Business Innovators Radio - Interview with Jeff Altman President of Altman Advisory Group – Legacy Planning

Episode Date: July 18, 2024

I have been in the financial services industry for over 50 years. I am a certified financial educator and approved to reach continuing education to CPA’s by the state of Nevada. I reside in Nevada with my wife of 30 years. I have two children and two grandchildren. I am a combat veteran of the Vietnam War and devote time to helping other vets in need. I derive great satisfaction from allowing clients to benefit from my experienceLearn More: http://altmanadvisorygroup.com/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-jeff-altman-president-of-altman-advisory-group-legacy-planning

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of Influential Entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have back with this Jeff Altman, who's the president of Altman Advisory Group and will be talking about legacy planning. Jeff, welcome back to the program. Thanks, Mike. Good to be here.

So I think that people would assume that, well, legacy is like my long term, you know, my namesake, my legacy. So I want to talk all about legacy planning and I'm excited to learn about what you do in that realm. But first, let's define what is legacy planning. That's a great idea. You know, over the years, I've had many clients of different walks of life and different attitudes. And one of my questions and getting to know them is learning about their children, their next and grandchildren, and do they want to pass on wealth to the next generation? And some say, well, of course, I can't.

I'd like to if I can. And then I have others who say, no, I don't. Or I have one son who has a drug issue and I'm not leaving him any money. Or my son hasn't talked to me in 15 years. and I'm not going to leave them a dime. Well, my function, my job is not to judge. My job is a hired gun is to make sure that clients' wishes are needed. And many times as these same people get older in life, I get a phone call and say, Jeff, you know, I've changed my mind and I'd like to leave something to my son. And I understand that. It happens often. So legacy planning is planning in it.

advance to transfer wealth to the next generation and perhaps seem to it that it can go on a generation after that after generation, depending upon the size of your estate. Now, there are the right ways to do these things and the wrong ways. And rules keep changing. You know, our government keeps coming up with new gutches. Give you an idea. In 2019, they'd be a passed what's called the Secure Act of 2019, and it's new rules for beneficiaries of IRAs. Now, under the old rules, you could leave your IRA to your children and your grandchildren, and they could spread the distribution over their entire life expectancy. That would lower the taxes, small amount each year.

But under the new rules, no can't. do that way. Now if you leave your IRA to your children or your grandchildren or any other non-spousal beneficiary, they must pay the taxes no later than 10 years after the inherited. Now, they have a choice. They could liquidate that account immediately and pay all the taxes are due. Now, keep in mind, let's say that it's $250,000 for lack of another number. that will affect the income tax they have to pay on the rest of their income. Yeah, throws them up to a different tier. Okay, they have another choice.

Choice too. They can spread the distributions and the taxes they pay in those distributions over 10 years. Well, that's a little better than having to pay them all at once, but it has to be spread over the 10-year period. or they can wait until the 10th year. And then the full pay the full tax on the distribution. Well, probably in 10 years, the hope is that that money would have grown. So now the taxes will be even higher.

So this is just an example. IRAs being one issue that can affect what you're able to pass on to the next generation. So in legacy planning, the sooner you make a decision as to what you would like to do in terms of passing on your hard-earned wealth to the next generation and maybe even thereafter, the quicker you make this decision, the better. Then the proper tools can be put in place. You know, I think a lot of people would go, like to your point about, oh, this person is doing this. I don't want them to get money. First of all, the key word in legacy planning is to have the plan. So to think ahead and to have a plan.

But secondly, like what you're saying here is, okay, when this happens and we're transferring and it triggers taxes for my family, if you're already planning ahead, that's being caring and loving for your family to provide this plan. But now the last element should be let's make sure that it's going to land to them in as optimal ways as possible. And now that big T word, taxation. So is there any way to prevent or even lower mitigate some of those taxes in your upfront planning? Well, the most advantageous financial tool to use to pass on greater wealth on a tax-free basis is life insurance.

Now, not all life insurance is the same, needless to say. So the proper life insurance product structured in the correct way will now, pass on tax-free wealth and maximize the amount that can be passed on. We also, through proper planning, can show the client how to pay for this life insurance without really taking money out of their pocket. As many people, my word, I can't afford it. They're not able to do it correctly. So life insurance is a key product.

Another issue that's very important, and it deals with IRAs. And that is how you designate your beneficiary. Many people have a living trust or have a will, and we feel that this will work to transfer. these accounts. An example is I had a couple of clients. They've been married for 20 years. It was a second marriage for both of them.

And they had a living trust, and their IRAs were in the living trust. The gentleman died, and his current wife didn't receive one penny of those IRAs. Everything went to his ex-wife. and the reason why, the reason for that is one small detail. And that the government tells us now that the proper way and the only way to pass on that account is through the beneficiary document that's part of the IRA. And that trumps, that overrules any other document that they may have, be in a living trust, be it a will.

and what have you. That is the only document that must be changed. So especially in the cases of second marriages or third marriages, it's important to understand that, how the documents are set up. And this, again, is where it's really necessary to have reviews of your account, a review that will cover all the bases.

You know, many times that financial, advisor calls his client. And do you know why he does that annual review? He's hoping he's going to find a reason to be able to generate more commission from this client. Rather than looking at all of the critical areas of the client's estate and the client's financial plan based on what that client's goals and needs are. So our function, my firm and my job as a coach, my clients really deal with me for a very specific reason, and that is to protect them, protect their assets, protect their financial well-being. We're not trying to find the next Apple stock that's going to make them a multi-millionaire. But we're trying to see that they reach their financial goals and they can

carry these financial goals out. We attempt to take what is complex and simplify it and design a plan that's tailor made to this client's goals, needs, and wishes. Challenges are going to come along in life. After all, life happens. Things change. Taxes, Medicare, the economy. The key is to monitor these things and be accountable for performance. What boils down to having a financial plan that protects the financial well-being of our client, a holistic plan that shows this consumer takes them on a path to where they're happy and financially secure with a whole. holistic plan. So it's important to look at the fact, do you have a holistic plan now? We cover income planning, tax planning, longevity planning, lifestyle maintenance, family dynamics.

All of these things can change our outlook and our well-being. It's what's important and meaningful to you that becomes important to us. Yep. You know, that's important. because A, it's not all about Jeff. It's all about the client. And I think that's important for people to realize. I want to go back to a point that you made that might have people scratch their head and going, a way to pass estate and legacy and funds and to your heirs is through a properly structured life insurance policy.

Talk a little bit about that from a very high level, but I think a lot of people think life insurance. I've got life insurance. How in the world would that work? Well, the life insurance policy you have now may well be sufficient, again, if it's set up properly. Sometimes that policy is not sufficient. I find most clients, when I ask them questions about their insurance, especially their life insurance, they don't really know what they have.

So one of the first things we do in our review is ask them to show us their financial statements and any other documents that they want us to review, life insurance policy being one of these. To be sure the beneficiary designations are correct, and again, is this a policy that's going to last all of their life? Sometimes clients will have a term policy, which means it stops at a specific period in time, maybe when they need it the most. Someone pays on this term policy for 30 years. they hit 70 years old, and if they live to be 71, the policies ended. It's not going to pay one penny. So we want to be sure that they have the proper coverage, and it meets the need. We don't want them to have insurance just for the sake of having insurance. Now, by nature, by law, that policy

will not go through probate, which is a costly expensive ordeal, not be exposed to probate, And the proceeds of the policy, if we generate it, created correctly, will be absolutely tax-free to the beneficiaries. Now, you know, let's assume you have an estate valued at $1 million. And do you want to leave $1 million to the next generation? Or if it were in your power, would you rather leave them $2 or $3 million? life insurance can do that because of the enhanced death benefit. And now again, if that policy is structured correctly, if it's titled correctly, that $3 million will pass on income tax free.

That's huge. And I think that's an interesting point that you bring up is you had said, you know, you can find the premiums for people where is it necessarily going to take a full hit out of their retirement accounts because whole life or permanent life insurance that you're talking about here, the premiums are higher than a term life. So how, what are some of the strategies that way? That's a very good question. Whole life is one policy that is truly very expensive. It's kind of vanilla. But another type of policy we look at is index universal life. Okay, index universal life. This is based on an index, be it the S&P 500 or the Dow Jones or a European index or an Asian index.

So you have the growth there, but the cost of the insurance is far less. A proper policy can be used to function as a bank, function as your bank, to where you're able to put money into the policy, and immediately, take that money out. You know, most whole life policies have what's called surrender charges that will run seven to 12 years. You put money into this policy and you ask the agent, well, how much cash is available in my policy? They'll say, oh, look, your account value is $5,000. Oh, that's great. How much money could I access right now? And he says, oh, that's only about 900.

Where's the difference? Surrender charges. Well, there aren't certain vehicles, certain life insurance products, where the surrender charges are waived so that when you put money into this contract, that cash is available and liquid from day one. Now, why would you borrow the money out?

Well, think of how a bank functions, just for a quick moment. You deposit money at the bank, and they pay you an interest rate, not too much, and they take your money, and what do they do with it? They put it out on mortgages, car loans, credit cards, you name it. And they're making a spread, they're making a profit on the money they borrow from you. Because when we open a bank account, savings or checking account, we are lending our money to the bank. Because the only way the bank can make money is by loaning money. And it's our money that the bank loans.

Well, here you have the ability to use a life insurance product the same way, just like a bank. Put money in, take it out, and generate a spread. That is, earn more money than you're being charged for the money when you borrow it. We can also show you ways in planning to create the cash flow to pay for the policy. And that might be by using a financial product that gives you an additional income stream. And that income be used to fund this policy. So it's really not affecting your standard of living or your lifestyle. But that again is all based on an individual, their age, their health, their longevity,

and what their goals and desires are. So, Jeff, I want to touch on a little bit of what you mentioned there about borrowing, because I think that that's an interesting concept. If you needed to go and borrow money for whatever, buy in a car or whatnot, you expect to pay an interest rate. And that interest is not yours. But if you're set up this index universal life policy and you've got cash value in there to be able to borrow, well, then whatever the interest rate is, is actually, if I'm understanding correctly, it's like taking money out of your right pocket and putting it in your left pocket because you're paying yourself.

That's correct. As example, when we take money out of an insurance policy, the correct way to do it to not be exposed to income tax is to borrow the money. We never withdraw it. And when we're borrowing the money, keep this in mind, it's an error to think we're borrowing money directly from the policy. We are not. We're borrowing the money from the insurance company. Our funds stay in the policy. Always there, always growing. It's in an account now that is growing based upon an index as an example of a standard and poor index, 500 stocks. Now, I could show you a product that over the last 20 years has actually returned to the client 15% a year. 15% a year, real gains. If you borrow the money, in today's rates, you might be paying 5.5% for the money. Well, if you're borrowing at 5.5%, but you're earning 15, you're making a spread of almost 10% a year. That's fantastic. Banks only operate typically, and insurance companies, on a 2% to 3% spread.

Cut that spread in half. Don't make 10%. make 5%. Make 3%. That's 3% on money, and that's earnings you never would have had. We can demonstrate to you what that means in terms of dollars and cents

and additional profits to you. So you're killing two birds with one stone. You're satisfying your desire to pass on that legacy wealth to the next generation and building your own asset, growing them. One dollar can do the work of two. And when you throw in the, we don't need to get into an in-depth tax conversation, but when you throw in the fact that the growth and cash value and dividends and all those things are growing tax-free, then that acts as even a higher amount for you

at that point, right? Tax-free is a magic word because income taxes, taxes are one of those enemies that can affect our financial well-being and the financial well-being of the next generation. Taxation and the V word, volatility. Volatility, taxation can destroy our income, can destroy the wealth that we want to pass on to the next generation. Well, I tell you, this has been really intriguing to talk about legacy planning, being able to see how this really, really can be planned out. You need to have that structure, that strategy in place ahead of time so that you're not caught short-handed

and also so that you have time to put these plans into place. Well, Jeff, this has been really, really helpful. If someone is interested in learning more and reaching out and connecting with you, what's the best way that they can do that? Please do. You can contact me directly via text, telephone, email, visit our website, schedule a one-on-one meeting, or if you like, schedule attending a webinar.

We do a series of educational webinars on various products. What we talked about today is one of those. You're welcome to RSVP, join. There's no cost, no obligation. We look forward to hearing from it. Jeff, thank you so much for coming back on. It's been a real pleasure. Thank you for your time, Mike.

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