The Stock Market After Midterms, Plus the Inheritance Disputes That Split Families

Stocks Rose After All 21 Midterms Since 1942. Here’s What Matters More for Your Money.

Dollars & Sense Podcast | November 8, 2026 with Joel Garris, CFP®

The midterms are over, but the conflict isn’t. This week on Dollars & Sense, Joel Garris, CFP®, breaks down what the midterm results really mean for your investments, interest rates, and taxes, and then tackles another topic that tears people apart: your estate plan.

The stock market after midterms has a track record worth knowing: stocks delivered positive returns in the year after all 21 midterm elections since 1942, regardless of which party controlled Congress. Past performance does not guarantee future results, and Joel Garris, CFP®, explains why debt, interest rates and tax rules matter more to your retirement than who won.

Then Joel turns to the other fight that splits families: inheritance disputes. With an estimated $105 trillion expected to pass between generations by 2048, an estate plan can check every technical box and still break a family apart.

WHAT YOU’LL LEARN

• Why gridlock in Washington tends to mean fewer big policy changes, and why markets like that certainty
• What the Fed’s September rate increase and higher yields could mean for your bond allocation
• Why Joel says nothing in the tax code is permanent, and why the years through 2028 matter for tax planning
• How a written caregiver agreement can head off resentment when one child does all the caregiving
• Why every large gift needs a record: was it a gift, a loan or an advance on inheritance?
• Why a house and an IRA of the same dollar amount are not the same inheritance, including the inherited IRA 10-year rule
• How to divide inheritance fairly, and the family conversation to have while you can still explain your reasons

Episode Chapters

• 00:00 The Topics That Tear Families Apart
• 03:50 The Stock Market After Midterms: Week One
• 05:21 Gridlock and 21 Positive Post-Midterm Years
• 07:59 The Debt Problem No Election Fixed
• 11:35 The Fed, Higher Rates and Your Bonds
• 13:09 Why Tax Rates Are Never Truly Permanent
• 15:00 AI Data Centers Meet State Elections
• 18:52 Inheritance Disputes Rarely Start Over Money
• 22:02 Caregiver Agreement: Equal Isn’t Always Fair
• 25:15 Gift, Loan or Advance on Inheritance?
• 27:00 Not Every $500,000 Inheritance Is Equal
• 32:40 How to Divide Inheritance Fairly

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Podcast Episode Transcript

[00:00:00] Joel Garris: We’re gonna go with, on this program, topics That unfortunately have become highly controversial in America today. So you would think that all of the conflict would have gotten resolved now that there is been– the midterms are behind us. But I’m pretty sure politics will still be a contentious topic at your holiday dinner.

[00:00:31] Joel Garris: So we thought we would, of course, start the program out with a conversation about that. What are some of the thoughts, what are some of the implications, how it relates to your money? So obviously important to do that wrap-up on, uh, the program, uh, this week. Uh, and then continuing, uh, I was intrigued about this, you know, uh, coming up with to-topics that create conflict.

[00:00:57] Joel Garris: A-and I would say, well, let’s just make the show all about [00:01:00] that. And so we’re gonna talk about how to keep your estate plan from tearing your family apart. We got five sort of, sort of trouble spots that we’re gonna talk about and how to kind of navigate that through. So another hotbed, if you will, of conflict.

[00:01:17] Joel Garris: And then, and this one probably is a little less maybe controversial, it won’t, uh, it won’t necessarily get your blood boiling, but it is one of those things out there that’s getting a lot of conversation. Um, and, um, gotta be careful with this one. Many financial firms are starting to kind of wrap their entire marketing strategy around, uh, this, this Roth conversion conversation.

[00:01:44] Joel Garris: And, you know, that, that’s great. Whatever your strategy is, your strategy is. But, um, it-it’s, it’s more than a 30-second ad, folks. Um, and so we’re gonna talk about the good, the bad and the indifferent about Roth conversions on the program. So you get kind of [00:02:00] the lay of the land for what we’re gonna cover.

[00:02:02] Joel Garris: Uh, so welcome on in to this week’s edition of Dollars and Sense, where we help you make sense out of all of life’s decisions involving your dollars. One of Central Florida’s longest running radio programs, also coming to you on a host of radio stations throughout the Central Florida region. Also a top 25 financial planning podcast on the World Wide Web.

[00:02:20] Joel Garris: I think we’re well over fifty thousand downloads of our program. Big number, and so we thank our podcast listening audience as well. Uh, obviously you get the opportunity to hear the show live on terrestrial radio on, uh, Sunday mornings at nine AM. Uh, but if for some reason you can’t make it, maybe you’re sitting in church or maybe you’re out exercising or whatever the case may be, uh, you can always check us out on one of those podcast platforms.

[00:02:51] Joel Garris: And to find out how you can subscribe to our channel, uh, either search for Dollars and Cents with Joel Garris of Nelson Financial Planning, or if that doesn’t [00:03:00] necessarily quickly come up with our channel, go to our website at Nelson Financial Planning, and there click on the icons and you’ll get connected.

[00:03:08] Joel Garris: Once you’re there, make s- Sense to subscribe, then that way you don’t have to do that whole process again, and you get notified of when we put up new content, which as folks know, is each and every week. My name, of course, is Joel Garris, certified financial planner, certified financial fiduciary at Nelson Financial Planning, where we got a team of great folks.

[00:03:25] Joel Garris: You got an opportunity to listen to a couple of them last week. Uh, and, uh, Christina and Rob, I appreciate them filling in, uh, on the program. As always, a good conversation, uh, from, uh, them. Uh, and that’s just part of the team at Nelson Financial Planning. So, uh, let’s get into this. So hey, if you haven’t, you know, been living under a rock, you know that there were midterms this past week.

[00:03:50] Joel Garris: Election is, I guess, it’s over. I think there’s still some races that are still, you know, like, like too close or haven’t totally been decided. But for the most part, [00:04:00] looks like, uh, obviously Democrats, uh, will have a House majority, uh, and a Senate majority as, as well. Uh, just a fascinating, um- You know, just a fascinating turn of events that, uh, at the end of the day, if, you know, for whatever reason you don’t kinda like the results, well, hey, two years from now, there’ll be another election.

[00:04:24] Joel Garris: So, um, and I think that, uh, comment starts to sort of underscore what our approach or perspective is when it comes to, um, when it comes to, to politics and, and, and those kinds of things. Um, and certainly in the short term, as we saw this week, uh, when you have a political result, it does cause the markets to sort of take some time to sort of digest and, uh, if this past week was, um, was, was any indication, the, the results, at least from a market [00:05:00] perspective, uh, are, are probably too early to tell, right?

[00:05:04] Joel Garris: Because you had a day like Wednesday where the markets were up dramatically, followed by Thursday where they were down dramatically. I think at the end of the day, the market basically kinda went… e-ended up, uh, close to where it had started out. It was down a little bit from where it had started out the week.

[00:05:21] Joel Garris: But, uh, m- a lot of conversation, uh, but, uh, I think it’s important to think about that when we think about markets and we overlay onto that political, uh, parties and who, uh, who is in charge of the House, who’s in charge of the Senate, who’s in charge of the executive branch, what, what ultimately we see time and time again is that this notion of gridlock, which might not necessarily be a good thing to solve the longer term problems of this country.

[00:05:54] Joel Garris: But certainly when you have gridlock, you, you, you wind up with not, there [00:06:00] not being a, a, a significant movement when it comes to policy. And, and you may say, “Well, that’s kind of weird why that would be good for the market.” But if you, if you, if you can sort of expect that there’s not big policy changes as a result of gridlock, and clearly legislative branch obviously run by the Democrats now, but the executive branch run by the Republicans, um, uh, that leads to whatever might, uh, tho- those folks might agree to.

[00:06:29] Joel Garris: It’s not gonna be so significant one way or the other as to significantly change policy, which incre- in- introduces sort of a level of certainty into the conversation, and obviously the markets like that. Um, uh, you know, when we think about, uh, you know, kinda how that plays out and how historically this has worked, the good news is that stocks have historically gone up on average about 15% in the [00:07:00] year following midterm elections.

[00:07:02] Joel Garris: And in fact- Stocks have delivered positive returns after all 21 midterms since 1942. So an impressive track record that has to deal with sort of some of, some un- policy uncertainty coming off, uh, the table, and obviously, uh, you know, that’s regardless of which party controls Congress. So that’s kind of the, so, so the positive perspective or, or the bigger picture perspective of gridlock is gonna produce less big policy changes.

[00:07:33] Joel Garris: Less big policy changes means that there’s more certainty for the market. Market’s like certainty, and certainly the historical performance of the markets post midterm would bear that out. Uh, positive returns after all 21 midterms, uh, going back to 1942, regardless of which party controlled Congress. So little bit of perspective there, if you will, in terms of kinda what that overall picture looks like.

[00:07:59] Joel Garris: Uh, now, [00:08:00] now kind of for the, the, the other news. And, and this has to do with issues that were with us long before the election, and I think bear, uh, some, some discussion or, or some thought when we think about in- investments and investment allocation and, and retirement planning. A- and one of those is that, you know, regardless of what happened in, in the midterm elections, we still kinda have a little bit of a debt problem in this country.

[00:08:25] Joel Garris: And as a result of that, um, uh, treasury yields and, and higher interest rates are, are sort of the, the, the to be e- e- expected. And a- at the end of the day, those are some of the more important things to be thinking about. What’s going on with the Federal Reserve? What’s going on with interest rates? What’s going on with economic growth, corporate earnings?

[00:08:46] Joel Garris: Those kinds of things are always gonna be way more important than, uh, than politics. And, and, and, you know, as we like to say, we’ve certainly said it on the show many times before, look, if, if you’re a business or a company, right, [00:09:00] and, and you, and, and the fate of your earnings is, is dependent upon whether there’s a D or an R in the House or the Senate or the White House, that’s not really a company that you wanna invest in.

[00:09:14] Joel Garris: Uh, that’s a company that is not geared for the long-term. So think about that when we think about politics and investing. If, if you’re looking at a company whose future is going to be dependent upon which poli- political party is in power, that’s not enough of a distinction to really make that a valuable investment option.

[00:09:36] Joel Garris: Now, clearly there are implications, and we wanna get to that, uh, and so we will. Uh, but we’re going to slide to a break, and then after the break, we’re gonna continue this conversation on the impact of midterms on the markets, the economy, and your retirement. Coming up next here on Dollars and Sense with Joel Gares of Nelson Financial Planning.

[00:09:59] Joel Garris: We’re talking about [00:10:00] midterms. We’re talking about the midterms that just happened this past week and sort of breaking it down a little bit. Want to get into the, sort of what the, the longer term sort of consequences might, might be in, in terms of, of the bigger picture items. As we said before the break, at the end of the day, w- we’ve got a situation for the next couple of years that’s going to be very focused on gridlock.

[00:10:26] Joel Garris: Gridlock, in fact, is good for the markets because it creates a level of certainty that there won’t be any major significant policy changes. Markets like certainty, so if we think about it from that perspective, uh, markets are sort of, uh, unemotional about the results of the midterms, even though you may be, and certainly many people are.

[00:10:50] Joel Garris: Uh, the reality is history, uh, backs that up. Uh, stocks, uh, in, uh, after all 21 midterms since 1942 have actually been positive over the, over the subsequent [00:11:00] 12-month period of time. Average return about 15%. So pretty interesting sort of historical perspective. I do think, though, that there are some things to be thinking about, um, just on a broader context.

[00:11:12] Joel Garris: We touched on one of them before the break. Look, um- Debt is debt. Uh, and, and debt is out of control in this country, and it’s leading to, uh, higher yields, higher int- in- i- interest rates. And, and, and that… It depends on which side of the coin you’re on on that, right? If, if you’re, uh, if you’re a big saver in, in high-yield accounts, then you’re probably making a little bit more money than you would.

[00:11:35] Joel Garris: Uh, otherwise, um, ob- obviously, the Federal Reserve, and this is just kind of a little fascinating, is if you recall, not more than probably six or eight months ago, a lot of pressure was getting put on the Fed to cut rates. A lot of political pressure was getting put, put on former Chairman Jerome Powell to sort of cut rates.

[00:11:54] Joel Garris: So he’s gone. New guy comes in, uh, you know, with the sort of the, [00:12:00] I guess, the assumption that, hey, okay, this is the guy that’s gonna cut rates. And right out of the gate, first meeting, September, he raises rates. Uh, widely expected that they’re gonna raise rates again in December as well. Um, and so, um, that, that’ll have an impact, right?

[00:12:17] Joel Garris: I mean, I think the Federal Reserve is, is going to be able to act a little even more independently than it was, um, ’cause obviously the executive branch, uh, gotta be feeling a little bit weakened after the results on, uh, on, on Tuesday. And so what that might mean for, you know, kind of the bond positions and things like that is you might have a, a, a, a bit of a volatility on that side in the short-term basis, ’cause if interest rates go up, then, you know, bonds typically will go down in value.

[00:12:47] Joel Garris: So be careful on the bond allocation. I still would say that you wanna be shorter, uh, maturity, a higher quality, just to kind of navigate through all of this. Because [00:13:00] Regardless of the midterm elections, you still have the p-the debt problem in this country. Uh, and, and that’s clearly, clearly has, um, an, an impact.

[00:13:09] Joel Garris: Uh, I, I would also say, uh, that, um, remember tax rates are not permanent. So despite, uh, a lot of the conversation that, uh, oh, you know, the one big beautiful bill th-that passed that’s gonna make these tax rates permanent, one thing I can attest to in the 30-odd years of doing this is, yeah, nothing’s permanent in the tax code.

[00:13:30] Joel Garris: Uh so, uh, you could certainly see some changes there, particularly after 2008. So I think there’s some interesting sort of planning things to be thinking about over the next couple of years, where you know what those tax rates are going to be, and I would argue after 2028 you might really not. And so, uh, it would be important if you’re thinking about kinda engaging in a transaction that’s got a high tax [00:14:00] implication, that you probably wanna try and get that in over the next couple of years where I think there is some certainty on tax rates.

[00:14:08] Joel Garris: But I think also after 2028, uh, probably all bets w-are off on that. So clearly elections have consequences. Just thinking bigger term, I think the Federal Reserve’s gonna act, uh, as they see fit, uh, without regard to kind of whatever the political winds might be. Uh, number two, I think it does, um, cause you to kinda think about, uh, taxes and tax planning a little bit more, uh, particularly, uh, you know, uh, uh, due to the lack of permanence in any part of the tax code.

[00:14:41] Joel Garris: And then, um, and then higher yields if you are o- are owning bonds and, and, or, or, or cash, you’re probably gonna wind up with a little bit more interest on that, so you earn a little bit more. But that’s not gonna be immediate. You’ve gotta kinda get through this period where you may see rates cl-climbing.

[00:14:59] Joel Garris: [00:15:00] Uh, and then the last one, and this one’s kind of interesting, and I think this one had, uh, perhaps, uh, some of the more direct ripples in the market this past week- I can’t forget about this discussion about AI. A lot of these candidates got elected on the promises of the data centers are not gonna be in your backyard.

[00:15:19] Joel Garris: And that’s fine, and we’ll see how that plays out ’cause, you know, a lot gets said on the political trail that doesn’t actually make it into reality. But this one might have some stickiness. And so particularly when you look at state elections as well, ’cause it wasn’t just a sort of a blue wave or, or if you wanna use that language, at the federal level.

[00:15:39] Joel Garris: Uh, that also happened at a lot of state level as well. And so that could really prove to have an impact on kinda how all of this AI sort of plays on out. So certainly some things to be thinking about. I think, you know, on the tech side th- y- they may have, you know, kind [00:16:00] of a little bit more, uh, you know, sort of parameters or guardrails on their behavior than what we’ve seen.

[00:16:07] Joel Garris: And, uh, I think interest rates might wind up, you know, kinda being a little bit higher, but that’s got nothing to do with politics. That’s got everything to do with the debt. Uh, and then, and then tax policy. I think you could certainly see some, some, some changes on that. So just some perspective. Guess what?

[00:16:22] Joel Garris: We’ll see how it all goes, uh, over the course of the next two years and, uh, beyond, uh, ’cause We have every intention of this show continuing on for another 40 years. Uh, but anyway, these all make great topics as well. If you are a client of Nelson Financial Planning, you know that we have one of our regular educational, uh, events coming up.

[00:16:44] Joel Garris: Uh, and that is on Wednesday. That is our breakfast session. We do one of these educational events every single quarter. And, uh, so, uh, that one coming up is on Wednesday. It is the breakfast session. Obviously, we’ll be talking a lot more [00:17:00] in detail about midterms as well. So if you are a client of the firm, you know how to RSVP for that.

[00:17:06] Joel Garris: Those events are exclusively reserved for our clients at Nelson Financial Planning. So, uh, so that’s kind of the political wrap-up. Uh, we’ll shift gears and talk about another great topic that always produces a lot of conflict besides politics, and, uh, that is your estate plan. Uh, and so we’re gonna kind of talk through, uh, uh, uh, s- several things that I think are, are, are some of the where, where, where the biggest pitfalls lie when it comes to estate planning and the impact, uh, that, that it has.

[00:17:39] Joel Garris: And, and the point of this conversation is this, is this notion of you can talk about estate planning and, oh, I gotta make sure my beneficiary’s correct, make sure everything’s titled correctly, make sure I’ve got all the right documents and all that stuff. But, um, it’s important to also make sure that your estate plan keeps your family [00:18:00] together and keeps those relationships intact after you’re gone.

[00:18:04] Joel Garris: And here’s the sad reality. We’ve seen where that doesn’t happen, where estate documents were done, estate plan was done, everything was done from a technical point of view, from a planning point of view, but then there was a big miss on being able to relate that and to reduce family conflict. Uh, and, and so that’s really where we wanna start this next conversation.

[00:18:31] Joel Garris: So stay tuned through the break, and we will continue here on Dollars and Cents with Joel Garris of Nelson Financial Planning. Make sure you check out our website at nelsonfinancialplanning.com to learn more about how we can help you make better decisions with your money.

[00:18:52] Joel Garris: My name is Joel Garris. I’m a certified financial planner, certified financial fiduciary at Nelson Financial Planning, where we [00:19:00] spend the entirety of our days helping people make those better decisions when it comes to their money. Uh, and this one is a big one. Uh, and, uh, you know, it’s one thing to say, “I wanna make sure that my estate plan is in good order,” and, and oftentimes we, we, we see that, where, where the estate plan sort of, you know, kind of checks the technical boxes.

[00:19:22] Joel Garris: But, um, but then there’s always, uh, the, the after impact of that, and we’ve seen time and time again where families es- essentially break up even though, uh, the estate plan was in order. Um, and, and so we wanted to talk about some of the concepts to be thinking about to make sure that your estate plan works effectively, but most importantly, uh, that your family is able to stay together after you’re gone.

[00:19:52] Joel Garris: Um, because many of the inherit- ma- many of the inheritance fights- That we see, [00:20:00] uh, aren’t caused by things that you would normally think about. I remember one in particular that we were involved in, it really came to blows over a, a, a, a nativity scene, and, uh, it, it just was really sad to see how that sort of played out, how you have beneficiaries fighting over poor baby Jesus.

[00:20:26] Joel Garris: Uh, and, and that’s what breaks the family apart. And to my knowledge, uh, some of the siblings haven’t, still haven’t spoken to each other. This was probably over, well over a decade ago. Uh, so, um, it’s that stuff that we wanted to talk a little bit about, um, because yeah, this, this stuff doesn’t blow up, um, over what you would normally, normally think.

[00:20:52] Joel Garris: Uh, it… There’s usually unresolved family dynamics that bubble up to the, to the [00:21:00] surface, uh, during this period of time. Um, it’s an emotional period of time. Uh, you know, there’s, there’s a lot of questions, there’s a lot of uncertainty, and, um, and those issues, you know, can, can range from things involving, like, caregiving, lifetime gifts, different types of assets.

[00:21:18] Joel Garris: I mean, all, all of those kinds of things. You know, throw in on, you know, sort of a lack of communication, and you have a recipe for a lot of issues. And folks, this is a big issue, and we all, we all heard about, you know, kind of these numbers, but just to recap those numbers if you hadn’t, haven’t heard them lately.

[00:21:35] Joel Garris: The scale of this is, is, is huge, because it’s estimated, uh, that between now and the year 2048, so obviously over the course of the next roughly 20-odd years, there’s expected to pass $105 trillion in intergenerational wealth. Those are big, big numbers, and as you might well imagine, um, you, [00:22:00] you, you can run into issues on that.

[00:22:02] Joel Garris: So we, we thought we would, um, you know, kind of spend some time talking about some, some trouble spots and some things that we see, uh, and why it’s important to kind of address this. And the first one has to deal with caregiving. Uh, who took care of Mom and Dad? And, and here’s the problem, and I’ll tell you what, I’m sure there’s a lot of people that, uh, are gonna hear this sort of general story and say, “I know somebody,” or, “I am involved in something like that,” including myself.

[00:22:35] Joel Garris: Um, so imagine there’s three adult children, right? Two live away, the third lives 10 minutes from Mom, and for the past several years, that child that has lived closest to Mom has been, uh, the primary driver, uh, y- you know, dealing with the medical stuff, taking care of groceries, having to miss work as a result of that, handling all the [00:23:00] emergencies, providing hands-on care, decisions, all of that.

[00:23:03] Joel Garris: Uh, and then Mom passes away And her documents are set up, as you might well imagine, where everything gets divided equally three ways. Now, mathematically, that’s equal, but in the case of what I just described, um, is that fair? Because the caregiving child may say, “I gave thousands of hours of my life and, uh, and that’s not getting recognized,” which can very quickly…

[00:23:39] Joel Garris: Again, emotional time, right? Someone’s just passed away, so that can very quickly lead to producing a lot of resentment. So here, here’s our suggestion on that. You’ve got to get that on the table because we’ve just seen that issue time and time again. Y- you, you have to account for the caregiving while the caregiving is occu- [00:24:00] occurring.

[00:24:00] Joel Garris: Maybe that’s e- either paying or creating a ledger, cr- creating a, a, a summary of, of what that looks like. You could even document it through, like, a written caregiver agreement. Um, typically for something like that, you might use an elder law attorney. Uh, there’s value to that in doing that beyond just the estate planning dynamic because if you do that, uh, you’re, you’re much more likely to be able to qualify for programs like Medicaid because these are…

[00:24:29] Joel Garris: this is payment for services, not gifts. Uh, be aware though, if it is gonna be payment of services, that as the caregiver, you need to report it and pay taxes on it. But the important thing is to kind of communicate that arrangement to everyone else. Make sure it’s documented now while everyone is around to be able to e- explain it.

[00:24:51] Joel Garris: And, and the reality is that, you know, um, th- those years of account… of caregiving, you don’t want that necessarily to be an accounting [00:25:00] exercise after the fact. Uh, a- and so you gotta deal with that now. So that’s kind of the, the first sort of, uh, uh, a pothole, if you will, that we see, and probably pothole’s a ge- a, a generous, generously kind description on that.

[00:25:15] Joel Garris: It can really get ugly quickly when we start to talk about this caregiving stuff. The other one, of course, is, is, is the gifting thing, right? So one kid got 80,000 for graduate school. Another got, you know, 100,000 for a house down payment. And then, uh, another one got loan money to start their business. Uh, 20 years goes by, poof, uh, and, um, ev- all the kids remember those transactions differently.

[00:25:40] Joel Garris: “Oh, that was a gift. That wasn’t a loan. That was, you know… Dad said that was coming out of the inheritance.” I mean It’s a mess. So I think it’s important, as we were just talking about with the caregiver, to document that, the caregiving duties, to document the value of that along the way, but to keep a ledger of those [00:26:00] significant lifetime gifts.

[00:26:01] Joel Garris: Document the details of it, who got it, what the date was, what the dollar amount was, why it was done, what the purpose of it. Was it, was, was it an advance against the inheritance, or is it completely separate? Um, there, you, you’ve really got to be careful. I mean, there’s some other rules that you’ve got to be careful of, too, involving gifting and things like that, which is limited to $19,000 per person.

[00:26:25] Joel Garris: If it’s more than that, then you may wind up having to do, uh, some reporting requirements on an IRS tax form. Generally, there’s no taxes due on that. Those are kind of more informational filing, but important to make sure that those are getting filed properly along the way, because they can have an impact on your future estate plan.

[00:26:45] Joel Garris: So documentation still matters. That’s gonna be a kind of a general theme here as we work through these items. Um, and, uh, make sure that it all gets written down. So tho- those are two pretty important concepts, what to do about the [00:27:00] caregiver, what to do about gifts made during the course of lifetime. Uh, this next one, um, and I remember a story about this, i- you know, uh, for a situation.

[00:27:11] Joel Garris: This is probably now, huh, 20 years ago. Um, and, uh, you know, there was a big complaint over, uh, inheriting, uh, certain types of assets. I think they were limited partnerships of some kind, and basically one of the beneficiaries was like, “I don’t want that. That’s, you know… Uh, that has to deal with low-income housing, and I’m not…

[00:27:32] Joel Garris: You know, I don’t believe in that, and I think it’s wrong what, you know, what, you know, how those, how those programs are set up.” A- and so it became this whole big controversy as to, you know, how you wound up dividing up the assets. Because the reality is, not everything is created equal, right? If you’re gonna inherit $500,000, um, you know, the nature of that $500,000, uh, can be very different depending [00:28:00] upon where it is coming from.

[00:28:01] Joel Garris: So we’re gonna talk a little bit more about that, but we got to take a break, uh, here on Dollars and Sense, so stay tuned with us through the break as we kind of work through trying to avoid the conflicts, not from having your estate plan done properly, but from making sure that it is implemented effectively and the family doesn’t bust up after you’re gone.

[00:28:24] Joel Garris: We’ll continue that here on Dollars and Sense with Joel Garris of Nelson Financial Planning after these messages.

[00:28:33] Joel Garris: Talking about some of the pitfalls that can happen w- even though your estate plan may be in perfect order and the conflict that that can create. And as we’ve shared with you in the program earlier, you know, we’ve just seen countless situations where that has caused families to fracture after somebody has passed away.

[00:28:53] Joel Garris: Uh, the first one we were talking about has to deal with caregiving duties, right? You got one that’s doing all the caregiving, the other two live away. [00:29:00] Uh, and then, you know, Mom passes, and it gets divided three ways. Well, is that really kind of fair, seeing how one was solely responsible for all of that caregiving?

[00:29:12] Joel Garris: Key point there is make sure that you are documenting that and what and how you want to ultimately deal with that rather than to leave that for after you’re gone. Second one, uh, that we were talking about before the break i, is sort of a similar vein, and that’s this notion of gifts, right? Uh, gifts that you made.

[00:29:34] Joel Garris: Uh, maybe you paid for graduate school. Maybe you had provided money for a down payment. Maybe it was a loan. Maybe it wasn’t a gift. Uh, all of that needs to be documented at the time. Create a written document that explains exactly what all of those gifts were during the course of lifetime. And then, uh, the one that we were currently working through is this notion that not, not all money is created equal.

[00:29:59] Joel Garris: [00:30:00] Uh, not all inheritances are created equal. Not all investment accounts are created equal. Uh, and the reality is that money that you’re getting from one account versus another account can… might appear that it’s being perfectly equal, but at the end of the day, it might not even be close. This is where the tax characteristics of your assets really matters when you think about the estate plan.

[00:30:25] Joel Garris: If you’re gonna leave the house to Johnny, and you’re gonna leave the IRA to Susie, even though they may be the same dollar amount, we got a problem here, because one is gonna go to Johnny with zero tax implications. The other going to Susie, that retirement account, that’s gonna have full tax implications that Susie’s gonna have to deal with.

[00:30:45] Joel Garris: So you’ve got to be aware of these issues and how they ultimately will impact the amount of that inheritance, and there’s different assets like real estate, where you get a step up in basis, and the entirety of [00:31:00] any tax consequence is gone. Life insurance as well in that same category. Roths also same category.

[00:31:08] Joel Garris: But a retirement account, that is going to be fully taxable. So you’ve got to really think through what’s the tax nature of these assets that I am giving. And I’ll tell you, on those retirement accounts in particular, it’s gotten a lot more complicated after 2020. Prior to 2020, uh, you kind of were able to sort of dribble it out over the course of your life expectancy.

[00:31:31] Joel Garris: Now, for deaths after 2020, so if someone died post-2020, you basically have a 10-year distribution rule, and you also have a re- Required minimum distribution rule that applies if they were of required minimum distribution age. So a lot of issues involving that, a lot of tax implications as well, a lot of required minimum distributions.

[00:31:54] Joel Garris: So a- again, one of those things before you just say, “Oh, you know, everybody gets a third,” [00:32:00] make sure that you are considering things like the after-tax value, uh, the liquidity of it, right? I mean, if you inherit property, that’s great, but guess what? Property comes with costs, property taxes, insurance, maintenance, all of that.

[00:32:13] Joel Garris: Uh, so all of those become part of that conversation about looking at the characteristics of the assets that are gonna transfer to your various beneficiaries, and thinking about that as a way to try and minimize conflict among those beneficiaries. It really underscores this notion that your estate plan has really gotta be talking to your financial and investment plan as well.

[00:32:40] Joel Garris: Those really have to be in sort of interchangeable between the two of them. Uh, next one, uh, you know, sort of where we see the pitfalls is this one is, um The notion of do I treat every one of my beneficiaries, every one of my kids, the same way when it [00:33:00] comes to their inheritance? Should, should… I-if I’ve got one kid that’s, you know, financially sophisticated, one that isn’t very good with money, another one that’s, you know, going through a divorce, um, the implications of a lump sum of money getting dropped in their lap when you pass are gonna be very, very different depending upon, uh, that particular background situation, both personally and financially.

[00:33:26] Joel Garris: So, uh, that then opens up the conversation about how you structure that inheritance, ’cause an outright distribution may be good for one beneficiary, but staged distributions may be better for another, uh, or a trust even to really separate that asset out and make sure that that doesn’t go, uh, to what could potentially be an ex-spouse.

[00:33:49] Joel Garris: So, the reality is that there’s more to consider than just, “I’m just gonna leave everything and, and divide it three ways, and that’s that,” because there’s definitely [00:34:00] some ripples that can occur based on the distribution strategy. So, one of the things that we like to point out is that it, it, it’s really about, you know, if you trust your beneficiaries, then that’s fine.

[00:34:12] Joel Garris: That’s great. Okay. Uh, you can just leave it to them equally divided. But if you don’t, th- there’s also no harm in having different delivery mechanisms for each of your beneficiaries. What structure is going to give sort of the best chance for each beneficiary to be able to benefit and, and, and continue to maintain what, what you have accumulated?

[00:34:38] Joel Garris: And then lastly, um, and I guess this is probably one of the overl- overwhelming problems that sort of overlay all of these topics, is this notion that nobody really ever talks about anything or explains anything. Uh, you know, you got your will, you got your trust, you got all of that, and, um, none of it really ever get ex- gets explained to the kids.

[00:34:58] Joel Garris: Now, we’re not saying sit down [00:35:00] and, and, you know, show them everything to the penny, to the dollar, all of that. But you can certainly talk about some of the general concepts that are going to be front and center w- after you pass away. Things like, well, why did they name the sister the trustee or the executor?

[00:35:17] Joel Garris: Things like, why did, uh, you know, why did he get the house? Uh, and, and, and, and why is… why are we using a trust? All of those kinds of things can be issues that can come up during the course of, of this process of transferring, uh, the assets. Clearly- It is much better to ex- to provide an explanation on what it is that you’re doing while you’re alive.

[00:35:42] Joel Garris: ‘Cause when you’re dead, you can’t really provide the explanation. So expl- take the time to have that family meeting to explain, explain the reasoning. Uh, um, give, give the beneficiaries an opportunity to ask questions. Again, you don’t have to get into exact details of what’s in what, but you can certainly talk [00:36:00] about sort of things from a general point of view and why you’re doing what you’re doing.

[00:36:05] Joel Garris: ‘Cause at the end of the day, if you do that beforehand, it certainly does, um, wind up being a much more valuable exercise. So look, here are the things that, that… some of the things that you can do, um, that, you know, are, are important from an estate planning perspective. First, make sure you review your beneficiaries.

[00:36:24] Joel Garris: That, that’s always a, a top item. Review your estate planning documents. Again, power of attorney, wills, things like that. Uh, look at the titling of the property, of the properties or the investments that you own. Are there named beneficiaries? Is this a joint account? Uh, how are these gonna… assets gonna pass without having to go through probate?

[00:36:44] Joel Garris: Uh, and then document, document, document. Document the caregiving stuff, right, becau- b- before it becomes an inheritance dispute. Document a record of the major gifts or loans or whatever they were. Make sure everybody understands what they were and that is properly documented. [00:37:00] Uh, look at the overall tax Picture of the assets that are gonna get inherited.

[00:37:06] Joel Garris: This is a bigger and bigger issue, especially with the new rules on inherited IRAs post 2020 that say, “Hey, you gotta take all this money out within a 10-year period of time,” thereby paying the taxes on that. If you’re still working, uh, and those are your peak earning years, then you may find that you’re paying a lot more in tax, which thereby then d- decreases the effective value of what your inheritance was.

[00:37:34] Joel Garris: And then I think most importantly, kind of think about having that family conversation while you still can to answer those kinds of questions. The goal is to make sure that the family stays together. Sadly, we’ve seen way too many scenarios where that does not happen, and it comes down to communication and documentation.

[00:37:55] Joel Garris: Those are probably the key takeaways to make sure that your estate plan [00:38:00] works as effectively as possible so that re- family relationships are preserved and it doesn’t lead to family litigation. Uh, we change– we spent some extra time on that topic ’cause we thought it was important. Did not get to the Roth piece, so we’ll slide that into next week.

[00:38:18] Joel Garris: So stay tuned. Next week we’ll talk about the pros, cons, and whatnot of Roth conversions, and how big of a topic that is out there today. Uh, so stay tuned with us, uh, for next week’s program where we’ll talk about that. Uh, with that, we’re gonna wrap it on up and get on out of here. This has been Dollars and Sense with Joel Garris of Nelson Financial Planning.

[00:38:36] Joel Garris: Make sure you visit our website at Nelson Financial Planning if you’d like to take advantage of that free offer of a complimentary con- uh, consultation at any point in time with any of our team. With that, we’ll get on out of here. Thanks for listening to this week’s program.