Financing Your Future – Excerpt From The Financial Shepherd

If you’re thinking about passing down wealth to family or loved ones, it can be tempting to just write a check and call it a day. It’s simple, quick, and requires almost no planning. But is that the smartest move for your legacy? Not always. When you’re dealing with significant wealth, how you transfer it matters just as much as how much you give. Whether you choose direct gifts or set up a trust can affect taxes, control, and what your heirs actually receive.

The Case for Direct Gifts

Giving directly to your heirs can feel straightforward. You can gift up to $19,000 per person per year (as of 2025) without triggering federal gift taxes. For many families, this is a simple way to share wealth while you’re still alive.

Direct gifts provide recipients with immediate access to the funds. That’s great if they need help with a home purchase, education costs, or starting a business. It also removes those assets from your taxable estate, potentially reducing estate taxes upon your passing.

However, direct gifts come with downsides. Once the money is gifted, you have no control over how it’s used. There are also risks if the recipient isn’t financially responsible or faces legal or financial troubles. Money given without structure can disappear quickly, leaving little long-term impact. And for larger gifts, you might run into gift tax limits or miss out on smarter tax strategies that could have preserved more of your wealth.

Another consideration is how direct gifts might impact the recipient’s own financial situation. A sudden influx of cash can complicate things like financial aid eligibility for education, create tax consequences, or even lead to disputes within the family if not communicated properly.

Why Trusts Might Be the Better Option

A trust provides a structured way to pass down wealth while keeping some control over how and when assets are used. You can create specific rules, such as delaying access until a certain age or earmarking funds for education, healthcare, or purchasing a home. This helps ensure that the money supports responsible decisions and benefits multiple generations.

Trusts also offer tax benefits and asset protection. Assets placed in certain types of trusts may be shielded from creditors, lawsuits, or divorce settlements. This can be particularly useful if you have concerns about an heir’s financial stability or their exposure to legal risks.

Additionally, trusts can help manage estate taxes and provide privacy since trust assets don’t go through probate, which is a public process. This not only speeds up the transfer of assets but also keeps family matters and wealth details confidential.

There are several types of trusts to consider, such as:

• Revocable Trusts: Allow you to retain control of the assets during your lifetime and adjust the trust as needed.
• Irrevocable Trusts: Once established, these can’t be easily changed but offer stronger asset protection and potential tax benefits.
• Generation-Skipping Trusts: Designed to pass assets directly to grandchildren, minimizing estate taxes across generations.
• Charitable Trusts: Enable you to support charitable causes while providing tax advantages and income streams for family members.

Setting up a trust requires more planning, legal support, and upfront costs compared to making direct gifts. But the long-term benefits, especially for substantial estates, can be well worth the effort.

Which Option Is Right for You?

Choosing between direct gifts and trusts isn’t always an either-or situation. In many cases, a blended strategy works best. You might give smaller direct gifts to help loved ones with immediate needs while setting up a trust to protect and manage the rest of your assets for the future.

The decision often comes down to your specific goals:

• Do you want to provide immediate support, or ensure long-term stewardship of your wealth?
• Are you concerned about tax implications?
• Do you want to protect assets from potential legal issues?
• How much control do you want over how your wealth is used after you’re gone?

Answering these questions can help guide the right approach for your family and financial legacy.

Choose the Right Strategy for Your Legacy

Passing down wealth isn’t just a financial decision, it’s a values decision. At Worth Advisors, we help you determine the best strategy for your situation, whether that involves direct gifts, trusts, or a combination of both. Let’s build a plan that protects your legacy and supports the next generation the way you intend.

You’ve probably heard the warnings: “Social Security is running out of money.” It’s a headline that gets clicks but also sparks genuine concern. If you’re in your 30s, 40s, or even 50s, it’s fair to wonder whether Social Security will be there for you by retirement. The truth? Social Security isn’t going away—but it will likely look different. And understanding what might change can help you build a better plan.

The Reality Behind the Headlines

Let’s clear something up first: Social Security is not going bankrupt. Yes, the program is under financial pressure, and the Social Security Trust Fund is projected to be depleted by the mid-2030s if no changes are made. But even if that happens, payroll taxes will still cover about 75-80% of scheduled benefits. That means the program won’t disappear, but benefits may be reduced unless reforms are passed.

Lawmakers have several ways to strengthen Social Security. They could raise the retirement age, adjust how benefits are calculated, increase the payroll tax cap, or use a combination of approaches. These reforms have been made in the past and are likely to happen again.

The key takeaway: Social Security is not in danger of vanishing. But relying solely on it to fund your retirement isn’t a good plan. It should be one part of a broader retirement strategy.

What You Can Do Right Now

1. Don’t Count on Social Security Alone: Social Security was never meant to be your only source of income in retirement. It’s a foundation, not a complete plan. Make sure you’re saving in retirement accounts like a 401(k), IRA, or other investment vehicles.
2. Stay Informed, But Not Anxious: Yes, Social Security faces challenges. But that doesn’t mean you need to panic. Keep an eye on proposed policy changes and be ready to adjust your expectations, but avoid making emotional decisions based on headlines.
3. Plan for Multiple Income Sources: Your retirement income should come from multiple places. Diversify with savings, investments, pensions (if available), and even part-time work or rental income if that fits your lifestyle.
4. Consider Delaying Benefits: To boost your future Social Security payout, consider delaying benefits past your full retirement age. Your benefit increases each year you wait (up to age 70).
5. Revisit Your Retirement Plan Regularly: As policies change, your plan should evolve too. Regular check-ins align with your goals, no matter what happens with Social Security.

Stay Focused on What You Can Control

Worrying about whether Social Security will change doesn’t help you prepare, but taking action does. The more you take control of your retirement planning today, the less you’ll have to worry about changes tomorrow.

At Worth Advisors, we help you build a plan that works with or without Social Security. Let’s ensure you’re set up for the future you want, no matter what changes may come.

Most people think of rebalancing as something you do with your investment portfolio—tweaking your mix of stocks and bonds to stay on target. That’s important, sure. But if you stop there, you’re missing the bigger picture. Your finances are more than your investment account. Rebalancing your total wealth means checking every part of your financial life to ensure it aligns with your goals. And that can make a much more significant difference than just shifting a few percentages in your portfolio.

Look Beyond the Portfolio

Rebalancing your wealth means reviewing all the areas that affect your financial health, not just your stocks and bonds. That includes things like:

• Cash Reserves: Are you holding too much cash in low-interest accounts? Or not enough to cover short-term needs?
• Debt: Is your debt structured in the most efficient way? Could you benefit from refinancing or consolidating?
• Insurance: Do your insurance policies still match your life stage and responsibilities?
• Tax Strategy: Have you reviewed tax planning opportunities based on current income, deductions, or investment decisions?
• Business Interests or Real Estate: If you own a business or property, is its role in your overall plan still effective?

Each of these pieces can shift over time. Life changes, markets move, and your goals evolve. Total wealth rebalancing is about stepping back to assess everything and making thoughtful adjustments.

Why It Matters

When one area of your finances becomes out of sync, it can impact everything else. For example, if you’ve had a significant life change—a new job, a move, an inheritance—your plan needs to reflect that. Even without significant events, your wealth can drift away from your goals due to time or market performance.

Think of total wealth rebalancing as a regular tune-up. It helps you:

• Stay aligned with your priorities by ensuring your plan reflects what matters most to you.
• Reduce unnecessary risks by reviewing outdated decisions or overlooked exposures.
• Maximize opportunities by taking advantage of changes in tax law, interest rates, or your financial position.

It’s not about perfection. It’s about intention. Total wealth rebalancing isn’t just a financial to-do list—it’s a way to keep your entire strategy working for you.

Keep the Big Picture in Focus

At Worth Advisors, real wealth management means looking at every piece of your financial life, not just your investments. Let’s chat if it’s been a while since you looked at the whole picture. We’ll help you step back, review, and rebalance so your strategy fits where you are today and where you want to go tomorrow.

Because we are close to another election, we must address some common concerns people have about its impact on the market. People believe the market is at a crossroads during an election year for various reasons. Its final destination won’t be known until we know who will run the country. Given how much the media can fuel these concerns, it’s straightforward to get caught up in this narrative that there’s a potential collapse around the corner. As financial advisors, we see people make hasty decisions because of these emotions. 

We want you to understand how previous elections have impacted the market to give you peace of mind and clarity. We go through this every four years. Stop worrying about the future and rely on the past. Ask yourself whether history supports the notion that elections have significantly disrupted markets. 

Market Performance in Election Years

One of the most persistent myths is that the stock market performs poorly during election years. The assumption is that the uncertainty surrounding elections leads to weaker market returns. On the surface, it does make sense—which is why it is such an easy myth to get pulled into. However, historical data doesn’t back this. If you look at how the S&P 500 has performed since 1928, the average return during election years is 7.5%. 

The average return in non-election years is 8.0%. So, yes, there is a slight drop, but it does show that the dropoff isn’t as significant as people think. A closer look reveals that while volatility can be higher in election years, this volatility won’t necessarily lead to adverse outcomes if you invest over the long term.  

For example, while the average election year since 1980 has seen an intra-year drawdown of about 17%, markets have often recovered once election results are finalized. Additionally, economic fundamentals drive market returns, which remain stable or improve despite political uncertainty. This demonstrates that the stock market’s resilience often overrides the temporary fluctuations that might occur during an election year.

The Impact of Election Results on the Market

Another widespread belief is that markets will crash if a particular candidate wins. This idea is often fueled by the emotions and uncertainty that elections bring. However, historical trends show that the market’s response to election outcomes is unpredictable. Looking back at previous elections, market movements are more closely tied to the broader economic environment than to who wins the election. For example, during the 2008 election, the market was more influenced by the unfolding Global Financial Crisis than by the candidates’ policies.

Similarly, in 2020, the COVID-19 pandemic had a far more significant impact on the market than the election itself. The data does not support the belief that the Federal Reserve avoids changing monetary policy during election years. The Fed has historically adjusted interest rates based on economic needs, regardless of the political calendar. For instance, since the 1950s, only in 2012 did the Fed refrain from raising or lowering rates during an election year. This shows that economic conditions, not political considerations, guide monetary policy decisions. After election results are announced and uncertainty fades, markets often rally. This pattern has been observed in many election years, indicating that the fear of a market crash tied directly to election outcomes is largely unfounded.

Focus On the Long Term & Work With Us 

Worrying about market fluctuations in an election year is understandable, but history shows these concerns are often overblown. The market tends to remain stable, with performance more influenced by economic factors than the election. If you are concerned about how the upcoming election could impact your investments, schedule a meeting with our team at Worth Advisors. We can help you create a financial plan focusing on long-term goals rather than short-term election cycles.

Disclaimer: Always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation to sell or purchase any securities. Any rates of return are historical or hypothetical in nature and are not a guarantee of future returns, which may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions and security positions, which, when sold, may be worth less or more than their original cost.