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December 30, 2023 - Money Matters Podcast

Scott and Pat tackle questions about college costs, financial gifts, and estate planning.

On this week’s Money Matters, Scott and Pat start the show by helping a father decide whether he should self-fund his daughter’s college costs. Then, they help a caller figure out how to value the amount of a financial gift he won’t give for another five years. Plus, Scott and Pat make a house call to a California woman to see whether she took their advice. Finally, they hear from a caller who had an estate planning conundrum.

Join Money Matters:  Get your most pressing financial questions answered by Allworth's co-founders Scott Hanson and Pat McClain live on-air! Call 833-99-WORTH. Or ask a question by clicking here.  You can also be on the air by emailing Scott and Pat at

Download and rate our podcast here.


Announcer: Would you like an opinion on a financial matter you're dealing with? Whether it's about retirement, investments, taxes, or 401(k)s, Scott Hanson and Pat McClain would like to help you by answering your call. To join Allworth's Money Matters, call now at 833-99-WORTH. That's 833-99-W-O-R-T-H.

Scott: Hey, everyone, this is Scott Hanson from Allworth's Money Matters. Pat and I want to offer our best wishes for a great year ahead. This is the end of the year. We are off on vacation, so you're going to hear some best of calls. I think you'll enjoy the calls, get some great advice from some of our listeners who call in. So enjoy and happy new year, everyone. See you next year. Welcome to All Worth's Money Matters. I'm Scott Hanson.

Pat: I'm Pat McClain. Thanks for joining us.

Scott: Both myself and my co-host here, we're both financial advisors. We like to help people with their finances, make good choices with their money, save well, invest properly, manage their taxes, plan for their assets while they're both living.

Pat: And at the end.

Scott: And at the end, which no one gets out of here alive. Last I looked.

Pat: Not so far.

Scott: Yeah. Anyway, I love taking your calls. To join us, you can join us by sending us an email at questions at We'll find a time to get you on or you can call 833-99-WORTH to get you on the number, 833-99-WORTH. And we're going to start right off with calls here in California talking with Lee. Lee, you're with Allworth's Money Matters.

Lee: Hi, Pat. How you doing?

Pat: Good. Hi, Lee.

Lee: Hi, Scott.

Scott: Hi, Lee. I felt excluded there for a minute. Thank you.

Lee: Hi, long time listener, first time caller.

Pat: Great, thanks for joining us.

Lee: I appreciate it. Thank you. We're looking at next year, our daughter going to college and we're just, I'm trying to prepare for that and we're looking at 20, 25,000 college cost to go to UC system. Hopefully locally. And so I have a couple of funds that will help pay for that and I'm not sure what priority I I should pay for this.

Scott: Okay. Do you have other children as well?

Lee: Just a daughter going to college. My son is probably not going to college.

Pat: How old are you?

Lee: Fifty-four.

Pat: How old's your spouse?

Lee: She is 48. She just turned 48.

Pat: All right. And since you've listened to this show, you said for many years, you probably know the questions we're going to ask. So rather than go through that, why don't you just share the information? Because the questions are almost always the same that we ask.

Lee: Yeah, so I have about $45,000 of 529 dedicated for her college. We have about, I have $187,000 from my 457 that I could access as well, an additional $60,000 outside the 457 as well.

Pat: How's that money invested?

Lee: They're invested in the stock market 100%. Both the 529, I believe that's on S&P and then the other one's VTS, stock total market index market fund.

Pat: Okay, all right. And what other assets?

Lee: Assets, I have, we have about 800 in retirement accounts. And that's a combination of 403(b)s, 457 and also Roth IRA.

Scott: Okay. How much is in the Roth?

Lee: Roth, I have about 150,000. Yeah.

Scott: All right, and what's your family income?

Lee: We take home about 280. So I'm projecting next year I'll be 285, this year about 282.

Pat: All right, and then? And you're putting the maximum into your 401(k)s and 403(b)s and 457s?

Lee: Yeah, my wife is putting it putting on her maximum. Mainly just focusing on the Roth IRA for myself and then the rest were saving it, saving for vacation and you know.

Scott: And can you fund, so once she's in college, you'll no longer be saving for her college. Can you fund some of this out of current cashflow?

Lee: I think so. So I think we can. And because we're looking at she paying, you know, a couple hundred thousand dollars if she does medical school.

Pat: Okay, okay. Let's let's start over here for a second. Let's start over here for a second.

Scott: No wonder you're calling, because at first I'm thinking this doesn't look like an insurmountable problem. Now you mention medical school.

Pat: Did you put any money in your other child's 529 plan?

Lee: Yes, but there's a we have a Able account for him, but that's really dedicated for him.

Pat: Okay, got it. Got it. Got it. Got it. Got it. Got it. Got it. Got it. Yeah. Okay. Thank you. Thank you. And we don't need to dig into what that means.

Scott: I mean, my first my first thought before you mentioned the medical school, I thought if I were in the situation, I'd drain the 529 plan first. Then I'd probably look at some of the stocks.

Pat: Yes, I would have gone exactly the same way, although I would have done it a little bit differently. I would have done it simultaneously. He said he thinks it's going to be $20,000 to $25,000 a year.

Scott: My guess is you can self-fund some of this, but unless...

Pat: That's right. That's right. I would have done a portion out of the 529s. Medical school throws a whole other wrench in it. I think it how certain is she going to go to? Well, she's going to be a freshman in college.

Scott: I would still use the 529 first. You're in a high income. I mean, because you sell some stocks, the capital gain tax. You're at a pretty high tax rate on those. Where's the bump to the higher rate? Yeah, and it's right about there

Pat: Yeah, and I question why you're using the Roth IRA.

Scott: You staying in California forever?

Lee: Yeah, my, our families are here, both my wife and my family. So I don't see us moving anywhere. We'll probably retire in California. I mean, we're pretty happy here.

Pat: So the education side of the, I would use the, I agree with Scott. I would use the four.

Scott: Because the stocks, whatever you got gains there, the challenge is California is going to tax it as ordinary income. The feds are going to give you a break at 15%.

Pat: I would use the 529 and, quite frankly, I think if you lowered your contributions to your wife's retirement plan and even your Roth IRA, you should self-fund this with just your 529.

Scott: Do you have any pensions that will come in at retirement?

Lee: Yes, I'm with CalPERS and my wife, she will also have UC Davis.

Pat: Oh, okay. This is easy. This is easy. This is easy. This is easy. Yeah.

Scott: So what and what percentage of your salaries will be made up in pension at retirement?

Lee: Not too. I'm expecting probably with my pension, just for myself, I'll probably be looking at like 80,000. Yeah.

Scott: So we still need to factor in your retirement.

Pat: Yeah, but, Scott, we can't get to the medical school thing yet. Let's not borrow trouble. If by her junior year, she says, "I am absolutely going to medical school."

Scott: So if I look at, Lee, I'm your situation, I would on Monday morning I would liquidate my 529 and have that moved out of stock market into cash like right now because no one knows what the market's gonna be next year.

Pat: And you're gonna need that money so you don't want the volatility. And I use these as the first dollars. And then I would actually self-fund. I would lower the contributions on the 401(k)s.

Scott: If you have to.

Pat: If I have to, but I would have a tendency not to want to get into that brokerage account.

Lee: Okay.

Scott: Yeah, because you relative to your net worth, you don't have a lot outside of retirement accounts, given your...

Pat: Yeah. Yeah. So you've got more than enough money to do it. The question you had was where should it come from? And it should be self-funded, even if it requires you to lower your contributions to your retirement plans and it's to use the 529 plan. Scott, do you agree?

Scott: Yeah, but I also, I mean, I think...

Pat: But you should obviously take losses in the brokerage.

Scott: Doing an in-depth financial plan at this stage, I think, would be helpful for you to look at when you're gonna retire, what your retirement needs are gonna be. And if you fund your daughter's entire medical school, how does that impact you? Does it mean you need to work a few years longer? Does it mean you have less money in retirement?

Pat: There's no question that there will be better decision making, doing a financial plan than calling two guys on the radio that have never met you and have four minutes' worth of information about you. There's no question that it'd be well worth your money to spend the $2,500 or $3,000 or $4,000 to actually do a financial plan. But for an answer on the radio show, it's self-fund and use the 529 and go to cash immediately.

Scott: I would go to cash in those dollars. Immediately. I mean, if you think about it, if you right before, if your daughter went to school right after the financial crisis or after 9-11.

Pat: My daughter just started law school. We picked up all the other 529 plans that we didn't use for the other three children. We pushed them into one 529 plan and it all sits in cash or short term in a short term bond.

Lee: Would you also consider like taking like home equity?

Pat: No, no, no, no, no, no.

Scott: You have a mortgage on your house now?

Lee: Yes, but we plan to pay it off in 15 years.

Pat: Yeah, I would more if she's going to go to if she's going to go to medical school, I'd be more inclined to actually get student loans to go to medical school.

Lee: All right.

Scott: Right. Even if, and then pay them off after the fact.

Pat: Yeah, yeah, yeah. In her name only. Yes, yes, of course. And don't worry about that till she goes to medical school. And then, look, when she graduates from medical school, if she goes and lives in small town, middle America that doesn't have enough doctors, which they don't have enough doctors, there are programs that will forgive all of that debt by where she decides to spend three or four years. Very similar to how the military does it with their doctors. Yeah.

Scott: So, hey, appreciate the call and wish you well and congrats on having a...

Pat: I know a number of doctors that became doctors through their time in the service.

Scott: Yeah, my eye doctor, that's where he started. Let's continue on, we're talking with Jack, Jack, you're with Allworth's Money Matters.

Jack: Hi, thank you for picking my call. Looking for some inspiration or creative ideas. My wife and I are planning on gifting about $500K each of our two children to help with house purchases. And one is using his gift right now to help purchase a house right now. The other probably won't be several years before he's going to be in the house market and we're trying to figure out how to adjust the future gift to maintain some sort of equity. What sort of interest rate would you suggest we use to value the second child's gift?

Scott: Your plan is to say I'm gonna have I want 500,000 of 2023 dollars. Is that what you're thinking to yourself? To go to to go to for each of my...

Jack: Exactly.

Pat: Yeah, so what so if your other son doesn't take it, other child doesn't take that 500,000 for six years, what would the equivalent amount of dollars be six years from now, that's what you're asking?

Jack: Exactly.

Scott: So my question is this, is this just for your own accounting purposes internally so when this other kid goes to buy a house, you know how to factor it or are you planning on taking money from your estate today?

Jack: No, this will be just internal. I mean, conceivably, if the second son decides to go forever without buying a house, it would be part of our estate. And, you know, 10 years from now or 20 years from now or something, what would be an equitable value?

Pat: Yeah, I mean, I would use the one year treasury or an interest rate that was today on a mortgage.

Jack: Okay.

Scott: Another way you can do it is you can look, I mean, you can prepare something so that should you die sooner than later, you've got a formula in place. But you can also just look at it five years from now, what happened with house prices, particularly house prices in your first son, what was that annual increase, and that's what the other kid gets.

Pat: We could make an argument for, I could actually, I like your idea better, Scott. But that wouldn't be fair to the house prices because then that would, what happens if the house prices went down because it was a geography risk versus mortgage risk? I would use the mortgage rate. Because this is in lieu of the person getting a mortgage on their home. And I would use.

Scott: Or they might still have a mortgage, just not as a very large mortgage compared to what they would otherwise.

Pat: That's right.

Scott: He's in California and there's not a lot of...

Jack: California, these are horrendous mortgages. This is a 900K mortgage.

Pat: I like the way you're thinking. Actually, I gotta tell you, even in our own trust, we have set up a program that actually values what goes to certain people based upon an underlying interest rate.

Scott: You could also earmark, depending on your situation, you could actually transfer an account, keep it in your name, and invest it in a portfolio that's going to yield the maximum amount with five years from now.

Pat: Oh, but are you going to write this into your trust?

Jack: Yes, that'll be another, that's right now, yeah, eventually we're going to end up doing that.

Pat: Well, you should do it when you when you complete the gift to the one child, you should put it into your trust immediately for that.

Jack: Yeah, that's exactly our plan.

Pat: Yeah, I would use 4%. And I'd use whatever that interest rate was at the time that I gave the money to the first child for a mortgage.

Scott: What interest? A mortgage rate? Six percent? Six and a half percent? I wouldn't use that high. I'm more of an inflationary rate. I think of...

Pat: You could put it at inflation. I think I'd use 4%.

Scott: We're not going to know until the future. Most likely you'll be alive to adjust it then, right? So you, I mean, really this is, this is about an estate plan.

Pat: That's right. That's right. I would use 4%.

Jack: I mean, we, we definitely want something in writing in the trust right now.

Scott: Understand. No, I get that. I get that.

Pat: But in the future, assuming that you don't pass on, and child number two comes to you 10 years from now and says, "Hey," and you say, "Look, I gave your sibling $500,000 nine years ago. And this is where interest rates were, this is what happened to housing. So you could buy the equivalent size portion of a home for $722,000." But what if home prices fell by a third? Would you still want to give him $500,000 or would you want to discount that?

Jack: Yeah, some sort of proportionate part of the total house price.

Pat: That's what I like.

Scott: I like where you're going, Jack. You've got something in your trust should you die early that's going to earmark dollars. You need some formula.

Pat: Yeah, so it's $500,000 at 4% compounded annually until the day to death. And then you remove that once the gift is completed.

Scott: You could put some regional housing.

Pat: Yeah, that would make it a lot more difficult. I assume your estate is relatively large.

Jack: Yes, we're in good shape.

Pat: You're doing all right. Yep, I like that idea. I'd use two formulas. I wouldn't worry about how much money I was gonna give the child until it happened. And then in the trust I'd put somewhere in the four to five range as a compounding interest. And I'd write it into the trust the day, the day that you give the money to the other child.

Jack: We're due to update it. It's been five years, as long as we don't procrastinate too long.

Scott: Well, that's funny, isn't it? It's funny. I mean the majority of Americans die without a will, which we all know we're gonna die. Majority die without a will but I think a lot of it is we know we're gonna die, but we're not gonna die today so, we can do it tomorrow, because we have other things we want to do today.

Pat: Actually, I was talking to a friend.

Jack: I'm about to go out. I'm about to go out for a bike ride. So yeah.

Pat: Beautiful. Perfect. Yeah. I talked to a friend of mine.

Scott: Where in California are you?

Jack: Silicon Valley.

Scott: So in Silicon Valley, while we've got you, so housing prices, have they come down at all in the last couple of years?

Jack: No, no.

Scott: Not at all.

Jack: Actually, the one, if you, just for comparison, the son that's about to buy the house just had two offers, or he's made two offers. The first one there were 20 total offers and they took the top five and had them do a bid-off. He wasn't in the top five. And then the second one is...

Scott: And what did this house sell for?

Jack: It sold for about 1.9.

Scott: And what was the house? Describe the house to the rest of the listeners.

Jack: And so, let's see, it was three and two, small.

Pat: Seventeen hundred square feet?

Jack: No, I think it was about 1300. And it needed a fair amount of upgrades and stuff like that.

Scott: How big was the lot? Like several acres?

Jack: That was the local town total acreage, I think.

Pat: And how beautiful was the creek that was running through the backyard? So look at that. How much was it? You say one.

Scott: A small lot, right? I was joking, 1300 square feet.

Jack: The lot was about 6000 square feet. And it was a three and two, 60, 70 years old, needing a fair amount of upgrade and a fair amount of work.

Pat: That is crazy.

Jack: Asking price was $1.5. And after the five bidders got done, I guess the final price was $1.9. So things don't seem to be slowing down.

Scott: That is amazing because this is the environment. Jack, do you have any other questions for us?

Jack: No.

Scott: Thank you, Jack. Thanks for calling. You know it's bad, we're going to have a discussion. Oh, this is crazy. So, here's an environment, right? Think about the last three years. In Silicon Valley, lockdown about as hard as anywhere in the country, right?

Pat: Yeah, California.

Scott: And then the Bay Area particularly, and the county. So, people are working remote. People are moving to other areas. That's probably one of the most expensive areas in the... Clearly for what you get, it's the most expensive area in California, if not anywhere. For what you get for $2 million. But you would think that these people have figured out how to work remotely, and they move to somewhere else where they get a bigger house for less dollars. And if they have to go in a couple of days a week, and they just go back and forth a couple of days a week, but that doesn't seem to be the case. Here's a house, 1.5 million.

Pat: Oh, this is so much to unwrap here, Scott. There's so much to unwrap here. There's corporate cultures to unwrap. It's do I believe that I'm going to move up the organization faster if I show up in the office four days or five days a week, if I'm visible.

Scott: And if you have a house, if you live locally versus you have a three-hour drive.

Pat: Am I really showing my commitment to the organization and the industry as a whole by staying in Silicon Valley? Do I want that connectivity to those movers and shakers in the corporate world? My answer is no. I'm just telling you, there's so much to unpack here. But It's an issue.

Scott: Well, the housing market is a surprise to many.

Pat: Oh, it is. I was talking to a gentleman.

Scott: Myself included.

Pat: A friend of mine, and he's a developer. And he was telling me when these interest rates, they didn't...

Scott: And what do you mean by developer?

Pat: They develop raw land in California. So raw land. Four houses. Been doing it for years. It's all he's ever done. So what happens is something used was a ranch years ago. Ranches. It's those big McMansion neighborhoods you see. What they do is they go to large institutions.

Scott: What do you mean by McMansion?

Scott: And what do you mean by that? For houses. Keep me by McMansion. You mean like a 3,000 square foot house, one on top of the other?

Pat: That's right.

Scott: Okay, 3,000 or 4,000 square foot houses.

Pat: Yeah, yeah. Maybe even bigger than that. Yeah, yeah in planned communities.

Scott: Bigger than 1300 in Silicon Valley.

Pat: Yeah, planned communities and what they do is they're multi-year, sometimes 10, 15, 20-year projects where they will go to institutions like pension plans and say, "Okay, this is the design for this ranch we just bought, you know, 50, 000 acres."

Scott: And they gotta get the zoning and they gotta get the water and then they've gotta get all the electricity, the infrastructure, the schools.

Pat: It's not it's a multi-year but he's been in this one project for probably 13, 14, 15 years, longer than that, 20 years. And, I was talking to him, I said, "Is this just the most amazing thing that you have ever seen with interest rates going up and all of a sudden new home prices in not just Northern California, but other parts of the United States just on fire?" They're seeing it in Texas, Houston, parts of Florida. And he said, "Yeah, we were, when these interest rates started going up and we realized that we thought they were going to continue to go up, we thought that we were just going to have to kind of, you know, save all our powder, let all the investors know there wouldn't be any returns for quite some time and then everything had to just calm down." Exactly the opposite happened. Exactly. So all the investors with their economic know-how, I don't think many predicted that new home prices would actually not only stabilize but go up.

Scott: And in part it's because the secondary market for homes, people aren't selling because their mortgages are so low.

Pat: Dried up.

Scott: Right? Their inventory's so low. So I wouldn't mind doing a move up, but I can't, I don't want to give up my mortgage. I have a $800,000 mortgage at 2.78%.

Pat: And I'm not gonna cash that in for a 6% or 7% mortgage. It just makes no sense So what we're seeing is we're seeing rehabs on existing homes, which are they're not borrowing money. So people are actually staying in place.

Scott: Like the Home Depots of the world are doing better than anyone would have expected.

Pat: Exactly. Which by the way is fueling part of the inflationary economy is that that's why the...

Scott: I think the biggest lesson though, Pat, as from an investor standpoint.

Pat: That's right.

Scott: There's things to look at and say, "How would you have predicted this, that home prices would continue to rise in a time like this when interest rates have essentially more than doubled? When historically, it's just the opposite.

Pat: It's exactly the opposite.

Scott: And so the point is, don't think you can outsmart the markets in the future. It just, that's a fool's game with, and that's how you destroy your finances.

Pat: Long timelines. Long timelines.

Scott: We're going to take a quick break. When we come back, we'll continue with the program. This is All Worth's Money Matters.

Announcer: Can't get enough of Allworth's Money Matters? Visit to listen to the Money Matters podcast.

Scott: Welcome back to Allworth's Money Matters, Scott Hanson.

Pat: Pat McClain.

Scott: Yeah, thank you for your part in the show.

Pat: Yeah, so we've got a segment we've run once or twice in the past and it's called House Calls. I don't know why.

Scott: Well, you had this idea, Pat. Why don't we have people that have been on the program?

Pat: It's from the old Click and Clack, the Tappet brothers, years, you've got to be really old to know these people. And they would call people up a week, months after they gave their recommendation on how to fix their car and ask how did it turn out. I thought this, it was always interesting to me because it's like...

Scott: Because you love working on cars so much.

Pat: No, it was, was the advice taken, used, not used? How was it, once we give advice on the radio show, I have no idea what happens to it. It goes into the ether and so we've created this program called, part of our segment called House Calls, where we actually get together with someone in the past that we had given advice to and we ask them what happened. So.

Scott: Yep, last year we spoke to a woman named Linda. She's been a long time listener to the show. She's not an Allworth client, but she wanted to know whether it makes sense to give an early inheritance to one of her two children, basically her daughter, to buy a home in California and here's a clip for that call.

Linda: My husband is semi-retired and he's collecting a pension of around $150,000. He's also, he's gone back to work as a retired annuitant and he's working part-time and his pay last year was around 93,000. And he plans to do this until he's maybe 70.

Pat: How old is he now?

Linda: He's 62.

Pat: Okay.

Linda: So neither one of us is collecting Social Security at this time. We have no mortgage on our house and we both have long-term care policies.

Pat: And do you work outside of the home?

Linda: No.

Pat: Okay.

Linda: We have financial assets of, excluding our house, of around 4.1 million. So we're thinking about giving our oldest child maybe a half a million. Is that something that we should even do?

Pat: Okay, let's talk about this for a second. And how old are you?

Linda: I'm 63.

Pat: And what's the value of the home?

Linda: Around 1.4.

Pat: And do you owe anything on it?

Linda: Nothing.

Pat: Okay, that's what I said.

Scott: So my guess is you're not spend... Maybe I'm wrong. My guess is you're not spending all the income that's coming in your house right now.

Pat: Yeah, because right now you've got income of 240 coming in approximately. Are you living on all of that? Are you spending all of that?

Linda: No.

Pat: Okay. Of this 4.1 million, how much money is outside of IRAs?

Linda: Outside of IRAs?

Scott: Yeah, 401(k).

Linda: 2.6.

Pat: Is outside and how much of that is invested in cash, bonds and or stocks? So tell me how much is in the cash or bond portion.

Linda: Okay, in the equities portion it's around 70%. In cash and bonds, it's around 30%.

Pat: Okay, so we've got about 850 grand.

Scott: Is this something both you and your husband want to do? Is this something that one of you wants to do?

Linda: It's something that I think I would like to do more because I think that why should they wait until we're gone to help them out that we can do now, especially in purchasing a house.

Pat: Tell me about the second child.

Linda: The second child, they're both... Okay, both of our kids make good livings. The daughter, she probably makes a little bit over 150.

Pat: Okay.

Linda: And my son, he will be making a good living, but he plans to maybe marry soon and between him and his future wife, they'll be making a great living. So he won't need the family inheritance.

Pat: Okay. So, is your daughter married?

Linda: No.

Pat: Okay. All right.

Scott: And this would be for your daughter buying a house or your son?

Linda: Yeah.

Pat: His daughter, the oldest, not married. Okay, so. And how old is she?

Linda: She is 30.

Pat: I like the idea.

Scott: I have no problem with that either.

Pat: I like the idea. Here's the one thing I will caution you only because I've seen it and I know Scott has seen it multiple times, you give the check to your daughter and you don't give the check to your son right away, at the same time, you're going to create animosity between either the two of them or your son and you. I don't care if your son has all the money in the world. It is a degree of fairness in their minds.

Scott: Not always. It can be, but I don't think that's always the case, Pat. Not in my experience. Even my own kids. At Christmas time, I never care if it's not always even.

Pat: You're not talking about a half a million dollars, though.

Scott: That's true. I'm talking about $50 gift cards.

Pat: I mean, even, look at, Scott, even when, you know, we'll get personal here, even when I sat down with my kids this last December and we went through our estate plan and we said, "Here's who we think should be the trustees on this estate plan if Mr. Hanson can't do it," and there was a dispute over why aren't all four listed as trustees, why are only one or two, regardless of the fact that I said the trustee doesn't have any special powers. It was just seen as a degree of fairness. So in this numbers here, I mean, you can give it to your son and your daughter at the same time.

Scott: Or, I mean, you could also gift a lesser amount to each, help your daughter get that house, and give an annual gift after that to help pay down the mortgage.

Pat: Which is an even better idea.

Scott: Because she's got, sounds like she's got the cash flow to help make a mortgage payment.

Pat: So what if you gave $200,000 and then next year...

Scott: Each year, each year you give a check to 30 grand.

Pat: Each one of them. So Linda's joining us now. Welcome back to the show, Linda. I have two questions. When did we record this? When did you originally call in and what did you end up doing?

Linda: You know what? I really don't remember when this call was. I know it was sometime last year.

Pat: Okay.

Scott: Last year, yeah, my notes say last year in 2022.

Linda: Let's say last year. Yeah, it was last year. I think it was mid-year. Maybe May, June.

Pat: Okay. And let me tell you why I asked that question. Interest rates at the time were not nearly as high on a mortgage as they are today. And as I was listening to the clip, I was thinking, would I give that same advice today where interest rates are or would it change? And I don't know the answer to that, but it caused me to think that. So that's why I asked you when the call was, and it was when mortgage interest rates were lower. What did you end up doing?

Linda: I ended up giving my daughter $500,000 and I also offered it to my son but he has declined because he thinks that he and his wife can do it on their own. So that's a different story. So she has been...

Scott: We're both looking at each other and thinking, no, that's the story.

Pat: That is the story.

Scott: Tell us what, what, what with your daughter, that is, we're both staring at each other.

Linda: Why would you do that?

Scott: Well, you gave $500,000 to your daughter, then what happened with your daughter then?

Linda: Okay, so she started searching for a house last winter and she thought it would be fairly easy but it was not. It was actually quite hard because of the supply. You know, the inventory was really low and she wanted a certain size house. And she found out that the certain size house she wanted was very competitive, very very competitive so she lost out on many offers. So she placed around five, six, seven offers. She lost out on all of those offers so then she started rethinking maybe if I look at a lower priced market, I would be more competitive because I would have more of a down payment. And that actually worked for her. So in May of this year, she was able to purchase a house but she actually had to... She overbid. She had to overbid by almost $51,000 to get this house. Yeah.

Pat: Wow. Wow. It's just what we talked about earlier in the show.

Scott: And same situation, a family helping their kids buying a house.

Pat: Yes. Interesting, interesting. And so she moved into the house and are you gifting to the children on an annual basis now as well?

Linda: We are not, but for my son, I think that's what I'm going to do instead is to gift him and his wife the $68,000 a year from both of us so that he has it, so that when he's ready to buy, he'll have the money or he'll have the sum enough to buy.

Pat: And he just flat out, give us the back, which is the, we said this, the story.

Linda: It's a different story because he and his wife are physicians so they wanna do it on their own.

Pat: I wanna do it on my own, but with someone else's help.

Linda: I don't think he realizes how tough it is, especially since they live in Southern California and it's much tougher down there.

Pat: Okay.

Linda: You know, there's just a lot more money there.

Scott: I like your concept. So you're going to do the annual exclusion amount that doesn't reduce your unified credit for your estate tax purposes.

Pat: And then you can stop it whenever you think you've reached parity.

Linda: Correct.

Scott: I think that's a brilliant idea. That's a great idea.

Pat: I like it.

Linda: I don't think he'll turn that down as long as we say, well, you can do whatever you want and hopefully he'll use it towards a house.

Pat: Yep. Perfect. Perfect. Perfect.

Scott: Yeah. Is there anything else we can help you out with while you were kind enough to call back?

Linda: Yes, I have another question, if you don't mind.

Scott: Of course not.

Linda: I have an IRA account and you probably won't like hearing this. It was mostly invested in one stock, which I know is a no-no. But I've sold off a lot of that one stock because it's at a very high price now, or it was a couple of weeks ago. So what should I do with that money?

Pat: What was the stock?

Linda: Microsoft.

Pat: And how much of the percentage of the portfolio is left in the Microsoft stock?

Linda: I would say still 40%.

Pat: Okay. And the reason I asked that, and by the way, it, you know, owning a single stock, everyone's big boys and girls if they understand the risk in doing so. And you obviously understood the risk in doing so, because you said, "You're not going to like hearing this." And this is percentage of the...

Scott: And it's a real problem if somebody can't afford it.

Pat: That's right.

Scott: If someone could afford a decline or a loss or a wipeout even in that stock, then that's their choice. Where it's really problematic is when someone's, their life savings is a million dollars, they're planning on using that for their retirement income. They've got it in one or two securities. One goes south, then there's.

Pat: That is where an issue is. So you want to duplicate, you want something in that portfolio that doesn't actually represent the tech sector. And it's highly unusual, but I think I would go with direct indexing in this portfolio and would carve around that tech sector so that you get the rest of the representation of the broader market.

Scott: Or use some ETFs that exclude tech.

Pat: That's right, and those exist too.

Linda: So would you dollar cost average that?

Pat: No, you're already in equities.

Scott: No, you're in equities.

Pat: Yeah. Yeah, no, no, no.

Scott: And you're not planning on spending these dollars anytime soon.

Linda: No.

Pat: Yeah. So I would, I would go 100% equities, but try to exclude as much tech as I could.

Linda: Even though it's a lot of money? And you would just throw it in one day?

Pat: Yeah.

Scott: Oh yeah. You took it out.

Pat: How many days did you take it out over?

Scott: It's been in the market. Well, so I would have advised at that time to as it as as you reduce your exposure there to take the proceeds and put it back in the market at that time. But still, like if dollar cost averaging works so well as a strategy, then as soon as your portfolio was fully invested, you'd move it all to cash and dollar cost average back in the next 12 or 18 months or whatever formula you want to do it. And then you'd continue to do that. But it's a risk mitigation tool. It's not designed to enhance.

Pat: Yeah, what you're trying to do is minimize the volatility in the marketplace.

Scott: Considering you have had one stock and that stock was volatile the last couple years and you stuck with it...

Pat: Now you're worried about volatility?

Scott: I know, that's what's wrong.

Pat: Now you're mentioning it? No, I would just go all in. And you want to look for something that excludes as much tech as possible, either direct indexing and or either direct indexing.

Linda: Okay, well thank you very much.

Scott: All right. ETFs. All right, appreciate it. Thanks, Linda. Thanks a lot. Glad you called. It was really interesting, Pat, we had two callers in this program that were both large chunks of money to help and most Americans do not have that kind of capital to help their kids get a house.

Pat: Most Americans don't listen to this show.

Scott: That is true.

Pat: In fact, the vast majority.

Scott: Okay.

Pat: This show may, Scott, Scott, this show may appeal to...

Scott: Clearly. Here's my point. It's not the listeners, I would think it's the, it's the next generation. Right? So, like Linda, I'm assuming her and her husband worked hard over the years, saved well, were disciplined in their savings. The vast majority of people that call into this program, Pat.

Pat: That's right.

Scott: Most of them aren't making a million bucks a year. They're professionals. They've been diligent with their savings. They've taken ownership of their lives. They were fortunate enough to not have any major calamities that derailed them at a time in their life where they've got more assets than they need, some of the people is, and they're able to help their kids, the next generation, to get a house. What I'm saying is, most kids, first of all, no one has a chance to pick their parents, right? You just, like, it's gonna be interesting the next 20, 50 years.

Pat: The generational wealth?

Scott: Correct. And it's so much more difficult for a young person starting today. Housing costs not just homes, but just rent.

Pat: Yes, as a percentage of their earnings relative to what it was for even you and I.

Scott: Correct. And it's, I mean, it's one of those things you kind of look at, like, this is not sustainable, this track we're on.

Pat: Yeah, it will change. But the people that, the reason I...

Scott: It'll change how?

Pat: The markets will reach equilibrium at some point in time. People will move to lower...

Scott: Or individual home ownership to the average American...

Pat: Will change.

Scott: It's gonna be like a lot of other European countries.

Pat: So Scott, I received this on my LinkedIn. I got a message from a young lady, Miss Ellington. Which, did you get one of these on your LinkedIn message? "I wanted to connect and send a quick note of appreciation for your Allworth Money Matters show. I discovered it yesterday on the radio by accident during my drive from the Bay Area to Oregon." So a long drive. "And I ended up listening to nine hours straight on Spotify."

Scott: I did get this.

Pat: So I responded to her.

Scott: Oh, thank you. Because I did not.

Pat: I responded to her. Glad you enjoyed the show. I usually can't get through my fan mail. Okay. This is the only reason I'm reading it.

Scott: It's the only one you got.

Pat: First one I've ever received. Glad you enjoyed this show. We really enjoy hosting. Please rate and share it with your friends and colleagues. And then by the way, eight hours straight, that's a record amount of time. But she's a young lady. That my point being is she'll do well financially over life because of her interest in money like this.

Scott: Yeah. Look, I mean, part of the reason we've done this for so many years is to be a source of education for people. We're pretty passionate about that.

Pat: Oh, yeah, give advice to young people, old people, people with money, people without money. That's anyway.

Scott: What is hard, Pat, is giving advice to someone at retirement age that doesn't have anything saved because there's not much we can do for that person.

Pat: Yeah. So just save, save, save. Yeah. All right, let's go to the calls.

Scott: All right, we're talking with Ray. Ray, you're with Allworth's Money Matters.

Ray: Afternoon guys. All right. Thank you for taking my call.

Scott: Yes. Thanks for calling.

Ray: Thanks to Bob Brinker, my wife and I purchased I bonds from Treasury Direct starting in 2001. We invested about 110,000 and the recent value is approximately 211,000.

Pat: All righty.

Ray: The accounts are in our names, but our trust attorney recommended that we move the ownership to our trust to avoid any probate issues when we pass.

Scott: I would agree.

Ray: But in order to change ownership, Treasury Direct requires a form be completed with a signature guarantee from a financial institution.

Pat: A medallion guarantee? Yes.

Ray: It doesn't have to be a medallion. It does have to be a financial institution. So I discussed this with my bank. Can I name the bank?

Pat: I don'tt care.

Scott: Sure.

Ray: Chase Bank, and they said their corporate rules did not allow them to do a signature guarantee.

Pat: That makes sense.

Ray: Really?

Pat: Yeah.

Ray: So I'm ticked off.

Scott: Are you a customer of theirs?

Ray: I've been a customer for over 30 years.

Pat: Do you have a brokerage account anywhere? A relationship with a firm like that.

Ray: Fidelity Vanguard, local one. Yeah, actually I did, yeah and the local Edward Jones, I contacted them.

Scott: They wouldn't do it either?

Pat: And they wouldn't do it either.

Ray: Wouldn't do it either.

Pat: And you have an account with them.

Scott: As we're surprised, you know it's funny, we're both surprised and then we're like, I wonder what Allworth's policy is.

Pat: I don't know what it is either. I know what it used to be.

Scott: Yeah, when we were a small organization.

Pat: It's a risk mitigation thing. Yeah. How much? It's $220,000. What percentage of your overall portfolio is this 220 grand?

Scott: 211.

Pat: Or 211.

Ray: It's small, it's a small portion. But I don't wanna leave a hassle to my kids.

Pat: Understand, I gotta tell you, if I wouldn't...

Scott: But for one thing, and I'm not an estate plan attorney, so I don't mean to be trying to practice law. I state that because I've been threatened to be sued by a estate plan attorney because we don't. But oftentimes in an estate plan of a larger estate, one will leave some assets outside of the estate in the event that there's some claims that arise.

Pat: And then the pourover will picks it up and puts it back in the estate.

Scott: Yes, and there's a pourover will that puts it in the estate.

Pat: I mean, so how many different people have you asked for this signature guarantee?

Ray: Well, I called around and I called a lot of banks and they said, "Yeah, we will sign it, but you've got to have an account that's been open for, I think the minimum was six months." that makes sense. It's just for money.

Scott: Got it. Yeah, that makes sense. It's just for money laundering purposes.

Ray: I did find El Dorado Savings, local bank, said 90 days. So we have, we now have an account at El Dorado.

Scott: Okay. You found a solution. So what's your question?

Ray: To me, this whole thing is ridiculous that Treasury Direct requires a financial institution signature.

Pat: Oh, it's the government.

Ray: Why can't they demand that the finance, all financial institutions give a signature?

Pat: Oh well no, look, look, and when you say that, I don't know what our policies are on signature guarantees.

Scott: Look, anytime someone opens an account with a financial institution, there's some background check to make it for money laundering purposes, for foreign entities, all the other, it's a lot to knowing your customers. So I mean, I can understand if a financial institution doesn't have a relationship with somebody saying, like, "We're not going to want to signature, I'm not going to guarantee who you are."

Pat: Yeah. I just met you. But I don't understand why a large instance.

Scott: But I think the question you're asking, you're trying to put logic to government. They don't design things for customer service in mind. That's not how they function.

Ray: But I'm of an age where I don't want these hassles.

Scott: Well then get it out of Treasury Direct and put it in a brokerage firm.

Ray: I guess I could, but it's paying pretty darn good interest.

Scott: No, no, no, you keep the TIPS.

Pat: Yeah, you keep the assets, just put it in a brokerage account.

Ray: Oh, I could move this into Fidelity?

Scott: One hundred percent. Yes, if you already have a brokerage account, just it makes it even easier for your heirs.

Pat: They're I bonds.

Ray: Okay.

Scott: Are these savings bonds or are these treasury?

Pat: Wait, wait, wait.

Scott: These are TIPS, treasury inflation protection.

Pat: What are these? They're I bonds, not TIPS.

Scott: Oh, they're savings bonds.

Pat: You can't. You can't do it. They're savings bonds.

Ray: That's what I thought.

Pat: Yeah.

Scott: I was thinking they were...

Pat: TIPS.

Scott: Yeah.

Pat: Yeah. Nope. There you go.

Ray: What do you mean, "There you go," what do I do?

Scott: You just did it. You're going to get the signature guarantee.

Pat: Go to El Dorado Savings, whatever you said, and be a nice customer, bring the ladies cookies and then get the signature guarantee.

Ray: I think you'd do a service to your many, many listeners to say, make the change now. Don't wait until you're getting up there.

Pat: Oh, look, there is that. Yes. Getting one's estate in order, we talked about earlier in the show is really, really important. I had a friend that's going to Greece and he said, "Well, I just updated my trust because I'm going to Greece." And I'm like, you're going to get shot. I'm like, what plane going to go down? All of a sudden, the chances are you die go up significantly. Anyway, appreciate the call.

Scott: I'm going to I'm like, what, the plane gonna go down? That's not how you're gonna go. Thanks, Ray, that's funny.

Pat: You've seen quite a few, I'm going to go on vacation so I think I should update my trust. Like, Sariova? That's a few years ago.

Scott: Well, no, I'll say it. What sort of landscape are you going to? I usually say, I think that's a great idea. Because if they haven't updated it, I'm not going to mock them. Because there's statistical chances of dying on vacation. They're so small. Okay, I don't think you would mock them either. You think? You judge them This is

Pat: This gentleman was telling me that I said that's a good idea.

Scott: You did. Yeah. Yeah, okay. But internally you're judging that person. I know, right?

Pat: But internally you're judging that person. They're like, what are they talking about?

Scott: Look, whatever it takes to motivate somebody, and some people don't like flying, and they're afraid, like, what happens if something happens when I'm over the Atlantic, plane goes down. I must say, I don't like it when I'm over the Atlantic either, and you're bad turbulence or something, you're like... Amazing these wings don't just fall right off. Okay. Anyway, we're out of time. It's been really great being with you. Hey, if you haven't given us a review Please do so wherever you're getting the way to get this podcast If you think this is helpful share it with a friend or family member, right? We'll see you next week This has been all worth money matters

Announcer: This program has been brought to you by Allworth Financial, a registered investment advisory firm. Any ideas presented during this program are not intended to provide specific financial advice. You should consult your own financial advisor, tax consultant, or estate planning attorney to conduct your own due diligence.