4 Red Flags to Watch Out for in Your Annuity Provider

4 Red Flags to Watch Out for in Your Annuity Provider

A new Ohio law was passed in February 2021 that attempts to impose ‘best interest’ fiduciary standards onto life insurance and annuity providers (you can learn more about the law here, here, and here). While this initially might spark hope, unfortunately the ‘best interest’ standards are extremely vague. If a salesman is able to argue why their product benefits their client, they are allowed to sell whatever financial product they want.

Operating in these separate silos of insurance agent, financial advisor, CPA, tax lawyer, etc. leaves room for abuse to the consumer. Many annuity providers and so-called financial advisors plant their product as a solution to a variety of problems, when in reality another product is likely more useful. Below are 4 cautionary tales from clients that have come to us for help in the past. If any of these situations have happened to you or a loved one, or are currently happening, we encourage you to seek out additional financial tools and professionals.

Pushing Annuity Sales, No Matter the Age

There are some financial advisors that will sell annuities to people in their twenties! While the argument can be made that money will grow in an annuity, and hence be a great product for a consumer, there are much more downsides to purchasing an annuity as a young adult. If you need to get that money out before retirement age (at age 59 and a half) you will have to pay penalties.

One particular client in their forties came to us as they were changing jobs and evaluating their personal finances. We found out together that all their retirement savings were slammed into a variable annuity! Having all your eggs in one basket is simply not a good idea, especially in a variable annuity that has a large fee structure. This client’s former ‘financial advisor’ sold annuities and didn’t bring to the client’s attention other financial tools that they could use. The continually accumulating fees greatly eroded their potential wealth and growth for the future.

Now, both of these types of situations will still happen under the new Ohio law because a creative argument can be made that these salesmen still acted in the best interest of their client. They still provided some value to their client, albeit other tools could have provided more value.

Another client that came to us was in her nineties. Her Certificate of Deposit (CD) matured, and the in-house advisor at her bank pressured her to move her money into an annuity. This locked her money up for many years, and the advisor didn’t educate her about other alternatives. She didn’t have much time to see any substantial growth from her annuity.

Again, this transaction will still be allowed to happen under the new Ohio law.

The Most Abusive Case We’ve Seen

The last story is something that actual would not be allowed under this new Ohio law, and is the most abusive action we’ve seen by a financial advisor. This person was in their sixties and wanted to secure some safe financial growth for the future. Their former ‘advisor’ in this situation was aware that this consumer that they were selling an annuity to had dementia and was heading towards long-term care in the future. This annuity did not even allow access to funds for a long-term care need. There are plenty of other tools out there that DO allow access to funds for long-term care needs, and even provide ENCHANCED benefits for long-term care. They would have to pay penalties to get that money out of the annuity on a monthly basis to pay for long-term care.


Situations like these are why financial professionals need to broaden their horizons and surround themselves with a network of experts in different areas. At our financial planning firm, DuPont Wealth Solutions, we draw on a variety of experts to best serve our clients.

Annuities are not in themselves bad, nor the financial industry as a whole. Many financial salesmen are simply trying to make a living like the rest of us. However, many also try to make their discipline work to the exclusion of other tools that will do the job better.

If you are looking to ease some long-term care concerns, and develop a retirement income plan please call 614-389-9711.

How to Become Your Own Financial Hero

How to Become Your Own Financial Hero

We need leadership everywhere in our lives: in our government, religious organizations, and businesses. It’s a common misconception that you have to be a certain age or hold a certain title to be a leader. That is simply not true. Anybody can lead from where they are in any organization.

What makes a good leader?

There are two traits that make up a good leader. One is the ability to connect with people, and the other is the ability to be trusted. If you have those two things, you can develop the rest. A leader also has to be willing to listen more than they speak. By doing this, you can meet people where they are and understand them better.

How can you become a better leader?

There are no natural-born leaders. Leadership is a skill that you can develop. Think of it like playing the piano. Even if you don’t believe you have an innate knack for it, you can sit down, practice, and become more proficient.

It’s also important to tailor your coaching strategy to whoever you’re coaching. Are you going to be more commanding, or softer? What level or type of leadership is appropriate for a situation at work, home, or play?

Another thing you should know about leadership is the difference between a fixed mindset and growth mindset. A fixed mindset means that you’re set on what you can and can’t do. For example, maybe you were always bad at math in school and now believe that you will always be bad at math. A growth mindset means the exact opposite. You are willing to try new things, and work on those things to succeed. A good coach can help unravel our fixed mindsets and undo the limiting beliefs we have about ourselves. They inspire us to grow.

Before you start leading others though, you should work on leading yourself. Start by destroying your own fixed mindset and limited beliefs.

What’s the difference between a coach and a mentor?

A good coach will assume that you, as an individual, have the answers to your own problems within you. A coach will ask you unbiased questions, attempt to learn the most possible information about you, and lead you to discover your own truths about your own life. They will meet you where you are, and help you find out where you need to go, and how to get there. A mentor on the other hand, will give you examples of what they do to succeed, and not necessarily tailor their recommendations to your specific needs.

What’s the difference between a manager and leader?

A manager is a leader without that element of connection we talked about previously. A leader inspires people to grow, while a manager simply oversees and handles tasks that people do. Managing is a stable and stagnant act, while leading is a dynamic task.  You manage things, you lead people.

So, what does this have to do with financial planning and estate planning?

I look at the label ‘financial advisor’ as a manger’s label, and ‘financial advocate’ as a leader’s/coach’s label. My job isn’t to tell you that you need a revocable living trust, annuity, will, or any other estate planning or financial planning tool. Rather, my job is to learn the most about you as I possibly can, and lead you to discover what you need in your own life. If we find some financial mistakes, or opportunities, I can help you manage your assets in the best way to meet your goals.

If you’d like to schedule an appointment with me and transform your finances call (614) 389 – 9711.

How to be Financially Resilient

How to be Financially Resilient

The worst way to invest is by acting on emotions. When unexpected changes occur in the economy, most people tend to panic.

Financial resilience isn’t about avoiding all those bad things that can happen to you (for example, a pandemic, or getting laid off) because, inevitably, those things will happen. Instead, financial resilience is about being able to deal with those things when they do happen. In this post, we’ll detail how to build up your financial resilience.

WHAT PEOPLE DO WHEN THE UNEXPECTED HAPPENS

There’s three reactions that humans have when something happens that they aren’t mentally prepared for:

  1. Most people will freeze and do nothing.
  2. About 10-15% of the population will do exactly the opposite of what they should do. They don’t remain calm, they panic.
  3. Another 10-15% of the population will do exactly what they should do. Maybe because they’ve been trained to deal with the situation or have thought about it before, so they aren’t as surprised.

Mental preparation is a large part of being financially resilient. It will increase your likelihood of making the right decision when surprise or tragedy strikes.

You cannot prepare yourself in a crisis effectively, you must be prepared before the crisis.

TRYING TO PREDICT THE FUTURE ISN’T HELPFUL

Many economists and money managers will try to tell you what’s going to happen in the future. The reality is no one knows what’s going to happen. Acting on outcome-based thinking, meaning trying to predict what will happen, isn’t productive. It’s more helpful, and constructive, to have a scenario-based thinking mindset, and prepare for all the situations that could feasibly happen, not only the few that you, or experts, believe are most likely to happen.

For example, it is very likely that taxes are going to go up in the future, but we don’t know exactly what that will look like, or how it will affect each individual person. An outcome-based thinker might predict the worst, panic, and sell many of their assets to avoid paying taxes. These tax changes may be years down the road, and that person just missed out on many gains to be had.

SO, WHAT CAN YOU DO?

While it’s pointless to try and predict the future, we recognize that there are certain trends and events that are more likely to happen than not. The more you can build those scenarios into your ‘business plan for life’ the more resilience you build up to be able to handle those inevitable changes.

Make sure to have an agile mindset. Be prepared to not know the outcome of situations, be okay with recognizing when you’re wrong, and be prepared to adapt to change. A fixed-mindset will not get you far in the financial world. This doesn’t mean you can’t be confident in your decisions; it just means you have to be flexible and adaptable at the same time.

RETIREMENT PLANNING

When it comes to saving for retirement through investing, you have a few options.

  1. Buy and hold and hope to market continues to go up. The worst-case scenario here is that the market goes down right before you retire, and you don’t have time to build your nest egg back up.
  2. Be a bit more agile and try to time the market correctly, buying and selling at exactly the right time. However, this is difficult for anyone to do, especially those with full-time jobs that don’t have time to focus all their time and energy on the stock market.
  3. Adopt a more tactical perspective and manage the risk based on math and probability. You can work with a financial advisor that will help you make money when the markets go up and cap your losses when the markets go down.

Managing the risk can look something like this: saving more for retirement than you think you’ll need, mentally preparing to retire later than you want to, and building tax-deferred or tax-free income options for retirement.

HOW TO FIND A GREAT MONEY MANAGER

Finding a great money manager or financial advisor can take time. We recommend doing all the research you can and partnering with one that has historically done well in up AND down markets. A good financial advisor will be flexible to the rapidly changing markets, able to admit when they’re wrong, and able to continually make corrections.

A great financial advisor is essential to have because they can hold you accountable to not panic buying or selling when bad things happen. They can help you build financial resilience so your retirement and estate planning needs are taken care of.

Give us a call at 614-408-0004 to speak with a financial advisor today.

Types of Life Insurance and How They Can Be Used in Estate Planning

Types of Life Insurance and How They Can Be Used in Estate Planning

Many of us start thinking about life insurance when we get our first full-time job and the company’s HR representative asks us “Do you want to enroll in the employer’s group life insurance policy?”. Most people think “Why not?” and sign up, naming a family member as the beneficiary of their policy, and then never give it another thought. Although this may be a good start, there are many more steps to take after that.

WHAT IS LIFE INSURANCE?

In general terms, life insurance is a contract between two parties, usually an individual and an insurance company, in which the company agrees to pay a specified sum of money (death benefit) upon the death of the insured to the beneficiaries named in the policy. In exchange for the death benefit, the individual who purchases the policy agrees to pay premiums to the company for a specified period of time, up to a specified amount, or both.

The right kind of life insurance, when properly understood and carefully coordinated with your estate planning, can provide significant economic benefits, tax benefits, and peace of mind for you and your loved ones. But there are numerous types of life insurance, and it can be well worth your time to become familiar with the primary varieties, and know the benefits of each.

TYPES OF LIFE INSURANCE

Term insurance will pay the death benefit only if the insured dies within the specified period (term) spelled out in the insurance contract. For example, if the policy is for a ten-year term but the insured dies in year eleven, no death benefit is payable to the beneficiaries. Terms are typically 10-25 years in length. This type of insurance is generally more affordable than other types of policies. It is the most profitable insurance for the insurance industry because people rarely pass away while their term is active.

Whole life insurance typically guarantees a consistent premium throughout the life of the contract, but the premiums are typically higher than term-life premiums because the insurance company maintains a reserve that helps keep the premiums level during the insured’s life. This reserve is an accumulated cash value within the policy that the policy owner can borrow against, or cash out if they choose to terminate the contract before they die. Different varieties of whole life insurance have unique features that can be customized for particular situations.

Universal life insurance (UL) policies are interest-sensitive policies that can result in higher death benefits and cash value over the life of the policy, depending on a variety of investment, expense, and mortality factors that are built into the contract. With the potential for greater gains in cash value, however, comes the potential for greater risk in the buildup of cash value. If the policy’s underlying investment assets perform poorly and the cash value buildup is insufficient to cover the expense charges and mortality costs, the policy will terminate. However, compared to whole life policies, UL policies are generally significantly more flexible with regard to making premium payments from year to year and withdrawing cash value. Therefore, depending on your circumstances, the type of cash flow you anticipate, and the risks that you are insuring against, a UL policy may be more appropriate. As with most insurance policies, you will find limitless varieties from insurer to insurer.

Variable life insurance (VL) policies are very similar to traditional whole life policies except that in VL policies, neither the death benefit nor the surrender value of the policy is guaranteed. In addition, either the death benefit, the surrender value, or both, can increase or decrease depending on the performance of the policy’s underlying investments. However, each VL policy typically has a minimum death benefit so that, even with poor asset performance, the beneficiaries will receive a payout at the insured’s death. These policies are unique because of the control that the policy owner has over the types of investments underlying the policy. The policy’s cash value can be invested in varying degrees in stocks, bonds, real estate, and money market portfolios. Policy premiums are typically fixed, but depending on the underlying assets’ performance, the cash value can fluctuate from day to day. As with other life insurance products, the death benefits are income tax-exempt. The earnings on the assets and the accumulated cash value in the policy are income tax-deferred until after the policy has been surrendered. In addition, the policyholder can also borrow up to a certain percentage of the policy’s cash value if they need to make a big purchase, such as a house or car (although interest is charged while the loan is outstanding).

Variable universal life insurance (VUL) insurance is, as the name indicates, a hybrid of variable life and universal life insurance, with many of the most desirable features of both types of insurance built into the contracts:

  • flexible premiums
  • adjustable death benefits
  • control over the types of investments within the policy
  • the ability to borrow against the cash value
  • partial withdrawal rights

Both VUL and VL policies are subject to Securities and Exchange Commission (SEC) regulation because of the flexibility of their investment options.

Survivorship life insurance policies can be used when the need for an infusion of cash (the death benefit) is necessary only at the death of the second of two individuals (such as a married couple). These policies can be term, whole, universal, or variable, depending on the policyholders’ need. Survivorship policies are particularly useful when a married couple owns significant real property that they want to keep in the family after the second spouse dies, and the family would rather pay estate taxes from the life insurance proceeds than raise the cash to pay the taxes by selling the property.

First-to-die life insurance policies allow the death benefit to be paid upon the death of the first of two insured individuals. Insuring two individuals instead of one costs less than the total premiums for separate life insurance policies on the same two individuals. For example, these policies can provide a surviving business partner with the cash necessary to buy the deceased partner’s share of the business from their spouse or family.

Single premium whole life insurance allows an individual to purchase, with a single cash payment, a specific amount of insurance to cover the remainder of their life. As with typical whole life, the insured can borrow against the policy’s cash value or surrender the policy. There may be income tax consequences for surrendering the policy, but as with most other life insurance policies, there can be significant income tax protection if the policy matures and pays out at the insured’s death. Also, in some states, the cash value of life insurance can enjoy significant asset protection against future creditors’ claims, thus making investing in life insurance more attractive than other types of investments.

WHICH TYPE OF INSURANCE IS BEST FOR ME?

With all of the choices available in the life insurance world, considering what type of insurance is best for your situation can feel overwhelming. If you are a young couple just starting out and you don’t have much spare income, it may be best to shop for some term insurance that will provide a cash payment that allows your surviving spouse to pay off the home and have sufficient income until they can provide for themselves on their own. 

If you are a middle-aged working professional with a family, you may want to consider purchasing a much larger term life policy or even a whole life policy that has a guaranteed death benefit as long as you keep paying the premiums. This option can be important if there is a chance that you could develop a chronic illness, such as diabetes or cancer, that would disqualify you from obtaining a new term policy when your old term policy terminates.

If you have a large estate with significant assets that would be difficult to sell, such as a successful business or real estate, a second-to-die or first-to-die policy might be a better option for ensuring that there is sufficient cash upon the death of one or both of you and your spouse, or business partners, to pay taxes or buy out a deceased partner’s business interests.

The bottom line is that life insurance policies come with a huge variety of options because families and individuals have an endless variety of circumstances. We can help you identify the risks you and your beneficiaries could be facing and mitigate those risks by working with a life insurance company to craft a policy that pairs well with your estate plan and unique needs.

Insurance can be complex, but you don’t have to go it alone. Call us at 614-408-0004.

5 Common Tax Planning Mistakes

5 Common Tax Planning Mistakes

No one wants to pay more than their fair share in taxes. Yet, many keep paying without taking a look at some of the opportunities that are out there to improve their tax picture. Taxes are going to increase under the Biden administration. Coupled with the unsustainably rising national debt, it’s inevitable. Now is the perfect time to take you tax returns to a professional and ask them: what should I be doing differently?

           Over the past few weeks, I’ve been aggressively asking current clients to do just that. By looking through their returns for missed opportunities and mistakes, there’s a few patterns that I’ve noticed. You probably see yourself in one of the following cases.

THE WEALTHY WIDOW

The case of a frugal woman that has investments growing to the point where some capital gains problems have arisen. She wants to leave a legacy for her children and grandchildren but is worried about the possibility of D.C. eliminating the capital gains step up in basis. Currently, if you die with a capital asset (such as a stock, business, or real estate) that asset goes on to your beneficiaries at the value that it existed at the time of your debt. With a lack of step-up in basis, there will be taxes due on the estate that is passed down to the next generation. Many beneficiaries might need to sell the home, or precious items in it, to pay those taxes.

You mustn’t wait until you see the tax law change to start taking action. If this woman were to wait until the step-up in basis is removed, it would likely be too late to take action to protect her estate and her family. It takes time to make these tax and estate planning changes.

THE EXECUTIVE

There has also been talks in Washington of raising the capital gains rate for people that plan on using those capital gain monies as income through retirement.

This man I talked to just the other day thought he had done all the right things. He had a well-balanced portfolio, had some Roth monies, etc. However, he also had a large chunk of his savings in a brokerage account that he intended to use for income during retirement. If the capital gains rate does increase, which is likely to happen, this man now finds himself in a whole different tax structure going forward. For example, he predicted that his money would be withdrawn at a 15% tax, but instead it might be 28%. That’s a major cut in income. Now, we have to restructure his portfolio over time to give him the same bang for his buck that he was planning on getting.

THE INCOMPETENT ACCOUNTANT

Let’s forget about the future for just a moment. Sometimes, mistakes are made when only considering the current tax structure. I was looking at a client’s tax returns recently and noticed that she wasn’t taking a few deductions that she should have been taking. Her account told her that she couldn’t take them, which was untrue. A second opinion helped her save thousands of dollars.

THE BUDDING BREWER

This is a case of a person that wants to, and is able to, turn their hobby into a legitimate business during retirement. A client of mine wanted to turn his brewing hobby into a full-fledged business. He was planning on buying a bar and already bought many materials. These were his business expenses, although he didn’t realize it. You don’t need to have a profit before you start a business, the be a business. If you can show intent to starting a legitimate business, you can claim those expenses on your tax returns.  

THE MILLIONAIRE NEXT DOOR

This is a case I often use to describe the dangers of future estate taxation. A gentleman who had built a portfolio of residential properties, and was now in his retirement years, came to me asking for estate and financial planning advice. He wants to give his properties to his children when he passes away but will be leaving them a lot of estate taxes in the process. His net worth is well more than what is protected currently for estate taxes. And currently, there are talks in Washington about reducing the estate tax exemption even further, to about $3 million. If you’re estate is over $3 million (meaning your total assets: life insurance, property, investments, everything) your estate tax will probably come in at 40%-50%. This tax doesn’t go away when you pass away, it trails the property. Ask yourself if your children are well-equipped to pay this tax when you pass away.

Regardless of what estate or tax planning concerns you have, we can help. We pride ourselves in being experts in both areas. To fully serve our clients, we’ve launched a new company, Ohio Tax Advocates. We now have the ability to provide a full range of tax services, including not just doing your tax returns for you, but also analyzing them. I advise you to meet with me, let me take a look at your tax returns and create an action plan for you. You never know how much money you could be saving until you make an appointment. Call our office at (614) 408-0004.

5 Ways to Get The Most Out of Your Life Insurance Policy

5 Ways to Get The Most Out of Your Life Insurance Policy

Many people believe life insurance is only for rich elderly folks and those with risky professions. The fact of the matter is, if you’re willing to pay a small amount of tax on a small life insurance premium, you could reap three to four times the money you put into it down the line. Life insurance is also much more versatile and flexible than other traditional savings methods.

Before we talk about how versatile life insurance can be, let’s explain some of the different types and forms of life insurance.

  • Term insurance is the type of life insurance most people are familiar with. If you’ve ever had a friend or family member, try to get into the insurance industry, they’ve probably told you about this product. It is a pure life insurance product. That means that it has no savings component. There is only a death benefit. It is the cheapest type of life insurance you can get, second only to a group insurance policy. Many young people get this type of insurance when they first start a family and are thinking about securing a future for their children and partner, should anything happen to themselves. It is the most profitable insurance for the insurance companies, because only a small percentage of death benefits are ever actually claimed. Term insurance typically is typically bought in 10-, 15-, or 20-year increments, and not many people actually pass away while their policy is active.
  • Group insurance covers an entire group of people under one contract. Typically, this is provided to you by an employer or labor organization. Term insurance is the most common form of group life insurance. We don’t recommend relying on group insurance because as one goes from job-to-job benefits can drastically change.
  • Permanent life insurance policies offer a death benefit and cash value (a savings account) that you can borrow from once you have put a certain amount of money into the policy or when the policy reaches a certain age. These withdrawals are made on a tax-deferred basis. Permanent life insurance lasts from the time you buy the policy to the time you pass away, as long as you pay the required premiums.
    • There are many different forms of permanent life insurance, with the most common being whole life insurance. With a whole life insurance policy, the premiums and death benefit stay fixed for the duration of the policy. These policies have a guaranteed rate of return, meaning the cash value is guaranteed to earn a minimum amount of interest.

PERMANENT LIFE INSURANCE OFFERS FLEXIBILITY

There are many ways you can take full advantage of the benefits a permanent life insurance policy offers you.

  1. Give your family a financially secure future. This first one is the most obvious. You can set the death benefit included in your life insurance policy to go to one or multiple intended beneficiaries when you pass away. This money is given to your family tax-free, and ensures that they are taken care of. They can use this money to cover funeral costs, and take that weight of their shoulders. The average costs for a funeral today is between $7,000 and $12,000 and is likely to increase in the future (https://www.lhlic.com/consumer-resources/average-funeral-cost/).
  2. Save for retirement. For many people, life insurance is a much better option for long-term savings than an employer matched 401(k). Life insurance can yield much more ROI, and faster. If you want to be contributing, or are already contributing, more into your 401(k) than what your employer can match, it might be the time to start looking towards life insurance. Life insurance also offers much more flexibility than a 401(k), because you don’t have the pay a penalty to withdraw funds before you reach 59 years of age. You can withdraw some of your cash value for retirement, and still have a significant death benefit go to your beneficiaries when you pass away.
  3. Be your own lender. You can treat your cash value like a bank, and use it to make large purchases such as a car, boat, etc. Simply withdraw the money when you need it and pay yourself back by continuing to pay your premiums. You can get around having to pay interest to a motor company or other lender.
  4. Secure funds for long-term health care. Unfortunately, many people have witnessed the health of their parents and/or grandparents deteriorate as they’ve gotten older. Some need to be placed in nursing homes, or just need to see doctors and specialists on a regular basis. The cost of this care can quickly eat away at the estate and take away from inheritance money. Life insurance can act as a save guard to that, and the cash value can be withdrawn to pay for these expenses.
  5. Cover college costs. You can use your cash value to fund you children or grandchildren’s higher education. Unlike a 529 plan, you don’t have to pay a penalty to withdraw funds for non-tuition-related expenses. If your child decides not to go to college, or if the options for higher education change in the future, you won’t have to give up any of the hard-earned money you put into the account.

Life insurance, combined with a proper estate plan, can ensure that the future generations of your family will be taken care of long after you pass away. They won’t have to worry about your long-term care or funeral expenses. And by using your own cash value to pay for large purchases, you can eliminate debt, and put more money into other savings options.

If you need help in determining what life insurance company to work with, attorney and financial planner Greg DuPont would love to help you. Call our office today at 614-408-0004 to schedule a consultation. The sooner you call, the more you can save.

Minimizing Taxes with Private Annuities

Minimizing Taxes with Private Annuities

Most people are aware that annuities, purchased from insurance companies for retirement purposes, provide the annuitant with a steady stream of income, often for the remainder of his or her life. But it is less well known that a certain type of annuity, the private annuity, can also serve as an estate planning tool. When structured properly, a private annuity arrangement supplies the annuitant with a stable retirement income, keeps assets within the family, and minimizes the tax burden for heirs.

Keeping Assets within the Family


A private annuity contract is typically drawn up between an older family member who wishes to remove a sizeable asset from his or her estate, such as real estate or a family business, and a younger family member who would otherwise inherit the asset. Under the terms of a private annuity contract, the obligor agrees to pay the annuitant a certain sum of money at set intervals, usually for the duration of the annuitant’s lifetime, in exchange for receiving the property. For the contract to be considered private, rather than commercial, the annuity obligor may not be an insurance company or other firm in the business of selling annuity contracts. Transfers of property, whether directly to family members or to a trust, are generally subject to gift tax. While the gift tax exclusion is relatively generous over a lifetime, limits on the amounts that may be transferred to individuals annually make avoiding gift tax complicated, especially for larger estates. The purchase of a private annuity avoids gift tax because it is considered a sale of property for tax purposes. Conflicts with the IRS over gift tax liability can be generally averted when the agreement is structured properly and the assets transferred are appraised at fair market value. The annuitant must also be prepared to relinquish control over the assets sold, including any voting rights in a business or trust. The private annuity is set up when the obligor receives a cash payment from the annuitant or the property is transferred to a private annuity trust. The annuitant is entitled to receive the entire asset sales price and accrued interest based on IRS life expectancy and interest rate tables. The annuitant may delay receiving income from the annuity until age 70½, but he or she is required to collect regular payments after that point. The arrangement may stipulate that the payment period will extend over the lifetime of a surviving spouse, as well. The annuitant may also borrow from the trust if he or she wishes. When the annuitant dies, the remaining principal is kept by the obligor, who pays no estate taxes. In this respect, the private annuity differs from commercial annuities issued by insurance companies. When the holder of a commercial annuity dies, any death benefits or payments to heirs may be included in the annuitant’s estate for tax purposes.

Tax Preparation Issues


The private annuity arrangement does not, however, avoid taxation altogether. The annuitant is liable to pay capital gains taxes on the appreciated value of the asset sold, but on a deferred basis. If, for example, the property used to buy the private annuity was originally purchased for $300,000 and had appreciated in value to $1 million at the time the annuity was arranged, the annuitant would not owe any capital gains taxes immediately; instead, taxes on the $700,000 gain would come due over time. A portion of each payment would consist of the original cost basis and, therefore, would be tax free. However, the portion of the payment considered as capital gains from the sale would be taxed as capital gains. Any earnings from the trust would be taxed as ordinary income. From the perspective of the heirs, an obvious drawback of the private annuity is that the annuitant could live longer than expected, resulting in no estate tax savings. If the annuitant reinvests the income from the annuity rather than spending it, other estate tax obligations may arise. A further consideration is the financial stability of the obligor: He or she should have the resources to continue to make payments if the annuitant were to outlive the value of the original investment.

Because private annuities are, by definition, unsecured, the annuitant should not enter into the arrangement if he or she lacks other sources of income. Problems could arise for the annuitant if the obligor is unable to make the payments, or if the obligor dies before the annuitant and the obligor’s heirs have difficulties taking on the annuity obligations.

Even when the arrangement works as intended, tension may exist between the obligor and other family members who believe they should have received a portion of the assets tied up in the private annuity. Because of the limitations of this approach, individuals crafting their estate planning checklist and asset protection strategies should consider a range of options before entering into a private annuity agreement. For specific guidance, consult your qualified tax and legal professionals.

No matter what your financial circumstances, DuPont and Blumenstiel are here to offer you the attention and service you deserve. For help with your tax preparation in Columbus, Ohio call us today.

How to Pick the Best Insurance Product to Secure Your Wealth

How to Pick the Best Insurance Product to Secure Your Wealth

Life insurance is a great tool that you can use to compound your wealth. The problem is that many life insurance and annuity companies advertise insane promises that they can’t keep and aren’t transparent about their business practices. You need to research these companies before working with them. If a massive amount of people were to cash in their benefits at once, many of these insurance companies would go under. You don’t want to be in that position. To find the insurance product with the least amount of risk, here are a few things to consider.

Using annuities as an example, many companies have never actually worked with a client directly and are incapable of understanding what the practical uses of their products actually are. These companies tell financial advisors what products they should sell, even when they don’t really know themselves. They produce recommendations and spreadsheets based strictly on the benefit to the dollar. For annuities, companies with the highest future payoff and Guaranteed Minimum Income Benefit ranked the highest. For life insurance, companies with the lowest premiums and highest benefit amounts rank the highest.

While premiums and payoffs are important, it is more important to check to see if these companies have poor financials. These poor financials could lead them to making promises with their pricing that they cannot actually achieve when a large volume of people start to cash in. Even though the pricing, the income, or the death benefit look attractive, many companies don’t have the financial wherewithal to actually make those promises. Even big companies with good ratings might not have enough surplus in place to keep their promise at the price they’re offering should anything happen to the economy or the company itself.

Ultimately, price matters, but not more than the promise.

By now, you might be questioning if a life-insurance policy is even right for you. However, the amount of money you could miss out on by not having an insurance product is far greater than the risk you take when putting your money into one of those products.

To find the least risky company to put your assets in, your financial advisor can use the TSR (Transparency Solvency in Riskier Assets) Ratio. This ratio compares the amount of high-risk assets (defined by the federal reserve) an insurance company has compared to the amount of surplus they have. If a company has a lot of high-risk, less liquid assets, and there is a real run on them where many people start cashing in their benefits for whatever reason, they must start liquidating those assets out of their surplus. Eventually, they can go broke if they don’t have enough to cover it. It’s important to make sure that their amount of surplus is viable not just for today, but years later.

The amount of surplus matters, not the size of the company, or their rating.

Insurance companies make it difficult for the average person to determine what is true and what’s not. It can take days upon days to do the amount of research needed to make an informed decision. A multidisciplinary lawyer or a well-rounded financial advisor that has built a network with multiple experts in the field is the best person to go to for help.

If you don’t have the time, or possibly even the interest, to research all of the things mentioned above, contact us. Greg DuPont is an estate planning lawyer, tax analyzer, and financial planner. As part of Matt Zagula’s SMART advisor network, Greg has access to hundreds of financial experts across the country. So, if he can’t answer your question, he’ll find someone who can.

Contact our office to schedule an appointment with him at 614-408-0004.

You Need to Take Emotions Out of Investing

You Need to Take Emotions Out of Investing

A year ago during this time, the market was in freefall. People saw their retirement savings plummeting and were panicking, rightfully so. However, now that the market has bounced back a bit, many people are starting to forget how scary it was to have their lifesavings and investments in jeopardy.

As we look at the stock market in 2021, you might be led to believe that businesses are doing much better than they actually are. Many individual investors are putting a large chunk of their life savings into stocks, fueled by overconfidence and the fear of missing out on big gains. Many are not taking into account the long-lasting impacts that COVID-19 still have on our economy, and will continue to have. While the economy would have certainly crashed harder in 2020 if not for government aide, continually printing stimulus money is causing the national debt to skyrocket in an unsustainable way. Eventually, the government will want that money back. Taxes will likely sharply increase in the next few decades.

Many individual investors believe that the market will only continue to grow and are making risky investments because of it. We’ve seen a sort of cult-like mentality surround investing recently, specifically in the stock market through the “buy and hold” game. For example, the GameStop stocks trend on Reddit. Many investors were posting their gains screenshots, bragging about how much money they made. This sparked additional people to invest, and lead to a plague of overconfidence. GameStop was not the only company wildly invested in though. As multiple users found good stocks to invest in and posted their gains, they garnered a following. The belief that their one good decision would certainly lead to many more is a mistaken assumption. People were risking their entire lifesavings on these trending stocks, and while there was a period of time where great gains were had, there was also a period where people lost tens to hundreds of thousands of dollars. It’s not just young people that invested either. Older individuals nearing the end of their savings journey also risked it all, leaving themselves no time to recover from any potential losses. Many investors believe they have nothing to lose, that the government will continue to bail out the public like they did during the height of the COVID-19 pandemic, and that their losses are just temporary. While we can be thankful that the government has helped our economy bounce back in the past, the assumption that it will always be this way is simply untrue. The national deficit is quickly approaching 30 trillion dollars, and according to the CBO, is on track to double in the next 30 years. At some point, the government is going to want that money back through heavy taxes.

Instead of risking your retirement savings on individual stocks, it’s important to take action to protect your money against future economic hardships. If you would like to continue investing and gambling in individual stocks, you must educate yourself on the market as best you can and know how the economy can affect you and your needs specifically. You should also only gamble a small portion of your money that you can afford to lose. On a regular basis, take your winnings off the top and put that money into something less risky and better protected from economic hardship. A fixed index annuity or an indexed universal life insurance policy are both great options. Another great option is to have a tactical money manager handle some of your portfolio for you. Look for somebody that has proven systems in place where algorithms run the show, not the head or heart. These actions put you in a defensive position, allowing you to take advantage of more opportunities.


Don’t let your emotions take over your investments. To protect your lifesavings and estate from future taxation, you must take protective action. If you need investment advice, don’t hesitate to call our office at 614-408-0004.

4 Ways to Protect Your Life Savings from Estate Taxation

4 Ways to Protect Your Life Savings from Estate Taxation

When we look at the rising national debt and the long lasting societal and economic implications of COVID-19, it’s almost certain that taxes are going to go up in the near future, specifically estate taxes. This tax increase could cause problems for the inheritance you bestow upon your children and grandchildren, and your own retirement income as well. To protect yourself against future problems that estate taxation may bring, an integrated approach to estate planning and retirement is essential. Failing to address income tax for your retirement will cause a potential bigger problem for your inheritance. You can improve the tax picture for yourself, while ensuring that your children and grandchildren can live comfortably, by doing the following things.

  1. Know the history of estate taxation.
    Estate taxation has changed quite a bit in the last 30 years. Back in the early 1990s, estates in excess of $600,000 were the most vulnerable to taxes. This $600,000 number includes the value of the home, retirement accounts and life insurance policies. In today’s money, that’s $1.1 million, a significant amount of savings for the average consumer. Estates over $600,000 in the early 90s would get hit extremely hard with taxes, as in around 50%. Therefore, many families had to put some strategies in place to try to protect their assets from taxation. In the past few decades, the government has continually increased exemptions for estate taxation, but that could all roll back in the next 20 years. With the debt clock continuing to rise, and healthcare reform on the horizon, the government needs more revenue. The estate value where taxes start to become a big issue will likely decrease back towards a $600,000 value. With the current housing bubble we’re seeing, you could be almost all the way to that $600,000 mark with just the value of your home. There are ways to safely take value out of your taxable estate that will better benefit you and your family.

  2. Be proactive in your retirement planning.
    The 401(k) has ushered in an era of complacency regarding retirement planning. That must change. Money tied up in a 401(k) can leave you vulnerable to income taxes. The 401(k) has attracted many people due to employer matching, however, there are other retirement savings options that will lead to more return on investment. You’ll also be able to better protect that investment from taxation. We recommend a Roth IRA because you are able to withdraw your money tax-free later in exchange for paying tax on it now.Read more about retirement savings options here.

  3. Protect your inheritance through a basic gifting strategy.
    A basic gifting strategy describes how one gives a certain amount of money every year to one or multiple beneficiaries throughout their lifetime. For example, a married couple gives $10,000 to each of their children every year. Many people don’t do this for fear of not having enough money for retirement. If you can afford it, it’s a great strategy that will take money out of your taxable estate.

  4. Protect your inheritance through a life insurance policy.
    This is the best option for being able to pass any type of asset onto your children and grandchildren 10-20 years down the road without being taxed. Many life insurance policies allow you to have a tax-free death benefit and withdraw money tax-free during your lifetime. You can withdraw this money for any reason, including for retirement income or to give to your children as part of that basic gifting strategy we just mentioned. You can even use it as a college savings plan (read more about that here). It’s a much better option than a 401(k) in terms of the amount of money you can get out of it. Life insurance policies can triple the money that you put into them, while 401(k)s typically have a low employer-matched percent. Paying life insurance policy premiums takes money out of your estate as well, reducing taxes there.

Retirement planning, tax planning and estate planning go hand and hand. We can help you make smart financial decisions to ensure that you’ll live comfortably though your retirement, and your children and grandchildren will be taken care of.

If you have any questions about retirement planning, planning your inheritance, or just have financial and legal questions in general, don’t hesitate to give us a call at (614) 408-0004. You can also fill out the contact form on our website at https://www.dandblaw.com/contact-us/.