Weekly Financial tip from Steve Sexton: Avoiding the Tax Time-bomb

Join Steve Sexton, the San Diego Entertainer’s trusted financial advisor, as he offers you yet another great money-saving tip. This week Steve offers financial advice that can help you and your loved ones avoid heavy taxes on money that you aren’t likely to spend—such as the money invested in your house, your brokerage accounts, life insurance policy, annuities, IRAs, etc. Together, this money is in what Steve calls a “never bucket,” or a sum of money that you are likely never to spend during the course of your lifetime and that will grow over the years. Watch the video below to see Steve’s advice in detail.

Steve explains that the money in this “never bucket” can create a “tax time-bomb”: the funds will accrue heavily because you do not spend them, and thus the taxes on the money you save will be very high when it passes on to your heirs or descendants. With the state tax plan going back up to a fifty-five percent range, the money you pass on to your heirs could be significantly reduced (by more than half of the original sum), leaving them with much less than you had intended to pass on. For example, Steve explains that if your heirs are to receive three million dollars from your savings, almost two million dollars of that could go to taxes. That’s a large chunk of money most of us would want to see go to our loved ones.

So how to avoid this tax time-bomb? Steve recommends the quick and easy solution of taking the proceeds from your brokerage accounts, annuities, and IRA and put them in a life insurance policy. By doing so, you ensure that all of the money from these financial investments will go to your heirs, as life insurance money is tax-free or not taxable. You can rest easy knowing that the people you care about will be well-taken care of in the future.

The Entertainer & Lifestyles Magazine has partnered with a top local financial expert to provide ongoing financial advisories. As part of the Entertainer’s continued commitment to San Diego’s financial wellbeing, Steve Sexton will continue to contribute and provide financial advice to our readers. Learn more about Steve Sexton on the Entertainer or tune in next week for another tip.

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