What You'll Learn In Today's Episode:

  • Why people choose to go to conferences.
  • Helpful ways to apply what you learn in a conference with your own clients.
  • Important HSA tips and details to take back to your clients.
  • How to deal with your digital legacy.
  • The reality of what it’s like to be a financial planner in a sad situation.
  • A strategy that is no more—and what’s coming next.
  • Why you shouldn’t wait until the final rules come out.
  • How to lessen the tax burden on inheritances.
  • The importance of educating your team.

In today’s episode, Micah is joined by two rock star advisors: Bill Harris and Jim Saulnier. Both are financial planners with their own practices, and they take some time to debrief with Micah about their key takeaways from the Ed Slott conference, as well as the importance of the in-between conversations, a huge detail about HSA contributions, helpful ways to apply the information you learn, and more.

Listen in as Jim and Bill share some of the unexpected things they learned at the conference, including new estate planning tips on dealing with digital property or legacy. You’ll learn the important points they took away from changes being made and why you shouldn’t wait until the final rules come out to start learning.

Podcast Article:

Are Industry Conferences Really Worth It?

For a financial advisor, that next conference could be just what you need to unlock your business’s potential.

Let’s face it: industry conferences are expensive, time-consuming, and exhausting. Are they really worth the investment for the average financial advisor trying to grow their business? In this article, Micah speaks with colleagues Bill Harris and Jim Saulnier about the power of industry conferences—and why every financial advisor, whatever their level of business or average account size, can benefit.

Action Items in This Article

  • Update your checklist for client accounts during the year of death, and be sure your process accounts for digital assets and includes cutting-edge tax strategies.
  • Bring your rockstar team onboard with the process so they can help keep your checklists streamlined, and invest in their education so they have the tools to continue supporting you throughout your business’s growth.
  • Talk to your client’s age 59 and a half about HSAs and maximum family contributions to be sure they’re in the best possible tax situation, and help your clients age 65 plan carefully for those crucial six months when they begin Medicare and can’t make HSA contributions.

What Conferences Really Offer

Conferences are expensive. It’s always hard to justify taking time away from the office and spending it on something of questionable value; for those who have never attended an industry conference, it’s only natural to be skeptical of the value they really bring.

But Micah Shilanski, Bill Harris, and Jim Saulnier know it’s exactly those financial advisors—trying to grow their own practice but struggling to find the time to invest in their growth—who have the most to gain from learning how other financial advisors are running their own practices. These are Micah, Bill, and Jim’s top reasons for regularly attending conferences.

Stay Abreast of Industry Changes

The most obvious benefit to attending industry conferences is that it’s a fast track to the kind of high-level industry knowledge you won’t find in a blog post or newsletter. It’s also a great way to keep informed and up to date in a changing world, and to use new knowledge and proven strategies to add value to your clients’ lives.

For example, some recent ambiguity on the part of Congress led to a complicated interpretation by the IRS, which led to a lot of confusion on the part of HSAs regarding “nondependent children.” At a recent conference, Micah—who has a number of clients with nondependent children—was able to clarify that the parents of a non-dependent 19-year-old on a high-deductible plan that qualifies for an HSA can make a maximum family HSA contribution ($7,300 plus whatever they’re able to add if they’re over 55). In addition, the child can contribute up to $7,300 to their own plan.

“That is a huge takeaway,” Micah confirms. “That is something that I’m going to bring up in multiple webinars and conferences.” This sort of cutting-edge knowledge shows you’re paying attention to the details, and it makes you a valuable resource for key topics other people aren’t talking about.

Expect Lessons in Unexpected Places

The pandemic put many of these conferences on hold—but things are opening up again, and conferences are back on the table for you to attend. But why? If you ask Bill Harris, it isn’t always for the programmed lessons. “Most of the learning I get is out in the hallways, talking with people like you,” he tells Micah. And, as Jim Saulnier points out, the optional breakout rooms are another opportunity to take in more knowledge and advice from those around you. 

For example, one discussion about IRAs at a recent conference veered into an in-depth and unprompted workshop on digital beneficiaries: cutting-edge estate law regarding who can access everything from your online HSA records to your iCloud account and airline miles. It wasn’t the topic on the agenda, but everyone present benefited from the tangent. As Micah notes, “It’s those same hallway experiences, those in-between conversations, that have transformed my practice over the years.”

Learn New Tools for Difficult Conversations

Financial advisors have an interesting relationship with their clients: they tend to receive the most unscheduled calls after a pivotal life event, many of them less than positive. Emotions are raw—and as Micah can attest, not all of them are the clients’.

“When you’ve known a client for fifteen or twenty years, you’ve gone through all these experiences with them, and they die, you know what? You are a little emotionally compromised as well.” So how do we make sure you stay on your A-game when emotions are high? As Micah learned at a recent conference, it’s all about the checklists.

When one person dies, the surviving spouse has a pile of paperwork ahead of them, and the timing of that paperwork can greatly affect their overall tax liability. A checklist keeps everything from widow tax returns to Roth IRA conversions front of mind and happening in a timely manner, and by speaking to other advisors, you’ll learn the phrases and approaches others use to discuss this painful time.

Attend an Industry Conference Today!

The life of a financial advisor can be an isolated one, and a conference is an important opportunity to swap war stories and industry strategies and get your hands dirty solving each other’s problems. And these in-the-trenches experiences have more than the immediate benefit; they will undoubtedly lead to lasting friendships. (It’s only a matter of time before Micah, Bill, and Jim finally rent that hunting cabin together!)It’s clear that conferences are important opportunities for financial advisors to level up. If you’re looking to transform your practice in meaningful ways, register for an industry conference near you, or sign up for The Perfect RIA mailing list to be notified of upcoming events.

Resources In Today's Episode:

Read the Transcript Below:

This is The Perfect RIA, in case you didn’t know. Bringing you all the strategies to help your business grow. Are you happy? Are you satisfied? Are you hanging on the edge of your seat? Sit back and listen in while you feel the beat. Another myth bites the dust…

Micah Shilanski:         Welcome back to another amazing episode of the Perfect RIA Podcast. I’m your coast, Micah Shilanski. And with me, is not Matthew Jarvis, but I have two rockstar advisors that I have seen at a conference for years. And we’re just wrapping up the Ed Slott Conference, and we’re going to do a quick little debrief. So, I have Bill Harris with us, and Jim Saulnier. Did I get that right?

Jim Saulnier:     You did well, very good, very good. Not bad for an Alaskan.

Micah Shilanski:         You know, we learn a little bit from now and then.

Jim Saulnier:     You done learn good.

Micah Shilanski:         How many years have I butchered it? Alright, we won’t go into that one. So, Bill, thanks so much for joining us.

Bill Harris:         Thanks for having me.

Micah Shilanski:         It’s going to be great. So, Bill, you guys are both CFPs, certified financial planners and you both have your independent financial planning practices helping out, and we’ve known each other for years. And I thought it’d be great to do a nice little debrief from the Ed Slott Conference.

So, I guess the first thing, when we talk about this, is why’d you decide to come to a conference? What’s the main thing that you want to get out a conference when you first started coming?

Bill Harris:         So, for me again, I’ve been a participant in the Ed Slott Program for a while. So, we haven’t had a live conference in two and a half years. So, it was really great to get together and see some people.

Most of the learning I get is out in the hallways, talking with people like you. And I learned something about HSAs yesterday and I wasn’t even in the class, but just hearing from other people what was going on was just a great experience. So, I think that kind of learning’s just so important.

Micah Shilanski:         Bill, I echo that a hundred percent. I love coming to conferences, not for sitting on my butt drinking hotel coffee. But it’s those hallway experiences, those in between conversations, yeah, that has transformed my practice over the years. Jim, what about yourself? You can’t use that one, sorry.

Jim Saulnier:     Well, Ed’s very proud of his food, so we have to see the …

Micah Shilanski:         Now, if you were an Ed Slott member, you get that joke.

Jim Saulnier:     You get that one, you get that. If you ever been to an Ed Slott … the two-day or even in the classes that we go to, he does talk up his food.

But very similar to both of you, I come to these to learn, and that’s why I’m in the Ed Slott Program. Specifically, this time, I was hoping to learn about the proposed regs under the Secure Act. There’s a lot of misinformation and confusion and I’m proud that the IRS took something that was relatively simple and totally blotched it into this incredibly complex set of rules now.

But that’s mainly why I joined the Ed Slott Program, but I go to conferences in general for the networking. Which for the last two years, we’ve been doing everything over Zoom and you lack that networking, the interpersonal relationships. And that’s why we like to/or I like to come in person to these events.

Micah Shilanski:         Not to be too much of a selfish plug here, but that is the reason we created our mastermind programs the way it is, is because these in between conversations are great. And what we focus on, on our mastermind, is a little bit of learning and a whole lot of experiences together.

We go do adventures, we go to other things, et cetera. So, we have more hallway conversations because we’re going to create more time for them. So, yeah, I love it.

Jim Saulnier:     And ultimately, great friendships. I mean, Bill, you and I have been hunting together and I know you’re going to try to come with us someday.

Micah Shilanski:         Well, Bill’s going to win that ticket for us. And then we’re definitely going to go. So, that is the plan.

Bill Harris:         And I’ve been up to Alaska fishing with you. So, again-

Micah Shilanski:         A couple times

Bill Harris:         … just made some great friendships over the years.

Jim Saulnier:     And the interpersonal friendships is invaluable as well.

Micah Shilanski:         Yeah, amen. Well, let’s talk about some fun tax stuff. Jim, as you mentioned, the IRS did a great job or Congress did a great job of over-complicating some very basic things.

Jim Saulnier:     I think it’s the IRS on this one. It’s their interpretation of what Congress passed.

Micah Shilanski:         Fair enough.

Jim Saulnier:     Congress was ambiguous, the IRS just chose to interpret it in a very complicated manner.

Micah Shilanski:         Well, let’s be safe and just blame both of them.

Jim Saulnier:     Alright.

Micah Shilanski:         Alright, fair enough. Alright. So, let’s talk about this: what did you learn out of this conference? So, you can pick on anything. We went through a bunch of different topics, but what things did you learn and take away from?

Jim Saulnier:     You can go first.

Bill Harris:         Oh, sure. Put me on the spot.

Listen, in the introduction, we talked about how I learned about HSAs and what I always try to do when I’m at a conference like this is immediately, which client has … you go through a lot of textbook stuff and you’re like, “Oh, so and so client has that issue” because sometimes there’s a lot of just really deep, heavy material and you want to know how to apply it.

So, you guys came out of an HSA thing the other day and talked about how a child can be on their parents’ healthcare plan, but be able to contribute to their own HSA and go above and beyond the family contribution amount. And I said, “Well, I get clients that fit that bill.” So, I’m like excited to go home and put that in use that way.

Jim Saulnier:     Non-dependent child.

Bill Harris:         Non-dependent child, yeah.

Jim Saulnier:     That was huge child, yeah.

Bill Harris:         And again, I wasn’t in that class, but I heard about it, I’m like that’s awesome.

Micah Shilanski:         Yeah. So, the quick summary on that one — Jim, jump in here if I’ve misheard this correctly. But if you have a 19-year-old that’s on a family health plan and they’re non-dependent, they’re self-sustaining, that’s there, but they’re still on their family, healthcare coverage — then both, assuming it’s a high deductible plan that qualifies for an HSA, then the parents can make a family HSA contribution, which is the 7,300 plus potentially they catch up if they’re over 55.

In addition to that, the child can make a family contribution as well, because they have their own … and they’re under their own family plan.

Jim Saulnier:     Of the full amount.

Micah Shilanski:         Of $7,300, right?

Jim Saulnier:     Until they are 26 and off the parental plan, they have to get their own plan, then they’re going to go back down to what a single person can contribute.

Micah Shilanski:         That is a huge takeaway. That is something that I’m going to bring up in multiple webinars. I’m going to bring it up in conferences because even though it doesn’t apply, this is going to show one of those little details that you’re paying attention to tax law, and a key thing that other people aren’t talking about.

Jim Saulnier:     Let’s give a plug to the gentleman to in the Ed Slott group — does anybody have it, can look it up?

Micah Shilanski:         The history man.

Jim Saulnier:     He’s like the Ed Slot of HSAs. This guy is incredible.

Micah Shilanski:         I’ll tell you what, if you want just email us; lifestyle@theperfectria.com. Shoot us in there, let us know you want that.

Bill Harris:         Give me a second, I’ll pull it up in a second.

Micah Shilanski:         Alright. Bill’s more amazing than I am.

Jim Saulnier:     He is the Ed Slott of HSAs.

Bill Harris:         Just so people on podcast land know, I do have a manual in front of me.

Micah Shilanski:         He’s searching his mind.

Bill Harris:         I’m searching the database so I will get you that. So, move on and we’ll get to it.

Micah Shilanski:         Alright. Well, let’s pick on HSAs for a little bit longer. Another thing that I thought was just a solid idea that they talked about.

Bill Harris:         Ryan McKeown.

Micah Shilanski:         Ryan McKeown.

Bill Harris:         Hopefully, I’m pronouncing that as well.

Micah Shilanski:         Yeah, he was a guru of this information. Just did a phenomenal job. So, I would definitely take a class someday.

Jim Saulnier:     What’s his website? Give that to the listeners.

Bill Harris:         It’s wealthenhancement.com.

Micah Shilanski:         Alright. You want to give out a cell phone number as well? No, just kidding. We won’t give that one out.

Jim Saulnier:     Hopefully, we’ll not get him into trouble with this compliance people: “He said what? He said what? You can’t do that.”

Micah Shilanski:         Well, the other thing that I really liked about this and I’m going to do a whole post on this because as you know, we specialize with federal employees, about a little bit of an edgy post; is should you fund your HSA before you fund your 401(k) or your TSP?

Take the match out just for discussion, but I’m going to make my math easy. The first seven grand, let’s say there’s a match, okay, you’re going to put the match in at least to your (k) plan or your TSP. But then other than that, what should you be funding?

He made one heck of an argument that you should be max funding your HSA over your 401(k) or your TSP.

Jim Saulnier:     Well, because it gets the trifecta the quad-

Micah Shilanski:         Amen!

Jim Saulnier:     … factor on taxes. Yeah, no that was-

Bill Harris:         And I wasn’t there, and I’d be like HSA all the way.

Micah Shilanski:         Yeah. So, Jim, just go ahead and run through that real quick. What’s the quad factor of taxes?

Jim Saulnier:     Well, the quad factor may not work in your situation because-

Micah Shilanski:         Because I’m in Alaska, you got Alaska Joe coming on?

Jim Saulnier:     No, putting the contribution into an HSA, but through your own contribution and not through a payroll deduction, you won’t get the quad factor, but you can still get the trifecta. And that’s going to be the money going into the HSA is obviously going to be deductible on your taxes. It’s going to grow tax-deferred inside the HSA.

Micah Shilanski:         That’s number two.

Jim Saulnier:     It’s going to be removed tax-free. So, it gets qualified for-

Micah Shilanski:         Potentially.

Jim Saulnier:     … medical expenses. The quad, the extra little tax pot is if your contributions go in via payroll deduction on your employer, then those will be exempt from FICA taxes, payroll taxes. But if you’re going to do the strategy that you said, you’re going to fund the HSA yourself out of your cashflow, rather than putting it in to your 401(k) or your TSP or whatever the case may be, you’ll miss that quad pot.

Micah Shilanski:         Yeah, potentially depending on what your employer allows.

Jim Saulnier:     Correct.

Micah Shilanski:         Yeah, fair enough. No, I think that’s a great one. So, a lot of things inside of HSAs, another great takeaway that I got from the HSA side was one of the things that I’ve known, but it’s just great, I’m going to echo this more with clients.

There’s no time restriction on when you can take the money out. This is a big misconception coming from the FSA, the flexible spending account rules as people put money in, they’re like, “Oh crap, well, I have a limited time before I can take that money out.”

Not with the HSA. I can keep socking away that $7,000 in change every single year in this account. And if I have my receipts, I can keep my receipts for 20 years. Then 20 years later, I can take a giant lumpsum of all of my qualified medical expenses over the last 20 years that I have those receipts for. And it all comes out a hundred percent tax-free.

Jim Saulnier:     Correct. Tax-free and a beneficiary, a non-spouse beneficiary who would have to close the HSA and pay taxes on that can use those old receipts within 12 months of your debt.

Micah Shilanski:         That’s right.

Jim Saulnier:     And take it out and it’s going to go to them. But just say it’s to reimburse for medical expenses that you had incurred while you were alive. I thought that was very interesting. Save those and let people know where they are.

And we might as well give a shout out that one of the things that I wanted to point out to you and your listeners, is you learn so much more at conferences than sometimes what the main topic is, which in Ed’s group, is IRAs.

Micah Shilanski:         IRA’s, yeah.

Jim Saulnier:     But we learned something and I have it somewhere in here, but Micah, you’re the tech geek here, so you’ll remember: for lack of a better term, the beneficiary designation for iPhones.

Micah Shilanski:         Oh my gosh, that was great.

Jim Saulnier:     And that was so important. The reason I’m mentioning that is maybe your receipts that someone is going to keep will be digitalized for all your healthcare expenses over the years. And now, and Micah will share in a minute (I’m putting him on the spot) where to put a little legitimate beneficiary designation into your iPhone, iPad, iCloud, whatever the heck it is-

Micah Shilanski:         Your iCloud account.

Jim Saulnier:     iCloud — and if you pass away, someone by Apple will be allowed to get all that information.

Micah Shilanski:         Yeah, it is a great thing. Now, I’m going to step up one step higher to that while I’m thinking about exactly how to do this. But it’s the refuter that you have to do … the Digital Assets Act that’s there, that you need to make sure is incorporated into your client’s estate plan. And most of the time, it’s not.

Now, our attorney does a great job of that. But this is a thing where you need to have one, in your estate planning documents, is the catchall in your will, in your trust, et cetera, who owns your digital assets when you die, but better than that, is a beneficiary designation just like in it.

So, the way that you would do this in your iPhone is pretty simple. You just go into your settings, at the very top, you click on your name. So, click on Micah Shilanski. Then inside of there, when you go into your-

Jim Saulnier:     Passwords.

Micah Shilanski:         … passwords account, what it’s going to say is they have legacy contacts and you can go inside of there and you can add more people into that account. And when you add more people into there, it’s going to be great. You can show up and you can put … I put my wife on there, I can put my sister on there, anyone else.

So, that way, if I die, they can use then that code, they can go to Apple. They can get my digital assets that they own.

Jim Saulnier:     And there could be the digital copies of your health expenses that you had during your life. And whoever inherits your non-spouse beneficiary, inherits your HSA can use those digital receipts within 12 months of your death to take that money out tax-free, which otherwise, would’ve been subject to taxes.

Bill Harris:         And this is kind of like cutting edge, new frontier of estate planning. If you think about it, I can’t tell you how many songs I’ve bought on Apple iTunes, airline miles, like everything’s digital. It’s like how do you access that? So, you better have a good plan around how your digital estate plan is going to work.

Micah Shilanski:         And keep in mind, what a lot of clients are going to default to doing is they’re saying, “Oh, well, I shared my password with my son. I shared my password with my daughter or whatever.”

Well, that’s great, that’s also illegal, that’s fraud. You’re logging in under someone else’s name, you’re considered a hacker. This doesn’t look too good. You have to give them legal permission to do that. And that’s done in estate planning documents and it’s done by beneficiary designations with these digital assets. That’s great.

Jim Saulnier:     Fascinating stuff.

Micah Shilanski:         So, getting stuff out of conferences that you didn’t intend to get out of, I mean, that’s a huge thing. It was not a takeaway I expected to come out of this conference at all.

Jim Saulnier:     No, I didn’t expect that either.

Bill Harris:         I agree.

Jim Saulnier:     And again, that’s the benefit of going to conferences.

Micah Shilanski:         I love it. Alright, Jim, I’ll put you on the spot again: what else did you learn in this one that you’re going to take back and implement with clients?

Jim Saulnier:     Well, hands down, Jeff Levine. I didn’t even know Jeff was going to be here.

Micah Shilanski:         Oh yeah. Now, if you don’t, I have a great clip of Jeff Levine talking to Jim. It is amazing. So, we might publish that later.

Jim Saulnier:     Well, why don’t you tell the whole story? Years ago … it was when Ed had a workbook, and I found a mistake in it or something.

Micah Shilanski:         Yeah. We were going through the workbook and you found a mistake in it, which is-

Jim Saulnier:     This was about three years ago, Ed gave us a workbook at his event and we had fill it, I don’t know if you remember that.

Bill Harris:         Yeah, I do.

Micah Shilanski:         And so, we went up on stage and we went up with Ed. We were working through the workbook and just like anyone else, no one likes to be wrong. So, fair enough. And so, we’re going through it, anyways, on the iPad that’s sitting there where we find out what the mistake I wrote on the iPad, “Jim is wrong.” And that just stuck, which was-

Jim Saulnier:     Wait, wait, wait — before you go on, I found it was a mistake.

Micah Shilanski:         Correct, you were correct. Jim was correct.

Jim Saulnier:     And we wanted to point out to Ed he made a mistake. Go ahead, take over the story.

Micah Shilanski:         Yeah. So, we wanted to point it out that he made a mistake, but on the iPad, I wrote in big letters, “Jim is wrong” and that stuck in Ed’s mind that was there. And so, we went back to the seats and he said, “Alright, I got to make a correction, and I got to give credit to the one who’s doing it.” He’s like, “Wait, where’s the Jim is wrong? Jim is wrong group?” He’s yelling it from the speakers, 400 people there. I thought it was amazing. Jim, slightly less so for some intent.

Jim Saulnier:     Because I was not wrong and Micah took credit for being right. But it’s funny how you put that idea in his head subconsciously by writing in big letters, which I did not see, “Jim is wrong.”

Anyways, we were going with that, is Jeff Levine who I’m sure all your listeners know, you have to introduce who Jeff is — I doubt it. Everyone’s probably heard of Jeff.

Micah Shilanski:         Jeff is great. If you don’t follow his tax work, he’s really good. He’s kind of on the cutting edge. Whenever there’s new tax acts that come out, he pushes out a ton of information. He’s involved a little I think with XY Tax, involved a little with Holistiplan. He used to have his own practice. I don’t know, does he still have his own practice?

Bill Harris:         I don’t know about that, but his Twitter is at CPA Planner, and he’s prolific on Twitter.

Jim Saulnier:     Isn’t he with-

Bill Harris:         So, I certainly recommend tuning into him.

Jim Saulnier:     He’s with the company now that’s Kitces is with.

Bill Harris:         Buckingham.

Micah Shilanski:         Yeah. So, solid guy, great tax information. Highly suggest you follow him.

Jim Saulnier:     Very smart. I had no idea he was going to be here. He used to be one of the technical consultants for the Ed Slott group years ago, and everybody loved listening to Jeff, and I still took away … I’m just amazed with this strategy.

So, I’m going to mention it again, it’s that 2038 trust, otherwise known as a testimony powers of appointment trust. I am flawed with that strategy.

Micah Shilanski:         Oh, it’s such a great idea for those that don’t live in Alaska. Because if you live in Alaska, we don’t need to do this complex thing. But what you’re talking about here is estate planning and step-up in … correction, adjustment in basis which happen.

Jim Saulnier:     Double step-up in basis potential.

Micah Shilanski:         That we get in community property estates or quasi community property estates like Alaska, but we have so many other states that are separate property. And you have that asset, that how do you get this full step-up in basis or a double step-up in basis.

Jim Saulnier:     At the death of each spouse, that’s the key here.

Micah Shilanski:         That is correct, for the first to die, yeah.

Jim Saulnier:     The death of each spouse. So, I was just really intrigued by that. That’s why I asked to repeat. He’s got to be sick of me, every time he’s seen me over the past day and a half, I keep asking him, “Are you sure this is legitimate? Are you sure we can do it? And what do I tell an attorney that I want to create?”

And that’s when he calls it a 2038 today, did you guys ever hear that?

Micah Shilanski:         Yeah.

Jim Saulnier:     Okay, because I had never even heard of that before.

Bill Harris:         Kinda I’ll say fun, like you go through and your client comes in and says they have a year left to live and our job is to say, “That’s awful, but let’s do this right now. Move all your assets over here.” That’s the reality of what we do.

Micah Shilanski:         Right, let’s do all the planning.

Jim Saulnier:     Sadly, all jokes aside, I’ve been exposed to that twice over the past 18 months. And it is so hard, especially because I know my clients very well and I am so saddened when I hear this. But my mind is instantly thinking … because I know their case, I know the situation, I know what we have to do.

For instance, homes in Colorado have appreciated so much and other real estate and I know what their investments are and I have a very hard time breaching from that point to the inevitable, “So, let’s talk about what we’re going to do,” and it’s not easy. And I’m sure you guys have all experienced the same. It’s not an easy discussion to have.

Micah Shilanski:         You know, I’m going to say the key end to that and feel free to push back on me Jim, if you disagree – but it’s having a process to go through, having a checklist to go through. Because when you’re in a state … I’ve known a client for 15, 16, 20 years, you’ve gone through all these experiences with them and they die, you know what? You are a little emotionally compromised as well.

Jim Saulnier:     I agree.

Micah Shilanski:         And so, how do we make sure we stay on our A-game, and I’m going to say that’s processes and checklist. And like this type of strategy you’re talking about, this has to be on your death process. You know what, another one that needs to be there is Roth conversions.

For that first year, the widow’s going to have a widow tax return. They still married, filing joint, before they’re off on a single return and they get hit with a widow penalty and a higher tax rate, that’s another thing that has to be on the checklist, is should you be looking at Roth conversions, which you’re not really thinking about a death, but you know what, that could be a huge tax planning strategy for them.

Jim Saulnier:     Absolutely, absolutely. So, that was some of the good takeaways that I got, was not even listening to Ed and his technical consultants. It’s what we got again from chatting to everybody in the breaks and attending these breakout sessions as they call them, where it’s optional, but most people attend it and learning from other people that are here.

Bill Harris:         I just want to change the game a little.

Micah Shilanski:         Go for it.

Bill Harris:         And if you can put some sad music … but it really hit me today, the stretch IRA is dead, it’s no more. And I’ve known that, but I was like, yeah, it really is. It’s gone. Like that strategy’s just no more. So, I think going through … I know we got clarification on the Secure Act and more … you know, what was it? 267 pages long?

Micah Shilanski:         290 pages.

Jim Saulnier:     275.

Micah Shilanski:         Oh, 275? Yeah, the proposed regulations, right? Don’t worry, in 20 years, we should have the final regulations. By that time, they’ll pass Secure Act 2.0.

Bill Harris:         I thought I had a decent grasp on what that was, but as we went through it over the last couple days, I’m like I got to read this and reread it again. And it’s complex. I mean, we have the lifetime tables and all that kind of stuff.

And I think we talked about the old one, when you inherit … this is for the chart to use and then down the bottom, it has all these additional things that applies and it’s changed so much. And we started this conversation talking about how Congress or the IRS, whoever did it, they really made this complicated.

Micah Shilanski:         Yeah.

Voiceover: The Perfect RIA challenges financial advisors to answer the question: what would you do if you weren’t afraid?

Surround yourself with the financial advisors who share your common values and goals towards success. The advisor is you, the time is now. Don’t be like most people who fail to take action and achieve their dreams.

Go online today at theperfectria.com and decide — decide what type of financial advisor you plan to be.

Micah Shilanski:         You know, but this is a great, I’m going to call dishwasher rule; let’s get credit for the work that we do. So, this is a great reason that you should get out there and review your client’s estate planning, and say, “Hey, now, does their trust comply with the new changes in the Secure Act?”

It may not. Whether it does or doesn’t get credit for the work that you’re going to do, get credit for talking about you said the death of the stretch IRA, right, Bill? Let’s make sure we’re chatting about the clients and what impact that’s actually going to have that’s there.

And keep in mind, with the new proposed regs that there, even under that 10-year rule, if a client passes away after the required beginning date, so after they have to take their RMD, there’s still an RMD that the client has to take, even the beneficiary has to take within the first nine years.

So, every year they got to take an RMD, plus they have the 10-year rule. So, these things are complex. We got to make sure we really understand that and how these beneficiary rules are, and we’re adequately explaining them to our clients and what impact that actually means.

The death of the stretch IRA, clients may or may not get that, what impact that has. We need to be able to explain it to them and say, “Great, now, here’s our next planning strategy that we need to do, showing your worth.”

Jim Saulnier:     Absolutely. And one thing that I picked up in respect to that, and Ed tried to make very clear, is these are just proposed regulations. The final rules are not out. But I was flawed when he began this whole discussion and I wrote it down, and he said the Tax Reform Act of 1986-

Micah Shilanski:         That’s right.

Jim Saulnier:     Which, as of then, was the biggest impact to the U.S. tax code, and he said, we have proof of that because the internal revenue code used to be called the Internal Revenue Code of 1954, but they changed it to the Internal Revenue Code in 1986 after this Tax Act change.

Anyways, his point was, the final IRA distribution regulations did not come out until 2001.

Micah Shilanski:         Wow.

Bill Harris:         I think it’s 2003. I think it was even later.

Jim Saulnier:     Oh, I wrote down 2001, but it could be 2000-

Micah Shilanski:         15, 17 years later, right?

Jim Saulnier:     But that’s how long it took the ‘86 Tax Act rules to be finalized. So, Ed warned us, and I guess we’ll pass this warning on. I was always telling clients, these are proposed regs, don’t worry about it. We’re not going to do anything until I get the final.

Because I thought the final, I said, okay, well, they’re going to close it sometime in May, they’ll probably be out by August. Literally, that’s what I was thinking, and I had shared that with some people.

And now, Ed says we don’t know. He doesn’t know when they’re going to come out. And that’s why he shared that story. Look, it took 15 or maybe 17 years from the ‘86 changes to get the final rules. And he said, “You guys need to start acting as if these proposed regs are the final rules.”

So, for all you guys listening and gals listening, who are thinking, “Well, I’ll wait till the final rules come out and then I’ll start learning this, and then I’ll start following this and paying attention,” you should be paying attention now and learning it now, even under the proposed rules, because we don’t know when the final rules are going to come out.

Micah Shilanski:         Jim, that’s such a great point. I want to add to that and say, you also need to know where these gray areas are in the proposed rules. There’s some things, okay, they’re proposed, yeah, they can change, but there’s some things they’re probably not going to change.

There’s also a few gray areas that are out there that we’re not a hundred percent sure on what the IRS means and how they’re going to rule on it. You need to be educating your client about this just to say “Micah, you told me …” you know what, I want my clients to say if the IRS changes the rules and we were wrong, was, “Well, Micah, we made our best guess, but I know you told me they’re proposed.”

Well, let’s make sure you’re documenting that mail, let’s make sure you’re communicating that. And guess what? CPAs are not on top of this stuff, they don’t know a lot of this stuff. So, this is a great way that you can do a nice center of influence campaign reaching out to CPAs and sharing some of this information as well.

Bill Harris:         Great idea.

Jim Saulnier:     The biggest gray that I got and still confuses me to a degree is the distributions, the RMDs between years 1 and 9 under the 10-year rule. If someone dies before their required beginning date, allegedly, there will be no distributions. But if you die after your required beginning date, there will be distributions versus during those first 9 of the 10 years.

And the consultants were making it clear that’s their understanding. But there is no guarantee that being exempt, if someone dies before they required beginning dates, being exempt for those first 10 years or technically 9 years, is going to apply or not.

So, I’m sitting there thinking, well, I’ve got clients already in that boat, should we start taking distributions because there’s no clear guidance? It’s kind of a gray area. Everything I have been reading on is saying, if someone died before the required beginning date, they’re on no distributions the first 10 years.

Micah Shilanski:         9, yeah, 10 you got to distribute it, yeah.

Jim Saulnier:     9, and the reason we keep saying 9/10 and there’s some ambiguity here, folks, is in year 10, the required distribution is the rest of the account.

Micah Shilanski:         Correct, 100%.

Jim Saulnier:     100%

Micah Shilanski:         It is very easy to calculate, which is great. Take it all.

Jim Saulnier:     Whereas, the first nine years, it’s going to be distributions based on the life expectancy of the beneficiary.

Bill Harris:         Micah, if I can paint a little picture, the three of us are in the room, listen to the conference and the speakers and we’ll hear something, we’ll all be like, “Did he say what I thought he said?” And we start talking about it in the back of the room.

But I think we looked, there was a calculation — a lot of people thought it was interpreted, if you’re a spouse, you could go the 10-year rule or you could go and wait year nine and then roll it over to your own spousal IRA. But then we saw the calculation of what you got to go through, and it’s complex.

Jim Saulnier:     No one’s going to do that anymore.

Micah Shilanski:         Oh, it’s a horrible idea. It’s a horrible idea.

Jim Saulnier:     No one’s going to do anymore because they essentially killed it with the hypothetical RMD calculation.

Bill Harris:         Thank you for bringing that up.

Micah Shilanski:         Oh, my gosh up. Alright, before we get to that complexity, one of the things … Jim, I want to go back to something that you said. So, let’s go into that scenario. I want to give a quick planning point of something I’m thinking about doing and push back on me if you have a better idea if you think this is horrible.

Jim Saulnier:     Literally?

Micah Shilanski:         Yeah, it’s okay. I can edit this thing later — oh, physically push back on me?

Jim Saulnier:     Physically push back on you?

Micah Shilanski:         That’s right, we’ll tell people later about what happened to your jaw.

Alright. So, you had brought up the point about the, we don’t know – we think that if somebody dies before the required beginning date, there’s no RMDs. Let’s go with that theory.

Jim Saulnier:     For the beneficiary.

Micah Shilanski:         For the beneficiary until year 10, great. Well, what if we wanted to be ultra conservative and said, you know what, maybe there would be because now there’s that rule that’s out there that says, at least, as rapidly, they’re supposed to take money out.

So, one thing I’m thinking about doing is let’s say the RMD is X amount of dollars: 6,000, 10,000 a year, whatever it is; my plan is okay, if the beneficiary has another IRA account, maybe that just makes sense to do more Roth conversions with. I use whatever the RMD is from one account just to pay taxes and on their own accounts, because you can’t do a Roth conversion on an inherited account.

But on the beneficiary’s own IRA account that they have, start doing Roth conversions with those accounts. So, if I’m really concerned about this RMD thing, well, then take it. But instead of just taking that money out, why don’t I use it for something else? Why don’t I do Roth conversions with it? Why don’t I do something else with that money?

Jim Saulnier:     Well, you can’t legitimately convert the RMD from a beneficiary, you’re talking about using that money to pay taxes?

Micah Shilanski:         You pay taxes, yeah. From the beneficiary IRA, I take that money out and I’d send it to an IRS, then from the beneficiary’s own IRA, not inherited IRA – their own account that they have assuming they have one, then I’d start doing the Roth conversion on that account.

Jim Saulnier:     Taking a bad thing turning it into good thing.

Micah Shilanski:         Exactly.

Jim Saulnier:     Lemons out of lemonade.

Micah Shilanski:         Lemon out of lemonade. That’s what we’re all about here.

Bill Harris:         Micah, I think that’s a great idea. I’m a big believer in the Roth and obviously, this just lessens the tax burden because you inherited the money and you got to take it out anyways. So, I don’t see any downside.

Micah Shilanski:         Perfect. Well, talking about downside, let’s talk about your hypothetical recalculated RMDs you just brought up.

Jim Saulnier:     This isn’t a hypothetical topic. This is the legitimate name of what the IRS came up with.

Bill Harris:         Yeah, I mean, I just learned about it today, it’s called the hypothetical retroactive spousal RMD. Would people like to know the Secure Act regulation pages for reference, Micah, so they can go back and look at it?

Micah Shilanski:         Give them the pages.

Bill Harris:         Yeah, in the Secure Act regs page 67-

Jim Saulnier:     Proposed regs.

Bill Harris:         Proposed regs, page 67 through 69, 75 … 241 through 244, 254, and 255. Go ahead.

Jim Saulnier:     To me, it’s what is essentially going to kill the strategy of a spouse inheriting the IRA. She is allowed or he is allowed to choose either the 10 year or move it to their own. The IRS was trying to close this loophole of, okay, well, I’m going to do it under the 10-year. And if they died before they required beginning day, I can leave that sitting for 9 years. And then in the 9th year, before the 10th year, because year 10 it’s a hundred percent RMD; in the 9th year, I’m going to move this to my own IRA and treat it that way.

Micah Shilanski:         So, I just skipped out of nine years of RMDs or a little bit less than that, that I had to take distributions. Now, I stuck at my own account which was clever. But then Bill, to your point, the IRS said that was a little too clever.

Bill Harris:         Little too clever, and now, you got to take some … if you’re going to do that somewhere, you’re not going to be able to roll it all over. You’re going to have to take some-

Micah Shilanski:         So, basically-

Jim Saulnier:     You have to go back and figure out the December 31st balance for each of the years, you kept it under the “10-year” rule. Figure out what the RMD would’ve been each of those years, add it all together and take it out in one lumpsum RMD in the year that you go to move it or roll it because the spouse can do a spousal rollover. Roll it over into your own IRA. You got to take a massive … so, it essentially kills the whole purpose of that.

Micah Shilanski:         There could be pros and cons with that. We could find an edged case potentially where that’s going to make sense. Yeah, but great news is (I’m going to make lemonade out of lemons here) there’s no penalty for this. So, they’re not going retroactive with a penalty. It’s just the distribution and pay taxes. So, that’s a positive thing that’s going to be there.

But again, the nightmare of the calculation to go and do this kind of kills it right there. It’s just not worth it.

Bill Harris:         And I think early on, we were interpreting this too, is you have a choice. You can go either the 10-year or you can roll it over. Then people were getting tricky with it. Now, it’s like, okay, we got some more definition of how this works. And again, this just goes into how complex these rules are. Thank you, IRS or Congress, or whoever did it. So, I guess that keeps us employed, right?

Micah Shilanski:         Amen. Alright. Well, guys, this podcast is all about action items. What can advisors take? What can we learn from this information and take actions on? So, I’d love us to boil it down to one thing. I’ll go ahead and go first. What’s one thing that we’re going to do after this when we go back to our office and implement?

For me, I’m going to go back and it’s going to be in our list, we’re going to update our checklist of the year of death. I’ve had a couple clients pass away and I’m just thinking, you know what, I really need to do this. Our checklist in the year of death, what are things that we need to be thinking about, especially how do digital assets play into it, these types of beneficiaries, what tax planning strategies are there in year of death? And I really want to make sure that’s top notch while it’s on top of my mind.

Bill Harris:         For me, it’s literally go through these manuals with my team and kinda look and start to make a list, like which clients does this apply to and start to go after it.

Micah Shilanski:         Yeah, I could go on such a tangent on that one, Bill, because how much time do we spend on our own education, but we deprive our team on this education. The more we can educate our team and the more competent and educated they can become, the better that they’re going to be. That’s the better massive value, delivering massive value to our clients in the end. So, I love that one. That’s a great one.

Sorry, Jim, you got to top that one.

Jim Saulnier:     I can do it.

Micah Shilanski:         Alright.

Bill Harris:         The challenge is on.

Micah Shilanski:         Garland has been thrown.

Jim Saulnier:     It has been thrown. We’ll try this, I got three options here. A couple of takeaways that I got that we’re definitely going to start looking at. We’ll go back to the HSA one again, because that was really good.

Micah Shilanski:         Oh, it’s a great one.

Jim Saulnier:     I like that … and this is one that it makes sense and I believe — I can’t say for certain, but I believe I have done this in the past, but I totally forgot about it. Clients who are over the age of 59 and a half and have an HSA (so, you need to be both sure).

If they’re funding the HSA, not through a payroll deduction, but they’re funding an HSA through their own like I do. I don’t do mine through a payroll deduction, I do it on my own.

So, if they were to take the money, let’s say, they’re allowed to put in the family max, 9,300 — take the $9,300 out of their IRA because they’re over 59 and a half-

Micah Shilanski:         Great idea.

Jim Saulnier:     No 10% early withdrawal penalty. Yes, it’s going to be taxable, y’all yelling at your iPod playing devices right now. But once they take that $9,300 out, put it into the HSA. Now, they get a $9,300 deduction on their taxes. So, it’s a wash.

But you’ve taken an asset that is going to always be subject to taxes when it’s removed from the traditional IRA and put it into an account that will never be subject to taxes, assuming, you take it out for qualified medical expenses, which isn’t that difficult to do throughout the rest of your retirement.

So, I’d like that. So, I have a note here that we’re going to go back and start looking for all our clients that fall into that category.

The other one that I’m going to have us do because it can burn us, especially in the year that a client turns 65, I have to remember to keep paying attention to the month that they go on Medicare because for HSA contribution eligibility, they essentially went on Medicare six months before they actually go on Medicare.

Now, Medicare does that to cover medical expenses that you might have incurred just before going on. So, they’re trying to do a good thing, but it’s a bad thing because you’re deemed to be on it six months earlier, you cannot contribute to an HSA during that six months period.

So, you may have to go back and remove that as an excess contribution, which was another element we learned, which made me go … we have in our office, we’ll call it things that make you go, “Hmm …” It’s like that song that came out a long time ago. So, if we have a “Hmm …” thing, we share it with everyone.

And what I learned and didn’t realize — everybody should know, removing an excess contribution from an IRA, you have until October 15th of the year following the year you made the excess contribution. But removing an excess contribution to an HSA, you only have until April 15th of the year following the year your client made the excess contribution. So, don’t think you have until October, you only have until April. So, we’re going to again, try to pay attention to that six-month window.

Part of what you said, build it into your … you called it a checklist. We call it build it into our SOP, standard operating procedure. But build that in that we’re paying closer attention to when a client’s going to go on Medicare and make sure we reach out to them six months before reminding them if they are contributing to an HSA-

Micah Shilanski:         I love it.

Jim Saulnier:     … you have to prorate that last six months and you may not be allowed to do it. So, those were the two of the three. I don’t want to get into the third one and bore your listeners, but did I win the challenge?

Micah Shilanski:         I don’t know about that one. I think we’ll play the “Jim is wrong.” No, no-

Jim Saulnier:     Alright, Jim is wrong.

Micah Shilanski:         … I thought all these were great things to be really actionable on and things that we’re going to do. Remember the dishwasher rule when we’re going out? It’s not just enough to say it and to do it internally, we got to be sharing that with a client.

One other thing, and then Bill, I know you have a comment. I want to make sure I bring up too: I’m going to say this is the importance of having a group of people to talk with at a conference.

So, thank you to you guys. Because one, we were only told to quiet down one time. I thought that was impressive.

Jim Saulnier:     Oh, we were right at the start, someone ratted us out.

Micah Shilanski:         That was ridiculous.

Jim Saulnier:     Had to be one of people sitting there.

Micah Shilanski:         Yeah, pretty much communists. Alright. But it’s the group of having a couple guys with you and being able to go through this, like when they’re talking about it on stage to be able to lean over, “Hey Bill, did he say this? Jim, how does this apply here?” And that’s really powerful, at least, for me, in conferences. So, thank you guys for that.

Bill Harris:         I want to just end on a fun cautionary tale.

Micah Shilanski:         Let’s do it.

Bill Harris:         Andy Ives is one of our technical consultants at Ed Slott and he read this, and we spent a lot of time in these meetings going through private letter rulings and tax quad cases.

And it usually ends badly, and it’s always the taxpayer is responsible. And so, he literally, in the regs, he says, “A custodian may calculate an RMD, but that custodian is not required to calculate the RMD correctly.”

So, for your listeners, like don’t be trusting your custodians. You better know how to do this. And just one final prop to you, Micah, like I love the podcast, you guys are doing great work. So, keep it up.

Micah Shilanski:         Awesome. Thank you, Bill. I appreciate it.

Bill Harris:         It’s really great you’re doing the podcast, so thank you.

Micah Shilanski:         And where can they find more information about you at, our listeners?

Bill Harris:         I’m on Twitter at Bill M. Harris, and you can LinkedIn Bill Harris as well. WH Cornerstone Investments.

Micah Shilanski:         Excellent. And Jim?

Jim Saulnier:     I’m not on Twitter. Wouldn’t even know how to tweet a tweet … tweet a tweet, whatever the hell they call that thing. Not on Twitter, not on Facebook.

Micah Shilanski:         But you have a pretty good podcast.

Jim Saulnier:     We do have a podcast, Retirement and IRA show, but that’s about it for social media. I’m not on any of that.

Bill Harris:         I was thrown off of Facebook for violating community standards, but I don’t know why.

Micah Shilanski:         I like you even more.

Jim Saulnier:     What did you say?

Micah Shilanski:         Alright, this is a perfect.

Bill Harris:         The irony, I don’t post. I just got this message one day, says “You’ve been removed for violating community standards.” I’m like, “I wasn’t even on Facebook.”

Jim Saulnier:     They must have looked at your voter registration.

Bill Harris:         Probably, who knows.

Micah Shilanski:         That’s right. Well, on that note, guys, it’s always about taking action. Take this information, make sure you go do it, make sure you give us five stars. And until next time, happy planning.

Hold on before we go. Something that you need to know. This isn’t tax, legal, or investment advice. That isn’t our intent. Information designed to change lives. Financial planning can make you thrive. Start today. Don’t think twice. Be a better husband, father, mother, and wife. The Perfect RIA. The Perfect RIA.

Recommended Podcast

How Your LLC Fails

Protecting your business.

See More

Accelerating Your Growth and Understanding Practice Valuations with Guest Ted Jenkin [Episode 260]

Insights into practice valuations and options for growth.

See More

Overcoming Head Trash and Building Lucrative CPA Relationships

Building referral relationships and creating routines for your success.

See More

Contact Us