Tag Archives: Inheritance

Q 1 2020 Extended (12 Page) Newsletter Video Audio Podcast Review By John Kvale

Welcome to our Video and Audio Podcast Review of our Q 1 2020 Newsletter. For those on the road or just unable to grab the time to read, our podcast type review gives you the behind the scenes insight to our thoughts, observations and deep views of the entire Newsletter.

Click Here for direct link to an electronic version (an early peek-good ole fashion paper versions are on their way to you shortly) and here for our Newsletter page

Let’s get going!

All New Pictures, Intro and Exit Music !

Q 1 2020 Newsletter

Click for PDF/Printable Version


Is Inheritance Taxable ?

This, our lead financial planning article for the newsletter-  With the subject of inheritance and the taxability of it occurring multiple times in the most recent quarter, the idea for this article spawned.

After completing the initial article, a continuation article idea also occurred which made the second part of the inheritance subject matter about being separate property.

We hope you enjoyed both articles and this was our lead financial planning articles.

All about the Car

In another fun personal financial planning two – part article, long desired, but fearful of writing …this article discusses the car, should you buy or lease and how to do so. Again, a second article occurred at a chance meeting in an airplane with a former law officer watching me finish the first article on the airplane!

In doing the research for these articles we ran across a really cool car research site, and mentioned some great buying resources as well.

Recession Thwarted – Capital Market Thoughts

To ignore new evidence in our minds is silly even if it goes against the grain of what you may have been saying!

In this article we review a CFA speaker’s slide about lowering rates during a recession and his conclusion. Bottom line, we’ve not been a big fan of lowering rates during economic growth, but an inverted yield curve which is highly predictive of a coming recession, along with lowering of rates, according to the speaker and the enclosed chart leads to a thwarting of the recession.

We hope we are wrong on this one and the speaker is correct!

Reach back to last year’s taxes in savings you can do now

In this article we discuss the remaining tax savings ideas that we can do this year, that will help last year’s taxes-

  • The SEP – Simplified Employee Pension
  • HSA – for the Health Savings Account
  • IRA – An oldie but a Goodie if it’s available to you
  • Roth – While not a tax saver you can do it now for last year’s taxes
  • Itemized itemize itemize – With today’s high standard deductions you may not be able to itemize but we remind that it’s a good idea to stay in shape as it’s likely these itemize deductions may come back in the future

We hope you enjoy … talk to you in the Spring !!!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

Why an Inheritance is Separate Property? How to NOT Co-Mingle and How TO Co-Mingle – Part 2 on Inheritance

As a follow-up to the “Why an Inheritance is Usually Not Taxable Post” we thought it timely to go one step farther and explain inheritance asset flow and the unique characteristics an inheritance has, even if you reside in a community property (most assets viewed as joint) state.

Inheritance has Direct Ownership Tracking

An inheritance is a unique transfer of assets with a very detectable and separable source. Given that inheritances are mostly determined by either beneficiary designations on specific assets such as an IRA beneficiary, Wills, Trusts or a transfer on death (TOD) which is basically specific beneficiaries for funds/assets, the source of an inheritance is very specific and very clear, which gives it unique characteristics regarding joint or co-mingled assets.

So how does an Inheritance Stay Separate?inheritance

It’s as easy as keeping the asset in her/his own name, and ABSOLUTELY not adding or depositing co-mingled assets into the separate property.

How to make Separate Property Joint?

Just the opposite as above, mix it up, in many cases there may be situations where there is a need or desire to make separate property joint property, possibly tax, inheritance tax, other asset location issues may make this appealing; taking the separate property adding a spouse or significant other and mixing the assets will efficient will effectively make the separate property joint property.

Once Joint, it is nearly impossible to separate again!

Have a Great “Inheritance Separate or Co-Mingled” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

Why an Inheritance is usually NOT Taxable !

Several times in the most recent quarter we were asked, and discussed in detail, if an inheritance is taxable? Because of this repeated subject we thought it appropriate to broach the subject here.

So is an inheritance taxable?inheritance

For the most part no. There are of course exceptions (certain states have silly inheritance laws, but these are slowly being repealed due to state resident desire). Under current tax law, upon death after tax investments receive a step up in basis, which means they are marked as the value of the deceased as fair value. This means that if an asset was purchased for just pennies decades ago, it’s new basis for the inheritor is the fair market value at the date of death.

As a side note for those thinking of gifting appreciated assets (to non charitable recipient) one might want to consider this step up in basis. If you gift a highly appreciated asset it will carry your basis and the recipient will then have Taxes upon sale.  All things considered equal, upon death that same asset under current tax law will transfer to the recipient with little or no taxes.

Once the assets are transferred into the beneficiaries account, the interest, dividend and capital gain clock will begin and moving forward, taxes will be due on this amount as the beneficiary becomes the owner of the asset, but the initial transfer will not be taxable, a very fair tax situation.

Receiving an IRA as Inheritance?  There are taxes, but not Immediately

Under current tax laws an IRA will pass to a spouse, child, sibling or other direct heir with no mandatory complete distribution necessary-there will be possible minimum distributions.

If a spouse is in the age range of RMD (Required Minimum Distributions) the receiving beneficiary spouse will pick up mandatory distributions based on his or her age. If a child is the recipient of an IRA the child’s age blended with the original decedent and will be computed to mandate a non-penalty but much smaller required minimum distribution even if the beneficiary is very young.

If the inheritor wanted to distribute the entire IRA, she/he has that option with no penalty, however this would bring full taxable income for the entire amount of the distribution, a decision that would need to be carefully considered before commencement.

So in summary, the immediate transfer of assets carries very little tax burden to the inheritor. Moving forward interest, dividends, future capital gains in after-tax accounts would be taxable, and in the case of an IRA the beneficiary, the RMD amount will be required and taxable, but in almost all cases these are the only taxes mandates.

Have a Great “No Inheritance Tax” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

Why Source of Funds May Determine Entrance into Capital Markets

Before we jump into this post we know that in 5 to 10 years our starting point hardly matters.

We also know that we’re all human and we like to get off on a good start in anything that we do, especially when it’s dealing with our hard earned capital!

What follows is our belief of the best possible way to get started on good footing, and keep a positive investment allocation.

There are always outliers and unique events – this is a template, and loosely the starting point for funds entering the capital markets … but by no means a written in stone … exact map.

Let’s start with the easypuit-1555653

New investment dollars that came from … say the backyard …  under your sofa … your overfilled emergency fund, or some other super safe and stable asset class . … almost certainly should be work into Capital Markets over time.

Depending on the situation, the amount, the time horizon … the time frame may vary from months to quarters or even longer depending on the situation to gain entrance to the Capital Markets …

A typical scenario would be to divide the time frame into equal parts and allocate over that period of time.

The goal is to take advantage of the ups and downs upon entrance into the Capital Markets ….

Funds such as 401k rollover’s, current investment portfolios that are moving from one pocket to another most certainly do not need this staggered entrance into the capital markets as they were invested already.

An accurate statement can be “If it just came out of the capital markets it can go back into the capital markets” even though it may be cash today.

Here are the gray areas

Of course there are gray areas that need judgment…

A large block of stock options sold. The funds where IN the Capital Markets but depending on the size and the situation, it may not make sense for these funds to be moved directly back into the capital markets all at once.

A sudden liquidity event such as the sale of a business – yes in essence it was in a investment that had volatility similar to the capital markets, but in most cases, risk reduction is desired and a staggered entrance along with a conservative allocation may be the best.


It all depends on the form?

Some inheritance come in the form of cash … others may come in the form of investments that are already invested – again depending on the situation, it may make sense to stagger entrance, or it may be just fine to  continue the allocation or even re-allocate in one swoop.

Bottom Line, there is no exact way for all situations, but there are ways to go without raising the blood pressure!

Have a Great “Good Entrance Capital Market” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.

Travels next week — Q4 2014 Newsletter Video Review

Most of next week I will be traveling to a water surrounded state for business. Tethered heavily with technology via planes and automobile as well as great coverage back home, we will not miss a beat.

The Newsletter is out – actually on its way to you now. If you do not have time to read the Newsletter or prefer my personal thoughts, take a look – well listen.

Click here for digital Newsletter!

Q 4 2014 Newsletter Video Review



Enjoy your Friday !

Have a Great Day!

John A. Kvale CFA, CFP

8222 Douglas Ave # 590
Dallas, TX 75225


Five Steps to Reducing Risks of an Inheritance, Ideas from an FT Article

Last week a very flattering article for J.K. Financial, Inc. (lead interview) was written by a division of the FT on inheritance planning. Since this article was geared more towards advisors, we thought clarification would be worthy.

Some Estimate Trillions to transfer

Over the next several decades there will be a large transfer of wealth. According to this ABC news article, the amount could be in the trillions.

FT Article on Inheritance PlanningFT Article John Kvale

After an extended interview, a division of the FT had the following  article on Inheritance planning geared toward advisors featuring J.K. Financial, Inc. and John Kvale. Here are the questions from the reporter (Chris Latham) and my answers. Following this electronic communication, we also had a lengthy discussion which formed the basis of the article. (Click the picture to see the article.)

The Questions

  1. How far in advance should the inheritance planning process begin for clients who expect to receive?
  2.  What does the planning process involve, for clients’ life goals, types of investment assets, tax mitigation, etc?
  3. What can the advisor do to address any potential emotional fallout for the client regarding guilt, family squabbles, etc.?
  4. If the client wants to splurge on that dream home after an inheritance, rather than invest the assets according to the advisor’s plan, what is the best next step?
  5. How does any of this change based on whether the inheritance is modest versus significant, comes when the client is under age 40 versus over age 60?

My Answers

  1. Planning in advance is usually completed by helping to insure the heir’s predecessors have completed an accurate plan and process. Depending on the size of the inheritance, we actually try to not include inheritance in our current clients recipient plans.
  2. The planning process is very dependent on the type of inheritance, but would mainly change life goals as well as tax mitigation, again depending on the type of inheritance.
  3. Family squabbles are a commonality, expect them and plan for them through full, complete, accurate and ongoing disclosure of the process. We find the biggest squabbles occur due to lack of contact and clarity for all members. Keep them all in the loop and less feelings will be at risk.
  4. Splurging is ok as long as it does not create an unsustainable expense i.e. Property tax that the client cannot afford. Staying frugal at first is usually the best option.
  5. The smaller and the younger an inheritance may occur the less overall effect on the client. The larger and the later, GENERALLY the more planning that is necessary.

Have a Great Monday! John Kvale PS Since this was a rather long article, I have limited my comments. PSS Looks like capital markets are going to stumble to the end of a second straight quarter.

8222 Douglas Ave # 590
Dallas, TX 75225

John Kvale Inheritance Planning Financial Times Article

Last week as mentioned here, I was honored to have a long interview with a terrific reporter from the Financial Times. In the world of media, you never know if anything will be printed, or even when and where. Luckily I was the lead interview and even garnered a mug shot. Thanks Chris (reporter)

Here is the Complete Story from the FTFT Article John Kvale

Click on the heading or the picture for the story. The article turned out to be more for advisors but has already been picked up by the Wall Street Journal as well.

I will go over the questions and answers of the article shortly in another post, as Inheritance Planning is something we have great experience. We will share our thoughts in a more planning for clients manner, rather than tips for other advisors. We are delighted with the article and thank the FT and Chris Latham for the great coverage.

Have a Great Day!

John Kvale

8222 Douglas Ave # 590
Dallas, TX 75225

Keys to Remember when you Receive an Inheritance

Statistically over the next decade many aging americans will pass away transferring a large amount of wealth from the current generation to the next younger. There are many confusing aspects of receiving an inheritance.  Here are a few confusing items we have experienced with clients over the last 20 years explained, to help clarify the situation and process.

 Taxes are usually not an issue for the recipient:

Most taxes are paid at the estate level or at the passing generations level prior to distribution to beneficiaries. Under current tax laws most assets receive a step up, or revaluation at the time of death and as such transfer to the beneficiary without taxes. Current tax laws even allow for IRA type of assets to transfer to the next generation in the form of a Beneficiary IRA, which carries special tax benefits and allows beneficiary to slow the taxable distributions, resulting in only a small annual taxable distribution to beneficiaries. (Current estate taxes rates and amounts are uncertain, but we feel will be clarified by the end of the year 2010.)

Upon receipt of the inheritance it may be time to review your Liability Insurance:

The type of liability insurance most important in the event of an inheritance is what we call an Umbrella Policy, and is usually purchased through your homeowners agent or automobile agent. This insurance acts as a gap type of insurance and helps cover holes in your regular personal coverages at a very reasonable cost, usually less than $1000 annually and covers up to 1 or 2 million dollars of gap liabilities.

Inheritance are separate assets until commingled:

Assets from an inheritance are separate assets, but do become commingled, or joint assets, upon contribution to joint titled accounts. In certain instances there may be reasons for keeping assets separate, as such, it is important to deposit separate assets into individually titled accounts if you wish them to remain separate property.

Don’t make any hurried decisions:

The death of a relative or related person can be a traumatic experience, there is no extreme hurry to make decisions. In our experience, we have found knee jerk reactions can often be unwise due to the stress of the situation. Do not delay the process for an extended time period, but trying to make all needed decisions immediately may sometimes have negative results.

This short list is not exhaustive and many situations may differ in complexity. This list does represent our most common misunderstandings and suggestions for helping in what may otherwise be a stressful situation.

Have a Good Day!