The Call Your Kids Will Get: Inheritance From the Other Side of the Table

You spent forty years building it. It will land in your kids' lap during the most expensive decade of their lives. This week we sit in their chair, because the best inheritance plans are designed from the receiving end.

Read the full article: https://news.americanretirementadvisors.com/wtki-the-call-your-kids-will-get/

American Retirement Advisors helps families in Arizona and Nevada navigate healthcare, retirement income, and inheritance planning. Want to reach out? Text us at (602) 281-3898, email support@americanretire.com, or visit https://americanretirementadvisors.com.

Transcript

SPEAKER_06 0:01

Welcome to the American Retirement Advisor, coming to you from One to Three Z Studios. Real stories, real strategies, and straight talk about healthcare, retirement income, and inheritance planning. I'm Ian Schaefer, joined with Eddie and Betty. Let's get into it.

SPEAKER_04 0:16

Welcome back to the American Retirement Advisor. I'm Betty, and Eddie's here with me in the studio today, and we have something a little different for you. We're talking about an article that Ian Schaefer, the COO here at American Retirement Advisors, just published. And it stopped me in my tracks when I read it.

SPEAKER_00 0:35

Good to be here. And yeah, this one is worth sitting down with. Ian is kicking off a whole week-long series, and this first piece sets the tone for everything that follows. He basically flips the entire conversation we usually have about retirement planning.

SPEAKER_04 0:51

Right, because we spend so much time talking to the people building wealth, the savers, the investors, the folks in our workshops. And Ian just turns the chair around, as he puts it, and says, let's look at this from your children's side of the table.

SPEAKER_00 1:06

And that reframe is doing a lot of work. Because most people, when they think about leaving an inheritance, they think about the number. How big is it? Will it be enough? Did we do right by our kids? But Ian's point is that the size of the account is not the whole story, not even close.

SPEAKER_04 1:23

He opens with this image that I keep coming back to. Your son at 52, at his desk, 17 minutes before a meeting, and his phone lights up. And by Thursday, he's sitting at your kitchen table with a legal pad, a password he can't find, and a question he won't say out loud.

SPEAKER_00 1:40

That image is so precise. The legal pad, the password he can't find. Ian's not describing a tragedy in the obvious sense. He's describing what actually happens, the practical, grinding, emotionally overwhelming reality of being the person who has to figure everything out while they're also grieving.

SPEAKER_04 1:59

And the question he won't say out loud, I think that line does so much. Because there's grief, there's love, and underneath all of that, there's this very real and urgent practical question about what to do with all of it. And people feel almost guilty for thinking about it.

SPEAKER_00 2:16

Ian says he's watched this pattern repeat, sitting in the back of hundreds of client conversations, and what he notices is that families measure an inheritance by its size. The tax code measures it by its timing, and he says the timing is, quote, almost comically bad.

SPEAKER_04 2:33

Okay, walk me through that, because when I first read it, I thought, well, the timing is what it is, right? You inherit when your parents pass. What does timing have to do with it?

SPEAKER_00 2:44

So this is the heart of the whole thing. Think about when realistically your kids are going to inherit. If you live a long, full life, which is the whole point of everything we're doing here, your children are probably going to be somewhere between 50 and 60 years old when that happens.

SPEAKER_04 3:00

Which sounds fine on the surface. They're adults, they're established, they can handle it.

SPEAKER_00 3:05

But Ian lays out what those years really look like: peak career, peak salary, peak tax bracket, maybe a kid in college, maybe two, a mortgage that's not quite paid off. He describes it as the single most expensive, highest earning stretch of their entire lives.

SPEAKER_03 3:23

So they're already in the top of their tax bracket, and then you drop a retirement account on top of that.

SPEAKER_00 3:28

That's Ian's exact framing, and it's a powerful one. Because here's what most people don't fully appreciate. Since the Secure Act, most adult children who inherit a traditional IRA don't get to stretch withdrawals out over their own lifetime the way heirs once could. The general rule now is a 10-year window to empty the account. 10 years sounds like a lot of time, though. It sounds like it, but every dollar that comes out of a traditional inherited IRA is ordinary income. It gets stacked right on top of everything your child is already earning. And Ian puts it so clearly, the account you built in a 22% world can unwind in their 35% world. Same dollars, very different outcome. Just because of whose tax return it lands on.

SPEAKER_05 4:16

That framing, same dollars, different world, I think that's the thing people really need to sit with.

SPEAKER_03 4:21

Because when you're saving, you're thinking about your tax situation.

SPEAKER_04 4:25

You might be in a lower bracket or you're deferring on purpose, but you're not necessarily picturing what bracket your kid is going to be in when they receive it.

SPEAKER_00 4:33

And that's the gap Ian is trying to close with this whole series. He's very clear that this is not meant to be doom and gloom. His word is options. Every one of these tax situations, he calls them tax bombs, can be diffused. But the person holding the tools is you, and the tools only work while you're still here to use them.

SPEAKER_04 4:53

That's a really important distinction. It's not that your kids can fix this after the fact. You have to be the one who sets it up in advance.

SPEAKER_00 5:01

Right. And Ian is going to spend the rest of the week walking through how step by step. Tuesday, which is the piece coming out next, goes deep on the inherited IRA rules and the specific moves that only work while you're alive. So today's article is really the setup for all of that.

SPEAKER_04 5:20

He lays out a trail map for the whole week. Tuesday is the 10-year tax bomb, Wednesday is about the house, what really happens when children inherit property, and he specifically mentions that Arizona and Nevada families have an advantage that most national articles never talk about.

SPEAKER_00 5:36

Which makes sense given that American Retirement Advisors is based in the Southwest. There are state-specific rules around property and deeds that can make a real difference, and most of the general advice people find online doesn't account for that. The specifics there are going to be worth paying close attention to on Wednesday.

SPEAKER_04 5:55

He also mentions something he calls the Three Siblings One House problem, which if you've ever been in that situation or watched another family go through it, you know exactly why he flags it.

SPEAKER_00 6:06

Three people with equal ownership and potentially very different ideas about what to do with a property. Sell it, keep it, rent it, and everyone's grieving at the same time. It can pull families apart in ways that have nothing to do with money and everything to do with money at the exact same time.

SPEAKER_04 6:23

Thursday is what he calls the folder, the 30 days after the call, and he says it's the most practical thing they'll publish all month.

SPEAKER_00 6:32

This is the article I'm genuinely looking forward to because it's about the mechanics of what your kids will need to find and when. And Ian connects it to something specific that American Retirement Advisors has built, which is the Beneficiary Box Program.

SPEAKER_04 6:47

Tell people about that, because he describes it pretty clearly in the piece.

SPEAKER_00 6:50

So the Beneficiary Box Program is four working sessions with David Schaefer, plus a system that Ian describes as one your family will really use. And Thursday's article is essentially the story of why it exists. So we'll definitely come back to that when that piece drops.

SPEAKER_04 7:08

And then Friday wraps up the week with what he calls the gift of a plan. And there's a spoiler right in the trail map, what the luckiest heirs all have in common. And it's not the biggest account.

SPEAKER_00 7:19

That line is doing a lot of work, and it connects to the deeper point Ian is making throughout. He talks about his father sitting across from families for decades and watching a pattern repeat. The inheritances that change lives for the better are almost never the biggest ones. They're the organized ones.

SPEAKER_04 7:37

And he gets specific about what organized means. It's not just having a will somewhere in a drawer. He lists it out.

SPEAKER_00 8:00

That last piece is so important, while everyone was still healthy enough to laugh about it. Because those conversations are so much easier to have when there's no urgency, when it's just a Tuesday afternoon and you're going over some paperwork, versus the alternative, which is your kid at the kitchen table with the legal pad and the password he can't find.

SPEAKER_04 8:19

Ian's phrase for the other kind of inheritance, the disorganized kind, is a scavenger hunt with a tax bill attached. And what gets me is that he's not talking about negligent people or people who didn't love their families. He says, same love behind it, same 40 years of work. The difference was the handoff.

SPEAKER_00 8:40

That framing should probably be on a wall somewhere, because it takes all the judgment out of it. This isn't about whether you loved your family enough. It's a logistics problem, it's a planning problem, and it's entirely solvable.

SPEAKER_04 8:52

So let's make this concrete for a moment, because I think some listeners might be hearing all of this and thinking, well, I have a will, I have accounts, my kids know roughly what we have. Is that enough?

SPEAKER_00 9:03

Probably not, and Ian's article gets it why. Having the assets is one thing, but are the beneficiary designations current? Because beneficiary designations on a retirement account, a life insurance policy, they pass outside of a will. So even if your will says one thing, if the beneficiary form on the account says something different, the form wins.

SPEAKER_04 9:25

And people don't update those after major life changes: divorce, remarriage, a child being born, a beneficiary who passed away before you did.

SPEAKER_00 9:35

It happens all the time, and it doesn't take a complicated situation to create a problem, just life happening and paperwork not keeping up. The exact rules for how to review and update all of that and the sequence to do it in is the kind of thing I'd really encourage people to bring to one of our advisors, because the specifics matter and they're going to vary by account type.

SPEAKER_05 9:55

And there's a timing dimension to this too, right? Because Ian is very clear that some of these moves only work while you're here. What kinds of things fall into that category?

SPEAKER_00 10:04

Well, the big one he's pointing toward for Tuesday is the inherited IRA situation. The strategies for reducing the tax hit on a traditional IRA, things like Roth conversions, those have to happen during your lifetime. Once the account passes to your child, the window for those particular moves is closed. And that's why Ian keeps coming back to the idea that the person holding the tools is you.

SPEAKER_04 10:26

I want to go back to something he says about the house, because I think that one catches people off guard. Most people assume that leaving the house to your kids is a straightforward thing. It's a gift, it's the family home.

SPEAKER_00 10:37

And emotionally it is. But practically, depending on how it's set up, it can be very complicated. Ian flags the deed situation specifically, and he mentions that Arizona and Nevada families have an advantage. We'll get into the full details of that on Wednesday when that piece comes out. But the general idea is that how the property is titled and what kind of deed is in place can determine whether it goes through probate or not, and probate is slow, public, and expensive.

SPEAKER_04 11:04

So there might be a way to set things up so the house passes to your kids without going through the courthouse at all. That's what he's pointing at.

SPEAKER_00 11:11

And again, the specifics are going to depend on the state and the situation. So I'd put that squarely in the category of things to ask one of our advisors about. But the point is that the deed you have on the house right now may or may not be the right deed for your goals, and it's worth knowing.

SPEAKER_04 11:26

And there's this piece about life insurance that I think connects here too, even though Ian doesn't spend a lot of time on it in this introductory article. When you think about the tools available for making an inheritance land cleanly, where does life insurance fit in?

SPEAKER_00 11:39

It's one of the more powerful tools in this space, but it really depends on which job you're asking it to do. Early in life, the job for most people is income replacement. If something happens to you while your kids are young, you need something to replace your income while they still depend on it. That's the job of term coverage, which is temporary, which is designed to be affordable and to cover those specific years.

SPEAKER_04 12:02

But term goes away eventually, right? You get to a point where it's expired.

SPEAKER_00 12:07

Right, and by design, because if you've done the planning right, by the time term expires, the kids are independent, the mortgage is done, and your savings have built up. But later in life, the jobs change. Now you might be thinking about estate liquidity, making sure your heirs aren't forced to sell assets quickly to cover taxes or expenses, or you're thinking about leaving something to a charity through a trust. Or you have a situation where one child is getting the business and another is getting the house, and you want to equalize things. Those jobs generally require coverage that lasts the whole of life, not just a window of it.

SPEAKER_01 12:42

Aaron Ross Powell So it's not that one is better than the other, they're just different tools for different stages and different goals.

SPEAKER_00 12:48

Aaron Ross Powell That's exactly it. And I think the mistake people sometimes make is assuming that whatever coverage they had at 35 is still the right fit at 65. The goals have changed, the family situation has changed, it's worth reviewing.

SPEAKER_04 13:02

Okay. Let's zoom back out to what Ian's really asking people to do with this opening piece, because he ends with a very specific exercise.

SPEAKER_00 13:11

Aaron Powell He asks you to picture the specific kid at the specific desk getting the specific call. Not just some abstract air, your actual child, your actual 52-year-old who has a meeting in 17 minutes in a life that is already very full.

SPEAKER_04 13:27

And then ask yourself one question. When that day comes, will what I've built land as a gift or as a project?

SPEAKER_00 13:34

A gift or a project. And I think most parents, when they're honest with themselves, know the difference. Not because they haven't worked hard or saved enough, but because the organizational piece, the communication piece, the proactive tax planning piece, that's the part that tends to get pushed off.

SPEAKER_04 13:52

Because it's uncomfortable, talking about your own death, talking about money with your kids, figuring out who gets what and why, none of that is fun.

SPEAKER_00 14:02

But Ian makes the case, and I think it's a compelling one, that doing that work now is one of the most generous things you can do for the people you love. It's not paperwork, it's a gift of clarity.

SPEAKER_04 14:14

And he's saying you don't have to figure it out alone. That's what the advisors at American Retirement Advisors are there for.

SPEAKER_00 14:20

The whole week of articles is building toward that. Each day is a different piece of the puzzle. The inherited IRA rules, the property, the folder your kids will need, and then what the families who got it right did differently. It's a really well-structured series.

SPEAKER_04 14:37

I'm going to be reading every one of them, and I think you should too. But more than reading them, I think the invitation here is to use them as a reason to sit down with someone who can sit down and look at your specific situation.

SPEAKER_00 14:50

Because the general principles in Ian's articles are valuable on their own, but the real work happens when someone is looking at your accounts, your family situation, your state, your tax picture. That's when you go from understanding the problem to actually solving it.

SPEAKER_04 15:06

And the window for solving it is while you're here and healthy and, as Ian puts it, while everyone can still laugh about it.

SPEAKER_00 15:13

That's not a small thing. The conversations you have with your kids now, the documents you put in order, the beneficiary forms you update, the deed you review, that all gets so much harder under the weight of a crisis. Do it now, when it can be calm and clear.

SPEAKER_02 15:29

So if you've been listening to this and you're thinking, I need to have that conversation, or I'm not sure my beneficiary designations are current, or I have no idea whether my house deed is set up the way it should be, those are the exact right questions to bring to the team at American Retirement Advisors.

SPEAKER_00 15:46

Reach out and set up a time to sit down with one of our advisors. That's what they're there for. And then follow along with Ian's series this week, because it's going to give you a lot of the language and the framework to make that conversation really productive.

SPEAKER_04 16:00

Because at the end of the day, everything you've built, all of it, the decades of saving and working and planning, you built it out of love. The question Ian is asking us is just whether the people we built it for will be able to receive it that way. And I think most of us, if we're honest, want the answer to be yes. So let's do the work to make sure it is. Thanks for spending this time with us today. We'll be back soon.

SPEAKER_00 16:29

A quick note before we wrap up. Today's episode covers financial topics for educational purposes only. American Retirement Advisors does not provide tax or legal advice. Please consult a CPA or tax professional before making any decisions based on what you heard today.

SPEAKER_04 16:47

This is Betty with the American Retirement Advisor. Thanks for listening. If this episode helped you think differently about your retirement, share it with someone who needs to hear it. You can read the full article and browse hundreds more at AmericanRetire.com. Want to reach out? You can text us at 602-281-3898. Or email support at AmericanRetire.com. Be sure to subscribe so you never miss an episode. We publish daily. See you next time.

SPEAKER_06 17:21

Thanks, Eddie. Thanks, Betty. Until next time, this is Ian Schaefer coming to you from 123 Easy Studios. I hope you've enjoyed this recording of the American Retirement Advisor, where we make healthcare, income, and inheritance planning 123 Easy.