirs would pay capital gains on anything over $300,000.

Repeal the limit restricting deduction of state and local taxes to $10,000.

According to the Tax Foundation General Equilibrium Model, Biden’s proposal in its entirety would raise $1.553 trillion from 2020 to 2029. Eventually, this tax plan would reduce the economy’s size by 1.62%. The plan would shrink the capital stock by about 3.75% and reduce the overall wage rate by a little over 1%, leading to about 542,000 fewer full-time equivalent jobs.

It is important to note that if the Democrats hold a majority in the House and the Republicans hold a majority in the Senate, any new tax legislation is likely to require compromise by both parties, limiting the scope of what would be implemented.

We do not know what will happen next year. But we can use the knowledge that we have today to make positive decisions regarding our future. If the proposals under President-elect Biden’s administration could have detrimental effects for you, schedule a meeting with your estate planning attorney, tax advisor, or financial adviser.

While we are not able to predict with certainty stability in our lives, we do have a small window of opportunity left this year to take advantage of effective tax and estate planning techniques. A change that we can control.

Teri Parker CFP® is a vice president for CAPTRUST Financial Advisors. She has practiced in the field of financial planning and investment management since 2000.  Reach her via email at


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5 tips to the secrets to aging well

What does it mean to you to live a life worth living?

This adage was popular around the turn of the 20th century. It was an exciting time, as the Industrial Age welcomed the Wright brother’s first flight and Henry Ford’s motor car. Yet, in those days most Americans lived an average of only 45 years. A life worth living included making sure that one had a job, was able to feed their family and to make the sacrifices necessary to give their children better opportunities.

Today, a life worth living has taken on a different meaning. We still seek to take care of our families, seeking to meet their basic necessities and to open doors for their successful futures. But most of us can look forward to living much longer than 45 years, which is well beyond launching the generation that follows us.

With the anticipation of living longer, we also talk about living well. A life worth living is an adage that is now used when talking about whether we have found meaning and fulfillment during our years here. We take stock of how we have contributed to the world, and we ask ourselves if we have truly made an impact.

Because of this development, behaviorists now see three distinct phases as they study life and aging.

The First Age is one of preparation and learning, as children grow and acquire life skills. They develop values that will govern their lives, and seek to answer such questions as, “Who am I and how do I fit into the world?”

The Second Age is one of achievement. This is the period of life when people establish their home, family and career. It is during this age that they hopefully become responsible members of society and make their professional contributions.

Then, as we move past the age of 50, we begin to shift into what is now called the Third Age. This age, previously considered as one of decline, is now seen as one of renewal.

Many reinvent themselves at this time, changing careers or professional paths, exploring new ways to enhance their lives and those of others. We step out to enjoy learning and trying out new experiences or interests.

This age can most often be a vibrant and exciting time, and I have often thought that the lexicon that accompanies this period of life does it a great injustice. Terms such as “retired” and “seniors” can serve as psychological barriers to a period of life that is ripe with rich and active opportunities.

How do we make the most of the Third Age? It’s an important question worth contemplating. Without designing this chapter of our lives with intention, we may miss the most meaningful and enjoyable part of life.

Here are five things to keep in mind so that you can make the most of this.

Live with purpose. What is important to you, now? Revisit your top values to see if how you are living now aligns with these. At the end of your life, what will you want to congratulate yourself for having accomplished? Is it a problem you will solve, or a contribution you will make to leave the world a better place? These are questions worth contemplating. Make this a point of discussion with friends or journal on this.

Power-boost your mindset. Do you enjoy a positive outlook on life? A negative outlook can actually cut years off your life. Signs you need to make a shift may include complaining about yourself or others, seeing the downfalls in opportunities before you see the potential, or talking about “why you can’t” with situations, rather than “how you can.”

Challenge your brain. Staying sharp means actively nourishing and flexing your brain. Some fun activities can include learning a new language, playing brain games, taking an online course and meditation. At a time when others are on the decline, decide to boost your memory and build gray matter.

Take care of your body. No list to age well would be complete without talking about things like exercise to maximize fitness, eating the right food, and reducing stress in your life wherever possible. You are never too old to start now. There are many resources online to help you get started.

Strengthening your social circle is a big part of what makes longer life enjoyable. Be sure your social circle is vibrant and meaningful. Do you have friendships that take but seldom give? Others that leave you feeling tired instead of energized? Take stock of your social circle to see if improvements need to be made.

Whether you are facing The Third Age, or well into it, it is not too late to take stock of where you are and where you want to be. Then make the shifts necessary to living a more meaningful and enjoyable life going forward, so that yours is a life well-lived.

Cotton works with executives, business owners, and their companies, to elevate and support leadership at all levels. Reach her via email at

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What COVID-19 looks like for those of us stuck in the middle class

It has been a little over seven months since the initial state lockdowns, and the focus on our Women Money and Mindset column this month is where we are now financially with the COVID-19 pandemic.

Most of the financial news right now seems extreme and unrelatable for most of us. For example, the wealth of U.S. billionaires increased by a massive $845 billion during the pandemic. At the same time, the number of those living in poverty has grown by 8 million since May.

So, how is COVID-19 affecting those of us who are not billionaires but who are also not destitute? Most Americans (58%) still consider ourselves to be part of the shrinking middle or upper-middle-class.

Those of us in the middle understand that the economy is not just about the stock market, although we most likely have an IRA or 401(k) and may own some stocks. We probably are not at risk of being evicted or losing work permanently, but we may be concerned about our ability to collect rents or might be worried if our businesses will fully recover. We may have suffered some losses this year and wonder if there are any tax breaks available, and we may have cut back on spending because we are nervous about future cash flow.

Here are some economic indicators and rates to focus on now for those of us in the middle.

The eviction rate

Some 12% percent of California renters have no confidence they can pay October’s rent, and an estimated 30-40 million Americans may be at risk for eviction once the CDC moratorium is lifted in January. Why is this a concern if we are not renters? Individual investors own forty percent of residential rental properties. These “mom and pop” landlords will struggle to pay their mortgages, utility bills, property taxes, maintenance costs, and other property-related expenses if their tenants cannot pay rent. Their inability to pay affects the overall economy and our property values.

If you are a landlord

With property taxes due in December, now is the time to determine what to do if your tenants cannot pay the rent.

Make sure to review eviction law changes. In California, the governor recently signed the “Tenant, Homeowner, and Small Landlord Relief and Stabilization Act of 2020”  that prevents evictions until after Jan. 31, 2021, and includes several new provisions that impact landlords. The law also provides new accountability and transparency provisions to protect “small landlord” borrowers who request CARES-compliant forbearance.

If you own commercial rental property, the new law does not apply to you but understand that many counties and cities also place restrictions on commercial evictions, with such protections often limited to small businesses and nonprofits.  Many California sheriff’s departments have also adopted policies declaring that they will not serve writs of possession during the COVID-19 emergency.

Your choices of what to do with a non-paying tenant are limited. You can forgive or lower rent payments even as your personal bills pile up, or hold firm, proceed with the eviction and risk the prospect of losing a tenant who may not be replaced for months or even years. The best solution might make you the hero and not the evil landlord: Work with tenants to see if you can help them apply for renter’s assistance so you can get paid. There are several local and state programs available.

Moving forward, review your property insurance policy with your agent or attorney to discuss lost rent coverage and business interruption insurance, especially if you own commercial rental property.

Interest rates

With interest rates being so low, now might be the time to refinance your rental or business property if it looks like cash flow might be tight. In fact, now is an excellent time to borrow in general, especially if your income was reduced in 2020. Most borrowing would be based on your 2019 tax returns. If there is a further economic downturn, or if the fed tightens credit, the ability to borrow later may not be as easy or inexpensive.

The unemployment rate

If you are a business owner and an employer, the unemployment rate should be of interest to you because it expresses the pool of employees available for you to hire. When unemployment was only 3.9 percent in September 2019, the number of candidates available, particularly as a small employer offering limited benefits, was restricted.

Now that the unemployment rate is 11% or more, the potential pool of employees available for you to hire just tripled, and the quality of the candidates has probably improved. It might be a good time to consider increasing staff if your company is recovering or if you want to grow.

If you did not take advantage of the Paycheck Protection Program, PPP, then you may be eligible for payroll tax credits when you hire or re-hire employees. You can even request payment now for employer payroll taxes you have already paid since March. For more information, visit

Tax rates

If you sustained losses in 2020, it might make sense to file your 2020 taxes early in 2021 to carry back the losses to 2018 and 2019 to claim a refund of taxes paid.

If your income was reduced during 2020, it might also make sense to reduce or eliminate the payment of your fourth quarter estimated tax payments in January.

If you still need cash this year, consider taking out an early distribution on your retirement plan to cover expenses (or pay off high-interest credit cards you may have charged), avoid the 10% penalty with the Coronavirus exception, and possibly pay tax at a lower rate this year, if your income was reduced sufficiently. Talk with your financial advisor.

Make sure to book an appointment with your CPA or tax attorney before the end of the year to discuss tax and estate/gift planning opportunities if your taxable income and value of your business were reduced this year.

While we have received good news over the past few months that the stock market is recovering, companies are re-hiring, and the very rich are doing well, we also see unsettling news about lines at food pantries and businesses shuttering. The truth is we do not know what tax laws, economic policies (or federal relief efforts) are in store for us until well after the election. Until that time, pay attention to small steps you can take to secure your overall financial health.

Michelle C. Herting specializes in estate, trust and gift taxes, and business valuations. She has three offices in Southern California and is president of the Charitable Gift Planners of Inland Southern California.

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Legal lessons from a pandemic: What you can plan for

I have been one of the lucky ones since the pandemic hit in March of this year. My loved ones are healthy, and my law practice is busier than ever. But I see the havoc COVID-19 has caused—I see it in my clients every day. I feel it myself sometimes, too.

It’s a sense of unease, of unknowing, and, perhaps most significantly, of a lack of control. It’s hard to plan for next week, let alone the future, when our environment, the advice from the experts, and indeed the outbreak itself, seems to change on a daily basis.  Can we take a vacation? Does it make sense to have a family gathering for the holidays? And if not now, when?

What we can plan for

That fear of the unknown and the need for control is why my office has been so busy. It’s that old saying, “only two things in life are certain: death and taxes.” Since I’m an estate planning attorney, I deal with both. My high net worth clients are concerned that if the election tilts one way, the very advantageous estate tax laws will change, and we’re busy doing planning and gifting to take advantage of current tax laws.

But everyone, no matter their net worth, is suddenly acutely aware of their own mortality, so we’re also busy with estate planning. Preparing for death or incapacity is one way of taking control.

Everyone age 18 and older needs a health care directive, a power of attorney, a HIPAA form and a will. If you own assets (that don’t have beneficiary designations) with a gross value of more than $166,250 in California, you should consider a living trust. A trust avoids the more costly and time-consuming probate process (especially in the times of COVID-19 when courts are working at a slower pace).

How to plan and take control

Hastily preparing estate planning documents due to sudden illness, travel plans or an unexpected change in life is not ideal. If the pandemic has you with more time on your hands, a more constructive use of that time — and a way to garner a little control — is to think about your estate planning and get it implemented. Spend some time thinking about these documents and the decisions inherent in this type of planning. The state of the world probably has you thinking more than ever about your values, and that’s imperative in estate planning.

We generally encourage clients to think about the next three to five years. If something were to happen to you (death or incapacity) in that time frame, what would be important to you? Don’t just think about who would inherit your estate—that’s often the easy part.

Decisions to be made

In the event you are incapacitated, who would manage your assets? Who would make personal decisions for you, such as where you will live, who your doctors will be, how your spiritual needs will be met? Do you have pets that need care?

It’s also a good idea to name alternates in case your first and even your second choice isn’t available (for example, you’ve named your spouse but you were both involved in the same car accident and he or she can’t act).

Advance Health Care Directives have received a lot of attention since the pandemic. Now, most everyone is familiar with ventilators and intubation, among other medical procedures. A health care directive allows you to state your preferences for those scenarios and others. Do you want life-sustaining treatment even if you’re in a condition considered irreversible? Do you want pain relief even if the medication shortens your life? Do you have any religious preferences that should be met, such as last rites? Do you wish to donate organs?

The agent named in your health care directive is also the person with the authority to carry out your post-death wishes, so be specific about cremation, burial, religious services, and the like.

Leaving a legacy

A living trust can be an ideal way to preserve a family legacy. When setting up a living trust, you decide on what you want to occur, and who you want to be involved in the event of your death or incapacity. You will decide who your beneficiaries will be (i.e. who inherits from you when you’re gone), whether you want assets going directly to those beneficiaries, or whether you want your assets held in a trust and distributed to your beneficiaries for purposes in keeping with your values.

For example, if education is important to you, you could structure a trust that provides the funding for education for your children, grandchildren, nieces and nephews (whomever you’d like) and reward specific goals obtained — cash distributions, for example, upon graduation from high school, college, or post-graduate work.

Your trust could provide for health care. If you have a special needs beneficiary, you may want to leave their gift in a special needs trust that provides for them but does not make them ineligible for government benefits. If a strong work ethic is important to you, your trust could provide for distributions to beneficiaries on a “matching” basis — annual distributions to match 50% of the beneficiary’s earnings, for example. A trust can likewise provide a supplement to beneficiaries who go into public service careers like teaching, law enforcement, or government work.

A sigh of relief

Often clients have trepidations about seeing me, and I get that. Seeing someone to talk about death and taxes is a lot like going to the dentist — you know you need to, but you suspect it will be painful. Think about estate planning instead as a way of formalizing your values and what you’d like to pass along to your beneficiaries. Think of it as a gift you are giving them.

If you think of estate planning as planning your legacy rather than as “death and taxes,” you will better be able to take control and plan for the future. Then, I suspect, you’ll be like many of my clients who are surprised at how relieved and how good they feel once the plan is completed. Of course, then I tell them they should come back for a review in three to five years, but that’s less painful. And won’t it be nice to think about the future again?

Teresa J. Rhyne is an attorney practicing in estate planning and trust administration in Riverside and Paso Robles, CA. She is also the #1 New York Times bestselling author of “The Dog Lived (and So Will I)” and “Poppy in The Wild” released on October 6, 2020.  You can reach her via email at

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Lessons from a pandemic: Save a lot, ride out the market

With the emergence of the coronavirus, we found ourselves in a global pandemic of proportions that, in our lifetime, we had only experienced in movies. Since March, we have been social distancing, wearing masks, and ordering our meals, groceries, and supplies online.

This disruption has changed our daily routines in ways we would never have expected. Fortunately, this pandemic has not been as deadly as the Spanish flu of 1918 but may have changed our lives in some manner forever.

While many of us have tried to stay focused on our family and work, it has not been easy. This disruption has changed our routines. After six months, parents are still finding themselves working from home while managing their children who are learning in a virtual classroom setting. In spring, we were all hopeful that social distancing would be temporary. But reality showed us this was not the case.

Many of us may find ourselves in this same setting until spring or summer of 2021. For example, Deutsche Bank publicly announced last week that its employees do not have to return to the office until July 2021.

Most of us have learned to keep enough food in our pantries and freezers to last several weeks without needing to make grocery store runs. Early in the pandemic, if we ran out of certain items, there was a good chance the stores were also sold out of the product. Our only option was to shop early in the day and stand in a long line to enter a store. Certain products seemed unobtainable. We were fortunate that the supply chain quickly rebounded to meet our needs.

COVID-19 taught us that, even in the U.S., we can experience empty grocery store shelves and people hoarding goods.

One takeaway from COVID-19 is to plan ahead and be prepared for the next disruption.

This pandemic is a reminder of why it is important to keep at least six months of cash reserves in your bank account. Many people have been laid off for months, many employees have permanently lost their jobs, and many small businesses have closed. The purpose of having a cash reserve on hand is to have the ability to access money in a financial crisis without incurring additional debt or having to sell your investments at the wrong time.

If you were not prepared financially for this pandemic, your primary focus going forward should be building an emergency cash reserve. It may be that in lieu of a six-month reserve, a 12-month reserve is more prudent.

The feeling was gut-wrenching as we watched the S&P 500 Index of large U.S. companies drop 34% in March from its market high on Feb. 19. The negative market swings caused much anxiety. If you panicked and liquidated a portfolio in late March, there was a good chance that you realized a significant loss. If you held tight, your portfolio should have rebounded. JPMorgan recently raised their expectations, predicting a 6% gain in the S&P Index this year.

While periods of market unrest are very unsettling, it is important to remember that history has shown us that the market will turn around. Our instinct in a volatile market is to sell out to preserve assets and avoid any additional losses. That approach might yield favorable results if we knew specifically what day to re-enter the market. But we do not, so hold tight.

The annualized return on the S&P 500 from Jan. 1, 1987 to Dec. 31, 2019, was 11.28%. Over this 32-year period, if you were out of the market during the 10 best-performing days, your annual return would have been reduced to 8.85%. If you were out of the market during the 50 best days of this 11,680-day period, your annual return would have decreased to 3.4%. History tells us that staying in the market yields better long-term results.

It is important to maintain a diversified portfolio so that, like in March, when the stock market plummeted, other asset classes—like bonds—performed well. If you are diversified, you are not investing in a single stock, or in a handful of stocks, and nothing else.

In most cases, an investor should have a variety of equity (stocks) and fixed income (bonds) in their portfolios. The best allocation or mix of investments depends on your age and risk tolerance level. The longer your timeline to retirement, the greater the opportunity to hold a higher concentration of equities. Managing risk as you age means gradually decreasing equity positions and increasing the allocation to fixed income.

COVID-19 has forced many us to change our daily routines and to re-evaluate our lives. We have not been traveling, attending sporting events, parties, or concerts, or commuting as much to work. These changes have provided us with the time to focus on our family, finances, and plan for our future. Sometimes, we get caught up in the fury of life and lose focus on what is important. Like it or not, COVID-19 has given us the opportunity for a reset.

Teri Parker CFP® is a vice president for CAPTRUST Financial Advisors. She has practiced in the field of financial planning and investment management since 2000. Reach her via email at

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Aging relatives could be hiding their frailty

I have a client who is in her early 90s and lives independently in a senior apartment living complex. She pays her bills, buys her groceries, showers regularly and cleans her home daily. At least that is what she will tell you if you ask her.

Recently, I scheduled an appointment with her to drop off a small bistro table for her patio. At one period in her life, she was a nun and continues to live by a vow of poverty, spending only enough money to survive. She had completely forgotten that I was coming, even after two reminder phone calls. Once I arrived, I spent the afternoon helping her organize the patio, tossing trash, and putting items away to make space for the new furniture.

When we shifted into the home, I discovered it was a complete mess, just like the patio. Papers were stacked a foot high on the kitchen table, flowers were sitting in vases of rancid water, the kitchen cabinets were sparsely filled and the bathroom was filthy. The overall living conditions were not acceptable. I helped take a few items to the trash bin outside, vacuumed the carpet and took many mental notes.

As soon as I left, I reached out to her only local family member and explained what I had observed. We had a difficult, lengthy conversation discussing how her loved one has reached a point where she needs additional assistance. We brainstormed until we had a plan in place that seemed to address the current situation.

It is difficult for most people to notice and accept the subtle changes in their loved one’s behavior that indicate that they may need additional assistance. Usually, the elderly person will not ask for help, knowing that they may be losing their cherished independence.

For the caregiver, acknowledging these changes pushes the awareness that our loved one is not immortal to the surface, reminding them that death is looming in the future. Sometimes family members believe they have failed because their loved one cannot live independently. The logical side of us knows that this is not true. Unfortunately, our emotions can interfere with our ability to accept that change must occur.

I did notice several signs that perhaps by themselves would have gone unnoticed but combined were a red flag. The signs were:

Forgetfulness: Recently, I have observed that this client is more forgetful than in the past. If we are scheduling a meeting, I ask her to grab a pencil and write down the meeting date and time. Sometimes she calls me several times before the meeting because she knows it exists but cannot recall when it is.

Disorganized, dirty home: My client has always lived a simple life, living in a clean, tidy home. However, because of her age, she had reached the point where doing laundry is physically difficult and where scrubbing the shower and changing her sheets is impossible. When I visited her home, it was a mess.

Lack of personal hygiene: My first observation when I arrived at her home was her appearance, and I immediately wondered if she was bathing. I peeked into her bathroom to observe if it was even feasible for her to bathe. It was not; the tub is about 16 inches high, which would be an obstacle for her to climb over. Her clothes did not fit and were secured by what appeared to be a man’s belt. This was not the typical outfit of a blouse and pants that she had worn for years. She almost looked as if she were homeless.

Minimal groceries: The kitchen cabinets were bare. I noticed a few Top Ramen containers of noodles. The refrigerator was sparsely stocked as well. The stove was piled with objects, and the counters were cluttered with stuff. Cooking any type of meal was not happening in that kitchen. In fact, reading instructions and opening certain types of food containers were probably not occurring either.

Consumed by loneliness: COVID-19 has been paralyzing for this individual; she is terribly lonely. Her local family member has not been able to visit since March due to health risks. She is possibly depressed due to the lack of social connections.

After I reflected on these observations, it was clear that additional assistance was needed. At this point, it seems that my client does not need round-the-clock care but would benefit from in-home assistance. She needs someone to help with meal preparation, laundry and bathing.

So initially, an in-home care company was vetted and contracted to provide two days of service. Additionally, a house cleaner was hired to clean the apartment and change the sheets weekly. Meals on Wheels now provides one freshly prepared meal a day. The family member, who also is the agent for the power of attorney and trustee for the trust, understands that she needs to provide oversight and possibly assist with the finances.

The most difficult and important step in this type of scenario is accepting the fact that a loved one is aging and needs additional help. Most likely, they are not going to admit that they are having a difficult time. It is possible that they may even tell little white lies to cover up the truth.

Look for signs that they may need assistance, brainstorm for solutions, and offer to help. If you feel frustrated because of the necessary changes, place this aside. Remember, we begin our life needing a caregiver and often end our life needing a caregiver. It is the circle of life.

Teri Parker is vice president for CAPTRUST Financial Advisors. She has practiced in the field of financial planning and investment management since 2000. Reach her via email at

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