Red Oak Financial Group

For this week's #wealthtipwednesday, take a look at our Red Oak Financial Group company brochure and get to know us a little bit. Happy Wednesday! -Your Friends at Red Oak Financial Group

💚📈🔎 WEALTH TIP WEDNESDAY ✔✔✔ Remember, the account holds the investment- it is not the investment! Many times people will conflate the type of account with the underlying investment. It is key to remember that an account is simply the container that you put investments (i.e. stocks and bonds) inside of. That container (i.e. account) can have unique features that may encourage growth or make it more beneficial to withdraw value (i.e. money) from said container, but the container can only do so much. Here is an analogy: Halloween is only a few weeks away, and people will be sitting on their stoops with different candies in different bowls. If someone has a fancy bowl that is easier to grab candy out of than the house next door's, that is a big plus. You can really get a nice handful fast! But if that easy-access bowl is filled with dental floss and chap stick, is that a nice win? Not for the average 8-year-old! How about the house next door? What if they use an old-school fishbowl that is hard to get your hand into, but what you leave with is one king size Snicker's Bar. Now we're talking! The point is that you have to invest well inside of the account. The account is just a tax wrapper, and the withdrawals, contributions, and growth will be subject to the rules of that tax wrapper. The account is very important (crucial even), but a powerful account filled up with cash is not as beneficial as a less advantageous account filled up with highly appreciating assets. Remember, the account needs investments inside of it. Great performing underlying investments combined with a powerful account type can yield great results over time. There is no substitute for investing well, though, regardless of the "container". Consult a financial professional for advice. -Your Friends at Red Oak Financial Group

💚📈🔎 WEALTH TIP WEDNESDAY ✔✔✔ What is an Irrevocable Life Insurance Trust (ILIT)? An Irrevocable Life Insurance Trust (ILIT) is a legal entity created to own and control a life insurance policy for the benefit of designated beneficiaries. Once the trust is established and the life insurance policy is transferred into it, the trust becomes the policy's owner, and the insured relinquishes control over the policy. This transfer is irrevocable, meaning the insured cannot change the terms of the trust or reclaim the policy. Here's how an ILIT works: Creation and Funding: The grantor (the person creating the trust) establishes the ILIT and selects a trustee to manage it. The grantor then transfers ownership of a life insurance policy to the ILIT or funds the trust so that it can purchase a policy. Management: The trustee manages the trust, pays the policy premiums (usually using funds provided by the grantor), and ensures the trust's terms are followed. Death Benefit Distribution: Upon the grantor's death, the life insurance policy pays out the death benefit to the ILIT. Since the trust owns the policy, the proceeds are not included in the grantor's estate, which can help reduce estate taxes. The trustee then distributes the proceeds to the beneficiaries according to the terms of the trust. Who Benefits from an ILIT? An ILIT is particularly beneficial for high-net-worth individuals concerned about estate taxes. By excluding the life insurance proceeds from the taxable estate, an ILIT can significantly reduce or eliminate estate tax liability, preserving more wealth for heirs. Additionally, beneficiaries benefit from asset protection, as the trust shields the death benefit from creditors. ILITs are also advantageous for those who wish to control the distribution of life insurance proceeds, ensuring that minor children, financially irresponsible heirs, or beneficiaries with special needs receive the funds in a structured and protected manner. #ilit #estateplanning Consult an estate attorney regarding your personal situation. -Your Friends at Red Oak Financial Group

💚📈🔎 WEALTH TIP WEDNESDAY ✔✔✔ 5 Reasons to Have and Not Have a Revocable (Living) Trust? Reasons to Use a Revocable Trust for Estate Planning 1) Avoiding Probate: One of the primary reasons to use a revocable trust is to avoid the probate process. Assets in a revocable trust pass directly to the beneficiaries without going through the public probate court, allowing for quicker distribution. 2) Maintaining Privacy: Unlike wills, which are public record once they go through probate, a revocable trust remains private. This means the details of your estate and the distribution of your assets are not made public. 3) Incapacity Planning: A revocable trust can include provisions for managing the grantor's assets if they become incapacitated. This ensures that a designated trustee can step in to manage the trust assets without the need for court-appointed guardianship. 4) Control Over Asset Distribution: A revocable trust allows the grantor to specify detailed instructions on how and when assets are distributed to beneficiaries. For example, the grantor can stipulate that assets be distributed over time or upon certain conditions, such as a beneficiary reaching a certain age. 5) Continuity and Management of Assets: In the event of the grantor’s death or incapacity, a revocable trust ensures seamless management of assets. The named successor trustee can immediately take over without the delays or complications that might arise with a will or probate process. Reasons Not to Use a Revocable Trust for Estate Planning 1) Costs: Setting up a revocable trust can be more expensive than simply drafting a will. There are legal fees involved in creating the trust, transferring assets into it, and potentially higher ongoing maintenance costs compared to a will. 2) No Tax Benefits: Unlike some other estate planning tools, a revocable trust does not provide any immediate tax benefits. It does not reduce estate taxes or income taxes for the grantor, as the trust assets are still considered part of the grantor's estate. 3) Complexity: Managing a revocable trust can be more complex than handling a simple will. The grantor needs to ensure that all relevant assets are properly transferred into the trust, which can require ongoing attention and administrative work. 4) Not a Creditor Shield: A revocable trust does not protect assets from creditors during the grantor's lifetime. Because the grantor retains control over the assets, they are still considered part of the grantor's estate and can be accessed by creditors. 5) Ongoing Administrative Burden: Once established, a revocable trust requires ongoing management, including the tracking of assets, potentially retitling properties, and keeping the trust documents up to date. This can be more burdensome than managing a will, which is typically only revisited upon significant life events. Consult an estate attorney regarding your situation. -Your Friends at Red Oak Financial Group

💚📈🔎 WEALTH TIP WEDNESDAY ✔✔✔ What types of investments are known as "alternative investments"? The term "alternative investments" encompasses a diverse range of assets that fall outside traditional investment categories like stocks, bonds, and cash. Here are the primary types of assets considered alternative investments: 1) Private Equity: Investments in private companies, including venture capital, leveraged buyouts, and growth equity. 2) Hedge Funds: Pooled investment funds that employ various strategies to earn active returns for their investors, often involving complex financial instruments and techniques. 3) Real Estate: Investments in physical properties, including residential, commercial, and industrial real estate, as well as real estate investment trusts (REITs). 4) Commodities: Physical goods such as precious metals (gold, silver), energy products (oil, natural gas), agricultural products (corn, wheat), and livestock. 5) Derivatives: Financial contracts whose value is derived from underlying assets such as futures, options, and swaps. 6) Infrastructure: Investments in physical structures and facilities like highways, bridges, utilities, and airports. 7) Private Debt: Loans or debt securities issued by private companies, including direct lending, distressed debt, and mezzanine financing. 8) Cryptocurrencies: Digital or virtual currencies like Bitcoin, Ethereum, and other blockchain-based assets. 9) Managed Futures: Investments in futures contracts managed by professional portfolio managers, often using systematic trading strategies. 10) Venture Capital: Investments in early-stage startups and emerging companies with high growth potential. 11) Natural Resources: Investments in assets like timberland, farmland, and water rights. 12) Collectibles: Tangible assets like art, antiques, rare coins, stamps, vintage cars, and wine. -Your Friends at Red Oak Financial Group

Red Oak Financial Group would like to welcome Jason Koval to the team as our newest financial advisor! Jason is a graduate from Loyola University Maryland and we could not be more excited to have him join the firm! Welcome to the team, Jason!

💚📈🔎 WEALTH TIP WEDNESDAY ✔✔✔ What is a Roth Conversion and What are the Benefits? A Roth conversion is a financial strategy where you transfer funds from a traditional retirement account, such as a traditional IRA or a 401(k), into a Roth IRA. This conversion requires you to pay taxes on the amount converted in the year of the conversion, but once the funds are in the Roth IRA, they grow tax-free and qualified withdrawals in retirement are also tax-free. Here's a breakdown of the process: Transfer Funds: You move money from a traditional IRA or 401(k) into a Roth IRA. This transfer can be a partial or full conversion. Tax Implications: Since traditional IRA and 401(k) contributions are typically made with pre-tax dollars, converting them to a Roth IRA triggers a tax liability. You must pay income taxes on the amount converted in the year of the conversion. The amount converted is added to your taxable income for that year. Benefits of a Roth IRA: Once the funds are in the Roth IRA, they grow tax-free. Unlike traditional retirement accounts, qualified withdrawals from a Roth IRA in retirement are not taxed. This can be advantageous, especially if you expect to be in a higher tax bracket in retirement or if you want to diversify your tax exposure. No Required Minimum Distributions (RMDs): Roth IRAs do not have required minimum distributions (RMDs) during the original account holder's lifetime, unlike traditional IRAs and 401(k)s. This can offer more flexibility in retirement planning and potentially leave more assets to heirs. Considerations: It's essential to consider your current and future tax situation, as well as your financial goals, before deciding to do a Roth conversion. Factors such as your age, income level, and anticipated retirement age can influence the decision. Overall, a Roth conversion can be a valuable strategy for some individuals to potentially reduce future tax liabilities and enhance retirement savings, but it's essential to weigh the short-term tax consequences against the long-term benefits. Consulting with a financial advisor or tax professional can help you determine if a Roth conversion is suitable for your financial situation. #rothconversion #rothIRA -Your Friends at Red Oak Financial Group

***OPEN SHREDDING EVENT*** Please stop by Red Oak Financial Group on Saturday morning, April 27th (tomorrow) for a free shredding event! The office is located at 403 Allegheny Ave. in Towson. Gather up your old documents and bring them over to shred and say hi! We hope to see you there, Your Friends at Red Oak Financial Group

💚📈🔎 WEALTH TIP WEDNESDAY ✔✔✔ What is an ILIT Trust and how can it help with estate planning? An Irrevocable Life Insurance Trust (ILIT) can offer several significant benefits for individuals and families seeking to protect their assets and provide for their loved ones. Here are some key advantages of establishing an ILIT: 1) Estate Tax Reduction: >One of the primary benefits of an ILIT is its ability to minimize estate taxes. When properly structured, the life insurance proceeds held within the trust are not considered part of the insured's taxable estate. This can result in substantial tax savings for beneficiaries. 2) Asset Protection: >Assets held within an ILIT are shielded from creditors, lawsuits, and other claims. Since the trust is irrevocable, once the assets are transferred into it, they are no longer considered part of the grantor's estate and are therefore protected from potential creditors. 3) Privacy: >Unlike assets passing through a will, assets held within an ILIT avoid the probate process, which can be time-consuming and costly. Additionally, the terms of a trust remain private, whereas wills are subject to public record upon probate. 4) Creditor Protection for Beneficiaries: >The assets distributed from the ILIT to beneficiaries can also be protected from the creditors of the beneficiaries, providing an additional layer of security. 5) Preservation of Government Benefits: >If structured correctly, an ILIT can ensure that life insurance proceeds do not impact the eligibility of beneficiaries for government benefits such as Medicaid or Supplemental Security Income (SSI). 6) Flexibility: >While the ILIT is irrevocable, it can still provide some flexibility through the use of trust provisions, such as the ability to appoint a successor trustee or modify distribution terms under certain circumstances. Overall, an ILIT can be a powerful tool for estate planning, offering tax savings, asset protection, privacy, and control over the distribution of assets to beneficiaries. If you believe you may have a large tax bill at death without the liquidity to pay it, an ILIT can provide your heirs just that. It's essential to work with a knowledgeable estate planning attorney to ensure the trust is properly drafted and administered to maximize its benefits. #ILIT #estateplanning #financialplanning -Your Friends at Red Oak Financial Group