STA Wealth Management, LLC
Partner and Executive VP of Financial Planning
Scott Bishop is a Partner and is Exec. Vice President of Financial Planning at STA Wealth, a Houston based RIA Firm. In this role, Scott guides clients through the process of identifying and realizing their personal financial planning goals while working with them to help develop, implement and monitor strategies to help assure the long-term coordination of their overall financial, retirement, business planning.
Scott is also the host of STA's radio show, "Financial Planning Fridays" on The STA Money Hour, on 950AM KPRC Radio in Houston at 12pm Central where he frequently discusses tax and financial planning topics and hosts interviews of industry experts.
Scott graduated from the University of Texas at Austin with a Bachelor of Business Administration in Accounting and received his Master of Business Administration from the University of St. Thomas.
Currently, Scott is a CFP® and a CPA and also holds a PFS® designation. Scott has been active as a member of the American Institute of Certified Public Accountants (AICPA), the Texas Society of Certified Public Accountants (TSCPA) and its Houston CPA Society as a member of its Board of Directors. He has also been recognized for excellence by being named the Young CPA of the Year for 2002-2003 by the Houston CPA Society, one of the largest and most prominent CPA chapters in the United States.
In addition, Scott has both authored and has been interviewed for numerous articles in financial related publications and websites such as the Wall Street Journal, MarketWatch, CNBC, USA Today, Washington Post, The New York Times, Investopedia, Houston Chronicle, Investment News, Kiplinger, The AICPA Tax Section, BankRate.com, the Houston Business Journal and the CPA Forum. Scott is also a member of the Houston Business and Estate Planning Council.
BBA - Accounting, University of Texas at Austin
MBA - Finance, University of St. Thomas
Assets Under Management:
AUM information provide is for the firm STA Wealth Management, LLC of which Scott Bishop is a partner/shareholder. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by STA Wealth Management, LLC (“STA”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from STA. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. STA is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the STA’s current written disclosure Brochure discussing our advisory services and fees is available upon request.
IRS CIRCULAR 230 NOTICE: To the extent that this message or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
STA Wealth Planning Process - Scott Bishop
If you have a cash value policy (whole life, universal life, etc.) that has cash value accumulated, you most likely can take a loan from the insurance policy. This can not be done with term insurance.
The cost and ramifications of the loan is included in the insurance contract/policy that you received. Before you take any loans, read the policy and call the insurance company and get guidance on how the loan will work, how much the interest will be and what your options will be. They can run an in-force illustration to show you the effect on the policy given many assumpesions like:
1) Interest rate for the loan,
2) How will it effect future dividends, growth or policy performance,
3) How it will effect the death benefit (or will you be putting your death benefit at risk.
I life insurance loan is typically tax free (unless it was set up as a Modified Endowment Contract - this is a tax term, but important to know if it is a MEC), but if there is a gain in the policy and if the loan causes the policy to lapse in the future, the gain may be realized on your tax return as ordinary income.
Some policies were designed to be very flexible for loans and some were not - be careful when taking loans from policies especially when the death benefit is important to your family or business.
Per the Social Security Administration website, The maximum benefit depends on the age you retire. For example, if you retire at full retirement age in 2017, your maximum benefit would be $2,687. However, if you retire at age 62 in 2017, your maximum benefit would be $2,153. If you retire at age 70 in 2017, your maximum benefit would be $3,538.
When you’re ready to apply for retirement benefits, use our online retirement application, the quickest, easiest, and most convenient way to apply.
In terms of fully maximizing your benefit, here are exertpts from a piece I wrote on my website:
I participated in a recent webinar presented by Laurence Kotlikoff, an economics profession at Boston University, in which he offered several pointers to the audience on Tips to consider when filing for Social Security.
At STA Wealth, we have been talking for years about how best to maximize your Social Security Benefits – see:
- Claiming Social Security Early
- Social Security – When to Start Them
- Social Security Claiming Strategies for Couples
- Planning for Social Security
- Why it Pays to Delay Taking Social Security
- A recent interview on the STA Money Hour with Andrew Hardwick
As financial planners, our advisors at STA Wealth have a broad understanding of how to advise our clients on maximizing their Social Security benefits – and the answer varies depending on each of our clients own personal circumstances.
Per Mr. Kotlikoff, this had become even more difficult due to recent changes to the file-and-suspend benefit rules of Social Security, which take effect this year and restrict that benefit to a limited number of couples. (The spouse who files and suspends must be 66 years old as of May 1, 2016, and submit his or her request to file and suspend by April 29. The other spouse, who will receive that spouse’s benefit, must be 62 years old as of Jan. 1 of this year.) It’s also because Social Security is complicated, and even the workers at the Social Security Administration may not fully understand it.
With that in Mind, Mr. Kotlikoff has these five pointers to consider before you file for your Social Security Benefits:
1. Social Security Workers Can Get it Wrong (although most are well intentioned):
Therefore, you need to know the rules yourself. “People in Social Security offices don’t seem to understand the new law,” said Kotlikoff, who’s also author of “Get What’s Yours — the Secrets to Maxing Out Your Social Security Benefits.” He then recounted stories of several retirees who were given erroneous information by their Social Security office. We have seen the same issues with our clients here at STA Wealth. So before you apply for benefits have your game plan on how best to maximize your Social Security given your needs and situation:
- Age (of you and your spouse if married),
- Tax and Work/Employment situation,
- Longevity (how long do you think you will live), and
- Cash Flow Needs.
At STA Wealth, we have software to help you maximize your benefits and there are also online tools at www.ssa.gov.
2. Retirees Should Tell Social Security What They Want to Do – Don’t Just Ask
As discussed above, Retirees need to have the right information about their benefits — which we can provide at STA Wealth — and then tell Social Security what they want to do, preferably in writing. They should not ask Social Security workers questions about their benefits and expect to get the right answer, says Kotlikoff.
Mr. Kotlikoff recommends that retirees specify in writing in the remarks section of their application what they want to do, such as claim spousal benefits, and be definitive and clear. “The application form can be misleading,” said Kotlikoff. It says on top that you’re filing for all available benefits even when you’re not always doing that. You can’t undo that statement. The only place to specify … [what you want to do] is in the remarks section.
If someone wants a spousal benefit and the spouse has already applied to file and suspend and won’t take benefits sooner than his or her 70th birthday, “that has to be in writing … definitive and clear,” said Kotlikoff.
3. File Social Security Applications Online Rather Than by Phone or in Person
For most of my career, I have recommended that clients should schedule an appointment in their local Social Security Office – I have had few problems with that. Perhaps that is because my clients have a plan.
However, Mr. Kotlikoff believes thatit may be safer to file for retirement benefits and spousal benefits online. In that case, he believes that retirees can state exactly what they want to do, and specify in the remarks section of the application form. “You can’t write what you want by phone,” said Kotlikoff. Filing online can also avoid the problem of a worker at a Social Security office writing down the wrong information. Widow and child benefits, however, cannot be applied for online, said Kotlikoff.
4. Specify When You Want to Take Social Security Benefits
If you are beginning your Social Security benefits at Full Retirement Age, for those currently filing, it would be age 66, you will need to specify the exact date they want to begin taking benefits in the remarks section of their social Security application. Otherwise Social Security will provide six months’ worth of retroactive benefits in a lump sum, which will have the effect of slightly reducing future monthly Social Security payments.
5. Keep Track of Ex-Spouses if You’re Collecting Their Spousal Benefits
During the webinar, Mr. Kotlikoff recounted the example of an ex-wife who’s 63 and made the grandfather cutoff to collect under file and suspend. She can file for full spousal benefits of an ex-spouse when she reaches full retirement age at 66, then collect those for four years until the larger retirement benefit kicks in at age 70. At that point, if the ex has passed away she can take the larger of two benefits – the divorced widow or the divorced spouse. Per Mr. Kotlikoff, you should keep track whether your ex spouse is still alive.
Roth IRAs are a GREAT "tax bucket" to help you save for retirement. They will grow both with additional annual deposits, Roth Converstion (from traditional IRAs) or by growth of your underlying Investments (these can be stocks, bonds, mutual funds, ETFs, real estate and sometimes even private deals). I reserve my Roth IRA personally for some of my higher growth investment ideas.
One of the things that I like about the growth of a Roth IRA is that all the growth will be tax-free when you take it out in retirement. If you compare that to other TAXABLE sources like pensions, Traditional IRA/401k withdrawals, Social Security and other investment income, it may be the only tax free source of income that you will have in retirement. This is very important especially if you believe that taxes will be higher when you retire and you would like a "bucket" of funds available tax free. It is also not subject to the ACA/Obamacare 3.8% Net Investment Income Tax.
One of the biggest issues with Roth IRAs is that not everyone is eligible as their income is above the annual income limits (approx $133k if single and $194k if married). To "get around" that, you may want to look into doing Roth Coversions - or even a "Back Door Roth Contribution".
Also, many make mistakes when using Roth IRAs - here is a piece I contributed to that may help you avoid these mistakes:
In addition to benefits such as Estate Tax Planning and asset protection, one of the primary reasons that parents (like yours) create an irrevocable trust is to separate equity from control and to help assure that their wishes are followed after they are gone...and that the beneficiaries can enjoy their inheritance (equity) while a business can continue operating (control).
Although it is possible for an irrevocable trusts to be terminated per rules set forth in the legal document (the trust document), it is typically very difficult and it is almost never able to be done unilaterally (by just your brother). Even if it is attempted it almost always needs the consent of all parties to the trust (not just your brother...don’t let him bully you) including:
- The Trustee(s) - sometimes there is one and sometimes there is more.
- The Trust Protector - a fiduciary to help resolve arguments/disagreements if your parents included one in their document.
- ALL Beneficiaries (that will for sure include you...and possibly even your children depending on the document).
In the event of disagreement like this, each family member should get their own legal counsel that has experience in both probate/trust law AND litigation and disputes related to trusts and estates. Don’t be bullied...get an expert.
My guess is that your parents used an experienced estate attorney to set up their Business Succession Plan (that is why it is so important)...especially when there is a family business where their children work in or are financially dependent on the business continuing through multiple generations.
By the way, the trust agreeement most likely spells out all of your rights as a beneficiary (including getting income and even changing who Contoller the company). Any good attorney can help make sure that the trustee (and your brother) cannot force or “expel” whoever does not obey him.
Good luck...and I hope your brother doesn’t stop the succession of the business that you and your parents have built from going to the next generation.
It depends on how long you owned and lived in the home before the sale and how much profit you made. If you owned and lived in the place for two of the five years before the sale, then up to $250,000 of profit is tax-free.
If you are married and file a joint return, the tax-free amount doubles to $500,000. The law lets you "exclude" this much otherwise taxable profit from your taxable income. (If you sold for a loss, though, you can't take a deduction for that loss.)
You can use this exclusion every time you sell a primary residence, as long as you owned and lived in it for two of the five years leading up to the sale, and haven't claimed the exclusion on another home in the last two years.
If your profit exceeds the $250,000 or $500,000 limit, the excess is reported as a capital gain on Schedule D.
How do I qualify for this tax break?
There are three tests you must meet in order to treat the gain from the sale of your main home as tax-free:
- Ownership: You must have owned the home for at least two years (730 days or 24 full months) during the five years prior to the date of your sale. It doesn't have to be continuous, nor does it have to be the two years immediately preceding the sale. If you lived in a house for a decade as your primary residence, then rented it out for two years prior to the sale, for example, you would still qualify under this test.
- Use: You must have used the home you are selling as your principal residence for at least two of the five years prior to the date of sale.
- Timing: You have not excluded the gain on the sale of another home within two years prior to this sale.
If you're married and want to use the $500,000 exclusion:
- You must file a joint return.
- At least one spouse must meet the ownership requirement, and both you and your spouse must have lived in the house for two of the five years leading up to the sale.
Even if you don't meet all of these requirements, there are special rules that may allow you to claim either the full exclusion or a partial exclusion:
- If you acquire ownership of a home as part of a divorce settlement, you can count the time the place was owned by your former spouse as time you owned the home for purposes of passing the two-out-of-five-years test.
- To meet the use requirement, you are allowed to count short temporary absences as time lived in the home, even if you rented the home to others during these absences. If you or your spouse is granted use of a home as part of a divorce or separation agreement, the spouse who doesn't live in the home can still count the days of use that the other spouse lives in that home. This can come into play if one spouse moves out of the house, but continues to own part or all of it until it is sold.
- If either spouse dies and the surviving spouse has not remarried prior to the date the home is sold, the surviving spouse can count the period the deceased spouse owned and used the property toward the ownership-and-use test.