Philip Fish, CFP<sup>®</sup> and Estate Planning Specialist with Sandy Spring Trust

Your tax plan needs to coordinate with your financial and estate plans. Phil Fish,  CFP® and estate planning specialist, Sandy Spring Trust brings over 30 years of experience in estate and financial planning, discusses Federal and State Estate taxes, the Maryland Inheritance Tax, Traditional and ROTH IRA tax considerations, Irrevocable Trust tax issues and capital gains.

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    - Hello everyone and welcome to Sandy Spring Bank's Real Life Matters seminar series. My name is Phil Fish. I'm an estate planning specialist and a certified financial planner with Sandy Spring Trust. I've worked for the bank for the past 20 years and have over 30 years experience and I'll be your host today as we talk about taxes. Now, we host a number of different seminar programs. You can locate them at We have a seminar library and you can visit there, go to wealth and go to trust and visit our seminar library where I will lead discussions on wills and revocable trusts and other topics. We also host a professional discussion series, where I interview local professionals in the areas of law, tax, finance, and healthcare and we have those posted on our website as well. So we hope you may enjoy some of those discussions but for today, we're gonna talk about taxes. I'm speaking today from the boardroom of Sandy Spring Bank in Olney, Maryland. This bank has been around for 153 years. We were founded in April of 1868 so we recently just had our birthday and for those of you who bank with us, thank you. We've become the largest local community bank in the region. One fact is when we opened our doors in 1868, we were one of the few banks to treat everyone equally and provide the same terms for every individual. There were not different classifications and that was unfortunately common in the 1860s. So we've grown as a community bank and it's an honor to be your host today as we talk about some interesting topics. You'll be joining us in one of two ways. Some of you have joined us through the live events. So happy Tuesday afternoon to you. It's actually a wonderful spring day. So I hope you're gonna get a chance to enjoy the weather and some of you have gone to the seminar library and are watching a recording of today's event. So no matter how you've joined us, welcome and all I ask for you to have today is a piece of paper, a pad and a pen and a pencil. The way we structure these is we start out as a one way conversation. So for those of you on the live event you'll notice that you do not see anyone other than myself and that's done for privacy reasons. Your video is blocked and your microphone is muted as well. So you don't have to worry about background noise. You can just relax and take notes. We decided not to take questions during these seminar programs for a couple of reasons. One is that the answer I would have to provide from a question from someone I don't know that well, would have to be very broad and generic. and to be honest a little vague because every individual is different and whether we're talking about investments or estate planning or tax issues, there is a nuance and two individuals with very similar scenarios may ask a similar question, but based on that specific, the answer could be very different. So that's a nice lead into a quick disclaimer that I need to read and I'll explain why I'm reading this disclaimer to you in a few moments. So bear with me. The material today is provided solely for the educational purposes by Sandy Spring Trust, the division of Sandy Spring Bank and is not intended to constitute tax, legal or accounting advice or recommendation of any investment strategy or transaction. You should always consult with your own tax, legal, accounting or financial advisors, regarding your specific situation and needs, Sandy Spring Trust and the Sandy Spring Bank logo are registered trademarks and all rights are reserved. Thank you for that quick housekeeping matter but it is an important discussion as you venture out there and start reading materials or listening to seminars online or any type of broad distribution of information, realize that it is just that, it is a broad distribution of information and your specific situation is unique to you. So we strongly recommend that especially with tax issues but also with estate planning and financial matters that you're getting good advice from local professionals who have gotten to know your specific situation, your goals, your objectives, what you're trying to accomplish because the tax strategy or the investment strategy or the estate planning strategy may be different for you than a similar individual, because your specific needs or situation or goals is slightly different. With that being said, what I'm gonna try to do today is give you some good solid information, allow you to take notes and at the end of today on the slide you'll see my contact information. You can reach out to me by phone or email. I'm a salaried employee of the bank. There's no cost to speak with me and I'd be happy to spend the 30 minutes or an hour just talking to you and see if the bank can help. Sandy Spring Trust where I work provides three main services. We professionally manage investment assets under the federal fiduciary standards, no commissions, no products being pushed, no conflicts of interest our trust division has been around for over 30 years as a part of the bank and all of our staff are salaried officers of the bank. As a corporate trust division, we are sometimes named in legal documents as a trustee and as a personal representative in wills, sometimes as a primary, sometimes as a backup. and we also provide support to family members and individuals who are named as decision-makers, agents and powers of attorney, trustees, personal representatives to help ease the burden on their shoulders. So thank you for joining us today. Let's get down to some discussions on taxes. There's an outline. You may have that with you. It's posted on the website. If you don't have that with you, it's quite alright. It's a fairly broad outline I use for all of the discussions but today I'm gonna be focusing heavily on the tax side. So I'll kind of skip over some of the estate planning and investment pieces, just touch on them briefly. There are other seminars on the website that go into more details on those areas. So thank you for banking with us. If you don't bank with us, Sandy Spring Bank would love to be your partner. Please feel free to reach out to any of our staff and if we can help you in any way, we would love to do so. So taxes, well let's start with the estate planning documents. All of you on the call should have a will, a financial power of attorney, a medical advanced directive. Some of you may have a revocable living trust. One component of the wills and revocable living trust for some clients is to do tax planning. Specifically, what we're gonna be talking today are a number of different taxes, estate taxes, a tax on the transfer of wealth from a client to maybe the family, children, nephews, nieces, et cetera and then the United States of America, we do have an estate tax, it's sometimes called a death tax or a transfer tax that is imposed on individuals with a pretty large net worth. The thresholds have risen. The federal thresholds are currently over $11 million per individuals. So for most of us we don't have a federal estate tax problem. There is also a state estate tax and so in Maryland we currently have around a $5 million threshold, in DC it's around 4 million. Virginia does not have an a state estate tax and each state is going to be different. So wherever you happen to be located, as you work on your estate tax plans, please make sure you're working with legal and tax professionals who are familiar with the laws in the state where you reside because they are different as we go around the country but when we work with clients, estate taxes are calculated on all of your assets, your retirement accounts, your real estate holdings, businesses, land. So if you own a piece of land that you may have no intention of selling, the estate tax is going to be calculated on its fair market value. When you die what could you sell it for? Even though if you have no intentions of selling it and a lot of individuals who own land run into huge tax problems because they have not planned properly. They might own a farm or just a large piece of land that could be developed into one of those housing projects and so therefore it has an incredibly high market value and that's what the taxes are based on. So when you're doing your estate planning, please take a look at what your current values are, work with your tax advisor or your estate planning advisor. Give me a call if you wanna have a conversation with me and let's make sure that you're not going to be hit with a significant estate tax when you pass away. Now, the thresholds have risen quite a bit over the past number of years. They used to be a lot more aggressive, $600,000 thresholds, $1 million threshold. So they are significantly higher than they were maybe only 10 years ago but laws can change and so there's a lot of talk about whether with the new administration whether the estate tax laws will change. We don't know but it's something that you wanna keep an eye on and you wanna make sure your estate planning documents are up to date and that the tax planning embedded in your wills and your revocable trust are appropriate for you, for the state where you live and for your situation. In Maryland, we have another tax we have to think about, it's called the inheritance tax. It's different from the state estate tax which is on distributions to children or any individual, charities are exempt from the estate tax. So if you leave money to a nonprofit, that amount is not part of that taxable estate. Also transfers to your spouse are exempt but when we start passing money down to children or grandchildren, then may be an estate tax depending on the value of all of your holdings but with the inheritance tax is different. Inheritance tax is just in Maryland, each state's different but there aren't many States that have an inheritance tax. Maryland is one of them and it's a tax on transfers to non direct family members. Children, spouses, grandchildren or exempt. Nephews, nieces, cousins, friends are exposed to this tax. So if you do live in Maryland and you're thinking of transferring some assets upon your death to non-direct family members, make sure you talk to your estate planning attorney as you work through that and there might be some strategies that you can discuss as far as how best to manage that tax, who pays the tax. You can have the individual cover the tax bill or you can actually have the estate, your other assets pay the tax. So if you want to leave $50,000 to your favorite cousin and you want them to receive the full 50,000, you can structure your estate plans with your attorney in such a way that your other assets pay that tax bill so your favorite cousin gets the full amount that you wanted them to receive. So with estate planning, we wanna make sure you've got your estate planning documents updated, drafted by good local estate planning attorneys who are familiar with the tax laws in your area and if you do have a business, pieces of land, rental properties, large retirement accounts, investment assets and when we tally them all up, if we're looking at 5 million or above, which is a lot of money that may be a tax issue that we want to at least have a conversation with your either your estate planning attorney or your tax advisor. Next step on the outline was decision-makers and the only thing I wanna cover in today's topic, we talk about decision makers more in other discussions is that they're going to have to take care of your tax situation. They're gonna have to do your taxes. So within your estate plan, you have an incapacity plan that says if you're not able to make decisions, who's going to handle your affairs. Part of that responsibility is doing your taxes. So then we have to talk about how do we prepare the decision makers for that situation? Well, one critical aspect of that is the tax side. Who does your taxes? Where do you keep your tax returns? Where do you have your assets located? All of those 1099 that you're collecting come tax time, how is your decision-maker gonna access this. Many times there online accounts with passwords, does your decision maker, either your trustee in your trust or your agent and your financial power of attorney have access to this information because they're gonna have to do your taxes, either working with your accountant or hiring somebody or trying to do them on their own but the fiduciary, the agent or the trustee is legally responsible for taking care of your tax work. So you need to communicate with them. Let them know where taxes have located let them know where the tax forms are, who your accountant is. Passwords to computers and online accounts, things like that. Next thing up we wanted to talk about is titling of assets. Sometimes it can get involved with taxes for example, we'll meet with clients who in this case will state well I want to avoid the estate tax so I'm just gonna add my son onto my accounts because if they're a joint owner, then that's going to avoid the estate tax and generally that doesn't work that way because you've maintained ownership but when you're working on your tax plan, we do need to look at things like traditional IRAs, Roth IRAs, do we wish to convert a traditional IRA to a Roth which is way beyond the scope of just a broad discussion, but just so that you know a little background, a traditional IRA and again, I apologize. some of you on the call may be more knowledgeable and please bear with me as we go through some basics but some of you on the call today may be starting to learn about this information and so you're gonna be at the other end, you're gonna be overwhelmed with the terminology. Just hang in there. If you have questions, reach out to me and I'd be happy to try and help and answer some questions for you maybe point in the right direction but when you talk about IRAs, we have traditional IRAs where you put money in and you get a tax deduction on the contribution. The money grows tax deferred which means there is no tax paid each year. Normally with an investment account, if I had stocks and bonds invested in a account just in my name, Phil Fish, it's a taxable account. If there are interests or dividends or capital gains realized, we'll talk about capital gains in a bit. There is a tax consequence. Even if I reinvest the money back into the investment account there will be a tax owed on those distributions, those capital gains, those dividends, those interest distributions. So many times clients get confused, they are like, "Why am I paying taxes 'cause I reinvested the money?" The IRS and the state tax bodies don't care. If you have an account in your name and your investments generated taxable interest or taxable capital gains, you'll get a tax report at the end of the year. They don't care whether you take the money out or whether you hold the funds in. Retirement accounts are different though. If I have a traditional IRA, I put the money in I can get a tax benefit on contributions and then the money grows and I do not get a 1099 each year. That money can be reinvested and there's no tax consequence issue so wonderful tax shelter. When I retire and I start to pull the money out, that's when the taxes apply and the withdrawal from a traditional IRA is gonna be treated as ordinary income. That's important to remember because in a little bit we're gonna be talking about stocks in capital gains. and the one thing to remember is that you can have stocks inside of an IRA but then never gonna be treated as capital gains transactions because there's on the buying and selling of stocks, there is no tax consequence. You're kind of in a tax-free bubble within the IRA when the funds come out, everything's considered income even if it's coming from stock sales, there is no capital gains tax issues when we talk about retirement accounts, IRAs, 401ks, Roth IRAs. A Roth IRA is different, R-O-T-H and that is a special kind of IRA. You put money in, you do not get a tax deduction on contributions but as the money grows it does grow tax deferred and if you meet certain criteria, the funds coming out can actually be tax free. Meaning you could pull out $10,000 out of your Roth and if you meet certain conditions, you're a certain age, the money's been in the Roth IRA for a certain period of time, it is a tax-free withdrawal. Going back to our earlier discussion on estate planning. If you have Roth IRAs, if you have traditional IRAs and you're thinking of leaving these accounts to beneficiaries, it's a great chance to talk to your tax advisor, talk to your estate planning advisor, talk to someone like myself who can maybe be a navigator and talk about different strategies. We mentioned the traditional IRAs and how there's a tax consequence when the money is released. One strategy some clients employ is they will actually list a charity of their choice, a nonprofit as a beneficiary for a portion or even all of their retirement accounts because the nonprofit does not pay taxes. So upon my death, if I had a traditional IRA and I wanted to make charitable contributions upon my death, it was part of my estate plan maybe I direct some funds from my traditional IRA to the charities of my choice because those individuals would not... The nonprofits do not pay taxes on those distributions and maybe family members or friends, I leave money from other locations whether it might be more tax favorable. One thing that's important to realize from today's discussion, your financial, your estate plan, your tax plan are all interconnected. They all interact with one another and so we need to be very thoughtful when we develop your estate plan. We need to be thoughtful about how we title your assets. When we develop your financial plan, we need to think about how do we structure your investments? Is there a certain type of investment that is better suited to be used in a certain type of account? And the answer is yes. So just something to think about and that's one area that Sandy Spring Trust is really good working, is working with the client, working with their estate planning attorney, their tax advisor. We have salary professional portfolio managers who work with our clients who help build investment portfolios that are tax efficient but also remember the core purpose of an investment is to make money not just to not pay taxes and we'll talk about that in a little bit. So that's kind of the initial section of the discussion on estate planning. You wanna make sure you have your revocable trust if you are using those, wills financial powers of attorney, medical advanced directives. Wanna make sure your decision-makers named in those documents are familiar with your assets and the location of assets, know how your taxes are being done, know who your accountant is, maybe even been introduced to your accountant so they can have a little chat and if it's your son or daughter you could say, "Here's my daughter, Julie, she's named in my documents as my decision maker. If anything happens to me, Julie's gonna be reaching out to you and you can work together to take care of any tax issues. If I become sick, or when I pass away." Again a proactive approach trying to get ahead of things. Let's talk about investments a little bit. When we talk about investments regarding to taxes, we have different types of tax situations. The most simplest form is income taxes generated from interest earned on accounts. Now with our low interest rate environment, we realized that that interest number has greatly reduced. It's a difficult time. We do discussions on investments on our website and we can certainly talk to clients about the challenges individuals are facing right now with such low interest rates but when we receive interest from CDs or savings accounts so money market market accounts, if they're in an individual or joint or trust name that will generate a taxable consequence. If you're investing in bonds, different types of bonds have different types of tax consequences. So federal bonds sometimes have some tax benefits to them. State bonds will sometimes have some tax benefits So they're called municipal bonds, municipal bonds in the state that you live in can have even more tax benefits. So when you look at your tax situation you don't always though want to look at the most tax efficient investment. You want look at your net return. So for example, interest rates will fluctuate between corporate bonds and federal bonds and municipal bonds. Depending on the client's tax situation, sometimes a federal bond would be better than a municipal bond. Sometimes a tax-free bond is better than the corporate bond. Sometimes it's not and it's not always a set. We may have a client who five years ago, we might be using more municipal bonds in their bond portfolio but now we might be leaning more towards corporate bonds just because of the way the interest rates have changed, the specific investments have changed, the client's tax situation might've changed. So when we look at investing, you want to be careful to immediately say, "Oh I want a tax-free bond because I don't pay taxes." That's very good but if your net return is still below what you would receive in a corporate bond after paying taxes, well maybe you want to look at a corporate bond, pay the tax and simply have more money in your pocket at the end of the day. Now I admit, that's a gross simplification of some of the strategies employed in bond investing and bond investing can be as complicated as stock investing. Of all types of different bonds, federal, state, municipal, county bonds, you have different levels of risk, different maturities, different tax considerations. You might buy a bond at issuance but you also buy a bond after it's been issued, you might buy a bond from somebody else, you might buy a bond for less than it was issued for, at a discount, you may buy at a premium. So then there are tax considerations to be considered then. Just realize again, that investing and taxes are intertwined with one another and the two decisions for hand in hand as you look at creating a portfolio for clients. So bonds, lets move to stock, with stocks, two reasons you invest in stocks to me, one is dividends. There are qualified dividends that are taxed at certain levels and non-qualified, again, I'm not gonna get into the deep weeds of tax issues but you need to realize that the type of investments you make will have different types of tax consequences. So make sure your financial advisor is, you know knowledgeable and is working with your tax advisor and with you, because again, based on your tax situation, certain investments may be better suited inside of a retirement account. Certain investments may be better suited inside of a taxable account. Certain investments may not be suitable for you based on your tax situation. So it's not just a matter of picking a good investment. It's a matter of picking an investment that is aligned with your overall tax strategy. So there's dividends, again if the dividends are reinvested the taxes are the same as if they are paid out and dividends paid inside of a retirement account, there again, no tax consequence there, and when those dividends if they're released outside are considered ordinary income just like with capital gains, distributions out of an IRA are gonna always be treated the same way. If it's a Roth, it may be tax-free. If it's a traditional IRA, there may be tax consequences and again, that may be based on your tax situation at that time and your tax bracket at that time. Another reason we invest in stocks is capital gains. You buy a stock for $10, it grows to $50. What occurs then is what's called an unrealized capital gain and again, if you're familiar with investing my apologies, because you're gonna look at me on the screen and go, "Good grief Phil everyone knows this." Well, you know, everyone does not. We host these events as a community program. You don't have to bank with us. You don't have to give us a lot of information. We asked for your name on the seminars and how you heard about the event, that's all we ask. We don't reach out to anyone unless you ask us to. So after listen to our program today, if you'd like to speak to me just send me a phone call or send me an email and I'd be happy to talk, but we don't reach out and contact anyone unless they've asked. So with capital gains, we've got a $10 stock, it grows to $50. That's an unrealized gain. There is no tax consequence because it's not real. You have not sold the stock. You have not realized the profit. So the IRS and the state where you reside both go, "Well, yes, it's worth $50. You've made a potential profit but that stock could go back down to 10 or even less. So we're not gonna tax you, unless you decide to sell the stock." If you sell the stock then you turn the unrealized capital gain into a realized capital and then there may will be a tax consequence. Based on on your tax bracket, the amount of capital gains taxes you pay will be different. There are different tax levels for different income levels so again, that's where good planning comes into play. Maybe a client who's had a quiet year where the taxable income is lower, maybe that's a great time to look at capturing some capital gains in their investment portfolio. Maybe an individual who's had a very successful year and has generated a lot of other taxable income may choose to be more conservative in how they realize capital gains in their investment portfolio. One thing I love about Sandy Spring Trust is for main accounts we assign a portfolio manager who's gonna work with the client and have those conversations with the client and have the ability to adjust the taxable consequences of the portfolio based on the client's needs. A lot of investment accounts now are model portfolios, they're gonna be set in stone and the tax consequences are gonna be irregardless of your own specific situation. You can't call up the team and go, "Hey can you ease up on the realized gains this year because I've sold some property and I've got a pretty heavy tax here." And the answer many times will be no. So if you feel you're not getting the type of personalized investment advice that you feel you deserve, you might wanna give us a call because we've built a wonderful reputation of being really focused on, as a fiduciary doing what's in the client's best interest. The other challenge we see with capital gains though, is a client's unwillingness to capture gains because of the taxes. I joined the bank in 2000 during the technology bubble and right before the time technology bust that occurred, when technologies stocks just went crazy high up and then just crushed them to the earth and there are many individuals who are millionaires, well on paper, but for different reasons, they chose not to sell their stocks that had greatly increased in value but in many times it was because of the tax consequence and capital gains taxes can be sometimes up to 20, 25% in taxes so if you sold, you know, $100,000 in stock, you could face, you know, 10, $20,000 in taxes depending on a lot of different factors but you would still have 80,000 even if you paid 20,000 in taxes and unfortunately in 2000, 2001, 2002 we saw a massive crash in the stock market and all of those potential profits went away. Discipline is very important in a tax plan. Making sure on the estate planning side, that you're working with an estate planning attorney and a tax advisor looking ahead, staying on top of the tax laws as they change 'cause they can change pretty rapidly and making sure your plans have flexibility within them. On your investment side, again, making sure that you're not set in a stone set strategy that you're aware of all the variables, you know what are interest rates doing? How are municipal bonds comparing to corporate bonds? What type of accounts are you using? Is it a retirement account? Is it a taxable account? Is it a trust account which we'll talk about at the end of today's program. Different types of accounts have different tax consequences related to them and just not paying attention can really hurt the client. So right now we've had an incredible run-up in the stock market, a strong fiduciary discipline means you are taking profits as you go along, you're paring back to maintain the asset allocation. So if you had a client with say a million dollars invested and they had half a million in stocks and half a million in bonds, if we left that alone and that was the setup 10 years ago they would be grossly over-weighted into stocks right now because the stock investments would have gone way up creating an imbalance. A fiduciary style would maintain discipline and pair off those excess profits and yes, if it's a taxable account, pay the tax but then you capture the gain, you make it real and then you can realign it into investments that might have a little more stability and might be better positioned if we go through a downturn in the market. So having discipline on both your investment strategy and your tax plan and it's not always about paying the least amount of taxes possible, because if you pay a tax, it means generally that you've made money. Maybe you sell a building for a profit. You sell a stock for a profit. You receive interest and dividends, but a case I've run across clients who said, "Well, I'm gonna keep my money in a non-interest bearing checking account because I don't wanna pay taxes." That doesn't make any sense because if you earned interest on that account, even if you pay taxes, you're still gonna end up with more money in your pocket than if you had earned zero. So we're always gonna look at the net return when we do look at investment and tax strategies and try to work in a coordinated fashion. Estate planning, tax planning, financial planning for each client are gonna be integral and have to be coordinated accordingly. Couple of things that before we wrap up today's session. With your decision-makers, they are going to need help. So the people named in your legal documents, your agents and your financial powers of attorney, trustees in your trust, they're gonna need investment advice because if you have a health issue, money may need to be raised to pay medical bills, where do we pull those funds from? Do we cash in a CD before it matures? Do we sell a stock? Do we pull money from a retirement account? Those actions are gonna trigger potential taxable consequences. They need to be done thoughtfully and generally most individuals are gonna need advice and guidance, legal advice, tax advice, financial advice. It's why many times at Sandy Spring Trust we get asked to be that advocate, that navigator to help clients work their way through these issues but also be positioned to provide support to individuals named in future roles within your legal documents, who are gonna be thrust into this role when mom or dad get sick and say, "Okay now you've got to manage all of these investment portfolios and deal with the tax issues and take care of your parent and pay medical bills." And many times we see some really bad investment decisions be made. I'll give you an example. The clients in their 90s and they have a stock portfolio and they have unrealized gains in that stock portfolio. They've had the stock portfolio for a long time. It's a taxable account and their health has declined. So unfortunately we're feeling that their life expectancy is not that long. There is a tax law called the step-up in basis law, which states that upon the death of an individual assets in their name, the cost basis is adjusted. Might be real estate, businesses, land, stocks to the value at their date of death. So if a client had bought a stock for $10 and it was now worth $100, upon that death, the cost basis of just up to $100, the value at the date of death. So to sell a stock for a client in their 90s to raise cash, to pay a bill would trigger a tax that might not be necessary. Maybe there's other funds that could be used, maybe even cashing in a CD early and paying a penalty would be a better financial move. than triggering a very large tax bill from the sale of stock. Those are the types of issues we help our clients with. Upon the incapacity of a client, somebody is going to have to come in and take care of things, upon the death of a client somebody's gonna have to come in as the personal representative, as the trustee and take care of the client's situation. So we're going to want to think about estate taxes, valuations, retirement accounts, beneficiary designations, who are you leaving these retirement accounts to? What are the tax consequences of leaving those funds? You leaving money to a nephew in Maryland? An IRA account could be very tax inefficient because we might have the Maryland inheritance tax plus potential income tax. Maybe there's another source of funds we could use to satisfy that beneficiary bequest and the last thing I wanna cover today is once we do the estate tax planning and again, if your net worth is above 5 million, which is a lot and for many of us on the call we're not gonna have that type of network but if you have businesses or real estate holdings, a large investment accounts, a large retirement accounts, everything gets added up. In DC and Maryland you may well have a state estate tax and realize that the federal threshold although very high currently may adjust in upcoming years, we don't know. Please make sure you're talking to a tax advisor, an estate planning advisor, somebody knowledgeable with the tax laws in the state where you reside and just make sure that you're not gonna end up having your family pay an estate tax bill, whether it's a federal or a state one that could have been avoided or even eliminated with a better estate and tax plan. There's nothing worse than seeing a family give money to the federal or state government that could have been not given to them if there had been a better tax plan, a better estate plan. I mentioned earlier these low interest rates which is a gut punch to many investors but there's always a counter side for clients with large estates with real estate holdings or land or businesses. These low interest rates provide a wonderful strategy to transfer wealth to future generations in very tax efficient ways. I'm not the person to provide that kind of specific advice. My role for the bank is kind of a generalist, a very knowledgeable generalist with 30 years of experience, more like a general practitioner in medicine, to meet with clients, to talk to them but I don't manage assets for our clients, even though I've been a certified financial planner for 20 years. We have salaried seasoned professional portfolio managers within our trust division who do that and I don't create legal documents. I'm not a lawyer and even if I were, we have lawyers on staff we don't provide legal advice. We refer clients either to their attorney or we can introduce you to local estate planning attorneys but please make sure that you're getting good advice and you look at strategies because if you can transfer your wealth legally and efficiently to people that you care about, whether it be family or friends or charities and you can reduce your federal or state estate tax bill, that's a good thing and everything we talk about is above board, it's legal, it's using the tax code for the client's benefit. The last thing I wanna talk about today is trusts, not revocable living trusts so if I had a revocable living trust it would be the Phil Fish revocable living trust created during my lifetime. It uses my social security numbers, it's tax tracker. So anything that I do in my revocable living trust is considered my assets under my control and it will be reported on my 1040 each year just like if it was in my individual name, but when I die I might establish a trust for a family member because they have a health issue or an addiction or they're young and that irrevocable trust is its own taxable entity. It will be assigned its own tax identification number and it will file its own annual tax return, call it 1041. These become complicated. So if you're planning on establishing a trust for the loved one, realize that the trustee of that trust is gonna have to hire somebody or take care of the taxable consequences of that trust and we get hired many times to either be the trustee or we're hired by the trustee to manage those trust assets and how those assets are managed and the tax consequences, it comes very important. The way these trusts work is the trust has tax consequences on any taxable consequence that is held within the trust. Distributions made out to the beneficiary in most cases, that tax consequence then gets passed down to the beneficiary. So based on the beneficiaries tax situation, we may do very different types of investment strategies. If we have a beneficiary in a very high taxable consequence, we may structure using more tax efficient investments. Our bank trust division a couple of years ago was asked to take over a trust where the beneficiary was a Maryland resident. The former trustee was not using bonds that were efficient for the beneficiary in Maryland. So they were paying a much higher state tax than they could have. We were brought in and we immediately made adjustments to the investment strategy to make the trust more tax efficient for the beneficiary. That's the type of work we do at Sandy Spring Trust, managing assets under federal fiduciary standards, serving within documents as a trustee or personal representative, or being hired by family members or friends who are named as trustee. If we can help you in any way, please reach out to us. and we'd love to be of assistance. We've covered a lot today. I'm speaking today from the boardroom of Sandy Spring Bank in our main office in Olney. Behind me, normally we're currently still in COVID times and so we're doing a lot of social interactions, virtual interactions, but in normal times this room gets filled up with senior management, Dan Schrider our president Phil Mantua our chief financial officer, board members. We are the largest local community bank that is based in this region. Our board of directors meet here, our executives work in this location and for 153 years, we have stood by our client's side during very difficult times, the rebuilding of the country after the civil war, World War I and the pandemic that occurred during that time, the great depression of the late twenties, early thirties, World War II, the technology crisis I mentioned that occurred in 2000 when I joined the bank 20 years ago and the crisis that we've been dealing with over this past year or so I hope you are safe and I hope your family is doing okay and if you've lost anyone recently, I am so sorry. It's been a difficult time. On behalf of the bank, thank you for joining us today and if we can help in any way, please reach out to me by phone or email and I'd be very happy to answer your questions and we can chat virtually or over the phone for half an hour and an hour. I'm a salaried officer of the bank. There is no cost to talk to me. Maybe I'll help indirectly, give you some ideas, things to think about or maybe you may decide to retain Sandy Spring Trust to be your partner and navigator and help you and your family move forward with a strong estate plan, a strong financial plan and a strong tax plan. On behalf of the bank, thank you for joining us today. Take care and have a wonderful day.

  • Disclosure

    This material is provided solely for educational purposes by Sandy Spring Trust, a division of Sandy Spring Bank, and is not intended to constitute tax, legal or accounting advice, or a recommendation for any investment strategy or transaction. You should consult your own tax, legal, accounting or financial advisors regarding your specific situation and needs. Our staff will work closely with your advisors to coordinate your overall plan. 

    Sandy Spring Trust does not endorse or recommend the services of any person or entity not affiliated with Sandy Spring Bank. 

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