The Wealth & Wisdom Blog

Don’t Let the Tax Tail Wag the Dog

Posted on November 16, 2021 by Cory Wessman

The phrase, “not letting the tax tail wag the investment dog” emerged in the 1960s to discourage business owners from making business based solely upon tax implications. The term “wag the dog” has historically been used whenever a minor detail controls a significant decision. More recently, the term “wagging the dog” has been used to describe how political leaders let loose a flurry of activity to distract their constituents from broader, more significant issues. Just as a small tail should not control an entire dog, a tax attribute should not drive the larger, more significant estate planning decisions.

Recent events in Washington D.C. demonstrate the importance of not elevating potential tax law changes ahead of the more significant family, financial and legal factors impacting estate planning decisions. While I have advised clients and advisors about these potential tax law changes (see my May, 2021, advisory update), as of this morning it appears that none of the substantive tax law changes being proposed will be enacted once the tax bill is signed into law.

In this month’s update, I summarize the new income tax rates that will be applicable to irrevocable trusts, and summarize four important tax rules that remain unchanged.

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Trends in Charitable Giving

Posted on October 18, 2021 by Cory Wessman

“Wessman…Wessman….Oh yes, I recognize your last name–your wife sends me all those fundraising emails!

My wife Heather is the associate development director at Avail Academy, a private school in Edina. When I first meet some Avail Academy parents, they claim to recognize our last name by reason of Heather’s numerous fundraising emails sent to them on behalf of the school. Ahead of the year-end charitable solicitation season, the season when your email inbox is filled with year-end requests for charitable contributions, in this month’s update I provide some thoughts on how lifetime charitable giving can be coupled with post-death (“testamentary”) charitable giving.

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Death in a Digital Age

Posted on September 16, 2021 by Cory Wessman

Honey, do you know where we stored our Amazon account password?

I am somewhat embarrassed to report that I once developed a personal rapport with a customer service representative because I called so many times to reset our password. Fortunately for me, and for that customer service representative, I have recently cleaned up my records, and have a good plan in place for the storage and record keeping of our digital assets. In this month’s update, I wish to provide you with a summary of how to keep adequate records of your digital assets, and how to properly plan for digital assets in the event of your death or incapacity.

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Digital Rights by Service Provider

Posted on September 16, 2021 by Cory Wessman

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FINANCIAL ACCOUNTS

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It is most critical for you to include, within the terms of your estate planning documents, provisions that provide your designated fiduciary with the authority to manage your accounts, including online accounts, during your incapacity or following your death. In the case of the each of the financial institutions listed below, each company will respect the authority you provide to your designated agent to gain access to your accounts following your death.

You should provide your desired and appointed “legal fiduciary” (that is, your Trustee, Personal Representative and Power of Attorney) with the contact information for any financial professional with whom you work regularly at a financial institution, such as your personal banker and your financial advisor. You might also inform your financial professionals with the contact information of your named fiduciary or fiduciaries.

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Back to School Special: How to Help Young Adult Children

Posted on August 17, 2021 by Cory Wessman

August in Minnesota means the State Fair, Twins and Vikings blowout losses, the last few days at the cabin, and “back to school” events. While my children are still a few weeks away from starting school, friends and clients are already seeing their young adult children off to college. In this month’s advisory update, I thought it would be appropriate to summarize two sets of legal problems we are addressing on behalf of parents with young adult children: (i) first, how the young adult children of our clients, many of whom are “flying the coop” for the first time this fall, can legally authorize their parents to gain access to their financial and health care information, and (ii) second, how our clients can financially assist their young adult children who are “setting out on their own.”

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Legal Designations for Young Adults

Posted on August 17, 2021 by Cory Wessman

Once a young adult child graduates high school and leaves home, many of our clients express frustration over the inability of the parents to obtain information and make important decisions that are critical to the well-being of the young adult child. To the frustration of many of our clients, the child’s university seems to know where to send the tuition invoice, but will not allow the parent access to the child’s financial or health care records. To avoid such frustrations, the appropriate legal documents can be prepared by which a young adult would name his or her parent(s) to hold legal authority on behalf of their young adult children.

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New View, Same Approach

Posted on July 18, 2021 by Cory Wessman

As of July 1, 2021, we are now “open for business” in our new office location in Bell Plaza, located in Bloomington on the southeast corner of France Ave. and 494. If you have not already done so, please update your contact information for us to the following mailing address: 3800 American Blvd. West Suite 930, Bloomington, MN 55431. Our email addresses and telephone numbers remain the same. When you are able, please stop by our new office. We would love to show you the new office location, and perhaps also buy you lunch or coffee.

As our firm transitions to this new era at our new location, I wish to express our appreciation to you, fellow trusted advisory team members, for the opportunity to work collaboratively on behalf of our valued clients. While we have a new office view, our collaborative approach to assisting our mutual clients has not changed. In this month’s update I want to share three reasons why I enjoy working together with fellow professional advisors to achieve the planning objectives of our joint clients.

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What Job Are You Being Hired For?

Posted on July 18, 2021 by Cory Wessman

In his best-selling book, “How Will You Measure Your Life,” Clay Christensen writes, “Companies focus too much on what they want to sell their customers, rather than what those customers really need.” According to Christiansen, successful companies are able to first determine what problems their customers are trying to solve, and then provide a product or service that is “hired” to solve the problem.

Christensen recounts how a fast food company conducted extensive research to determine why the sales of their milkshakes peaked at two distinct daily intervals. They determined that milkshake sales peaked in the morning by reason of commuters who purchased milkshakes to occupy them during long work commutes. For these consumers, the milkshake was made thicker because it was being “hired” to solve the problem of boredom. The company also determined that milkshake peaked in the early evening hours by reason of parents of young children who sought to provide their children with an after-dinner treat. For these consumers, the milkshake was made smaller, smoother and sweeter because it was being “hired” to provide a good excuse for a family outing.

At our firm, we take pride in the preparation of the legal documents that will address a client’s numerous business, tax and family legal issues. Ultimately, however, the job that we are “hired” to accomplish is not to create a stack of legal documents. Rather, we are being hired to provide our clients with the peace of mind that comes from knowing that their legal affairs are in order. Our clients appreciate the time and effort we take to explain legal and tax terminology in layperson’s terms, to lay out their options for implementing a plan consistent with their overall objectives, and to work collaboratively with other advisors to achieve those objectives. Our clients derive peace of mind from the fact that our firm, together with other advisory team members, will continue to be available to them and their surviving family members in the future to address their legal matters.

Initiating Difficult Conversations

Posted on June 19, 2021 by Cory Wessman

“Son, we have decided that your brother is going to lead our family company.”

Those of us who are “Minnesota nice” have a difficult time initiating difficult conversations, especially with family. For example, have you and your spouse had conversations about his or her wishes to remarry if you die? (without naming names, of course). According to a study entitled, “The Better Than Expected Consequences of Asking Sensitive Questions,” those who fail to initiate difficult conversations are missing out on important benefits. According to the authors, “individuals make a potentially costly mistake when they avoid asking sensitive questions, as they overestimate the interpersonal costs of asking sensitive questions.” While we often avoid difficult topics for fear of offending others, we miss out on the opportunity to use the difficult topics to deepen our relationships.

In this month’s update, I share a few thoughts as to how clients might communicate difficult estate planning topics with their family.

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American Family Plan and Gifts to Children and Charity

Posted on May 19, 2021 by Cory Wessman

A few weeks ago, President Biden introduced proposed legislation under the name of the “American Families Plan” (“AFP.”) In this month’s update, I wish to summarize the appropriateness, or perhaps the double-meaning, of the name of the American Family Plan legislation. If the AFP is enacted, certain taxpayers should consider gifts to other members of the taxpayer’s family, or perhaps gifts to favorite charities, thereby benefitting other American families. There are many uncertainties about the AFP proposal, including the opportunities that wealthy taxpayers might have to liquidate highly-appreciated assets ahead of the effective date of any legislation. For now, I wish to draw your attention to how two tax proposals, if enacted, would impact gifting decisions.

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