The State of Your Estate: Planning Basics (Part 2)
by SGL Financial
Our 2 Cents – Episode #247
The State of Your Estate: Planning Basics (Part 2)
Here’s Part 2 of our State Estate Tax Planning series! Plus, the Lewits share some St. Patrick’s Day data and highlight what’s on the agenda for our March financial planning calendar. Tune in now!
- Quotes of the Month:
- “Saving is a very fine thing. Especially when your parents have done it for you.” – Winston Churchill
- “I’ve got all the money I’ll ever need…if I die by four o’clock.” – Henny Youngman
- St. Patrick’s Day by the Numbers:
- From green outfits to festive celebrations, St. Paddy’s Day spending adds up. Here are a few statistics that show the financial side of the holiday.
- March Financial Focus:
- This March, we’re focusing on maximizing tax-advantaged accounts.
- Discover actionable steps you can take to make the most of these valuable tax-saving strategies.
- State Estate Tax Planning Part 2:
- Explore additional planning strategies that can help preserve more of your estate from Illinois estate taxes and safeguard your legacy.
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847.499.3330
Podcast Transcript
Announcer: You’re listening to Our 2 Cents with the team from SGL Financial, Building Wealth for Life. Steve Lewit is the president of SGL Financial and Gabriel Lewit is the CEO. They’re here to discuss all the latest and financial news, trends, strategies, and more.
Gabriel Lewit: Well, hello everybody. Welcome back to another episode of Our 2 Cents. We’ve got, I think, a phenomenal show lined up for you today as we always endeavor to do. We’ve got a very smiley Steve Lewit over here on the microphone.
Steve Lewit: It’s so windy outside. I love the wind.
Gabriel Lewit: Yeah?
Steve Lewit: The wind is blowing like crazy today.
Gabriel Lewit: It was shaking my car on the drive in.
Steve Lewit: Yeah, mine too. We lost folks. I’m very sad because right outside of our window, we have a pond and we have this great willow tree on the far side. And two years ago lost a whole side of it to the wind and today in the little pond is a big branch blowing in.
Gabriel Lewit: It looks like the tree lost an arm.
Steve Lewit: Yeah, it does.
Gabriel Lewit: You’re looking at it-
Steve Lewit: It looks so sad.
Gabriel Lewit: It looks all half dilapidated now.
Steve Lewit: So, I just wanted to share my sadness with you.
Gabriel Lewit: I think he might actually be in tears, folks.
Steve Lewit: Not quite. Not quite.
Gabriel Lewit: Oh, yeah. Well, hopefully your houses are good and your cars are good. Yeah, very windy day. They said it could get up to 60 mile per hour winds today. So what a fun time here. March is bringing all sorts of fun weather our way.
Steve Lewit: Yeah, be careful in the wind.
Gabriel Lewit: Yes. Yeah. So okay, what are we going to talk about today? We’re going to talk about a range of topics. Last week we talked a little bit about estate planning, about retiring outside the U.S. We covered a little bit of estate planning. We’re going to cover more on that today, kind of a part B, if you will. And we’re also going to supplement that with a couple of entertaining topics here about, well, St. Patrick’s Day coming up right around the corner here. Perhaps I think the day that they get this episode emailed to them will be St. Patrick’s Day. That’s a Sunday, right? I think.
Steve Lewit: Mm-hmm.
Gabriel Lewit: Pretty sure. What’s that, Tuesday? Well, I think I’ll like the parades and stuff for the Sunday.
Steve Lewit: Or on Sunday, yeah. Sunday, drinking day.
Gabriel Lewit: To me, that’s the St. Patrick’s Day, right?
Steve Lewit: Bring me a pint avail.
Gabriel Lewit: And that plus a couple of other things. So we’re going to go ahead and-
Steve Lewit: Go down to the Blarney Stone.
Gabriel Lewit: You sure could.
Steve Lewit: Yeah.
Gabriel Lewit: You don’t do that though.
Steve Lewit: No, I don’t.
Gabriel Lewit: Yeah.
Steve Lewit: I do wear a little green though.
Gabriel Lewit: There you go.
Steve Lewit: Yeah.
Gabriel Lewit: So, we’re going to go ahead and jump in here today. So we hope you are doing well and thanks again for joining us. Well, to kick things off, we’re going to do some quotes of the month here, which we like to do to keep you entertained.
Steve Lewit: I love quotes of the month.
Gabriel Lewit: All right. So here’s our first one. And then I don’t know if you know this person. Of course you do, Steve. But they said, “Saving is a very fine thing, especially when your parents have done it for you.”
Steve Lewit: Yes. I like it. Whoever said that is a genius.
Gabriel Lewit: You’ll recognize the name, Winston Churchill?
Steve Lewit: Winston. Good job, man. Yeah, parents do a lot for their kid. But you know, Gabriel, what’s really interesting, if we ask people, is leaving money to your kids a priority for you? What do they always say?
Gabriel Lewit: They would say, “No.” But if you were to ask the kids, “Would you like it if mom and dad left you lots of money,” they would probably all say?
Steve Lewit: They would say, “Yes,” but they wouldn’t say that to their parents. What they’re going to say to their parents is, “Mom and dad, you spend everything you make. We don’t need anything.”
Gabriel Lewit: Well, some might. Yeah.
Steve Lewit: But deep down…
Gabriel Lewit: It’s like, “Yeah, the more you leave us, the better.”
Steve Lewit: The more you leave, the happier we are.
Gabriel Lewit: Yeah. So yeah, saving’s a very fine thing, especially when your parents have done it for you. Yep. Now the next person, I don’t recognize his name. You might have to pull him up here on the screen, producer Gabby. It says, “I’ve got all the money I’ll ever need… If I die by 4:00.”
Steve Lewit: Sounds like Yogi Bear.
Gabriel Lewit: It’s a Henry Young, Henny. Oh, Henny. I thought it said Henry. Henny Youngman.
Steve Lewit: Henny Youngman was a great comedian.
Gabriel Lewit: Yeah. An old-fashioned looking comedian here in black and white photos. So that means he’s old because it’s only black and white photos.
Steve Lewit: So, you should ask me about these people before you look it up because-
Gabriel Lewit: When you Google quotes, you don’t know who people are.
Steve Lewit: I do.
Gabriel Lewit: They just show you the quotes and the names.
Steve Lewit: Well, wait, wait, wait, wait. You don’t know who they are because you’re a young dude, us older dudes know who Penny, Henny… Oh my God. We know who this community is.
Gabriel Lewit: Henny. Henny, yes.
Steve Lewit: Henny, young men. Yeah.
Gabriel Lewit: All right. So yeah, “I’ve got all the money I’ll ever need if I die by 4:00.” Well, if that feels like you, well, perhaps there’s some savings to do.
Steve Lewit: I’m sad for you too.
Gabriel Lewit: We might want to focus on a savings plan.
Steve Lewit: All right. And you might have a few broken limbs in your financial plan.
Gabriel Lewit: And then you’re going to really be hoping for Winston Churchill’s quotes to be applicable.
Steve Lewit: If your parents are still here, keep hoping.
Gabriel Lewit: Exactly.
Steve Lewit: Or you can buy a lottery ticket.
Gabriel Lewit: You could. That’s not a good plan though. All said and done. All right, well, let’s talk a little bit about St. Patrick’s Day. We’ve got some numbers here for you just to get you in the spirit. Naturally, St. Patrick’s Day has been celebrated for hundreds of years. It’s certainly become very popular around these parts and in many parts around the country where of course people tend to imbibe themselves…
Steve Lewit: Said well. Said well. Very nicely said.
Gabriel Lewit: … with the alcohols.
Steve Lewit: Yes, imbibe with the alcohols.
Gabriel Lewit: Well, some key findings, consumers spent 7 billion celebrating St. Patrick’s Day last year.
Steve Lewit: Go for it, man.
Gabriel Lewit: Okay. Which is a little less than $44 per person.
Steve Lewit: Oh, amazing.
Gabriel Lewit: Whoever came up with the study figured that out. The average price for a pint of Guinness is $7.89 here in 2026. So if you want 10 pints to keep yourself buzzed and more throughout the day…
Steve Lewit: Imbibed.
Gabriel Lewit: Imbibed. You’d be spending a cool $78.90 to fill your belly.
Steve Lewit: Yes.
Gabriel Lewit: Okay. Plus food that you’ll probably want afterwards, okay. The price for corn beef in U.S. grocery stores has increased by 22% from 2025 to 2026. So your corn beef, a rye sandwich is going to be more expensive.
Steve Lewit: No, I think it’s corn beef and cabbage.
Gabriel Lewit: Well, there’s all sorts of stuff you can do with corn beef.
Steve Lewit: We should ask Tracy. She celebrates big time. Yeah.
Gabriel Lewit: Yeah. Well, and about 100,000 tourists visit Ireland each year for the holiday. Dublin’s St. Patrick’s Day Festival brings in an estimated 50 million to their local economy. And so it’s not too late if you feel like making that 100,001 or 2, you can book a flight.
Steve Lewit: If you’re going, I hope you bought your tickets already because of the oil problem. Tickets for plane fares have gone up tremendously. On a ticket, they have a gasoline tax that they can put on your fair when you buy the ticket and those have really gone up.
Gabriel Lewit: Yeah. Well, yeah, today we’re not going to dig too much into that Strait of Hormuz, Iran situation.
Steve Lewit: No, I just brought that up as a point of like interest, like a sidebar.
Gabriel Lewit: A little good sidebar there.
Steve Lewit: A sidebar.
Gabriel Lewit: Well, we’ll keep tabs on that for you. And of course we talked about the spending. It stayed pretty steady here for a couple of years. 2023, 6.9 billion, 2024, 7.2 billion, 2025, 7 billion. So people are spending pretty consistently here for St. Patrick’s Day.
Steve Lewit: Consistent imbibing.
Gabriel Lewit: Yep. You might be interested to know in case you’re drinking on this day and you just want to share some statistics. Well, 61% of the American population tends to celebrate St. Patrick’s Day.
Steve Lewit: Wow.
Gabriel Lewit: And they do so in a number of different ways. 30% make a special dinner. 26% go to a bar/restaurant.
Steve Lewit: This is of all people, not just Irish people.
Gabriel Lewit: Oh, yeah, this is of Americans. 24% decorate their home or office, get very festive.
Steve Lewit: Really? Wow.
Gabriel Lewit: 15% attend a private party. I was actually shocked at this one. Only 14% attend the parade.
Steve Lewit: Well, yeah. Well, yeah. That’s still a lot of-
Gabriel Lewit: It’s kind of chilly. It’s usually a chilly time. Last year I went to a parade with my kids and it was snowing. This Sunday, it’s forecasted to be rainy, about 80% chance of rain, which if it’s raining, I definitely won’t go, which I always feel bad for the parade people when it rains, because they got to slog through it.
Steve Lewit: Well, here’s the deal.
Gabriel Lewit: Nobody shows up.
Steve Lewit: 14% is a lot of people…
Gabriel Lewit: Well, sure. Yeah.
Steve Lewit: … to sit on the curbs of the streets and watch a parade. So I think that’s a lot of people.
Gabriel Lewit: Yeah. 11% host a party. And of course, the biggest one I saved for last year, 79% of people wear green clothing.
Steve Lewit: Yep. I will wear green.
Gabriel Lewit: There you go.
Steve Lewit: Yeah.
Gabriel Lewit: All right. So I don’t know if-
Steve Lewit: Now I feel badly that we’re bringing the statistics down because we didn’t decorate the office at all.
Gabriel Lewit: Well, it’s not St. Patrick’s Day yet. So you could if you wanted to.
Steve Lewit: That’s true. We could still do it. Yes.
Gabriel Lewit: All right. And of course in Chicago here, those of you that live in the area know that they dye the Chicago River green. And there’s usually a big parade in downtown Chicago as well.
Steve Lewit: There’s also like a celebration when they’re dying it.
Gabriel Lewit: Yep. And then let’s see, last but not least, you’ll like this, Steve, New York City is home to the world’s oldest and largest St. Patrick’s Day parade.
Steve Lewit: Yes.
Gabriel Lewit: And it was first held in 1762, just three years after the founding of the Guinness Brewery.
Steve Lewit: Yeah, I remember that one. I said, older folks really know stuff.
Gabriel Lewit: Yeah. And this was actually 14 years even before the Declaration of Independence was signed.
Steve Lewit: Is that a fact? Wow.
Gabriel Lewit: It is indeed a fact.
Steve Lewit: That’s amazing. It’s an amazing parade in New York. Yeah.
Gabriel Lewit: Yeah. Well, so there you go, folks. You’ve got some fun statistics to share during your revelry this upcoming weekend or week.
Steve Lewit: During the party.
Gabriel Lewit: If you’re ultra into it, you both celebrate on Sunday and then on the actual St. Patrick’s Day itself.
Steve Lewit: Yeah. Three days of imbibing.
Gabriel Lewit: Workers see bleary-eyed employees in the morning. It’s that time of year.
Steve Lewit: Yes, it is. Yes, it is.
Gabriel Lewit: All right. All right. Well, that’s all I wanted to say about that, just to share a little bit there.
Steve Lewit: Cool.
Gabriel Lewit: Keep our show on some lighter notes before we get into the money stuff. All right. Well, let’s talk about some March financial planning calendar tips. So again, earlier in the year we talked about an overall yearly annual financial planning calendar and how somewhere in each month we would talk about key topics walking through this calendar each month. So for March, the topic here is maximizing tax advantaged accounts.
Steve Lewit: Yes.
Gabriel Lewit: Okay. And I can’t recall what February is worth, but that’s okay.
Steve Lewit: What is a tax advantage account, Gabriel?
Gabriel Lewit: Well, sir, it is an account that has kind of more than your typical just tax every year characteristics. So let’s start with a taxable account, which is called a non-tax advantage account or non-qualified. Basically what it means is it depends on actually what you put your money in, but let’s just start with the simplest of options. You put your money into a savings account that earns 3% interest, and I’ll just use 100,000 for really easy math. If you had 100,000 to put in, you would earn $3,000 that year in interest. And because it is a taxable account, you would be taxed on your tax return that year. You would have a 1099 interest statement showing that you earned $3,000 through interest and you would have to pay taxes on that.
Steve Lewit: So, kind of pay-as-you-go.
Gabriel Lewit: To some extent. I mean, it depends if you buy stocks with a taxable account, then you have potential capital gains tax every year, as well as yield from bonds or interest taxed every year, just like the example we gave of the savings account. But you also have long-term and short-term capital gains, which is a bit beyond the scope here. But these are all called taxable accounts and they are helpful to know about to compare to what we’re going to talk about today, which are tax advantaged accounts, which give you more special tax treatment.
Steve Lewit: Well said.
Gabriel Lewit: Thank you.
Steve Lewit: Well said.
Gabriel Lewit: Okay. So the first is what most people are familiar with is a 401(k), is a tax advantage account. Now there are two types, also known as qualified accounts or tax qualified, meaning they have special qualifications to them that make them different from taxable accounts.
Steve Lewit: And that would include 457s and 403(b)s.
Gabriel Lewit: Correct. IRAs, Roth IRAs. These are all tax advantage accounts. And so obviously the goal is to figure out every year if you’re saving money, what type of account should you contribute to? Do you want to contribute to a taxable account, a tax deferred account, a tax-free account, or a blend of all three? That is really at the essence of this month’s discussion point here of how to maximize and take advantage of tax advantage accounts, especially if you aren’t aware of the differences here, learning about those and then being very purposeful about which one you save to while you’re in that savings phase of your life.
Steve Lewit: Yeah. So folks, think of it as three buckets. One is a taxable, you earn something, you pay a tax on it. The other is you say, “I’m not going to pay the taxes today. I’m going to pay the taxes in the future when I take the money out.” And that’s your IRS 401(k) SEPs and SIMPLEs. And the last bucket, which is my all-time favorite bucket is a tax-free bucket. There are no taxes when you take money out or it passes to your kids.
Gabriel Lewit: There is also a fourth bucket.
Steve Lewit: There is.
Gabriel Lewit: There is.
Steve Lewit: Oh, this is news for me.
Gabriel Lewit: You actually know this, but it’s the only triple tax advantage account. It’s one you get a deduction on when you put the money in. It grows tax deferred and it’s tax-free when you take it out, assuming you use it for the right purpose known as an HSA.
Steve Lewit: HSA. Fantastic account.
Gabriel Lewit: A Health savings account. So the idea here again is which one to use. Well, let’s talk about that. Actually, I just had a conversation with a client the other day on a review meeting and this exact topic came up. So I think it’s very timely for those of you still saving. And regularly in reviews, we are talking to our clients about assessing your tax brackets and determining based on your tax situation which one might be the best one. Now, if you are in a very high tax bracket today, very commonly you’re going to opt for a pre-tax or traditional 401(k) contribution or IRA contribution depending on if you’re eligible for the IRA.
Now what’s interesting is to be eligible for a regular IRA contribution, you tend to have to have a low enough income level for it to be deductible, which means you might also be better off in the Roth IRA because normally a pre-tax account you want to contribute to if you have a very high tax bracket because you get a tax deduction today to save you money on taxes, but way down the road, your future self will be taxed on any dollars that comes out of those accounts. So your future self will not be very happy, I can tell you that.
Steve Lewit: And will be less happy if taxes go up in the future.
Gabriel Lewit: And will be less happy if the tax rates 30 years from now or 20 years from now are much higher. And there’s something called required minimum distributions that you’re forced to take out from these pre-tax accounts. So all of those together could make that perhaps not the best decision for you. Now, there’s too many variables for us to tell you exactly which one you should contribute to here on the call. So we’re just going to cover them very high-level. But if we want to dig into this, you’d have to give us a call. We run a tax analysis. We look at your financial plan, we look at your retirement scenarios, and then we help you figure out the right one to contribute to.
Steve Lewit: Yeah, but I think from an overall perspective, Gabriel, when you’re thinking about taxes, if you saw those three tax buckets posted in front of you and I asked you, “Gabriel, where do you want all your money, which bucket would you pick?”
Gabriel Lewit: Everybody would pick, we want our money in the tax-free bucket.
Steve Lewit: Tax-free bucket. Right.
Gabriel Lewit: It’s just how do you get it in there? And you have to be purposeful about doing it.
Steve Lewit: And that’s the question. How do we move money from all the other buckets into the tax-free bucket?
Gabriel Lewit: Well, it’s simple. I mean, the first step is you stop putting money into the pre-tax ones and you put it into the Roth. The Roth is the tax-free bucket. Typically, folks, there is a life insurance option where if you don’t qualify for Roth or you’re looking to save more, you like this a lot, Steve. I have this for my own personal financial plan as well, but you can put money into a specially designed life insurance policy as much as you want or as little as you want. And it would also be used as tax-free income in the future. One of the few alternatives other than a Roth IRA, but the most common is going to be a Roth 401(k) or a Roth IRA.
Steve Lewit: Absolutely.
Gabriel Lewit: Okay. And the goal is to decide, “Yes, I want to have more tax-free money,” and thus you have to switch your contributions to put some percentage of your savings into these tax-free accounts to get the benefit of them further down the road.
Steve Lewit: Yes.
Gabriel Lewit: Okay. Now, of course, you could also do a blend. There is in fact some benefit to this depending on your situation. If it’s really unclear if you’re going to be a higher or lower bracket in the future, maybe you’re just right in this middle spot where it’s just hard to tell. You could do half traditional half Roth and there’s nothing wrong with that either. So sometimes people feel like they have to do one or the other.
Steve Lewit: Yeah, you can split it.
Gabriel Lewit: You really could split it 50/50 or any other percentage and get a balance of both, which I really like as well.
Steve Lewit: And you’re going to get your match from the company no matter what you do.
Gabriel Lewit: Correct. Yeah. Now let’s talk briefly about the HSA. The HSA, you have to have a high deductible health plan to be eligible for. That’s a little beyond the scope of our call here today. But if you have a regular, very low deductible health plan, you may not be eligible for putting money into an HSA. A lot of people opt if they have generally good health to get a higher deductible plan. So they can purposefully use and max out the HSA every year to become a really large part of their retirement plan and use it as an investment account and build up a couple hundred thousand dollars in there by the time they retire. And thus they get a tax deduction and they have a tax-free pool of money to pay for all their future healthcare costs and retirement.
Steve Lewit: And those healthcare costs, Gabriel, include premiums, includes healthcare, anything that has to do, it’s a very-
Gabriel Lewit: Basically, yeah.
Steve Lewit: It’s a wonderful account to have.
Gabriel Lewit: Yeah. So it’s a decision you would have to make, right? If you happen to have just a ton of medical expenses or kids or you’re going to have more kids, maybe that high deductible health plan isn’t right for you right now, but if you’re just out of school, it’s a great choice. If you are generally very healthy, never see the doctor, no kids to pay for it. Maybe it’s a great choice for you there. But it is, no doubt about it, a great tax advantage account that you could contribute to.
Steve Lewit: Yeah. No, retirees, however, cannot contribute to that account.
Gabriel Lewit: Well, once you’re on Medicare. Once you’re on Medicare.
Steve Lewit: Once you’re on Medicare. That’s the rule. I was trying to think, is there an age limit or… It’s a Medicare limit.
Gabriel Lewit: Once you’re on Medicare. Yeah. Well, the other key thing here is you could save. It’s not really the purpose of today’s show to, because we’re talking specifically about tax advantage accounts, but you could save in a regular brokerage account too, which can be useful if you need this money before retirement age, which is minimal rules on these accounts mean 59 and a half before you can access the funds.
Steve Lewit: So even a Roth account, Gabriel, I have to wait until 59 and a half to withdraw that money.
Gabriel Lewit: Not all of it. Roths, you can take what you put in.
Steve Lewit: The principle out.
Gabriel Lewit: Yeah, the original contributions.
Steve Lewit: Without a penalty.
Gabriel Lewit: But not the earnings.
Steve Lewit: Not the earnings.
Gabriel Lewit: Until you’re 59 and a half. Now, you did mention there’s a long list of other types of accounts, SEPs and SIMPLEs and 403(b)s. Deferred comp programs are almost a type of retirement account in some ways, but you just don’t get the income today so you don’t pay the taxes, but then you get it out in retirement and you pay the taxes then. Lots of different ways. But the core of all this, Steve, is how much do you need to save? What does your plan show you needing to save? And are you doing it every year? And are you doing it in the most efficient way?
Steve Lewit: Exactly. Exactly. There are lots of choices and it’s hard. We can’t go through all those choices here, as you said, Gabriel, but the one choice you can go through here is you got to say, if you’re not retired and you’re working, what are you saving and is it enough?
Gabriel Lewit: Well, let’s put it this way, because I like to oversimplify things sometimes. If you don’t save any money, you’re not going to have any money for retirement.
Steve Lewit: I think Yogi Bear said that too.
Gabriel Lewit: So, you do need to save if you want to be able to retire at some point. And then we figure out where’s the best place to save it. All right. Well, there was one last topic as part of March’s review checklist. So the first was review your savings and your tax advantage accounts and which ones you’re saving to. The second was fund your HSA, especially if you’re eligible for it or consider it. The third is review your beneficiary designations on your investment and retirement accounts. Now, this sounds simpler than it is in practicality because it can just feel like a pain, but you got to inventory every one of your accounts that you have, checkings, savings, brokerage, retirement, 401(k), Roths, you name it, right? You have to look up and see who is my current beneficiary? Do I have a current beneficiary and is it the right one? And people tend to miss doing this frequently.
Steve Lewit: Well, some accounts have no beneficiaries. More often though, Gabriel, if someone opens a brokerage account, puts beneficiaries on, their life has changed. A spouse has passed away or there’s a divorce or a kid doesn’t talk to you anymore and they’re still on the account and nobody checks.
Gabriel Lewit: Well, yeah, I mean, it happens all the time. And of course, the goal here of this financial planning calendar, if you’re following it with us here, if you’re a regular listener of the show, is to pick one thing to do or two things every month to make managing your finances feel a little easier. So that is your homework assignment here for March.
Steve Lewit: March madness on beneficiaries and tax bucket. You didn’t bring up March Madness. I grew up-
Gabriel Lewit: Yeah. I mean, it’s a whole tournament. We can talk about it.
Steve Lewit: Are you in the pool?
Gabriel Lewit: I haven’t done it yet, actually. I’m going to let everybody else do it this, because I always win, so as you’ve always mentioned.
Steve Lewit: Just stay out.
Gabriel Lewit: I didn’t get a chance to do that.
Steve Lewit: Do not come into the pool. Give me a chance.
Gabriel Lewit: Maybe I’ll do a bracket outside of the company just so I can be in the loop.
Steve Lewit: Here’s the thing. I have no idea what I’m doing. I go-
Gabriel Lewit: Producer Gabby, have people entered? Yeah. Okay.
Steve Lewit: Yeah. I’m in it.
Gabriel Lewit: Maybe I’ll do a last-minute entry.
Steve Lewit: Bracket day is Sunday. You know how I pick my bracket?
Gabriel Lewit: Randomly.
Steve Lewit: No, it says, “Would you like us to pick a bracket for you?”
Gabriel Lewit: Oh, that’s no fun. That’s no fun.
Steve Lewit: Well, I don’t know anything about it.
Gabriel Lewit: Yeah. Everyone guesses. Okay.
Steve Lewit: Purdue. Who’s going to win?
Gabriel Lewit: I don’t know. I haven’t even looked at it yet.
Steve Lewit: Ohio State.
Gabriel Lewit: All right.
Steve Lewit: Florida.
Gabriel Lewit: You’re supposed to pick Purdue because that’s your son’s school or is your son’s school. Yeah.
Steve Lewit: It is.
Gabriel Lewit: All right. So if you have questions on any of these financial planning checklist items that we’ve covered so far or any other questions, you can call us 847-499-3330 or go to sglffinancial.com. Schedule a time to talk to one of our advisors or Steve or myself and we can help guide you through these various questions. Now, for the rest of our show here today, we’re going to do a part B on our estate planning topic from last week.
Steve Lewit: Which has to do with taxes as well.
Gabriel Lewit: Yeah. It’s avoiding Illinois state estate taxes or any state that has a state estate tax. And we had talked about properly setting up trusts as being one of the key components of that. Another one, just to piggyback off what we were just talking about is making sure your beneficiaries are updated properly. If you have a trust that’s set up to help you avoid a state estate tax, you have to make sure your accounts are either owned by that trust or the beneficiary of those accounts is the trust. So that goes hand in hand with checking your beneficiaries. It’s called trust funding is really the name of that, where you either change ownership of accounts or change beneficiaries to ensure the trust receives the funds after someone passes away.
Steve Lewit: Yeah. So I had a client in the other day, I said, “Do you have a trust?” A potential client. He says, “Yeah, I got a trust.” I said, “Well, when was it done?” He said, “About 10 years ago.” I said, “And it’s funded.” He said, “What does that mean?” And I said, “It means all your money goes to the trust when both of you pass.” He says, “No, we never did anything.” And there are a lot of funds that are unfunded. So what, Gabriel, what is the problem with Illinois estate tax? Let’s go back to ground zero.
Gabriel Lewit: Well, just for a second, because we want to make sure we get into more of the strategies, but if you pass away with over $4 million and you’re single, you are going to be taxed on… Basically, you have over the limit, right? You use up your four million exemption, maybe you have 4.5 million, you have $500,000 more in assets, you’re going to get a state estate tax.
Steve Lewit: Yeah, on the four and a half million.
Gabriel Lewit: Well, it’s a percentage of…
Steve Lewit: But it goes back to zero.
Gabriel Lewit: You’re overly confusing. Bottom line is if you have under four million, you’re not going to owe a tax. If you have more than four million, you’re going to owe a tax. The more over four million you have, the larger the tax you are going to have, okay? Whether you want to calculate that as a percentage of your full amount or just the amount over… You could calculate it both ways, but the point is if you have $4 million, you’re not going to owe a tax. If you have $4 million and $1 is you’re pretty much not going to owe a tax. If you have $5 million, you’re going to owe a pretty healthy amount of Illinois or a state estate tax. And that number might be different for different states with their estate taxes. So we talked about there’s ways of avoiding that.
One is having proper trusts set up. So the goal for the rest of our show here today was just to give you a quick list of other things that you could do and because there’s quite a bit, one of those is you could move out to a state that doesn’t have a state estate tax.
Steve Lewit: Which a lot of people… A lot of people will ask that question, “If I’m going to move, what is the estate tax in that state?” It’s a big decision maker.
Gabriel Lewit: Yeah. I mean, it’s conceptually simple, but maybe not so simple if you have family members, kids, grandkids, a lot of people in the surrounding area here in Illinois where you don’t want to lose those connections or live far away from them. So that becomes a bit more challenging if you feel like you have to stay because of those reasons. But if you have no, maybe you don’t like your family or you have no attachments, you could move, and that would very easily solve that problem. The other things that you can do is, and actually for our next show, I didn’t have time here today, but we had this article for five cities that retirees are moving to in 2026. We’ll list those out to maybe start our next show, but all of the top five that were on this list were states that did not have a state estate tax.
Steve Lewit: Sure. Well, think about it. Why pay an estate tax when you have the option not to?
Gabriel Lewit: Yeah, exactly. So we do have a couple of things here that we’ve obviously have on a list here, a lot of different strategies you can use. The first one was changing residency to a state without an estate tax. We also talked about setting up your trust, credit shelter, trust, or bypass trust properly. We had talked briefly about this concept of setting up an irrevocable life insurance trust.
Steve Lewit: So, do you want to just say a couple of words about why setting up a trust if you’re a married couple will help you on your estate taxes?
Gabriel Lewit: Yeah. Let’s say you have $9 million, right? And both you and your spouse, even if you both used up your $4 million exemptions for Illinois, you’d still have $1 million over the limit, right? So let’s say you buy a trust or buy a trust, buy a life insurance policy, place it in an irrevocable trust. What happens is two things. One, you’re going to start paying premiums for this life insurance policy, which is going to bring down your $9 million estate year by year, depending on the size that you-
Steve Lewit: So, you’re moving money out of your estate, investing it in an asset.
Gabriel Lewit: Yep. Life insurance. Now, let’s say it was a $200,000 a year premium, which sounds like a lot, but if you have 9 million and you’re trying to get under that estate tax level, maybe it needs to be a larger amount. And then let’s say it pays out to you $10 million or $8 million. Well, if that paid out to your estate, you’d have a bigger estate tax problem. So you put it inside of a irrevocable trust so that when you pass away, the surviving spouse passes, it pays outside of your estate and no estate taxes are due on it, but you’re also bringing down what’s left of your taxable estate by paying the life insurance premiums.
Steve Lewit: Exactly. And you may have heard this acronym ILIT, I-L-I-T, which is a insurance life insurance trust, an irrevocable life insurance trust, sorry, that many people use to do exactly that, reduce the level of your estate and then secure all the taxes you paid by getting the money in there through the life insurance.
Gabriel Lewit: Exactly. Yeah. And that typically is far more advantageous than doing nothing and paying an estate tax.
Steve Lewit: Now, if I’m a husband and wife, I have no trust, what’s my exemption?
Gabriel Lewit: If you have no trust?
Steve Lewit: Yeah.
Gabriel Lewit: Well, if the first person passed away and let’s say four million were in their name and they leave the four million to the spouse and it wasn’t set up properly, now the spouse has the same nine million.
Steve Lewit: Yep. And with only one-
Gabriel Lewit: $4 million exemption.
Steve Lewit: Four million exemption. Yeah. So you need a trust folks, if you’re a couple, to get two exemptions, you need to have a trust that’s properly written in order to do that. Yeah.
Gabriel Lewit: Now the other thing is related to just spending down your money. You could do that in lots of ways. You could just spend more money on you, but you can’t buy property with it.
Steve Lewit: Because…
Gabriel Lewit: Because if I take $1 million and buy $1 million house, have I changed my net worth?
Steve Lewit: No.
Gabriel Lewit: I have not.
Steve Lewit: But you could buy property in an irrevocable trust that’s not yours.
Gabriel Lewit: Yeah. And there’s pros and cons to that from other taxation perspectives, step-up and basis.
Steve Lewit: Basis.
Gabriel Lewit: And so on. And other things like that.
Steve Lewit: Exactly.
Gabriel Lewit: You could just buy fancy depreciating cars. You could spend money on kids’ colleges. You could donate to charities. You could help family members. There’s a lot of things you can do to try to bring down your estate if it’s over an Illinois state estate tax limit. But it typically isn’t something you’re going to know how to navigate yourself. It’s a bit complex and it needs to be coordinated. So that’s where we tend to really spend our time there when we get clients that are in this scenario. Let’s come up with a game plan. Now, Roth IRA conversions are another strategy because you are basically taking money and turning it into its after tax amount. So if you had 100,000 and you converted it and it’s really worth 76,000 tax-free, you have the same net value because 100,000 was really worth 76. If you convert it it’s still 76, now tax-free, but you did lower your taxable estate. So there are very valuable strategies there.
Steve Lewit: All right. Let’s be careful there. So you lower your estate by paying the tax, but the Roth itself is still estate taxable.
Gabriel Lewit: Correct. But the pre-tax $100,000 IRA…
Steve Lewit: Would be taxable more.
Gabriel Lewit: Taxable more from an estate tax perspective.
Steve Lewit: Exactly. Exactly.
Gabriel Lewit: Because it’s not calculating a difference between tax-free assets or pre-tax assets.
Steve Lewit: Exactly.
Gabriel Lewit: CRTs, charitable remainder trusts are another option.
Steve Lewit: I love those.
Gabriel Lewit: There’s a whole host of other things. There’s probably five or six other very common strategies here, folks. But the idea here is just to make sure this is on your radar. Now, many of you listening may say, “Well, this isn’t going to apply to me.” Perhaps not today, but it might if you inherit money or if your assets continue to grow. Some of you this might be very applicable for. And for others, it just might be an interesting thing to just keep on the radar.
Steve Lewit: Yeah, that’s an interesting point, Gabriel, because you might have $3 million today and say, “Well, I don’t have to worry about that.” But if you’re 65 and let’s say you die at 90, that’s 25 years. Assets grow just because of inflation over 25 years and that four million, I don’t believe is inflation adjusted.
Gabriel Lewit: I believe you’re correct. They might change it in the future. And also, even if it was, your assets should grow a lot more than inflation.
Steve Lewit: Exactly. So that’s something to look at. And one of the things we look at with folks who are under, we’re projecting 20 years from now, “Hey, look, you’re going to have 6 or $7 million. Let’s take care of that today by creating a trust or making some of these moves that you’ve listed.” And by the way, folks, we have a list of all of these strategies. If you’d like to have it, Gabriel will give you his commercial on what to call and who to write to.
Gabriel Lewit: Well, again, I say the best thing if you’re concerned about this is come on in, let’s talk about it because it’s complicated and we’ve got to have a very strategic game plan for avoiding Illinois state estate taxes. So anyways, if you’d like to talk with us or have questions for us, give us a call, 847-499-3330 or go to sglffinancial.com, click contact us or email us as always, info@sglfinancial.com and we can’t wait to hear from you.
Steve Lewit: Are we going for Guinness’s now? No, too early in the morning.
Gabriel Lewit: It’s early in the morning, but-
Steve Lewit: Too early. It’s almost-
Gabriel Lewit: The weekend’s coming.
Steve Lewit: … St. Patrick’s Day. Yeah. All right.
Gabriel Lewit: Well, have a wonderful time if you celebrate. We will then talk to you on the next show.
Steve Lewit: Stay well, everybody.
Gabriel Lewit: Bye-bye.
Steve Lewit: See ya.
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