Case Study
Recently Widowed
Situation
Jane and Paul have been retired for 15 years, and Paul always handled the investments and had a higher risk tolerance than Jane. Paul recently passed away, and Jane wants to spend her retirement years on hobbies she enjoys without having to worry about her investments and assets.
They have accumulated a significant amount of assets, and it’s most important to her to manage their investments thoughtfully. Jane would like to fulfill her retirement goals of traveling, supporting her Church and other charities, moving to a Senior living community, and leaving a legacy to her family.
Concerns
- Should I invest differently now that Paul passed away?
- Based on my assets and age, what is the maximum amount of money I can spend monthly on myself, my family, and charitable causes?
- How can I minimize taxes now that I am filing single vs jointly?
- How can I minimize taxes when I pass so my family can inherit as much as possible?
- Are my Estate Planning documents up to date, and do they fulfill my wishes?
Our Solution
Financial Planning
Investments
Tax Strategy
Investments
- We provided Jane with our risk tolerance questionnaire which confirmed she has a low risk tolerance. Her plan displayed that she doesn’t require a high investment return to reach her goals.
- We adjusted asset allocation to align portfolio risk with Jane’s lower risk tolerance threshold and designed her portfolio to meet specific goals instead of soley investing for the best possible return.
- Now that she’s in a higher tax bracket since filing taxes single vs jointly, we incorporated Tax-Free Bonds to generate tax-free income.
Financial Planning
- We reviewed Jane’s Estate Planning documents, which didn’t explicitly mention bequeathing money to 5 grandchildren as she desires. She also wants to place Guardrails on spending when her two children receive their inheritance.
- To help update her documents, we coordinated a meeting with a trusted Estate Planning Attorney.
- Because Jane’s estate exceeds Maryland’s estate tax exemption, we reminded her to file Maryland Form MET-1 to preserve Paul’s unused exemption. We also recommended annual gifts to her children and grandchildren using the $19,000 gift tax exclusion per person. This supports her family while helping bring the value of her estate below the exemption and reduce potential estate taxes.
- Our team created a plan that incorporated her goals and life events and told her exactly how much we recommend spending a month. Since this amount was much more than she was spending, she is confident she can increase her charitable contributions.
- Jane does not want to adjust her spending if stocks decline. So, we stress tested her Guardrails plan and reviewed how her portfolio and spending would be impacted in bad markets (e.g., the Financial Crisis and the Dot-Com Bubble). Based on results, no spending adjustments were necessary in these events.
Tax Strategy
- Our team reviewed Jane’s taxes from the previous year and noted an underpayment penalty. We worked with an accountant to help Jane adjust tax withholdings across income sources such as pensions, social security benefits and IRA distributions, to align with Safe Harbor guidelines and reduce risk of underpayment penalties.
- Jane has held a mutual fund for over 30 years, with high fees and recent poor performance, but significant gains. We proposed a strategy to unwind this position tax-efficiently by opening a Direct Indexing account. Realized losses in the Direct Indexing account are used to offset gains from selling shares of the mutual fund.
- Jane was donating to her Church from her checking account. We helped set up a checkbook linked to her IRA, which she now uses for tax-free charitable contributions, reducing her tax burden.
Outcome
Jane values our comprehensive approach to investment management, tax reduction, and overall planning. She knows we take as much off her plate as possible so she can focus on what she enjoys most.
Jane knows her portfolio is aligned with her situation and goals, and it’s highly unlikely she will have to adjust her expenses no matter what the market brings; her taxes are thoroughly reviewed, her estate planning documents are now up to date, and she knows exactly how her assets will pass to her children and grandchildren.
Most importantly, by partnering with Snyder Asset Management, Jane is confident she’s on the path to reach her goals of maximizing enjoyment in retirement, giving charitability and leaving a legacy.