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.
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:
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.
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.
I am an Elite IRA Advisor with Ed Slott & Co (Ed is a CPA and is known nationally as an IRA expert). Here is one of the pieces I found on Ed’s website (that I have updated for 2017) on this topic.
There’s a common belief that if you have a 401(k) plan where you work and you contribute to it, you’re not allowed to also contribute to your IRA for the same year. But that’s not true; you’re allowed to contribute to both.
As far as IRA or Roth IRA contributions go, for 2017, the maximum that you can contribute is $5,500 if you’re under age 50 or $6,500 if you’re age 50 or older this year. In fact, you can contribute to both an IRA and a Roth IRA for the year, but the total limit is $5,550 (or $6,500). For example, let’s assume you’re age 60, working this year, and eligible to contribute the full $6,500 to a Roth IRA. If you decide to only contribute $4,000 to your Roth IRA, you could choose to contribute the remaining $2,500 to your IRA, bringing the total to $6,500.
Let’s also assume you have a 401(k) plan where you work. The maximum 401(k) contributions (also known as salary deferrals) you can make for 2017 are $18,000. If you are age 50 or older and your plan allows, you can also make catch-up contributions of an additional $6,000, making your total 401(k) contributions $24,000. Oftentimes, 401(k) plans have some plan-based restrictions on salary deferrals that might reduce the maximum dollar amount you can actually save. For example, your plan might need to limit your salary deferrals to pass certain IRS nondiscrimination tests.
Contributing to a 401(k) in no way limits your ability to make contributions to an IRA or Roth IRA. Roth IRA eligibility is only limited by your modified adjusted gross income and there are no income limits for contributing to a traditional IRA. The biggest limit really is how much money you can afford to contribute. If you can afford to contribute the maximum to both your 401(k) and IRA for 2017, then you can contribute a total of $23,500 ($5,500 + 18,000) if you’re under age 50 or $30,500 ($6,500 + $24,000) if your age 50 or older.